U.S. $29,000,000
AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of January 25, 2000
between
ESENJAY EXPLORATION, INC.,
as the Borrower
and
DEUTSCHE BANK AG,
New York Branch and/or Cayman Islands Branch,
as the Lender
TABLE OF CONTENTS
-----------------
PAGE
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ARTICLE I DEFINITIONS AND ACCOUNTING TERMS..............................................................3
1.1. Defined Terms....................................................................................3
1.2. Use of Defined Terms............................................................................29
1.3. Cross-References................................................................................29
1.4. Accounting and Financial Determinations.........................................................31
ARTICLE II COMMITMENTS, BORROWING PROCEDURES AND NOTES..................................................31
2.1 Commitments.....................................................................................31
2.1.1. Tranche A Commitment.................................................................31
2.1.2. Tranche B Commitment.................................................................31
2.1.3. Letters of Credit....................................................................32
2.1.4. Lender Not Required To Make Loans, etc. Under Certain Circumstances..................32
2.2 Reduction of Commitment Amounts.................................................................32
2.2.1. Optional.............................................................................32
2.2.2. Mandatory............................................................................33
2.3. Borrowing Procedure.............................................................................33
2.4. Continuation and Conversion Elections...........................................................33
2.5. Loan Accounts and Notes.........................................................................34
2.6. Borrowing Base Redetermination and Collateral Value
Redeterminaton..................................................................................34
2.7. Purposes........................................................................................36
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES..................................................35
3.1 Repayments and Prepayments and Certain Borrowing Base Matters...................................35
3.1.1. Repayments and Prepayments...........................................................36
3.1.2. Borrowing Base Deficiencies, Collateral Value Deficiencies and Asset Sales...........37
3.2. Interest Provisions.............................................................................39
3.2.1 Rate.................................................................................40
3.2.2. Post-Maturity Rates..................................................................40
3.2.3. Payment Dates........................................................................40
3.2.4. Maximum Interest.....................................................................41
3.3. Fees............................................................................................42
3.3.1. Confidential Fee Letter..............................................................42
3.3.2. Unused Fee...........................................................................42
3.3.3. Letter of Credit Stated Amount Fee...................................................42
3.3.4. Letter of Credit Issuance Fee........................................................43
3.3.5. Letter of Credit Administrative Fees.................................................43
3.4. Proceeds Account................................................................................43
3.5. Overriding Royalty Interest and Warrants; Assignment and
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Warrants are Not Collateral Security...........................................................43
ARTICLE IV LETTERS OF CREDIT...........................................................................44
4.1. Issuance Requests..............................................................................44
4.2. Issuances and Extensions.......................................................................45
4.3. Expenses.......................................................................................46
4.4. Disbursements..................................................................................47
4.5. Reimbursement..................................................................................47
4.6. Deemed Disbursements...........................................................................48
4.7. Nature of Reimbursement Obligations............................................................48
4.8. Increased Costs; Indemnity.....................................................................50
ARTICLE V CERTAIN INTEREST RATE AND OTHER PROVISIONS..................................................51
5.1. LIBO Rate Lending Unlawful.....................................................................51
5.2. Deposits Unavailable...........................................................................51
5.3. Increased Loan Costs, etc......................................................................52
5.4. Funding Losses.................................................................................53
5.5. Increased Capital Costs........................................................................53
5.6. Taxes..........................................................................................54
5.7. Payments, Computations, etc....................................................................55
5.8. Setoff.........................................................................................55
5.9. Use of Proceeds................................................................................56
ARTICLE VI CONDITIONS PRECEDENT........................................................................56
6.1. Initial Credit Extension.......................................................................56
6.1.1. Resolutions, etc.....................................................................56
6.1.2. Delivery of Notes....................................................................57
6.1.3. Guaranties...........................................................................57
6.1.4. Pledge Agreements....................................................................57
6.1.5. Security Agreement...................................................................57
6.1.6. Consents, Mortgage Consents and Approvals............................................58
6.1.7. Mortgage.............................................................................58
6.1.8. Opinions of Counsel..................................................................58
6.1.9. UCC-11s..............................................................................59
6.1.10. Evidence of Insurance...............................................................59
6.1.11. Engineering Reports.................................................................59
6.1.12. Environmental Report................................................................59
6.1.13. Approved Budget.....................................................................59
6.1.14. Assignment and Amendment and Restatement of
Existing Credit Documents...........................................................59
6.1.15. ORRI Agreement and Certificate, etc.................................................60
6.1.16. Assignment..........................................................................60
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6.1.17. Hedging Agreements..................................................................60
6.1.18. Warrants, etc.......................................................................60
6.1.19. Closing Fees, Expenses, etc.........................................................60
6.1.20. Other Documents.....................................................................60
6.2. Inclusion of Hydrocarbon Interests in the Borrowing Base........................................60
6.2.1. Environmental Report................................................................61
6.2.2. Mortgage............................................................................61
6.2.3. UCC-11s.............................................................................61
6.2.4. Evidence of Insurance...............................................................61
6.2.5. Engineering Reports.................................................................62
6.2.6. Material Contracts and Related Consents; Security Agreement.........................62
6.2.7. Guaranties..........................................................................62
6.2.8. Additional Stock or Partnership Pledge..............................................62
6.2.9. Overriding Royalty Interests........................................................62
6.2.10. Other Documents.....................................................................63
6.3. All Credit Extensions...........................................................................63
6.3.1. Compliance with Warranties, No Default, etc.........................................63
6.3.2. Credit Request......................................................................64
6.3.3. Satisfactory Legal Form.............................................................64
ARTICLE VII REPRESENTATIONS AND WARRANTIES..............................................................64
7.1. Organization, etc...............................................................................64
7.2. Due Authorization, Non-Contravention, etc.......................................................65
7.3. Government Approval, Regulation, etc............................................................65
7.4. Investment Company Act..........................................................................65
7.5. Public Utility Holding Company Act..............................................................65
7.6. Validity, etc...................................................................................65
7.7. Financial Information...........................................................................66
7.8. No Material Adverse Change......................................................................66
7.9. Litigation, Labor Controversies, etc............................................................66
7.10. Ownership of Properties.........................................................................66
7.11. Taxes...........................................................................................67
7.12. Pension and Welfare Plans.......................................................................67
7.13. Compliance with Law.............................................................................67
7.14. Claims and Liabilities..........................................................................67
7.15. No Prohibition on Perfection of Security Documents..............................................67
7.16. Solvency........................................................................................68
7.17. Environmental Warranties........................................................................69
7.18. Regulations G, U and X..........................................................................70
7.19. Year 2000 Compliance............................................................................70
7.20. Insurance.......................................................................................71
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7.21. Accuracy of Information.........................................................................71
7.22. Title Warranty..................................................................................71
7.23. Starboard Project...............................................................................71
ARTICLE VIII COVENANTS....................................................................................72
8.1. Affirmative Covenants...........................................................................72
8.1.1. Financial Information, Reports, Notices, etc.........................................72
8.1.2. Compliance with Laws, etc............................................................75
8.1.3. Maintenance, Development and Sale of Properties......................................76
8.1.4. Insurance............................................................................78
8.1.5. Books and Records....................................................................78
8.1.6. Environmental Covenant...............................................................79
8.1.7. Further Assurances...................................................................79
8.1.8. Hydrocarbon Hedging..................................................................81
8.1.9. Interest Rate Protection.............................................................81
8.1.10. Merger of Certain Subsidiaries.......................................................81
8.2. Negative Covenants..............................................................................81
8.2.1. Business Activities..................................................................81
8.2.2. Indebtedness.........................................................................81
8.2.3. Liens................................................................................83
8.2.4. Financial Condition..................................................................85
8.2.5. Investments..........................................................................85
8.2.6. Restricted Payments, etc.............................................................86
8.2.7. Rental Obligations...................................................................87
8.2.8. Consolidation, Merger, etc...........................................................87
8.2.9. Asset Dispositions, etc..............................................................87
8.2.10. Modification of Certain Documents....................................................88
8.2.11. Transactions with Affiliates.........................................................88
8.2.12. Negative Pledges, Restrictive Agreements, etc........................................88
8.2.13. Take or Pay Contracts................................................................88
ARTICLE IX EVENTS OF DEFAULT...........................................................................89
9.1. Listing of Events of Default....................................................................89
9.1.1. Non-Payment of Obligations...........................................................89
9.1.2. Breach of Warranty...................................................................89
9.1.3. Non-Performance of Certain Covenants and Obligations.................................89
9.1.4. Non-Performance of Other Covenants and Obligations...................................89
9.1.5. Default on Other Indebtedness........................................................89
9.1.6. Judgments............................................................................90
9.1.7. Pension Plans........................................................................90
9.1.8. Control of the Borrower..............................................................91
9.1.9. Bankruptcy, Insolvency, etc..........................................................91
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9.1.10. Impairment of Security, etc..........................................................91
9.1.11. Material Adverse Effect..............................................................92
9.2. Action if Bankruptcy............................................................................92
9.3. Action if Other Event of Default................................................................92
9.4. Rights Not Exclusive............................................................................92
ARTICLE X MISCELLANEOUS PROVISIONS....................................................................92
10.1. Waivers, Amendments, etc........................................................................92
10.2. Notices.........................................................................................93
10.3. Payment of Costs and Expenses...................................................................94
10.4. Indemnification.................................................................................95
10.5. Survival........................................................................................96
10.6. Severability....................................................................................96
10.7. Headings........................................................................................96
10.8. Execution in Counterparts, Effectiveness, etc...................................................96
10.9. Governing Law; Entire Agreement.................................................................96
10.10. Successors and Assigns..........................................................................97
10.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes.............................................................................97
10.11.1. Assignments.........................................................................97
10.11.2. Participations......................................................................98
10.11.3. Modifications for Other Lenders.....................................................99
10.12. Forum Selection and Consent to Jurisdiction....................................................99
10.13. Waiver of Jury Trial..........................................................................100
10.14. Notice........................................................................................101
v
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 25,
2000, between ESENJAY EXPLORATION, INC., a Delaware corporation and the
successor-by-merger to Frontier Natural Gas Corporation and the
successor-by-merger to 3DX Technologies, Inc. (the "BORROWER"), and DEUTSCHE
BANK AG, New York Branch and/or Cayman Islands Branch (the "LENDER"),
W I T N E S S E T H:
WHEREAS, the Borrower is engaged in the business of oil and gas
exploration and production, and activities related or ancillary thereto; and
WHEREAS, the Borrower is a party to the Amended and Restated Credit
Agreement, dated as of October 13, 1998 (herein, as the same was amended by that
certain Amendment No. 1 to Amended and Restated Credit Agreement, dated as of
January 28, 1999, that certain Amendment No. 2 to Amended and Restated Credit
Agreement, dated as of August 16, 1999, and that certain Amendment No. 3 to
Amended and Restated Credit Agreement dated as of November 1, 1999, and as the
same may have been from time to time further amended, supplemented or modified,
the "EXISTING CREDIT AGREEMENT"), with Bank of America National Trust and
Savings Association, now known as Bank of America, N.A. ("BANK OF AMERICA")
pursuant to which Bank of America agreed to extend credit (including by issuing
letters of credit) to the Borrower in an aggregate principal amount (including
the aggregate face amount of letters of credit) of up to $20,000,000; and
WHEREAS, the Borrower is also party to the Credit Agreement (as the
same may have been from time to time amended, supplemented or modified, the
"EXISTING LOAN AGREEMENT") dated as of January 28, 1999, with Duke Energy
Financial Services, Inc., a Delaware corporation ("DUKE"; together with Bank of
America, the "EXISTING SECURED CREDITORS"), pursuant to which Duke agreed to
make loans to the Borrower in an aggregate principal amount of up to $9,000,000;
and
WHEREAS. the Borrower and its Subsidiaries (collectively, the
"GRANTORS"), Existing Secured Creditors and Bank of America, in its capacity as
collateral agent (in such capacity, the "COLLATERAL AGENT") are parties to that
certain Collateral Agency and Intercreditor Agreement dated as of January 28,
1999 (as the same may have been from time to time amended, supplemented or
modified, the "INTERCREDITOR AGREEMENT"), pursuant to which Collateral Agent
agreed to act as collateral agent for the Existing Secured Creditors in respect
of the collateral security furnished to secure the obligations
of the Grantors under the Existing Credit Agreement and the Existing Loan
Agreement; and
WHEREAS, pursuant to the Existing Credit Agreement, the Existing Loan
Agreement and the Intercreditor Agreement, Grantors have entered into various
mortgages, security agreements, pledges and other security documents
(collectively, the "EXISTING SECURED CREDITOR DOCUMENTS") under which the
Grantors (i) have granted Liens to Bank of America and to the Collateral Agent
on substantially all of their properties and assets to secure the payment and
performance of the Obligations (as defined in the Existing Credit Agreement) and
(ii) are guaranteeing the Obligations. Pursuant to the Existing Loan Agreement,
the Grantors have also granted Liens for the benefit of Duke on certain of their
Oil and Gas Properties to secure the payment and performance of the Obligations
(as defined in the Existing Loan Agreement); and
WHEREAS, the respective indebtedness of Borrower to the Existing
Secured Creditors under the Existing Credit Agreement and the Existing Loan
Agreement is evidenced by certain promissory notes of the Borrower
(collectively, the "EXISTING NOTES") and is secured by the Existing Secured
Creditor Documents (the Existing Notes, the Existing Secured Creditor Documents
and various related agreements, instruments and documents are referred to
collectively as the "EXISTING CREDIT DOCUMENTS"; the Existing Credit Documents
do not include the documents, agreements, rights and interests listed on
SCHEDULE VII hereto (the "EXCLUDED ASSETS")); and
WHEREAS, the Lender has purchased all of the right, title and interest
of Bank of America, Duke and Collateral Agent under the Existing Credit
Documents from Assignors, and Bank of America, Duke and Collateral Agent have
sold, assigned and transferred all such right, title and interest to the Lender;
and
WHEREAS, the Borrower desires to amend and restate the Existing Credit
Agreement and the Existing Loan Agreement, and to obtain Commitments from the
Lender pursuant to which Loans will be made to the Borrower from time to time
prior to the applicable Commitment Termination Date, in a maximum aggregate
principal amount of Loans at any one time not to exceed in the aggregate the
lesser of (x) the Collateral Value, or (y) $29,000,000; and
WHEREAS, the Lender is willing, on the terms and subject to the
conditions hereinafter set forth (including ARTICLE V), to extend such
Commitments, to amend and restate the Existing Credit Agreement and the Existing
Loan Agreement, and to make such Loans to the Borrower; and
WHEREAS, the proceeds of such Loans will be used
(1) to refinance the Existing Secured Debt (defined below);
2
(2) to conduct other Approved Development Activities on the Oil
and Gas Properties owned by the Borrower or one of the
Borrower's Subsidiaries, including those Properties located
in Liberty, Hardin, Wharton, Aransas, ▇▇▇▇▇▇▇, Goliad, Bee,
De ▇▇▇▇, Lovaca, Brazoria, Jefferson, Chambers, Galveston,
Matagorda, Live Oak, San Patricio, Karnes, Willacy and
▇▇▇▇▇▇▇ Counties, Texas; Beaureguard, Calcasieu, Cameron and
Terrebonne Parishes, Louisiana; and Cleveland County,
Oklahoma; and
(3) for general corporate and working capital purposes; and
WHEREAS, the Parties have agreed it is in their respective best
interests to enter into this Agreement amending, restating and superseding the
Existing Credit Agreement and the Existing Loan Agreement,
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. SECTION DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"ACQUIRED PROPERTIES" means those Oil and Gas Properties and other
assets that are acquired from time to time in an Acquisition.
"ACQUISITION" means an acquisition by the Borrower or one or more of
its Subsidiaries of Acquired Properties.
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power
(a) to vote 10% or more of the securities (on a fully diluted
basis) having ordinary voting power for the election of directors or
managing general partners; or
3
(b) to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"AGREEMENT" means, on any date, this Amended and Restated Credit
Agreement as originally in effect on the Effective Date and as thereafter from
time to time amended, supplemented, amended and restated, or otherwise modified
and in effect on such date.
"ALTERNATE REFERENCE RATE" means, on any date and with respect to all
Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest as announced from time to time by the
Lender as its base rate, prime rate or other reference rate at its
Domestic Office; or
(b) the Federal Funds Rate most recently determined by the
Lender plus 1/2%.
The Alternate Reference Rate is not necessarily intended to be the lowest rate
of interest in connection with extensions of credit. Changes in the rate of
interest on that portion of any Loans maintained as Base Rate Loans will take
effect simultaneously with each change in the Alternate Reference Rate. The
Lender will give notice to the Borrower of changes in the Alternate Reference
Rate.
"APPLICABLE LAW" means with respect to any Person or matter, any
federal, state, regional, tribal or local statute, law, code, rule, treaty,
convention, application, order, decree, consent decree, injunction, directive,
determination or other requirement (whether or not having the force of law)
relating to such Person or matter and, where applicable, any interpretation
thereof by a Government Agency having jurisdiction with respect thereto or
charged with the administration or interpretation thereof.
"APPLICABLE MARGIN" means, with respect to any Credit Extension at any
time of determination, a margin above the interest rate or fee applicable to
such Credit Extension equal to the following:
-------------------------------------- ---------------------- ----------------------------
Alternate
LIBO Rate Reference Rate
-------------------------------------- ---------------------- ----------------------------
Tranche A Loan 2.0% 0%
-------------------------------------- ---------------------- ----------------------------
Tranche B Loan 2.0% 0%
-------------------------------------- ---------------------- ----------------------------
Letter of Credit 2.0% 0%
-------------------------------------- ---------------------- ----------------------------
4
"APPROVALS" means each and every approval, authorization, license,
permit, consent, variance, land use entitlement, franchise, agreement, filing or
registration by or with any Government Agency or other Person necessary for all
stages of developing, operating, maintaining and abandoning Oil and Gas
Properties.
"APPROVED BUDGET" means the Borrower's plan, as approved by the Lender
pursuant to SECTION 8.1.3, for conducting Approved Development Activities on the
Oil & Gas Properties comprising the Borrowing Base Properties, Mortgaged
Properties and the Development Properties. The Approved Budget shall set forth,
by geographic region or trend, as appropriate, projected drilling costs,
completion costs, geological and geophysical costs, G&A Expenses, workover
expenses (beyond those accounted for by the Borrower as lease operating
expenses), the number of ▇▇▇▇▇ to be drilled and other major items as the Lender
may reasonably request, in each quarter for the 12 month period covered by such
Approved Budget. The Approved Budget shall be presented in substantially the
form of EXHIBIT P, or such other form as the Lender may approve, and shall be
updated each Fiscal Quarter for the following four (4) Fiscal Quarters as
provided in SECTION 8.1.1.
"APPROVED DEVELOPMENT ACTIVITIES" means drilling, geological and
geophysical investigations and evaluations and related activities on the
Borrowing Base Properties, the Mortgaged Properties and/or Development
Properties substantially in accordance with the Approved Budget (i) in order to
bring into production Proven Reserves which the Lender has included in its
determination of the Borrowing Base, and (ii) in order to further explore and/or
develop the Mortgaged Properties and the Development Properties not otherwise
included in the Borrowing Base, in each case as approved by the Lender.
"ASPECT" means Aspect Resources LLC, a Colorado limited liability
company.
"ASSIGNEE LENDER" is defined in SECTION 10.11.1.
"ASSIGNMENT" means the Assignment and Conveyance of Overriding Royalty
Interest, substantially in the form of EXHIBIT J, from the Borrower and/or the
Borrower's Subsidiaries to the Designee, assigning to the Designee, as
additional consideration for the making of Commitments by the Lender and not as
collateral security for the Loans, overriding royalty interests in its or their
Hydrocarbon Interests comprising all Oil and Gas Properties of the Borrower and
its Subsidiaries on which a well is logged prior to the earlier of (X) the
Stated Maturity Date applicable to the Tranche B Loan and (Y) in the event that
the Tranche B Loan is indefeasibly repaid in full prior to the Tranche A
Availability Termination Date, the Tranche A Availability Termination Date;
PROVIDED, HOWEVER, that the Designee shall not receive an overriding royalty
interest in respect of any well which is not completed for production and never
produces Hydrocarbons, and FURTHER PROVIDED that, with respect to the
Raymondville Project in Willacy County, Texas
5
(more particularly described in SCHEDULE VIII hereto), Designee shall not
receive an overriding royalty interest if and to the extent that, within
ninety (90) days after the Effective Date, the Borrower has sold its interest
therein. The overriding royalty interest conveyed by the Assignment is
subject to reduction as set forth in the Agreement Concerning Overriding
Royalty Interest between the Borrower, the Lender and the Designee, and the
Borrower has the optional right to purchase such overriding royalty interest
from the Designee as provided in SECTION 3.5(b).
"AUTHORIZED OFFICER" means, relative to any Obligor, those of its
officers whose signatures and incumbency shall have been certified to the Lender
pursuant to SECTION 6.1.1.
"BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Reference Rate.
"BANK OF AMERICA" is defined in the SECOND RECITAL.
"BORROWER" is defined in the PREAMBLE.
"BORROWING" means the Loans of the same type and, in the case of LIBO
Rate Loans, having the same Interest Period made by the Lender on the same
Business Day and pursuant to the same Borrowing Request in accordance with
SECTION 2.1.
"BORROWING BASE" means, as at any date, (a) prior to the initial
Borrowing Base Redetermination, $12,000,000, subject to reduction, however, as
set forth in that certain Closing Agreement dated as of the Effective Date
between the Borrower and the Lender (the "CLOSING AGREEMENT"), and (b)
thereafter, (i) that amount of Indebtedness for borrowed money under the
Facility that the Lender determines can be supported by the Proven Reserves
attributable to Hydrocarbon Interests owned directly by the Borrower or its
Subsidiaries which are a part of the Borrowing Base Properties, after an
engineering and economic review of such reserves conducted by the Lender using
its customary standards for oil and gas facilities of this type, taking into
account the value of all those proved developed producing oil and gas reserves
and certain portions of certain other categories of Proven Reserves attributable
to the Borrowing Base Properties.
"BORROWING BASE DEFICIENCY" means the amount by which (a) the sum of
the aggregate outstanding principal amount of all Tranche A Loans plus Letter of
Credit Outstandings exceeds (b) the then current Borrowing Base.
"BORROWING BASE DEFICIENCY NOTIFICATION DATE" means the date on which
any notice of a Borrowing Base Deficiency is received by the Borrower.
6
"BORROWING BASE PROPERTIES" means those Mortgaged Properties, those
Development Properties and those other Oil and Gas Properties owned by the
Borrower or its Subsidiaries, if any, that are given value by the Lender in its
determination of the then current Borrowing Base.
"BORROWING BASE REDETERMINATION" is defined in SECTION 2.6.
"BORROWING REQUEST" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of EXHIBIT
B-1 hereto.
"BUSINESS DAY" means
(a) any day which is neither a Saturday or Sunday nor any
other day on which banks are authorized or required to be closed in New
York, New York; and
(b) relative to the making, continuing, prepaying or repaying
of any LIBO Rate Loans, any day on which dealings in Dollars are
carried on in the London interbank market.
"CAPITAL EXPENDITURES" means, for any period, (without duplication) the
aggregate amount of all expenditures of the Borrower and its consolidated
Subsidiaries for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital expenditures including,
with respect to any period, payments made by the Borrower and its consolidated
Subsidiaries with respect to Capitalized Lease Liabilities incurred during such
period.
"CAPITALIZATION" means, at any time, the sum of (a) the total Debt of
the Borrower and its consolidated Subsidiaries PLUS (b) the total equity of the
Borrower and its consolidated Subsidiaries.
"CAPITALIZED LEASE LIABILITIES" means all monetary obligations of the
Borrower or any of its consolidated Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, would be classified as capitalized
leases, and, for purposes of this Agreement and each other Loan Document, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with GAAP.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year
after such time, issued or guaranteed by the United States Government;
7
(b) commercial paper, maturing not more than nine months from the
date of issue, which is issued by
(i) a corporation (other than an Affiliate of the Borrower)
organized under the laws of any state of the United States or of
the District of Columbia and rated at least A-1 by Standard &
Poor's Corporation or P-1 by ▇▇▇▇▇'▇ Investors Service, Inc., or
(ii) the Lender;
(c) any certificate of deposit or bankers acceptance, maturing
not more than one year after such time, which is issued by
(i) a commercial banking institution that is a member of the
Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000, or
(ii) the Lender; or
(d) any repurchase agreement entered into with the Lender (or
other commercial banking institution of the stature referred to in
CLAUSE (c)) which
(i) is secured by a fully perfected security interest in any
obligation of the type described in any of CLAUSES (a) through
(c); and
(ii) has a market value at the time such repurchase
agreement is entered into of not less than 100% of the repurchase
obligation of the Lender (or other commercial banking
institution) thereunder.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"CHANGE IN CONTROL" means if (a) either Old Esenjay or Aspect shall
fail beneficially to own at least 80% of their existing percentages of the
outstanding shares of the voting capital stock of the Borrower as of December
31, 1999 (subject to dilution only in the event of the issuance of additional
shares of such voting capital stock), on a fully diluted basis, (b) ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and/or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ shall fail to be
actively involved in the management of the business of the Borrower or (c) the
Borrower ceases to own beneficially and of record 100% of the capital stock of
each of the Borrower's Subsidiaries.
8
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time, and the regulations promulgated
thereunder.
"COLLATERAL AGENT" is defined in the FOURTH RECITAL.
"COLLATERAL VALUE" shall mean, as at any date, (a) prior to the initial
Collateral Value Redetermination, $21,000,000, subject to reduction, however, as
set forth in the Closing Agreement, and (b) thereafter, the lesser of
(X) the quotient of (i) the projected net future cash flow, discounted
at ten percent (10%) per annum, from the anticipated production of
Hydrocarbons from Proven Reserves attributable to Hydrocarbon Interests
owned directly by the Borrower or one of the Borrower's Subsidiaries
which are a part of the Borrowing Base Properties, after an engineering
and economic review of such reserves conducted by the Lender taking
into account the value of all those proved developed producing oil and
gas reserves and all other categories of Proven Reserves attributable
to the Borrowing Base Properties that the Lender expects can become
proved developed producing reserves with funds that the Lender
determines are available to the Borrower for such purpose and use,
divided by (ii) 1.4, and
(Y) quotient of (i) the projected net future cash flow, discounted at
ten percent (10%) per annum, from the anticipated production of
Hydrocarbons from Proven Reserves attributable to Hydrocarbon Interests
owned directly by the Borrower or one of the Borrower's Subsidiaries
which are a part of the Borrowing Base Properties, after an engineering
and economic review of such reserves conducted by the Lender taking
into account the value of all those proved developed producing oil and
gas reserves and all other categories of Proven Reserves attributable
to the Borrowing Base Properties that the Lender expects can become
proved developed producing reserves with funds that the Lender
determines are available to the Borrower for such purpose and use,
divided by (ii) 1.25, minus the amount calculated from time to time by
the Lender as the ▇▇▇▇ to Market Exposure under all Hedging Agreements
between the Borrower and the Lender or any Affiliate of the Lender and
all other Hedging Agreements of the Borrower that are otherwise
permitted by this Agreement.
"COLLATERAL VALUE DEFICIENCY" means the amount by which (a) the sum of
the aggregate outstanding principal amount of all Tranche A Loans plus the
aggregate outstanding principal amount of the Tranche B Loan plus all Letter of
Credit Outstandings exceeds (b) the then current Collateral Value.
9
"COLLATERAL VALUE DEFICIENCY NOTIFICATION DATE" shall mean the date on
which any notice of a Collateral Value Deficiency is received by the Borrower.
"COLLATERAL VALUE REDETERMINATION" is defined in SECTION 2.6.
"COMMITMENT" means the Lender's commitment pursuant to SECTION 2.1 to
make Loans to the Borrower and to issue Letters of Credit in accordance with the
terms and provisions of this Agreement.
"COMMITMENT AMOUNT" means the lesser of (i) $29,000,000, as reduced
from time to time pursuant to the provisions of SECTION 2.2, or (ii) the
Borrowing Base.
"COMMITMENT AVAILABILITY" means, on any date, the excess of
(a) the then applicable Commitment Amount, over
(b) the sum of
(i) the aggregate outstanding principal amount of all
applicable Loans on such date, plus
(ii) the Letter of Credit Outstandings on such date.
"COMMITMENT TERMINATION DATE" means the earliest of
(a) the date on which either the Tranche A Commitment Amount or
the Tranche B Commitment Amount, or either of them, as applicable, is
terminated in full or reduced to zero pursuant to SECTION 2.2; and
(b) the date on which any Commitment Termination Event occurs.
"COMMITMENT TERMINATION EVENT" means
(a) the occurrence of any Default described in CLAUSES (a)
through (d) of SECTION 9.1.9 with respect to the Borrower or any
Subsidiary; or
(b) the occurrence and continuance of any other Event of Default
and either
(i) declaration of the Loans and other Obligations to be due
and payable pursuant to SECTION 9.3, or
10
(iii) absence of such declaration, the giving of notice by
the Lender to the Borrower that the Commitments have been
terminated.
"CONFIDENTIAL FEE LETTER" means that certain confidential fee letter
dated as of January 10, 2000, between the Borrower and the Lender, as the same
may be from time to time amended, modified and supplemented.
"CONSENT" means a Consent to Assignment executed and delivered pursuant
to SECTION 6.2.6, substantially in the form of EXHIBIT J, as amended,
supplemented, restated or otherwise modified from time to time pursuant to which
the Borrower's counterparty to each Material Contract (i) consents to the
assignment of each such Material Contract to the Lender as security for the
Obligations and (ii) provides the Lender an independent right to cure defaults
under such Material Contract.
"CONSOLIDATED NET INCOME" means, with respect to the Borrower and its
consolidated Subsidiaries for any period, the consolidated net income (or loss)
of the Borrower and its consolidated Subsidiaries for such period determined in
accordance with GAAP.
"CONTINGENT LIABILITY" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any Indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "GUARANTY OBLIGATION"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; or (c) to purchase
any materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such services, shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered.
"CONTINUATION/CONVERSION NOTICE" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of EXHIBIT B-2 hereto.
11
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.
"CREDIT EXTENSION" means and includes
(a) the advancing of any Tranche A Loans by the Lender in
connection with a Borrowing hereunder,
(b) the advancing of any Tranche B Loans by the Lender in
connection with a Borrowing hereunder, and
(c) any issuance by an Issuer, or the extension of the Stated
Expiry Date by an Issuer, of a Letter of Credit.
"CURRENT RATIO" means, as of the end of each Fiscal Quarter, the ratio
of
(a) the current assets (including the unused portion of the
Commitment Amount (to the extent available to be borrowed)) of the
Borrower and its consolidated Subsidiaries
TO
(b) the current liabilities (minus the current portion of long
term Debt) of the Borrower and its consolidated Subsidiaries.
"DEBT" means the outstanding principal amount of all Indebtedness of
the Borrower and its consolidated Subsidiaries of the nature referred to in
CLAUSES (a) and (b) of the definition of "INDEBTEDNESS".
"DEBT TO CAPITALIZATION RATIO" means, as of the end of each Fiscal
Quarter, the ratio of (a) Debt to (b) Capitalization.
"DEFAULT" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"DEVELOPMENT PROPERTIES" means the Oil and Gas Properties owned
directly by the Borrower and its Subsidiaries that are projected to be the
subject of Approved Development Activities in accordance with the then current
Approved Budget.
"DISBURSEMENT DATE" is defined in SECTION 4.4.
12
"DESIGNEE" is defined in SECTION 3.5.
"DISBURSEMENT" means the amount disbursed by the Issuer on a
Disbursement Date.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached hereto as
SCHEDULE I, as it may be amended, supplemented or otherwise modified from time
to time by the Borrower with the written consent of the Lender.
"DISTRIBUTION PAYMENTS" is defined in SECTION 8.2.6.
"DOLLAR" and the sign "$" mean lawful money of the United States.
"DOMESTIC OFFICE" means the office of the Lender designated as such on
its signature page hereto or designated in a Lender Assignment Notice or such
other office of the Lender (or any successor or assign of the Lender) within the
United States as may be designated from time to time by notice from the Lender,
as the case may be, to each other Person party hereto.
"DUKE" is defined in the THIRD RECITAL.
"EBITDA" means for any period, the sum, without duplication, of the
following:
(a) Consolidated Net Income for such period, plus
(b) Interest Expense for such period, plus
(c) all depreciation and amortization of assets
(including goodwill and other intangible assets) of the Borrower and
its consolidated Subsidiaries deducted in determining Consolidated Net
Income for such period, plus (minus)
(d) all federal, state, local and foreign income taxes of the
Borrower and its consolidated Subsidiaries deducted (or credits added)
in determining Consolidated Net Income for such period, plus (minus)
(e) other non-cash items deducted or added in determining
Consolidated Net Income for such period.
"EFFECTIVE DATE" means the date this Agreement becomes effective
pursuant to SECTION 10.8.
13
"ENGINEERING REPORT" means one or more reports, in form and substance
satisfactory to the Lender, prepared at the sole cost and expense of the
Borrower by Netherland, ▇▇▇▇▇▇ & Associates, Inc. or another petroleum engineer
acceptable to the Lender in its reasonable business judgment, which shall
evaluate the Proven Reserves and probable reserves attributable to the
Hydrocarbon Interests owned directly by the Borrower and/or its Subsidiaries and
constituting part of the Borrowing Base Properties, as of the immediately
preceding January 1 or July 1. Each Engineering Report shall set forth volumes,
projections of the future rate of production, Hydrocarbons prices, escalation
rates, discount rate assumptions, and net proceeds of production, present value
of the net proceeds of production, estimated costs of Remedial Action, operating
expenses and capital expenditures, in each case based upon updated economic
assumptions reasonably acceptable to the Lender.
"ENVIRONMENTAL LAWS" means all Applicable Laws relating to public
health and safety through protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"EVENT OF DEFAULT" is defined in SECTION 9.1.
"EXISTING CREDIT AGREEMENT" is defined in the SECOND RECITAL.
"EXISTING CREDIT DOCUMENTS" is defined in the SIXTH RECITAL.
"EXISTING LOAN AGREEMENT" is defined in the THIRD RECITAL.
"EXISTING SECURED CREDITORS" is defined in the THIRD RECITAL.
"EXISTING NOTES" is defined in the SIXTH RECITAL.
"EXISTING SECURED CREDITOR DOCUMENTS" is defined in the FIFTH RECITAL.
"EXISTING SECURED DEBT" means the Debt of the Borrower originally
incurred in favor of (a) Bank of America pursuant to the Existing Credit
Agreement and (b) Duke pursuant to the Existing Loan Agreement, such Debt (and
the security therefor) having been assigned to the Lender.
"EXCLUDED ASSETS" is defined in the SIXTH RECITAL.
14
"FACILITY" means the Tranche A Facility or the Tranche B Facility, or
either of them, as the case may be, providing for the Commitment and the Loans.
"FEDERAL FUNDS RATE" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day, such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Lender of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York
City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Lender.
"FISCAL QUARTER" means any quarter ending on the last day of March,
June, September, and December of a Fiscal Year.
"FISCAL YEAR" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (E.G., "Fiscal Year 1998") refer to the Fiscal Year ending
on the December 31 occurring during such calendar year.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"GAAP" is defined in SECTION 1.4.
"G&A EXPENSES" means the general and administrative expenses of the
Borrower and its Subsidiaries not attributable to any particular Oil and Gas
Property or Properties, including without limitation, salaries, office rent and
operating expenses, overhead and outside contractors.
"GOVERNMENT AGENCY" means any federal, state, regional, tribal or local
government or governmental department or other entity charged with the
administration, interpretation or enforcement of any Applicable Law.
"GRANTORS" is defined in the FOURTH RECITAL.
"GUARANTIES" means the guaranties of the Obligations, executed and
delivered pursuant to SECTION 6.1.3 AND SECTION 6.2.7, substantially in the form
of EXHIBIT E, given by each of the Borrower's Subsidiaries.
"HAZARDOUS MATERIAL" means
15
(a) any "hazardous substance", as defined by CERCLA;
(b) any "hazardous waste", as defined by the Resource
Conservation and Recovery Act, as amended;
(c) any petroleum, crude oil or fraction thereof;
(d) any hazardous, dangerous or toxic chemical, material, waste
or substance within the meaning of any Environmental Law;
(e) any radioactive material, including any naturally occurring
radioactive material, and any source, special or by-product material
as defined in 42 U.S.C. Section 2011 ET SEQ., and any amendments or
reauthorizations thereof;
(f) asbestos-containing materials in any form or condition; or
(g) polychlorinated biphenyls in any form or condition.
"HEDGING AGREEMENTS" means:
(a) interest rate swap agreements, basis swap agreements,
interest rate cap agreements, forward rate agreements, interest rate
floor agreements and interest rate collar agreements, and all other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency exchange rates, and
(b) forward contracts, options, futures contracts, futures
options, commodity swaps, commodity options, commodity collars,
commodity caps, commodity floors and all other agreements or
arrangements designed to protect such Person against fluctuations in
the price of commodities.
"HEDGING OBLIGATIONS" means, with respect to any Person, all
liabilities (including but not limited to obligations and liabilities arising in
connection with or as a result of early or premature termination of a Hedging
Agreement, whether or not occurring as a result of a default thereunder) of such
Person under a Hedging Agreement.
"HIGHEST LAWFUL RATE" is defined in SECTION 3.2.4.
"HYDROCARBON INTERESTS" means all rights, titles and interests in and
to oil and gas leases; oil, gas and mineral leases; other Hydrocarbon leases;
mineral interests; mineral servitudes; overriding royalty interests; royalty
interests; net profits interests; production payment interests; and other
similar interests.
16
"HYDROCARBONS" means, collectively, oil, gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate and all other liquid or
gaseous hydrocarbons and related minerals and all products therefrom, in each
case whether in a natural or a processed state.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of the Borrower, any qualification or exception to such opinion or certification
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement;
(c) which relates to the treatment or classification of any item
in such financial statement and which, as a condition to its removal,
would require an adjustment to such item the effect of which would be
to cause the Borrower to be in default of any of its obligations under
SECTION 8.2.4.; or
(d) which relates to possible errors generated by financial
reporting and related systems due to the Year 2000 Problem.
"INCLUDING" means including without limiting the generality of any
description preceding such term, and, for purposes of this Agreement and each
other Loan Document, the parties hereto agree that the rule of EJUSDEM GENERIS
shall not be applicable to limit a general statement, which is followed by or
referable to an enumeration of specific matters, to matters similar to the
matters specifically mentioned.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and
banker's acceptances issued for the account of such Person;
(c) all other items which, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of
such Person as of the date at which Indebtedness is to be determined;
(d) net liabilities of such Person under all Hedging Obligations;
17
(e) all net monetary obligations of such Persons with respect to
Production Payments;
(f) all Capitalized Lease Liabilities;
(g) whether or not so included as liabilities in accordance with
GAAP, all obligations of such Person to pay the deferred purchase
price of property or services, and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being
purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not
such indebtedness shall have been assumed by such Person or is limited
in recourse; and
(h) all Contingent Liabilities of such Person;
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer, unless the Lender expressly permits
exclusion based on non-recourse provisions acceptable to the Lender set forth in
the agreements regarding such Indebtedness.
"INDEMNIFIED LIABILITIES" is defined in SECTION 10.4.
"INDEMNIFIED PARTIES" is defined in SECTION 10.4.
"INITIAL TRANCHE B AMOUNT" means the original, principal amount of the
Tranche B Loan made by the Lender on the Effective Date.
"INTERCREDITOR AGREEMENT" is defined in the FOURTH RECITAL.
"INTEREST COVERAGE RATIO" means, for any four (4)consecutive Fiscal
Quarters commencing with the Fiscal Quarter beginning October 1, 1999, the ratio
of (a) EBITDA for such Fiscal Quarters to (b) Interest Expense for such Fiscal
Quarters; PROVIDED, HOWEVER, that solely for purposes of calculating the
Interest Coverage Ratio there shall be excluded from the calculation of
Consolidated Net Income those expenses of the Borrower and its Consolidated
Subsidiaries for geological and geophysical services and those incurred in
connection with oil and gas ▇▇▇▇▇ that were not commercially successful, in each
case with respect to such entities, Oil & Gas Properties where such expenses
have not been capitalized.
"INTEREST EXPENSE" means, for any period, the consolidated interest
expense of the Borrower and its consolidated Subsidiaries for such period
(including all imputed
18
interest under Hedging Agreements, but excluding all fees paid under SECTION
3.3), as determined in accordance with GAAP, including the interest expense
associated with any Capitalized Lease Liabilities of the Borrower and its
consolidated Subsidiaries.
"INTEREST PERIOD" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to SECTION 2.3 or 2.4
and ending on (but excluding) the day which numerically corresponds to such date
one, three or six months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in each case as the
Borrower may select in its relevant notice pursuant to SECTION 2.3 or 2.4;
PROVIDED, HOWEVER, that
(a) no more than three different Interest Periods may be in
effect at any time;
(b) Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing shall be of the same duration;
(c) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall end on the next
following Business Day (unless, if such Interest Period applies to
LIBO Rate Loans, such next following Business Day is the first
Business Day of another calendar month, in which case such Interest
Period shall end on the Business Day next preceding such numerically
corresponding day);
(d) no Interest Period may end later than the Stated Maturity
Date; and
(e) the Borrower shall select each Interest Period for a
particular LIBO Rate Loan so as not to require (as reasonably
foreseeable as possible) a prepayment of such LIBO Rate Loan during
such Interest Period.
"INVESTMENT" means, relative to any Person,
(a) any loan or advance made by such Person to any other Person
(excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business and excluding
prepaid expenses incurred in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person in any
other Person; PROVIDED, HOWEVER, that (i) Hedging Obligations and (ii)
Production
19
Payments where the Borrower or its Subsidiary is the grantor or
transferror thereof shall not be considered Investments.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"ISSUANCE REQUEST" means a request for the issuance of a Letter of
Credit and certificate duly executed by the chief executive, accounting or
financial Authorized Officer of the Borrower, in substantially the form of
EXHIBIT M attached hereto (with such changes thereto as may be agreed upon from
time to time by the Issuer and the Borrower).
"ISSUER" means the Lender or its designee, in its capacity as an issuer
of the Letters of Credit.
"LENDER ASSIGNMENT NOTICE" means a Lender Assignment Notice
substantially in the form of EXHIBIT G hereto.
"LENDER" is defined in the PREAMBLE.
"LETTER OF CREDIT" is defined in SECTION 4.1.
"LETTER OF CREDIT AVAILABILITY" means, at any time, the lesser of
(a) the excess of
(i) $1,000,000 OVER
(ii) the then Letter of Credit Outstandings,
OR
(b) the Tranche A Commitment Availability at such time.
"LETTER OF CREDIT OUTSTANDINGS" means, at any time, an amount equal to
sum of
(a) the aggregate Stated Amount at such time of all Letters of
Credit then outstanding and undrawn (as such aggregate Stated Amount
shall be adjusted, from time to time, as a result of drawings, the
issuance of Letters of Credit, or otherwise),
20
PLUS
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.
"LIBO RATE" means, with respect to each Interest Period for a LIBO Rate
Loan, the rate of interest equal to the average (rounded upward, if necessary,
to the nearest 1/16th of 1%) of the rates per annum at which Dollar deposits in
immediately available funds are offered to the Lender's LIBOR Office in the
London interbank market as at or about 11:00 a.m. London time two (2) Business
Days prior to the beginning of such Interest Period for Dollar deposits of
amounts comparable to the outstanding principal amount of the LIBO Rate Loan for
which an interest rate is then being determined with maturities comparable to
the Interest Period to be applicable to such LIBO Rate Loan.
"LIBO RATE LOAN" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate.
"LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) determined pursuant to the following formula:
LIBO Rate = LIBO RATE
---------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate
Loans will be determined by the Lender on the basis of the LIBOR Reserve
Percentage in effect on, and the applicable rates furnished to and received by
the Lender, two Business Days before the first day of such Interest Period.
"LIBOR OFFICE" means the office of the Lender designated as such on the
signature page hereto or designated in a Lender Assignment Notice or such other
office of the Lender (or any successor or assign of the Lender) as designated
from time to time by notice from the Lender to the Borrower, whether or not
outside the United States, which shall be making or maintaining LIBO Rate Loans
of the Lender hereunder.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for
LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the
maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or
21
other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as
currently defined in Regulation D of the F.R.S. Board, having a term
approximately equal or comparable to such Interest Period.
"LIEN" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or otherwise), charge against or interest in Property to secure (i)
the payment of a debt or (ii) the performance of an obligation, or other
priority or preferential arrangement of any kind or nature whatsoever in respect
of any Property (including those created by, arising under or evidenced by any
conditional sale or other title retention agreement, the interest of a lessor
under a capital lease, any financing lease having substantially the same
economic effect as any of the foregoing, or the filing of any financing
statement naming the owner of the asset to which such lien relates as debtor,
under the Uniform Commercial Code or any comparable law) and any contingent or
other agreement to provide any of the foregoing.
"LOANS" means the loans provided for by SECTION 2.1 and shall include
Tranche A Loans and Tranche B Loans.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security
Documents, the Warrant Documents, all Letters of Credit, all Hedging Agreements
and all other agreements relating to this Agreement entered into from time to
time between the Borrower (or any or all of its Subsidiaries or Affiliates) and
the Lender (or any Affiliate of the Lender), and any document delivered by the
Borrower or any of its Subsidiaries in connection with any of the foregoing.
"MMBtu" means one million British Thermal Units.
"▇▇▇▇ TO MARKET EXPOSURE" means the net amount, as determined by the
Lender from time to time, that would be required to terminate all outstanding
transactions then open under Hedging Agreements between the Borrower and any
other Person.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, liabilities,
contractual obligations, condition (financial or otherwise), affairs or
prospects of the Borrower or any other Obligor and its consolidated
Subsidiaries; or (b) a material impairment of the ability of the Borrower or any
Obligor to perform under any Loan Document and to avoid any Event of Default; or
(c) a material adverse effect upon (i) the legality, validity, binding effect or
enforceability against the Borrower, its Subsidiaries or any other Obligor of
any Loan Document, or (ii) the perfection or priority of any Lien granted under
any of the Loan Documents.
22
"MATERIAL CONTRACT" means (i) each Acquisition Agreement, Hydrocarbon
purchase and sale agreement, or similar contract relating to any Hydrocarbon
Interests included in the Mortgaged Properties, Borrowing Base Properties and/or
Development Properties or (ii) other agreement designated as such by the Lender.
"MORTGAGE CONSENTS" means all consents required under existing oil and
gas leases or other agreements and Approvals by Governmental Agencies to the
granting of a Mortgage to the Lender, and as reasonably determined by the Lender
with respect to Acquired Properties that become Mortgaged Properties after the
Effective Date.
"MORTGAGES" means the Mortgage, Deed of Trust, Assignment, Security
Agreement, Financing Statements and Fixture Filing executed and delivered
pursuant to SECTION 6.1.7 and SECTION 6.2.2, substantially in the form of
EXHIBIT D hereto, as amended, supplemented, restated or otherwise modified from
time to time.
"MORTGAGED PROPERTIES" means the Hydrocarbon Interests, Properties and
interests described in and secured by the Mortgages, as such Properties and
interests are from time to time constituted, all as further provided in SECTION
6.1.7 and SECTION 6.2.2.
"NON-REDEEMABLE STOCK" means stock issued by the Borrower or any of its
Subsidiaries, PROVIDED that such stock is not considered debt for GAAP, tax law
or any other purpose and PROVIDED FURTHER that neither the Borrower nor any of
its Subsidiaries has any obligation to redeem or purchase or pay dividends on
such stock or to exchange such stock for, or convert such stock to, any other
security, whether such obligation arises pursuant to the terms of such stock or
any other agreement relating thereto or otherwise and whether or not such
obligation exists in all circumstances or only upon the occurrence of a
particular event or condition or upon the passage of time or otherwise.
"NOTES" means the secured promissory note or notes of the Borrower
payable to the order of the Lender, in the form of EXHIBIT A hereto (as such
promissory notes may be amended, endorsed or otherwise modified from time to
time), evidencing the aggregate Indebtedness of the Borrower to the Lender
resulting from outstanding Loans, and also means all other promissory notes
accepted from time to time in substitution therefor or renewal thereof.
"OBLIGATIONS" means all obligations (monetary or otherwise) of the
Borrower and/or any other Obligor arising under or in connection with this
Agreement, the Notes and each other Loan Document, including without limitation,
all Hedging Obligations arising under Hedging Agreements between the Borrower
(or any Affiliate of the Borrower) and the Lender (or any Affiliate of the
Lender).
23
"OBLIGOR" means the Borrower, any of its Subsidiaries or any other
Person (other than the Lender or any Affiliate of the Lender) obligated under,
or otherwise a party to, any Loan Document.
"OIL AND GAS PROPERTIES" means Hydrocarbon Interests; the Properties
now or hereafter pooled or unitized with Hydrocarbon Interests; all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created thereby (including without limitation all units
created under orders, regulations and rules of any Government Agency having
jurisdiction) which may affect all or any portion of the Hydrocarbon Interests;
all operating agreements, joint venture agreements, contracts and other
agreements which relate to any of the Hydrocarbon Interests or the production,
sale, purchase, exchange or processing of Hydrocarbons from or attributable to
such Hydrocarbon Interests; all Hydrocarbons in and under and which may be
produced and saved or attributable to the Hydrocarbon Interests, the lands
covered thereby and all oil in tanks and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; all tenements, profits a prendre, hereditaments, appurtenances and
Properties in anywise appertaining, belonging, affixed or incidental to the
Hydrocarbon Interests, Properties, rights, titles, interests and estates
described or referred to above, including any and all Property, real or
personal, now owned or hereinafter acquired and situated upon, used, held for
use or useful in connection with the operating, working or development of any of
such Hydrocarbon Interests or Property (excluding drilling rigs, automotive
equipment or other personal property which may be on such premises for the
purpose of drilling a well or for other similar temporary uses) and including
any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, water ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"OLD ESENJAY" means Esenjay Petroleum Corporation, a Texas corporation.
"ORGANIC DOCUMENT" means, relative to any corporate Obligor, its
certificate of incorporation, its by-laws and all shareholder agreements, voting
trusts and similar arrangements applicable to any of its authorized shares of
capital stock, and, relative to any partnership Obligor, its partnership
agreement.
"OVERRIDING ROYALTY INTEREST" means the interests conveyed and assigned
by the Assignment.
24
"PARTICIPANT" is defined in SECTION 10.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under section 4069 of ERISA.
"PERCENTAGE" means, relative to the Lender, 100%, as such percentage
may be adjusted from time to time pursuant to Lender Assignment Notice(s)
executed by the Lender and its Assignee Lender(s) and delivered pursuant to
SECTION 10.11.
"PERSON" means any natural person, corporation, partnership, joint
venture, limited liability company, firm, association, trust, Government Agency
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"PLAN" means any Pension Plan or Welfare Plan.
"PLEDGE AGREEMENT" means a Pledge Agreement of the Borrower executed
and delivered pursuant to SECTION 6.1.4 and SECTION 6.2.8, substantially in the
form of EXHIBIT F-1 hereto, and a Pledge Agreement of each of the Borrower's
Subsidiaries executed and delivered pursuant to SECTION 6.1.4 and SECTION 6.2.8,
substantially in the form of EXHIBIT F-2 hereto, in each case as amended,
supplemented, restated or otherwise modified from time to time.
"PROCEEDS ACCOUNT" is defined in SECTION 3.4.
"PRODUCTION PAYMENTS" means a production payment (whether volumetric or
dollar denominated) or similar royalty, overriding royalty, net profits interest
or other similar interest in Oil and Gas Properties, or the right to receive all
or a portion of the production or the proceeds from the sale of production
attributable to such Oil and Gas Properties where the holder of such interest
has recourse solely to such interest and the grantor or transferor thereof has
an express contractual obligation to produce and sell Hydrocarbons from such Oil
and Gas Properties, or to cause such Oil and Gas Properties to be so operated
and maintained, in each case in a reasonably prudent manner.
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"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"PROVEN RESERVES" means collectively, "proved oil and gas reserves,"
"proved developed producing oil and gas reserves," "proved developed
non-producing oil and gas reserves" (consisting of proved developed shut-in oil
and gas reserves and proved developed behind pipe oil and gas reserves), and
"proved undeveloped oil and gas reserves," as such terms are defined by the U.S.
Securities and Exchange Commission in its standards and guidelines.
"QUARTERLY PAYMENT DATE" means, commencing in April 2000, the first
Business Day of each April, July, October and January.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, substantially in the form of EXHIBIT O-3, between the Borrower and
the Lender or the Designee.
"REIMBURSEMENT OBLIGATION" is defined in SECTION 4.5.
"RELEASE" means a "release," as such term is defined in CERCLA.
"REMEDIAL ACTION" means any action under Environmental Laws required to
(a) clean up, remove, treat, dispose of, ▇▇▇▇▇, or in any other way address
pollutants (including Hazardous Materials) in the environment, (b) prevent the
Release or threat of a Release or minimize the further Release of pollutants, or
(c) investigate and determine if a remedial response is needed and to design
such a response and any post-remedial investigation, monitoring, operation, and
maintenance and care.
"RESOURCE CONSERVATION AND RECOVERY ACT" means the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, ET SEQ., as in effect
from time to time.
"RESTRICTED PAYMENT TESTS" means compliance with each of the following
restrictions (both before and immediately after giving effect to the applicable
Distribution Payment):
(a) Tangible Net Worth shall not be less than the sum of (i)
$20,000,000 plus (ii) fifty percent (50%) of Consolidated Net Income
(excluding the effects of consolidated net losses), for all Fiscal
Quarters beginning after the Effective Date and treated as a single
accounting period;
(b) the Current Ratio shall be not less than 1.0:1.0;
(c) the Debt to Capitalization Ratio shall not be greater than
60%;
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(d) the Interest Coverage Ratio shall be not less than 3.0:1.0;
(e) the Tranche B Loan shall have been paid in full and the
Tranche B Commitment shall have been terminated;
(f) there shall exist no Collateral Value Deficiency;
(g) there shall exist no Borrowing Base Deficiency; and
(h) no Default shall have occurred and be continuing.
"SECURITY AGREEMENT" means a security agreement and any similar
instrument or agreement executed and delivered pursuant to SECTION 6.1.5 or
SECTION 6.2.6, substantially in the form of EXHIBIT C, as amended, supplemented,
restated or otherwise modified from time to time.
"SECURITY DOCUMENTS" means, collectively, (a) the Guaranties, (b) the
Pledge Agreements, (c) the Mortgages, (d) the Security Agreements, (e) the
Consents and (f) the Mortgage Consents, together with any exhibits, schedules
and other attachments to such documents and any financing statements related
thereto, as such documents, exhibits, schedules, attachments or financing
statements may be, from time to time, amended, supplemented, restated or
otherwise modified.
"STATED AMOUNT" of each Letter of Credit means the face amount or the
"Stated Amount" of such Letter of Credit (as defined therein).
"STATED EXPIRY DATE" is defined in SECTION 4.1.
"STATED MATURITY DATE means
(a) as to any Tranche A Loan, that date that is four (4) years
after the Tranche A Availability Termination Date; and
(b) as to any Tranche B Loan, that date that is two (2) years
after the Tranche B Availability Termination Date.
"SUBSIDIARY" means, with respect to any Person, (a) any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, (b) any
partnership, limited liability company, joint venture, association or other
business entity in which more than 50% of the equity interest or
27
voting power is at the time directly or indirectly owned by such Person, by
such Person and one or more other Subsidiaries of such Person, or by one or
more other Subsidiaries of such Person or (c) any partnership in which such
Person is a general partner.
"SURETY INSTRUMENTS" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"TANGIBLE NET WORTH" means the consolidated net worth of the Borrower
and its consolidated Subsidiaries after subtracting therefrom the aggregate
amount of any intangible assets of the Borrower and its consolidated
Subsidiaries, including goodwill, franchises, licenses, patents, trademarks,
trade names, copyrights, service marks and brand names.
"TAXES" is defined in SECTION 5.6.
"TERM LOAN" means a Tranche A Loan that has been converted from a
revolving loan to a term loan pursuant to the provisions of SECTION 2.1.1.
"TRANCHE A AVAILABILITY TERMINATION DATE" means January 24, 2001.
"TRANCHE A COMMITMENT" means the Lender's commitment pursuant to
SECTION 2.1.1 to make Tranche A Loans to the Borrower in accordance with the
terms and provisions of this Agreement.
"TRANCHE A COMMITMENT AMOUNT" means $20,000,000, as reduced from time
to time pursuant to the provisions of SECTION 2.2.
"TRANCHE A FACILITY" means the Facility providing for the Tranche A
Commitment and the Tranche A Loans.
"TRANCHE A LOAN" means the loans made by the Lender to the Borrower
pursuant to its Tranche A Commitment in accordance with SECTIONS 2.1.1 and 2.3,
and includes such Loans during all times before and after they have been
converted into a Term Loan pursuant to SECTION 2.1.1(b).
"TRANCHE B AVAILABILITY TERMINATION DATE" means the Effective Date.
"TRANCHE B COMMITMENT" means the Lender's commitment pursuant to
SECTION 2.1.2 to make the Tranche B Loan to the Borrower in accordance with the
terms and provisions of this Agreement.
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"TRANCHE B COMMITMENT AMOUNT" means $9,000,000, as reduced from time to
time pursuant to the provisions of SECTION 2.2.
"TRANCHE B FACILITY" means the Facility providing for the Tranche B
Commitment and the Tranche B Loan.
"TRANCHE B LOAN" means the Loan made by the Lender to the Borrower
pursuant to its Tranche B Commitment in accordance with SECTIONS 2.1.2 and 2.3.
"TYPE" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UNITED STATES" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"WARRANT AGREEMENT" means the Warrant Agreement, substantially in the
form of EXHIBIT O-1, between the Borrower and the Lender or the Designee.
"WARRANT DOCUMENTS" means the Warrant Agreement, the Warrants and the
Registration Rights Agreement.
"WARRANTS" means the warrants, substantially in the form of EXHIBIT
O-2, from the Borrower to the Lender or the Designee.
"WELFARE PLAN" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
"YEAR 2000 COMPLIANT" is defined in SECTION 7.19.
"YEAR 2000 PROBLEM" is defined in SECTION 7.19.
SECTION 1.2. USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and in
each Note, Borrowing Request, Continuation/Conversion Notice, notice and other
communication or other Loan Document delivered from time to time in connection
with this Agreement or any other Loan Document.
SECTION 1.3. CROSS-REFERENCES. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section in this Agreement or other Loan Document,
as applicable.
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(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar
words refer to this Agreement as a whole and not to any particular
provision of this Agreement; and subsection, Section, Schedule and
Exhibit references are to this Agreement or such other Loan Document,
as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such
clause of such Article, Section or definition.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) In the computation of periods of time from a
specified date to a later specified date, the word "from"
means "from and including"; the words "to" and "until" each
mean "to but excluding," and the word "through" means "to and
including."
(iii) The term "property" includes any kind of
property or asset, real, personal or mixed, tangible or
intangible.
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and
other modifications thereto, but only to the extent such amendments and
other modifications are not prohibited by the terms of any Loan
Document, and (ii) references to any statute or regulation are to be
construed as including all statutory and regulatory provisions
consolidating, amending, replacing, supplementing or interpreting the
statute or regulation.
(e) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are
cumulative and shall each be performed in accordance with their terms.
Unless otherwise expressly provided, any reference to any action of the
Lender by way of consent, approval or waiver shall be deemed modified
by the phrase "in its sole discretion."
(f) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Lender,
the Borrower and the other parties, and are the products of all
parties. Accordingly, they shall not be construed against the Lender
merely because of the Lender's involvement in their preparation.
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SECTION 1.4. ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise
specified, all accounting terms used herein or in any other Loan Document shall
be interpreted, all accounting determinations and computations hereunder or
thereunder (including under SECTION 8.2.4) shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared in
accordance with, those generally accepted accounting principles ("GAAP") applied
in the preparation of the financial statements referred to in SECTION 7.7.
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. COMMITMENTS. On the terms and subject to the conditions of
this Agreement (including ARTICLE V), the Lender agrees to make loans ("LOANS")
to the Borrower equal to the aggregate amount of the Borrowing of Loans
requested by the Borrower to be made pursuant to the Commitments on such day
described in this SECTION 2.1.
SECTION 2.1.1. TRANCHE A COMMITMENT.
(a) From time to time on any Business Day during the period from and
after the Effective Date to the earlier to occur of (x) Tranche A Availability
Termination Date and (y) any Commitment Termination Date relating to all
Commitments or to the Tranche A Commitment, the Lender will make Tranche A Loans
to the Borrower equal to the amount of the Tranche A Loan requested by the
Borrower to be made on such day in the applicable Borrowing Request therefor. On
the terms and subject to the conditions of this Agreement, the Borrower may from
time to time borrow, prepay and reborrow Tranche A Loans.
(b) On the terms and subject to the conditions of this Agreement, the
Lender agrees to convert the aggregate unpaid principal amount of the Tranche A
Loans outstanding at the opening of business on the Tranche A Availability
Termination Date to a Term Loan, PROVIDED that (i) no Event of Default has
occurred and is continuing at that time, (ii) the representations and warranties
of the Borrower and its Subsidiaries made and given in the Loan Documents are
true and correct and (iii) the Borrower has provided a certificate to the Lender
to that effect. Once repaid or prepaid, such Term Loan may not be reborrowed.
SECTION 2.1.2 TRANCHE B COMMITMENT. On the Effective Date, the Lender
will make the Tranche B Loan to the Borrower in an amount equal to the aggregate
amount of the Tranche B Loan requested by the Borrower to be made on such day in
the applicable Borrowing Request therefor. On the terms and subject to the
conditions
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of this Agreement, the Borrower may from time to time prepay or repay Tranche
B Loans, but may not reborrow any amounts paid or prepaid.
SECTION 2.1.3 LETTERS OF CREDIT. From time to time on any Business Day,
the Issuer will issue the Letters of Credit in accordance with ARTICLE IV.
SECTION 2.1.4 LENDER NOT REQUIRED TO MAKE LOANS, ETC. UNDER CERTAIN
CIRCUMSTANCES. The Lender shall not be required to
(a) make any Loan if, after giving effect thereto
(i) the aggregate outstanding principal amount of all Tranche A
Loans would exceed the Tranche A Commitment Amount less the Letter of
Credit Outstandings, or
(ii) the aggregate outstanding principal amount of all Tranche B
Loans would exceed the Tranche B Commitment Amount, or
(iii) a Collateral Value Deficiency would exist; or
(iv) a Borrowing Base Deficiency would exist; or
(v) an Event of Default has occurred and is continuing; or
(b) cause an Issuer to issue any Letter of Credit if, after giving
effect thereto
(i) all Letter of Credit Outstandings together with the aggregate
outstanding principal amount of all Tranche A Loans would exceed the
Tranche A Commitment Amount; or
(ii) a Collateral Value Deficiency would exist; or
(iii) a Borrowing Base Deficiency would exist; or
(iv) all Letter of Credit Outstandings would exceed $1,000,000;
or
(v) an Event of Default has occurred and is continuing.
SECTION 2.2 REDUCTION OF COMMITMENT AMOUNTS. The Commitment Amount is
subject to reduction from time to time pursuant to this SECTION 2.2.
SECTION 2.2.1 OPTIONAL. The Borrower may, from time to time on any
Business Day, voluntarily reduce the Tranche A Commitment Amount; PROVIDED,
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HOWEVER, that all such reductions shall require at least three (3) Business
Days' prior notice to the Lender and be permanent, and any partial reduction of
either Commitment Amount shall be in a minimum amount of $250,000 and in an
integral multiple of $50,000.
SECTION 2.2.2 MANDATORY.
(a) On the Tranche A Availability Termination Date, the unused
portion of the Tranche A Commitment shall, without any further action,
automatically and permanently be cancelled.
(b) On the Tranche B Availability Termination Date, the unused
portion of the Tranche B Commitment shall, without any further action,
automatically and permanently be cancelled.
(c) On any Commitment Termination Date, the Commitment Amount
shall be reduced to zero.
SECTION 2.3 BORROWING PROCEDURE. By delivering a Borrowing Request to
the Lender on or before 10:00 a.m. (New York time) on a Business Day, the
Borrower may from time to time irrevocably request, on not less than three (3)
nor more than five (5) Business Days' notice, that a Borrowing be made in a
minimum amount of $250,000 and an integral multiple of $50,000, or in the unused
amount of the applicable Commitment. On the terms and subject to the conditions
of this Agreement, each Borrowing shall be made on the Business Day specified in
such Borrowing Request. The Lender shall make such funds available to the
Borrower by wire transfer to the accounts the Borrower shall have specified in
its Borrowing Request.
SECTION 2.4 CONTINUATION AND CONVERSION ELECTIONS. By delivering a
Continuation/Conversion Notice to the Lender on or before 10:00 a.m. (New York
time) on a Business Day, the Borrower may from time to time irrevocably elect,
on not less than three (3) nor more than five (5) Business Days' notice that
all, or any portion in an aggregate minimum amount of $250,000 and an integral
multiple of $50,000, of any Base Rate Loans, be converted into a LIBO Rate Loan,
or of any LIBO Rate Loans, be converted into a Base Rate Loan or continued as a
LIBO Rate Loan (in the absence of delivery of a Continuation/Conversion Notice
with respect to any LIBO Rate Loan at least three (3) Business Days before the
last day of the then current Interest Period with respect thereto, such LIBO
Rate Loan shall, on such last day, automatically convert to a Base Rate Loan);
PROVIDED, HOWEVER, that no portion of the outstanding principal amount of any
LIBO Rate Loan may be continued as, and no portion of the outstanding principal
amount of any Base Rate Loan may be converted into, LIBO Rate Loans when any
Default has occurred and is continuing.
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SECTION 2.5 LOAN ACCOUNTS AND NOTES.
(a) The Loans made by the Lender shall be evidenced by one or
more loan accounts or records maintained by the Lender in the ordinary
course of business. The loan accounts or records maintained by the
Lender shall be conclusive absent manifest error of the amount of the
Loans made by the Lender to the Borrower and the interest and payments
thereon. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Borrower
hereunder to pay any amount owing with respect to the Loans.
(b) The Loans made by the Lender shall also be evidenced by a
Note or Notes payable to the order of the Lender in a maximum principal
amount equal the Lender to make (or cause to be made) appropriate
notations on the grid attached to the Notes (or on any continuation of
such grid) or in other books and records maintained by the Lender,
which notations, if made, shall evidence, INTER ALIA, the date of, the
outstanding principal of, and the interest rate applicable to the Loans
evidenced thereby (the Borrower may from time to time reasonably
request a copy of such grid). Such notations shall be conclusive and
binding on the Borrower absent manifest error rebuttable presumptive
evidence of the matters described therein; PROVIDED, HOWEVER, that the
failure of the Lender to make any such notations shall not limit or
otherwise affect any Obligations of the Borrower or any other Obligor.
(c) The Borrower acknowledges that the Note delivered to the
Lender as of the Effective Date amends, restates and renews the
Existing Notes given by the Borrower under the agreements evidencing
the Existing Secured Debt.
SECTION 2.6 BORROWING BASE REDETERMINATION AND COLLATERAL VALUE
REDETERMINATON.
(a) Within thirty (30) days after receipt of the Engineering
Report required to be delivered semi-annually, commencing with the
Engineering Report required to be delivered sixty (60) days after July
1, 2000, the Lender shall notify the Borrower in writing of the
Borrowing Base determined by the Lender on the basis of such
Engineering Report. Borrower or Lender may request, and Lender will
consider, one (1) additional determination of the Borrowing Base at any
time during each Fiscal Year following the Effective Date. Each such
determination is herein called a "BORROWING BASE REDETERMINATION".
Contemporaneously with each Borrowing Base Redetermination that shall
occur at any time that any Tranche B Loan is outstanding, the Lender
shall notify the Borrower in writing of the Collateral Value determined
by the Lender on the basis of such Engineering Report. Each such
determination is herein called a "COLLATERAL VALUE REDETERMINATION".
Each Borrowing Base Redetermination (and, as applicable,
34
Collateral Value Redetermination) shall be effective as of April 1st
(with respect to Engineering Reports effective January 1st), October
1st (with respect to Engineering Reports effective July 1st) or upon
notice from the Lender (with respect to any requested Borrowing Base
Redetermination) when the Borrower is notified of the amount of the
redetermined Borrowing Base (and, as applicable the amount of the
redetermined Collateral Value) by the Lender.
(b) In addition to the Borrowing Base Redeterminations and
Collateral Value Redeterminations described in the foregoing SECTION
2.6(a), the Borrower shall deliver to the Lender an Engineering Report
dated effective as of April 1, 2000, and the Lender shall redetermine
the Borrowing Base and the Collateral Value based upon such Engineering
Report. Such report shall be delivered on or before May 1, 2000, and
the Borrowing Base Redetermination and Collateral Value Redetermination
made pursuant thereto shall be effective as of June 1, 2000. If
approved by the Lender, such Engineering Report may be prepared by an
internal engineer employed by the Borrower.
(c) The Borrowing Base and Collateral Value are also subject
to adjustment as provided for in SECTION 3.1.2.
SECTION 2.7 PURPOSES. The Borrower shall apply the proceeds of each
Loan only in the following manner:
(a) to refinance the Existing Secured Debt;
(b) to finance Approved Development Activities with
respect to the Oil and Gas Properties owned by the Borrower or one of
the Borrower's Subsidiaries including those Properties located in
Liberty, Hardin, Wharton, Aransas, ▇▇▇▇▇▇▇, Goliad, Bee, De ▇▇▇▇,
Lovaca, Brazoria, Jefferson, Chambers, Galveston, Matagorda, Live Oak,
San Patricio, Karnes, Willacy and ▇▇▇▇▇▇▇ Counties, Texas; Beaureguard,
Calcasieu, Cameron and Terrebonne Parishes, Louisiana; and Cleveland
County, Oklahoma; and
(c) for other general corporate and working capital purposes.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1 REPAYMENTS AND PREPAYMENTS AND CERTAIN BORROWING BASE
MATTERS. The Borrower shall repay the unpaid principal amount of the Loans as
set forth in this SECTION 3.1.
35
SECTION 3.1.1 REPAYMENTS AND PREPAYMENTS. The Borrower shall repay in
full the unpaid principal amount of each Tranche A Loan, and each Tranche A Loan
shall mature and be due and payable, on the Tranche A Availability Termination
Date; PROVIDED, HOWEVER, that, as provided in SECTION 2.1.1(b), if (i) no Event
of Default has occurred and is continuing, (ii) the representations and
warranties of the Borrower and its Subsidiaries are true and correct in all
material respects and (iii) the Lender shall have received a certificate to that
effect, the unpaid principal amount of the Tranche A Loans shall, on the Tranche
A Availability Termination Date, not be due and payable but shall convert to a
Term Loan. The Borrower shall repay in full the unpaid principal amount of each
Loan upon the Stated Maturity Date applicable thereto. Prior thereto, the
Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount
of any Loans; PROVIDED, HOWEVER, that
(i) any such prepayment shall be made PRO RATA among Loans
of the same type;
(ii) no such prepayment of any LIBO Rate Loan may be made on
any day other than the last day of the Interest Period for such
Loan;
(iii) all such voluntary prepayments shall require at least
three (3) but no more than five (5) Business Days' prior written
notice to the Lender (which notice is irrevocable) stating the
date and amount of such prepayment and the type of Loan to be
prepaid; and
(iv) all such voluntary partial prepayments shall be in an
aggregate minimum amount of $100,000 and an integral multiple of
$50,000;
(b) shall, on each date when any reduction in any Commitment
Amount shall become effective, including pursuant to SECTION 2.2, make
a mandatory prepayment (which shall be applied (or held for
application, as the case may be) by the Lender to the payment of the
aggregate unpaid principal amount of those Loans then outstanding and
then to the payment of the then Letter of Credit Outstandings) equal
to the excess, if any, of the aggregate outstanding principal amount
of all Loans and Letter of Credit Outstandings over such Commitment
Amount as so reduced;
(c) shall make prepayments as specified in SECTION 3.1.2;
36
(d) shall, if Tranche A Loans have been converted to a Term Loan
pursuant to the terms and conditions hereof, on each Quarterly Payment
Date after the Tranche A Availability Termination Date, make a payment
in an amount equal to that necessary to amortize the principal of all
Tranche A Loans that have been converted into a Term Loan equally over
the remaining Quarterly Payment Dates and the Stated Maturity Date
that is applicable to Tranche A Loans;
(e) shall, on the following dates, pay an amount necessary to
reduce the outstanding principal amount of the Tranche B Loan to the
following amounts, such that the entire amount of the Tranche B Loan
shall be repaid in full on Stated Maturity Date applicable to the
Tranche B Loan:
-------------------------------------------------------- --------------------------------------------------------
Maximum Amount of Initial Tranche B Amount Remaining
Date on Which Payment is Due: Outstanding and Unpaid after Payment:
-------------------------------------------------------- --------------------------------------------------------
April 30, 2001 75%
-------------------------------------------------------- --------------------------------------------------------
July 31, 2001 50%
-------------------------------------------------------- --------------------------------------------------------
October 31, 2001 25%
-------------------------------------------------------- --------------------------------------------------------
Stated Maturity Date for Tranche B Loan 0%
-------------------------------------------------------- --------------------------------------------------------
and
(f) shall, immediately upon any acceleration of the Loans
pursuant to SECTION 9.2 or SECTION 9.3, repay all Loans, unless,
pursuant to SECTION 9.3, only a portion of all Loans is so
accelerated.
Each payment or prepayment of any Loans made pursuant to this Section shall be
without premium or penalty, except as may be required by SECTION 4.4, and shall
be applicable, to the extent of such prepayment, in the inverse order of
maturity. No voluntary prepayment of principal of any Loans or any prepayment
pursuant to the preceding CLAUSE (c) shall cause a reduction in any Commitment
Amount.
SECTION 3.1.2. BORROWING BASE DEFICIENCIES, COLLATERAL VALUE
DEFICIENCIES AND ASSET SALES.
(a) Upon the occurrence of a Borrowing Base Deficiency and/or
a Collateral Value Deficiency, the Lender may notify the Borrower of
such Borrowing Base Deficiency and/or such Collateral Value Deficiency,
as
37
applicable. Within ten (10) days from and after the Borrowing Base
Deficiency Notification Date and/or such Collateral Value Deficiency
Notification Date, as applicable, the Borrower shall notify the Lender
that it shall take one of the following actions:
(i) execute and deliver to the Lender supplemental or
additional Security Documents, in form and substance
reasonably satisfactory to the Lender and its counsel,
securing payment of the Notes and the other Obligations and
covering other Properties of the Borrower or its Subsidiaries,
including additional Oil and Gas Properties directly owned by
the Borrower or one or more of the Borrower's Subsidiaries
which are not then covered by any Loan Document and which are
of a type and nature satisfactory to the Lender, and having a
value, in addition to other Oil and Gas Properties already
subject to a Mortgage, sufficient to eliminate the Borrowing
Base Deficiency and the Collateral Value Deficiency, as
applicable, all as more particularly described in SECTION
8.1.7(a) and (b); or
(ii) make a payment with respect to the Obligations,
(which shall be applied (or held for application, as the case
may be) by the Lender to the payment of the aggregate unpaid
principal amount of those Loans then outstanding and then to
the payment of the then Letter of Credit Outstandings) in an
aggregate principal amount sufficient to eliminate such
Borrowing Base Deficiency and Collateral Value Deficiency, as
applicable, within sixty (60) days after the Borrowing Base
Deficiency Notification Date or Collateral Value Deficiency
Notification Date, as applicable (and the Borrower shall make
such payment within such 60-day period).
If the Borrower shall elect to execute and deliver (or cause one or
more of the Borrower's Subsidiaries to execute and deliver)
supplemental or additional Security Documents to the Lender pursuant to
CLAUSE (i), it shall provide the Lender with descriptions of the
additional assets to be collaterally assigned (together with current
valuations, Engineering Reports, Security Documents described in CLAUSE
(i) and title evidence applicable thereto and other documents including
opinions of counsel, each of which shall be in form and substance
reasonably satisfactory to the Lender) within sixty (60) days after the
Borrowing Base Deficiency Notification Date or Collateral Value
Deficiency Notification Date, as applicable. Such supplemental or
additional Security Documents shall be subject to the terms of SECTION
8.1.7. If the Borrower fails to take any of the actions described in
CLAUSES (i) or (ii) above within such ten (10) day period, then without
any necessity for notice to the Borrower or any other person, the
Borrower shall become obligated immediately to pay Obligations in an
aggregate
38
principal amount equal to the applicable Borrowing Base Deficiency
and/or Collateral Value Deficiency.
(b) If the Borrower or any Subsidiary sells, transfers or
otherwise disposes of Borrowing Base Properties that have been given a
value in the most recent determination of the Borrowing Base in the
aggregate for the Borrower and such Subsidiaries in excess of $250,000
during the period from the effective date of the most recent Borrowing
Base Redetermination until the effective date of the next Borrowing
Base Redetermination, the Borrowing Base and the Collateral Value shall
be immediately reduced, until the effective date of the next Borrowing
Base Redetermination and Collateral Value Redetermination, by an amount
as reasonably determined by the Lender, or if the value of the
applicable Oil and Gas Properties cannot be readily determined by the
Lender, by the entire amount of the net sales proceeds realized from
the sale, transfer or other disposition of such assets.
If such reduction shall result in a Borrowing Base Deficiency and/or
Collateral Value Deficiency, then in lieu of the provisions of CLAUSE
(a) of SECTION 3.1.2, the Borrower shall immediately make a payment
with respect to the Obligations in an amount equal to the greater of
such Borrowing Base Deficiency or such Collateral Value Deficiency. In
addition to and cumulative of the foregoing , if a Borrowing Base
Deficiency and/or Collateral Value Deficiency exists prior to such
sale, transfer or other disposition of assets, then in lieu of the
provisions of CLAUSE (a) of SECTION 3.1.2, the Borrower shall, with the
written consent of the Lender, immediately make a payment with respect
to the Obligations (which shall be applied (or held for application, as
the case may be) by the Lender first to the payment of the aggregate
unpaid principal amount of those Loans then outstanding, and then to
the payment of the then Letter of Credit Outstandings) in an aggregate
principal amount equal to the lesser of (i) the greater of the amount
of the Collateral Value Deficiency or the amount of the Borrowing Base
Deficiency (after giving effect to the applicable sale, transfer or
other disposition) or (ii) 100% of the net sales proceeds realized from
the applicable sale, transfer or other disposition.
(c) In addition, if the Borrower or any of its Subsidiaries
raises capital through the issuance of any type of common, preferred or
other equity or issues any subordinated debt or senior unsecured debt,
the proceeds of such issuance will first be applied to cure any
Borrowing Base Deficiency and/or Collateral Value Deficiency
SECTION 3.2. INTEREST PROVISIONS. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this SECTION 3.2.
39
SECTION 3.2.1. RATE. Pursuant to an appropriately delivered Borrowing
Request or Continuation/Conversion Notice, the Borrower may elect that Loans
accrue interest at a rate per annum:
(a) on that portion maintained from time to time as a Base
Rate Loan, equal to the Alternate Reference Rate plus the Applicable
Margin from time to time in effect; and
(b) on that portion maintained as a LIBO Rate Loan, during
each Interest Period applicable thereto, equal to the sum of the LIBO
Rate (Reserve Adjusted) for such Interest Period plus the Applicable
Margin.
All LIBO Rate Loans shall bear interest from and including the first day of the
applicable Interest Period to (but not including) the last day of such Interest
Period at the interest rate determined as applicable to such LIBO Rate Loan.
SECTION 3.2.2. POST-MATURITY RATES. After (w) the date any principal
amount of any Loan shall have become due and payable (whether on the Stated
Maturity Date, upon acceleration or otherwise), (x) the date any other monetary
Obligation of the Borrower shall have become due and payable, (y) the date any
other Event of Default shall have occurred (and so long as such Event of Default
shall be continuing), and (z) the date that is sixty (60) days after a Borrowing
Base Deficiency Notification Date or after a Collateral Value Deficiency
Notification Date, if the applicable Borrowing Base Deficiency or Collateral
Value Deficiency, as applicable, has not been cured, the Borrower shall pay, but
only to the extent permitted by Applicable Law, interest (after as well as
before judgment) on all Obligations at a rate per annum equal to
(a) with respect to LIBO Rate Loans, the higher of the sum
of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the
Applicable Margin plus a margin of 3%, or the sum of the Alternate
Reference Rate plus the Applicable Margin plus a margin of 3%; or
(b) in all other cases, the sum of the Alternate Reference
Rate plus the Applicable Margin plus a margin of 3%.
SECTION 3.2.3. PAYMENT DATES. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date;
(b) on the date of any optional or required payment or
prepayment, in whole or in part, of principal outstanding on such Loan
and on that portion of such Loan so paid or prepaid;
40
(c) with respect to Base Rate Loans, on each Quarterly Payment
Date occurring after the Effective Date and on each date on which a
Base Rate Loan is converted into a LIBO Rate Loan;
(d) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period and, if such Interest Period shall exceed
three months, on the ninetieth (90th) day of such Interest Period and
on each date on which a LIBO Rate Loan is converted into a Base Rate
Loan; and
(e) on that portion of any Loans which is accelerated pursuant
to SECTION 9.2 or SECTION 9.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount shall have
become due and payable (whether on the Stated Maturity Date, upon acceleration
or otherwise) shall be payable upon demand.
SECTION 3.2.4. MAXIMUM INTEREST. It is the intention of the parties
hereto to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the Obligations of the Borrower to the Lender under
this Agreement shall be subject to the limitation that payments of interest
shall not be required to the extent that receipt thereof would be contrary to
provisions of Applicable Law limiting rates of interest which may be charged or
collected by the Lender. Accordingly, if the transactions contemplated hereby
would be usurious under Applicable Law with respect to the Lender then, in that
event, notwithstanding anything to the contrary in this Agreement, it is agreed
as follows:
(a) the provisions of this SECTION 3.2.4 shall govern and
control;
(a) the aggregate of all consideration which constitutes
interest under Applicable Law that is contracted for, charged or
received under this Agreement, or under any of the other aforesaid
agreements or otherwise in connection with this Agreement by the Lender
shall under no circumstances exceed the maximum amount of interest
allowed by Applicable Law (such maximum lawful interest rate, if any,
with respect to the Lender herein called the "HIGHEST LAWFUL RATE"),
and any excess shall be credited to the Borrower by the Lender (or, if
such consideration shall have been paid in full, such excess refunded
to the Borrower);
(c) all sums paid, or agreed to be paid, to the Lender for the
use, forbearance and detention of the indebtedness of the Borrower to
the Lender hereunder shall, to the extent permitted by Applicable Law,
be amortized,
41
prorated, allocated and spread throughout the full term of such
indebtedness until payment in full so that the actual rate of interest
is uniform throughout the full term thereof; and
(d) if at any time the interest provided pursuant to SECTIONS
3.2.1 and 3.2.2 together with any other fees payable pursuant to this
Agreement and deemed interest under Applicable Law, exceeds that amount
which would have accrued at the Highest Lawful Rate, the amount of
interest and any such fees to accrue to the Lender pursuant to this
Agreement shall be limited, notwithstanding anything to the contrary in
this Agreement, to that amount which would have accrued at the Highest
Lawful Rate, but any subsequent reductions, as applicable, shall not
reduce the interest to accrue to such Lender pursuant to this Agreement
below the Highest Lawful Rate until the total amount of interest
accrued pursuant to this Agreement and such fees deemed to be interest
equals the amount of interest which would have accrued to such Lender
if a varying rate per annum equal to the interest provided pursuant to
SECTIONS 3.2.1 and 3.2.2 had at all times been in effect, PLUS the
amount of fees which would have been received but for the effect of
this SECTION 3.2.4.
SECTION 3.3. FEES. The Borrower agrees to pay the fees set forth in
this SECTION 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. CONFIDENTIAL FEE LETTER. The Borrower agrees to pay to
the Lender the Structuring Fee, the Closing Fee and the Engineering Fee as
provided in the Confidential Fee Letter.
SECTION 3.3.2. UNUSED FEE. The Borrower agrees to pay to the Lender,
for the period (including any portion thereof when any of the Commitments are
suspended by reason of the Borrower's inability to satisfy any condition of
ARTICLE V) commencing on the Effective Date, and continuing through the final
Commitment Termination Date, an unused fee at the rate of one-half of one
percent (0.5%) per annum on the average daily Commitment Availability. Such fees
shall be based on a year comprised of three-hundred and sixty (360) days and
shall be payable by the Borrower in arrears on each Quarterly Payment Date,
commencing with the first such day following the Effective Date, and on each
Commitment Termination Date.
SECTION 3.3.3. LETTER OF CREDIT STATED AMOUNT FEE. The Borrower agrees
to pay to the Issuer a fee for each Letter of Credit for the period from and
including the date of the issuance of such Letter of Credit to (but not
including) the date upon which such Letter of Credit expires, at a rate per
annum equal to two percent (2%) of the Stated Amount of such Letter of Credit,
based on a year comprised of three-hundred and sixty (360) days. A prorated
portion of such fee shall be payable by the Borrower in arrears on each
Quarterly Payment Date, and on the earlier of the Tranche A
42
Availability Termination Date or the Tranche A Commitment Termination Date
for any period then ending for which such fee shall not theretofore have been
paid, commencing on the first such date after the issuance of such Letter of
Credit.
SECTION 3.3.4. LETTER OF CREDIT ISSUANCE FEE. The Borrower agrees to
pay to the Issuer an issuance fee for each Letter of Credit issued by the Issuer
equal to the greater of (x) 0.25% of the Stated Amount of such Letter of Credit
or (y) $500. Such fee shall be payable by the Borrower on the date of issuance
of such Letter of Credit.
SECTION 3.3.5. LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrower
agrees to pay to the Lender the amounts described in SECTION 4.3.
SECTION 3.4. PROCEEDS ACCOUNT. The Security Documents contain an
assignment to the Lender by the Borrower and its Subsidiaries, as applicable, of
all production of Hydrocarbons and all proceeds attributable thereto properly
allocable to the Mortgaged Properties. Notwithstanding such assignment of
production, the Borrower may, until the Lender shall give notice to the
contrary, receive such proceeds. Thereafter, all such proceeds from the sale of
such production shall be paid directly into an account of the Borrower
maintained with the Lender (the "PROCEEDS ACCOUNT"). The Borrower hereby grants
to the Lender, subject to the prior assignment in favor of the Lender of such
production and its proceeds, a security interest in the Proceeds Account and all
proceeds thereof.
SECTION 3.5. OVERRIDING ROYALTY INTEREST AND WARRANTS; ASSIGNMENT AND
WARRANTS ARE NOT COLLATERAL SECURITY.
(a) In addition to interest paid on the Loans, the Borrower
and its Subsidiaries, as applicable, shall assign and convey to the
Lender's designee ("DESIGNEE"), as additional consideration payable to
the Lender to be retained in perpetuity and not as additional
collateral security, an overriding royalty interest in the Borrower's
and each of Borrower's Subsidiaries' Hydrocarbon Interests comprising
all Oil and Gas Properties of the Borrower and its Subsidiaries on
which a well is logged prior to the earlier of (X) the Stated Maturity
Date applicable to the Tranche B Loan and (Y) in the event that the
Tranche B Loan is indefeasibly repaid in full prior to the Tranche A
Availability Termination Date, the Tranche A Availability Termination
Date; PROVIDED, HOWEVER, that Designee shall not receive an overriding
royalty interest in respect of any well which is not completed for
production and never produces Hydrocarbons, and FURTHER PROVIDED that,
with respect to the Raymondville Project in Willacy County, Texas (more
particularly described in SCHEDULE VIII hereto), Designee shall not
receive an overriding royalty interest if and to the extent that,
within ninety (90) days after the Effective Date, the Borrower has sold
its interest therein. Such overriding royalty interest shall be
conveyed by the Assignment. In addition to the
43
representations and warranties given in the Assignment, the Borrower
hereby represents and warrants that the overriding royalty interest
conveyed by the Assignment is free and clear of any mortgages, deeds
of trust, voluntary or contractual Liens, pledges, security
interests, charges, conditional sales or other title retention
documents, or other encumbrances or burdens other than those in
favor of the Lender, and as expressly set forth in the Assignment.
(b) If all Tranche B Loans are paid in full and the Tranche B
Commitment is terminated after the Tranche A Availability Termination
Date, but before April 30, 2002, then the Borrower may purchase the
overriding royalty interest conveyed by the Assignment pursuant to the
terms and conditions set forth in that certain Agreement Concerning
Overriding Royalty Interests of even date herewith among the Borrower,
the Lender and the Designee.
(c) Although various transactions between the Borrower and
LaSalle Street Natural Resources Corporation may take place at or
before the Effective Date, the overriding royalty interest described in
the foregoing SUBSECTIONS (a) AND (b) shall not affect in any way the
overriding royalty interests previously acquired by LaSalle Street
Natural Resources Corporation or Duke pursuant to the agreements
evidencing and related to the Existing Secured Debt, or any such
overriding royalty interests that Duke may be entitled to receive after
the Effective Date.
(d) In addition to interest paid on the Loans, the Borrower
shall issue to the Designee, as additional consideration payable to the
Lender to be retained in perpetuity and not as additional collateral
security, the rights and interests granted in the Warrant Documents.
ARTICLE IV
LETTERS OF CREDIT
SECTION 4.1. ISSUANCE REQUESTS. By delivering to the Issuer an Issuance
Request on or before 12:00 noon (New York time), the Borrower may request, from
time to time prior to the earlier to occur of (x) the Tranche A Availability
Termination Date and (y) the Tranche A Commitment Termination Date, and on not
less than three (3) nor more than ten (10) Business Days' notice, that the
Issuer issue an irrevocable standby letter of credit in substantially the form
of EXHIBIT N hereto, or in such other form as may be mutually agreed by the
Borrower and the Issuer (each a "LETTER OF CREDIT"), in support of financial
obligations of the Borrower incurred in the Borrower's ordinary course of
business and which are described in such Issuance Request. Each Letter of Credit
shall by its terms:
44
(a) be issued in a Stated Amount which
(i) is at least $50,000;
(ii) does not exceed (or would not exceed) the then
Letter of Credit Availability;
(b) be stated to expire on a date (its "STATED EXPIRY
DATE") no later than the earlier of one (1) year after its date of
issuance, or (ii) one (1) year after the Tranche A Availability
Termination Date; and
(c) on or prior to its Stated Expiry Date
(ii) terminate immediately upon notice to the Issuer
from the beneficiary thereunder that all obligations covered
thereby have been terminated, paid, or otherwise satisfied in
full,
(iii) reduce in part immediately and to the extent
the beneficiary thereunder has notified the Issuer that the
obligations covered thereby have been paid or otherwise
satisfied in part, or
(iv) terminate thirty (30) Business Days after notice
to the beneficiary thereunder from the Lender that an Event of
Default has occurred and is continuing.
So long as the conditions set forth in SECTION 6.3 have been satisfied, by
delivery to the Issuer of an Issuance Request at least three (3) but not more
than ten (10) Business Days prior to the Stated Expiry Date of any Letter of
Credit, the Borrower may request the Issuer to extend the Stated Expiry Date of
such Letter of Credit for an additional period not to exceed the earlier of one
(1) year from its date of extension or the Commitment Termination Date.
SECTION 4.2. ISSUANCES AND EXTENSIONS. On the terms and subject to the
conditions of this Agreement (including ARTICLE VI), the Issuer shall issue
Letters of Credit, and extend the Stated Expiry Dates of outstanding Letters of
Credit, in accordance with the Issuance Requests made therefor. The Issuer will
make available the original of each Letter of Credit which it issues in
accordance with the Issuance Request therefor to the beneficiary thereof and
will notify the beneficiary under any Letter of Credit of any extension of the
Stated Expiry Date thereof. Upon the expiration of any Letter of Credit, the
Borrower may re-use any portion of the Letter of Credit Availability for the
issuance of new Letters of Credit prior to Commitment Termination Date.
45
The Issuer is under no obligation to issue any Letter of Credit if:
(i) any order, judgment or decree of any Government Agency
or arbitrator shall by its terms purport to enjoin or restrain the
Issuer from issuing such Letter of Credit, or any requirement of
Applicable Law or any request or directive (whether or not having
the force of law) from any Government Agency with jurisdiction over
the Issuer shall prohibit, or request that the Issuer refrain from,
the issuance of letters of credit generally or such Letter of Credit
in particular or shall impose upon the Issuer with respect to such
Letter of Credit any restriction, reserve or capital requirement
(for which the Issuer is not otherwise compensated hereunder) not in
effect on the Effective Date, or shall impose upon the Issuer any
unreimbursed loss, cost or expense which was not applicable on the
Effective Date and which the Issuer in good ▇▇▇▇▇ ▇▇▇▇▇ material to
it;
(ii) one or more of the applicable conditions contained in
ARTICLE VI is not then satisfied;
(iii) the expiry date of any requested Letter of Credit is
prior to the maturity date of any financial obligation to be supported
by the requested Letter of Credit;
(iv) any requested Letter of Credit does not provide for
drafts, or is not otherwise in form and substance acceptable to the
Issuer, or the issuance of a Letter of Credit shall violate any
applicable policies of the Issuer;
(v) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person; or
(vi) such Letter of Credit is in a face amount denominated in
a currency other than Dollars.
The Uniform Customs and Practice for Documentary Credits most recently published
by the International Chamber of Commerce at the time of issuance of any Letter
of Credit shall (unless otherwise expressly provided in the Letters of Credit)
apply to the Letters of Credit.
SECTION 4.3. EXPENSES. The Borrower agrees to pay to the Issuer all
reasonable administrative expenses of the Issuer in connection with the
issuance, maintenance, modification (if any) and administration of each Letter
of Credit issued by the Issuer upon demand from time to time.
46
SECTION 4.4. DISBURSEMENTS. The Issuer will notify the Borrower
promptly of the presentment for payment of any Letter of Credit, together with
notice of the date (the "DISBURSEMENT DATE") such payment shall be made. Subject
to the terms and provisions of such Letter of Credit, the Issuer shall make such
payment to the beneficiary (or its designee) of such Letter of Credit. In paying
any drawing under a Letter of Credit, the Issuer shall not have any
responsibility to obtain any document (other than to obtain and review any sight
draft and certificates expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document. Prior to
12:00 noon (New York time) on the Disbursement Date, the Borrower will reimburse
the Issuer for all amounts which it has disbursed under the Letter of Credit. To
the extent the Issuer is not reimbursed in full in accordance with the preceding
sentence, the Borrower's Reimbursement Obligation shall accrue interest at a
fluctuating rate equal to the lesser of (i) the Highest Lawful Rate or (ii) the
Alternate Reference Rate, plus the Applicable Margin, plus a margin of 3% per
annum, payable on demand. In the event the Issuer is not reimbursed by the
Borrower on the Disbursement Date, or if the Issuer must for any reason return
or disgorge such reimbursement, the Lender shall, on the terms and subject to
the conditions of this Agreement, fund the Reimbursement Obligation therefor by
making, on the next Business Day, Loans as provided in SECTION 2.1.1 (the
Borrower being deemed to have given a timely Borrowing Request therefor for such
amount); PROVIDED, HOWEVER, for the purpose of determining the availability of
the Commitments to make Loans immediately prior to giving effect to the
application of the proceeds of such Loans, such Reimbursement Obligation shall
be deemed not to be outstanding at such time.
SECTION 4.5. REIMBURSEMENT. The Borrower's obligation (a "REIMBURSEMENT
OBLIGATION") under SECTION 4.4 to reimburse the Issuer with respect to each
Disbursement (including interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim, or
defense to payment which the Borrower may have or have had against the Lender,
the Issuer or any beneficiary of a Letter of Credit, including any defense based
upon the occurrence of any Default, any draft, demand or certificate or other
document presented under a Letter of Credit proving to be forged, fraudulent,
invalid or insufficient, the failure of any Disbursement to conform to the terms
of the applicable Letter of Credit (if, in the Issuer's good faith opinion, such
Disbursement is determined to be appropriate) or any non-application or
misapplication by the beneficiary of the proceeds of such Disbursement, or the
legality, validity, form, regularity, or enforceability of such Letter of
Credit; PROVIDED, HOWEVER, that nothing herein shall adversely affect the right
of the Borrower to commence any proceeding against the Issuer for any wrongful
Disbursement made by the Issuer under a Letter of Credit as a result of acts or
omissions constituting gross negligence or willful misconduct on the part of the
Issuer.
47
SECTION 4.6. DEEMED DISBURSEMENTS. Upon the occurrence and during the
continuation of any Event of Default or the occurrence of the Commitment
Termination Date, an amount equal to that portion of Letter of Credit
Outstandings attributable to outstanding and undrawn Letters of Credit shall, at
the election of the Lender, and without demand upon or notice to the Borrower,
be deemed to have been paid or disbursed by the Lender under such Letters of
Credit (notwithstanding that such amount may not in fact have been so paid or
disbursed), and, upon notification by the Lender to the Borrower of its
obligations under this Section, the Borrower shall be immediately obligated to
reimburse the Lender the amount deemed to have been so paid or disbursed by the
Lender. Any amounts so received by the Lender from the Borrower pursuant to this
Section shall be held as collateral security for the repayment of the Borrower's
obligations in connection with the Letters of Credit issued by the applicable
Issuer. At any time when such Letters of Credit shall terminate and all
Obligations to the Lender are either terminated or paid or reimbursed to the
Lender in full, the Obligations of the Borrower under this Section shall be
reduced accordingly (subject, however, to reinstatement in the event any payment
in respect of such Letters of Credit is recovered in any manner from the Lender
or the Issuer), and the Lender will return to the Borrower the excess, if any,
of
(a) the aggregate amount deposited by the Borrower with the
Lender and not theretofore applied by the Lender to any Reimbursement
Obligation
OVER
(b) the aggregate amount of all Reimbursement Obligations to the
Lender pursuant to this Section, as so adjusted.
At such time when all Events of Default shall have been cured or waived, the
Lender shall return to the Borrower all amounts then on deposit with the Lender
pursuant to this Section. All amounts on deposit pursuant to this Section shall,
until their application to any Reimbursement Obligation or their return to the
Borrower, as the case may be, bear interest for the Borrower's account at the
daily average Federal Funds Rate from time to time in effect (net of the costs
of any reserve requirements, in respect of amounts on deposit pursuant to this
Section, pursuant to F.R.S. Board Regulation D), which interest shall be held by
the Lender as additional collateral security for the repayment of the Borrower's
Obligations in connection with the Letters of Credit issued by the Lender.
SECTION 4.7. NATURE OF REIMBURSEMENT OBLIGATIONS. The Borrower shall
assume all risks of the acts, omissions, or misuse of any Letter of Credit by
the beneficiary thereof. Neither the Lender nor any Issuer (except to the extent
of its own gross negligence or willful misconduct) shall be responsible for:
48
(a) the form, validity, sufficiency, accuracy, genuineness, or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter
of Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent, or forged;
(b) the form, validity, sufficiency, accuracy, genuineness,
or legal effect of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or
benefits thereunder or proceeds thereof in whole or in part, which may
prove to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(d) errors, omissions, interruptions, or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex, facsimile or otherwise;
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit or of the proceeds thereof;
(f) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Borrower in
respect of any Letter of Credit;
(g) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuer (if other
than the Lender or its Affiliates) or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or
by the Letters of Credit or any unrelated transaction;
(h) any payment by an Issuer under any Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of any Letter of Credit; or any payment made by
an Issuer under any Letter of Credit to any Person purporting to be a
trustee in bankruptcy, debtor-in-possession, assignee for the benefit
of creditors, liquidator, receiver or other representative of or
successor to any beneficiary or any transferee of any Letter of Credit,
including any arising in connection with any insolvency proceeding; or
(i) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including any other circumstance
that might
49
otherwise constitute a defense available to, or a discharge of, the
Borrower or a guarantor.
None of the foregoing shall affect, impair, or prevent the vesting of any of the
rights or powers granted the Lender or the Issuer hereunder. In furtherance and
extension, and not in limitation or derogation, of any of the foregoing, any
action taken or omitted to be taken by the Lender or the Issuer in good faith
and not constituting gross negligence or willful misconduct shall be binding
upon the Borrower and shall not put the Lender or the Issuer under any resulting
liability to the Borrower.
SECTION 4.8. INCREASED COSTS; INDEMNITY. If by reason of
(a) any change in Applicable Law after the Effective Date or
any change in the interpretation or application by any judicial or
regulatory authority of any Applicable Law, or
(b) compliance by the Lender with any direction, request or
requirement (whether or not having the force of law) of any Government
Agency, including Regulation D of the F.R.S. Board:
(i) the Lender shall be subject to any tax (other
than taxes on net income and franchises), levy, charge or
withholding of any nature or to any variation thereof or to
any penalty with respect to the maintenance or fulfillment of
its obligations under this ARTICLE IV, whether directly or by
such being imposed on or suffered by the Lender;
(ii) any reserve, deposit or similar requirement is
or shall be applicable, increased, imposed or modified in
respect of any Letters of Credit issued by an Issuer; or
(iii) there shall be imposed on the Lender any other
condition regarding this ARTICLE IV or any Letter of Credit,
and the result of the foregoing is directly or indirectly to increase the cost
to the Lender or the Issuer of issuing or maintaining any Letter of Credit or to
reduce any amount receivable in respect thereof by the Lender or the Issuer,
then and in any such case the Issuer or the Lender may, at any time after the
additional cost is incurred or the amount received is reduced, notify the
Borrower thereof, and the Borrower shall pay on demand such amounts as the
Lender or the Issuer may specify to be necessary to compensate the Lender or the
Issuer for such additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full thereof at a rate equal
at all times to the Alternate Reference Rate plus the Applicable Margin plus
three percent (3%) per annum. The determination by the Lender or the Issuer, as
the case
50
may be, of any amount due pursuant to this Section, as set forth in a
statement setting forth the calculation thereof in reasonable detail shall,
in the absence of manifest error, be final and conclusive and binding on all
of the parties hereto.
(c) In addition to amounts payable as elsewhere provided in
this ARTICLE IV, the Borrower hereby indemnifies, exonerates and holds
the Lender and each Issuer harmless from and against any and all
actions, causes of action, suits, losses, costs, liabilities and
damages, and expenses incurred in connection therewith (irrespective of
whether the Lender or the Issuer is a party to the action for which
indemnification is sought), including reasonable attorneys' fees and
disbursements, which the Lender or the Issuer may incur or be subject
to as a consequence, direct or indirect, of
(i) the issuance of the Letters of Credit, other
than as a result of the gross negligence or wilful misconduct
of the Issuer as determined by a court of competent
jurisdiction, or
(ii) the failure of the Issuer to honor a drawing
under any Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future de jure
or de facto Government Agency.
ARTICLE V
CERTAIN INTEREST RATE AND OTHER PROVISIONS
SECTION 5.1. LIBO RATE LENDING UNLAWFUL. If the Lender shall determine
(which determination shall, upon notice thereof to the Borrower, be conclusive
and binding on the Borrower) that the introduction of or any change in or in the
interpretation of any law makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for the Lender to make,
continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan,
the obligation of the Lender to make, continue, maintain or convert into any
such LIBO Rate Loans shall, upon such determination, forthwith be suspended
until the Lender shall notify the Borrower that the circumstances causing such
suspension no longer exist, and all LIBO Rate Loans shall automatically convert
into Base Rate Loans at the end of the then current Interest Periods with
respect thereto or sooner, if required by such law or assertion.
SECTION 5.2. DEPOSITS UNAVAILABLE. If the Lender shall have determined
that Dollar deposits in the relevant amount are not available to the Lender in
its relevant market, then, upon notice from the Lender to the Borrower, the
obligations of the Lender under SECTION 2.3 to make any Loans shall forthwith be
suspended until the Lender
51
shall notify the Borrower that the circumstances causing such suspension no
longer exist.
SECTION 5.3. INCREASED LOAN COSTS, ETC. If by reason of
(a) any change in Applicable Law after the Effective Date or
any change in the interpretation or application by any judicial or
regulatory authority of any Applicable Law, or
(b) compliance by the Lender with any direction, request or
requirement (whether or not having the force of Governmental Agency,
including Regulation D of the F.R.S. Board:
(i) the Lender shall be subject to any tax (other
than taxes on net income and franchises), levy, charge or
withholding of any nature or to any variation thereof or to
any penalty with respect to any payment due under any LIBO
Rate Loan or other amounts due under this Agreement, whether
directly or by such being imposed on or suffered by the
Lender;
(ii) any reserve, deposit or similar requirement is
or shall be applicable, increased, imposed or modified in
respect of Letters of Credit issued by an Issuer or any other
extensions of credit or other assets of, or any deposits with
or other liabilities of, the Lender or Loans made by the
Lender, or against any other funds, obligations or other
property owned or held by the Lender and the Lender actually
incurs such additional costs; or
(iii) there shall be imposed on the Lender any other
condition affecting this Agreement (or any of such extensions
of credit or liabilities),
and the result of the foregoing is directly or indirectly to increase the cost
to the Lender of making, continuing or the Issuer of issuing or maintaining (or
of its obligation to make, continue or maintain) any Loans as, or of converting
(or of its obligation to convert) any Loans into, LIBO Rate Loans, any Letter of
Credit or to reduce any amount receivable in respect thereof by the Lender or
the Issuer, then and in any such case the Lender or the Issuer may, at any time
after the additional cost is incurred or the amount received is reduced, notify
the Borrower thereof, and the Borrower shall pay on demand such amounts as the
Lender or the Issuer may specify to be necessary to compensate the Lender or the
Issuer for such additional cost or reduced receipt, together with interest on
such amount from the date demanded until payment in full thereof at a rate equal
at all times to the Alternate Reference Rate plus the Applicable Margin plus
three percent (3%) per annum. The determination by the Lender or the Issuer, as
the case may be, of any amount due pursuant to this Section, as set forth in a
statement setting forth the
52
calculation thereof in reasonable detail, shall, in the absence of manifest
error, be final and conclusive and binding on all of the parties hereto.
SECTION 5.4. FUNDING LOSSES. In the event the Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the Lender to
make, continue or maintain any portion of the principal amount of any Loan as,
or to convert any portion of the principal amount of any Loan into, a LIBO Rate
Loan) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
SECTION 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor by reason of any act or omission by
the Borrower or failure of a condition precedent to be satisfied; or
(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/ Conversion Notice
therefor by reason of any act or omission by the Borrower;
then, upon the written notice of the Lender to the Borrower, the Borrower shall,
within five (5) days of its receipt thereof, pay to the Lender such amount as
will (in the reasonable determination of the Lender) reimburse the Lender for
such loss or expense. Such written notice (which shall include calculations in
reasonable detail) shall, in the absence of manifest error, be conclusive and
binding on the Borrower.
SECTION 5.5 INCREASED CAPITAL COSTS. If any change in, or the
introduction, adoption, effectiveness, interpretation, reinterpretation or
phase-in of, any Applicable Law of any Government Agency, affects or would
affect the amount of capital required or expected to be maintained by the Lender
or any Person controlling the Lender, and the Lender determines (in its sole and
absolute discretion) that the rate of return on its or such controlling Person's
capital as a consequence of its Commitments hereunder, issuance of Letters of
Credit or the Loans made by the Lender is reduced to a level below that which
the Lender or such controlling Person could have achieved but for the occurrence
of any such circumstance, then, in any such case upon notice from time to time
by the Lender to the Borrower, the Borrower shall immediately pay directly to
the Lender additional amounts sufficient to compensate the Lender or such
controlling Person for such reduction in rate of return. A statement of the
Lender as to any such additional amount or amounts (including calculations
thereof in reasonable detail) shall, in the absence of manifest error, be
conclusive and binding upon the Borrower. In
53
determining such amount, the Lender may use any method of averaging and
attribution that it (in its reasonable discretion) shall deem applicable.
SECTION 5.6 TAXES. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future income,
excise, stamp or franchise taxes and other taxes, levies, assessments, imposts,
deductions, fees, duties, withholdings or other charges and all liabilities with
respect thereto of any nature whatsoever imposed by any taxing authority, but
excluding franchise taxes and taxes imposed on or measured by the Lender's net
income or receipts (such non-excluded items being called "TAXES"). In the event
that any withholding or deduction from any payment to be made by the Borrower
hereunder is required in respect of any Taxes pursuant to any Applicable Law
then (unless the Borrower already knows of such withholding or deduction, upon
notice thereof from the Lender) the Borrower will
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the Lender an official receipt or other
documentation satisfactory to the Lender evidencing such payment to
such authority; and
(c) pay to the Lender such additional amount or amounts as is
necessary to ensure that the net amount actually received by the
Lender will equal the full amount the Lender would have received and
retained had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Lender with respect to
any payment received by the Lender hereunder, the Lender may pay such Taxes and
the Borrower will promptly pay such additional amounts (including any penalties,
interest or expenses) as is necessary in order that the net amount received by
such person after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount such person would have received had
not such Taxes been asserted.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Lender the required receipts or other
required documentary evidence, the Borrower shall indemnify the Lender for any
incremental Taxes or other liability (including interest, expenses or penalties)
that may become payable by the Lender as a result of any such failure, whether
or not such Taxes or liabilities were correctly or legally asserted. Payment
under this indemnity shall be made within thirty (30) days after the date the
Lender makes written demand therefor.
54
Upon the request of the Borrower, each Assignee Lender that is
organized under the laws of a jurisdiction other than the United States
shall, prior to the due date of any payment in respect of the Borrowings,
execute and deliver to the Borrower, on or about January 15 of each calendar
year, one or more (as the Borrower may reasonably request) United States
Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or
documents (or successor forms or documents), appropriately completed, as may
be applicable to establish the extent, if any, to which a payment to such
Assignee Lender is exempt from withholding or deduction of Taxes.
To the extent taxes are imposed against the overriding royalty
interest conveyed to the Designee, or the production attributable thereto,
the terms and provisions of the Assignment shall govern the payment of the
same.
SECTION 5.7. PAYMENTS, COMPUTATIONS, ETC. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Note
or any other Loan Document shall be made by the Borrower without setoff,
deduction or counterclaim, not later than 11:00 a.m. (New York time) on the
date due, in U.S. Dollars in same day or immediately available funds, to such
account with the Lender in New York, New York as the Lender shall specify
from time to time by notice to the Borrower. Funds received after that time
shall be deemed to have been received by the Lender on the next succeeding
Business Day and any applicable interest or fee shall continue to accrue. All
interest shall be computed on the basis of the actual number of days
(including the first day but excluding the last day) occurring during the
period for which such interest is payable over a year comprised of 360 days
(or, in the case of interest on a Base Rate Loan (other than when calculated
with respect to the Federal Funds Rate), 365 days or, if appropriate, 366
days). Whenever any payment to be made shall otherwise be due on a day which
is not a Business Day, such payment shall (except as otherwise required by
CLAUSE (c) of the definition of the term "Interest Period" with respect to
LIBO Rate Loans) be made on the next succeeding Business Day and such
extension of time shall be included in computing interest and fees, if any,
in connection with such payment.
SECTION 5.8. SETOFF. The Lender shall, upon the occurrence of any
Default described in CLAUSES (a) through (d) of SECTION 9.1.9 or upon the
occurrence of any other Event of Default, have the right to appropriate and
apply to the payment of the Obligations owing to it (whether or not then
due), and (as security for such Obligations) the Borrower hereby grants to
the Lender a continuing security interest in, any and all balances, credits,
deposits, accounts or moneys of the Borrower then or thereafter maintained
with or otherwise held by the Lender, including without limitation, the
Proceeds Account. The Lender agrees promptly to notify the Borrower after any
such setoff and application made by the Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of the
55
Lender under this SECTION 5.8 are in addition to other rights and remedies
(including other rights of setoff under Applicable Law or otherwise) which
the Lender may have.
SECTION 5.9. USE OF PROCEEDS. The Borrower shall apply the proceeds
of each Borrowing in accordance with SECTION 2.7; without limiting the
foregoing, no proceeds of any Loan will be used to acquire any equity
security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934 or any "margin stock", as defined in F.R.S.
Board Regulation U, X or G.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. INITIAL CREDIT EXTENSION. The obligation of the Lender
to make the initial Credit Extension shall be subject to the prior or
concurrent satisfaction of each of the conditions precedent set forth in this
SECTION 6.1.
SECTION 6.1.1. RESOLUTIONS, ETC. The Lender shall have received from
the Borrower and each of Borrower's Subsidiaries a certificate, dated the
date of the initial Credit Extension, of the respective Secretary or
Assistant Secretary of each of the Borrower and the Borrower's Subsidiaries,
respectively, as to
(a) resolutions of the respective Boards of Directors of the
Borrower, or such Borrower's Subsidiary then in full force and effect
authorizing the execution, delivery and performance of this Agreement,
the Notes and each other Loan Document to be executed by it;
(b) the incumbency and signatures of those of its officers or
Persons authorized to act with respect to this Agreement, the Notes
and each other Loan Document executed by it;
(c) the Organic Documents of the Borrower or such Borrower's
Subsidiary; and
(d) evidence that each of the Borrower or such Borrower's
Subsidiary in good standing under the laws of the jurisdiction of its
respective organization and in each of the jurisdictions where the
Mortgaged Properties, Borrowing Base Properties and Development
Properties are located,
upon which certificates the Lender may conclusively rely until it shall have
received a further certificate of the Secretary of the Borrower canceling or
amending such prior certificate.
56
SECTION 6.1.2. DELIVERY OF NOTES. The Lender shall have received the
Notes duly executed and delivered by the Borrower.
SECTION 6.1.3. GUARANTIES. The Lender shall have received executed
counterparts of the Guaranties (or amendments and restatements of guaranties
previously delivered under the Existing Credit Documents), dated as of the
date hereof, duly executed by each of the Borrower's Subsidiaries.
SECTION 6.1.4. PLEDGE AGREEMENTS. The Lender shall have received
executed counterparts of the Pledge Agreements (or amendments and
restatements of pledge agreements previously delivered under the Existing
Credit Documents), dated as of the date hereof, duly executed by the Borrower
pledging all of its interest in the capital stock of each of the Borrower's
Subsidiaries, in each case together with the certificates, evidencing all of
the issued and outstanding shares of capital stock pledged pursuant to the
Pledge Agreements, which certificates shall in each case be accompanied by
undated stock powers duly executed in blank, or, if any securities pledged
pursuant to the Pledge Agreements are uncertificated securities, confirmation
and evidence satisfactory to the Lender that the security interest in such
uncertificated securities has been transferred to and perfected by the Lender
in accordance with Section 8-313 and Section 8-321 of the Uniform Commercial
Code, as in effect in the State of Texas and/or New York, and, as applicable,
with the evidence of completion (or satisfactory arrangement for the
completion) of all filings and recordings of the Pledge Agreements as may be
necessary, or in the reasonable opinion of the Lender, desirable, effectively
to create a valid, perfected first priority lien against and security
interest in the collateral covered thereby.
SECTION 6.1.5. SECURITY AGREEMENT. The Lender shall have received
executed counterparts of a Security Agreement (or amendments and restatements
of security agreements previously delivered under the Existing Credit
Documents), dated as of the date hereof, duly executed by the Borrower and
each of its Subsidiaries, as applicable, together with
(a) executed copies of Uniform Commercial Code financing
statements (Form UCC-1), in proper form for filing, naming the Borrower
(or its Subsidiary, as applicable) as the debtor and the Lender as the
secured party, or other similar instruments or documents, filed under
the Uniform Commercial Code of all jurisdictions as may be necessary
or, in the opinion of the Lender, desirable to perfect the security
interest of the Lender pursuant to such Security Agreement; and
(b) executed copies of proper Uniform Commercial Code Form
UCC-3 termination statements, if any, necessary to release all Liens
and other rights of any Person in any collateral described in such
Security Agreement previously
57
granted by any Person together with such other Uniform Commercial
Code Form UCC-3 termination statements as the Lender may reasonably
request from the Borrower.
SECTION 6.1.6. CONSENTS, MORTGAGE CONSENTS AND APPROVALS. The Lender
shall have received true and correct copies, certified by the Borrower, of
(a) all Mortgage Consents and Consents required in connection with the
Properties to be encumbered by Mortgages delivered pursuant to SECTION 6.1.7
or the Security Agreements delivered pursuant to SECTION 6.1.5, respectively,
and (b) all Approvals that may be requested by the Lender.
SECTION 6.1.7. MORTGAGE. The Lender shall have received counterparts
of a Mortgage (or amendments and restatements of mortgages previously
delivered under the Existing Credit Documents), relating to all of the
Hydrocarbon Interests and related Oil and Gas Properties of the Borrower and
its Subsidiaries that are included in the Lender's determination of the
initial Borrowing Base, dated as of a recent date, duly executed by the
Borrower and/or its Subsidiaries, as applicable, together with
(a) evidence of the completion (or satisfactory arrangements
for the completion) of all recordings and filings of such Mortgage as
may be necessary or, in the reasonable opinion of the Lender, desirable
effectively to create a valid, perfected first priority Lien against
the Properties purported to be covered thereby;
(b) favorable mortgagee's title opinions in favor of the
Lender (in form and substance and issued by title counsel reasonably
satisfactory to the Lender, substantially in the form of EXHIBIT I
hereto), with respect to the Property purporting to be covered by the
Mortgage setting forth the working interest and net revenue interest of
the Borrower and/or its Subsidiaries in such Properties and opining
that the Borrower's and/or its Subsidiaries' title to such property is
good and marketable and valid and that the interests created by the
Mortgage constitute valid first Liens thereon free and clear of all
defects and encumbrances other than as approved by the Lender; and
(c) such other approvals, opinions, or documents as the Lender
may reasonably request.
SECTION 6.1.8. OPINIONS OF COUNSEL. The Lender shall have received
opinions, dated the date of the initial Borrowing and addressed to the Lender,
from
(a) ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to the Borrower and the Borrower's
Subsidiaries, substantially in the form of EXHIBIT H hereto;
58
(b) special title counsel to the Borrower, who shall be
acceptable to the Lender, with respect to the Oil and Gas Properties
described on SCHEDULE II hereto, substantially in the form of EXHIBIT
I hereto.
SECTION 6.1.9. UCC-11s. The Lender shall have received certified
copies of Uniform Commercial Code Requests for Information or Copies (Form
UCC-11), or a similar search report certified by a party acceptable to the
Lender, dated a date reasonably near to the date of the initial Borrowing,
listing all effective financing statements which name the Borrower, its
Subsidiaries, and each other Obligor (under their present names and any
previous names) as the debtor and which are filed in the State of Texas,
together with copies of such financing statements (none of which shall cover
any collateral described in the Mortgages or other Security Documents).
SECTION 6.1.10. EVIDENCE OF INSURANCE. The Lender shall have
received certificates of insurance satisfactory to it evidencing the
existence of all insurance required to be maintained by the Borrower by this
Agreement and the other Loan Documents.
SECTION 6.1.11. ENGINEERING REPORTS. The Lender shall have received
Engineering Reports from Netherland, ▇▇▇▇▇▇ & Associates, dated as of
November 1, 1999, as to the Borrowing Base Properties listed on SCHEDULE II,
covering at least 85% of the Borrowing Base Properties and Engineering
Reports from internal engineers employed by the Borrower as to all other
Borrowing Base Properties.
SECTION 6.1.12. ENVIRONMENTAL REPORT. The Lender shall have received
the Phase I environmental assessments prepared by Cornerstone Environmental
Resources, Inc. or other Person acceptable to the Lender with respect to the
Mortgaged Properties, and such other information with respect to the
ownership and past use of the Mortgaged Properties as the Lender may
reasonably request, and such reports and information shall be satisfactory in
form, substance and scope to the Lender.
SECTION 6.1.13. APPROVED BUDGET. The Lender shall have received the
Approved Budget for Fiscal Year 2000, in form, scope and detail reasonably
satisfactory to the Lender.
SECTION 6.1.14. ASSIGNMENT AND AMENDMENT AND RESTATEMENT OF EXISTING
CREDIT DOCUMENTS. The documents, instruments and agreements comprising or
evidencing the Debt and the collateral security for the Existing Secured Debt
shall each have been assigned to the Lender and amended, or amended and
restated to provide that such documents, instruments and agreements secure
the Obligations, in each case pursuant to instruments in form and substance
satisfactory to the Lender and its counsel.
59
SECTION 6.1.15. ORRI AGREEMENT AND CERTIFICATE, ETC. The Lender
shall have received an executed Agreement Concerning Overriding Royalty
Interests, substantially in the form of EXHIBIT K-1, a Certificate as to
Overriding Royalty Interests, substantially in the form of EXHIBIT K-2, and
the executed Agreement as to Certain Tax Matters, substantially in the form
of EXHIBIT L, pertaining to the overriding royalty interest granted by the
Assignment and pertaining to the Warrants.
SECTION 6.1.16. ASSIGNMENT. The Lender shall have received
counterparts of the Assignment with respect to the Borrowing Base Properties
described on SCHEDULE II, duly executed by the Borrower and the Borrower's
Subsidiaries, together with
(a) evidence of the completion (or satisfactory arrangements
for the completion) of all recordings and filings of the Assignment as
may be necessary or desirable to vest title to the Overriding Royalty
Interest described therein in favor of the Designee; and
(b) such title opinions or other assurances of title with
respect to the overriding royalties which are the subject of the
Assignment as the Lender may reasonably require.
SECTION 6.1.17. HEDGING AGREEMENTS. The Borrower shall have entered
into (and shall have delivered to the Lender copies of) each of the Hedging
Agreements required by SECTIONS 8.1.8 and 8.1.9.
SECTION 6.1.18. WARRANTS, ETC. The Lender or the Designee shall have
received the Warrant Documents, in each case executed and delivered by the
Borrower.
SECTION 6.1.19. CLOSING FEES, EXPENSES, ETC. The Lender shall have
received all reasonable costs and expenses due and payable pursuant to
SECTIONS 3.3 and 10.3, if then invoiced.
SECTION 6.1.20. OTHER DOCUMENTS. The Lender shall have received such
other documents as it may reasonably request.
SECTION 6.2. INCLUSION OF HYDROCARBON INTERESTS IN THE BORROWING
BASE. The inclusion of any additional Hydrocarbon Interests in the Borrowing
Base is subject to the following conditions having been satisfied and receipt
by the Lender of the following documents, in each case with respect to each
Hydrocarbon Interest and related Oil and Gas Properties which the Borrower
requests be included in the Borrowing Base, and each of which conditions and
documents shall be satisfactory to the Lender in form and substance:
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SECTION 6.2.1. ENVIRONMENTAL REPORT. The Lender shall have received
Phase I environmental assessments as of a recent date prepared by an
environmental consulting firm as shall be acceptable to the Lender, and such
other information with respect to the ownership and past use of the Mortgaged
Properties relating to such Hydrocarbon Interests as the Lender may
reasonably request, and such reports shall be satisfactory in form, substance
and scope to the Lender.
SECTION 6.2.2. MORTGAGE. The Lender shall have received counterparts
of a Mortgage relating to such Hydrocarbon Interests and related Oil and Gas
Properties, dated as of a recent date, duly executed by the Borrower and/or
its Subsidiaries, as applicable, together with
(a) evidence of the completion (or satisfactory arrangements
for the completion) of all recordings and filings of such Mortgage as
may be necessary or, in the reasonable opinion of the Lender, desirable
effectively to create a valid, perfected first priority Lien against
the Properties purported to be covered thereby;
(b) favorable mortgagee's title opinions in favor of the
Lender (in form and substance and issued by title counsel reasonably
satisfactory to the Lender, substantially in the form of EXHIBIT I
hereto), with respect to the Property purporting to be covered by the
Mortgage setting forth the working interest and net revenue interest of
the Borrower and/or its Subsidiaries in such Properties and opining
that the Borrower's and/or its Subsidiaries' title to such property is
good and marketable and valid and that the interests created by the
Mortgage constitute valid first Liens thereon free and clear of all
defects and encumbrances other than as approved by the Lender; and
(c) such other approvals, opinions, or documents as the Lender
may reasonably request.
SECTION 6.2.3. UCC-11s. The Lender shall have received certified
copies of Uniform Commercial Code Requests for Information or Copies (Form
UCC-11), or a similar search report certified by a party acceptable to the
Lender, dated as of a recent date, listing all effective financing statements
which name the Borrower or its Subsidiaries (under their present names and
any previous names) as the debtor and which are filed in the jurisdictions in
the State of Texas or the state in which such Oil and Gas Properties are
located and in which the Mortgage referenced in SECTION 6.2.2. is to be
filed, together with copies of such financing statements (none of which shall
cover any collateral described in any such Mortgage).
SECTION 6.2.4. EVIDENCE OF INSURANCE. The Lender shall have received
certificates of insurance satisfactory to it evidencing the existence of all
insurance
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required to be maintained by the Borrower by this Agreement and the other
Loan Documents with respect to the Hydrocarbon Interests and related Oil and
Gas Properties being added to the Borrowing Base.
SECTION 6.2.5. ENGINEERING REPORTS. The Lender shall have received
an Engineering Report, dated as of a recent date from a petroleum engineer
reasonably acceptable to the Lender, as to the Hydrocarbon Interests being
added to the Borrowing Base.
SECTION 6.2.6. MATERIAL CONTRACTS AND RELATED CONSENTS; SECURITY
AGREEMENT. The Lender shall have received true and correct copies, certified
by the Borrower, and approved the form and substance of, (a) each Material
Contract related to the Hydrocarbon Interests being added to the Borrowing
Base, (b) each Approval as may be requested by the Lender. In addition, the
Lender shall have received duly executed counterparts of a Security Agreement
or, if applicable, amendments to an existing Security Agreement which add any
such Material Contract to the Collateral (as defined in the Security
Agreement), a Consent and, as applicable, a Mortgage Consent, for each such
Material Contract, dated as of a recent date.
SECTION 6.2.7. GUARANTIES. The Lender shall have received duly
executed counterparts of a Guaranty from any Subsidiary of the Borrower which
is adding Hydrocarbon Interests to the Borrowing Base, unless such a Guaranty
has already been delivered to the Lender in connection with a previous
addition to the Borrowing Base or on the Effective Date.
SECTION 6.2.8. ADDITIONAL STOCK OR PARTNERSHIP PLEDGE. The Lender
shall have received executed counterparts of the Pledge Agreement, dated not
later than the date of such Loan, duly executed by the Borrower or the
applicable Guarantor pledging its interest in the capital stock or
partnership interest, as the case may be, of any Subsidiary which is adding
Hydrocarbon Interests to the Borrowing Base, unless such Pledge Agreement has
already been delivered to the Lender, accompanied by the original share
certificate evidencing such capital stock and executed stock powers (in
blank) and the evidence of satisfactory arrangement for the completion of all
filings and recordings of the Pledge Agreement as may be necessary or, in the
reasonable opinion of the Lender, desirable, effectively to create a valid,
perfected first priority lien against and security interest in the collateral
covered thereby.
SECTION 6.2.9. OVERRIDING ROYALTY INTERESTS. To the extent that (x)
certain new Properties (or new classifications of Properties) are considered
by the Lender in a redetermination of the Borrowing Base and the Collateral
Value, (y) the Designee has not already received an Assignment pertaining
thereto and (z) pursuant to SECTION 3.5(a)(i) OR (ii), the Designee is
entitled to receive an overriding royalty interest, the Designee shall have
received an Assignment and a Certificate as to Overriding Royalty
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Interests with respect to such Properties duly executed by the Borrower and
the Borrower's Subsidiaries, together with
(a) evidence of the completion (or satisfactory arrangements
for the completion) of all recordings and filings of the Assignment as
may be necessary or desirable to vest title to the Overriding Royalty
Interest described therein; and
(b) such title opinions or other assurances of title with
respect to the overriding royalties which are the subject of the
Assignment as the Lender may reasonably require.
SECTION 6.2.10. OTHER DOCUMENTS. The Lender shall have received such
other documents as it may reasonably request.
SECTION 6.3. ALL CREDIT EXTENSIONS. The obligation of the Lender to
make any Credit Extension shall be subject to the satisfaction of each of the
conditions precedent set forth in this SECTION 6.3.
SECTION 6.3.1. COMPLIANCE WITH WARRANTIES, NO DEFAULT, ETC. Both
before and after giving effect to any Credit Extension (but, if any Default
of the nature referred to in SECTION 9.1.5 shall have occurred with respect
to any other Indebtedness, without giving effect to the application, directly
or indirectly, of the proceeds of any Borrowing) the following statements
shall be true and correct
(a) the representations and warranties set forth in ARTICLE VII
(excluding, however, those contained in SECTION 7.9) and in the other
Loan Documents shall be true and correct with the same effect as if
then made (unless stated to relate solely to an earlier date, in which
case such representations and warranties shall be true and correct as
of such earlier date);
(b) except as disclosed by the Borrower to the Lender pursuant to
SECTION 7.9
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or, to
the knowledge of the Borrower, threatened against the Borrower or
any of its Subsidiaries which has or might reasonably be expected
to have a Material Adverse Effect; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to SECTION 7.9
which has or might reasonably be expected to have a Material
Adverse Effect; and
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(a) no Default shall have then occurred and be continuing, and
neither the Borrower nor any other Obligor are in material violation
of any Applicable Law or court order or decree if such violation has
or might reasonably be expected to have a Material Adverse Effect.
SECTION 6.3.2. CREDIT REQUEST. The Lender shall have received a
Borrowing Request or Issuance Request, as the case may be, for such Credit
Extension. Each of the delivery of a Borrowing Request or an Issuance Request
and the acceptance by the Borrower of the proceeds of the Borrowing or the
issuance of the Letter of Credit as applicable, shall constitute a
representation and warranty by the Borrower that on the date of such
Borrowing (both immediately before and after giving effect to such Borrowing
and the application of the proceeds thereof) or the issuance of the Letter of
Credit, as applicable, the statements made in SECTION 6.3.1 are true and
correct.
SECTION 6.3.3. SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower or any of its
Subsidiaries shall be reasonably satisfactory in form and substance to the
Lender and its counsel; the Lender and its counsel shall have received all
information, approvals, opinions, documents or instruments as the Lender or
its counsel may reasonably request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to
make Loans and to issue or cause the issuance of Letters of Credit hereunder,
the Borrower represents and warrants unto the Lender and any Issuer as set
forth in this ARTICLE VII.
SECTION 7.1. ORGANIZATION, ETC. The Borrower is a Delaware
corporation and each of the Borrower's Subsidiaries is an Oklahoma
corporation validly organized and existing and in good standing under the
laws of the jurisdiction of its organization, is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction where the nature of its business requires such qualification,
where the failure so to qualify would have a Material Adverse Effect and has
full power and authority and holds all requisite governmental licenses,
permits and other approvals to enter into and perform its Obligations under
this Agreement, the Notes and each other Loan Document to which it is a party
and to own and hold under lease its Property and to conduct its business
substantially as currently conducted by it, in each case where the failure so
to do would have a Material Adverse Effect. As of the Effective Date, Old
Esenjay is the owner of not less than 25% of the issued and outstanding
shares of the Borrower, and Aspect is the owner of not less than 25% of the
issued and outstanding shares of the Borrower. The Borrower is the sole
shareholder of each of the Borrower's Subsidiaries.
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As of the Effective Date, the Borrower has no Subsidiaries other than as
listed in SCHEDULE IV.
SECTION 7.2. DUE AUTHORIZATION, NON-CONTRAVENTION, ETC. The
execution, delivery and performance by the Borrower and each other Obligor of
this Agreement, the Notes and each other Loan Document executed or to be
executed by it are within the Borrower's and each such Obligor's corporate
powers, have been duly authorized by all necessary corporate action, and do
not
(a) contravene the Borrower's or such Obligor's Organic
Documents;
(b) contravene or result in any violation of or default under any
Applicable Law or any material contractual restriction, court decree
or order, in each case binding on or affecting the Borrower or any
other Obligor or any Properties, businesses, assets or revenues of the
Borrower or any other Obligor;
(c) result in, or require the creation or imposition of, any Lien
on (except for the Liens of the Loan Documents) any of the Borrower's
or any other Obligor's Properties, businesses, assets or revenues.
SECTION 7.3. GOVERNMENT APPROVAL, REGULATION, ETC. No authorization
or approval or other action by, and no notice to or filing with, any
Government Agency or other Person is required for the due execution, delivery
or performance by the Borrower or any other Obligor of this Agreement, the
Notes or any other Loan Document to which it is a party.
SECTION 7.4. INVESTMENT COMPANY ACT. Neither the Borrower, its
Subsidiaries nor any Affiliate thereof, is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 7.5. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower nor any of its 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.
SECTION 7.6. VALIDITY, ETC. This Agreement constitutes, and the
Notes and each other Loan Document executed by the Borrower or any of its
Subsidiaries will, on the due execution and delivery thereof, constitute, the
legal, valid and binding obligations of the Borrower and such Subsidiaries,
as applicable, enforceable in accordance with their respective terms, and
each Loan Document executed pursuant hereto by each other Obligor will, on
the due execution and delivery thereof by such Obligor, be the legal, valid
and binding obligation of such Obligor enforceable in
65
accordance with its terms, in each case subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally.
SECTION 7.7. FINANCIAL INFORMATION. The audited consolidated balance
sheets of the Borrower and each of its consolidated Subsidiaries as at
December 31, 1998, and the unaudited consolidated balance sheets of the
Borrower and its consolidated Subsidiaries as at September 30, 1999, and the
respective, related consolidated unaudited statements of operations and cash
flow of the Borrower and each of its Subsidiaries, copies of which have been
furnished to the Lender, have been prepared in accordance with GAAP
consistently applied, and present fairly the consolidated financial condition
of the corporations covered thereby as at the date thereof and the results of
their unaudited operations for the period then ended, and show all material
Indebtedness of the Borrower and its consolidated Subsidiaries, as of the
date thereof, including liabilities for taxes, material commitments and
Contingent Liabilities.
SECTION 7.8. NO MATERIAL ADVERSE CHANGE. Since September 30, 1999,
there has been no change in the financial condition, operations, assets,
business, Properties or prospects of the Borrower or its Subsidiaries that
has or might reasonably be expected to have a Material Adverse Effect, except
that, solely for financial reporting purposes and due solely to certain
non-cash charges, the Borrower expects to report an operating loss for the
fourth (4th) quarter of 1999.
SECTION 7.9. LITIGATION, LABOR CONTROVERSIES, ETC. There is no
pending or, to the knowledge of the Borrower, threatened litigation, action,
proceeding, or labor controversy affecting the Borrower or any of its
Subsidiaries, or any of their respective Properties, businesses, assets or
revenues, which has or might reasonably be expected to have a Material
Adverse Effect, except as disclosed in ITEM 7.9 ("LITIGATION") of the
Disclosure Schedule.
SECTION 7.10. OWNERSHIP OF PROPERTIES. Each of the Borrower and each
of its Subsidiaries has good and merchantable title to its Properties
(including, without limitation, all Hydrocarbon Interests), free and clear of
all Liens except (a) those referred to in the financial statements referred
to in SECTION 7.7, (b) as disclosed to the Lender in the DISCLOSURE SCHEDULE
or (c) as permitted by SECTION 8.2.3. After giving full effect to all Liens
permitted under SECTION 8.2.3, the Borrower and its Subsidiaries own the net
interests in Hydrocarbons produced from the Oil and Gas Properties as
reflected in the most recent Engineering Report, and neither the Borrower nor
any of its Subsidiaries is obligated to bear costs or expenses in respect of
the Oil and Gas Properties in excess of its working interest percentage as
reflected in the most recent Engineering Report.
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SECTION 7.11. TAXES. Each of the Borrower and its Subsidiaries has
filed all Federal and other tax returns and reports required by Applicable
Law to have been filed by it and has paid all taxes and other governmental
charges thereby shown to be owing, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on
its books.
SECTION 7.12. PENSION AND WELFARE PLANS. During the
twelve-consecutive-month period prior to the Effective Date and prior to the
date of any Borrowing hereunder, no steps have been taken to terminate any
Pension Plan, and no contribution failure has occurred with respect to any
Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
No condition exists or event or transaction has occurred with respect to any
Pension Plan which might result in the incurrence by the Borrower or any
member of the Controlled Group of any material liability, fine or penalty.
Except as disclosed in ITEM 7.12 ("EMPLOYEE BENEFIT PLANS") of the Disclosure
Schedule or as otherwise reflected in the Financial Statements of the
Borrower and its consolidated Subsidiaries, neither the Borrower nor any
member of the Controlled Group has any contingent liability with respect to
any post-retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 7.13. COMPLIANCE WITH LAW. Neither the Borrower nor any of
its Subsidiaries (a) is in violation of any Applicable Law of, or the terms
of any Approval issued by, any Government Agency; or (b) has failed to obtain
any Approval necessary to ownership of any of its properties or the conduct
of its business (including without limitation any such authorization from the
Federal Energy Regulatory Commission or any state conservation commission or
similar body); which violation or failure could reasonably be expected to
have a Material Adverse Effect.
SECTION 7.14. CLAIMS AND LIABILITIES. Except as disclosed to the
Lender in ITEM 7.14 ("CLAIMS AND LIABILITIES") of the Disclosure Schedule,
neither the Borrower nor any of its Subsidiaries has accrued any liabilities
under gas purchase contracts for gas not taken, but for which it is liable to
pay if not made up and which, if not paid, would have a Material Adverse
Effect. Except as disclosed to the Lender in ITEM 7.14 of the Disclosure
Schedule, no claims exist against the Borrower or any of its Subsidiaries for
gas imbalances which claims if adversely determined would have a Material
Adverse Effect. No purchaser of product supplied by the Borrower or any of
its Subsidiaries has any claim against the Borrower or any of its
Subsidiaries for product paid for, but for which delivery was not taken as
and when paid for, which claim if adversely determined would have a Material
Adverse Effect.
SECTION 7.15. NO PROHIBITION ON PERFECTION OF SECURITY DOCUMENTS.
None of the terms or provisions of any indenture, mortgage, deed of trust,
agreement or other
67
instrument to which the Borrower or any of its Subsidiaries is a party or by
which the Borrower or any of its Subsidiaries or the property of the Borrower
or any of its Subsidiaries is bound prohibit the filing or recordation of any
of the Loan Documents or any other action which is necessary or appropriate
in connection with the perfection of the Liens evidenced and created by any
of the Loan Documents.
SECTION 7.16. SOLVENCY. Neither the Borrower nor any of its
Subsidiaries is "insolvent", as such term is used and defined in the United
States Bankruptcy Code, 11 U.S.C. Section 101, ET SEQ.
SECTION 7.17 ENVIRONMENTAL WARRANTIES. As a reasonable and prudent
operator of oil and gas producing properties, in the ordinary course of its
business, the Borrower has conducted, with respect to its Oil and Gas
Properties, and, on an ongoing basis, conducts a review of the effect of
Environmental Laws on the business, operations and Properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including any capital or operating
expenditures required for Remedial Action or other clean-up or closure of
Properties presently owned or operated, any capital or operating expenditures
required for Remedial Action or otherwise to achieve or maintain compliance
with environmental protection standards imposed by any Environmental Law or
as a condition of any Approval, license, permit or contract, any related
constraints on operating activities, including any periodic or permanent
shutdown of any facility or reduction in the level of or change in the nature
of operations conducted thereat and any actual or potential liabilities to
third parties, including employees, and any related costs and expenses). On
the basis of this review, the Borrower has reasonably concluded that, except
as disclosed in ITEM 7.17 ("ENVIRONMENTAL MATTERS") of the Disclosure
Schedule, to the best of its knowledge after due inquiry:
(a) all facilities and Property (including underlying
groundwater) owned, leased or operated by the Borrower or any of its
Subsidiaries have been, and continue to be, owned, leased or operated
by the Borrower or any of its Subsidiaries in compliance with all
Environmental Laws where the failure to do so could reasonably be
expected to have a Material Adverse Effect;
(d) there have been no past, and there are no pending or
threatened
(i) claims, complaints, notices or inquiries to, or requests
for information received by, the Borrower or any of its
Subsidiaries with respect to any alleged violation of any
Environmental Law, that, singly or in the aggregate, have or may
reasonably be expected to have a Material Adverse Effect, or
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(ii) claims, complaints, notices or inquiries to, or
requests for information received by, the Borrower or any of its
Subsidiaries regarding potential liability under any
Environmental Law or under any common law theories relating to
operations or the condition of any facilities or Property
(including underlying groundwater) owned, leased or operated by
the Borrower or any of its Subsidiaries that, singly or in the
aggregate, have, or may reasonably be expected to have a Material
Adverse Effect;
(c) there have been no Releases of Hazardous Materials at, on or
under any Property now or previously owned or leased by the Borrower
or any of its Subsidiaries that, singly or in the aggregate, have, or
may reasonably be expected to have, a Material Adverse Effect;
(d) each of the Borrower or any of its Subsidiaries, as
applicable, has been issued and is in compliance with all permits,
certificates, approvals, licenses and other authorizations relating to
environmental matters and necessary or desirable for its business
where the failure to do so could reasonably be expected to have a
Material Adverse Effect;
(e) no Property now or previously owned, leased or operated by
the Borrower or any of its Subsidiaries is listed or proposed for
listing on the National Priorities List pursuant to CERCLA, or, to the
extent that such listing may, singly or in the aggregate, have, or may
reasonably be expected to have a Material Adverse Effect, on the
CERCLIS or on any other similar federal or state list of sites
requiring investigation or clean-up;
(f) there are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any Property now or
previously owned, leased or operated by the Borrower or any of its
Subsidiaries that, singly or in the aggregate, have, or may reasonably
be expected to have, a Material Adverse Effect;
(g) neither the Borrower nor any Subsidiaries of the Borrower has
directly transported or directly arranged for the transportation of
any Hazardous Material to any location which is listed or proposed for
listing on the National Priorities List pursuant to CERCLA, or, to the
extent that such listing may, singly or in the aggregate, have, or may
reasonably be expected to have a Material Adverse Effect, on the
CERCLIS or on any similar federal or state list or which is the
subject of federal, state or local enforcement actions or other
investigations which may lead to material claims against the Borrower
or any of its Subsidiaries for any remedial work, damage to natural
resources or personal injury, including claims under CERCLA;
69
(h) there are no polychlorinated biphenyls, radioactive materials
or friable asbestos present at any Property now or previously owned or
leased by the Borrower or any of its Subsidiaries that, singly or in
the aggregate, have, or may reasonably be expected to have, a Material
Adverse Effect;
(i) since the respective dates of the reports delivered pursuant
to SECTION 6.1.12 and SECTION 6.2.1, no event has occurred or
condition changed which would make the descriptions and
characterizations of the Properties covered thereby incomplete or
misleading in any material respect; and
(j) no condition exists at, on or under any property now or
previously owned or leased by the Borrower or any of its Subsidiaries
which, with the passage of time, or the giving of notice or both,
would give rise to material liability under any Environmental Law
that, singly or in the aggregate have, or may reasonably be expected
to have a Material Adverse Effect.
SECTION 7.18. REGULATIONS G, U AND X. Neither the Borrower nor any
of its Subsidiaries is engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock, and no proceeds of any Loans
will be used for a purpose which violates, or would be inconsistent with,
F.R.S. Board Regulation G, U or X. Terms for which meanings are provided in
F.R.S. Board Regulation G, U or X or any regulations substituted therefor, as
from time to time in effect, are used in this Section with such meanings.
SECTION 7.19 YEAR 2000 COMPLIANCE.
(a) The Borrower: (i) developed a review and assessment
program of all areas with its and each of its Subsidiaries' businesses
and operations (including those affected by suppliers and vendors) that
could be adversely affected by the "YEAR 2000 PROBLEM" (that is, the
risk that computer applications (as well as imbedded microchips) used
by the Borrower or any of its Subsidiaries (or any of their suppliers
and vendors) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999); (ii) developed a plan and a timetable for
addressing the Year 2000 Problem on a timely basis; and (iii)
implemented that plan in accordance with that timetable.
(b) The Borrower reasonably believes that all computer
applications (including those of their suppliers and vendors) that are
material to its or its Subsidiaries' businesses and operations were and
are able to perform properly date-sensitive functions for all dates
before and after January 1, 2000 (that is, be "YEAR 2000 COMPLIANT"),
except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect.
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SECTION 7.20. INSURANCE. The Borrower and its Subsidiaries have the
benefit of the insurance coverage described in the certificates of insurance
delivered pursuant to SECTION 6.1.10 and required to be maintained pursuant
to SECTION 8.1.4.
SECTION 7.21. ACCURACY OF INFORMATION. All factual information
heretofore or contemporaneously furnished by or on behalf of the Borrower or
any of its Subsidiaries in writing to the Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby
(including without limitation each Engineering Report) is, and all other such
factual information hereafter furnished by or on behalf of the Borrower or
any of its Subsidiaries to the Lender will be, true and accurate in every
material respect on the date as of which such information is dated or
certified and as of the date of execution and delivery of this Agreement by
the Lender, and such information is not, or shall not be, as the case may be,
incomplete by omitting to state any material fact necessary to make such
information not misleading.
SECTION 7.22. TITLE WARRANTY. The Borrower represents and warrants
that the Overriding Royalty Interest conveyed in the Assignment is free and
clear of any mortgages, deeds of trust, voluntary or contractual Liens,
pledges, security interests, charges, conditional sales or other title
retention documents, or other encumbrances or burdens other than those in
favor of the Lender or the Designee and as expressly set forth in the
Assignment, and the Borrower hereby binds itself, its successors and assigns
to warrant and forever defend the title to the Overriding Royalty Interest
therein granted, conveyed, assigned, and transferred unto the Designee, its
successors and assigns, against the lawful claims and demands of every person
whomsoever claiming or to claim the same or any part thereof, by, through or
under the Borrower or any of its Subsidiaries but not otherwise.
SECTION 7.23. STARBOARD PROJECT. The Indebtedness of the Borrower
affecting certain properties located in Terrebonne Parish, Louisiana and
sometimes known as the "Starboard Project" consists of nonrecourse
obligations of the Borrower to 420 Energy Investments, Inc., a Delaware
corporation, in an amount not exceeding $864,000 plus accrued interest
relating to the recoupment of the Borrower's share of costs incurred in
connection with a 3-D seismic program and payable solely out of production
which may be obtained from the Properties located in Terrebonne Parish,
Louisiana that are involved in such program by the conversion of such
indebtedness into an overriding royalty interest burdening only such
properties.
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ARTICLE VIII
COVENANTS
SECTION 8.1. AFFIRMATIVE COVENANTS. The Borrower agrees with the
Lender and any Issuer that, until all Commitments have terminated and all
Obligations have been paid and performed in full, the Borrower and each of
its Subsidiaries will perform the obligations set forth in this SECTION 8.1.
SECTION 8.1.1. FINANCIAL INFORMATION, REPORTS, NOTICES, ETC. The
Borrower will furnish, or will cause to be furnished, to the Lender copies of
the following financial statements, reports, notices and other information:
(a) as soon as available and in any event within 50 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year
of the Borrower, consolidated and consolidating balance sheets of the
Borrower and its consolidated Subsidiaries as of the end of such Fiscal
Quarter and consolidated and consolidating statements of operations and
cash flow of the Borrower and its consolidated Subsidiaries for such
Fiscal Quarter and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such Fiscal Quarter, certified
by the chief financial Authorized Officer of the Borrower;
(b) as soon as available and in any event within 95 days after
the end of each Fiscal Year of the Borrower, a copy of the annual audit
report for such Fiscal Year for the Borrower and its consolidated
Subsidiaries, including therein the audited consolidated and
consolidating balance sheets of the Borrower and its consolidated
Subsidiaries as of the end of such Fiscal Year and audited statements
of operations and cash flow of the Borrower and its consolidated
Subsidiaries for such Fiscal Year, in the case of such audited
financials, each case certified (without any Impermissible
Qualification) in a manner reasonably acceptable to the Lender by an
independent public accountant acceptable to the Lender, together with a
certificate from the Chief Financial Officer of the Borrower from such
accountants containing a computation of, and showing compliance with,
each of the financial ratios and restrictions contained in SECTION
8.2.4 and to the effect that, in making the examination necessary for
the signing of such annual report by such accountants, they have not
become aware of any Default that has occurred and is continuing, or, if
they have become aware of such Default, describing such Default and the
steps, if any, being taken to cure it;
(c) concurrently with the delivery of the financial statements
referred to in CLAUSES (a) and (b), a certificate, executed by the
Authorized Officer of the Borrower, showing (in reasonable detail and
with appropriate calculations and computations in all respects
reasonably satisfactory to the Lender) (i) compliance
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with the financial covenants set forth in SECTION 8.2.4 and (ii) a
comparison between the actions described in the then current
Approved Budget and the actual actions taken in such period, and
also certifying, to such Authorized Officer's best knowledge, that
no Default has occurred and is then outstanding;
(d) commencing December 31, 2000, and thereafter on or prior
to December 31st of each year, an Approved Budget for the Borrower for
the immediately following Fiscal Year, reasonably satisfactory to the
Lender, such budgets to be substantially in the form of EXHIBIT P;
(e) on or prior to the fiftieth (50th) day after the end of
each Fiscal Quarter, a proposed revision to the then current Approved
Budget for the four (4) Fiscal Quarters next following, in form, scope
and detail reasonably satisfactory to the Lender;
(f) as soon as possible and in any event within five (5)
Business Days after any responsible officer of the Borrower becomes
aware of the occurrence of each Default and any event which has or is
reasonably likely to have a Material Adverse Effect, a statement of
Authorized Officer of the Borrower setting forth details of such
Default or event and the action which the Borrower has taken and
proposes to take with respect thereto;
(g) as soon as possible and in any event within five (5)
Business Days after any responsible officer of the Borrower becomes
aware of (x) the occurrence of any adverse development with respect to
any litigation, action, proceeding or labor controversy described in
SECTION 7.9 or (y) the commencement of any litigation, action,
proceeding or labor controversy of the type described in SECTION 7.9,
notice thereof and, to the extent reasonably requested by the Lender,
copies of all documentation relating thereto not subject to the
attorney-client privilege;
(h) as soon as possible and in any event within ten (10) days
after any responsible officer of the Borrower or any of its
Subsidiaries has actual knowledge thereof, notice of
(i) any claim by any Person against the Borrower or any
of its Subsidiaries of nonpayment of, or
(ii) any attempt by any Person to collect upon or
enforce
any accounts payable (that are more than 30 days past due) of the Borrower or
any of its Subsidiaries, in the case of any single account payable in excess of
$100,000, or in the case of all accounts payable in the aggregate in excess of
$250,000;
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(i) upon, but in no event later than ten (10) days after, any
responsible officer of the Borrower or any of its Subsidiaries becomes
aware of (i) any and all enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened
or other environmental claims against the Borrower or any Subsidiary or
any of its Properties pursuant to any applicable Environmental Laws
which could have a Material Adverse Effect, and (ii) any environmental
or similar condition on any real property adjoining or in the vicinity
of the property of the Borrower or any Subsidiary that could reasonably
be anticipated to cause such property or any part thereof to be subject
to any restrictions on the ownership, occupancy, transferability or use
of such property under any Environmental Laws;
(j) as soon as available and in any event within sixty (60)
days after January 1, 2000 and January 1st of each calendar year, an
Engineering Report from an independent petroleum engineering firm
acceptable to the Lender in its reasonable judgment, and as soon as
available and in any event within sixty (60) days after July lst of
each calendar year commencing in 2000, an Engineering Report from the
Borrower's internal reserve engineers, unless the Lender, at least
sixty (60) days before the required delivery date of such Engineering
Report, has requested that it be prepared by an independent petroleum
engineering firm reasonably acceptable to the Lender;
(k) promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to any of its security holders,
the sending or filing thereof, all material reports and registration
statements which the Borrower or any of its Subsidiaries files with the
Securities and Exchange Commission or any national securities exchange,
the filing thereof, copies of all tariff and rate cases and other
material reports filed with any regulatory authority (other than
routine operating reports), and receipt thereof, copies of all notices
received from any regulatory authority concerning material
noncompliance by the Borrower or any of its Subsidiaries with any
applicable regulations;
(l) immediately upon becoming aware of the institution of any
steps by the Borrower or any other Person to terminate any Pension
Plan, or the failure to make a required contribution to any Pension
Plan if such failure is sufficient to give rise to a Lien under section
302(f) of ERISA, or the taking of any action with respect to a Pension
Plan which could result in the requirement that the Borrower furnish a
bond or other security to the PBGC or such Pension Plan, or the
occurrence of any event with respect to any Pension Plan which could
result in the incurrence by the Borrower of any material liability,
fine or penalty, or any material increase in the contingent liability
of the Borrower with respect to any
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post-retirement Welfare Plan benefit, notice thereof and copies of all
documentation relating thereto;
(m) promptly after the Borrower discovers or determines that
any computer application (including those of its suppliers or vendors)
that is material to the businesses or operations of the Borrower and
its Subsidiaries taken as a whole is not Year 2000 Compliant, notice
thereof and a copy of the Borrower's plan for dealing with such
problem, except to the extent such failure could not reasonably be
expected to have a Material Adverse Effect; and
(n) on or before the thirtieth (30th) day of each month, a
report containing operational and accounting information with respect
to the Mortgaged Properties, Borrowing Base Properties and Development
Properties for the immediately preceding month, including estimated
production volumes, revenues, operating costs, drilling costs,
completion costs, geological and geophysical costs, and G&A Expenses,
position under Hedging Agreements and such other information (including
drilling and completion reports and well test data) respecting the
condition or operations, financial or otherwise, of the Borrower or any
of its Subsidiaries as the Lender may from time to time reasonably
request.
SECTION 8.1.2. COMPLIANCE WITH LAWS, ETC. The Borrower will, and will
cause each of its Subsidiaries to, comply with all Applicable Laws, except where
failure to so comply would not be reasonably expected to have a Material Adverse
Effect, such compliance to include (without limitation):
(a) the maintenance and preservation of its corporate existence
and qualification as a foreign corporation; and
(b) the payment, before the same become delinquent, of all taxes,
assessments and governmental charges imposed upon it or upon its
property except to the extent being diligently contested in good faith
by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books.
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SECTION 8.1.3. MAINTENANCE, DEVELOPMENT AND SALE OF PROPERTIES.
(a) The Borrower will, and will cause each of its Subsidiaries
to, maintain (subject to any disposition permitted by SECTION 8.2.9),
preserve, protect and keep its Properties in good repair, working order
and condition (ordinary wear and tear excepted), and make necessary and
proper repairs, renewals and replacements so that its business carried
on in connection therewith may be properly conducted at all times in
accordance with standard industry practices. In particular, the
Borrower will, and will cause each of its Subsidiaries to, operate or
cause to be operated its Oil and Gas Properties as a reasonable and
prudent operator.
(b) The Borrower shall use all reasonable efforts promptly to
complete the Approved Development Activities contemplated by the
Approved Budget. In addition, the Borrower shall use all reasonable
efforts to develop and bring into production in a prudent and
businesslike manner all proved developed non-producing reserves and
projects that the Lender has considered in its determination of the
Borrowing Base.
(c) The Borrower shall ensure that at all times it has
available to it, either through its employees or through independent
contractors, petroleum engineers with appropriate experience and
expertise in the proper operation and development of properties similar
to the Mortgaged Properties, the Borrowing Base Properties and the
Development Properties.
(d) From time-to-time, but not less than once each Fiscal
Quarter (at the time described in SECTION 8.1.1(e)) during the time the
Tranche B Loan is outstanding, the Borrower shall deliver to the Lender
a written proposal containing revisions to the Approved Budget then in
effect, showing, among other things, revised projections of Approved
Development Activities for the twelve (12) month period following such
revision, which revisions shall in all respects satisfactory to the
Lender. Within ten (10) Business Days after receipt of such proposal
for a revised Approved Budget, the Lender shall either approve the
revisions or object to such revisions. In the event that the Lender has
not delivered to the Borrower an approval or objection within such ten
(10) day period, such revisions shall be deemed approved. In the event
that the Lender shall object to a proposed revision, the Borrower shall
discuss such objections with the Lender and shall further revise and
resubmit such proposed revisions to the Approved Budget until a revised
Approved Budget acceptable to the Lender has been submitted to and
approved or deemed approved by the Lender. Once approved in writing or
deemed approved by the Lender, the then existing Approved Budget shall
be amended and the Approved Budget as revised and amended shall
thereafter replace and supersede the prior Approved Budget.
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(e) Promptly after the drilling and completion of each well
drilled on the Oil and Gas Properties that have been considered by the
Lender in the determination or redetermination of the Borrowing Base or
the Collateral Value, the Borrower shall promptly request assignments
of any interests earned by virtue of such drilling and, within fifteen
(15) days after the earlier to occur of the receipt of such assignments
or sixty (60) days after first production from such well, shall deliver
to the Lender:
(i) true and correct copies of any such assignments
of record title of the applicable Oil & Gas Properties into
the Borrower or its Subsidiary, as applicable,
(ii) true and correct copies of all required Consents
and Approvals (including copies of applications to the Mineral
Board of the State of Louisiana for the relevant Approvals)
applicable to such assignments,
(iii) original, executed and acknowledged
counterparts of an Assignment from the Borrower or its
Subsidiary, as applicable, to the Designee (effective not
later than the date of first production from such well),
(iv) original, executed and acknowledged counterparts
of a supplemental Mortgage and related amendments to financing
statements and
(v) a favorable mortgagee's title opinion showing
that the Borrower or its Subsidiary, as applicable, is vested
with good and marketable title to interests in the applicable
Mortgaged Property consistent with the working interests and
net revenue interest for such property shown in the most
recent Engineering Report and showing that the interests
created by such supplemental Mortgage constitute valid first
Liens thereon, free and clear of all defects and encumbrances
other than as approved by the Lender,
in each case in form and substance reasonably satisfactory to the
Lender.
(f) The Borrower and each of its Subsidiaries shall, promptly
after the Effective Date, take all necessary actions and use its
reasonable best efforts to obtain appropriate Consents from the Mineral
Board of the State of Louisiana of the granting of the Assignment and
the Mortgage with respect to any State of Louisiana leases covered by
such instruments.
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SECTION 8.1.4. INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, maintain or cause to be maintained with responsible insurance
companies insurance with respect to its properties and business against such
casualties and contingencies and of such types and in such amounts as is
customary in the case of similar businesses (including, where appropriate, well
control, operator's extra expense and remediation insurance) and will furnish to
the Lender at reasonable intervals at the request of the Lender a certificate of
an Authorized Officer of the Borrower setting forth the nature and extent of all
insurance maintained by the Borrower and its Subsidiaries in accordance with
this SECTION 8.1.4. The following shall apply to the insurance required by this
SECTION 8.1.4:
(a) Each policy for property insurance covering the Mortgaged
Property shall show the Lender as loss payee;
(b) Each policy for liability insurance covering the Mortgaged
Property shall show the Lender as additional insured;
(c) Each insurance policy covering the Mortgaged Property shall
provide that at least thirty (30) days prior written notice of
cancellation, reduction in amount or other change in coverage, or of
lapse shall be given to the Lender by the insurer; and
(d) The Borrower shall, if so requested by the Lender, deliver to
the Lender the original or a certified copy of each insurance policy
covering the Mortgaged Property.
SECTION 8.1.5. BOOKS AND RECORDS. The Borrower will, and will cause
each of its Subsidiaries to, keep books and records which accurately reflect all
of its material business affairs and transactions and permit the Lender or any
of its respective representatives, at reasonable times (but in any event, within
three (3) Business Days after notice from the Lender and during all normal
business hours) and at reasonable intervals, to visit all of its offices, to
discuss its financial matters with its officers, directors and, after
forty-eight (48) hours notice to the Borrower and independent public accountant
(and the Borrower hereby authorizes such independent public accountant to
discuss the Borrower's and its Subsidiaries' financial matters with the Lender
or its representatives whether or not any representative of the Borrower is
present) and to examine (and, at the expense of the Borrower, photocopy extracts
from) any of its books or other corporate records. The Borrower shall pay any
reasonable fees of such independent public accountant incurred in connection
with the Lender's exercise of its rights pursuant to this Section. Furthermore,
the Borrower will permit the Lender, or its agents, at the cost and expense of
the Borrower, to enter upon the Oil and Gas Properties and all parts thereof,
for the purpose of investigating and inspecting the
78
condition and operation thereof, and shall permit reasonable access to the field
offices and other offices, including the principal place of business, of the
Borrower to inspect and examine the Oil and Gas Properties.
SECTION 8.1.6. ENVIRONMENTAL COVENANT. The Borrower will, and will
cause each of its Subsidiaries to,
(a) use, operate and maintain all of its facilities and
Properties in compliance with all Environmental Laws, keep all
necessary permits, approvals, certificates, licenses and other
authorizations relating to environmental matters in effect and remain
in compliance therewith, and handle all Hazardous Materials in
compliance with all applicable Environmental Laws where failure to do
so would reasonably be expected to have a Material Adverse Effect;
(b) (i) promptly notify the Lender, and if requested by the
Lender, and provide copies of all written claims, complaints, notices
or inquiries relating to the condition of its facilities and Properties
or compliance with Environmental Laws, (ii) use all reasonable efforts
within ninety (90) days to have dismissed with prejudice any actions or
proceedings relating to compliance with Environmental Laws which would
or could in the reasonable opinion of the Lender have a Material
Adverse Effect, and (iii) diligently pursue cure of any material
underlying environmental problem which forms the basis of any such
claim, complaint, notice or inquiry; and
(c) provide such information and certifications which the
Lender may reasonably request from time to time to evidence compliance
with this SECTION 8.1.6.
SECTION 8.1.7. FURTHER ASSURANCES.
(a) The Borrower shall, and shall cause each of its
Subsidiaries to, upon the request of the Lender, take such actions and
execute and deliver such documents and instruments as the Lender shall
require to ensure that the Lender shall, at all times, have received
currently effective, duly executed Loan Documents encumbering Oil and
Gas Properties of the Borrower and its Subsidiaries constituting 90% of
value of the Proven Reserves to which value is given in the
determination of the then current Borrowing Base and Collateral Value
(with accompanying letters in lieu of transfer orders) and satisfactory
title evidence in form and substance reasonably acceptable to the
Lender in its reasonable business judgment as to ownership of such Oil
and Gas Properties; PROVIDED that, upon thirty (30) days notice to the
Borrower, the Lender may require, and the Borrower and/or its
Subsidiaries, as applicable, shall execute, acknowledge and deliver to
the Lender, Mortgages effectively encumbering 100% of the Oil and Gas
79
Properties of the Borrower and its Subsidiaries to which value is given
in the determination of the then current Borrowing Base.
(b) If the Lender shall determine that, as of the date of any
Borrowing Base Redetermination, the Borrower or any of its Subsidiaries
shall have failed to comply with the preceding SUBSECTION 8.1.7(a), the
Lender may notify the Borrower in writing of such failure and, within
thirty (30) days from and after receipt of such written notice by the
Borrower, the Borrower or its Subsidiaries (as applicable) shall
execute and deliver to the Lender supplemental or additional Loan
Documents, in form and substance reasonably satisfactory to the Lender
and its counsel, securing payment of the Notes and the other
Obligations and covering additional assets not then encumbered by any
Loan Documents (together with current valuations, Engineering Reports,
and title evidence applicable to the additional assets collaterally
assigned and such other documents as the Lender may reasonably require,
including opinions of counsel, each of which shall be in form and
substance reasonably satisfactory to the Lender) such that the Lender
shall have received currently effective duly executed Loan Documents
encumbering Oil and Gas Properties constituting at least 90% (or, as
provided in SUBSECTION 8.1.7(a), 100%) of the value of the Proven
Reserves of the Borrower and its Subsidiaries to which value is given
in the determination of the then current Borrowing Base (with
accompanying letters in lieu of transfer orders) and satisfactory title
evidence in form and substance acceptable to the Lender in its
reasonable business judgment as to ownership of such Oil and Gas
Properties.
(c) From time to time, but not less often that once each
Fiscal Quarter, the Borrower shall, and shall cause each of its
Subsidiaries to, deliver duly executed and acknowledged counterparts of
the Assignment as are necessary to ensure that the Designee shall have
received the overriding royalty interests in all of the Oil and Gas
Properties required by SECTION 3.5. On or before the day which is
ninety (90) days after the Effective Date, the Borrower shall convey to
the Designee the required overriding royalty interest in respect of the
Raymondville Project, in Willacy County, Texas unless, prior to such
ninetieth (90th) day, the Borrower has sold such Oil and Gas Property.
(d) The Borrower shall ensure that all written information,
exhibits, certificates and reports furnished by or on behalf of the
Borrower to the Lender do not and will not contain any untrue statement
of a material fact and do not and will not omit to state any material
fact or any fact necessary to make the statements contained therein not
misleading in light of the circumstances in which made, and will
promptly disclose to the Lender and correct any defect or error that
may be discovered therein or in any Loan Document or in the execution,
acknowledgment or recordation thereof.
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SECTION 8.1.8. HYDROCARBON HEDGING. On or before the Effective Date,
the Borrower will enter into natural gas and crude oil Hedging Agreements with
counterparties and on such other terms as are satisfactory to the Lender, that
will enable the Borrower to obtain a net realized price of not less than (a)
$2.20 per MMBtu of natural gas and (b) $17.50 per barrel of oil produced from
its and each Borrower's Subsidiary's Hydrocarbon Interests on the volumes set
forth on SCHEDULE IV (being an amount equal to 75% of the estimated production
(for the period commencing as of the Effective Date and ending not earlier than
the Stated Maturity Date for the Tranche B Loan) from proved developed producing
reserves attributable to the Hydrocarbon Interests of the Borrower and its
Subsidiaries as of the Effective Date), commencing no later than the date of the
initial Loans hereunder.
SECTION 8.1.9. INTEREST RATE PROTECTION. On or before the Effective
Date, the Borrower shall enter into Hedging Agreements, with counterparties and
on such other terms as are satisfactory to the Lender, designed to ensure a
maximum interest rate of (a) 9.5% per annum on the notional amount projected to
be outstanding as Tranche A Loans and (b) 9.5% per annum on the notional amount
projected to be outstanding as the Tranche B Loan for all periods prior to the
Tranche B Availability Termination Date.
SECTION 8.1.10. MERGER OF CERTAIN SUBSIDIARIES. The Borrower shall, on
or before April 30, 2000, cause Frontier, Inc. and Frontier Exploration and
Production Corporation to be merged with and into the Borrower and shall deliver
to the Lender Certificates of Merger from the appropriate Government Agencies
evidencing such mergers.
SECTION 8.2. NEGATIVE COVENANTS. The Borrower agrees with the Lender
and any Issuer that, until all Commitments have terminated and all Obligations
have been paid and performed in full, the Borrower will perform the obligations
set forth in this SECTION 8.2.
SECTION 8.2.1. BUSINESS ACTIVITIES. The Borrower will not, and will not
permit its Subsidiaries to, engage in any business activity, except those
described in the first recital and such activities as may be incidental or
related thereto. Until the merger of Frontier, Inc. and Frontier Exploration and
Production Corporation with and into the Borrower as described in SECTION
8.1.10, the Borrower will not, and will not permit any of its Subsidiaries, to
conduct any business in such Subsidiaries other than as may be necessary to
manage and operate its existing properties and to implement such mergers.
SECTION 8.2.2. INDEBTEDNESS. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness, other than,
without duplication, the following:
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(a) Indebtedness in respect of the Loans and other Obligations;
(b) Indebtedness in an aggregate principal amount not to exceed
$500,000 at any time outstanding which is incurred by the Borrower or
any of its Subsidiaries to a vendor of any assets to finance its
acquisition of such assets;
(c) unsecured Indebtedness incurred in the ordinary course of
business (including (i) open accounts extended by suppliers on normal
trade terms in connection with purchases of goods and services, and
(ii) gas balancing, but excluding Indebtedness incurred through the
borrowing of money or Contingent Liabilities);
(d) Hedging Obligations incurred pursuant to the Hedging
Agreements approved by the Lender pursuant to SECTIONS 8.1.8 and
8.1.9; and
(e) Contingent Obligations incurred to satisfy bonding
requirements imposed by any Government Agency not to exceed, in the
aggregate, $250,000;
(f) Indebtedness of its Subsidiaries existing as of the Effective
Date which is identified in ITEM 8.2.2(f) of the Disclosure Schedule;
(g) Indebtedness in respect of Capitalized Lease Obligations in
an amount not to exceed $250,000 at any time outstanding;
(h) Indebtedness owed by the Borrower to any of the Subsidiaries
or by any Subsidiary of the Borrower to the Borrower or any
Subsidiary;
(i) endorsements of negotiable instruments for collection in the
ordinary course of business;
(j) Indebtedness of the Borrower and its Subsidiaries which are
Investments to the extent permitted by SECTION 8.2.5(b);
(k) any nonrecourse obligations of the Borrower to 420 Energy
Investments, Inc., a Delaware corporation, in an amount not to exceed
$864,000 plus accrued interest relating to the recoupment of the
Borrower's share of costs incurred in connection with a 3-D seismic
program and payable out of production which may be obtained from the
Properties involved in such program;
(k) additional Indebtedness not permitted by CLAUSES (a) through
(k) above, PROVIDED, HOWEVER, that the aggregate amount of all
Indebtedness incurred by the Borrower and its consolidated
Subsidiaries pursuant to this CLAUSE (l) shall not exceed $500,000 at
any one time outstanding;
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PROVIDED, HOWEVER, that no Indebtedness otherwise permitted by CLAUSE (b) shall
be permitted if, after giving effect to the incurrence thereof, any Default
shall have occurred and be continuing.
SECTION 8.2.3. LIENS. The Borrower will not, and will not permit any of
the Subsidiaries to create, incur, assume or suffer to exist any Lien upon any
of its Property, revenues or assets, whether now owned or hereafter acquired,
except
:
(a) Liens securing payment of the Obligations, granted pursuant
to any Loan Document;
(b) Liens granted to secure payment of Indebtedness of the type
permitted and described in CLAUSE (b) of SECTION 8.2.2 and covering
only those assets acquired with the proceeds of such Indebtedness;
(c) Hydrocarbon production sales contracts;
(d) Liens for taxes, assessments or other governmental charges or
levies not at the time delinquent or thereafter payable without
penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(e) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books; PROVIDED, that at no time
shall such sums exceed in the aggregate $100,000;
(f) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or
other forms of governmental insurance or benefits (other than ERISA),
or to secure performance of bonds, licenses, statutory obligations,
and performance bonds, tenders, statutory obligations, leases and
contracts (other than for borrowed money), all other obligations of a
like nature entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds, all other obligations of
a like nature;
(g) zoning and similar covenants, restrictions, easements,
servitudes, permits, conditions, exceptions, reservations, minor
rights, minor encumbrances, minor irregularities in title or
conventional rights of reassignment prior to
83
abandonment and similar restrictions and other similar encumbrances
or title defects which do not materially interfere with the
occupation, use and enjoyment by the Borrower of its assets in the
ordinary course of business as presently conducted, or materially
impair the value thereof for the purpose of such business;
(h) judgment Liens in existence less than thirty (30) days after
the entry thereof or with respect to which execution has been stayed
or the payment of which is covered in full (subject to a customary
deductible) by insurance maintained with responsible insurance
companies;
(i) deposits of cash to secure insurance in the ordinary course
of business;
(j) banker's liens arising by operation of law securing fees and
costs of such banks, but not liens securing borrowed money;
(k) 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 the Borrower to secure amounts
owing, which amounts are not yet due or are being contested in good
faith by appropriate proceedings, if such reserve as may be required
by GAAP shall have been made therefor;
(l) production sales agreements, division orders, operating
agreements and other agreements customary in the oil and gas business
for producing, processing, gathering, transporting and selling
Hydrocarbons;
(m) the terms any provisions of the leases, unit agreements,
assignments and other transfer of title documents in the chain of
title under which the Borrower acquired the relevant Properties;
(n) any Liens securing Indebtedness, neither assumed nor
guaranteed by the Borrower nor on which it customarily pays interest,
existing upon real estate or rights in or relating to real estate
acquired by the Borrower for substation, metering station, pump
station, storage, gathering line, transmission line, transportation
line, distribution line, or right of way purposes, and any Liens
reserved in leases for rent and compliance with the terms of the
leases in the case of leasehold estates, so long as no default has
occurred in the payment or performance thereof, and to the extent that
any such Lien referred to in this clause does not materially impair
the use of the Properties covered by such Lien for the purposes for
which such Properties is held by the Borrower;
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(o) the statutory Lien to secure payment of the proceeds of
Hydrocarbon production established by Texas Bus. & Com. Code Section
9.319 and similar laws of other jurisdictions;
(p) rights reserved to or vested in any Government Agency by the
terms of any right, power, franchise, grant, license, or permit, or by
any provision of law, to terminate such right, power, franchise,
grant, license, or permit or to purchase, condemn, expropriate, or
recapture or to designate a purchaser of any of the Properties of the
Borrower; and
(q) rights of a common owner of any interest in real estate,
rights of way, or easements held by the Borrower and such common owner
as tenant in common or through other common ownership.
SECTION 8.2.4. FINANCIAL CONDITION. The Borrower will not permit:
(a) Tangible Net Worth at any time to be less than $20,000,000,
plus fifty percent (50%) of Consolidated Net Income (excluding the
effects of consolidated net losses) for all Fiscal Quarters beginning
after the Effective Date and treated as a single accounting period;
(b) the Current Ratio at any time, commencing on January 1,
2000, to be less than 1.0:1.0;
(c) the Debt to Capitalization Ratio at any time to be greater
than 60%; or
(d) the Interest Coverage Ratio to be less than 3.0:1.0.
The Borrower shall not, and shall not suffer or permit any Subsidiary to, make
any significant change in accounting treatment or reporting practices, except
as required by GAAP, or, without the consent of the Lender, such consent not to
be unreasonably withheld, change the fiscal year of the Borrower or of any
Subsidiary.
SECTION 8.2.5. INVESTMENTS. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Cash Equivalent Investments;
(b) without duplication, Investments permitted as Indebtedness
pursuant to SECTION 8.2.2;
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(c) without duplication, Investments in the nature of Capital
Expenditures;
(d) to the extent the formation or acquisition of any Subsidiary
is permitted hereunder, Investments in such Subsidiary; and
(e) Investments permitted by SECTION 8.2.8;
PROVIDED, HOWEVER, that
(f) any Investment which when made complies with the
requirements of the definition of the term "CASH EQUIVALENT INVESTMENT"
may continue to be held notwithstanding that such Investment if made
thereafter would not comply with such requirements; and
(g) no Investment otherwise permitted by CLAUSE (b) shall be
permitted to be made if, immediately before or after giving effect
thereto, any Default shall have occurred and be continuing.
SECTION 8.2.6. RESTRICTED PAYMENTS, ETC. On and at all times after the
Effective Date:
(a) the Borrower will not, and will not permit any of its
Subsidiaries (other than a wholly-owned Subsidiary) to, declare, pay or
make any dividend or distribution (in cash, property or obligations) on
any class of equity (now or hereafter outstanding) of the Borrower or
such Subsidiary or on any options, warrants or other rights with
respect to any interest or shares of any class of capital stock (now or
hereafter outstanding) of the Borrower or such Subsidiary or apply any
of its funds, property or assets to the purchase, redemption, sinking
fund or other retirement of, any class of capital stock (now or
hereafter outstanding) of the Borrower, or options, warrants or other
rights with respect to any interest or shares of or in any class of
capital stock (now or hereafter outstanding) of the Borrower or such
Subsidiary (such dividends, distributions or applications being called
"DISTRIBUTION PAYMENTS") other than Distribution Payments which do not
cause the Borrower to be in violation of the Restricted Payment Tests;
and
(b) the Borrower will not permit any Subsidiary to make any
Distribution Payments other than to the Borrower; and
(c) the Borrower will not, and will not permit its Subsidiaries
to, make any deposit for any of the foregoing purposes.
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SECTION 8.2.7. RENTAL OBLIGATIONS. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into at any time any arrangement
(excluding oil and gas leases entered into in the ordinary course of business)
which involves the leasing by the Borrower or any Subsidiary from any lessor of
any real or personal property (or any interest therein), except arrangements
which, together with all other such arrangements which shall then be in effect,
will not require the payment of an aggregate amount of rentals by the Borrower
or any Subsidiary in excess of (excluding escalations resulting from a rise in
the consumer price or similar index) $250,000 for any Fiscal Year or $1,250,000
during the full remaining term of such arrangements; PROVIDED, HOWEVER, that
any calculation made for purposes of this SECTION 8.2.7 shall exclude any
amounts (i) required to be expended for maintenance and repairs, insurance,
taxes, assessments, and other similar charges and (ii) any amounts relating to
Capitalized Lease Obligations.
SECTION 8.2.8. CONSOLIDATION, MERGER, ETC. The Borrower will not, and
will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate
with, or merge into or with, any other partnership or corporation, unless, in
the case of such consolidation or merger, the Borrower is the surviving entity
and Principal Shareholders retain control over the Borrower. The Borrower will
not create any Subsidiary except with the prior written consent of the Lender.
SECTION 8.2.9. ASSET DISPOSITIONS, ETC. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, transfer, lease, contribute
or otherwise convey, or grant options, warrants or other rights with respect
to, all or substantially all of the assets of the Borrower or any of its
Subsidiaries in any one transaction or in any series of transactions, whether
or not related. The Borrower will not, and will not permit any of its
Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or
grant options, warrants (or other rights with respect to), less than all or any
substantial part of its assets (including accounts receivable and including any
assets sold and then leased pursuant to a "sale/leaseback" transaction) to any
Person other than
(a) farmouts under standard industry terms of Properties not
holding Proven Reserves;
(b) abandonment of Properties not capable of producing
Hydrocarbons in paying quantities after the expiration of their
primary terms;
(c) if such assets are not Borrowing Base Properties, such
transfer, lease, contribution or conveyance is for cash or other
consideration having a value at least equal to the fair market value
of such assets;
(d) if such assets are in the Borrowing Base, the Borrower
complies with the terms of SECTION 3.1.2 and such sale, transfer,
lease, contribution or
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conveyance is for cash in an amount at least equal to the fair market
value of such assets; or
(e) as permitted by SECTION 2.7 of the Mortgage.
SECTION 8.2.10. MODIFICATION OF CERTAIN DOCUMENTS. Except with respect
to amendments to Material Contracts that do not directly and materially affect
the rights of Lender under the Loan Documents, the Borrower will not amend its
Organic Documents or consent to any amendment, supplement or other modification
of any of the terms or provisions contained in, or applicable to, the Material
Contracts, in each case without the prior written consent of the Lender.
SECTION 8.2.11. TRANSACTIONS WITH AFFILIATES. The Borrower will not,
and will not permit any of its Subsidiaries to, enter into, or cause, suffer or
permit to exist any arrangement or contract with any of its other Affiliates
unless such arrangement or contract is fair and equitable to the Borrower and
is an arrangement or contract of the kind which would be entered into by a
prudent Person in the position of the Borrower or such Subsidiary with a Person
which is not one of its Affiliates.
SECTION 8.2.12. NEGATIVE PLEDGES, RESTRICTIVE AGREEMENTS, ETC. The
Borrower will not, and will not permit any of its Subsidiaries to, enter into
any agreement (excluding this Agreement, any other Loan Document and any
agreement governing any Indebtedness permitted by CLAUSES (b) OR (e) of SECTION
8.2.2 as in effect on the Effective Date as to the assets financed with the
proceeds of such Indebtedness) prohibiting
(a) the creation or assumption of any Lien upon its properties,
revenues or assets, whether now owned or hereafter acquired (other
than those assets subject to Liens permitted by SECTION 8.2.3(b)), or
the ability of the Borrower or any other Obligor to amend or otherwise
modify this Agreement or any other Loan Document; or
(b) the ability of any Subsidiary to make any payments, directly
or indirectly, to the Borrower by way of dividends, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments, or any other agreement or arrangement which restricts the
ability of any such Subsidiary to make any payment, directly or
indirectly, to the Borrower.
SECTION 8.2.13. TAKE OR PAY CONTRACTS. Except as disclosed to the
Lender in ITEM 8.2.13 of the Disclosure Schedule, and except for reservation
charges payable for reservations of capacity in gathering systems and pipelines
incurred in the ordinary course of business on an arm's length basis for
volumes reasonably expected to be
88
produced from the Borrowers' Properties to be transported through such systems
and pipelines, the Borrower will not, and will not permit any of its
Subsidiaries to, enter into or be a party to any arrangement for the purchase
of materials, supplies, other property (including without limitation
Hydrocarbons), or services if such arrangement requires that payment be made by
the Borrower or such Subsidiary regardless of whether such materials, supplies,
other property, or services are delivered or furnished to it.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. LISTING OF EVENTS OF DEFAULT. Each of the following events
or occurrences described in this SECTION 9.1 shall constitute an "EVENT OF
DEFAULT".
SECTION 9.1.1. NON-PAYMENT OF OBLIGATIONS. The Borrower shall default
in the payment or prepayment when due of any principal of any Loan; the
Borrower shall default in the payment when due of any Reimbursement Obligation
or Hedging Obligation under a Hedging Agreement in effect between the Borrower
and the Lender or an Affiliate of the Lender; or the Borrower shall default
(and such default shall continue unremedied for a period of five (5) days) in
the payment when due of any interest on any Loan or any fee or of any other
Obligation.
SECTION 9.1.2. BREACH OF WARRANTY. Any representation or warranty of
the Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it or any other writing or certificate
furnished by or on behalf of the Borrower or any other Obligor to the Lender
for the purposes of or in connection with this Agreement or any such other Loan
Document (including any certificates delivered pursuant to ARTICLE VI) is or
shall be incorrect in any material respect when made or deemed made.
SECTION 9.1.3. NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS.
The Borrower shall default in the due performance and observance of any of its
obligations under SECTION 3.1.2, SECTION 8.1 (other than 8.1.2, 8.1.3 and
8.1.6) or SECTION 8.2.
SECTION 9.1.4. NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. The
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan
Document executed by it, and such default shall continue unremedied for a
period of fifteen (15) days after notice thereof shall have been given to the
Borrower by the Lender.
SECTION 9.1.5. DEFAULT ON OTHER INDEBTEDNESS.
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(a) A default shall occur in the payment when due (subject to
any applicable grace period), whether by acceleration or otherwise, of
any Indebtedness (including any subordinated indebtedness permitted by
SECTION 8.2.2 and any Hedging Agreements in effect between the
Borrower and the Lender or any Affiliate of the Lender, but excluding
Indebtedness described in SECTION 9.1.1) of the Borrower, any
consolidated Subsidiary or other Obligor having a principal amount,
individually or in the aggregate, in excess of $50,000, or a default
shall occur in the performance or observance of any obligation or
condition with respect to such Indebtedness if the effect of such
default is to accelerate the maturity of any such Indebtedness or such
default shall continue unremedied for any applicable period of time
sufficient to permit any holder of such Indebtedness, or any trustee
or agent for such holders, to cause such Indebtedness to become due
and payable prior to its expressed maturity.
(b) A failure to pay when due any royalty, overriding royalty or
similar interest burdening the Oil and Gas Properties of the Borrower,
in the aggregate, in excess of $50,000.
SECTION 9.1.6. JUDGMENTS. Any judgment, decree, arbitration award or
order for the payment of money in excess of $50,000 in excess of valid and
collectible insurance in respect thereof the payment of which is not being
disputed or contested by the insurer or insurers shall be rendered against the
Borrower, any consolidated Subsidiary, or other Obligor and either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of ten (10) consecutive days
during which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect.
SECTION 9.1.7. PENSION PLANS. Any of the following events shall occur
with respect to any Pension Plan
(a) the institution of any steps by the Borrower, any member
of its Controlled Group or any other Person to terminate a Pension Plan
if, as a result of such termination, the Borrower or any such member
could be required to make a contribution to such Pension Plan, or could
reasonably expect to incur a liability or obligation to such Pension
Plan; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
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SECTION 9.1.8. CONTROL OF THE BORROWER. Any Change in Control shall
occur.
SECTION 9.1.9. BANKRUPTCY, INSOLVENCY, ETC. The Borrower or any other
Obligor shall
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness to pay, debts as they become
due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Borrower
or any other Obligor or any property of any thereof, or make a general
assignment for the benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any other Obligor
or for a substantial part of the property of any thereof, and such
trustee, receiver, sequestrator or other custodian shall not be
discharged within sixty (60) days, PROVIDED that the Borrower and each
other Obligor hereby expressly authorizes the Lender to appear in any
court conducting any relevant proceeding during such 60-day period to
preserve, protect and defend its rights under the Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower or any
other Obligor, and, if any such case or proceeding is not commenced by
the Borrower or such other Obligor, such case or proceeding shall be
consented to or acquiesced in by the Borrower or such other Obligor or
shall result in the entry of an order for relief or shall remain for
sixty (60) days undismissed, PROVIDED that the Borrower and each other
Obligor hereby expressly authorizes the Lender to appear in any court
conducting any such case or proceeding during such 60-day period to
preserve, protect and defend its rights under the Loan Documents; or
(e) take any action authorizing, or in furtherance of, any of
the foregoing.
SECTION 9.1.10. IMPAIRMENT OF SECURITY, ETC. Any Loan Document, or any
Lien granted thereunder, shall (except in accordance with its terms), in whole
or in part, terminate, cease to be effective or cease to be the legally valid,
binding and enforceable obligation of any Obligor party thereto; the Borrower,
any other Obligor or any other party shall, directly or indirectly, contest in
any manner such effectiveness, validity, binding nature or enforceability; or
any Lien securing any Obligation shall, in whole or in
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part, cease to be a perfected first priority Lien, subject only to those
exceptions expressly permitted by such Loan Document.
SECTION 9.1.11. MATERIAL ADVERSE EFFECT. Any Material Adverse Effect
shall occur.
SECTION 9.2. ACTION IF BANKRUPTCY. If any Event of Default described
in CLAUSES (a) through (d) of SECTION 9.1.9 shall occur with respect to the
Borrower or any other Obligor, the Commitments (if not theretofore terminated)
shall automatically terminate and the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become
immediately due and payable, without notice or demand.
SECTION 9.3. ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
(other than any Event of Default described in CLAUSES (a) through (d) of
SECTION 9.1.9 with respect to the Borrower or any other Obligor) shall occur
for any reason, whether voluntary or involuntary, and be continuing, the
Lender, may by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loans and other Obligations to be due and
payable and/or the Commitments (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of such Loans and other
Obligations which shall be so declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment,
and/or, as the case may be, the Commitments shall terminate.
SECTION 9.4. RIGHTS NOT EXCLUSIVE. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other rights, powers, privileges or remedies provided by Applicable Law or
in equity, or under any other instrument, document or agreement now existing or
hereafter arising.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. WAIVERS, AMENDMENTS, ETC.
(a) 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
Borrower and the Lender. No failure or delay on the part of the Lender
in exercising any power or right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right.
No notice to or demand on the Borrower in any case
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shall entitle it to any notice or demand in similar or other
circumstances. No waiver or approval by the Lender under this
Agreement or any other Loan Document shall, except as may be otherwise
stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted
hereunder.
(b) This Agreement is an amendment and restatement of, and
replaces and supersedes the documents and agreements evidencing the
Existing Secured Debt; PROVIDED, HOWEVER, that no right, interest,
claim or cause of action of any kind of the respective lender which may
have existed under such documents and agreements evidencing the
Existing Secured Debt shall in any way be released, modified,
compromised or waived by virtue of this Agreement superseding and
replacing such documents and agreements.
SECTION 10.2. NOTICES.
(a) All notices and other communications provided to any party
hereto under this Agreement or any other Loan Document shall be in
writing and shall be hand delivered or sent by overnight courier,
certified mail (return receipt requested), or telecopy to such party at
its address or telecopy number set forth on the signature pages hereof
or set forth in the Lender Assignment Notice or at such other address
or telecopy number as may be designated by such party in a notice to
the other parties. Without limiting any other means by which a party
may be able to provide that a notice has been received by the other
party, a notice shall be deemed to be duly received (a) if sent by
hand, on the date when left with a responsible person at the address of
the recipient; (b) if sent by telefax, on the date of receipt by the
sender of an acknowledgment or transmission reports generated by the
machine from which the telefax was sent indicating that the telefax was
sent in its entirety to the recipient's telefax number.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when
delivered for overnight (next-day) delivery, or transmitted in legible
form by facsimile machine, respectively, or if mailed, upon the third
Business Day after the date deposited into the U.S. mail, or if
delivered, upon delivery.
(c) Any agreement of the Lender herein to receive certain
notices by telephone or facsimile is solely for the convenience and at
the request of the Borrower. The Lender shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the
Borrower to give such notice and the Lender shall not have any
liability to the Borrower or other Person on account of any action
taken or not taken by the Lender in reliance upon such telephonic or
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facsimile notice. The obligation of the Borrower to repay the Loans
shall not be affected in any way or to any extent by any failure by the
Lender to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Lender of a confirmation which is at
variance with the terms understood by the Lender to be contained in the
telephonic or facsimile notice.
SECTION 10.3. PAYMENT OF COSTS AND EXPENSES. The Borrower agrees to pay
within thirty (30) days after written demand all reasonable expenses of the
Lender (including the reasonable fees and out-of-pocket expenses of internal and
external counsel to the Lender and of local counsel, if any, who may be retained
by counsel to the Lender) in connection with
(a) the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby are consummated,
(b) the filing, recording, refiling or rerecording of the
Mortgages, the Security Agreements, the Pledge Agreements and/or any
Uniform Commercial Code financing statements relating thereto and all
amendments, supplements and modifications to, and all releases and
terminations of, any thereof and any and all other documents or
instruments of further assurance required to be filed or recorded or
refiled or rerecorded by the terms hereof or of the Mortgages, the
Security Agreements and the Pledge Agreements, and
(c) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
The Borrower further agrees to pay, and to save the Lender harmless from all
liability for, any stamp or other taxes (other than any income or franchise tax
of the Lender) which may be payable in connection with the execution or
delivery of this Agreement, the Borrowings hereunder, the issuance of the
Notes, the issuance of the Letters of Credit, or any other Loan Documents. The
Borrower also agrees to reimburse the Lender within thirty (30) days after
written demand for all reasonable out-of-pocket expenses (including attorneys'
fees and legal expenses of internal and external attorneys, and the expenses of
any accountant, engineer or other expert retained or utilized in connection
therewith) incurred by the Lender in connection with (x) the negotiation of any
restructuring or "work-out", whether or not consummated, of any Obligations and
(y) the enforcement of any Obligations. All requests for payment under this
SECTION 10.3 shall be accompanied by invoices containing reasonable details.
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SECTION 10.4. INDEMNIFICATION. In consideration of the execution and
delivery of this Agreement by the Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds Deutsche Bank Securities
Inc., the Lender, any Issuer and each of their respective affiliates and each of
their respective officers, directors, employees and agents (collectively, the
"INDEMNIFIED PARTIES") free and harmless from and against any and all actions,
causes of action, suits, losses, costs, liabilities and damages, and expenses
incurred in connection therewith (irrespective of whether any such Indemnified
Party is a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
"INDEMNIFIED LIABILITIES"), incurred by the Indemnified Parties or any of them
as a result of, or arising out of, or relating to
(a) this Agreement, any Loan Document or any document
contemplated by or referred to herein;
(b) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan, including
any Acquisition, or the use of any Letter of Credit;
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by the Borrower or any of its
Subsidiaries of all or any portion of the stock or assets of any
Person, whether or not the Lender is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to
any Environmental Law or the condition of any facility or Property
owned, leased or operated by the Borrower or any of its Subsidiaries;
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any
facility or Property owned, leased or operated by the Borrower or any
of its Subsidiaries thereof of any Hazardous Material (including any
losses, liabilities, damages, injuries, costs, expenses or claims
asserted or arising under any Environmental Law), regardless of
whether caused by, or within the control of, the Borrower or any of
its Subsidiaries; or
(f) any misrepresentation, inaccuracy or breach in or of SECTION
7.17 or SECTION 8.1.6,
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or willful misconduct. If and to the extent that the foregoing
undertaking may be
95
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under Applicable Law. The obligations in
this SECTION 10.4 shall survive payment of all other Obligations. At the
election of any Indemnified Party, the Borrower shall defend such Indemnified
Party using legal counsel satisfactory to such Indemnified Party in such
Person's sole discretion, at the sole cost and expense of the Borrower. All
amounts owing under this SECTION 10.4 shall be paid within thirty (30) days
after written demand.
SECTION 10.5. SURVIVAL. The obligations of the Borrower under SECTIONS
10.3 and 10.4 shall in each case survive any termination of this Agreement, the
payment in full of all Obligations and the termination of all Commitments. The
representations and warranties made by each Obligor in this Agreement and in
each other Loan Document shall survive the execution and delivery of this
Agreement and each such other Loan Document.
SECTION 10.6. SEVERABILITY. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.7. HEADINGS. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 10.8. EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be executed by the Borrower and the Lender and be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof are
executed on behalf of the Borrower and the Lender. This Agreement is made and
entered into for the sole protection and legal benefit of the Borrower, the
Lender, the Issuer and Persons indemnified hereunder, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
SECTION 10.9. GOVERNING LAW; ENTIRE AGREEMENT. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE MORTGAGES OR AS EXPRESSLY
PROVIDED IN ANY SUCH DOCUMENT) SHALL
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EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK. This Agreement, the Notes and the other Loan
Documents constitute the entire understanding among the parties hereto with
respect to the subject matter hereof and supersede any prior agreements,
written or oral, with respect thereto.
SECTION 10.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the Lender;
and
(b) the rights of sale, assignment and transfer of the Lender are
subject to SECTION 10.11.
SECTION 10.11. SALE AND TRANSFER OF LOANS AND NOTES; PARTICIPATIONS IN
LOANS AND NOTES. The Lender may assign, or sell participations in, its Loans and
Commitments to one or more other Persons in accordance with this SECTION 10.11.
SECTION 10.11.1. ASSIGNMENTS. The Lender may at any time assign and
delegate to one or more Persons, including without limitation, commercial banks
or other financial institutions (each Person to whom such assignment and
delegation is to be made, being hereinafter referred to as an "ASSIGNEE
LENDER"), all or any fraction of the Lender's total Loans and Commitments (which
assignment and delegation shall be of a constant, and not a varying, percentage
of all the Lender's Loans and Commitments) in a minimum aggregate amount of
$1,000,000 (or the entire remaining amount of the Lender's Loans and
Commitments); PROVIDED, HOWEVER, that the Lender is required at all times to
maintain Loans, Letter of Credit Outstandings and Commitments hereunder in an
aggregate amount of $1,000,000 (unless the Lender shall have reduced its Loans,
Letter of Credit Outstandings and Commitments to zero); PROVIDED, FURTHER,
HOWEVER, that the Borrower and each other Obligor shall be entitled to continue
to deal solely and directly with the Lender in connection with the interests so
assigned and delegated to an Assignee Lender until
(a) 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 Borrower
by the Lender and such Assignee Lender,
(b) such Assignee Lender shall have executed and delivered to
the Borrower and the Lender a Lender Assignment Notice, accepted by the
Lender, and
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(c) the processing fees described below shall have been paid.
From and after the date that the Assignee Lender delivers such Lender Assignment
Notice, (x) 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 Notice, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Notice, shall be
released from its obligations hereunder and under the other Loan Documents.
Within five (5) Business Days after its receipt of notice that the Lender has
received an executed Lender Assignment Notice and the Borrower has received from
the Lender execution copies of appropriate Notes, the Borrower shall execute and
deliver 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 (each such
Note to be in exchange for, but not in payment of, the corresponding Note then
held by such assignor Lender). The assignor Lender shall ▇▇▇▇ the predecessor
Note "exchanged" and deliver it to the Borrower. Accrued interest on that part
of the predecessor Note evidenced by the new Notes, and accrued fees, shall be
paid as provided in the Lender Assignment Notice. Accrued interest on that part
of the predecessor Note 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 to the
Lender upon delivery of any Lender Assignment Notice in the amount of $2,500.
Any attempted assignment and delegation not made in accordance with this SECTION
10.11.1 shall be null and void. Nothing contained in this Agreement shall
prohibit any Lender from pledging or assigning any Note to any Federal Reserve
Bank in accordance with Applicable Law.
SECTION 10.11.2. PARTICIPATIONS. The Lender may at any time sell to one
or more Persons, including without limitation, commercial banks or other
financial institutions (each of such Persons being herein called a
"PARTICIPANT") participating interests in any of the Loans, Commitments, or
other interests of the Lender hereunder; PROVIDED, HOWEVER, that
(a) no participation contemplated in this SECTION 10.11.2
shall relieve the Lender from its Commitments or its other obligations
hereunder or under any other Loan Document,
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(b) the Lender shall remain solely responsible for the
performance of its Commitments and such other obligations,
(c) the Borrower and each other Obligor shall continue to deal
solely and directly with the Lender in connection with the Lender's
rights and obligations under this Agreement and each of the other Loan
Documents, and
(d) the Borrower shall not be required to pay any amount under
SECTION 5.2 or SECTION 10.3 that is greater than the amount which it
would have been required to pay had no participating interest been
sold.
The Borrower acknowledges and agrees that each Participant, for purposes of
SECTIONS 5.1 and 5.2 (except as provided in SECTION 10.11.2(d)), 10.3 and 10.4,
shall be considered a Lender.
SECTION 10.11.3. MODIFICATIONS FOR OTHER LENDERS. In the event that the
Lender assigns an interest pursuant to this SECTION 10.11, the Lender and the
Borrower agree to enter into such modifications and amendments to this Agreement
and the other Loan Documents as are necessary or advisable to confirm that the
Lender shall act as agent for itself and the Assignee Lenders.
SECTION 10.12. FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE
BORROWER SHALL BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK
OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;
PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT THE LENDER'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. THE BORROWER
[AND THE LENDER EACH] HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. THE BORROWER FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE
BORROWER [AND THE LENDER EACH] HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY
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OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM
THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE
OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 10.13 WAIVER OF JURY TRIAL. THE LENDER AND THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE LENDER OR THE BORROWER. THE BORROWER ACKNOWLEDGES AND AGREES THAT
IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH
OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
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SECTION 10.14 NOTICE THIS WRITTEN AGREEMENT TOGETHER WITH THE OTHER
LOAN DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
ESENJAY EXPLORATION, INC.,
a Delaware corporation
By_______________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
Title: Senior Vice President
All notices should be sent to:
One ▇▇▇▇▇ Center
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
1100 CCNB Center South
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇ Branch
and/or Cayman Islands Branch
By:________________________________
Name:______________________________
Title:_____________________________
By:________________________________
Name:______________________________
Title:_____________________________
Address: ▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇ Branch
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
All notices should be sent to:
Deutsche Bank AG
c/o Deutsche Bank Securities Inc.
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇