EXHIBIT 4.1
________________________________________________________________________________
EXECUTION VERSION
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
EDGE PETROLEUM CORPORATION,
EDGE PETROLEUM EXPLORATION COMPANY,
EDGE PETROLEUM OPERATING COMPANY, INC.,
▇▇▇▇▇▇ OIL CORPORATION,
AND
▇▇▇▇▇▇ EXPLORATION COMPANY,
AS BORROWERS,
THE LENDERS SIGNATORY HERETO,
AND
UNION BANK OF CALIFORNIA, N.A., AS AGENT
DATED AS OF DECEMBER 31, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, N.A. AS CO-ARRANGER
BNP PARIBAS, AS SYNDICATION AGENT AND CO-ARRANGER
________________________________________________________________________________
REVOLVING LINE OF CREDIT OF UP TO $100,000,000
ARTICLE I DEFINITIONS AND INTERPRETATION................................... 2
1.1 Terms Defined Above.................................................. 2
1.2 Additional Defined Terms............................................. 2
1.3 Undefined Financial Accounting Terms................................. 18
1.4 References........................................................... 18
1.5 Articles and Sections................................................ 18
1.6 Number and Gender.................................................... 18
1.7 Computation of Time Periods.......................................... 19
1.8 Incorporation of Schedules and Exhibits.............................. 19
ARTICLE II TERMS OF FACILITY................................................ 19
2.1 Revolving Line of Credit............................................. 19
2.2 Method of Borrowing.................................................. 19
2.3 Letter of Credit Facility............................................ 20
2.4 Use of Loan Proceeds and Letters of Credit........................... 24
2.5 Interest; Computations............................................... 25
2.6 Repayment of Loans and Interest...................................... 25
2.7 Outstanding Amounts.................................................. 26
2.8 Time, Place, and Method of Payments.................................. 26
2.9 Pro Rata Treatment; Adjustments...................................... 26
2.10 Borrowing Base Determinations........................................ 27
2.11 Prepayments.......................................................... 29
2.12 Reduction of the Commitments......................................... 30
2.13 Commitment Fee....................................................... 31
2.14 Intentionally Omitted................................................ 31
2.15 Borrowing Base Increase Fees......................................... 31
2.16 Letter of Credit Fee................................................. 31
2.17 Intentionally Omitted................................................ 31
2.18 Advances by Agent.................................................... 31
2.19 Security Interest in Accounts; Right of Offset....................... 32
2.20 General Provisions Relating to Interest.............................. 32
2.21 Yield Protection..................................................... 33
2.22 Limitation on Loans.................................................. 33
2.23 Illegality........................................................... 34
2.24 Increased Costs...................................................... 35
2.25 Letters in Lieu of Transfer Orders................................... 37
2.26 Power of Attorney.................................................... 37
2.27 Taxes................................................................ 37
2.28 Replacement of Lenders under Certain Circumstances................... 39
ARTICLE III CONDITIONS....................................................... 40
3.1 Conditions Precedent to Effectiveness................................ 40
3.2 Conditions Precedent to All Borrowings............................... 43
3.3 Determinations under Sections 3.1 and 3.2............................ 44
ARTICLE IV REPRESENTATIONS AND WARRANTIES................................... 44
4.1 Due Authorization..................................................... 44
4.2 Corporate Existence.................................................. 44
4.3 Valid and Binding Obligations........................................ 44
4.4 Use of Proceeds...................................................... 45
4.5 Security Instruments................................................. 45
4.6 Title to Assets...................................................... 45
4.7 Scope and Accuracy of Financial Statements........................... 45
4.8 No Material Misstatements............................................ 45
4.9 Liabilities and Litigation........................................... 45
4.10 Compliance with Laws................................................. 46
4.11 ERISA................................................................ 46
4.12 Environmental Laws................................................... 46
4.13 Investment Company Act Compliance.................................... 47
4.14 Public Utility Holding Company Act Compliance........................ 47
4.15 Proper Filing of Tax Returns; Payment of Taxes Due................... 47
4.16 Refunds.............................................................. 47
4.17 Gas Contracts........................................................ 47
4.18 Intellectual Property................................................ 48
4.19 Condition of Properties; Casualties or Taking of Property............ 48
4.20 Locations of Borrower................................................ 48
4.21 Subsidiaries......................................................... 48
4.22 No Burdensome Restrictions; No Defaults.............................. 48
ARTICLE V AFFIRMATIVE COVENANTS............................................ 49
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5.1 Maintenance and Access to Records.................................... 49
5.2 Quarterly Financial Statements; Compliance Certificates.............. 49
5.3 Annual Financial Statements.......................................... 49
5.4 Oil and Gas Production Reports....................................... 49
5.5 Title Opinions; Title Defects........................................ 49
5.6 Notices of Certain Events............................................ 50
5.7 Letters in Lieu of Transfer Orders; Division Orders.................. 51
5.8 Additional Information............................................... 51
5.9 Compliance with Laws................................................. 51
5.10 Payment of Assessments and Charges................................... 52
5.11 Maintenance of Corporate Existence and Good Standing................. 52
5.12 Intentionally Omitted................................................ 52
5.13 Further Assurances................................................... 52
5.14 Initial Fees and Expenses............................................ 52
5.15 Subsequent Fees and Expenses of Agent and Lenders.................... 52
5.16 Operation of Oil and Gas Properties.................................. 53
5.17 Maintenance and Inspection of Properties............................. 53
5.18 Maintenance of Insurance............................................. 53
5.19 Intentionally Omitted................................................ 54
5.20 Intentionally Omitted................................................ 54
5.21 Payment of Hedging Obligations....................................... 54
5.22 Agreement to Pledge.................................................. 54
5.23 Multiple Borrowers................................................... 54
5.24 Post-Closing Requirements............................................ 56
ARTICLE VI NEGATIVE COVENANTS............................................... 56
6.1 Indebtedness......................................................... 56
6.2 Trade Payables....................................................... 57
6.3 Contingent Obligations............................................... 57
6.4 Liens; Negative Pledges.............................................. 57
6.5 Sales of Assets...................................................... 57
6.6 Leasebacks........................................................... 57
6.7 Intentionally Omitted................................................ 57
6.8 Investments; Acquisitions............................................ 57
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6.9 Dividends and Distributions.......................................... 58
6.10 Changes in Corporate Structure....................................... 58
6.11 Transactions with Affiliates......................................... 59
6.12 Lines of Business.................................................... 59
6.13 Compliance with ERISA................................................ 59
6.14 New Subsidiaries..................................................... 59
6.15 EBITDAX to Interest Expense Ratio.................................... 59
6.16 Working Capital...................................................... 59
6.17 Maximum Leverage Ratio............................................... 60
ARTICLE VII EVENTS OF DEFAULT................................................ 60
7.1 Enumeration of Events of Default..................................... 60
7.2 Remedies............................................................. 62
7.3 Application of Proceeds Upon Default................................. 62
ARTICLE VIII THE AGENT........................................................ 63
8.1 Appointment.......................................................... 63
8.2 Delegation of Duties................................................. 63
8.3 Exculpatory Provisions............................................... 63
8.4 Reliance by Agent.................................................... 64
8.5 Notice of Default.................................................... 64
8.6 Non-Reliance on Agent and Other Lenders.............................. 64
8.7 Indemnification...................................................... 65
8.8 Restitution.......................................................... 66
8.9 Agent in Its Individual Capacity........................................66
8.10 Successor Agent...................................................... 66
8.11 Applicable Parties................................................... 66
8.12 Collateral Matters................................................... 67
ARTICLE IX MISCELLANEOUS.................................................... 67
9.1 Assignments; Participations.......................................... 67
9.2 Waivers, Amendments.................................................. 69
9.3 Survival of Representations, Warranties, and Covenants............... 69
9.4 Notices and Other Communications..................................... 69
9.5 Parties in Interest.................................................. 70
9.6 Rights of Third Parties.............................................. 70
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9.7 Renewals; Extensions................................................. 70
9.8 No Waiver; Rights Cumulative......................................... 70
9.9 Survival Upon Unenforceability....................................... 70
9.10 Amendments; Waivers.................................................. 70
9.11 Controlling Agreement................................................ 70
9.12 Disposition of Collateral............................................ 71
9.13 Indemnification...................................................... 71
9.14 Confidentiality...................................................... 72
9.15 GOVERNING LAW........................................................ 72
9.16 JURISDICTION AND VENUE............................................... 72
9.17 WAIVER OF RIGHTS TO JURY TRIAL....................................... 73
9.18 ENTIRE AGREEMENT..................................................... 73
9.19 Counterparts......................................................... 73
LIST OF SCHEDULES
Schedule 1 - Permitted Indebtedness
Schedule 4.9 - Liabilities and Litigation
Schedule 4.12 - Environmental Matters
Schedule 4.16 - Refunds
Schedule 4.17 - Gas Contracts
Schedule 4.19 - Casualties
Schedule 4.21 - Subsidiaries
Schedule 6.13 - Plan Obligations
Schedule 9.4 - Notice Information for Lenders and Applicable Lending Offices
LIST OF EXHIBITS
Exhibit A - Form of Borrowing Request
Exhibit B - Form of Compliance Certificate
Exhibit C - Form of Lender Assignment Agreement
Exhibit D - Form of Mortgage
Exhibit E - Form of Notes
Exhibit F - Form of Notice of Conversion or Continuation
Exhibit G - Form of Security Agreement
Exhibit H - Form of Security Agreements (Stock Pledge)
Exhibit I - Form of Transfer Letters
Exhibit J-1 - Form of Opinion of In-House Counsel
Exhibit J-2 - Form of Opinion of Outside Counsel
Exhibit K - Form of Guaranty
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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This THIRD AMENDED AND RESTATED CREDIT AGREEMENT is made and entered into
this 31st day of December, 2003, by and among EDGE PETROLEUM CORPORATION, a
Delaware corporation ("Parent"), EDGE PETROLEUM EXPLORATION COMPANY, a Delaware
corporation ("Edge Exploration"), EDGE PETROLEUM OPERATING COMPANY, INC., a
Delaware corporation, ("Edge Operating"), ▇▇▇▇▇▇ EXPLORATION COMPANY, a Delaware
corporation ("▇▇▇▇▇▇ Exploration"), ▇▇▇▇▇▇ OIL CORPORATION, a Michigan
corporation ("▇▇▇▇▇▇ Operating" and, together with the Parent, Edge Exploration,
Edge Operating, and ▇▇▇▇▇▇ Exploration, referred to collectively as the
"Borrowers"), the lenders named herein ("Lenders"), and UNION BANK OF
CALIFORNIA, N.A., a national banking association, as agent for the Lenders
("Agent").
WITNESSETH:
A. The Parent and Edge Exploration are parties to that certain Second
Amended and Restated Credit Agreement dated as of October 6, 2000 among the
Parent, Edge Exploration, the lenders party thereto ("Existing Lenders"), and
the Agent, as agent for the Existing Lenders, as amended by (i) the Amendment
No. 1 and Waiver dated as of November 21, 2001, (ii) the Amendment No. 2 to
Second Amended and Restated Credit Agreement dated as of ▇▇▇, ▇▇, ▇▇▇▇, (▇▇▇)
the Amendment No. 3 to Second Amended and Restated Credit Agreement dated as of
August 8, 2002, (iv) the Amendment No. 4 to Second Amended and Restated Credit
Agreement dated as of April 21, 2003, and (v) Amendment No. 5 to Second Amended
and Restated Credit Agreement dated as of September 30, 2003 (as so amended the
"Existing Credit Agreement").
B. In order to secure the full and punctual payment and performance of the
loans under the Existing Credit Agreement, the Parent and Edge Exploration have
executed and delivered mortgages, collateral assignments, security agreements
and financing statements in favor of the Agent (or in favor of any predecessors
in such capacity) (collectively, the "Existing Security Documents") granting a
mortgage lien and continuing security interest in and to the collateral
described in such Existing Security Documents.
C. On December 4, 2003, pursuant to the terms of that certain Agreement and
Plan of Merger dated as of May 28, 2003, among the Parent, Edge Delaware Sub
Inc., a Delaware corporation ("Merger Sub"), and ▇▇▇▇▇▇ Exploration (the "Merger
Agreement"), Merger Sub merged with and into ▇▇▇▇▇▇ Exploration with ▇▇▇▇▇▇
Exploration surviving such merger as a wholly-owned subsidiary of Parent and the
sole shareholder of ▇▇▇▇▇▇ Operating (the "▇▇▇▇▇▇ Merger").
D. The Parent, Edge Exploration, Edge Operating, the Agent and the Existing
Lenders have agreed to amend and restate, and ▇▇▇▇▇▇ Operating and ▇▇▇▇▇▇
Exploration have agreed to join in as borrowers under, the Existing Credit
Agreement, the loans under the Existing Credit Agreement, and the Existing
Security Documents effective upon the Closing Date.
Now, therefore, the Borrowers, the Agent and the Existing Lenders, and the
other Lenders party hereto, do hereby agree that the Existing Credit Agreement
is amended and
restated in its entirety as follows and the Existing Note (as defined below) is
amended and restated to provide as stated in the Notes (as defined below):
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Agreement, each of the terms
defined above shall have the meanings assigned to such terms.
1.2 Additional Defined Terms. As used in this Agreement, each of the
following terms shall have the meaning assigned thereto in this Section, unless
the context otherwise requires:
"Acceptable Security Interest" in any Property means a Lien (a) which
exists in favor of the Agent for the benefit of itself, the Lenders, and the
Swap Counterparties, (b) which is superior to all other Liens (other than
Permitted Liens), (c) which secures the Obligations, and (d) which is perfected
and enforceable against all Persons in preference to any rights of any Person
therein (other than Permitted Liens).
"Adjusted LIBO Rate" shall mean, for any LIBO Rate Loan, an interest rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined
by the Agent to be equal to the sum of the LIBO Rate for such Loan plus the
Applicable Margin, but in no event exceeding the Highest Lawful Rate.
"Affiliate" shall mean any Person directly or indirectly controlling, or
under common control with, any Borrower and includes any Subsidiary of any
Borrower and any "affiliate" of any Borrower within the meaning of Reg. Section
240.12b-2 of the Securities Exchange Act of 1934, as amended, with "control," as
used in this definition, meaning possession, directly or indirectly, of the
power to direct or cause the direction of management, policies or action through
ownership of voting securities, contract, voting trust, or membership in
management or in the group appointing or electing management or otherwise
through formal or informal arrangements or business relationships.
"Agreement" shall mean this Third Amended and Restated Credit Agreement, as
it may be amended, supplemented, restated or otherwise modified from time to
time.
"Applicable Lending Office" shall mean, for each Lender and type of Loan,
the lending office of such Lender (or an affiliate of such Lender) designated
for such type of Loan on Schedule 9.4 hereof or such other office of such Lender
(or an affiliate of such Lender) as such Lender may from time to time specify to
the Agent and the Borrowers as the office by which Loans of such type are to be
made and maintained.
"Applicable Margin" shall mean (a) as to each LIBO Rate Loan, 2.25% and (b)
as to each Floating Rate Loan, 0.50%.
"Borrowing" means, subject to Section 2.22(c), a borrowing consisting of
simultaneous Loans of the same type made by each Lender pursuant to Section
2.2(a), Continued by each
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Lender pursuant to Section 2.2(b), or Converted by each Lender to Loans of a
different type pursuant to Section 2.2(b).
"Borrowing Base" shall mean, at any time, the amount determined by the
Lenders in accordance with Section 2.10 and then in effect.
"Borrowing Base Deficiency" shall mean the excess at any time of (a) the
sum of the Loan Balance and the L/C Exposure over (b) the lesser of (i) the
aggregate Commitments and (ii) the Borrowing Base.
"Borrowing Request" shall mean each written request, in substantially the
form attached hereto as Exhibit A, by a Borrower to the Agent for a Borrowing
pursuant to Section 2.2(a).
"Business Day" shall mean (a) for all purposes other than as covered by
clause (b) of this definition, a day other than a Saturday, Sunday, legal
holiday for commercial banks under the laws of the State of Texas, or any other
day when banking is suspended in the State of Texas, and (b) with respect to all
requests, notices, and determinations in connection with, and payments of
principal and interest on, LIBO Rate Loans, a day which is a Business Day
described in clause (a) of this definition and which is a day for trading by and
between banks for Dollar deposits in the London interbank market.
"Cash Collateral Account" means a special cash collateral account pledged
to the Agent containing cash deposited pursuant to Sections 7.2(a)(iv),
7.2(b)(iv) or 2.11(b)(iii), to be maintained with the Agent in accordance with
Section 2.3(g) through Section 2.3(i).
"Change in Control" shall mean the occurrence of any of the following: (a)
the acquisition by any Person, or two or more Persons acting in concert (other
than members of the senior management of the Parent), of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange Commission
under the Securities Exchange Act of 1934) of 50% or more of the outstanding
shares of voting stock of the Parent, or (b) except due to a merger permitted by
Section 6.10, (i) the Parent ceases to directly or indirectly own 100% of the
issued and outstanding shares of voting stock of Edge Exploration, (ii) the
Parent ceases to directly or indirectly own 100% of the issued and outstanding
shares of voting stock of ▇▇▇▇▇▇ Exploration, or (iii) Edge Exploration ceases
to directly or indirectly own 100% of the issued and outstanding shares of
voting stock of Edge Operating.
"Closing Date" shall mean the date of this Agreement.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean the Mortgaged Properties, Cash Collateral Accounts,
and any other Property now or at any time used or intended as security for the
payment or performance of all or any portion of the Obligations (subject to the
provisions of Section 7.3) that is subject to a Security Instrument.
"Commitment" shall mean, for each Lender, the amount set opposite such
Lender's name on the signature pages of this Agreement as its Commitment or, if
such Lender has entered into
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any Lender Assignment Agreement after the date of this Agreement, the amount set
forth for such Lender as its Commitment in the Register maintained by the Agent
pursuant to Section 9.1(c), as such amount may be reduced pursuant to Section
2.12.
"Commitment Fee" shall mean each fee payable to the Agent for the benefit
of the Lenders by the Borrowers pursuant to Section 2.13.
"Commitment Period" shall mean the period from and including the Closing
Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean the earlier to occur of (a) the
Final Maturity Date and (b) the earlier termination in whole of the Commitments
pursuant to Section 2.12 or Section 7.2.
"Commonly Controlled Entity" shall mean any Person which is under common
control with any Borrower within the meaning of Section 4001 of ERISA.
"Compliance Certificate" shall mean each certificate, substantially in the
form attached hereto as Exhibit B, executed by a Responsible Officer of the
Parent and furnished to the Agent and the Lenders from time to time in
accordance with Section 5.2.
"Contingent Obligation" shall mean, as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends, or other obligations of any other Person (for purposes of this
definition, a "primary obligation") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
regardless of whether such obligation is contingent, (a) to purchase any primary
obligation or any Property constituting direct or indirect security therefor,
(b) to advance or supply funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working or equity capital of any other Person in
respect of any primary obligation, or otherwise to maintain the net worth or
solvency of any other Person, (c) to purchase Property, securities or services
primarily for the purpose of assuring the owner of any primary obligation of the
ability of the Person primarily liable for such primary obligation to make
payment thereof, or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss in respect thereof, with the amount of any
Contingent Obligation being deemed to be equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof as determined by such Person in good faith.
"Continue", "Continuation", and "Continued" each refers to a continuation
of Loans for an additional Interest Period upon the expiration of the Interest
Period then in effect for such Loans.
"Convert", "Conversion", and "Converted" each refers to a conversion of a
LIBO Rate Loan into a Floating Rate Loan or the conversion of a Floating Rate
Loan into a LIBO Rate Loan pursuant to Section 2.2(b).
"Default" shall mean any event or occurrence which with the lapse of time
or the giving of notice or both would become an Event of Default.
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"Default Rate" shall mean a per annum interest rate equal to the Reference
Rate plus five percent (5%), but in no event exceeding the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"EBITDAX" shall mean, for any period, (a) Net Income for such period plus
(b) to the extent deducted in determining Net Income, Interest Expense, taxes
accrued or provided for, depreciation, depletion, amortization, other similar
non-cash items, and exploration and abandonment expenses, in each case for such
period.
"Engineering Report" means either an Independent Engineering Report or an
Internal Engineering Report.
"Environmental Complaint" shall mean any written or oral complaint, order,
directive, claim, citation, notice of environmental report or investigation, or
other notice by any Governmental Authority with respect to (a) air emissions,
(b) spills, releases, or discharges to soils, any improvements located thereon,
surface water, groundwater, or the sewer, septic, waste treatment, storage, or
disposal systems servicing any Property of any Borrower, (c) solid or liquid
waste disposal, (d) the use, generation, storage, transportation, or disposal of
any Hazardous Substance, or (e) other environmental, health, or safety matters
affecting any Property of any Borrower or the business conducted thereon.
"Environmental Laws" shall mean (a) the following federal laws as they may
be cited, referenced, and amended from time to time: the Clean Air Act, the
Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of any Borrower
is situated, as they may be cited, referenced and amended from time to time; (c)
any rules or regulations promulgated under or adopted pursuant to the above
federal and state laws; and (d) any other equivalent foreign, federal, state, or
local statute or any requirement, rule, regulation, code, ordinance, or order
adopted pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal, handling,
or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations thereunder and interpretations
thereof.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control or treated as a single employer with any Borrower, any
Guarantor, or any of their Subsidiaries, within the meaning of Section 414(b),
(c), (m) or (o) of the Code.
"ERISA Event" means (a) a reportable event described in Section 4043(b) or
4043(c)(1), (2), (3), (5), (6), (8), (9), or (13) of ERISA with respect to a
Title IV Plan or a Multiemployer Plan, (b) the withdrawal of any Borrower, any
Guarantor, or any of their Subsidiaries or any ERISA Affiliate from a Title IV
Plan subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the
complete
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or partial withdrawal of any Borrower, any Guarantor, or any of their
Subsidiaries or any ERISA Affiliate from any Multiemployer Plan, (d) notice of
reorganization or insolvency of a Multiemployer Plan, (e) the filing of a notice
of intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA, (f) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC, (g) the failure to
make any required contribution to a Title IV Plan or Multiemployer Plan, (h) the
imposition of a lien under Section 412 of the Code or Section 302 of ERISA on
any Borrower, any Guarantor, or any of their Subsidiaries or any ERISA Affiliate
or (i) any other event or condition that might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or the imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board (or any successor), as in effect from
time to time.
"Event of Default" shall mean any of the events specified in Section 7.1.
"Existing Indebtedness" shall mean the "Obligations" as defined under the
Existing Credit Agreement outstanding as of the Closing Date.
"Existing Note" shall mean that certain Amended and Restated Promissory
Note dated April 21, 2003, in the face amount of up to $40,000,000 made by the
Parent, Edge Exploration and Edge Operating payable to the order of Union Bank
of California, N.A., which note was issued in renewal and replacement of that
certain Promissory Note dated October 6, 2000, in the face amount of up to
$25,000,000 made by the Parent, Edge Exploration and Edge Operating and payable
to the order of Union Bank of California, N.A.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for any such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or any of its successors.
"Final Maturity Date" shall mean December 31, 2006.
"Financial Statements" shall mean statements of the financial condition of
the Parent and its consolidated Subsidiaries on a consolidated and consolidating
basis as at the point in time and for the period indicated and consisting of at
least a balance sheet and related statements of operations, common stock and
other stockholders' equity, and cash flows, and when such statements prepared on
a consolidated basis are required by applicable provisions of this Agreement to
be audited, accompanied by the unqualified certification of a
nationally-recognized firm of independent certified public accountants or other
independent certified public
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accountants acceptable to the Agent and footnotes to any of the foregoing, all
of which shall be prepared in accordance with GAAP consistently applied from
quarter to quarter (except for any inconsistency that results from a change in
GAAP) and consistently applied within each set of Financial Statements and in
comparative form with respect to the corresponding period of the preceding
fiscal period.
"Floating Rate" shall mean an interest rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined by the Agent to be equal to
the sum of the Reference Rate for such Loan plus the Applicable Margin, but in
no event exceeding the Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any portion of the Loan
Balance which a Borrower has requested, in the initial Borrowing Request for
such Loan or a subsequent Borrowing Request for such portion of the Loan
Balance, which bears interest at the Floating Rate, or which pursuant to the
terms hereof is otherwise required to bear interest at the Floating Rate.
"GAAP" shall mean generally accepted accounting principles established by
the Financial Accounting Standards Board or the American Institute of Certified
Public Accountants and in effect in the United States from time to time.
"Governmental Authority" shall mean any nation, country, commonwealth,
territory, government, state, county, parish, municipality, or other political
subdivision and any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining to government.
"Guarantor" means each entity executing a Guaranty.
"Guaranty" means a Guaranty in substantially the form of the attached
Exhibit K and executed by a Guarantor, and "Guaranties" shall mean all such
guaranties collectively.
"Hazardous Substances" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum, petroleum products, associated oil or natural gas exploration,
production, and development wastes, or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes," or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other law or regulation now or hereafter enacted or promulgated by any
Governmental Authority.
"Hedge Agreement" shall mean any agreement, device or arrangement entered
into by one Person with another Person providing for payments which are related
to fluctuations in the prices or rates, including currencies, interest rates,
securities prices and commodity prices, including prices of petroleum (or any
fraction thereof), natural gas, or natural gas liquids (including, but not
limited to, swaps, caps, collars, options, puts, calls, futures and forward
contracts).
-7-
"Hedging Obligations" of a Person means all obligations of such Person
under forward sales arrangements, calls, options, swaps, or other similar
transactions or any combination thereof, including any right or obligation to
purchase, sell or deliver any currency, commodity or security at a future date
for a specified price entered into to protect such Person from fluctuations in
prices or rates, including currencies, interest rates, commodity prices, and
securities prices.
"Highest Lawful Rate" shall mean the maximum non-usurious interest rate, if
any (or, if the context so requires, an amount calculated at such rate), that at
any time or from time to time may be contracted for, taken, reserved, charged,
or received under applicable laws of the State of Texas or the United States of
America, whichever authorizes the greater rate, as such laws are presently in
effect or, to the extent allowed by applicable law, as such laws may hereafter
be in effect and which allow a higher maximum non-usurious interest rate than
such laws now allow.
"Hydrocarbons" means oil, gas, coal seam gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, and all other liquid and
gaseous hydrocarbons produced or to be produced in conjunction therewith from a
well bore and all products, by-products, and other substances derived therefrom
or the processing thereof, and all other minerals and substances produced in
conjunction with such substances, including, but not limited to, sulfur,
geothermal steam, water, carbon dioxide, helium, and any and all minerals, ores,
or substances of value and the products and proceeds therefrom.
"Indebtedness" shall mean, as to any Person, without duplication, (a) all
liabilities (excluding reserves for deferred income taxes, deferred compensation
liabilities, and other deferred liabilities and credits) which in accordance
with GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet, (b) all obligations of such Person evidenced
by bonds, debentures, promissory notes, or similar evidences of indebtedness,
(c) all other indebtedness of such Person for borrowed money, (d) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services (other than trade payables, which include amounts owed to
drilling contractors, entered into in the ordinary course of business on
ordinary terms); (e) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in either
case with respect to property acquired by the Person (even though the rights and
remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property) including, without limitation,
production payments, net profit interests and other hydrocarbon interests
subject to repayment out of future oil and gas production; (f) all obligations
with respect to capital leases; (g) all Hedging Obligations; and (h) all
obligations, including Contingent Obligations of others, to the extent any such
obligation is secured by a Lien on the assets of such Person (whether or not
such Person has assumed or become liable for the obligation secured by such
Lien).
"Independent Engineering Report" means a report, in form and substance
reasonably satisfactory to the Agent, prepared by a nationally or regionally
recognized independent consulting petroleum engineers that the Parent has
engaged with the Agent's consent, such consent not to be unreasonably withheld,
addressed to the Agent and the Lenders with respect to the Oil and Gas
Properties owned by the Borrowers or the Guarantors (or to be acquired by the
Borrowers or the Guarantors) which are or are to be included in the Borrowing
Base, which report shall (a) specify the location, quantity, and type of the
estimated Proven Reserves
-8-
attributable to such Oil and Gas Properties, (b) contain a projection of the
rate of production of such Oil and Gas Properties, (c) contain an estimate of
the net operating revenues to be derived from the production and sale of
Hydrocarbons from such Proven Reserves based on product price and cost
escalation assumptions reasonably estimated by the Agent and the Lenders, and
(d) contain such other information as is customarily obtained from and provided
in such reports or is otherwise reasonably requested by the Agent.
"Insolvency Proceeding" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or of all
or a substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a case
under Title 11 of the United States Code, seeking liquidation, reorganization,
or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's
relief, or other similar law of the United States, the State of Texas, or any
other jurisdiction.
"Intellectual Property" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
"Interest Expense" shall mean, for any relevant accounting period, the sum
of (a) gross interest expense (including all cash and accrued interest expense)
of the Parent and its consolidated Subsidiaries on a consolidated basis for that
period, including (i) the amortization of debt discounts, (ii) the amortization
of all fees payable in connection with the issuance of debt, to the extent
included in interest expense, and (iii) the portion of any payments or accruals
with respect to capital leases allocable to interest expense and (b) capitalized
interest of the Parent and its consolidated Subsidiaries on a consolidated
basis.
"Interest Period" shall mean, for each LIBO Rate Loan comprising part of
the same Borrowing, the period commencing on the date of such LIBO Rate Loan or
the date of the Conversion of any Floating Rate Loan into a LIBO Rate Loan and
ending on the last day of the period selected by a Borrower pursuant to the
provisions below and Section 2.2 and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by a Borrower pursuant to the
provisions below and Section 2.2. The duration of each such Interest Period
shall be one, two, three, or, subject to availability, six months, in each case
as a Borrower may, upon notice received by the Agent not later than 10:00 a.m.
(Dallas, Texas time) on the third Business Day prior to the first day of such
Interest Period select; provided, however, that:
(a) Interest Periods commencing on the same date for Loans comprising part
of the same Borrowing shall be of the same duration;
(b) no Borrower may select any Interest Period which ends after the Final
Maturity Date;
(c) whenever the last day of any Interest Period would otherwise occur on a
day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, provided that if such
extension would cause the last day of such
-9-
Interest Period to occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding Business Day; and
(d) any Interest Period which 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) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month.
"Internal Engineering Report" means a report, in form and substance
reasonably satisfactory to the Agent, prepared by the Borrowers and certified by
a Responsible Officer of a Borrower, addressed to the Agent and the Lenders with
respect to the Oil and Gas Properties owned by any of the Borrowers or the
Guarantors (or to be acquired by any Borrower or the Guarantors) which are or
are to be included in the Borrowing Base, which report shall (a) specify the
location, quantity, and type of the estimated Proven Reserves attributable to
such Oil and Gas Properties, (b) contain a projection of the rate of production
of such Oil and Gas Properties, (c) contain an estimate of the net operating
revenues to be derived from the production and sale of Hydrocarbons from such
Proven Reserves based on product price and cost escalation assumptions
reasonably estimated by the Agent and the Lenders, and (d) contain such other
information as is customarily obtained from and provided in such reports or is
otherwise reasonably requested by the Agent.
"L/C Exposure" shall mean, at any time, the sum of (a) the aggregate
undrawn maximum face amount of each Letter of Credit at such time and (b) the
aggregate unpaid amount of all Reimbursement Obligations owing with respect to
such Letters of Credit at such time minus the amount of any cash collateral held
by the Agent in the Cash Collateral Account at such time.
"Lender Assignment Agreement" shall mean the assignment agreement entered
into by a Lender and an Assignee Lender, and accepted by the Agent, in
substantially the form of the attached Exhibit C.
"Letter of Credit" shall mean any standby letter of credit issued by the
Agent for the account of a Borrower pursuant to Section 2.3.
"Letter of Credit Application" shall mean the standard letter of credit
application employed by the Agent as the issuer of the Letters of Credit, from
time to time, in connection with Letters of Credit.
"Letter of Credit Fee" shall mean each fee payable by the Borrowers to the
Agent for the account of the Lenders pursuant to Section 2.16 upon or in
connection with the issuance or renewal of each Letter of Credit.
"LIBO Rate" shall mean, with respect to any Interest Period for any LIBO
Rate Loan, the lesser of (a) the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) set forth on the applicable Telerate Page as the
London Interbank Offered Rate for deposits in Dollars at 11:00 a.m., (London,
England time) two Business Days prior to the first day of such Interest Period,
in the case of any LIBO Rate Loan and for a period equal to such Interest
Period, and (b) the Highest Lawful Rate. If no such quotation appears on the
applicable Telerate Page, the term "LIBO Rate" shall mean, with respect to any
Interest Period for any LIBO Rate Loan,
-10-
the lesser of (i) the rate per annum (rounded upwards if necessary, to the
nearest 1/100 of 1%) quoted by the Agent at approximately 11:00 a.m., London
time (or as soon thereafter as practicable) two Business Days prior to the first
day of the Interest Period for such LIBO Rate Loan for the offering by the Agent
to leading banks in the London interbank market of Dollar deposits in an amount
substantially equal to the principal amount of such LIBO Rate Loan and having a
period equal to the Interest Period for such LIBO Rate Loan, and (ii) the
Highest Lawful Rate.
"LIBO Rate Loan" shall mean any Loan and any portion of the Loan Balance
which a Borrower has requested, in the initial Borrowing Request for such Loan
or a subsequent Borrowing Request for such portion of the Loan Balance, bearing
interest at the Adjusted LIBO Rate and which is permitted by the terms hereof to
bear interest at the Adjusted LIBO Rate.
"LIBO Rate Reserve Percentage" of any Lender for the Interest Period for
any LIBO Rate Loan means the reserve percentage applicable during such Interest
Period (or if more than one such percentage shall be so applicable, the daily
average of such percentages for those days in such Interest Period during which
any such percentage shall be so applicable) under regulations issued from time
to time by the Federal Reserve Board for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental, or
other marginal reserve requirement) for such Lender with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities having a term
equal to such Interest Period.
"Lien" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of such Property, whether such
interest is based on common law, statute, or contract, and including, but not
limited to, the lien or security interest arising from a deed of trust, trust
deed, mortgage, ship mortgage, encumbrance, pledge, security agreement,
conditional sale or trust receipt, or a lease, consignment, or bailment for
security purposes (other than true leases or true consignments), liens of
mechanics, materialmen, and artisans, maritime liens and reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
Property. For the purpose of this Agreement, a Borrower shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, financing lease, or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person
for security purposes), and the filing or recording of any financing statement
or other security instrument in any public office.
"Limitation Period" shall mean any period while any amount remains owing on
the Notes and interest on such amount, calculated at the applicable interest
rate, plus any fees or other sums payable under any Loan Document and deemed to
be interest under applicable law, would exceed the amount of interest which
would accrue at the Highest Lawful Rate.
-11-
"Liquid Investment" shall mean:
(a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States;
(b) (i) negotiable or nonnegotiable certificates of deposit, time deposits,
or other similar banking arrangements maturing within 180 days from the date of
acquisition thereof ("bank debt securities"), issued by (A) any Lender (or any
Affiliate of any Lender) or (B) any other bank or trust company which has a
combined capital surplus and undivided profit of not less than $500,000,000, if
at the time of deposit or purchase, such bank debt securities are rated not less
than "A" (or the then equivalent) by the rating service of Standard & Poor's
Ratings Group or of ▇▇▇▇▇'▇ Investors Service, and (ii) commercial paper issued
by (A) any Lender (or any Affiliate of any Lender) or (B) any other Person if at
the time of purchase such commercial paper is rated not less than "A-2" (or the
then equivalent) by the rating service of Standard & Poor's Ratings Group or not
less than "P-2" (or the then equivalent) by the rating service of ▇▇▇▇▇'▇
Investors Service, or upon the discontinuance of both of such services, such
other nationally recognized rating service or services, as the case may be, as
shall be selected by a Borrower with the consent of the Required Lenders;
(c) repurchase agreements relating to investments described in clauses (a)
and (b) above with a market value at least equal to the consideration paid in
connection therewith, with any Person who regularly engages in the business of
entering into repurchase agreements and has a combined capital surplus and
undivided profit of not less than $500,000,000, if at the time of entering into
such agreement the debt securities of such Person are rated not less than "A"
(or the then equivalent) by the rating service of Standard & Poor's Ratings
Group or of ▇▇▇▇▇'▇ Investors Service; and
(d) such other instruments (within the meaning of Article 9 of the Uniform
Commercial Code as adopted in the State of Texas) as a Borrower may request and
the Required Lenders may approve in writing, which approval will not be
unreasonably withheld.
"Loan" shall mean any loan made by any Lender to or for the benefit of a
Borrower pursuant to this Agreement.
"Loan Balance" shall mean, at any time, the aggregate outstanding principal
balance of the Notes at such time.
"Loan Documents" shall mean the this Agreement, the Notes, any Letter of
Credit Applications, any Letters of Credit, the Security Instruments, Hedge
Agreements entered into between a Borrower and a Swap Counterparty and all other
documents and instruments now or hereafter executed by a Borrower or a Guarantor
and delivered as required under any Loan Document, and all renewals and
extensions of, amendments and supplements to, and restatements of, any or all of
the foregoing from time to time in effect.
"Material Adverse Effect" shall mean (a) a material adverse change in the
business, assets, financial condition, or results of operations of a Borrower or
any of its Subsidiaries since the date of the Financial Statements, or (b) the
occurrence and continuance of any event or circumstance which could reasonably
be expected to have a material adverse effect on a
-12-
Borrower's ability to perform its obligations under this Agreement, any Note,
any Guaranty or any other Loan Document.
"Mortgage" means each mortgage or deed of trust executed by any Borrower or
Guarantor in favor of the Agent in substantially the form of the attached
Exhibit D or such other form acceptable to the Agent, and "Mortgages" shall mean
all such mortgages collectively.
"Mortgaged Properties" shall mean all Oil and Gas Properties of a Borrower
or a Guarantor subject to a Mortgage and granted as security for the Obligations
(subject to the provisions of Section 7.3).
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which any Borrower, any Guarantor, or any of their
Subsidiaries or any ERISA Affiliate has any obligation or liability, contingent
or otherwise.
"Net Income" shall mean, for any relevant accounting period, the net income
of the Parent and its consolidated Subsidiaries on a consolidated basis for such
period, determined in accordance with GAAP.
"Notes" shall mean, collectively, each of the promissory notes of the
Borrowers, each of which shall be in part a renewal, extension and modification,
but not a discharge or novation, of the Existing Note and shall be in the form
attached hereto as Exhibit E, together with all renewals, extensions for any
period, increases, and rearrangements thereof.
"Notice of Conversion or Continuation" means a notice of conversion or
continuation in the form of the attached Exhibit F, executed by a Responsible
Officer of the applicable Borrower.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Notes, (b) the undrawn, unexpired amount of all outstanding
Letters of Credit, (c) the obligation of the Borrowers for the payment of
Commitment Fees, and Letter of Credit Fees, (d) all Reimbursement Obligations,
(e) all Hedging Obligations of the Borrowers, the Guarantors, and their
Subsidiaries to Swap Counterparties and (f) all other obligations and
liabilities of the Borrowers and of the Guarantors to the Agent and/or the
Lenders, now existing or hereafter incurred, under, arising out of or in
connection with any Loan Document, and to the extent that any of the foregoing
includes or refers to the payment of amounts deemed or constituting interest,
only so much thereof as shall have accrued, been earned and which remains unpaid
at each relevant time of determination.
"Oil and Gas Properties" shall mean fee, leasehold, or other interests in
or under mineral estates or oil, gas, and other liquid or gaseous hydrocarbon
leases with respect to Properties situated in the United States or offshore from
any State of the United States, including, without limitation, overriding
royalty and royalty interests, leasehold estate interests, net profits
interests, production payment interests, and mineral fee interests, together
with contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Properties appertaining, belonging, affixed, or
incidental thereto, and also including all unsevered and unextracted
Hydrocarbons in, under, or attributable to such oil and gas Properties and
interests.
-13-
"Parent" shall have the meaning given such term in the first paragraph of
this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Percentage Share" shall mean, as to each Lender, the percentage such
Lender's Commitment constitutes of the aggregate Commitments.
"Permitted Indebtedness" shall mean each of the following:
(a) Indebtedness arising from endorsing negotiable instruments for deposit
or collection in the ordinary course of business;
(b) current liabilities incurred in the ordinary course of business;
(c) purchase money Indebtedness which does not exceed an aggregate
principal amount of $1,000,000 during the term of this Agreement;
(d) Indebtedness existing on the Closing Date as disclosed on Schedule 1
hereof, such Indebtedness existing by virtue of the requirements of GAAP or
obligations existing on the Closing Date which may at any time hereafter become
Indebtedness by virtue of any changes in the requirements of GAAP;
(e) performance guarantees and performance surety or other bonds provided
in the ordinary course of business;
(f) trade credit incurred or operating leases entered into in the ordinary
course of business; and
(g) Indebtedness owing to any Borrower or Guarantor, so long as such
Indebtedness is subordinated pursuant to terms satisfactory to the Agent.
"Permitted Liens" shall mean (a) Liens for taxes, assessments, or other
governmental charges or levies not yet due or which (if foreclosure, distraint,
sale, or other similar proceedings shall not have been initiated) are being
contested in good faith by appropriate proceedings, and such reserve as may be
required by GAAP shall have been made therefor, (b) Liens in connection with
workers' compensation, unemployment insurance or other social security (other
than Liens created by Section 4068 of ERISA), old-age pension, or public
liability obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by GAAP
shall have been made therefor, (c) Liens in favor of vendors, carriers,
warehousemen, repairmen, mechanics, workmen, materialmen, construction, or
similar Liens arising by operation of law in the ordinary course of business in
respect of obligations which are not yet due or which are being contested in
good faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (d) Liens in favor of operators and
non-operators under joint operating agreements or similar contractual
arrangements arising in the ordinary course of the business of any Borrower to
secure amounts owing, which amounts are not yet due or are being contested in
good faith by
-14-
appropriate proceedings, if such reserve as may be required by GAAP shall have
been made therefor, (e) Liens under production sales agreements, division
orders, operating agreements, and other agreements customary in the oil and gas
business for processing, producing, and selling Hydrocarbons securing
obligations not constituting Indebtedness and provided that such Liens do not
secure obligations to deliver or sell Hydrocarbons at some future date without
receiving full payment therefor within 90 days of delivery, (f) easements,
rights of way, restrictions, and other similar encumbrances, and minor defects
in the chain of title which are customarily accepted in the oil and gas
financing industry, none of which materially interfere with the ordinary conduct
of the business of any Borrower or materially detract from the value or use of
the Property to which they apply, (g) liens granted to secure purchase money
indebtedness which does not exceed the amount described in the definition of
Permitted Indebtedness, (h) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of like nature
incurred in the ordinary course of business; (i) Liens arising by reason of any
judgment or order of any Governmental Authority if (A) appropriate legal
proceedings for the review of such judgment or order are being diligently
prosecuted and execution or enforcement thereof is stayed pending appeal and (B)
such judgment or order does not constitute an Event of Default under Section
7.1(g); (j) royalties, overriding royalties, net profits interests, production
payments, reversionary interests, calls on production, preferential purchase
rights and other burdens on or deductions from the proceeds of production, that
do not secure Indebtedness and that are taken into account in computing the net
revenue interests and working interests of the Borrowers or any of its
Subsidiaries warranted in the Security Instruments; (k) operating agreements,
unitization and pooling agreements and orders, farmout agreements, gas balancing
agreements and other agreements, in each case that are customary in the oil, gas
and mineral production business and that are entered into in the ordinary course
of business that are taken into account in computing the net revenue interests
and working interests of the Borrower or any of its Subsidiaries warranted in
the Security Instruments and only to the extent that any such Lien referred to
in this clause does not materially impair the use of the Property covered by
such Lien for the purposes for which such Property is held by the Borrower or
any Subsidiary or materially impair the value of such Property subject thereto;
and (l) Liens in favor of the Agent for the benefit of the Agent, the Lenders
and the Swap Counterparties.
"Permitted Negative Pledge" shall mean any restriction (a) ineffective
pursuant to Section 4.06 through 4.09 of the UCC or similar applicable
provisions of other jurisdictions, (b) in agreements with respect to item (g) in
the definition of "Permitted Liens" to the extent such restrictions restrict
only the property subject to such Permitted Liens, (c) that restricts in a
customary manner the subletting, assignment or transfer of any property or asset
that is subject to a lease, license or similar contract (other than a lease,
license, or similar contract covering or related to any Oil and Gas Property of
any Borrower, any Guarantor, or any of their Subsidiaries), or the assignment or
transfer of any such lease, license or other contract (other than a lease,
license, or similar contract covering or related to any Oil and Gas Property of
any Borrower, any Guarantor, or any of their Subsidiaries), (c) any restriction
with respect to a Borrower or Guarantor (or any of its property or assets)
imposed pursuant to an agreement entered into for the direct or indirect sale or
disposition of assets (including the capital stock or assets of such Person )
(or the property or assets that are subject to such restrictions) pending the
closing of such sale or disposition, and (e) arising or existing by reason of
applicable law or any applicable rule, regulation or order of a Governmental
Authority.
-15-
"Person" shall mean an individual, corporation, limited liability company,
partnership, trust, unincorporated organization, government, any agency or
political subdivision of any government, or any other form of entity.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Proven Reserves" means, at any particular time, the estimated quantities
of Hydrocarbons which geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
attributable to Oil and Gas Properties included or to be included in the
Borrowing Base under then existing economic and operating conditions (i.e.,
prices and costs as of the date the estimate is made).
"Reference Rate" means a fluctuating interest rate per annum as shall be in
effect from time-to-time equal to the rate of interest publicly announced by
Union Bank of California, N.A., as its reference rate, whether or not any
Borrower has notice thereof.
"Register" has the meaning set forth in Section 9.1(d).
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be amended or supplemented from time to
time.
"Reimbursement Obligations" means all of the obligations of the Borrowers
set forth in Section 2.3(d).
"Release of Hazardous Substances" shall mean any emission, spill, release,
disposal, or discharge (except in accordance with the Requirement of Law or
pursuant to a valid permit, license, certificate, or approval of the relevant
Governmental Authority) of any Hazardous Substance into or upon (a) the air, (b)
soils or any improvements located thereon, (c) surface water or groundwater, or
(d) the sewer or septic system, or the waste treatment, storage, or disposal
system servicing any Property of any Borrower.
"Required Lenders" shall mean, at any time, Lenders holding at least 67% of
the then Loan Balance and the L/C Exposure of the Lenders at such time, or, if
there is no Loan Balance and no L/C Exposure is outstanding at such time,
Lenders having at least 67% of the aggregate amount of the Commitments at such
time.
"Requirement of Law" shall mean, as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any applicable law, treaty, ordinance, order,
judgment, rule, decree, regulation, or determination of an arbitrator, court, or
other Governmental Authority, including, without limitation, rules, regulations,
orders, and requirements for permits, licenses, registrations, approvals, or
authorizations, in each case as such now exist or may be hereafter amended and
are applicable to or binding upon such Person or any of its Property or to which
such Person or any of its Property is subject.
"Responsible Officer" shall mean, as to any Person, its President, Chief
Executive Officer, Chief Financial Officer or any Vice President.
-16-
"Restricted Payment" shall mean, with respect to any Person, (a) any
dividends or other distributions (in cash, property, or otherwise) on, or any
payment for the purchase, redemption, or other acquisition of, any shares of any
capital stock or other equity interests (including partnership interests and
membership interests) of such Person, or any options, warrants or rights to
purchase or acquire any such equity interest of such Person, other than
dividends payable solely in such Person's stock, other equity interests or
options, warrants or rights to purchase or acquire the equity interest of such
Person, or (b) principal or interest payments (in cash, property or otherwise)
on or redemptions of subordinated debt of such Person.
"Security Agreement" shall mean security agreements executed by any
Borrower or Guarantor in favor of the Agent in substantially the form of the
attached Exhibit G or such other form acceptable to the Agent and granting a
security interest in certain personal property of such Borrower or Guarantor.
"Security Agreement (Stock Pledge)" shall mean security agreements executed
by any Borrower in favor of the Agent in substantially the form of the attached
Exhibit H or such other form acceptable to the Agent and pledging equity
interest in a Person and certain other personal property related thereto.
"Security Instruments" shall mean the Existing Security Documents, the
security instruments executed and delivered in satisfaction of the condition set
forth in Section 3.1(a)(vi), and all other documents and instruments at any time
executed as security for all or any portion of the Obligations (subject to the
provisions of Section 7.3), as such instruments may be amended, restated, or
supplemented from time to time.
"Stock" means shares of capital stock (whether denominated as common stock
or preferred stock), beneficial, partnership or membership interests,
participations or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity,
whether voting or non-voting.
"Subsidiary" of a Person shall mean any corporation, association,
partnership or other business entity of which more than 50% of the outstanding
shares of capital stock (or other equivalent interests) having by the terms
thereof ordinary voting power under ordinary circumstances to elect a majority
of the board of directors or Persons performing similar functions (or, if there
are no such directors or Persons, having general voting power) of such entity
(irrespective of whether at the time capital stock (or other equivalent
interests) of any other class or classes of such entity shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more
Subsidiaries of such Person or by one or more Subsidiaries of such Person.
"Swap Counterparty" shall mean any Lender or an Affiliate of a Lender that
is party to a Hedge Agreement with any Borrower or any Subsidiary of a Borrower.
"Title IV Plan" means a pension plan, other than a Multiemployer Plan,
covered by Title IV of ERISA and to which any Borrower, any Guarantor, or any of
their Subsidiaries or any ERISA Affiliate has any obligation or liability,
contingent or otherwise.
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"Total Indebtedness" of a Person shall mean, at any time, the funded
Indebtedness of the Borrower under, or permitted by, this Agreement at such
time.
"UCC" shall mean the Uniform Commercial Code as from time to time in effect
in the State of Texas.
"Withdrawal Liability" means, with respect to any Borrower, any Guarantor,
or any of their Subsidiaries or any ERISA Affiliate at any time, the aggregate
liability incurred (whether or not assessed) with respect to all Multiemployer
Plans pursuant to Section 4201 of ERISA or for increases in contributions
required to be made pursuant to Section 4243 of ERISA.
1.3 Undefined Financial Accounting Terms. Except as otherwise expressly
provided herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Lenders hereunder shall (unless otherwise
disclosed to the Lenders in writing at the time of delivery thereof) be
prepared, in accordance with GAAP applied on a basis consistent with those used
in the preparation of the latest financial statements furnished to the Lenders
hereunder (except for any inconsistency between quarters resulting from changes
made to GAAP between such quarters). All calculations made for the purposes of
determining compliance with this Agreement shall (except as otherwise expressly
provided herein) be made by application of GAAP applied on a basis consistent
with those used in the preparation of the annual or quarterly financial
statements furnished to the Lenders pursuant to Sections 5.2 and 5.3 hereof most
recently delivered prior to or concurrently with such calculations (except for
any inconsistency between quarters resulting from changes made to GAAP between
such quarters) or, prior to the delivery of the first financial statements under
Sections 5.2 and 5.3 hereof, used in the preparation of the Financial
Statements. In addition, all calculations and defined accounting terms used
herein shall, unless expressly provided otherwise, when referring to any Person,
refer to such Person on a consolidated basis and mean such Person and its
consolidated subsidiaries.
1.4 References. References in this Agreement to Schedule, Exhibit, Article,
or Section numbers shall be to Schedules, Exhibits, Articles, or Sections of
this Agreement, unless expressly stated to the contrary. References in this
Agreement to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," "hereunder" and words of similar import shall be to this Agreement in
its entirety and not only to the particular Schedule, Exhibit, Article, or
Section in which such reference appears.
1.5 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 Number and Gender. Whenever the context requires, reference herein made
to the single number shall be understood to include the plural; and likewise,
the plural shall be understood to include the singular. Definitions of terms
defined in the singular or plural shall be equally applicable to the plural or
singular, as the case may be, unless otherwise indicated. Words denoting sex
shall be construed to include the masculine, feminine and neuter, when such
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construction is appropriate; and specific enumeration shall not exclude the
general but shall be construed as cumulative.
1.7 Computation of Time Periods. In the Loan Documents in the computation
of periods of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding".
1.8 Incorporation of Schedules and Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE II
TERMS OF FACILITY
2.1 Revolving Line of Credit.
(a) Upon the terms and conditions and relying on the representations and
warranties contained in this Agreement, the Lenders severally agree, during the
Commitment Period, to make Loans to the Borrowers, in immediately available
funds, to or for the benefit of the Borrower requesting such Loans, from time to
time on any Business Day designated by such Borrower following receipt by the
Agent of a Borrowing Request from such Borrower in accordance with Section
2.2(a); provided, however, that no Loan shall be made if after giving effect to
such Loan, the sum of the Loan Balance and the L/C Exposure then outstanding,
would exceed the lesser of (i) the aggregate Commitments and (ii) the Borrowing
Base.
(b) Subject to the terms of this Agreement, during the Commitment Period,
the Borrowers may borrow, repay, and reborrow Loans and may Convert Loans of one
type into Loans of another type or Continue Loans with one Interest Period with
a different Interest Period. Except for prepayments made pursuant to Section
2.11, each Borrowing or repayment shall be in an aggregate amount at least equal
to (i) in the case of Floating Loans, $250,000 and in integral multiples of
$50,000 in excess thereof, and (ii) in the case of LIBO Rate Loans, $500,000 and
in integral multiples of $100,000 in excess thereof.
2.2 Method of Borrowing.
(a) Requesting a Loan. Each Loan shall be made pursuant to a Borrowing
Request (or by telephone notice promptly confirmed in writing by a Borrowing
Request), given by such Borrower to the Agent not later than 10:00 a.m., Dallas,
Texas time (i) at least three Business Day before the date of the proposed Loan,
in the case of a LIBO Rate Loan, and (ii) at least one Business Day before the
date of the proposed Loan, in the case of a Floating Rate Loan, by the
applicable Borrower to the Agent. Each Borrowing Request shall be in writing or
by facsimile or telephone, confirmed immediately in writing specifying (v) name
of the Borrower requesting the Loan, (w) the requested date of such Loan (which
shall be a Business Day), (x) whether the requested Loan is a LIBO Rate Loan or
a Floating Rate Loan (y) the requested aggregate amount of such Loan, and (z) if
such Loan is to be a LIBO Rate Loan, the requested Interest Period for such
Loan.
(b) Conversions and Continuations. In order to elect to Convert or Continue
a Loan under this Section, the Borrower requesting such Conversion or
Continuation shall deliver an
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irrevocable Notice of Conversion or Continuation to the Agent (or give telephone
notice promptly confirmed in writing by a Notice of Conversion or Continuation)
not later than 10:00 a.m., Dallas, Texas time (i) at least one Business Day
before the proposed conversion date in the case of a Conversion to a Floating
Rate Loan, and (ii) at least three Business Days in advance of such requested
Conversion or Continuation date in the case of a Conversion to, or a
Continuation of, a LIBO Rate Loan. Each such Notice of Conversion or
Continuation shall be in writing or by facsimile or telephone, confirmed
immediately in writing specifying (v) name of the Borrower requesting the
Conversion or Continuation, (w) the requested date of such Conversion or
Continuation (which shall be a Business Day), (x) the amount of the Loan to be
Converted or Continued and whether such Loan is a LIBO Rate Loan or a Floating
Rate Loan, (y) whether a Conversion or Continuation is requested, and if a
Conversion, into what type of Loan, and (z) in the case of a Conversion to, or a
Continuation of, a LIBO Rate Loan, the requested Interest Period.
(c) Notices Irrevocable. Each Borrowing Request and Notice of Conversion or
Continuation delivered by a Borrower shall be irrevocable and binding on such
Borrower. In the case of any Loan for which the related Borrowing Request or
Notice of Conversion or Continuation specifies is to be a LIBO Rate Loan, each
Borrower hereby indemnifies the Agent and the Lenders against any loss,
out-of-pocket cost or expense incurred by the Agent or the Lenders, as
applicable, as a result of any failure to fulfill on or before the date
specified in such Borrowing Request or such Notice of Conversion or Continuation
for such Loan the applicable conditions set forth in Article III, including,
without limitation, any loss (including any loss of anticipated profits), cost
or expense incurred by reason of the liquidation or re-employment of deposits or
other funds acquired by the Agent or Lenders to fund the Loan to be made by the
Lenders when such Loan, as a result of such failure, is not made on such date.
(d) Note. The indebtedness of the Borrowers to the Lenders resulting from
Loans owing to the Lenders shall be evidenced by the Notes from the Borrowers
payable to the order of the Lenders.
(e) Funding by Lenders. Not later than 12:00 p.m., Dallas, Texas time, as
the case may be, on the date specified for each Loan, each Lender shall make
available an amount equal to its Percentage Share of the Loans to be made on
such date to the Agent, at an account designated by the Agent, in immediately
available funds, for the account of the applicable Borrower. After the Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in Article III, the Agent will make such funds available to such Borrower
at its account with the Agent. The failure of any Lender to make any Loan
required to be made by it hereunder shall not relieve any other Lender of its
obligation to make any Loan required to be made by it, and no Lender shall be
responsible for the failure of any other Lender to make any Loan.
2.3 Letter of Credit Facility.
(a) Issuance. Upon the terms and conditions and relying on the
representations and warranties contained in this Agreement, the Agent, as
issuing bank for the Lenders, agrees from the date of this Agreement until the
date which is thirty days prior to the Final Maturity Date, to issue on behalf
of the Lenders in their respective Percentage Shares, Letters of Credit for the
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account of any Borrower and to renew, increase and extend such Letters of
Credit. Letters of Credit shall be issued, renewed, increased or extended from
time to time on any Business Day designated by the Borrower requesting such
Letter of Credit following the receipt in accordance with the terms hereof by
the Agent of the written (or oral, confirmed promptly in writing) request by a
Responsible Officer of such Borrower therefor and a Letter of Credit
Application. Letters of Credit shall be issued in such amounts as the Borrowers
may request; provided, however, that the Agent shall not be obligated to issue,
increase, extend, or renew any Letter of Credit if (i) the Letter of Credit
shall have an expiration date which is subsequent to the Final Maturity Date,
(ii) the Letter of Credit shall have an expiration date more than one year after
the issuance thereof; provided that, any such Letter of Credit with a one-year
tenor may expressly provide that it is renewable at the option of the Agent for
additional one-year periods, (iii) the Letter of Credit is in form and substance
not acceptable to the Agent in its sole discretion, (iv) the Borrower requesting
such Letter of Credit has not delivered to the Agent a completed and executed
Letter of Credit Application, (v) the Letter of Credit is not governed by the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500 or any successor to such
publication, (vi) after giving effect to the issuance, increase, renewal, or
extension of such Letter of Credit, the L/C Exposure would exceed $2,500,000, or
(vii) after giving effect to the issuance, increase, renewal, or extension of
such Letter of Credit, the sum of the L/C Exposure and the Loan Balance then
outstanding, would exceed the lesser of (A) the aggregate Commitments and (B)
the Borrowing Base. If the terms of any Letter of Credit Application referred to
in this Section 2.3(b) conflicts with the terms of this Agreement, the terms of
this Agreement shall control.
(b) Lender Participation. Upon the date of the issuance, extension, renewal
or increase of a Letter of Credit, the Agent shall be deemed to have sold to
each Lender and each Lender shall have been deemed to have purchased from the
Agent a participation in the Agent's obligation with respect to the relevant
Letter of Credit, equal to such Lender's Percentage Share at such date. Such
sale and purchase shall otherwise be in accordance with the terms of this
Agreement. The Agent shall promptly notify each such participant Lender by
telex, telephone, or telecopy (confirmed promptly in writing) of each Letter of
Credit issued, increased, renewed or extended and the actual dollar amount of
such Lender's participation in such Letter of Credit.
(c) INDEMNIFICATION. EACH LENDER AGREES TO SEVERALLY INDEMNIFY THE AGENT,
AS THE ISSUER OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS-IN-FACT AND AFFILIATES OF THE AGENT (TO THE EXTENT NOT
REIMBURSED BY THE BORROWERS AND WITHOUT LIMITING THE OBLIGATION OF THE BORROWERS
TO DO SO), RATABLY ACCORDING TO THE PERCENTAGE SHARE OF SUCH LENDER AT THE TIME
OF ISSUANCE OF SUCH LETTER OF CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES,
CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME
(INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE PAYMENT AND PERFORMANCE
OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT
OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
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ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR SUCH LETTER OF CREDIT OR ANY ACTION TAKEN OR OMITTED BY THE AGENT
AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH
ANY OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT AS THE ISSUER OF SUCH
LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER (OTHER THAN THE AGENT
AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR THE PAYMENT OF ANY
PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE GROSS
NEGLIGENCE WHETHER SOLE OR CONCURRENT OR WILLFUL MISCONDUCT OF THE AGENT AS THE
ISSUER OF A LETTER OF CREDIT. THE AGREEMENTS IN THIS SECTION 2.3(C) SHALL
SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF
THIS AGREEMENT.
(d) Reimbursement. Each of the Borrowers hereby agrees to pay on demand to
the Agent for the benefit of the Lenders in respect of each Letter of Credit an
amount equal to any amount paid by the Agent under or in respect of such Letter
of Credit. In the event the Agent makes a payment pursuant to a request for draw
presented under a Letter of Credit and such payment is not promptly reimbursed
by the Borrowers upon demand, the Agent shall give notice of such payment to the
Lenders, and each Lender shall promptly reimburse the Agent for such Lender's
Percentage Share of such payment, and such reimbursement shall be deemed for all
purposes of this Agreement to constitute a Floating Rate Loan to such Borrower
who requested such Letter of Credit from such Lender. If such reimbursement is
not made by any Lender to the Agent on the same day on which the Agent shall
have made payment on any such draw, such Lender shall pay interest thereon to
the Agent at a rate per annum equal to the Federal Funds Rate. Each of the
Borrowers hereby unconditionally and irrevocably authorizes, empowers, and
directs the Agent and the Lenders to record and otherwise treat such payment
under a Letter of Credit not immediately reimbursed by the Borrowers as a
Floating Rate Loan to the Borrowers.
(e) Obligations Unconditional. The obligations of the Borrowers under this
Agreement in respect of each Letter of Credit shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, notwithstanding the following circumstances:
(i) any lack of validity or enforceability of the Letter of Credit
Application or any documents in connection with such application;
(ii) any amendment or waiver of or any consent to departure from any
Letter of Credit Application or any documents in connection with such
application;
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(iii) the existence of any claim, set-off, defense or other right
which a Borrower may have at any time against any beneficiary or transferee of
such Letter of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), the Agent, any Lenders or any other person or entity,
whether in connection with this Agreement, the transactions contemplated in this
Agreement or in the Letter of Credit Letter Application or any documents in
connection with such application or any unrelated transaction;
(iv) any statement or any other document presented under such Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect to
the extent the Agent would not be liable therefor pursuant to the following
Section 2.3(f);
(v) payment by the Agent under such Letter of Credit against
presentation of a draft or certificate which does not comply with the terms of
such Letter of Credit; or
(vi) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing;
provided, however, that nothing contained in this Section 2.3(e) shall be deemed
to constitute a waiver of any remedies of the Borrowers in connection with the
Letters of Credit.
(f) Liability of Agent. Each of the Borrowers assumes all risks of the acts
or omissions of any beneficiary or transferee of any Letter of Credit with
respect to its use of such Letter of Credit. Neither the Agent nor any of its
officers or directors shall be liable or responsible for:
(i) the use which may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith;
(ii) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged;
(iii) payment by the Agent against presentation of documents which do
not comply with the terms of a Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the relevant Letter of
Credit; or
(iv) any other circumstances whatsoever in making or failing to make
payment under any Letter of Credit (INCLUDING THE AGENT'S OWN NEGLIGENCE),
except that the Borrowers shall have a claim against the Agent, and the Agent
shall be liable to, and shall promptly pay to, the Borrowers, to the extent of
any direct, as opposed to consequential, damages suffered by the Borrowers which
the Borrowers prove were caused by (A) the Agent's willful misconduct or gross
negligence in determining whether documents presented under a Letter of Credit
comply with the terms of such Letter of Credit or (B) the Agent's willful
failure to make lawful payment under any Letter of Credit after the presentation
to it of a draft and certificate strictly complying with the terms and
conditions of such Letter of Credit.
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In furtherance and not in limitation of the foregoing, the Agent may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
(g) Cash Collateral Account. If a Borrower is required to deposit funds in
the Cash Collateral Account pursuant to this Agreement, then the Borrowers and
the Agent shall establish the Cash Collateral Account and the Borrowers shall
execute any documents and agreements, including the Agent's standard form
assignment of deposit accounts, that the Agent reasonably requests in connection
therewith to establish the Cash Collateral Account and grant to the Agent, a
security interest in such account and the funds therein. Each of the Borrowers
hereby pledges to the Agent and grants to the Agent a security interest in the
Cash Collateral Account, whenever established, all funds held in the Cash
Collateral Account from time to time, and all proceeds thereof as security for
the payment of the Obligations.
(h) Funds of Cash Collateral Account. Funds held in the Cash Collateral
Account shall be held as cash collateral for obligations with respect to Letters
of Credit and promptly applied by the Agent to any reimbursement or other
obligations under Letters of Credit that exist or occur. To the extent that any
surplus funds are held in the Cash Collateral Account above the L/C Exposure
during the existence of a Default or Event of Default, the Agent may (i) hold
such surplus funds in the Cash Collateral Account as cash collateral for the
Obligations or (ii) apply such surplus funds to any Obligations in its sole
discretion. If no Default exists, the Agent shall release to the Borrowers at
the Borrowers' written request any funds held in the Cash Collateral Account
above the amounts required by this Agreement.
(i) Investments of Funds. Funds held in the Cash Collateral Account
shall be invested in Liquid Investments maintained with, and under the sole
dominion and control of, the Agent or in another investment if mutually agreed
upon by the Borrowers and the Agent, but the Agent shall have no other
obligation to make any other investment of the funds therein. The Agent shall
exercise reasonable care in the custody and preservation of any funds held in
the Cash Collateral Account and shall be deemed to have exercised such care if
such funds are accorded treatment substantially equivalent to that which the
Agent accords its own property, it being understood that the Agent shall not
have any responsibility for taking any necessary steps to preserve rights
against any parties with respect to any such funds.
2.4 Use of Loan Proceeds and Letters of Credit. On the Closing Date, each
of the Lenders shall pay to Existing Lenders an amount equal to the outstanding
principal balance under the Existing Credit Agreement times such Lender's
Percentage Share. Such Existing Indebtedness under the Existing Credit Agreement
shall be renewed, extended, and rearranged pursuant to the terms of this
Agreement and the Notes and shall, for all purposes, be deemed a Borrowing
hereunder;
(a) proceeds of all subsequent Loans shall be used for general corporate
purposes of a Borrower, including, without limitation, costs of acquiring,
exploring on and developing Oil and Gas Properties and general working capital
needs; and
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(b) Letters of Credit shall be used solely for general corporate purposes
of a Borrower; provided, however, no Letter of Credit may be used in lieu or in
support of stay or appeal bonds.
2.5 Interest; Computations. Subject to the terms of this Agreement
(including, without limitation, Section 2.20), interest on the Loans shall
accrue and be payable at a rate per annum equal to the Floating Rate for each
Floating Rate Loan and the Adjusted LIBO Rate for each LIBO Rate Loan. Interest
on all Floating Rate Loans shall be computed on the basis of a year of 365 or
366 days, as the case may be, and actual days elapsed (including the first day
but excluding the last day) during the period for which payable. Interest on all
LIBO Rate Loans shall be computed on the basis of a year of 360 days, and actual
days elapsed (including the first day but excluding the last day) during the
period for which payable. Notwithstanding the foregoing, interest on past-due
principal and, to the extent permitted by applicable law, past-due interest,
shall accrue at the Default Rate, computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed (including the first day but
excluding the last day) during the period for which payable, and shall be
payable upon demand by the Lenders at any time as to all or any portion of such
interest. In the event that a Borrower fails to select the duration of any
Interest Period for any LIBO Rate Loan within the time period and otherwise as
provided herein, such Loan (if outstanding as a LIBO Rate Loan) will be
automatically converted into a Floating Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Floating Rate
Loan) will remain as, or (if not then outstanding) will be made as, a Floating
Rate Loan. Interest provided for herein shall be calculated on unpaid sums
actually advanced and outstanding pursuant to the terms of this Agreement and
only for the period from the date or dates of such advances until repayment. All
computations of interest based on the Federal Funds Rate, and of fees shall be
made by the Agent, on the basis of a year of 365 or 366 days, in each case for
the actual number of days (including the first day, but excluding the last day)
occurring in the period for which such interest or fees are payable. Each
determination by the Agent of an interest rate or of fees shall be conclusive
and binding for all purposes, absent manifest error.
2.6 Repayment of Loans and Interest. Accrued and unpaid interest on each
outstanding Floating Rate Loan shall be due and payable monthly commencing on
the last day of December, 2003 and continuing on the last day of each calendar
month thereafter while any Floating Rate Loan remains outstanding, the payment
in each instance to be the amount of interest which has accrued and remains
unpaid in respect of the relevant Loan. Accrued and unpaid interest on each
outstanding LIBO Rate Loan shall be due and payable on the last day of the
Interest Period for such LIBO Rate Loan and, in the case of any Interest Period
in excess of three months, on the day of the third monthly anniversary following
the commencement of such Interest Period, the payment in each instance to be the
amount of interest which has accrued and remains unpaid in respect of the
relevant Loan. The Loan Balance, together with all accrued and unpaid interest
thereon, shall be due and payable at Commitment Termination Date. At the time of
making each payment hereunder or under the Notes, the Borrowers shall specify to
the Agent the Loans or other amounts payable by the Borrowers hereunder to which
such payment is to be applied. In the event a Borrower fails to so specify, or
if an Event of Default has occurred and is continuing, the Agent shall apply
such payment in accordance with Section 7.3.
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2.7 Outstanding Amounts. The Loan Balance reflected by the notations by the
Lenders on their records shall be deemed rebuttably presumptive evidence of the
Loan Balance. The liability for payment of principal and interest evidenced by
the Notes shall be limited to principal amounts actually advanced and
outstanding pursuant to this Agreement and interest on such amounts calculated
in accordance with this Agreement.
2.8 Time, Place, and Method of Payments. All payments required pursuant to
this Agreement or the Notes shall be made in lawful money of the United States
of America and in immediately available funds, shall be deemed received by the
Lenders on the next Business Day following receipt if such receipt is after 2:00
p.m., Dallas, Texas time, as the case may be, on any Business Day, and shall be
made to the Agent at the address of its Applicable Lending Office for Floating
Rate Loans. Except as provided to the contrary herein, if the due date of any
payment hereunder or under the Notes would otherwise fall on a day which is not
a Business Day, such date shall be extended to the next succeeding Business Day,
and interest shall be payable for any principal so extended for the period of
such extension; provided, however, that if such extension would cause payment of
interest on or principal of a LIBO Rate Loan to be made in the next following
calendar month, such payment shall be made on the next preceding Business Day.
2.9 Pro Rata Treatment; Adjustments.
(a) Except to the extent otherwise expressly provided herein, (i) each Loan
and each issuance, renewal, extension or increase of a Letter of Credit made
pursuant to this Agreement shall be from the Lenders pro rata in accordance with
their Percentage Shares, (ii) each payment by a Borrower of Commitment Fees
shall be made for the account of the Lenders pro rata in accordance with their
respective Percentage Shares, (iii) Letter of Credit Fees shall be made for the
account of the Lenders in accordance with each Lender's Percentage Share, (iv)
each payment of principal of Loans shall be made for the account of the Lenders
pro rata in accordance with their respective Percentage Shares of the Loan
Balance, and (v) each payment of interest on Loans shall be made for the account
of the Lenders pro rata in accordance with their Percentage Shares of the
aggregate amount of interest due and payable to the Lenders.
(b) The Agent shall distribute all payments with respect to the Obligations
to the Lenders promptly upon receipt in like funds as received. In the event
that any payments made hereunder by a Borrower prior to the occurrence of an
Event of Default are insufficient to satisfy in full the Obligations due and
payable at such time, such payments shall be applied (i) first, to fees and
expenses due the Agent pursuant to the terms of this Agreement or any other Loan
Document, (ii) second, to fees and expenses due the Lenders pursuant to the
terms of this Agreement or any other Loan Document, (iii) third, to accrued
interest, (iv) fourth, to the Loan Balance, (v) fifth, to any other Obligations
other than Hedging Obligations of the Borrower to the Agent and/or Lenders, and
(vi) last, to Hedging Obligations of a Borrower to the Agent and/or Lenders.
(c) If any Lender (for purposes of this Section, a "benefited Lender")
shall at any time receive any payment of all or part of its portion of the
Obligations, or receive any Collateral in respect thereof (whether voluntarily
or involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Sections 7.1(f) or 7.1(g), or otherwise) in an amount greater
than such Lender was entitled to receive pursuant to the terms hereof, such
benefited
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Lender shall purchase for cash from the other Lenders such portion of the
Obligations of such other Lenders or shall provide such other Lenders with the
benefits of any such Collateral or the proceeds thereof as shall be necessary to
cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds with each of the Lenders according to the terms hereof.
If all or any portion of such excess payment or benefits is thereafter recovered
from such benefited Lender, such purchase shall be rescinded and the purchase
price and benefits returned by such Lender, to the extent of such recovery, but
without interest. Each of the Borrowers agrees that each such Lender so
purchasing a portion of the Obligations of another Lender may exercise all
rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of
such portion. If any Lender ever receives, by voluntary payment, exercise of
rights of set-off or banker's lien, counterclaim, cross-action or otherwise, any
funds of a Borrower to be applied to the Obligations, or receives any proceeds
by realization on or with respect to any Collateral, all such funds and proceeds
shall be immediately forwarded to the Agent for distribution in accordance with
the terms of this Agreement.
2.10 Borrowing Base Determinations.
(a) Generally. Except during such periods as permitted by Section
2.11(b)(i), the amount of the Loans and L/C Exposure outstanding at any time may
not exceed the lesser of (i) the Borrowing Base in effect at such time and (ii)
the aggregate Commitments in effect at such time. The Borrowing Base shall be
determined in accordance with the standards set forth in Section 2.10(d) and is
subject to periodic redetermination pursuant to Sections 2.10(b) and 2.10(c) and
periodic reduction pursuant to Section 2.10(b)(v).
(b) Calculation of Borrowing Bases.
(i) The Borrowers shall deliver to the Agent and each of the Lenders
on or before each March 15, beginning March 15, 2004, an Independent Engineering
Report evaluating the Mortgaged Properties as of January 1 of such calendar
year, and such other information as may be reasonably requested by any Lender
with respect to the Mortgaged Properties included or to be included in the
Borrowing Base. Within 30 days after the Agent and the Lenders' receipt of such
Independent Engineering Report and other information, the Agent shall deliver to
each Lender the Agent's recommendation for the redetermined Borrowing Base.
Within 15 days after the Lenders' receipt of the Agent's recommendation, the
Agent and the Required Lenders shall redetermine the Borrowing Base in
accordance with Section 2.10(d) (except that any increase in the Borrowing Base
shall require the consent of all the Lenders) and the Agent shall promptly
notify the Borrowers in writing of the amount of the Borrowing Base as so
redetermined.
(ii) The Borrowers shall deliver to the Agent and each Lender on or
before each September 15, beginning September 15, 2004, an Internal Engineering
Report evaluating the Mortgaged Properties of the Borrowers as of July 1 of such
calendar year, and such other information as may be reasonably requested by the
Agent or any Lender with respect to the Mortgaged Properties included or to be
included in the Borrowing Base. Within 30 days after the Agent and the Lenders'
receipt of such Internal Engineering Report and other information, the Agent
shall deliver to each Lender the Agent's recommendation for the redetermined
-▇▇-
▇▇▇▇▇▇▇▇▇ ▇▇▇▇. Within 15 days after the Lenders' receipt of the Agent's
recommendation, the Agent and the Required Lenders shall redetermine the
Borrowing Base in accordance with Section 2.10(d) (except that any increase in
the Borrowing Base shall require the consent of all the Lenders) and the Agent
shall promptly notify the Borrowers in writing of the amount of the Borrowing
Base as so redetermined.
(iii) In the event that a Borrower does not furnish to the Agent and
the Lenders the Independent Engineering Report, Internal Engineering Report or
other information specified in clauses (i) and (ii) above by the date specified
therein, the Agent and the Required Lenders (or all the Lenders in case of an
increase in the Borrowing Base) may nonetheless redetermine the Borrowing Base
and redesignate the Borrowing Base from time-to-time thereafter in their sole
discretion (but in accordance with Section 2.10(d)) until the Agent and the
Required Lenders (or all the Lenders in case of an increase in the Borrowing
Base) receive the relevant Independent Engineering Report, Internal Engineering
Report, or other information, as applicable, whereupon the Agent and the
Required Lenders (or all the Lenders in case of an increase in the Borrowing
Base) shall redetermine the Borrowing Base as otherwise specified in this
Section 2.10.
(iv) Each delivery of an Engineering Report by the Borrowers to the
Agent and the Lenders shall constitute a representation and warranty by the
Borrowers to the Agent and the Lenders that on and as of the date of such
Engineering Report (A) the Borrowers, as applicable, own the Oil and Gas
Properties specified therein free and clear of any Liens (except Permitted
Liens), and (B) each Oil and Gas Property described as "proved developed"
therein was developed for oil and gas, and the ▇▇▇▇▇ pertaining to such Oil and
Gas Properties that are described therein as producing ▇▇▇▇▇ ("▇▇▇▇▇"), were
each producing oil and gas in paying quantities, except for ▇▇▇▇▇ that were
unitized as water or gas injection ▇▇▇▇▇ or as water disposal ▇▇▇▇▇.
(v) For the period from and including the date of this Agreement to
and including the first redetermination after the Closing Date, the amount of
the Borrowing Base shall be $40,000,000.
(c) Interim Redetermination. In addition to the Borrowing Base
redeterminations provided for in Section 2.10(b), (i) the Agent and the Required
Lenders (or if an increase in the Borrowing Base is made, all of the Lenders)
may, based on such information as the Agent and the Lenders deem relevant (but
in accordance with Section 2.10(d)), make one additional redetermination of the
Borrowing Base during any six-month period and (ii) the Borrowers may request
and the Agent and the Required Lenders (or if an increase in the Borrowing Base
is made, all of the Lenders) shall, based on such information as the Agent and
the Lenders deem relevant (but in accordance with Section 2.10(d)), make one
additional redetermination of the Borrowing Base during any six-month period.
The party requesting the redetermination shall give the other party at least 10
days' prior written notice that a redetermination of the Borrowing Base pursuant
to this paragraph (c) is to be performed. In connection with any redetermination
of the Borrowing Base under this Section 2.10(c), each of the Borrowers shall
provide the Agent and the Lenders with such information regarding such
Borrower's business (including, without limitation, its Oil and Gas Properties,
the Proven Reserves, and production relating thereto) as the Agent or any Lender
may reasonably request, including, in the case of requests for an increase to
the Borrowing Base of $1,000,000 or more, an updated Independent Engineering
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Report. The Agent shall promptly notify the Borrowers in writing of each
redetermination of the Borrowing Base pursuant to this Section 2.10(c) and the
amount of the Borrowing Base as so redetermined.
(d) Standards for Redetermination. Each redetermination of the Borrowing
Base by the Agent and the Lenders pursuant to this Section 2.10 shall be made
(i) in the sole discretion of the Agent and the Lenders (but in accordance with
the other provisions of this Section 2.10(d)), (ii) in accordance with the Agent
and the Lenders' customary internal standards and practices for valuing and
redetermining the value of Oil and Gas Properties in connection with reserve
based oil and gas loan transactions, (iii) in conjunction with the most recent
Independent Engineering Report or Internal Engineering Report, as applicable, or
other information received by the Agent and the Lenders relating to the Proven
Reserves of any Borrower or Guarantor, and (iv) based upon the estimated value
of the Proven Reserves owned by the Borrowers and Guarantors and pledged as
collateral security for the Obligations as determined by the Agent and the
Lenders. In valuing and redetermining the Borrowing Base, the Agent and the
Lenders may also consider the business, financial condition, and Indebtedness
obligations of the Borrowers and such other factors as the Agent and the Lenders
customarily deem appropriate. In that regard, each of the Borrowers acknowledges
that the determination of the Borrowing Base contains an equity cushion (market
value in excess of loan value), which is essential for the adequate protection
of the Agent and the Lenders. No Proven Reserves shall be included or considered
for inclusion in the Borrowing Base unless the Agent and the Lenders shall have
received, at the Borrowers' expense, (i) evidence satisfactory in form and
substance to the Agent that the Agent has an Acceptable Security Interest in the
Oil and Gas Properties relating thereto pursuant to the Security Instruments and
(ii) title opinions meeting the requirements of Section 5.5(a) (or, prior to 30
days from the date this Agreement becomes effective, title materials sufficient
to satisfy the requirements of Section 3.1(j)). At all times after the Agent has
given the Borrowers notification of a redetermination of the Borrowing Base
under this Section 2.10, the Borrowing Base shall be equal to the redetermined
amount or such lesser amount designated by each of the Borrowers and disclosed
in writing to the Agent and the Lenders until the Borrowing Base is subsequently
redetermined in accordance with this Section 2.10.
2.11 Prepayments. The Borrowers shall have no right to prepay any principal
amount of any Advance except as provided in Section 2.11.
(a) Optional. Each of the Borrowers may elect, at any time and from time to
time, to prepay any of the Loans, in whole or in part, after giving prior
telephone notice (which shall be confirmed promptly in writing or by facsimile)
to the Agent of such election by (i) 10:00 a.m. (Dallas, Texas time) three
Business days before such prepayment date in the case of LIBO Rate Loans and
(ii) 10:00 a.m. (Dallas, Texas time) one Business Day before such prepayment
date in the case of Floating Rate Loans, in each case stating the proposed date
and aggregate principal amount of such prepayment. If any such notice is given,
such Borrower shall prepay such Loans in whole or ratably in part in an
aggregate principal amount equal to the amount specified in such notice,
together with accrued interest to the date of such prepayment on the principal
amount prepaid and amounts, if any, required to be paid pursuant to Sections
2.24 and 2.21 as a result of such prepayment being made on such date; provided,
however, that each partial prepayment of principal shall be in an aggregate
principal amount as set forth in Section 2.1(b).
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(b) Mandatory.
(i) If at any time the sum of the Loan Balance and the L/C Exposure
exceeds the lesser of (A) the aggregate Commitments and (B) the Borrowing Base
then in effect (other than due to an optional reduction in the Commitments
pursuant to Section 2.12), the Borrowers shall (w) within 10 days of notice from
the Agent of such occurrence, repay the Lenders an amount equal to the amount of
such excess, including any unpaid accrued interest on the amount prepaid, (x)
within 10 days of notice from the Agent of such occurrence, indicate the
Borrowers' election to pay the Lenders an amount equal to the amount of such
excess, including any unpaid accrued interest on the amount to be prepaid, in
six equal consecutive monthly installments with the first such installment being
due and payable at the end of the calendar month in which such election is made,
which payments shall be in addition to other principal payments due under this
Agreement, (y) within 10 days of notice from the Agent of such occurrence,
indicate the Borrowers' election to, and within 30 days from such notice from
the Agent, provide additional Collateral of character and value satisfactory to
the Lenders in their sole discretion, to secure the amount of such excess by the
execution and delivery to the Lenders of Security Instruments in form and
substance satisfactory to the Agent, or (z) within 10 days of notice from the
Agent of such occurrence, indicate its election to combine the options provided
in clause (x) and clause (y) above, and provide the amount to be prepaid in
installments and the amount to be provided as additional Collateral. If the
Borrowers elects the combined option in clause (z), the Borrowers shall (1) make
such six equal consecutive monthly installments with the first such installment
being due and payable at the end of the calendar month in which such election is
made, which payments shall be in addition to other principal payments due under
this Agreement and (2) within 30 days from such notice from the Agent, provide
additional Collateral of character and value satisfactory to the Lenders in
their sole discretion, to secure the amount of such excess by the execution and
delivery to the Lenders of Security Instruments in form and substance
satisfactory to the Agent.
(ii) If at any time the sum of the Loan Balance and the L/C Exposure
exceeds the lesser of (A) aggregate Commitments and (B) the Borrowing Base, due
to an optional reduction in the Commitments pursuant to Section 2.12, the
Borrowers shall immediately repay the Lenders an amount equal to the amount of
such excess.
(iii) In the event that a mandatory prepayment is required under this
Section and the Loan Balance is less than the amount required to be prepaid, the
Borrowers shall repay the entire Loan Balance and deposit into the Cash
Collateral Account, as additional collateral securing the Obligations, an amount
of cash, in immediately available funds, equal to the L/C Exposure minus the
lesser of (A) the aggregate Commitments and (B) the Borrowing Base.
(c) Ratable Payments; Effect of Notice. Each payment of any Loan pursuant
to this Section 2.11 or any other provision of this Agreement shall be made in a
manner such that all Loans comprising part of the same Borrowing are paid in
whole or ratably in part. All notices given pursuant to this Section 2.11 shall
be irrevocable and binding upon the Borrowers.
2.12 Reduction of the Commitments. The Borrowers shall have the right, upon
at least three Business Days' irrevocable notice to the Agent, to terminate in
whole or reduce ratably in part the unused portion of the Commitments; provided
that each partial reduction shall be in the
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aggregate amount of $1,000,000 or in integral multiples of $1,000,000 in excess
thereof. Any reduction or termination of the Commitments pursuant to this
Section 2.12 shall be permanent, with no obligation of the Lenders to reinstate
such Commitments and the Commitment Fees provided for in Section 2.13 shall
thereafter be computed on the basis of the Commitments, as so reduced.
2.13 Commitment Fee. In addition to interest on the Notes as provided
herein and other fees payable hereunder and to compensate the Lenders for
maintaining funds available, the Borrowers shall pay to the Agent, for the
account of the Lenders, in immediately available funds, a commitment fee on the
average daily amount by which the lesser of (a) the Borrowing Base and (b) the
aggregate Commitments, exceeds the sum of (i) the Loan Balance and (ii) the L/C
Exposure, from the date this Agreement becomes effective until the Commitment
Termination Date at the rate of .375% per annum. The fee payable pursuant to the
preceding sentence is due quarterly in arrears on the last day of each March,
June, September and December commencing March 31, 2004, and on the Commitment
Termination Date.
2.14 Intentionally Omitted.
2.15 Borrowing Base Increase Fees. The Borrowers agree to pay to the Agent
for the account of the Lenders in connection with any incremental increase of
the Borrowing Base to an amount that exceeds the level of the Borrowing Base
then in effect, a Borrowing Base increase fee on the amount of such incremental
increase. The Borrowing Base increase fee shall be in an amount equal to .50%
multiplied by the amount of the incremental increase to the extent, but only to
the extent that such incremental increase amount exceeds the level of Borrowing
Base then in effect at such time, such Borrowing Base increase fee to be due and
payable on the date that the increase to the Borrowing Base becomes effective.
2.16 Letter of Credit Fee. In addition to interest on the Notes as provided
herein and Commitment Fees payable hereunder, the Borrowers agree to pay (a) to
the Agent, for the account of the Lenders, on the date of the issuance,
extension or renewal of each Letter of Credit, a non-refundable Letter of Credit
Fee equal to the greater of (i) $500 or (ii) 2.00% per annum, on the face amount
of such Letter of Credit and for the period for which such Letter of Credit is
issued, extended or renewed, and (b) to the Agent as the issuing bank for its
own account, on the date of issuance, extension or renewal of each Letter of
Credit, a fronting fee for each Letter of Credit equal to the greater of (i)
$250 and (ii) .125% per annum, on the face amount of such Letter of Credit and
for the period for which such Letter of Credit is issued, extended or renewed.
The Borrowers also agree to pay on demand to the Agent, for its own account as
the issuer of the Letters of Credit, its customary letter of credit
transactional fees, including, without limitation, amendment fees, payable with
respect to each Letter of Credit.
2.17 Intentionally Omitted.
2.18 Advances by Agent. Each and every covenant of the Borrowers herein
contained shall be performed and kept by the Borrowers solely at the Borrowers'
expense. If the Borrowers fail to perform or keep any of the covenants of
whatsoever kind or nature contained in this Agreement, Agent (either by it
directly or on its behalf by the trustee under any Mortgage or any receiver
appointed hereunder or thereunder) may, but will not be obligated to, make
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advances to perform the same on any Borrower's behalf, and each Borrower hereby
agrees to repay such sums and any costs and expenses (including reasonable
attorneys' fees and expenses) incurred in connection therewith on demand plus
interest thereon from the date of the advance until reimbursement of the Agent
at the Default Rate. Such amounts will be in addition to any sum of money which
may, pursuant to the terms and conditions of the written instruments comprising
part of the Obligations, be due and owing. No such advance will be deemed to
relieve any Borrower from any default hereunder.
2.19 Security Interest in Accounts; Right of Offset. As security for the
payment and performance of the Obligations, each of the Borrowers hereby
transfers, assigns, and pledges to the Agent, for the benefit of the Agent, the
Lenders and the Swap Counterparties, and grants to the Agent, for the benefit of
the Agent, the Lenders and the Swap Counterparties, a security interest in all
funds of each of the Borrowers now or hereafter or from time to time on deposit
with the Agent or any Lender, with such interest of the Lenders to be
retransferred, reassigned, and/or released by the Agent and each Lender, as the
case may be, at the expense of the Borrowers upon payment in full and complete
performance by the Borrowers of all Obligations. Except during the continuance
of an Event of Default, the Borrowers may withdraw such funds (except for those
funds contained in the Cash Collateral Account) at their discretion. All
remedies as secured party or assignee of such funds shall be exercisable by the
Agent and each Lender upon the occurrence of any Event of Default, regardless of
whether the exercise of any such remedy would result in any penalty or loss of
interest or profit with respect to any withdrawal of funds deposited in a time
deposit account prior to the maturity thereof. Furthermore, each of the
Borrowers hereby grants to the Agent and each Lender the right, exercisable at
such time as any Obligation shall mature, whether by acceleration of maturity or
otherwise, of offset or banker's lien against all funds of each of the Borrowers
now or hereafter or from time to time on deposit with the Agent and each Lender,
regardless of whether the exercise of any such remedy would result in any
penalty or loss of interest or profit with respect to any withdrawal of funds
deposited in a time deposit account prior to the maturity thereof.
2.20 General Provisions Relating to Interest.
(a) It is the intention of the parties hereto to comply strictly with the
usury laws of the State of Texas to the extent applicable to each Lender and the
United States of America. In this connection, there shall never be collected,
charged, or received on the sums advanced hereunder interest in excess of that
which would accrue at the Highest Lawful Rate. For purposes of Tex. Fin. Code
▇▇▇. Section 303.301 (▇▇▇▇▇▇ 1998), each of the Borrowers agrees that the
Highest Lawful Rate shall be the "indicated (weekly) rate ceiling" as defined in
such Article, provided that the Agent and the Lenders may also rely, to the
extent permitted by applicable laws of the State of Texas or the United States
of America, on alternative maximum rates of interest under other laws of the
State of Texas or other states or the United States of America applicable to the
Agent and/or such Lender, if greater.
(b) Notwithstanding anything herein or in the Notes to the contrary, during
any Limitation Period, the interest rate to be charged on amounts evidenced by
the Notes shall be the Highest Lawful Rate, and the obligation, if any, of the
Borrowers for the payment of fees or other charges deemed to be interest under
applicable law shall be suspended. During any period or periods of time
following a Limitation Period, to the extent permitted by applicable laws of
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the State of Texas or other states or the United States of America, the interest
rate to be charged hereunder shall remain at the Highest Lawful Rate until such
time as there has been paid to the Agent for the account of each Lender (i) the
amount of interest in excess of that accruing at the Highest Lawful Rate that
the Agent and the Lenders would have received during the Limitation Period had
the interest rate remained at the otherwise applicable rate, and (ii) all
interest and fees otherwise payable to the Agent and the Lenders but for the
effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on the Notes or
under this Agreement or any other Loan Document include amounts which by law are
deemed interest and which would exceed the amount permitted if the Highest
Lawful Rate were in effect, each of the Borrowers stipulates that such payment
and collection will have been and will be deemed to have been, to the greatest
extent permitted by applicable laws of the State of Texas any other applicable
states' laws or the United States of America, the result of mathematical error
on the part of a Borrower and the Agent and the Lenders; and the Agent and the
Lenders shall promptly refund the amount of such excess (to the extent only of
such interest payments in excess of that which would have accrued and been
payable on the basis of the Highest Lawful Rate) upon discovery of such error by
the Agent and the Lenders or notice thereof from a Borrower. In the event that
the maturity of any Obligation is accelerated, by reason of an election by the
Agent and the Lenders or otherwise, or in the event of any required or permitted
prepayment, then the consideration constituting interest under applicable laws
may never exceed the Highest Lawful Rate; and excess amounts paid which by law
are deemed interest, if any, shall be credited by the Lenders on the principal
amount of the Obligations, or if the principal amount of the Obligations shall
have been paid in full, refunded to the Borrowers.
(d) All sums paid, or agreed to be paid, to the Agent and the Lenders for
the use, forbearance and detention of the proceeds of any advance hereunder
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full term hereof until paid in full so that
the actual rate of interest is uniform but does not exceed the Highest Lawful
Rate throughout the full term hereof.
2.21 Yield Protection. If (a) any payment of principal of any LIBO Rate
Loan is made other than on the last day of the Interest Period for such Loan as
a result of any payment pursuant to Section 2.11, the acceleration of the
maturity of the Note pursuant to Article VII, or for any other reason or (b) a
Borrower fails to make a principal or interest payment with respect to any LIBO
Rate Loan on the date such payment is due and payable, the Borrowers shall,
within 15 days of any written demand sent by the Agent to the Borrowers
detailing the calculation of such costs, pay to the Agent for the account of the
Lenders any amounts required to compensate a Lender for any additional losses,
out-of-pocket costs or expenses which it may reasonably incur as a result of
such payment or nonpayment, including, without limitation, any loss (including
loss of anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the Lender to
fund or maintain such Loan.
2.22 Limitation on Loans. Anything herein to the contrary notwithstanding:
(a) at no time shall there be more than four Interest Periods applicable to
outstanding LIBO Rate Loans;
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(b) if any Lender shall, at least one Business Day before the date of any
requested Loan, reasonably conclude that the introduction of or any change in or
in the interpretation, by any administrative authority or Governmental Authority
charged with the administration thereof or by any court, of any law or
regulation, in each case occurring after the Closing Date makes it unlawful, or
that any central bank or other Governmental Authority asserts that it is
unlawful, for the Lenders or its Applicable Lending Office to perform its
obligations under this Agreement to make LIBO Rate Loans or to fund or maintain
LIBO Rate Loans, the right of the Borrowers to select LIBO Rate Loans shall be
suspended until the Agent shall notify the Borrowers that the circumstances
causing such suspension no longer exist, and such requested Loan shall be a
Floating Rate Loan;
(c) if the Agent is unable to determine in good faith the LIBO Rate for
LIBO Rate Loans comprising any requested Borrowing and the Agent gives
telephonic or telecopy notice thereof to the Borrowers as soon as practicable,
the right of the Borrowers to select LIBO Rate Loans for such requested
Borrowing or any subsequent Borrowings shall be suspended until the Agent shall
notify the Borrowers that the circumstances causing such suspension no longer
exist, and such requested Loan and any Loan requested thereafter shall be a
Floating Rate Loan;
(d) if the Required Lenders shall, by 11:00 a.m., Dallas, Texas time, at
least one Business Day before the date of any requested Loan, reasonably
conclude that the LIBO Rate for LIBO Rate Loans will not adequately reflect the
cost to such Lenders of making or funding LIBO Rate Loans, as the case may be,
the right of the Borrowers to select LIBO Rate Loans shall be suspended until
such Lenders shall notify the Agent and the Borrowers that the circumstances
causing such suspension no longer exist, and each subsequent Loan shall be a
Floating Rate Loan;
(e) if a Borrower shall fail to select the duration or continuation of any
Interest Period for any LIBO Rate Loan in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.1, the Agent will
forthwith so notify such Borrower and such Loan will be made available to such
Borrower with a one-month Interest Period or, in the case of an existing LIBO
Rate Loan, Continue with a one-month Interest Period; and
(f) if a Borrower shall fail to deliver a Borrowing Request and Notice of
Conversion or Continuation prior to the end of an Interest Period for any
existing Loan which is to be refinanced, then the Agent will forthwith so notify
such Borrower and such Borrower shall (unless such Loan is repaid at the end of
an Interest Period) be deemed to have given notice of an election to refinance
such Loan with a Floating Rate Loan.
Each Lender that has delivered a notice pursuant to paragraph (b), (c) or (d)
above agrees that it will notify the Borrowers and the Agent as soon as
practicable if the conditions giving rise to the notice cease to exists;
provided that, that the failure to so notify the Borrowers or the Agent shall
not release or diminish or otherwise affect in any way any of the Borrowers'
obligations hereunder or any of the other terms of this Section 2.22.
2.23 Illegality. If any Lender shall notify the Agent and the Borrowers
that the introduction of or any change in or in the interpretation, by any
administrative authority or Governmental Authority charged with the
administration thereof or by any court, of any law or
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regulation makes it unlawful, or that any central bank or other Governmental
Authority asserts that it is unlawful for such Lender or its Applicable Lending
Office to perform its obligations under this Agreement to maintain any LIBO Rate
Loan of such Lender then outstanding hereunder, (a) the Borrowers shall, no
later than 10:00 a.m. (Dallas, Texas time) (i) if not prohibited by law, on the
last day of the Interest Period for each outstanding LIBO Rate Loan made by such
Lender or (ii) if required by such notice, on the second Business Day following
its receipt of such notice, prepay all of the LIBO Rate Loans made by such
Lender then outstanding, together with accrued interest on the principal amount
prepaid to the date of such prepayment and amounts, if any, required to be paid
pursuant to Section 2.24 as a result of such prepayment being made on such date,
(b) such Lender shall simultaneously make a Floating Rate Loan to the Borrowers
on such date in an amount equal to the aggregate principal amount of the LIBO
Rate Loan prepaid to such Lender, and (c) the right of the Borrowers to select
LIBO Rate Loans from such Lender for any subsequent Borrowing shall be suspended
until such Lender shall notify the Agent that the circumstances causing such
suspension no longer exist; provided, that such Lender agrees to use reasonable
efforts to designate a different Applicable Lending Office if the making of such
designation would avoid such payment, and would not, in its reasonable judgment,
be otherwise disadvantageous to such Lender. Each Lender that has delivered a
notice pursuant to this Section 2.23 agrees that it will notify the Borrowers
and the Agent as soon as practicable if the conditions giving rise to the notice
cease to exists; provided that, that the failure to so notify the Borrowers or
the Agent shall not release or diminish or otherwise affect in any way any of
the Borrower's obligations hereunder or any of the other terms of this Section
2.23.
2.24 Increased Costs.
(a) LIBO Rate Loans. If, due to either (i) the introduction of or any
change (other than any change by way of imposition or increase of reserve
requirements included in the LIBO Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law) (other than with respect to taxes,
levies, impositions, deductions, charges and withholdings which are addressed in
Section 2.27), there shall be any increase in the cost to any Lender of agreeing
to make or making, funding, or maintaining LIBO Rate Loans, then the Borrowers
shall from time to time, within 15 days of any written demand by such Lender
detailing the calculation of such costs (with a copy of such demand to the
Agent), immediately pay to the Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost; provided,
that, before making any such demand, such Lender agrees to use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the making
of such designation would avoid the need for such increased cost and would not,
in its reasonable judgment, be otherwise disadvantageous to such Lender. A
certificate as to the amount of such increased cost and detailing the
calculation of such cost submitted to the Borrowers and the Agent by such Lender
shall be conclusive and binding for all purposes, absent manifest error.
(b) Capital Adequacy. If any Lender or the Agent as the bank issuing the
Letters of Credit determines in good faith that compliance with any law or
regulation or any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted or made after the Closing Date, affects or would affect the amount
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of capital required or expected to be maintained by such Lender or the Agent or
any corporation controlling such Lender or the Agent and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend or the Agent's commitment to issue the Letters of Credit and other
commitments of this type, then, upon 15 days' prior written notice by such
Lender or the Agent detailing the calculation of such amounts (with a copy of
any such demand to the Agent, as applicable), the Borrowers shall immediately
pay to the Agent for the account of such Lender or the Agent itself, as the case
may be, from time to time as specified by such Lender or the Agent additional
amounts sufficient to compensate such Lender or the Agent, in light of such
circumstances, (i) with respect to such Lender, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend under this Agreement and (ii) with respect
to the Agent, to the extent that the Agent reasonably determines such increase
in capital to be allocable to the issuance or maintenance of the Letters of
Credit; provided, that, before making any such demand, such Lender or the Agent
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Applicable Lending Office
if the making of such designation would avoid the need for such increase in
capital and would not, in its reasonable judgment, be otherwise disadvantageous
to such Lender or the Agent. A certificate as to such amounts and detailing the
calculation of such amounts submitted to a Borrower by such Lender or the Agent
shall be conclusive and binding for all purposes, absent manifest error.
(c) Letters of Credit. If any change in any law or regulation or
in the interpretation thereof by any court or administrative or Governmental
Authority charged with the administration thereof shall either (i) impose,
modify, or deem applicable any reserve, special deposit, or similar requirement
against letters of credit issued by, or assets held by, or deposits in or for
the account of, the Agent or (ii) impose on the Agent any other condition
regarding the provisions of this Agreement relating to the Letters of Credit or
any Obligations with respect to Letters of Credit, and the result of any event
referred to in the preceding clause (i) or (ii) shall be to increase the cost to
the Agent of issuing or maintaining any Letter of Credit (which increase in cost
shall be determined by the Agent's reasonable allocation of the aggregate of
such cost increases resulting from such event), then, upon 15 days' prior
written notice by the Agent detailing the calculation of such amounts, the
Borrowers shall pay to the Agent, from time to time as specified by the Agent,
additional amounts which shall be sufficient to compensate the Agent for such
increased cost; provided, that, before making any such demand, the Agent agrees
to use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Applicable Lending Office if
the making of such designation would avoid the need for such increased cost and
would not, in its reasonable judgment, be otherwise disadvantageous to the
Agent. A certificate as to such increased cost incurred by the Agent, as a
result of any event mentioned in clause (i) or (ii) above, and detailing the
calculation of such increased costs submitted by the Agent to a Borrower, shall
be conclusive and binding for all purposes, absent manifest error.
(d) Limitations. Failure or delay on the part of any Lender or the
Agent to demand compensation pursuant to this Section 2.24 shall not constitute
a waiver of such Lender's or the Agent's right to demand such compensation;
provided that, a Lender or the Agent, as applicable, claiming compensation under
this Section 2.24 shall only be entitled to compensation under this Section 2.24
for increased costs occurring (i) from and after the date of such notice until
the events giving rise to such claim have ceased to exist, and (ii) during the
one hundred twenty
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(120) day period preceding the date the Borrowers receive notice from Agent or
such Lender setting forth the described claim for compensation.
2.25 Letters in Lieu of Transfer Orders. The Agent agrees that none
of the letters in lieu of transfer or division orders provided by the Borrowers
pursuant to Section 3.1(a)(vi)(G) or Section 5.7 will be sent to the addressees
thereof prior to the occurrence of an Event of Default, at which time the Agent
may, at its option and in addition to the exercise of any of its other rights
and remedies, send any or all of such letters.
2.26 Power of Attorney. Each of the Borrowers hereby designates the
Agent as its agent and attorney-in-fact, to act in its name, place, and stead
for the purpose of completing and, upon the occurrence of an Event of Default,
delivering any and all of the letters in lieu of transfer orders delivered by a
Borrower to the Agent pursuant to Section 3.1(a)(vi)(G) or Section 5.7,
including, without limitation, completing any blanks contained in such letters
and attaching exhibits thereto describing the relevant Collateral. Each of the
Borrowers hereby ratifies and confirms all that the Agent shall lawfully do or
cause to be done by virtue of this power of attorney and the rights granted with
respect to such power of attorney. This power of attorney is coupled with the
interests of the Agent in the Collateral, shall commence and be in full force
and effect as of the Closing Date and shall remain in full force and effect and
shall be irrevocable so long as any Obligation remains outstanding or unpaid or
any Commitment exists. The powers conferred on the Agent by this appointment are
solely to protect the interests of the Agent and the Lenders under the Loan
Documents and shall not impose any duty upon the Agent to exercise any such
powers. The Agent shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and shall not be responsible
to the Borrowers or any other Person for any act or failure to act with respect
to such powers, except for gross negligence or willful misconduct.
2.27 Taxes.
(a) No Deduction for Certain Taxes. Any and all payments by any
Borrower shall be made, in accordance with Section 2.6, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction under the laws of
which such Lender or the Agent (as the case may be) is organized, or the
jurisdiction of such Person's Applicable Lending Office, or any political
subdivision of either such jurisdiction (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If any Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable to any Lender or the Agent, (i) the
sum payable shall be increased as may be necessary so that, after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.27), such Lender or the Agent (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been
made; provided, however, that if such Borrower's obligation to deduct or
withhold Taxes is caused solely by such Lender's or the Agent's failure to
provide the forms described in paragraph (d) of this Section 2.27, no such
increase shall be required; (ii) such Borrower shall make such deductions; and
(iii) such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
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(b) Other Taxes. In addition, each Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the Notes, or the other Loan Documents (hereinafter referred to as
"Other Taxes").
(c) Indemnification. EACH BORROWER INDEMNIFIES EACH LENDER AND THE
AGENT FOR THE FULL AMOUNT OF TAXES OR OTHER TAXES (INCLUDING, WITHOUT
LIMITATION, ANY TAXES OR OTHER TAXES IMPOSED BY ANY JURISDICTION ON AMOUNTS
PAYABLE UNDER THIS SECTION 2.27) PAID BY SUCH LENDER OR THE AGENT (AS THE CASE
MAY BE) AND ANY LIABILITY (INCLUDING INTEREST AND EXPENSES) ARISING THEREFROM OR
WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR
LEGALLY ASSERTED. EACH PAYMENT REQUIRED TO BE MADE BY ANY BORROWER IN RESPECT OF
THIS INDEMNIFICATION SHALL BE MADE TO THE AGENT FOR THE BENEFIT OF ANY PARTY
CLAIMING SUCH INDEMNIFICATION WITHIN 15 DAYS FROM THE DATE THE BORROWER RECEIVES
WRITTEN DEMAND THEREFOR FROM THE AGENT ON BEHALF OF ITSELF AS AGENT OR ISSUING
LENDER, OR ANY SUCH LENDER. IF ANY LENDER OR THE AGENT RECEIVES A REFUND IN
RESPECT OF ANY TAXES PAID BY ANY BORROWER UNDER THIS PARAGRAPH (C), SUCH LENDER
OR THE AGENT, AS THE CASE MAY BE, SHALL PROMPTLY PAY TO SUCH BORROWER SUCH
BORROWER'S SHARE OF SUCH REFUND.
(d) Foreign Lender Withholding Exemption. Each Lender and issuing
lender that is not incorporated under the laws of the United States of America
or a state thereof agrees that it shall deliver to the Borrowers and the Agent
upon the effectiveness of this Agreement in the case of each initial Lender or
upon the effectiveness of any Lender Assignment Agreement pursuant to which it
becomes a Lender in the case of each other Lender, and on or before the date, if
any, it changes its Applicable Lending Office, and from time to time thereafter
as reasonably requested in writing by the Borrower (i) two duly completed copies
of United States Internal Revenue Service Form W8-ECI or W8-BEN or successor
applicable form, as the case may be, certifying in each case that such Lender is
entitled to receive payments under this Agreement and the Notes payable to it,
without deduction or withholding of any United States federal income taxes, (ii)
if applicable, an Internal Revenue Service Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding tax, and (iii) any other governmental forms which are
necessary or required under an applicable tax treaty or otherwise by law to
reduce or eliminate any withholding tax, which have been reasonably requested by
the Borrowers. Each Lender which delivers to the Borrowers and the Agent a Form
W8-ECI or W8-BEN and Form W-8 or W-9 pursuant to the next preceding sentence
further undertakes to deliver to the Borrowers and the Agent two further copies
of the said letter and Form W8-ECI or W8-BEN and Form W-8 or W-9, or successor
applicable forms, or other manner of certification, as the case may be, on or
before the date that any such letter or form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent letter
and form previously delivered by it to the Borrowers and the Agent, and such
extensions or renewals thereof as may reasonably be requested by the Borrowers
and the Agent certifying in the case of a Form W8-ECI or W8-BEN that such Lender
is entitled to receive
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payments under this Agreement without deduction or withholding of any United
States federal income taxes. If any change in treaty, law or regulation has
occurred after the date that the form described in the first sentence of this
paragraph (d) was originally required to be provided, but prior to the date on
which any delivery required by the preceding sentence would otherwise be
required, and such change renders all such forms inapplicable or which would
prevent any Lender from duly completing and delivering any such form with
respect to it and such Lender advises the Borrowers and the Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax, and in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax, such Lender shall not be
required to deliver such forms. Each Borrower shall withhold tax at the rate and
in the manner required by the laws of the United States with respect to payments
made to a Lender failing to timely provide the requisite Internal Revenue
Service forms.
(e) Change of Applicable Lending Office. Any Lender claiming any
additional amount payable pursuant to this Section 2.27 shall use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the making
of such designation would avoid the need for, or materially reduce the amount
of, any such additional amount that may thereafter accrue and would not, in the
reasonable judgment of such Lender, be disadvantageous to such Lender.
(f) Repayment under Certain Circumstances. Each Lender (and the
Agent with respect to payments to the Agent for its own account) will use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions), if such efforts or their results would not, in the reasonable
judgment of such Lender or the Agent, be materially disadvantageous to such
Lender or Agent, to (i) maintain an exemption, if any, available to it from
United States tax withholding (whether available by treaty, by existing law or
administrative waiver or by virtue of the location of such Lender's Applicable
Lending Office) and (ii) otherwise cooperate with the Borrowers to minimize
amounts payable by the Borrower under this Section 2.27. Subject to the
foregoing, if a Borrower pays any amount pursuant to this Section 2.27 and such
Lender or the Agent receives a refund of any or all of such amount, such refund
shall be applied to reduce any Obligations then due and owing or, to the extent
that no Obligations are then due and owing, paid over to a Borrower pursuant to
Section 2.27(c).
(g) Exclusions. Notwithstanding anything contained herein to the
contrary (including Section 2.27(b)), no Borrower shall be required to make any
payment to any Lender under this Section 2.27 with respect to any Taxes or Other
Taxes that (i) are attributable solely to such Lender's failure to comply with
the requirements of Section 2.27(d), (ii) are United States taxes that were
being imposed on amounts payable to such Lender at the time the Lender became a
party to this Agreement, or (iii) are United States taxes imposed as a result of
an event occurring after the date on which such Lender became a Lender, other
than a change in any applicable treaty, law, or regulation.
2.28 Replacement of Lenders under Certain Circumstances. If at any
time (a) the Borrowers become obligated to pay any additional amount to a Lender
as described in Section 2.24 or 2.27 or any Lender ceases to make LIBO Rate
Loans pursuant to Section 2.11, or (b) any Lender becomes insolvent and its
assets become subject to a receiver, liquidator, trustee, custodian or other
Person having similar powers, then the Borrowers may replace such Lender
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by causing such Lender to (and such Lender shall be obligated to) assign
pursuant to Section 9.1 all of its rights and obligations under this Agreement
to a Lender or other Person selected by the Borrowers and reasonably acceptable
to the Agent, for a purchase price equal to the outstanding principal amount of
such Lender's Advances and all accrued interest and fees and other amounts
payable hereunder.
ARTICLE III
CONDITIONS
3.1 Conditions Precedent to Effectiveness. The effectiveness of
this Agreement is subject to the condition precedent that:
(a) Documentation. All matters incident to the consummation of the
transactions contemplated herein shall be satisfactory to the Agent, and the
Agent shall have received, reviewed, and approved the following documents and
other items, appropriately executed when necessary and, where applicable,
acknowledged by one or more authorized officers of a Borrower all in form and
substance satisfactory to the Agent and dated, where applicable, of even date
herewith or another date acceptable to the Agent in its sole discretion:
(i) multiple counterparts of this Agreement as requested
by the Lenders;
(ii) a Guaranty executed by each Subsidiary of a Borrower
that is not a Borrower and the Notes executed by each Borrower;
(iii) copies of the Certificate of Incorporation and all
amendments thereto and the bylaws and all amendments thereto of each of the
Borrowers and any Guarantor accompanied by a certificate issued by the secretary
or an assistant secretary of each of the Borrowers or such Guarantor as the case
may be, to the effect that each such copy is correct and complete;
(iv) a certificate of incumbency and signatures of all
officers of each of the Borrowers and any Guarantor who are authorized to
execute Loan Documents on behalf of such Borrower or such Guarantor, as the case
may be, each such certificate being executed by the secretary or an assistant
secretary of such Borrower or such Guarantor;
(v) copies of corporate resolutions approving the Loan
Documents and authorizing the transactions contemplated herein and therein, duly
adopted by the boards of directors of each of the Borrowers and any Guarantor
accompanied by a certificate of the secretary or an assistant secretary of such
Borrower or such Guarantor, as the case may be, to the effect that such copies
are true and correct copies of resolutions duly adopted at a meeting or by
unanimous consent of the board of directors of such Borrower or such Guarantor
and that such resolutions constitute all the resolutions adopted with respect to
such transactions, have not been amended, modified, or revoked in any respect,
and are in full force and effect as of the date of such certificate;
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(vi) multiple counterparts, as requested by the Lenders,
of the following Security Instruments creating, evidencing, perfecting, and
otherwise establishing Liens in favor of the Agent for the benefit of the Agent,
the Lenders and the Swap Counterparties, in and to the Collateral as security
for the Obligations (subject to the provisions of Section 7.3):
A. Supplements to the existing Mortgages or if applicable, new
Mortgages, from a Borrower to the Agent for its benefit and the benefit
of the Lenders covering (1) all Oil and Gas Properties to be included
in the Borrowing Base which are not already encumbered under a
Mortgage, and (2) Oil and Gas Properties of the Borrowers and
Guarantors that, when combined with those Oil and Gas Properties
already encumbered under a Mortgage, comprise 90% of the PV-10 value of
all Oil and Gas Properties of the Borrowers and Guarantors;
B. The Security Agreement (Stock Pledge) executed by the
Borrowers and the Guarantors covering all of the issued and outstanding
capital stock of each of their respective Subsidiaries and other
personal property related thereto;
C. The Security Agreement executed by the Borrowers and the
Guarantors covering all personal property of the Borrowers and the
Guarantors;
D. Financing Statements naming each of the Borrowers, as debtor,
in favor of the Agent, as secured party, constituent to the instruments
described in clause (A) through clause (C) above;
E. Undated letters, in form of Exhibit I, from the Borrowers to
each purchaser of production and disburser of the proceeds of
production from or attributable to the Mortgaged Properties, together
with additional letters with the addressees left blank, authorizing and
directing the addressees to make future payments attributable to
production from the Mortgaged Properties directly to the Agent;
F. To the extent not previously delivered under the Existing
Credit Agreement, Irrevocable Stock Powers executed in blank and the
stock certificates for the stocks pledged under the Security Agreements
(Stock Pledge);
(vii) audited Financial Statements of the Parent as of
December 31, 2002 and unaudited Financial Statements of the Parent as of
September 30, 2003;
(viii) certificates dated as of a recent date from the
Secretary of State or other appropriate Governmental Authority evidencing the
existence or qualification and good standing of each of the Borrowers in its
jurisdiction of incorporation and in any other jurisdiction where such
qualification is required by applicable law; provided that any such certificates
that have not been delivered to the Agent prior to the effectiveness of this
Agreement shall not be a condition precedent to the effectiveness of this
Agreement, so long as such certificates are delivered in accordance with Section
5.24(b);
(ix) results of searches of the UCC Records of the
Secretary of State of the States of Alabama, Louisiana, Mississippi, Texas,
Delaware, Montana, and Michigan from a source reasonably acceptable to the Agent
and reflecting no Liens, other than Permitted Liens,
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against any of the Collateral as to which perfection of a Lien is accomplished
by the filing of a financing statement; provided that the terminations required
by Section 5.24(c) shall not be a condition precedent to the effectiveness of
this Agreement, so long as such items are delivered in accordance with Section
5.24(c);
(x) copies of all operating, lease, sublease, royalty,
sales, exchange, processing, farmout, bidding, pooling, unitization,
communitization, and other agreements relating to the Mortgaged Properties
requested by the Agent;
(xi) Engineering Reports covering the Mortgaged Properties
to be included in the Borrowing Base, including the Oil and Gas Properties to be
added as collateral pursuant to supplements to Mortgages or new Mortgages as
required under clause (vi) above;
(xii) the opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and the opinion of
▇▇▇▇▇ ▇▇▇▇▇, LLP, as counsel to the Borrowers, substantially in the form
attached hereto as Exhibits J-1 and J-2, with such changes thereto as may be
approved by the Agent;
(xiii) certificates evidencing the insurance coverage
required pursuant to Section 5.18; provided that any such certificates that have
not been delivered to the Agent prior to the effectiveness of this Agreement
shall not be a condition precedent to the effectiveness of this Agreement, so
long as such certificates are delivered in accordance with Section 5.24(a); and
(xiv) such other agreements, documents, instruments,
opinions, certificates, waivers, consents, and evidence as the Agent may
reasonably request.
(b) Payment of Fees. The Borrowers shall have paid (i) all fees
that have accrued pursuant to Article II of the Existing Credit Agreement prior
to the date this Agreement becomes effective, (ii) all costs and expenses which
have been invoiced and are payable pursuant to Section 5.14, and (iii) a
facility fee equal to 0.50% of the initial Borrowing Base (as set forth in
Section 2.10(b)(v)) to the Agent for the ratable benefit of the Lenders.
(c) No Default. No Default shall have occurred and be continuing
or would result from the consummation of the transactions contemplated by this
Agreement, including the advance of a Loan or from the application of the
proceeds therefrom or an issuance of a Letter of Credit;
(d) Representations and Warranties. The representations and
warranties contained in Article IV hereof and in each other Loan Document shall
be true and correct in all material respects.
(e) Material Adverse Effect. No event or circumstance that could
reasonably be expected to cause a Material Adverse Effect shall have occurred.
(f) No Proceeding or Litigation; No Injunctive Relief. No action,
suit, investigation or other proceeding (including, without limitation, the
enactment or promulgation of a statute or rule) by or before any arbitrator or
any Governmental Authority shall be threatened or pending and no preliminary or
permanent injunction or order by a state or federal court shall have been
entered (i) in connection with this Agreement or any transaction contemplated
hereby except as
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set forth in Schedule 4.9 or (ii) which, in any case, in the reasonable judgment
of the Agent, could reasonably be expected to result in a Material Adverse
Effect.
(g) Consents, Licenses, Approvals, etc. The Agent shall have
received true copies (certified to be such by each of the Borrowers or other
appropriate party) of all consents, licenses and approvals required in
accordance with applicable law in connection with the execution, delivery, and
performance of payment obligations by the Borrowers and Guarantors of the Loan
Documents, and the validity and enforceability of this Agreement and the other
Loan Documents against the Borrowers and the Guarantors. In addition, each of
the Borrowers and its Subsidiaries shall have all such material consents,
licenses and approvals required in connection with the continued operation of
such Borrower and its Subsidiaries, and such approvals shall be in full force
and effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on this Agreement and
the actions contemplated hereby.
(h) Borrowing Request. The Agent shall have received a Borrowing
Request from a Borrower in the form of Exhibit A, with appropriate insertions
and executed by a duly authorized Responsible Officer of such Borrower.
(i) ▇▇▇▇▇▇ Merger. The ▇▇▇▇▇▇ Merger shall have been completed and
effective for all purposes and the Agent shall have received certified, true,
correct and complete copies of the Merger Agreement, including all amendments,
supplements and other modifications, if any, thereto, and all other instruments,
documents and agreements related to the ▇▇▇▇▇▇ Merger.
(j) Title Review. Any review of the title of the Borrowers or
Guarantors by the Agent or its counsel prior to the closing of this Agreement
shall be satisfactory to the Agent.
3.2 Conditions Precedent to All Borrowings. The obligation of each
Lender to make a Loan on the occasion of each Borrowing and of the Agent to
issue, increase, or extend any Letter of Credit shall be subject to the further
conditions precedent that on the date of such Borrowing or the issuance,
increase, or extension of such Letter of Credit:
(a) the following statements shall be true (and each of the giving
of the applicable Borrowing Request or Letter of Credit Application and the
acceptance by a Borrower of the proceeds of such Borrowing or the issuance,
increase, or extension of such Letter of Credit shall constitute a
representation and warranty by the Borrowers that on the date of such Borrowing,
the issuance, increase, or extension of such Letter of Credit, such statements
are true):
(i) the representations and warranties contained in
Article IV of this Agreement, the Security Instruments, and each of the other
Loan Documents are true and correct in all material respects on and as of the
date of such Borrowing or the date of the issuance, increase, or extension of
such Letter of Credit, before and after giving effect to such Borrowing or to
the issuance, increase, or extension of such Letter of Credit and to the
application of the proceeds from such Borrowing, as though made on and as of
such date other than any such representations and warranties that, by their
terms, refer to a specific date, in which case as of such specific date; and
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(ii) no Default has occurred and is continuing or would
result from such Borrowing or from the application of the proceeds therefrom,
from the issuance, increase, or extension of such Letter of Credit.
3.3 Determinations under Sections 3.1 and 3.2. For purposes of
determining compliance with the conditions specified in Sections 3.1 and 3.2,
each Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by the Loan Documents
shall have received written notice from such Lender prior to the Borrowings
hereunder specifying its objection thereto and such Lender shall not have made
available to the Agent such Lender's ratable portion of such Borrowings.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of the Borrowers jointly and severally represents and warrants as
follows:
4.1 Due Authorization. The execution, delivery, and performance by
each of the Borrowers of this Agreement, and the borrowings hereunder, the
execution, delivery and performance by each of the Borrowers of the Notes, the
repayment of the Notes and interest and fees provided for in the Notes and this
Agreement, the execution, delivery, and performance of the Security Instruments
and Guaranties by each of the Borrowers and Guarantors party thereto and the
performance of all obligations of each of the Borrowers and Guarantors under the
Loan Documents are within the power of such Borrower or Guarantor, have been
duly authorized by all necessary corporate action by each of the Borrowers and
Guarantors, and do not and will not to (a) require any Borrower or Guarantor to
obtain the consent of any Governmental Authority, (b) cause any Borrower or
Guarantor to contravene or conflict with any Requirement of Law, (c) contravene
or conflict with any indenture, instrument, or other agreement to which any
Borrower or Guarantor is a party or by which any Property of any Borrower or
Guarantor may be presently bound or encumbered, (d) contravene any Borrower's or
Guarantor's certificate of incorporation, bylaws or other similar governance
documents, or (e) result in or require the creation or imposition of any Lien in
prohibited by this Agreement.
4.2 Corporate Existence. Each of the Borrowers and Guarantors is a
corporation duly organized, legally existing, and in good standing under the
laws of its state of incorporation and is duly qualified as a foreign
corporation and is in good standing in all jurisdictions wherein the ownership
of Property or the operation of its business necessitates same, other than those
jurisdictions wherein the failure to so qualify will not have a Material Adverse
Effect.
4.3 Valid and Binding Obligations. All Loan Documents have been
duly executed and delivered by each of the Borrowers and Guarantors party
thereto. Each Loan Document is the legal, valid, and binding obligation of each
of the Borrowers and Guarantors party thereto, enforceable against each of the
Borrowers in accordance with its terms.
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4.4 Use of Proceeds. The proceeds of the Loans will be used by the
Borrowers for the purposes described in Section 2.4. None of the Borrowers or
Guarantors has engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U). No
proceeds of any Loan will be used to purchase or carry any margin stock in
violation of Regulation T, U or X.
4.5 Security Instruments. The provisions of each Security
Instrument are effective to create in favor of the Agent for the benefit of the
Agent, the Lenders and the Swap Counterparties, a legal, valid, and enforceable
Lien in all right, title, and interest of any Borrower or Guarantor in the
Collateral described therein, which Liens, assuming the accomplishment of
recording and filing in accordance with applicable laws prior to the
intervention of rights of other Persons, shall constitute fully perfected
first-priority Liens on all right, title, and interest of any Borrower or
Guarantor in the Collateral described therein (subject only to Permitted Liens).
The Liens created under the Existing Security Documents, as modified by the
Security Instruments delivered as of the date hereof, continue to constitute
good and valid first-priority Liens (subject only to Permitted Liens) as of the
original date of recordation thereof, except as to (a) Property that has been
disposed of in accordance with this Agreement and that is not included in the
Borrowing Base and (b) Liens on Property of Edge Petroleum Operating Company,
Inc. that were originally perfected by filing financing statements, provided
that such Liens are re-perfected on or before the date this Agreement becomes
effective.
4.6 Title to Assets. Each of the Borrowers and Guarantors, and
each of their Subsidiaries has good and defensible title to all of its
Properties as is customary in the oil and gas industry in all material respects,
free and clear of all Liens except for Permitted Liens.
4.7 Scope and Accuracy of Financial Statements. The Parent has
delivered to the Agent and the Lenders copies of the Financial Statements as
required under Section 3.1(a)(vii), and such Financial Statements are accurate
and complete in all material respects and present fairly the financial position
and results of operations and cash flows of the Parent and its consolidated
Subsidiaries in accordance with GAAP as at the relevant point in time or for the
period indicated, as applicable. No event or circumstance has occurred since
December 31, 2002 that could reasonably be expected to have a Material Adverse
Effect.
4.8 No Material Misstatements. To the knowledge of the Borrowers
and Guarantors, no information, exhibit, statement or report furnished to the
Lenders by or at the direction of the Borrowers or Guarantors contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading; provided,
however, no representation or warranty is made with respect to any projections,
estimates, pro forma financial information, forward-looking statements, and
statements regarding the future performance of any Borrower, any Guarantor, or
any of their Subsidiaries provided to the Lenders ("Projections") other than
that such Projections have been prepared in good faith based upon assumptions
believed to be reasonable at the time such Projections were prepared.
4.9 Liabilities and Litigation. Other than as reflected in the
Financial Statements referred to in Section 4.7 or as listed on Schedule 4.9
attached hereto, none of the Borrowers or Guarantors has any liabilities,
direct, or contingent, which may materially and adversely affect its business or
operations or its ownership of the Collateral, and no litigation or other action
of any nature affecting any Borrower or Guarantor is pending before any
Governmental Authority or arbitrator or, to the best knowledge of such Borrower
or Guarantor, threatened against or affecting such Borrower or
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Guarantor which could reasonably be expected to result in any impairment of its
ownership of any Collateral, have a Material Adverse Effect, or which purports
to affect the legality, validity, binding effect or enforceability of this
Agreement, any Note, or any other Loan Document.
4.10 Compliance with Laws. Each of the Borrowers and Guarantors and
their respective Properties, including, without limitation, the Mortgaged
Properties, are in compliance with all applicable Requirements of Law,
including, without limitation, Environmental Laws, the Natural Gas Policy Act of
1978, as amended, and ERISA, except to the extent non-compliance with any such
Requirements of Law could not reasonably be expected to have a Material Adverse
Effect.
4.11 ERISA.
(a) Each employee benefit plan of any Borrower, any Guarantor, or
any of their Subsidiaries intended to qualify under Section 401 of the Code does
so qualify, and any trust created thereunder is exempt from tax under the
provisions of Section 501 of the Code, except where such failures, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
(b) Each Title IV Plan is in compliance in all material respects
with applicable provisions of ERISA, the Code and other Requirements of Law
except for non-compliances that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(c) There has been no, nor is there reasonably expected to occur,
any ERISA Event other than those that, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
4.12 Environmental Laws.
(a) Except as set forth on Schedule 4.12, each of the Borrowers
and Guarantors (i) has obtained all permits, licenses, orders, approvals or
other authorizations required under Environmental Laws necessary for the
ownership and operation of its Properties and the conduct of its business,
except where failure to do so could not reasonably be expected to have a
Material Adverse Effect; (ii) has been and is in compliance with all terms and
conditions of such environmental permits, licenses, orders, approvals and other
authorizations and with all other requirements of applicable Environmental Laws,
except where failure to be in compliance could not reasonably be expected to
have a Material Adverse Effect; (iii) has not received notice of any violation
or alleged violation of any Environmental Laws which could reasonably be
expected to have a Material Adverse Effect; and (iv) is not subject to any
actual or contingent Environmental Complaint, which could reasonably be expected
to cause a Material Adverse Effect.
(b) Except as set forth on Schedule 4.12, to each of the
Borrowers' and Guarantors' best knowledge none of the presently owned or
operated Property, and to each of the Borrowers' and Guarantors' actual
knowledge none of the previously owned or operated Property, of any Borrower or
Guarantor, or of any of their former Subsidiaries, wherever located, (i) has
been placed on or proposed to be placed on the National Priorities List, the
Comprehensive Environmental Response Compensation Liability Information System
list, or their state or local analogs, or, to the extent the same could
reasonably be expected to have a Material Adverse Effect, have been otherwise
investigated, designated, listed, or identified as a potential site for removal,
remediation, cleanup, closure, restoration, reclamation, or other response
activity under any Environmental Laws; (ii) is subject to a Lien, arising under
or in connection with any Environmental Laws, that attaches to any revenues or
to any Property owned or operated by any Borrower, wherever located, which could
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reasonably be expected to cause a Material Adverse Effect; or (iii) has been the
site of any Release of Hazardous Substances from present or past operations
which has caused at the site or at any third-party site any condition that has
resulted in or could reasonably be expected to result in the need for Response
(as defined under Environmental Laws) that would cause a Material Adverse
Effect.
(c) Except as set forth on Schedule 4.12, without limiting the
foregoing, (i) all necessary notices have been properly filed, and no further
action is required under current Environmental Law as to each Response or other
restoration or remedial project undertaken by any of the Borrowers or Guarantors
or any of their former Subsidiaries on any of their presently or formerly owned
or operated Property and (ii) the present and, to each of the Borrowers' and
Guarantors' best knowledge, future liability, if any, of any Borrower or
Guarantor which could reasonably be expected to arise in connection with
requirements under Environmental Laws will not result in a Material Adverse
Effect.
4.13 Investment Company Act Compliance. None of the Borrowers or
Guarantors is, nor is directly or indirectly controlled by or acting on behalf
of any Person which is, an "investment company" or an "affiliated person" of an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
4.14 Public Utility Holding Company Act Compliance. None of the
Borrowers or Guarantors, nor any of their Subsidiaries is a "holding company,"
or a "subsidiary company" of a "holding company," or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
4.15 Proper Filing of Tax Returns; Payment of Taxes Due. Each of
the Borrowers and Guarantors has duly and properly filed, or has obtained an
extension for the filing of, a United States income tax return and all other
material tax returns which are required to be filed and has paid all taxes due
except such as are being contested in good faith and as to which adequate
provisions and disclosures have been made. The respective charges and reserves
on the books of the Borrowers with respect to taxes and other governmental
charges are adequate.
4.16 Refunds. Except as described on Schedule 4.16 attached hereto,
no orders of, proceedings pending before, or other requirements of the Minerals
Management Service, Bureau of Land Management, the Federal Energy Regulatory
Commission, the Texas Railroad Commission, or any Governmental Authority exist
which could result in a Borrower or Guarantor being required to refund any
material portion of the proceeds received or to be received from the sale of
Hydrocarbons constituting part of the Mortgaged Property.
4.17 Gas Contracts. Except as described on Schedule 4.17 attached
hereto, none of the Borrowers or Guarantors (a) is obligated in any material
respect by virtue of any prepayment made under any contract containing a
"take-or-pay" or "prepayment" provision or under any similar agreement to
deliver Hydrocarbons produced from or allocated to any of the Mortgaged Property
at some future date without receiving full payment therefor within 90 days of
delivery, and (b) has produced gas, in any material amount, subject to, and none
of the Borrowers or Guarantors nor any of their Mortgaged Properties is subject
to, balancing rights of third parties or subject to balancing duties under
governmental requirements or joint operating agreements, except as to such
matters for which such Borrower or Guarantor has disclosed to the Agent and has
established monetary reserves
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adequate in amount to satisfy such obligations and have segregated such reserves
from other accounts.
4.18 Intellectual Property. Each of the Borrowers and Guarantors
owns or is licensed to use all Intellectual Property necessary to conduct all
business material to its condition (financial or otherwise), business, or
operations as such business is currently conducted. No claim has been asserted
or is pending by any Person against any Borrower, Guarantor, or their
Subsidiaries with respect to the use by any of the Borrowers, the Guarantors, or
their respective Subsidiaries of any such Intellectual Property or challenging
or questioning the validity or effectiveness of any such Intellectual Property
except for such claims as do not, in the aggregate, give rise to any material
liability on part of any Borrower, any Guarantor, or any Subsidiary of any
Borrower or Guarantor; and the Borrowers and Guarantors know of no valid basis
for any such claim. The use of such Intellectual Property by each of the
Borrowers, the Guarantors, and their respective Subsidiaries does not infringe
on the rights of any Person, except for such claims and infringements as do not,
in the aggregate, give rise to any material liability on the part of any
Borrower, any Guarantor, or any Subsidiary of any Borrower or Guarantor.
4.19 Condition of Properties; Casualties or Taking of Property. The
material Properties used or to be used in the continuing operations of the
Borrowers, the Guarantors, and their respective Subsidiaries are in good repair,
working order and condition, ordinary wear and tear excepted. Except as
disclosed on Schedule 4.19 attached hereto or as is fully covered by insurance,
neither the business nor any material Property of any Borrower or Guarantor has
been materially and adversely affected 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 Governmental Authority, riot,
activities of armed forces, or acts of God or any public enemy.
4.20 Locations of Borrower. The principal place of business and
chief executive office of each of the Borrowers is located at the address of
such Borrower or Guarantor set forth in Section 9.4 or at such other location as
such Borrower or Guarantor may have, by proper written notice hereunder, advised
the Agent.
4.21 Subsidiaries. The Borrowers and Guarantors have no
Subsidiaries other than as listed on Schedule 4.21 (as supplemented from time to
time in accordance with Section 6.14) attached hereto.
4.22 No Burdensome Restrictions; No Defaults.
(a) None of the Borrowers or Guarantors nor any of their
Subsidiaries is a party to any indenture, loan, or credit agreement or any lease
or other agreement or instrument or subject to any charter or corporate
restriction or provision of applicable law or governmental regulation which
would reasonably be expected to cause a Material Adverse Effect. None of the
Borrowers or Guarantors nor any of their Subsidiaries is in default under or
with respect to any contract, agreement, lease, or other instrument to which
such Borrower, Guarantor, or any of its Subsidiaries is a party and which could
reasonably be expected to cause a Material Adverse Effect. None of the Borrowers
or Guarantors nor any of their Subsidiaries has received any notice of default
under any material contract, agreement, lease, or other instrument to which such
Borrower, Guarantor, or such Subsidiary is a party.
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(b) No Default has occurred and is continuing.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note or any amount under any Loan Document shall remain
unpaid, any Letter of Credit shall remain outstanding, or any Lender shall have
any Commitment hereunder, and unless the Required Lenders shall otherwise
consent in writing, each of the Borrowers shall, and shall cause each if its
respective Subsidiaries and each Guarantor to:
5.1 Maintenance and Access to Records. Keep adequate records, in
accordance with GAAP, of all its transactions so that at any time, and from time
to time, its true and complete financial condition may be readily determined,
and within two Business Days following the reasonable request of the Agent or
any Lender, make such records available for inspection by the Agent or any
Lender and, at the expense of the Borrowers, allow the Agent or any Lender to
make and take away copies thereof.
5.2 Quarterly Financial Statements; Compliance Certificates. Cause
the Parent to deliver to the Agent and each Lender, (a) on or before the 45th
day after the close of each of the first three quarterly periods of each fiscal
year of the Parent, a copy of the unaudited consolidated and consolidating
Financial Statements of the Parent and its consolidated Subsidiaries as at the
close of such quarterly period and from the beginning of such fiscal year to the
end of such period, such Financial Statements to be certified by a Responsible
Officer of the Parent (i) as having been prepared in accordance with GAAP
consistently applied from quarter to quarter (except for any inconsistency that
results from a change in GAAP) and consistently applied within each set of
Financial Statements and (ii)as a fair presentation of the condition of the
Parent, subject to changes resulting from normal year-end audit adjustments, and
(b) on or before the 45th day after the close of each fiscal quarter of the
Parent and on or before the 90th day after the close of each fiscal year of the
Parent, a Compliance Certificate in the form of Exhibit B hereto signed by a
Responsible Officer of the Parent.
5.3 Annual Financial Statements. Cause the Parent to deliver to
the Agent and each Lender, on or before the 90th day after the close of each
fiscal year of the Parent, a copy of the annual audited consolidated and
unaudited consolidating Financial Statements of the Parent.
5.4 Oil and Gas Production Reports. Cause the Parent to deliver to
the Agent and each Lender, as soon as available and in any event within 45 days
after the end of each fiscal quarter of the Parent, a report certified by a
Responsible Officer of the Parent in form and substance reasonably satisfactory
to the Agent prepared by the Parent covering the Mortgaged Properties and
detailing on a monthly basis (a) the production, revenue, and price information
and associated operating expenses for such month, (b) any changes to any
producing reservoir, production equipment, or producing well during such month,
which changes could cause a Material Adverse Change and (c) any sales of any
Borrower's, any Guarantor's, or any of their respective Subsidiaries' Oil and
Gas Properties during such month
5.5 Title Opinions; Title Defects. (a) Within 30 days from the
date this Agreement becomes effective, to the extent not previously delivered
under the Existing Credit Agreement, furnish title opinions reasonably
acceptable to the Agent, covering 75% of the PV-10 value (as set forth on the
reserve report delivered by the Borrowers to the Agent prior to the date this
Agreement
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becomes effective) of all Proven Reserves of the Borrowers' and Guarantors' Oil
and Gas Properties in form and substance reasonably satisfactory to the Agent in
its sole discretion as to the status of the Borrowers' or the Guarantors'
respective title to the Mortgaged Properties, and (b) promptly, but in any event
within 60 days after notice by the Agent of any defect (other than Permitted
Liens), material in the reasonable opinion of the Agent and the Required Lenders
in value, in the title of the Borrowers and the Guarantors to any of their
respective Oil and Gas Properties to be included in the Borrowing Base, at the
Borrowers' option, either(i) clear such title defects, including title defects
identified in title opinions previously delivered under the Existing Credit
Agreement, or (ii) grant as Collateral, acceptable Oil and Gas Properties of a
Borrower or a Guarantor with no title defects or exceptions (other than
Permitted Liens) as determined in the reasonable opinion of the Agent and the
Required Lenders, and of at least an equivalent value, as determined in the
reasonable opinion of the Agent and the Required Lenders, to the decrease in
value of the Oil and Gas Properties attributable to such title defects. If any
such title defects are not cured in a timely manner or such additional
Collateral is not provided in a timely manner, then the Borrowers hereby
authorize the Agent to take such actions to cure such title defects and hereby
agrees to pay all related costs and fees incurred by the Agent to do so;
provided, however, to the extent it is reasonably determined by the Required
Lenders that such title defects cannot be cured or a Borrower notifies the Agent
that it requests a reduction in the Borrowing Base, the Required Lenders may
(and, if requested by any Borrower, shall) reduce the Borrowing Base by the
amount equal to the decrease in value of the Oil and Gas Properties attributable
to such title defect. If within the 60 day period provided for under this
Section 5.5 the Borrowers cures the title defects or exceptions by complying
with clauses (i) and (ii) above, or if the Borrowing Base is reduced as provided
in the immediately preceding sentence and the Borrowers shall have timely
complied with the Section 2.11(b) as necessary, then no Default or Event of
Default shall have occurred as a result of such title defect or exception.
5.6 Notices of Certain Events. Deliver to the Agent, promptly upon
having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by a Responsible
Officer of the Parent and setting forth the relevant event or circumstance and
the steps being taken by the Borrowers with respect to such event or
circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual
obligation of a Borrower or Guarantor, or any litigation, investigation, or
proceeding between a Borrower or Guarantor and any Governmental Authority which,
in either case, if not cured or if adversely determined, as the case may be,
could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding involving a Borrower or Guarantor
as a defendant or in which any Property of a Borrower or Guarantor is subject to
a claim and in which the amount involved is $100,000 or more and which is not
covered by insurance or in which injunctive or similar relief is sought;
(d) the receipt by a Borrower or Guarantor of any material written
Environmental Complaint;
(e) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority or other Person concerning the
environmental condition of, or relating to, any Property of a Borrower or
Guarantor following any allegation of a violation of any Requirement of Law that
could result in liability of a Borrower or Guarantor;
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(f) any Release of Hazardous Substances by a Borrower or Guarantor
or from, affecting, or related to any Property of a Borrower or Guarantor or
adjacent to any Property of a Borrower except in accordance with applicable
Requirements of Law or the terms of a valid permit, license, certificate, or
approval of the relevant Governmental Authority, or the violation of any
Environmental Law, or the revocation, suspension, or forfeiture of or failure to
renew, any permit, license, registration, approval, or authorization which, in
either case, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect;
(g) upon the request of any Lender, the change in identity or
address of any Person remitting to a Borrower or Guarantor proceeds from the
sale of hydrocarbon production from or attributable to any Mortgaged Property;
(h) any change in the senior management of a Borrower or a
Guarantor;
(i) any Borrower, Guarantor, Subsidiary of a Borrower, or any
ERISA Affiliate knows or has reason to know that any ERISA Event has occurred;
(j) any Borrower, Guarantor, Subsidiary of a Borrower, or any
ERISA Affiliate knows or has reason to know that a request for a minimum funding
waiver under Section 412 of the Code has been filed with respect to any Title IV
Plan or Multiemployer Plan;
(k) any Borrower, Guarantor, Subsidiary of a Borrower, or any
ERISA Affiliate files a notice of intent to terminate any Title IV Plan, if such
termination would require material additional contributions in order to be
considered a standard termination within the meaning of Section 4041(b) of
ERISA, a copy of each notice; and
(l) any other event or condition which could reasonably be
expected to have a Material Adverse Effect.
5.7 Letters in Lieu of Transfer Orders; Division Orders. Promptly
upon request by the Agent at any time and from time to time, execute such
letters in lieu of transfer orders, in addition to the letters signed by the
Borrowers or Guarantors and delivered to the Agent in satisfaction of the
condition set forth in Section 3.1(a)(vi)(G) and/or division and/or transfer
orders as are necessary or appropriate to transfer and deliver to the Agent
proceeds from or attributable to any Mortgaged Property.
5.8 Additional Information. Furnish to the Agent and each Lender,
promptly upon the request of the Agent or any Lender, such additional financial
or other information concerning the assets, liabilities, operations, and
transactions of the Borrowers and Guarantors as the Agent or any Lender may from
time to time reasonably request; and notify the Agent and each Lender not less
than ten Business Days prior to the occurrence of any condition or event that
may change the proper location for the filing of any financing statement or
other public notice or recording for the purpose of perfecting a Lien in any
Collateral, including, without limitation, any change in its name or the
jurisdiction or type of its organization; and upon the request of the Agent or
any Lender, execute such additional Security Instruments as may be necessary or
appropriate in connection therewith.
5.9 Compliance with Laws. Comply with all applicable Requirements
of Law, except where such Requirements of Law are being contested in good faith
and the Borrowers maintain adequate reserves therefor, or where failure to so
comply could not reasonably be expected to cause a
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Material Adverse Effect, including, without limitation, (a) the Natural Gas
Policy Act of 1978, as amended, (b) ERISA, (c) Environmental Laws, and (d)
permits, licenses, registrations, approvals, and authorizations issued to it or
of which it has knowledge (i) related to any natural or environmental resource
or media located on, above, within, in the vicinity of, related to or affected
by any Property of a Borrower or a Guarantor, (ii) required for the performance
of the operations of a Borrower or a Guarantor, or (iii) applicable to the use,
generation, handling, storage, treatment, transport, or disposal of any
Hazardous Substances; and instruct all employees, crew members, agents,
contractors, subcontractors, and future lessees (pursuant to appropriate lease
provisions) of a Borrower or a Guarantor, while such Persons are acting within
the scope of their relationship with a Borrower or a Guarantor, to comply with
all such Requirements of Law as may be necessary or appropriate to enable a
Borrower or a Guarantor to so comply.
5.10 Payment of Assessments and Charges. Pay all taxes,
assessments, governmental charges, rent, and other Indebtedness which, if
unpaid, might become a Lien against the Property of a Borrower or a Guarantor,
except any of the foregoing being contested in good faith and as to which
adequate reserves in accordance with GAAP have been established or unless
failure to pay would not have a Material Adverse Effect.
5.11 Maintenance of Corporate Existence and Good Standing. Maintain
its corporate existence or qualification and good standing in its jurisdiction
of incorporation and in all jurisdictions wherein the Property now owned or
hereafter acquired or business now or hereafter conducted necessitates same,
unless the failure to do so would not have a Material Adverse Effect.
5.12 Intentionally Omitted.
5.13 Further Assurances. Upon the Agent's written request, promptly
cure any defects in the execution and delivery of any of the Loan Documents and
all agreements contemplated thereby, and execute, acknowledge, and deliver such
other assurances, instruments, approvals, opinions, and documents as shall, in
the reasonable opinion of the Agent, be necessary to fulfill the terms of the
Loan Documents.
5.14 Initial Fees and Expenses. Pay on demand (a) all reasonable
out-of-pocket costs and expenses of the Agent in connection with the
preparation, execution, delivery, administration, modification, and amendment of
this Agreement, the Notes, and the other Loan Documents including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent with respect to advising the Agent as to its rights and responsibilities
under this Agreement, and (b) all reasonable out-of-pocket costs and expenses,
if any, of the Agent, as the issuing bank for the Letters of Credit, and each
Lender (including, without limitation, reasonable counsel fees and expenses of
the Agent, and each Lender) in connection with the enforcement (whether through
negotiations, legal proceedings, or otherwise) of this Agreement, the Notes, and
the other Loan Documents.
5.15 Subsequent Fees and Expenses of Agent and Lenders. Upon
request by the Agent, promptly reimburse the Agent (to the fullest extent
permitted by law) for all amounts reasonably expended, advanced, or incurred by
or on behalf of the Agent to ratify, amend, restate, or prepare additional Loan
Documents, as the case may be and for the filing and recordation of Security
Instruments. Promptly reimburse the Agent and each Lender for all amounts
reasonably expended, advanced, or incurred (a) to, to the extent provided under
Section 2.18, satisfy any obligation of a Borrower under any of the Loan
Documents; (b) to collect the Obligations; (c) to enforce the rights
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of the Agent and each Lender under any of the Loan Documents; and (d) to protect
the Properties or business of a Borrower or a Guarantor, including, without
limitation, the Collateral, which amounts shall be deemed compensatory in nature
and liquidated as to amount upon notice to a Borrower by the Agent and each
Lender and which amounts shall include, but not be limited to (i) all court
costs, (ii) reasonable attorneys' fees, (iii) reasonable fees and expenses of
auditors and accountants incurred to protect the interests of the Agent and each
Lender, (iv) fees and expenses incurred in connection with the participation by
the Agent and each Lender as a member of the creditors' committee in a case
commenced under any Insolvency Proceeding, (v) fees and expenses incurred in
connection with lifting the automatic stay prescribed in Section 362 Title 11 of
the United States Code, and (vi) fees and expenses incurred in connection with
any action pursuant to Section 1129 Title 11 of the United States Code all
reasonably incurred by the Agent and each Lender in connection with the
collection of any sums due under the Loan Documents, together with interest at
the per annum interest rate equal to the Floating Rate, calculated on a basis of
a calendar year of 365 or 366 days, as the case may be, counting the actual
number of days elapsed, on each such amount from the date of notification that
the same was expended, advanced, or incurred by the Agent and each Lender until
the date it is repaid to the Agent and each Lender, with the obligations under
this Section surviving (x) the non-assumption of this Agreement in a case
commenced under any Insolvency Proceeding and being binding upon a Borrower or a
Guarantor and/or a trustee, receiver, custodian, or liquidator of a Borrower or
a Guarantor appointed in any such case, and (y) the payment and performance of
all Obligations, the termination of the Commitments, the termination of all
Letters of Credit and the termination of this Agreement and the other Loan
Documents.
5.16 Operation of Oil and Gas Properties. Develop, maintain, and
operate its Oil and Gas Properties in a prudent and workmanlike manner in
accordance with industry standards.
5.17 Maintenance and Inspection of Properties. Maintain all of its
tangible material Properties in good repair and condition, ordinary wear and
tear excepted; make all necessary replacements thereof and operate such
Properties in a good and workmanlike manner; and permit on two Business Days
prior written notice any authorized representative of the Agent or any Lender to
visit and inspect any tangible Property of a Borrower or a Guarantor.
5.18 Maintenance of Insurance. Maintain insurance with respect to
its Properties and businesses against such liabilities, casualties, risks, and
contingencies as is customary in the relevant industry and sufficient to prevent
a Material Adverse Effect, and maintain insurance as required under any Security
Instrument, all such insurance to be in amounts and from insurers reasonably
acceptable to the Agent and, with respect to property damage insurance covering
Collateral and business interruption insurance, if any, maintained by a Borrower
or a Guarantor, naming the Agent as loss payee in form reasonably satisfactory
to the Agent or shall name the Agent as an additional insured, as applicable.
Upon any renewal of any such insurance furnish to the Agent or any Lender
evidence, reasonably satisfactory to the Agent of the maintenance of such
insurance. All certified copies of policies or certificates thereof, and
endorsements and renewals thereof shall be delivered to and retained by the
Agent. All policies or certificates of insurance shall set forth the coverage,
the limits of liability, the name of the carrier, the policy number, and the
period of coverage. In addition, all policies of insurance required under the
terms hereof shall contain an endorsement or agreement by the insurer that any
loss shall be payable in accordance with the terms of such policy
notwithstanding any act of negligence of such Borrower or a Guarantor, or any
party holding under such Borrower or a Guarantor which might otherwise result in
a forfeiture of the insurance and the further agreement of the insurer waiving
all rights of setoff, counterclaim or deductions against such Borrower or
Guarantor. All such policies shall contain a provision that notwithstanding any
contrary
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agreements between such Borrower or Guarantor and the applicable insurance
company, such policies will not be canceled, allowed to lapse without renewal,
surrendered or amended (which provision shall include any reduction in the scope
or limits of coverage) without at least 30 days' prior written notice to the
Agent. In the event that, notwithstanding the "lender's loss payable
endorsement" requirement of this Section, the proceeds of any insurance policy
described above are paid to a Borrower or a Guarantor, such Borrower or
Guarantor shall deliver such proceeds to the Agent immediately upon receipt.
Furthermore, the Agent shall have the right to collect, and each of the
Borrowers hereby assigns, and agrees to cause each Guarantor to assign, to the
Agent for the benefit of the Agent, the Lenders and the Swap Counterparties, any
and all monies that may become payable under any policies of insurance relating
to business interruption or by reason of damage, loss, or destruction of any of
the Collateral. In the event of any damage, loss, or destruction of Mortgaged
Properties for which insurance proceeds are received, the Agent, for the benefit
of the Agent, the Lenders and the Swap Counterparties, may, at its option, apply
all such sums or any part thereof received by it toward the payment of the
Obligations, whether matured or unmatured, in the amount of any excess of the
sum of the Loan Balance and the L/C Exposure over the Borrowing Base (as reduced
or as would be reduced as a result of such damage, loss, or destruction),
application to be made first to interest and then to principal, and shall
deliver to such Borrower the balance, if any, after such application has been
made. Otherwise, provided that no Default or Event of Default has occurred and
is continuing, the Agent shall deliver any such proceeds received by it to such
Borrower or Guarantor. In the event the Agent receives insurance proceeds not
attributable to Collateral or business interruption, the Agent shall deliver any
such proceeds to such Borrower or Guarantor.
5.19 Intentionally Omitted.
5.20 Intentionally Omitted.
5.21 Payment of Hedging Obligations. Pay, and cause each Guarantor
and each Subsidiary of a Borrower or Guarantor that is a party to a Hedge
Agreement to pay, all Hedging Obligations as they become due and in any event
within sixty (60) days from the date the relevant Hedging Obligation becomes
due.
5.22 Agreement to Pledge. Grant to the Agent an Acceptable Security
Interest in 90% of the PV-10 value of all Oil and Gas Properties of, and 100% of
all Properties (other than Oil and Gas Properties) of, each Borrower, each
Guarantor, and each Subsidiary of a Borrower or Guarantor now owned or hereafter
acquired promptly after receipt of a written request from the Agent.
5.23 Multiple Borrowers.
(a) Obligations Joint and Several and Unconditional. The
obligations of each of the Borrowers under this Agreement and the Notes are
joint and several and absolute and unconditional irrespective of the value,
genuineness, validity, regularity or enforceability of the obligations of the
other Borrowers under this Agreement, the Notes or any other agreement or
instrument referred to herein or therein (collectively, the "Other Borrower
Obligations"), or any substitution, release or exchange of any other guarantee
of or security for any of the Other Borrower Obligations, and, to the fullest
extent permitted by applicable law, irrespective of any other circumstance
whatsoever which might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor, it being the intent of this Section 5.23 that
the obligations of each of the Borrowers hereunder shall be absolute and
unconditional under any and all circumstances. Without limiting the generality
of the
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foregoing, it is agreed that the occurrence of any one or more of the following
shall not affect the liability of any Borrower under this Agreement, the Notes
or any other agreement referred to herein or therein:
(i) at any time or from time to time, without notice to
any Borrower, the time for any performance of or compliance with any of the
Other Borrower Obligations shall be extended, or such performance or compliance
shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Other Borrower Obligations
shall be accelerated, or any of the Other Borrower Obligations shall be
modified, supplemented or amended in any respect, or any right under this
Agreement or the Notes or any other agreement or instrument referred to herein
or therein shall be waived or any other guarantee of any of the Other Borrower
Obligations or any security therefor shall be released or exchanged in whole or
in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor
of, the Agent or any Lender or Lenders as security for any of the Other Borrower
Obligations shall fail to be perfected.
Each of the Borrowers hereby expressly waives, with respect to the
Other Borrower Obligations diligence, presentment, demand of payment, protest
and all notices whatsoever, and any requirement that the Agent or any Lender
exhaust any right, power or remedy or proceed against the other Borrowers under
this Agreement or the Notes or any other agreement or instrument referred to
herein or therein, or against any other Person under any other guarantee of, or
security for, any of the Other Borrower Obligations.
(b) Reinstatement. The obligations of a Borrower under this
Section 5.23 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the other Borrowers in respect of the
Other Borrower Obligations is rescinded or must be otherwise restored by any
holder of any of the Other Borrower Obligations, whether as a result of any
proceedings in a bankruptcy or reorganization or otherwise, and each of the
Borrowers agrees that it will indemnify the Agent and each Lender on demand for
all reasonable costs and expenses (including, without limitation, fees of
counsel) incurred by the Agent or such Lender in connection with such rescission
or restoration.
(c) Subrogation. Each of the Borrowers hereby agrees that until
the payment and satisfaction in full of all Other Borrower Obligations and the
expiration and termination of the Commitments of the Lenders under this
Agreement it shall not exercise any right or remedy arising by reason of any
performance by it of any of its obligations hereunder, whether by subrogation or
otherwise, against the Other Borrower Obligations or any security for any of the
Other Borrower Obligations.
(d) Remedies. To the fullest extent permitted by, or not
prohibited by, applicable law, each of the Borrowers agrees that, as between
such Borrower and the Lenders, the obligations of the other Borrowers under this
Agreement and the Notes may be declared to be forthwith due and payable as
provided in Article VII hereof (and shall be deemed to have become automatically
due and payable in the circumstances provided in Article VII) notwithstanding
any stay, injunction or other prohibition preventing such declaration (or such
obligations from being deemed to have
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become automatically due and payable), such obligations (whether or not due and
payable by such other Borrowers) shall forthwith become due and payable by such
Borrower.
(e) Limitation on Obligations. Notwithstanding any provision to
the contrary contained herein, in any of the Notes or any other agreement or
instrument referred to herein or therein, to the extent the joint obligations of
the Borrowers would be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of applicable state or federal law
relating to fraudulent conveyances or transfers) then the aggregate obligations
of each of the Borrowers hereunder and under the Notes and all other agreements
and instruments referred to herein or therein shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state and
including, with limitation, the federal Bankruptcy Code).
5.24 Post-Closing Requirements. Deliver to the Agent each of the
following, no later than the time indicated for such item:
(a) No later than 5:00 p.m. Dallas, Texas time on March 16, 2004,
certificates evidencing the insurance coverage required pursuant to Section
5.18, to the extent not delivered prior to the effectiveness of this Agreement;
(b) No later than 5:00 p.m. Dallas, Texas time on March 19, 2004,
to the extent not delivered at closing pursuant to Section 3.1(a)(vii),
certificates dated as of a recent date from the Secretary of State or other
appropriate Governmental Authority evidencing the existence or qualification and
good standing of each of the Borrowers in its jurisdiction of incorporation and
in any other jurisdiction where such qualification is required by applicable
law; and
(c) No later than 5:00 p.m. Dallas, Texas time on March 19, 2004,
evidence reasonably satisfactory to the Agent that all financing statements and
other filings representing Liens that purport to secure Indebtedness of ▇▇▇▇▇▇
Operating or ▇▇▇▇▇▇ Exploration that was paid off in connection with the
acquisition by the Parent of the assets and stock of ▇▇▇▇▇▇ Operating and ▇▇▇▇▇▇
Exploration, or that has been otherwise paid off, or that is not permitted under
this Agreement, have been terminated.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Note or any amount under any Loan Document shall remain
unpaid, any Letter of Credit shall remain outstanding, or any Lender shall have
any Commitment, no Borrower shall, nor shall it permit any Guarantor or any of
its or such Guarantor's respective Subsidiaries to, unless the Required Lenders
shall otherwise consent in writing:
6.1 Indebtedness. Create, incur, assume, or suffer to exist any
Indebtedness, whether by way of loan or otherwise other than (a) the
Obligations, (b) Permitted Indebtedness (including without limitation guarantees
by the Borrowers and Guarantors of Permitted Indebtedness), and (c) Hedging
Obligations that are not created for speculative purposes; provided that, with
respect to any such Hedging Obligations arising under Hedging Agreements entered
into in respect of any commodity, the following additional restrictions shall
apply: (i) no Hedging Agreements shall be entered into if, after giving effect
to such Hedging Agreement and all other Hedging Agreements then outstanding, the
Borrowers and Guarantors shall have hedged more than 75% of the monthly
production volume of Proven Reserves as forecast in the Lenders' most recent
engineering evaluation
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of the Mortgaged Properties, (ii) Parent shall have notified the Agent, within
five days of the establishment of each such Hedging Agreement of the strike
price, the volume of production committed, if applicable, and the term under the
relevant agreement, and (iii) no such Hedging Agreement shall have a term in
excess of eighteen months.
6.2 Trade Payables. Permit (a) any of its trade payables to be
outstanding for more than 90 days (except in cases where any such trade payable
is being disputed in good faith and adequate reserves under GAAP have been
established) and (b) the weighted average maturity of all such trade payables to
exceed 75 days.
6.3 Contingent Obligations. Create, incur, assume, or suffer to
exist any Contingent Obligation not otherwise permitted by Section 6.1.
6.4 Liens; Negative Pledges. (a) Create, incur, assume, or suffer
to exist any Lien (other than Permitted Liens) on any Oil and Gas Properties or
other Property of the Borrowers, the Guarantors, or their Subsidiaries, whether
now owned or hereafter acquired; or (b) directly or indirectly enter into,
incur, or permit to exist any agreement or other arrangement (other than
Permitted Negative Pledges) that prohibits, restricts, or imposes any condition
upon the ability of any Borrower, Guaranty, or Subsidiary of a Borrower or
Guarantor to create, incur, or permit to exist any Lien upon any of its
Property, securing any of the Obligations.
6.5 Sales of Assets. Sell, transfer, or otherwise dispose of any
assets to any Person other than a Borrower or Guarantor other than (a) sales of
inventory in the ordinary course of business (including oil and gas sold as
produced, but excluding seismic data) and sales of Liquid Investments in the
ordinary course of business for cash or other Liquid Investments of reasonably
equivalent value, (b) occasional sales, leases or other dispositions of
immaterial assets for consideration not less than fair market value, (c) sales,
leases or other dispositions of assets that are obsolete or have negligible fair
market value, (d) sales of equipment no longer used or useful in such Person's
business or equipment salvaged in connection with any plugging or abandonment of
any well, (e) sales of interests in exploration prospects in the ordinary course
of business, (f) sales of seismic data in the ordinary course of business not to
exceed $1,000,000 from the Closing Date until the Final Maturity Date, (g)
farmouts of undeveloped acreage not included in the Borrowing Base and
assignments in connection therewith in the ordinary course of business, and (h)
sales, leases or other dispositions of assets not otherwise permitted by the
terms of this Section 6.5 in an aggregate amount not to exceed $1,000,000 during
any six-month period between scheduled Borrowing Base redeterminations.
6.6 Leasebacks. Either directly or indirectly, enter into, assume,
guarantee or otherwise become liable under any agreement to sell or transfer any
Property and thereafter rent or lease as lessee such Property or other Property
intended for the same use or purpose as the Property sold or transferred.
6.7 Intentionally Omitted.
6.8 Investments; Acquisitions. Make or permit to exist any loans,
advances, extensions of credit or capital contributions to, or make any
acquisition or investment in, or purchase or commit to purchase any stock or
other securities or evidences of indebtedness of or interests in, any Person or
any Property, or pay management fees to any Person ("Investments"), except for
(a) advances or extensions of credit in the form of accounts receivable incurred
in the ordinary course of business
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and upon terms common in the industry for such accounts receivable, (b) advances
to employees of such Borrower for the payment of expenses in the ordinary course
of business, (c) Investments in any other Borrower or a Guarantor, (d) Liquid
Investments, (e) advances made pursuant to operating agreements, unitization and
pooling agreements and orders, farmout agreements and gas balancing agreements,
in each case under this clause (e) made in the ordinary course of business to
the extent customary in the oil, gas and mineral production business, (f)
plugging and abandonment deposits, escrow deposits, purchase and sale agreement
escrow amounts and other similar deposits or escrows customary for the oil, gas
and mineral business and in each case made in the ordinary course of business,
(g) formation of new Subsidiaries in compliance with Section 6.14 hereof, (h)
Investments made in replacement Property with the proceeds of a permitted asset
sale, if such Investments are made for fair consideration within 180 days of
receipt of such proceeds and in an amount not exceeding the amount of such
proceeds, (i) provided no Default or Event of Default exists prior to or
immediately thereafter, any acquisition of assets (other than stock or other
equity interests in a Person whose financial statements would be required under
GAAP to be consolidated with such Borrower, Guarantor, or Subsidiary as a result
of such acquisition) solely in exchange for, or out of the net cash proceeds of
a substantially concurrent issuance of equity interests of the Parent that is
permitted under the Loan Documents, and (j) other Investments not otherwise
permitted by this Section 6.8 which in the aggregate do not exceed $1,000,000 in
any period between scheduled redeterminations of the Borrowing Base;
6.9 Dividends and Distributions. Make any Restricted Payments
except for (a) Restricted Payments made by Subsidiaries of a Borrower to such
Borrower and (b) if no Event of Default or Borrowing Base Deficiency exists or
would occur as a result thereof, (i) redemption of warrants by the Borrower in
accordance with their terms, (ii) cash payments by the Borrower in lieu of
fractional shares or other equity interests of a Borrower, and (iii) Restricted
Payments made by a Borrower, Guarantor, or any of their Subsidiaries as a result
of the redemption of Stock or options held by employees and members of
management of such Borrower, Guarantor, or Subsidiary in an amount not to exceed
$1,500,000.00 in the aggregate in any fiscal year of the Parent.
6.10 Changes in Corporate Structure. Enter into any transaction of
consolidation, merger, or amalgamation; or liquidate, wind up, or dissolve (or
suffer any liquidation or dissolution); provided that
(a) a Subsidiary may merge, consolidate, or amalgamate into a
Guarantor or a Borrower so long as such Guarantor or Borrower is the surviving
entity;
(b) Borrower may merge, consolidate, or amalgamate into another
Borrower;
(c) any Borrower or Guarantor may merge with an Affiliate
incorporated solely for the purpose of reincorporating such Borrower or
Guarantor in another jurisdiction within the United States, so long as (i) such
Borrower or Guarantor shall have given 10 days' prior written notice to the
Agent of such merger, (ii) no Default or Event of Default shall have occurred
and be continuing or would result therefrom, (iii) such merger does not
adversely affect the rights of the Lenders, (iv) the continuing or surviving
corporation expressly assumes all of the obligations of such Borrower or
Guarantor hereunder pursuant to assumption documents reasonably satisfactory to
the Agent, and (v) each document or instrument (including any Uniform Commercial
Code financing statement, security agreement, pledge agreement, collateral
assignment, mortgage, or deed of trust) required by the Loan Documents or under
law or reasonably requested by the Agent to be executed, filed,
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registered, or recorded in order to maintain in favor of the Agent a continuous
Acceptable Security Interest on the Collateral shall have been executed, filed,
registered, or recorded; and
(d) any Person may merge, consolidate, or amalgamate into a
Borrower or Guarantor in which such Borrower or Guarantor is the survivor in
connection with any Investment permitted by Section 6.8, provided that (i) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom, (ii) such Borrower or Guarantor shall have given 10 days'
prior written notice thereof to the Agent, and (iii) each document or instrument
(including any Uniform Commercial Code financing statement, security agreement,
pledge agreement, collateral assignment, mortgage, or deed of trust) required by
the Loan Documents or under law or reasonably requested by the Agent to be
executed, filed, registered, or recorded in order to maintain in favor of the
Agent a continuous Acceptable Security Interest on the Collateral shall have
been executed, filed, registered, or recorded.
6.11 Transactions with Affiliates. Directly or indirectly, enter
into any transaction (including the sale, lease, or exchange of Property or the
rendering of service) with any of its Affiliates (other than a Borrower or
Guarantor), other than upon fair and reasonable terms no less favorable than
could be obtained in an arm's length transaction with a Person which was not an
Affiliate.
6.12 Lines of Business. Expand, on its own or through any
Subsidiary, into any line of business other than the exploration, development,
exploitation, and production of oil, gas, liquids, and minerals and business
activities reasonably consistent therewith.
6.13 Compliance with ERISA. Cause or permit to occur (a) an event
that could result in the imposition of a Lien under Section 412 of the Code or
Section 302 or 4068 of ERISA or (b) ERISA Events that could reasonably be
expected to have a Material Adverse Effect in the aggregate.
6.14 New Subsidiaries. Form or acquire any new Subsidiary without
(a) such new Subsidiary executing and delivering to the Agent, at its request, a
Guaranty (or become a Borrower under this Agreement, if consented to by Agent
and each Lender) and such Security Instruments as the Agent or the Required
Lenders may reasonably request, (b) the equity holder of such new Subsidiary
executing and delivering to the Agent, at its request, such Security Instruments
and stock certificates (or similar certificates of ownership) and stock powers
as the Agent or the Required Lenders may reasonably request, (c) the delivery by
the Borrowers of an updated Schedule 4.21 identifying such new Subsidiary and in
form and substance reasonably satisfactory to the Agent, which shall replace the
existing Schedule 4.21 without formal amendment, and (d) the delivery by the
Borrowers of any certificates, opinions of counsel, title opinions or other
documents as the Agent may reasonably request.
6.15 EBITDAX to Interest Expense Ratio. Permit the ratio of, as of
the last day of any fiscal quarter of the Parent, (a) consolidated EBITDAX of
the Parent for the four fiscal quarters then ended to (b) the consolidated
Interest Expense of the Parent for the four fiscal quarters then ended, to be
less than 3.5 to 1.0.
6.16 Working Capital. Permit, as of the last day of any fiscal
quarter of the Parent, the amount of the Parent's consolidated current assets
less its consolidated current liabilities to be less than $1,000,000. For
purposes of calculating the foregoing amount (a) "current assets" shall include
an amount equal to the amount of Loans available to be borrowed under Section
2.1 as of the date of
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calculation and exclude the ▇▇▇▇-to-market portion of any Hedge Agreement, and
(b) "current liabilities" shall exclude (i) the current portion of Indebtedness
existing under this Agreement, (ii) liabilities for an retirement obligations
recognized as a result of a Borrower's compliance with Financial Accounting
Standards Board Statement of Accounting Standards No. 143 and (iii) the
▇▇▇▇-to-market portion of any Hedge Agreement.
6.17 Maximum Leverage Ratio. Permit the ratio of, as of the last
day of any fiscal quarter of the Parent, (a) the Total Indebtedness of the
Parent as of such fiscal quarter end to (b) an amount equal to the consolidated
EBITDAX of the Parent for the two quarters then ended times two, to be greater
than 3.0 to 1.0.
ARTICLE VII
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events
shall constitute an Event of Default:
(a) the Borrowers shall fail to (i) pay any principal of any Loan
or reimburse any drawing under any Letter of Credit when the same becomes due
and payable, (ii) pay any interest or any fee owing in connection with the
Obligations, this Agreement or any of the other Loan Documents within three
Business Days after the same becomes due and payable or (iii) pay any other
amount owing in connection with the Obligations, this Agreement or any of the
other Loan Documents within five Business Days after the same becomes due and
payable;
(b) default shall be made by a Borrower in the due observance or
performance of (i) its covenants contained in Article VI and Section 5.12, or
(ii) any other obligations or covenants set forth in any Loan Document which is
not covered by clause (i) of this Section 7.1(b) or any other provision of this
Section 7.1 if such default shall remained unremedied for 30 days after the
occurrence of such default;
(c) any representation or warranty made by a Borrower or Guarantor
in any of the Loan Documents proves to have been untrue in any material respect
as of the date made or deemed made;
(d) (i) failure to pay any principal of or premium or interest on
its Indebtedness which is outstanding in a principal amount of at least $500,000
individually or when aggregated with all such Indebtedness of the Borrowers or
the Guarantors or their Subsidiaries so in default (but excluding Indebtedness
evidenced by the Notes) when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness; (ii) any other
event shall occur or condition shall exist under any agreement or instrument
relating to Indebtedness which is outstanding in a principal amount of at least
$500,000 individually or when aggregated with all such Indebtedness of the
Borrowers or the Guarantors or their Subsidiaries so in default, and shall
continue after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Indebtedness; or (iii) any such
Indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof;
(e) Intentionally Omitted.
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(f) a Borrower, a Guarantor, or any of its Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against a
Borrower, a Guarantor, or any of its Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against a
Borrower, a Guarantor, or any of its Subsidiaries, either such proceeding shall
remain undismissed for a period of 60 days or any of the actions sought in such
proceeding shall occur; or a Borrower or any of its Subsidiaries shall take any
corporate or limited liability company action to authorize any of the actions
set forth above in this Section 7.1(f);
(g) any judgment, decree or order for the payment of money shall
be rendered against a Borrower, a Guarantor, or any of its Subsidiaries in an
amount in excess of $500,000 (net of any insurance) if rendered solely against a
Borrower, a Guarantor, or any of its Subsidiaries, or for which a Borrower's, a
Guarantor's, or any such Subsidiary's allocated portion of which exceeds
$500,000 (net of insurance) and either (i) such judgment, decree or order
remains unsatisfied and in effect for a period of 30 consecutive days or more
without being vacated, discharged, satisfied or stayed or bonded pending appeal
or (ii) enforcement proceedings shall have been commenced by any creditor upon
such judgment, decree or order;
(h) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against a Borrower or any Guarantor
under the Racketeering Influence and Corrupt Organizations Statute (18 U.S.C.
'1961 et seq.), the result of which could be the forfeiture or transfer of any
material Property of a Borrower or a Guarantor subject to a Lien in favor of the
Agent for the benefit of the Agent, the Lenders and the Swap Counterparties
without (i) satisfaction or provision for satisfaction of such Lien, or (ii)
such forfeiture or transfer of such Property being expressly made subject to
such Lien, but only where such action or proceeding is not being contested by
such Borrower or Guarantor in good faith;
(i) a Borrower or Guarantor shall have (i) concealed, removed, or
diverted, or permitted to be concealed, removed, or diverted, any part of its
Property, with intent to hinder, delay, or defraud its creditors or any of them,
(ii) made or suffered a transfer of any of its Property which may be fraudulent
under any bankruptcy, fraudulent conveyance, or similar law, or (iii) shall have
suffered or permitted, while insolvent, any creditor to obtain a Lien upon any
of its Property through legal proceedings or distraint which is not vacated
within 30 days from the date thereof;
(j) any Security Instrument shall for any reason not, or cease to,
create an Acceptable Security Interest in the Collateral purportedly covered
thereby;
(k) a Change in Control shall have occurred;
(l) an ERISA Event shall occur and the amount of all liabilities
and deficiencies resulting therefrom, whether or not assessed, is such that
there is a Material Adverse Affect; or
(m) the occurrence of a Material Adverse Effect and the same shall
remain unremedied for 30 days after notice given by the Agent, excluding any
change in prevailing economic or business conditions that are applicable,
generally, to companies engaged in the domestic oil and gas
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exploration and production business in the continental United States, including,
without limitation, fluctuations in oil and gas prices.
7.2 Remedies.
(a) Automatic Acceleration of Maturity. Upon the occurrence of an
Event of Default specified in Section 7.1(f), immediately and without notice,
(i) all Obligations shall automatically become immediately due and payable,
without presentment, demand, protest, notice of protest, default, or dishonor,
notice of intent to accelerate maturity, notice of acceleration of maturity, or
other notice of any kind, except as may be provided to the contrary elsewhere
herein, all of which are hereby expressly waived by each of the Borrowers; (ii)
the Commitments shall immediately cease and terminate unless and until
reinstated by the Agent and the Lenders in writing; (iii) to the extent
permitted by and in compliance with applicable law, the Agent and the Lenders
may set-off and apply any and all deposits (general or special, time or demand,
provisional or final) held by the Agent and the Lenders and any and all other
indebtedness at any time owing by the Agent and the Lenders to or for the credit
or account of the Borrowers against any and all of the Obligations although such
Obligations may be unmatured; and (iv) the Borrowers shall deposit into the Cash
Collateral Account an amount of cash equal to the outstanding L/C Exposure as
security for the Obligations to the extent the any obligations of the Borrowers
with respect to the Letters of Credit are not otherwise paid to the Agent at
such time.
(b) Optional Acceleration of Maturity. Upon the occurrence and
during the continuance of any Event of Default other than those specified in
Section 7.1(f), the Agent and the Lenders may (i) by notice to the Borrowers,
declare all Obligations immediately due and payable, without presentment,
demand, protest, notice of protest, default, or dishonor, notice of intent to
accelerate maturity, notice of acceleration of maturity, or other notice of any
kind, except as may be provided to the contrary elsewhere herein, all of which
are hereby expressly waived by each of the Borrowers; (ii) by notice to the
Borrowers, terminate the Commitments unless and until reinstated by the Agent
and the Lenders in writing; (iii) to the extent permitted by and in compliance
with applicable law, the Agent and the Lenders may set-off and apply any and all
deposits (general or special, time or demand, provisional or final) held by the
Agent and the Lenders and any and all other indebtedness at any time owing by
the Agent and the Lenders to or for the credit or account of the Borrowers or
Guarantors against any and all of the Obligations although such Obligations may
be unmatured; and (iv) upon notice from the Agent, the Borrowers shall deposit
into the Cash Collateral Account an amount of cash equal to the outstanding L/C
Exposure as security for the Obligations to the extent the any obligations of
the Borrowers with respect to the Letters of Credit are not otherwise paid to
the Agent at such time.
(c) Non-exclusivity of Remedies. Upon the occurrence and during
the continuance of any Event of Default, the Agent and the Lenders may, in
addition to the foregoing in this Section, exercise any or all of their rights
and remedies provided by law or pursuant to the Loan Documents.
7.3 Application of Proceeds Upon Default. From and during the
continuance of any Event of Default, any monies or property actually received by
the Agent pursuant to the Credit Agreement, the exercise of any rights or
remedies under any security agreement, mortgage or any other agreement with any
Borrower or any Guarantor or any of their respective subsidiaries or affiliates
which secures any of the Obligations, shall be applied in the following order:
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First, to the payment of all amounts due to the Agent under any of the
expense reimbursement or indemnity provisions of the Credit Agreement, any
security agreement, mortgage or other collateral documents, and any applicable
law;
Second, ratably, according to the then unpaid amounts thereof, without
preference or priority of any kind among them, to the payment of interest
constituting part of the Obligations then due and payable;
Third, ratably, according to the then unpaid amounts thereof, without
preference or priority of any kind among them, to the payment of all other
Obligations then due and payable, including Obligations with respect to Letters
of Credit and any Hedging Obligations, and;
Fourth, the remainder, if any, to whichever of the Borrowers, or its
respective successors or assigns, as may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.
ARTICLE VIII
THE AGENT
8.1 Appointment. Each Lender hereby designates and appoints the
Agent as the agent of such Lender under this Agreement and the other Loan
Documents. Each Lender authorizes the Agent, as the agent for such Lender, to
take such action on behalf of such Lender under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties to, responsibilities to, or any fiduciary relationship with, any Lender
except those expressly set forth herein or in any other Loan Document; and no
implied covenants, functions, responsibilities, duties, obligations, or
liabilities on the part of the Agent shall be read into this Agreement or any
other Loan Document or otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
8.3 Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(a) required to initiate or conduct any litigation or collection proceedings
hereunder, except with the concurrence of the Lenders and contribution by each
Lender of its Percentage Share of costs reasonably expected by the Agent to be
incurred in connection therewith, (b) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this
Agreement or any other Loan Document (except for gross negligence or willful
misconduct of the Agent or such Person), or (c) responsible in any manner to any
Lender for (i) any recitals, statements, representations or warranties made by a
Borrower or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, (ii) for the
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sufficiency, accuracy, or completeness of any materials provided by the Agent,
or the failure of the Agent to provide any materials or disclose any matter to
any Lender except as may be expressly required herein, or (iii) for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document or for any failure of a Borrower to perform
its obligations hereunder or thereunder. The Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of a Borrower.
8.4 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrowers), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless and until an executed Lender
Assignment Agreement shall have been received by the Agent. The Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless it shall first receive such advice or
concurrence of the Lenders as it deems appropriate and contribution by each
Lender of its Percentage Share of costs reasonably expected by the Agent to be
incurred in connection therewith. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Lenders. Such request
and any action taken or failure to act pursuant thereto shall be binding upon
the Lenders and all future holders of the Notes. In no event shall the Agent be
required to take any action that exposes the Agent to personal liability or that
is contrary to any Loan Document or applicable Requirement of Law.
8.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received notice from a Lender or the Borrowers referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall promptly give written notice thereof to the Lenders. The
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Lenders; provided that unless and until the
Agent shall have received such directions, subject to the provisions of Section
7.2, the Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders. In the event that the
officer of the Agent primarily responsible for the lending relationship with the
Borrowers or the officer of any Lender primarily responsible for the lending
relationship with the Borrowers becomes aware that a Default or Event of Default
has occurred and is continuing, the Agent or such Lender, as the case may be,
shall use its good faith efforts to inform the other Lenders and/or the Agent,
as the case may be, promptly of such occurrence. Notwithstanding the preceding
sentence, failure to comply with the preceding sentence shall not result in any
liability to the Agent or any Lender.
8.6 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any other Lender nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to such Lender and that no
act by the Agent or any other Lender hereafter taken, including any review of
the affairs of the Borrowers, shall be deemed to constitute any representation
or warranty by the Agent or any Lender
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to any other Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
condition (financial and otherwise) and creditworthiness of the Borrowers and
the value of the Collateral and other Properties of the Borrowers and has made
its own decision to enter into this Agreement. Each Lender also represents that
it will, independently and without reliance upon the Agent or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, condition (financial and otherwise) and
creditworthiness of the Borrowers and the value of the Collateral and other
Properties of the Borrowers. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder, the
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the business, operations, property,
condition (financial and otherwise), or creditworthiness of the Borrowers or the
value of the Collateral or other Properties of the Borrowers which may come into
the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
8.7 Indemnification. EACH LENDER AGREES TO SEVERALLY INDEMNIFY THE
AGENT AND ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND
AFFILIATES (TO THE EXTENT NOT REIMBURSED BY THE BORROWERS AND WITHOUT LIMITING
THE OBLIGATION OF THE BORROWERS TO DO SO), RATABLY AND ACCORDING TO THE
PERCENTAGE SHARE OF SUCH LENDER, FROM AND AGAINST ANY AND ALL LIABILITIES,
CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME
(INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE PAYMENT AND PERFORMANCE
OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT) BE IMPOSED ON,
INCURRED BY OR ASSERTED AGAINST THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OTHER DOCUMENT
CONTEMPLATED OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
ANY ACTION TAKEN OR OMITTED BY THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR IN CONNECTION WITH
ANY OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY LIABILITIES, CLAIMS,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR ASSERTED AS A RESULT OF THE
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO
LENDER SHALL BE LIABLE FOR THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES OR DISBURSEMENTS RESULTING FROM THE GROSS NEGLIGENCE, SOLE OR
CONCURRENT OR WILLFUL MISCONDUCT OF THE AGENT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES. THE AGREEMENTS IN THIS
SECTION SHALL SURVIVE THE
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PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT.
8.8 Restitution. Should the right of the Agent or any Lender to
realize funds with respect to the Obligations be challenged and any application
of such funds to the Obligations be reversed, whether by Governmental Authority
or otherwise, or should the Borrowers otherwise be entitled to a refund or
return of funds distributed to the Lenders in connection with the Obligations,
the Agent or such Lender, as the case may be, shall promptly notify the Lenders
of such fact. Not later than Noon, Dallas, Texas time, as the case may be, of
the Business Day following such notice, each Lender shall pay to the Agent an
amount equal to the ratable share of such Lender of the funds required to be
returned to the Borrowers. The ratable share of each Lender shall be determined
on the basis of the percentage of the payment all or a portion of which is
required to be refunded originally distributed to such Lender, if such
percentage can be determined, or, if such percentage cannot be determined, on
the basis of the Percentage Share of such Lender. The Agent shall forward such
funds to the Borrowers or to the Lender required to return such funds. If any
such amount due to the Agent is made available by any Lender after Noon, Dallas,
Texas time, as the case may be, of the Business Day following such notice, such
Lender shall pay to the Agent (or the Lender required to return funds to the
Borrowers, as the case may be) for its own account interest on such amount at a
rate equal to the Federal Funds Rate for the period from and including the date
on which restitution to the Borrowers is made by the Agent (or the Lender
required to return funds to the Borrowers, as the case may be) to but not
including the date on which such Lender failing to timely forward its share of
funds required to be returned to the Borrowers shall have made its ratable share
of such funds available.
8.9 Agent in Its Individual Capacity. The Agent and its affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrowers as though the Agent were not the agent hereunder.
With respect to any Note issued to the Lender serving as the Agent, the Agent
shall have the same rights and powers under this Agreement as a Lender and may
exercise such rights and powers as though it were not the Agent. The terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
8.10 Successor Agent. The Agent may resign as Agent upon thirty
days' notice to the Lenders and the Borrowers. If the Agent shall resign as
Agent under this Agreement and the other Loan Documents, or if the Agent shall
assign all of its obligations, then the Lenders shall appoint from among the
Lenders a successor agent for the Lenders, whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent. The term "Agent" shall
mean such successor agent effective upon its appointment. The rights, powers,
and duties of the former Agent as Agent shall be terminated, without any other
or further act or deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Notes. After the removal or resignation of
any Agent hereunder as Agent, the provisions of this Article VIII and Sections
2.3(c) and 5.19, shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement and the other Loan
Documents.
8.11 Applicable Parties. The provisions of this Article are solely
for the benefit of the Agent and the Lenders, and the Borrowers shall not have
any rights as a third party beneficiary or otherwise under any of the provisions
of this Article. In performing functions and duties hereunder and under the
other Loan Documents, the Agent shall act solely as the agent of the Lenders and
does not assume, nor shall it be deemed to have assumed, any obligation or
relationship of trust or agency with or for the Borrowers or any legal
representative, successor, and assign of the Borrowers.
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8.12 Collateral Matters.
(a) The Agent is authorized on behalf of the Lenders, without the
necessity of any notice to or further consent from the Lenders, from time to
time, to take any actions with respect to any Collateral or Security Instruments
which may be necessary to perfect and maintain Acceptable Security Interests in
and Liens upon the Collateral granted pursuant to the Security Instruments. The
Agent is further authorized on behalf of the Lenders, without the necessity of
any notice to or further consent from the Lenders, from time to time, to take
any action in exigent circumstances as may be reasonably necessary to preserve
any rights or privileges of the Lenders under the Loan Documents or applicable
law.
(b) The Lenders irrevocably authorize the Agent and the Agent
hereby agrees to release any Lien granted to or held by the Administrative Agent
upon any Collateral (i) upon termination of the Commitments and all Letters of
Credit issues hereunder and payment in full of all outstanding Loans,
Reimbursement Obligations and all other Obligations then due and payable under
this Agreement and under any other Loan Document; (ii) constituting property
sold or disposed of as part of or in connection with any disposition permitted
under this Agreement or the other Loan Documents; or (iii) constituting property
leased to a Borrower or any Subsidiary of a Borrower under a lease which has
expired or has been terminated in a transaction permitted under this Agreement.
At the request and expense of the Parent, the Agent will deliver to the Parent
or authorize such termination statements and other documents as shall be
reasonably necessary to evidence termination of such Liens. Upon the request of
the Agent at any time, the Lenders will confirm in writing the Agent's authority
to release particular types or items of Collateral pursuant to this Section
8.12.
ARTICLE IX
MISCELLANEOUS
9.1 Assignments; Participations. Each Lender may assign or sell
participations in its Loans and Commitments to one or more other Persons in
accordance with this Section 9.1.
(a) Assignments. Any Lender (i) with the written consent of each
of the Borrowers and the Agent (which consent shall not be unreasonably delayed
or withheld), may at any time, assign and delegate to one or more commercial
banks or other financial institutions, and (ii) with notice to the Borrowers and
the Agent, but without the consent of the Borrowers or the Agent, may assign and
delegate to any of its affiliates or to any other Lender (each Person described
in (i) or (ii) above as being the Person to whom such assignment and delegation
is to be made, being hereinafter referred to as an "Assignee Lender"), all or
any fraction of such Lender's total Loans and Commitments (which assignment and
delegation shall be of a constant, and not a varying percentage, of all the
assigning Lender's Loans and Commitments), in a minimum aggregate amount of
$1,000,000 or if less, the entire amount of such Lender's total Loans and
Commitments; provided that (w) such Assignee Lender will comply with all the
provisions of this Agreement, (x) the Borrowers and the Agent shall be entitled
to continue to deal solely and directly with such assigning Lender in connection
with the interests so assigned and delegated to an Assignee Lender until written
notice of such assignment and delegation together with payment instructions,
addresses and related information with respect to such Assignee Lender, shall
have been given to the Borrowers and the Agent by such Lender and such Assignee
Lender, (y) such Assignee Lender shall have executed and delivered to the
Borrowers and the Agent a Lender Assignment Agreement, accepted by the Borrowers
and the Agent, and substantially in the form attached hereto as Exhibit C, and
(z) the processing fees described below shall have been paid.
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(b) Rights and Obligations. From and after the effective date of
the Lender Assignment Agreement, (i) the Assignee Lender thereunder shall be
deemed automatically to have become a party hereto and to the extent that rights
and obligations hereunder have been assigned and delegated to such Assignee
Lender in connection with such Lender Assignment Agreement, shall have the
rights and obligations of a Lender hereunder and under the other Loan Documents,
and (ii) the Assignor Lender, to the extent that rights and obligations
hereunder have been assigned and delegated by it in connection with such Lender
Assignment Agreement, shall be released from its obligations hereunder and under
the other Loan Documents. Within five Business Days after its receipt of notice
that the Agent has received an executed Lender Assignment Agreement, the
Borrowers shall execute and deliver to the Agent (for delivery to the relevant
Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and
Commitments and, if the assignor Lender has retained Loans and Commitments
hereunder, replacement Notes in the principal amount of the Loans and
Commitments retained by the assignor Lender hereunder (such Notes to be in
exchange for, but not in payment of, those Notes then held by such assignor
Lender). Each such Note shall be dated the date of the predecessor Notes. The
assignor Lender shall ▇▇▇▇ the predecessor Notes "exchanged" and deliver them to
the Borrowers. Accrued interest on that part of the predecessor Notes evidenced
by the new Notes, and accrued fees, shall be paid as provided in the Lender
Assignment Agreement. Accrued interest on that part of the predecessor Notes
evidenced by the replacement Notes shall be paid to the assignor Lender. Accrued
interest and accrued fees shall be paid at the same time or times provided in
the predecessor Notes and in this Agreement. Such Assignor Lender or such
Assignee Lender must also pay a processing fee in the amount of $3,000 to the
Agent upon delivery of any Lender Assignment Agreement. Any attempted assignment
and delegation not made in accordance with this Section 9.1 shall be null and
void.
(c) Participations. Any Lender may, at any time and without
necessity for the consent of the Agent or the Borrowers, sell to one or more
commercial banks (each of such commercial banks being herein called a
"Participant") participating interests in any of the Loans, Commitments, or
other interests of such Lender hereunder; provided, however, that (i) no
participation contemplated in this Section 9.1 shall relieve such Lender from
its Commitments or its other obligations hereunder or under any other Loan
Document, (ii) such Lender shall remain solely responsible for the performance
of its Commitments and such other obligations, (iii) the Borrowers and the Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and each of the other
Loan Documents, and (iv) such Lender shall not require the Participant's consent
to any matter under this Agreement, except for (A) change in the principal
amount of the Notes, (B) reductions in fees or interest, (C) releasing all or
substantially all of any collateral, (D) permitting the Borrowers or any
Subsidiary to enter into any merger or consolidation with or into any other, (E)
postponement of any date fixed for any payment of principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, or (F) extensions of
the Final Maturity Date or the Commitment Termination Date.
(d) The Register. The Agent shall maintain at its address referred
to in Section 9.4 a copy of each Lender Assignment Agreement delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitments of, and principal amount of the Loans owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrowers, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrowers or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
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9.2 Waivers, Amendments. The provisions of this Agreement and of
each other Loan Document may from time to time be amended, modified or waived,
if such amendment, modification, or waiver is in writing and consented to by the
Borrowers and the Required Lenders; provided, however, that no such amendment,
modification or waiver would: (a) modify any requirement hereunder that any
particular action be taken by all of the Lenders or by the Required Lenders
unless consented to by each Lender; (b) modify this Section 9.2, change the
definition of "Required Lenders", or change the Commitment or Percentage Share
of any Lender, reduce the fees described in Article II, extend the Commitment
Termination Date, release any Security Instrument or Lien except as otherwise
permitted hereby, or initiate any foreclosure, enforcement or collection
procedure without the consent of each Lender; (c) extend the due date for, (or
reduce the amount of any scheduled repayment or prepayment of principal of or
interest on any Loan) without the consent of the holder of that Note evidencing
such Loan; (d) affect, adversely the interests, rights, or obligations of the
Agent without the consent of the Agent; (e) release any Guarantor from its
obligations under any Guaranty without the consent of each Lender; or (f)
increase the Borrowing Base, without the consent of each Lender.
9.3 Survival of Representations, Warranties, and Covenants. All
representations and warranties of the Borrowers and all covenants and agreements
herein made shall survive the execution and delivery of the Notes and the
Security Instruments and shall remain in force and effect so long as any
Obligation (other than under Section 5.15 and Section 9.13) is outstanding or
any Commitment exists.
9.4 Notices and Other Communications. Except as to oral notices
expressly authorized herein, which oral notices shall be confirmed in writing,
all notices, requests, and communications hereunder shall be in writing
(including by facsimile). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed to have been
duly given or made when delivered by hand, or, in the case of delivery by mail,
when deposited in the mail if concurrent facsimile notice is also given, or, if
no concurrent facsimile notice is given, three Business Days after deposited in
the mail, certified mail, return receipt requested, postage prepaid, or, in the
case of facsimile notice, when receipt thereof is acknowledged orally or by
written confirmation report, addressed as follows:
(a) if to the Agent:
Union Bank of California, N.A.
Lincoln Plaza
▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to a Borrower:
c/o Edge Petroleum Corporation
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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(c) if to a Lender, then to the address set forth opposite such
Lender's name on Schedule 9.4.
Any party may, by proper written notice hereunder to the others, change
the individuals or addresses to which such notices to it shall thereafter be
sent.
9.5 Parties in Interest. Subject to the restrictions on changes in
corporate structure set forth in Section 6.10 and other applicable restrictions
contained herein, all covenants and agreements herein contained by or on behalf
of the Borrowers or the Agent and each Lender shall be binding upon and inure to
the benefit of the Borrowers or the Agent and each Lender, as the case may be,
and their respective legal representatives, successors, and assigns.
9.6 Rights of Third Parties. All provisions herein are imposed
solely and exclusively for the benefit of the Agent and each Lender and the
Borrowers. No other Person shall have any right, benefit, priority, or interest
hereunder or as a result hereof or have standing to require satisfaction of
provisions hereof in accordance with their terms, and any or all of such
provisions may be freely waived in whole or in part by the Agent or the Lenders
at any time if in their sole discretion they deem it advisable to do so.
9.7 Renewals; Extensions. All provisions of this Agreement
relating to the Notes shall apply with equal force and effect to each promissory
note hereafter executed which in whole or in part represents a renewal or
extension of any part of the Indebtedness of the Borrowers under this Agreement,
the Notes, or any other Loan Document.
9.8 No Waiver; Rights Cumulative. No course of dealing on the part
of the Agent or the Lenders, their officers or employees, nor any failure or
delay by the Agent or the Lenders with respect to exercising any of their rights
under any Loan Document shall operate as a waiver thereof. The rights of the
Agent and each Lender under the Loan Documents shall be cumulative and the
exercise or partial exercise of any such right shall not preclude the exercise
of any other right. The making of any Loan or the issuance, renewal, extension
or increase of any Letter of Credit shall not constitute a waiver of any of the
covenants, warranties, or conditions of the Borrowers contained herein. In the
event a Borrower is unable to satisfy any such covenant, warranty, or condition,
the making of any Loan or the issuance, extension, increase or renewal of a
Letter of Credit shall not have the effect of precluding the Agent and each
Lender from thereafter declaring such inability to be an Event of Default as
hereinabove provided.
9.9 Survival Upon Unenforceability. In the event any one or more
of the provisions contained in any of the Loan Documents or in any other
instrument referred to herein or executed in connection with the Obligations
shall, for any reason, be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision of any Loan Document or of any other instrument referred to
herein or executed in connection with such Obligations.
9.10 Amendments; Waivers. Neither this Agreement nor any provision
hereof may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge, or termination is sought.
9.11 Controlling Agreement. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
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9.12 Disposition of Collateral. Notwithstanding any term or
provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure, or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of the Agent and the Lenders; provided, however, that in no
event shall the Agent or any Lender violate applicable law or exercise rights
and remedies other than those provided in such Security Instruments or otherwise
existing at law or in equity.
9.13 Indemnification. EACH BORROWER SHALL INDEMNIFY THE AGENT, EACH
LENDER, AND EACH AFFILIATE THEREOF AND EACH OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE
FOR THE BENEFIT OF THE AGENT AND EACH LENDER UNDER ANY SECURITY INSTRUMENT
(INDIVIDUALLY AN "INDEMNIFIED PARTY") FROM, AND DISCHARGE, RELEASE, AND HOLD
EACH INDEMNIFIED PARTY HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES,
CLAIMS, FINES, PENALTIES, CHARGES, OR DAMAGES, ADMINISTRATIVE AND JUDICIAL
PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND WHICH MAY BE IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST ANY INDEMNIFIED PARTY IN ANY WAY RELATING TO OR ARISING
DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, OUT OF THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT OR ANY ACTION TAKEN OR OMITTED BY ANY INDEMNIFIED PARTY UNDER THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT (COLLECTIVELY, THE "CLAIMS"), INCLUDING ANY
SUCH CLAIMS ARISING FROM THE PERSON BEING INDEMNIFIED'S SOLE OR CONCURRENT
NEGLIGENCE OR STRICT LIABILITY), AND INCLUDING WITHOUT LIMITATION CLAIMS ARISING
DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE PRESENCE OF ANY
HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF A BORROWER, (B) ANY
ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF A BORROWER, WHETHER
PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY A BORROWER OR ANY PREDECESSOR
IN TITLE, EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF A BORROWER OR ANY
OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION
WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP,
TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR
PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER
ANY PROPERTY OF A BORROWER, (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL
RESOURCES ARISING IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE,
TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY A BORROWER OR ANY
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF A BORROWER WHILE SUCH PERSONS
ARE ACTING WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH A BORROWER, IRRESPECTIVE
OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE OF ANY LOAN DOCUMENT, ANY
ALLEGATION BY ANY BENEFICIARY OF A LETTER OF CREDIT OF A WRONGFUL DISHONOR BY
THE AGENT OR ANY LENDER OF A CLAIM OR DRAFT PRESENTED THEREUNDER, OR ANY OTHER
ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED THEREBY;
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PROVIDED THAT THE INDEMNITY PROVIDED FOR UNDER THIS SECTION 9.13 SHALL NOT APPLY
TO ANY CLAIMS INCURRED SOLELY BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE PERSON TO BE INDEMNIFIED. THE AGREEMENTS IN THIS SECTION 9.13
SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS, THE TERMINATION OF
THE COMMITMENTS, THE TERMINATION OF ALL LETTERS OF CREDIT AND THE TERMINATION OF
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
9.14 Confidentiality. Each Lender and the Agent agrees that it will
use reasonable efforts, to the extent not inconsistent with practical business
requirements, not to disclose without the prior consent of the Borrowers the
Information, as defined below, provided that any Lender or the Agent may
disclose any such Information (a) to its and its Affiliates' officers,
directors, employees and agents, including accountants, legal counsel and other
advisor, (b) that has become generally available to the public, (c) to the
extent requested by any Governmental Authority or quasi-regulatory authority,
(d) as may be required or appropriate in response to any summons, subpoena or
similar legal process, (e) in order to comply with any applicable Law, (f) in
connection with the exercise of any remedies hereunder or under the other Loan
Documents or any suit, action or proceeding relating to the enforcement of its
rights hereunder or thereunder, (g) in connection with any litigation involving
any Lender or Agent pertaining to this Agreement or any other Loan Document or
any other document or instrument delivered in connection herewith or therewith,
(h) subject to an agreement containing provisions substantially the same as
those of this Section 9.14, (i) to any Lender, the Agent or any Affiliate of a
Lender or Agent, (j) to any actual or prospective assignee of or participant in
any of its rights or obligations under this Agreement and the other Loan
Documents that has agreed to comply with this Section 9.14, or (k) to any actual
or prospective counterparty (or its advisors) to any swap or derivative
transaction relating to a Borrower or any Subsidiary or any of their respective
obligations that has agreed to comply with this Section 9.14. For the purposes
of this Section, "Information" shall mean all information received from a
Borrower and related to a Borrower or its business, other than any such
information that was available to the Agent, or any Lender on a nonconfidential
basis from a source that is not in breach of its obligations of confidentiality
to a Borrower; provided that, in the case of Information received from a
Borrower after the date hereof, such information is clearly identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 9.13 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord its own confidential information.
9.15 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE DEEMED TO
BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF TEXAS; PROVIDED, HOWEVER, THAT VERNON'S CHAPTER 346
OF THE TEXAS FINANCE CODE (FORMERLY TEX. REV. CIV. STAT. ▇▇▇. ART. ▇▇▇▇, ▇▇. 15)
(WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY.
9.16 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH
RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED
TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE
SOLE DISCRETION AND ELECTION OF THE LENDERS, IN COURTS HAVING SITUS IN DALLAS,
DALLAS COUNTY, TEXAS. THE
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BORROWERS HEREBY SUBMIT TO THE JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL
COURT LOCATED IN DALLAS, DALLAS COUNTY, TEXAS AND HEREBY WAIVE ANY RIGHTS THEY
MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION
BROUGHT AGAINST THEM BY THE LENDERS IN ACCORDANCE WITH THIS SECTION.
9.17 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWERS, THE AGENT AND
THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF
ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE
AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE
PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE
LENDERS ENTERING INTO THIS AGREEMENT.
9.18 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER WRITTEN LOAN
DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN
THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF.
FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS
REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH
PARTIES.
9.19 Counterparts. For the convenience of the parties, this
Agreement may be executed in multiple counterparts, each of which for all
purposes shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same Agreement.
[Signature pages follow.]
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IN WITNESS WHEREOF, this Agreement is deemed executed effective as of
the date first above written.
BORROWERS:
EDGE PETROLEUM CORPORATION
EDGE PETROLEUM EXPLORATION COMPANY
EDGE PETROLEUM OPERATING COMPANY, INC.
▇▇▇▇▇▇ OIL CORPORATION
▇▇▇▇▇▇ EXPLORATION COMPANY
Each by:____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Chief Financial Officer
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AGENT:
UNION BANK OF CALIFORNIA, N.A.
By:________________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Senior Vice President
By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
COMMITMENTS: LENDERS:
$60,000,000.00 UNION BANK OF CALIFORNIA, N.A.
By:________________________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Senior Vice President
By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
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$40,000,000.00 BNP PARIBAS
By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
By:________________________________________________
Name:______________________________________________
Title:_____________________________________________
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