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CREDIT AGREEMENT
$75,000,000
Dated as of
April 12, 2007
among
BASELINE OIL & GAS CORP.,
as Borrower,
DRAWBRIDGE SPECIAL OPPORTUNITIES FUND LP,
as Administrative Agent,
and
THE LENDERS PARTY HERETO
PETROBRIDGE INVESTMENT MANAGEMENT, LLC
Sole Lead Arranger
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TABLE OF CONTENTS
PAGE:
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ARTICLE I : DEFINITIONS AND ACCOUNTING MATTERS................................ 1
Section 1.01 Certain Defined Terms.............................. 1
Section 1.02 Terms Generally; Rules of Construction............. 1
Section 1.03 Accounting Terms and Determinations; GAAP.......... 1
ARTICLE II : THE CREDITS...................................................... 1
Section 2.01 Commitment......................................... 1
Section 2.02 Loans and Borrowings............................... 1
Section 2.03 Requests for Borrowings............................ 1
Section 2.04 Funding of Borrowings.............................. 1
Section 2.05 Termination/Reduction of Commitments............... 1
Section 2.06 Borrowing Base..................................... 1
ARTICLE III : PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES........... 1
Section 3.01 Repayment of Loans................................. 1
Section 3.02 Prepayments........................................ 1
Section 3.03 Interest........................................... 1
Section 3.04 Fees............................................... 1
ARTICLE IV : PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS................ 1
Section 4.01 Payments Generally; Pro Rata Treatment;
Sharing of Set-offs.............................. 1
Section 4.02 Presumption of Payment by the Borrower............. 1
Section 4.03 Certain Deductions by the Administrative Agent..... 1
Section 4.04 Disposition of Proceeds............................ 1
ARTICLE V : INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES, ETC............... 1
Section 5.01 Increased Costs.................................... 1
Section 5.02 Taxes.............................................. 1
ARTICLE VI LOCKBOX PROCEDURES; CASUALTY PROCEEDS.............................. 1
Section 6.01 Lockbox Account.................................... 1
Section 6.02 Notice............................................. 1
Section 6.03 Casualty Proceeds.................................. 1
ARTICLE VII : CONDITIONS PRECEDENT............................................ 1
Section 7.01 Effective Date..................................... 1
Section 7.02 Term Draw.......................................... 1
Section 7.03 Each Credit Event.................................. 1
Section 7.04 Conditions Precedent for the Benefit of the Lender..1
Section 7.05 No Waiver.......................................... 1
i
ARTICLE VIII : REPRESENTATIONS AND WARRANTIES................................. 1
Section 8.01 Organization; Powers............................... 1
Section 8.02 Authority; Enforceability.......................... 1
Section 8.03 Approvals; No Conflicts............................ 1
Section 8.04 Financial Condition; No Material Adverse Change.... 1
Section 8.05 Litigation......................................... 1
Section 8.06 Environmental Matters.............................. 1
Section 8.07 Compliance with the Laws and Agreements; No Defaults1
Section 8.08 Investment Company Act............................. 1
Section 8.09 Taxes.............................................. 1
Section 8.10 ERISA.............................................. 1
Section 8.11 Disclosure; No Material Misstatements.............. 1
Section 8.12 Insurance.......................................... 1
Section 8.13 Restriction on Liens............................... 1
Section 8.14 Subsidiaries....................................... 1
Section 8.15 Location of Business and Offices................... 1
Section 8.16 Properties; Titles, Etc............................ 1
Section 8.17 Maintenance of Properties.......................... 1
Section 8.18 Gas Imbalances, Prepayments........................ 1
Section 8.19 Marketing of Production............................ 1
Section 8.20 Swap Agreements.................................... 1
Section 8.21 Use of Loans....................................... 1
Section 8.22 Solvency........................................... 1
Section 8.23 Material Agreements................................ 1
Section 8.24 No Brokers......................................... 1
Section 8.25 Reliance........................................... 1
Section 8.26 Investments and Guaranties......................... 1
Section 8.27 Acquisition........................................ 1
Section 8.28 Payments by Purchasers of Production............... 1
Section 8.29 Existing Accounts Payable.......................... 1
ARTICLE IX : AFFIRMATIVE COVENANTS............................................ 1
Section 9.01 Financial Statements; Other Information............ 1
Section 9.02 Notices of Material Events......................... 1
Section 9.03 Existence; Conduct of Business..................... 1
Section 9.04 Payment of Obligations............................. 1
Section 9.05 Performance of Obligations under Loan Documents.... 1
Section 9.06 Operation and Maintenance of Properties............ 1
Section 9.07 Insurance.......................................... 1
Section 9.08 Books and Records; Inspection Rights............... 1
Section 9.09 Compliance with Laws............................... 1
Section 9.10 Environmental Matters.............................. 1
Section 9.11 Further Assurances................................. 1
Section 9.12 Reserve Reports.................................... 1
Section 9.13 Title Information.................................. 1
Section 9.14 Additional Collateral; Additional Guarantors....... 1
Section 9.15 ERISA Compliance................................... 1
Section 9.16 Swap Agreements.................................... 1
Section 9.17 Marketing Activities............................... 1
Section 9.18 Development Plan................................... 1
Section 9.19 Overriding Royalty Interests....................... 1
Section 9.20 Equity Raise....................................... 1
Section 9.21 Right of First Refusal............................. 1
Section 9.22 Separate Entity.................................... 1
Section 9.23 Directors of Borrower; Observers................... 1
ii
ARTICLE X : NEGATIVE COVENANTS................................................ 1
Section 10.01 Financial Covenants................................ 1
Section 10.02 Debt............................................... 1
Section 10.03 Liens.............................................. 1
Section 10.04 Restricted Payments................................ 1
Section 10.05 Investments, Loans and Advances.................... 1
Section 10.06 Nature of Business; International Operations....... 1
Section 10.07 Limitation on Leases............................... 1
Section 10.08 Sale and Leasebacks................................ 1
Section 10.09 Proceeds of Loans.................................. 1
Section 10.10 ERISA Compliance................................... 1
Section 10.11 Sale or Discount of Receivables.................... 1
Section 10.12 Mergers, Etc....................................... 1
Section 10.13 Sale of Properties................................. 1
Section 10.14 Environmental Matters.............................. 1
Section 10.15 Transactions with Affiliates....................... 1
Section 10.16 Material Agreements................................ 1
Section 10.17 Subsidiaries....................................... 1
Section 10.18 Negative Pledge Agreements; Dividend Restrictions.. 1
Section 10.19 Gas Imbalances, Take-or-Pay or Other Prepayments... 1
Section 10.20 Swap Agreements.................................... 1
Section 10.21 Limitation on Capital Expenditures................. 1
Section 10.22 Certain Activities................................. 1
Section 10.23 Net Sales.......................................... 1
Section 10.24 G&A Costs.......................................... 1
Section 10.25 Press Release...................................... 1
Section 10.26 Acquisition Documents.............................. 1
ARTICLE XI : EVENTS OF DEFAULT; REMEDIES...................................... 1
Section 11.01 Events of Default.................................. 1
Section 11.02 Remedies........................................... 1
ARTICLE XII : THE AGENTS...................................................... 1
Section 12.01 Appointment; Powers................................ 1
Section 12.02 Duties and Obligations of Administrative Agent..... 1
Section 12.03 Action by Administrative Agent..................... 1
Section 12.04 Reliance by Administrative Agent................... 1
Section 12.05 Subagents.......................................... 1
Section 12.06 Resignation or Removal of Administrative Agent..... 1
Section 12.07 Agents as a Lender................................. 1
Section 12.08 No Reliance........................................ 1
Section 12.09 Administrative Agent May File Proofs of Claim...... 1
Section 12.10 Authority of Administrative Agent
to Release Collateral and Liens.................. 1
Section 12.11 The Arranger....................................... 1
iii
ARTICLE XIII : GENERAL........................................................ 1
Section 13.01 Notices............................................ 1
Section 13.02 Waivers; Amendments................................ 1
Section 13.03 Expenses, Indemnity; Damage Waiver................. 1
Section 13.04 Successors and Assigns............................. 1
Section 13.05 Survival; Revival; Reinstatement................... 1
Section 13.06 Counterparts; Integration; Effectiveness........... 1
Section 13.07 Severability....................................... 1
Section 13.08 Right of Setoff.................................... 1
SECTION 13.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE.... 1
Section 13.10 Headings........................................... 1
Section 13.11 Confidentiality.................................... 1
Section 13.12 Interest Rate Limitation........................... 1
SECTION 13.13 EXCULPATION PROVISIONS............................. 1
Section 13.14 Collateral Matters; Swap Agreements................ 1
Section 13.15 No Third Party Beneficiaries....................... 1
Section 13.16 Securitization..................................... 1
Section 13.17 USA Patriot Act Notice............................. 1
ANNEXES, EXHIBITS AND SCHEDULES:
Annex I Commitments
Exhibit A-1 Form of Revolving Note
Exhibit A-2 Form of Term Note
Exhibit B-1 Form of Revolving Borrowing Request
Exhibit B-2 Form of Term Loan Borrowing Request
Exhibit C Form of Warrant
Exhibit D Form of Compliance Certificate
Exhibit E Form of Assignment and Assumption
Exhibit F Form of Letters-in-Lieu
Exhibit G Form of ORRI Assignment
Exhibit H Form of Development Plan
Exhibit I Security Instruments
Schedule 1.01 Approved Counterparty
Schedule 8.05 Litigation
Schedule 8.06 Environmental Matters
Schedule 8.12 Insurance
Schedule 8.14 Subsidiaries
Schedule 8.17 Properties
Schedule 8.18 Gas Imbalances
Schedule 8.19 Marketing Contracts
Schedule 8.20 Swap Agreements
Schedule 8.23 Material Agreements
Schedule 8.24 Brokers
Schedule 8.29 Past Due Accounts Payable
Schedule 10.05 Investments
Schedule 10.23 Net Sales Volume
iv
This CREDIT AGREEMENT, dated as of April 12, 2007, is among BASELINE OIL &
GAS CORP., a corporation duly formed and existing under the laws of the State of
Nevada (the "Borrower"), each of the Lenders from time to time party hereto, and
DRAWBRIDGE SPECIAL OPPORTUNITIES FUND LP, as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"Administrative Agent").
RECITALS
WHEREAS, the Borrower has requested that the Lenders provide certain loans
to and extensions of credit on behalf of the Borrower.
WHEREAS, The Lenders have agreed to make such loans and extensions of
credit subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and of the loans, extensions of credit and commitments
hereinafter referred to, the parties hereto agree as follows:
ARTICLE I:
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Certain Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"Acquisition" means the acquisition of certain oil, gas and mineral
Properties pursuant to the terms and conditions of the Acquisition Documents.
"Acquisition Documents" means (a) the Purchase and Sale Agreement between
Statex Petroleum I, L.P and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ LP, as sellers, and Borrower
dated as of December 20, 2006, as amended by First Amendment to Purchase and
Sale Agreement, dated as of January 15, 2007, as further amended by Second
Amendment to Purchase and Sale Agreement, dated as of March 9, 2007 (as amended
the "PSA") and (b) all bills of sale, assignments, agreements, instruments and
documents executed and delivered in connection therewith, in each case, as
amended.
"Acquisition Properties" means all of the Oil and Gas Properties and other
properties acquired by the Borrower or any Guarantor pursuant to the Acquisition
Documents.
"Act" has the meaning assigned such term in Section 13.17.
"Administrative Agent" has the meaning set forth in the introductory
paragraph.
"Administrative Questionnaire" means an Administrative Questionnaire in a
form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
1
"Agent Observers" has the meaning assigned such term in Section 9.23.
"Agents" means, collectively, the Administrative Agent and, if applicable,
Collateral Agent; and "Agent" shall mean either the Administrative Agent or, if
applicable, Collateral Agent, as the context requires.
"Agreement" means this Credit Agreement, as the same may from time to time
be amended, modified, supplemented or restated.
"Applicable Percentage" means, with respect to (a) any Revolving Lender,
the percentage of the total Commitments represented by such Revolving Lender's
Commitment, as such percentage is set forth on Part A of Annex I (as such Part A
of Annex I is amended by the Administrative Agent from time to time to reflect
Assignments) and (b) any Term Lender, its Term Loan Percentage.
"Approved Counterparty" means (a) any Lender or any Affiliate of a Lender
and (b) with regard to Swap Agreements in respect of commodities, and subject to
the conditions set forth therein, any other Person set forth on Schedule 1.01 or
otherwise approved by the Administrative Agent.
"Approved Petroleum Engineers" means any independent petroleum engineer
reasonably acceptable to the Administrative Agent.
"Arranger" means Petrobridge Investment Management, LLC, in its capacities
as the sole lead arranger hereunder.
"Assignment and Assumption" means an assignment and assumption entered
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 13.04(b)), and accepted by the Administrative Agent, in the
form of Exhibit F or any other form approved by the Administrative Agent.
"Availability Period" means the period from and including the Effective
Date to but excluding the Revolving Maturity Date.
"Board" means the Board of Governors of the Federal Reserve System of the
United States of America or any successor Governmental Authority.
"Borrower" has the meaning set forth in the introductory paragraph.
"Borrowing" means Loans made or continued on the same date and, in the
case of Revolving Loans, as to which a single Interest Period is in effect.
"Borrowing Base" means, at any time, an amount equal to the lesser of (a)
$54,700,000, and (b) the amount determined in accordance with Section 2.06, as
the same may be adjusted from time to time pursuant to Section 9.13(c) or
Section 10.13(d) less any amount outstanding under the Term Loan.
"Borrowing Base Deficiency" occurs if at any time the total Revolving
Exposures exceeds the Borrowing Base then in effect.
2
"Borrowing Base Utilization Percentage" means, as of any day, the fraction
expressed as a percentage, the numerator of which is the sum of the Revolving
Exposures of the Revolving Lenders on such day, and the denominator of which is
the Borrowing Base in effect on such day.
"Borrowing Request" means a request by the Borrower for a Revolving
Borrowing in accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other day
on which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed.
"Capital Expenditures" means, in respect of any Person, for any period,
the aggregate (determined without duplication) of all exploration and
development expenditures and costs that are capital in nature and any other
expenditures that are capitalized on the balance sheet of such Person in
accordance with GAAP.
"Capital Leases" means, in respect of any Person, all leases which shall
have been, or should have been, in accordance with GAAP, recorded as capital
leases on the balance sheet of the Person liable (whether contingent or
otherwise) for the payment of rent thereunder.
"Cash Receipts" means all cash or cash equivalents received by or on
behalf of the Borrower and its Subsidiaries with respect to the following: (a)
sales of Hydrocarbons from the Oil and Gas Properties (including any other
working interest owner receipts received by Borrower or its Affiliates as
operator of Oil and Gas Properties), (b) cash representing operating revenue
earned or to be earned by the Borrower and its Subsidiaries, (c) any insurance
proceeds received by the Borrower or its Subsidiaries, (d) any proceeds from
Swap Agreements, and (e) any other cash or cash equivalents received by the
Borrower or its Subsidiaries from whatever source; provided that advances under
the Loans shall not constitute "Cash Receipts".
"Casualty Proceeds" has the meaning assigned such term in Section
6.01(b)(iv).
"Casualty Proceeds Account" has the meaning assigned such term in Section
6.03.
"Change in Control" means (a) any "person" or "group" (as such terms are
used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) shall become, or obtain rights (whether by means
of warrants, options, or otherwise) to become a "beneficial owner" as defined in
Rules 13(d)-3 and 13(d)-5 under the Exchange Act, directly or indirectly, of
more that 50% of the outstanding Equity Interests of the Borrower on a fully
diluted basis, (b) occupation of a majority of the seats (other than vacant
seats) on the board of directors of the Borrower by Persons who were neither (i)
nominated by the board of directors of the Borrower nor (ii) appointed by
directors so nominated or (c) the failure of the Borrower to own all of the
issued and outstanding Equity Interests in the Guarantors, except as otherwise
permitted by this Agreement.
"Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender (or, for
purposes of Section 5.01(a)), by any lending office of such Lender or by such
Lender's holding company, if any) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.
3
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"Commitment" means, with respect to each Revolving Lender, the commitment
of such Revolving Lender to make Revolving Loans hereunder in an amount not to
exceed the following: (a) the amount set forth opposite such Revolving Lender's
name on Part A of Annex I under the caption "Commitment", minus (b) the product
of (i) such Revolving Lender's Applicable Percentage and (ii) the outstanding
principal amount under the Term Loans, minus (c) the amount that such Revolving
Lender's Commitment is reduced or terminated from time to time in connection
with Section 2.05(b), plus or minus (d) the amount by which such Revolving
Lender's Commitment is modified from time to time pursuant to any assignment
permitted by Section 13.04(b). The term "Commitments" means, at any time, the
total Commitments of all Revolving Lenders at such time.
"Commitment Fee Rate" means one and one-half percent (1.50%).
"Consolidated Net Income" means with respect to the Borrower and the
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and the Consolidated Subsidiaries after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (a) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and the Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in cash during such period by such other Person to
the Borrower or to a Consolidated Subsidiary, as the case may be; (b) the net
income (but not loss) during such period of any Consolidated Subsidiary to the
extent that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted
by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary or is
otherwise restricted or prohibited, in each case determined in accordance with
GAAP; (c) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (d) any extraordinary non-cash gains or losses during such period
and (e) any gains or losses attributable to writeups or writedowns of assets,
including ceiling test writedowns; and provided, further, that if the Borrower
or any Consolidated Subsidiary shall acquire or dispose of any Property during
such period, then Consolidated Net Income shall be calculated after giving pro
forma effect to such acquisition or disposition, as if such acquisition or
disposition had occurred on the first day of such period.
"Consolidated Subsidiaries" means each Subsidiary of the Borrower (whether
now existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.
4
"consolidation" has the meaning assigned such term in Section 10.12.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to "control" such other Person. "Controlling" and
"Controlled" have meanings correlative thereto.
"Debt" means, for any Person, the sum of the following (without
duplication): (a) all obligations of such Person for borrowed money or evidenced
by bonds, bankers' acceptances, debentures, notes or other similar instruments;
(b) all obligations of such Person (whether contingent or otherwise) in respect
of letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the lesser of the
amount of such Debt and the maximum stated amount of such guarantee or assurance
against loss; (h) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or to
purchase the Debt or Property of others; (i) obligations to deliver commodities,
goods or services, including, without limitation, Hydrocarbons, in consideration
of one or more advance payments, other than gas balancing arrangements in the
ordinary course of business; (j) obligations to pay for goods or services even
if such goods or services are not actually received or utilized by such Person;
(k) any Debt of a partnership for which such Person is liable either by
agreement, by operation of law or by a Governmental Requirement but only to the
extent of such liability; (l) Disqualified Capital Stock; and (m) the
undischarged balance of any production payment created by such Person or for the
creation of which such Person directly or indirectly received payment. The Debt
of any Person shall include all obligations of such Person of the character
described above to the extent such Person remains legally liable in respect
thereof notwithstanding that any such obligation is not included as a liability
of such Person under GAAP.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Direction Letters" means a letter addressed to each purchaser of
Hydrocarbons from Borrower's or its Subsidiaries' Oil and Gas Properties
directing such purchaser to remit to the Lockbox Account all proceeds with
respect to the sale of such Hydrocarbons in form and substance satisfactory to
the Administrative Agent.
"Development Plan" means the Initial Development Plan and each other
development plan, in form and substance satisfactory to the Lenders in their
sole discretion delivered to Administrative Agent and approved by Administrative
Agent in accordance with Section 9.18 setting forth, the updated plan of
development for the :Borrower's and its Subsidiaries Oil and Gas Properties and
Hydrocarbon Interests.
5
"Disqualified Capital Stock" means any Equity Interest that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Termination Date and (b) the date on which there are no Loans or
other obligations hereunder outstanding and all of the Commitments are
terminated.
"dollars" or "$" refers to lawful money of the United States of America.
"Domestic Subsidiary" means any Subsidiary that is organized under the
laws of the United States of America or any state thereof or the District of
Columbia.
"EBITDA" means, for any period, the sum of Consolidated Net Income for
such period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes, depreciation,
depletion, amortization, unrealized hedging losses and other similar non-cash
charges, minus unrealized hedging gains and all non-cash income added to
Consolidated Net Income.
"Effective Date" means the date on which the conditions specified in
Section 7.01 are satisfied (or waived in accordance with Section 13.02), which
date shall occur on or before the date set forth in Section 7.01.
"Employment Agreements" has the meaning assigned such term in Section
7.01(w).
"Engineering Reports" has the meaning assigned such term in Section
2.06(c)(i).
"Environmental Laws" means any and all Governmental Requirements
pertaining in any way to health, safety, the environment or the preservation or
reclamation of natural resources, in effect in any and all jurisdictions in
which the Borrower or any Subsidiary is conducting or at any time has conducted
business, or where any Property of the Borrower or any Subsidiary is located,
including without limitation, the Oil Pollution Act of 1990 ("OPA"), as amended,
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection Governmental Requirements.
The term "oil" shall have the meaning specified in OPA, the terms "hazardous
substance" and "release" (or "threatened release") have the meanings specified
in CERCLA, the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA and the term "oil and gas waste" shall mean those
waste that are excluded from the definition of "hazardous waste" pursuant to 40
C.F.R. Section 261.4(b)(5) ("Section 261.4(b)(5)"); provided, however, that (a)
in the event either OPA, CERCLA, RCRA or Section 261.4(b)(5) is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and (b) to the extent
the laws of the state or other jurisdiction in which any Property of the
Borrower or any Subsidiary is located establish a meaning for "oil," "hazardous
substance," "release," "solid waste," "disposal" or "oil and gas waste" which is
broader than that specified in either OPA, CERCLA, RCRA or Section 261.4(b)(5),
such broader meaning shall apply.
6
"Environmental Permit" means any permit, registration, license, approval,
consent, exemption, variance, or other authorization required under or issued
pursuant to applicable Environmental Laws.
"Equity Interests" means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with the Borrower or a Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" means (a) a "Reportable Event" described in section 4043 of
ERISA and the regulations issued thereunder, (b) the withdrawal of the Borrower,
a Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it
was a "substantial employer" as defined in section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to Section 4202 of ERISA or (f) any other event or
condition which might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
"Event of Default" has the meaning assigned such term in Section 11.01.
7
"Excepted Liens" means: (a) Liens for Taxes, assessments or other
governmental charges or levies which are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (b) Liens in connection with
workers' compensation, unemployment insurance or other social security, old age
pension or public liability obligations which are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (c) statutory landlord's
liens, operators', vendors', carriers', warehousemen's, repairmen's, mechanics',
suppliers', workers', materialmen's, construction or other like Liens arising by
operation of law in the ordinary course of business or incident to the
exploration, development, operation and maintenance of Oil and Gas Properties
each of which is in respect of obligations that are not delinquent or that are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (d) contractual Liens
which arise in the ordinary course of business under operating agreements, joint
venture agreements, oil and gas partnership agreements, oil and gas leases,
farm-out agreements, division orders, contracts for the sale, transportation or
exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, overriding royalty agreements,
marketing agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims that are
not delinquent or that are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Subsidiary or materially impair the
value of such Property subject thereto; (e) Liens arising solely by virtue of
any statutory or common law provision relating to banker's liens, rights of
set-off or similar rights and remedies and burdening only deposit accounts or
other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
regulations promulgated by the Board and no such deposit account is intended by
Borrower or any of its Subsidiaries to provide collateral to the depository
institution; (f) easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any Property of the Borrower or any
Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, that do not secure
any monetary obligations and that in the aggregate do not materially impair the
use of such Property for the purposes of which such Property is held by the
Borrower or any Subsidiary or materially impair the value of such Property
subject thereto; (g) Liens on cash or securities pledged to secure performance
of tenders, surety and appeal bonds, government contracts, performance and
return of money bonds, bids, trade contracts, leases, statutory obligations,
regulatory obligations and other obligations of a like nature incurred in the
ordinary course of business; and (h) judgment and attachment Liens not giving
rise to an Event of Default, provided that any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such proceeding may be
initiated shall not have expired and no action to enforce such Lien has been
commenced; provided, further, that Liens described in clauses (a) through (e)
shall remain "Excepted Liens" only for so long as no action to enforce such Lien
has been commenced and no intention to subordinate the first priority Lien
granted in favor of the Administrative Agent and the Lenders is to be hereby
implied or expressed by the permitted existence of such Excepted Liens.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender or any other recipient of any payment to be made by or on account of any
obligation of the Borrower or any Guarantor hereunder or under any other Loan
Document, (a) income or franchise taxes imposed on (or measured by) its net
income by the United States of America or such other jurisdiction under the laws
of which such recipient is organized or in which its principal office is located
or, in the case of any Lender, in which its applicable lending office is located
and (b) any branch profits taxes imposed by the United States of America or any
similar tax imposed by any other jurisdiction in which the Borrower or any
Guarantor is located.
8
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person. Unless
otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.
"Financial Statements" means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 8.04(a).
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time subject to the terms and conditions
set forth in Section 1.03.
"General and Administrative Costs" means normal and customary expenses and
costs that are classified as general and administrative costs, including
consulting fees, salary, rent, supplies, travel and entertainment, insurance,
accounting, legal, engineering and broker related fees, required to manage the
affairs of the Borrower.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government over the Borrower, any Subsidiary, any of their Properties, any Agent
or any Lender.
"Governmental Requirement" means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
9
"Guarantors" means each Domestic Subsidiary, if any, that guarantees the
Indebtedness pursuant to Section 9.14(b).
"Guaranty Agreement" means an agreement executed by the Guarantors in the
form of the Guaranty and Collateral Agreement executed as of the date hereof
satisfactory to the Collateral Agent and its counsel unconditionally
guarantying, on a joint and several basis, payment of the Indebtedness, as the
same may be amended, modified or supplemented from time to time.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
non-usurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum non-usurious interest rate than
applicable laws allow as of the date hereof.
"Hydrocarbon Interests" means all rights, titles, interests and estates
now or hereafter acquired in and to oil and gas leases, oil, gas and mineral
leases, or other liquid or gaseous hydrocarbon leases, mineral fee interests,
overriding royalty and royalty interests, net profit interests and production
payment interests, including any reserved or residual interests of whatever
nature.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
"Indebtedness" means any and all amounts owing or to be owing by the
Borrower, any of its Subsidiaries or any Guarantor (whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to
become due, now existing or hereafter arising): (a) to the Administrative Agent
or any Lender under any Loan Document; (b) to any Secured Swap Provider under a
Secured Hedge Obligation; and (c) all renewals, extensions and/or rearrangements
of any of the above.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning assigned such term in Section 13.03(b).
"Information" has the meaning assigned such term in Section 13.11.
"Initial Development Plan" shall mean the Borrower's Plan of Development
for the Oil and Gas Properties and the related Hydrocarbon Interests attached as
Exhibit H, which has been approved by Administrative Agent.
"Initial Reserve Reports" means the reports of ▇▇▇▇▇▇▇▇ & Associates,
dated as of March 19, 2007, with respect to certain of the Acquisition
Properties and to certain Oil and Gas Properties of the Borrower and its
Subsidiaries as of December 31, 2006, and internal engineering reports provided
by the Borrower with respect to certain other Oil and Gas Properties.
10
"Interest Expense" means, for any period, the sum (determined without
duplication) of the aggregate gross interest expense of the Borrower and the
Consolidated Subsidiaries for such period, including to the extent included in
interest expense under GAAP: (a) amortization of debt discount, (b) capitalized
interest and (c) the portion of any payments or accruals under Capital Leases
allocable to interest expense, plus the portion of any payments or accruals
under Synthetic Leases allocable to interest expense whether or not the same
constitutes interest expense under GAAP.
"Interest Payment Date" means (a) with respect to any Revolving Loan, the
last day of each month and (b) with respect to the Term Loans, the last day of
each month.
"Interim Redetermination Date" means the date on which a Borrowing Base
that has been redetermined pursuant to an Interim Redetermination becomes
effective as provided in Section 2.06(d).
"Interim Redetermination" has the meaning assigned such term in Section
2.06(b).
"Investment" means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any agreement to make any such acquisition (including, without
limitation, any "short sale" or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or capital contribution to,
assumption of Debt of, purchase or other acquisition of any other Debt or equity
participation or interest in, or other extension of credit to, any other Person
(including the purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such Property to
such Person, but excluding any such advance, loan or extension of credit having
a term not exceeding ninety (90) days representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business);
(c) the purchase or acquisition (in one or a series of transactions) of Property
of another Person that constitutes a business unit including the purchase of Oil
and Gas Properties or (d) the entering into of any guarantee of, or other
contingent obligation (including the deposit of any Equity Interests to be sold)
with respect to, Debt or other liability of any other Person and (without
duplication) any amount committed to be advanced, lent or extended to such
Person.
"Lease Operating Statement" or "LOS" has the meaning set forth in Section
9.01(c).
"Lenders" means the Revolving Lenders and the Term Lenders.
"Letters-in-Lieu" means letters-in-lieu substantially in the form of
Exhibit G.
"Liabilities" has the meaning assigned such term in Section 13.16.
"Lien" means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties. The term "Lien" shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Subsidiaries shall be deemed to
be the owner of any Property which they have acquired or hold subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.
11
"Loan Documents" means this Agreement, the Notes, the ORRI Conveyances,
the Warrant and the Security Instruments.
"Loans" means the Revolving Loans and the Term Loans.
"Lockbox Account" has the meaning assigned such term in Section 6.01(a).
"Lockbox Bank" has the meaning assigned such term in Section 6.01(a).
"Liabilities" has the meaning assigned such term in Section 13.16.
"Majority Lenders" means, at any time while any Loans are outstanding, the
Majority Revolving Lenders and the Majority Term Lenders.
"Majority Revolving Lenders" means (a) at any time while no Revolving
Loans are outstanding, the Administrative Agent and Revolving Lenders having
more than fifty percent (50%) of the total Commitments and (b) at any time while
any Revolving Loans are outstanding, the Administrative Agent and Revolving
Lenders holding more than fifty percent (50%) of the outstanding aggregate
principal amount of the Revolving Loans (without regard to any sale by a Lender
of a participation in any Revolving Loan under Section 13.04(c)).
"Majority Term Lenders" means at any time while the Term Loans are
outstanding, Term Lenders holding more than fifty percent (50%) of the
outstanding aggregate principal amount of the Term Loans (without regard to any
sale of a participation in any Term Loan under Section 13.04(c)).
"Material Adverse Effect" means a material adverse change in, or material
adverse effect on (a) the business, operations, Property, liabilities (actual or
contingent), condition (financial or otherwise) or prospects of the Borrower and
its Subsidiaries taken as a whole, (b) the ability of the Borrower, any of its
Subsidiaries or any Guarantor to perform any of its obligations under any Loan
Document to which it is a party, (c) the validity or enforceability of any Loan
Document or (d) the rights and remedies of or benefits available to the
Administrative Agent, any other Agent or any Lender under any Loan Document.
"Material Agreements" has the meaning set forth in Section 8.23.
"Material Indebtedness" means Debt, or obligations in respect of one or
more Swap Agreements, of any one or more of the Borrower and its Subsidiaries in
an aggregate principal amount exceeding $400,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of the Borrower
or any of its Subsidiaries in respect of any Swap Agreement at any time shall be
the Swap Termination Value.
12
"Mortgaged Property" means any Property owned by the Borrower or any
Guarantor which is subject to the Liens existing and to exist under the terms of
the Security Instruments.
"Multiemployer Plan" means a Plan which is a multiemployer plan as defined
in section 3(37) or 4001 (a)(3) of ERISA.
"New Albany Debt" means $1,700,000 bridge loan from Lakewood Group, LLC,
pursuant to Senior Secured Debenture, dated as of March 15, 2007, issued by the
Borrower to Lakewood Group, LLC.
"New Borrowing Base Notice" has the meaning assigned such term in Section
2.06(d).
"Net Cash Proceeds" means, with respect to the sale of any Equity
Interests of the Borrower, all cash received by the Borrower or any of its
Subsidiaries from such sale after payment of, or provision for, all underwriter
fees and expenses, SEC and blue sky fees, printing costs, fees and expenses of
accountants, lawyers and other professional advisors, brokerage commissions and
other out-of-pocket fees and expenses actually incurred in connection with such
sale of Equity Interests.
"Notes" means the promissory notes of the Borrower described in Section
2.02(c) and being substantially in the form of Exhibit A-1 or Exhibit A-2, as
applicable, together with all amendments, modifications, replacements,
extensions and rearrangements thereof.
"Oil and Gas Properties" means (a) Hydrocarbon Interests; (b) the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c)
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon
Interests; (d) all operating agreements, contracts and other agreements,
including production sharing contracts and agreements, which relate to any of
the Hydrocarbon Interests or the production, sale, purchase, exchange or
processing of Hydrocarbons from or attributable to such Hydrocarbon Interests;
(e) all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, including all oil in tanks, and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment, rental equipment or other personal Property which
may be on such premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇
or other ▇▇▇▇▇, buildings, structures, fuel separators, liquid extraction
plants, plant compressors, pumps, pumping units, field gathering systems, tanks
and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements, cables,
wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements
and servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing.
13
"Operating Costs" means all costs (net to the Borrower and its
Subsidiaries) associated with the direct operation of the Borrower's and its
Subsidiaries' Oil and Gas Properties.
"ORRI Assignments" means that certain Assignment of Overriding Royalty
Interest in the form attached hereto as Exhibit G from the Borrower to Lenders.
"Other Boards" has the meaning assigned such term in Section 9.23.
"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or Property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement and any other Loan Document.
"Participant" has the meaning set forth in Section 13.04(c)(i).
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any employee pension benefit plan, as defined in section 3(2)
of ERISA, which (a) is currently or hereafter sponsored, maintained or
contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at
any time during the six calendar years preceding the date hereof, sponsored,
maintained or contributed to by the Borrower or a Subsidiary or an ERISA
Affiliate.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time in The Wall Street Journal as the prime rate; each change in The
Wall Street Journal's quotation of the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective. In the
event that The Wall Street Journal is no longer published or does not have a
quotation for the Prime Rate, Lenders will utilize the Prime rate of Interest
quoted by JPMorgan Chase Bank or such other financial institution or publication
that is nationally recognized that the Administrative Agent may select.
Notwithstanding anything to the contrary, for all purposes of this Agreement,
the Prime Rate shall never be less than seven and one-half percent (7.50%).
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, including, without
limitation, cash, securities, accounts and contract rights.
"Proposed Borrowing Base" has the meaning assigned to such term in Section
2.06(c)(i).
"Proposed Borrowing Base Notice" has the meaning assigned to such term in
Section 2.06(c)(ii).
"Proved Developed Producing Reserves" has the meaning set forth in the SPE
Definitions, as adjusted by the Administrative Agent.
14
"Proved Developed Non-Producing Reserves" has the meaning set forth in the
SPE Definitions, as adjusted by the Administrative Agent.
"Proved Reserves" has the meaning set forth in the SPE Definitions, as
adjusted by the Administrative Agent.
"Proved Undeveloped Reserves" has the meaning set forth in the SPE
Definitions, as adjusted by the Administrative Agent.
"PSA" has the meaning given such term in the definition of "Acquisition
Documents".
"Rating Agencies" has the meaning assigned to such term in Section 13.16.
"Redemption" means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, or defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt. "Redeem" has the correlative meaning thereto.
"Redetermination Date" means, with respect to any Scheduled
Redetermination or any Interim Redetermination, the date that the redetermined
Borrowing Base related thereto becomes effective pursuant to Section 2.06(d).
"Register" has the meaning assigned such term in Section 13.04(b)(iv).
"Regulation D" means Regulation D of the Board, as the same may be
amended, supplemented or replaced from time to time.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors (including attorneys, accountants and experts) of such Person and
such Person's Affiliates.
"Release" means any depositing, spilling, leaking, pumping, pouring,
placing, emitting, discarding, abandoning, emptying, discharging, migrating,
injecting, escaping, leaching, dumping, or disposing.
"Remedial Work" has the meaning assigned such term in Section 9.10(a).
"Repayment" has the meaning assigned such term in Section 9.19(b).
"Repayment Date" means the date that is 180 days after the Effective Date.
15
"Reserve Report" means the Initial Reserve Report and each other report
delivered pursuant to Section 9.12, each in form and substance satisfactory to
the Lenders in their sole discretion (including, without limitation, the use of
satisfactory methodologies and risk analyses), setting forth, the updated
estimates of Proved Developed Producing Reserves, Proved Developed Non-Producing
Reserves, and Proved Undeveloped Reserves and projected production profiles and
overall economics of the Oil and Gas Properties, together with a projection of
the rate of production and future cash flows as of such date, based on the
following pricing assumptions:
(a) oil and gas prices (as adjusted by Administrative Agent for btu
content and quality) will be determined by Administrative Agent based on
Administrative Agent's then current forward product pricing curve, which prices
will be adjusted to reflect location and quality differentials and hedging
arrangements then in place;
(b) cash flow will be determined based on the Borrower's net
production (projected production profile less royalty volumes adjusted for
working interest ownership) multiplied by above prices, less (x) the Operating
Costs and production and severance taxes and (y) capital expenditures including
any (net) abandonment costs; and
(c) Operating Costs and production and severance taxes shall be
based on actual costs.
"Responsible Officer" means, as to any Person, the Chief Executive
Officer, the President, any Financial Officer or any Vice President of such
Person. Unless otherwise specified, all references to a Responsible Officer
herein shall mean a Responsible Officer of the Borrower.
"Restricted Payment" means any dividend or other distribution (whether in
cash, securities or other Property) with respect to any Equity Interests in the
Borrower, or any payment (whether in cash, securities or other Property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in the Borrower or any option, warrant or other right to
acquire any such Equity Interests in the Borrower.
"Revenues" means all revenues earned by or on behalf of the Borrower and
its Subsidiaries with respect to the following: (a) sales of Hydrocarbons from
the Oil and Gas Properties (including any other working interest owner receipts
received by Borrower or its Affiliates as operator of Oil and Gas Properties),
(b) cash representing operating revenue earned or to be earned by the Borrower
and its Subsidiaries, (c) any insurance proceeds received by the Borrower or its
Subsidiaries, (d) any proceeds from Swap Agreements, and (e) any other cash or
cash equivalents received by the Borrower or its Subsidiaries from whatever
source; provided that neither advances under the Loans nor proceeds from the
sale of Borrower's Equity Interests shall constitute "Revenues".
"Revolving Borrowing" shall mean a Borrowing comprised of Revolving Loans.
"Revolving Exposure" means, with respect to any Revolving Lender at any
time, the outstanding principal amount of such Revolving Lender's Revolving
Loans.
"Revolving Lender" means a Person listed on Part A of Annex I as a Lender
and any Person that shall have become a party hereto pursuant to an Assignment
and Assumption, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Assumption.
"Revolving Loans" means the loans made by the Revolving Lenders to the
Borrower pursuant to Section 2.01.
16
"Revolving Maturity Date" means the earlier to occur of (a) April 12, 2010
and (b) the date that the aggregate Commitments are sooner terminated pursuant
to Section 2.05(b) or Section 11.02.
"Revolving Notes" shall mean Notes issued pursuant to Section 2.02(c)
evidencing Revolving Loans.
"Scheduled Redetermination Date" means the date on which the Borrowing
Base that has been redetermined pursuant to a Scheduled Redetermination becomes
effective as provided in Section 2.06(d).
"Scheduled Redetermination" has the meaning assigned such term in Section
2.06(b).
"SEC" means the Securities and Exchange Commission or any successor
Governmental Authority.
"Secured Hedge Obligations" means all obligations of the Borrower or any
Subsidiary under any Swap Agreement entered into by (a) the Borrower or any
Subsidiary and (b) any Secured Swap Provider.
"Secured Swap Provider" means any Person that (a) is a Lender or any
Affiliate of any Lender, (b) becomes a party to a Swap Agreement with the
Borrower or any of its Subsidiaries while such Person (or such Person's
Affiliate) is a Lender and (c) continues to be a Lender while such Swap
Agreement is in effect (e.g., a Lender or its Affiliate, as applicable, ceases
to be a Secured Swap Provider if such Lender or Affiliate, as applicable, ceases
to be a Lender under this Agreement).
"Securitization" has the meaning assigned such term in Section 13.16.
"Securitization Parties" has the meaning assigned such term in Section
13.16.
"Security Instruments" means the Guaranty Agreement, mortgages, deeds of
trust and other agreements, instruments or certificates described or referred to
in Exhibit E, and any and all other agreements, instruments, consents or
certificates now or hereafter executed and delivered by the Borrower or any
other Person (other than Swap Agreements with the Lenders or any Affiliate of a
Lender or participation or similar agreements between any Lender and any other
lender or creditor with respect to any Indebtedness pursuant to this Agreement)
in connection with, or as security for the payment or performance of the
Indebtedness, the Notes, this Agreement, as such agreements may be amended,
modified, supplemented or restated from time to time.
"Semi-Annual Redetermination" has the meaning assigned in Section 2.06(b).
"SPE Definitions" means, with respect to any term, the definition thereof
adopted by the Board of Directors, Society for Petroleum Engineers (SPE) Inc.,
March 1997.
"Subsidiary" means (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner. Unless otherwise indicated herein, each reference to the term
"Subsidiary" shall mean a Subsidiary of the Borrower.
17
"Swap Agreement" means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement, whether
exchange traded, "over-the-counter" or otherwise, involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the
Subsidiaries shall be a Swap Agreement.
"Swap Termination Value" means, in respect of any one or more Swap
Agreements, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Agreements, (a) for any date on or after
the date such Swap Agreements have been closed out and termination value(s)
determined in accordance therewith, such termination value(s) and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
▇▇▇▇-to-market value(s) for such Swap Agreements, as determined by the
counterparties to such Swap Agreements.
"Synthetic Leases" means, in respect of any Person, all leases which shall
have been, or should have been, in accordance with GAAP, treated as operating
leases on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Termination Date" means the latest to occur of the Revolving Maturity
Date and the Term Maturity Date.
"Term Lender" means a Person listed on Part B of Annex I as a Term Lender
and any Person that shall have become a party hereto pursuant to an Assignment
and Assumption, other than any such Person that ceases to be a party hereto
pursuant to an Assignment and Assumption.
"Term Loans" has the meaning assigned such term in Section 7.02.
"Term Loan Borrowing Request" means a request by the Borrower for the Term
Borrowing in accordance with Section 2.03(b).
18
"Term Loan Commitment" means, with respect to any Term Lender, its Term
Loan Percentage of $20,300,000, as set forth on Annex I.
"Term Loan Funding Date" means the date on which the conditions specified
in Section 7.02 are satisfied (or waived in accordance with Section 13.02),
which date shall occur on or before the date set forth in Section 7.02.
"Term Loan Percentages" means, with respect to any Term Lender, the
percentage set forth in the column titled "Term Loan Percentage" on Part B of
Annex I for such Term Lender or in the Assignment pursuant to which such Term
Lender becomes a party hereto, as applicable.
"Term Loan Rate" means, with respect to the Term Loan, the rate per annum
equal to the Prime Rate plus three percent (3%).
"Term Maturity Date" shall mean the earlier to occur of (a) the date that
is three years and six months after the Effective Date or (b) the date the Term
Loans are accelerated pursuant to Section 11.02.
"Term Notes" shall mean Notes issued pursuant to Section 2.02(c)
evidencing Term Loans.
"Total Debt" means, at any date, all Debt of the Borrower and the
Consolidated Subsidiaries on a consolidated basis, excluding (a) non-cash
obligations under FAS 133 and (b) accounts payable and other accrued liabilities
(for the deferred purchase price of Property or services) from time to time
incurred in the ordinary course of business which are not greater than sixty
(60) days past the date of invoice or delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP.
"Total Proved Reserves" has the meaning set forth in the SPE Definitions,
as may be adjusted by the Administrative Agent.
"Transactions" means, with respect to (a) the Borrower, the execution,
delivery and performance by the Borrower of this Agreement, each other Loan
Document and Acquisition Document to which it is a party, the Acquisition, the
borrowing of Loans, the use of the proceeds thereof, and the grant of Liens by
the Borrower on Mortgaged Properties and other Properties pursuant to the
Security Instruments and (b) each Guarantor, the execution, delivery and
performance by such Guarantor of each Loan Document and Acquisition Document to
which it is a party, the Acquisition, the guaranteeing of the Indebtedness and
the other obligations under the Guaranty Agreement by such Guarantor and such
Guarantor's grant of the security interests and provision of collateral under
the Security Instruments, and the grant of Liens by such Guarantor on Mortgaged
Properties and other Properties pursuant to the Security Instruments.
"Warrant" means the Warrant Agreement substantially in the form of Exhibit
C whereby Borrower grants to the Lenders, in the aggregate, 3,200,000 shares of
common stock of Borrower with a strike price of $0.50 per share.
19
"Wholly-Owned Subsidiary" means any Subsidiary of which all of the
outstanding Equity Interests (other than any directors' qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by the Borrower
or one or more of the Wholly-Owned Subsidiaries or are owned by the Borrower and
one or more of the Wholly-Owned Subsidiaries.
Section 1.02 Terms Generally; Rules of Construction. The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Loan Documents), (b) any reference herein to any law shall be construed as
referring to such law as amended, modified, codified or reenacted, in whole or
in part, and in effect from time to time, (c) any reference herein to any Person
shall be construed to include such Person's successors and assigns (subject to
the restrictions contained in the Loan Documents), (d) the words "herein",
"hereof" and "hereunder", and words of similar import, shall be construed to
refer to this Agreement in its entirety and not to any particular provision
hereof, (e) with respect to the determination of any time period, the word
"from" means "from and including" and the word "to" means "to and including" and
(f) any reference herein to Articles, Sections, Annexes, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Annexes, Exhibits
and Schedules to, this Agreement. No provision of this Agreement or any other
Loan Document shall be interpreted or construed against any Person solely
because such Person or its legal representative drafted such provision.
Section 1.03 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which Borrower's independent
certified public accountants concur and which are disclosed to Administrative
Agent on the next date on which financial statements are required to be
delivered to the Lenders pursuant to Section 9.01(a); provided that, unless the
Borrower and the Majority Lenders shall otherwise agree in writing, no such
change shall modify or affect the manner in which compliance with the covenants
contained herein is computed such that all such computations shall be conducted
utilizing financial information presented consistently with prior periods.
20
ARTICLE II:
THE CREDITS
Section 2.01 Commitment. Subject to the terms and conditions set forth
herein:
(a) each Revolving Lender agrees to make Revolving Loans to the
Borrower during the Availability Period in an aggregate principal amount that
will not result in such Revolving Lender's Revolving Exposure exceeding an
amount equal to the lesser of such Revolving Lender's Commitment and (ii) its
Applicable Percentage of the then effective Borrowing Base. At no time shall the
total Revolving Exposure of all Revolving Lenders exceed the Commitments. Within
the foregoing limits and subject to the terms and conditions set forth herein,
the Borrower may borrow, repay and reborrow the Revolving Loans; and
(b) each Term Lender agrees to make its Term Loan Percentage of the
Term Loan on the Term Loan Funding Date.
Section 2.02 Loans and Borrowings.
(a) Borrowings; Several Obligations. Each Revolving Loan shall be
made as part of a Revolving Borrowing consisting of Revolving Loans made by the
Revolving Lenders ratably in accordance with their respective Commitments. The
Term Loan shall be made by the Term Lenders ratably in accordance with their
Term Loan Percentages. The failure of any Lender to make any Loan required to be
made by it shall not relieve any other Lender of its obligations hereunder;
provided that the Term Loan Commitments, the Term Loan Commitments and the
Commitments are several and no Lender shall be responsible for any other
Lender's failure to make Loans as required.
(b) Minimum Amounts; Limitation on Number of Borrowings. For any
Revolving Borrowing, such Revolving Borrowing shall be in an aggregate amount
that is an integral multiple of $500,000 and not less than $1,000,000. There
shall not at any time be more than a total of six (6) Revolving Loans
outstanding.
(c) Notes. The Loans made by each Lender shall be evidenced by a
single promissory note of the Borrower in substantially the form of Exhibit A-1,
with respect to Revolving Loans, and Exhibit A-2 with respect to Term Loans, as
applicable. Each such Note shall be dated, in the case of (i) any Lender party
hereto as of the date of this Agreement, as of the date of this Agreement, or
(ii) any Lender that becomes a party hereto pursuant to an Assignment and
Assumption, as of the effective date of the Assignment and Assumption, payable
to the order of such Lender in a principal amount equal to its Commitment, its
Term Loan Commitment as in effect on such date, and otherwise duly completed. If
any Revolving Lender's Commitment increases or decreases for any reason (whether
pursuant to Section 2.05, Section 13.04(b) or otherwise), the Borrower shall
deliver or cause to be delivered on the effective date of such increase or
decrease, a new Note payable to the order of such Revolving Lender in a
principal amount equal to its Commitment, after giving effect to such increase
or decrease, and otherwise duly completed. The date, amount, interest rate and,
if applicable, Interest Period of each Loan made by each Lender, and all
payments made on account of the principal thereof, shall be recorded by such
Lender on its books for its Note, and, prior to any transfer, may be endorsed by
such Lender on a schedule attached to such Note or any continuation thereof or
on any separate record maintained by such Lender. Failure to make any such
notation or to attach a schedule shall not affect any Lender's or the Borrower's
rights or obligations in respect of such Loans or affect the validity of such
transfer by any Lender of its Note.
21
Section 2.03 Requests for Borrowings.
(a) Revolving Borrowings. To request a Revolving Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone not
later than 10:00 a.m., New York City time, four Business Days before the date of
the proposed Revolving Borrowing. Each such telephonic Borrowing Request shall
be irrevocable and shall be confirmed promptly by hand delivery or telecopy to
the Administrative Agent of a written Borrowing Request in substantially the
form of Exhibit B-1 and signed by the Borrower. Each such telephonic and written
Borrowing Request shall specify the following information in compliance with
Section 2.02: (i) the aggregate amount of the requested Revolving Borrowing;
(ii) the date of such Revolving Borrowing, which shall be a Business Day; (iii)
the amount of the then effective Borrowing Base, the current total Revolving
Exposures (without regard to the requested Borrowing) and the pro forma total
Revolving Exposures (giving effect to the requested Borrowing); and (iv) the
location and number of the Borrower's account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.04. Each
Borrowing Request shall constitute a representation that the amount of the
requested Revolving Borrowing shall not cause the total Revolving Exposures to
exceed the lesser of the Commitments and the then-effective Borrowing Base.
Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03(a), the Administrative Agent shall advise each Revolving Lender of
the details thereof and of the amount of such Revolving Lender's Revolving Loan
to be made as part of the requested Revolving Borrowing.
(b) Term Borrowings. To request that a Term Loan be made in the case
of the Term Loan, the Borrower shall notify the Administrative Agent of such
request by telephone not later than 10:00 a.m., New York City time on a date
that is at least four Business Days prior to the Effective Date unless a later
date is agreed to by the Administrative Agent. Such telephonic Borrowing
Requests shall be irrevocable and shall be confirmed promptly by hand delivery
or telecopy to the Administrative Agent of a written Term Loan Borrowing Request
in substantially the form of Exhibit B-2 and signed by the Borrower. Such
telephonic and written Term Loan Borrowing Request shall specify the following
information in compliance with Section 2.02: (i) the aggregate amount of the
requested Term Borrowing; (ii) the date of such Term Borrowing, which shall be a
Business Day at least four Business Days prior to the Effective Date unless a
later date is agreed to by the Administrative Agent; and (iii) the location and
number of the Borrower's account to which funds are to be disbursed, which shall
comply with the requirements of Section 2.04. Promptly following receipt of a
Term Loan Borrowing Request in accordance with this Section 2.03(b), the
Administrative Agent shall advise each Term Lender of the details thereof and of
the amount of such Term Lender's Term Loan to be made as part of the requested
Term Borrowing.
Section 2.04 Funding of Borrowings.
(a) Funding by Lenders. Each Revolving Lender and Term Lender shall
make each Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds by 10:00 a.m., New York City time, to
the account of the Administrative Agent most recently designated by it for such
purpose by notice to the Lenders. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in like
funds, to an account of the Borrower maintained in New York, New York and
designated by the Borrower in the Borrowing Request; provided that the
Administrative Agent, at its election, may elect to deposit all such Loans in
the Lockbox Account or to make payment directly to the Person that Borrower will
ultimately pay with the proceeds of any Loan. Nothing herein shall be deemed to
obligate any Lender to obtain the funds for its Loan in any particular place or
manner or to constitute a representation by any Lender that it has obtained or
will obtain the funds for its Loan in any particular place or manner.
22
(b) Presumption of Funding by the Lenders. Unless the Administrative
Agent shall have received notice from a Lender prior to the proposed date of any
Borrowing that such Lender will not make available to the Administrative Agent
such Lender's share of such Borrowing, the Administrative Agent may assume that
such Lender has made such share available on such date in accordance with
Section 2.04(a) and may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. In such event, if a Lender has not in fact made
its share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from and including the date such amount is made available
to the Borrower to but excluding the date of payment to the Administrative
Agent, at (i) in the case of such Lender, the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation or (ii) in the case of the
Borrower, the interest rate applicable to the applicable Loan. If such Lender
pays such amount to the Administrative Agent, then such amount shall constitute
such Lender's Loan included in such Borrowing.
Section 2.05 Termination/Reduction of Commitments.
(a) Scheduled Termination of Commitments. Unless previously
terminated, the Commitments shall terminate on the Revolving Maturity Date. If,
at any time, the Commitments or the Borrowing Base is terminated or reduced to
zero, then the Commitments shall terminate on the effective date of such
termination or reduction.
(b) Optional Termination and Reduction of Commitments.
(i) The Borrower may at any time terminate, or from time to
time reduce, the Commitments; provided that (A) each reduction of the
Commitments shall be in an amount that is an integral multiple of $1,000,000 and
not less than $1,000,000 and (B) the Borrower shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the
Revolving Loans in accordance with Section 3.02(d), the total Revolving
Exposures would exceed the lesser of the Borrowing Base then in effect and the
Commitments.
(ii) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under Section 2.05(b)(i) at
least four Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Revolving Lenders of the contents thereof. Each notice delivered by the Borrower
pursuant to this Section 2.05(b)(ii) shall be irrevocable. Any termination or
reduction of the Commitments shall be permanent and may not be reinstated. Each
reduction of the Commitments shall be made ratably among the Revolving Lenders
in accordance with each Revolving Lender's Applicable Percentage.
23
Section 2.06 Borrowing Base.
(a) Initial Borrowing Base. For the period from and including the
Effective Date to but excluding the first Redetermination Date, the amount of
the Borrowing Base shall be Eleven Million Seven Hundred Thirteen Thousand Two
Hundred Twenty Four Dollars ($11,713,224). Notwithstanding the foregoing, the
Borrowing Base may be subject to further adjustments from time to time pursuant
to Section 9.13(c).
(b) Scheduled and Interim Redeterminations. The Borrowing Base shall
be redetermined, semi-annually (a "Semi-Annual Redetermination" or a "Scheduled
Redetermination") all in accordance with this Section 2.06. Subject to Section
2.06(d), a Semi-Annual Redetermination shall become effective and applicable to
the Borrower, the Administrative Agent and the Revolving Lenders on September
15th and March 15th of each year, commencing September 15, 2007. In addition,
after the first year anniversary of the Effective Date, the Administrative Agent
may, at the direction of the Majority Revolving Lenders, by notifying the
Borrower thereof, one time during any 12 month period, elect to cause the
Borrowing Base to be redetermined between Semi-Annual Redeterminations (an
"Interim Redetermination") in accordance with this Section 2.06.
(c) Scheduled and Interim Redetermination Procedure.
(i) Each Scheduled Redetermination and each Interim
Redetermination shall be effectuated as follows: Upon receipt by the
Administrative Agent of (A) the Reserve Report and the certificate required to
be delivered by the Borrower to the Administrative Agent, in the case of a
Scheduled Redetermination, pursuant to Section 9.12(a), (a) and (c), and, in the
case of an Interim Redetermination, pursuant to Section 9.12(b) and (c), and (B)
such other reports, data and supplemental information, including, without
limitation, the information provided pursuant to Section 9.12(c), as may, from
time to time, be reasonably requested by the Majority Revolving Lenders (the
Reserve Report, such certificate and such other reports, data and supplemental
information being the "Engineering Reports"), the Administrative Agent shall
evaluate the information contained in the Engineering Reports and shall, in good
faith, propose a new Borrowing Base (the "Proposed Borrowing Base") based upon
such information and such other information (including, without limitation, the
status of title information with respect to the Oil and Gas Properties as
described in the Engineering Reports and the existence of any other Debt) as the
Administrative Agent deems appropriate in its sole discretion and consistent
with its normal oil and gas lending criteria as such exists at the particular
time. In no event shall the Proposed Borrowing Base exceed the Commitments.
(ii) The Administrative Agent shall notify the Borrower and
the Revolving Lenders of the Proposed Borrowing Base (the "Proposed Borrowing
Base Notice"):
(A) in the case of a Semi-Annual Redetermination, (1) if
the Administrative Agent shall have received the Engineering Reports required to
be delivered by the Borrower pursuant to Section 9.12(a) and (c) in a timely and
complete manner, then on or before September 15th and March 15th of such year
following the date of delivery or (2) if the Administrative Agent shall not have
received the Engineering Reports required to be delivered by the Borrower
pursuant to Section 9.12(a) and (c) in a timely and complete manner, then
promptly after the Administrative Agent has received complete Engineering
Reports from the Borrower and has had a reasonable opportunity to determine the
Proposed Borrowing Base in accordance with Section 2.06(c)(i); and
24
(B) in the case of an Interim Redetermination, promptly,
and in any event, within fifteen (15) days after the Administrative Agent has
received the required Engineering Reports.
(iii) Any Proposed Borrowing Base that would increase the
Borrowing Base then in effect must be approved or deemed to have been approved
by all of the Revolving Lenders as provided in this Section 2.06(c)(iii) and any
Proposed Borrowing Base that would decrease or maintain the Borrowing Base then
in effect must be approved or be deemed to have been approved by the Majority
Revolving Lenders as provided in this Section 2.06(c)(iii). Upon receipt of the
Proposed Borrowing Base Notice, each Revolving Lender shall have ten (10) days
to agree with the Proposed Borrowing Base or disagree with the Proposed
Borrowing Base by proposing an alternate Borrowing Base. If at the end of such
ten (10) days, any Revolving Lender has not communicated its approval or
disapproval in writing to the Administrative Agent, such silence shall be deemed
to be an approval of the Proposed Borrowing Base. If, at the end of such 10-day
period, all of the Revolving Lenders, in the case of a Proposed Borrowing Base
that would increase the Borrowing Base then in effect, or the Majority Revolving
Lenders, in the case of a Proposed Borrowing Base that would decrease or
maintain the Borrowing Base then in effect, have approved or deemed to have
approved the Proposed Borrowing Base, as aforesaid, then the Proposed Borrowing
Base shall become the new Borrowing Base, effective on the date specified in
Section 2.06(d). If, however, at the end of such 10-day period, all of the
Lenders or the Majority Revolving Lenders, as applicable, have not approved or
deemed to have approved, as aforesaid, then the Administrative Agent shall poll
the Revolving Lenders to ascertain the highest Borrowing Base then acceptable to
the number of Revolving Lenders sufficient to constitute the Majority Revolving
Lenders for purposes of this Section 2.06 and, so long as such amount does not
increase the Borrowing Base then in effect, such amount shall become the new
Borrowing Base, effective on the date specified in Section 2.06(d).
(d) Effectiveness of a Redetermined Borrowing Base. After a
redetermined Borrowing Base is approved or is deemed to have been approved by
all of the Lenders or the Majority Revolving Lenders, as applicable, pursuant to
Section 2.06(c)(iii), the Administrative Agent shall notify the Borrower and the
Revolving Lenders of the amount of the redetermined Borrowing Base (the "New
Borrowing Base Notice"), and such amount shall become the new Borrowing Base,
effective and applicable to the Borrower, the Administrative Agent and the
Lenders:
(i) in the case of a Semi-Annual Redetermination, (A) if the
Administrative Agent shall have received the Engineering Reports required to be
delivered by the Borrower pursuant to Section 9.12(a) and (c) in a timely and
complete manner, then on September 1st or March 1st, as applicable, following
such notice, or (B) if the Administrative Agent shall not have received the
Engineering Reports required to be delivered by the Borrower pursuant to Section
9.12(a) and (c) in a timely and complete manner, then on the Business Day next
succeeding delivery of such notice; and
(ii) in the case of an Interim Redetermination, on the
Business Day next succeeding delivery of such notice.
Such amount shall then become the Borrowing Base until the next Scheduled
Redetermination Date, the next Interim Redetermination Date or the next
adjustment to the Borrowing Base under Section 9.13(c) or Section 10.13,
whichever occurs first. Notwithstanding the foregoing, no Scheduled
Redetermination or Interim Redetermination shall become effective until the New
Borrowing Base Notice related thereto is received by the Borrower.
25
ARTICLE III:
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
Section 3.01 Repayment of Loans.
(a) Revolving Loans. The Borrower hereby unconditionally promises to
pay to the Administrative Agent for the account of each Revolving Lender the
then unpaid principal amount of each Revolving Loan on the Revolving Maturity
Date.
(b) Term Loans. The Borrower hereby unconditionally promises to pay
to the Administrative Agent for the account of each Term Lender the then unpaid
principal amount of the Term Loans on the Term Maturity Date.
Section 3.02 Prepayments.
(a) Optional Revolving Loan Prepayments. The Borrower shall have the
right at any time and from time to time to prepay any Revolving Loan in whole or
in part, subject to prior notice in accordance with Section 3.02(c) without
premium or penalty.
(b) Optional Term Loan Prepayments. The Borrower shall have the
right to prepay the Term Loans in whole or in part, subject to prior notice in
accordance with Section 3.02(c) without premium or penalty.
(c) Notice and Terms of Optional Prepayment. The Borrower shall
notify the Administrative Agent by telephone (confirmed by telecopy) of any
prepayment hereunder not later than 10:00 a.m., New York City time, ten Business
Days before the date of prepayment. Each such notice shall be irrevocable and
shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be prepaid and whether the Borrower is prepaying a Revolving
Borrowing or a Term Borrowing. Promptly following receipt of any such notice
relating to a Borrowing, the Administrative Agent shall advise the applicable
Lenders of the contents thereof. Each partial prepayment of any Borrowing shall
be in an amount that would be permitted in the case of an advance of a Borrowing
as provided in Section 2.02. Each prepayment of a Borrowing shall be applied
ratably to the applicable Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section 3.03.
(d) Mandatory Prepayments of Loans.
(i) If, at any time, the total Revolving Exposure exceeds the
lesser of the total Commitments and the then-effective Borrowing Base, then the
Borrower shall prepay the Revolving Loans in accordance with subsection (ii)
below.
26
(ii) If the Borrower is obligated to make a prepayment as
required pursuant to this Section 3.02(d), then (A) in the case of a change in
the Borrowing Base pursuant to Section 2.06, such prepayment and/or deposit
shall be made in no more than three (3) substantially equal monthly
installments, with the first such payment being due and payable within ten (10)
Business Days following the Borrower's receipt of the New Borrowing Base Notice
in accordance with Section 2.06(d), in the case of any adjustment to the
Borrowing Base pursuant to Section 10.13, the Borrower shall be obligated to
make such prepayment within three Business Days after the date it receives cash
proceeds as a result of such disposition and (C) with any respect to any other
prepayment required pursuant to this Section 3.02(d), such prepayment and/or
deposit shall be made on the date such excess occurs; provided that all payments
required to be made pursuant to this Section 3.02(d) must be made on or prior to
the Revolving Maturity Date.
(iii) If as of the last Business Day of any month the Lockbox
Account has in excess of $250,000 in it, Borrower will make a prepayment on the
Loans equal to the difference between the then current balance and $250,000 such
payments shall first be applied to the Revolving Loans then outstanding.
(iv) In the event that the Borrower or its Subsidiaries sell,
assign or otherwise dispose of any of their Oil and Gas Properties (other than
asset sales permitted by Section 10.13, then the Borrower shall prepay the Loans
on the date of such sale or other disposition of the Oil and Gas Properties
occurs in an aggregate amount equal to the proceeds of such sale or disposition,
less the actual costs and fees associated with such sale or disposition provided
that such costs and fees are not in excess of 3% of the proceeds from such sale
or disposition which shall be applied first to the Revolving Loans then
outstanding.
(v) Each prepayment of Borrowings pursuant to this Section
3.02(d) shall be applied to the Revolving Loans then outstanding.
(vi) Each prepayment of Revolving Loans pursuant to this
Section 3.02(d) shall be applied ratably to the Revolving Loans included in the
prepaid Borrowings and shall be accompanied by accrued interest to the extent
required by Section 3.03.
(vii) Any payment or prepayment of the Loans shall be applied
first to the Revolving Loans. Only at such time that the principal balance of
Revolving Loans has been reduced to zero, will any payment or prepayment on the
Loans be applied to the Term Loans.
(e) No Premium or Penalty. Prepayments permitted or required under
this Section 3.02 shall be without premium or penalty.
Section 3.03 Interest.
(a) In General.
(i) Revolving Loans comprising each Revolving Borrowing shall
bear interest at the Prime Rate that is in effect from time to time, but in no
event to exceed the Highest Lawful Rate.
(ii) The Term Loans shall bear interest at the Term Loan Rate,
but in no event to exceed the Highest Lawful Rate.
27
(b) Post-Default Rate. Notwithstanding the foregoing, if an Event of
Default has occurred and is continuing, or if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower or any Guarantor
hereunder or under any other Loan Document is not paid when due, whether at
stated maturity, upon acceleration or otherwise, then all Loans outstanding, in
the case of an Event of Default, and such overdue amount, in the case of a
failure to pay amounts when due, shall bear interest, after as well as before
judgment, at a rate per annum equal to two percent (2%) plus the rate of
interest otherwise applicable to such Loan as provided in Section 3.03(a), but
in no event to exceed the Highest Lawful Rate.
(c) Interest Payment Dates. Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan and on the
Revolving Maturity Date (with respect to Revolving Loans) and on the Term
Maturity Date (with respect to Term Loans) as applicable; provided that (i)
interest accrued pursuant to Section 3.03(b) shall be payable on demand and (ii)
in the event of any repayment or prepayment of any Loan, accrued interest on the
principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment.
(d) Interest Rate Computations. All interest computed by reference
to the Prime Rate or the Term Loan Rate shall be computed on the basis of a year
of 360 days, unless such computation would exceed the Highest Lawful Rate, in
which case interest shall be computed on the basis of a year of 365 days (or 366
days in a leap year) and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day thereof). The applicable
Prime Rate and Term Loan Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error, and shall be
binding upon the parties hereto.
Section 3.04 Fees.
(a) Commitment Fee. On or prior to the Effective Date the Borrower
agrees to pay to the Administrative Agent, for the account of (i) each Revolving
Lender pro rata in accordance with their respective commitments, a commitment
fee equal to $173,102 in the aggregate, and (ii) each Term Lender pro rata in
accordance with their respective commitments, a commitment fee equal to $300,000
in the aggregate. In addition, on or prior to the date of any increase in the
Commitment, the Borrower agrees to pay to the Administrative Agent for the
benefit of the Revolving Lenders, pro rata in accordance with their respective
commitments, a commitment fee equal to product of (x) the positive difference
between (A) the amount of the Commitment after such increase in the Commitment
less (B) the greatest amount that the Commitment has been during the term of
this Agreement prior to the date of such increase multiplied by (y) the
Commitment Fee Rate.
(b) Administrative Agent Fees. Beginning on August 15, 2007 and
thereafter, the Borrower shall pay to the Administrative Agent a semi-annual
administrative fee of $25,000 on each February 15 and August 15 of each year
that this Agreement is in effect in arrears and on the Credit Agreement
Termination Date.
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ARTICLE IV:
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS.
Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) Payments by the Borrower. The Borrower shall make each payment
required to be made by it hereunder (whether of principal, interest, fees, or of
amounts payable under Section 5.01, Section 5.02 or otherwise) prior to 10:00
a.m., New York City time, on the date when due, in immediately available funds,
without defense, deduction, recoupment, set-off or counterclaim. Fees due and
payable hereunder, once paid, shall be fully earned and shall not be refundable
under any circumstances. Any amounts received after such time on any date may,
in the discretion of the Administrative Agent, be deemed to have been received
on the next succeeding Business Day for purposes of calculating interest
thereon. All such payments shall be made to the Administrative Agent at its
offices specified in Section 13.01, except that payments pursuant to Section
5.01, Section 5.02 and Section 13.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
under this Agreement shall be made in dollars.
(b) Application of Insufficient Payments. If at any time
insufficient funds are received by and available to the Administrative Agent to
pay fully all amounts of principal, interest and fees then due hereunder, such
funds shall be applied (i) first, towards payment of interest and fees then due
hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, towards
payment of principal then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of principal then due to such parties.
(c) Sharing of Payments by Lenders. If any Lender shall, by
exercising any right of set-off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Loans resulting in such
Lender receiving payment of a greater proportion of the aggregate amount of its
Loans and accrued interest thereon than the proportion received by any other
Lender, then the Lender receiving such greater proportion shall purchase (for
cash at face value) participations in the Loans of other Lenders to the extent
necessary so that the benefit of all such payments shall be shared by the
Lenders ratably in accordance with the aggregate amount of principal of and
accrued interest on their respective Loans and in the priority established by
Section 11.02(c); provided that (i) if any such participations are purchased and
all or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the extent
of such recovery, without interest, and (ii) the provisions of this Section
4.01(c) shall not be construed to apply to any payment made by the Borrower
pursuant to and in accordance with the express terms of this Agreement or any
payment obtained by a Lender as consideration for the assignment of or sale of a
participation in any of its Loans to any assignee or participant, other than to
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this Section 4.01(c) shall apply). The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
29
Section 4.02 Presumption of Payment by the Borrower. Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders the amount due. In such event, if the Borrower has not in fact made such
payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.
Section 4.03 Certain Deductions by the Administrative Agent. If any Lender
shall fail to make any payment required to be made by it pursuant to Section
2.04(b) or Section 4.02 then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender's obligations under such Sections until all such unsatisfied
obligations are fully paid.
Section 4.04 Disposition of Proceeds. The Security Instruments contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower's or
each Guarantor's interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property. The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby. Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower and its
Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to
take such actions as may be necessary to cause such proceeds to be paid to the
Borrower and/or such Subsidiaries.
30
ARTICLE V:
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES, ETC.
Section 5.01 Increased Costs.
(a) Capital Requirements. If any Lender shall be a bank or other
Person subject to any capital adequacy rules, and such Lender reasonably
determines that any Change in Law regarding capital requirements has or would
have the effect of reducing the rate of return on such Lender's capital or on
the capital of such Lender's holding company, if any, as a consequence of this
Agreement or the Loans made by Lenders hereunder, to a level below that which
such Lender or such Lender's holding company could have achieved but for such
Change in Law (taking into consideration such Lender's policies and the policies
of such Lender's holding company with respect to capital adequacy), then from
time to time the Borrower will pay to such Lender, as the case may be, such
additional amount or amounts as will compensate such Lender or such Lender's
holding company for any such reduction in rate of return suffered with respect
to the amounts advanced under the Loans.
(b) Certificates. A certificate of a Lender setting forth the amount
or amounts necessary to compensate such Lender or its holding company, as the
case may be, as specified in the immediately preceding subsection (a) shall be
delivered to the Borrower and shall be conclusive absent manifest error. The
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
(c) Effect of Failure or Delay in Requesting Compensation. Failure
or delay on the part of any Lender to demand compensation pursuant to this
Section 5.01 shall not constitute a waiver of such Lender's right to demand such
compensation.
Section 5.02 Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of
any obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.02), the Administrative Agent or Lenders (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower or such Guarantor shall make such
deductions and (iii) the Borrower or such Guarantor shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
(b) Payment of Other Taxes by the Borrower. The Borrower shall pay
any Other Taxes to the relevant Governmental Authority in accordance with
applicable law.
(c) Indemnification by the Borrower. The Borrower shall indemnify
the Administrative Agent and each Lender within 10 days after written demand
therefore, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent or such Lender, as the case may be, on or with respect
to any payment by or on account of any obligation of the Borrower hereunder
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 5.02) and any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate of the
Administrative Agent or a Lender as to the amount of such payment or liability
under this Section 5.02 shall be delivered to the Borrower and shall be
conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable, but in any event
within 30 days after receipt of a request by the Administrative Agent of
evidence of any payment of Indemnified Taxes or Other Taxes by the Borrower or a
Guarantor to a Governmental Authority, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
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ARTICLE VI
LOCKBOX PROCEDURES; CASUALTY PROCEEDS
Section 6.01 Lockbox Account.(a) The Borrower and the Administrative Agent
shall establish prior to the Effective Date and thereafter maintain at the
Borrower's expense an interest-bearing account (the "Lockbox Account") under
Administrative Agent's exclusive control with a bank (the "Lockbox Bank")
reasonably acceptable to the Lenders which has entered into an account control
agreement pursuant to which all Revenues to be received by the Borrower or its
Subsidiaries shall be deposited, and the Borrower shall direct (and hereby
agrees to direct) each payor of any Revenues of the borrower and its
Subsidiaries now and in the future to make payment to such Lockbox Account. The
Borrower hereby irrevocably appoints Administrative Agent as its
attorney-in-fact (and such appointment shall be deemed to be coupled with an
interest so long as any Loans remain outstanding) to address any direction
letter or letter-in-lieu of division order executed by the Borrower it may hold
and deliver or have delivered any such letter to any Person purchasing
Hydrocarbons from the Oil and Gas Properties that is not then directing payment
for such Hydrocarbons to the Lockbox Account.
(b) On the last Business Day of each month, the Administrative Agent
(on behalf of the Lenders) shall direct the Lockbox Bank to make the following
payments from the Lockbox Account in the following order of priority and to the
extent funds remain available:
(i) amounts to the Borrower to (A) pay overriding royalty
interests created under any ORRI Assignment and to pay other royalties and
overriding royalty interests (1) with respect to existing Oil and Gas
Properties, to the extent such burdens exist at the time of the execution of
this Agreement and (2) with respect to Oil and Gas Properties that Borrower
acquires subsequent to the date of this Agreement to the extent such burdens
exist at the time that the Borrower acquires such Oil and Gas Properties and is
payable to non-Affiliated third parties, and (B) remit any revenues attributable
to the working interests of non-Affiliated third parties that were paid to or
received by the Borrower, in each case, as the Lenders determine is reasonably
accurate in its good faith discretion and any applicable severance tax or
ad-valorem tax attributable to all proceeds received by the Borrower;
(ii) payment to any third party (including Lenders or any of
their Affiliates) of any amounts due under any Swap Agreement of the Borrower
approved by the Lenders;
(iii) Operating Costs approved by the Administrative Agent;
(iv) payment of any cash or cash equivalents representing
proceeds of insurance policies with respect to any casualty to any of the
Borrower's Property (the "Casualty Proceeds"), to the Casualty Proceeds Account
subject to and in accordance with the provisions of Section 6.03;
32
(v) payment of all fees owed to any of the Administrative
Agent or the Lenders then due and unpaid under Section 2.04;
(vi) payment of all interest then accrued and unpaid on the
Loans;
(vii) payment to the Administrative Agent and the Lenders of
any other amounts due (other than principal on the Loans) under this Agreement
and any of the other Loan Documents; and
(viii) payment of any General and Administrative Costs
provided that such amount withdrawn from the Lockbox Account with respect to
General and Administrative Costs shall not exceed $225,000 in any fiscal
quarter; and
(ix) payment of any amount required by Section 3.02(d)(iii),
to the extent applicable.
(c) The Administrative Agent may, at its option, apply sums in the
Lockbox Account to pay directly to the ultimate payee thereof some or all of the
payments described in Section 6.01, as the Lenders elect, including advances or
prepayment to third Persons of expenditures incurred in the ordinary course of
Borrower's operation of its Properties.
(d) Upon the Credit Agreement Termination Date, all amounts
remaining in the Lockbox Account shall be disbursed to the Borrower to the
Operating Account or such other account as Borrower may designate in writing to
the Administrative Agent.
Section 6.02 Notice. Immediately following the establishment of the
Lockbox Account, the Borrower shall send Direction Letters, to all Persons that
owe or are expected to owe Cash Receipts to the Borrower or its Subsidiaries,
directing such persons to forward all such amounts directly to the Lockbox
Account. The Borrower hereby irrevocably appoints the Administrative Agent as
its attorney-in-fact (such appointment being coupled with an interest) for
sending any such notice to any Person who is or may become obligated to make any
payment of Cash Receipts to the Borrower. After the establishment of the Lockbox
Account, with respect to Cash Receipts received directly by the Borrower, the
Borrower shall within three Business Days deposit, or cause to be deposited, all
such amounts in the Lockbox Account. If the Borrower has knowledge that any
Person is in receipt of Cash Receipts that would otherwise be properly deposited
in the Lockbox Account, the Borrower shall promptly notify such Person and the
Administrative Agent in writing of such circumstance and shall direct such
Person to deposit, or cause to be deposited, all such amounts in the Lockbox
Account.
Section 6.03 Casualty Proceeds. All Casualty Proceeds (for collateral
purposes) are hereby assigned by the Borrower to the Administrative Agent, and
the Borrower shall have the right to collect any such payments, and such
payments shall be deposited by the Lenders or the Administrative Agent in an
account at the Lockbox Bank controlled by Administrative Agent (the "Casualty
Proceeds Account"). In the event of any casualty, the Borrower shall deliver
within 30 days, a written report from an engineering firm acceptable to the
Lenders describing the nature of the casualty, the nature of any restoration
required, and a good faith estimate of the cost of such restoration. If the
Lenders in their sole discretion determine that the remediation is not in its
best interests, given the cost of such restoration and the effect such
restoration would have on the amount and timing of repayment of the Loans, then
the Lenders may apply such Casualty Proceeds to the prepayment of the
outstanding principal balance and accrued interest of the Loans and the other
Indebtedness, whether or not such Indebtedness is then due and payable. If the
Lenders determine that such Casualty Proceeds shall be used for restoration,
then the proceeds shall be disbursed from the Casualty Proceeds Account for such
restoration in accordance with procedures reasonably determined by the Lenders
consistent with construction loan funding principles. Notwithstanding the
foregoing, if the Lenders determine that the Casualty Proceeds shall be used for
restoration and such Casualty Proceeds are less than $50,000, then such amount
shall be disbursed from the Casualty Proceeds Account to the Borrower and the
Borrower shall utilize such proceeds solely for restoration of such casualty.
33
ARTICLE VII:
CONDITIONS PRECEDENT
Section 7.01 Effective Date. This Agreement and the obligations of the
Revolving Lenders to make Revolving Loans hereunder shall not become effective
until the date on which each of the following conditions are satisfied (or
waived in accordance with Section 13.02):
(a) The Administrative Agent, the Arranger and the Lenders shall
have received all fees and other amounts due and payable on or prior to date
such fees have become due and payable, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses required to be reimbursed
or paid by the Borrower hereunder.
(b) The Administrative Agent shall have received a certificate of
the Secretary or an Assistant Secretary of the Borrower setting forth (i)
resolutions of its board of directors with respect to the authorization of the
Borrower to execute and deliver the Loan Documents to which it is a party and to
enter into the transactions contemplated in those documents, (ii) the officers
of the Borrower (A) who are authorized to sign the Loan Documents to which the
Borrower is a party and (B) who will, until replaced by another officer or
officers duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other communications in
connection with this Agreement and the transactions contemplated hereby, (iii)
specimen signatures of such authorized officers, and (iv) the articles or
certificate of incorporation and bylaws of the Borrower, certified as being true
and complete. The Administrative Agent and the Lenders may conclusively rely on
such certificate until the Administrative Agent receives notice in writing from
the Borrower to the contrary.
(c) The Administrative Agent shall have received certificates of the
appropriate State agencies with respect to the existence, qualification and good
standing of the Borrower.
(d) The Administrative Agent shall have received a compliance
certificate which shall be substantially in the form of Exhibit D, duly and
properly executed by a Responsible Officer and dated as of the date of Effective
Date.
(e) The Administrative Agent shall have received from each party
hereto counterparts (in such number as may be requested by the Administrative
Agent) of this Agreement signed on behalf of such party.
34
(f) The Administrative Agent shall have received duly executed Notes
payable to the order of each Revolving Lender in a principal amount equal to its
initial Commitment dated as of the date hereof.
(g) The Borrower shall have delivered to the Administrative Agent a
Revolving Borrowing Request in the amount of $9,713,224.
(h) The Administrative Agent shall have received from the Borrower
duly executed counterparts of the ORRI Assignments for each Lender or their
designee with respect to the Oil and Gas Properties of the Borrower as of the
date of such funding as provided for herein.
(i) The Administrative Agent shall have received from each party
thereto duly executed counterparts of the Warrant Agreement.
(j) The Administrative Agent shall have received from each party
thereto duly executed counterparts (in such number as may be requested by the
Administrative Agent) of the Security Instruments described on Exhibit I. In
connection with the execution and delivery of such documents, the Administrative
Agent shall be reasonably satisfied that the Security Instruments create first
priority, perfected Liens on all of Borrower's Property, as security for the
Indebtedness, such Liens being subject only to Excepted Liens identified in
clauses (a) through (j) of the definition thereof, but subject to the provisos
at the end of such definition.
(k) The Administrative Agent shall have received an opinion of (i)
▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇▇ LLP, special New York counsel to the Borrower, (ii) ▇▇▇▇▇▇▇
▇▇▇▇▇▇ L.L.P., local counsel in Texas, (iii) Scopelitis, Garvin, Light & ▇▇▇▇▇▇,
P.C., local counsel in Indiana, and (iv) local counsel of any other
jurisdictions requested by the Administrative Agent, in each case in form and
substance acceptable to the Administrative Agent and its counsel.
(l) The Administrative Agent shall have received a certificate of
insurance coverage of the Borrower evidencing that the Borrower is carrying
insurance in accordance with Section 8.12.
(m) The Administrative Agent shall have received title information
as the Administrative Agent may reasonably require satisfactory to the
Administrative Agent setting forth the status of title to the Borrower's and its
Subsidiaries' Oil and Gas Properties evaluated in the Initial Reserve Report as
of the Effective Date.
(n) The Administrative Agent shall be satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and its
Subsidiaries as well as the Acquisition Properties and shall have received such
reports in form and substance as the Administrative Agent may requested related
thereto including a Phase I environmental report with respect to certain ▇▇▇▇▇.
(o) The Administrative Agent shall have completed a review of all
litigation affecting the Borrower and shall be satisfied with the status of such
matters and the potential impact that such matters may have on the Borrower.
35
(p) The Administrative Agent shall have received a certificate of a
Responsible Officer of the Borrower certifying that the Borrower has received
all consents and approvals required by Section 8.03.
(q) The Administrative Agent shall have received (i) the financial
statements referred to in Section 8.04(a), (ii) the Initial Reserve Report
accompanied by a certificate covering the matters described in Section
9.12(b)(i) through (iii) and (iii) copies of all material contracts or
agreements, including, but not limited to, all operating agreements covering the
Oil and Gas Properties, as well as all marketing, transportation, and processing
agreements related to such Oil and Gas Properties.
(r) The Administrative Agent shall have received appropriate UCC
search certificates reflecting no prior Liens encumbering the Properties of the
Borrower and the Subsidiaries, including the Equity Interests of any Guarantor
and the Borrower, for each of the following jurisdictions: Nevada and Texas and
any other jurisdiction requested by the Administrative Agent (other than those
being assigned or released on or prior to the Effective Date or Liens permitted
by Section 10.03).
(s) The Administrative Agent shall have received from the Borrower
an executed and delivered copy of a Swap Agreement, in form and substance, and
with respect to volumes, satisfactory to the Administrative Agent, covering the
Borrower's and its Subsidiaries Hydrocarbon production in accordance with the
requirements of Section 9.16.
(t) The Acquisition shall have been consummated simultaneously with
the funding of the Term Loans and the Revolving Loans and the Administrative
Agent shall have received and be satisfied with its review of (i) a certificate
of a Responsible Officer of the Borrower certifying: (A) that the Borrower is
concurrently consummating the Acquisition in accordance with the terms of the
Acquisition Documents (with all of the material conditions precedent thereto
having been satisfied in all material respects by the parties thereto) and
acquiring substantially all of the Acquisition Properties contemplated by the
Acquisition Documents; (B) as to the final purchase price for the Acquisition
Properties after giving effect to all adjustments as of the closing date
contemplated by the Acquisition Documents and specifying, by category, the
amount of such adjustment; (C) that attached thereto is a true and complete list
of the Oil and Gas Properties that have been excluded from the Acquisition
pursuant to the terms of the Acquisition Documents, specifying with respect
thereto the basis of exclusion as (1) title defect, (2) preferential purchase
right, (3) environmental or (4) casualty loss; (D) that attached thereto is a
true and complete list of all Acquisition Properties for which the Seller has
elected to cure a title defect, (E) that attached thereto is a true and complete
list of all Acquisition Properties for which the Seller has elected to remediate
an adverse environmental condition, (F) the Acquisition Properties are the Oil
and Gas Properties identified as the "Acquisition Properties" evaluated in the
Initial Reserve Reports and (G) that attached thereto is a true and complete
list of all Acquisition Properties that are currently pending final decision by
a third party regarding purchase of such property in accordance with any
preferential right; (ii) a true and complete executed copy of each of the
Acquisition Documents; (iii) original counterparts or copies, certified as true
and complete, of the assignments, deeds and leases for all of the Acquisition
Properties; and (iv) such other related documents and information as the
Administrative Agent shall have reasonably requested.
36
(u) The Administrative Agent shall have received a letter from ▇▇▇▇▇
& ▇▇▇ ▇▇▇▇▇▇ LLP evidencing the appointment of such law firm as authorized agent
for service of process on each of the Borrower and each Obligor (as defined in
the Guaranty Agreement) under each Loan Document to which it is a party.
(v) The Administrative Agent shall have completed and be satisfied
with its due diligence review of the Borrower and its operations, including
title, environmental, engineering, marketing, operations, land, financial
condition and such other matters as the Administrative Agent may reasonably
determine.
(w) The Administrative Agent shall have received and reviewed, with
results satisfactory to the Lenders an employment agreement between the Borrower
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (the "Employment Agreement"), which Employment Agreement
shall include employment terms that are acceptable to the Administrative Agent.
(x) The Administrative Agent shall have received Letters-in-Lieu
executed in blank by the Borrower and any Loan Party as applicable, with respect
to the Security Instruments in such quantity as the Administrative Agent may
reasonably request.
(y) The Administrative Agent shall have received Direction Letters
executed in blank by the Borrower and any Loan Party as applicable, in such
quantity as the Administrative Agent may reasonably request.
(z) Since December 31, 2006, there shall not have been any
disruption or adverse change in the financial or capital markets.
(aa) Satisfactory due diligence review of the Borrower's material
agreements, including, but not limited to, satisfactory review of the operating
agreements governing the Oil and Gas Properties, the drilling contracts,
marketing agreements, transportation agreements and processing agreements.
(bb) The Administrative Agent shall be reasonably satisfied with the
potential plugging and abandonment liabilities associated with the Oil & Gas
Properties, including, without limitation, the bonding or collateralization
obligations of the Borrower associated therewith.
(cc) Each of the Borrower and each of its Subsidiaries shall be in
full compliance with all financial obligations under any document or agreement
enforceable against it.
(dd) The Administrative Agent shall have received such other
documents as the Administrative Agent or special counsel to the Administrative
Agent may reasonably request.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Revolving Loans hereunder
shall not become effective unless each of the foregoing conditions is satisfied
(or waived pursuant to Section 13.02) at or prior to 10:00 a.m., New York City
time, on April 30, 2007 (and, in the event such conditions are not so satisfied
or waived, the Commitments and this Agreement shall terminate at such time).
37
Section 7.02 Term Draw. The obligations of the Term Lenders to make the
Term Loans pursuant to Section 2.01 (the "Term Loans") shall not become
effective until the date on which each of the following conditions are satisfied
(or waived in accordance with Section 13.02):
(a) The conditions set forth in Section 7.01 shall have been
satisfied (or waived in accordance with Section 13.02). (b) The Administrative
Agent shall have received duly executed Notes payable to the order of each Term
Lender in a principal amount equal to its Term Loan Commitment.
(c) The Administrative Agent shall have received a Term Loan
Borrowing Request in an amount equal to Twenty Million Three Hundred Thousand
Dollars ($20,300,000).
The Administrative Agent shall notify the Borrower and the Lenders when the
foregoing conditions have been met, and such notice shall be conclusive and
binding. Notwithstanding the foregoing, the obligations of the Lenders to make
the Term Loans hereunder shall not become effective unless each of the foregoing
conditions is satisfied (or waived pursuant to Section 13.02) at or prior to
10:00 a.m., New York City time, on the Effective Date (and, in the event such
conditions are not so satisfied or waived, the Term Loan Commitments shall
terminate at such time).
Section 7.03 Each Credit Event. The obligation of each Lender to make a
Loan on the occasion of any Borrowing (including the initial funding) is subject
to the satisfaction of the following conditions:
(a) At the time of and immediately after giving effect to such
Borrowing no Default shall have occurred and be continuing.
(b) At the time of and immediately after giving effect to such
Borrowing, no event, development or circumstance has occurred or shall then
exist that has resulted in, or could reasonably be expected to have, a Material
Adverse Effect.
(c) The representations and warranties of the Borrower set forth in
this Agreement and in the other Loan Documents shall be true and correct on and
as of the date of such Borrowing, except to the extent any such representations
and warranties are expressly limited to an earlier date, in which case, on and
as of the date of such Borrowing, such representations and warranties shall
continue to be true and correct as of such specified earlier date.
(d) The making of such Loan would not conflict with, or cause any
Lender or the Issuing Bank to violate or exceed, any applicable Governmental
Requirement, and no Change in Law shall have occurred, and no litigation shall
be pending or threatened, which does or, with respect to any threatened
litigation, seeks to, enjoin, prohibit or restrain, the making or repayment of
any Loan or the consummation of the transactions contemplated by this Agreement
or any other Loan Document.
38
(e) The receipt by the Administrative Agent of a Borrowing Request
in accordance with Section 2.03.
Each request for a Revolving Borrowing shall be deemed to constitute a
representation and warranty by the Borrower on the date thereof as to the
matters specified in Section 7.03(a) through (e).
Section 7.04 Conditions Precedent for the Benefit of the Lender. All
conditions precedent to the obligations of the Lenders to make any advance is
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any advance in the absence of strict
compliance with such conditions precedent.
Section 7.05 No Waiver. No waiver of any condition precedent shall
preclude the Lenders from requiring such condition to be met prior to making any
subsequent advance of the Loans.
ARTICLE VIII:
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that each of the
following statements is true and correct on the date hereof (and after giving
effect to the Transactions), and will be true and correct on the occasion of
each Borrowing, and the delivery of each compliance certificate except to the
extent such representations and warranties are expressly limited to an earlier
date:
Section 8.01 Organization; Powers. Each of the Borrower and the
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as now
conducted, and is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where failure to have
such power, authority, licenses, authorizations, consents, approvals and
qualifications could not reasonably be expected to have a Material Adverse
Effect.
Section 8.02 Authority; Enforceability. The Transactions are within the
Borrower's and each Guarantor's corporate powers and have been duly authorized
by all necessary corporate and, if required, stockholder action (including,
without limitation, any action required to be taken by any class of directors of
the Borrower or any other Person, whether interested or disinterested, in order
to ensure the due authorization of the Transactions). Each Loan Document and
Acquisition Document to which the Borrower and each Guarantor is a party has
been duly executed and delivered by the Borrower and such Guarantor and
constitutes a legal, valid and binding obligation of the Borrower and such
Guarantor, as applicable, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
39
Section 8.03 Approvals; No Conflicts. The Transactions (a) do not require
any consent or approval of, registration or filing with, or any other action by,
any Governmental Authority or any other third Person (including shareholders or
any class of directors, whether interested or disinterested, of the Borrower or
any other Person), nor is any such consent, approval, registration, filing or
other action necessary for the validity or enforceability of any Loan Document
or the consummation of the transactions contemplated thereby, except such as
have been obtained or made and are in full force and effect other than (i) the
recording and filing of the Security Instruments as required by this Agreement
and (ii) those third party approvals or consents that, if not made or obtained,
would not cause a Default hereunder, could not have a Material Adverse Effect or
do not have an adverse effect on the enforceability of the Loan Documents, (b)
will not violate any applicable law or regulation or the charter, by-laws or
other organizational documents of the Borrower or any Subsidiary or any order of
any Governmental Authority, (c) will not violate or result in a default under
any indenture, agreement or other instrument binding upon the Borrower or any
Subsidiary or its Properties, or give rise to a right thereunder to require any
payment to be made by the Borrower or such Subsidiary and (d) will not result in
the creation or imposition of any Lien on any Property of the Borrower or any
Subsidiary (other than the Liens created by the Loan Documents).
Section 8.04 Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Lenders its
consolidated balance sheet and statements of income, stockholders equity and
cash flows (i) as of and for the fiscal year ended December 31, 2006, reported
on by ▇▇▇▇▇▇ & ▇▇▇▇▇▇ PC, independent public accountants and (ii) as of and for
the first month and the portion of the fiscal year ended January 31, 2007,
certified by its chief financial officer. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its Consolidated Subsidiaries as
of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the unaudited
quarterly financial statements.
(b) Since March 1, 2007, (i) there has been no event, development or
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Subsidiaries has
been conducted only in the ordinary course consistent with past business
practices.
(c) Neither the Borrower nor any Subsidiary has on the date hereof
any material Debt (including Disqualified Capital Stock) or any contingent
liabilities, off-balance sheet liabilities or partnerships, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments, except as referred to or reflected or
provided for in the Financial Statements.
40
Section 8.05 Litigation.
(a) Except as set forth on Schedule 8.05, there are no actions,
suits, investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Subsidiary or involving the Acquisition
(i) that are not fully covered by insurance, (ii) that involve any Loan Document
any Acquisition Document or the Transactions or (iii) that could impair the
consummation of the Acquisition on the time and in the manner contemplated by
the Acquisition Documents.
(b) Since the date of this Agreement, there has been no change in
the status of the matters disclosed in Schedule 8.05.
Section 8.06 Environmental Matters. Except for such matters as set forth
on Schedule 8.06 or that, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect on the Borrower:
(a) the Borrower and its Subsidiaries and each of their respective
Properties and operations thereon are, and within all applicable statute of
limitation periods have been, in compliance with all applicable Environmental
Laws;
(b) the Borrower and its Subsidiaries have obtained all
Environmental Permits required for their respective operations and each of their
Properties, with all such Environmental Permits being currently in full force
and effect, and none of Borrower or its Subsidiaries has received any written
notice or otherwise has knowledge that any such existing Environmental Permit
will be revoked or that any application for any new Environmental Permit or
renewal of any existing Environmental Permit will be protested or denied;
(c) there are no claims, demands, suits, orders, inquiries, or
proceedings concerning any violation of, or any liability (including as a
potentially responsible party) under, any applicable Environmental Laws that is
pending or threatened against the Borrower or its Subsidiaries or any of their
respective Properties or as a result of any operations at the Properties;
(d) none of the Properties contain or have contained any: (i)
underground storage tanks; (ii) asbestos-containing materials; (iii) landfills
or dumps; (iv) hazardous waste management units as defined pursuant to RCRA or
any comparable state law; or (v) sites on or nominated for the National Priority
List promulgated pursuant to CERCLA or any state remedial priority list
promulgated or published pursuant to any comparable state law;
(e) there has been no Release or threatened Release, of Hazardous
Materials at, on, under or from any of Borrower's or its Subsidiaries'
Properties, there are no investigations, remediations, abatements, removals, or
monitorings of Hazardous Materials required under applicable Environmental Laws
at such Properties and none of such Properties are adversely affected by any
Release or threatened Release of a Hazardous Material originating or emanating
from any other real property;
(f) neither the Borrower nor its Subsidiaries has received any
written notice asserting an alleged liability or obligation under any applicable
Environmental Laws with respect to the investigation, remediation, abatement,
removal, or monitoring of any Hazardous Materials at, under, or Released or
threatened to be Released from any real properties offsite the Borrower's or its
Subsidiaries' Properties and there are no conditions or circumstances that would
reasonably be expected to result in the receipt of such written notice;
41
(g) there has been no exposure of any Person or property to any
Hazardous Materials as a result of or in connection with the operations and
businesses of any of the Borrower's or its Subsidiaries' Properties that would
reasonably be expected to form the basis for a claim for damages or compensation
and there are no conditions or circumstances that would reasonably be expected
to result in the receipt of notice regarding such exposure; and
(h) the Borrower and its Subsidiaries have provided to Lenders
complete and correct copies of all environmental site assessment reports,
investigations, studies, analyses, and correspondence on environmental matters
(including matters relating to any alleged non-compliance with or liability
under Environmental Laws) that are in any of the Borrower's or its Subsidiaries'
possession or control and relating to their respective Properties or operations
thereon.
Section 8.07 Compliance with the Laws and Agreements; No Defaults.
(a) Each of the Borrower and each Subsidiary is in compliance with
all Governmental Requirements applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and possesses
all licenses, permits, franchises, exemptions, approvals and other governmental
authorizations necessary for the ownership of its Property and the conduct of
its business.
(b) Neither the Borrower nor any Subsidiary is in default nor has
any event or circumstance occurred which, but for the expiration of any
applicable grace period or the giving of notice, or both, would constitute a
default or would require the Borrower or a Subsidiary to Redeem or make any
offer to Redeem under any indenture, note, credit agreement or instrument
pursuant to which any Material Indebtedness is outstanding or by which the
Borrower or any Subsidiary or any of their Properties is bound.
(c) No Default has occurred and is continuing.
Section 8.08 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.
Section 8.09 Taxes. Each of the Borrower and its Subsidiaries has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves in accordance with GAAP. The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of Taxes and other governmental charges are, in the reasonable opinion
of the Borrower, adequate. No Tax Lien has been filed and, to the knowledge of
the Borrower, no claim is being asserted with respect to any such Tax or other
such governmental charge.
42
Section 8.10 ERISA.
(a) As of the Effective Date, neither the Borrower nor any
Subsidiaries has or has had any Plan in effect. The Borrower, the Subsidiaries
and each ERISA Affiliate have complied in all material respects with ERISA and,
where applicable, the Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could result
in imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability
damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated within the past five years. No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been or
is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be
incurred with respect to any Plan. No ERISA Event with respect to any Plan has
occurred.
(e) Full payment when due has been made of all amounts which the
Borrower, the Subsidiaries or any ERISA Affiliate is required under the terms of
each Plan or applicable law to have paid as contributions to such Plan as of the
date hereof, and no accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with respect
to any Plan.
(f) The actuarial present value of the benefit liabilities under
each Plan which is subject to Title IV of ERISA does not, as of the end of the
Borrower's most recently ended fiscal year, exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities. The term "actuarial
present value of the benefit liabilities" shall have the meaning specified in
section 4041 of ERISA.
(g) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its
sole discretion at any time without any material liability.
(h) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any
Multiemployer Plan.
(i) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
is required to provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the Plan.
43
Section 8.11 Disclosure; No Material Misstatements. None of the written
information, statements, exhibits, certificates, documents or reports furnished
to either the Administrative Agent or the Lenders by the Borrower or any of its
Affiliates in connection with the negotiation of this Agreement and the other
Loan Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statement contained therein not
materially misleading in the light of the circumstances in which made and with
respect to the Borrower and its Affiliates taken as a whole. There is no fact
peculiar to the Borrower or any of its Affiliates which has a Material Adverse
Effect or in the future is reasonably likely to have (so far as the Borrower can
now foresee) a Material Adverse Effect and which has not been set forth in this
Agreement, the Loan Documents or the other documents, certificates and
statements furnished to the Administrative Agent and the Lenders by or on behalf
of the Borrower or its Affiliates prior to, or on, the Effective Date in
connection with the transactions contemplated hereby. There are no statements or
conclusions in any Reserve Report taken as a whole that are based upon or
include misleading information or fail to take into account material information
regarding the matters reported therein which is (i) supplied by or on behalf of
the Borrower or (ii) though the information is not supplied by the Borrower, the
Borrower has actual knowledge of its misleading nature.
Section 8.12 Insurance. Schedule 8.12 attached hereto contains an accurate
and complete description of all material policies of fire, liability, workmen's
compensation and other forms of insurance that are owned or held by or on behalf
of the Borrower and its Subsidiaries. All such policies are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date of the closing have been paid, and no notice of cancellation
or termination has been received with respect to any such policy. Such policies
are sufficient for compliance with all Governmental Requirements and all
agreements to which the Borrower is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage for the assets and
operations of the Borrower and its Subsidiaries in at least such amounts and
against at least such risks (but including in any event public liability) as are
usually insured against in the same general area by companies engaged in the
same or a similar business; will remain in full force and effect through the
respective dates set forth in Schedule 8.12 without the payment of additional
premiums, except for policies for which premiums were based on estimated amounts
and are subject to periodic adjustments; and will not in any way be affected by,
or terminate or lapse by reason of, the transactions contemplated by this
Agreement and the Loan Documents. Neither the Borrower nor any Subsidiary (nor
to Borrower's knowledge any prior owner of the Oil and Gas Properties) has been
refused any insurance with respect to its assets or operations, nor has it been
limited below usual and customary policy limits, by an insurance carrier to
which it has applied for any insurance or with which it has carried insurance
during the last three years. The Collateral Agent, the Administrative Agent and
the Lenders have been or will be on or before the Effective Date named as
additional insureds in respect of such liability insurance policies and the
Collateral Agent has been named as loss payee with respect to property loss
insurance. provisions in said insurance policy or policies shall provide that
the insurer will endeavor to give at least 30 days prior notice of any
cancellation to the Collateral Agent.
Section 8.13 Restriction on Liens. Neither the Borrower nor any of the
Subsidiaries is a party to any material agreement or arrangement, or subject to
any order, judgment, writ or decree, which either restricts or purports to
restrict its ability to grant Liens to the Collateral Agent and the Lenders on
or in respect of their Properties to secure the Indebtedness and the Loan
Documents.
44
Section 8.14 Subsidiaries. Except as set forth on Schedule 8.14, the
Borrower has no Subsidiaries and the Borrower has no Foreign Subsidiaries.
Section 8.15 Location of Business and Offices. The Borrower's jurisdiction
of organization is Nevada; the name of the Borrower as listed in the public
records of its jurisdiction of organization is Baseline Oil & Gas Corp.; and the
organizational identification number of the Borrower in its jurisdiction of
organization is C2466-2004 (or, in each case, as set forth in a notice delivered
to the Administrative Agent pursuant to Section 9.01(m) in accordance with
Section 13.01). The Borrower's principal place of business and chief executive
offices are located at the address specified in Section 13.01 (or as set forth
in a notice delivered pursuant to Section 9.01(m) and Section 13.01(c)). Each
Subsidiary's jurisdiction of organization, name as listed in the public records
of its jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 8.14 (or as set forth
in a notice delivered pursuant to Section 9.01(m)).
Section 8.16 Properties; Titles, Etc.
(a) Each of the Borrower and the Subsidiaries has good and
defensible title to the Oil and Gas Properties evaluated in the most recently
delivered Reserve Report and good title to all its personal Properties, in each
case, free and clear of all Liens except Liens permitted by Section 10.03. After
giving full effect to the Excepted Liens, the Borrower or the Subsidiary
specified as the owner owns the net interests in production attributable to the
Hydrocarbon Interests as reflected in the most recently delivered Reserve
Report, and the ownership of such Properties shall not in any material respect
obligate the Borrower or such Subsidiary to bear the costs and expenses relating
to the maintenance, development and operations of each such Property in an
amount in excess of the working interest of each Property set forth in the most
recently delivered Reserve Report that is not offset by a corresponding
proportionate increase in the Borrower's or such Subsidiary's net revenue
interest in such Property.
(b) All material leases and agreements necessary for the conduct of
the business of the Borrower and the Subsidiaries are valid and subsisting, in
full force and effect, and there exists no default or event or circumstance
which with the giving of notice or the passage of time or both would give rise
to a default under any such lease or leases, which could reasonably be expected
to have a Material Adverse Effect.
(c) The rights and Properties presently owned, leased or licensed by
the Borrower and the Subsidiaries including, without limitation, all easements
and rights of way, include all rights and Properties necessary to permit the
Borrower and the Subsidiaries to conduct their business in all material respects
in the same manner as its business has been conducted prior to the date hereof.
(d) All of the Properties of the Borrower and the Subsidiaries that
are reasonably necessary for the operation of their businesses are in good
working condition and are maintained in accordance with prudent business
standards.
(e) The Borrower and each Subsidiary owns, or is licensed to use,
all trademarks, tradenames, copyrights, patents and other intellectual Property
material to its business, and the use thereof by the Borrower and such
Subsidiary does not infringe upon the rights of any other Person, except for any
such infringements that, individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect. The Borrower and its
Subsidiaries either own or have valid licenses or other rights to use all
databases, geological data, geophysical data, engineering data, seismic data,
maps, interpretations and other technical information used in their businesses
as presently conducted, subject to the limitations contained in the agreements
governing the use of the same, which limitations are customary for companies
engaged in the business of the exploration and production of Hydrocarbons.
45
Section 8.17 Maintenance of Properties. Except as set forth on Schedule
8.17, the Oil and Gas Properties (and Properties unitized therewith) of Borrower
and its subsidiaries have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all Government Requirements and in
conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties. Specifically in
connection with the foregoing, (a) no Oil and Gas Property is subject to having
allowable production reduced below the full and regular allowable (including the
maximum permissible tolerance) because of any overproduction (whether or not the
same was permissible at the time) and (b) none of the ▇▇▇▇▇ comprising a part of
the Oil and Gas Properties (or Properties unitized therewith) is deviated from
the vertical more than the maximum permitted by Governmental Requirements, and
such ▇▇▇▇▇ are, in fact, bottomed under and are producing from, and the well
bores are wholly within, the Oil and Gas Properties (or in the case of ▇▇▇▇▇
located on Properties unitized therewith, such unitized Properties). All
pipelines, ▇▇▇▇▇, gas processing plants, platforms and other material
improvements, fixtures and equipment owned in whole or in part by the Borrower
or any of its Subsidiaries that are necessary to conduct normal operations are
being maintained in a state adequate to conduct normal operations, and with
respect to such of the foregoing which are operated by the Borrower or any of
its Subsidiaries, in a manner consistent with the Borrower's or its
Subsidiaries' past practices.
Section 8.18 Gas Imbalances, Prepayments. As of the date hereof, except as
set forth on Schedule 8.18, (a) on a net basis there are no gas imbalances, take
or pay or other prepayments that would require the Borrower or any of its
Subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor, (b)
no material gas imbalances presently exist with respect to any of the Borrower's
Oil and Gas Properties, (c) none of the Borrower's Oil and Gas Properties are
subject to any contractual or other arrangement whereby payment for production
therefrom is to be deferred for a substantial period of time after the month in
which such production is delivered (i.e., in the case of oil, not in excess of
60 days, and in the case of gas, not in excess of 90 days) and (d) none of the
Oil and Gas Properties of the Borrower is subject to a contractual or other
arrangement for the sale of oil or gas production for a fixed price which cannot
be canceled on 90 days (or less) notice or which contains terms which are not
customary in the industry. None of the Oil and Gas Properties of Borrower is
subject at present to any regulatory refund obligation and no facts exist which
might cause the same to be imposed.
46
Section 8.19 Marketing of Production. Except for contracts listed and in
effect on the date hereof on Schedule 8.19, and thereafter either disclosed in
writing to the Administrative Agent or included in the most recently delivered
Reserve Report (with respect to all of which contracts the Borrower represents
that it or its Subsidiaries are receiving a price for all production sold
thereunder which is computed substantially in accordance with the terms of the
relevant contract and are not having deliveries curtailed substantially below
the subject Property's delivery capacity), no material agreements exist which
are not cancelable on 60 days notice or less without penalty or detriment for
the sale of production from the Borrower's or its Subsidiaries' Oil and Gas
Properties (including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that (a)
pertain to the sale of production at a fixed price and (b) have a maturity or
expiry date of longer than six months from the date hereof. All proceeds from
the sale of the Borrower's interests in Hydrocarbons from its Oil and Gas
Properties will, after the Effective Date, be paid in full to the Borrower by
the purchaser thereof on a timely basis, and none of such proceeds are currently
being held in suspense by such purchaser or any other Person.
Section 8.20 Swap Agreements. Schedule 8.20, as of the date hereof, and
after the date hereof, each report required to be delivered by the Borrower
pursuant to Section 9.01(f), sets forth, a true and complete list of all Swap
Agreements of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net ▇▇▇▇ to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.
Section 8.21 Use of Loans. The proceeds of the Loans shall be used only
(a) to provide funding in connection with the Acquisition, (b) repay New Albany
Debt, (c) to pay closing costs and fees related to the Transaction, and (d) to
provide working capital for development drilling and completion expenditures
that are provided for in the then current approved Development Plan on Oil and
Gas Properties owned by the Borrower or its Subsidiaries (including those
acquired under the Acquisition). The Borrower and its Subsidiaries are not
engaged principally, or as one of its or their important activities, in the
business of extending credit for the purpose, whether immediate, incidental or
ultimate, of buying or carrying margin stock (within the meaning of Regulation
T, U or X of the Board). No part of the proceeds of any Loan will be used for
any purpose which violates the provisions of Regulations T, U or X of the Board.
Section 8.22 Solvency. After giving effect to the transactions
contemplated hereby, (a) the aggregate assets (after giving effect to amounts
that could reasonably be received by reason of indemnity, offset, insurance or
any similar arrangement), at a fair valuation, of the Borrower and the
Guarantors, taken as a whole, will exceed the aggregate Debt of the Borrower and
the Guarantors on a consolidated basis, as the Debt becomes absolute and
matures, (b) each of the Borrower and the Guarantors will not have incurred or
intended to incur, and will not believe that it will incur, Debt beyond its
ability to pay such Debt (after taking into account the timing and amounts of
cash to be received by each of the Borrower and the Guarantors and the amounts
to be payable on or in respect of its liabilities, and giving effect to amounts
that could reasonably be received by reason of indemnity, offset, insurance or
any similar arrangement) as such Debt becomes absolute and matures and (c) each
of the Borrower and the Guarantors will not have (and will have no reason to
believe that it will have thereafter) unreasonably small capital for the conduct
of its business.
47
Section 8.23 Material Agreements. Set forth on Schedule 8.23 hereto is a
complete and correct list of all material agreements and other instruments of
the Borrower and its Subsidiaries setting forth each counterparty thereto (other
than the Loan Documents) relating to the purchase, transportation by pipeline,
gas processing, marketing, development, sale and supply of Hydrocarbons, farmout
arrangements, joint operating agreements, contract operating agreements or other
material contracts (excluding oil and gas leases of the Borrower) to which the
Borrower is a party on or after the Effective Date or by which its Properties is
bound on or after the Effective Date (collectively "Material Agreements") and
copies of such documents have been provided to the Administrative Agent. All
such agreements are in full force and effect and the Borrower is not in default
thereunder, nor is there any uncured default by any Affiliate predecessor in
interest to the Borrower or, to the Borrower's knowledge, by any predecessor in
interest to the Borrower (other than an Affiliate predecessor) or counterparty
thereto, nor has the Borrower altered any material item of such agreements since
the Effective Date without the prior written consent of the Lenders.
Section 8.24 No Brokers. Except as set forth on Schedule 8.24, no Person
is entitled to any brokerage fee or finders fee or similar fee or commission in
connection with arranging the Loans contemplated by this Agreement.
Section 8.25 Reliance. In connection with the negotiation of and the
entering into this Agreement, the Borrower acknowledges and represents that none
of the Lenders, the Administrative Agent or any representative of any of the
foregoing is acting as a fiduciary or financial or investment advisor for it; it
is not relying upon any representations (whether written or oral) of such
Persons; it has consulted with its own legal, regulatory, tax, business
investment, financial and accounting advisors to the extent it has deemed
necessary, and it has made its own investment, hedging, and trading decisions
based upon its own judgment and upon any advice from such advisors as it has
deemed necessary and not upon any view expressed by any Lender, the
Administrative Agent or any representative of any of the foregoing; it has not
been given by any Lender, the Administrative Agent or any representative of any
of the foregoing (directly or indirectly through any other Person) any advice,
counsel, assurance, guarantee, or representation whatsoever as to the expected
or projected success, profitability, return, performance, result, effect,
consequence, or benefit (either legal, regulatory, tax, financial, accounting,
or otherwise) of this Agreement or the transactions contemplated hereby; and it
is entering into this Agreement and the other Loan Documents with a full
understanding of all of the risks hereof and thereof (economic and otherwise),
and it is capable of assuming and willing to assume (financially and otherwise)
those risks.
Section 8.26 Investments and Guaranties. The Borrower has not made any
investments in, advances to or guaranties of the obligations of any Person,
except as reflected in the financial statements described in Section 9.01(a).
Section 8.27 Acquisition. The copies of the Acquisition Documents
delivered by the Borrower to the Administrative Agent are true, accurate and
complete and have not been amended or modified in any manner, other than
pursuant to amendments or modifications previously delivered to the
Administrative Agent. No party to any Acquisition Document is in default in
respect of any material term or obligation thereunder.
Section 8.28 Payments by Purchasers of Production. All proceeds from the
sale of the Borrower's interests in Hydrocarbons from its Oil and Gas Properties
are currently being paid in full to the Borrower by the purchaser thereof on a
timely basis and at prices and terms comparable to market prices and terms
generally available at the time such prices and terms were negotiated for oil
and gas production from producing areas situated near such Oil and Gas
Properties, and none of such proceeds are currently being held in suspense by
such purchaser or any other Person.
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Section 8.29 Existing Accounts Payable. Set forth on Schedule 8.29 hereto
is a complete and correct list of all existing accounts payable of the Borrower
as of the date hereof that are more than 30 days past due.
ARTICLE IX:
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents shall have been paid in full, the Borrower
covenants and agrees with the Lenders that:
Section 9.01 Financial Statements; Other Information. The Borrower will
furnish to the Administrative Agent and each Lender:
(a) Annual Financial Statements. As soon as available, but in any
event in accordance with then applicable law and not later than 90 days after
the end of each fiscal year of the Borrower, its audited consolidated balance
sheet and related statements of operations, stockholders' equity and cash flows
as of the end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by ▇▇▇▇▇▇ &
▇▇▇▇▇▇ PC or other independent public accountants of recognized national
standing (without a "going concern" or like qualification or exception and
without any qualification or exception as to the scope of such audit) to the
effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Borrower and its Consolidated Subsidiaries on a consolidated basis in accordance
with GAAP consistently applied.
(b) Quarterly Financial Statements. As soon as available, but in any
event in accordance with then applicable law and not later than 45 days after
the end of each of the first three fiscal quarters of each fiscal year of the
Borrower, its consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the Borrower and
its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes.
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(c) Operating Statements. Borrower shall deliver the following
report on a monthly basis within 25 days after the end of each month (all such
reports covering the Borrower and its Subsidiaries): internally prepared (and on
a comparative basis to the results for the prior 12 months) (i) a report setting
forth the volume of crude oil and natural gas produced and saved on a daily
basis, the volumes of crude oil and natural gas sold, the prices at which such
sales were made and the revenues derived from such sales, gross revenues, net
income, related lease operating expenses from the Oil and Gas Properties, and
setting forth the related ad valorem, severance and production and lease
operating expenses attributable to the Oil and Gas Properties, and any
production imbalances incurred during such period (the "Lease Operating
Statement" or "LOS"), Borrower may provide estimated data to the extent that it
does not have the necessary data to provide actual data at the time the LOS is
required, provided that to the extent that Borrower obtains such actual data in
the future, such future LOS will incorporate such actual data, (ii) a drilling
schedule with respect to the Borrower's and its subsidiaries' Oil and Gas
Properties for the next 180 days and (iii) such additional information with
respect to any of the Borrower's and its Subsidiaries' Oil and Gas Properties as
may be reasonably requested by the Administrative Agent.
(d) Certificate of Financial Officer - Compliance. Concurrently with
any delivery of financial statements under Section 9.01(a), Section 9.01(b) or
Section 9.01(c), a certificate of a Financial Officer of the Borrower in
substantially the form of Exhibit D hereto (i) certifying as to whether a
Default has occurred and, if a Default has occurred, specifying the details
thereof and any action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations demonstrating compliance with
Section 9.13(b) and Section 10.01 and (iii) stating whether any change in GAAP
or in the application thereof has occurred since the date of the audited
financial statements referred to in Section 8.04 and, if any such change has
occurred, specifying the effect of such change on the financial statements
accompanying such certificate.
(e) Certificate of Financial Officer - Consolidating Information.
If, at any time, all of the Consolidated Subsidiaries of the Borrower are not
Consolidated Subsidiaries, then concurrently with any delivery of financial
statements under Section 9.01(a) or Section 9.01(b), a certificate of a
Financial Officer setting forth consolidating spreadsheets that show all
Consolidated Subsidiaries and the eliminating entries, in such form as would be
presentable to the auditors of the Borrower.
(f) Certificate of Financial Officer - Swap Agreements. Concurrently
with any delivery of financial statements under Section 9.01(a), Section 9.01(b)
and Section 9.01(c), a certificate of a Financial Officer, in form and substance
satisfactory to the Administrative Agent, setting forth as of the last Business
Day of such fiscal quarter or fiscal year, a true and complete list of all Swap
Agreements of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional
principal amounts or volumes, the amount contracted in volumes and as a
percentage of the Borrower's and its Subsidiaries' total anticipated production
throughout the length of such Swap Agreements, the hedged price(s), interest
rate(s) or exchange rates(s), as applicable, and any new or amended credit
support agreements relating thereto (including any margin required or supplied),
and the counterparty to each such agreement) and the net ▇▇▇▇-to-market value
therefor.
(g) Certificate of Insurer - Insurance Coverage. Concurrently with
any delivery of financial statements under Section 9.01(a), a certificate of
insurance coverage from each insurer with respect to the insurance required by
Section 9.07, in form and substance satisfactory to the Collateral Agent, and,
if requested by the Collateral Agent or any Lender, all copies of the applicable
policies.
50
(h) Other Accounting Reports. Promptly upon receipt thereof, a copy
of each other report or letter submitted to the Borrower or any of its
Subsidiaries by independent accountants in connection with any annual, interim
or special audit made by them of the books of the Borrower or any such
Subsidiary, and a copy of any response by the Borrower or any such Subsidiary,
or the Board of Directors of the Borrower or any such Subsidiary, to such letter
or report.
(i) SEC and Other Filings; Reports to Shareholders. Promptly after
the same become publicly available, copies of all periodic and other material
reports, proxy statements and other materials filed by the Borrower or any
Subsidiary with the SEC, or with any national securities exchange, or
distributed by the Borrower to its shareholders generally, as the case may be.
(j) Notices Under Material Instruments. Promptly after the
furnishing thereof, copies of any financial statement, report or notice
furnished to or by any Person pursuant to the terms of any preferred stock
designation, indenture, loan or credit or other similar agreement, other than
this Agreement and not otherwise required to be furnished to the Lenders
pursuant to any other provision of this Section 9.01.
(k) Lists of Purchasers. Concurrently with the delivery of any
Reserve Report to the Administrative Agent pursuant to Section 9.12, a list of
all Persons purchasing Hydrocarbons from the Borrower or any Subsidiary.
(l) Notice of Sales of Oil and Gas Properties. If the Borrower or
any Subsidiary intends to sell, transfer, assign or otherwise dispose of any Oil
or Gas Properties or any Equity Interests in any Subsidiary in accordance with
Section 10.13, prior written notice of such disposition, the price thereof and
the anticipated date of closing and any other details thereof requested by the
Administrative Agent or any Lender.
(m) Information Regarding Borrower and Guarantors. Prompt written
notice (and in any event within ten days prior thereto) of any change (i) in the
Borrower or any Guarantor's corporate name or in any trade name used to identify
such Person in the conduct of its business or in the ownership of its
Properties, (ii) in the location of the Borrower or any Guarantor's chief
executive office or principal place of business, (iii) in the Borrower or any
Guarantor's identity or corporate structure or in the jurisdiction in which such
Person is incorporated or formed, (iv) in the Borrower or any Guarantor's
jurisdiction of organization or such Person's organizational identification
number in such jurisdiction of organization, and (v) in the Borrower or any
Guarantor's federal taxpayer identification number.
(n) Notice of Litigation/Casualty Events. Prompt written notice, and
in any event within five Business Days, of the delivery of any demand letter, or
the filing of any lawsuit or arbitration proceeding with an expected potential
liability in excess of $100,000, or the occurrence of any Casualty Event or the
commencement of any action or proceeding that could reasonably be expected to
result in a demand notice, lawsuit, arbitration proceeding, or Casualty Event.
(o) Notices of Certain Changes. Promptly, but in any event within
five Business Days after the execution thereof, copies of any amendment,
modification or supplement to the Employment Agreements, the certificate or
articles of incorporation, by-laws, any preferred stock designation or any other
organic document of the Borrower, any Guarantor or any Subsidiary.
51
(p) Notices Relating to Acquisition. If, after the Effective Date:
(i) the Borrower is required or elects to purchase any of the Acquisition
Properties which had been excluded from, or return any of the Acquisition
Properties which had been included in, the Acquisition Properties in accordance
with the terms of the Acquisition Documents, (ii) the Borrower is required to
honor any preferential purchase right in respect of any Acquisition Property
which has not been waived, (iii) any matter being disputed in accordance with
the terms of the Acquisition Documents is resolved or (iv) the Borrower and the
seller(s) calculate and agree upon the "closing adjustment statement" or
"post-closing adjustment statement" as contemplated by the Acquisition
Documents, then, in each such case, the Borrower shall promptly give the
Administrative Agent notice in reasonable detail of such circumstances.
(q) Operating Reports. The Borrower shall prepare and provide to the
Lenders and Administrative Agent the following reports:
(i) on a monthly basis by the 25th of each month, a cumulative
report through the end of the prior month setting forth all amounts to be
disbursed pursuant to Section 6.01(b), including a schedule identifying each
category of payments identified as clauses (i) through (v) of Section 6.01(b),
with a detailed schedule of all items in each such clause;
(ii) on a weekly basis each Monday a weekly operational and
production report; and
(iii) such other information as the Lenders may reasonably
request with respect to drilling, operation or property status matters,
including notice of any material changes with regard to oil and gas prices
received, contracts or production expenses or any material litigation affecting
the operation of the Oil and Gas Properties of the Borrower and any
Subsidiaries.
(r) ORRI Payments. Promptly, but in any event within five days after
payment, Borrower shall give notice to the Arranger of all amounts paid to the
Lenders or their designees in connection with any overriding royalty interest
created under any ORRI Assignment.
(s) Board of Directors Materials. Promptly following any request
therefore, such materials and minutes prepared for and distributed in connection
with meetings of or actions taken by the board of directors of the Borrower
(other than any materials or information governed by a confidentiality agreement
prohibiting the sharing of such information with the Administrative Agent or the
Lenders).
(t) Other Requested Information. Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrower or any Subsidiary (including, without
limitation, any Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA), or compliance with the terms of this
Agreement or any other Loan Document, as the Administrative Agent or any Lender
may reasonably request.
52
Section 9.02 Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default or the occurrence of any event
that with notice or lapse of time, or both, would constitute an Event of
Default;
(b) the filing or commencement of, or the threat in writing of, any
action, suit, proceeding, investigation or arbitration by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any
Affiliate thereof not previously disclosed in writing to the Lenders or any
material adverse development in any action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lenders) that, in either
case, if adversely determined, could reasonably be expected to result in
liability in excess of $250,000 not fully covered by insurance, subject to
normal deductibles;
(c) the filing or commencement of any action, suit, proceeding, or
arbitration by or on behalf of the Borrower or any of its Subsidiaries claiming
or asserting damages in favor of the Borrower or its Subsidiaries valued in
excess of $250,000;
(d) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate amount
exceeding $250,000; and
(e) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 9.02 shall be accompanied by a
statement of a Responsible Officer of the Borrower setting forth the details of
the event or development requiring such notice and any action taken or proposed
to be taken with respect thereto.
Section 9.03 Existence; Conduct of Business. The Borrower will, and will
cause each Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which its Oil and Gas Properties is located or the
ownership of its Properties requires such qualification; provided that the
foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 10.12.
Section 9.04 Payment of Obligations. The Borrower will, and will cause
each Subsidiary to, pay its obligations, including Tax liabilities of the
Borrower and all of its Subsidiaries before the same shall become delinquent or
in default, except where (a) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect or result in the
seizure or levy of any Property of the Borrower or any Subsidiary.
53
Section 9.05 Performance of Obligations under Loan Documents. The Borrower
will pay the Notes according to the reading, tenor and effect thereof, and the
Borrower will, and will cause each Subsidiary to, do and perform every act and
discharge all of the obligations to be performed and discharged by them under
the Loan Documents, including, without limitation, this Agreement, at the time
or times and in the manner specified.
Section 9.06 Operation and Maintenance of Properties. The Borrower, at its
own expense, will, and will cause each Subsidiary to:
(a) operate its Oil and Gas Properties and other material Properties
or cause such Oil and Gas Properties and other material Properties to be
operated in a careful and efficient manner in accordance with the practices of
the industry and in compliance with all applicable contracts and agreements and
in compliance with all Governmental Requirements, including, without limitation,
applicable pro ration requirements, Environmental Laws, and plugging and
abandonment obligations and all applicable laws, rules and regulations of every
other Governmental Authority from time to time constituted to regulate the
development and operation of its Oil and Gas Properties and the production and
sale of Hydrocarbons and other minerals therefrom.
(b) keep and maintain all Property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted
preserve, and maintain and keep in good repair, working order and efficiency
(ordinary wear and tear excepted) all of its Oil and Gas Properties and other
material Properties, including, without limitation, all equipment, machinery and
facilities.
(c) promptly pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Oil and Gas Properties and will do all other
things necessary to keep unimpaired their rights with respect thereto and
prevent any forfeiture thereof or default thereunder.
(d) promptly perform or make reasonable and customary efforts to
cause to be performed, in accordance with industry standards, the obligations
required by each and all of the assignments, deeds, leases, sub-leases,
contracts and agreements affecting its interests in its Oil and Gas Properties
and other material Properties.
Section 9.07 Insurance. The Borrower will, and will cause each Subsidiary
to, maintain, with financially sound and reputable insurance companies,
insurance in such amounts and against such risks as are customarily maintained
by companies engaged in the same or similar businesses operating in the same or
similar locations but in any event it will maintain at a minimum the types of
insurance and in such amounts as reflected on Schedule 8.12. The loss payable
clauses or provisions in said insurance policy or policies insuring any of the
collateral for the Loans shall be endorsed in favor of and made payable to the
Administrative Agent as its interests may appear and such policies shall name
the Administrative Agent and the Lenders as "additional insureds" and provide
that the insurer will endeavor to give at least 30 days prior notice of any
cancellation to the Administrative Agent except in the case of a cancellation
resulting from the failure to pay premiums in respect of such policy, in which
event the insurer will endeavor to give at least 10 days prior notice of such
cancellation.
54
Section 9.08 Books and Records; Inspection Rights. The Borrower will, and
will cause each Subsidiary to, keep proper books of record and account in which
full, true and correct entries are made of all dealings and transactions in
relation to its business and activities. The Borrower will, and will cause each
Subsidiary to, permit any representatives designated by the Administrative Agent
or any Lender, upon reasonable prior notice, to visit and inspect its
Properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
Section 9.09 Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 9.10 Environmental Matters.
(a) The Borrower shall at its sole expense: (i) comply, and shall
cause its Properties and operations and each Subsidiary and each Subsidiary's
Properties and operations to comply, with all applicable Environmental Laws, the
breach of which could be reasonably expected to have a Material Adverse Effect;
(ii) not dispose of or otherwise release, and shall cause each Subsidiary not to
dispose of or otherwise release, any oil, oil and gas waste, hazardous
substance, or solid waste on, under, about or from any of the Borrower's or its
Subsidiaries' Properties or any other Property to the extent caused by the
Borrower's or any of its Subsidiaries' operations except in compliance with
applicable Environmental Laws, the disposal or release of which could reasonably
be expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each Subsidiary to timely obtain or file, all notices, permits,
licenses, exemptions, approvals, registrations or other authorizations, if any,
required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower's or its Subsidiaries'
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and diligently prosecute to
completion, and shall cause each Subsidiary to promptly commence and diligently
prosecute to completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the "Remedial Work") in the event any
Remedial Work is required or reasonably necessary under applicable Environmental
Laws because of or in connection with the actual or suspected past, present or
future disposal or other release of any oil, oil and gas waste, hazardous
substance or solid waste on, under, about or from any of the Borrower's or its
Subsidiaries' Properties, which failure to commence and diligently prosecute to
completion could reasonably be expected to have a Material Adverse Effect; and
(v) establish and implement, and shall cause each Subsidiary to establish and
implement, such policies of environmental audit and compliance as may be
necessary to continuously determine and assure that the Borrower's and its
Subsidiaries' obligations under this Section 9.10(a) are timely and fully
satisfied, which failure to establish and implement could reasonably be expected
to have a Material Adverse Effect.
(b) The Borrower will promptly, but in no event later than five days
of the occurrence of a triggering event, notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any landowner or
other third party against the Borrower or its Subsidiaries or their Properties
of which the Borrower has knowledge in connection with any Environmental Laws
(excluding routine testing and corrective action) if the Borrower reasonably
anticipates that such action will result in liability (whether individually or
in the aggregate) in excess of $50,000, not fully covered by insurance, subject
to normal deductibles.
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(c) The Borrower will, and will cause each Subsidiary to, provide
environmental audits and tests in accordance with American Society of Testing
Materials standards upon request by the Administrative Agent and the Lenders and
no more than once per year in the absence of any Event of Default (or as
otherwise required to be obtained by the Administrative Agent or the Lenders by
any Governmental Authority), in connection with any future acquisitions of Oil
and Gas Properties or other Properties.
(d) The Borrower will use reasonable efforts to cause the operator
to comply with this Section 9.10, to the extent the Borrower is not the operator
of any Property.
Section 9.11 Further Assurances.
(a) The Borrower at its sole expense will, and will cause each
Subsidiary to, promptly execute and deliver to the Administrative Agent or the
Collateral Agent, as applicable, all such other documents, agreements and
instruments reasonably requested by the Administrative Agent or the Collateral
Agent to comply with, cure any defects or accomplish the conditions precedent,
covenants and agreements of the Borrower or any Subsidiary, as the case may be,
in the Loan Documents, including the Notes, or to further evidence and more
fully describe the collateral intended as security for the Indebtedness, or to
correct any omissions in this Agreement or the Security Instruments, or to state
more fully the obligations secured therein, or to perfect, protect or preserve
any Liens created pursuant to this Agreement or any of the Security Instruments
or the priority thereof, or to make any recordings, file any notices or obtain
any consents, all as may be reasonably necessary or appropriate, in the sole
discretion of the Collateral Agent, in connection therewith.
(b) The Borrower hereby authorizes the Collateral Agent to file one
or more financing or continuation statements, and amendments thereto, relative
to all or any part of the Mortgaged Property without the signature of the
Borrower or any other Guarantor where permitted by law. A photographic or other
reproduction of the Security Instruments or any financing statement covering the
Mortgaged Property or any part thereof shall be sufficient as a financing
statement where permitted by law. If any Event of Default occurs and is
continuing, the Borrower hereby authorizes the Administrative Agent to complete
with all pertinent information any Letter-in-Lieu that has been given to the
Administrative Agent in connection herewith and deliver such Letter-in-Lieu to
any purchaser of production from the Borrower's or its Subsidiaries' Oil and Gas
Properties, and neither the Borrower nor any of its Subsidiaries will contest
such Letter-in-Lieu and, if notified by such purchaser, the Borrower shall
acknowledge to such purchaser that such purchaser should disburse any amounts to
the Administrative Agent that such purchaser would otherwise be obligated to
disburse to Borrower or any Subsidiary in connection with such Letter-in-Lieu.
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Section 9.12 Reserve Reports.
(a) With respect to a Semi-Annual Scheduled Redetermination, on or
before February 15 (with an as of date of January 1) and August 15 (with an as
of date of July 1) of each year, commencing August 15, 2007, the Borrower shall
furnish to the Administrative Agent and the Revolving Lenders a Reserve Report.
The Reserve Reports shall be prepared by one or more Approved Petroleum
Engineers.
(b) In the event of an Interim Redetermination, the Borrower shall
furnish to the Administrative Agent and the Revolving Lenders a Reserve Report
prepared by or under the supervision of the chief engineer of the Borrower who
shall certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately preceding
provided Reserve Report prepared by one or more Approved Petroleum Engineers.
For any Interim Redetermination requested by the Administrative Agent pursuant
to Section 2.06(b), the Borrower shall provide such Reserve Report with an "as
of" date as required by the Administrative Agent as soon as possible, but in any
event no later than thirty (30) days following the receipt of such request.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Lenders a certificate from a
Responsible Officer certifying that in all material respects: (i) the
information used in developing the Reserve Report and any other information
delivered in connection therewith is true and correct, (ii) the projections
provided in the Reserve Report are reasonable based upon the factual information
provided by Borrower in developing such Reserve Report, (iii) the Borrower or
its Subsidiaries owns good and defensible title to the Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free of all Liens
except for Liens permitted by Section 10.03, (iv) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances, take or
pay or other prepayments in excess of the volume specified in Section 8.18 with
respect to its Oil and Gas Properties evaluated in such Reserve Report which
would require the Borrower or any Subsidiary to deliver Hydrocarbons either
generally or produced from such Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor, (v) none of their
Oil and Gas Properties have been sold since the date of the last Borrowing Base
determination except as set forth on an exhibit to the certificate, which
certificate shall list all of its Oil and Gas Properties sold and in such detail
as reasonably required by the Administrative Agent, (vi) attached to the
certificate is a list of all marketing agreements entered into subsequent to the
later of the date hereof or the most recently delivered Reserve Report which the
Borrower could reasonably be expected to have been obligated to list on Schedule
8.19 had such agreement been in effect on the date hereof and (vii) attached
thereto is a schedule of the Oil and Gas Properties evaluated by such Reserve
Report that are Mortgaged Properties and demonstrating the percentage of the
Borrowing Base that the value of such Mortgaged Properties represent.
(d) In connection with the delivery of the Reserve Reports to be
delivered in Section 9.12(a) above, the Borrower shall also furnish to the
Administrative Agent and the Arranger a reserve report with respect to the Oil
and Gas Properties conveyed to the Lenders as part of any ORRI Assignment
provided to the Lenders under this Agreement.
57
Section 9.13 Title Information.
(a) On or before the delivery to the Administrative Agent and the
Lenders of each Reserve Report required by Section 9.12(a) and Section 9.12(a),
the Borrower will deliver title information in form and substance acceptable to
the Administrative Agent covering enough of the Oil and Gas Properties evaluated
by such Reserve Report that were not included in the immediately preceding
Reserve Report, so that the Administrative Agent shall have received together
with title information previously delivered to the Administrative Agent,
satisfactory title information on at least 95% of the total value of the Oil and
Gas Properties evaluated by such Reserve Report.
(b) If the Borrower has provided title information for additional
Properties under Section 9.13(a), the Borrower shall, within 60 days of notice
from the Administrative Agent that title defects or exceptions exist with
respect to such additional Properties, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not
permitted by Section 10.03 raised by such information, (ii) substitute
acceptable Mortgaged Properties with no title defects or exceptions except for
Excepted Liens (other than Excepted Liens described in clauses (e), (g) and (h)
of such definition) having an equivalent value or (iii) deliver title
information in form and substance acceptable to the Administrative Agent so that
the Administrative Agent shall have received, together with title information
previously delivered to the Administrative Agent, satisfactory title information
on at least 95% of the value of the Oil and Gas Properties evaluated by such
Reserve Report.
(c) If the Borrower is unable to cure any title defect requested by
the Administrative Agent or the Lenders to be cured within the 60-day period or
the Borrower does not comply with the requirements to provide acceptable title
information covering 95% of the value of the Oil and Gas Properties evaluated in
the most recent Reserve Report, such default shall not be a Default, but instead
the Administrative Agent shall have the right to exercise the following remedy
in its sole discretion from time to time, and any failure to so exercise this
remedy at any time shall not be a waiver as to future exercise of the remedy by
the Administrative Agent. To the extent that the Administrative Agent is not
satisfied with title to any Mortgaged Property after the 60-day period has
elapsed, such unacceptable Mortgaged Property shall not count towards the 95%
requirement, and the Administrative Agent may send a notice to the Borrower and
the Lenders that the then outstanding Borrowing Base shall be reduced by an
amount as determined by the Majority Lenders to cause the Borrower to be in
compliance with the requirement to provide acceptable title information on 95%
of the value of the Oil and Gas Properties. This new Borrowing Base shall become
effective immediately after receipt of such notice.
58
Section 9.14 Additional Collateral; Additional Guarantors.
(a) Promptly after the end of each month, the Borrower shall review
the list of current Mortgaged Properties (as described in Section 9.12(c)(vii))
to ascertain whether the Mortgaged Properties represent at least 95% of the
total value of the Oil and Gas Properties evaluated in the most recently
completed Reserve Report after giving effect to exploration and production
activities, acquisitions, dispositions and production. If the Mortgaged
Properties do not represent at least 95% of such total value, then the Borrower
shall, and shall cause its Subsidiaries to, grant, as soon as reasonably
possible and in any event within 15 days after the end of such month to the
Administrative Agent as security for the Indebtedness a first-priority Lien
interest (provided the Excepted Liens of the type described in clauses (a) to
(d) and (f) of the definition thereof may exist, but subject to the provisos at
the end of such definition) on additional Oil and Gas Properties not already
subject to a Lien of the Security Instruments such that after giving effect
thereto, the Mortgaged Properties will represent at least 95% of such total
value. All such Liens will be created and perfected by and in accordance with
the provisions of deeds of trust, security agreements and financing statements
or other Security Instruments, all in form and substance reasonably satisfactory
to the Administrative Agent and in sufficient executed (and acknowledged where
necessary or appropriate) counterparts for recording purposes. In order to
comply with the foregoing, if any Subsidiary places a Lien on its Oil and Gas
Properties and such Subsidiary is not a Guarantor, then it shall become a
Guarantor and comply with Section 9.14(b).
(b) The Borrower shall promptly cause each Subsidiary to guarantee
the Indebtedness pursuant to the Guaranty Agreement. In connection with any such
guaranty, the Borrower shall, or shall cause such Subsidiary to, (i) execute and
deliver the Guaranty Agreement or a supplement to the Guaranty Agreement as
required by the Administrative Agent, (ii) ▇▇▇▇▇ ▇ ▇▇▇▇ in and to all of the
Properties of such Subsidiary (including, without limitation, the Oil and Gas
Properties of such Subsidiary) pursuant to a Security Instrument and such other
deeds of trust, mortgages, agreements and instruments, in form and substance
satisfactory to the Collateral Agent, as the Collateral Agent may request, (iii)
pledge all of the Equity Interests of such Subsidiary (including, without
limitation, delivery of original stock certificates evidencing the Equity
Interests of such Subsidiary, together with an appropriate undated stock powers
for each certificate duly executed in blank by the registered owner thereof) and
(iv) execute and deliver such other additional closing documents, certificates
and legal opinions as shall reasonably be requested by the Administrative Agent
or the Collateral Agent.
(c) The Borrower will at all times cause the other material tangible
and intangible assets of the Borrower and each Subsidiary to be subject to a
Lien of the Security Instruments.
Section 9.15 ERISA Compliance. The Borrower will promptly furnish and will
cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent (a) promptly after the filing thereof with the United
States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (b) immediately upon becoming aware of the occurrence of any ERISA
Event or of any "prohibited transaction," as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by the President or the principal Financial
Officer, the Subsidiary or the ERISA Affiliate, as the case may be, specifying
the nature thereof, what action the Borrower, the Subsidiary or the ERISA
Affiliate is taking or proposes to take with respect thereto, and, when known,
any action taken or proposed by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto, and (c) immediately upon receipt
thereof, copies of any notice of the PBGC's intention to terminate or to have a
trustee appointed to administer any Plan. With respect to each Plan (other than
a Multiemployer Plan), the Borrower will, and will cause each Subsidiary and
ERISA Affiliate to, (i) satisfy in full and in a timely manner, without
incurring any late payment or underpayment charge or penalty and without giving
rise to any lien, all of the contribution and funding requirements of section
412 of the Code (determined without regard to subsections (d), (e), (f) and (k)
thereof) and of section 302 of ERISA (determined without regard to sections 303,
304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a
timely manner, without incurring any late payment or underpayment charge or
penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.
59
Section 9.16 Swap Agreements. The Borrower shall enter into Swap
Agreements on or before the Effective Date, the date that the initial Borrowing
Base becomes fully available and at each Scheduled Redetermination during the
first year after the Effective Date with an Approved Counterparty and with the
notional volumes for which, as of the date such Swap Agreement is executed
(together with any other Swap Agreements in effect), of at least 75% of the
reasonably anticipated projected production from Proved Developed Producing
Reserves for each month through the third anniversary of the Effective Date for
each of crude oil and natural gas, calculated separately. The Swap Agreements
will be in form and substance acceptable to the Administrative Agent. The
notional volumes for each additional Swap Agreement shall be established by the
Administrative Agent at the time of such agreement. The Borrower shall neither
assign, terminate or unwind any such Swap Agreements nor sell any Swap
Agreements if the effect of such action (when taken together with any other Swap
Agreements executed contemporaneously with the taking of such action) would have
the effect of canceling its positions under such Swap Agreements required
hereby.
Section 9.17 Marketing Activities.
(a) The Borrower will not, and will not permit any of its
Subsidiaries to, engage in marketing activities for any Hydrocarbons or enter
into any contracts related thereto other than (i) contracts for the sale of
Hydrocarbons scheduled or reasonably estimated to be produced from their proved
Oil and Gas Properties during the period of such contract, (ii) contracts for
the sale of Hydrocarbons scheduled or reasonably estimated to be produced from
proved Oil and Gas Properties of third parties during the period of such
contract associated with the Oil and Gas Properties of the Borrower and its
Subsidiaries that the Borrower or one of its Subsidiaries has the right to
market pursuant to joint operating agreements, unitization agreements or other
similar contracts that are usual and customary in the oil and gas business and
(iii) other contracts for the purchase and/or sale of Hydrocarbons of third
parties (A) that have generally offsetting provisions (i.e. corresponding
pricing mechanics, delivery dates and points and volumes) such that no
"position" is taken and (B) for which appropriate credit support has been taken
to alleviate the material credit risks of the counterparty thereto.
(b) All Hydrocarbons produced from the Oil and Gas Properties of
Borrower and its Subsidiaries shall be marketed on an arms length basis using
one or more Persons that are not Affiliates of the Borrower.
Section 9.18 Development Plan. Borrower shall at least 30 days prior to
each October 1, and March 1, deliver to the Administrative Agent a detailed plan
of development with respect to the Borrower's and its Subsidiaries Oil and Gas
Properties and other Hydrocarbon Interests setting forth the timing and amount
of all Capital Expenditures to be made in connection therewith for the next
succeeding six month period and which will be in substantially the form and
provide the similar types of information as the Initial Development Plan. The
Administrative Agent shall have 30 days to approve or reject any proposed
development plan submitted by the Borrower. In the event that the Administrative
Agent rejects any proposed development plan presented by the Borrower, the
Borrower will review the Agent's reasons for rejecting such development plan and
revise its proposed development plan consistent with the Administrative Agent's
comments and resubmit a revised development plan to the Administrative Agent
within five (5) Business Days of the Administrative Agent's rejection of the
proposed development plan and the Administrative Agent shall notify the Borrower
if it approves the revised development plan. The Borrower will continue to
cooperate with the Administrative Agent as set forth above until such time that
a new development plan for the next six month period has been approved.
60
Section 9.19 Overriding Royalty Interests.
(a) As additional consideration for the making of the Loans by the
Lenders, the Borrower agrees to and will cause any Subsidiary to, convey to the
Lenders or their designees, in undivided shares proportionate to their
respective Commitments, an overriding royalty interest in the aggregate amount
specified below in and to the Oil and Gas Properties referred to below. The
overriding royalty shall be conveyed with respect to each (i) Oil and Gas
Property currently owned by the Borrower and any Subsidiary and (ii) any
additional Oil and Gas Property acquired by the Borrower or any Subsidiary or in
which the Borrower or any Subsidiary acquires an additional interest, in each
case, after the effective date through the date this Agreement is terminated.
(b) The overriding royalty interest in any Oil and Gas Property
required to be conveyed shall equal (i) three percent (3.00%) of 8/8ths with
respect to all Oil and Gas Properties of Borrower and its Subsidiaries and (ii)
two percent (2.00%) of 8/8ths with respect to any Oil and Gas Property acquired
by Borrower or any Subsidiary after the Effective Date (in each case,
proportionately reduced to the undivided working interest owned by the Borrower
and any of its Subsidiaries therein, as such working interest may increase or
decrease from time to time in accordance with the provisions of any agreement in
effect at the time of creation of the relevant overriding royalty interest). In
addition to the above, in the event that the Borrower has not made principal
repayments of at least $3,000,000 with respect to the Revolving Loans from the
Net Proceeds from the sale of Equity Interests in the Borrower ("Repayment") on
or prior to the Repayment Date, Borrower will grant an additional overriding
royalty interest of one percent (1.00%) of 8/8ths (proportionately reduced to
the undivided working interest owned by the Borrower and any of its Subsidiaries
therein, as such working interest may increase or decrease from time to time in
accordance with the provisions of any agreement in effect at the time of
creation of the relevant overriding royalty interest) in each Oil and Gas
Property of the Borrower and its Subsidiaries on the Repayment Date and
thereafter on each monthly anniversary date of the Repayment Date the Borrower
shall grant an additional overriding royalty interest out of Borrower's and its
Subsidiaries' Oil and Gas Properties of one percent (1.00%) of 8/8ths until the
earlier to occur of (i) such time that the Repayment has been made or (ii) the
Borrower has granted in the aggregate overriding royalty interests in the
Borrower's and its Subsidiaries Oil and Gas Properties equal to three percent
(3%) of 8/8ths pursuant to this sentence. The overriding royalty shall be
subject to the terms and conditions set forth in the form of the ORRI
Assignment, and any other agreements currently in existence as of the time of
the acquisition of such Properties and validly affecting the underlying leases.
(c) An overriding royalty interest required to be conveyed hereby:
(i) with respect to any currently owned Oil and Gas Property shall be effective
as to Hydrocarbons produced on and after the first day of the calendar month in
which this Agreement is executed and with respect to any subsequently acquired
Oil and Gas Property or increased interest in a currently owned Oil and Gas
Property shall be effective as to Hydrocarbons produced on and after the first
day of the calendar month in which the relevant acquisition occurred, (ii) shall
be conveyed by a conveyance substantially in the form of the ORRI Assignment
executed by the appropriate grantor and filed for recording by the Borrower
promptly after the receipt, delivery and recording of applicable assignments
into the Borrower or any Subsidiary establishing its interest of record in any
Oil and Gas Properties and shall be delivered by the Borrower to the Lenders or
their designees promptly after its return from recording and (iii) shall survive
any termination of this Agreement.
61
(d) If, prior to finalization of the division order process, the
Borrower or any Subsidiary receives proceeds of production from a well with
respect to which the Borrower or any Subsidiary is required to convey an
overriding royalty interest under this Section 9.19, the Borrower shall estimate
the amount of such revenue payable on account of the overriding royalty interest
and shall pay or cause the relevant subsidiary to pay such estimated proceeds to
the Lenders; provided that, upon the completion of the division order process,
if any amounts are determined to have been overpaid or underpaid to the Lenders
or their designees, the Borrower or any relevant Subsidiary and the Lenders or
their designees shall promptly make appropriate adjustments among themselves to
give effect to the correct division of interests, retroactive to the effective
date of such overriding royalty interest.
(e) Within sixty days (60) after the end of each fiscal quarter, the
Borrower will prepare a summary of all ▇▇▇▇▇ spudded on the Oil and Gas
Properties of the Borrower or any Subsidiary during the preceding fiscal
quarter. Such summary shall indicate the date each well was completed (or
anticipated to be completed) and those ▇▇▇▇▇ for which an overriding royalty
interest pursuant to Section 9.19(c) above has been recorded in the appropriate
land records and delivered to the Lenders. For those ▇▇▇▇▇ where no overriding
royalty interest has been filed of record, an approximate date of when the
Borrower expects such overriding royalty interest to be recorded.
(f) As of the date hereof, Borrower is executing and delivering a
blanket ORRI Conveyance with respect to all of Borrower's Oil and Gas Properties
in ▇▇▇▇ County, Indiana. The County Recorder of ▇▇▇▇ County Indiana has
indicated that the Recorder's Office will not accept a blanket ORRI Conveyance
and that only an ORRI Conveyance affecting only a single lease is acceptable for
filing in ▇▇▇▇ County Indiana. Borrower agrees that at the request of the
Lenders, from time to time, Borrower will execute, acknowledge and deliver such
number of ORRI Conveyances with respect to Borrower's Oil and Gas Properties
located in ▇▇▇▇ County Indiana each affecting only a single lease and otherwise
in suitable form for filing in ▇▇▇▇ County, Indiana so that the Lender's have
obtained an overriding royalty interest with respect all of Borrower's Oil and
Gas Properties in ▇▇▇▇ County, Indiana as contemplated in the original blanket
ORRI Conveyance. Upon execution and delivery of such additional ORRI
Conveyances, Borrower shall cause such ORRI Conveyances to be filed in the
appropriate filing office in ▇▇▇▇ County, Indiana.
Section 9.20 Equity Raise. The Borrower shall cause a sale of the
Borrower's Equity Interests such that Borrower will receive Net Proceeds of at
least $3,000,000 on or before the date that is 180 days after the date of the
Effective Date. Borrower will have an underwriter reasonably acceptable to
Administrative Agent in place with respect to this sale of the Equity Interests
within 90 days of the Effective Date. The proceeds of such sale of Equity
Interests will be used to repay the Loans on the date of the consummation of the
sale of such Equity Interests.
62
Section 9.21 Right of First Refusal. If at any time during the term of
this Agreement, Borrower or its Subsidiaries desires to develop any Oil and Gas
Properties or other project for which there is insufficient funding available
from Borrower's equity capital, Borrower shall present to Administrative Agent a
financing request for such projects at least 30 days prior to the proposed start
date for such project and/or closing date for such transaction, including,
without limitation, all financial data that Borrower has developed with respect
to such projects, and any other information which Administrative Agent may
reasonably request so as to enable Administrative Agent to evaluate and
determine whether Administrative Agent shall offer to finance such proposed
project through this Agreement or another facility agented by the Administrative
Agent and with the Lenders as the lenders thereunder. Any such offer to finance
a proposed project by Administrative Agent shall be accepted by the Borrower so
long as the terms of such offer (a) are reasonable compared generally to
financing then being obtained in the region for similar projects and (b) are not
less favorable to the Borrower than financing proposals it has received from
other third-parties relating to the proposed project.
Section 9.22 Separate Entity. Borrower will, (a) take all necessary steps
to maintain its separate entity identity and records, (b) will not commingle any
assets or business functions with any other Person, (c) maintain separate
financial statements, (d) not assume or guarantee the debts, liabilities or
obligations of others, (e) hold itself out to the public and creditors as an
entity separate from others, (f) not commit any fraud or misuse of the separate
entity legal status or any other injustice or unfairness, (g) not maintain its
assets in such a manner that it will be costly or difficult to segregate
ascertain or identify its individual assets from those of its partners or
Affiliates, (h) not take any action that might cause it to become insolvent, (i)
not fail to hold appropriate meetings (or act by unanimous written consent) to
authorize all appropriate actions, or fail in authorizing such actions, to
observe all formalities required by the laws of the State of Nevada, or fail to
observe all formalities required by its organizational documents, (j) not hold
itself out to be responsible for the debts of another Person and (k) not share
any common logo with or hold itself out as or be considered as a department or
division of its partners, an Affiliate, or any other person or entity.
Section 9.23 Directors of Borrower; Observers. The Administrative Agent
shall be entitled to have one or more observers (the "Agent Observers") attend
any regular meeting of the Directors of the Borrower. The Agent Observers shall
not be entitled to vote on matters presented to or discussed by the Directors of
the Borrower at any such meeting. The Agent Observers shall be timely notified
of the time and place of any such meeting and will be given written notice of
all proposed actions to be taken by the Directors of the Borrower at any such
meeting as if the Agent Observers were members of the Directors of the Borrower.
Such notice shall describe in reasonable detail the nature and substance of the
matters to be discussed and/or voted upon at any such meeting (or the proposed
actions to be taken by written consent without a meeting). The Agent Observers
shall have the right to receive all information provided to the members of the
Directors of the Borrower in anticipation of or at any such meeting, in addition
to copies of the records of the proceedings or minutes of any such meeting, when
provided to the members of the Directors of the Borrower. The Borrower shall
reimburse the Agent Observers for all reasonable and documented out-of-pocket
costs and expenses incurred in connection with their participation in any such
meeting. The Agent Observers shall also have the right to receive all
information provided to each member of the Board of Directors (or similar body)
of each Subsidiary (if any) of the Borrower (the "Other Boards"), in
anticipation of or at all meetings thereof (whether regular or special and
whether telephonic or otherwise), in addition to copies of the records of the
proceedings or minutes of such meetings, when provided to the members of such
Other Boards. The Borrower will also furnish or will cause to be furnished to
Administrative Agent and its counsel a copy of each written consent without a
meeting adopted by the Directors of the Borrower or any of the Other Boards not
later than five (5) days after it has been signed by the last signatory thereto.
The Directors of the Borrower shall hold a regularly scheduled meeting at least
monthly during the six month period following the Effective Date and at least
quarterly thereafter. The Borrower shall cause an amendment to its
organizational documents to effect this schedule if necessary.
63
ARTICLE X:
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder and all other amounts
payable under the Loan Documents have been paid in full, the Borrower covenants
and agrees with the Lenders that:
Section 10.01 Financial Covenants.
(a) Ratio of Total Debt to EBITDA. The Borrower will not permit the
Borrower's ratio of Total Debt as of the last day of any fiscal quarter to
annualized EBITDA during the period set forth below to be greater than the ratio
for such period set forth below. EBITDA shall be annualized by multiplying the
EBITDA as of the end of the applicable fiscal quarter by four.
-------------------------------------------------------------------------------
Period Ratio
-------------------------------------------------------------------------------
April 1, 2007 - September 30, 2007 7.50:1.00
-------------------------------------------------------------------------------
October 1, 2007 - March 31, 2008 4.50:1.00
-------------------------------------------------------------------------------
April 1, 2008 - December 31, 2008 3.50:1.00
-------------------------------------------------------------------------------
January 1, 2009 - June 30, 2009 3.00:1.00
-------------------------------------------------------------------------------
July 1, 2009 - thereafter 2.00:1.00
-------------------------------------------------------------------------------
(b) Ratio of EBITDA to Interest. The Borrower will not permit on the
last day of the fiscal quarter set forth below, the Borrower's ratio of EBITDA
for the applicable fiscal quarter to Consolidated Interest Expense to be less
than the ratio set forth below for the applicable quarter;
--------------------------------------------------------------------------------
Period Ratio
--------------------------------------------------------------------------------
April 1, 2007 - September 30, 2007 1.50:1.00
--------------------------------------------------------------------------------
October 1 - December 31, 2007 2.00:1.00
--------------------------------------------------------------------------------
January 1, 2008 - June 30, 2008 2.50:1.00
--------------------------------------------------------------------------------
July 1, 2008 - thereafter 3.00:1.00
--------------------------------------------------------------------------------
64
(c) Current Ratio. The Borrower will not permit, as of the last day
of any fiscal quarter, the Borrower's ratio of (i) consolidated current assets
(including any undrawn amounts that are committed under this Agreement that
Borrower is permitted to draw but excluding non-cash assets under FAS 133) to
(ii) consolidated current liabilities (excluding non-cash obligations under FAS
133 and outstanding amounts under this Agreement), to be less than 1.00:1.00;
(d) Reserve Ratios to Total Debt. The Borrower will not permit, as
of the last day of any fiscal quarter, (i) its ratio of the Net Present Value of
Proved Developed Producing Reserves, to Total Debt to be less than 0.90:1.00 at
any time prior to September 30, 2007 and 1.00:1.00 thereafter, and (ii) its
ratio of the Net Present Value of Total Proved Reserves divided by Total Debt to
be less than 1.50:1.00 at any time prior to March 31, 2009 and 2.00:1.00
thereafter. The foregoing ratios shall be determined by reference to the most
recent Reserve Report, based on pricing parameters determined by Arranger.
(e) Calculations of Consolidated Net Income and Debt. For purposes of Section
10.01, notwithstanding anything herein to the contrary, (a) in calculating
Consolidated Net Income as of the end of any fiscal quarter for purposes of
determining EBITDA the Borrower shall use the lesser of (i) the actual General
and Administrative Costs incurred by Borrower and its Subsidiaries or (ii)
$225,000 and (b) in calculating Debt, the Debt shown in item 1 on Schedule 8.23
shall not be included as Debt.
Section 10.02 Debt. The Borrower will not, and will not permit any
Subsidiary to, incur, create, assume or suffer to exist any Debt, except:
(a) the Notes or other Indebtedness arising under the Loan Documents
or any guaranty of or suretyship arrangement for the Notes or other Indebtedness
arising under the Loan Documents.
(b) Debt of the Borrower and its Subsidiaries existing on the date
hereof that is reflected in the Financial Statements.
(c) accounts payable and accrued expenses, liabilities or other
obligations to pay the deferred purchase price of Property or services, from
time to time incurred in the ordinary course of business that are not greater
than sixty (60) days past the date of invoice or delinquent or that are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP.
(d) Debt under Capital Leases not to exceed $100,000.
(e) Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil and Gas
Properties.
(f) intercompany Debt between the Borrower and any Subsidiary or
between Subsidiaries; provided that such Debt is not held, assigned,
transferred, negotiated or pledged to any Person other than the Borrower or one
of its Wholly-Owned Subsidiaries, and, provided, further, that any such Debt
owed by either the Borrower or a Guarantor shall be subordinated to the
Indebtedness on terms set forth in the Guaranty Agreement.
65
Section 10.03 Liens. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any of its
Properties (now owned or hereafter acquired), except (a) Liens securing the
payment of any Indebtedness and the Secured Hedge Obligations and (b) Excepted
Liens.
Section 10.04 Restricted Payments. The Borrower will not, and will not
permit any of its Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, return any capital to its
stockholders or make any distribution of its Property to its Equity Interest
holders, except (a) the Borrower may declare and pay dividends with respect to
its Equity Interests payable solely in additional shares of its Equity Interests
(other than Disqualified Capital Stock), (b) Wholly-Owned Subsidiaries may
declare and pay dividends ratably with respect to their Equity Interests and (c)
the Borrower may make Restricted Payments pursuant to and in accordance with
stock option plans or other benefit plans for management or employees of the
Borrower and its Subsidiaries.
Section 10.05 Investments, Loans and Advances. The Borrower will not, and
will not permit any Subsidiary to, make or permit to remain outstanding any
Investments in or to any Person, except that the foregoing restriction shall not
apply to:
(a) Investments reflected in the Financial Statements or that are
disclosed to the Lenders in Schedule 10.05.
(b) accounts receivable arising in the ordinary course of business.
(c) direct obligations of the United States or any agency thereof,
or obligations guaranteed by the United States or any agency thereof, in each
case maturing within one year from the date of creation thereof.
(d) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or any
office located in the United States of any other bank or trust company which is
organized under the laws of the United States or any state thereof, has capital,
surplus and undivided profits aggregating at least $100,000,000 (as of the date
of such bank or trust company's most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set forth from
time to time, by Standard & Poor's Rating Group or ▇▇▇▇▇'▇ Investors Service,
Inc., respectively.
(e) deposits in money market funds investing exclusively in
Investments described in Section 10.05(c) or Section 10.05(d).
Section 10.06 Nature of Business; International Operations. The Borrower
will not, and will not permit any Subsidiary to, allow any material change to be
made in the character of its business as an independent oil and gas exploration
and production company. From and after the date hereof, the Borrower and its
Subsidiaries will not acquire or make any other expenditure (whether such
expenditure is capital, operating or otherwise) in or related to, any Oil and
Gas Properties not located within the geographical boundaries of the United
States.
Section 10.07 Limitation on Leases. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or suffer to exist any
obligation for the payment of rent or hire of Property of any kind whatsoever
(real or personal but excluding Capital Leases and leases of Hydrocarbon
Interests), under leases or lease agreements that would cause the aggregate
amount of all payments made by the Borrower and the Subsidiaries pursuant to all
such leases or lease agreements, including, without limitation, any residual
payments at the end of any lease, to exceed $500,000 in any period of twelve
consecutive calendar months during the life of such leases.
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Section 10.08 Sale and Leasebacks. The Borrower will not enter into any
arrangement, directly or indirectly, with any Person whereby the Borrower shall
sell or transfer any of its Property, whether now owned or hereafter acquired,
and whereby the Borrower shall then or thereafter rent or lease such Property or
any part thereof or other Property that the Borrower intends to use for
substantially the same purpose or purposes as the Property sold or transferred.
Section 10.09 Proceeds of Loans. The Borrower will not permit the proceeds
of the Loans to be used for any purpose other than those permitted by Section
8.21. Neither the Borrower nor any Person acting on behalf of the Borrower has
taken or will take any action which might cause any of the Loan Documents to
violate Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect. If requested by the Administrative Agent, the Borrower will furnish to
the Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.
Section 10.10 ERISA Compliance. The Borrower will not, and will not permit
any Subsidiary to, at any time:
(a) engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrower, a Subsidiary or any ERISA
Affiliate could be subjected to either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed by Chapter
43 of Subtitle D of the Code.
(b) terminate, or permit any ERISA Affiliate to terminate, any Plan
in a manner, or take any other action with respect to any Plan, which could
result in any liability of the Borrower, a Subsidiary or any ERISA Affiliate to
the PBGC.
(c) fail to make, or permit any ERISA Affiliate to fail to make,
full payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower, a Subsidiary or any
ERISA Affiliate is required to pay as contributions thereto.
(d) permit to exist, or allow any ERISA Affiliate to permit to
exist, any accumulated funding deficiency within the meaning of section 302 of
ERISA or section 412 of the Code, whether or not waived, with respect to any
Plan.
(e) permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by the
Borrower, a Subsidiary or any ERISA Affiliate which is regulated under Title IV
of ERISA to exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of ERISA.
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(f) contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation to
contribute to, any Multiemployer Plan.
(g) acquire, or permit any ERISA Affiliate to acquire, an interest
in any Person that causes such Person to become an ERISA Affiliate with respect
to the Borrower or a Subsidiary or with respect to any ERISA Affiliate of the
Borrower or a Subsidiary if such Person sponsors, maintains or contributes to,
or at any time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (i) any Multiemployer Plan or (ii) any other Plan
that is subject to Title IV of ERISA under which the actuarial present value of
the benefit liabilities under such Plan exceeds the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities.
(h) incur, or permit any ERISA Affiliate to incur, a liability to or
on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA.
(i) contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation to
contribute to, any employee welfare benefit plan, as defined in section 3(1) of
ERISA, including, without limitation, any such plan maintained to provide
benefits to former employees of such entities, that may not be terminated by
such entities in their sole discretion at any time without any material
liability.
(j) amend, or permit any ERISA Affiliate to amend, a Plan resulting
in an increase in current liability such that the Borrower, a Subsidiary or any
ERISA Affiliate is required to provide security to such Plan under section
401(a)(29) of the Code.
Section 10.11 Sale or Discount of Receivables. Except for receivables
obtained by the Borrower or any Subsidiary out of the ordinary course of
business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, the Borrower will not, and will not
permit any Subsidiary to, discount or sell (with or without recourse) any of its
notes receivable or accounts receivable.
Section 10.12 Mergers, Etc. The Borrower will not, and will not permit any
Subsidiary to, merge into or with or consolidate with any other Person, or sell,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its Property to any other Person (any
such transaction, a "consolidation"); provided that any Subsidiary may
participate in a consolidation with the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or any other Subsidiary and if
one of such Subsidiaries is a Wholly-Owned Subsidiary, then the surviving Person
shall be a Wholly-Owned Subsidiary.
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Section 10.13 Sale of Properties. The Borrower will not, and will not
permit any of its Subsidiaries to, sell, assign, farm-out, convey or otherwise
transfer any Property except for the sale of Hydrocarbons in the ordinary course
of business; farmouts of acreage that contain no Proved Reserves and assignments
in connection with such farmouts; the sale or transfer of equipment that is no
longer necessary for the business of the Borrower or such Subsidiary or is
replaced by equipment of at least comparable value and use; and sales or other
dispositions of Oil and Gas Properties or any interest therein or Subsidiaries
owning Oil and Gas Properties, provided that no such sale or sales or
dispositions during any twelve-month period is of Oil and Gas Properties having
a value of $100,000.
Section 10.14 Environmental Matters. The Borrower will not, and will not
permit any Subsidiary to, cause or permit any of its Property to be in violation
of, or do anything or permit anything to be done which will subject any such
Property to any Remedial Work under any Environmental Laws, assuming disclosure
to the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations could reasonably be expected to have costs associated
therewith in excess of $250,000 or result in a Material Adverse Effect.
Section 10.15 Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of Property or the
rendering of any service, with any Affiliate (other than the Guarantors and
Wholly-Owned Subsidiaries of the Borrower) unless such transactions are
otherwise permitted under this Agreement, are in the ordinary course of business
and are upon fair and reasonable terms no less favorable to it than it would
obtain in a comparable arm's length transaction with a Person not an Affiliate.
Section 10.16 Material Agreements. The Borrower will not, and will not
permit any Subsidiary to, enter into or amend or otherwise modify any Material
Agreement or any other contract or agreement that involves an individual
commitment from such Person of more than $100,000 in the aggregate in any twelve
month period (except for such contracts and agreements that relate to the
projects contemplated in the Development Plan) with all such new or modified
Material Agreements related to projects contemplated in the Development Plan to
be in form and substance reasonably satisfactory to the Administrative Agent.
Section 10.17 Subsidiaries. The Borrower will not, and will not permit any
Subsidiary to, create or acquire any additional Subsidiary unless the Borrower
gives written notice to the Administrative Agent of such creation or acquisition
and complies with Section 9.14(b). The Borrower shall not, and shall not permit
any Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in
any Subsidiary except in compliance with Section 10.13(d). Neither the Borrower
nor any Subsidiary shall have any Foreign Subsidiaries.
Section 10.18 Negative Pledge Agreements; Dividend Restrictions. The
Borrower will not, and will not permit any Subsidiary to, create, incur, assume
or suffer to exist any contract, agreement or understanding (other than this
Agreement and the Security Instruments) which in any way prohibits or restricts
the granting, conveying, creation or imposition of any Lien on any of its
Property in favor of the Collateral Agent and the Lenders or restricts any
Subsidiary from paying dividends or making distributions to the Borrower or any
Guarantor, or which requires the consent of or notice to other Persons in
connection therewith.
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Section 10.19 Gas Imbalances, Take-or-Pay or Other Prepayments. The
Borrower will not, and will not permit any Subsidiary to, allow gas imbalances,
take-or-pay or other prepayments with respect to the Oil and Gas Properties of
the Borrower or any Subsidiary that would require the Borrower or such
Subsidiary to deliver Hydrocarbons at some future time without then or
thereafter receiving full payment therefor to exceed 50,000 Mcf of gas (on an
Mcfe equivalent basis) in the aggregate.
Section 10.20 Swap Agreements. The Borrower will not, and will not permit
any Subsidiary to, enter into any Swap Agreements with any Person other than the
Swap Agreements required pursuant to Section 9.16 or as otherwise agreed by the
Administrative Agent. In no event shall any Swap Agreement contain any
requirement, agreement or covenant for the Borrower or any Subsidiary to post
collateral or margin to secure their obligations under such Swap Agreement or to
cover market exposures except to the extent any such Swap Agreements are secured
by the Security Instruments as permitted by the terms of this Agreement. Other
than as to a counterparty that is a Lender or an Affiliate of any of the
Lenders, no Swap Agreement shall contain any requirement, agreement or covenant
for the Borrower or any Subsidiary to post collateral or margin to secure their
obligations under such Swap Agreement or to cover market exposures.
Section 10.21 Limitation on Capital Expenditures. Except as expressly
provided for in the then current approved Development Plan, (a) during the first
year after the Effective Date, the Borrower will not, and will not permit any of
its Subsidiaries to, make more than $100,000 in Capital Expenditures or other
costs associated with the exploration and development of Borrower's and its
Subsidiaries' Oil and Gas Properties (excluding normal lease operating expenses)
and (b) thereafter, the Borrower will not, and will not permit any of its
Subsidiaries to, make more than $100,000 in Capital Expenditures or other costs
associated with the exploration and development of Borrower's and its
Subsidiaries' Oil and Gas Properties (excluding normal lease operating
expenses).
Section 10.22 Certain Activities. The Borrower shall not, and shall not
permit any Subsidiary to, without the written consent of each Lender, (a) take
any action not in the ordinary course of the business of the Borrower (unless
such action could not reasonably be expected to have a Material Adverse Effect),
(b) file or settle any litigation or arbitral proceedings, or release claim, for
amount in excess of $250,000 in the aggregate, (c) either singly or jointly,
directly or indirectly, commence, join any other Person in commencing, or
authorize a trustee or other Person acting on its behalf or on behalf of others
to commence, any voluntary bankruptcy, reorganization, arrangement, insolvency,
liquidation, or receivership under the laws of the United States or any state
thereof or (d) make a general assignment for the benefit of its creditors.
Section 10.23 Net Sales. The Borrower shall not permit the net sales
volume of Hydrocarbons from the Borrower's and its Subsidiaries' Oil and Gas
Properties for the periods indicated on Schedule 10.23 to be less than the
amount for such period as set forth in Schedule 10.23. The Borrower will provide
the Administrative Agent with evidence that the preceding is being satisfied
within 30 days after the end of each quarter.
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Section 10.24 G&A Costs. Without the prior consent of the Lenders the
Borrower shall not incur and shall not permit any Subsidiary to incur General
and Administrative Costs on a quarterly basis in excess of $400,000.
Section 10.25 Press Release. Without the prior consent of each Lender or
as may be required by applicable Governmental Authority or stock exchange rule,
the Borrower shall not issue any press release or make any public announcement
concerning this Agreement or the credit facility being provided in connection
herewith, provided, however, that the consent provisions of this Section 10.25
shall not impede or preclude the Borrower from filing its Current Report on Form
8-K with the Securities and Exchange Commission, not later than the third
business day following the execution hereof.
Section 10.26 Acquisition Documents. The Borrower will not, and will not
permit any of its Subsidiaries to, amend, modify or supplement any of the
Acquisition Documents if the effect thereof could reasonably be expected to have
a Material Adverse Effect (and provided that the Borrower promptly furnishes to
the Administrative Agent a copy of such amendment, modification or supplement).
ARTICLE XI:
EVENTS OF DEFAULT; REMEDIES
Section 11.01 Events of Default. One or more of the following events shall
constitute an "Event of Default":
(a) the Borrower shall fail to pay any principal of any Loan when
and as the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof, by acceleration or otherwise.
(b) the Borrower shall fail to pay any interest on any Loan or any
fee or any other amount (other than an amount referred to in Section 11.01(a))
payable under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of two Business
Days.
(c) any representation or warranty made or deemed made by or on
behalf of the Borrower or any Subsidiary in or in connection with any Loan
Document or any amendment or modification of any Loan Document or waiver under
such Loan Document, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect in any material respect when made or deemed made.
(d) the Borrower or any Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in Section 9.01(m), Section 9.02,
Section 9.03, Section 9.07 or in ARTICLE X.
(e) the Borrower or any Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in this Agreement (other than
those specified in Section 11.01(a), Section 11.01(b) or Section 11.01(d)) or
any other Loan Document, and such failure shall continue unremedied for a period
of 30 days after the earlier to occur of (i) notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender) or (ii) a Responsible Officer of the Borrower or such Subsidiary
otherwise becoming aware of such default; provided, however, for purposes of
Section 3.03, payment of Post Default Rate interest shall begin to accrue as of
the date of such default.
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(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of any
Material Indebtedness, when and as the same shall become due and payable.
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits the holder or holders of such Material Indebtedness or any trustee or
agent on its or their behalf (with or without the giving of notice, the lapse of
time or both) to cause such Material Indebtedness to become due, or to require
the Redemption thereof or any offer to Redeem to be made in respect thereof,
prior to its scheduled maturity or require the Borrower or any Subsidiary to
make an offer in respect thereof.
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any Subsidiary or its debts, or of a substantial
part of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed for 30
days or an order or decree approving or ordering any of the foregoing shall be
entered.
(i) the Borrower or any Subsidiary shall voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution of,
or fail to contest in a timely and appropriate manner, any proceeding or
petition described in Section 11.01(h), (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing; or any stockholder of the Borrower shall make any request or take
any action for the purpose of calling a meeting of the stockholders of the
Borrower to consider a resolution to dissolve and wind-up the Borrower's
affairs.
(j) the Borrower or any Subsidiary shall become unable, admit in
writing its inability or fail generally to pay its debts as they become due.
(k) (i) one or more judgments for the payment of money in an
aggregate amount in excess of $250,000 to the extent no covered by independent
third party insurance provided by insurers of the highest claims paying rating
or financial strength as to which the insurer does not dispute coverage and is
not subject to an insolvency proceeding) or (ii) any one or more non-monetary
judgments that have, or could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, shall be rendered against the
Borrower, any of its Subsidiaries or any combination thereof and the same shall
remain undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the Borrower or any of
its Subsidiaries to enforce any such judgment.
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(l) the Loan Documents after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full force
and effect and valid, binding and enforceable in accordance with their terms
against the Borrower or a Guarantor party thereto or shall be repudiated by any
of them, or cease to create a valid and perfected Lien of the priority required
thereby on any of the collateral purported to be covered thereby, except to the
extent permitted by the terms of this Agreement, or the Borrower or any
Subsidiary or any of their Affiliates shall so state in writing.
(m) an ERISA Event shall have occurred that, in the opinion of the
Majority Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower
and its Subsidiaries in an aggregate amount exceeding (i) $250,000 in any year
or (ii) $500,000 for all periods.
(n) Any Governmental Authority (i) revokes or fails to renew any
material license, permit or franchise of the Borrower or any Subsidiary, (ii)
the Borrower or any Subsidiary for any reason loses any material license, permit
or franchise, (iii) the Borrower or any Subsidiary suffers the imposition of any
restraining order, escrow, suspension or impound of funds in connection with any
proceeding (judicial or administrative) with respect to any material license,
permit or franchise; and, in each case, (A) such revocation, failure or loss
could reasonably be expected to have a Material Adverse Effect and (B) such
Default remains unremedied for a period of 30 days after the earlier of (1) the
date upon which a Responsible Officer knew or reasonably should have known of
such Default and (2) the date upon which written notice thereof is given to the
Borrower by the Administrative Agent.
(o) The Borrower or any Subsidiary fails to duly observe, perform or
comply with any agreements with any Person or any term or condition of any
instrument, if such agreement or instrument is materially significant to the
Borrower or to the Borrower and its Subsidiaries on a consolidated bases, and
such failure is not remedied within the applicable grace period (if any)
provided in such agreement or instrument.
(p) a Change in Control shall occur.
(q) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ is no longer President and Chief Executive
Officer of the Borrower and a replacement suitable to Administrative Agent has
not been found within 60 days of such event.
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Section 11.02 Remedies.
(a) In the case of an Event of Default other than one described in
Section 11.01(h), Section 11.01(i) or Section 11.01(j), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent may,
and at the request of the Majority Lenders, shall, by notice to the Borrower,
take either or both of the following actions, at the same or different times:
(i) terminate any or all of the Commitments, the Term Loan Commitments and
thereupon the applicable commitments shall terminate immediately and (ii)
declare the Notes and the Loans then outstanding to be due and payable in whole
(or in part, in which case any principal not so declared to be due and payable
may thereafter be declared to be due and payable), and thereupon the principal
of the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower and the Guarantors
accrued hereunder and under the Notes and the other Loan Documents, shall become
due and payable immediately, without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other notice of any kind, all of
which are hereby waived by the Borrower and each Guarantor; and in case of an
Event of Default described in Section 11.01(h), Section 11.01(i) or Section
11.01(j), all of the Commitments, the Term Loan Commitments shall automatically
terminate and the Notes and the principal of all of the Loans then outstanding,
together with accrued interest thereon and all fees and the other obligations of
the Borrower and the Guarantors accrued hereunder and under the Notes and the
other Loan Documents, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower and each Guarantor.
(b) In the case of the occurrence of an Event of Default, the
Administrative Agent, the Collateral and the Lenders will have all other rights
and remedies available at law and equity.
(c) All proceeds realized from the liquidation or other disposition
of collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied:
(i) first, to payment or reimbursement of that portion of the
Indebtedness constituting fees, expenses and indemnities payable to the
Administrative Agent and the Collateral Agent in their capacity as such;
(ii) second, pro rata to payment or reimbursement of that
portion of the Indebtedness constituting fees, expenses and indemnities payable
to the Revolving Lenders;
(iii) third, pro rata to payment or reimbursement of that
portion of the Indebtedness constituting fees, expenses and indemnities payable
to the Term Lenders
(iv) fourth, pro rata to payment of accrued interest on the
Revolving Loans;
(v) fifth, pro rata to payment of principal outstanding on the
Revolving Loans and Indebtedness referred to in Clause (b) of the definition of
Indebtedness owing to a Lender or an Affiliate of a Lender;
(vi) sixth, pro rata to payment of accrued interest on the
Term Loans;
(vii) seventh, pro rata to payment of principal outstanding on
the Term Loans;
(viii) eighth, pro rata to any other Indebtedness;
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(ix) ninth, any excess, after all of the Indebtedness shall
have been indefeasibly paid in full in cash, shall be paid to the Borrower or as
otherwise required by any Governmental Requirement.
ARTICLE XII:
THE AGENTS
Section 12.01 Appointment; Powers. Each of the Lenders hereby appoints
Drawbridge Special Opportunities Fund, L.P. as the Administrative Agent. Each of
the Lenders hereby authorizes the Administrative Agent to take such actions on
its behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms hereof and the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto.
Section 12.02 Duties and Obligations of Administrative Agent. The
Administrative Agent shall have no duties or obligations except those expressly
set forth in the Loan Documents. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing (the use of the term "agent" herein and in the other Loan Documents
with reference to the Administrative Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law; rather, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties), (b) the Administrative
Agent shall not have any duty to take any discretionary action or exercise any
discretionary powers, except as provided in Section 12.03, and (c) except as
expressly set forth herein, the Administrative Agent shall have no duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to the Borrower or any of its Subsidiaries that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity. The Administrative Agent shall be deemed not to have knowledge of
any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and shall not be responsible
for or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or any other Loan
Document, (ii) the contents of any certificate, report or other document
delivered hereunder or under any other Loan Document or in connection herewith
or therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or in any other Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement, any other Loan Document or any other agreement, instrument or
document, (v) the satisfaction of any condition set forth in ARTICLE VII or
elsewhere herein, other than to confirm receipt of items expressly required to
be delivered to the Administrative Agent or as to those conditions precedent
expressly required to be to the Administrative Agent's satisfaction, (vi) the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrower and its Subsidiaries or any other
obligor or guarantor, or (vii) any failure by the Borrower or any other Person
(other than itself) to perform any of its obligations hereunder or under any
other Loan Document or the performance or observance of any covenants,
agreements or other terms or conditions set forth herein or therein. For
purposes of determining compliance with the conditions specified in ARTICLE VII,
each Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to a Lender unless the
Administrative Agent shall have received written notice from such Lender prior
to the proposed closing date specifying its objection thereto.
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Section 12.03 Action by Administrative Agent. The Administrative Agent
shall have no duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Administrative Agent
is required to exercise in writing as directed by the Majority Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 13.02) and in all cases the Administrative
Agent shall be fully justified in failing or refusing to act hereunder or under
any other Loan Documents unless it shall (a) receive written instructions from
the Majority Lenders or the Lenders, as applicable, (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 13.02) specifying the action to be taken and (b) be
indemnified to its satisfaction by the Lenders against any and all liability and
expenses which may be incurred by it by reason of taking or continuing to take
any such action. The instructions as aforesaid and any action taken or failure
to act pursuant thereto by the Administrative Agent shall be binding on all of
the Lenders. If a Default has occurred and is continuing, then the
Administrative Agent shall take such action with respect to such Default as
shall be directed by the requisite Lenders in the written instructions (with
indemnities) described in this Section 12.03, provided that, unless and until
the Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders. In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law. If a Default has occurred and
is continuing, the Collateral Agent shall not have any obligation to perform any
act in respect thereof. The Administrative Agent shall not be liable for any
action taken or not taken by it with the consent or at the request of the
Majority Lenders or the Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
13.02), and otherwise the Administrative Agent shall not be liable for any
action taken or not taken by it hereunder or under any other Loan Document or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith INCLUDING ITS OWN ORDINARY
NEGLIGENCE, except for its own gross negligence or willful misconduct.
Section 12.04 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing believed by it to be genuine and to have been signed or sent by
the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and each of the
Borrower and the Lenders hereby waives the right to dispute the Administrative
Agent's record of such statement, except in the case of gross negligence or
willful misconduct by the Administrative Agent. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts. The Administrative Agent may deem and treat the
payee of any Note as the holder thereof for all purposes hereof unless and until
a written notice of the assignment or transfer thereof permitted hereunder shall
have been filed with the Administrative Agent.
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Section 12.05 Subagents. The Administrative Agent may perform any and all
its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding Sections of this ARTICLE XII shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.
Section 12.06 Resignation or Removal of Administrative Agent. Subject to
the appointment and acceptance of a successor Agent as provided in this Section
12.06, the Agent may resign at any time by notifying the Lenders and the
Borrower, and the Administrative Agent may be removed at any time with or
without cause by the Majority Lenders. Upon any such resignation or removal, the
Majority Lenders shall have the right, in consultation with the Borrower, to
appoint a successor. If no successor shall have been so appointed by the
Majority Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation or removal of the retiring
Agent, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent which shall be a bank with an office in New York, New York, or
an Affiliate of any such bank. Upon the acceptance of its appointment as Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
The fees payable by the Borrower to a successor Agent shall be the same as those
payable to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Agent's resignation hereunder, the provisions of this
ARTICLE XII and Section 13.03 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while it was acting
as Agent.
Section 12.07 Agents as a Lender. Each financial institution serving as an
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not an
Agent, and such financial institution and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of business with the
Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent
hereunder.
Section 12.08 No Reliance. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party. Each Lender also acknowledges that
it will, independently and without reliance upon the Administrative Agent, any
other Agent or any other Lender and based on such documents and information as
it shall from time to time deem appropriate, continue to make its own decisions
in taking or not taking action under or based upon this Agreement, any other
Loan Document, any related agreement or any document furnished hereunder or
thereunder. The Agents shall not be required to keep itself informed as to the
performance or observance by the Borrower or any of its Subsidiaries of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrower or its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, no Agent nor the Arranger shall have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of the Borrower (or any of its Affiliates) which
may come into the possession of the Administrative Agent or any of its
Affiliates. In this regard, each Lender acknowledges that ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
is acting in this transaction as special counsel to the Administrative Agent
only, except to the extent otherwise expressly stated in any legal opinion or
any Loan Document. Each other party hereto will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.
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Section 12.09 Administrative Agent May File Proofs of Claim. In case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Borrower or any of its Subsidiaries, the
Administrative Agent (irrespective of whether the principal of any Loan shall
then be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the Administrative Agent shall have made any demand on
the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise:
(a) to file and prove a claim for the whole amount of the principal
and interest owing and unpaid in respect of the Loans and all other Indebtedness
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their
respective agents and counsel and all other amounts due the Lenders and the
Administrative Agent under Section 13.03) allowed in such judicial proceeding;
and
(b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Lender to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Lenders, to pay to the Administrative Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the
Administrative Agent and its agents and counsel, and any other amounts due the
Administrative Agent under Section 13.03.
Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Lender any plan
of reorganization, arrangement, adjustment or composition affecting the
Indebtedness or the rights of any Lender or to authorize the Administrative
Agent to vote in respect of the claim of any Lender in any such proceeding.
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Section 12.10 Authority of Administrative Agent to Release Collateral and
Liens. Each Lender hereby authorizes the Administrative Agent to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan Documents. Each Lender hereby authorizes the Administrative Agent to
execute and deliver to the Borrower, at the Borrower's sole cost and expense,
any and all releases of Liens, termination statements, assignments or other
documents reasonably requested by the Borrower in connection with any sale or
other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 10.13 or is otherwise authorized by the terms
of the Loan Documents.
Section 12.11 The Arranger. The Arranger shall have no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents other than their duties, responsibilities and liabilities in their
capacity as Lenders hereunder.
ARTICLE XIII:
GENERAL
Section 13.01 Notices.
(a) Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to Section 13.01(b)), all
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(i) if to the Borrower, to it at Baseline Oil & Gas Corp.,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (▇-▇▇), ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Tel: (▇▇▇) ▇▇▇-▇▇▇▇,
Fax: ▇▇▇-▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
(ii) if to the Administrative Agent, to it at Drawbridge
Special Opportunities Fund LP, 1345 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
(iii) if to the Arranger, to it at Petrobridge Investment
Management LLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Telephone No. (▇▇▇) ▇▇▇-▇▇▇▇; Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇);
and
(iv) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
(b) Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V
unless otherwise specifically provided for in this Agreement or otherwise agreed
by the Administrative Agent and the applicable Lender. The Administrative Agent
or the Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.
(c) Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.
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Section 13.02 Waivers; Amendments.
(a) No failure on the part of the Administrative Agent or any Lender
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege, or any abandonment or discontinuance of steps
to enforce such right, power or privilege, under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies of the Administrative Agent, any other Agent and the
Lenders hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be permitted by Section 13.02(b), and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan
shall not be construed as a waiver of any Default, regardless of whether the
Administrative Agent, any other Agent or any Lender may have had notice or
knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Majority Lenders or by the Borrower and the Administrative Agent with
the consent of the Majority Lenders; provided that no such agreement shall (i)
increase the Commitment of any Revolving Lender without the written consent of
such Revolving Lender, (ii) increase the Borrowing Base without the written
consent of each Revolving Lender, decrease or maintain the Borrowing Base
without the consent of the Majority Revolving Lenders or modify in any manner
Section 2.06 without the consent of each Revolving Lender, (iii) reduce the
principal amount of any Loan or reduce the rate of interest thereon, or reduce
any fees payable hereunder, or reduce any other Indebtedness hereunder or under
any other Loan Document, without the written consent of each Lender affected
thereby, (iv) postpone the scheduled date of payment or prepayment of the
principal amount of any Loan, or any interest thereon, or any fees payable
hereunder, or any other Indebtedness hereunder or under any other Loan Document,
or reduce the amount of, waive or excuse any such payment, without the written
consent of each Lender, (v) postpone or extend the Term Maturity Date without
the consent of all of the Term Lenders or postpone or extend the Revolving
Maturity Date without the consent all of the Revolving Lenders (vi) change
Section 4.01(b) or Section 4.01(c) in a manner that would alter the pro rata
sharing of payments required thereby, without the written consent of each
Lender, (vii) waive or amend Section 9.14 or change the definition of the terms
"Subsidiary", without the written consent of each Lender, (viii) release any
Guarantor (except as set forth in the Guaranty Agreement), release any of the
collateral (other than as provided in Section 12.10), or reduce the percentage
set forth in Section 9.14(a) without the written consent of each Lender, or
change any of the provisions of this Section 13.02(b) or the definitions of
"Majority Lenders" or any other provision hereof (other than the preceding
subsection (ix)) specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or under any other Loan Documents or
make any determination or grant any consent hereunder or any other Loan
Documents, without the written consent of each Lender; provided, further, that
no such agreement shall amend, modify or otherwise affect the rights or duties
of the Administrative Agent or the Collateral Agent hereunder or under any other
Loan Document without the prior written consent of the Administrative Agent or
Collateral Agent, as applicable. Notwithstanding the foregoing, any supplement
to Schedule 8.14 (Subsidiaries) shall be effective simply by delivering to the
Administrative Agent a supplemental schedule clearly marked as such and, upon
receipt, the Administrative Agent will promptly deliver a copy thereof to the
Lenders.
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Section 13.03 Expenses, Indemnity; Damage Waiver.
(a) The Borrower shall pay (i) all out-of-pocket expenses incurred
by the Administrative Agent and its Affiliates, including, without limitation,
the reasonable fees, charges and disbursements of counsel and other outside
consultants for the Administrative Agent, the reasonable travel, photocopy,
mailing, courier, telephone and other similar expenses, and the cost of
environmental audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all costs, expenses, Taxes, assessments and
other charges incurred by any Agent or any Lender in connection with any filing,
registration, recording or perfection of any security interest contemplated by
this Agreement or any Security Instrument or any other document referred to
therein, (iii) all out-of-pocket expenses incurred by any Agent or any Lender,
including the fees, charges and disbursements of any counsel for any Agent or
any Lender, in connection with the enforcement or protection of its rights in
connection with this Agreement or any other Loan Document, including its rights
under this Section 13.03, or in connection with the Loans made hereunder,
including, without limitation, all such out-of-pocket expenses incurred during
any workout, restructuring or negotiations in respect of such Loans.
(b) THE BORROWER SHALL INDEMNIFY EACH AGENT, THE ARRANGER, EACH
LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH SUCH PERSON
BEING CALLED AN "INDEMNITEE") AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM,
ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING
THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED
BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS
A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE
PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT OF
THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii) THE FAILURE
OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT,
INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (iii) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OR COVENANT OF
THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS OR ANY
81
INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS DELIVERED IN CONNECTION THEREWITH, (iv)
THE FAILURE TO DISCLOSE ANY MATERIAL INFORMATION WITH RESPECT TO THE BORROWER,
ANY OF ITS SUBSIDIARIES OR ANY OF THE COLLATERAL TO BE PLEDGED UNDER ANY LOAN
DOCUMENT, (v) ANY WASTE OF THE COLLATERAL PLEDGED UNDER ANY LOAN DOCUMENT, (vi)
ANY FRAUD, MISAPPROPRIATION OF FUNDS, THEFT OR OTHER ILLEGAL ACTIVITY BY THE
BORROWER, ANY OF ITS SUBSIDIARIES OR ANY RELATED PARTY OF THE FOREGOING, (vii)
ANY LOAN OR THE USE OF THE PROCEEDS THEREFROM, (viii) ANY OTHER ASPECT OF THE
LOAN DOCUMENTS, (ix) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS
SUBSIDIARIES BY THE BORROWER AND ITS SUBSIDIARIES, (x) ANY ASSERTION THAT THE
LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE
SECURITY INSTRUMENTS, (xi) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR
ANY SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE
PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT,
DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID
WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (xii) THE BREACH OR
NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (xiii) THE PAST OWNERSHIP BY THE
BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF
THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (xiv) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR
TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES
OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE
BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF
HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR
ANY OF ITS SUBSIDIARIES, (xv) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO
THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xvi) ANY OTHER ENVIRONMENTAL,
HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xvii) ANY
ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO
ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT
NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF
ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL
NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS,
DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to any Agent or the Arranger under Section 13.03(a) or (b),
each Lender severally agrees to pay to such Agent or the Arranger, as the case
may be, such Lender's Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against such Agent or the Arranger in its capacity as such.
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(d) To the extent permitted by applicable law, the Borrower shall
not assert, and hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as a
result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or the use
of the proceeds thereof.
(e) All amounts due under this Section 13.03 shall be payable
promptly after written demand therefor.
Section 13.04 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 13.04. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants (to the extent
provided in Section 13.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent and the Lenders) any
legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) (i) Subject to the conditions set forth in Section
13.04(b)(ii), any Lender may assign to one or more assignees all or a portion of
its rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it) without the prior written
consent of the Borrower.
(ii) Provided that such Assignments shall be subject to the
following conditions:
(A) except in the case of an assignment to a Lender or
an Affiliate of a Lender or an assignment of the entire remaining amount of the
assigning Lender's Commitment, the amount of the Commitment of the assigning
Lender subject to each such assignment (determined as of the date the Assignment
and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $1,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;
(B) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement;
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(C) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Assumption, together with
a processing and recordation fee of $4,500; and
(D) the assignee, if it shall not be a Lender, shall
deliver to the Administrative Agent an Administrative Questionnaire.
(iii) Subject to Section 13.04(b)(iv) and the acceptance and
recording thereof, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Section
5.01, Section 5.02 and Section 13.03). Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
Section 13.04 shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
Section 13.04(c).
(iv) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, the Commitment of, and principal amount
of the Loans owing to, each Lender pursuant to the terms hereof from time to
time (the "Register"). The entries in the Register shall be conclusive, and the
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice. In connection with any changes to the Register, if necessary, the
Administrative Agent will reflect the revisions on Annex I and forward a copy of
such revised Annex I to the Borrower and each Lender.
(v) Upon its receipt of a duly completed Assignment and
Assumption executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in Section
13.04(b) and any written consent to such assignment required by Section
13.04(b), the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this Section 13.04(b).
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(c) (i) Any Lender may, without the consent of the Borrower and the
Administrative Agent, sell participations to one or more banks or other entities
(a "Participant") in all or a portion of such Lender's rights and obligations
under this Agreement (including all or a portion of its Commitment and the Loans
owing to it); provided that (A) such Lender's obligations under this Agreement
shall remain unchanged, (B) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations and (C) the
Borrower, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the proviso to Section 13.02 that affects such Participant. In
addition such agreement must provide that the Participant be bound by the
provisions of Section 13.03. Subject to Section 13.04(c)(ii), the Borrower
agrees that each Participant shall be entitled to the benefits of Section 5.01
and Section 5.02 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to Section 13.04(b). To the extent permitted by
law, each Participant also shall be entitled to the benefits of Section 13.08 as
though it were a Lender, provided such Participant agrees to be subject to
Section 4.01(c) as though it were a Lender.
(ii) A Participant shall not be entitled to receive any
greater payment under Section 5.01 or Section 5.02 than the applicable Lender
would have been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such Participant is
made with the Borrower's prior written consent. A Participant that would be a
Foreign Lender if it were a Lender shall not be entitled to the benefits of
Section 5.02 unless the Borrower is notified of the participation sold to such
Participant.
(d) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including, without limitation, any pledge or assignment to
secure obligations to a Federal Reserve Bank, and this Section 13.04(d) shall
not apply to any such pledge or assignment of a security interest; provided that
no such pledge or assignment of a security interest shall release a Lender from
any of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.
(e) Notwithstanding any other provisions of this Section 13.04, no
transfer or assignment of the interests or obligations of any Lender or any
grant of participations therein shall be permitted if such transfer, assignment
or grant would require the Borrower and the Guarantors to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
state.
Section 13.05 Survival; Revival; Reinstatement.
(a) All covenants, agreements, representations and warranties made
by the Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent, any other Agent or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Commitments have not
expired or terminated. The provisions of Section 5.01, Section 5.02 and Section
13.03 and ARTICLE XII shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans and the Commitments or the termination of this Agreement,
any other Loan Document or any provision hereof or thereof.
85
(b) To the extent that any payments on the Indebtedness or proceeds
of any collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent's, the Collateral Agent's and the Lenders' Liens,
security interests, rights, powers and remedies under this Agreement and each
Loan Document shall continue in full force and effect. In such event, each Loan
Document shall be automatically reinstated and the Borrower shall take such
action as may be reasonably requested by the Administrative Agent, the
Collateral Agent and the Lenders to effect such reinstatement.
Section 13.06 Counterparts; Integration; Effectiveness.
(a) This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts) and delivered in original, facsimile
or by electronic mail, each of which shall constitute an original, but all of
which when taken together shall constitute a single contract.
(b) This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Administrative Agent (including
the Fee Letter) constitute the entire contract among the parties relating to the
subject matter hereof and thereof and supersede any and all previous agreements
and understandings, oral or written, relating to the subject matter hereof and
thereof. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES HERETO AND THERETO AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(c) Except as provided in Section 7.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
Section 13.07 Severability. Any provision of this Agreement or any other
Loan Document held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
86
Section 13.08 Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind, including, without limitations obligations under Swap Agreements) at any
time owing by such Lender or Affiliate to or for the credit or the account of
the Borrower or any Subsidiary against any of and all the obligations of the
Borrower or any Subsidiary owed to such Lender now or hereafter existing under
this Agreement or any other Loan Document, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section 13.08 are in addition to other rights and remedies
(including other rights of setoff) which such Lender or its Affiliates may have.
SECTION 13.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
ANY CONFLICT OF LAW STATUTES THAT WOULD MANDATORILY REQUIRE THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF
AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE
AND DOES NOT PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN
ANY COURT OTHERWISE HAVING JURISDICTION.
(c) THE BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND
EMPOWERS AND HEREBY CONFERS AN IRREVOCABLE SPECIAL POWER, AMPLE AND SUFFICIENT,
TO ▇▇▇▇▇ AND ▇▇▇ ▇▇▇▇▇▇ LLP, WITH OFFICES ON THE DATE HEREOF AT ▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, AS ITS DESIGNEE, APPOINTEE AND AGENT WITH RESPECT TO
ANY SUCH ACTION OR PROCEEDING IN NEW YORK TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR
AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL
PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH
PROCEEDING AND AGREES THAT THE FAILURE OF SUCH AGENT TO GIVE ANY ADVICE OF ANY
SUCH SERVICE OF PROCESS TO THE BORROWER SHALL NOT IMPAIR OR AFFECT THE VALIDITY
OF SUCH SERVICE OR OF ANY CLAIM BASED THEREON. IF FOR ANY REASON SUCH DESIGNEE,
APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, THE BORROWER
AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN NEW YORK CITY
REASONABLY SATISFACTORY TO THE ADMINISTRATIVE AGENT ON THE TERMS AND FOR THE
PURPOSES OF THIS PROVISION. EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
TO IT AT THE ADDRESS SPECIFIED IN SECTION 13.01 OR SUCH OTHER ADDRESS AS IS
SPECIFIED PURSUANT TO SECTION 13.01 (OR ITS ASSIGNMENT AND ASSUMPTION), SUCH
SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST ANOTHER PARTY IN ANY OTHER JURISDICTION.
87
(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (iv)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 13.09.
Section 13.10 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
Section 13.11 Confidentiality. Each of the Administrative Agent, the
Collateral Agent and the Lenders agrees to maintain the confidentiality of the
Information (as defined below), except that Information may be disclosed (a) to
its and its Affiliates' directors, officers, employees and agents, including
accountants, legal counsel and other advisors (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority, (c) to
the extent required by applicable laws or regulations or by any subpoena or
similar legal process, (d) to any other party to this Agreement or any other
Loan Document, (e) in connection with the exercise of any remedies hereunder or
under any other Loan Document or any suit, action or proceeding relating to this
Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section 13.11, to (i) any assignee of or Participant in,
or any prospective assignee of or Participant in, any of its rights or
obligations under this Agreement or (ii) any actual or prospective counterparty
(or its advisors) to any Swap Agreement relating to the Borrower and its
obligations, (g) with the consent of the Borrower or (h) to the extent such
Information (i) becomes publicly available other than as a result of a breach of
this Section 13.11 or (ii) becomes available to the Administrative Agent, the
Collateral Agent or any Lender on a non-confidential basis from a source other
than the Borrower. For the purposes of this Section 13.11, "Information" means
all information received from the Borrower or any Subsidiary relating to the
Borrower or any Subsidiary and their businesses, other than any such information
that is available to the Administrative Agent or any Lender on a
non-confidential basis prior to disclosure by the Borrower or a Subsidiary;
provided that, in the case of information received from the Borrower or any
Subsidiary after the date hereof, such information is clearly identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 13.11 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
88
Section 13.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (a) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (b) in the event that the maturity of the Notes is accelerated by
reason of an election of the holder thereof resulting from any Event of Default
under this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to any Lender may never include more than the maximum amount allowed
by such applicable law, and excess interest, if any, provided for in this
Agreement or otherwise shall be canceled automatically by such Lender as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Indebtedness (or, to the
extent that the principal amount of the Indebtedness shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower). All sums paid
or agreed to be paid to any Lender for the use, forbearance or detention of sums
due hereunder shall, to the extent permitted by law applicable to such Lender,
be amortized, prorated, allocated and spread throughout the stated term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law. If at any time and from time to time (i) the
amount of interest payable to any Lender on any date shall be computed at the
Highest Lawful Rate applicable to such Lender pursuant to this Section 13.12 and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total amount of interest
payable to such Lender shall equal the total amount of interest which would have
been payable to such Lender if the total amount of interest had been computed
without giving effect to this Section 13.12.
89
SECTION 13.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 13.14 Collateral Matters; Swap Agreements. The benefit of the
Security Instruments and of the provisions of this Agreement relating to any
collateral securing the Indebtedness shall also extend to and be available to
those Lenders or their Affiliates which are counterparties to any Swap Agreement
with the Borrower or any of its Subsidiaries on a pro rata basis in respect of
any obligations of the Borrower or any of its Subsidiaries which arise under any
such Swap Agreement while such Person or its Affiliate is a Lender, but only
while such Person or its Affiliate is a Lender, including any Swap Agreements
between such Persons in existence prior to the date hereof. No Lender or any
Affiliate of a Lender shall have any voting rights under any Loan Document as a
result of the existence of obligations owed to it under any such Swap
Agreements.
Section 13.15 No Third Party Beneficiaries. This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans hereunder are solely
for the benefit of the Borrower, and no other Person (including, without
limitation, any Subsidiary of the Borrower, any obligor, contractor,
subcontractor, supplier or materialsman) shall have any rights, claims, remedies
or privileges hereunder or under any other Loan Document against the
Administrative Agent, any other Agent or any Lender for any reason whatsoever.
There are no third party beneficiaries.
Section 13.16 Securitization. The Borrower hereby acknowledges that the
Lenders and their Affiliates may sell or securitize the Loans (a
"Securitization") through the pledge of the Loans as collateral security for
loans to the Lenders or their Affiliates or through the sale of the Loans or the
issuance of direct or indirect interests in the Loans, which loans to the
Lenders or their Affiliates or direct or indirect interests will be rated by
▇▇▇▇▇'▇, S&P or one or more other rating agencies (the "Rating Agencies"). The
Borrower shall cooperate with the Lenders and their Affiliates to effect the
Securitization including, without limitation, by (a) amending this Agreement and
the other Loan Documents, and executing such additional documents, as reasonably
requested by the Lenders in connection with the Securitization, provided that
(i) any such amendment or additional documentation does not impose material
additional costs on the Borrower and (ii) any such amendment or additional
documentation does not materially adversely affect the rights, or materially
increase the obligations, of the Borrower under the Loan Documents or change or
affect in a manner adverse to the Borrower the financial terms of the Loans, (b)
providing such information as may be reasonably requested by the Lenders in
connection with the rating of the Loans or the Securitization, and (c) providing
in connection with any rating of the Loans a certificate (i) agreeing to
indemnify the Lenders and their Affiliates, any of the Rating Agencies, or any
party providing credit support or otherwise participating in the Securitization
(collectively, the "Securitization Parties") for any losses, claims, damages or
liabilities (the "Liabilities") to which the Lenders, their Affiliates or such
Securitization Parties may become subject insofar as the Liabilities arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact by Borrower or any Affiliate of Borrower contained in any Loan
Document or in any writing delivered by or on behalf of the Borrower or any
Affiliate of the Borrower to the Lenders in connection with any Loan Document or
arise out of or are based upon the omission or alleged omission by Borrower or
any Affiliate of Borrower to state therein a material fact required to be stated
therein, or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and such indemnity
shall survive any transfer by the Lenders or their successors or assigns of the
Loans and (ii) agreeing to reimburse the Lenders and their Affiliates for any
legal or other expenses reasonably incurred by such Persons in connection with
defending the Liabilities.
90
Section 13.17 USA Patriot Act Notice. Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required
to obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.
[SIGNATURES BEGIN ON NEXT PAGE]
91
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
BORROWER: BASELINE OIL & GAS CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Title: Chief Executive Officer
-------------------------------------
Signature Page 1
ADMINISTRATIVE AGENT: DRAWBRIDGE SPECIAL OPPORTUNITIES FUND LP
By: Drawbridge Special Opportunities GP
LLC, its general partner
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Signature Page 2
LENDER: DRAWBRIDGE SPECIAL OPPORTUNITIES FUND LP
By: Drawbridge Special Opportunities GP
LLC, its general partner
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Address: 1345 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Chief Credit Officer
Telecopy: 212.202.3685
Signature Page 3
LENDER: ▇. ▇. ▇▇▇▇▇ SPECIAL OPPORTUNITIES FUND, L.P.
By: ▇.▇. ▇▇▇▇▇ Partners, LLC,
its general partner
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
Address: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: 646.344.4676
Signature Page 4
LENDER: ▇▇▇▇▇▇▇ NATIONAL LOAN INVESTORS, LTD.
By:
-------------------------------------
Name:
-------------------------------------
Title:
-------------------------------------
Address: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: 646.344.4676
Signature Page 5
ANNEX I
COMMITMENTS
PART A: REVOLVING COMMITMENTS
------------------------------------------------------------------------------------------------------------
Name of Revolving Lender Applicable Percentage Commitment*
------------------------------------------------------------------------------------------------------------
Drawbridge Special Opportunities Fund LP 50.0000% $27,350,000.00
------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ National Loan Investors, Ltd. 42.5000% $23,247,500.00
------------------------------------------------------------------------------------------------------------
▇.▇. ▇▇▇▇▇ Special Opportunities Fund, L.P. 07.5000% $ 4,102,500.00
------------------------------------------------------------------------------------------------------------
TOTAL 100.0000% $54,700,000.00
------------------------------------------------------------------------------------------------------------
* Note: These amounts represent the aggregate potential Commitment of the
Lenders under this Agreement, and the parties recognize that such amount will be
automatically adjusted from time to time as described in the definition of
"Commitment"
PART B: TERM LOANS
----------------------------------------------------------------------------------------------------------------
Name of Term Lender Term Loan Percentage Term Loan Commitment
----------------------------------------------------------------------------------------------------------------
Drawbridge Special Opportunities Fund LP 50.0000% $10,150,000.00
----------------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ National Loan Investors, Ltd. 42.5000% $ 8,627,500.00
----------------------------------------------------------------------------------------------------------------
▇.▇. ▇▇▇▇▇ Special Opportunities Fund, L.P. 7.5000% $ 1,522,500.00
----------------------------------------------------------------------------------------------------------------
TOTAL 100.0000% $20,300,000.00
----------------------------------------------------------------------------------------------------------------
Annex I
EXHIBIT A-1
FORM OF REVOLVING NOTE
$[ ] April 12, 2007
FOR VALUE RECEIVED, Baseline Oil & Gas Corp., a Nevada corporation (the
"Borrower"), hereby promises to pay to the order of [ ] (the "Revolving
Lender"), at the principal office of Drawbridge Special Opportunities Fund LP
(the "Administrative Agent"), at [ ], the principal sum of [ ] Dollars
($[ ]) (or such lesser amount as shall equal the aggregate unpaid principal
amount of the Revolving Loans made by the Revolving Lender to the Borrower under
the Credit Agreement, as hereinafter defined), in lawful money of the United
States of America and in immediately available funds, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of each such Revolving Loan, at such office, in like
money and funds, for the period commencing on the date of such Revolving Loan
until such Revolving Loan shall be paid in full, at the rates per annum and on
the dates provided in the Credit Agreement.
The date, amount, interest rate, Interest Period and maturity of each
Revolving Loan made by the Revolving Lender to the Borrower, and each payment
made on account of the principal thereof, shall be recorded by the Revolving
Lender on its books and, prior to any transfer of this Note, may be endorsed by
the Revolving Lender on the schedules attached hereto or any continuation
thereof or on any separate record maintained by the Revolving Lender. Failure to
make any such notation or to attach a schedule shall not affect any Revolving
Lender's or the Borrower's rights or obligations in respect of such Revolving
Loans or affect the validity of such transfer by any Revolving Lender of this
Note.
This Note is one of the Notes referred to in the Credit Agreement dated as
of April 12, 2007 among the Borrower, the Administrative Agent, and the other
lenders signatory thereto (including the Revolving Lender), and evidences
Revolving Loans made by the Revolving Lender thereunder (such Credit Agreement
as the same may be amended, supplemented or restated from time to time, the
"Credit Agreement"). Capitalized terms used in this Note have the respective
meanings assigned to them in the Credit Agreement.
This Note is issued pursuant to the Credit Agreement and is entitled to
the benefits provided for in the Credit Agreement and the other Loan Documents.
The Credit Agreement provides for the acceleration of the maturity of this Note
upon the occurrence of certain events, for prepayments of Revolving Loans upon
the terms and conditions specified therein and other provisions relevant to this
Note.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
BASELINE OIL & GAS CORP.
By: _________________________________
Name: _________________________________
Title: _________________________________
Exhibit A-1
EXHIBIT A-2
FORM OF TERM NOTE
$[ ] April 12, 2007
FOR VALUE RECEIVED, Baseline Oil & Gas Corp., a Nevada corporation (the
"Borrower"), hereby promises to pay to the order of [ ] (the "Term Lender"),
at the principal office of Drawbridge Special Opportunities Fund LP (the
"Administrative Agent"), at [ ], the principal sum of [ ] Dollars ($[ ])
(or such lesser amount as shall equal the aggregate unpaid principal amount of
the Term Loans made by the Term Lender to the Borrower under the Credit
Agreement, as hereinafter defined), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Term Loan, at such office, in like money and
funds, for the period commencing on the date of such Term Loan until such Term
Loan shall be paid in full, at the rates per annum and on the dates provided in
the Credit Agreement.
The date, amount, interest rate and maturity of each Term Loan made by the
Term Lender to the Borrower, and each payment made on account of the principal
thereof, shall be recorded by the Term Lender on its books and, prior to any
transfer of this Note, may be endorsed by the Term Lender on the schedules
attached hereto or any continuation thereof or on any separate record maintained
by the Term Lender. Failure to make any such notation or to attach a schedule
shall not affect any Term Lender's or the Borrower's rights or obligations in
respect of such Term Loans or affect the validity of such transfer by any Term
Lender of this Note.
This Note is one of the Notes referred to in the Credit Agreement dated as
of April 12, 2007 among the Borrower, the Administrative Agent, and the other
lenders signatory thereto (including the Term Lender), and evidences Term Loans
made by the Term Lender thereunder (such Credit Agreement as the same may be
amended, supplemented or restated from time to time, the "Credit Agreement").
Capitalized terms used in this Note have the respective meanings assigned to
them in the Credit Agreement.
This Note is issued pursuant to the Credit Agreement and is entitled to
the benefits provided for in the Credit Agreement and the other Loan Documents.
The Credit Agreement provides for the acceleration of the maturity of this Note
upon the occurrence of certain events, for prepayments of Term Loans upon the
terms and conditions specified therein and other provisions relevant to this
Note.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
BASELINE OIL & GAS CORP.
By: _________________________________
Name: _________________________________
Title: _________________________________
Exhibit ▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF REVOLVING BORROWING REQUEST
April __, 2007
Baseline Oil & Gas Corp., a Nevada corporation (the "Borrower"), pursuant
to Section 2.03(a) of the Credit Agreement dated as of April 12, 2007 (together
with all amendments, restatements, supplements or other modifications thereto,
the "Credit Agreement") among the Borrower, Drawbridge Special Opportunities
Fund LP, as Administrative Agent and the other agents and lenders (the
"Lenders") which are or become parties thereto (unless otherwise defined herein,
each capitalized term used herein is defined in the Credit Agreement), hereby
requests a Borrowing as follows:
(i) Aggregate amount of the requested Revolving Borrowing is $_______;
(ii) Date of such Revolving Borrowing is __________;
(iii) Amount of Borrowing Base in effect on the date hereof is $_________;
(iv) Total Revolving Exposures on the date hereof (i.e., outstanding
principal amount of Revolving Loans is $_______; and
(v) Pro forma total Revolving Exposures (giving effect to the requested
Revolving Borrowing) is __________; and
(vi) Location and number of the Borrower's account to which funds are to
be disbursed, which shall comply with the requirements of Section 2.04 of the
Credit Agreement, is as follows:
_____________________________________________________
_____________________________________________________
_____________________________________________________
The undersigned certifies that he/she is the [ ] of the Borrower, and that
as such he/she is authorized to execute this certificate on behalf of the
Borrower. The undersigned further certifies, represents and warrants on behalf
of the Borrower that the Borrower is entitled to receive the requested Revolving
Borrowing under the terms and conditions of the Credit Agreement.
BASELINE OIL & GAS CORP.
By: _______________________________
Name: _______________________________
Title: _______________________________
Exhibit B-1
EXHIBIT B-2
FORM OF TERM LOAN BORROWING REQUEST
April __, 2007
Baseline Oil & Gas Corp., a Nevada corporation (the "Borrower"), pursuant
to Section 2.03(b) of the Credit Agreement dated as of April 12, 2007 (together
with all amendments, restatements, supplements or other modifications thereto,
the "Credit Agreement") among the Borrower, Drawbridge Special Opportunities
Fund LP, as Administrative Agent and the other agents and lenders (the
"Lenders") which are or become parties thereto (unless otherwise defined herein,
each capitalized term used herein is defined in the Credit Agreement), hereby
requests a Borrowing as follows:
(i) Aggregate amount of the requested Term Borrowing is $__________;
(ii) Date of such Term Borrowing is __________;
(iii) Location and number of the Borrower's account to which funds are to
be disbursed is as follows:
_____________________________________________________
_____________________________________________________
_____________________________________________________
The undersigned certifies that he/she is the [ ] of the Borrower, and
that as such he/she is authorized to execute this certificate on behalf of the
Borrower. The undersigned further certifies, represents and warrants on behalf
of the Borrower that the Borrower is entitled to receive the requested Term
Borrowing under the terms and conditions of the Credit Agreement.
BASELINE OIL & GAS CORP.
By: _______________________________
Name: _______________________________
Title: _______________________________
Exhibit B-2
EXHIBIT C
FORM OF WARRANT
Exhibit C
EXHIBIT D
FORM OF
COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he/she is the [_____________] of
Baseline Oil & Gas Corp., a Nevada corporation (the "Borrower"), and that as
such he/she is authorized to execute this certificate on behalf of the Borrower.
With reference to the Credit Agreement dated as of April 12, 2007 (together with
all amendments, restatements, supplements or other modifications thereto being
the "Agreement") among the Borrower, Drawbridge Special Opportunities Fund LP,
as Administrative Agent, and the other agents and lenders (the "Lenders") which
are or become a party thereto, and such Lenders, the undersigned represents and
warrants as follows (each capitalized term used herein having the same meaning
given to it in the Agreement unless otherwise specified):
(a) The representations and warranties of the Borrower contained in
ARTICLE VIII of the Agreement and in the Loan Documents and otherwise made in
writing by or on behalf of the Borrower or any Guarantor pursuant to the
Agreement and the Loan Documents were true and correct when made, and are
repeated at and as of the time of delivery hereof and are true and correct in
all material respects at and as of the time of delivery hereof, except to the
extent such representations and warranties are expressly limited to an earlier
date or the Majority Lenders have expressly consented in writing to the
contrary.
(b) The Borrower has performed and complied with all agreements and
conditions contained in the Agreement and in the Loan Documents required to be
performed or complied with by it prior to or at the time of delivery hereof [or
specify default and describe].
(c) Since [same date as audited financials in Section 8.04(a)], no change
has occurred, either in any case or in the aggregate, in the condition,
financial or otherwise, of the Borrower or any Subsidiary which could reasonably
be expected to have a Material Adverse Effect [or specify event].
(d) There exists no Default or Event of Default [or specify Default and
describe].
(e) Attached hereto are the detailed computations necessary to determine
whether the Borrower is in compliance with Section 10.01 and Section 9.14 as of
the end of the [fiscal quarter][fiscal year] ending [ ].
EXECUTED AND DELIVERED this __ day of April, 2007.
BASELINE OIL & GAS CORP.
By: ______________________________________
Name: ______________________________________
Title: ______________________________________
Exhibit D
EXHIBIT E
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the "Assignment and Assumption") is dated
as of the Effective Date set forth below and is entered into by and between
[Insert name of Assignor] (the "Assignor") and [Insert name of Assignee] (the
"Assignee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
"Credit Agreement"), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
the Administrative Agent as contemplated below (i) all of the Assignor's rights
and obligations in its capacity as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto to the extent related
to the amount and percentage interest identified below of all of such
outstanding rights and obligations of the Assignor under the respective
facilities identified below (including any guarantees included in such
facilities) and (ii) to the extent permitted to be assigned under applicable
law, all claims, suits, causes of action and any other right of the Assignor (in
its capacity as a Lender) against any Person, whether known or unknown, arising
under or in connection with the Credit Agreement, any other documents or
instruments delivered pursuant thereto or the loan transactions governed thereby
or in any way based on or related to any of the foregoing, including contract
claims, tort claims, malpractice claims, statutory claims and all other claims
at law or in equity related to the rights and obligations sold and assigned
pursuant to clause (i) above (the rights and obligations sold and assigned
pursuant to clauses (i) and (ii) above being referred to herein collectively as
the "Assigned Interest"). Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Assumption,
without representation or warranty by the Assignor.
1. Assignor: ______________________________
2. Assignee: ______________________________
[and is an Affiliate/Approved Fund of
[identify Lender]]
3. Borrower: Baseline Oil & Gas Corp.
4. Administrative Agent: Drawbridge Special Opportunities Fund LP, as the
administrative agent under the Credit Agreement
5. Credit Agreement: The Credit Agreement dated as of April 12, 2007 among
the Administrative Agent, the Lenders parties
thereto, and the Borrower.
Exhibit E
17
6. Assigned Interest:
---------------------------------------------------------------------------------------------------------------
Aggregate Amount of
Commitment/Loans for all Amount of Commitment/Loans Percentage Assigned of
Commitment Assigned Lenders Assigned Commitment/Loans(1)
---------------------------------------------------------------------------------------------------------------
$ $ %
---------------------------------------------------------------------------------------------------------------
$ $ %
---------------------------------------------------------------------------------------------------------------
Effective Date: _____________ ___, 2007 [TO BE INSERTED BY ADMINISTRATIVE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
ASSIGNOR
[NAME OF ASSIGNOR]
By:______________________________
Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:______________________________
Title:
Consented to and Accepted:
Drawbridge Special Opportunities Fund LP
as Administrative Agent
By: Drawbridge Special Opportunities GP, LLC,
its general partner
By_________________________________
Title:
[Consented to:]
[NAME OF RELEVANT PARTY]
By________________________________
Title:
----------
(1) Set forth, to at least 9 decimals, as a percentage of the
Commitment/Lenders of all Lenders thereunder.
Exhibit E
ANNEX 1
STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in
respect of any Loan Document or (iv) the performance or observance by the
Borrower, any of its Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.
1.2 Assignee. The Assignee (a) represents and warrants that (i) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
satisfies the requirements, if any, specified in the Credit Agreement that are
required to be satisfied by it in order to acquire the Assigned Interest and
become a Lender, (iii) from and after the Effective Date, it shall be bound by
the provisions of the Credit Agreement as a Lender thereunder and, to the extent
of the Assigned Interest, shall have the obligations of a Lender thereunder,
(iv) it has received a copy of the Credit Agreement, together with copies of the
most recent financial statements delivered pursuant to Section 9.01 thereof, as
applicable, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Assumption and to purchase the Assigned Interest on the basis of
which it has made such analysis and decision independently and without reliance
on the Administrative Agent or any other Lender, and (v) if it is a Foreign
Lender, attached to the Assignment and Assumption is any documentation required
to be delivered by it pursuant to the terms of the Credit Agreement, duly
completed and executed by the Assignee; and (b) agrees that (i) it will,
independently and without reliance on the Administrative Agent, the Assignor or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, and (ii) it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.
2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.
3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.
Exhibit E
EXHIBIT F
FORM OF LETTERS-IN-LIEU
[DATE]
________________________
________________________
________________________
________________________
Re: Letter-in-Lieu of Transfer Order
Ladies and Gentlemen:
Enclosed is a copy of a Deed of Trust, Fixture Filing, Assignment of
As-Extracted Collateral, Security Agreement and Financing Statement dated April
12, 2007 (the "Mortgage"), from ___________________, a ___________________
("Mortgagor"), to ______________, as Administrative Agent ("Mortgagee") creating
a mortgage lien on the real property described therein and a security interest
in the personal property and fixtures described therein.
Mortgagee understands that, pursuant to division orders, transfer orders
or other agreements, you are currently disbursing proceeds of production from
one or more of the properties listed on the attached schedule ("Schedule").
Mortgagee requests that you change your records and begin making payment to
Mortgagee for the interests of Mortgagor, as shown on Exhibit A to the Mortgage,
for the property(ies) from which you are purchasing production and which you
have previously credited to Mortgagor, effective as of the date hereof, at the
address set forth below:
In consideration of your acceptance of this Letter-in-Lieu of Transfer
Order, Mortgagee hereby ratifies, confirms, adopts and agrees to be bound by all
previous sales contracts, division orders and transfer orders heretofore
executed by Mortgagor insofar as the same cover and relate to the interest shown
on the attached Schedule. Mortgagor hereby agrees to indemnify, save and hold
you harmless from and against any and all claims, demands, actions, judgments,
damages, liabilities, losses, costs, charges, recoveries and other expense of
every nature and character which you at any time shall or may sustain by reason
of the payments to Mortgagee of proceeds of production as requested and
authorized hereby; provided, however, the aggregate liability of Mortgagee with
respect to any warranty, representation, covenant or indemnification contained
in this letter or any previous sales contracts, division orders or transfer
orders shall be limited to an amount equal to the amounts disbursed by you to
Mortgagee hereunder. Recipient will not take any further orders regarding
amendments to your records or these payment instructions from Mortgagor unless
consented to by Mortgagee.
In order that we may have a record evidencing your acceptance of this
Letter-in-Lieu of Transfer Order, we request that you execute one copy of this
letter in the space provided below and return the same to us in the enclosed
self-addressed envelope.
Exhibit F
Very truly yours,
MORTGAGOR:
[________________]
By: ______________________________
Name: ______________________________
Title: ______________________________
MORTGAGEE:
[________________]
By: ______________________________
Name: ______________________________
Title: ______________________________
ACCEPTED this ____ day of
________, 200__, and we have
changed our records effective
with ________ production.
By: ____________________________
Name: ____________________________
Title: ____________________________
Exhibit F
EXHIBIT G
FORM OF ORRI ASSIGNMENT
Exhibit G
EXHIBIT H
FORM OF DEVELOPMENT PLAN
Exhibit H
EXHIBIT I
SECURITY INSTRUMENT
Exhibit I
SCHEDULE 1.01
APPROVED COUNTERPARTY
Macquarie Bank Limited
Schedule 1.01
SCHEDULE 8.05
LITIGATION
NONE
Schedule 8.05
SCHEDULE 8.06
ENVIRONMENTAL MATTERS
The following items were identified in the February 2007, ▇▇▇▇ Environmental
Site Assessment of the ▇▇▇▇▇▇▇▇ County, Texas property.
SPCC Issues
Spill prevention and containment/control items not in complete compliance and to
be completed this year by Baseline are:
- Repair/build up the containment berm at the ▇▇▇▇▇▇ Central Tank
Battery.
- Using the existing SPCC plans of Statex, have updated SPCC plans
prepared for Baseline, as the new operator in the field.
Air Emissions
The 5 tank batteries are not in complete compliance and need to be registered
with the Texas Commission on Environmental Quality/PI-7 permits obtained. Steps
to be taken this year are:
- Prepare and submit the PI-7 applications, and receive
approvals/permit numbers.
NORM Disposal
There are 2 drums of naturally occurring radioactive material on the property,
and a small site at the Hill tank battery that has some elevated levels of NORM.
These will be addressed this year as well as the labeling of any equipment with
high NORM levels.
PCB Issues and General "Housekeeping'
The recent environmental assessment included the testing of numerous electrical
transformers in the field and none of the transformers qualified as PCB
Contaminated Electrical Equipment. However, the transformers in the field need
to be stored in a common area and any oil stains remediated. This will be done
this year.
Close the Workover Pits
Nine, small pits used during workover operations will be closed this year.
Contaminated Soil & Old Pits/Tank Battery Sites
During the environmental assessment, damaged soil areas were identified at an
old ▇▇▇▇▇▇ A ATB-1 location, an old ▇▇▇▇▇▇ ATB-2 site, an old Black Caddo Unit
ATB site, and an old abandoned (1920's) plant site near the ▇▇▇▇▇▇ A4 well.
These sites have higher than normal, soil salinities as identified in the soil
samples taken during the recent site assessments. There are no plans to perform
a near term, complete remediation of these sites, as the sites are not a part of
the oil and gas reserves or ▇▇▇▇▇/facilities being assigned by Statex to
Baseline with this acquisition. In addition, it was noted in the reports, that
there are no open environmental violations or complaints on record for the
assets being acquired and no spills were listed with the Railroad Commission
since 1993 (which was remediated). Also, there are no current demands or
requests for remediation efforts by regulatory agencies or land owners.
Schedule 8.06
SCHEDULE 8.12
INSURANCE
[CERTIFICATE OF LIABILITY INSURANCE OMITTED]
Schedule 8.12
SCHEDULE 8.14
SUBSIDIARIES
NONE
Schedule 8.14
SCHEDULE 8.17
MAINTENANCE OF PROPERTIES
NONE
Schedule 8.17
SCHEDULE 8.18
GAS IMBALANCES
NONE
Schedule 8.18
SCHEDULE 8.19
MARKETING CONTRACTS
1. Crude Oil Marketing Agreement: Sunoco Partners Marketing & Terminals LP
and Statex Petroleum agreement; expires 2/28/07; month to month
thereafter; assigned to Borrower
2. Natural Gas Marketing agreement: month to month agreement between Statex
Petroleum and ▇▇▇▇▇▇ Gas Processing, Ltd.; assigned to Borrower
Schedule 8.19
SCHEDULE 8.20
SWAP AGREEMENTS
ISDA Master Agreement between Macquarie Bank Limited and Baseline Oil & Gas
Corp., dated as of ▇▇▇▇▇ ▇▇, ▇▇▇▇
▇▇▇▇:
Effective date: May 1, 2007
Termination date:
Notional amounts or volumes:
Net ▇▇▇▇ to market value thereof:
Credit support agreements relating thereto:
Schedule 8.20
SCHEDULE 8.23
MATERIAL AGREEMENTS
1. 10% Convertible Notes, taken in November 2005; convert at $0.50 per share;
25 total notes for a total of $2.375 million.
2. $1.7 million Debenture with Lakewood Group, LLC; includes a mortgage of
New Albany assets; this debenture to be paid off/retired at closing of new
Credit Agreement, and mortgage released.
3. Loan and Promissory Note between Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇; $50,000.00; 6%
interest rate; due upon closing of a financing of $5 million or more or on
July 26, 2007. Note dated January 26, 2007.
4. Loan and Promissory Note between Company and ▇▇▇▇ ▇▇▇▇▇▇; $50,000.00; 6%
interest rate; due upon closing of a financing of $5 million or more or on
July 26, 2007. Note dated January 26, 2007.
5. Extension to the note with ▇▇▇▇ ▇▇▇▇▇▇; extended until earlier of 42
months or closing of an equity offering of $3 million or more.
6. Extension to the note with ▇▇▇▇▇▇ ▇▇▇▇▇▇; extended until earlier of 42
months or closing of an equity offering of $3 million or more
7. Employment Agreement between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the Company dated Dec 5,
2006.
8. Transitional Matters Agreement dated April 12, 2007, between Baseline Oil
& Gas Corp. and Statex Petroleum.
▇▇▇▇▇▇▇▇ County Acquisition - Material Agreements
1. Brazos River Water Supply Agreement 1/1/2003 - 12/31/2007
2. United Cooperative Services Electric service agreement; 10/1/2003 -
5/31/2008
3. Surface Use agreements:
a. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and Statex Petroleum.
b. ▇▇▇▇▇▇▇ ▇▇▇▇ and Statex Petroleum
4. Water Injection Agreement - Black Brothers Ranch and Statex Petroleum.
5. Black Caddo Unit Agreement April 1, 1990.
6. Black Caddo Unit Operating Agreement - January 1, 2006
7. West Black Caddo Unit Agreement - Sept 1, 1998
8. West Black Caddo Unit Operating Agreement - January 1, 2006
9. Joint Operating Agreement between Statex and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ dated Jan 1,
2006
10. Oil Marketing agreement - between Baseline Oil & Gas Corp and Texon LP
New Albany Shale - List of Material Agreements
1. Membership Interest Redemption Agreement dated March 16, 2007
2. Assignment, ▇▇▇▇ of Sale and Conveyance, dated March 16,2007
3. Extension Agreement dated March 12, 2007
4. EXHIBIT D - following list is from the Assignment, ▇▇▇▇ of Sale, and
Conveyance, dated as of March 16, 2007:
a. Purchase and Sale Agreement dated November 15, 2006, by and between
Aurora Energy, Ltd., and New Albany-Indiana, LLC.
b. Purchase and Sale Agreement dated March 3, 2006, by and between
Source Rock Resources, Inc., and New Albany-Indiana, LLC.
Schedule 8.23
c. Farmout and Participation Agreement dated as of July 19, 2005,
between Aurora Energy, Ltd., and Wabash Energy Partners, as Farmors,
and JetEx LLC, as Farmee, covering lands located in Green, Clay, and
▇▇▇▇▇ Counties, Indiana (the "JetEx Farmout").
d. Assignment of Farmout and Participation Agreement dated January 31,
2006, between Aurora Energy, Ltd., and New Albany-Indiana, LLC.
e. Exploration Agreement dated January 27, 2006, effective as of
November 1, 2005, between Aurora Energy, Ltd., and New Albany -
Indiana, LLC.
f. Exploration Agreement dated April 7, 2006, by and among Source Rock
Resources, Inc., New Albany-Indiana, LLC, and Aurora Energy, Ltd.
▇. ▇▇▇▇▇ of Option dated January 27, 2006, between Aurora Energy, Ltd.,
and New Albany Indiana, LLC.
h. Operating Agreement dated May 1, 2006, between El Paso Production
Company, as Operator, and Pogo Producing Company, Aurora Energy,
Ltd., Aurora Operating, L.L.C., and New Albany-Indiana, LLC, as
Non-Operators, covering the South ▇▇▇▇▇ Prospect Area (Initial Test
- ▇▇▇▇▇▇ 1-10H), ▇▇▇▇▇▇ County, Indiana, a memorandum of which is
recorded in Book 66, Page 840, Instrument Number 200600003777,
Public Records of ▇▇▇▇▇▇ County, Indiana.
i. Operating Agreement dated effective as of April 1, 2006, among
Aurora Energy, Ltd., as Operator, and New Albany-Indiana, LLC,
Venator Energy, LLC, and ▇▇▇▇▇ ▇▇▇▇▇▇▇, as Non Operators, relating
to the Cardinal Unit, ▇▇▇▇▇▇ County, Indiana.
j. Operating Agreement dated effective as of April 1, 2006, among
Aurora Energy, Ltd., as Operator, and New Albany - Indiana, LLC,
Venator Energy, LLC, and ▇▇▇▇▇ ▇▇▇▇▇▇▇, as Non Operators, relating
to the Eagle Unit, ▇▇▇▇▇▇ County, Indiana.
Schedule 8.23
SCHEDULE 8.24
BROKERS
Company has a Consulting Agreement with Masstar Investments Inc., of Metairie,
LA dated November 14, 2006, as follows (and disclosed on Dec 21, 2006):
- 1% fee ($280,000 cash), to be paid at closing for the introduction
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇▇ County acquisition to the
Company; closing fee is a combination finders fee and for
reimbursement of expenses paid by Masstar to consultants performing
evaluations of the acquisition and initial third party engineering
reserve reports.
- 360,000 options at exercise price of $0.50 per share.
- Monthly retainer of $10,000 per month for 12 months, beginning after
the closing of a financing. (Said retainer will be accrued until an
equity offering is completed.)
Schedule 8.24
SCHEDULE 8.29
PAST DUE ACCOUNTS PAYABLE
Current 1 - 30 31 - 60 61 - 90 > 90 TOTAL comments
--------- --------- -------- ---------- --------- ---------- --------
▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇ 0.00 0.00 2,984.38 0.00 0.00 2,984.38 expenses
▇▇▇▇▇ & ▇▇▇ ▇▇▇▇▇▇ 79,284.73 0.00 0.00 0.00 0.00 79,284.73 financing/closing work
Gusrea, ▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇▇▇▇▇, PLLC 0.00 0.00 0.00 0.00 -1,876.99 -1,876.99 credit
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP 0.00 68,927.88 0.00 0.00 0.00 68,927.88 Statex/NewAlbany closings
Stockgroup Media, Inc 395.00 -395.00 0.00 0.00 0.00 0.00
ended; do not owe;
StreetSmart 0.00 6,000.00 6,000.00 6,000.00 0.00 18,000.00 right off
Wachovia Insurance Services, Inc. 0.00 0.00 0.00 42,882.06 0.00 42,882.06 d&o insurance
old payment; do not owe;
Wachovia Securities 0.00 0.00 0.00 0.00 3,809.50 3,809.50 right off
--------- --------- -------- ---------- --------- ----------
79,679.73 74,532.88 8,984.38 48,882.06 1,932.51 214,011.56
========= ========= ======== ========== ========= ==========
Schedule 8.29
SCHEDULE 10.05
INVESTMENTS
NONE
Schedule 10.05
SCHEDULE 10.23
NET SALES VOLUME
Fiscal Quarter Hydrocarbons Produced during Applicable Quarter on a BOE Basis
-------------- --------------------------------------------------------------
Q207 42,800
Q307 46,850
Q407 60,000
Q108 70,000
Q208 70,000
Q308 70,000
Q408 75,000
Q109 70,000
Q209 70,000
Q309 70,000
Q409 70,000
Q110 65,000
Q210 65,000
Schedule 10.23