Exhibit 10.1
[EXECUTION COPY]
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
PARALLEL PETROLEUM CORPORATION
AND PARALLEL, L.P.,
AS BORROWERS,
AND
PARALLEL, L.L.C.,
AS GUARANTOR,
AND
FIRST AMERICAN BANK, SSB
AND THE INSTITUTIONS NAMED HEREIN,
AS LENDERS,
AND
FIRST AMERICAN BANK, SSB
AS JOINT LEAD ARRANGER AND
ADMINISTRATIVE AGENT,
AND
BNP PARIBAS,
AS JOINT LEAD ARRANGER AND
SYNDICATION AGENT
SEPTEMBER 27, 2004
TABLE OF CONTENTS
Page No.
1. Definitions.....................................................1
2. Commitments of the Lenders.....................................12
(a) Revolving Loans.......................................12
(b) Ratable Loans.........................................12
(c) Procedure for Borrowing...............................12
(d) Letters of Credit.....................................13
(e) Procedure for Obtaining Letters of Credit.............14
(f) Voluntary Reduction of Commitment.....................14
(g) Several Obligations...................................15
(h) Type and Number of Advances...........................15
3. Notes Evidencing Loans.........................................15
(a) Form of Notes.........................................15
(b) Issuance of Additional Notes..........................15
(c) Interest Rates........................................16
(d) Payment of Interest...................................16
(e) Payment of Principal..................................16
(f) Payment to Lenders....................................16
(g) Sharing of Payments, Etc..............................16
(h) Non-Receipt of Funds by the Agent.....................17
4. Interest Rates.................................................17
(a) Options...............................................17
(b) Interest Rate Determination...........................18
(c) Conversion Option.....................................18
(d) Recoupment............................................19
(e) Interest Rates Applicable After Default...............19
5. Special Provisions Relating to Loans...........................19
(a) Unavailability of Funds or Inadequacy of Pricing......19
(b) Change in Laws........................................20
(c) Increased Cost or Reduced Return......................20
(d) Discretion of Lender as to Manner of Funding..........22
(e) Breakage Fees.........................................22
6. Collateral Security............................................23
7. Borrowing Base.................................................24
(a) Initial Borrowing Base................................24
(b) Subsequent Determinations of Borrowing Base...........24
(c) Subsequent Unscheduled Redeterminations of
Borrowing Base........................................24
(d) Other Determinations of the Borrowing Base............25
(e) Evaluation Factors....................................25
(f) Required Percentage of Lenders........................25
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(g) Automatic Reductions of Borrowing Base................25
8. Fees...........................................................25
(a) Letter of Credit Fee..................................25
(b) Borrowing Base Determination Fee......................25
(c) Unused Commitment Fee.................................26
(d) Facility Fee..........................................26
(e) Agency and Arrangement Fee............................26
9. Prepayments....................................................26
(a) Voluntary Prepayments.................................26
(b) Mandatory Collateral or Prepayment For Borrowing
Base Deficiency.......................................27
10. Representations and Warranties.................................27
(a) Creation and Existence................................27
(b) Power and Authority...................................27
(c) Binding Obligations...................................28
(d) No Legal Bar or Resultant Lien........................28
(e) No Consent............................................28
(f) Financial Condition...................................28
(g) Liabilities...........................................28
(h) Litigation............................................28
(i) Taxes; Governmental Charges...........................29
(j) Titles, Etc...........................................29
(k) Defaults..............................................29
(l) Casualties; Taking of Properties......................29
(m) Use of Proceeds; Margin Stock.........................29
(n) Location of Business and Offices......................30
(o) Compliance with the Law...............................30
(p) No Material Misstatements.............................30
(q) Not A Utility.........................................30
(r) ERISA.................................................31
(s) Public Utility Holding Company Act....................31
(t) Subsidiaries..........................................31
(u) Environmental Matters.................................31
(v) Liens.................................................31
(w) Investment Company Act................................31
(x) General...............................................31
11. Conditions of Lending..........................................32
12. Affirmative Covenants..........................................35
(a) Financial Statements and Reports......................35
(b) Certificates of Compliance............................36
(c) Accountants' Certificate..............................37
(d) Taxes and Other Liens.................................37
(e) Compliance with Laws..................................37
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(f) Further Assurances....................................37
(g) Performance of Obligations............................38
(h) Insurance.............................................38
(i) Accounts and Records..................................38
(j) Right of Inspection...................................39
(k) Notice of Certain Events..............................39
(l) ERISA Information and Compliance......................39
(m) Environmental Reports and Notices.....................40
(n) Compliance and Maintenance............................40
(o) Operation of Properties...............................40
(p) Compliance with Leases and Other Instruments..........41
(q) Certain Additional Assurances Regarding
Maintenance and Operations of Properties..............41
(r) Sale of Certain Assets/Prepayment of Proceeds.........41
(s) Title Matters.........................................41
(t) Curative Matters......................................42
(u) Change of Principal Place of Business.................42
(v) Additional Collateral.................................42
(w) Crude Oil Hedging.....................................43
13. Negative Covenants.............................................43
(a) Negative Pledge.......................................43
(b) Current Ratio.........................................44
(c) Funded Debt Ratio.....................................44
(d) Adjusted Consolidated Net Worth.......................44
(e) Consolidations and Mergers............................44
(f) Debts, Guaranties and Other Obligations...............44
(g) Dividend and Distributions............................45
(h) Loans and Advances....................................45
(i) Receivables and Payables..............................46
(j) Nature of Business....................................46
(k) Transactions with Affiliates..........................46
(l) Rate Management Transactions..........................46
(m) Investments...........................................47
(n) Amendment to Organizational Documents.................47
(o) ERISA Compliance......................................47
(p) Accounting Method and Fiscal Year.....................48
(r) Issuance of Equity Interests..........................48
14. Events of Default..............................................48
15. The Agent and the Lenders......................................50
(a) Appointment and Authorization.........................50
(b) Note Holders..........................................51
(c) Consultation with Counsel.............................52
(d) Documents.............................................52
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(e) Resignation or Removal of Agent.......................52
(f) Responsibility of Agent...............................52
(g) Independent Investigation.............................54
(h) Indemnification.......................................54
(i) Benefit of Section 15.................................55
(j) Pro Rata Treatment....................................55
(k) Assumption as to Payments.............................55
(l) Other Financings......................................56
(m) Interests of Lenders..................................56
(n) Investments...........................................56
(o) Delegation to Affiliates..............................57
(p) Execution of Collateral Documents.....................57
(q) Collateral Releases...................................57
(r) Internal Revenue Service Forms........................57
(s) Syndication Agent.....................................58
16. Exercise of Rights.............................................58
17. Notices........................................................58
18. Expenses.......................................................59
19. Indemnity......................................................60
20. Non-Liability of Lenders.......................................60
21. Governing Law..................................................61
22. Invalid Provisions.............................................61
23. Maximum Interest Rate..........................................61
24. Amendments.....................................................62
25. Multiple Counterparts..........................................62
26. Conflict.......................................................62
27. Survival.......................................................62
28. Parties Bound..................................................62
29. Assignments and Participations.................................63
30. Choice of Forum: Consent to Service of Process and
Jurisdiction...................................................64
31. Waiver of Jury Trial...........................................65
32. Other Agreements...............................................65
33. Financial Terms................................................65
34. Communications Via Internet....................................65
35. Amendment and Restatement......................................66
36. USA Patriot Act Notice.........................................66
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Exhibits
Exhibit "A" - Notice of Borrowing
Exhibit "B" - Revolving Note
Exhibit "C" - Guaranty
Exhibit "D" - Certificate of Compliance
Exhibit "E" - Assignment and Acceptance Agreement
Schedules
Schedule "1" - Liens
Schedule "2" - Financial Condition
Schedule "3" - Liabilities
Schedule "4" - Litigation
Schedule "5" - Title Matters
Schedule "6" - Curative Matters
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (hereinafter referred
to as the "Agreement") executed as of the 27th day of September, 2004, is by and
among PARALLEL PETROLEUM CORPORATION, a Delaware corporation ("PPC") and
PARALLEL, L.P., a Texas limited partnership ("PLP") (hereinafter PPC and PLP are
collectively referred to as "Borrowers" and individually as a "Borrower"), and
PARALLEL, L.L.C., a Delaware limited liability company ("Guarantor"), and FIRST
AMERICAN BANK, SSB, a state savings bank ("First American"), and each of the
financial institutions which is a party hereto (as evidenced by the signature
pages to this Agreement) or which may from time to time become a party hereto
pursuant to the provisions of Section 29 hereof or any successor or assignee
thereof (hereinafter collectively referred to as "Lenders", and individually,
"Lender"), and First American, as Joint Lead Arranger and as Administrative
Agent ("Agent") and BNP Paribas, as Joint Lead Arranger and as Syndication Agent
("Syndication Agent").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that the Lenders provide Borrowers
with a $200,000,000 revolving credit facility and the Lenders are willing to
make such facility available to Borrowers, subject to the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereby agree as follows:
1........Definitions. When used herein the terms "Agent", "Agreement",
"Borrower", "Borrowers", "First American", "Guarantor", "Lender", "Lenders",
"PLP", "PPC" and "Syndication Agent" shall have the meanings indicated above.
When used herein the following terms shall have the following meanings:
Adjusted Consolidated Net Worth shall mean PPC's consolidated
stockholders' equity, as determined in accordance with GAAP, excluding the
cumulative effect of any change in accounting principles after June 30, 2004 and
the after-tax net effect of any non-recurring non-cash charges after June 30,
2004, including, without limitation, any charges under Financial Accounting
Standards Board Statement Nos. 133 and 144, as amended, supplemented or modified
from time to time.
Advance means a borrowing hereunder (i) made to Borrowers by some or
all of the Lenders on the same Borrowing Date, or (ii) converted or continued by
the Lenders on the same date of conversion or continuation, consisting, in
either case, of the aggregate amount of the several Loans of the same type and,
in the case of LIBOR Loans, for the same Interest Period.
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Affiliate means any Person which, directly or indirectly, controls, is
controlled by or is under common control with the relevant Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, shall mean a member of the board of directors, a partner or an
officer of such Person, or any other Person with possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, through the ownership (of record, as trustee, or by
proxy) of voting shares, partnership interests or voting rights, through a
management contract or otherwise. Any Person owning or controlling directly or
indirectly ten percent or more of the voting shares, partnership interests or
voting rights, or other equity interest of another Person shall be deemed to be
an Affiliate of such Person.
Acquisition means the acquisition contemplated by that certain Asset
Sale Agreement dated as of September 16, 2004, by and among Chevron U.S.A. Inc.,
as Seller, and Parallel, L.P., as Purchaser, relating to certain oil and gas
properties located in ▇▇▇▇▇▇▇ County, Texas.
Alternate Base Rate means, as of any date, a rate of interest per annum
equal to the higher of (i) the Base Rate for such date, or (ii) the sum of the
Federal Funds Effective Rate for such date plus one-half of one percent (.50%)
per annum.
Assignment and Acceptance means a document substantially in the form of
Exhibit "E" hereto.
Available Commitment means, at any time, the Commitment then in effect
minus the Total Outstandings.
Base Rate shall mean, as of any date, the fluctuating rate per annum
published in the Money Rates section of The Wall Street Journal as the U.S.
"prime rate". If the Money Rates section of The Wall Street Journal contains
more than one U.S. "prime rate", then the "prime rate" for purposes of this
definition shall be the higher of said rates. If the Money Rates section of The
Wall Street Journal does not have a rate designated by it as its "prime rate",
then the "prime rate" shall be deemed to be the fluctuating rate of interest per
annum which is the general reference rate designated by Agent as its "reference
rate", "base rate" or other similar rate and which is comparable to the "prime
rate" as described above. The Base Rate is used by Agent as a general reference
rate of interest, taking into account such factors as Agent may deem
appropriate, it being understood that it is not necessarily the lowest or best
rate actually charged to any customer and that Agent may make various commercial
or other loans at rates of interest having no relationship to such rate. Each
change in the Base Rate shall become effective without prior notice to Borrowers
automatically as of the opening of business on the date of such change in the
Base Rate.
Base Rate Loans shall mean any loan during any period which bears
interest based upon the Alternate Base Rate or which would bear interest based
upon the Alternate Base Rate if
2
neither the Maximum Rate ceiling nor the minimum 4.50% floor rate under Section
4(a)(i) hereof was in effect at that particular time.
Base Rate Margin means:
(a) two percent (2.00%) per annum whenever the Borrowing Base
Usage is equal to or greater than 85%; or
(b) zero percent (0%) per annum whenever the Borrowing Base
Usage is less than 85%.
Borrowing Base shall mean the value assigned by the Lenders from time
to time to the Oil and Gas Properties or other Collateral pursuant to Section 7
hereof.
Borrowing Base Deficiency is used herein as defined in Section 9(b)
hereof.
Borrowing Base Usage shall mean, as of any date, the Total Outstandings
divided by the Borrowing Base.
Borrowing Date means the date elected by Borrowers pursuant to Section
2(c) hereof for an Advance on the Loan.
Business Day shall mean (i) with respect to any borrowing, payment or
note selection of LIBOR Loans, a day (other than Saturdays or Sundays) on which
banks are legally open for business in Midland, Texas and New York, New York and
on which dealings in United States dollars are carried on in the London
interbank market, and (ii) for all other purposes a day (other than Saturdays
and Sundays) on which banks are legally open for business in Midland, Texas.
Change of Control shall occur (i) if a majority of the individuals
comprising the Board of Directors of PPC as of the Effective Date shall either
resign, be declared incompetent or otherwise be removed (voluntarily or
involuntarily) or cease to serve as members of the Board of Directors of PPC,
and/or (ii) upon the acquisition of beneficial ownership (within the meaning of
Rule 13d-3 under the Securities Exchange Act of 1934, as amended, the "1934
Act") of an aggregate of 60% or more of the Voting Power of PPC's outstanding
Voting Securities by any person or group (as such term is used in Rule 13d-5
under the ▇▇▇▇ ▇▇▇) who beneficially owned less than 50% of the Voting Power of
PPC's outstanding Voting Securities on the Effective Date. For purposes of the
definition of "Change of Control," Voting Securities" means all securities of a
company entitling the holders thereof to vote in an election of directors
(without consideration of the rights of any class of stock other than the common
stock to elect directors by a separate class vote); and a specified percentage
of the "Voting Power" of a company means such number of the Voting Securities as
will enable the holders thereof to cast such percentage of all the votes
3
which could be cast in an election of directors (without consideration of the
rights of any class of stock other than the common stock to elect directors by a
separate class vote).
Collateral is used herein as defined in Section 6 hereof.
Commitment means (A) for all Lenders, the lesser of (i) $200,000,000 or
(ii) the Borrowing Base, as reduced or increased from time to time pursuant to
Sections 2 and 7 hereof, and (B) as to any Lender, its obligation to make
Advances hereunder in amounts not exceeding, in the aggregate, an amount equal
to such Lender's Commitment Percentage times the total Commitment as of any
date. The Commitment of each Lender hereunder shall be adjusted from time to
time to reflect assignments made by such Lender pursuant to Section 29 hereof.
Each reduction in the Commitment shall result in a Pro Rata reduction in each
Lender's Commitment.
Commitment Percentage means for each Lender the percentage set forth
opposite the Lender's name on the signature page hereto. The Commitment
Percentage of each Lender hereunder shall be adjusted from time to time to
reflect assignments made by such Lender pursuant to Section 29 hereof.
Consolidated Current Assets means the total of the consolidated current
assets determined in accordance with GAAP, including as of any date, the
Available Commitment, but excluding the after tax net effect of any
non-recurring non-cash charges after June 30, 2004, under Financial Accounting
Standards Board Statement No. 133, as amended, supplemented or modified from
time to time.
Consolidated Current Liabilities means the total of consolidated
current obligations as determined in accordance with GAAP, excluding therefrom,
as of any date, current maturities due on the Loans, and excluding the after tax
net effect of any non-recurring non-cash charges after June 30, 2004, under
Financial Accounting Standards Board Statement No. 133, as amended, supplemented
or modified from time to time.
Consolidated EBITDA means for any period, PPC's consolidated earnings
during such period from continuing operations, before provision for interest
expenses, income taxes, depreciation, depletion, amortization, gains and losses
on asset sales and other non-cash charges.
Consolidated Funded Debt means as of any date, PPC's total outstanding
liabilities for borrowed money and other interest-bearing liabilities on such
date, determined in each case on a consolidated basis in accordance with GAAP.
Consolidated Net Income shall mean PPC's consolidated net income after
income taxes calculated in accordance with GAAP.
4
Current Ratio means the ratio of Consolidated Current Assets for the
date or period being measured to the Consolidated Current Liabilities for such
date or period.
Default means all the events specified in Section 14 hereof, regardless
of whether there shall have occurred any passage of time or giving of notice, or
both, that would be necessary in order to constitute such event as an Event of
Default.
Default Rate shall mean a default rate of interest determined in
accordance with Section 4(e) hereof.
Defaulting Lender is used herein as defined in Section 3(f) hereof.
Effective Date means the date of this Agreement.
Eligible Assignee means any of (i) a Lender or any Affiliate of a
Lender; (ii) a commercial bank organized under the laws of the United States, or
any state thereof, and having a combined capital and surplus of at least
$100,000,000; (iii) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development, or a political subdivision of any such country, and having a
combined capital and surplus of at least $100,000,000, provided that such bank
is acting through a branch or agency located in the United States; (iv) a Person
that is primarily engaged in the business of commercial lending and that (A) is
a subsidiary of a Lender, (B) a subsidiary of a Person of which a Lender is a
subsidiary, or (C) a Person of which a Lender is a subsidiary; (v) any other
entity (other than a natural person) which is an "accredited investor" (as
defined in Regulation D under the Securities Act) which extends credit or buys
loans as one of its businesses, including, but not limited to, insurance
companies, mutual funds, investments funds and lease financing companies; and
(vi) with respect to any Lender that is a fund that invests in loans, any other
fund that invests in loans and is managed by the same investment advisor of such
Lender or by an Affiliate of such investment advisor (and treating all such
funds so managed as a single Eligible Assignee); provided, however, that no
Affiliate of either Borrower or of Guarantor shall be an Eligible Assignee.
Engineered Value is used herein as defined in Section 6 hereof.
Environmental Laws means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C.A. ss.9601, et seq., the Resource
Conservation and Recovery Act, as amended by the Hazardous Solid Waste Amendment
of 1984, 42 U.S.C.A. ss.6901, et seq., the Clean Water Act, 33 U.S.C.A. ss.1251,
et seq., the Clean Air Act, 42 U.S.C.A. ss.1251, et seq., the Toxic Substances
Control Act, 15 U.S.C.A. ss.2601, et seq., The Oil Pollution Act of 1990, 33
U.S.G. ss.2701, et seq., and all other laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, orders, permits and
restrictions of any federal, state, county,
5
municipal and other governments, departments, commissions, boards, agencies,
courts, authorities, officials and officers, domestic or foreign, relating to
oil pollution, air pollution, water pollution, noise control and/or the
handling, discharge, disposal or recovery of on-site or off-site asbestos,
radioactive materials, spilled or leaked petroleum products, distillates or
fractions and industrial solid waste or "hazardous substances" as defined by 42
U.S.C. ss. 9601, et seq., as amended, as each of the foregoing may be amended
from time to time.
Environmental Liability means any claim, demand, obligation, cause of
action, order, violation, damage, injury, judgment, penalty or fine, cost of
enforcement, cost of remedial action or any other costs or expense whatsoever,
including reasonable attorneys' fees and disbursements, resulting from the
violation or alleged violation of any Environmental Law or the release of any
substance into the environment which is required to be remediated by a
regulatory agency or governmental authority or the imposition of any
Environmental Lien (as hereinafter defined), which could reasonably be expected
to individually or in the aggregate have a Material Adverse Effect.
Environmental Lien means a Lien in favor of any court, governmental
agency or instrumentality or any other Person (i) for any Environmental
Liability or (ii) for damages arising from or cost incurred by such court or
governmental agency or instrumentality or other person in response to a release
or threatened release of asbestos or "hazardous substance" into the environment,
the imposition of which Lien could reasonably be expected to have a Material
Adverse Effect.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
Event of Default is used herein as defined in Section 14 hereof.
Federal Funds Effective Rate shall mean, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of Dallas, Texas, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations at approximately 10:00 a.m.
(Dallas, Texas time) on such day on such transactions received by the Agent from
three (3) Federal funds brokers of recognized standing selected by the Agent in
its sole discretion.
Financial Statements means balance sheets, income statements,
statements of cash flow and appropriate footnotes and schedules, prepared in
accordance with GAAP.
GAAP means generally accepted accounting principles, consistently
applied.
6
Guaranty means the unlimited Guaranty of Guarantor in the form of
Exhibit "C" attached hereto.
Interest Payment Date shall mean the last day of each calendar month in
the case of Base Rate Loans and, in the case of LIBOR Loans, the last day of the
applicable Interest Period, and if such Interest Period is longer than three (3)
months, at three (3) month intervals following the first day of such Interest
Periods.
Interest Period shall mean with respect to any LIBOR Loan (i)
initially, the period commencing on the date such LIBOR Loan is made and ending
one (1), two (2), three (3), six (6) or twelve (12) months (if, at the date of
any such election, a six (6) or twelve (12) month placement is available to the
Agent) thereafter as selected by the Borrowers pursuant to Section 4(a)(ii), and
(ii) thereafter, each period commencing on the day following the last day of the
next preceding Interest Period applicable to such LIBOR Loan and ending one (1),
two (2), three (3) or six (6) months (if, at the date of any such election, a
six (6) month placement is available to the Agent) thereafter, as selected by
the Borrowers pursuant to Section 4(a)(ii); provided, however, that (i) if any
Interest Period would otherwise expire on a day which is not a Business Day,
such Interest Period shall expire on the next succeeding Business Day unless the
result of such extension would be to extend such Interest Period into the next
calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day, (ii) if any Interest Period begins on the last Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period) such
Interest Period shall end on the last Business Day of a calendar month, and
(iii) any Interest Period which would otherwise expire after the Maturity Date
shall end on such Maturity Date.
Letters of Credit is used herein as defined in Section 2(d) hereof.
LIBOR Base Rate shall mean the offered rate for the period equal to or
greater than the Interest Period for U.S. dollar deposits of not less than
$1,000,000 as of 11:00 a.m. City of London, England time two (2) Business Days
prior to the first day of the Interest Period as shown on the display designated
as "British Bankers Association Interest Settlement Rates" on ▇▇▇▇▇▇'▇ for the
purpose of displaying such rate. In the event such rate is not available on
▇▇▇▇▇▇'▇, then such offered rate shall be otherwise independently determined by
the Agent from an alternate, substantially independent source available to Agent
or shall be calculated by Agent by substantially similar methodology as that
theretofore used to determine such offered rate.
LIBOR Loans means any loans during any period which bear interest at
the LIBOR Rate, or which would bear interest at such rate if the Maximum Rate
ceiling was not in effect at a particular time.
LIBOR Margin means:
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(a) four and three-quarters percent (4.75%) per annum whenever
the Borrowing Base Usage is equal to or greater than 85%; or
(b) two and three-quarters percent (2.75%) per annum whenever
the Borrowing Base Usage is equal to or greater than 75%, but less than
85%; or
(c) two and one-half percent (2.50%) per annum whenever the
Borrowing Base Usage is equal to or greater than 50%, but less than
75%; or
(d) two and one-quarter percent (2.25%) per annum whenever the
Borrowing Base Usage is less than 50%.
LIBOR Rate means, with respect to a LIBOR Loan for the relevant
Interest Period, the higher of (A) four and one-half percent (4.50%), or (B) the
sum of (i) the quotient of the LIBOR Base Rate applicable to such Interest
Period, divided by one minus the Reserve Requirement (expressed as a decimal)
applicable to such Interest Period, plus (ii) the LIBOR Margin. The LIBOR Rate
shall be rounded to the next higher multiple of 1/100th of one percent if the
rate is not such a multiple.
Lien means any mortgage, deed of trust, pledge, security interest,
assignment, encumbrance or lien (statutory or otherwise) of every kind and
character.
Loan Documents means this Agreement, the Notes, the Guaranty in the
form of Exhibit "C" hereto, the Security Instruments and all other documents
executed by Borrowers, Guarantor or any of their Subsidiaries and delivered to
the Agent or the Lenders in connection with the transactions described in this
Agreement.
Loans means the Revolving Loans.
Majority Lenders means Lenders holding 66-2/3% or more of the
Commitments or if one or more of the Commitments have been terminated, Lenders
holding 66-2/3% of the outstanding Loans.
Material Adverse Effect shall mean a material adverse effect on (i) the
assets or properties, liabilities, financial condition, business, operations,
affairs or circumstances of either Borrower or Guarantor, (ii) the ability of
either Borrower or Guarantor to carry out its businesses as of the date of this
Agreement or as proposed at the date of this Agreement to be conducted, (iii)
the ability of either Borrower or Guarantor to perform fully and on a timely
basis its obligations under any of the Loan Documents, or (iv) the validity or
enforceability of any of the Loan Documents or the rights and remedies of the
Agent or the Lenders thereunder.
Maturity Date shall mean December 20, 2008.
8
Maximum Rate means at any particular time in question, the maximum
non-usurious rate of interest which under applicable law may then be charged on
the Notes. If such Maximum Rate changes after the date hereof, the Maximum Rate
shall be automatically increased or deceased, as the case may be, without notice
to Borrowers from time to time as of the effective date of each change in such
Maximum Rate.
Notes means the Revolving Notes, substantially in the form of Exhibit
"B" hereto issued or to be issued hereunder to each Lender, respectively, to
evidence the indebtedness to such Lender arising by reason of the Advances on
the Commitment, together with all modifications, renewals and extensions thereof
or any part thereof.
Notice of Borrowing is used herein as defined in Section 2(c) hereof.
Oil and Gas Properties means all oil, gas and mineral properties and
interests and related personal properties, in which either Borrower or any
Subsidiary now or hereafter owns an interest.
Other Financing is used herein as defined in Section 15(l) hereof.
Payor is used herein as defined in Section 3(h) hereof.
Permitted Liens shall mean (i) royalties, overriding royalties,
reversionary interests, production payments and similar burdens to the extent
the same do not reduce either Borrower's or Guarantor's net revenue interest in
the Oil and Gas Properties to an interest below that represented to Agent and
Lenders; (ii) sales contracts or other arrangements for the sale of production
of oil, gas or associated liquid or gaseous hydrocarbons which would not (when
considered cumulatively with the matters discussed in clause (i) above) deprive
either Borrower or Guarantor of any material right in respect of its assets or
properties (except for rights customarily granted with respect to such contracts
and arrangements); (iii) statutory Liens for taxes or other assessments that are
not yet delinquent (or that, if delinquent, are being contested in good faith by
appropriate proceedings, levy and execution thereon having been stayed and
continue to be stayed and for which either Borrower or Guarantor has set aside
on its books adequate reserves in accordance with GAAP); (iv) easements, rights
of way, servitudes, permits, surface leases and other rights in respect to
surface operations, pipelines, grazing, logging, canals, ditches, reservoirs or
the like, conditions, covenants and other restrictions, and easements of
streets, alleys, highways, pipelines, telephone lines, power lines, railways and
other easements and rights of way on, over or in respect of either Borrower's or
Guarantor's assets or properties and that do not individually or in the
aggregate cause a Material Adverse Effect; (v) materialmen's, mechanic's,
repairman's, employee's, vendor's, laborer's warehousemen's, landlord's,
carrier's, pipeline's, contractor's, sub-contractor's, operator's,
non-operator's (arising under operating or joint operating agreements), and
other Liens (including any financing statements filed in respect thereof)
incidental to obligations incurred by either Borrower or
9
Guarantor in connection with the construction, maintenance, development,
transportation, processing, storage or operation of either Borrower's or
Guarantor's assets or properties to the extent not delinquent (or which, if
delinquent, are being contested in good faith by appropriate proceedings and for
which either Borrower or Guarantor, as applicable, has set aside on its books
adequate reserves in accordance with GAAP); (vi) all contracts, agreements and
instruments, and all defects and irregularities and other matters affecting
either Borrower's or Guarantor's assets and properties which were in existence
at the time either Borrower's or Guarantor's assets and properties were
originally acquired by it and all routine operational agreements entered into in
the ordinary course of business, which contracts, agreements, instruments,
defects, irregularities and other matters and routine operational agreements are
not such as to, individually or in the aggregate, interfere materially with the
operation, value or use of either Borrower's or Guarantor's assets and
properties, considered in the aggregate; (vii) liens in connection with
workmen's compensation, unemployment insurance or other social security, old age
pension or public liability obligations; (viii) legal or equitable encumbrances
deemed to exist by reason of the existence of any litigation or other legal
proceeding or arising out of a judgment or award with respect to which an appeal
is being prosecuted in good faith and levy and execution thereon have been
stayed and continue to be stayed; (ix) rights reserved to or vested in any
municipality, governmental, statutory or other public authority to control or
regulate either Borrower's or Guarantor's assets and properties in any manner,
and all applicable laws, rules and orders from any governmental authority; (x)
landlord's liens; (xi) Liens incurred pursuant to the Security Instruments; and
(xii) Liens existing at the date of this Agreement which are identified in
Schedule "1" hereto.
Person means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
Plan means any plan subject to Title IV of ERISA and maintained by
either Borrower, Guarantor or any Subsidiary, or any such plan to which either
Borrower is required to contribute on behalf of its employees.
Pro Rata or Pro Rata Part means for each Lender, (i) for all purposes
where no Loan is outstanding, such Lender's Commitment Percentage and (ii)
otherwise, the proportion which the portion of the outstanding Loans owed to
such Lender bears to the aggregate outstanding Loans owed to all Lenders at the
time in question.
Rate Management Transaction means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into by either
Borrower or any of their respective Subsidiaries which is a rate swap, basis
swap, forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest rate
option, forward exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-currency rate
swap
10
transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions) or any combination
thereof, whether linked to one or more interest rates, foreign currencies,
commodity prices, equity prices or other financial measures.
Regulation D shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
and other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
Reimbursement Obligations shall mean at any time, the obligations of
either or both Borrowers in respect of all Letters of Credit then outstanding to
reimburse amounts paid by any Lender in respect of any drawing or drawings under
a Letter of Credit.
Required Payment is used herein as defined in Section 3(h) hereof.
Reserve Requirement means, with respect to any Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
Revolving Loan or Loans means an Advance or Advances made pursuant to
Section 2(a) hereof.
Security Instruments is used collectively herein to mean this
Agreement, all Deeds of Trust, Mortgages, Security Agreements, Assignments of
Production and Financing Statements and other collateral documents covering
certain of the Oil and Gas Properties and related personal property, equipment,
oil and gas inventory and proceeds of the foregoing, all guaranties, all pledge
agreements, all security agreements and all collateral assignments of notes and
liens executed as security for the Loans, all such documents to be in form and
substance reasonably satisfactory to Agent.
Subsidiary means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by either Borrower or another Subsidiary.
Total Outstandings means, at any time, the sum of (i) the total
principal balance outstanding on the Revolving Loans, plus (ii) the total face
amount of all outstanding Letters of Credit, plus (iii) the amount of all unpaid
Reimbursement Obligations.
Tranche means a set of LIBOR Loans made by the Lenders at the same time
and for the same Interest Period.
11
Unscheduled Redeterminations means a redetermination of the Borrowing
Base made at any time other than on the dates set for the regular
redetermination of the Borrowing Base which are made (A) at the request of
Borrowers (but only once each six (6) month period), or (B) at the reasonable
request of Majority Lenders, or (C) at any time that Agent or Majority Lenders
determine, in their sole discretion that either (i) there has been a material
decrease in the value of the Collateral, or (ii) an event has occurred which
could cause a Material Adverse Effect.
2........Commitments of the Lenders.
(a) Revolving Loans. On the terms and conditions hereinafter
set forth, each Lender agrees severally to make Advances to Borrowers
from time to time during the period beginning on the Effective Date and
ending on the Maturity Date in such amounts as Borrowers may request up
to an amount not to exceed, in the aggregate principal amount advanced
at any time, its Pro Rata Part of the Available Commitment. Subject to
the terms of this Agreement, Borrowers may borrow, repay and reborrow
at any time prior to the Maturity Date. The obligation of Borrowers
hereunder shall be evidenced by this Agreement and the Notes issued in
connection herewith, said Notes to be as described in Section 3 hereof.
Notwithstanding any other provision of this Agreement, no Advance shall
be required to be made hereunder if any Default or Event of Default has
occurred and is continuing. Each Advance under the Commitment shall be
an aggregate amount of at least $500,000 or any whole multiples of
$100,000 in excess thereof. Irrespective of the face amount of the Note
or Notes, the Lenders shall never have the obligation to Advance any
amount or amounts in excess of the Commitment or to increase the
Commitment.
(b) Ratable Loans. Each Advance hereunder shall consist of
Revolving Loans made from the several Lenders ratably in proportion to
the ratio that their respective Commitments bear to the total of all
Commitments.
(c) Procedure for Borrowing. Whenever Borrowers desire an
Advance under the Commitment, they shall give Agent telegraphic, telex,
facsimile or telephonic notice ("Notice of Borrowing") of such
requested Advance, which in the case of telephonic notice, shall be
promptly confirmed in writing. Each Notice of Borrowing shall be in the
form of Exhibit "A" attached hereto and shall be received by Agent not
later than 11:00 a.m. Midland, Texas time, (i) one Business Day prior
to the Borrowing Date in the case of Base Rate Loans, or (ii) three
Business Days prior to any proposed Borrowing Date in the case of LIBOR
Loans. Each Notice of Borrowing shall specify (i) the Borrowing Date
(which shall be a Business Day), (ii) the principal amount to be
borrowed, (iii) the portion of the Advance constituting Base Rate Loans
and/or LIBOR Loans and (iv) if any portion of the proposed Advance is
to constitute LIBOR Loans, the initial Interest Period selected by
Borrowers pursuant to Section 4 hereof to be applicable thereto. Upon
receipt of such Notice, Agent shall advise each Lender thereof;
provided, that if the Lenders
12
have received at least one (1) day's notice of such Advance prior to
funding of a Base Rate Loan, or at least three (3) days' notice of each
Advance prior to funding in the case of a LIBOR Loan, each Lender shall
provide Agent at its office at ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, not later than 1:00 p.m., Midland, Texas time, on the
Borrowing Date, in immediately available funds, its Pro Rata Part of
the requested Advance, but the aggregate of all such fundings by each
Lender shall never exceed such Lender's Commitment. Not later than 2:00
p.m., Midland, Texas time, on the Borrowing Date, Agent shall make
available to the Borrowers at the same office, in like funds, the
aggregate amount of such requested Advance. Neither Agent nor any
Lender shall incur any liability to the Borrowers in acting upon any
Notice of Borrowing referred to above which Agent or such Lender
believes in good faith to have been given by a duly authorized officer
or other person authorized to borrow on behalf of Borrowers or for
otherwise acting in good faith under this Section 2(c). Upon funding of
Advances by Lenders and such funds being made available to Borrowers in
accordance with this Agreement, pursuant to any such Notice, the
Borrowers shall have effected Advances hereunder.
(d) Letters of Credit. On the terms and conditions hereinafter
set forth, the Agent shall from time to time during the period
beginning on the Effective Date and ending on the Maturity Date upon
request of either Borrower issue standby Letters of Credit for the
account of either Borrower (the "Letters of Credit") in such face
amounts as either Borrower may request, but not to exceed in the
aggregate face amount at any time outstanding the sum of One Million
and No/100 Dollars ($1,000,000.00). The face amount of all Letters of
Credit issued and outstanding hereunder shall be considered as Advances
on the Commitment for Borrowing Base purposes and all payments made by
the Agent on such Letters of Credit shall be considered as Advances
under the Notes. Each Letter of Credit used for the account of either
Borrower hereunder shall (i) be in favor of such beneficiaries as are
specifically requested by such Borrower for purposes of securing such
Borrower's obligations associated with its oil and gas operations and
activities, or securing such Borrower's obligations in connection with
Rate Management Transactions permitted under this Agreement, (ii) have
an expiration date not exceeding the earlier of (a) one year or (b) the
Maturity Date, and (iii) contain such other terms and provisions as may
be required by Agent. Each Lender (other than Agent) agrees that, upon
issuance of any Letter of Credit hereunder, it shall automatically
acquire a participation in the Agent's liability under such Letter of
Credit in an amount equal to such Lender's Commitment Percentage of
such liability, and each Lender (other than Agent) thereby shall
absolutely, unconditionally and irrevocably assume, as primary obligor
and not as surety, and shall be unconditionally obligated to Agent to
pay and discharge when due, its Commitment Percentage of Agent's
liability under such Letter of Credit. The Borrowers hereby, jointly
and severally, unconditionally agree to pay and reimburse the Agent for
the amount of each demand for payment under any Letter of Credit that
is in compliance with the provisions of any such Letter of Credit at or
prior to
13
the date on which payment is to be made by the Agent to the beneficiary
thereunder, without presentment, demand, protest or other formalities
of any kind. Upon receipt from any beneficiary of any Letter of Credit
of any demand for payment under such Letter of Credit, the Agent shall
promptly notify the Borrowers of the demand and the date upon which
such payment is to be made by the Agent to such beneficiary in respect
of such demand. Forthwith upon receipt of such notice from the Agent,
Borrowers shall advise the Agent whether or not Borrowers intend to
borrow hereunder to finance their obligations to reimburse the Agent,
and if so, submit a Notice of Borrowing as provided in Section 2(c)
hereof. If Borrowers fail to so advise Agent and thereafter fail to
reimburse Agent, the Agent shall notify each Lender of the demand and
the failure of the Borrowers to reimburse the Agent, and each Lender
shall reimburse the Agent for its Commitment Percentage of each such
draw paid by the Agent and unreimbursed by the Borrowers. All such
amounts paid by Agent and/or reimbursed by the Lenders shall be treated
as an Advance or Advances under the Commitment, which Advances shall be
immediately due and payable and shall bear interest at the Maximum
Rate.
(e) Procedure for Obtaining Letters of Credit. The amount and
date of issuance, renewal, extension or reissuance of a Letter of
Credit pursuant to the Lenders' commitments above in Section 2(d) shall
be designated by either Borrower's written request delivered to Agent
at least three (3) Business Days prior to the date of such issuance,
renewal, extension or reissuance. Concurrently with or promptly
following the delivery of the request for a Letter of Credit, the
Borrower making such request shall execute and deliver to the Agent an
application and agreement with respect to the Letter of Credit, said
application and agreement to be in the form used by the Agent. The
Agent shall not be obligated to issue, renew, extend or reissue such
Letter of Credit if (A) the amount thereon when added to the face
amount of the outstanding Letters of Credit plus any Reimbursement
Obligations exceeds One Million and No/100 Dollars ($1,000,000.00) or
(B) the amount thereof when added to the Total Outstandings would
exceed the Commitment. Borrowers, jointly and severally, agree to pay
the Agent for the benefit of the Lenders commissions for issuing the
Letters of Credit (calculated separately for each Letter of Credit) in
an amount equal to the greater of (i) the LIBOR Margin in effect per
annum at the time of issuance times the maximum face amount of the
Letter of Credit (calculated on the basis of actual days elapsed or a
year consisting of 360 days) or (ii) $500.00. In addition, Borrowers,
jointly and severally, agree to pay to the Agent for its own account an
additional commission of one-quarter of one percent (.25%) times the
maximum face amount of such Letter of Credit for issuing each such
Letter of Credit. Such commissions shall be payable prior to the
issuance of each Letter of Credit and thereafter on each anniversary
date of such issuance while such Letter of Credit is outstanding.
(f) Voluntary Reduction of Commitment. Subject to the
provisions of Section 5(e) hereof, Borrowers may at any time, or from
time to time, upon not less than
14
three (3) Business Days' prior written notice to Agent, reduce or
terminate the Commitment; provided, however, that (i) each reduction in
the Commitment must be in the amount of $1,000,000 or more, in
increments of $100,000 and (ii) each reduction must be accompanied by a
prepayment of the Notes in the amount by which the outstanding
principal balance of the Notes exceeds the Commitment as reduced
pursuant to this Section 2(f).
(g) Several Obligations. The obligations of the Lenders under
the Commitment are several and not joint. The failure of any Lender to
make an Advance required to be made by it shall not relieve any other
Lender of its obligation to make its Advance, and no Lender shall be
responsible for the failure of any other Lender to make the Advance to
be made by such other Lender. No Lender shall be required to lend
hereunder any amount in excess of its legal lending limit.
(h) Type and Number of Advances. Any Advance on the Commitment
may be a Base Rate Loan or a LIBOR Loan, or a combination thereof, as
selected by the Borrowers pursuant to Section 4 hereof. The total
number of Tranches which may be outstanding at any time shall never
exceed three (3).
3........Notes Evidencing Loans. The loans described above in Section 2
shall be evidenced by promissory notes of Borrowers as follows:
(a) Form of Notes. The Revolving Loan shall be evidenced by a
Note or Notes in the aggregate face amount of $200,000,000, and the
Note or Notes shall be in the form of Exhibit "B" hereto with
appropriate insertions. Notwithstanding the face amount of the Notes,
the actual principal amount due from the Borrowers to Lenders on
account of the Notes, as of any date of computation, shall be the sum
of Advances then and theretofore made on account thereof, less all
principal payments actually received by Lenders in collected funds with
respect thereto. Although the Notes may be dated as of the Effective
Date, interest in respect thereof shall be payable only for the period
during which the loans evidenced thereby are outstanding and, although
the stated amount of the Notes may be higher, the Notes shall be
enforceable, with respect to Borrowers' obligation to pay the principal
amount thereof, only to the extent of the unpaid principal amount of
the Revolving Loans. Irrespective of the face amount of the Notes, no
Lender shall ever be obligated to advance on the Commitment any amount
in excess of its Commitment then in effect.
(b) Issuance of Additional Notes. At the Effective Date there
shall be outstanding Note or Notes in the aggregate face amount of
$200,000,000 payable to the order of Lenders. From time to time new
Notes may be issued to other Lenders as such Lenders become parties to
this Agreement. Upon request from Agent, Borrowers shall execute and
deliver to Agent any such new or additional Notes. From time to time as
15
new Notes are issued the Agent shall require that each Lender exchange
its Note(s) for newly issued Note(s) to better reflect the extent of
each Lender's Commitments hereunder.
(c) Interest Rates. The unpaid principal balance of the Notes
shall bear interest from time to time as set forth in Section 4 hereof.
(d) Payment of Interest. Interest on the Notes shall be
payable on each Interest Payment Date.
(e) Payment of Principal. Principal of the Revolving Loans
shall be due and payable to the Agent for the ratable benefit of the
Lenders on the Maturity Date unless earlier due in whole or in part as
a result of an acceleration of the amount due or pursuant to the
mandatory prepayment provisions of Section 9(b) hereof.
(f) Payment to Lenders. Each Lender's Pro Rata Part of payment
or prepayment of the Loans shall be directed by wire transfer to such
Lender by the Agent at the address provided to the Agent for such
Lender for payments no later than 2:00 p.m., Midland, Texas, time on
the Business Day such payments or prepayments are deemed hereunder to
have been received by Agent; provided, however, in the event that any
Lender shall have failed to make an Advance as contemplated under
Section 2 hereof (a "Defaulting Lender") and the Agent or another
Lender or Lenders shall have made such Advance, payment received by
Agent for the account of such Defaulting Lender or Lenders shall not be
distributed to such Defaulting Lender or Lenders until such Advance or
Advances shall have been repaid in full to the Lender or Lenders who
funded such Advance or Advances. Any payment or prepayment received by
Agent at any time after 12:00 noon, Midland, Texas, time on a Business
Day shall be deemed to have been received on the next Business Day.
Interest shall cease to accrue on any principal as of the end of the
day preceding the Business Day on which any such payment or prepayment
is deemed hereunder to have been received by Agent. If Agent fails to
transfer any principal amount to any Lender as provided above, then
Agent shall promptly direct such principal amount by wire transfer to
such Lender.
(g) Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, or otherwise) on account of
the Loans, (including, without limitation, any set-off) which is in
excess of its Pro Rata Part of payments on the Loans, as the case may
be, obtained by all Lenders, such Lender shall purchase from the other
Lenders such participation as shall be necessary to cause such
purchasing Lender to share the excess payment pro rata with each of
them; provided that, if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of the
recovery. Borrowers agree that any Lender so purchasing a participation
from another Lender
16
pursuant to this Section may, to the fullest extent permitted by law,
exercise all of its rights of payment (including the right of offset)
with respect to such participation as fully as if such Lender were the
direct creditor of Borrowers in the amount of such participation.
(h) Non-Receipt of Funds by the Agent. Unless the Agent shall
have been notified by a Lender or the Borrowers (the "Payor") prior to
the date on which such Lender is to make payment to the Agent of the
proceeds of a Loan to be made by it hereunder or Borrowers are to make
a payment to the Agent for the account of one or more of the Lenders,
as the case may be (such payment being herein called the "Required
Payment"), which notice shall be effective upon receipt, that the Payor
does not intend to make the Required Payment to the Agent, the Agent
may assume that the Required Payment has been made and may, in reliance
upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient on such date and, if the
Payor has not in fact made the Required Payment to the Agent, the
recipient of such payment shall, on demand, pay to the Agent the amount
made available to it together with interest thereon in respect of the
period commencing on the date such amount was made available by the
Agent until the date the Agent recovers such amount at the rate
applicable to such portion of the applicable Loan.
4........Interest Rates.
(a) Options.
(i) Base Rate Loans. On all Base Rate Loans Borrowers
agree to pay interest on the Notes calculated on the basis of
the actual days elapsed in a year consisting of 365 days, or
if appropriate, 366 days with respect to the unpaid principal
amount of each Base Rate Loan from the date the proceeds
thereof are made available to Borrowers until maturity
(whether by acceleration or otherwise), at a varying rate per
annum equal to the lesser of (A) the Maximum Rate (defined
herein), or (B) the greater of (i) four and one-half percent
(4.50%), or (ii) the sum of the Alternate Base Rate plus the
Base Rate Margin. Subject to the provisions of this Agreement
as to prepayment, the principal of the Notes representing Base
Rate Loans shall be payable as specified in Section 3(e)
hereof and the interest in respect of each Base Rate Loan
shall be payable on each Interest Payment Date applicable
thereto. Past due principal and, to the extent permitted by
law, past due interest in respect to each Base Rate Loan,
shall bear interest, payable on demand, at a rate per annum
equal to the Default Rate.
17
(ii) LIBOR Loans. On all LIBOR Loans Borrowers agree
to pay interest calculated on the basis of a year consisting
of 360 days with respect to the unpaid principal amount of
each LIBOR Loan from the date the proceeds thereof are made
available to Borrowers until maturity (whether by acceleration
or otherwise), at a varying rate per annum equal to the lesser
of (i) the Maximum Rate, or (ii) the LIBOR Rate. Subject to
the provisions of this Agreement with respect to prepayment,
the principal of the Notes shall be payable as specified in
Section 3(e) hereof and the interest with respect to each
LIBOR Loan shall be payable on each Interest Payment Date
applicable thereto. Past due principal and, to the extent
permitted by law, past due interest shall bear interest,
payable on demand, at a rate per annum equal to the Default
Rate. Upon three (3) Business Days' written notice prior to
the making by the Lenders of any LIBOR Loan (in the case of
the initial Interest Period therefor) or the expiration date
of each succeeding Interest Period (in the case of subsequent
Interest Periods therefor), Borrowers shall have the option,
subject to compliance by Borrowers with all of the provisions
of this Agreement, as long as no Event of Default exists, to
specify whether the Interest Period commencing on any such
date shall be a one (1), two (2), three (3), six (6) or twelve
(12) month period. If Agent shall not have received timely
notice of a designation of such Interest Period as herein
provided, Borrowers shall be deemed to have elected to convert
all maturing LIBOR Loans to Base Rate Loans.
(b) Interest Rate Determination. The Agent shall determine
each interest rate applicable to the Loans hereunder. The Agent shall
give prompt notice to Borrowers and the Lenders of each rate of
interest so determined and its determination thereof shall be
conclusive absent error.
(c) Conversion Option. Borrowers may elect from time to time
(i) to convert all or any part of its LIBOR Loans to Base Rate Loans by
giving Agent irrevocable notice of such election in writing prior to
10:00 a.m. (Midland, Texas time) on the conversion date and such
conversion shall be made on the requested conversion date, provided
that any such conversion of a LIBOR Loan shall only be made on the last
day of the Interest Period with respect thereof, (ii) to convert all or
any part of its Base Rate Loans to LIBOR Loans by giving the Agent
irrevocable written notice of such election three (3) Business Days
prior to the proposed conversion and such conversion shall be made on
the requested conversion date or, if such requested conversion date is
not a Business Day, on the next succeeding Business Day. Any such
conversion shall not be deemed to be a prepayment of any of the loans
for purposes of this Agreement or the Notes.
18
(d) Recoupment. If at any time the applicable rate of interest
selected pursuant to Sections 4(a)(i) or 4(a)(ii) above shall exceed
the Maximum Rate, thereby causing the interest on the Notes to be
limited to the Maximum Rate, then any subsequent reduction in the
interest rate so selected or subsequently selected shall not reduce the
rate of interest on the Notes below the Maximum Rate until the total
amount of interest accrued on the Notes equals the amount of interest
which would have accrued on the Notes if the rate or rates selected
pursuant to Sections 4(a)(i) or (ii), as the case may be, had at all
times been in effect.
(e) Interest Rates Applicable After Default. Notwithstanding
anything to the contrary contained in this Section 4, during the
continuance of a Default or an Event of Default the Majority Lenders
may, at their option, by notice from Agent to Borrowers (which notice
may be revoked at the option of the Majority Lenders notwithstanding
the provisions of Section 15 hereof, which requires all Lenders to
consent to changes in interest rates) declare that no Advance may be
made as, converted into, or continued as a LIBOR Loan. During the
continuance of an Event of Default, the Majority Lenders, may, at their
option, by notice from Agent to Borrowers (which notice may be revoked
at the option of Majority Lenders notwithstanding the provisions of
Section 15 hereof, which requires all Lenders to consent to changes in
interest rates) declare that (i) each LIBOR Loan shall bear interest
for the remainder of the applicable Interest Period at the rate
otherwise applicable to such Interest Period plus four percent (4%) per
annum and (ii) each Base Rate Loan shall bear interest at the rate
otherwise applicable to such Interest Period plus four percent (4%),
provided that, during the continuance of an Event of Default under
Section 14(f) or 14(g), the interest rate set forth in clauses (i) and
(ii) above shall be applicable to all outstanding Loans without any
election or action on the part of the Agent or any Lender.
5........Special Provisions Relating to Loans.
(a) Unavailability of Funds or Inadequacy of Pricing. In the
event that, in connection with any proposed LIBOR Loan, the Agent
reasonably determines, which determination shall, absent manifest
error, be final, conclusive and binding upon all parties, due to
changes in circumstances since the date hereof, adequate and fair means
do not exist for determining the LIBOR Rate or such rate will not
accurately reflect the costs to the Lenders of funding a LIBOR Loan for
such Interest Period, the Agent shall give notice of such determination
to Borrowers and the Lenders, whereupon, until the Agent notifies
Borrowers and the Lenders that the circumstances giving rise to such
suspension no longer exist, the obligations of the Lenders to make,
continue or convert Loans into a LIBOR Loan shall be suspended, and all
Loans to Borrowers shall be Base Rate Loans during the period of
suspension.
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(b) Change in Laws. If at any time any new law or any change
in existing laws or in the interpretation of any new or existing laws
shall make it unlawful for any Lender to make or continue to maintain
or fund LIBOR Loans hereunder, then such Lender shall promptly notify
Borrowers in writing and such Lender's obligation to make, continue or
convert Loans into LIBOR Loans under this Agreement shall be suspended
until it is no longer unlawful for such Lender to make or maintain
LIBOR Loans. Upon receipt of such notice, Borrowers shall either repay
the outstanding LIBOR Loans owed to such Lender, without penalty, on
the last day of the current Interest Periods (or, if any Lender may not
lawfully continue to maintain and fund such LIBOR Loans, immediately),
or Borrowers may convert such LIBOR Loans at such appropriate time to
Base Rate Loans.
(c) Increased Cost or Reduced Return.
(i) If, after the date hereof, the adoption of any
applicable law, rule, or regulation, or any change in any
applicable law, rule, or regulation, or any change in the
interpretation or administration thereof by any governmental
authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any
Lender with any request or directive (whether or not having
the force of law) of any such governmental authority, central
bank, or comparable agency:
(A) shall subject such Lender to any tax,
duty, or other charge with respect to any LIBOR
Loans, its Notes, or its obligation to make LIBOR
Loans, or change the basis of taxation of any amounts
payable to such Lender under this Agreement or its
Notes in respect of any LIBOR Loan (other than
franchise taxes and taxes imposed on or measured by
the overall net income of such Lender);
......... (B) shall impose, modify, or deem applicable
any reserve, special deposit, assessment, or similar
requirement (other than reserve requirements, if any,
taken into account in the determination of the LIBOR
Rate) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities
or commitments of, such Lender, including the
Commitment of such Lender hereunder; or
(C) shall impose on such Lender or on the
London interbank market any other condition affecting
this
20
Agreement or its Notes or any of such extensions
of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost
to such Lender of making, converting into, continuing, or
maintaining any LIBOR Loan or to reduce any sum received or
receivable by such Lender under this Agreement or its Notes
with respect to any LIBOR Loan, then Borrowers shall pay to
such Lender on demand such amount or amounts as will
reasonably compensate such Lender for such increased cost or
reduction. If any Lender requests compensation by Borrowers
under this Section 5(c), Borrowers may, by notice to such
Lender (with a copy to Agent), suspend the obligation of such
Lender to make or continue LIBOR Loans, or to convert all or
part of the Base Rate Loans owing to such Lender to LIBOR
Loans, until the event or condition giving rise to such
request ceases to be in effect (in which case the provisions
of Section 5(c) shall be applicable); provided that such
suspension shall not affect the right of such Lender to
receive the compensation so requested.
(ii) If, after the date hereof, any Lender shall have
reasonably determined that the adoption of any applicable law,
rule, or regulation regarding capital adequacy or any change
therein or in the interpretation or administration thereof by
any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether
or not having the force of law) of any such governmental
authority, central bank, or comparable agency, has or would
have the effect of reducing the rate of return on the capital
of such Lender or any corporation controlling such Lender as a
consequence of such Lender's obligations hereunder to a level
below that which such Lender or such corporation could have
achieved but for such adoption, change, request, or directive
(taking into consideration its policies with respect to
capital adequacy), then from time to time upon demand
Borrowers shall pay to such Lender such additional amount or
amounts as will reasonably compensate such Lender for such
reduction.
(iii) Each Lender shall promptly notify Borrowers and
Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Lender to
compensation pursuant to this Section 5(c) and will designate
a separate lending office, if applicable, if such designation
will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Lender, be
otherwise disadvantageous to it. Any Lender claiming
compensation under this
21
Section 5(c) shall furnish to Borrowers and Agent a
statement setting forth the additional amount or amounts to
be paid to it hereunder which shall be conclusive in the
absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution
methods.
(iv) Any Lender giving notice to Borrowers through
the Agent pursuant to Section 5(c) shall give to Borrowers a
statement signed by an officer of such Lender setting forth in
reasonable detail the basis for, and the calculation of such
additional cost, reduced payments or capital requirements, as
the case may be, and the additional amounts required to
compensate such Lender therefor.
(v) Within five (5) Business Days after receipt by
Borrowers of any notice referred to in Section 5(c), Borrowers
shall pay to the Agent for the account of the Lender issuing
such notice such additional amounts as are required to
compensate such Lender for the increased cost, reduced
payments or increased capital requirements identified therein,
as the case may be.
(d) Discretion of Lender as to Manner of Funding.
Notwithstanding any provisions of this Agreement to the contrary, each
Lender shall be entitled to fund and maintain its funding of all or any
part of its Loan in any manner it sees fit, it being understood,
however, that for the purposes of this Agreement all determinations
hereunder shall be made as if each Lender had actually funded and
maintained each LIBOR Loan through the purchase of deposits having a
maturity corresponding to the last day of the Interest Period
applicable to such LIBOR Loan and bearing an interest rate at the
applicable interest rate for such Interest Period.
(e) Breakage Fees. Without duplication under any other
provision hereof, if any Lender incurs any loss, cost or expense
including, without limitation, any loss of profit and loss, cost,
expense or premium reasonably incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by such Lender to
fund or maintain any LIBOR Loan or the relending or reinvesting of such
deposits or amounts paid or prepaid to the Lenders as a result of any
of the following events other than any such occurrence as a result in
the change of circumstances described in Sections 5(a) and (b):
(i) any payment, prepayment or conversion of a LIBOR
Loan on a date other than the last day of its Interest Period
(whether by acceleration, prepayment or otherwise);
(ii) any failure to make a principal payment of a
LIBOR Loan on the due date thereof; or
22
(iii) any failure by Borrowers to borrow, continue,
prepay or convert to a LIBOR Loan on the dates specified in a
notice given pursuant to Section 2(c) or 4(c) hereof;
then Borrowers shall pay to such Lender such amount as will reimburse
such Lender for such loss, cost or expense. If any Lender makes such a
claim for compensation, it shall furnish to Borrowers and Agent a
statement setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the
computation of such loss, cost or expense) and the amounts shown on
such statement shall be conclusive and binding absent manifest error.
6........Collateral Security. To secure the performance by Borrowers of
their obligations hereunder, and under the Notes, Security Instruments and Rate
Management Transactions, whether now or hereafter incurred, matured or
unmatured, direct or contingent, joint or several, or joint and several,
including extensions, modifications, renewals and increases thereof, and
substitutions therefor, Borrowers shall herewith grant and assign to Agent for
the ratable benefit of the Lenders a first and prior Lien on certain of their
Oil and Gas Properties, certain related equipment, oil and gas inventory,
as-extracted collateral and proceeds of the foregoing. The Oil and Gas
Properties herewith mortgaged to the Agent by Borrowers shall represent (i) not
less than 80% of the Engineered Value (as hereinafter defined) of Borrowers'
proved developed producing Oil and Gas Properties as of the Effective Date, and
(ii) not less than 80% of the Engineered Value of Borrowers' other proved Oil
and Gas Properties as of the Effective Date. In addition to the mortgaging of
the Oil and Gas Properties, PPC shall grant and assign to Agent for the ratable
benefit of Lenders a first and prior Lien on all equity interests in Guarantor,
and Guarantor shall provide Lenders with the Guaranty. Obligations arising from
Rate Management Transactions between Borrowers and one or more of the Lenders or
an Affiliate of any of the Lenders shall be secured by the Collateral on a pari
passu basis with the indebtedness and obligations of Borrowers under the Loan
Documents. All Oil and Gas Properties and other collateral in which Borrowers
and Guarantor herewith grant or hereafter grant to Agent for the ratable benefit
of the Lenders a first and prior Lien (to the satisfaction of the Agent) in
accordance with this Section 6, as such properties and interests are from time
to time constituted, are hereinafter collectively called the "Collateral".
The granting and assigning of such security interests and Liens by
Borrowers and Guarantor shall be pursuant to Security Instruments in form and
substance reasonably satisfactory to the Agent. Concurrently with the delivery
of each of the Security Instruments or within a reasonable time thereafter,
Borrowers shall have furnished to the Agent mortgage and title opinions and
other title information reasonably satisfactory to Agent with respect to the
title and Lien status of Borrowers' interests in not less than 80% of the
Engineered Value of Borrowers' mortgaged Oil and Gas Properties. "Engineered
Value" for this purpose shall mean future net revenues discounted at the
discount rate being used by the Agent as of the date of any such determination
utilizing the pricing parameters used in the engineering report furnished to the
23
Agent pursuant to Sections 7 and 12 hereof. Borrowers will cause to be executed
and delivered to the Agent, in the future, additional Security Instruments if
the Agent reasonably deems such are necessary to insure perfection or
maintenance of Lenders' security interests and Liens in not less than 80% of the
Engineered Value of the Oil and Gas Properties or in any of the other
Collateral.
7........Borrowing Base.
(a) Initial Borrowing Base. At the Effective Date, the
Borrowing Base shall be $72,000,000.
(b) Subsequent Determinations of Borrowing Base. Subsequent
determinations of the Borrowing Base shall be made by the Lenders
semi-annually on or about April 1 and October 1 of each year beginning
April 1, 2005, or as Unscheduled Redeterminations. No later than March
1 and September 1 of each year, beginning March 1, 2005, Borrowers
shall, at their own expense, furnish to Lenders an engineering report
covering the Oil and Gas Properties in form and substance satisfactory
to Agent and dated effective not more than sixty (60) days prior to the
delivery of the same to Lenders. Each such report shall be prepared by
an independent petroleum engineering firm acceptable to Agent,
utilizing economic pricing perameters used by Agent as established from
time to time, together with such other information, reports and data
concerning the value of the Oil and Gas Properties as Agent shall deem
reasonably necessary to determine the value of such Oil and Gas
Properties. Agent shall by notice to Borrowers no later than 45 days
after its receipt of the engineering report and all other information
requested by Lenders (herein called a "Determination Date"), notify
Borrowers of the designation by Lenders of the new Borrowing Base for
the period beginning on such Determination Date and continuing until,
but not including, the next Determination Date.
(c) Subsequent Unscheduled Redeterminations of Borrowing Base.
Within thirty (30) days after either (i) receipt of notice from Agent
that Lenders require an Unscheduled Redetermination, or (ii) Borrowers
give notice to Agent of their desire to have an Unscheduled
Redetermination performed, Borrowers shall furnish to Lenders an
engineering report in form and substance satisfactory to Agent prepared
by independent petroleum engineers acceptable to Agent valuing the Oil
and Gas Properties utilizing economic and pricing parameters used by
the Agent as established from time to time, together with such other
information, reports and data concerning the value of the Oil and Gas
Properties as Agent shall deem reasonably necessary to determine the
value of such Oil and Gas Properties. If an Unscheduled Redetermination
is made by Lenders, the Agent shall notify Borrowers within a
reasonable time after receipt of all requested information of the new
Borrowing Base, and such new Borrowing Base shall continue until the
next Determination Date.
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(d) Other Determinations of the Borrowing Base. If Borrowers
do not furnish all such information, reports and data by any date
specified in Section 7(b) or 7(c), unless such failure is of no fault
of Borrowers, Lenders may nonetheless designate the Borrowing Base at
any amounts which Lenders in their discretion determine and may
redesignate the Borrowing Base from time to time thereafter until
Lenders receive all such information, reports and data, whereupon
Lenders shall designate a new Borrowing Base as described above.
(e) Evaluation Factors. Each Lender shall determine the amount
of the Borrowing Base attributable to the Oil and Gas Properties based
upon the loan collateral value which such Lender in its discretion
(using such methodology, assumptions and discount rates as such Lender
customarily uses in assigning collateral value to oil and gas
properties, oil and gas gathering systems, gas processing and plant
operations) assigns to such Oil and Gas Properties at the time in
question and based upon such other credit factors consistently applied
(including, without limitation, the assets, liabilities, cash flow,
business, properties, prospects, management and ownership of Borrowers
and their Affiliates) as such Lender customarily considers in
evaluating similar oil and gas credits.
(f) Required Percentage of Lenders. All determinations or
Unscheduled Redeterminations of the Borrowing Base require the approval
of all Lenders. If the Lenders cannot otherwise agree on the Borrowing
Base attributable to the Oil and Gas Properties, each Lender shall
submit in writing to the Agent its proposed Borrowing Base attributable
to the Oil and Gas Properties and the Borrowing Base attributable to
the Oil and Gas Properties shall be set on the basis of the lowest
Borrowing Base attributable to the Oil and Gas Properties proposed by
any Lender.
(g) Automatic Reductions of Borrowing Base. If at any time any
of the Oil and Gas Properties are sold, the Borrowing Base then in
effect shall automatically be reduced by an amount equal to the amount
of prepayment required to be made pursuant to Section 12(r) hereof. The
Borrowing Base shall be additionally reduced from time to time pursuant
to the provisions of Section 12(t) hereof and as elsewhere provided
herein. It is expressly understood that Agent and Lenders have no
obligation to designate the Borrowing Base at any particular amounts,
except in the exercise of their discretion, whether in relation to the
Commitment of otherwise.
8........Fees.
(a) Letter of Credit Fee. Borrowers shall pay to Agent the
Letter of Credit fees required above in Section 2(e).
(b) Borrowing Base Determination Fee. Borrowers shall pay to
Agent for the ratable benefit of Lenders at the time Agent provides any
notice required by Section 7, an
25
amount equal to three-eighths of one percent (.375%) of the
amount of any increase in the Borrowing Base upon a scheduled
semi-annual determination of the Borrowing Base or an Unscheduled
Redetermination. The parties acknowledge and agree that such fee is
intended as reasonable compensation to Lenders for their time, effort
and expense in determining the Borrowing Base.
(c) Unused Commitment Fee. Borrowers shall pay to Agent for
the ratable benefit of the Lenders an unused commitment fee (the
"Unused Commitment Fee") in an amount equal to one-quarter of one
percent (.25%) times the daily average of the unadvanced amount of the
Commitment (i.e., the Commitment minus the Total Outstandings). Such
Unused Commitment Fee shall be calculated on the basis of a year
consisting of 360 days. The Unused Commitment Fee shall be payable
quarterly in arrears on the last day of each calendar quarter beginning
September 30, 2004, with the first payment being for the period from
July 1, 2004 through September 30, 2004, and with the final fee payment
due on the Maturity Date for any period then ending for which the
Unused Commitment Fee shall not have been theretofore paid. In the
event the Commitment terminates on any date prior to the end of any
such quarterly period, Borrowers shall pay to the Agent for the ratable
benefit of the Lenders, on the date of such termination, the total
Unused Commitment Fee due for the period in which such termination
occurs. If a date for payment of the Unused Commitment Fee shall be
other than a Business Day such payment shall be made on the next
succeeding Business Day.
(d) Facility Fee. On the Effective Date Borrowers shall pay to
Agent for the ratable benefit of Lenders a facility fee in the amount
of $300,000.
(e) Agency and Arrangement Fee. Borrowers shall pay to Agent
for its own account the fees described in the fee letter dated as of
the Effective Date between Borrowers and Agent, at the times provided
therein.
9........Prepayments.
(a) Voluntary Prepayments. Subject to the provisions of
Section 5(e) hereof, Borrowers may at any time and from time to time,
without penalty or premium, prepay the Notes, in whole or in part. Each
such prepayment shall be made on at least three (3) Business Days'
notice to Agent in the case of LIBOR Loan Tranches and without notice
in the case of Base Rate Loans and shall be in a minimum amount of (i)
$500,000 or any whole multiple of $100,000 in excess thereof (or the
unpaid balance of the Notes, whichever is less), for Base Rate Loans,
plus accrued interest thereon, to the date of prepayment, and (ii)
$1,000,000 or any whole multiple of $100,000 in excess thereof (or the
unpaid balance of the Notes, whichever is less) for LIBOR Loans, plus
accrued interest thereon to the date of prepayment.
26
(b) Mandatory Collateral or Prepayment For Borrowing Base
Deficiency. In the event the Total Outstandings ever exceed the
Borrowing Base as determined by Lenders pursuant to Section 7 hereof (a
"Borrowing Base Deficiency"), Borrowers shall, within thirty (30) days
after written notification from the Agent, either (A) by instruments
reasonably satisfactory in form and substance to the Lenders, provide
the Agent with collateral with value and quality in amounts
satisfactory to all of the Lenders in their discretion in order to
increase the Borrowing Base by an amount at least equal to such excess,
(B) prepay, without premium or penalty, the principal amount of the
Notes in an amount at least equal to such excess plus accrued interest
thereon to the date of prepayment, or (C) eliminate the Borrowing Base
Deficiency through a combination of (A) and (B) above. If the Total
Outstandings ever exceed the Commitment as a result of any required
reduction in the Commitment pursuant to Section 7(g) hereof, then in
such event, Borrowers shall immediately prepay the principal amount of
the Notes in an amount at least equal to such excess plus accrued
interest to the date of prepayment.
10.......Representations and Warranties. In order to induce the Lenders
to enter into this Agreement, Borrowers and Guarantor, jointly and severally,
represent and warrant to the Lenders (which representations and warranties will
survive the delivery of the Notes) that:
(a) Creation and Existence. PPC is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified and in good standing in the
State of Texas and in all other jurisdictions wherein failure to
qualify may result in a Material Adverse Effect. PLP is a limited
partnership duly organized and validly existing under the laws of the
State of Texas and is duly qualified in the State of Texas and in all
other jurisdictions wherein failure to qualify may result in a Material
Adverse Effect. Guarantor is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified and in good standing in the
State of Nevada and in all other jurisdictions wherein failure to
qualify may result in a Material Adverse Effect. Borrowers and
Guarantor have all power and authority (corporate or otherwise) to own
their respective properties and assets and to transact the business in
which they are engaged.
(b) Power and Authority. Each Borrower is duly authorized and
empowered to create and issue the Notes; and each Borrower and
Guarantor is duly authorized and empowered to execute, deliver and
perform its respective Loan Documents, including this Agreement; and
all action (corporate or otherwise) on each Borrower's and Guarantor's
part requisite for the due creation and issuance of the Notes and for
the due execution, delivery and performance of the Loan Documents,
including this Agreement, has been duly and effectively taken.
27
(c) Binding Obligations. This Agreement does, and the Notes
and other Loan Documents upon their creation, issuance, execution and
delivery will, constitute valid and binding obligations of each
Borrower and Guarantor, respectively, enforceable in accordance with
its respective terms (except that enforcement may be subject to general
principles of equity and any applicable bankruptcy, insolvency, or
similar debtor relief laws now or hereafter in effect and relating to
or affecting the enforcement of creditors' rights generally).
(d) No Legal Bar or Resultant Lien. The Notes and the Loan
Documents, including this Agreement, do not and will not, to the best
of either Borrower's or Guarantor's knowledge, violate any provisions
of any contract, agreement, law, regulation, order, injunction,
judgment, decree or writ to which Borrower or Guarantor is subject, or
result in the creation or imposition of any Lien or other encumbrance
upon any assets or properties of either Borrower or of Guarantor, other
than those contemplated or permitted by this Agreement.
(e) No Consent. The execution, delivery and performance by
Borrowers of the Notes and the execution, delivery and performance by
Borrowers and Guarantor of the other Loan Documents to which each is a
party, including this Agreement, does not require the consent or
approval of any other person or entity, including without limitation
any regulatory authority or governmental body of the United States or
any state or any political subdivision of the United States or any
state thereof, which consent has not been obtained.
(f) Financial Condition. The Financial Statements of PPC dated
as of June 30, 2004, which have been delivered to Lenders by PPC are
complete and correct in all material respects and fully and accurately
reflect in all material respects the financial condition and results of
operations of PPC as of such date and for the periods stated and no
change in the condition, financial or otherwise, of PPC which is
reasonably expected to have a Material Adverse Effect has occurred
since June 30, 2004, except as disclosed to Lenders in Schedule "2"
attached hereto.
(g) Liabilities. Neither either Borrower nor Guarantor has any
material liability, direct or contingent on the Effective Date, except
as disclosed to the Lenders in the Financial Statements or on Schedule
"3" attached hereto. No unusual or unduly burdensome restrictions,
restraint, or hazard exists by contract, law or governmental regulation
or otherwise relative to the business, assets or properties of either
Borrower or Guarantor which is reasonably expected to have a Material
Adverse Effect.
(h) Litigation. Except as described in the Financial
Statements, or as otherwise disclosed to the Lenders in Schedule "4"
attached hereto, on the Effective Date there is no litigation, legal or
administrative proceeding, investigation or other action of
28
any nature pending or, to the knowledge of the officers of either
Borrower or Guarantor, threatened against or affecting either
Borrower, Guarantor or any Subsidiary which involves the possibility
of any judgment or liability not fully covered by insurance, and which
is reasonably expected to have a Material Adverse Effect.
(i) Taxes; Governmental Charges. Each Borrower and Guarantor
has filed all tax returns and reports required to be filed and has paid
all taxes, assessments, fees and other governmental charges levied upon
it or its assets, properties or income which are due and payable,
including interest and penalties, the failure of which to pay could
reasonably be expected to have a Material Adverse Effect, except such
as are being contested in good faith by appropriate proceedings and for
which adequate reserves for the payment thereof as required by GAAP has
been provided and levy and execution thereon have been stayed and
continue to be stayed.
(j) Titles, Etc. Each Borrower and Guarantor has good and
defensible title to all of its respective material assets, including
without limitation, the Oil and Gas Properties and other Collateral,
free and clear of all Liens or other encumbrances except Permitted
Liens.
(k) Defaults. Neither either Borrower nor Guarantor is in
default and no event or circumstance has occurred which, but for the
passage of time or the giving of notice, or both, would constitute a
default under any loan or credit agreement, indenture, mortgage, deed
of trust, security agreement or other agreement or instrument to which
either Borrower or Guarantor is a party in any respect that would be
reasonably expected to have a Material Adverse Effect. No Default or
Event of Default hereunder has occurred and is continuing.
(l) Casualties; Taking of Properties. Since the dates of the
latest Financial Statements of Borrowers and Guarantor delivered to
Lenders, neither the business nor the assets or properties of Borrowers
or Guarantor has been affected (to the extent it is reasonably expected
to cause a Material Adverse Effect), as a result of any fire,
explosion, earthquake, flood, drought, windstorm, accident, strike or
other labor disturbance, embargo, requisition or taking of property or
cancellation of contracts, permits or concessions by any domestic or
foreign government or any agency thereof, riot, activities of armed
forces or acts of God or of any public enemy.
(m) Use of Proceeds; Margin Stock. The proceeds of the
Commitment may be used by Borrowers for the purposes of (i) refinancing
either Borrower's existing indebtedness with Lenders, (ii) the
acquisition, exploration and development of oil and gas properties, and
(iii) working capital in either Borrower's oil and gas business.
Neither either Borrower nor Guarantor is engaged principally or as one
of its important activities in the business of extending credit for the
purpose of purchasing or carrying any "margin
29
stock " as defined in Regulation U of the Board of Governors of the
Federal Reserve System (12 C.F.R. Part 221), or for the purpose of
reducing or retiring any indebtedness which was originally incurred to
purchase or carry a margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of
Regulation G or U of the Board of Governors of the Federal Reserve
System.
Neither either Borrower nor Guarantor, nor any person or
entity acting on behalf of either Borrower or Guarantor, has taken or
will take any action which might cause the loans hereunder or any of
the Loan Documents, including this Agreement, to violate Regulation G
or U or any other regulation of the Board of Governors of the Federal
Reserve System or to violate the Securities Exchange Act of 1934 or any
rule or regulation thereunder, in each case as now in effect or as the
same may hereafter be in effect.
(n) Location of Business and Offices. The principal place of
business and chief executive offices of each Borrower and Guarantor are
located at the addresses as stated in Section 17 hereof.
(o) Compliance with the Law. To the best of each Borrower's
and Guarantor's knowledge, neither either Borrower, Guarantor nor any
Subsidiary:
(i) is in violation of any law, judgment, decree,
order, ordinance, or governmental rule or regulation to which
either Borrower, Guarantor, or any Subsidiary, or any of its
respective assets or properties are subject; or
(ii) has failed to obtain any license, permit,
franchise or other governmental authorization necessary to the
ownership of any of its respective assets or properties or the
conduct of its respective business.
(p) No Material Misstatements. No information, exhibit or
report furnished by either Borrower or Guarantor to the Lenders in
connection with the negotiation of this Agreement contained any
material misstatement of fact or omitted to state a material fact or
any fact necessary to make the statements contained therein not
materially misleading.
(q) Not A Utility. Neither either Borrower nor Guarantor is a
utility as a result of being engaged in the (i) generation,
transmission, or distribution and sale of electric power; (ii)
transportation, distribution and sale through a local distribution
system of natural or other gas for domestic, commercial, industrial, or
other use; (iii) provision of telephone or telegraph service to others;
(iv) production, transmission, or distribution and sale of steam or
water; (v) operation of a railroad; or (vii) provision of sewer service
to others.
30
(r) ERISA. Each Borrower, Guarantor and each Subsidiary is in
compliance in all material respects with the applicable provisions of
ERISA, and no "reportable event", as such term is defined in Section
403 of ERISA, has occurred with respect to any Plan of either Borrower,
Guarantor or any Subsidiary.
(s) Public Utility Holding Company Act. Neither either
Borrower nor Guarantor is a "holding company", or "subsidiary company"
of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(t) Subsidiaries. PPC has no Subsidiaries other than Guarantor
and PLP. PLP has no Subsidiaries. PPC and Guarantor collectively own
100% of the partnership interests of PLP and PPC owns 100% of the
membership interests of Guarantor.
(u) Environmental Matters. As of the Effective Date neither
either Borrower nor Guarantor (i) has received notice or otherwise
learned of any Environmental Liability which would be reasonably
expected to individually or in the aggregate have a Material Adverse
Effect arising in connection with (A) any non-compliance with or
violation of the requirements of any Environmental Law or (B) the
release or threatened release of any toxic or hazardous waste into the
environment, (ii) has received notice of any threatened or actual
liability in connection with the release or notice of any threatened
release of any toxic or hazardous waste into the environment which
would be reasonably expected to individually or in the aggregate have a
Material Adverse Effect or (iii) has received notice or otherwise
learned of any federal or state investigation evaluating whether any
remedial action is needed to respond to a release or threatened release
of any toxic or hazardous waste into the environment for which either
Borrower or Guarantor is or may be liable which would reasonably be
expected to result in a Material Adverse Effect.
(v) Liens. Except (i) as disclosed on Schedule "1" hereto and
(ii) for Permitted Liens, the assets and properties of each Borrower
and Guarantor are free and clear of all Liens and encumbrances.
(w) Investment Company Act. Neither either Borrower nor
Guarantor is an "investment company," or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(x) General. As of the Effective Date, there are no
significant material facts or conditions relating to the Loans, the
Loan Documents, any of the Collateral, or the financial condition or
business of either Borrower or Guarantor that could, collectively or
individually, have a Material Adverse Effect and that have not been
related, in writing, to
31
Lenders as an attachment to this Agreement; and all writings
heretofore or hereafter exhibited or delivered to Lenders by or on
behalf of either Borrower or Guarantor are and will be genuine and in
all material respects what they purport and appear to be.
11.......Conditions of Lending.
(a)......The effectiveness of this Agreement, and the obligation to
make the initial Advance or issue any initial Letter of Credit under the
Commitment shall be subject to satisfaction of the following conditions
precedent:
(i) Borrowers' Execution and Delivery. Borrowers shall have
executed and delivered this Agreement, the Notes and all other required
Loan Documents, all in form and substance satisfactory to the Agent;
(ii) Guarantor's Execution and Delivery. Guarantor shall have
executed and delivered this Agreement, its Guaranty in the form of
Exhibit "C" and all other required Loan Documents, all in form and
substance satisfactory to the Agent;
(iii) Legal Opinions. The Agent shall have received from
Borrowers' and Guarantor's legal counsel one or more favorable legal
opinions in form and substance satisfactory to the Agent as to (1) the
matters set forth in subsections 10(a), (b), (c), (d), (e) and (h)
hereof, and (2) as to such other matters as Agent or its counsel may
reasonably request;
(iv) Resolutions. The Agent shall have received (1) a copy of
the resolutions, in form and substance satisfactory to Agent, of the
Board of Directors of PPC authorizing the execution, delivery and
performance of this Agreement and the other Loan Documents to which it
is a party, the borrowings contemplated hereunder and, to the extent
applicable, the pledge of Collateral, certified by the secretary or an
assistant secretary of PPC as of the Effective Date, which certificate
shall be in form and substance satisfactory to Agent and Agent's
counsel and shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded, (2) a copy of the
resolutions, in form and substance satisfactory to Agent duly adopted
by the respective partners of PLP authorizing the execution, delivery
and performance of this Agreement and the other Loan Documents to which
it is a party, the borrowings contemplated hereunder and, to the extent
applicable, the pledge of Collateral, certified by its general partner,
which certificate shall be in form and substance satisfactory to Agent
and Agent's counsel and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded, and
(3) resolutions, in form and substance satisfactory to Agent, of the
managers of Guarantor
32
authorizing the execution, delivery and performance of this Agreement,
its Guaranty and the other Loan Documents to which it is a party and,
to the extent applicable, the pledge of Collateral, certified by its
secretary or assistant secretary as of the Effective Date, which
certificate shall be in form and substance satisfactory to Agent and
Agent's counsel and shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded;
(v) Good Standing. The Agent shall have received evidence of
existence and good standing for PPC and Guarantor and evidence of
existence for PLP;
(vi) Incumbency. The Agent shall have received a signed
certificate of each Borrower and Guarantor, certifying the names of the
officers of each Borrower and Guarantor authorized to sign loan
documents on behalf of each Borrower and Guarantor, together with the
true signatures of each such officer. The Agent may conclusively rely
on such certificate until the Agent receives a further certificate of
either Borrower or Guarantor canceling or amending the prior
certificate and submitting signatures of the officers named in such
further certificate;
(vii) Environmental Review. The Agent shall have received
satisfactory evidence that Borrowers have completed an environmental
review of their respective material Oil and Gas Properties or other
environmental assurances satisfactory to Agent;
(viii) Organizational Documents. The Agent shall have received
copies of Certificates of Incorporation, Organization, Formation or
Limited Partnership, as applicable, for each Borrower and Guarantor
together with all amendments thereto, appropriately certified by
governmental authority in the jurisdiction of organization of each
Borrower and Guarantor, as applicable, and a copy of the Bylaws,
Limited Liability Company Agreement or Agreement of Limited
Partnership, as applicable, of each Borrower and Guarantor, and all
amendments thereto, certified by one or more officers or owners of each
Borrower or Guarantor, as the case may be, as being true, correct and
complete;
(ix) Payment of Fees. Agent shall have received any fees and
expenses required to be received by it on the Effective Date pursuant
to the Loan Documents and the fee letter dated as of the Effective
Date, between Borrowers and Agent;
(x) Representation and Warranties. The representations and
warranties of Borrowers and Guarantor under this Agreement shall be
true and correct in all
33
material respects as of such date, as if then made (except to the
extent that such representations and warranties related solely to an
earlier date);
(xi) Security Instruments. Agent shall have received Security
Instruments in form and substance satisfactory to Agent covering the
Collateral as required by Section 6 hereof;
(xii) Title Opinions or Information. Agent shall have received
from Borrower title opinions or title information covering such part of
the Oil and Gas Properties as may be selected by Agent, such opinions
or other title information to be in content, form and substance
satisfactory to Agent;
(xiii) Engineering Review. Agent shall have received a copy of
an engineering report prepared by an independent engineering firm
acceptable to Agent in its sole discretion covering such part of the
Oil and Gas Properties as may be selected by Agent, said report to be
in form and substance satisfactory to Agent;
(xiv) Absence of Certain Proceedings. No suit, action or other
proceeding by a third party or a governmental authority shall be
pending or threatened which relates to this Agreement or the
transactions contemplated hereby;
(xv) Certificates of Insurance. Borrowers shall deliver
certificates of insurance acceptable to Agent evidencing the existence
and extent of their insurance coverage;
(xvi) Closing of Acquisition. The Agent shall have received
satisfactory evidence that the Acquisition has closed or is closing
simultaneously with the closing of this Agreement on terms satisfactory
to Agent, including, without limitation, free and clear of all Liens,
other than Permitted Liens;
(xvii) No Event of Default. No Default or Event of Default
shall have occurred and be continuing;
(xviii) Other Documents. Agent shall have received such other
instruments and documents incidental and appropriate to the
transactions provided for herein as Agent or its counsel may reasonably
request, and all such documents shall be in form and substance
reasonably satisfactory to the Agent; and
(xix) Legal Matters Satisfactory. All legal matters incident
to the consummation of the transactions contemplated hereby shall be
reasonably
34
satisfactory to special counsel for Agent retained at the expense of
Borrowers and Guarantor.
(b)......The obligation of the Lenders to make any Advance or issue any
Letter of Credit under the Commitment (other than the initial Advance) shall be
subject to the following additional conditions precedent that, at the date of
making each such Advance and after giving effect thereto:
(i) Representation and Warranties. The representations and
warranties of Borrowers and Guarantor under this Agreement are true and
correct in all material respects as of such date, as if then made
(except to the extent that such representations and warranties relate
solely to an earlier date);
(ii) No Event of Default. No Default or Event of Default shall
have occurred and be continuing; and
(iii) Legal Matters Satisfactory. All legal matters incident
to the consummation of the transactions contemplated hereby shall be
satisfactory to special counsel for Agent retained at the expense of
Borrowers and Guarantor.
Each Notice of Borrowing shall constitute a representation and warranty by
Borrowers that the conditions contained in Sections 11(b)(i) and (ii) have been
satisfied.
12.......Affirmative Covenants. A deviation from the provisions of this
Section 12 shall not constitute a Default or an Event of Default under this
Agreement if such deviation is consented to in writing by Majority Lenders prior
to the date of deviation. Borrowers and Guarantor will at all times comply with
the covenants contained in this Section 12 from the date hereof and for so long
as the Commitments are in existence or any amount is owed to the Agent or the
Lenders under this Agreement or the other Loan Documents.
(a) Financial Statements and Reports. Borrowers and Guarantor
shall promptly furnish to the Agent from time to time upon request such
information regarding the business and affairs and financial condition
of Borrowers and Guarantor, as the Agent may reasonably request, and
will furnish to the Agent:
(i) Annual Financial Statements. As soon as
available, and in any event within ninety (90) days after the
end of each fiscal year of PPC (x) the annual audited
consolidated Financial Statements of PPC, prepared in
accordance with GAAP accompanied by an unqualified opinion on
such consolidated statements rendered by BDO ▇▇▇▇▇▇▇, LLP or
another independent accounting firm reasonably acceptable to
the Agent, and (y)
35
the annual unaudited consolidating Financial Statements of PPC
prepared in accordance with GAAP;
(ii) Quarterly Financial Statements. As soon as
available, and in any event within forty-five (45) days after
the end of each fiscal quarter of PPC, the quarterly unaudited
consolidated and consolidating Financial Statements of PPC
prepared in accordance with GAAP;
(iii) Report on Properties. As soon as available and
in any event on or before March 1, 2005, and thereafter on or
before March 1 and September 1 of each calendar year, and at
such other times as any Lender, in accordance with Section 7
hereof, may request, the engineering reports required to be
furnished to the Agent under such Section 7 on the Oil and Gas
Properties;
(iv) Quarterly Production Reports. As soon as
available and in any event within forty-five (45) days after
the end of each fiscal quarter of Borrowers, a quarterly
production report, in form and substance satisfactory to the
Agent, indicating the sales volumes, sales revenues,
production taxes, operating expenses and net operating income
from the Oil and Gas Properties, with detailed, calculations
and worksheets, all in form and substance reasonably
satisfactory to the Agent;
(v) SEC Reports. As soon as available, and in any
event within five (5) days of filing, copies of all filings by
PPC with the Securities and Exchange Commission;
(vi) Additional Information. Promptly upon request of
the Agent from time to time any additional financial or other
information that the Agent may reasonably request.
All such reports, information, balance sheets and Financial Statements
referred to in Subsection 12(a) above shall be in such detail as the
Agent may reasonably request and shall be prepared in a manner
consistent with the Financial Statements.
(b) Certificates of Compliance. Concurrently with the
furnishing of the annual audited Financial Statements pursuant to
Subsection 12(a)(i) hereof and the quarterly unaudited Financial
Statements pursuant to Subsection 12(a)(ii) hereof, Borrowers will
furnish or cause to be furnished to the Agent a certificate in the form
of Exhibit "D" attached hereto, signed by the President, Chief
Financial Officer or other authorized representative of Borrowers, (i)
stating that Borrowers and Guarantor have fulfilled in all material
respects their respective obligations under the Notes and the Loan
36
Documents, including this Agreement, and that all representations and
warranties made herein and therein continue (except to the extent they
relate solely to an earlier date) to be true and correct in all
material respects (or specifying the nature of any change), or if a
Default has occurred, specifying the Default and the nature and status
thereof; (ii) to the extent requested from time to time by the Agent,
specifically affirming compliance of each Borrower and Guarantor in all
material respects with any of its representations (except to the extent
they relate solely to an earlier date) or obligations under said
instruments; (iii) setting forth the computation, in reasonable detail
as of the end of each period covered by such certificate, of compliance
with Sections 13(b), (c) and (d); and (iv) containing or accompanied by
such financial or other details, information and material as the Agent
may reasonably request to evidence such compliance.
(c) Accountants' Certificate. Concurrently with the furnishing
of the annual audited Financial Statements pursuant to Section 12(a)(i)
hereof, Borrowers will furnish a statement from the firm of independent
public accountants which prepared such Financial Statements to the
effect that nothing has come to their attention to cause them to
believe that there existed on the date of such statements any Event of
Default and specifically calculating PPC's compliance with Sections
13(b), (c) and (d) of this Agreement.
(d) Taxes and Other Liens. Each Borrower and Guarantor will
pay and discharge promptly all taxes, assessments and governmental
charges or levies imposed upon it, or upon its income or any of its
assets or property, as well as all claims of any kind (including claims
for labor, materials, supplies and rent) which, if unpaid, might become
a Lien or other encumbrance upon any or all of its assets or property
and which could reasonably be expected to result in a Material Adverse
Effect; provided, however, that neither either Borrower nor Guarantor
shall be required to pay any such tax, assessment, charge, levy or
claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings diligently
conducted, levy and execution thereon have been stayed and continue to
be stayed and if it shall have set up adequate reserves therefor, if
required, under GAAP.
(e) Compliance with Laws. Each Borrower and Guarantor will
observe and comply, in all material respects, with all applicable laws,
statutes, codes, acts, ordinances, orders, judgments, decrees,
injunctions, rules, regulations, orders and restrictions relating to
environmental standards or controls or to energy regulations of all
federal, state, county, municipal and other governments, departments,
commissions, boards, agencies, courts, authorities, officials and
officers, domestic or foreign.
(f) Further Assurances. Borrowers will cure promptly any
defects in the creation and issuance of the Notes and the execution and
delivery of the Notes and each Borrower and Guarantor will cure
promptly any defects in the execution and delivery of the other Loan
Documents, including this Agreement, to which it is a party. Each
37
Borrower and Guarantor at its sole expense will promptly execute and
deliver to Agent upon its reasonable request all such other and further
documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements in this Agreement, or to
correct any omissions in the Notes or the other Loan Documents or more
fully to state the obligations set out herein.
(g) Performance of Obligations. Borrowers will pay the Notes
and other obligations incurred by it hereunder according to the
reading, tenor and effect thereof and hereof; and each Borrower and
Guarantor will do and perform every act and discharge all of the
obligations provided to be performed and discharged by it under the
Loan Documents, including this Agreement, at the time or times and in
the manner specified.
(h) Insurance. Each Borrower now maintains and will continue
to maintain insurance with financially sound and reputable insurers
with respect to its assets and the assets of its Subsidiaries against
such liabilities, fires, casualties, risks and contingencies and in
such types and amounts as is customary in the case of persons engaged
in the same or similar businesses and similarly situated. Upon request
of the Agent, each Borrower will furnish or cause to be furnished to
the Agent from time to time a summary of its insurance coverage in form
and substance reasonably satisfactory to the Agent, and, if requested,
will furnish the Agent copies of the applicable policies. Upon demand
by Agent any insurance policies covering any such property shall be
endorsed (i) to provide that such policies may not be canceled, reduced
or affected in any manner for any reason without fifteen (15) days
prior notice to Agent, (ii) to provide for insurance against fire,
casualty and other hazards normally insured against, in the amount of
the full value (less a reasonable deductible not to exceed amounts
customary in the industry for similarly situated business and
properties) of the property insured, and (iii) to provide for such
other matters as the Agent may reasonably require. PPC will at all
times maintain adequate insurance with respect to all of its assets and
the assets of its Subsidiaries, including but not limited to, the Oil
and Gas Properties or any Collateral against their liability for injury
to persons or property, which insurance shall be by financially sound
and reputable insurers and shall without limitation provide the
following coverages: comprehensive general liability (including
coverage for damage to underground resources and equipment, damages
caused by blowouts or cratering, damage caused by explosion, damage to
underground minerals or resources caused by saline substances, broad
form property damage coverage, broad form coverage for contractually
assumed liabilities and broad form coverage for acts of independent
contractors), workers compensation, automobile liability and
environmental liability. PPC shall at all times maintain adequate
insurance with respect to all of its and its Subsidiaries other assets
and ▇▇▇▇▇ in accordance with prudent business practices.
(i) Accounts and Records. Each Borrower and Guarantor will
keep books, records and accounts in which full, true and correct
entries will be made of all dealings or
38
transactions in relation to its business and activities, prepared in a
manner consistent with prior years, subject to changes suggested by
Borrowers' auditors or with which Borrowers' auditors concur.
(j) Right of Inspection. Each Borrower and Guarantor will
permit any officer, employee or agent of the Lenders to examine each
Borrower's and Guarantor's books, records and accounts, and take copies
and extracts therefrom, all at such reasonable times during normal
business hours and as often as the Lenders may reasonably request. The
Lenders will use best efforts to keep all Confidential Information (as
herein defined) confidential and will not disclose or reveal the
Confidential Information or any part thereof other than (i) as required
by law, and (ii) to the Lenders', and the Lenders' subsidiaries',
Affiliates, officers, employees, legal counsel and regulatory
authorities or advisors to whom it is necessary to reveal such
information for the purpose of effectuating the agreements and
undertakings specified herein or as otherwise required in connection
with the enforcement of the Lenders' and the Agent's rights and
remedies under the Notes, this Agreement and the other Loan Documents.
As used herein, "Confidential Information" means information about
Borrowers or Guarantor furnished by either Borrower or Guarantor to the
Lenders, but does not include information (i) which was publicly known,
or otherwise known to the Lenders, at the time of the disclosure, (ii)
which subsequently becomes publicly known through no act or omission by
the Lenders, or (iii) which otherwise becomes known to the Lenders,
other than through disclosure by either Borrower or Guarantor.
(k) Notice of Certain Events. Each Borrower and Guarantor
shall promptly notify the Agent if it learns of the occurrence of (i)
any event which constitutes an Event of Default together with a
detailed statement of the steps being taken to cure such Event of
Default; (ii) any legal, judicial or regulatory proceedings affecting
either Borrower or Guarantor or any of the assets or properties of
either Borrower or Guarantor which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect; (iii) any
dispute between either Borrower or Guarantor and any governmental or
regulatory body or any other Person or entity which, if adversely
determined, would reasonably be expected to cause a Material Adverse
Effect; (iv) any other matter which in either Borrower's or Guarantor's
reasonable opinion could have a Material Adverse Effect.
(l) ERISA Information and Compliance. Each Borrower and
Guarantor will promptly furnish to the Agent upon becoming aware of the
occurrence of any "reportable event", as such term is defined in
Section 4043 of ERISA, or of any "prohibited transaction", as such term
is defined in Section 4975 of the Internal Revenue Code of 1986, as
amended, in connection with any Plan or any trust created thereunder, a
written notice signed by the President or chief financial officer of
each Borrower specifying the
39
nature thereof, what action such party is taking or proposes to take
with respect thereto, and, when known, any action taken by the
Internal Revenue Service with respect thereto.
(m) Environmental Reports and Notices. Borrowers will deliver
to the Agent (i) promptly upon its becoming available, one copy of each
report (other than routine informational filings) sent by either
Borrower or Guarantor to any court, governmental agency or
instrumentality pursuant to any Environmental Law, (ii) notice, in
writing, promptly upon either Borrower's or Guarantor's receipt of
notice or otherwise learning of any claim, demand, action, event,
condition, report or investigation indicating any potential or actual
liability arising in connection with (x) the non-compliance with or
violation of the requirements of any Environmental Law which reasonably
could be expected to have a Material Adverse Effect; (y) the release or
threatened release of any toxic or hazardous waste into the environment
which reasonably would be expected to have a Material Adverse Effect or
which release either Borrower or Guarantor would have a duty to report
to any court or government agency or instrumentality, or (iii) the
existence of any Environmental Lien on any properties or assets of
either Borrower or Guarantor, and Borrowers shall promptly deliver a
copy of any such notice to Agent.
(n) Compliance and Maintenance. Each Borrower and Guarantor
will (i) observe and comply in all material respects with all
Environmental Laws; (ii) except as provided in Subsections 12(p) and
12(q) below, maintain the Oil and Gas Properties and other assets and
properties in good and workable condition at all times and make all
repairs, replacements, additions, betterments and improvements to the
Oil and Gas Properties and other assets and properties as are needed
and proper so that the business carried on in connection therewith may
be conducted properly and efficiently at all times; (iii) take or cause
to be taken whatever actions are necessary or desirable to prevent an
event or condition of default by either Borrower or Guarantor under the
provisions of any gas purchase or sales contract or any other contract,
agreement or lease comprising a part of the Oil and Gas Properties or
other collateral security hereunder which default could reasonably be
expected to result in a Material Adverse Effect; and (iv) furnish Agent
upon request evidence reasonably satisfactory to Agent that there are
no Liens, claims or encumbrances on the Oil and Gas Properties, except
Permitted Liens.
(o) Operation of Properties. Except as provided in Subsections
12(p) and (q) below, Borrowers will operate, or use reasonable efforts
to cause to be operated, all Oil and Gas Properties in a careful and
efficient manner in accordance with the practice of the industry and in
compliance in all material respects with all applicable laws, rules,
and regulations, and in compliance in all material respects with all
applicable proration and conservation laws of the jurisdiction in which
the properties are situated, and all applicable laws, rules, and
regulations, of every other agency and authority from time to time
constituted to regulate the development and operation of the properties
and the production and sale of hydrocarbons and other minerals
therefrom; provided, however,
40
that Borrowers shall have the right to contest in good faith by
appropriate proceedings, the applicability or lawfulness of any such
law, rule or regulation and pending such contest may defer compliance
therewith, as long as such deferment shall not subject the properties
or any part thereof to foreclosure or loss.
(p) Compliance with Leases and Other Instruments. Borrowers
will pay or cause to be paid and discharge all rentals, delay rentals,
royalties, production payment, and indebtedness required to be paid by
either Borrower (or required to keep unimpaired in all material
respects the rights of either Borrower in the Oil and Gas Properties)
accruing under, and perform or cause to be performed in all material
respects each and every act, matter, or thing required of Borrowers by
each and all of the assignments, deeds, leases, subleases, contracts,
and agreements in any way relating to Borrowers or any of the Oil and
Gas Properties and do all other things necessary of Borrowers to keep
unimpaired in all material respects the rights of Borrowers thereunder
and to prevent the forfeiture thereof or default thereunder; provided,
however, that nothing in this Agreement shall be deemed to require
either Borrower to perpetuate or renew any oil and gas lease or other
lease by payment of rental or delay rental or by commencement or
continuation of operations nor to prevent either Borrower from
abandoning or releasing any oil and gas lease or other lease or well
thereon when, in any of such events, in the opinion of Borrowers
exercised in good faith, it is not in the best interest of Borrowers to
perpetuate the same.
(q) Certain Additional Assurances Regarding Maintenance and
Operations of Properties. With respect to those Oil and Gas Properties
which are being operated by operators other than the Borrowers,
Borrowers shall not be obligated to perform any undertakings
contemplated by the covenants and agreement contained in Subsections
12(n) or 12(o) hereof which are performable only by such operators and
are beyond the control of Borrowers; however, Borrowers agree to
promptly take all reasonable actions available under any operating
agreements or otherwise to bring about the performance of any such
material undertakings required to be performed thereunder.
(r) Sale of Certain Assets/Prepayment of Proceeds. Borrowers
will immediately pay over to the Agent for the ratable benefit of the
Lenders as a prepayment of principal on the Notes and a reduction of
the Commitment, an amount equal to 100% of the net proceeds received by
either Borrower from the sale of the Oil and Gas Properties, which sale
has been approved in advance by the Lenders. Any such prepayment of
principal on the Notes required by this Section 12(r), shall not be in
lieu of, but shall be in addition to, any mandatory prepayment of
principal required to be paid pursuant to Section 9(b) hereof.
(s) Title Matters. Within sixty (60) days after the Effective
Date with respect to the Oil and Gas Properties listed on Schedule "5"
hereto, Borrowers shall furnish
41
Agent with title opinions and/or title information reasonably
satisfactory to Agent showing good and defensible title of Borrowers
to such Oil and Gas Properties subject only to the Permitted Liens. As
to any Oil and Gas Properties hereafter mortgaged to Agent, Borrowers
will promptly (but in no event more than sixty (60) days following
such mortgaging), furnish, if requested, Agent with title opinions
and/or title information reasonably satisfactory to Agent showing good
and defensible title of Borrowers to such Oil and Gas Properties
subject only to Permitted Liens.
(t) Curative Matters. Within sixty (60) days after the
Effective Date with respect to matters listed on Schedule "6" and,
thereafter, within sixty (60) days after receipt by Borrowers from
Agent or its counsel of written notice of title defects the Agent
reasonably requires to be cured, Borrowers shall either (i) provide
such curative information, in form and substance satisfactory to Agent,
or (ii) substitute Oil and Gas Properties of value and quality
satisfactory to the Agent for all of Oil and Gas Properties for which
such title curative was requested but upon which Borrowers elected not
to provide such title curative information, and, within sixty (60) days
of such substitution, provide title opinions or title information
satisfactory to the Agent covering the Oil and Gas Properties so
substituted. If the Borrowers fail to satisfy (i) or (ii) above within
the time specified, the loan collateral value assigned by the Lenders
to the Oil and Gas Properties for which such curative information was
requested shall be deducted from the Borrowing Base resulting in a
reduction thereof.
(u) Change of Principal Place of Business. Each Borrower and
Guarantor shall give Agent at least thirty (30) days prior written
notice of its intention to move its principal place of business from
the address set forth in Section 17 hereof.
(v) Additional Collateral. Borrowers agree to regularly
monitor engineering data covering all producing oil and gas properties
and interests owned or acquired by either Borrower on or after the date
hereof and to mortgage or cause to be mortgaged such of the same to
Agent for the ratable benefit of the Lenders in substantially the form
of the Security Instruments, as applicable, to the extent that the
Lenders shall at all times during the existence of the Commitment be
secured by perfected Liens and security interests covering (i) not less
than eighty percent (80%) of the Engineered Value of all proved
developed producing Oil and Gas Properties of Borrowers, and (ii) not
less than eighty percent (80%) of the Engineered Value of all other
proved Oil and Gas Properties of Borrowers. In addition, the Borrowers
agree that in connection with the mortgaging of such additional oil and
gas properties, they shall within a reasonable time thereafter, deliver
or cause to be delivered to the Agent such mortgage and title opinions
and other title information with respect to the title and Lien status
of such oil and gas properties as may be necessary to maintain at all
times a level of such title opinions and title information of not less
than eighty percent (80%) of the Engineered Value of all Oil and Gas
Properties mortgaged to the Agent for the ratable benefit of the
Lenders.
42
(w) Crude Oil Hedging. Borrowers shall maintain with
counterparties acceptable to the Agent non-speculative crude oil price
▇▇▇▇▇▇ for rolling twenty-four (24) month periods, but not to extend
beyond the Maturity Date unless Borrowers otherwise elect, and with
prices and other terms as shall be approved in advance by Agent
covering (i) at least sixty percent (60%) of Borrowers' estimated
monthly crude oil production from Borrowers' proved producing Oil and
Gas Properties during the 2004 calendar year, and (ii) at least fifty
percent (50%) of Borrowers' estimated monthly crude oil production from
Borrowers' proved producing Oil and Gas Properties during the 2005
calendar year and thereafter until the Maturity Date. Each of the
foregoing hedging requirements shall be based upon the then most
current reserve evaluation delivered by Borrowers to Agent pursuant to
Section 12(a)(iii) above, and Borrowers shall be in compliance with the
required volumes to be hedged within ninety (90) days after the
effective date of each such most current reserve evaluation.
13.......Negative Covenants. A deviation from the provisions of this
Section 13 shall not constitute an Event of Default under this Agreement if such
deviation is consented to in writing by Majority Lenders prior to the date of
deviation. Each Borrower and Guarantor, as applicable, will at all times comply
with the covenants contained in this Section 13 from the date hereof and for so
long as the Commitment is in existence or any amount is owed to the Agent or the
Lenders under this Agreement or the other Loan Documents.
(a) Negative Pledge. Neither either Borrower nor Guarantor
will, and will not permit any Subsidiary to:
(i) create, incur, assume or permit to exist any
Lien, security interest or other encumbrance on any of its
respective assets or properties except Permitted Liens; or
(ii) sell, lease, transfer or otherwise dispose of,
in any fiscal year, any of its respective assets except for
(A) sales of extracted petroleum hydrocarbons made in the
ordinary course of either Borrower's oil and gas business, and
(B) to the extent not otherwise forbidden under the Security
Instruments, equipment that is worthless or obsolete or which
is replaced by equipment of equal suitability in value, and
interests in oil and gas leases, or portions thereof, so long
as no well situated on any such lease or located on any unit
containing all or any part thereof, is capable (or is subject
to being made capable through commercially feasible
operations) of production oil, gas or other hydrocarbons or
minerals in commercial quantities.
43
(b) Current Ratio. PPC shall not allow its Current Ratio to be
less than 1.0 to 1.0 as of the end of any fiscal quarter beginning with
the fiscal quarter ending September 30, 2004.
(c) Funded Debt Ratio. PPC will not allow its ratio of
Consolidated Funded Debt to Consolidated EBITDA to exceed 3.00 to 1.00.
This ratio shall be calculated at the end of each fiscal quarter of PPC
beginning on September 30, 2004, using the results of the twelve-month
period immediately preceding the end of each such fiscal quarter.
(d) Adjusted Consolidated Net Worth. At all times during the
term hereof, PPC's Adjusted Consolidated Net Worth shall not be less
than (a) $50,000,000, plus (b) seventy-five percent (75%) of the net
proceeds from any equity securities issued by the PPC on or after the
date of this Agreement, plus (c) fifty percent (50%) of PPC's
Consolidated Net Income for each fiscal quarter, if positive, and zero
percent (0%) if negative, determined on a cumulative basis, for the
period beginning July 1, 2004, and ending on the last day of the most
recent fiscal quarter as of the time in question.
(e) Consolidations and Mergers. Neither either Borrower,
Guarantor nor any Subsidiary will form any new Subsidiary or
consolidate or merge with or into any other Person, except that any
Subsidiary may consolidate or merge with or into either Borrower if
such Borrower is the surviving entity in such consolidation or merger
and if, after giving effect thereto, no Default or Event of Default
shall have occurred and be continuing.
(f) Debts, Guaranties and Other Obligations. Neither either
Borrower nor Guarantor will, and will not permit any Subsidiary to,
incur, create, assume or in any manner become or be liable in respect
of any indebtedness, or guarantee or otherwise in any manner become or
be liable in respect of any indebtedness, liabilities or other
obligations of any other Person, whether by agreement to purchase the
indebtedness of any other Person or agreement for the furnishing of
funds to any other Person through the purchase or lease of goods,
supplies or services (or by way of stock purchase, capital
contribution, advance or loan) for the purpose of paying or discharging
the indebtedness of any other Person, or otherwise, except that the
foregoing restrictions shall not apply to:
(i) the Notes and any renewal or increase thereof, or
other indebtedness heretofore disclosed to Lenders in the
Borrowers' or Guarantor's Financial Statements or on Schedule
"4" hereto; or
(ii) taxes, assessments or other government charges
which are not yet due or are being contested in good faith by
appropriate action promptly initiated and diligently
conducted, if such reserve as shall be
44
required by GAAP shall have been made therefor and levy and
execution thereon have been stayed and continue to be
stayed; or
(iii) indebtedness (other than in connection with a
loan or lending transaction) incurred in the ordinary course
of business which is not more than 60 days past due,
including, but not limited to indebtedness for drilling,
completing, leasing and reworking oil and gas ▇▇▇▇▇; or
(iv) obligations under Rate Management Transactions
permitted pursuant to Section 13(l) hereof; or
(v) other indebtedness not exceeding $250,000 in the
aggregate for Borrowers, Guarantor and Subsidiaries
outstanding at any time; or
(vi) any renewals or extensions of (but, other than
in the case of the Notes, not increases in) any of the
foregoing.
(g) Dividend and Distributions. Neither either Borrower nor
Guarantor will, and will not permit any Subsidiary to, declare, pay or
make any loans, advances, dividends or distributions of any kind to its
stockholders or other equity owners, or make any other distribution on
account of, or purchase, acquire or redeem or retire any stock or other
security issued by it except that (i) PPC may pay cash dividends on its
outstanding shares of 6% Convertible Preferred Stock in accordance with
the provisions of PPC's Certificate of Designations, Preferences and
Rights of Serial Preferred Stock - 6% Convertible Preferred Stock dated
October 19, 1998, provided that no Default or Event of Default exists
at the time of declaration or payment of such dividends and the payment
of such dividends would not cause a Default or Event of Default, (ii)
either Borrower's Subsidiaries may declare, pay or make dividends or
distributions to such Borrower, and (iii) PLP may make distributions to
Guarantor, provided that Guarantor immediately redistributes such
distributions to PPC.
(h) Loans and Advances. Neither either Borrower nor Guarantor
will, and will not permit any Subsidiary to, make or permit to remain
outstanding any loans or advances to or in any Person, except that the
foregoing restriction shall not apply to:
(i) loans or advances to any Person, the material
details of which have been set forth in the Financial
Statements of the Borrowers and the Guarantor heretofore
furnished to Lenders; or
(ii) advances made in the ordinary course of either
Borrower's or Guarantor's oil and gas business; or
45
(iii) other loans or advances to any third party or
Affiliate (other than a Borrower) not in excess of $100,000 in
the aggregate outstanding; or
(iv) loans or advances to either Borrower.
(i) Receivables and Payables. Neither either Borrower nor
Guarantor will, and will not permit any Subsidiary to, discount or sell
with recourse, or sell for less than the market value thereof, any of
its notes receivable or accounts receivable.
(j) Nature of Business. Neither either Borrower nor Guarantor
will, and will not permit any Subsidiary to, permit any material change
to be made in the character of its businesses as carried on at the date
hereof.
(k) Transactions with Affiliates. Neither either Borrower nor
Guarantor will, and will not permit any Subsidiary to, enter into any
transaction with any Affiliate, except transactions upon terms that are
no less favorable to it than could be obtained in a transaction
negotiated at arm's length with an unrelated third party.
(l) Rate Management Transactions. Neither either Borrower nor
Guarantor will, and will not permit any Subsidiary to, enter into any
Rate Management Transactions, except the foregoing prohibitions shall
not apply to (x) transactions required by this Agreement or consented
to in writing by the Majority Lenders, in each case which are on terms
acceptable to the Majority Lenders, or (y) transactions by Borrowers
designed to hedge, provide a floor price for, or swap crude oil or
natural gas, provided that (i) the same do not cover more than
seventy-five percent (75%) of Borrowers' aggregate estimated production
from proved producing reserves existing as of the date of the execution
thereof based upon the then most current reserve evaluation required
pursuant to Section 12(a)(iii) above, (ii) the same do not contain
terms or provisions which would require margin calls, (iii) the
counterparty to any such transaction has a minimum rating of "A-1" by
Standard & Poors' Corporation or "A-3" by ▇▇▇▇▇'▇ Investors Service,
Inc., (iv) the same are for a term not extending beyond December 31,
2008, and (v) the same include provisions for payment to Borrowers upon
the occurrence of specified price indexes of a price per unit of
measurement equal to or greater than that under the Agent's then
current pricing policies; or, provided that (A) the same do not cover
more than ninety percent (90%) of Borrowers'
46
aggregate estimated production from proved producing reserves existing
as of the date of the execution thereof based upon the then most
current reserve evaluation required pursuant to Section 12(a)(iii)
above, (B) the same do not cover more than seventy-five percent (75%)
of Borrowers' aggregate estimated production from all categories of
proved reserves existing as of the date of the execution thereof based
upon the then most current reserve evaluation required pursuant to
Section 12(a)(iii) above, (C) as of the date of the execution thereof,
Borrowers' aggregate actual production from proved producing reserves
exceeds Borrowers' aggregate forecasted production from proved
producing reserves for such date based on the then most current
reserve evaluation required pursuant to Section 12(a)(iii) above, (D)
the same are for a term not extending beyond December 31, 2005 or are
for a term of twelve (12) months or less, and (E) the same satisfy the
requirements set forth in items (ii), (iii) and (v) above.
(m) Investments. Neither either Borrower nor Guarantor will,
and will not permit any Subsidiary to, make any investments in any
Person or entity, except such restriction shall not apply to:
(i) investments with maturities of not more than 180
days in direct obligations of the United States of America or
any agency thereof; or
(ii) investments in certificates of deposit issued by
a Lender; or
(iii) PLP's existing investments in First Permian GP,
L.L.C. and in First Permian, L.P. and PPC's existing
investments in West Fork Pipeline Company GP, LLC and in West
Fork Pipeline Company LP; or
(iv) other investments not to exceed (A) $1,000,000
in the aggregate for Borrowers, Guarantor and Subsidiaries
during the 2005 calendar year, when aggregated with loans and
advances allowed pursuant to Section 13(h)(iii), and (B)
$500,000 in the aggregate for Borrowers, Guarantor and
Subsidiaries during any calendar year other than the 2005
calendar year, when aggregated with loans and advances allowed
pursuant to Section 13(h)(iii); or
(v) investments in Subsidiaries to the extent of such
investments as of the Effective Date.
(n) Amendment to Organizational Documents. Neither either
Borrower nor Guarantor will, and will not permit any Subsidiary to,
permit any material amendment to, or any material alteration of, its
Articles or Certificate of Incorporation, Articles or Certificate of
Organization, Agreement or Certificate of Limited Partnership,
Certificate of Formation, Bylaws, Limited Liability Company Agreement
or other governing documents, as applicable.
(o) ERISA Compliance. Neither either Borrower nor Guarantor
will, and will not permit any Subsidiary to, permit any plan subject to
ERISA maintained by it to (i)
47
engage in any "prohibited transaction" as such term is defined in
Section 4975 of the Internal Revenue Code of 1986, as amended; (ii)
incur any "accumulated funding deficiency" as such term is defined in
Section 302 of ERISA; or (iii) terminate in a manner which could
result in the imposition of a lien on its property pursuant to Section
4068 of ERISA.
(p) Accounting Method and Fiscal Year. Neither either Borrower
nor Guarantor will, and will not permit any Subsidiary to, make any
change in its present accounting method unless such changes are
required for conformity with GAAP.
(q) Issuance of Equity Interests. Neither PLP nor Guarantor
will issue or sell to any Person (other than PPC) any equity interest
in it, or any option, warrant or other right to acquire any such equity
interest.
14.......Events of Default. Any one or more of the following events
shall be considered an "Event of Default" as that term is used herein:
(a) Borrowers shall fail to pay when due or declared due the
principal of, and the interest on, the Notes or any fee or any other
indebtedness of Borrowers incurred pursuant to this Agreement or any of
the other Loan Documents; or
(b) Any representation or warranty made by either Borrower or
Guarantor under this Agreement, or in any certificate or statement
furnished or made to the Lenders pursuant hereto, or in connection
herewith, or in connection with any document furnished hereunder, shall
prove to be untrue in any material respect as of the date on which such
representation or warranty is made (or deemed made), or any
representation, statement (including Financial Statements),
certificate, report or other data furnished or to be furnished or made
by either Borrower or Guarantor under any Loan Document, including this
Agreement, proves to have been untrue in any material respect, as of
the date as of which the facts therein set forth were stated or
certified; or
(c) Default shall be made in the due observance or performance
of any of the covenants or agreements of either Borrower or Guarantor
contained in the Loan Documents, including this Agreement (excluding
covenants contained in Section 13 of the Agreement for which there is
no cure period), and such default shall continue for more than thirty
(30) days after written notice from Agent is received by Borrowers; or
(d) Default shall be made in the due observance or performance
of the covenants of either Borrower or Guarantor contained in Section
13 of this Agreement; or
(e) Default shall be made in respect of any obligation for
borrowed money other than the Notes, for which either Borrower,
Guarantor or any Subsidiary is liable
48
(directly, by assumption, as guarantor or otherwise), or any
obligations secured by any mortgage, pledge or other consensual
security interest with respect thereto, on any asset or property of
either Borrower, Guarantor or any Subsidiary or in respect of any
agreement relating to any such obligations, unless the aggregate
amount of such obligations in respect of which such default shall have
occurred is less than $250,000; or
(f) Either Borrower, Guarantor or any Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking an appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action
authorizing the foregoing; or
(g) An involuntary case or other proceeding, shall be
commenced against either Borrower, Guarantor or any Subsidiary seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of thirty
(30) days; or an order for relief shall be entered against either
Borrower, Guarantor or any Subsidiary under the federal bankruptcy laws
as now or hereinafter in effect; or
(h) A final judgment or order for the payment of money in
excess of $250,000 (or judgments or orders aggregating in excess of
$250,000) shall be rendered against either Borrower, Guarantor or any
Subsidiary and such judgments or orders shall continue unsatisfied and
unstayed for a period of thirty (30) days; or
(i) In the event the Total Outstandings shall at any time
exceed the Borrowing Base established for the Notes, and Borrowers
shall fail to comply with the provisions of Section 9(b) hereof; or
(j) An event of default (as defined therein) shall occur under
any agreement entered into in connection with any Rate Management
Transaction; or
(k) A Change of Control shall occur; or
49
(l) Any Lien for failure to pay income, payroll, FICA or
similar taxes shall be filed by the U. S. Government or any agent or
instrumentality thereof against either Borrower, Guarantor or any
Subsidiary, or any of their respective assets; or
(m) Any of the Loan Documents shall cease, for any reason, to
be in full force and effect, or either Borrower or Guarantor shall so
assert.
Upon occurrence of any Event of Default specified in Subsections 14(f)
and (g) hereof, the entire principal amount due under the Notes and all interest
then accrued thereon, and any other liabilities of Borrowers hereunder, shall
become automatically and immediately due and payable all without notice and
without presentment, demand, protest, notice of protest or dishonor or any other
notice of default of any kind, all of which are hereby expressly waived by the
Borrowers and Guarantor. Upon the occurrence of any other Event of Default, the
Agent, upon request of Majority Lenders, shall by written notice to the
Borrowers declare the principal of, and all interest then accrued on, the Notes
and any other liabilities hereunder to be forthwith due and payable, whereupon
the same shall forthwith become due and payable without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or other notice
of any kind, all of which the Borrowers and Guarantor hereby expressly waive,
anything contained herein or in the Notes to the contrary notwithstanding.
Upon the occurrence and during the continuance of any Event of Default,
the Lenders are hereby authorized at any time and from time to time, without
notice to the Borrowers or the Guarantor (any such notice being expressly waived
by the Borrowers and the Guarantor), to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by any of the Lenders to or for the credit
or the account of either Borrower or Guarantor against any and all of the
indebtedness of the Borrowers under the Notes and the Loan Documents, including
this Agreement, irrespective of whether or not the Lenders shall have made any
demand under the Loan Documents, including this Agreement or the Notes and
although such indebtedness may be unmatured. Any amount set-off by any of the
Lenders shall be applied against the indebtedness owed the Lenders by the
Borrowers pursuant to this Agreement and the Notes. The Lenders agree promptly
to notify the Borrowers after any such setoff and application, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Lenders may have.
15.......The Agent and the Lenders.
(a) Appointment and Authorization. Each Lender hereby appoints
Agent as its nominee and agent, in its name and on its behalf: (i) to
act as nominee for and on behalf of such Lender in and under all Loan
Documents; (ii) to arrange the means whereby the funds of Lenders are
to be made available to the Borrowers under the Loan
50
Documents; (iii) to take such action as may be requested by any Lender
under the Loan Documents (when such Lender is entitled to make such
request under the Loan Documents); (iv) to receive all documents and
items to be furnished to Lenders under the Loan Documents; (v) to be
the secured party, mortgagee, beneficiary, and similar party in respect
of, and to receive, as the case may be, any collateral for the benefit
of Lenders; (vi) to promptly distribute to each Lender all material
information, requests, documents and items received from the Borrowers
or Guarantor under the Loan Documents; (vii) to promptly distribute to
each Lender such Lender's Pro Rata Part of each payment or prepayment
(whether voluntary, as proceeds of insurance thereon, or otherwise) in
accordance with the terms of the Loan Documents and (viii) to deliver
to the appropriate Persons requests, demands, approvals and consents
received from Lenders. Each Lender hereby authorizes Agent to take all
actions and to exercise such powers under the Loan Documents as are
specifically delegated to Agent by the terms hereof or thereof,
together with all other powers reasonably incidental thereto. With
respect to its Commitment hereunder and the Notes issued to it, Agent
and any successor Agent shall have the same rights under the Loan
Documents as any other Lender and may exercise the same as though it
were not the Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include Agent and any successor Agent in
its capacity as a Lender. Agent and any successor Agent and its
Affiliates may accept deposits from, lend money to, act as trustee
under indentures of and generally engage in any kind of business with
the Borrowers or Guarantor, and any Person which may do business with
the Borrowers or Guarantor, all as if Agent and any successor Agent was
not Agent hereunder and without any duty to account therefor to the
Lenders; provided that, if any payments in respect of any property (or
the proceeds thereof) now or hereafter in the possession or control of
Agent which may be or become security for the obligations of the
Borrowers or Guarantor arising under the Loan Documents by reason of
the general description of indebtedness secured or of property
contained in any other agreements, documents or instruments related to
any such other business shall be applied to reduction of the
obligations of the Borrowers and Guarantor arising under the Loan
Documents, then each Lender shall be entitled to share in such
application according to its Pro Rata Part thereof. Each Lender, upon
request of any other Lender, shall disclose to all other Lenders all
indebtedness and liabilities, direct and contingent, of the Borrowers
and Guarantor to such Lender as of the time of such request.
(b) Note Holders. From time to time as other Lenders become a
party to this Agreement, Agent shall obtain execution by Borrowers of
additional Notes in amounts representing the Commitments of each such
new Lender, up to an aggregate face amount of all Notes not exceeding
$200,000,000. The obligation of such Lender shall be governed by the
provisions of this Agreement, including but not limited to, the
obligations specified in Section 2 hereof. From time to time, Agent may
require that the Lenders exchange their Notes for newly issued Notes to
better reflect the Commitments of the Lenders. Agent may treat the
payee of any Note as the holder thereof until written
51
notice of transfer has been filed with it, signed by such payee and in
form satisfactory to Agent.
(c) Consultation with Counsel. Lenders agree that Agent may
consult with legal counsel selected by Agent and shall not be liable
for any action taken or suffered in good faith by it in accordance with
the advice of such counsel. LENDERS ACKNOWLEDGE THAT COTTON, ▇▇▇▇▇▇▇,
▇▇▇▇▇ & ▇▇▇▇▇▇ IS COUNSEL FOR FIRST AMERICAN, BOTH AS AGENT AND AS A
LENDER, AND THAT SUCH FIRM DOES NOT REPRESENT ANY OF THE OTHER LENDERS
IN CONNECTION WITH THIS TRANSACTION.
(d) Documents. Agent shall not be under a duty to examine or
pass upon the validity, effectiveness, enforceability, genuineness or
value of any of the Loan Documents or any other instrument or document
furnished pursuant thereto or in connection therewith, and Agent shall
be entitled to assume that the same are valid, effective, enforceable
and genuine and what they purport to be.
(e) Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below,
Agent may resign at any time by giving written notice thereof to
Lenders and Borrowers, and Agent may be removed at any time with or
without cause by all Lenders (excluding the Agent). If no successor
Agent has been so appointed by Majority Lenders (and approved by the
Borrowers) and has accepted such appointment within thirty (30) days
after the retiring Agent's giving of notice of resignation or removal
of the retiring Agent, then the retiring Agent may, on behalf of
Lenders, appoint a successor Agent. Any successor Agent must be
approved by Borrowers, which approval will not be unreasonably
withheld. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights and duties of the retiring Agent, and
the retiring Agent, as the case may be, shall be discharged from its
duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this
Section 15 shall continue in effect for its benefit in respect to any
actions taken or omitted to be taken by it while it was acting as
Agent. To be eligible to be an Agent hereunder the party serving, or to
serve, in such capacity must own a Pro Rata Part of the Commitments
equal to the level of Commitment required to be held by any Lender
pursuant to Section 29 hereof.
(f) Responsibility of Agent. It is expressly understood and
agreed that the obligations of Agent under the Loan Documents are only
those expressly set forth in the Loan Documents and that Agent shall be
entitled to assume that no Default or Event of Default has occurred and
is continuing, unless Agent has actual knowledge of such fact or has
received notice from a Lender or the Borrowers that such Lender or the
Borrowers consider that a Default or an Event of Default has occurred
and is continuing and
52
specifying the nature thereof. Neither Agent nor any of its directors,
officers, attorneys or employees shall be liable for any action taken
or omitted to be taken by them under or in connection with the Loan
Documents, except for its or their own gross negligence or willful
misconduct. Agent shall not incur liability under or in respect of any
of the Loan Documents by acting upon any notice, consent, certificate,
warranty or other paper or instrument believed by it to be genuine or
authentic or to be signed by the proper party or parties, or with
respect to anything which it may do or refrain from doing in the
reasonable exercise of its judgment, or which may seem to it to be
necessary or desirable. The Syndication Agent shall have no
responsibilities as an agent hereunder.
Agent shall not be responsible to Lenders for any of the
Borrowers' or Guarantor's recitals, statements, representations or
warranties contained in any of the Loan Documents, or in any
certificate or other document referred to or provided for in, or
received by any Lender under, the Loan Documents, or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of
any of the Loan Documents or for any failure by the Borrowers or
Guarantor to perform any of their obligations hereunder or thereunder.
Agent may employ agents and attorneys-in-fact and shall not be
answerable, except as to money or securities received by it or its
authorized agents, for the negligence or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care.
The relationship between Agent and each Lender is only that of
agent and principal and has no fiduciary aspects. Nothing in the Loan
Documents or elsewhere shall be construed to impose on Agent any duties
or responsibilities other than those for which express provision is
therein made. In performing its duties and functions hereunder, Agent
does not assume and shall not be deemed to have assumed, and hereby
expressly disclaims, any obligation or responsibility toward or any
relationship of agency or trust with or for the Borrowers or any of
their beneficiaries or other creditors. As to any matters not expressly
provided for by the Loan Documents, Agent shall not be required to
exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of all Lenders
and such instructions shall be binding upon all Lenders and all holders
of the Notes; provided, however, that Agent shall not be required to
take any action which is contrary to the Loan Documents or applicable
law.
Agent shall have the right to exercise or refrain from
exercising, without notice or liability to the Lenders, any and all
rights afforded to Agent by the Loan Documents or which Agent may have
as a matter of law; provided, however, Agent shall not (i) without the
consent of all Lenders designate the amount of the Borrowing Base or
(ii) without the consent of Majority Lenders, take any other action
with regard to amending the Loan Documents, waiving any default under
the Loan Documents, releasing or substituting any Collateral (except as
permitted in Section 15(q) hereof) or taking any other action with
53
respect to the Loan Documents. Provided further, however, that no
amendment, waiver, or other action shall be effected pursuant to the
preceding clause (ii) without the consent of all Lenders which: (a)
would increase the Borrowing Base, (b) would reduce any fees hereunder,
or the principal of, or the interest on, any Lender's Note or Notes,
(c) would postpone any date fixed for any payment of any fees
hereunder, or any principal or interest of any Lender's Note or Notes,
(d) would increase the aggregate Commitments or any Lender's individual
Commitment hereunder or would materially alter Agent's obligations to
any Lender hereunder, (e) would release Borrowers from their obligation
to pay any Lender's Note or Notes, (f) would change the definition of
Majority Lenders, (g) would extend the Maturity Date or (h) would amend
this sentence or the previous sentence. Agent shall not have liability
to Lenders for failure or delay in exercising any right or power
possessed by Agent pursuant to the Loan Documents or otherwise unless
such failure or delay is caused by the gross negligence of the Agent,
in which case only the Agent responsible for such gross negligence
shall have liability therefor to the Lenders.
(g) Independent Investigation. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys in fact or Affiliates has made any
representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Borrowers
and Guarantor, shall be deemed to constitute any representation or
warranty by the Agent to any Lender. Each Lender severally represents
and warrants to Agent that it has made its own independent
investigation and assessment of the financial condition and affairs of
the Borrowers and Guarantor in connection with the making and
continuation of its participation hereunder and has not relied
exclusively on any information provided to such Lender by Agent in
connection herewith, and each Lender represents, warrants and
undertakes to Agent that it shall continue to make its own independent
appraisal of the credit worthiness of the Borrowers and Guarantor while
the Notes are outstanding or its Commitments hereunder are in force.
Agent shall not be required to keep itself informed as to the
performance or observance by the Borrowers and Guarantor of this
Agreement or any other document referred to or provided for herein or
to inspect the properties or books of the Borrowers and Guarantor.
Other than as provided in this Agreement, Agent shall not have any
duty, responsibility or liability to provide any Lender with any credit
or other information concerning the affairs, financial condition or
business of the Borrowers and Guarantor which may come into the
possession of Agent.
(h) Indemnification. Lenders agree to indemnify Agent and the
Syndication Agent ("Indemnified Agents") ratably according to their
respective Commitments on a Pro Rata basis, from and against any and
all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any proper and
reasonable kind or nature whatsoever which may be imposed on, incurred
by or asserted against any Indemnified Agent in any way relating to or
arising out of the Loan
54
>page>
Documents or any action taken or omitted by any Indemnified Agent
under the Loan Documents, provided that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from any Indemnified Agent's gross negligence or willful
misconduct. Each Lender shall be entitled to be reimbursed by any such
Indemnified Agent for any amount such Lender paid to any such
Indemnified Agent under this Section 15(h) to the extent such
Indemnified Agent has been reimbursed for such payments by Borrowers
or any other Person. THE PARTIES INTEND FOR THE PROVISIONS OF THIS
SECTION TO APPLY TO AND PROTECT THE INDEMNIFIED AGENTS FROM THE
CONSEQUENCES OF ANY LIABILITY, INCLUDING STRICT LIABILITY, IMPOSED OR
THREATENED TO BE IMPOSED ON ANY INDEMNFIED AGENT AS WELL AS FROM THE
CONSEQUENCES OF ITS OWN NEGLIGENCE, WHETHER OR NOT THAT NEGLIGENCE IS
THE SOLE, CONTRIBUTING OR CONCURRING CAUSE OF ANY SUCH LIABILITY.
(i) Benefit of Section 15. The agreements contained in this
Section 15 are solely for the benefit of Agent, Syndication Agent and
the Lenders and are not for the benefit of, or to be relied upon by,
the Borrower, any Affiliate of the Borrowers or any other Person.
(j) Pro Rata Treatment. Subject to the provisions of this
Agreement, each payment (including each prepayment) by the Borrowers
and each collection by Lenders (including offsets) on account of the
principal of and interest on the Notes and fees provided for in this
Agreement, that are payable by the Borrowers, shall be made Pro Rata;
provided, however, in the event that any Defaulting Lender shall have
failed to make an Advance as contemplated under Section 3 hereof and
Agent or another Lender or Lenders shall have made such Advance,
payment received by Agent for the account of such Defaulting Lender or
Lenders shall not be distributed to such Defaulting Lender or Lenders
until such Advance or Advances shall have been repaid in full to the
Lender or Lenders who funded such Advance or Advances.
(k) Assumption as to Payments. Except as specifically provided
herein, unless Agent shall have received notice from the Borrowers
prior to the date on which any payment is due to Lenders hereunder that
the Borrowers will not make such payment in full, Agent may, but shall
not be required to, assume that the Borrowers have made such payment in
full to Agent on such date and Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due such Lender. If and to the extent
the Borrowers shall not have made such payment in full to Agent, each
Lender shall repay to Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from
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the date such amount is distributed to such Lender until the date such
Lender repays such amount to Agent, at the interest rate applicable to
such portion of the Loan.
(l) Other Financings. Without limiting the rights to which any
Lender otherwise is or may become entitled, such Lender shall have no
interest, by virtue of this Agreement or the Loan Documents, in (a) any
present or future loans from, letters of credit issued by, or leasing
or other financial transactions by, any other Lender to, on behalf of,
or with either Borrowers or Guarantor (collectively referred to herein
as "Other Financings") other than the obligations hereunder; (b) any
present or future guarantees by or for the account of either Borrower
or Guarantor which are not contemplated by the Loan Documents; (c) any
present or future property taken as security for any such Other
Financings; or (d) any property now or hereafter in the possession or
control of any other Lender which may be or become security for the
obligations of either Borrower or Guarantor arising under any loan
document by reason of the general description of indebtedness secured
or property contained in any other agreements, documents or instruments
relating to any such Other Financings.
(m) Interests of Lenders. Nothing in this Agreement shall be
construed to create a partnership or joint venture between Lenders for
any purpose. Agent, Lenders, Borrowers and Guarantor recognize that the
respective obligations of Lenders under the Commitments shall be
several and not joint and that neither Agent nor any of Lenders shall
be responsible or liable to perform any of the obligations of the other
under this Agreement. Each Lender is deemed to be the owner of an
undivided interest in and to all rights, titles, benefits and interests
belonging and accruing to Agent under the Security Instruments,
including, without limitation, liens and security interests in any
collateral, fees and payments of principal and interest by the
Borrowers under the Commitments on a Pro Rata basis. Each Lender shall
perform all duties and obligations of Lenders under this Agreement in
the same proportion as its ownership interest in the Loans outstanding
at the date of determination thereof.
(n) Investments. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Lenders any funds which it
has received, or whenever Agent in good faith determines that there is
any dispute among the Lenders about how such funds should be
distributed, Agent may choose to defer distribution of the funds which
are the subject of such uncertainty or dispute. If Agent in good faith
believes that the uncertainty or dispute will not be promptly resolved,
or if Agent is otherwise required to invest funds pending distribution
to the Lenders, Agent may invest such funds pending distribution (at
the risk of the Borrowers). All interest on any such investment shall
be distributed upon the distribution of such investment and in the same
proportions and to the same Persons as such investment. All monies
received by Agent for distribution to the Lenders (other than to the
Person who is Agent in its separate capacity as a Lender) shall be held
by the
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Agent pending such distribution solely as Agent for such
Lenders, and Agent shall have no equitable title to any portion
thereof.
(o) Delegation to Affiliates. The Borrowers, Guarantor and the
Lenders agree that the Agent may delegate any of its duties under this
Agreement to any of its Affiliates. Any such Affiliate (and such
Affiliate's directors, officers, agents and employees) which perform
duties in connection with this Agreement shall be entitled to the same
benefits of the indemnification, waiver and other protective provisions
to which the Agent is entitled under this Section 15 and Section 19.
(p) Execution of Collateral Documents. The Lenders hereby
empower and authorize the Agent to execute and deliver the Security
Instruments and all related financing statements and other financing
statements, agreements, documents or instruments that shall be
necessary or appropriate to effect the purposes of the Security
Instruments.
(q) Collateral Releases. The Lenders hereby empower and
authorize the Agent to execute and deliver to the Borrowers and
Guarantor on their behalf any agreements, documents, or instruments as
shall be necessary or appropriate to reflect any releases of Collateral
which shall be permitted by the terms hereof (including, without
limitation, the release of Collateral that Borrowers or Guarantor are
permitted to sell pursuant to Section 13(a)(ii) hereof) or of any other
Loan Document or which shall otherwise have been approved by the
requisite Lenders pursuant to this Section 15.
(r) Internal Revenue Service Forms. At least five (5) Business
Days prior to the first date on which interest or fees are payable
hereunder for the account of any Lender, each Lender that is not
incorporated under the laws of the United States of America, or a state
thereof, agrees that it will deliver to the Agent two duly completed
copies of United States Internal Revenue Service Form W-8 BEN or W-8
ECI or W-8 IMY or W-8 EXP or such other form as may be applicable and
allowable under the Internal Revenue Code and the regulations
thereunder (collectively, a "Withholding Form"), certifying in either
case that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United
States federal income taxes. Each Lender which so delivers a
Withholding Form further undertakes to deliver to the Agent two
additional copies of such form (or a successor form) on or before the
date that such form expires or becomes obsolete or after the occurrence
of any event requiring a change in the most recent Withholding Form so
delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Agent, in each case
certifying that such Lender is entitled to receive payments under this
Agreement and the Notes without deduction or withholding of any United
States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior
to the date on which any such
57
delivery would otherwise be required which renders all such
Withholding Forms inapplicable or which would prevent such Lender from
duly completing and delivering any such Withholding Form with respect
to it and such Lender advises the Agent that it is not capable of
receiving payments without any deduction or withholding of United
States federal income tax.
(s) Syndication Agent. The Lender identified in this Agreement
as the Syndication Agent shall not have any right, power, obligation,
liability, responsibility or duty under this Agreement other than those
applicable to all Lenders as such. Without limiting the foregoing, the
Syndication Agent shall not have or be deemed to have a fiduciary
relationship with any Lender. Each Lender hereby makes the same
acknowledgments with respect to the Syndication Agent as it makes with
respect to the Agent in Section 15(f).
16.......Exercise of Rights. No failure to exercise, and no delay in
exercising, on the part of the Agent or the Lenders, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right. The rights of the Agent and the Lenders hereunder shall be in addition to
all other rights provided by law.
17.......Notices. Any notices or other communications required or
permitted to be given by this Agreement or any other documents or instruments
referred to herein must be given in writing (which may be by bank wire, telecopy
or similar writing) and shall be given to the party to whom such notice or
communication is directed at the address or telecopy number of such party as
follows:
(a) BORROWERS:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
(b) GUARANTOR:
▇▇▇▇-▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, President
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
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With copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
(c) AGENT and LENDERS:
c/o FIRST AMERICAN
▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
Any such notice or other communication shall be effective (a) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section 17 and the appropriate answerback is received or receipt is
otherwise confirmed, (b) if given by mail, three (3) days after deposit in the
mails with first-class postage, prepaid, as addressed as aforesaid or (c) if
given by any other method, when delivered at the address specified in this
Section 17; provided, however, that notices to the Agent under Sections 2, 3, 4
or 5 hereof shall not be effective until received. Any notice required to be
given to the Lenders shall be given to the Agent and distributed to all Lenders
by the Agent.
18.......Expenses. The Borrowers shall pay (i) all reasonable and
necessary out-of-pocket expenses of the Agent, including reasonable fees and
disbursements of special counsel for the Agent, in connection with the
preparation of this Agreement, any waiver or consent hereunder or any amendment
hereof or any Default or Event of Default or alleged Default or Event of Default
hereunder, (ii) all reasonable and necessary out-of-pocket expenses of the
Agent, including reasonable fees and disbursements of special counsel for the
Agent in connection with the preparation of any participation agreement for a
participant or participants or any amendment thereof and (iii) if a Default or
an Event of Default occurs, all reasonable and necessary out-of-pocket expenses
incurred by the Lenders, including reasonable fees and disbursements of counsel,
in connection with such Default and Event of Default and collection and other
enforcement proceedings resulting therefrom. THE BORROWERS AND GUARANTOR HEREBY
ACKNOWLEDGE THAT COTTON, ▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ IS SPECIAL COUNSEL TO FIRST
AMERICAN, AS AGENT AND AS A LENDER, UNDER THIS AGREEMENT AND THAT IT IS NOT
COUNSEL TO, NOR DOES IT REPRESENT THE BORROWERS OR GUARANTOR IN CONNECTION WITH
THE TRANSACTIONS DESCRIBED IN THIS AGREEMENT. The Borrowers and Guarantor are
relying on separate counsel in the transaction described herein. The Borrowers
and Guarantor shall indemnify the Lenders against any transfer taxes, document
taxes, assessments or charges
59
made by any governmental authority by reason of the execution, delivery and
filing of the Loan Documents. The obligations of this Section 18 shall survive
any termination of this Agreement, the expiration of the Loans and the payment
of all indebtedness of the Borrowers to the Lenders hereunder and under the
Notes.
19.......Indemnity. The Borrowers and Guarantor hereby, jointly and
severally, agree to indemnify the Agent, each Lender, their respective
Affiliates, and each of their directors, officers, and employees (the
"Indemnified Parties") against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all
attorney's fees and expenses of litigation or preparation therefor of any
Indemnified Party) which any of them may pay or incur arising out of or relating
to this Agreement, the other Loan Documents, the transactions contemplated
hereby or the direct or indirect application or proposed application of the
proceeds of any Loan hereunder even if any of the foregoing arises out of the
ordinary negligence of the party seeking indemnification except to the extent
that they are determined in a final non-appealable judgment by a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the party seeking indemnification. The indemnity set forth herein
shall be in addition to any other obligations or liabilities of the Borrowers or
Guarantor to any Indemnified Party hereunder or at common law or otherwise, and
shall survive any termination of this Agreement, the expiration of the Loans and
the payment of all indebtedness of the Borrowers to the Lenders hereunder and
under the Notes. THE PARTIES INTEND FOR THE PROVISIONS OF THIS SECTION TO APPLY
TO AND PROTECT EACH INDEMNIFIED PARTY FROM THE CONSEQUENCES OF ANY LIABILITY
INCLUDING STRICT LIABILITY IMPOSED OR THREATENED TO BE IMPOSED ON THE
INDEMNIFIED PARTY AS WELL AS FROM THE CONSEQUENCES OF ITS OWN NEGLIGENCE,
WHETHER OR NOT THAT NEGLIGENCE IS THE SOLE, CONTRIBUTING, OR CONCURRING CAUSE OF
ANY CLAIM.
20.......Non-Liability of Lenders. The relationship between the
Borrowers and Guarantor on the one hand and the Lenders and the Agent on the
other hand shall be solely that of borrower/guarantor and lender. Neither the
Agent nor any Lender shall have any fiduciary responsibility to the Borrowers or
Guarantor. Neither the Agent nor any Lender undertakes any responsibility to the
Borrowers or Guarantor to review or inform the Borrowers or Guarantor of any
matter in connection with any phase of the Borrowers' or Guarantor's businesses
or operations. The Borrowers and Guarantor agree that neither the Agent nor any
Lender shall have any liability to the Borrowers or Guarantor (whether sounding
in tort, contract or otherwise) for losses suffered by the Borrowers or
Guarantor in connection with, arising out of, or in any way related to, the
transactions contemplated and the relationship established by this Agreement and
the other Loan Documents, or any act, omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment by a court
of competent jurisdiction that such loss resulted from the gross negligence or
willful misconduct of the party from which recovery is sought. Neither the Agent
nor any Lender shall have any liability with respect to, and the Borrowers and
Guarantor hereby waive, release and agree not to ▇▇▇ for, any special, indirect,
60
consequential or punitive damages suffered by the Borrowers or Guarantor in
connection with, arising out of, or in any way related to this Agreement, the
Loan Documents or any transaction contemplated thereby.
21.......Governing Law. THIS AGREEMENT IS BEING EXECUTED AND DELIVERED,
AND IS INTENDED TO BE PERFORMED, IN MIDLAND, MIDLAND COUNTY, TEXAS, AND THE
SUBSTANTIVE LAWS OF TEXAS SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT
AND INTERPRETATION OF THIS AGREEMENT AND ALL OTHER DOCUMENTS AND INSTRUMENTS
REFERRED TO HEREIN, UNLESS OTHERWISE SPECIFIED THEREIN.
22.......Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Agreement, such provisions shall be fully severable and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of this Agreement, and the
remaining provisions of the Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement.
23.......Maximum Interest Rate. Regardless of any provisions contained
in this Agreement or in any other documents and instruments referred to herein,
the Lenders shall never be deemed to have contracted for or be entitled to
receive, collect or apply as interest on the Notes any amount in excess of the
Maximum Rate, and in the event any Lender ever receives, collects or applies as
interest any such excess, or if an acceleration of the maturities of any Notes
or if any prepayment by the Borrowers results in the Borrowers having paid any
interest in excess of the Maximum Rate, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
the Notes for which such excess was received, collected or applied, and, if the
principal balance of such Note is paid in full, any remaining excess shall
forthwith be paid to the Borrowers. All sums paid or agreed to be paid to the
Lenders for the use, forbearance or detention of the indebtedness evidenced by
the Notes and/or this Agreement shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such indebtedness until payment in full so that the rate or amount of interest
on account of such indebtedness does not exceed the Maximum Rate. In determining
whether or not the interest paid or payable under any specific contingency
exceeds the Maximum Rate of interest permitted by law, the Borrowers and the
Lenders shall, to the maximum extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee or premium, rather
than as interest; and (ii) exclude voluntary prepayments and the effect thereof;
and (iii) compare the total amount of interest contracted for, charged or
received with the total amount of interest which could be contracted for,
charged or received throughout the entire contemplated term of the Note at the
Maximum Rate.
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For purposes of Section 303 of the Texas Finance Code, to the extent
applicable to any Lender or Agent, Borrowers agree that the Maximum Rate shall
be the "weekly ceiling" as defined in said Chapter, provided that such Lender or
Agent, as applicable, may also rely, to the extent permitted by applicable laws
of the State of Texas and the United States of America, on alternative maximum
rates of interest under the Texas Finance Code or other laws applicable to such
Lender or Agent from time to time if greater.
24.......Amendments. This Agreement may be amended only by an
instrument in writing executed by an authorized officer of the party against
whom such amendment is sought to be enforced. No modification or waiver of any
provision of the Loan Documents, including this Agreement, or the Notes nor
consent to departure therefrom, shall be effective unless in writing signed by
Borrowers and/or Guarantor, as applicable, and Majority Lenders (or by Agent on
behalf of Majority Lenders) subject to the additional requirements of Section
15(f) hereof, to the extent applicable. No such consent or waiver shall extend
beyond the particular case and purpose involved. No notice or demand given in
any case shall constitute a waiver of the right to take other action in the
same, similar or other circumstances without such notice or demand. No amendment
of any provision of this Agreement relating to the Agent shall be effective
without the written consent of the Agent.
25.......Multiple Counterparts. This Agreement may be executed in a
number of identical separate counterparts (including by facsimile transmission),
each of which for all purposes is to be deemed an original, but all of which
shall constitute, collectively, one agreement. No party to this Agreement shall
be bound hereby until a counterpart of this Agreement has been executed by all
parties hereto.
26.......Conflict. In the event any term or provision hereof is
inconsistent with or conflicts with any provision of the Loan Documents, the
terms or provisions contained in this Agreement shall be controlling.
27.......Survival. All covenants, agreements, undertakings,
representations and warranties made in the Loan Documents, including this
Agreement, the Notes or other documents and instruments referred to herein shall
survive all closings hereunder and shall not be affected by any investigation
made by any party.
28.......Parties Bound. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs, legal representatives and estates, provided, however, that neither the
Borrowers nor the Guarantor may, without the prior written consent of all of the
Lenders, assign any rights, powers, duties or obligations hereunder.
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29.......Assignments and Participations.
(a) Each Lender shall have the right to sell, assign or
transfer all or any part of its Note or Notes, its Commitment and its
rights and obligations hereunder to one or more Affiliates, Lenders,
financial institutions, pension plans, insurance companies, investment
funds, or similar Persons who are Eligible Assignees or to a Federal
Reserve Bank; provided, that each sale, assignment or transfer (other
than to an Affiliate, a Lender or a Federal Reserve Bank) shall require
the consent of Agent and the Borrowers, which consents will not be
unreasonably withheld; provided, however, that if an Event of Default
has occurred and is continuing, the consent of the Borrower shall not
be required. Any such assignee, transferee or recipient shall have, to
the extent of such sale, assignment, or transfer, the same rights,
benefits and obligations as it would if it were such Lender and a
holder of such Note, Commitment and rights and obligations, including,
without limitation, the right to vote on decisions requiring consent or
approval of all Lenders or Majority Lenders and the obligation to fund
its Commitment; provided, that (1) each such sale, assignment, or
transfer (other than to an Affiliate, a Lender or a Federal Reserve
Bank) shall be in an aggregate principal amount not less than
$5,000,000, (2) each remaining Lender shall at all times maintain its
Commitment then outstanding in an aggregate principal amount at least
equal to $5,000,000; (3) each such sale, assignment or transfer shall
be of a Pro Rata portion of such Lender's Commitment, (4) no Lender may
offer to sell its Note or Notes, Commitment, rights and obligations or
interests therein in violation of any securities laws; and (5) no such
assignments (other than to a Federal Reserve Bank) shall become
effective until the assigning Lender and its assignee delivers to Agent
and Borrowers an Assignment and Acceptance and the Note or Notes
subject to such assignment and other documents evidencing any such
assignment. An assignment fee in the amount of $2,500 for each such
assignment (other than to an Affiliate, a Lender or the Federal Reserve
Bank) will be payable to Agent by assignor or assignee. Within five (5)
Business Days after its receipt of copies of the Assignment and
Acceptance and the other documents relating thereto and the Note or
Notes, the Borrowers shall execute and deliver to Agent (for delivery
to the relevant assignee) a new Note or Notes evidencing such
assignee's assigned Commitment and if the assignor Lender has retained
a portion of its Commitment, a replacement Note in the principal amount
of the Commitment retained by the assignor (except as provided in the
last sentence of this paragraph (a) such Note or Notes to be in
exchange for, but not in payment of, the Note or Notes held by such
Lender). On and after the effective date of an assignment hereunder,
the assignee shall for all purposes be a Lender, party to this
Agreement and any other Loan Document executed by the Lenders and shall
have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party thereto,
and no further consent or action by Borrowers, Lenders or the Agent
shall be required to release the transferor Lender with respect to its
Commitment assigned to such assignee and the transferor Lender shall
henceforth be so released.
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(b) Each Lender shall have the right to grant participations
in all or any part of such Lender's Notes and Commitment hereunder to
one or more pension plans, investment funds, insurance companies,
financial institutions or other Persons, provided, that:
(i) each Lender granting a participation shall retain
the right to vote hereunder, and no participant shall be
entitled to vote hereunder on decisions requiring consent or
approval of Lenders or Majority Lenders (except as set forth
in (iii) below);
(ii) in the event any Lender grants a participation
hereunder, such Lender's obligations under the Loan Documents
shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the holder of any
such Note or Notes for all purposes under the Loan Documents,
and Agent, each Lender and Borrowers shall be entitled to deal
with the Lender granting a participation in the same manner as
if no participation had been granted; and
(iii) no participant shall ever have any right by
reason of its participation to exercise any of the rights of
Lenders hereunder, except that any Lender may agree with any
participant that such Lender will not, without the consent of
such participant (which consent may not be unreasonably
withheld) consent to any amendment or waiver requiring
approval of all Lenders.
(c) It is understood and agreed that any Lender may provide to
assignees and participants and prospective assignees and participants
financial information and reports and data concerning Borrowers' or
Guarantor's properties and operations which was provided to such Lender
pursuant to this Agreement, provided, that each recipient thereto has
first agreed, for the benefit of Borrowers and Guarantor, to hold such
information, reports and data in confidence on the terms set out in
Section 12(j) hereof.
(d) Upon the reasonable request of either Agent or Borrower,
each Lender will identify those to whom it has assigned or participated
any part of its Notes and Commitment, and provide the amounts so
assigned or participated.
30.......Choice of Forum: Consent to Service of Process and
Jurisdiction. THE OBLIGATIONS OF BORROWERS AND GUARANTOR UNDER THE LOAN
DOCUMENTS ARE PERFORMABLE IN MIDLAND COUNTY, TEXAS. ANY SUIT, ACTION OR
PROCEEDING AGAINST EITHER BORROWER OR GUARANTOR WITH RESPECT TO
64
THE LOAN DOCUMENTS OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT THEREOF, MAY
BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS, COUNTY OF MIDLAND, OR IN THE
UNITED STATES COURTS LOCATED IN MIDLAND COUNTY, TEXAS AND THE BORROWER AND EACH
GUARANTOR HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS FOR
THE PURPOSE OF ANY SUCH SUIT, ACTION OR PROCEEDING. EACH BORROWER AND GUARANTOR
HEREBY IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING IN SAID COURT BY THE MAILING THEREOF BY LENDER BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWERS, AT THE ADDRESSES FOR NOTICES
AS PROVIDED IN SECTION 17. EACH BORROWER AND GUARANTOR HEREBY IRREVOCABLY WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT
BROUGHT IN THE COURTS LOCATED IN THE STATE OF TEXAS, COUNTY OF MIDLAND, AND
HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
31.......Waiver of Jury Trial. EACH BORROWER AND GUARANTOR HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
32.......Other Agreements. THIS WRITTEN CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
33.......Financial Terms. All accounting terms used in this Agreement
which are not specifically defined herein shall be construed in accordance with
GAAP.
34.......Communications Via Internet. Borrowers and Guarantor hereby
authorize the Agent and each Lender and their respective counsel, engineers and
advisors to communicate and transfer documents and other information (including
confidential information) concerning this transaction or Borrowers and Guarantor
and the Collateral or the business affairs of Borrowers and Guarantor via the
internet or other electronic communication without regard to the lack of
security of such communications.
65
35.......Amendment and Restatement. This Agreement amends and restates
in its entirety that certain First Amended and Restated Credit Agreement dated
December 20, 2002, by and among Borrowers, Guarantor, First American, as Agent,
and First American and the other lender parties thereto, as Lenders, as amended
by First Amendment to First Amended and Restated Credit Agreement dated
September 12, 2003.
36.......USA Patriot Act Notice. Each Lender and the Agent (for itself
and not on behalf of any Lender) hereby notifies the Borrowers that pursuant to
the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)) (the "Act"), it is required to obtain, verify and
record information that identifies each Borrower, which information includes the
name and address of each Borrower and other information that will allow such
Lender or the Agent, as applicable, to identify each Borrower in accordance with
the Act.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
66
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
BORROWERS:
PARALLEL PETROLEUM CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
PARALLEL, L.P., a Texas limited partnership
By: Parallel Petroleum Corporation,
Its General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
GUARANTOR:
PARALLEL, L.L.C., a Delaware limited liability
company
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
67
LENDERS:
COMMITMENT PERCENTAGE FIRST AMERICAN BANK, SSB,
AS OF EFFECTIVE DATE: a state savings bank, as Joint Lead Arranger
and Administrative Agent and as a Lender
27% By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------- --------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Executive Vice President
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT]
68
COMMITMENT PERCENTAGE BNP PARIBAS, as Joint Lead Arranger and
AS OF EFFECTIVE DATE: Syndication Agent and as a Lender
45% By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------- --------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Title: Managing Director
--------------------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: Vice President
--------------------------------
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT]
69
COMMITMENT PERCENTAGE WESTERN NATIONAL BANK,
AS OF EFFECTIVE DATE: as a Lender
10% By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------- ------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT]
70
COMMITMENT PERCENTAGE CITIBANK, F.S.B.,
AS OF EFFECTIVE DATE: as a Lender
18% By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
----------------------- -----------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
Vice President
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT]
71
EXHIBIT "A"
NOTICE OF BORROWING
The undersigned hereby certifies that he is the ___________________ of
PARALLEL PETROLEUM CORPORATION, a Delaware corporation ("PPC") and that PPC is
the sole general partner of PARALLEL, L.P., a Texas limited partnership ("PLP",
and together with PPC "Borrowers"), and that as such he is authorized to execute
this Notice of Borrowing on behalf of Borrowers. With reference to that certain
Second Amended and Restated Credit Agreement dated as of September 27, 2004 (as
same may be amended, modified, increased, supplemented and/or restated from time
to time, the "Agreement") entered into by and among Borrowers, the Guarantor
party thereto, First American Bank, SSB, as Joint Lead Arranger and
Administrative Agent, BNP Paribas, as Joint Lead Arranger and Syndication Agent
and FIRST AMERICAN BANK, SSB, and the other financial institutions party thereto
(the "Lenders"), the undersigned further certifies, represents and warrants on
behalf of Borrowers that all of the foregoing statements are true and correct
(each capitalized term used herein having the same meaning given to it in the
Agreement unless otherwise specified):
(a) Borrowers request that the Lenders advance Borrowers on
the Loan the aggregate sum of $________________ by no later than
__________________. Immediately following such Advance, the aggregate
outstanding balance of Advances shall equal $_________________ on the
Loan.
(b) This Advance shall be a Base Rate Loan ____________, or a
LIBOR Loan ______________, (if LIBOR please state requested Interest
Period: ____months).
(c) As of the date hereof, and as a result of the making of
the requested Advance, there does not and will not exist any Default or
Event of Default.
(d) Borrowers have and, to the knowledge of Borrowers,
Guarantor has performed and complied with all agreements and conditions
contained in the Agreement and the other Loan Documents which are
required to be performed or complied with by Borrowers and/or Guarantor
before or on the date hereof.
(e) The representations and warranties contained in the
Agreement are true and correct in all material respects as of the date
hereof and shall be true and correct upon the making of the Advance,
with the same force and effect as though made on and as of the date
hereof and thereof (except to the extent such representations and
warranties relate solely to an earlier date).
72
(f) No change that would cause a Material Adverse Effect to
the condition, financial or otherwise, of Borrowers or, to the
knowledge of Borrowers, Guarantor has occurred since the most recent
Financial Statement provided to the Lenders.
EXECUTED AND DELIVERED this _____ day of ___________, 20____.
PARALLEL PETROLEUM CORPORATION,
a Delaware corporation
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
PARALLEL, L.P., a Texas limited partnership
By: Parallel Petroleum Corporation,
Its General Partner
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
73
EXHIBIT "B"
REVOLVING NOTE
$_____________ Midland, Texas ___________, ____
FOR VALUE RECEIVED, the undersigned PARALLEL PETROLEUM CORPORATION, a
Delaware corporation, and PARALLEL, L.P., a Texas limited partnership
(hereinafter collectively referred to as "Borrowers"), hereby jointly and
severally and unconditionally promise to pay to the order of
_____________________ (the "Lender") at the offices of FIRST AMERICAN BANK, SSB
(the "Agent") in Midland County, Texas, the principal sum of
_____________________ AND __/100 DOLLARS ($______________), or so much thereof
as may be advanced and outstanding at any time or from time to time pursuant to
the Credit Agreement (as hereinafter defined) in lawful money of the United
States of America together with interest from the date hereof until paid at the
rates specified in the Credit Agreement. All payments of principal and interest
due hereunder are payable at the offices of Agent at ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, or at such other address as Lender shall designate in
writing to Borrowers.
The principal and all accrued interest on this Note shall be due and
payable in accordance with the terms and provisions of the Credit Agreement.
This Note is executed pursuant to that certain Second Amended and
Restated Credit Agreement dated of even date herewith among Borrowers, the
Guarantor named therein, First American Bank, SSB, as Joint Lead Arranger and
Administrative Agent, BNP Paribas, as Joint Lead Arranger and Syndication Agent,
and the Lenders from time to time parties thereto (as the same may be modified
or amended from time to time, the "Credit Agreement"), and is one of the Notes
referred to therein. Reference is made to the Credit Agreement and the Loan
Documents (as that term is defined in the Credit Agreement) for a statement of
prepayment rights and obligations of Borrowers, for a statement of the terms and
conditions under which the due date of this Note may be accelerated and for
statements regarding other matters affecting this Note (including without
limitation the obligations of the holder hereof to advance funds hereunder,
principal and interest payment due dates, voluntary and mandatory prepayments,
exercise of rights and remedies, payment of attorneys' fees, court costs and
other costs of collection and certain waivers by Borrowers and others now or
hereafter obligated for payment of any sums due hereunder). Upon the occurrence
of an Event of Default, as that term is defined in the Credit Agreement and Loan
Documents, the Agent may declare forthwith to be entirely and immediately due
and payable the principal balance hereof and the interest accrued hereon, and
the Lender shall have all rights and remedies of the Lender under the Credit
Agreement and Loan Documents. This Note may be prepaid in accordance with the
terms and provisions of the Credit Agreement.
B-1
Regardless of any provision contained in this Note, the holder hereof
shall never be entitled to receive, collect or apply, as interest on this Note,
any amount in excess of the Maximum Rate (as such term is defined in the Credit
Agreement), and, if the holder hereof ever receives, collects, or applies as
interest, any such amount which would be excessive interest, it shall be deemed
a partial prepayment of principal and treated hereunder as such; and, if the
indebtedness evidenced hereby is paid in full, any remaining excess shall
forthwith be paid to Borrowers. In determining whether or not the interest paid
or payable, under any specific contingency, exceeds the Maximum Rate, Borrowers
and the holder hereof shall, to the maximum extent permitted under applicable
law (i) characterize any non-principal payment as an expense, fee or premium
rather than as interest, (ii) exclude voluntary prepayments and the effects
thereof, and (iii) spread the total amount of interest throughout the entire
contemplated term of the obligations evidenced by this Note and/or referred to
in the Credit Agreement so that the interest rate is uniform throughout the
entire term of this Note; provided that, if this Note is paid and performed in
full prior to the end of the full contemplated term thereof; and if the interest
received for the actual period of existence thereof exceeds the Maximum Rate,
the holder hereof shall refund to Borrowers the amount of such excess or credit
the amount of such excess against the indebtedness evidenced hereby, and, in
such event, the holder hereof shall not be subject to any penalties provided by
any laws for contracting for, charging, taking, reserving or receiving interest
in excess of the Maximum Rate.
If any payment of principal or interest on this Note shall become due
on a day other than a Business Day (as such term is defined in the Credit
Agreement), such payment shall be made on the next succeeding Business Day and
such extension of time shall in such case be included in computing interest in
connection with such payment.
If this Note is placed in the hands of an attorney for collection, or
if it is collected through any legal proceeding at law or in equity or in
bankruptcy, receivership or other court proceedings, Borrowers agree to pay all
costs of collection, including, but not limited to, court costs and reasonable
attorneys' fees.
Borrowers and each surety, endorser, guarantor and other party ever
liable for payment of any sums of money payable on this Note, jointly and
severally waive presentment and demand for payment, notice of intention to
accelerate the maturity, protest, notice of protest and nonpayment, as to this
Note and as to each and all installments hereof, and agree that their liability
under this Note shall not be affected by any renewal or extension in the time of
payment hereof, or in any indulgences, or by any release or change in any
security for the payment of this Note, and hereby consent to any and all
renewals, extensions, indulgences, releases or changes.
This Note shall be governed by and construed in accordance with the
applicable laws of the United States of America and the laws of the State of
Texas.
B-2
THIS INSTRUMENT SECURES A LINE OF CREDIT USED PRIMARILY FOR BUSINESS,
COMMERCIAL OR AGRICULTURAL PURPOSES.
This Note is executed in renewal, extension, increase and
rearrangement, but not in extinguishment or novation, of that certain Revolving
Note dated December 20, 2002, in the original principal amount of
$_______________, executed by Borrowers and payable to the order of Lender.
THIS WRITTEN NOTE, THE CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENTS BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the date and year first above written.
BORROWERS:
PARALLEL PETROLEUM CORPORATION
a Delaware corporation
By:
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
PARALLEL, L.P., a Texas limited partnership
By: Parallel Petroleum Corporation,
Its General Partner
By:
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
B-3
EXHIBIT "C"
GUARANTY
THIS GUARANTY (this "Guaranty") is made as of the _____ day of
September, 2004, by PARALLEL, L.L.C., a Delaware limited liability company (the
"Guarantor") in favor of the Agent, for the benefit of the Lenders, under the
Credit Agreement referred to below;
WITNESSETH:
WHEREAS, PARALLEL PETROLEUM CORPORATION, a Delaware corporation ("PPC")
and PARALLEL, L.P., a Texas limited partnership ("PLP") (PPC and PLP
collectively are hereinafter referred to as the "Principal"), Guarantor, FIRST
AMERICAN BANK, SSB, a state savings bank, having its principal office in
Midland, Texas, as Joint Lead Arranger and Administrative Agent (the "Agent"),
BNP PARIBAS, as Joint Lead Arranger and Syndication Agent, and certain other
financial institutions from time to time parties thereto (the "Lenders") have
entered into a certain Second Amended and Restated Credit Agreement dated of
even date herewith (as same may be amended or modified from time to time, the
"Credit Agreement"), providing, subject to the terms and conditions thereof, for
extensions of credit to be made by the Lenders to the Principal;
WHEREAS, it is a condition precedent to the Agent and the Lenders
executing the Credit Agreement that Guarantor execute and deliver this Guaranty
whereby the Guarantor shall guarantee the payment when due, subject to Section 9
hereof, of all Guaranteed Obligations and Rate Management Obligations, as
defined below; and
WHEREAS, in consideration of the financial and other support that the
Principal has provided, and such financial and other support as the Principal
may in the future provide, to the Guarantor, and in order to induce the Lenders
and the Agent to enter into the Credit Agreement, and the Lenders and their
Affiliates to enter into one or more Rate Management Transactions with the
Principal, and because the Guarantor has determined that executing this Guaranty
is in its interest and to its financial benefit, the Guarantor is willing to
guarantee the obligations of the Principal under the Credit Agreement, any Note,
any Rate Management Transaction, and the other Loan Documents;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION l.1. Selected Terms Used Herein.
"Guaranteed Obligations" is defined to mean (i) all indebtedness,
obligations and
C-1
liabilities of either Principal to Agent or any Lender arising out of or
pursuant to the provisions of the Credit Agreement, the Notes and other Loan
Documents, (ii) all Rate Management Obligations, (iii) all indebtedness,
obligations and liabilities of either Principal to any Lender of any kind or
character now existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint
and several, and regardless of whether such indebtedness, obligations and
liabilities may, prior to their acquisition by any Lender, be or have been
payable to or in favor of a third party and subsequently acquired by any Lender
(it being contemplated that any Lender may make such acquisitions from third
parties), including without limitation all indebtedness, obligations and
liabilities of either Principal to any Lender now existing or hereafter arising
by note, draft, acceptance, guaranty, endorsement, letter of credit, assignment,
purchase, overdraft, discount, indemnity agreement or otherwise, (iv) all
accrued but unpaid interest on any of the indebtedness described in (i), (ii)
and (iii) above, (v) all obligations of either Principal to any Lender under any
documents evidencing, securing, governing and/or pertaining to all or any part
of the indebtedness described in (i), (ii), (iii) or (iv) above, (vi) all costs
and expenses incurred by any Lender in connection with the collection and
administration of all or any part of the indebtedness and obligations described
in (i), (ii), (iii), (iv) or (v) above or the protection or preservation of, or
realization upon, the collateral securing all or any part of such indebtedness
and obligations, including without limitation all reasonable attorneys' fees,
and (vii) all renewals, extensions, modifications and rearrangements of the
indebtedness and obligations described in (i), (ii), (iii), (iv), (v) and (vi)
above.
"Rate Management Obligations" means any and all obligations of either
Principal, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all Rate
Management Transactions with Agent or a Lender or an Affiliate of Agent or a
Lender, and (ii) any and all cancellations, buy backs, reversals, terminations
or assignments of any Rate Management Transactions.
SECTION 1.2. Terms in Credit Agreement. Other capitalized terms used
herein but not defined herein shall have the meaning set forth in the Credit
Agreement.
SECTION 2.1. Representations and Warranties. The Guarantor represents
and warrants (which representations and warranties shall be deemed to have been
renewed upon each Borrowing Date under the Credit Agreement) that:
(a) It is a corporation, partnership or limited liability
company duly and properly incorporated or organized, as the case may
be, validly existing and (to the extent such concept applies to such
entity) in good standing under the laws of its jurisdiction of
incorporation or organization and has all requisite authority to
conduct its business in each jurisdiction in which its business is
conducted.
C-2
(b) It has the power and authority and legal right to execute
and deliver this Guaranty and to perform its obligations hereunder. The
execution and delivery by it of this Guaranty and the performance of
its obligations hereunder have been duly authorized by proper
corporate, partnership or limited liability company proceedings, and
this Guaranty constitutes a legal, valid and binding obligation of
Guarantor enforceable against it in accordance with its terms, except
as enforceability may be limited by general principles of equity and
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
(c) Neither the execution and delivery by it of this Guaranty,
nor the consummation of the transactions herein contemplated, nor
compliance with the provisions hereof will violate (i) any law, rule,
regulation, order, writ, judgment, injunction, decree or award binding
on it or any of its subsidiaries or (ii) its articles or certificate of
incorporation, partnership agreement, limited liability company
agreement, certificate of partnership, articles or certificate of
organization, by-laws, or operating or other management agreement, as
the case may be, or (iii) the provisions of any indenture, instrument
or agreement to which it or any of its subsidiaries is a party or is
subject, or by which it, or its Property, is bound, or conflict with or
constitute a default thereunder, or result in, or require, the creation
or imposition of any Lien in, of or on the property of Guarantor or a
subsidiary thereof pursuant to the terms of any such indenture,
instrument or agreement. No order, consent, adjudication, approval,
license, authorization, or validation of, or filing, recording or
registration with, or exemption by, or other action in respect of any
governmental or public body or authority, or any subdivision thereof,
which has not been obtained by it or any of its subsidiaries, is
required to be obtained by it or any of its subsidiaries in connection
with the execution and delivery of this Guaranty or the performance by
it of its obligations hereunder or the legality, validity, binding
effect or enforceability of this Guaranty.
SECTION 2.2. Covenants. The Guarantor covenants that, so long as any
Lender has any Commitment outstanding under the Credit Agreement, any
Reimbursement Obligations remain outstanding, any Rate Management Transaction
remains in effect or any of the Guaranteed Obligations shall remain unpaid, that
it will, and, if necessary, will enable the Principal to, fully comply with
those covenants and agreements set forth in the Credit Agreement.
SECTION 3. The Guaranty. Subject to Section 9 hereof, the Guarantor
hereby absolutely and unconditionally guarantees, as primary obligor and not as
surety, the full and punctual payment (whether at stated maturity, upon
acceleration or early termination or otherwise, and at all times thereafter) and
performance of the Guaranteed Obligations, including without limitation any such
Guaranteed Obligations incurred or accrued during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, whether or not
allowed or allowable in such proceeding. Upon failure by the Principal to pay
punctually any such amount, the Guarantor agrees that it shall forthwith on
demand pay to the Agent for the benefit of the
C-3
Lenders and, if applicable, their Affiliates, the amount not so paid at the
place and in the manner specified in the Credit Agreement, any Note, any Rate
Management Transaction or the relevant Loan Document, as the case may be. This
Guaranty is a guaranty of payment and not of collection. The Guarantor waives
any right to require any Lender, or any Affiliate of any Lender, to ▇▇▇ the
Principal, any other guarantor, or any other Person obligated for all or any
part of the Guaranteed Obligations, or otherwise to enforce its payment against
any Collateral securing all or any part of the Guaranteed Obligations.
SECTION 4. Guaranty Unconditional. Subject to Section 9 hereof, the
obligations of the Guarantor hereunder shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any of the Guaranteed Obligations, by operation
of law or otherwise, or any obligation of any other guarantor of any of
the Guaranteed Obligations, or any default, failure or delay, willful
or otherwise, in the payment or performance of the Guaranteed
Obligations;
(ii) any modification or amendment of or supplement to the
Credit Agreement, any Note, any Rate Management Transaction or any
other Loan Document;
(iii) any release, nonperfection or invalidity of any direct
or indirect security for any obligation of the Principal under the
Credit Agreement, any Note, the Security Instrument, any Rate
Management Transaction, any other Loan Document, or any obligations of
any other guarantor of any of the Guaranteed Obligations, or any action
or failure to act by the Agent, any Lender or any Affiliate of any
Lender with respect to any collateral securing all or any part of the
Guaranteed Obligations;
(iv) any change in the corporate existence, structure or
ownership of the Principal or any other guarantor of any of the
Guaranteed Obligations, or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting the Principal, or any other
guarantor of the Guaranteed Obligations, or its assets or any resulting
release or discharge of any obligation of the Principal, or any other
guarantor of any of the Guaranteed Obligations;
(v) the existence of any claim, setoff or other rights which
the Guarantor may have at any time against the Principal, any other
guarantor of any of the Guaranteed Obligations, the Agent, any Lender
or any other Person, whether in connection herewith or any unrelated
transactions;
(vi) any invalidity or unenforceability relating to or against
the Principal, or any other guarantor of any of the Guaranteed
Obligations, for any reason related to the
C-4
Credit Agreement, any Rate Management Transaction, any other Loan
Document, or any provision of applicable law or regulation purporting
to prohibit the payment by the Principal, or any other guarantor of the
Guaranteed Obligations, of the principal of or interest on any Note or
any other amount payable by the Principal under the Credit Agreement,
any Note, any Rate Management Transaction or any other Loan Document;
or
(vii) any other act or omission to act or delay of any kind by
the Principal, any other guarantor of the Guaranteed Obligations, the
Agent, any Lender or any other Person or any other circumstance
whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of Guarantor's obligations
hereunder.
SECTION 5. Discharge Only Upon Payment In Full: Reinstatement In
Certain Circumstances. The Guarantor's obligations hereunder shall remain in
full force and effect until all Guaranteed Obligations shall have been
indefeasibly paid in full, the Commitments under the Credit Agreement shall have
terminated or expired and all Rate Management Transactions have terminated or
expired. If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Principal or any other party under the Credit
Agreement, any Rate Management Transaction or any other Loan Document is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Principal or otherwise, the Guarantor's
obligations hereunder with respect to such payment shall be reinstated as though
such payment had been due but not made at such time.
SECTION 6. Waivers. The Guarantor irrevocably waives acceptance hereof,
presentment, demand, protest and, to the fullest extent permitted by law, any
notice not provided for herein, as well as any requirement that at any time any
action be taken by any Person against the Principal, any other guarantor of any
of the Guaranteed Obligations, or any other Person.
SECTION 7. Subrogation. The Guarantor hereby agrees not to assert any
right, claim or cause of action, including, without limitation, a claim for
subrogation, reimbursement, indemnification or otherwise, against the Principal
arising out of or by reason of this Guaranty or the obligations hereunder,
including, without limitation, the payment or securing or purchasing of any of
the Guaranteed Obligations by the Guarantor unless and until the Guaranteed
Obligations are indefeasibly paid in full, any commitment to lend under the
Credit Agreement and any other Loan Documents is terminated and all Rate
Management Transactions have terminated or expired.
SECTION 8. Stay of Acceleration. If acceleration of the time for
payment of any of the Guaranteed Obligations is stayed upon the insolvency,
bankruptcy or reorganization of the Principal, all such amounts otherwise
subject to acceleration under the terms of the Credit Agreement, any Note, any
Rate Management Transaction or any other Loan Document shall
C-5
nonetheless be payable by the Guarantor hereunder forthwith on demand by the
Agent made at the request of the Majority Lenders.
SECTION 9. Limitation on Obligations.
(a) The provisions of this Guaranty are severable, and in any
action or proceeding involving any state corporate law, or any state,
federal or foreign bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of
Guarantor under this Guaranty would otherwise be held or determined to
be avoidable, invalid or unenforceable on account of the amount of
Guarantor's liability under this Guaranty, then, notwithstanding any
other provision of this Guaranty to the contrary, the amount of such
liability shall, without any further action by the Guarantor, the Agent
or any Lender, be automatically limited and reduced to the highest
amount that is valid and enforceable as determined in such action or
proceeding (such highest amount determined hereunder being the
Guarantor's "Maximum Liability"). This Section 9(a) with respect to the
Maximum Liability of the Guarantor is intended solely to preserve the
rights of the Agent hereunder to the maximum extent not subject to
avoidance under applicable law, and neither the Guarantor nor any other
person or entity shall have any right or claim under this Section 9(a)
with respect to the Maximum Liability, except to the extent necessary
so that the obligations of the Guarantor hereunder shall not be
rendered voidable under applicable law.
(b) The Guarantor agrees that the Guaranteed Obligations may
at any time and from time to time exceed the Maximum Liability of the
Guarantor, without impairing this Guaranty or affecting the rights and
remedies of the Agent hereunder. Nothing in this Section 9(b) shall be
construed to increase Guarantor's obligations hereunder beyond its
Maximum Liability.
SECTION 10. Application of Payments. All payments received by the Agent
hereunder shall be applied by the Agent to payment of the Guaranteed Obligations
in the following order unless a court of competent jurisdiction shall otherwise
direct:
(a) FIRST, to payment of all costs and expenses of the Agent
incurred in connection with the collection and enforcement of the
Guaranteed Obligations or of any security interest granted to the Agent
in connection with any Collateral securing the Guaranteed Obligations;
(b) SECOND, to payment of that portion of the Guaranteed
Obligations constituting accrued and unpaid interest and fees, pro rata
among the Lenders and their Affiliates in accordance with the amount of
such accrued and unpaid interest and fees owing to each of them;
C-6
(c) THIRD, to payment of the principal of the Guaranteed
Obligations then due and unpaid from the Principal to any of the
Lenders or their Affiliates, Pro Rata among the Lenders and their
Affiliates in accordance with the amount of such principal then due and
unpaid to each of them; and
(d) FOURTH, to payment of any Guaranteed Obligations (other
than those listed above) Pro Rata among those parties to whom such
Guaranteed Obligations are due in accordance with the amounts owing to
each of them.
SECTION 11. Notices. All notices, requests and other communications to
any party hereunder shall be given or made by telecopier or other writing and
telecopied, or mailed or delivered to the intended recipient at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopy number as such party may hereafter specify for such purpose by
notice to the Agent in accordance with the provisions of Section 17 of the
Credit Agreement. Except as otherwise provided in this Guaranty, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice sent by
certified mail return-receipt requested, on the date set forth on the receipt
(provided, that any refusal to accept any such notice shall be deemed to be
notice thereof as of the time of any such refusal), in each case given or
addressed as aforesaid.
SECTION 12. No Waivers. No failure or delay by the Agent or any Lender
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies provided in this Guaranty, the Credit Agreement, any
Note, any Rate Management Transaction and the other Loan Documents shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 13. No Duty to Advise. The Guarantor assumes all responsibility
for being and keeping itself informed of the Principal's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Guaranteed Obligations and the nature, scope and extent of the risks that
the Guarantor assumes and incurs under this Guaranty, and agrees that neither
the Agent nor any Lender has any duty to advise the Guarantor of information
known to it regarding those circumstances or risks.
SECTION 14. Successors and Assigns. This Guaranty is for the benefit of
the Agent and the Lenders and their respective successors and permitted assigns
and in the event of an assignment of any amounts payable under the Credit
Agreement, any Note, any Rate Management Transaction, or the other Loan
Documents, the rights hereunder, to the extent applicable to the indebtedness so
assigned, shall be transferred with such indebtedness. This Guaranty shall be
binding upon the Guarantor and its successors and permitted assigns.
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SECTION 15. Changes in Writing. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by the Guarantor and the Agent with the consent of the Majority
Lenders.
SECTION 16. Costs of Enforcement. The Guarantor agrees to pay all costs
and expenses including, without limitation, all court costs and attorneys' fees
and expenses paid or incurred by the Agent or any Lender or any Affiliate of any
Lender in endeavoring to collect all or any part of the Guaranteed Obligations
from, or in prosecuting any action against, the Principal, the Guarantor or any
other guarantor of all or any part of the Guaranteed Obligations.
SECTION 17. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF TEXAS. THE GUARANTOR HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
TEXAS (MIDLAND DIVISION) AND OF ANY TEXAS STATE COURT SITTING IN MIDLAND, TEXAS
AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER LOAN DOCUMENTS) OR THE
TRANSACTIONS CONTEMPLATED HEREBY. THE GUARANTOR IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 18. Taxes, etc. All payments required to be made by the
Guarantor hereunder shall be made without setoff or counterclaim and free and
clear of and without deduction or withholding for or on account of, any present
or future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any government or any political or taxing authority thereof (but
excluding income and franchise taxes), provided, however, that if the Guarantor
is required by law to make such deduction or withholding, Guarantor shall
forthwith (i) pay to the Agent or any Lender, as applicable, such additional
amount as results in the net amount received by the Agent or any Lender, as
applicable, equaling the full amount which would have been received by the Agent
or any Lender, as applicable, had no such deduction or withholding been made,
(ii) pay the full amount deducted to the relevant authority in accordance with
applicable law, and (iii) furnish to the Agent or any Lender, as applicable,
certified copies of official receipts evidencing payment of such withholding
taxes within 30 days after such payment is made.
C-8
SECTION 19. Setoff. Without limiting the rights of the Agent or the
Lenders under applicable law, if all or any part of the Guaranteed Obligations
is then due, whether pursuant to the occurrence of a Default or otherwise, then
the Guarantor authorizes the Agent and the Lenders to apply any sums standing to
the credit of the Guarantor with the Agent or any Lender toward the payment of
the Guaranteed Obligations.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed, under seal, by its authorized officer as of the day and year first
above written.
GUARANTOR:
PARALLEL, L.L.C., a Delaware limited
liability company
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Financial Officer
C-9
EXHIBIT "D"
CERTIFICATE OF COMPLIANCE
The undersigned hereby certifies that he is the ___________________ of
PARALLEL PETROLEUM CORPORATION, a Delaware corporation ("PPC") and that PPC is
the sole general partner of Parallel, L.P., a Texas limited partnership ("PLP",
and together with PPC "Borrowers"), and that as such he is authorized to execute
this Certificate of Compliance on behalf of Borrowers. With reference to that
certain Second Amended and Restated Credit Agreement, dated as of September 27,
2004 (as same may be amended, modified, increased, supplemented and/or restated
from time to time, the "Agreement") entered into by and among the Borrowers, the
Guarantor party thereto, First American Bank, SSB, as Joint Lead Arranger and
Administrative Agent, BNP Paribas, as Joint Lead Arranger and Syndication Agent,
and FIRST AMERICAN BANK, SSB, as "Agent," for itself and the Lenders signatory
thereto (the "Lenders"), the undersigned further certifies, represents and
warrants on behalf of Borrowers that all of the following statements are true
and correct (each capitalized term used herein having the same meaning given to
it in the Agreement unless otherwise specified):
(a) Borrowers have and, to the knowledge of Borrowers,
Guarantor has fulfilled in all material respects their respective
obligations under the Notes and Loan Documents, including the
Agreement, and all representations and warranties made herein and
therein continue (except to the extent they relate solely to an earlier
date) to be true and correct in all material respects [if the
representations and warranties are not true and correct, the party
signing this certificate shall except from the foregoing statement the
matters for which such representations and warranties are no longer
true specifying the nature of any such change.]
(b) No Default or Event of Default has occurred under the Loan
Documents, including the Agreement [if a Default or Event of Default
has occurred, the party certifying hereto shall specify the facts
constituting the Default or Event of Default and the nature and status
thereof].
(c) To the extent requested from time to time by the Agent,
the certifying party shall specifically affirm compliance of the
Borrowers in all material respects with any of its representations and
warranties (except to the extent they relate solely to an earlier date)
or obligations under the Loan Documents.
(d) Financial Computations for the period ending
________________ (provide calculations on a consolidated basis):
(i) Current Ratio;
(ii) Funded Debt Ratio; and
D-1
(iii) Adjusted Consolidated Net Worth.
EXECUTED, DELIVERED AND CERTIFIED TO this ____day of ______________,
20_______.
PARALLEL PETROLEUM CORPORATION,
a Delaware corporation
By:
-------------------------------
Name:
-------------------------------
Title:
-------------------------------
PARALLEL, L.P., a Texas limited partnership
By: Parallel Petroleum Corporation,
Its General Partner
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
D-2
EXHIBIT "E"
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This Assignment and Acceptance Agreement (this "Assignment Agreement")
between ___________________ (the "Assignor") and ____________________________
(the "Assignee") is dated as of ____________, 20_____. The parties hereto agree
as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Second Amended and
Restated Credit Agreement (which, as it may be amended, modified, renewed or
extended from time to time is herein called the "Credit Agreement") described in
Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
them in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents, such that after giving effect to such
assignment the Assignee shall have purchased pursuant to this Assignment
Agreement the percentage interest specified in Item 2 of Schedule 1 of all
outstanding rights and obligations under the Credit Agreement and the other Loan
Documents relating to the facilities listed in Item 3 of Schedule 1. The
aggregate Commitment (or Loans, if the applicable Commitment has been
terminated) purchased by the Assignee hereunder is set forth in Item 4 of
Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement (the
"Effective Date") shall be the later of the date specified in Item 5 of Schedule
1 or two Business Days (or such shorter period agreed to by the Agent) after
this Assignment Agreement, together with any consents required under the Credit
Agreement, are delivered to the Agent. In no event will the Effective Date occur
if the payments required to be made by the Assignee to the Assignor on the
Effective Date are not made on the proposed Effective Date.
4. PAYMENT OBLIGATIONS. In consideration for the sale and assignment of Loans
hereunder, the Assignee shall pay the Assignor, on the Effective Date, the
amount agreed to by the Assignor and the Assignee. On and after the Effective
Date, the Assignee shall be entitled to receive from the Agent all payments of
principal, interest and fees with respect to the interest assigned hereby. The
Assignee will promptly remit to the Assignor any interest on Loans and fees
received from the Agent which relate to the portion of the Commitment or Loans
assigned to the Assignee hereunder for periods prior to the Effective Date and
not previously paid by the Assignee to the Assignor. In the event that either
party hereto receives any payment
E-1
to which the other party hereto is entitled under this Assignment Agreement,
then the party receiving such amount shall promptly remit it to the other party
hereto.
5. RECORDATION FEE. The Assignor and Assignee each agree to pay one-half of the
recordation fee required to be paid to the Agent in connection with this
Assignment Agreement unless otherwise specified in Item 6 of Schedule 1.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S LIABILITY. The
Assignor represents and warrants that (i) it is the legal and beneficial owner
of the interest being assigned by it hereunder, (ii) such interest is free and
clear of any adverse claim created by the Assignor and (iii) the execution and
delivery of this Assignment Agreement by the Assignor is duly authorized. It is
understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor nor
any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrowers or Guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrowers or Guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
property, books or records of the Borrowers or Guarantor, (vi) the validity,
enforceability, perfection, priority, condition, value or sufficiency of any
collateral securing or purporting to secure the Loans or (vii) any mistake,
error of judgment, or action taken or omitted to be taken in connection with the
Loans or the Loan Documents.
7. REPRESENTATIONS AND UNDERTAKINGS OF THE ASSIGNEE. The Assignee (i) confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information at it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Loan Documents, (iii) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto, (iv) confirms that the execution
and delivery of this Assignment Agreement by the Assignee is duly authorized,
(v) agrees that it will perform in accordance with its terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender, (vi) agrees that its payment instructions and
notice instructions are as set forth in the attachment to
▇-▇
▇▇▇▇▇▇▇▇ ▇, (▇▇▇) confirms that none of the funds, monies, assets or other
consideration being used to make the purchase and assumption hereunder are "plan
assets" as defined under ERISA and that its rights, benefits and interests in
and under the Loan Documents will not be "plan assets" under ERISA, (viii)
agrees to indemnify and hold the Assignor harmless against all losses, costs and
expenses (including, without limitation, reasonable attorneys' fees) and
liabilities incurred by the Assignor in connection with or arising in any manner
from the Assignee's non-performance of the obligations assumed under this
Assignment Agreement, and (ix) if applicable, attaches the forms prescribed by
the Internal Revenue Service of the United States certifying that the Assignee
is entitled to receive payments under the Loan Documents without deduction or
withholding of any United States federal income taxes.
8. GOVERNING LAW. This Assignment Agreement shall be governed by the internal
law, and not the law of conflicts, of the State of Texas
9. NOTICES. Notices shall be given under this Assignment Agreement in the manner
set forth in the Credit Agreement. For the purpose hereof, the addresses of the
parties hereto (until notice of a change is delivered) shall be the address set
forth in the attachment to Schedule 1.
10. COUNTERPARTS; DELIVERY BY FACSIMILE. This Assignment Agreement may be
executed in counterparts. Transmission by facsimile of an executed counterpart
of this Assignment Agreement shall be deemed to constitute due and sufficient
delivery of such counterpart and such facsimile shall be deemed to be an
original counterpart of this Assignment Agreement.
IN WITNESS WHEREOF, the duly authorized officers of the parties hereto
have executed this Assignment Agreement as of the date first above written.
[ASSIGNOR]
By:
---------------------------
Title:
---------------------------
Address:
---------------------------
---------------------------
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[ASSIGNEE]
By:
---------------------------
Title:
---------------------------
Address:
---------------------------
---------------------------
(If required)
ACKNOWLEDGED AND CONSENTED TO:
FIRST AMERICAN BANK, SSB
as Administrative Agent
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
PARALLEL PETROLEUM CORPORATION
a Delaware corporation
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
PARALLEL, L.P., a Texas limited partnership
By: Parallel Petroleum Corporation,
Its General Partner
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
E04
SCHEDULE "1"
LIENS
None.
SCHEDULE "2"
FINANCIAL CONDITION
None.
SCHEDULE "3"
LIABILITIES
(a) Purchase and Sale Agreement dated September 16, 2004, between Parallel,
L.P. and Caprock Oil & Gas, L.P.
(b) Purchase and Sale Agreement dated September 16, 2004, between Parallel,
L.P. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇.
SCHEDULE "4"
LITIGATION
Pending or Threatened Litigation,
Legal or Administrative Proceedings
None.
SCHEDULE "5"
TITLE MATTERS
1. Signal Hill No. 1, ▇▇▇▇▇▇▇ County, Texas
2. Big Twelve No. 1, ▇▇▇▇▇▇▇ County, Texas
3. Overpass No. 1, ▇▇▇▇▇▇▇ County, Texas
4. ▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
5. ▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
6. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
7. ▇▇▇▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
8. Riverside General Hospital No. 1, Liberty County, Texas
9. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇ ▇▇▇ ▇▇. ▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
10. Diamond M and G-C-W Glorieta, ▇▇▇▇▇▇ County, Texas (All ▇▇▇▇▇ and
interests earned pursuant to Diamond M. Trade Agreement dated December
10, 2001, among Diamond M Production Company and Parallel Petroleum
Company, et al.)
11. Jade No. 1, ▇▇▇▇▇▇ County, Texas
12. Garnet No. 1, ▇▇▇▇▇▇ County, Texas
13. ▇▇▇▇ ▇▇. ▇ ▇▇▇ ▇▇▇. ▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
SCHEDULE "6"
CURATIVE MATTERS
None.