EXHIBIT 10.5
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INTERCREDITOR, SECURITY AND
COLLATERAL AGENCY AGREEMENT
Dated as of October 28, 2004
among
ABRAXAS PETROLEUM CORPORATION,
as the Borrower,
THE SUBSIDIARIES OF THE BORROWER
LISTED ON SCHEDULE I HERETO,
as Guarantors,
▇▇▇▇▇ FARGO FOOTHILL, INC.,
as Revolving Credit Facility Administrative Agent,
GUGGENHEIM CORPORATE FUNDING, LLC,
as Bridge Loan Administrative Agent,
and
U.S. BANK NATIONAL ASSOCIATION,
as Trustee and Collateral Agent
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01. Definitions..............................................5
Section 1.02. Generic Terms............................................6
Section 1.03. Construction.............................................6
Section 1.04. Times....................................................6
ARTICLE II
SECURITY INTERESTS; COLLATERAL
Section 2.01. Security Interests.......................................6
Section 2.02. Sales and Dispositions of Collateral Without Release
or Consent..............................................11
Section 2.03. Assets Sales; Release of Affected Assets................12
Section 2.04. Termination of Security Interests.......................13
Section 2.05. No Alteration of Priority...............................13
Section 2.06. Marshaling..............................................14
Section 2.07. Maintenance of Properties...............................14
Section 2.08. Negative Covenants......................................14
ARTICLE III
LEGENDS
Section 3.01. Legends.................................................15
ARTICLE IV
COLLATERAL AGENT ACCOUNTS
Section 4.01. Establishment of the Collateral Agent Accounts..........16
Section 4.02. Funding of Asset Sale Proceeds Account and Bridge
Loan Asset Sale Proceeds Account........................17
Section 4.03. Funding of Collateral Account..........................18
Section 4.04. Distribution of Amounts on Deposit in Asset Sale
Proceeds Account and Bridge Loan Asset Sale
Proceeds Account........................................19
Section 4.05. Distribution of Amounts on Deposit in Bridge Loan
Asset Proceeds Account..................................19
Section 4.06. Distribution of Amounts on Deposit in Collateral
Account During Default Period...........................21
Section 4.07. Payments Under Debt Documents Not During Default Period.24
Section 4.08. Payments Not in Compliance with this Article IV.........25
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ARTICLE V
THE COLLATERAL AGENT
Section 5.01. Appointment and Powers..................................25
Section 5.02. Performance of Duties...................................25
Section 5.03. Reliance Upon Documents.................................26
Section 5.04. Successor Collateral Agent..............................26
Section 5.05. Indemnification.........................................28
Section 5.06. Compensation and Reimbursement..........................28
Section 5.07. Representations and Warranties of the Collateral Agent..28
Section 5.08. Representations and Warranties of each Borrower Party...29
Section 5.09. Representations and Warranties of each Secured Party....30
Section 5.10. Waiver of Setoffs.......................................31
ARTICLE VI
CONTROL PARTY; REMEDIES
Section 6.01. Exercise of Remedies; Management of Collateral..........31
Section 6.02. Control Party...........................................32
Section 6.03. Rights and Remedies.....................................32
Section 6.04. Bankruptcy Issues.......................................34
Section 6.05. Notice of Default and Certain Events....................36
Section 6.06. Remedies Cumulative.....................................36
Section 6.07. The Collateral Agent's and Secured Parties'
Liability for Collateral................................36
Section 6.08. Amounts Collected.......................................37
Section 6.09. Appraisals..............................................37
Section 6.10. Reinstatement...........................................37
Section 6.11. Trust Indenture Act.....................................37
ARTICLE VII
SUBORDINATION; FINANCING AGREEMENTS
Section 7.01. Blockage of Payments to the Junior Secured Parties......37
Section 7.02. Payments Held in Trust/Turnover.........................38
Section 7.03. Collateral Agent to Effectuate Subordination............38
Section 7.04. No Waiver of Subordination Provisions...................38
Section 7.05. Modification of Financing Agreements....................38
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments..............................................41
Section 8.02. Notices.................................................41
Section 8.03. Severability............................................41
Section 8.04. Term of this Agreement..................................41
Section 8.05. Assignments.............................................42
Section 8.06. TRIAL BY JURY WAIVED....................................42
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Section 8.07. GOVERNING LAW...........................................43
Section 8.08. Consents to Jurisdiction................................43
Section 8.09. Time of Essence.........................................43
Section 8.10. Counterparts............................................43
Section 8.11. Integration.............................................43
Section 8.12. Headings................................................43
Section 8.13. Full Recourse...........................................43
Section 8.14. Collateral Agent and its Affiliates.....................44
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INTERCREDITOR, SECURITY AND COLLATERAL AGENCY AGREEMENT (this "Agreement")
dated as of October 28, 2004, among (i) ABRAXAS PETROLEUM CORPORATION, a Nevada
corporation (the "Borrower"), (ii) the subsidiaries of the Borrower listed on
Schedule I hereto (the "Guarantors"), (iii) ▇▇▇▇▇ FARGO FOOTHILL, INC., a
California corporation, in its capacity as agent (in such capacity, together
with any successor in such capacity, the "Revolving Credit Facility
Administrative Agent") for the lenders who are from time to time parties to the
Revolving Credit Facility Documents referred to herein (the "Revolving
Lenders"), (iv) U.S. BANK NATIONAL ASSOCIATION, a national banking association,
in its capacities as trustee (in such capacity, together with any successor in
such capacity, the "Trustee") for the holders of securities issued under the
Noteholder Documents referred to herein (the "Noteholders"), and as collateral
agent (in such capacity, together with any successor in such capacity appointed
in accordance with the terms of this Agreement, the "Collateral Agent") for the
Secured Parties referred to herein, and (v) GUGGENHEIM CORPORATE FUNDING, LLC, a
Delaware limited liability company, in its capacity as agent (in such capacity,
together with any successor in such capacity, the "Bridge Loan Administrative
Agent") for the lenders who are from time to time parties to the Bridge Loan
Documents referred to herein (the "Bridge Lenders").
RECITALS
A. Concurrently herewith, (i) the Borrower is entering into the Loan
Agreement, dated as of the date hereof (the "Revolving Credit Facility"), with
the Revolving Lenders and the Revolving Credit Facility Administrative Agent
pursuant to which the Revolving Lenders may from time to time make loans and
other financial accommodations to the Borrower and (ii) each of the Guarantors
is guarantying (each, a "Revolving Credit Facility Guaranty") the obligations of
the Borrower owing to the Revolving Credit Facility Administrative Agent and the
Revolving Lenders under the Revolving Credit Facility.
B. Concurrently herewith, (i) each of the Borrower and the Guarantors is
entering into the Indenture, dated as of the date hereof (the "Indenture"),
among the Borrower, the Guarantors and the Trustee, pursuant to which
$125,000,000 aggregate principal amount of Floating Rate Senior Secured Notes
due 2009 of the Borrower (the "Notes") are being issued and (ii) each of the
Guarantors is guarantying (each, a "Noteholder Guaranty") the obligations of the
Borrower owing to the Trustee and the Noteholders under the Notes and the
Indenture.
C. Concurrently herewith, (i) the Borrower is entering into the Loan
Agreement, dated as of the date hereof (the "Bridge Loan"), with the Bridge
Lenders and the Bridge Loan Administrative Agent, pursuant to which the Bridge
Lenders have agreed to make loans and other financial accommodations to the
Borrower, and (ii) each of the Guarantors is guarantying (each, a "Bridge Loan
Guaranty") the obligations of the Borrower owing to the Bridge Loan
Administrative Agent and the Bridge Lenders under the Bridge Loan.
D. The Revolving Lenders and the Noteholders wish to agree as to their
respective rights and priorities with respect to payments received in respect of
Senior Indebtedness referred to herein and proceeds of the Collateral referred
to herein, and as to certain other rights, priorities and interests as between
and among the Revolving Credit Facility Administrative Agent and the Revolving
Lenders, and the Trustee and the Noteholders, as the holders of Senior
Indebtedness.
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E. The parties hereto wish to agree as to the priority of the repayment of
the Senior Indebtedness and the Junior Indebtedness referred to herein, and the
rights of each with respect thereto, and as to their respective liens upon and
security interests in the Collateral, and as to certain other rights, priorities
and interests as between and among the Revolving Credit Facility Administrative
Agent and the Revolving Lenders, the Trustee and the Noteholders, and the Bridge
Loan Administrative Agent and the Bridge Lenders, as the holders of Secured
Obligations referred to herein.
F. In order to provide security for the prompt payment and performance of
the Borrower's obligations under the Revolving Credit Facility, the Indenture
and the Bridge Loan, the Borrower is entering into certain mortgages, deeds of
trust, debentures, security agreements, pledge agreements, collateral
assignments and other security documents, including this Agreement
(collectively, the "Borrower Security Documents"), pursuant to which the
Borrower is agreeing to grant to the Collateral Agent, on behalf of and for the
benefit of (i) the Revolving Credit Facility Administrative Agent and the
Revolving Lenders, a shared first priority security interest in the Collateral,
(ii) the Trustee and the Noteholders, a shared first priority security interest
in the Collateral, and (iii) the Bridge Loan Administrative Agent and the Bridge
Lenders, a second priority security interest in the Collateral, in each case, in
the manner set forth in this Agreement and the other Borrower Security
Documents.
G. In order to provide security for the prompt payment and performance of
its obligations under each Revolving Credit Facility Guaranty, Noteholder
Guaranty and Bridge Loan Guaranty to which it is a party, each Guarantor is
entering into certain mortgages, deeds of trust, debentures, security
agreements, pledge agreements, collateral assignments and other security
documents, including this Agreement (collectively, the "Guaranty Security
Documents"), pursuant to which each such Guarantor is agreeing to grant to the
Collateral Agent, on behalf of and for the benefit of (i) the Revolving Credit
Facility Administrative Agent and the Revolving Lenders, a shared first priority
security interest in the Collateral with respect to such Guarantor, (ii) the
Trustee and the Noteholders, a shared first priority security interest in the
Collateral with respect to such Guarantor, and (iii) the Bridge Loan
Administrative Agent and the Bridge Lenders, a second priority security interest
in the Collateral with respect to such Guarantor, in each case, in the manner
set forth in this Agreement and the other Guaranty Security Documents.
AGREEMENTS
In consideration of the premises and of the agreements herein contained,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, each of the parties hereto hereby agrees as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Certain capitalized terms used herein have the
meanings set forth in Appendix A hereto. Terms not defined herein have the
respective meanings assigned thereto in the Indenture in effect on the Closing
Date.
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Section 1.02. Generic Terms. The terms "hereof," "herein" or "hereunder,"
unless otherwise modified by more specific reference, refer to this Agreement
(including Appendix A hereto) in its entirety. Unless otherwise indicated in
context, the terms "Article", "Section", "Appendix", "Schedule" and "Exhibit"
refer to an Article, Section, Appendix, Schedule or Exhibit of this Agreement.
Unless otherwise indicated in context, the term "including" shall mean
"including, without limitation". The definition of a term includes the singular,
the plural, the past, the present, the future, the active and the passive forms
of such term.
Section 1.03. Construction. A reference herein to any party to this
Agreement or any other agreement or instrument referred to herein includes such
party's successors and permitted assigns. A reference herein to any agreement
shall be to such agreement (together with any appendix, schedule and exhibit
attached thereto) as it may have been, or may hereafter be, amended, restated,
supplemented, replaced, substituted, renewed, refinanced, refunded, extended,
waived or otherwise modified from time to time in accordance with its terms and,
if applicable, this Agreement. A reference herein to any law or other
legislation or to any provision of any law or other legislation shall include
any amendment, modification or re-enactment thereof, any law or other
legislative provision substituted therefor and all regulations, rules and
interpretations issued thereunder or pursuant thereto.
Section 1.04. Times. All times referred to herein shall be to times in The
City of New York.
ARTICLE II
SECURITY INTERESTS; COLLATERAL
Section 2.01. Security Interests.
(a) Grant to the Collateral Agent, on Behalf of and for the Benefit of the
Revolving Loan Parties. In order to secure the full and punctual payment of, and
the performance by the Borrower Parties of, all of the Revolving Credit Facility
Indebtedness owing from time to time to the holders thereof, and to secure the
performance of all obligations of the Borrower Parties under this Agreement and
the other Financing Agreements in respect of Revolving Credit Facility
Indebtedness, and subject only to the Grant of the shared first priority Lien
and security interest pursuant to Section 2.01(b) in respect of the Noteholder
Indebtedness to the extent and on the terms set forth in this Agreement and to
such Permitted Prior Liens as may be in effect from time to time, each of the
Borrower Parties hereby Grants to the Collateral Agent for itself and on behalf
of and for the benefit of holders of the Revolving Credit Facility Indebtedness
as their interests specified herein may appear, a continuing shared first
priority Lien and security interest on and in all of its right, title and
interest in and to the Collateral, whether now owned and existing or hereafter
acquired or arising and wherever located.
(b) Grant to the Collateral Agent, on Behalf of and for the Benefit of the
Noteholder Parties. In order to secure the full and punctual payment of, and the
performance by the Borrower Parties of, all of the Noteholder Indebtedness owing
from time to time to the holders thereof, and to secure the performance of all
obligations of the Borrower Parties under this Agreement and the other Financing
Agreements in respect of Noteholder Indebtedness, and subject only to the Grant
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of the shared first priority Lien and security interest pursuant to Section
2.01(a) in respect of the Revolving Credit Facility Indebtedness to the extent
and on the terms set forth in this Agreement and to such Permitted Prior Liens
as may be in effect from time to time, each of the Borrower Parties hereby
Grants to the Collateral Agent for itself and on behalf of and for the benefit
of holders of Noteholder Indebtedness as their interests specified herein may
appear, a continuing shared first priority Lien and security interest on and in
all of its right, title and interest in and to the Collateral, whether now owned
and existing or hereafter acquired or arising and wherever located.
(c) Grant to Collateral Agent, on Behalf of and for the Benefit of the
Junior Secured Parties. In order to secure the full and punctual payment of, and
the performance by the Borrower Parties of, all of the Junior Indebtedness owing
from time to time to the holders thereof, and to secure the performance of all
obligations of the Borrower Parties under this Agreement and the other Financing
Agreements in respect of Junior Indebtedness, and subject only to the Grants of
the security interests pursuant to Sections 2.01(a) and 2.01(b) in respect of
the Senior Indebtedness to the extent and on the terms set forth in this
Agreement and to such Permitted Prior Liens as may be in effect from time to
time, each of the Borrower Parties hereby Grants to the Collateral Agent on
behalf of and for the benefit of holders of Junior Indebtedness as their
interests specified herein may appear, a continuing second priority Lien and
security interest on and in all of its right, title and interest in and to the
Collateral, whether now owned and existing or hereafter acquired or arising and
wherever located, which Lien and security interest are subject to, and junior
and subordinated in all respects to, the Security Interests for the benefit of
the Senior Secured Parties.
(d) Priorities. The Borrower Parties intend, and each of the Collateral
Agent and the Secured Parties hereby agrees, that, (i) subject to any Permitted
Prior Liens and clause (iii) below, the Security Interests in the Collateral
securing the Senior Indebtedness for the benefit of each of the several Senior
Secured Parties shall rank equally among themselves (except as provided in this
Agreement) and shall be prior to all other Liens in respect of the Collateral,
(ii) subject to any Permitted Prior Liens and clause (iii) below, the Security
Interest in the Collateral securing the Junior Indebtedness for the benefit of
each of the several Junior Secured Parties shall rank equally among themselves
and shall be prior to all other Liens in respect of the Collateral other than
the Security Interests in the Collateral for the benefit of the Senior Secured
Parties, (iii) other than during a Default Period, distributions under this
Agreement by the Collateral Agent shall be made in accordance with Sections
4.04, 4.05 and 4.07, and (iv) during a Default Period, distributions under this
Agreement by the Collateral Agent shall be made in accordance with Section 4.06.
The Borrower Parties shall take all actions (including granting control over
investment property) necessary to obtain and maintain, in favor of the
Collateral Agent for the benefit of (x) the Senior Secured Parties, shared first
Liens on and shared first priority, perfected security interests in the
Collateral, subject to no other Liens other than Permitted Prior Liens and (y)
the Junior Secured Parties, a second Lien on and a second priority, perfected
security interest in the Collateral, subject to no other Liens other than the
Liens in favor of the Collateral Agent for the benefit of the Senior Secured
Parties and Permitted Prior Liens; provided, however, that Borrower shall not be
required (i) to deliver to the Collateral Agent Control Agreements in connection
with any Securities Accounts or DDAs which have a balance of $25,000 or less, in
the aggregate, or (ii) to take perfection actions with respect to items of
Personal Property Collateral that have a value of $100,000 or less, in the
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aggregate, or to any Oil and Gas Properties which, together with any other Oil
and Gas Properties not securing the Secured Obligations, do not at any time have
either an aggregate "PV-10" (as that term is defined in the Indenture in effect
on the Closing Date) or an aggregate fair market acreage value exceeding
$250,000.
The Collateral Agent, for the benefit of the Secured Parties, acknowledges
the Grants of the Security Interests under this Agreement in accordance with the
provisions of this Agreement and the other Security Documents. The Security
Interests in the Collateral shall attach to all Collateral without further act
on the part of any Secured Party or any Borrower Party. Except as provided
herein, no Collateral may be withdrawn by the Collateral Agent or any other
Person from any Collateral Agent Account.
(e) No Transfer of Duties. The Security Interests are granted as security
only and shall not (i) transfer or in any way affect or modify, or relieve the
Borrower Parties from, any obligation to perform or satisfy any term, covenant,
condition or agreement to be performed or satisfied by the applicable Borrower
Party under or in connection with this Agreement or any other Financing
Agreement to which it is a party or (ii) impose any obligation on any of the
Secured Parties or the Collateral Agent to perform or observe any such term,
covenant, condition or agreement or impose any liability on any of the Secured
Parties or the Collateral Agent for any act or omission on the part of any of
the Borrower Parties relative thereto or for any breach of any representation or
warranty on the part of any of the Borrower Parties contained therein or made in
connection therewith.
(f) Negotiable Collateral. If any Collateral, including any proceeds
thereof, is evidenced by or consists of Negotiable Collateral, and if to the
extent that perfection or priority of the Security Interests is dependent on or
enhanced by possession, each Borrower Party, immediately upon request of the
Collateral Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to the Collateral Agent.
(g) Collection of Accounts, General Intangibles and Negotiable Collateral.
At any time during a Default Period, the Collateral Agent or the Collateral
Agent's designee may (i) notify Account Debtors of any Borrower Party that the
Accounts, chattel paper or General Intangibles have been assigned to the
Collateral Agent or that the Collateral Agent has Security Interests therein or
(ii) collect the Accounts, chattel paper or General Intangibles directly and
charge the collection costs and expenses to the Collateral Account. Each
Borrower Party agrees that it will (x) hold in trust for the Secured Parties, as
the Secured Parties' trustee, any Collections that it receives, (y) immediately
deliver to the Collateral Agent for deposit into the Asset Sale Proceeds Account
or the Bridge Loan Asset Sale Proceeds Account, as applicable, all Net Cash
Proceeds, all Net Loss Proceeds, and any other Collections (in their original
form) in connection with each Asset Sale, Event of Loss or Bridge Loan Asset
Sale, as applicable, as received by such Borrower Party at all times other than
during a Default Period, and (z) immediately deliver to the Collateral Agent for
deposit into the Collateral Account all Net Cash Proceeds, all Net Loss Proceeds
and any other Collections (in their original form) as received by such Borrower
Party at all times during a Default Period.
(h) Delivery of Additional Documentation Required.
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(i) Each Borrower Party authorizes the Collateral Agent to file any
financing statement required hereunder, and any continuation statement or
amendment with respect thereto, in any appropriate filing office without the
signature of such Borrower Party where permitted by Applicable Law. In addition,
each Borrower Party hereby authorizes the Collateral Agent at any time and from
time to time to file, one or more financing or continuation statements, fixture
filings, and amendments thereto that describe the Collateral as all assets of
such Borrower Party or words of similar effect and that contain any other
information required by Part 5 of Article 9 of the UCC for the sufficiency or
filing office acceptance of any financing statement, continuation statement,
fixture filing or amendment, including whether such Borrower Party is an
organization, the type of organization and any organization identification
number issued to such Borrower Party.
(ii) If any Borrower Party acquires any commercial tort claims after the
Closing Date, such Borrower Party shall promptly deliver to the Collateral Agent
a written description of such commercial tort claim and, upon request of the
Collateral Agent, shall deliver a written agreement, in form and substance
reasonably satisfactory to the Collateral Agent, pursuant to which such Borrower
Party shall pledge and collaterally assign all of its right, title and interest
in and to such commercial tort claim to the Collateral Agent as security for the
Secured Obligations (each, a "Commercial Tort Claim Assignment").
(iii) At any time upon the request of the Collateral Agent, each Borrower
Party shall execute and deliver to the Collateral Agent any and all financing
statements, original financing statements in lieu of continuation statements,
amendments to financing statements, fixture filings, security agreements,
pledges, assignments, Commercial Tort Claim Assignments, endorsements of
certificates of title and all other documents (collectively, the "Additional
Documents") that the Collateral Agent may request, each in form and substance
reasonably satisfactory to the Collateral Agent, to create and perfect and
continue perfected or better perfect the Security Interests in the Collateral
(whether now owned or hereafter acquired, tangible or intangible, or real or
personal), and in order to fully consummate all of the transactions contemplated
by this Agreement and the other Financing Agreements.
(iv) To the maximum extent permitted by Applicable Law, each Borrower Party
authorizes the Collateral Agent to execute any such Additional Documents in such
Borrower Party's name and authorizes the Collateral Agent to file such executed
Additional Documents in any appropriate filing office. To the maximum extent
permitted by Applicable Law, each Borrower Party authorizes the filing of any
Additional Documents without the signature of such Borrower Party in any
appropriate filing office. The Collateral Agent will promptly provide the
Borrower or the applicable Guarantor with a copy of any Additional Documents.
Any Agent, in its reasonable discretion, may direct the Collateral Agent to
request, execute and file any such Additional Documents.
(v) In addition, if any Borrower Party at any time acquires or otherwise
owns any property or asset of the kind included in the Collateral that is not
subject to valid and enforceable Liens in favor of the Collateral Agent as
security for the Secured Obligations, then such Borrower Party will be required
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to, as soon as practicable (but in any event within 15 days with respect to
clause (A) below, and within 30 days with respect to clause (B) below, of the
earlier of such acquisition or of the day an officer of such Borrower Party has
knowledge or should have reasonably known of any such deficiency with respect to
any such property or asset): (A) execute and deliver to the Collateral Agent one
or more joinder agreements to the applicable Security Documents and any
Additional Documents requested by the Collateral Agent, each in form and
substance reasonably satisfactory to the Collateral Agent, required to grant
security interests in such Collateral in favor of the Collateral Agent for the
benefit of the holders of the Secured Obligations, and deliver to the Collateral
Agent one or more opinions of counsel reasonably satisfactory to the Collateral
Agent with respect to the matters set forth in this clause (A) consistent with
the opinions delivered on the Closing Date; and (B) cause the Liens granted in
each Security Document to be duly perfected first and second priority security
interests (subject to Permitted Prior Liens) in favor of the Collateral Agent,
including by pledging any capital stock constituting such Collateral as
appropriate, and cause each other Lien upon such Collateral to be (x) released,
unless it is a Permitted Prior Lien, or (y) subordinated, whether by agreement
or operation of law, to the Security Interests for the benefit of holders of the
Secured Obligations if it is a Permitted Lien but not a Permitted Prior Lien,
and deliver to the Collateral Agent one or more opinions of counsel reasonably
satisfactory to the Collateral Agent with respect to lien perfection matters set
forth in this clause (B) consistent with the opinions delivered on the Closing
Date.
(vi) The Borrower shall deliver to the Collateral Agent and each Agent,
within 30 calendar days following the end of each calendar year beginning on
January 1, 2005, an Officers' Certificate, or, if requested by the Collateral
Agent, one or more opinions of counsel reasonably satisfactory to the Collateral
Agent, to the effect that no Additional Documents are required to be executed or
filed in order to duly perfect (and to maintain the perfection of) the
Securities Interests as contemplated by this Agreement.
(i) Power of Attorney. Each Borrower Party hereby irrevocably makes,
constitutes, and appoints the Collateral Agent (and any of the Collateral
Agent's officers, employees or agents designated by the Collateral Agent) as
such Borrower Party's true and lawful attorney, with power to (i) if such
Borrower Party refuses to, or fails timely to promptly execute and deliver any
of the documents described in Section 2.01(h), sign the name of such Borrower
Party on any of the documents described in Section 2.01(h), (ii) at any time
that an Event of Default has occurred and is continuing, sign such Borrower
Party's name on any invoice or ▇▇▇▇ of lading relating to the Collateral, draft
against Account Debtors or notice of Account Debtors, (iii) send requests for
verification of Accounts, (iv) endorse such Borrower Party's name on any
Collection item that may come into the Secured Parties' possession, (v) any time
that an Event of Default has occurred and is continuing, make, settle and adjust
all claims under such Borrower Party's policies of insurance and make all
determinations and decisions with respect to such policies of insurance and (vi)
at any time that an Event of Default has occurred and is continuing, settle and
adjust disputes and claims respecting the Accounts, chattel paper or General
Intangibles directly with Account Debtors, for amounts and upon terms that the
Collateral Agent determines to be reasonable, and the Collateral Agent may cause
to be executed and delivered any documents and releases that the Collateral
Agent determines to be necessary. The appointment of the Collateral Agent as
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such Borrower Party's attorney, and each and every one of its rights and powers,
being coupled with an interest, is irrevocable until all of the Secured
Obligations have been fully and finally repaid and performed and, to the extent
applicable, the Secured Parties' obligations to extend credit thereunder are
terminated. Notwithstanding the foregoing sentence, if at any time or times
after the Final Termination Date, any Secured Party shall be required to repay
any amount previously paid by or on behalf of the Borrower Parties by virtue of
an order of any court having jurisdiction in the premises, including as a result
of an adjudication that such amounts constituted preferential payments or
fraudulent conveyances, then the power of attorney granted by this Section
2.01(i) shall be reinstated.
(j) Right to Inspect. The Collateral Agent and each Secured Party (through
any of their respective officers, employees or agents) shall have the right,
upon notice to the Borrower, which notice shall not be required upon the
occurrence and during the continuation of an Event of Default, from time to time
hereafter to inspect the Books and to check, to test and appraise the Collateral
and to review the Oil and Gas Properties of the Borrower Parties in order to
verify any Borrower Party's financial condition or the amount, quality, value or
condition of, or any other matter relating to, the Collateral.
(k) Control Agreements. Each Borrower Party agrees that it will not
transfer assets out of any Securities Accounts or DDA to another bank, other
financial institution or securities intermediary, as applicable, unless each
such Borrower Party, the Collateral Agent, and the substitute bank, other
financial institution or securities intermediary have entered into a Control
Agreement. Each Borrower Party hereby agrees to take any and all action that the
Collateral Agent requests in order for the Collateral Agent to obtain control in
accordance with the UCC, including Sections 9-104, 9-105, 9-106 and 9-107 of the
UCC, as applicable, with respect to any Securities Accounts or other Investment
Property, or any DDA, chattel paper or letter-of-credit rights. No arrangements
contemplated hereby or by any Control Agreement in respect of any Securities
Accounts or other Investment Property, or any DDA, chattel paper or
letter-of-credit rights shall be modified by any Borrower Party without the
prior written consent of the Collateral Agent. During a Default Period, the
Collateral Agent may notify any bank, other financial institution, securities
intermediary or depository to liquidate the applicable Securities Account or
DDA, or any Investment Property maintained or held thereby, and to remit the
proceeds of the Securities Account or DDA to the Collateral Account.
Notwithstanding anything to the contrary herein, the Secured Parties agree that
the Borrower Parties shall not be required to deliver to the Collateral Agent
Control Agreements in connection with any Securities Accounts or DDAs which have
a balance of $25,000 or less, in the aggregate.
Section 2.02. Sales and Dispositions of Collateral Without Release or
Consent.
(a) The Borrower Parties shall effect sales and other dispositions of
Collateral, including Asset Sales, in strict accordance with the provisions of
this Agreement, each of the other Financing Agreements and the Trust Indenture
Act.
(b) Subject to Section 2.03, the Borrower Parties may, to the extent
permitted by Applicable Law, without any release or consent by the Collateral
Agent, conduct ordinary course activities with respect to their properties,
including the following activities, so long as they do not constitute Asset
Sales and otherwise comply with the terms of this Agreement, each of the other
Financing Agreements and the Trust Indenture Act:
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(i) disposing of items of equipment and other assets included in the
Collateral that have become worn out, defective or obsolete or not used or
useful in the business of the applicable Borrower Party and which are, to
the extent required by this Agreement or the other Security Documents,
replaced by property of substantially equivalent or greater value which
becomes subject to the Security Interests;
(ii) selling, leasing or abandoning (A) any undeveloped oil and gas
property subject to the Security Interests or (B) any other oil and gas
property subject to the Security Interests, in each case of clauses (A) and
(B), that is not capable of production in economic quantities;
(iii) terminating, canceling, amending or otherwise modifying any
contract subject to the Security Interests;
(iv) surrendering or modifying any license or permit subject to the
Security Interests;
(v) altering, repairing, replacing, changing the location and position
of and adding to the structures, equipment, fixtures and appurtenances on
any property subject to the Security Interests; or
(vi) selling hydrocarbons or other mineral products for value;
provided, however, that, in each case, (x) no Event of Default and no "default"
under any of the Financing Agreement has occurred and is continuing, (y) no
Event of Default and no "default" under any of the Financing Agreements would
result from any of the foregoing activities, individually or in the aggregate,
which is proposed to be undertaken, and (z) any of the foregoing activities,
individually or in the aggregate, which is proposed to be undertaken would not
violate this Agreement and the other Security Documents.
(c) The Borrower shall deliver to the Collateral Agent and each Agent,
within 30 calendar days following the end of each six-month period beginning on
December 1, 2004, an Officers' Certificate to the effect that all releases and
withdrawals during the preceding six-month period with respect to which no
release or consent of the Collateral Agent was obtained were in the ordinary
course of the business of the Borrower Parties and were permitted by this
Agreement, the other Financing Agreements and the Trust Indenture Act.
Section 2.03. Assets Sales; Release of Affected Assets.
(a) If a Borrower Party will be requesting that the Collateral Agent
execute and deliver a Release, then, at least ten (10) Business Days prior to
the date of the Authorized Asset Disposition to which such request relates, the
Borrower and the applicable Borrower Party (if not the Borrower) shall deliver
to the Collateral Agent and each Agent, a duly executed Authorized Asset
Disposition Certificate in respect of such Authorized Asset Disposition,
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indicating the Affected Assets subject to such Authorized Asset Disposition, and
specifying the anticipated consummation date of such Authorized Asset
Disposition, as applicable (the "Release Date").
(b) Subject to Section 2.03(c), following receipt by the Collateral Agent
of an Authorized Asset Disposition Certificate from a Borrower Party, the
Collateral Agent shall execute and deliver on or before the Release Date
(subject to consummation of such Authorized Asset Disposition) such instruments
of release from the Security Interests as the Borrower may reasonably request to
effectuate the release of the Affected Assets (each, a "Release"), and any such
Release so executed and delivered shall be fully binding on the Secured Parties
and the Collateral Agent; provided, however, that the Collateral Agent shall not
release any Collateral pursuant to this Section 2.03(b) if, prior to the Release
Date, any Agent shall have delivered written notice to the Collateral Agent
(with a copy to the Borrower) that the release of such Collateral is not in
compliance in any material respect with the Financing Agreements to which such
Agent is a party and until such notice is rescinded or withdrawn in writing by
such Agent; provided, further, that none of the Secured Parties or the
Collateral Agent shall be required to make any representations or warranties
with respect to such release, and all such releases shall be made without
recourse to any Secured Party or the Collateral Agent.
(c) During a Default Period, the Collateral Agent shall not release any
Collateral from the Security Interests, except for value in connection with the
Collateral Agent's exercise of right and remedies under this Agreement and the
other Financing Agreements. If instructed by the Control Party during a Default
Period in accordance with this Agreement, the Collateral Agent shall execute and
deliver such instruments as the Control Party may reasonably request to
effectuate the sale of Collateral and the release of such Collateral so sold
from the Security Interests, and any such instruments so executed and delivered
shall be fully binding on the Borrower Parties, the Secured Parties and the
Collateral Agent; provided, however, that none of the Secured Parties or the
Collateral Agent shall be required to make any representations or warranties
with respect to such sale and release, and all such sales and releases shall be
made without recourse to any Secured Party or the Collateral Agent.
Section 2.04. Termination of Security Interests. On the Final Termination
Date, the Security Interests and the rights, remedies, powers, duties, authority
and obligations conferred upon the Secured Parties and the Collateral Agent
pursuant to this Agreement shall terminate and be of no further force and effect
and all rights, remedies, powers, duties, authority and obligations of the
Secured Parties and the Collateral Agent with respect to the Collateral shall be
automatically released in favor of the Borrower Parties; provided, however, that
each of the Secured Parties and the Collateral Agent, if requested in writing by
the Borrower and at Borrower's expense, shall execute and deliver such
instruments of release in favor of the Borrower Parties as the Borrower may
reasonably request to effectuate such release, and any such instruments so
executed and delivered shall be fully binding on the Secured Parties and the
Collateral Agent; provided, further, however, that none of the Secured Parties
or the Collateral Agent shall be required to make any representations or
warranties with respect to such release, and all such releases shall be made
without recourse to any Secured Party or the Collateral Agent.
Section 2.05. No Alteration of Priority. The Lien and Security Interest
priorities provided in this Article II shall not be altered or otherwise
affected by any amendment, restatement, supplement, replacement, substitution,
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renewal, refinancing, refunding, extension or other modification of the other
Financing Agreements, nor by the time, order, method of attachment of the
Security Interests upon any of the Collateral, nor by the time or order of
filing or recording of financing statements or other documents to perfect any
Security Interests in the Collateral, nor by the time of taking of possession or
control over any Collateral, nor by the rules for determining priority under the
UCC or any other Applicable Law governing the relative priorities of secured
creditors, nor by any other action or inaction which any Agent or Secured Party
may take or fail to take in respect of the Collateral. Each of the Secured
Parties consents to the Borrower Parties' Granting to each other Secured Party
the Liens and Security Interests provided for in this Article II.
Section 2.06. Marshaling. None of the Secured Parties or the Collateral
Agent shall be under any obligation to marshal any assets in favor of any
Borrower Party or any other party or against or in payment of any or all of the
Secured Obligations.
Section 2.07. Maintenance of Properties. Each Borrower Party shall (i)
maintain and preserve all of its properties which are necessary or useful in the
proper conduct to its business in good working order and condition, ordinary
wear and tear excepted, (ii) comply at all times with the Financing Agreements
and the provisions of all leases to which it is a party as lessee, so as to
prevent any loss or forfeiture thereof or thereunder, (iii) cause to be done all
things necessary to preserve and keep in good repair, working order and
efficiency all the Oil and Gas Properties of such Borrower Party and other
material assets including, without limitation, all equipment, machinery,
facilities, and marketing, gathering, transportation and processing assets and
(iv) from time to time, will make all the reasonably necessary repairs, renewals
and replacements so that at all times the state and conditions of such Oil and
Gas Properties and other material assets will be fully preserved and maintained,
except to the extent a portion of such assets is no longer capable of producing
Hydrocarbons in economically reasonable amounts.
Section 2.08. Negative Covenants. Each Borrower Party covenants and agrees
that, until the Final Termination Date, such Borrower Party will not do any of
the following:
(a) Change Name. Change any Borrower Party's name, organizational identification
number, state of incorporation, FEIN, corporate structure, or identity, or add
any new fictitious name; provided, however, that any Borrower Party may change
its name upon at least 30 days' prior written notice to the Collateral Agent of
such change and so long as, at the time of such written notification, such
Borrower Party provides and files in the appropriate filing offices any
financing statements or fixture filings necessary to perfect and continue
perfected the Security Interests.
(b) Change in Location of Chief Executive Office; Equipment with Bailees.
Relocate its chief executive office to a new location without providing 30 days'
prior written notification thereof to the Collateral Agent and so long as, at
the time of such written notification, each Borrower Party provides and files in
the appropriate filing offices any financing statements or fixture filings
necessary to perfect and continue perfected the Security Interests and also
provides to the Collateral Agent a Collateral Access Agreement with respect to
such new location. The Equipment shall not at any time now or hereafter be
stored with a bailee, warehouseman, or similar party without appropriate actions
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being taken to continue the perfection of the Security Interests in such
equipment.
ARTICLE III
LEGENDS
Section 3.01. Legends.
(a) The Trustee and each Borrower Party will cause each Noteholder Document
and any other instrument or agreement hereafter evidencing or guarantying any
Noteholder Indebtedness to be indorsed with substantially the following legend:
The indebtedness evidenced by this document is subject to the
provisions of the Intercreditor, Security and Collateral Agency
Agreement, dated as of October 28, 2004, among ABRAXAS PETROLEUM
CORPORATION (the "Company"), the subsidiaries of the Company listed on
Schedule I thereto, ▇▇▇▇▇ FARGO FOOTHILL, INC., in its capacity as
agent for the lenders who are from time to time parties to a Loan
Agreement dated as of October 28, 2004, U.S. BANK NATIONAL ASSOCIATION,
in its capacities as trustee for the holders of the Company's Floating
Rate Senior Secured Notes due 2009 issued under an Indenture dated as
of October 28, 2004, and as collateral agent, and GUGGENHEIM CORPORATE
FUNDING, LLC, in its capacity as agent for the lenders who are from
time to time parties to a Loan Agreement dated as of October 28, 2004.
(b) The Bridge Loan Administrative Agent and each Borrower Party will cause
each Junior Document and any other instrument or agreement hereafter evidencing
or guarantying any Junior Indebtedness to be indorsed with substantially the
following legend:
The indebtedness evidenced by this document is subordinated to the
prior payment in full of the Senior Indebtedness (as defined in the
Intercreditor, Security and Collateral Agency Agreement hereinafter
referred to) pursuant to, and to the extent provided in, the
Intercreditor, Security and Collateral Agency Agreement, dated as of
October 28, 2004, among ABRAXAS PETROLEUM CORPORATION (the "Company"),
the subsidiaries of the Company listed on Schedule I thereto, ▇▇▇▇▇
FARGO FOOTHILL, INC., in its capacity as agent for the lenders who are
from time to time parties to a Loan Agreement dated as of October 28,
2004, U.S. BANK NATIONAL ASSOCIATION, in its capacities as trustee for
the holders of the Company's Floating Rate Senior Secured Notes due
2009 issued under an Indenture dated as of October 28, 2004, and as
collateral agent, and GUGGENHEIM CORPORATE FUNDING, LLC, in its
capacity as agent for the lenders who are from time to time parties to
a Loan Agreement dated as of October 28, 2004.
(c) The Trustee, Junior Secured Parties and the Borrower Parties will (i)
▇▇▇▇ their books or accounts or take such other action as shall be effective to
give reasonable notice of the effect of this Agreement and (ii) in the case of
any Junior Indebtedness which is not evidenced by any instrument, upon the
request of the Collateral Agent or any Senior Secured Party, cause such Junior
Indebtedness to be evidenced by an appropriate instrument or instruments
indorsed with the above legend. The Secured Parties and the Borrower Parties
will, at the Borrower Parties' expense and at any time and from time to time,
promptly execute and deliver all further instruments and other documents, and
take all further action, that may be necessary or, in the opinion of the
Collateral Agent or any Agent, desirable, in order to protect any right or
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interest granted or purported to be granted hereby or by any other Security
Document or to enable the Secured Parties to exercise and enforce their rights
and remedies hereunder and thereunder.
ARTICLE IV
COLLATERAL AGENT ACCOUNTS
Section 4.01. Establishment of the Collateral Agent Accounts.
(a) On or prior to the execution and delivery of this Agreement, the
Collateral Agent shall establish segregated demand deposit accounts, designated
as: (i) the "Asset Sale Proceeds Account -- U.S. Bank, as Collateral Agent for
the Abraxas Petroleum Corporation Secured Financing" (the "Asset Sale Proceeds
Account"); (ii) the "Bridge Loan Asset Sale Proceeds Account -- U.S. Bank, as
Collateral Agent for the Abraxas Petroleum Corporation Secured Financing" (the
"Bridge Loan Asset Sale Proceeds Account"); and (iii) the "Collateral Account --
U.S. Bank, as Collateral Agent for the Abraxas Petroleum Corporation Secured
Financing" (the "Collateral Account", and together with the Asset Sale Proceeds
Account and the Bridge Loan Asset Sale Proceeds Account, the "Collateral Agent
Accounts"). The Collateral Agent shall have sole control and dominion and the
sole right of withdrawal over the Collateral Agent Accounts. The Collateral
Agent Accounts and all balances on deposit therein, or otherwise to the credit
thereof, shall be held by the Collateral Agent as provided in this Article IV.
Funds in each Collateral Agent Account shall not be commingled with any other
moneys.
(b) Except as provided in this Agreement, the Collateral Agent shall make
no withdrawal from or application of funds on deposit in, or otherwise to the
credit of, any Collateral Agent Account. The Collateral Agent agrees to give the
Borrower and the Agents notice as promptly as practicable if, to the actual
knowledge of a Responsible Officer of the Collateral Agent, any Collateral Agent
Account or any funds on deposit therein, or otherwise to the credit of the
Collateral Agent Account, shall become subject to any writ, order, judgment,
warrant of attachment, execution or similar process. Neither the Borrower
Parties nor any other Person (other than the Collateral Agent on behalf of the
Secured Parties) shall have any legal, equitable or beneficial interest in any
Collateral Agent Account, except as provided in this Agreement.
(c) The Collateral Agent and the Secured Parties hereby (i) acknowledge and
agree to the terms of subordination and distribution provisions set forth in
this Agreement and (ii) agree to enforce such provisions and cause all payments
in respect of the Secured Obligations to be applied in accordance with the terms
of this Agreement.
(d) All payments to be made by the Collateral Agent hereunder shall be made
only from amounts available in the applicable Collateral Agent Account. Each of
the Secured Parties hereby agrees to look solely to such amounts to the extent
available for distribution to it as provided in this Agreement, and that the
Collateral Agent is not personally liable to any of them for any amounts payable
or any liability under this Agreement or any other Financing Agreement, except
(in the case of the Collateral Agent) as expressly provided herein.
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Notwithstanding anything to the contrary contained in this Agreement, the
Borrower Parties shall remain liable to the Collateral Agent and the Secured
Parties for any deficiency.
(e) Funds on deposit in each Collateral Agent Account shall be invested and
reinvested by the Collateral Agent in Eligible Investments in accordance with
written instructions of (i) at all times following and during the continuation
of an Event of Default, the Control Party and (ii) at all other times, the
Borrower. In the absence of written directions to the Collateral Agent, the
funds shall be invested in investments described in clause (f) of the definition
of Eligible Investments. Any investment earnings shall be deposited in the
applicable Collateral Agent Account when received by the Collateral Agent and
shall be applied by the Collateral Agent in the same manner as the other amounts
on deposit in such Collateral Agent Account are to be applied. The Collateral
Agent's reasonable fees and expenses in making such investments and any losses
incurred in such investments shall be charged against the principal amount
invested. The Collateral Agent shall not be liable for any loss resulting from
any investment, reinvestment or liquidation required to be made under this
Agreement other than by reason of its willful misconduct or gross negligence.
Eligible Investments and any other investment required to be made hereunder
shall be held to their maturities except that any such investment may be sold
(without regard to its maturity) by the Collateral Agent without instructions
whenever such sale is necessary to make a distribution required under this
Agreement. Uninvested funds held hereunder shall not earn or accrue interest.
Section 4.02. Funding of Asset Sale Proceeds Account and Bridge Loan Asset
Sale Proceeds Account.
(a) At all times other than during a Default Period, (i) the Borrower
Parties agree that they will pay over to the Collateral Agent, for deposit in
the Asset Sale Proceeds Account, all Net Cash Proceeds, all Net Loss Proceeds
and any other Collections (in their original form) as received by such Borrower
Party in connection with an Asset Sale or Event of Loss, as applicable, in each
case immediately upon receipt thereof, and (ii) the Secured Parties agree that
they will pay over to the Collateral Agent, for deposit in the Asset Sale
Proceeds Account, all Net Cash Proceeds, all Net Loss Proceeds and any other
Collections (in their original form) in connection with an Asset Sale or Event
of Loss, as applicable, as received by such Secured Party, in each case,
promptly following receipt thereof to the extent such amounts were not received
from the Collateral Agent pursuant to the distribution provisions set forth in
this Agreement.
(b) At all times other than during a Default Period, (i) the Borrower
Parties agree that they will pay over to the Collateral Agent, for deposit in
the Bridge Loan Asset Sale Proceeds Account, all Net Cash Proceeds and any other
Collections (in its original form) as received by such Borrower Party in
connection with a Bridge Loan Asset Sale, in each case immediately upon receipt
thereof, and (ii) the Secured Parties agree that they will pay over to the
Collateral Agent, for deposit in the Bridge Loan Asset Sale Proceeds Account,
all Net Cash Proceeds and any other Collections (in their original form) in
connection with a Bridge Loan Asset Sale as received by such Secured Party, in
each case, promptly following receipt thereof to the extent such amounts were
not received from the Collateral Agent pursuant to the distribution provisions
set forth in this Agreement. Upon receipt of funds in the Bridge Loan Asset Sale
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Proceeds Account and from time to time thereafter, the Collateral Agent shall
deliver Collateral Agent Notices to the Agents as provided in Section 4.05.
(c) Notwithstanding anything to the contrary contained in this Agreement or
any other Financing Agreements, all cash proceeds and other consideration,
including Net Cash Proceeds, received by any Borrower Party, any Secured Party
or the Collateral Agent in respect of any issuance, sale or other disposition of
any Grey Wolf Capital Stock, whether or not such disposition constitutes an
Asset Sale, will be required to be applied exclusively to the repayment of any
Junior Indebtedness then outstanding.
Section 4.03. Funding of Collateral Account.
(a) At all times during a Default Period, but subject to Sections 4.02(c)
(it being understood that Grey Wolf Capital Stock and proceeds thereof are not
included in the Collateral) and 4.03(b), (i) the Borrower Parties agree that
they will pay over to the Collateral Agent, for deposit in the Collateral
Account, all Net Cash Proceeds, all Net Loss Proceeds and any other Collections
(in their original form) as received by such Borrower Party in connection with
any sale, disposition or loss of Collateral, including an Authorized Asset
Disposition or Event of Loss, in each case immediately upon receipt thereof,
(ii) the Borrower Parties agree to make all cash payments with respect to the
Secured Obligations promptly to the Collateral Agent for deposit in the
Collateral Account, and (iii) the Secured Parties agree that they will pay over
to the Collateral Agent for deposit in the Collateral Account any proceeds of
the Collateral, including any Net Cash Proceeds, Net Loss Proceeds and any other
Collections (in their original form) as received by such Secured Party, in each
case, promptly following receipt thereof to the extent such amounts were not
received from the Collateral Agent pursuant to the distribution provisions set
forth in this Agreement. In addition, all amounts received by the Collateral
Agent and the Agents in connection with the exercise of remedies under this
Agreement and the other Financing Agreements shall be promptly deposited in the
Collateral Account. Upon receipt of funds in the Collateral Account and from
time to time thereafter, the Collateral Agent shall deliver Collateral Agent
Notices to the Agents as provided in Section 4.06.
(b) Notwithstanding anything to the contrary contained in this Agreement or
any other Financing Agreements, (i) Section 4.03(a) shall not apply to (x) any
proceeds to be paid to any Secured Party in respect of any Secured Obligations
out of the proceeds of any refinancing of such Secured Obligations permitted in
accordance with Section 7.05, or (y) any proceeds to be paid to any Secured
Party in respect of Secured Obligations existing prior to the commencement of a
Bankruptcy Case out of the proceeds of any DIP Financing to the extent such
payment is approved by the court having jurisdiction in such Bankruptcy Case,
and (ii) a Default Period shall be deemed not to have occurred or exist if (x)
holders of Junior Indebtedness are no longer prohibited by Section 7.01 from
receiving any payments with respect to the Junior Indebtedness and (y) the only
Event of Default then existing is an Event of Default resulting from the failure
to make any payment with respect to Junior Indebtedness.
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Section 4.04. Distribution of Amounts on Deposit in Asset Sale Proceeds
Account and Bridge Loan Asset Sale Proceeds Account.
(a) At all times other than during a Default Period, (i) funds in the Asset
Sale Proceeds Account shall be distributed by the Collateral Agent from time to
time to the Person or Persons entitled thereto following delivery by the
Borrower of an Authorized Asset Proceeds Release Certificate, which certificate
shall be delivered to the Collateral Agent (with a copy each Agent) not less
than (5) Business Days prior to such distribution, and (ii) funds in the Bridge
Loan Asset Sale Proceeds Account shall be distributed by the Collateral Agent
from time to time to the Person or Persons entitled thereto as provided in
Section 4.05; provided, however, that if an Asset Sale, Bridge Loan Sale or
Event of Loss giving rise to Net Cash Proceeds or Net Loss Proceeds results in
the Revolving Credit Facility Indebtedness being in excess of the Availability
(as that term is defined in the Revolving Credit Facility in effect on the
Closing Date), the Collateral Agent shall promptly distribute to the Revolving
Credit Facility Administrative Agent, for the benefit of the Revolving Lenders,
an amount equal to such excess from such Net Cash Proceeds or Net Loss Proceeds
to the extent available; provided, further, that the Collateral Agent shall not
release any funds pursuant to this Section 4.04 if any Agent shall have
delivered written notice to the Collateral Agent (with a copy to the Borrower)
that the release of such funds is not in compliance in any material respect with
the Financing Agreements to which such Agent is a party and until such notice is
rescinded or withdrawn in writing by such Agent. Except as expressly permitted
by Sections 4.02(c) (to the extent that any proceeds of Grey Wolf Capital Stock
are deposited in any such account, it being understood that Grey Wolf Capital
Stock and proceeds thereof are not included in the Collateral) and 4.04(b), no
funds shall be released, withdrawn or transferred from the Asset Sale Proceeds
Account or the Bridge Loan Asset Sale Proceeds Account during a Default Period.
(b) Promptly following the commencement of a Default Period, the Collateral
Agent shall transfer into the Collateral Account all of the funds then on
deposit in the Asset Sale Proceeds Account and the Bridge Loan Asset Sale
Proceeds Account.
(c) No Borrower Party shall deliver an Authorized Asset Proceeds Release
Certificate at any time following the occurrence and during the continuation of
an Event of Default.
Section 4.05. Distribution of Amounts on Deposit in Bridge Loan Asset
Proceeds Account.
(a) No later than 3:00 P.M. on the fifth (5th) Business Day after receipt
by an Agent of written notice (a "Collateral Agent Notice") from the Collateral
Agent from time to time (a "Receipt of Notice Day"), each of the following
Persons shall deliver to the Collateral Agent a written notice setting forth the
following information as at the close of business on the applicable Receipt of
Notice Day:
(i) With respect to the Revolving Credit Facility Documents, if any
amount thereunder is outstanding, the Revolving Credit Facility
Administrative Agent shall separately set forth the amounts to be paid
(including a per diem calculation) in accordance with clauses "first",
"third" and "fourth" of Section 4.05(b);
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(ii) With respect to the Noteholder Documents, if any are then
outstanding, the Trustee shall separately set forth the amounts to be paid
in accordance with clauses "second" and "fifth" of Section 4.05(b); and
(iii) With respect to the Junior Documents, if any amount thereunder is
outstanding, the Bridge Loan Administrative Agent shall separately set
forth the amounts to be paid in accordance with clauses "sixth" and
"seventh" of Section 4.05(b).
Each Collateral Agent Notice shall set forth the amount to be paid to the
Collateral Agent and each Agent as of the day of such notice prior to
distribution of Net Cash Proceeds pursuant to Section 4.05(b). A Collateral
Agent Notice delivered pursuant this Section 4.05 shall state that such notice
is being delivered pursuant to this Section 4.05.
(b) All Net Cash Proceeds from a Bridge Loan Asset Sale shall be
distributed by the Collateral Agent from time to time promptly following such
Bridge Loan Asset Sale in the following order of priority, to the extent
available:
first, such amount as shall be required to pay the Revolving Credit
Facility Administrative Agent, for the benefit of the Revolving Lenders,
all interest then due and payable under the Revolving Credit Facility
Documents until such amount shall have been paid in full;
second, such amount as shall be required to pay the Trustee, for the
benefit of the Noteholders, all interest then due and payable under the
Noteholder Documents until such amount shall have been paid in full;
third, such amount as shall be required to pay the Revolving Credit
Facility Administrative Agent, for the benefit of the Revolving Lenders,
all accrued and unpaid interest under the Revolving Credit Facility
Documents that was not paid under clause "first" of this paragraph until
such amount shall have been paid in full;
fourth, such amount as shall be required to pay the Revolving Credit
Facility Administrative Agent, for the benefit of the Revolving Lenders,
for all principal outstanding under the Revolving Credit Facility Documents
until such amount shall have been paid in full;
fifth, if the amount of such Net Cash Proceeds remaining after any
payment made pursuant to clause "first," "second," "third" or "fourth" of
this paragraph, together with any Net Cash Proceeds in the Bridge Loan
Asset Sale Proceeds Account from previous Bridge Loan Asset Sales, exceeds
$5,000,000, such aggregate amount of Net Cash Proceeds shall be used to
make a Net Proceeds Offer as if such aggregate amount of Net Cash Proceeds
are "Excess Proceeds" within the meaning of the Indenture (and if such
aggregate amount of Net Cash Proceeds does not exceed $5,000,000, the
amount of Net Cash Proceeds from such Bridge Loan Asset Sale remaining
after payments made pursuant to clause "first," "second," "third" and
"fourth" of this paragraph shall be deposited into the Bridge Loan Asset
Sale Proceeds Account;
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sixth, after the payment of all amounts required by a Net Proceeds
Offer made in accordance with clause "fifth" of this paragraph, such amount
as shall be required to pay the Bridge Loan Administrative Agent, for the
benefit of the Bridge Lenders, all accrued and unpaid interest under the
Junior Documents until such amount shall have been paid in full;
seventh, such amount as shall be required to pay the Bridge Loan
Administrative Agent, for the benefit of the Bridge Lenders, for all
principal outstanding under the Junior Documents until such amount shall
have been paid in full; and
eighth, such other amounts as shall be required to pay each of the
Secured Parties for all other amounts outstanding under the Secured
Documents until the Secured Obligations shall have been paid in full, pro
rata on the basis of all such amounts.
For the purposes of the foregoing, "paid in full" means, with reference to
any amounts or obligations owing under the Financing Agreements, payment of all
such amounts or obligations owing under such Financing Agreements in accordance
with the terms thereof (which may include the cash collateralization of any
contingent obligations), including loan fees, service fees, professional fees,
interest (and specifically including interest accrued after the commencement of
any Bankruptcy Case), default interest, interest on interest, and expense
reimbursements, except to the extent that default or overdue interest (but not
any other interest) and loan fees, each arising from or related to a default,
are disallowed in any Bankruptcy Case.
(c) To the extent there exists any excess monies or property in the Bridge
Loan Asset Proceeds Account after the Final Termination Date, the Collateral
Agent shall return such excess amounts to the Borrower.
(d) In the event the Collateral Agent shall not receive from any Person any
information set forth in Section 4.05(a) that is required to enable the
Collateral Agent to make a distribution to such Person pursuant to Section
4.05(b), the Collateral Agent shall not make such distribution to such Person.
In such event, the Collateral Agent shall make distributions pursuant to other
clauses of Section 4.05(b) to the extent it shall have sufficient information to
enable it to make such distributions, and shall continue to hold any funds
remaining, after making such distributions, until the Collateral Agent shall
receive all necessary information to enable it to distribute any funds so
withheld, and upon receipt of the information necessary to distribute any funds
so withheld, the Collateral Agent shall distribute such funds accordingly.
Section 4.06. Distribution of Amounts on Deposit in Collateral Account
During Default Period.
(a) No later than 3:00 P.M. on the fifth (5th) Business Day after receipt
by an Agent of a Collateral Agent Notice from the Collateral Agent from time to
time, each of the following Persons shall deliver to the Collateral Agent a
written notice setting forth the following information as at the close of
business on the applicable Receipt of Notice Day:
(i) Each Agent shall set forth the amounts to be paid to such Person in
accordance with clause "second" and "third" of Section 4.06(b);
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(ii) With respect to the Revolving Credit Facility Documents, if any
amount thereunder is outstanding, the Revolving Credit Facility
Administrative Agent shall separately set forth the amounts to be paid
(including a per diem calculation) in accordance with clauses "fourth" and
"sixth" of Section 4.06(b);
(iii) With respect to the Noteholder Documents, if any are then
outstanding, the Trustee shall separately set forth the amounts to be paid
in accordance with clauses "fifth", "seventh" and "eighth" of Section
4.06(b); and
(iv) With respect to the Junior Documents, if any amount thereunder is
outstanding, the Bridge Loan Administrative Agent shall separately set
forth the amounts to be paid in accordance with clauses "ninth" and "tenth"
of Section 4.06(b).
Each Collateral Agent Notice shall set forth the amount to be paid to the
Collateral Agent as of the day of such notice in accordance with clause "first"
of Section 4.06(b).
(b) During a Default Period, all funds in the Collateral Account shall be
distributed by the Collateral Agent from time to time, and in any event upon the
earlier of (i) the first Business Day of each calendar month and (ii) promptly
following such time as the aggregate amount of such funds in the Collateral
Account shall exceed $250,000, in the following order of priority:
first, such amount as shall be required to reimburse the Collateral
Agent for any reasonable out-of-pocket costs and expenses actually incurred
by it (to the extent not previously reimbursed) in the protection of, or
the realization of the value of, any Collateral, shall be applied by the
Collateral Agent in reimbursement of such costs and expenses;
second, such amount as shall be required to reimburse the following
amounts to the indicated Party to the extent such costs and expenses were
incurred while the indicated Party was the Control Party, in each such case
pro rata on the basis of all such amounts:
(i) the Revolving Credit Facility Administrative Agent for any
reasonable out-of-pocket costs and expenses actually incurred by it (to
the extent not previously reimbursed) in the protection of, or the
realization of the value of, any Collateral, shall be distributed to
the Revolving Credit Facility Administrative Agent;
(ii) the Trustee for any reasonable out-of-pocket costs and
expenses actually incurred by it (to the extent not previously
reimbursed) in the protection of, or the realization of the value of,
any Collateral, shall be distributed to the Trustee; and
(iii) the Bridge Loan Administrative Agent for any reasonable
out-of-pocket costs and expenses actually incurred by it (to the extent
not previously reimbursed) in the protection of, or the realization of
the value of, any Collateral, shall be distributed to the Bridge Loan
Administrative Agent;
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third, such amount as shall be required to reimburse the following
amounts to the indicated Party to the extent such costs and expenses were
incurred while the indicated Party was not the Control Party, in each such
case pro rata on the basis of all such amounts:
(i) the Revolving Credit Facility Administrative Agent for any
reasonable out-of-pocket costs and expenses actually incurred by it (to
the extent not previously reimbursed) in the protection of, or the
realization of the value of, any Collateral, shall be distributed to
the Revolving Credit Facility Administrative Agent;
(ii) the Trustee for any reasonable out-of-pocket costs and
expenses actually incurred by it (to the extent not previously
reimbursed) in the protection of, or the realization of the value of,
any Collateral, shall be distributed to the Trustee; and
(iii) any Revolving Lender, Noteholder or Bridge Lender for
payments, if any, made by such Person to the Collateral Agent or any of
the Agents (to the extent not previously reimbursed) in the protection
of, or the realization of the value of, any Collateral, shall be
distributed to the applicable Agent for the account of such Noteholder,
Revolving Lender or Bridge Lender, as the case may be; provided, that
no Person shall be entitled to payment pursuant to this clause --------
(iii) to the extent such payments were made to Collateral Agent or any
of the Agents with respect to costs and expenses incurred while such
Person was not a member of the Secured Party that was the Control
Party;
fourth, such amount as shall be required to pay the Revolving Credit
Facility Administrative Agent, for the benefit of the Revolving Lenders, all
accrued and unpaid interest, and thereafter, commitment fees, under the
Revolving Credit Facility Documents (at the rate provided in the Revolving
Credit Facility Documents) until such amount shall have been paid in full;
fifth, if, immediately after the making of any payment contemplated by this
clause "fifth", the Collateral Coverage Ratio is at least 3.0 to 1.0, such
amount as shall be required to pay the Trustee, for the benefit of the
Noteholders, all accrued and unpaid interest under the Noteholder Documents (at
the rate provided in the Noteholder Documents) until such amount shall have been
paid in full;
sixth, such amount as shall be required to pay the Revolving Credit
Facility Administrative Agent, for the benefit of the Revolving Lenders, for all
principal (and, thereafter, any other amounts, including any fees, expenses,
premiums and reimbursement obligations) outstanding under the Revolving Credit
Facility Documents until such amount shall have been paid in full;
seventh, if (i) the Collateral Coverage Ratio is less than 3.0 to 1.0 and
(ii) no payment was made pursuant to clause "fifth" above, such amount as shall
be required to pay the Trustee, for the benefit of the Noteholders, all accrued
and unpaid interest under the Noteholder Documents (at the rate provided in the
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Noteholder Documents) until such amount shall have been paid in full, including
all interest accrued thereon after the commencement of a Bankruptcy Case at the
rate;
eighth, such amount as shall be required to pay the Trustee, for the
benefit of the Noteholders, for all principal (and, thereafter, any other
amounts) outstanding under the Noteholder Documents until such amount shall have
been paid in full;
ninth, such amount as shall be required to pay the Bridge Loan
Administrative Agent, for the benefit of the Bridge Lenders, all accrued and
unpaid interest under the Junior Documents (at the rate provided in the Junior
Documents) until such amount shall have been paid in full, including all
interest accrued thereon after the commencement of a Bankruptcy Case at the
rate;
tenth, such amount as shall be required to pay the Bridge Loan
Administrative Agent, for the benefit of the Bridge Lenders, for all principal
(and, thereafter any other amounts) outstanding under the Junior Documents until
such amount shall have been paid in full; and
eleventh, such other amounts as shall be required to pay each of the
Secured Parties for all other amounts outstanding under the Secured Documents
until the Secured Obligations shall have been paid in full, pro rata on the
basis of all such amounts.
For the purposes of the foregoing, "paid in full" means, with reference to
any amounts or obligations owing under the Financing Agreements, payment of all
such amounts or obligations owing under such Financing Agreements in accordance
with the terms thereof (which may include the cash collateralization of any
contingent obligations), including loan fees, service fees, professional fees,
interest (and specifically including interest accrued after the commencement of
any Bankruptcy Case), default interest, interest on interest, and expense
reimbursements, except to the extent that default or overdue interest (but not
any other interest) and loan fees, each arising from or related to a default,
are disallowed in any Bankruptcy Case.
(c) To the extent there exists any excess monies or property in the
Collateral Account after the Final Termination Date, the Collateral Agent shall
return such excess amounts to the Borrower.
(d) In the event the Collateral Agent shall not receive from any Person any
information set forth in Section 4.06(a) that is required to enable the
Collateral Agent to make a distribution to such Person pursuant to Section
4.06(b), the Collateral Agent shall not make such distribution to such Person.
In such event, the Collateral Agent shall make distributions pursuant to other
clauses of Section 4.06(b) to the extent it shall have sufficient information to
enable it to make such distributions, and shall continue to hold any funds
remaining, after making such distributions, until the Collateral Agent shall
receive all necessary information to enable it to distribute any funds so
withheld, and upon receipt of the information necessary to distribute any funds
so withheld, the Collateral Agent shall distribute such funds accordingly.
Section 4.07. Payments Under Debt Documents Not During Default Period. At
all times other than during a Default Period, the Borrower Parties shall be
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entitled (i) to receive proceeds of Collateral in accordance with the Debt
Documents and (ii) to pay, and shall pay, the Secured Obligations due and
payable to each Secured Party in accordance with the terms of the Debt Documents
even if such payments are made using the proceeds of Collateral. To the extent
there exists any monies or property in the Collateral Account after the
discontinuation of a Default Period, the Borrower Parties shall be entitled to
receive and disburse such funds in accordance with the provisions of this
Section 4.07.
Section 4.08. Payments Not in Compliance with this Article IV. If any
payment or distribution of property or assets of any Borrower Party, whether in
cash, securities or other property, shall be received by the Secured Parties and
such payment or distribution was not in compliance with the provisions of this
Article IV, such payment or distribution shall be held in trust for the benefit
of and shall be paid over to or delivered to the Collateral Agent for
distribution pursuant to this Article IV until all Senior Indebtedness shall
have been Paid in Full.
ARTICLE V
THE COLLATERAL AGENT
Section 5.01. Appointment and Powers. Subject to the terms and conditions
hereof, each of the Secured Parties hereby appoints U.S. Bank National
Association as the Collateral Agent and U.S. Bank National Association hereby
accepts such appointment and agrees to act as Collateral Agent for the Secured
Parties and to perform the duties of the Collateral Agent in accordance with the
provisions of this Agreement. Each Secured Party hereby authorizes the
Collateral Agent to take such action on its behalf and to exercise such rights,
remedies, powers and privileges hereunder as are specifically authorized to be
exercised by the Collateral Agent by the terms hereof, together with such
rights, remedies, powers and privileges as are reasonably incidental thereto.
Section 5.02. Performance of Duties.
(a) If the Collateral Agent receives a request to take action or consent
under any of the Financing Agreements that is not expressly authorized,
permitted or required by this Agreement, the Collateral Agent shall immediately
request direction from the Control Party. Except as specifically provided in
this Agreement, the Collateral Agent shall not take any action under this
Agreement or any other Financing Agreement without the direction of the Control
Party.
(b) The Collateral Agent may perform any of its duties hereunder directly
or by or through agents or employees and shall be entitled to consult with
counsel and to act in reliance upon the advice of such counsel concerning
matters pertaining to the agencies created hereby and its duties hereunder, and
shall not be liable for any action taken or omitted to be taken by it in good
faith and in reasonable reliance upon and in accordance with the advice of
counsel selected by it. The Collateral Agent undertakes to perform only such
duties as are expressly set forth herein, and no implied covenants or
obligations shall be read into this Agreement against the Collateral Agent. No
provision of this Agreement shall be construed to relieve the Collateral Agent
from liability to the Secured Parties, or any of them, or the Borrower for its
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own gross negligence or willful misconduct, provided that: (i) the Collateral
Agent shall not be liable with respect to any action taken, suffered or omitted
by it in good faith (A) reasonably believed by it to be authorized or within the
discretion or rights or powers conferred on it by this Agreement, or (B) in
accordance with any written direction or request of the Secured Parties (other
than those that require the consent of other parties and such consent has been
withheld), unless in either case the Collateral Agent was grossly negligent in
ascertaining the pertinent facts or grossly negligent in determining the
requirements imposed by this Agreement or such written direction or request; and
(ii) the Collateral Agent shall not be liable for any error of judgment made in
good faith by any of its officers or employees, unless the Collateral Agent was
grossly negligent in ascertaining the pertinent facts or in determining the
requirements imposed by this Agreement.
(c) Anything in this Agreement to the contrary notwithstanding, in no event
shall the Collateral Agent be liable under or in connection with this Agreement
for indirect, special, incidental, punitive or consequential losses or damages
of any kind whatsoever, including, but not limited to lost profits, whether or
not foreseeable, even if the Collateral Agent has been advised of the
possibility thereof and regardless of the form of action in which such damages
are sought; provided, however, that this clause shall not be deemed to apply in
the event of a finding by a court of competent jurisdiction of gross negligence
or willful misconduct on the part of the Collateral Agent.
Section 5.03. Reliance Upon Documents.
(a) In the absence of bad faith on its part, the Collateral Agent (i) may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any note, notice, resolution, consent,
certificate, affidavit, letter, telegram, teletype message, statement, order or
other document reasonably believed by it to be genuine and correct and to have
been signed or sent by the proper Person or Persons, (ii) shall not be obligated
to make any investigation into facts or matters stated in any such document or
instrument and (iii) shall have no liability in acting, or in omitting to act,
where such action or omission to act is in reliance upon any statement or
opinion contained in any such document or instrument. The Collateral Agent
assumes no responsibility or liability for (i) the correctness of the recitals
to this Agreement, or (ii) the validity, execution (except its own execution),
effectiveness, value, sufficiency, enforceability or legality of this Agreement,
or the other Financing Agreements or of the Collateral (or any part thereof).
The Collateral Agent shall have no responsibility for maintaining the value of
the Collateral or, ensuring that any Collateral is properly delivered to it,
provided that the Collateral Agent shall be responsible for holding the
Collateral in accordance with the provisions hereof. The Collateral Agent shall
take or cause to be taken all action recommended pursuant to any Opinion of
Counsel received by the Collateral Agent as may be necessary or appropriate to
perfect and protect the Security Interests granted hereby.
(b) Notwithstanding any provision to the contrary contained in Article V,
in performing its obligations to transfer amounts and make payments to any
Person in accordance with Article IV, the Collateral Agent is entitled to rely
upon the information furnished to it by the Agents pursuant to Sections 4.05(a)
and 4.06(a).
Section 5.04. Successor Collateral Agent.
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(a) Merger. Any Person into whom the Collateral Agent may be converted or
merged, or with which it may be consolidated, or to which it may sell or
transfer its trust business and assets as a whole or substantially as a whole,
or any Person resulting from any such conversion, sale, merger, consolidation or
transfer to which the Collateral Agent is a party, shall (provided it is
otherwise qualified to serve as the Collateral Agent hereunder) be and become a
successor Collateral Agent hereunder and be vested with all of the title to the
Collateral and all of the trusts, powers, discretions, immunities, privileges
and other matters as was its predecessor without the execution or filing of any
instrument or any further act, deed or conveyance on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
(b) Resignation. The Collateral Agent and any successor Collateral Agent
may at any time resign by giving 60 days' written notice by registered,
certified or express mail to each Agent, the Borrower and each Guarantor;
provided, that such resignation shall take effect only upon the date which is
the later of the effective date of the appointment of a successor Collateral
Agent pursuant to paragraph (d) below and the acceptance in writing by such
successor Collateral Agent of such appointment and of its obligation to perform
its duties hereunder in accordance with the provisions hereof. Subject to the
preceding sentence, if on the 60th day after written notice of resignation is
delivered by a resigning Collateral Agent as described above no successor
Collateral Agent or temporary successor Collateral Agent has been appointed in
accordance herewith, the resigning Collateral Agent may petition a court of
competent jurisdiction in New York City for the appointment of a successor.
(c) Removal. At any time other than after the occurrence and during the
continuation of an Event of Default (but not more than once in any twelve (12)
month period), the Borrower may remove the Collateral Agent, with or without
cause, by an instrument delivered to the Collateral Agent and the Agents. At any
time after the occurrence and during the continuation of an Event of Default,
the Control Party may remove the Collateral Agent, with or without cause, by an
instrument delivered to the Borrower, the other Agents and the Collateral Agent.
A temporary successor may be removed at any time to allow a successor Collateral
Agent to be appointed pursuant to paragraph (d) below. Any removal pursuant to
the provisions of this paragraph (c) shall take effect only upon the date which
is the latest of the effective date of the appointment of a successor Collateral
Agent appointed pursuant to paragraph (d) below and the acceptance in writing by
such successor Collateral Agent of such appointment and of its obligation to
perform its duties hereunder in accordance with the provisions hereof.
(d) Acceptance by Successor. Any successor Collateral Agent shall be a bank
or trust company (i) having its principal office in New York, New York, or such
other jurisdiction as the Secured Parties may approve by Majority Vote, and (ii)
having a shareholders' or owners' equity of at least $500,000,000 as of the
effective date of appointment. No successor Collateral Agent can be an Agent.
The Secured Parties by Majority Vote shall have the sole right to appoint each
successor Collateral Agent, subject only to the requirements set forth in the
preceding sentence. If the Secured Parties shall not have agreed by Majority
Vote within ten days as to the selection of a successor Collateral Agent, the
Control Party shall have the right to appoint a temporary successor to act as
the Collateral Agent. If by the 90th day after appointment of such temporary
successor Collateral Agent, the Secured Parties by Majority Vote shall have
remained unable to agree by Majority Vote as to the selection of a successor
Collateral Agent, such temporary successor shall automatically become the
successor Collateral Agent hereunder. Every temporary or permanent successor
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Collateral Agent appointed hereunder shall execute, acknowledge and deliver to
its predecessor and to the Agents and the Borrower an instrument in writing
accepting such appointment hereunder and the relevant predecessor shall execute,
acknowledge and deliver such other documents and instruments as will effectuate
such appointment, whereupon such successor, without any further act, deed or
conveyance, shall become fully vested with all the estates, properties, rights,
powers, duties and obligations of its predecessors.
Section 5.05. Indemnification. The Borrower Parties shall, jointly and
severally, indemnify the Collateral Agent and the Control Party, each of its
officers, employees and its agents for, and hold the Collateral Agent and each
of its officers, employees and its agents harmless against, any loss, liability,
damage, claim, action, demand or expense (including the costs and expenses of
defending against any claim of liability) arising out of or in connection with
the performance of its duties hereunder, except such loss, liability, damage,
claim, action, demand or expense as shall result from their gross negligence or
willful misconduct. The obligation of the Borrower Parties under this Section
shall survive the termination of this Agreement and the resignation or removal
of the Collateral Agent.
Section 5.06. Compensation and Reimbursement. The Borrower agrees (a) to
pay to the Collateral Agent from time to time, reasonable compensation (as
separately agreed between the Borrower and Collateral Agent) for all services
rendered by it hereunder, and (b) to reimburse the Collateral Agent upon its
request for all reasonable expenses, disbursements and advances incurred or made
by the Collateral Agent in accordance with any provision of, or carrying out its
duties and obligations under, this Agreement (including the reasonable
compensation and fees and the expenses and disbursements of its agents, any
certified public accountants and legal counsel), except any expense,
disbursement or advance as may be attributable to gross negligence, bad faith or
willful misconduct on the part of the Collateral Agent.
Section 5.07. Representations and Warranties of the Collateral Agent. The
Collateral Agent represents and warrants to each Borrower Party and to each
Secured Party as follows:
(a) Due Organization. The Collateral Agent is a national banking
association, organized, validly existing and in good standing under the laws of
the United States of America and is duly authorized and licensed under
Applicable Law to conduct its business as presently conducted.
(b) Power. The Collateral Agent has all requisite right, power and
authority to execute and deliver this Agreement and to perform all of its duties
as Collateral Agent hereunder.
(c) Due Authorization. The execution and delivery of this Agreement by the
Collateral Agent, and the performance by the Collateral Agent of its duties
hereunder, have been duly authorized by all necessary proceedings and no further
approvals or filings (other than financing statements and other Additional
Documents), including any approvals by any Governmental Authority, are required
for the valid execution and delivery by the Collateral Agent, or the performance
by the Collateral Agent, of this Agreement and the other Financing Agreements to
which it is or may be party.
28
(d) Valid and Binding Agreement. The Collateral Agent has duly executed and
delivered this Agreement, and assuming due execution and delivery by the other
parties hereto, this Agreement constitutes the legal, valid and binding
obligation of the Collateral Agent, enforceable against the Collateral Agent in
accordance with its terms, except as such enforceability may be limited (i) by
bankruptcy, insolvency, reorganization and similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) by general principles of
equity, regardless of whether such enforceability is considered in a proceeding
in equity or at law.
(e) No Other Intercreditor Agreement. The Collateral Agent has not entered
into any subordination agreement or intercreditor agreement with respect to the
Collateral other than this Agreement.
Section 5.08. Representations and Warranties of each Borrower Party. Each
Borrower Party jointly and severally represents and warrants to the Collateral
Agent and each Secured Party as follows, and such representations and warranties
shall survive the execution and delivery of this Agreement:
(a) Due Organization. Each Borrower Party is a limited liability company or
a corporation, as the case may be, duly organized or incorporated and validly
existing and in good standing under the laws of the its respective state of
organization or incorporation, and is duly authorized and licensed under
Applicable Law to conduct its business as presently conducted.
(b) Power. Each Borrower Party has all requisite right, power and authority
to execute and deliver this Agreement and to perform all of its duties
hereunder.
(c) Due Authorization. The execution and delivery of this Agreement by each
Borrower Party, and the performance by each Borrower Party of its duties
hereunder, have been duly authorized by all necessary proceedings. Other than
the filing of financing statements and informational filings with the Securities
and Exchange Commission, fixture filings, and recording of Mortgages, the
execution, delivery, and performance by each Borrower Party of this Agreement
does not and will not require any registration with, consent, or approval of, or
notice to, or other action with or by, any Governmental Authority or other
Person.
(d) Valid and Binding Agreement. Each Borrower Party has duly executed and
delivered this Agreement, and assuming due execution and delivery by the other
parties hereto, this Agreement constitutes the legal, valid and binding
obligation of each Borrower Party, enforceable against each Borrower Party in
accordance with its terms, except as such enforceability may be limited by
general principles of equity regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(e) Perfection and Priority of Liens. The Security Interests in favor of
the Senior Secured Parties are validly created and perfected shared first
priority Liens and security interests, and the Security Interests in favor of
the Junior Secured Parties are validly created and perfected second priority
Liens and security interests, in each case, subject only to Permitted Liens;
provided, however, that such representation with respect to perfection and
priority does not apply with respect to (i) Securities Accounts and DDA's to the
extent that a Control Agreement is necessary to perfect a security interest in
29
such Securities Accounts or DDA's and any such Securities Accounts or DDA's have
balances of $25,000 or less in the aggregate, (ii) other Personal Property
Collateral that has a value of $100,000 in the aggregate, and (iii) any Oil and
Gas Properties which, together with any other Oil and Gas Properties not
securing the Secured Obligations, do not at any time have either an aggregate
"PV-10" (as that term is defined in the Indenture in effect on the Closing Date)
or an aggregate fair market acreage value exceeding $250,000.
(f) No Other Intercreditor Agreement. No Borrower Party has entered into
any subordination agreement or intercreditor agreement with respect to the
Collateral other than this Agreement that is still in effect. This Agreement is
intended to be a subordination agreement with respect to the Junior Secured
Parties and the Junior Indebtedness within the meaning of section 510(a) of the
Bankruptcy Code.
(g) No Encumbrances. Each Borrower Party has good and indefeasible title to
the Personal Property Collateral and the Real Property (other than Oil and Gas
Properties constituting Real Property) owned by such Borrower Party or good and
defensible title to Oil and Gas Properties constituting Real Property, owned by
such Borrower Party free and clear of Liens except for Permitted Liens.
(h) Location of Chief Executive Office; FEIN; Commercial Tort Claims. The
chief executive office of each of the Borrower Parties is located at the address
indicated in Schedule III and such Borrower Parties' FEIN is identified in
Schedule III. Each Borrower Parties' organizational identification number is
identified in Schedule III. No Borrower Party holds any commercial tort claims
as of the date hereof.
Section 5.09. Representations and Warranties of each Secured Party. Each
Secured Party severally but not jointly represents and warrants to the
Collateral Agent as follows:
(a) Due Organization. Such Secured Party is a limited liability company or
a corporation, as the case may be, duly organized or incorporated and validly
existing and in good standing under the laws of its respective state of
organization or incorporation, and is duly authorized and licensed under
Applicable Law to conduct its business as presently conducted.
(b) Power. Such Secured Party has all requisite right, power and authority
to execute and deliver this Agreement and to perform all of its duties
hereunder.
(c) Due Authorization. The execution and delivery of this Agreement by such
Secured Party, and the performance by such Secured Party of its duties
hereunder, have been duly authorized by all necessary proceedings and no further
approvals or filings, including any approvals by any Governmental Authority, are
required for the valid execution and delivery by such Secured Party, or the
performance by such Secured Party, of this Agreement.
(d) Valid and Binding Agreement. Such Secured Party has duly executed and
delivered this Agreement, and assuming due execution and delivery by the other
parties hereto, this Agreement constitutes the legal, valid and binding
obligation of such Secured Party, enforceable against such Secured Party in
accordance with its terms, except as such enforceability may be limited by
30
general principles of equity regardless of whether such enforceability is
considered in a proceeding in equity or at law.
Section 5.10. Waiver of Setoffs. The Collateral Agent hereby expressly
waives any and all rights of setoff that the Collateral Agent may otherwise at
any time have under Applicable Law with respect to any account and agrees that
amounts in the Collateral Account shall at all times be held and applied in
accordance with the provisions of Article IV.
ARTICLE VI
CONTROL PARTY; REMEDIES
Section 6.01. Exercise of Remedies; Management of Collateral.
Notwithstanding anything to the contrary contained in any of the Financing
Agreements:
(a) The Control Party shall have the exclusive right to direct the
Collateral Agent to manage, perform and enforce the terms of the Security
Documents with respect to the Collateral and to exercise and enforce all
privileges and rights thereunder in their sole discretion, including (i) taking
or retaking control or possession of Collateral, (ii) holding, preparing for
sale, processing, selling, leasing, disposing of and liquidating Collateral,
(iii) commencing, or joining with any other creditor in commencing, any
Bankruptcy Case, (iv) enforcing or settling any insurance claims with respect to
the Collateral, and (v) exercising the rights and remedies described in Section
6.03, provided that, if the Collateral Agent is directed to exercise any rights
and remedies in accordance with this Agreement, the Collateral Agent shall
diligently pursue in good faith the exercise and enforcement of its rights or
remedies against such Collateral in a commercially reasonable manner designed to
maximize the value to be obtained from such Collateral and in any sale or other
disposition of any of such Collateral by the Collateral Agent, the Collateral
Agent shall conduct such sale or other disposition in a commercially reasonable
manner. Except as provided in this Agreement, no other parties to the Financing
Agreements shall have the right to exercise or to instruct the Collateral Agent
to exercise any rights or remedies under the Security Documents or with respect
to Collateral or commence, or join with any other creditor in commencing, any
Bankruptcy Case.
(b) Except as provided in this Agreement, any and all proceeds of
Collateral which shall come into the possession, control or custody of any
Borrower Party or any Secured Party will be deemed to have been received for the
account of the Collateral Agent on behalf of the Secured Parties and shall be
immediately paid to the Collateral Agent for deposit into the applicable
Collateral Agent Account for distribution pursuant to Article IV.
(c) The Secured Parties, by their extension of financing to the Borrower
evidenced by the Financing Agreements, each hereby agree that, with respect to
any Financing Agreement at any time during a Default Period, the Agents will
each be directed in exercising, or refraining from exercising, any action under
such applicable Financing Agreement with respect to the Collateral, including
exercising remedies of a secured party thereunder, by the Collateral Agent as
directed by the Control Party.
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(d) The rights and priorities set forth in this Agreement shall remain
binding irrespective of the terms of any plan of reorganization in a Bankruptcy
Case or other provisions of the Bankruptcy Code or any similar federal or state
statute.
Section 6.02. Control Party.
(a) At all times other than during a Default Period, the "Control Party"
shall be the Senior Secured Parties acting by Majority Vote.
(b) Upon the commencement of a Default Period and for a period of 240 days
following such commencement (the "Initial Control Period"), the Control Party
shall be the Junior Secured Parties acting by Majority Vote. If, by the last
Business Day during the Initial Control Period, the Senior Indebtedness shall
not have been Paid in Full, the Control Party shall be the Senior Secured
Parties acting by Majority Vote; provided, however, that if, within 15 days
prior to the end of the Initial Control Period, the Junior Secured Parties pay
or cause to be paid to the Senior Secured Parties an amount equal to the
outstanding Senior Indebtedness (and cause the Senior Indebtedness to be Paid in
Full), then the Junior Secured Parties shall remain the Control Party and the
Junior Secured Parties will be subrogated to all of the rights of the Senior
Secured Parties, including the right to payment on the Senior Indebtedness;
provided further, that the Initial Control Period shall be tolled during such
time as the Collateral Agent is stayed from enforcing its Liens on a material
portion of the Collateral to the extent the Collateral Agent, on behalf of the
Control Party, used reasonable efforts to attempt to vacate such stay or made a
reasonable determination that any such action to vacate such stay would have
been without merit.
(c) After the Senior Indebtedness shall have been Paid in Full, the Control
Party shall at all times be the Junior Secured Parties acting by Majority Vote.
(d) The Collateral Agent shall give written notice to all of the other
parties to this Agreement promptly upon a change in the identity of the Control
Party. Each of the parties hereto agrees that it shall not exercise any of the
rights of the Control Party at such time as it is not the Control Party
hereunder. In the absence of bad faith on its part, the Collateral Agent may
conclusively rely, and will be fully protected in so relying, on (i) statements
as to the identity of the Control Party and (ii) on any direction, waiver or
consent of the Control Party.
(e) This Article VI shall not be construed in any way to limit or impair
the right of any Secured Party to bid for and purchase Collateral at any private
or judicial foreclosure upon such Collateral initiated by any Secured Party.
Section 6.03. Rights and Remedies.
(a) Remedies Under the Debt Documents. The Control Party shall direct the
Collateral Agent, which in turn shall direct the Agents under each Debt
Document, in the exercise of remedies available pursuant to such Debt Document.
(b) Remedies Under the Security Documents. At all times during a Default
Period, the Control Party may authorize and instruct the Collateral Agent to do
any one or more of the following on behalf of the Secured Parties (and
Collateral Agent, acting upon the instructions of the Control Party, shall do
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the same on behalf of the Secured Parties), all of which are authorized by the
Borrower Parties:
(i) enforce, settle or adjust disputes and claims (including insurance
claims) directly with Account Debtors for amounts and upon terms which
Collateral Agent considers advisable, and in such cases, Collateral Agent
will credit the Borrower Parties with respect to obligations under the
Financing Agreements with only the net amounts received by Collateral Agent
in payment of such disputed Accounts after deducting all expenses incurred
or expended by the Secured Parties in connection therewith;
(ii) without notice to or demand upon any Borrower Party, make such
payments and do such acts as the Collateral Agent considers necessary or
reasonable to protect the Security Interests (and each of the Borrower
Parties (x) hereby agrees to assemble the Personal Property Collateral if
the Collateral Agent so requires, and to make the Personal Property
Collateral available to the Collateral Agent at a place that the Collateral
Agent may reasonably designate, (y) hereby authorizes the Collateral Agent
to enter the premises where the Personal Property Collateral is located, to
take and maintain possession of the Personal Property Collateral, or any
part of it, and to pay, purchase, contest, or compromise any Lien that in
the Collateral Agent's determination appears to conflict with the Security
Interests and to pay all reasonable expenses incurred in connection
therewith and to charge the Borrower Parties' therefor and (z) with respect
to any owned or leased premises occupied by such Borrower Party, hereby
Grants the Collateral Agent a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any
of the Secured Parties' rights or remedies provided herein, in the other
Financing Agreements, at law, in equity or otherwise);
(iii) without notice to any Borrower Party (such notice being expressly
waived), and without constituting a retention of any Collateral in
satisfaction of an obligation, set off and apply to the Secured Obligations
any and all (x) balances and deposits of any Borrower Party held by any
Secured Party or (y) Indebtedness at any time owing to or for the credit or
the account of any Borrower Party held by any Secured Party;
(iv) hold, as cash Collateral, any and all balances and deposits of the
Borrower Parties furnished as security to the Secured Parties to secure the
full and final repayment of all of the Secured Obligations and apply, to
the extent permitted by Applicable Law, such cash Collateral to repay the
Secured Obligations;
(v) ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale and sell (in the manner provided for herein)
the Personal Property Collateral (and each of the Borrower Parties hereby
Grants to the Collateral Agent a license or other right to use, without
charge, such Borrower Party's labels, patents, copyrights, trade secrets,
trade names, trademarks, service marks and advertising matter, or any
property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling
any Personal Property Collateral, and such Borrower Party's rights under
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all licenses and all franchise agreements shall inure to the Collateral
Agent's benefit on behalf of the Secured Parties); or
(vi) sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for
cash or on terms, in such manner and at such places (including any Borrower
Parties' premises) as the Collateral Agent determines is commercially
reasonable (it being understood that it is not necessary that the Personal
Property Collateral be present at any such sale);
(vii) give notice of the disposition of the Personal Property
Collateral as follows: (x) the Collateral Agent shall give the Borrower
Parties a notice in writing of the time and place of public sale, or, if
the sale is a private sale or some other disposition other than a public
sale is to be made of the Personal Property Collateral, the time on or
after which the private sale or other disposition is to be made; and (y)
the notice shall be personally delivered or mailed, postage prepaid, to the
Borrower Parties as provided in Section 8.02, at least 10 days before the
earliest time of disposition set forth in thenn notice; it being understood
that no notice needs to be given prior to the disposition of any portion of
the Personal Property Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized
market;
(viii) seek the appointment of a receiver or keeper to take possession
of all or any portion of the Collateral or to operate same and, to the
maximum extent permitted by Applicable Law, seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(ix) seek relief from the automatic stay of Section 362 of the
Bankruptcy Code (or any other stay) in any Bankruptcy Case in respect of
any portion of the Collateral on which the Collateral Agent then has a
Lien, or seek to dismiss any Bankruptcy Case or to convert a Bankruptcy
Case under chapter 11 of the Bankruptcy Code to a Bankruptcy Case under
chapter 7 of the Bankruptcy Code;
(x) foreclose any or all of the Mortgages and sell the Real Property or
cause the Real Property to be sold in accordance with the provisions of the
Mortgages and Applicable Law, and exercise any and all other rights or
remedies available to the Collateral Agent, on behalf of the Secured
Parties, under the Mortgages, any of the other Financing Agreements, at law
or in equity with respect to the Collateral encumbered by the Mortgages;
(xi) exercise on behalf of the Secured Parties all other rights and
remedies with respect to any and all of the Collateral available at law or
in equity or pursuant to any other Financing Agreement; and
(xii) demand and receive payment from the Borrower Parties for any
deficiency that exists after disposition of the Collateral (as provided
above), and the Borrower Parties jointly and severally agree to immediately
pay such deficiency.
Section 6.04. Bankruptcy Issues.
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(a) This Agreement shall continue in full force and effect after the
commencement of a Bankruptcy Case (all references herein to Borrower Parties
being deemed to apply to Borrower Parties as debtor-in-possession and to a
trustee for Borrower Parties' estate in a Bankruptcy Case), and shall apply with
full force and effect with respect to all Collateral acquired by such Borrower
Parties, and to all Secured Obligations incurred by Borrower Parties subsequent
to such commencement (it being understood that the relative rights of the
Secured Parties in or to any distributions from or in respect of any Collateral
or proceeds of Collateral as provided in this Agreement shall continue after the
commencement of a Bankruptcy Case on the same basis as prior to the date of such
commencement), subject to any court order approving the financing of, or use of
cash collateral by, the Borrower or any Obligor as debtor-in-possession. In
furtherance of the foregoing, the Junior Secured Parties acknowledge and agree
that, in the event of a distribution of debt or equity securities under a plan
of reorganization under any Bankruptcy Case in satisfaction of Secured
Obligations (such securities, "Reorganization Securities") to each of the Senior
Secured Parties and the Junior Secured Parties, such Reorganization Securities
received by the Junior Secured Parties shall be subordinated to the
Reorganization Securities received by the Senior Secured Parties to the same
extent that the Junior Indebtedness is subordinated to the Senior Indebtedness
pursuant to the terms of this Agreement.
(b) If any Borrower Party shall become subject to a Bankruptcy Case and if
as debtor-in-possession moves for approval to obtain financing (a "DIP
Financing") to be provided in good faith by the parties to the Revolving Credit
Facility (the "DIP Lender") under Section 364 of the Bankruptcy Code (including
the use of cash collateral with the consent of the DIP Lender), the other
Secured Parties agree that (i) adequate notice to the other Secured Parties
shall be deemed to have been provided for such DIP Financing if the other
Secured Parties receive notice thereof in a manner prescribed in Section 8.02
prior to any hearing on a request to approve such DIP Financing and (ii) no
objection shall be raised by it to any such DIP Financing on the grounds of a
failure to provide "adequate protection" for its Liens so long as (A) the
Collateral Agent for the benefit of the Secured Parties retains a Lien on the
Collateral (including proceeds thereof arising after the commencement of such
proceeding) with the same priority as existed prior to the commencement of such
Bankruptcy Case, (B) the Collateral Agent for the benefit of the Secured Parties
receives a replacement Lien on post-petition assets to the same extent granted
to the DIP Lender, with the same priority as existed prior to the commencement
of such Bankruptcy Case, (C) the aggregate principal amount of the DIP Financing
(which shall have a superpriority administrative expense claim status and first
lien priority) will not exceed the lesser of (x) the Maximum Revolver Amount,
plus any Related Revolving Credit Facility Indebtedness, and (y) the outstanding
pre-petition Revolving Credit Facility Indebtedness (including any obligations
outstanding under Bank Product Agreements) plus $5,000,000, (D) the Collateral
Agent for the benefit of each of the Secured Parties shall receive superpriority
administrative expense claim status to the extent of any diminution of value of
the Collateral available to such Secured Party, subordinated to the
superpriority administrative expense claim status of the DIP Lender and with the
same priority among the Secured Parties as existed prior to the commencement of
the Bankruptcy Case, and (E) such DIP Financing is subject to the terms of this
Agreement. Nothing contained herein shall be deemed to limit the rights of the
other Secured Parties to object to the DIP Financing or use of cash collateral
on any grounds other than the failure to provide "adequate protection" for its
Liens.
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(c) Each of the Secured Parties shall not, directly or indirectly, (i)
challenge or contest the validity or enforceability of this Agreement or any of
the Financing Agreements, (ii) challenge or contest the exercise of any rights,
remedies or duties of the Control Party in accordance with this Agreement and
the applicable Financing Agreements, or (ii) take any action that would
reasonably be expected to restrain, hinder, limit, delay or otherwise interfere
in any material respect with the exercise of the rights or duties of the
Collateral Agent in accordance with this Agreement.
Section 6.05. Notice of Default and Certain Events.
(a) The Borrower Parties shall promptly send to the Collateral Agent and
each Agent written notice of any default under any of the Financing Agreements
or any Event of Default, and shall promptly provide to the Collateral Agent and
each Agent copies of any notices (other than periodic reports and advance
requests) received from or delivered by any Borrower Party to any Secured Party
in connection with any of the Financing Agreements.
(b) The Collateral Agent will promptly provide to the Agents written notice
of any action taken by the Collateral Agent with respect to its obligations or
duties under this Agreement, including action taken at the instruction of the
Control Party, and shall promptly provide the Agents with copies of any notices
received from or delivered to any Borrower Party in connection with this
Agreement.
Section 6.06. Remedies Cumulative. Subject always to the terms and
conditions hereof, each and every right, power and remedy given to the Secured
Parties, the Collateral Agent and the Control Party specifically or otherwise in
this Agreement or the other Financing Agreements shall be cumulative and shall
be in addition to every other right, power and remedy herein specifically given
or now or hereafter existing at law, in equity or by statute, and each and every
right, power and remedy whether specifically herein given or otherwise existing
may be exercised from time to time and as often and in such order as may be
deemed expedient by any Agent, the Secured Parties, the Collateral Agent or the
Control Party, as appropriate, and the exercise or the beginning of the exercise
of any right, power or remedy shall not be construed to be a waiver of the right
to exercise at the same time or thereafter any other right, power or remedy. No
delay or omission by any Agent, the Secured Parties, the Collateral Agent or the
Control Party in the exercise of any right, remedy or power or in the pursuit of
any remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default or to be an acquiescence therein.
Section 6.07. The Collateral Agent's and Secured Parties' Liability for
Collateral. The Borrower Parties hereby agree that (a) the Collateral Agent and
the Secured Parties shall not in any way or manner be liable or responsible for
(i) the safekeeping of the Collateral, (ii) any loss or damage thereto occurring
or arising in any manner or fashion from any cause, (iii) any diminution in the
value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency or other Person, and (b) all risk of loss, damage or
destruction of the Collateral shall be borne jointly and severally by the
Borrower Parties.
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Section 6.08. Amounts Collected. Any and all proceeds collected by the
Collateral Agent in the exercise of remedies under this Article VI shall be
deposited in the Collateral Account and distributed pursuant to Section 4.06.
Section 6.09. Appraisals. At the request of the Control Party, the
Collateral Agent may from time to time during a Default Period commission an
appraisal with respect to the Collateral or any portion thereof. The Collateral
Agent shall not be required to commission such appraisal unless there are
sufficient funds in the Collateral Account to cover the cost of such appraisal
or, if such funds are not sufficient, the Control Party (or any other Secured
Party) shall have agreed to reimburse the Collateral Agent for the cost of such
appraisal.
Section 6.10. Reinstatement. If any Senior Secured Party is required in any
Bankruptcy Case or otherwise to turn over or otherwise pay any amount (a
"Recovery") to the estate or to any creditor or representative of a Borrower
Party or any other Person, then the Senior Indebtedness shall be reinstated to
the extent of such Recovery. If this Agreement shall have been terminated prior
to such Recovery, this Agreement shall be reinstated in full force and effect,
and such prior termination shall not diminish, release, discharge, impair, or
otherwise affect the obligations of the parties hereto from such date of
reinstatement. All rights, interests, agreements and obligations of the Secured
Parties under this Agreement shall remain in full force and effect, and shall
continue irrespective of the commencement of, or any discharge, confirmation,
conversion, or dismissal of any Bankruptcy Case by or against any Borrower Party
or any other Person and irrespective of any other circumstance which otherwise
might constitute a defense available to, or a discharge of any Borrower Party or
any other Person in respect of the Senior Indebtedness. No priority or right of
the Senior Secured Parties or any other holder of Senior Indebtedness shall at
any time be prejudiced or impaired in any way by any act or failure to act on
the part of any Borrower Party or any other Person or by the noncompliance by
any Person with the terms, provisions, or covenants of the Financing Agreements,
regardless of any knowledge thereof which the Senior Secured Parties or any
holder of Senior Indebtedness may have.
Section 6.11. Trust Indenture Act. Notwithstanding any other provision of
this Article VI, the right of any Noteholder to receive payment of the principal
of and interest on the Notes, on or after the respective due dates expressed in
the Notes, or to institute suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such holder.
ARTICLE VII
SUBORDINATION; FINANCING AGREEMENTS
Section 7.01. Blockage of Payments to the Junior Secured Parties. Until all
Senior Indebtedness shall have been Paid in Full, no payment in cash, securities
or other property (excluding (i) securities that are subordinated to the Senior
Indebtedness to the same extent as, or more deeply than, the Junior Indebtedness
is subordinated to the Senior Indebtedness pursuant to this Agreement and (ii)
Grey Wolf Capital Stock or any proceeds thereof) shall be made by or on behalf
of the Borrower Parties with respect to any Junior Indebtedness and, except as
37
provided in this Agreement, the Junior Secured Parties will not ask, demand, ▇▇▇
for, take or receive any such payment, directly or indirectly, out of the
proceeds of the Collateral from or on behalf of the Borrower Parties, if at the
time of such payment or immediately after giving effect thereto there shall have
occurred and be continuing an Event of Default with respect to any of the Senior
Documents which arises out of the failure to make any payment with respect to
any Senior Indebtedness. If at any time following a blockage of payments
pursuant to this Section 7.01 holders of Junior Indebtedness are no longer
prohibited by this Section 7.01 from receiving any payments with respect to the
Junior Indebtedness, such holders shall be entitled to receive, and the Borrower
Parties shall pay, all payments with respect to the Junior Indebtedness that
have been blocked together with any default interest to the extent provided for
in the Junior Documents.
Section 7.02. Payments Held in Trust/Turnover. If, notwithstanding Section
7.01, any payment or distribution of assets of any Borrower Party, whether in
cash, securities or other property, shall be received by the Junior Secured
Parties in violation of Section 7.01 such payment or distribution shall be held
in trust for the benefit of and shall be paid over to or delivered to the
Collateral Agent for distribution pursuant to Section 4.06, until all Senior
Indebtedness shall have been Paid in Full.
Section 7.03. Collateral Agent to Effectuate Subordination. Each Secured
Party by its acceptance hereof authorizes and directs the Collateral Agent on
its behalf to take such action as may be necessary or appropriate to effectuate
the subordination provided in this Agreement and appoints the Collateral Agent
its attorney-in-fact for any and all such purposes.
Section 7.04. No Waiver of Subordination Provisions. No right of the Senior
Secured Parties or the Collateral Agent to enforce the subordination of the
Junior Indebtedness as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Borrower
Party or any of the Senior Secured Parties or the Collateral Agent or by any
non-compliance by any Borrower Party with the terms, provisions and covenants of
this Agreement or any other Financing Agreement.
Section 7.05. Modification of Financing Agreements. Notwithstanding
anything to the contrary contained in any of the other Financing Agreements:
(a) None of the Junior Documents may be amended, restated, supplemented,
replaced, substituted, renewed, refinanced, refunded, extended or otherwise
modified without the prior consent of the Senior Secured Parties by Majority
Vote; provided, that, without the consent of the Senior Secured Parties, the
Junior Documents may be:
(i) amended, restated or supplemented at any time in order (A) to cure
any ambiguity or omission or to correct any mistake, (B) to conform to the
description of the Junior Documents contained in the Offering Memorandum or
(C) to make any other provision in regard to matters or questions (other
than those described in clause (ii) below) that will not adversely affect
the interests of the Senior Secured Parties in any material respect; and
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(ii) amended, restated, supplemented, replaced, substituted, renewed,
refunded, extended or otherwise modified in connection with any refinancing
of Junior Indebtedness (each, for purposes of this clause, a "refinancing")
so long as (A) such new Indebtedness shall be in a principal amount that
does not exceed the principal amount of the Indebtedness being refinanced
(or, if such Indebtedness being refinanced provides for an amount less than
the principal amount thereof to be due and payable upon a declaration of
acceleration thereof, such lesser amount as of the date of determination)
plus the amount of accrued interest thereon plus the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness being refinanced or the amount of any premium
reasonably determined by the Borrower Parties as necessary to accomplish
such refinancing, plus the amount of expenses of the Borrower Parties
incurred in connection with such refinancing, (B) the Lien securing such
new Indebtedness is limited to all or part of the same property that was or
would have been encumbered by the Lien securing the Indebtedness being
refinanced, (C) such new Indebtedness has an Average Life equal to or
greater than the Average Life of the Indebtedness being refinanced and a
final Stated Maturity not earlier than the final Stated Maturity of the
Indebtedness being refinanced, (D) such new Indebtedness is incurred by
either the Borrower or another Borrower Party that is the obligor of the
Indebtedness being refinanced, and (E) such new Indebtedness, including the
Lien securing such new Indebtedness, is subject to the provisions of this
Agreement to the same extent as the Indebtedness being refinanced.
(b) None of the Revolving Credit Facility Documents may be amended,
restated, supplemented, replaced, substituted, renewed, refinanced, refunded,
extended or otherwise modified without the prior consent of the other Senior
Secured Parties and the Junior Secured Parties, each voting separately as a
class, by Majority Vote; provided, that, without the consent of the other Senior
Secured Parties and the Junior Secured Parties, the Revolving Credit Facility
Documents may be:
(i) amended, restated or supplemented at any time in order (A) to cure
any ambiguity or omission or to correct any mistake, (B) to conform to the
description of the Revolving Credit Facility Documents contained in the
Offering Memorandum or (C) to make any other provision in regard to matters
or questions (other than those described in clause (ii) below) that will
not adversely affect the interests of the other Senior Secured Parties and
the Junior Secured Parties in any material respect; or
(ii) amended, restated, supplemented, replaced, substituted, renewed,
refunded, extended or otherwise modified in connection with any refinancing
of Indebtedness under the Revolving Credit Facility Documents (each, for
purposes of this clause, a "refinancing") so long as (A) any such
refinancing shall be in a principal amount that does not exceed the Maximum
Revolver Amount, plus any Related Revolving Credit Facility Indebtedness,
(B) such new Indebtedness shall not bear interest at a rate in excess of
that payable on the Indebtedness being refinanced (or in the case of
refinanced Indebtedness that was subject to a floating interest rate, a
rate based on the same financial terms (including base rate and spread, as
the refinanced Indebtedness) or require the payment of any premium in
connection with any subsequent refinancing of such new Indebtedness in an
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amount in excess of that payable on the Indebtedness being refinanced, (C)
the Lien securing such new Indebtedness is limited to all or part of the
same property that was or would have been encumbered by the Lien securing
the Indebtedness being refinanced, (D) such new Indebtedness has a final
Stated Maturity not earlier than the final Stated Maturity of the
Indebtedness being refinanced, (E) such new Indebtedness is incurred by
either the Borrower or another Borrower Party who is the obligor of the
Indebtedness being refinanced, and (F) such new Indebtedness, including the
Lien securing such new Indebtedness, is subject to the provisions of this
Agreement to the same extent as the Indebtedness being refinanced.
(c) None of the Noteholder Documents may be amended, restated,
supplemented, replaced, substituted, renewed, refinanced, refunded, extended or
otherwise modified without the prior consent of the other Senior Secured Parties
and the Junior Secured Parties, each voting separately as a class, by Majority
Vote; provided, that, without the consent of the other Senior Secured Parties
and the Junior Secured Parties, the Noteholder Documents may be:
(i) amended, restated or supplemented at any time in order (A) to cure
any ambiguity or omission or to correct any mistake, (B) to conform to the
description of the Noteholder Documents contained in the Offering
Memorandum or (C) to make any other provision in regard to matters or
questions (other than those described in clause (ii) below) that will not
adversely affect the interests of the other Senior Secured Parties and the
Junior Secured Parties in any material respect; or
(ii) amended, restated, supplemented, replaced, substituted, renewed,
refunded, extended or otherwise modified in connection with any refinancing
of Indebtedness under the Noteholder Documents (each, for purposes of this
clause, a "refinancing") so long as (A) such new Indebtedness shall be in a
principal amount that does not exceed the principal amount of the
Indebtedness being refinanced (or, if such Indebtedness being refinanced
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration thereof, such lesser amount as
of the date of determination) plus the amount of accrued interest thereon
plus the amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Indebtedness being refinanced or
the amount of any premium reasonably determined by the Borrower Parties as
necessary to accomplish such refinancing, plus the amount of expenses of
the Borrower Parties incurred in connection with such refinancing, (B) such
new Indebtedness shall not bear interest at a rate in excess of a rate
based on the same financial terms (including base rate and spread, as the
refinanced Indebtedness) or require the payment of any premium in
connection with any subsequent refinancing of such new Indebtedness in an
amount in excess of that payable on the Indebtedness being refinanced, (C)
the Lien securing such new Indebtedness is limited to all or part of the
same property that was or would have been encumbered by the Lien securing
the Indebtedness being refinanced, (D) such new Indebtedness has an Average
Life equal to or greater than the Average Life of the Indebtedness being
refinanced and a final Stated Maturity not earlier than the final Stated
Maturity of the Indebtedness being refinanced, (E) such new Indebtedness is
incurred by either the Borrower or another Borrower Party that is the
obligor of the Indebtedness being refinanced, and (F) such new
Indebtedness, including the Lien securing such new Indebtedness, is subject
40
to the provisions of this Agreement to the same extent as the Indebtedness
being refinanced.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Amendments. This Agreement may be amended, changed, modified,
altered or terminated only by written instrument or written instruments signed
by each of the Agents, the Collateral Agent and the Borrower; provided, that the
consent of the Borrower shall not be required if such amendment, change,
modification, alteration or termination does not have a material adverse effect
on the Borrower Parties, taken as a whole.
Section 8.02. Notices.
(a) All notices, certificates, directions, reports or other communications
required or permitted hereunder shall be in writing addressed to the appropriate
Notice Address and shall be sufficiently given or made (and shall be deemed
received or made) (i) upon delivery to such Notice Address by hand or nationally
recognized overnight courier service, on the date such delivery is made, or (ii)
upon receipt of confirmation of transmission by the sender's facsimile machine,
on the date such transmission is made if made during normal business hours on a
Business Day and otherwise on the Business Day next succeeding the date of
transmission (provided that a copy of such transmission is delivered by hand or
nationally recognized overnight courier service for receipt on the Business Day
next succeeding the date of transmission). Each party hereto may, by notice
given in accordance herewith to each of the other parties hereto, designate any
further or different address to which subsequent notices, certificates,
directions, reports or other communications shall be sent.
(b) Upon receipt of a Default Notice, the Collateral Agent shall (i) have
the right at the direction of the Control Party to exercise any and all rights
and remedies (x) granted to a secured party by the UCC or otherwise allowed at
law and (y) otherwise provided by this Agreement and (ii) give prompt notice
thereof to the Agents (other than any Agent from which the Collateral Party
received such Default Notice).
Section 8.03. Severability. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof. The parties hereto further agree that the holding by any
court of competent jurisdiction that any remedy pursued by the Collateral Agent
or any Secured Party hereunder is unavailable or unenforceable shall not affect
in any way the ability of the Collateral Agent or such Secured Party or any
other Secured Party to pursue any other remedy available to it.
Section 8.04. Term of this Agreement. This Agreement shall take effect on
the Closing Date and shall continue in effect until the Final Termination Date.
On the Final Termination Date, this Agreement shall terminate, all outstanding
obligations of the parties hereunder shall cease and terminate and the
Collateral, if any, held hereunder and not to be used or applied in discharge of
41
any obligations of the Borrower Parties in respect of the Secured Obligations or
otherwise under this Agreement, shall be released to and in favor of the
Borrower Parties; provided that the provisions of Sections 5.05, 5.06, 8.06,
8.07, 8.08 and 8.09 shall survive any termination of this Agreement and the
release of the Collateral upon such termination. Notwithstanding the foregoing,
if (i) after the termination of this Agreement or (ii) at any time or times
subsequent to the payment of all or any part of the Secured Obligations, any
Secured Party shall be required to repay any amounts previously paid by or on
behalf of the Borrower Parties in reduction thereof by virtue of an order of any
court having jurisdiction in the premises, including as a result of an
adjudication that such amounts constituted preferential payments or fraudulent
conveyances, then this Agreement and the obligations of the Borrower Parties
hereunder shall be reinstated and the Borrower Parties unconditionally agree to
pay, jointly and severally, to the Collateral Agent upon demand a sum in cash
equal to the amount of any such repayment, together with interest on such amount
from the date of such repayment by such Secured Party to the date of payment to
such Secured Party at the prevailing interest rate established pursuant to the
terms of the applicable Debt Document. The Collateral Agent shall pay any amount
received by it as aforesaid to such Secured Party, subject to the provisions of
this Agreement.
Section 8.05. Assignments. This Agreement shall (i) be a continuing
obligation of the Borrower Parties, (ii) be binding upon each of the Borrower
Parties, the Secured Parties, the Collateral Agent, and upon their respective
successors, transferees and assigns, and (iii) inure to the benefit of and be
enforceable by each of the Borrower Parties, the Secured Parties and the
Collateral Agent, and by their respective successors, permitted transferees and
permitted assigns. The Borrower Parties may not transfer or assign any of its
rights under this Agreement, or transfer or delegate any of its duties
hereunder, without the prior written consent of each of the Collateral Agent and
the Agents, and any such attempted assignment or delegation shall be null and
void; provided, however, that no such consent shall be required in connection
with any transfer, assignment or delegation (including by merger, by
consolidation or by sale of all or substantially all of the Borrower's assets)
that is expressly permitted under this Agreement and each of the Financing
Agreements so long as the transferee, assignee or delegate expressly agrees to
be bound by the terms of this Agreement as the Borrower or a Borrower Party, as
applicable. Subject to any restrictions on transfer or assignment in any of the
other Financing Agreements, nothing contained herein shall restrict any Secured
Party from transferring or assigning to any Person any or all of its rights
under this Agreement or with respect to any real or personal property or other
interests pledged to such Secured Party or in which such Secured Party has a
Security Interest.
Section 8.06. TRIAL BY JURY WAIVED. EACH OF THE PARTIES HERETO WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT, ANY OF THE OTHER FINANCING AGREEMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREUNDER OR THEREUNDER. EACH OF THE PARTIES HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
42
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER FINANCING AGREEMENTS
TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER.
Section 8.07. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW
YORK.
Section 8.08. Consents to Jurisdiction. Each of the parties hereto
irrevocably submits to the jurisdiction of the United States District Court for
the Southern District of New York and the Supreme Court of the State of New York
in New York County, and any appellate court therefrom, in any action, suit or
proceeding brought against it and related to or in connection with this
Agreement, the other Financing Agreements or the transactions contemplated
hereunder or thereunder or for recognition or enforcement of any judgment. Each
of the parties hereto agrees that a final judgment in any such action, suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. To the extent
permitted by Applicable Law, each of the parties hereby waives and agrees not to
assert by way of motion, as a defense or otherwise in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such courts, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
agreement or any of the other financing documents or the subject matter hereof
may not be litigated in or by such courts.
Section 8.09. Time of Essence. The Borrower Parties, the Collateral Agent
and the Agents agree that time shall be of the essence in respect of the
performance by the Borrower Parties and the Collateral Agent of their respective
obligations hereunder.
Section 8.10. Counterparts. This Agreement may be executed in any number of
counterparts by the parties hereto, each of which shall be an original, and all
such counterparts shall constitute one and the same instrument.
Section 8.11. Integration. This Agreement, together with the schedules and
appendices hereto (which schedules and annexes are deemed a part of this
Agreement) and the other Financing Agreements, constitute the entire agreement
and understanding among the parties hereto, and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. No prior drafts of this Agreement and no words or phrases from any such
prior drafts shall be admissible into evidence in any action or proceeding
involving this Agreement.
Section 8.12. Headings. The headings of Articles, Sections and subsections
herein are for convenience of reference only and shall not affect the
interpretation hereof.
Section 8.13. Full Recourse. Notwithstanding any provisions of this
Agreement to the contrary, the payment obligations of the Borrower Parties set
forth under this Agreement and the other Financing Agreements shall be full
recourse obligations of the Borrower Parties. Upon the exhaustion of the
Collateral, all further liability of the Borrower Parties shall continue and
shall not be extinguished until the Final Termination Date.
43
Section 8.14. Collateral Agent and its Affiliates. U.S. Bank National
Association and any of its affiliates providing services in connection with the
transactions contemplated in the other Financing Agreements shall have only the
duties and responsibilities expressly provided in each capacity and shall not,
by virtue of its or any Affiliate acting in any other capacity be deemed to have
duties or responsibilities or be deemed to be held to a standard of care other
than as expressly provided with respect to each such capacity. U.S. Bank
National Association (or its Affiliates) in its and their various capacities in
connection with the transactions contemplated in the Financing Agreements,
including as Collateral Agent, may enter into business transactions from which
it and/or such Affiliates may derive revenues and profits in addition to the
fees stated in the various Financing Agreements, without any duty to account
therefor.
44
IN WITNESS WHEREOF the Borrower Parties, the Agents and the Collateral
Agent have duly executed this Agreement as of the date first set forth above.
BORROWER: ABRAXAS PETROLEUM CORPORATION,
as the Borrower
By:___________________________________
Title:
GUARANTORS: EASTSIDE COAL COMPANY, INC.,
as Guarantor
By:___________________________________
Title:
SANDIA OIL & GAS CORPORATION,
as Guarantor
By:___________________________________
Title:
SANDIA OPERATING CORP.,
as Guarantor
By:___________________________________
Title:
WAMSUTTER HOLDINGS INC.,
as Guarantor
By:___________________________________
Title:
WESTERN ASSOCIATED ENERGY CORPORATION,
as Guarantor
By:___________________________________
Title:
45
REVOLVING CREDIT FACILITY ADMINISTRATIVE AGENT: ▇▇▇▇▇ FARGO FOOTHILL, INC.,
as Revolving Credit Facility
Administrative Agent
By:_________________________
Title:
TRUSTEE AND U.S. BANK NATIONAL ASSOCIATION
COLLATERAL AGENT: as Trustee and Collateral Agent
By:________________________
Title:
BRIDGE LOAN GUGGENHEIM CORPORATE FUNDING,
ADMINISTRATIVE AGENT: LLC, as Bridge Loan
Administrative Agent
By:________________________
Title:
46
INDEX
Appendices
Appendix A Definitions
Schedules
Schedule I List of Guarantors
Schedule II Collateral
Schedule III Representations and Warranties
Exhibits
Exhibit A Form of Authorized Asset Disposition Certificate
Exhibit B Form of Authorized Asset Proceeds Release Certificate
i
Appendix A
Defined Terms
Capitalized terms used in this Agreement have the following meanings:
"Account Debtor" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, "chattel paper" (as that
term is defined in the UCC) or a General Intangible.
"Accounts" means all of each Borrower Parties' now owned or hereafter
acquired right, title, and interest with respect to "accounts" (as that term is
defined in the UCC), and any and all supporting obligations in respect thereof.
"Additional Documents" has the meaning set forth in Section
2.01(h)(iii).
"Affected Assets" means any portion of the Collateral that is subject
to an Authorized Asset Disposition.
"Affiliate" of any specified Person means (i) any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any other Person who is a director,
executive officer, trustee, partner, member or comparable manager of (x) such
specified Person or (y) any Person described in the preceding clause (i). For
the purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with") as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise.
"Agents" means, collectively, the Trustee, the Revolving Credit
Facility Administrative Agent and the Bridge Loan Administrative Agent.
"Applicable Law" means all applicable provisions of any constitution,
statute, rule, regulation or order of any governmental or non-governmental body
(including any Governmental Authority), all applicable government approvals and
all applicable orders, judgments, writs or decrees of any court or arbitrator of
competent jurisdiction.
"Asset Sale" means an "Asset Sale" as defined in the Indenture in
effect on the Closing Date.
"Asset Sale Proceeds Account" has the meaning set forth in Section
4.01(a).
"Authorized Asset Disposition" means (i) any Asset Sale and (ii) any
other sale or disposition of Collateral, in each case of clauses (i) and (ii),
that is not prohibited by the terms of any of the Financing Agreements.
"Authorized Asset Disposition Certificate" means an Officers'
Certificate of the Borrower, in form and substance as attached hereto as Exhibit
A-1
A, certifying that the applicable sale or disposition of Collateral is
authorized under this Agreement and the other Financing Agreements and that all
requirements under this Agreement and the other Financing Agreements have been
satisfied to allow for such sale or disposition, receipt of which Officers'
Certificate has been acknowledged in writing by the Collateral Agent and
provided to each of the Agents.
"Authorized Asset Proceeds Release Certificate" means an Officers'
Certificate of the Borrower, in substance as attached hereto as Exhibit B,
certifying that the applicable release of proceeds from the Asset Sale Proceeds
Account is authorized under this Agreement and the other Financing Agreements
and that all requirements under this Agreement and the other Financing
Agreements have been satisfied to allow for such release, receipt of which
Officers' Certificate has been acknowledged in writing by the Collateral Agent
and provided to each of the Agents.
"Average Life" means, with respect to any Indebtedness, as at any date
of determination, the quotient obtained by dividing (i) the sum of the product
of (x) the number of years (and any portion thereof rounded up to the nearest
month) from the date of determination to the date or dates of each successive
scheduled principal payment (including any sinking fund or mandatory redemption
payment requirements) of such Indebtedness multiplied by (y) the amount of each
such payment by (ii) the sum of all such payments.
"Bank Product Agreement" means those certain agreements entered into
from time to time by any Borrower Party for any service or facility extended to
any Borrower Party by the Revolving Credit Facility Administrative Agent or any
Affiliate of the Revolving Credit Facility Administrative Agent, including (i)
credit cards, (ii) credit card processing services, (iii) debit cards, (iv)
purchase cards, (v) cash management or related services (including the Automated
Clearing House processing of electronic funds transfers through the direct
Federal Reserve Fedline system), (vi) cash management, including controlled
disbursement, accounts or services or (vii) any Currency Exchange Contract,
Interest Rate Protection Obligation or Oil and Gas Hedging Contracts (as such
terms used in this definition are defined in the Indenture in effect on the
Closing Date).
"Bankruptcy Case" means any proceeding commenced by or against any
Borrower Party, under any provision of the Bankruptcy Code or under any other
federal, provincial or state bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, liquidation or other similar relief, and all converted or
succeeding cases in respect thereof.
"Bankruptcy Code" means (i) the United States Bankruptcy Code (11
U.S.C. ss. 101, et seq.), as amended, and any successor statute, or (ii) the
Bankruptcy and Insolvency Act (Canada) and any successor statute, or (iii) the
Companies' Creditors Arrangement Act (Canada), as applicable, or (iv) any
similar legislation in a relevant jurisdiction and any successor statute, in
each case as in effect from time to time.
"Books" means any Borrower Parties' now owned or hereafter acquired
books and records (including all of its Records indicating, summarizing, or
evidencing its assets (including the Collateral) or liabilities, all of its
Records relating to its business operations or financial condition, and all of
its goods or General Intangibles related to such information).
Appendix A-2
"Borrower" has the meaning set forth in the Preamble to this Agreement.
"Borrower Parties" means, collectively, the Borrower and each Guarantor
and each other Person who becomes a Borrower or a Guarantor under the Financing
Agreements.
"Borrower Security Documents" has the meaning set forth in the Recitals
to this Agreement.
"Bridge Lenders" has the meaning set forth in the Preamble to this
Agreement.
"Bridge Loan" has the meaning set forth in the Recitals to this
Agreement and includes any amendment, restatement, supplement, replacement,
substitution, renewal, refinancing, refunding, extension or other modification
of the Bridge Loan to the extent not prohibited by Section 7.05.
"Bridge Loan Administrative Agent" has the meaning set forth in the
Preamble to this Agreement.
"Bridge Loan Asset Sale" means an "Agent Directed Asset Sale" as that
term is defined in Section 6.20(a) of the Bridge Loan in effect on the Closing
Date.
"Bridge Loan Asset Sale Account" has the meaning set forth in Section
4.01(a).
"Bridge Loan Guaranty" has the meaning set forth in the Recitals to
this Agreement and includes any amendment, restatement, supplement, replacement,
substitution, renewal, refinancing, refunding, extension or other modification
of a Bridge Loan Guaranty to the extent not prohibited by Section 7.05.
"Business Day" means any day other than a Saturday, Sunday, or a day on
which bank institutions in The City of New York, Minneapolis, Minnesota, or San
Antonio, Texas are authorized or required by law, regulation or executive order
to remain closed.
"Capital Stock" has the meaning set forth in the Indenture in effect on
the Closing Date.
"Cash Management Agreements" means the cash management service
agreements, in form and substance as is customary each of which is among the
applicable Borrower Party, the Collateral Agent and a bank providing cash
management services acceptable to the Collateral Agent.
"Closing Date" means October 28, 2004, or such other date as the
Borrower and the Agents shall agree upon.
"Collateral" means, collectively, all of the property and assets of
each Borrower Party described on Schedule II attached hereto; provided, however,
that no Grey Wolf Capital Stock (or any proceeds thereof) shall constitute part
of the Collateral.
"Collateral Access Agreement" means a landlord waiver, bailee letter,
or acknowledgement agreement of any lessor, warehouseman, processor, consignee,
Appendix A-3
or other Person in possession of, having a Lien upon, or having rights or
interests in the Books and Records, the Equipment or Inventory, but excluding
Oil and Gas Properties, in each case, in form and substance as is customary.
"Collateral Account" has the meaning set forth in Section 4.01(a).
"Collateral Agent" has the meaning set forth in the Preamble to this
Agreement.
"Collateral Agent Accounts" has the meaning set forth in Section
4.01(a).
"Collateral Agent Notice" has the meaning set forth in Section 4.05(a).
"Collateral Coverage Ratio" means, as of any date of determination, the
ratio of (i) the aggregate PV-10 of the Proved Developed Producing Reserves,
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves of the
Borrower, provided, that the aggregate amount attributable to the PV-10 of
Proved Developed Non-Producing Reserves and Proved Undeveloped Reserves shall
not exceed the aggregate PV-10 of the Proved Developed Producing Reserves
multiplied by 1.2222 (so that for the purposes of such calculation the amount
attribution to the PV-10 of the Proved Developed Producing Reserves shall be at
least 45% of the aggregate amount attributable to this clause (i)) to (ii) the
aggregate amount of Revolving Credit Facility Indebtedness then outstanding, as
determined in good faith by Revolving Credit Facility Administrative Agent.
"Collections" means all cash, checks, notes, instruments and other
items of payment (including insured proceeds, proceeds of cash sales, rental
proceeds and tax refunds) of any Borrower Party.
"Commercial Tort Claim Assignment" has the meaning set forth in Section
2.01(h)(ii).
"Control Agreement" means a control agreement, in form and substance as
is customary, executed and delivered by the applicable Borrower Party, the
Collateral Agent and the applicable securities intermediary with respect to a
Securities Account or bank with respect to a DDA or other deposit account, other
than DDAs or other deposit accounts that are subject to a Cash Management
Agreement.
"Control Party" has the meaning set forth in Section 6.02.
"Corporate Trust Office" means the office of the Collateral Agent
located in St. ▇▇▇▇, Minnesota, at which at any particular time its corporate
trust business shall be administered. The Collateral Agent shall notify the
Agents of any change in the location of such principal office prior to any such
change.
"DDA" means any checking or other demand deposit account maintained by
any Borrower Party.
"Debt Documents" means collectively, the Revolving Credit Facility, the
Notes, the Indenture and the Bridge Loan.
Appendix A-4
"Default Notice" means written notice of an Event of Default from the
Borrower or from any Secured Party.
"Default Period" means the period commencing on the date that a Default
Notice is received or deemed received by the Collateral Agent, the Borrower and
each of the other Agents in a manner prescribed in Section 8.02 and ending at
such time as the Event of Default specified in such Default Notice shall no
longer be continuing.
"DIP Financing" has the meaning set forth in Section 6.04(b).
"DIP Lender" has the meaning set forth in Section 6.04(b).
"Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States as at the time shall be legal tender for all
debts, public and private.
"Equipment" means all of Borrower Parties' now owned or hereafter
acquired right, title, and interest with respect to equipment, machinery,
machine tools, motors, furniture, furnishings, fixtures, vehicles (including
motor vehicles), vessels, tools, parts, goods (other than consumer goods, farm
products, or Inventory), wherever located, including all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.
"Eligible Account" means either (i) a segregated account with an
Eligible Institution or (ii) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States or any one of the states thereof or the District of Columbia (or any
United States branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution has a long-term unsecured debt rating
of at least A3 or its equivalent by Moody's or at least A- or its equivalent by
S&P. An Eligible Account may be maintained with the Collateral Agent so long as
the Collateral Agent is an Eligible Institution; provided that the Collateral
Agent, in its individual capacity, shall have waived all rights of set-off and
counterclaim with respect to such account.
"Eligible Institution" means the corporate trust department of the
Collateral Agent or a depository institution organized under the laws of the
United States of America or any state thereof or the District of Columbia (or
any U.S. branch of a foreign bank), which has a long-term unsecured debt rating
of at least A3 or its equivalent by Moody's or a long-term issuer credit rating
of at least A- or its equivalent by S&P.
"Eligible Investments" means investments in (a) obligations of the
United States government or agencies thereof, or obligations guarantied by the
United States government, (b) open market commercial paper of any corporation
incorporated under the laws of the United States or any state thereof rated at
least P-1 or its equivalent by Moody's or at least A-1 or its equivalent by S&P,
(c) interest-bearing time deposits or certificates of deposit issued by
commercial banks organized under the laws of the United States or of any
political subdivision thereof (or any United States branch of a foreign bank)
having a combined capital and surplus in excess of $500,000,000 which banks or
their holding companies have a rating of A or its equivalent by Moody's or A or
its equivalent by S&P, provided, however, that the aggregate amount at any one
time invested in certificates of deposit issued by any one bank shall not be in
Appendix A-5
excess of 5% of such bank's capital and surplus, (d) Dollar denominated offshore
certificates of deposit issued by, or offshore time deposits with, any
commercial bank described in (c) or any subsidiary thereof, (e) repurchase
agreements with any financial institution having combined capital and surplus of
at least $500,000,000 with any of the obligations described in clauses (a)
through (d) as collateral so long as such investment is held by a third party
custodian also qualifying as an Eligible Institution, and (f) Dollar denominated
investments in money market funds substantially all of whose assets comprise
securities of the types described in clauses (a) through (d), including funds
managed or offered by the Collateral Agent. All Eligible Investments must be
held in an Eligible Account. If any Eligible Investment was deposited in an
account which, at the time of the deposit, was an Eligible Account but
subsequently ceases to qualify as an Eligible Account, the Collateral Agent must
immediately transfer the Eligible Investment to an Eligible Account.
"Event of Default" means (i) any material breach, violation or default
in the observance or performance of any representation, warranty or covenant of
any Borrower Party contained in this Agreement or (ii) any "Event of Default" as
defined in any other Financing Agreement.
"Event of Loss" means any "Event of Loss" as defined in the Indenture
in effect on the Closing Date.
"Farmout Agreement" has the meaning set forth in the Indenture in
effect on the Closing Date.
"Farmout Property" has the meaning set forth in the Indenture in effect
on the Closing Date.
"FEIN" means Federal Employer Identification Number.
"Final Termination Date" means the date on which all obligations of the
Borrower Parties under the Financing Agreements, including all Secured
Obligations, shall have been Paid in Full.
"Financing Agreements" means, collectively, the Senior Documents and
the Junior Documents.
"General Intangibles" means all of each Borrower Party's now owned or
hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
judgments, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, designs, inventions, trade names, trade
secrets, d/b/a's, Internet domain names, logos, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), and any and all supporting
obligations in respect thereof, and any other personal property other than
goods, Accounts, Investment Property and Negotiable Collateral.
Appendix A-6
"Governmental Authority" means any federal (including the federal
government of Canada), state, local, provincial or other governmental or
administrative body, instrumentality, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.
"Grant" means to grant, bargain, sell, warrant, alienate, premise,
release, convey, assign, transfer, mortgage, pledge, create and grant a security
interest in and right of setoff against, deposit, set over and confirm.
"Grey Wolf Capital Stock" means capital stock of Grey Wolf Exploration
Inc. or any successor.
"Guarantee" means any obligation, contingent or otherwise, of any
Person guaranteeing Indebtedness of another Person (including obligations,
agreements to purchase assets, securities or services, to take-or-pay such
Indebtedness of another Person or to maintain financial statement conditions, or
similar arrangements or agreements, in each case entered into for the purpose of
assuring the obligee of such Indebtedness of the payment thereof, including the
foregoing, the payment of amounts drawn down by letters of credit, or to protect
such obligee against loss in respect thereof, in whole or in part), but
excluding (i) endorsements of negotiable instruments for collection or deposit
in the ordinary course of business, and (ii) contingent obligations in
connection with the sale or discount of accounts receivable and similar paper;
provided, however, that a Guarantee by any Person shall not include a
contractual commitment by one Person to invest in another Person; and provided,
further, that such Investment is otherwise permitted by the Noteholder
Documents. When used as a verb, "Guarantee" shall have a corresponding meaning.
"Guarantors" has the meaning set forth in the Preamble to this
Agreement, and shall include any Person that becomes a guarantor of the Senior
Indebtedness or the Junior Indebtedness after the Closing Date.
"Guaranty Security Documents" has the meaning set forth in the Recitals
to this Agreement.
"Hydrocarbon Interests" means all rights, titles, interests and estates
now owned or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, oil, gas and casinghead gas leases, or other liquid or gaseous
hydrocarbon leases, mineral fee, term or lease interests, farm-outs, overriding
royalty and royalty interests, net profit interests, oil payments, production
payment interests and similar mineral interests, including any reserved or
residual interest of whatever nature.
"Hydrocarbons" means oil, gas, coal seam gas, casinghead gas,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, all products
and byproducts refined, separated, settled and dehydrated therefrom and all
products and byproducts refined therefrom, including kerosene, liquefied
petroleum gas, refined lubricating oils, diesel fuel, drip gasoline, natural
gasoline, helium, sulfur, geothermal steam, water, carbon dioxide, and all other
minerals.
"Indebtedness" has the meaning set forth in the Indenture in effect on
the Closing Date.
Exhibit A-7
"Indenture" has the meaning set forth in the Recitals to this Agreement
and, except as otherwise provided in this Agreement, includes any amendment,
restatement, supplement, replacement, substitution, renewal, refinancing,
refunding, extension or other modification of the Indenture to the extent not
prohibited by Section 7.05.
"Initial Control Period" has the meaning set forth in Section 6.02(b).
"Inventory" means all of each Borrower Parties' now owned or hereafter
acquired right, title, and interest with respect to "inventory" (as that term is
defined in the UCC), including extracted Hydrocarbons and other goods held for
sale or lease or to be furnished under a contract of service, goods that are
leased by any Borrower Party as lessor, goods that are furnished by any Borrower
Party under a contract of service, and raw materials, work in process, or
materials used or consumed in any Borrower Party business.
"Investment Property" means all of each Borrower Parties' now owned or
hereafter acquired right, title and interest with respect to "investment
property" (as that term is defined in the UCC), and any and all supporting
obligations in respect thereof.
"Junior Documents" means the Bridge Loan, each Bridge Loan Guaranty,
and any other document, instrument, mortgage or agreement (including each
Security Document) now existing or in the future entered into evidencing,
documenting, securing or otherwise relating to the Bridge Loan, any Bridge Loan
Guaranty, together with, to the extent not prohibited by Section 7.05, any
amendment, restatement, supplement, replacement, substitution, renewal,
refinancing, refunding, extension or other modification of the Bridge Loan, a
Bridge Loan Guaranty or any such other document, instrument, mortgage or
agreement.
"Junior Indebtedness" means any and all presently existing or hereafter
arising Indebtedness, reimbursement obligations, claims, debts, liabilities,
expenses, fees, indemnities or other obligations (including any prepayment
premium) of the Borrower Parties owing under the Junior Documents, whether
direct or indirect, whether contingent or of any other nature, character, or
description (including all interest and other amounts accruing after
commencement of any Bankruptcy Case, and any interest and other amounts that,
but for the provisions of the Bankruptcy Code, would have accrued and become due
or otherwise would have been allowed).
"Junior Majority Vote" means, as of a particular date of determination,
the affirmative vote or consent of the holders of at least a majority in
aggregate unpaid principal amount of all Junior Indebtedness as of such date,
voting as a single class.
"Junior Secured Parties" means (i) the Bridge Loan Administrative
Agent, individually and on behalf of the Bridge Loan Lenders, and (ii) each
party to a Financing Agreement with respect to the Junior Indebtedness due to
it.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance or similar agreement or preferential
arrangement of any kind or nature whatsoever serving to provide security for an
obligation, whether or not filed, recorded or otherwise perfected under
applicable law (including any agreement to give or ▇▇▇▇▇ ▇ ▇▇▇▇ or any lease,
conditional sale, title retention or similar agreement having substantially the
Appendix A-8
same economic effect as any of the foregoing) upon or with respect to any
property of any kind. A Person shall be deemed to own subject to a Lien any
property that such Person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Majority Vote" means, as applicable, a Senior Majority Vote or Junior
Majority Vote, or, in the case of the Secured Parties collectively, the
affirmative vote or consent of the holders of at least a majority in aggregate
unpaid principal amount of all Secured Obligations as of such date, voting as a
single class.
"Maximum Revolver Amount" means $15,000,000, less the aggregate amount
of permanent reductions of the Revolving Lenders' commitments under the
Revolving Credit Facility.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., a Delaware
corporation, and its successors and assigns.
"Mortgages" means, individually and collectively, one or more
mortgages, deeds of trust, debentures or deeds to secure debt, executed and
delivered by any Borrower Party in favor of the Collateral Agent, for the
benefit of the Secured Parties, in form and substance satisfactory to the
Collateral Agent, that encumber the Real Property Collateral, the Oil and Gas
Properties and the related improvements thereto.
"Negotiable Collateral" means all of each Borrower Party's now owned
and hereafter acquired right, title, and interest with respect to letters of
credit, letter of credit rights, instruments, promissory notes, drafts,
documents, and chattel paper (including electronic chattel paper and tangible
chattel paper), and any and all supporting obligations in respect thereof.
"Net Cash Proceeds" has the meaning set forth in the Indenture in
effect on the Closing Date.
"Net Loss Proceeds" has the meaning set forth in the Indenture in
effect on the Closing Date.
"Net Proceeds Offer" has the meaning set forth in the Indenture in
effect on the Closing Date.
"Noteholders" has the meaning set forth in the Preamble to this
Agreement, including their respective successor and assigns.
"Noteholder Documents" means, collectively, the Indenture, the Notes,
each Noteholder Guaranty and any other document, instrument, mortgage or
agreement (including any Security Document) now existing or in the future
entered into evidencing, documenting, securing or otherwise relating to the
Indenture, the Notes and the Noteholder Guaranties, together with, to the extent
not prohibited by Section 7.05, any amendment, restatement, supplement,
replacement, substitution, renewal, refinancing, refunding, extension or other
modification of the Indenture, the Notes, a Noteholder Guaranty, and any such
other document, instrument, mortgage or agreement.
Appendix A-9
"Noteholder Guaranty" has the meaning set forth in the Recitals to this
Agreement and includes any amendment, restatement, supplement, replacement,
substitution, renewal, refinancing, refunding, extension or other modification
of a Noteholder Guaranty to the extent not prohibited by Section 7.05.
"Noteholder Indebtedness" means any and all presently existing or
hereafter arising Indebtedness, reimbursement obligations, claims, debts,
liabilities, expenses, fees, indemnities or other obligations (including any
prepayment premium) of the Borrower Parties owing under the Noteholder
Documents, whether direct or indirect, whether contingent or of any other
nature, character, or description (including all interest and other amounts
accruing after commencement of any Bankruptcy Case, and all interest and other
amounts that, but for the provisions of the Bankruptcy Code, would have accrued
and become due or otherwise would have been allowed).
"Notes" has the meaning set forth in the Recitals to this Agreement and
includes any amendment, restatement, supplement, replacement, substitution,
renewal, refinancing, refunding, extension or other modification of the Notes to
the extent not prohibited by Section 7.05.
"Notice Address" means:
(a) as to the Borrower Parties:
ABRAXAS PETROLEUM CORPORATION
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopier: (▇▇▇)-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ INCORPORATED
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) as to the Trustee and the Collateral Agent:
U.S. BANK NATIONAL ASSOCIATION EP-MN-W53C ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(c) as to the Revolving Credit Facility Administrative Agent:
Appendix A-10
▇▇▇▇▇ FARGO FOOTHILL, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Business Finance Division Manager
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(d) as to the Bridge Loan Administrative Agent:
GUGGENHEIM CORPORATE FUNDING, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Managing Director - Abraxas
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
"Offering Memorandum" means the Offering Memorandum of the Borrower
dated October 21, 2004, relating to the Notes.
"Oil and Gas Business" means (i) the acquisition, exploration,
exploitation, development, operation and disposition of interests in Oil and Gas
Properties and Hydrocarbons, (ii) the gathering, marketing, treating,
processing, storage, selling and transporting of any production from such
interests or properties, including the marketing of Hydrocarbons obtained from
unrelated Persons, (iii) any business relating to or arising from exploration
for or development, production, treatment, processing, storage, transportation
or marketing of oil, gas and other minerals and products produced in association
therewith, (iv) any business relating to oilfield sales and service, and (v) any
activity that is ancillary or necessary or desirable to facilitate the
activities described in clauses (i) through (iv) of this definition.
"Oil and Gas Hedging Contracts" means any agreement or arrangement, or
any combination thereof, relating to hydrocarbon prices, transportation or basis
costs or differentials or other similar financial factors, that is customary in
the Oil and Gas Business and is entered into in the ordinary course of business
for the purpose of limiting or managing risks associated with fluctuations in
such prices, costs, differentials or similar factors and not for the purpose of
speculation.
"Oil and Gas Properties" means all Hydrocarbon Interests; personal
property and/or real property now or hereafter pooled or unitized with
Hydrocarbon Interests; presently existing or future unitization, pooling
agreements and declarations of pooled units and the units created thereby
(including all units created under orders, regulations and rules of any
Governmental Authority having jurisdiction) which may affect all or any portion
Appendix A-11
of the Hydrocarbon Interests; pipelines, gathering lines, compression
facilities, tanks and processing plants; oil and ▇▇▇▇▇, gas ▇▇▇▇▇, water well,
injection ▇▇▇▇▇, platforms, spars or other offshore facilities, casings, rods,
tubing, pumping units and engines, Christmas trees, derricks, separators, gun
barrels, flow lines, gas systems (for gathering, treating and compression), and
water systems (for treating, disposal and injection); interests held in royalty
trusts whether presently existing or hereafter created; Hydrocarbons in and
under and which may be produced, saved, processed or attributable to the
Hydrocarbon Interests, the lands covered thereby and all Hydrocarbons in
pipelines, gathering lines, tanks and processing plants and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; all tenements, hereditaments, appurtenances and
personal property and/or real property in any way appertaining, belonging,
affixed or incidental to the Hydrocarbon Interests, and all rights, titles,
interests and estates described or referred to above, including any and all real
property, now owned or hereafter acquired, used or held for use in connection
with the operating, working or development of any of such Hydrocarbon Interests
or personal property and/or Real Property and including any and all surface
leases, rights-of-way, easements and servitude together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing; oil, gas and mineral leasehold, fee and term interests, overriding
royalty interests, mineral interests, royalty interests, net profits interests,
net revenue interests, oil payments, production payments, carried interests,
leases, subleases, farmouts and any and all other interests in Hydrocarbons; in
each case whether now owned or hereafter acquired directly or indirectly.
"Opinion of Counsel" means a written opinion of counsel who shall be
acceptable to the Collateral Agent and the Agents.
"Paid in Full" means, with reference to any amount or obligations due
and payable under any of the Financing Agreements, the final payment in full in
cash of such amount or obligations (or cash collateralization in respect of any
contingent obligations) in accordance with the applicable Financing Agreement
and, in each case, such payment shall not be subject to disgorgement, repayment
or return for any reason whatsoever and the Secured Parties' obligations to
extend credit under the Financing Agreements shall have been terminated.
"Permitted Farmout Agreement" has the meaning set forth in the
Indenture in effect on the Closing Date.
"Permitted Liens" has the meaning set forth in the Indenture in effect
on the Closing Date.
"Permitted Prior Liens" has the meaning set forth in the Indenture in
effect on the Closing Date.
"Person" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than Real
Property.
Appendix A-12
"PV-10" has the meaning set forth in the Revolving Credit Facility in
effect on the Closing Date.
"Proved Developed Non-Producing Reserves" means those Oil and Gas
Properties designated as "proved developed non-producing" (in accordance with
the Definitions for Oil and Gas Reserves approved by the board of directors of
the Society for Petroleum Engineers, Inc. from time to time) in the Reserve
Report.
"Proved Developed Producing Reserve" means those Oil and Gas Properties
designated as "proved developed producing" (in accordance with the Definitions
for Oil and Gas Reserves approved by the board of directors of the Society for
Petroleum Engineers, Inc. from time to time) in the Reserve Report.
"Proved Undeveloped Reserves" means those Oil and Gas Properties
designated as "proved undeveloped" (in accordance with the Definitions for Oil
and Gas Reserves approved by the board of directors of the Society for Petroleum
Engineers, Inc. from time to time) in the Reserve Report.
"Real Property" means all present and future interests of any Borrower
Party as owner, lessee, or otherwise, in real property, with respect to which
any Secured Party, has been or is in the future granted a Lien or Security
Interest, including all rents, issues, and profits or other proceeds arising
therefrom, including insurance proceeds, any interest arising from an option to
purchase or lease any such assets, and all of such Borrower Parties' Books and
Records relating thereto.
"Receipt of Notice Day" has the meaning set forth in Section 4.05(a).
"Record" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"Recovery" has the meaning set forth in Section 6.10.
"Related Revolving Credit Facility Indebtedness" means (i) Indebtedness
under the Revolving Credit Facility related to any fees and expenses incurred by
any Borrower Party in connection with the Revolving Credit Facility (including
those owed to any Person not an Affiliate of a Borrower Party) in connection
with any permitted amendment (including any amendment and restatement thereof),
supplement, replacement, restatement or other modification from time to time,
including any permitted agreements (and related instruments and documents)
extending the maturity of, refinancing, replacement or other restructuring of
all or any portion of the Indebtedness under the Revolving Credit Facility (and
related instruments and documents) or any successor or replacement agreements
(and related instruments and documents) and (ii) any capitalized interest, fees,
or other expenses incurred by any Borrower Party whether or not charged to a
loan account or any similar account created under the Revolving Credit Facility.
"Release" has the meaning set forth in Section 2.03(b).
"Release Date" has the meaning set forth in Section 2.03(a).
Appendix A-13
"Reorganization Securities" has the meaning set forth in Section
6.04(a).
"Reserve Report" has the meaning set forth in the Revolving Credit
Facility in effect on the Closing Date.
"Responsible Officer" means any officer within the Corporate Trust
Office (or any successor group of the Collateral Agent) including any vice
president, assistant vice president, assistant secretary.
"Restricted Subsidiary" has means a subsidiary of any Borrower Party
that is a "Restricted Subsidiary" under each of the Financing Agreements in
effect on the Closing Date.
"Revolving Lenders" has the meaning set forth in the Preamble to this
Agreement.
"Revolving Credit Facility Administrative Agent" has the meaning set
forth in the Preamble to this Agreement.
"Revolving Credit Facility" has the meaning set forth in the Recitals
to this Agreement and includes any amendment, restatement, supplement,
replacement, substitution, renewal, refinancing, refunding, extension or other
modification of the Revolving Credit Facility to the extent not prohibited by
Section 7.05.
"Revolving Credit Facility Documents" means, collectively, the
Revolving Credit Facility, each Revolving Credit Facility Guaranty, each Bank
Product Agreement, if any, and any other document, instrument, mortgage or
agreement (including each Security Agreement) now existing or in the future
entered into evidencing, documenting, securing or otherwise relating to the
Revolving Credit Facility and the Revolving Credit Facility Guaranties, together
with, to the extent not prohibited by Section 7.05, any amendment, restatement,
supplement, replacement, substitution, renewal, refinancing, refunding,
extension or other modification of the Revolving Credit Facility, a Revolving
Credit Facility Guaranty, a Bank Product Agreement and any such other document,
instrument, mortgage or agreement.
"Revolving Credit Facility Guaranty" has the meaning set forth in the
Recitals to this Agreement and includes any amendment, restatement, supplement,
replacement, substitution, renewal, refinancing, refunding, extension or other
modification of any Revolving Credit Facility Guaranty to the extent not
prohibited by Section 7.05.
"Revolving Credit Facility Indebtedness" means any and all presently
existing or hereafter arising Indebtedness, reimbursement obligations, claims,
debts, liabilities, expenses, fees, indemnities or other obligations (including
any prepayment premium and obligations under Bank Product Agreements) of the
Borrower Parties owing under the Revolving Credit Facility Documents, whether
direct or indirect, whether contingent or of any other nature, character, or
description (including all interest and other amounts accruing after
commencement of any Bankruptcy Case, and all interest and other amounts that,
but for the provisions of the Bankruptcy Code, would have accrued and become due
or otherwise would have been allowed).
"Secured Obligations" means, collectively, the Senior Indebtedness and
the Junior Indebtedness.
Appendix A-14
"Secured Parties" means, collectively, the Senior Secured Parties and
the Junior Secured Parties. "Securities Account" means a "securities account"
(as that term is defined in the UCC).
"Security Documents" means, collectively, the Borrower Security
Documents, the Guaranty Security Documents and any other document, instrument,
mortgage or agreement now existing or in the future entered into securing
obligations under any Debt Document, together with, to the extent not prohibited
by Section 7.05, any amendment, restatement, supplement, replacement,
substitution, renewal, refinancing, refunding, extension or other modification
of any Borrower Security Document, any Guaranty Security Document or any such
other document, instrument, mortgage or agreement; provided, however, that the
Security Documents shall not include any pledge of Grey Wolf Capital Stock (or
any proceeds thereof) securing the Junior Indebtedness.
"Security Interest" means each security interest and Lien granted by
any Borrower Party to the Collateral Agent for the benefit of the Secured
Parties pursuant to this Agreement and the other Security Documents.
"Senior Documents" means, collectively, (i) the Revolving Credit
Facility Documents and (ii) the Noteholder Documents.
"Senior Indebtedness" means, collectively, (i) the Revolving Credit
Facility Indebtedness and (ii) the Noteholder Indebtedness.
"Senior Majority Vote" means, as of a particular date of determination,
the affirmative vote or consent of the holders of at least a majority in
aggregate unpaid principal amount of all Senior Indebtedness (which for the
purposes of this definition shall include the outstanding unfunded commitments
of such holders) as of such date, voting as a single class.
"Senior Secured Parties" means, collectively, (i) the Trustee,
individually and on behalf of the Noteholders, (ii) the Revolving Credit
Facility Administrative Agent, individually and on behalf of the Revolving
Lenders, and (iii) each party to a Financing Agreement with respect to the
Senior Indebtedness owed to it.
"S&P" means Standard & Poor's Ratings Services, a division of
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. and any successor thereto.
"Stated Maturity" means, when used with respect to any Indebtedness or
any installment of interest thereon, means the date specified in the instrument
evidencing or governing such Indebtedness as the fixed date on which the
principal of such Indebtedness or such installment of interest is due and
payable.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trustee" has the meaning set forth in the Preamble to this Agreement.
Appendix A-15
"UCC" means the Uniform Commercial Code as adopted in the State of New
York, or in such other jurisdiction as governs the perfection of the liens and
security interests in the Collateral for the purposes of the provisions hereof
relating to such perfection or effect of perfection, as in effect from time to
time.
"United States" means the United States of America (including the
states and the District of Columbia), its territories and possessions.
Appendix A-16