1
EXHIBIT 10.12
POST-PETITION LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
PETSEC ENERGY INC.
AS BORROWER,
AND
THE FINANCIAL INSTITUTIONS NAMED HEREIN
AS THE LENDERS,
AND
FOOTHILL CAPITAL CORPORATION
AS AGENT
Dated as of June 20, 2000
2
TABLE OF CONTENTS
Page(s)
-------
1. DEFINITIONS AND CONSTRUCTION.............................................................................2
1.1 Definitions.....................................................................................2
1.2 Accounting Terms...............................................................................28
1.3 Code...........................................................................................28
1.4 Construction...................................................................................28
1.5 Schedules and Exhibits.........................................................................28
2. LOAN AND TERMS OF PAYMENT...............................................................................28
2.1 Revolving Advances.............................................................................28
2.2 Letter of Credit Subfacility...................................................................36
2.3 Hedging Arrangement Subfacility................................................................39
2.4 Payments.......................................................................................43
2.5 Overadvances...................................................................................44
2.6 Interest and Letter of Credit Fees: Rates, Payments, and Calculations.........................44
2.7 Collection of Proceeds of Collateral and Other Collections.....................................47
2.8 Crediting Payments; Application of Collections.................................................48
2.9 Designated Account.............................................................................48
2.10 Maintenance of Loan Account; Statements of Obligations.........................................48
2.11 Fees...........................................................................................49
2.12 Priority of All Advances, Letters of Credit and Hedging Agreement Undertakings.................50
3. CONDITIONS; TERM OF AGREEMENT...........................................................................50
3.1 Conditions Precedent to the Establishment of the DIP Facility..................................50
3.2 Conditions Precedent to all Advances, all Letters of Credit and all Hedging Undertakings.......51
3.3 Condition Subsequent...........................................................................52
3.4 Term...........................................................................................52
3.5 Effect of Termination..........................................................................53
3.6 Early Termination by Borrower..................................................................53
3.7 [Intentionally Omitted]........................................................................53
4. CREATION OF SECURITY INTEREST...........................................................................53
4.1 Grant of Security Interest.....................................................................53
4.2 Negotiable Collateral..........................................................................53
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral.........................53
4.4 Delivery of Additional Documentation Required..................................................54
4.5 Power of Attorney..............................................................................54
4.6 Right to Inspect...............................................................................54
4.7 Control Agreements.............................................................................55
4.8 Pre-Petition Liens.............................................................................55
4.9 California Field Properties....................................................................55
5. REPRESENTATIONS AND WARRANTIES..........................................................................55
i
3
5.1 No Encumbrances................................................................................55
5.2 Eligible Proved Reserves; Ownership of Oil and Gas Properties..................................56
5.3 Operations of Oil and Gas Properties...........................................................58
5.4 Equipment......................................................................................58
5.5 Location of Inventory and Equipment............................................................58
5.6 Oil and Gas Property Collateral Records and Inventory Records..................................58
5.7 Location of Chief Executive Office; FEIN.......................................................58
5.8 Due Organization and Qualification; Subsidiaries...............................................58
5.9 Due Authorization; No Conflict.................................................................59
5.10 Claims, Disputes, and Litigation...............................................................60
5.11 No Material Adverse Change.....................................................................60
5.12 No Fraudulent Transfer.........................................................................61
5.13 Employee Benefits..............................................................................61
5.14 Environmental Condition........................................................................61
5.15 Compliance with the Law........................................................................62
5.16 Insurance......................................................................................62
5.17 Hedging Agreement..............................................................................63
5.18 Brokerage Fees.................................................................................63
5.19 Permits and other Intellectual Property........................................................63
5.20 Year 2000 Compatibility........................................................................63
5.21 Cash Flow Forecast.............................................................................64
5.22 Absence of Certain Changes.....................................................................64
5.23 Operating Costs................................................................................64
5.24 [Intentionally Omitted]........................................................................64
5.25 No Default.....................................................................................64
5.26 Leases.........................................................................................64
5.27 Marketing Agreements...........................................................................64
5.28 [Intentionally Omitted]........................................................................65
5.29 Condition of Equipment.........................................................................65
5.30 ▇▇▇▇▇..........................................................................................65
5.31 No Vessels.....................................................................................65
5.32 Subordinated Debt..............................................................................65
6. AFFIRMATIVE COVENANTS...................................................................................66
6.1 Accounting System..............................................................................66
6.2 Collateral Reporting...........................................................................66
6.3 Financial Statements, Reports, Certificates....................................................68
6.4 Tax Returns....................................................................................70
6.5 Guarantor Reports..............................................................................70
6.6 [Intentionally Omitted]........................................................................70
6.7 Title to Equipment.............................................................................70
6.8 Maintenance of Oil and Gas Property Collateral and Equipment; Operation of Business...........70
6.9 Taxes..........................................................................................72
6.10 Insurance......................................................................................72
6.11 No Setoffs or Counterclaims....................................................................74
6.12 Location of Inventory and Equipment............................................................74
ii
4
6.13 Compliance with Laws...........................................................................74
6.14 Employee Benefits..............................................................................75
6.15 Leases.........................................................................................76
6.16 Broker Commissions.............................................................................76
6.17. Oil and Gas Property Title Information.........................................................76
6.18 Additional Collateral..........................................................................77
6.19 Hedging Agreements.............................................................................78
6.20 Further Assurances.............................................................................78
6.21 Financial Advisor..............................................................................78
6.22 Notice of Course of Action.....................................................................78
6.23 Delivery to Agent of Documentation regarding Any Proposed Sale of Assets.......................79
7. NEGATIVE COVENANTS......................................................................................79
7.1 Indebtedness...................................................................................79
7.2 Liens..........................................................................................80
7.3 Restrictions on Fundamental Changes............................................................80
7.4 Disposal of Assets.............................................................................81
7.5 Change Name....................................................................................81
7.6 Guarantee......................................................................................81
7.7 Nature of Business.............................................................................81
7.8 Prepayments and Amendments.....................................................................82
7.9 Change of Control..............................................................................82
7.10 Consignments...................................................................................82
7.11 Distributions; Repurchases of Capital Stock; Payments to PEL or Petsec USA.....................82
7.12 Accounting Methods.............................................................................82
7.13 Investments....................................................................................82
7.14 Transactions with Affiliates...................................................................82
7.15 Suspension.....................................................................................83
7.16 [Intentionally Omitted].......................................................................83
7.17 Use of Proceeds................................................................................83
7.18 Change in Location of Chief Executive Offices; Inventory and Equipment.........................83
7.19 No Prohibited Transactions Under ERISA.........................................................83
7.20 Operating Budget...............................................................................84
7.21 [Intentionally Omitted]........................................................................84
7.22 Securities Accounts............................................................................84
7.23 Gas Imbalances, Take-or-Pay or Other Prepayments...............................................85
7.24 Payments on the Parent Notes or the Unsecured Notes............................................85
7.25 Non-Consent Operations.........................................................................85
7.26 Waivers of Rights Relating to Oil and Gas Properties...........................................85
7.27 Contracts for Sale of Production...............................................................85
7.28 Filing and Form and Substance of DIP Orders, Motions, Pleadings and Applications...............85
7.29 Compliance with DIP Orders.....................................................................86
7.30 Consent to Amendment of DIP Orders.............................................................86
7.31 Other Court Filings and Applications...........................................................86
8. EVENTS OF DEFAULT.......................................................................................86
iii
5
9. THE LENDER GROUP'S RIGHTS AND REMEDIES..................................................................89
9.1 Rights and Remedies............................................................................89
9.2 Remedies Cumulative............................................................................91
10. TAXES AND EXPENSES......................................................................................92
11. WAIVERS; INDEMNIFICATION................................................................................92
11.1 Demand; Protest; etc...........................................................................92
11.2 The Lender Group's Liability for Collateral....................................................92
11.3 Indemnification................................................................................92
12. NOTICES.................................................................................................93
13. Choice Of Law And Venue; Jury Trial Waiver..............................................................94
14. DESTRUCTION OF BORROWER'S DOCUMENTS.....................................................................94
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS..............................................................94
15.1 Assignments and Participations.................................................................94
15.2 Successors.....................................................................................97
16. AMENDMENTS; WAIVERS.....................................................................................97
16.1 Amendments and Waivers.........................................................................97
16.2 No Waivers; Cumulative Remedies................................................................98
17. AGENT; THE LENDER GROUP.................................................................................98
17.1 Appointment and Authorization of Agent.........................................................98
17.2 Delegation of Duties...........................................................................99
17.3 Liability of Agent.............................................................................99
17.4 Reliance by Agent..............................................................................99
17.5 Notice of Default or Event of Default.........................................................100
17.6 Credit Decision...............................................................................100
17.7 Costs and Expenses; Indemnification...........................................................101
17.8 Agent in Individual Capacity..................................................................101
17.9 Successor Agent...............................................................................102
17.10 Withholding Tax...............................................................................102
17.11 Collateral Matters............................................................................103
17.12 Restrictions on Actions by Lenders; Sharing of Payments.......................................104
17.13 Agency for Perfection.........................................................................105
17.14 Payments by Agent to the Lenders..............................................................105
17.15 Concerning the Collateral and Related Loan Documents..........................................105
17.16 Field Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
Other Reports and Information.................................................................105
17.17 Several Obligations; No Liability.............................................................107
18. GENERAL PROVISIONS.....................................................................................107
18.1 Effectiveness.................................................................................107
18.2 Section Headings..............................................................................107
18.3 Interpretation................................................................................107
iv
6
18.4 Severability of Provisions....................................................................107
18.5 Amendments in Writing.........................................................................107
18.6 Counterparts; Telefacsimile Execution.........................................................108
18.7 Revival and Reinstatement of Obligations......................................................108
18.8 Integration...................................................................................108
18.9 Release.......................................................................................108
18.10 Lender Group Fees and Expenses................................................................109
v
7
SCHEDULES AND EXHIBITS
Schedule C-1 Commitments
Schedule P-1 Permitted Liens
Schedule 3.1(f) Certain Adverse Changes since January 12, 2000
Schedule 5.1(a) Certain Owned Oil and Gas Properties
Schedule 5.1(b) Working Interest/Net Revenue Interest/Operator
Schedule 5.1(c) Material Contract Rights & Obligations
Schedule 5.1(d) Non-Leasehold Asset Ownership
Schedule 5.1(e) Personal Property/Fixtures
Schedule 5.2(a) Outstanding Authorities For Expenditures/Non-Consent ▇▇▇▇▇
Schedule 5.2(e) Imbalances in Gas Production/"Take or Pay" Contracts
Schedule 5.2(h) Certain Additional Information Concerning Oil and Gas Properties
Schedule 5.8 Capital Stock/Subsidiaries
Schedule 5.10 Litigation
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Hazardous Materials
Schedule 5.16 Insurance
Schedule 5.17 Hedging Agreements
Schedule 5.19 Permits and Other Intellectual Property
Schedule 5.21 Cash Flow Forecast
Schedule 5.23 Operating Costs
Schedule 5.26 Potential Defaults Under Certain Oil and Gas Leases
Schedule 5.27 Certain Marketing Agreements
Schedule 6.12 Certain Additional Locations of Collateral
Schedule 7.1 Permitted Other Indebtedness
Exhibit A-1 Form of Agreement and Acceptance
Exhibit C-1 Form of Compliance Certificate
Exhibit T-1 Form of Transfer Order Letters
Exhibit 6.2 Form of Borrowing Base Certificate
vi
8
POST-PETITION LOAN AND SECURITY AGREEMENT
THIS POST-PETITION LOAN AND SECURITY AGREEMENT (this "Agreement"), is
entered into as of June 20, 2000, among the financial institutions listed on
the signature pages hereof (such financial institutions, together with their
respective successors and assigns, are referred to hereinafter each individually
as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION,
a California corporation, as agent for the Lenders ("Agent"), with a place of
business located at ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇; and PETSEC ENERGY INC., a Nevada corporation and a
Chapter 11 debtor-in-possession ("Borrower"), with its chief executive office
located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
RECITALS
A. Borrower, Lenders and Agent are parties to a certain Amended and
Restated Loan and Security Agreement, dated as of January 12, 2000 (the
"Pre-Petition Loan Agreement"), pursuant to which Lenders have purchased the
Indebtedness (as defined in the Pre-Petition Loan Agreement) of Borrower to the
Prior Lenders (as defined in the Pre-Petition Loan Agreement) described in the
Pre-Petition Loan Agreement, and Lenders have made revolving loans to Borrower,
and Agent has issued letters of credit for the account of Borrower and/or issued
guaranties of payment, indemnities, participations and undertakings with respect
to letters of credit issued by an issuing bank for the account of Borrower, and
Agent has issued guaranties of payment, indemnities, participations and/or
undertakings related to Hedging Agreements (as hereinafter defined)
(collectively, the "Pre-Petition Liabilities"). As security for the payment and
performance of Borrower's obligations under or in connection with the
Pre-Petition Loan Agreement and the Pre-Petition Liabilities, (i) Borrower
granted to Agent, for the benefit of Agent and Lenders, security interests in
and liens against substantially all of Borrower's property and (ii) Agent , for
the benefit of Agent and Lenders, was assigned by certain holders of existing
security interests in and liens against substantially all of Borrower's property
such security interests and liens against substantially all of Borrower's
property (such security interests and liens being hereinafter collectively
referred to as the "Pre-Petition Liens").
B. On April 13, 2000 (herein called the "Filing Date"), Borrower filed a
voluntary petition (herein called the "Petition") concerning its case (herein
called the "Chapter 11 Case") under Chapter 11 of the Bankruptcy Code (11 U.S.C.
101 et. seq. (herein called the "Bankruptcy Code") in the United States
Bankruptcy Court for the Western District of Louisiana Opelousas Division
(herein called the "Court").
C. Borrower is continuing to manage its business and properties as debtor
in possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code. No
trustee has been appointed in the Chapter 11 Case.
D. Borrower has requested that the Lender Group (as hereinafter defined)
make funds available to Borrower pursuant to Section 364(c)(1), (c)(2), (c)(3)
and (d) of the Bankruptcy Code
1
9
to the same extent and priority as the Pre-Petition Liens for such purposes as
are hereinafter described in this Agreement.
E. Borrower has been unable to obtain debtor in possession financing on an
unsecured basis or on terms as favorable or more favorable than the terms
provided herein, and an immediate need exists for the Borrower to obtain funds
to continue in the operation of its business.
F. To provide security for, and to assure the repayment of the Obligations
(as hereinafter defined), Borrower has agreed to provide to Agent, for the
benefit of the Lender Group, inter alia, security interests in and liens against
substantially all of Borrower's property and interests, whether real or
personal, tangible or intangible, on the terms and conditions set forth herein
and in accordance with Section 364 (c)(1), (c)(2), (c)(3) and (d) of the
Bankruptcy Code to the same extent and priority as the Pre-Petition Liens.
G. The Lender Group is willing to make funds available to Borrower for the
aforementioned purposes, subject to the terms and conditions set forth in this
Post-Petition Loan and Security Agreement as set forth in the DIP Orders (as
hereinafter defined) of the Court approving the proposed financing.
NOW, THEREFORE, in consideration of the premises herein contained and for
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
or any of its Subsidiaries arising out of the sale or lease of goods,
Hydrocarbons or Oil and Gas Properties or the rendition of services by Borrower
or any of its Subsidiaries, irrespective of whether earned by performance, and
any and all credit insurance, guaranties, or security therefor.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other Person who
directly or indirectly controls, is controlled by, is under common control with
or is a director or officer of such Person. For purposes of this definition,
"control" means the possession, directly or indirectly, of the power to vote 5%
or more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a Person.
2
10
"Agent" means Foothill, solely in its capacity as agent for the
Lenders, and shall include any successor agent.
"Agent Account" means an account at a bank designated by Agent
from time to time as the account into which Borrower shall make all payments to
Agent for the benefit of the Lender Group, and into which the Lender Group shall
make all payments to Agent, under this Agreement and the other Loan Documents.
Initially, unless and until Agent notifies Borrower and the Lender Group to the
contrary, the Agent Account shall be that certain deposit account bearing
account number 323-266193 and maintained by Agent with The Chase Manhattan Bank,
N.A., 4 New York Plaza, 15th Floor, New York, New York 10004, ABA #▇▇▇-▇▇▇-▇▇▇.
"Agent Advances" has the meaning set forth in Section 2.1(g).
"Agent's Liens" has the meaning set forth in Section 4.1.
"Agent-Related Persons" means Agent and any successor agent,
together with their respective Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of such Persons and their
Affiliates.
"Agreement" has the meaning set forth in the preamble hereto.
"Arranging Institution" has the meaning set forth in Section
2.3(a).
"Assignee" has the meaning set forth in Section 15.1.
"Assignment and Acceptance" has the meaning set forth in Section
15.1 and shall be in the form of Exhibit A-1 attached hereto.
"Australian Dollars" or the sign "AUS$" means dollars which are
lawful money of the country of Australia.
"Authorized Person" means any officer or other employee of
Borrower.
"Availability" means the amount that Borrower is entitled to
borrow as Advances under Section 2.1, such amount being the difference derived
when (a) the sum of the principal amount of Advances (including Agent Advances
and Foothill Loans) then outstanding (including any amounts that the Lender
Group may have paid for the account of Borrower pursuant to any of the Loan
Documents and that have not been reimbursed by Borrower) is subtracted from (b)
the lesser of (i) the Maximum Revolving Amount less the aggregate amount of all
Letter of Credit/Hedging Arrangement Usage, or (ii) the Borrowing Base less (A)
the aggregate amount of all Letter of Credit/Hedging Arrangement Usage, less (B)
the aggregate amount of the Reserves Against Availability.
If the Revolving Facility Usage is equal to or greater than the lesser of the
Borrowing Base or, the Maximum Revolving Amount, then the Availability is zero
(-0-).
3
11
"Average Unused Portion of Maximum Revolving Amount" means, as
of any date of determination, (a) the Maximum Revolving Amount, less (b) the sum
of (i) the average Daily Balance of Advances that were outstanding during the
immediately preceding month, plus (ii) the average Daily Balance of the Letter
of Credit/Hedging Arrangement Usage during the immediately preceding month.
"Avoidance Claim" means any claim that could be asserted by or
on behalf of Borrower or the Estate in Borrower's Chapter 11 Case against a
Person under 11 U.S.C. Sections 544, 546, 547, 548, 549, 550 or 553.
"Bankruptcy Code" has the meaning set forth in the recitals to
this Agreement.
"Benefit Plan" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"Books" means all of Borrower's and its Subsidiaries' books and
records including: ledgers; records indicating, summarizing, or evidencing
Borrower's and its Subsidiaries' properties or assets (including the Collateral)
or liabilities, including but not limited to well logs and seismographic
reports; all information relating to Borrower's and its Subsidiaries' business
operations or financial condition; and all computer programs, disk or tape
files, printouts, runs, or other computer prepared information.
"Borrower" has the meaning set forth in the recitals to this
Agreement.
"Borrowing" means a borrowing hereunder consisting of Advances
made on the same day by the Lenders to a Borrower, or by Foothill in the case of
a Foothill Loan, or by Agent in the case of an Agent Advance.
"Borrowing Base" has the meaning set forth in Section 2.1(a).
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"Change of Control" shall be deemed to have occurred at such
time as (a) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly
or indirectly, of more than 30% of the total voting power of all classes of
stock then outstanding of PEL entitled to vote in the election of directors or
(b) a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934) other than PEL becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934),
directly or indirectly, of any voting power of any class of stock then
outstanding of Petsec USA entitled to vote in the election of directors or (c) a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities
4
12
Exchange Act of 1934) other than Petsec USA becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of any voting power of any class of stock then outstanding of
Borrower entitled to vote in the election of directors or (d) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) other than Borrower becomes a "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of any voting power of any class of stock then outstanding of any
Subsidiary of Borrower entitled to vote in the election of directors.
"California Field Properties" means the Mineral Interests of
Borrower in Buckeye and ▇▇▇▇ Field, Calusa County California and in the ▇▇▇▇▇
1-1 well located in Yolo County, California.
"Chapter 11 Case" has the meaning set forth in the recitals to
this Agreement.
"Closing Date" means the date of execution of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means all of Borrower's right, title, and interest
in and to each of the following, whether or not the following was existing or
acquired by Borrower prior to or after the Filing Date:
(a) the Accounts,
(b) the Books,
(c) the Equipment,
(d) the General Intangibles (other than (i) the Hedging
Agreements that by their express terms prohibit the grant of a security interest
therein by Borrower or give the other parties thereto the right to terminate the
same upon the grant of a security interest therein by Borrower (but not the
general intangibles for money due or to become due thereunder), and (ii) the
Excluded Seismic License Rights),
(e) the Inventory,
(f) the Investment Property,
(g) the Negotiable Collateral,
(h) the Oil and Gas Properties,
(i) the Real Property;
5
13
(j) any money, or other assets of Borrower that now or hereafter
come into the possession, custody, or control of any member of the Lender Group,
and
(k) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any or all of
the Collateral, and any and all Accounts, Books, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, Real Property, Oil and
Gas Properties, money, deposit accounts, or other tangible or intangible
property resulting from the sale, exchange, collection, or other disposition of
any of the foregoing, or any portion thereof or interest therein, and the
proceeds thereof.
In no event shall the term "Collateral" include any Avoidance
Claim or the proceeds of any Avoidance Claim.
"Collateral Access Agreement" means a landlord waiver or
consent, mortgagee waiver or consent, bailee letter, or a similar
acknowledgement agreement of any warehouseman, processor, lessor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the Equipment, Inventory, or Oil and Gas Properties, in each case, in form
and substance satisfactory to Agent.
"Collections" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"Commitment" means, at any time with respect to a Lender, the
principal amount set forth beside such Lender's name under the heading
"Commitment" on Schedule C-1 attached hereto or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 15.1, as such Commitment
may be adjusted from time to time in accordance with the provisions of Section
15.1, and "Commitments" means, collectively, the aggregate amount of the
commitments of all of the Lenders.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit C-1 and delivered by the chief accounting officer of
Borrower to Agent.
"Consolidated Net Income" shall mean with respect to Borrower
and its Subsidiaries, for any period, the aggregate of the net income (or loss)
of Borrower and its Subsidiaries after allowances for taxes for such period,
determined on a consolidated basis in accordance with GAAP; provided that there
shall be excluded from such net income (to the extent otherwise included
therein) the following: (i) the net income of any Person in which Borrower or
any of its Subsidiaries has an interest (which interest does not cause the net
income of such other Person to be consolidated with the net income of Borrower
and its Subsidiaries in accordance with GAAP), except to the extent of the
amount of dividends or distributions actually paid in such period by such other
Person to Borrower or to any of its Subsidiaries, as the case may be; (ii) the
net income (but not loss) of any of Borrower's Subsidiaries to the extent that
the declaration or payment of dividends or similar distributions or transfers or
loans by that Subsidiary is not at the time permitted by operation of the terms
of its charter or any agreement, instrument or Legal Requirement applicable to
such Subsidiary, or is otherwise restricted or prohibited in each case
6
14
determined in accordance with GAAP; (iii) the net income (or loss) of any Person
acquired in a pooling-of-interests transaction for any period prior to the date
of such transaction; (iv) any extraordinary gains, including gains attributable
to Property sales not in the ordinary course of business; (v) the cumulative
effect of a change in accounting principles and any gains or losses attributable
to writeups or writedowns of assets; and (vi) any writedowns of non-current
assets, provided however, that any ceiling limitation writedowns under SEC
guidelines shall be treated as capitalized costs, as if such writedowns had not
occurred.
"Control Agreement" means a control agreement, in form and
substance reasonably satisfactory to Agent, between Borrower, Agent, and the
applicable securities intermediary with respect to the applicable Securities
Account and related Investment Property.
"Court" has the meaning set forth in the recitals to this
Agreement.
"Daily Balance" means the amount of an Obligation owed at the
end of a given day.
"Default" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"Defaulting Lender" means any Lender that fails to make any
Advance that it is required to make hereunder on any Funding Date and that has
not cured such failure by making such Advance within one (1) Business Day after
written demand upon it by Agent to do so.
"Defaulting Lenders Rate" means the Reference Rate for the first
three (3) days from and after the date the relevant payment is due and,
thereafter, at the interest rate then applicable to Advances.
"Defensible Title" means as to the Mineral Interests, such title
held by Borrower that (i) is free from reasonable doubt to the end that a
prudent purchaser engaged in the business of the ownership, development and
operation of producing oil and gas properties, with knowledge of all of the
facts and their legal bearing, would be willing to accept and pay full value
therefor; (ii) is deducible of record from the records of the applicable parish
or county, or, in the case of federal leases, from the records of the applicable
office of the Bureau of Lands Management or Minerals Management Service, or, in
the case of state leases, from the applicable records of the applicable state
land office; (iii) entitle Borrower to receive not less than the "Net Revenue
Interest" set forth in Schedule 5.1(b) with respect to each Mineral Interest
owned by Borrower as of the date of this Agreement, and not less than the "Net
Revenue Interest" set forth in the most recent Reserve Report with respect to
each Mineral Interest acquired by Borrower after the date of this Agreement, in
each case, without reduction, suspension or termination throughout the
productive life of such Mineral Interest; (iv) obligates Borrower to bear costs
and expenses relating to operations on and the maintenance and development of
each Mineral Interest in an amount not greater than the "Working Interest" set
forth in Schedule 5.1(b) with respect to each Mineral Interest owned by Borrower
as of the date of this Agreement, and not greater than the "Working Interest"
set forth in the most recent Reserve Report with respect to each Mineral
7
15
Interest acquired by Borrower after the date of this Agreement (except to the
extent that Borrower is obligated under an Operating Agreement to assume a
portion of a defaulting or non-consenting party's share of costs), in each case
without increase for the respective productive life of such Mineral Interest;
and (v) is free and clear of Liens and material encumbrances and defects, except
for Permitted Liens.
"Designated Account" means account number ▇▇▇-▇-▇▇▇▇▇▇ of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Agent.
"Designated Account Bank" means The Chase Manhattan Bank, N.A.,
whose office is located at 4 Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, and whose ABA number is ▇▇▇▇▇▇▇▇▇.
"DIP Facility" means the credit facilities established by the
Lender Group in favor of the Borrower pursuant to Section 2 hereof.
"DIP Loan Documents" means this Agreement, the Disbursement
Letter, the Letters of Credit, the Lockbox Agreements, the Oil and Gas Property
Mortgages, the Real Property Mortgages, the Guaranty Agreements, the Security
Agreements, the Subordination Agreements, any note or notes executed by Borrower
and payable to the Lender Group, and any other agreement entered into, now or in
the future, in connection with this Agreement.
"DIP Orders" means the Interim Financing Order and the Permanent
or Final Financing Order entered by the Court or any other court of competent
jurisdiction.
"Disbursement Letter" means an instructional letter executed and
delivered by Borrower to Agent regarding the extensions of credit to be made on
the Closing Date, the form and substance of which shall be satisfactory to
Agent.
"Dollars" or the sign "$" means dollars which are lawful money
of the United States of America.
"EBITDA" shall mean, for any period, the sum, determined
(without duplication) for Borrower and its Subsidiaries, of (i) Consolidated Net
Income of Borrower and its Subsidiaries plus (ii) Interest Expense of Borrower
and its Subsidiaries for such period to the extent deducted in the determination
of Consolidated Net Income of Borrower and its Subsidiaries for such period plus
(iii) depreciation, amortization and other similar non-cash items (with the
exception of non-cash charges that require an accrual or reserve for cash
charges for any future period and normally recurring accruals) to the extent
deducted in the determination of Consolidated Net Income of Borrower and its
Subsidiaries for such period plus (iv) all taxes accrued for such period on or
measured by income to the extent deducted in the determination of Consolidated
Net Income of Borrower and its Subsidiaries for such period.
8
16
"Eligible Proved Developed Non-Producing Reserves" means
Eligible Proved Reserves of Borrower consisting of Proved Developed
Non-Producing Reserves.
"Eligible Proved Developed Producing Reserves" means Eligible
Proved Reserves consisting of Proved Developed Producing Reserves.
"Eligible Proved Reserves" means the NYMEX Value of Proved
Reserves consisting of Mineral Interests of Borrower that: (i) are subject to a
duly executed and recorded Oil and Gas Property Mortgage that creates a
perfected lien in such Mineral Interest which is of first priority subject only
to Permitted Liens; (ii) either are identified on Schedule 5.1(a) or constitute
Qualified Subsequent Oil and Gas Property; (iii) strictly comply with each and
all of the representations and warranties made by Borrower to Agent in the Loan
Documents; and (iv) are and at all times continue to be acceptable to Agent in
all respects; provided, however, the standards of eligibility may be fixed and
revised from time to time by Agent in Agent's credit judgment. In determining
the amount to be so included, Eligible Proved Reserves shall be valued based
upon the NYMEX Value of such Proved Reserves as of the date of determination of
Eligible Proved Reserves, with such adjustments as Agent may deem appropriate in
its sole discretion. An item of Proved Reserves shall not be included in
Eligible Proved Reserves if:
(a) it is not owned solely by Borrower or Borrower does not have
either good, valid, and marketable title thereto or Defensible Title thereto
acceptable to Agent, or the title information relating thereto is not
satisfactory to Agent (without limiting the foregoing, it is understood and
agreed by Borrower that no Mineral Interests of Borrower located in the Federal
Outer Continental Shelf shall be included in Eligible Proved Reserves prior to
the time that Borrower's Mineral Interest therein and Borrower's acquisition
thereof shall have been approved in writing by the MMS and evidence of the same
satisfactory to Agent shall have been received by Agent);
(b) it is not subject to a valid and perfected first priority
Lien and security interest in favor of Agent for the benefit of the Lender Group
created by a duly recorded Oil and Gas Property Mortgage, except for Permitted
Liens with respect to which Agent has established a Reserve Against Availability
in the full amount (or such other amount as may be determined by Agent in its
sole discretion) that any holders of the Permitted Liens could assert from time
to time thereunder (whether upon the passage of time, the satisfaction of
conditions, or otherwise); or
(c) it is subject to a Lien in favor of any third Person or any
order, judgment, writ or decree, which either restricts or purports to restrict
Borrower or any of its Subsidiaries' ability to grant Liens to other Persons on
or in respect of its respective assets or properties.
"Eligible Proved Undeveloped Reserves" means Eligible Proved
Reserves consisting of Proved Undeveloped Reserves.
"Eligible Transferee" means: (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $150,000,000; (b) a commercial bank organized under the laws
of any other country which is a member of the
9
17
Organization for Economic Cooperation and Development or a political subdivision
of any such country, and having total assets in excess of $150,000,000; provided
that such bank is acting through a branch or agency located in the United
States; (c) a finance company, insurance company or other financial institution
or fund that is engaged in making, purchasing or otherwise investing in
commercial loans in the ordinary course of its business and having total assets
in excess of $100,000,000; (d) any Affiliate (other than individuals) of, or any
fund, money market account, investment account or other account managed by, a
pre-existing Lender under this Agreement; (e) so long as no Event of Default has
occurred and is continuing, any other Person approved by Agent and Borrower; and
(f) during the continuation of an Event of Default, any other Person approved by
Agent.
"Environmental Laws" shall mean any and all Legal Requirements
pertaining to health or the environment in effect in any and all jurisdictions
in which the Borrower or any Subsidiary is conducting or at any time has
conducted business, or where any Property of the Borrower or any Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The term "oil" shall
have the meaning specified in OPA, the term "release" (or "threatened release")
has the meaning specified in CERCLA, and the terms "solid waste" and "disposal"
(or "disposed") have the meanings specified in RCRA; provided, however, that (i)
in the event either OPA, CERCLA or RCRA is amended so as to broaden the meaning
of any term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment, and (ii) to the extent the laws of the state
in which any Property of the Borrower or any Subsidiary is located establish a
meaning for "oil," "release," "solid waste" or "disposal" which is broader than
that specified in either OPA, CERCLA or RCRA, such broader meaning shall apply.
"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, drillsite equipment (including separators, dehydrators, meters, etc.),
compressors, gathering lines, pipelines, vehicles (including motor vehicles and
trailers), tools, parts, and other goods (other than consumer goods, farm
products, or Inventory), wherever located, including, (a) any interest of
Borrower in any of the foregoing, and (b) all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor statutes,
and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as
10
18
employed by the same employer as the employees of Borrower under IRC Section
414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the
IRC, any organization subject to ERISA that is a member of an affiliated service
group of which Borrower is a member under IRC Section 414(m), or (d) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any party subject
to ERISA that is a party to an arrangement with Borrower and whose employees are
aggregated with the employees of Borrower under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of Borrower, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, or (g) providing any security to any Plan under Section
401(a)(29) of the IRC by Borrower or its Subsidiaries or any of their ERISA
Affiliates.
"Estate" means the bankruptcy estate created in the Chapter 11
Case pursuant to 11 U.S.C. Section 541(a).
"Event of Default" has the meaning set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and any successor statute thereto.
"Excluded Seismic License Rights" means only Borrower's licensee
rights to use seismic and geophysical data under Borrower's seismic and
geophysical license agreements which by their terms expressly prohibit the grant
of a security interest therein by Borrower or give the other party thereto a
right to terminate the same upon the grant of such a security interest by
Borrower.
"FEIN" means Federal Employer Identification Number.
"Filing Date" has the meaning set forth in the recitals to this
Agreement.
"Foothill" means Foothill Capital Corporation, a California
corporation.
"Foothill Loans" has the meaning set forth in Section 2.1(f).
"Funding Date" means the date on which a Borrowing occurs.
11
19
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and future
general intangibles and other personal property (including contract rights,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, Permits, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods, Accounts, and Negotiable Collateral.
"Governing Documents" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational or
governing documents of such Person.
"Governmental Authority" means any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through Stock or capital ownership or otherwise, by any of the
foregoing.
"Guaranty Agreements" means, collectively, any and all of the
guaranty agreements with respect to the Obligations which are, or are to be,
executed by a Guarantor in favor of Agent for the benefit of the Lender Group,
as required from time to time by Agent, in form and substance satisfactory to
Agent, in each case as the same may be amended, modified, restated,
supplemented, increased, renewed, extended, substituted for or replaced from
time to time.
"Guarantor" means each Subsidiary of Borrower not a signatory to
this Agreement, and each other Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations.
"Hazardous Materials" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "hazardous materials," "hazardous
wastes," "toxic substances," or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity", (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
12
20
"Hedging Agreements" shall mean any swap agreement, cap, floor,
collar, exchange transaction, forward agreement or other exchange or protection
agreement relating to Hydrocarbons or any option with respect to any such
transaction.
"Hedging Agreement Undertaking" has the meaning set forth in
Section 2.3.
"Hedging Arrangements Usage" means the sum of (a) the amount
determined by Agent from time to time as Agent's reasonable good faith estimate
of the aggregate liability (contingent or otherwise) of the Lender Group with
respect to Hedging Agreements which are the subject of Hedging Agreement
Undertakings which are part of the DIP Facility plus (b) the amounts of
unreimbursed payments made by the Lender Group with respect to Hedging Agreement
Undertakings which are the subject of Hedging Agreement Undertakings which are
part of the DIP Facility.
"Hydrocarbons" shall mean oil, natural gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all constituents, elements or compounds thereof and products
refined or separated therefrom.
"Indebtedness" means: (a) all obligations of Borrower or any of
its Subsidiaries for borrowed money, (b) all obligations of Borrower or any of
its Subsidiaries evidenced by bonds, debentures, notes, or other similar
instruments and all reimbursement or other obligations of Borrower or any of its
Subsidiaries in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations of Borrower or any of
its Subsidiaries under capital leases, (d) all obligations or liabilities of
others secured by a Lien on any property or asset of Borrower or any of its
Subsidiaries, irrespective of whether such obligation or liability is assumed,
(e) any obligation of Borrower or any of its Subsidiaries guaranteeing or
intended to guarantee (whether guaranteed, endorsed, co-made, discounted, or
sold with recourse to Borrower or any of its Subsidiaries) any indebtedness,
lease, dividend, letter of credit, or other obligation of any other Person other
than the endorsement of checks for deposit in the ordinary course of business,
(f) the net ▇▇▇▇ to market value of all obligations of Borrower or any of its
Subsidiaries under any Hedging Agreements and any Hedging Agreement Undertaking,
(g) all obligations of Borrower or any of its Subsidiaries to deliver goods or
services including Hydrocarbons in consideration of advance payments, (h) the
undischarged balance of any production payment, and (i) the undischarged balance
of any net profits interest or overriding royalty interest created by Borrower
or any of its Subsidiaries in favor of the grantee of such interest for the
creation of which Borrower or any of its Subsidiaries directly or indirectly
received advance payment of money from such grantee or any of its Affiliates
(and not including net profits interests and overriding royalty interests
created by Borrower in the ordinary course of business of Borrower and not in
connection with the advance payment of money to Borrower or its Subsidiaries or
Affiliates by the grantee of such interest or any of its Affiliates).
"Indemnified Liabilities" has the meaning set forth in Section
11.3.
"Indemnified Person" has the meaning set forth in Section 11.3.
13
21
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law, assignments for the benefit of creditors, formal
or informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief.
"Intangible Assets" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"Intellectual Property" has the meaning ascribed thereto in
Section 5.19.
"Interest Expense" shall mean, for any period, the sum
(determined without duplication) of the aggregate amount of interest expense
accruing during such period on Indebtedness of Borrower and its Subsidiaries,
including the interest portion of payments under capitalized leases and any
capitalized interest, but excluding amortization of debt discount and expense.
"Interim Financing Order" means the order entered by the Court
pursuant to Section 364(c) and (d) of the Bankruptcy Code to the same extent and
priority as Lender Group's pre-petition liens and Bankruptcy Rule 4001(c)
authorizing Borrower to incur post-petition secured and super-priority
indebtedness under the DIP Facility in accordance with this Agreement on an
interim basis, granting Agent, for the benefit of the Lender Group, a right to
the proceeds from all Collateral in accordance with this Agreement, providing
for the immediate payoff in full of all the Pre-Petition Debt, providing that
all Letters of Credit existing on the Filing Date are to be part of the DIP
Facility and that the reimbursement obligations, indemnification obligations,
and other liabilities of Borrower in connection therewith constitute
"Obligations" under this Agreement, and providing that all the Pre-Petition
Liens secure payment of the Obligations with such Pre-Petition Liens to
constitute first, priority perfected Liens subject only to Liens that were
senior to the Pre-Petition Liens on the Filing Date or to such other Liens, if
any, made senior Post-Petition pursuant to the Interim Financing Order, and
providing for the ratification of the Pre-Petition Loan Documents to the extent
necessary to effectuate the foregoing.
"Inventory" means all present and future inventory in which
Borrower or any of its Subsidiaries has any interest, including goods and
extracted Hydrocarbons held for sale or lease or to be furnished under a
contract of service and all of Borrower's present and future raw materials, work
in process, finished goods, and packing and shipping materials, wherever
located.
"Investment Property" means all of Borrower's present and
hereafter acquired "investment property" as that term is defined in Section
9-115 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
14
22
"Legal Requirements" means all applicable international,
foreign, federal, state, and local laws, judgments, decrees, orders, statutes,
ordinances, rules, regulations, or Permits, including, without limitation, all
Environmental Laws.
"Lender" and "Lenders" have the respective meanings set forth in
the preamble to this Agreement, and shall include any other Person made a party
to this Agreement in accordance with the provisions of Section 15.1 hereof.
"Lender Group" means, individually and collectively, each of the
individual Lenders and Agent.
"Lender Group Expenses" means all: costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower under any of the
DIP Loan Documents that are paid or incurred by the Lender Group; fees or
charges paid or incurred by the Lender Group in connection with the Lender
Group's transactions with Borrower, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation, and UCC (or equivalent) searches and including
searches with the patent and trademark office, the copyright office, or the
department of motor vehicles), filing, recording, publication, appraisal
(including periodic Oil and Gas Property Collateral appraisals and engineer
reports in an amount not to exceed that set forth in Section 2.11(d)), Reserve
Reports and environmental audits; costs and expenses incurred by Agent in the
disbursement of funds to Borrower (by wire transfer or otherwise); charges paid
or incurred by Agent resulting from the dishonor of checks; costs and expenses
paid or incurred by the Lender Group to correct any default or enforce any
provision of the DIP Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated; costs and expenses paid or incurred by Agent in
examining the Books; costs and expenses of third party claims or any other suit
paid or incurred by the Lender Group in enforcing or defending the DIP Loan
Documents or in connection with the transactions contemplated by the DIP Loan
Documents or the Lender Group's relationship with Borrower (or any of its
Subsidiaries party to one or more DIP Loan Documents); and the Lender Group's
reasonable attorneys fees and expenses and the reasonable fees and expenses of
all other professionals employed by or on behalf of the Lender Group which are
incurred in advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or the Chapter 11 Case),
defending, or concerning the DIP Loan Documents, irrespective of whether suit is
brought.
"Lender-Related Persons" means, with respect to any Lender, such
Lender, together with such Lender's Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of such Lender and such
Lender's Affiliates.
"Letter of Credit" means an L/C or an L/C Guaranty, as the
context requires.
15
23
"Letter of Credit/Hedging Arrangements Usage" means the sum of
(a) Letter of Credit Usage, plus (b) Hedging Arrangements Usage.
"Letter of Credit Usage" means the sum of (a) the undrawn amount
of uncancelled Letters of Credit, which are part of the DIP Facility (including
any Rollover Letters of Credit) plus (b) the amount of unreimbursed drawings
under Letters of Credit which are part of the DIP Facility (including any
Rollover Letters of Credit), minus (c) the aggregate amount of cash collateral
securing outstanding Letters of Credit which are part of the DIP Facility
(including any Rollover Letters of Credit) pursuant to Section 2.2(e).
"Lien" means any interest in Property securing an obligation
owed to, or a claim by, any Person other than the owner of the Property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest shall be recorded or perfected, and whether such interest shall be
contingent upon the occurrence of some future event or events or the existence
of some future circumstance or circumstances, including (a) the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement, adverse
claim or charge, conditional sale or trust receipt, or from a lease,
consignment, or bailment for security purposes and also including reservations,
exceptions, encroachments, easements, rights-of-way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting Oil
and Gas Property or Real Property and (b) production payments, overriding
royalty interests, net profits interests and the like payable out of Oil and Gas
Property. For purposes of this Agreement, Borrower or any of its Subsidiaries
shall be deemed to be the owner of any Property which it has acquired or holds
subject to a conditional sale agreement, or leases under a financing lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person in a transaction intended to create financing.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Party" means Borrower and each Guarantor.
"Lockbox Account" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means Lockbox Operating Procedural
Agreements and those certain Depository Account Agreements, in form and
substance satisfactory to Agent, each of which is among Borrower, Agent, and one
of the Lockbox Banks.
"Lockbox Banks" means such banks as may be agreed to by Borrower
and Foothill from time to time.
"Lockboxes" has the meaning set forth in Section 2.7.
"Material Adverse Change" means (a) a material adverse change
occurring on or after January 12, 2000 in the business, prospects, operations,
results of operations, assets, liabilities or condition (financial or otherwise)
of Borrower, (b) a material adverse effect on the
16
24
ability of Borrower to carry out its business as at the Closing Date or as
proposed as of the Closing Date, (c) the material impairment of Borrower's
ability to perform its obligations under the Loan Documents to which it is a
party or of the Lender Group to enforce the Obligations or realize upon the
Collateral, (d) any event or circumstance that in the credit judgment of the
Agent is likely to have a material adverse effect on the value of the Collateral
or the amount that the Lender Group would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of the Collateral, or (e) a material impairment of the priority of the Agent's
Liens with respect to the Collateral. Notwithstanding the foregoing, the
commencement of the Chapter 11 Case shall not be a "Material Adverse Change".
"Material Contract" means, as to any Person, any supply,
purchase, service, employment, tax, indemnity, farmout, gas marketing, gas
imbalance, operating, unitization, communitization, partnership, joint venture
or other agreement of such Person or any of its Subsidiaries or by which such
Person or any of its Subsidiaries or any of their respective properties are
otherwise bound, which is material to the business, operations or properties of
such Person, as the same shall be amended, modified and supplemented and in
effect from time to time.
"Maturity Date" has the meaning set forth in Section 3.4.
"Maximum Revolving Amount" means $30,000,000.
"Mineral Interests" shall mean all right, title, interest and
estates now owned or hereafter acquired in and to oil and gas leases, oil, gas
and mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved interests, reversionary
interests, carried working interests, or residual interests of whatever nature.
"MMS" means the Minerals Management Service of the United States
Department of the Interior.
"Monthly Fees and Expenses" has the meaning set forth in Section
18.10.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any
successor thereto.
"Multiemployer Plan" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or any
ERISA Affiliate has contributed, or was obligated to contribute, within the past
six years.
"Negotiable Collateral" means all of a Person's present and
future letters of credit, notes, drafts, instruments, Investment Property,
documents, personal property leases (wherein such Person is the lessor), chattel
paper, and the Books relating to any of the foregoing.
"NYMEX Price" means, as of the date of the determination
thereof, the average of the 24 succeeding monthly futures contract prices,
commencing with the month during which the determination is to be made, for each
of the appropriate crude oil or natural gas
17
25
categories included in the most recent Reserve Report provided by Borrower to
Agent pursuant to Section 6.2, as applicable, as quoted on the New York
Mercantile Exchange ("NYMEX"), or, if the NYMEX no longer provides futures
contract price quotes for 24 month periods, the longest period of quotes of less
than 24 months shall be used, and, if the NYMEX no longer provides such futures
contract quotes or has ceased to operate, the Agent shall designate another
nationally recognized commodities exchange to replace the NYMEX.
"NYMEX Value" means, at any date of determination thereof as to
any Proved Reserves of Borrower, the result of
(a) the discounted present value of future net revenues
(i.e., after deducting production and ad valorem taxes and less future capital
costs and operating expenses) from Proved Reserves of Borrower as of such date
utilizing the NYMEX Price for the appropriate category of oil or gas as quoted
in a nationally recognized publication for such pricing as selected as of such
date by Agent and assuming that production costs thereafter remain constant,
then discounted at a rate of 10% per year to obtain the present value; minus
(b) to the extent not taken into account in subparagraph
(a) above, the discounted present value (discounted at a rate of 10% per year)
of Borrower's future plugging and abandonment expenses; minus
(c) to the extent not taken into account in subparagraph
(a) above, minority interests and other interests of Persons other than Borrower
and any natural gas balancing liabilities of Borrower.
"Obligations" means all loans, Advances, debts, principal,
interest contingent reimbursement obligations under any outstanding Letters of
Credit (including, without limitation, the Rollover Letters of Credit, the
intent of the parties being that all Letters of Credit issued in connection with
the Pre-Petition Loan Agreement existing on the Filing Date are to be part of
the DIP Facility and all reimbursement obligations, indemnification obligations
and other liabilities of Borrower in connection therewith shall be "Obligations"
for the purpose of this Agreement), premiums, liabilities (including all amounts
charged to Borrower's Loan Account pursuant hereto), obligations, fees, charges,
costs, or Lender Group Expenses, lease payments, guaranties, covenants, and
duties owing by Borrower to the Lender Group of any kind and description arising
pursuant to or evidenced by the DIP Loan Documents or otherwise incurred after
the Filing Date, whether direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising, and
including any debt, liability, or obligation owing from Borrower to others that
the Lender Group may have obtained by assignment or otherwise, any debt,
liability, or obligation owing to Agent or any Lender arising from any Hedging
Agreements under which Agent or any Lender is a counterparty or any Hedging
Agreement Undertaking, and further including all interest not paid when due and
all Lender Group Expenses that Borrower is required to pay or reimburse by the
DIP Loan Documents, by law, or otherwise.
18
26
"Oil and Gas Properties" means all of the present and future
right, title and interest (real, personal, mixed, contractual or otherwise) of
Borrower and its Subsidiaries in, to and under or derived from the following:
(a) All presently existing and hereafter arising Mineral
Interests and surface interests;
(b) All presently existing and hereafter arising unitization,
communitization and pooling declarations, orders, and agreements
(including all units formed by voluntary agreement and those formed
under the rules, regulations, orders or other official acts of any
governmental entity or tribal authority having appropriate
jurisdiction);
(c) All presently existing and arising oil sales contracts,
casinghead gas sales contracts, gas sales contracts, processing
contracts, gathering contracts, transportation contracts, easements,
rights-of-way, servitudes, surface leases, subsurface leases,
farm-out contracts, farm-in contracts, operating agreements, areas of
mutual interest and other contracts, agreements and instruments;
(d) All presently existing and hereafter arising personal
property, improvements, fixtures, ▇▇▇▇▇ (whether producing, plugged
and abandoned, shut-in, injection, disposal or water supply), tanks,
boilers, buildings, machinery, vehicles, Equipment, gathering lines,
pipelines, utility lines, power lines, telephone lines, water rights,
roads, permits, licenses and other appurtenances, to the extent the
same are situated upon and used or held for use by Borrower or any of
its Subsidiaries in connection with the ownership, operation,
maintenance or repair of the Mineral Interests and/or surface
interests; and
(e) All reservoir, reserve, seismic, geologic or geophysical
information and data.
"Oil and Gas Property Collateral" means the Oil and Gas
Properties which are identified on Schedule 5.1(a) or Schedule 5.1(b), and any
other Oil and Gas Properties now owned or hereafter acquired by Borrower or any
of its Subsidiaries.
"Oil and Gas Property Mortgages" means one or more mortgages,
deeds of trust, or deeds to secure debt, executed by Borrower and each of its
Subsidiaries in favor of Agent, the form and substance of which shall be
satisfactory to Agent, that encumber the Oil and Gas Property Collateral and the
related improvements thereto (including the Prior Lender Assignment Agreements).
"Oil and Gas Property Release Price" shall be the sum of (i) 65%
of the NYMEX Value of Borrower's Eligible Proved Developed Producing Reserves
attributable to such Oil and Gas Property Collateral in the most recent
applicable Reserve Report delivered to Agent by Borrower, plus (ii) 45% of the
NYMEX Value of the Borrower's Eligible Proved Developed Non-Producing Reserves
attributable to such Oil and Gas Property Collateral in such Reserve
19
27
Report, plus (iii) 20% of the NYMEX Value of Borrower's Eligible Proved
Undeveloped Reserves attributable to such Oil and Gas Property Collateral in
such Reserve Report.
"Overadvance" has the meaning set forth in Section 2.5.
"Parent Note" shall mean that certain promissory note issued by
the Borrower to Petsec USA in the original stated amounts of $27,500,000 plus
Australian Dollars AUS$12,739,029.88, dated on or about June 12, 1997, together
with any extensions thereof, securities issued in exchange therefore, or
modifications or amendments thereto.
"Participant" has the meaning set forth in Section 15.1(e).
"PBGC" means the Pension Benefit Guaranty Corporation as defined
in Title IV of ERISA, or any successor thereto.
"PEL" means Petsec Energy Ltd., an Australian corporation, the
legal and beneficial owner of 100% of the issued and outstanding capital stock
of Petsec USA.
"Permanent Financing Order" means the order entered by the Court
pursuant to Section 364(c) and (d) of the Bankruptcy Code to the same extent and
priority as Lender Group's pre-petition liens as to which no stay has been
entered and which has not been vacated, modified or overturned; is in form and
substance substantially similar to the Interim Financing Order; and authorizes
the incurrence by Borrower of permanent post-petition secured and super-priority
indebtedness under the DIP Facility in accordance with this Agreement and the
DIP Loan Documents including but not limited to, securing the Obligations by the
Pre-Petition Liens with such Pre-Petition Liens constituting first priority
perfected Liens subject only to Liens that were senior to the Pre-Petition Liens
on the Filing Date or to such other Liens, if any, made senior Post-Petition
pursuant to the terms of the Permanent Financing Order, and providing for the
ratification of the Pre-Petition Loan Documents to the extent necessary to
effectuate the foregoing.
"Permits" of a Person shall mean all rights, franchises,
permits, authorities, licenses, certificates of approval or authorizations,
including licenses and other authorizations issuable by a Governmental
Authority, which pursuant to applicable Legal Requirements are necessary to
permit such Person lawfully to conduct and operate its business as currently
conducted and to own and use its assets.
"Permitted Liens" means (a) Liens held by Agent for the benefit
of the Lender Group, (b) Liens for unpaid Pre-Petition taxes and Liens for
unpaid Post-Petition taxes that either (I) are not yet due and payable or (II)
are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d)
the interests of lessors under operating leases and purchase money Liens of
lessors under capital leases to the extent that the acquisition or lease of the
underlying asset is permitted under Section 7.21 and so long as the Lien only
attaches to the asset purchased or acquired and only secures the purchase price
of the asset, (e) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, or other
like Liens arising by operation of law incidental to the exploration,
development, operation and maintenance of Oil and Gas Properties, in each case
incurred in the ordinary course of
20
28
business of Borrower and not in connection with the borrowing of money, and
which Liens either (I) are for sums not yet due and payable, or (II) are the
subject of Permitted Protests, (f) Liens arising from deposits made in
connection with obtaining worker's compensation or other unemployment insurance,
(g) Liens on deposits and escrowed funds made to secure performance of bids,
tenders and leases (to the extent permitted under this Agreement) incurred in
the ordinary course of business of Borrower and not in connection with the
borrowing of money, (h) Liens of or resulting from any judgment or award that do
not result in and reasonably could not be expected to result in a Material
Adverse Change and as to which the time for the appeal or petition for rehearing
of which has not yet expired, or in respect of which Borrower is in good faith
prosecuting an appeal or proceeding for a review and in respect of which a stay
of execution pending such appeal or proceeding for review has been secured, (i)
Liens with respect to the Oil and Gas Property Collateral that are exceptions to
the title opinions issued in connection with the Oil and Gas Mortgages, as
accepted by Agent, (j) with respect to any Oil and Gas Property Collateral
consisting of Mineral Interests, (I) exceptions, encroachments, easements,
rights of way, zoning, covenants, conditions, and other similar restrictions,
encumbrances, minor defects in title and reservations in the terms of the oil
and gas leases and other instruments creating or evidencing the Mineral
Interests which (A) do not affect Borrower's Defensible Title thereto to an
extent unacceptable to Agent in its reasonable judgement or restrict the full
use or other benefits of ownership by Borrower or such Subsidiary, as the case
may be, and (B) do not affect the ability of Borrower or such Subsidiary, as the
case may be, to receive a share of production or proceeds from, allocated to, or
attributable to such Mineral Interests equal to the interest of Borrower or such
Subsidiary, as the case may be, therein as represented herein, in the other Loan
Documents or in the initial Reserve Report which includes such Mineral
Interests, and (C) do not materially interfere with the ordinary conduct of the
business of Borrower or such Subsidiary, as the case may be, and (D) do not
interfere with or impair the value of Agent's Lien therein for the benefit of
the Lender Group, and (E) are customarily waived by reasonable and prudent
Mineral Interest owners, and (II) Liens reserved in leases or farmout agreements
for rent or royalties and for compliance with the terms of the farmout
agreements or leases in the case of leasehold estates, to the extent that any
such Lien referred to in this clause does not materially impair the use of the
Mineral Interest covered by such Lien for the purposes for which such Mineral
Interest is held by the Borrower or any Subsidiary, does not materially
interfere with or impair the value of such Mineral Interest subject thereto or
Agent's Lien therein for the benefit of the Lender Group, is customarily waived
by reasonable and prudent operators, and is consented to in writing by Agent,
(k) farmout, carried working interests, joint operating, unitization, royalty,
overriding royalty, sales and similar agreements relating to the exploration or
development of, or production from, Oil and Gas Properties or the sale of the
hydrocarbons after they are produced which are existing at the time of
acquisition of such Oil and Gas Property, are usual and customary for the
industry, and are disclosed to and approved by Agent in writing prior to any
Proved Reserves attributable to such Oil and Gas Property being included in
Eligible Proved Reserves, and (l) operator liens which are subordinated in
priority and right to the Liens of Agent for the benefit of the Lender Group
securing the Obligations pursuant to a written Subordination Agreement executed
by the holders of such operator liens in favor the Lender Group.
"Permitted Protest" means the right of Borrower to protest any
Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax
lien), or rental payment, provided that (a) a reserve with
21
29
respect to such obligation is established on the books of Borrower in an amount
that is satisfactory to Agent, (b) any such protest is instituted and diligently
prosecuted by Borrower in good faith, and (c) Agent is satisfied that, while any
such protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Agent's Liens in and to the Collateral.
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint ventures, trusts, land trusts, business trusts, or
other organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Personal Property Collateral" means all Collateral other than
the Oil and Gas Property Collateral and other than the Real Property Collateral.
"Petsec USA" means Petsec (U.S.A.) Inc., a Nevada corporation,
the legal and beneficial owner of 100% of the issued and outstanding capital
stock of Borrower.
"Plan" means any employee benefit plan, program, or arrangement
maintained or contributed to by Borrower or with respect to which it may incur
liability.
"Petition" has the meaning set forth in the recitals hereto.
"Post-Petition" means that event or item arose after the Filing
Date of the Petition.
"Pre-Petition Debt" means all indebtedness, liabilities, and
obligations (including, without limitation, all "Obligations", as defined in the
Pre-Petition Loan Agreement) owed by Borrower to Agent and Lenders on the Filing
Date (including, without limitation, the Pre-Petition Liabilities described in
the recitals to this Agreement), whether direct or indirect, absolute or
contingent, primary or secondary, due or to become due, including all interest
thereon accruing after the Filing Date and all legal fees and collection
expenses heretofore or hereafter incurred in collecting any of such
indebtedness, liabilities and obligations.
"Pre-Petition Liabilities" has the meaning set forth in the
recitals hereto.
"Pre-Petition Liens" has the meaning set forth in the recitals
hereto.
"Pre-Petition Loan Agreement" has the meaning set forth in the
recitals hereto.
"Pre-Petition Loan Documents" means the Pre-Petition Loan
Agreement and all other "Loan Documents," as such term is defined in the
Pre-Petition Loan Agreement.
"Prior Lender Assignment Agreements" has the meaning set forth
in the recitals.
"Prior Lenders" has the meaning set forth in the recitals.
22
30
"Professional Fee Carve-Out" means the maximum aggregate amount
of (a) allowed professional fees and disbursements incurred by professionals
retained by the Borrower and any statutory committee of unsecured creditors
appointed in the Chapter 11 Case; and (b) quarterly fees required to be paid
pursuant to 28 U.S.C. Section 1930(a)(6) whose payment shall have priority over
the otherwise super-priority claims granted to the Agent and the Lenders
pursuant to the DIP Orders entered by the Court, such maximum aggregate amount
not to exceed $250,000 on account of such professional fees and disbursements
incurred following a Default under this Agreement, plus the aggregate amount of
all unpaid professional fees and disbursements incurred, accrued or invoiced
from the Filing Date to the date of Default; provided, however, the Professional
Fees Carve-Out shall not include professional fees and disbursements incurred in
connection with asserting any claims or causes of action against the Agent
and/or Lenders and/or challenging or raising any defense to the Pre-Petition
Debt or the Obligations and/or challenging the validity, attachment, binding
effect, enforceability, perfection or priority of any Lien granted to the Agent
and/or the Lenders pursuant to the Pre-Petition Loan Documents and/or
challenging the validity, binding effect or enforceability of the Pre-Petition
Loan Documents or the DIP Loan Documents, and/or challenging any of the rights
or interests of the Agent or Lenders under the DIP Financing Documents.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Pro Rata Share" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the aggregate amount of the
Commitments.
"Proved Developed Non-Producing Reserves" means Proved Reserves
of Borrower, other than Proved Developed Producing Reserves and Proved
Undeveloped Reserves, that can be expected to be recovered through existing
▇▇▇▇▇ with existing equipment and operating methods.
"Proved Developed Producing Reserves" means Proved Reserves of
Borrower, other than Proved Developed Non-Producing Reserves and Proved
Undeveloped Reserves, that can be expected to be recovered from currently
producing zones under the continuation of present operating methods.
"Proved Reserves" means at any particular time, the estimated
quantities of Hydrocarbons which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs attributable to Mineral Interests included or to be included in the
Reserve Report under existing economic and operating conditions.
"Proved Undeveloped Reserves" means Proved Reserves of Borrower,
other than Proved Developed Producing Reserves and Proved Developed
Non-Producing Reserves, that are expected to be recovered from new ▇▇▇▇▇ on
undrilled acreage, or from existing ▇▇▇▇▇ where a relatively major expenditure
is required for recompletion.
23
31
"Qualified Subsequent Oil and Gas Property" means, as at any
date of determination thereof, Oil and Gas Properties acquired subsequent to the
date of this Agreement with respect to which all of the representations
specified in Section 5.2 are true and correct, and Borrower has delivered to
Agent the Oil and Gas Mortgages, opinions, certificates and other items and
information described in Exhibit B-1.
"Real Property" means any estates or interests in real property
now owned or hereafter acquired by Borrower or any Subsidiary of Borrower,
excluding Oil and Gas Properties.
"Real Property Collateral" means the parcel or parcels of real
property and the related improvements thereto identified on Schedule 5.1(d) and
any Real Property hereafter acquired by Borrower.
"Real Property Mortgages" means one or more mortgages, deeds of
trust, or deeds to secure debt, executed by Borrower and each of its
Subsidiaries in favor of Agent, or to the Prior Agent and assigned to Agent, the
form and substance of which shall be satisfactory to Agent, that encumber the
Real Property Collateral and the related improvements thereto.
"Reference Rate" means the variable rate of interest, per annum,
most recently announced by ▇▇▇▇▇ Fargo Bank, National Association, or any
successor thereto, as its "prime rate," irrespective of whether such announced
rate is the best rate available from such financial institution.
"Reorganization Plan" means a plan of reorganization proposed by
a Borrower or any other Person in the Chapter 11 Case.
"Reportable Event" means any of the events described in Section
4043(c) of ERISA or the regulations thereunder other than a Reportable Event as
to which the provision of 30 days notice to the PBGC is waived under applicable
regulations.
"Required Lenders" means, at any time, Lenders whose Pro Rata
Shares aggregate 65% or more of the Commitments, or, if the Commitments have
been terminated irrevocably, 65% of the Obligations then outstanding.
"Reserve Report" means a report, in form and substance
satisfactory to Agent, prepared by ▇▇▇▇▇ ▇▇▇▇▇ Company or another firm of
independent petroleum engineers acceptable to Agent evaluating the oil and gas
reserves attributable to the Mineral Interests of Borrower and its Subsidiaries
(as determined on an unconsolidated basis) which shall, among other things, (a)
identify the ▇▇▇▇▇ covered thereby, (b) specify said third party's opinions with
respect to the total volume of Proved Reserves (specifying with such opinions
the terms of categories Proved Developed Producing Reserves, Proved Developed
Non-Producing Reserves and Proved Undeveloped Reserves) which Borrower has the
right to produce (or cause to be produced) for its own account, (c) set forth
said firm's opinions with respect to the NYMEX Value of each of the categories
of the Proved Reserves as specified in subclause (b) above, (d) set forth said
firm's opinions with respect to the projected future rate of production of the
Proved
24
32
Reserves, (e) contain such other information as requested by Agent with respect
to the projected rate of production, gross revenues, operating expenses, net
income, taxes, capital expenditures and other capital costs, net revenues and
present value of future net revenues attributable to such reserves and
production therefrom, and (f) contain a statement of the price and escalation
parameters, procedures and assumptions upon which such determinations were
based.
"Reserves Against Availability" means such reserves as Agent
reasonably determines in Agent's discretion as being appropriate to reflect
impediments to Agent's ability to realize upon the Collateral or impairments or
reductions to the value of the Collateral. Without limiting the generality of
the foregoing, Reserves Against Availability may include (but are not limited
to) reserves based upon the following:
(a) Post-Petition accounts payable which are more than 45 days
past the due date thereof;
(b) past due or accrued taxes or other governmental charges
(whether Pre-Petition or Post-Petition), including ad valorem, personal
property, production, severance and other taxes which may have priority
over the Liens or security interests of Agent in the Collateral;
(c) Liens in favor of third Persons securing Post-Petition
obligations (whether or not such Liens are Permitted Liens);
(d) deposits which are due or scheduled to become due during the
immediately following 180 day period under deposit or escrow
arrangement concerning costs, expenses and liabilities relating to the
plugging and abandonment of Oil and Gas Properties;
(e) estimates of present and future costs, expenses, deposits
and liabilities related to the plugging and abandonment of the Oil and
Gas Properties net of the amount thereof which has been taken into
account in the most recent Reserve Report or is fully secured by an
escrow arrangement acceptable to Agent;
(f) Sums which Borrower may be required to pay which are due or
are scheduled to become due during such period with respect to
Post-Petition obligations as shall be determined by Agent with respect
to rental, delay rental, lease and other amounts payable under leases
or the Oil and Gas Properties;
(g) without duplication of the foregoing, amounts owing by
Borrower to any Person to the extent secured by a Lien (whether or not
such Lien is a Permitted Lien) on, or trust (constructive or otherwise)
over, any of the Collateral (including proceeds thereof or collections
from the sale of Hydrocarbons or Mineral Interests which may from time
to time come into the possession of any of the Lender Group or its
agents), which Lien or trust, in the determination of Agent (from the
perspective of an asset-based lender), has a reasonable possibility of
having a priority superior to the Agent's Liens (such as landlord
liens, ad valorem
25
33
taxes, production taxes, severance taxes, sales taxes, Collections
attributable to Mineral Interests of Persons other than Borrower) in
and to such item of Collateral, proceeds or collection;
(h) amounts determined by Agent to be reasonably necessary to
account for anticipated professional fees and disbursements and United
States trustee fees (whether or not accrued or approved) in the Chapter
11 Case.;
(i) with respect to any sale of Oil and Gas Property Collateral
that at the time of such sale has no Proved Reserves attributable to it
in the most recent applicable Reserve Report delivered to Agent by
Borrower, an amount equal to 20% of the net proceeds of any such sale;
and
(j) with respect to any sale of Oil and Gas Property Collateral
that at the time of such sale has any Proved Reserves attributable to
it in the most recent applicable Reserve Report delivered to Agent by
Borrower, an amount equal to 20% of the portion of the Borrowing Base
attributable to such Proved Reserves in the most recently determined
Borrowing Base prior to such sale.
"Retiree Health Plan" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"Revolving Facility Usage" means, as of any date of
determination, the sum of (a) the aggregate amount of Advances outstanding, plus
(b) the Letter of Credit/Hedging Arrangement Usage.
"Rollover Letters of Credit" means Letters of Credit existing on
the Filing Date to the extent the DIP Orders provide such Letters of Credit are
to be part of this DIP Facility and that the reimbursement obligations,
indemnification obligations, and other liabilities thereunder of Borrower
constitute "Obligations" under this Agreement.
"SEC" means the United States Securities and Exchange Commission
and any successor Federal agency having similar powers.
"Securities Account" means a "securities account" as that term
is defined in Section 8-501 of the Code.
"Security Agreements" means, collectively, any and all of the
security agreement, pledges, mortgages, deeds of trust, assignments, stock
pledge agreements and such other agreements, documents and instruments, in form
and substance satisfactory to Agent, which are, or are to be, executed by
Borrower and/or any one or more of its Subsidiaries in favor of Agent and/or the
Lenders as may be required from time to time by Agent to provide Agent for the
benefit of the Lender Group with Liens upon all of the assets and properties of
Borrower and its Subsidiaries as security for the payment and performance in
full of the Obligations, in each case
26
34
as the same may be amended, modified, restated, supplemented, increased,
renewed, extended, substituted for or replaced from time to time.
"Settlement" has the meaning set forth in Section 2.1(h)(i).
"Settlement Date" has the meaning set forth in Section
2.1(h)(i).
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and any successor thereto.
"Stock" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity, whether voting or nonvoting, including common
stock, preferred stock, or any other "equity security" (as such term is defined
in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under
the Exchange Act).
"Subordination Agreements" means, individually and collectively,
any and all subordination agreements and similar agreements, documents and
instruments in favor of or for the benefit of the Lender Group, in form and
substance satisfactory to Agent.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"Tangible Net Worth" means, as of any date of determination, the
difference of (a) Borrower's total stockholders' equity, minus (b) the sum of:
(i) all Intangible Assets of Borrower, (ii) all of Borrower's prepaid expenses,
and (iii) all amounts due to Borrower from Affiliates.
"Title Opinion" has the meaning set forth in Section 3.1(l).
"Transfer Order Letters" means transfer order letters in the
form of Exhibit T-1 attached hereto containing the information as provided for
therein.
"Unsecured Notes" means those certain 9 1/2% unsecured notes in
the aggregate original principal amount of $100,000,000 dated as of June 13,
1997, and maturing on June 30, 2007, issued under the Unsecured Notes Indenture,
as amended, modified, renewed or restated from time to time.
"Unsecured Notes Indenture" means that certain Indenture dated
as of June 13, 1997 among Borrower and the Bank of New York, pursuant to which
the Unsecured Notes have been issued, as amended, modified, renewed or restated
from time to time.
"Voidable Transfer" has the meaning set forth in Section 15.8.
27
35
"Working Interest" means that interest in an oil and gas mineral
lease which gives the owner the right to explore for, develop, exploit, and/or
produce the minerals and includes the obligation to pay the expense of such
activities.
"Year 2000 Compliant" means that Borrower's and each of its
Subsidiaries' computer software programs (whether used in Borrower's or its
Subsidiaries' business or licensed by or to Borrower or any of its Subsidiaries
to or from third parties) effectively processes data including data fields
requiring references to dates on and after January 1, 2000 and have been
designed not to experience or produce invalid or incorrect results or abnormal
software operation related to or as a result of the occurrence of such dates.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower on a consolidated basis
unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any other
DIP Loan Document clearly requires otherwise, references to the plural include
the singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where otherwise
indicated, the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this Agreement
or any other DIP Loan Document refer to this Agreement or any other DIP Loan
Documents, as the case may be, as a whole and not to any particular provision of
this Agreement or such other DIP Loan Document, as the case may be. An Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in writing by Agent. Section, subsection, clause, schedule, and exhibit
references herein are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the other DIP Loan Documents to this Agreement
or any of the DIP Loan Documents shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits attached
to this Agreement shall be deemed incorporated herein by reference.
2. DIP FACILITY AND TERMS OF PAYMENT
2.1 REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement and
during the term of this Agreement, each Lender agrees to make advances
("Advances") to Borrower in an amount at any one time outstanding not to exceed
such Lender's Pro Rata Share of an amount
28
36
equal to the lesser of (i) the Maximum Revolving Amount less (A) the aggregate
amount of all Letter of Credit/Hedging Arrangement Usage, less (B) the aggregate
amount of the reserves, if any, established by Agent under Section 2.1(b), or
(ii) the Borrowing Base, less (A) the aggregate amount of all Letter of
Credit/Hedging Arrangement Usage, less (B) the aggregate amount of the reserves,
if any, established by Agent under Section 2.1(b). For purposes of this
Agreement, the "Borrowing Base," as of any date of determination (which, in the
absence of the occurrence and continuation of an Event of Default, shall be
determined no less frequently than monthly), shall mean the lesser of:
(x) the result of
(I) 55% of Borrower's Eligible Proved Developed Producing
Reserves, plus
(II) 25% of Borrower's Eligible Proved Developed
Non-Producing Reserves, plus
(III) 15% of Borrower's Eligible Proved Undeveloped
Reserves; or
(y) 133% of the amount determined under subclause (x)(I).
In determining the Borrowing Base as of any date of determination, the Proved
Reserves shall be based upon the volumetric quantity and production forecasts
and the related lease operating expenses of Proved Reserves estimated in the
most recently delivered Reserve Report minus the amount of Proved Reserves that
has been sold or produced since the date of the Reserve Report.
The Lenders shall have no obligation to make further Advances hereunder to the
extent they would cause the outstanding Revolving Facility Usage to exceed the
Maximum Revolving Amount.
Amounts borrowed pursuant to this Section 2.1 may be repaid and, subject to the
terms and conditions of this Agreement, reborrowed at any time during the term
of this Agreement.
(b) Advance Rate Adjustments and Reserves; Proved Reserves
Reappraisals.
(i) Anything to the contrary in this Section
notwithstanding, Agent shall have the right to establish reserves in such
amounts as Foothill, in its reasonable credit judgment (from the perspective of
an asset-based lender) shall deem necessary or appropriate, including reserves
on account of (A) sums that Borrower is required to pay (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and has failed to pay under any Section
of this Agreement or any other DIP Loan Document, and (B) without duplication of
the foregoing, amounts owing by such Borrower to any Person to the extent
secured by a Lien on, or trust over, any of the Collateral, which Lien or trust,
in the reasonable determination of Foothill (from the perspective of an
asset-based lender),
29
37
could have a priority superior to the Agent's Liens (such as landlord liens, ad
valorem taxes, or sales taxes where given priority under applicable law) in and
to such item of Collateral, (C) sums from time to time owing by Borrower with
respect to its insurance premium finance contracts (including the indebtedness
described in Schedule 7.1), whether or not the same is then due or in default,
and (D) without duplication of the foregoing, Reserves Against Availability.
Furthermore, Borrower agrees and acknowledges that, at all times from and after
the date that Borrower sells, transfers or otherwise disposes of any of the
platform and jacket described in Schedule 5.2(e), there shall be an additional
reserve that Agent may establish in the amount of $1,000,000 without regard to
any other criteria for the establishment of reserves under this Agreement, which
$1,000,000 reserve shall remain in effect for as long as Agent, in its sole
discretion, may deem appropriate from time to time.
(ii) Agent shall have the right to require, from time to
time, Borrower to deliver updated Reserve Reports whereby the volumetric
quantity and production forecasts and related lease operating expenses of Proved
Reserves are redetermined from time to time by a qualified petroleum engineer
approved by Agent after the Closing Date for the purpose of recalculating the
NYMEX Value of the Proved Reserves located at the Oil and Gas Property
Collateral. In the absence of the occurrence and continuation of an Event of
Default, such updated Reserve Reports (A) shall be prepared as of each June 30
and December 31 of each year by ▇▇▇▇▇ ▇▇▇▇▇ Company or other firm of independent
petroleum engineers acceptable to Agent, and delivered to Agent not later than
60 days after each such June 30 and December 31 date, and (B) shall be prepared
as of the last day of April 2000 and thereafter as of the last day of each month
by ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ or other petroleum engineering consultants to Agent
acceptable to Agent, and delivered to Agent not less than 10 days after the end
of each such month, and such Reserve Reports shall be based upon the most
recently delivered Reserve Report described in subclause (A) above and such
other information as may be provided by Borrower, as adjusted by ▇▇▇▇▇▇▇, ▇▇▇▇ &
▇▇▇▇▇▇▇▇ or such other petroleum engineering consultant, as the case may be, in
such manner and to such extent as such consultant deems appropriate in its
reasonable discretion. Borrower agrees to provide to ▇▇▇▇▇ ▇▇▇▇▇ Company,
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ and such other petroleum engineering firms and
consultants, as the case may be, with all information and data requested by any
of them or Agent so as to enable them to deliver such Reserve Reports to Agent
as and when required under this Agreement.
(c) Procedure for Borrowing. Each Borrowing shall be made upon
Borrower's irrevocable request therefor to Agent (which notice must be received
by Agent no later than 10:00 a.m. (California time) on the Business Day
preceding the requested Funding Date specifying (i) the amount of the Borrowing,
and (ii) the requested Funding Date, which shall be a Business Day, and each
such request for a Borrowing shall be accompanied by a Reserve Report with
respect to any Oil and Gas Properties which are to be acquired by Borrower.
Notwithstanding the foregoing, Borrower will not be permitted to request any
Advance, and the Lenders will have no obligation to fund any advance at any time
Borrower's cash on hand and in bank accounts exceeds the sum of (a) $1,000,000,
plus (b) the amount of Borrower's projected cash expenditures for the five (5)
Business Day period commencing on the date any such Advance is requested.
30
38
(d) Agent's Election. Promptly after receipt of a request for a
Borrowing pursuant to Section 2.1(c), Agent shall elect, in its discretion, (i)
to have the terms of Section 2.1(e) apply to such requested Borrowing, or (ii)
to request Foothill to make a Foothill Loan pursuant to the terms of Section
2.1(f) in the amount of the requested Borrowing; provided, however, that if
Foothill declines in its sole discretion to make a Foothill Loan pursuant to
Section 2.1(f), Agent shall elect to have the terms of Section 2.1(e) apply to
such requested Borrowing.
(e) Making of Advances.
(i) In the event that Agent shall elect to have the terms of
this Section 2.1(e) apply to a requested Borrowing as described in Section
2.1(d), then promptly after receipt of a request for a Borrowing pursuant to
Section 2.1(c), Agent shall notify the Lenders, not later than 1:00 p.m.
(California time) on the Business Day immediately preceding the Funding Date
applicable thereto, by telecopy, telephone, or other similar form of
transmission, of the requested Borrowing. Each Lender shall make the amount of
such Lender's Pro Rata Share of the requested Borrowing available to Agent in
immediately available funds, to such account of Agent as Agent may designate,
not later than 10:00 a.m. (California time) on the Funding Date applicable
thereto. After Agent's receipt of the proceeds of such Advances, upon
satisfaction of the applicable conditions precedent set forth in Section 3
hereof, Agent shall make the proceeds of such Advances available to Borrower on
the applicable Funding Date by transferring same day funds equal to the proceeds
of such Advances received by Agent to Borrower's Designated Account; provided,
however, that, subject to the provisions of Section 2.1(k), Agent shall not
request any Lender to make, and no Lender shall have the obligation to make, any
Advance if Agent shall have received written notice from any Lender, or
otherwise has actual knowledge, that (1) one or more of the applicable
conditions precedent set forth in Section 3 will not be satisfied on the
requested Funding Date for the applicable Borrowing unless such condition has
been waived, or (2) the requested Borrowing would exceed the Availability of the
Borrower.
(ii) Unless Agent receives notice from a Lender, with
respect to any Borrowing, at least one (1) Business Day prior to the date of
such Borrowing, that such Lender will not make available as and when required
hereunder to Agent for the account of Borrower the amount of that Lender's Pro
Rata Share of the Borrowing, Agent may assume that each Lender has made or will
make such amount available to Agent in immediately available funds on the
Funding Date and Agent may (but shall not be so required), in reliance upon such
assumption, make available to Borrower on such date a corresponding amount. If
and to the extent any Lender shall not have made its full amount available to
Agent in immediately available funds and Agent in such circumstances has made
available to Borrower such amount, that Lender shall on the Business Day
following such Funding Date make such amount available to Agent, together with
interest at the Defaulting Lenders Rate for each day during such period. A
notice submitted by Agent to any Lender with respect to amounts owing under this
subsection shall be conclusive, absent manifest error. If such amount is so made
available, such payment to Agent shall constitute such Lender's Advance on the
date of Borrowing for all purposes of this Agreement. If such amount is not made
available to Agent on the Business Day following the Funding Date, Agent will
notify Borrower of such failure to fund and, upon demand by Agent, Borrower
shall pay such amount to Agent for Agent's account, together with interest
thereon for
31
39
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Advances composing such
Borrowing. The failure of any Lender to make any Advance on any Funding Date
shall not relieve any other Lender of any obligation hereunder to make an
Advance on such Funding Date, but no Lender shall be responsible for the failure
of any other Lender to make the Advance to be made by such other Lender on any
Funding Date.
(iii) Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrower to Agent for the Defaulting
Lender's benefit; nor shall a Defaulting Lender be entitled to the sharing of
any payments hereunder. Amounts payable to a Defaulting Lender shall instead be
paid to or retained by Agent. Agent may hold and, in its discretion, re-lend to
Borrower the amount of all such payments received or retained by it for the
account of such Defaulting Lender. Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents and determining Pro
Rata Shares, such Defaulting Lender shall be deemed not to be a "Lender" and
such Lender's Commitment shall be deemed to be zero (-0-). This section shall
remain effective with respect to such Lender until (x) the Obligations under
this Agreement shall have been declared or shall have become immediately due and
payable or (y) the requisite non-Defaulting Lenders and Agent shall have waived
such Lender's default in writing. The operation of this section shall not be
construed to increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by Borrower of its duties and obligations
hereunder.
(f) Making of Foothill Loans.
(i) In the event Agent shall elect, with the consent of
Foothill as a Lender, to have the terms of this Section 2.1(f) apply to a
requested Borrowing as described in Section 2.1(d), Foothill as a Lender shall
make an Advance in the amount of such Borrowing (any such Advance made solely by
Foothill as a Lender pursuant to this Section 2.1(f) being referred to as a
"Foothill Loan" and such Advances being referred to collectively as "Foothill
Loans") available to Borrower on the Funding Date applicable thereto by
transferring same day funds to Borrower's Designated Account. Each Foothill Loan
is an Advance hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that all payments thereon shall be payable
to Foothill as a Lender solely for its own account (and for the account of the
holder of any participation interest with respect to such Advance). Subject to
the provisions of Section 2.1(k), Agent shall not request Foothill as a Lender
to make, and Foothill as a Lender shall not make, any Foothill Loan if Agent
shall have received written notice from any Lender, or otherwise has actual
knowledge, that (i) one or more of the applicable conditions precedent set forth
in Section 3 will not be satisfied on the requested Funding Date for the
applicable Borrowing unless such condition has been waived, or (ii) the
requested Borrowing would exceed the Availability of Borrower on such Funding
Date. Foothill as a Lender shall not otherwise be required to determine whether
the applicable conditions precedent set forth in Section 3 have been satisfied
on the Funding Date applicable thereto prior to making, in its sole discretion,
any Foothill Loan.
32
40
(ii) The Foothill Loans shall be secured by the Collateral
and shall constitute Advances and Obligations hereunder, and shall bear interest
at the rate applicable from time to time to Advances pursuant to Section 2.6
hereof.
(g) Agent Advances.
(i) Subject to the limitations set forth in the proviso
contained in this Section 2.1(g), Agent hereby is authorized by Borrower and the
Lenders, from time to time in Agent's sole discretion, (1) after the occurrence
and during the continuance of a Default or an Event of Default, or (2) at any
time that any of the other applicable conditions precedent set forth in Section
3 have not been satisfied, to make Advances to Borrower on behalf of the Lenders
that Agent, in its reasonable business judgment, deems necessary or desirable
(A) to preserve or protect the Collateral, or any portion thereof, (B) to
enhance the likelihood of repayment of the Obligations, or (C) to pay any other
amount chargeable to Borrower pursuant to the terms of this Agreement, including
Lender Group Expenses and the costs, fees, and expenses described in Section 10
(any of the Advances described in this Section 2.1(g) being hereinafter referred
to as "Agent Advances"); provided, that the Required Lenders may at any time
revoke Agent's authorization contained in this Section 2.1(g) to make Agent
Advances, any such revocation to be in writing and to become effective upon
Agent's receipt thereof.
(ii) Agent Advances shall be repayable on demand and secured
by the Collateral, shall constitute Advances and Obligations hereunder, and
shall bear interest at the rate applicable from time to time to the Advances
pursuant to Section 2.6 hereof.
(h) Settlement. It is agreed that each Lender's funded portion of
the Advances is intended by the Lenders to equal, at all times, such Lender's
Pro Rata Share of the outstanding Advances. Such agreement notwithstanding,
Agent, Foothill, and the other Lenders agree (which agreement shall not be for
the benefit of or enforceable by Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Foothill Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:
(i) Agent shall request settlement ("Settlement") with the
Lenders on a weekly basis, or on a more frequent basis if so determined by
Agent, (1) on behalf of Foothill, with respect to each outstanding Foothill
Loan, (2) for itself, with respect to each Agent Advance, and (3) with respect
to Collections received, as to each by notifying the Lenders by telecopy,
telephone, or other similar form of transmission, of such requested Settlement,
no later than 2:00 p.m. (California time) on the Business Day immediately prior
to the date of such requested Settlement (the date of such requested Settlement
being the "Settlement Date"). Such notice of a Settlement Date shall include a
summary statement of the amount of outstanding Advances, Foothill Loans, and
Agent Advances for the period since the prior Settlement Date, the amount of
repayments received in such period, and the amounts allocated to each Lender of
the interest, fees, and other charges for such period. Subject to the terms and
conditions contained herein (including Section 2.1(e)(iii)): (y) if a Lender's
balance of the Advances, Foothill Loans, and Agent Advances exceeds such
Lender's Pro Rata Share of the Advances, Foothill Loans, and Agent Advances as
of a Settlement Date, then Agent shall by no later than 12:00 p.m. (California
33
41
time) on the Settlement Date transfer in immediately available funds to the
account of such Lender as such Lender may designate, an amount such that each
such Lender shall, upon receipt of such amount, have as of the Settlement Date,
its Pro Rata Share of the Advances, Foothill Loans, and Agent Advances; and (z)
if a Lender's balance of the Advances, Foothill Loans, and Agent Advances is
less than such Lender's Pro Rata Share of the Advances, Foothill Loans, and
Agent Advances as of a Settlement Date, such Lender shall no later than 12:00
p.m. (California time) on the Settlement Date transfer in immediately available
funds to such account of Agent as Agent may designate, an amount such that each
such Lender shall, upon transfer of such amount, have as of the Settlement Date,
its Pro Rata Share of the Advances, Foothill Loans, and Agent Advances. Such
amounts made available to Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Foothill Loan or
Agent Advance and, together with the portion of such Foothill Loan or Agent
Advance representing Foothill's Pro Rata Share thereof, shall constitute
Advances of such Lenders. If any such amount is not made available to Agent by
any Lender on the Settlement Date applicable thereto to the extent required by
the terms hereof, Agent shall be entitled to recover for its account such amount
on demand from such Lender together with interest thereon at the Defaulting
Lenders Rate.
(ii) In determining whether a Lender's balance of the
Advances, Foothill Loans, and Agent Advances is less than, equal to, or greater
than such Lender's Pro Rata Share of the Advances, Foothill Loans, and Agent
Advances as of a Settlement Date, Agent shall, as part of the relevant
Settlement, apply to such balance the portion of payments actually received in
good funds by Agent or Foothill with respect to principal, interest, fees
payable by Borrower and allocable to the Lenders hereunder, and proceeds of
Collateral. To the extent that a net amount is owed to any such Lender after
such application, such net amount shall be distributed by Agent or Foothill to
that Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no
Agent Advances or Foothill Loans are outstanding, may pay over to Foothill any
payments received by Agent, that in accordance with the terms of this Agreement
would be applied to the reduction of the Advances, for application to Foothill's
Pro Rata Share of the Advances. If, as of any Settlement Date, Collections
received since the then immediately preceding Settlement Date have been applied
to Foothill's Pro Rata Share of the Advances other than to Foothill Loans or
Agent Advances, as provided for in the previous sentence, Foothill shall pay to
Agent for the accounts of the Lenders, and Agent shall pay to the Lenders, to be
applied to the outstanding Advances of such Lenders, an amount such that each
Lender shall, upon receipt of such amount, have, as of such Settlement Date, its
Pro Rata Share of the Advances. During the period between Settlement Dates,
Foothill with respect to Foothill Loans, Agent with respect to Agent Advances,
and each Lender with respect to the Advances other than Foothill Loans and Agent
Advances, shall be entitled to interest at the applicable rate or rates payable
under this Agreement on the daily amount of funds employed by Foothill, Agent,
or the Lenders, as applicable.
(i) Notation. Agent shall record on its books the principal
amount of the Advances owing to each Lender, including the Foothill Loans owing
to Foothill, and Agent Advances owing to Agent, and the interests therein of
each Lender, from time to time. In addition, each Lender is authorized, at such
Lender's option, to note the date and amount of each payment or prepayment of
principal of such Lender's Advances in its books and records,
34
42
including computer records, such books and records constituting rebuttably
presumptive evidence, absent manifest error, of the accuracy of the information
contained therein.
(j) Lenders' Failure to Perform. All Advances (other than
Foothill Loans and Agent Advances) shall be made by the Lenders simultaneously
and in accordance with their Pro Rata Shares. It is understood that (i) no
Lender shall be responsible for any failure by any other Lender to perform its
obligation to make any Advances hereunder, nor shall any Commitment of any
Lender be increased or decreased as a result of any failure by any other Lender
to perform its obligation to make any Advances hereunder, and (ii) no failure by
any Lender to perform its obligation to make any Advances hereunder shall excuse
any other Lender from its obligation to make any Advances hereunder.
(k) Optional Overadvances. Any contrary provision of this
Agreement notwithstanding, if the condition for borrowing under Section 3.2(d)
cannot be fulfilled, the Lenders nonetheless hereby authorize Agent or Foothill,
as applicable, and Agent or Foothill, as applicable, may, but is not obligated
to, knowingly and intentionally continue to make Advances (including Foothill
Loans) to Borrower such failure of condition notwithstanding, so long as, at any
time (i) the outstanding Revolving Facility Usage does not exceed the Borrowing
Base by more than five percent (5%) of the Borrowing Base, and (ii) the
outstanding Revolving Facility Usage (except for and excluding amounts charged
to the Loan Account for interest, fees, or Lender Group Expenses) does not
exceed the Maximum Revolving Amount. The foregoing provisions are for the sole
and exclusive benefit of Agent, Foothill, and the Lenders and are not intended
to benefit Borrower in any way. The Advances and Foothill Loans, as applicable,
that are made pursuant to this Section 2.1(k) shall be subject to the same terms
and conditions as any other Advance or Foothill Loan, as applicable, except that
the rate of interest applicable thereto shall be the rates set forth in Section
2.6(b) hereof without regard to the presence or absence of a Default or Event of
Default; provided, that the Required Lenders may, at any time during the
continuance of an Event of Default or if Borrower fails to satisfy any other
material lending condition, revoke Agent's authorization contained in this
Section 2.1(k) to make Overadvances (except for and excluding amounts charged to
the Loan Account for interest, fees, or Lender Group Expenses), any such
revocation to be in writing and to become effective upon Agent's receipt
thereof.
In the event Agent obtains actual knowledge that Revolving
Facility Usage exceeds the amount permitted by the preceding paragraph,
regardless of the amount of or reason for such excess, Agent shall notify
Lenders as soon as practicable (and prior to making any, or any further,
intentional Overadvances (except for and excluding amounts charged to the Loan
Account for interest, fees, or Lender Group Expenses)) unless Agent determines
that prior notice would result in imminent harm to the Collateral or its value),
and the Lenders thereupon shall, together with Agent, jointly determine the
terms of arrangements that shall be implemented with Borrower intended to
reduce, within a reasonable time, the outstanding principal amount of the
Advances to Borrower to an amount permitted by the preceding paragraph. In the
event any Lender disagrees over the terms of reduction and/or repayment of any
Overadvance, the terms of reduction and/or repayment thereof shall be
implemented according to the determination of the Required Lenders.
35
43
Each Lender shall be obligated to settle with Agent as provided
in Section 2.1(h) for the amount of such Lender's Pro Rata Share of any
unintentional Overadvances by Agent reported to such Lender, any intentional
Overadvances made as permitted under this Section 2.1(k), and any Overadvances
resulting from the charging to the Loan Account of interest, fees, or Lender
Group Expenses.
(l) [Intentionally Omitted].
2.2 LETTER OF CREDIT SUBFACILITY.
(a) Agreement to Cause Issuance; Amounts; Outside Expiration
Date. Subject to the terms and conditions of this Agreement, Agent agrees to
issue letters of credit for the account of Borrower (each, an "L/C") or to issue
guarantees of payment, indemnities, participations and/or undertakings (each
such guaranty, indemnity, participation or undertaking an "L/C Guaranty") with
respect to letters of credit issued by an issuing bank for the account of
Borrower. Agent shall have no obligation to issue an L/C or L/C Guaranty if any
of the following would result:
(i) the sum of 100% of the aggregate amount of all Letter of
Credit Usage would exceed the Borrowing Base less the amount of
outstanding Advances less the aggregate amount of the Hedging
Arrangement Usage, less the aggregate amount of reserves established
under Section 2.1(b); or
(ii) the aggregate amount of all Letter of Credit Usage
would exceed the Maximum Revolving Amount less the amount of
outstanding Advances less the aggregate amount of the Hedging
Arrangement Usage, less the aggregate amount of reserves established
under Section 2.1(b.
(iii) the outstanding Obligations would exceed the Maximum
Revolving Amount; or
(iv) the aggregate amount of all Letter of Credit Usage
would exceed $5,000,000; or
(v) the aggregate amount of all Letter of Credit/Hedging
Agreement Usage would exceed $10,000,000.
Borrower expressly understands and agrees that Agent shall have no obligation to
arrange for the issuance by issuing banks of the letters of credit that are to
be the subject of L/C Guarantees. Borrower and the Lender Group acknowledge and
agree that certain of the letters of credit that are to be the subject of L/C
Guarantees may be outstanding on the Closing Date. Each Letter of Credit shall
have an expiry date no later than 45 days prior to the date which is one year
from the Closing Date and all such Letters of Credit shall be in form and
substance acceptable to Agent in its sole discretion. If the Lender Group is
obligated to advance funds under a Letter of Credit, Borrower immediately shall
reimburse such amount to Agent and, in the absence of such reimbursement, the
amount so advanced immediately and automatically shall be deemed to be an
36
44
Advance hereunder and, thereafter, shall bear interest at the rate then
applicable to such Advances under Section 2.6.
(b) Indemnification. Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless from any loss, cost, expense, or
liability, including payments made by the Lender Group, expenses, and reasonable
attorneys fees incurred by the Lender Group arising out of or in connection with
any Letter of Credit other than loss, costs, expenses or liabilities arising out
of or resulting from the gross negligence or willful misconduct of Agent or
Lenders. Borrower agrees to be bound by the issuing bank's regulations and
interpretations of any Letters of Credit guarantied by the Lender Group and
opened to or for Borrower's account or by Agent's interpretations of any L/C
issued by the Lender Group to or for Borrower's account, even though this
interpretation may be different from Borrower's own, and Borrower understands
and agrees that the Lender Group shall not be liable for any error, ordinary
negligence, or mistake, whether of omission or commission, in following
Borrower's instructions or those contained in the Letter of Credit or any
modifications, amendments, or supplements thereto. Borrower understands that the
L/C Guarantees may require the Lender Group to indemnify the issuing bank for
certain costs or liabilities arising out of claims by Borrower against such
issuing bank. Borrower hereby agrees to indemnify, save, defend, and hold the
Lender Group harmless with respect to any loss, cost, expense (including
reasonable attorneys fees), or liability incurred by the Lender Group under any
L/C Guaranty as a result of the Lender Group's indemnification of any such
issuing bank.
(c) Supporting Materials. Borrower hereby authorizes and directs
any bank that issues a letter of credit guaranteed by the Lender Group to
deliver to Agent all instruments, documents, and other writings and property
received by the issuing bank pursuant to such letter of credit, and to accept
and rely upon Agent's instructions and agreements with respect to all matters
arising in connection with such letter of credit and the related application.
Borrower may or may not be the "applicant" or "account party" with respect to
such letter of credit.
(d) Compensation for Letters of Credit. Any and all charges,
commissions, fees, and costs incurred by Agent relating to the letters of credit
guaranteed by the Lender Group shall be considered Lender Group Expenses for
purposes of this Agreement and immediately shall be reimbursable by Borrower to
Agent.
(e) Cash Collateral. Immediately upon the termination of this
Agreement, Borrower agrees to either (i) provide cash collateral to be held by
Agent in an amount equal to 105% of the maximum amount of the Lender Group's
obligations under outstanding Letters of Credit (including, without limitation,
outstanding Rollover Letters of Credit), or (ii) cause to be delivered to Agent
releases of all of the Lender Group's obligations under outstanding Letters of
Credit (including, without limitation, outstanding Rollover Letters of Credit).
At Agent's discretion, any proceeds of Collateral received by Agent after the
occurrence and during the continuation of an Event of Default may be held as the
cash collateral required by this Section 2.2(e).
(f) Increased Costs. If by reason of (i) any change in any
applicable law, treaty, rule, or regulation or any change in the interpretation
or application by any
37
45
governmental authority of any such applicable law, treaty, rule, or regulation,
or (ii) compliance by the issuing bank or Agent with any direction, request, or
requirement (irrespective of whether having the force of law) of any
governmental authority or monetary authority including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System as from
time to time in effect (and any successor thereto):
a. any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letters of Credit issued hereunder, or
b. there shall be imposed on the issuing bank or the Lender
Group or any other condition regarding any letter of credit, or Letter of
Credit, as applicable, issued pursuant hereto (including, without limitation,
outstanding Rollover Letters of Credit);
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or the Lender Group of issuing, making, guaranteeing, or
maintaining any letter of credit, or Letter of Credit, as applicable, or to
reduce the amount receivable in respect thereof by such issuing bank or the
Lender Group, then, and in any such case, the Lender Group may, at any time
within a reasonable period after the additional cost is incurred or the amount
received is reduced, notify Borrower, and Borrower shall pay on demand such
amounts as the issuing bank or Agent may specify to be necessary to compensate
the issuing bank or the Lender Group for such additional cost or reduced
receipt, together with interest on such amount from the date of such demand
until payment in full thereof at the rate set forth in Section 2.6(a)(i) or
(c)(i), as applicable. The determination by the issuing bank or Agent, as the
case may be, of any amount due pursuant to this Section 2.2(f), as set forth in
a certificate setting forth the calculation thereof in reasonable detail, shall,
in the absence of manifest or demonstrable error, be final and conclusive and
binding on all of the parties hereto.
(g) Participations.
(1) Purchase of Participations. Immediately upon issuance of
any Letter of Credit (including, without limitation, outstanding Rollover
Letters of Credit) in accordance with this Section 2.2, each Lender shall be
deemed to have irrevocably and unconditionally purchased and received without
recourse or warranty, an undivided interest and participation in the credit
support or enhancement provided through Agent to such issuer in connection with
the issuance of such Letter of Credit, equal to such Lender's Pro Rata Share of
the face amount of such Letter of Credit (including, without limitation, all
obligations of Borrower with respect thereto, and any security therefor or
guaranty pertaining thereto).
(2) Documentation. Upon the request of any Lender, Agent
shall furnish to such Lender copies of any Letter of Credit (including, without
limitation, outstanding Rollover Letters of Credit), reimbursement agreements
executed in connection therewith, application for any Letter of Credit
(including, without limitation, outstanding Rollover Letters of Credit) and
credit support or enhancement provided through Agent in connection with the
issuance of any Letter of Credit (including, without limitation, outstanding
Rollover Letters of Credit), and such other documentation as may reasonably be
requested by such Lender.
38
46
(3) Obligations Irrevocable. The obligations of each Lender
to make payments to Agent with respect to any Letter of Credit (including,
without limitation, outstanding Rollover Letters of Credit) or with respect to
any credit support or enhancement provided through Agent with respect to a
Letter of Credit (including, without limitation, outstanding Rollover Letters of
Credit), and the obligations of Borrower to make payments to Agent, for the
account of the Lenders, shall be irrevocable, not subject to any qualification
or exception whatsoever, including any of the following circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other DIP Loan Documents;
(ii) the existence of any claim, setoff, defense or
other right which Borrower may have at any time against a beneficiary named
in a Letter of Credit or any transferee of any Letter of Credit (or any
Person for whom any such transferee may be acting), any Lender, Agent, the
issuer of such Letter of Credit, or any other Person, whether in connection
with this Agreement, any Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying transactions
between Borrower or any other Person and the beneficiary named in any
Letter of Credit);
(iii) any draft, certificate or any other document
presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of any of the Loan
Documents; or
(v) the occurrence of any Default or Event of Default.
(h) Recovery or Avoidance of Payments. In the event any payment
by or on behalf of Borrower received by Agent with respect to any Letter of
Credit (including; without limitation, outstanding Rollover Letters of Credit)
(or any guaranty by Borrower or reimbursement obligation of Borrower relating
thereto) and distributed by the Agent to the Lenders on account of their
respective participations therein, is thereafter set aside, avoided or recovered
from Agent in connection with any receivership, liquidation or bankruptcy
proceeding, the Lenders shall, upon demand by Agent, pay to Agent their
respective Pro Rata Shares of such amount set aside, avoided or recovered,
together with interest at the rate required to be paid by Agent upon the amount
required to be repaid by it.
2.3 HEDGING ARRANGEMENT SUBFACILITY.
(a) Agreement to Cause Issuance; Amounts; Outside Expiration
Date. Subject to the terms and conditions of this Agreement, Agent agrees to
issue guarantees of payment, indemnities, participations and/or undertakings
related to Hedging Agreements (each such guaranty, indemnity, participation or
other undertaking, a "Hedging Agreement Undertaking") with respect to Hedging
Agreements entered into with, or arranged by or through,
39
47
directly or indirectly, one or more financial institutions acceptable to Agent
(each, an "Arranging Institution") for the account of Borrower. Agent shall have
no obligation to issue a Hedging Agreement Undertaking to Borrower if any of the
following would result:
(i) the sum of 100% of the aggregate amount of all
Hedging Arrangement Usage, would exceed the Borrowing Base less the
amount of outstanding Advances less the aggregate amount of the Letter
of Credit Usage, less the aggregate amount of reserves established
under Section 2.1(b); or
(ii) the aggregate amount of all Hedging Arrangement
Usage would exceed the lesser of: (x) the Maximum Revolving Amount
less the amount of outstanding Advances less the aggregate amount of
the Letter of Credit Usage, less the aggregate amount of reserves
established under Section 2.1(b); or (y) the Unsecured Notes
Indebtedness Limitation less the amount of outstanding Advances less
the aggregate amount of the Letter of Credit Usage less the aggregate
amount of reserves established under Section 2.1(b); or
(iii) the aggregate amount of all Letter of
Credit/Hedging Arrangement Usage would exceed $10,000,000.
Borrower expressly understands and agrees that Agent shall have no obligation to
arrange for any Arranging Institution to enter into or arrange any Hedging
Agreement that is to be the subject of Hedging Agreement Undertakings. Borrower
and the Lender Group acknowledge and agree that certain of the Hedging
Agreements that are to be the subject of Hedging Agreement Undertakings may be
outstanding on the Closing Date. Each Hedging Agreement that is to be subject of
a Hedging Agreement Undertaking shall have an expiry date no later than one year
from the Closing Date and all such Hedging Agreements and Hedging Agreement
Undertakings shall be in form and substance acceptable to Agent in its sole
discretion. If the Lender Group is obligated to advance funds under a Hedging
Agreement Undertaking, Borrower immediately shall reimburse such amount to Agent
and, in the absence of such reimbursement, the amount so advanced immediately
and automatically shall be deemed to be an Advance hereunder and, thereafter,
shall bear interest at the rate then applicable to such Advances under Section
2.6.
(b) Indemnification. Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless from any loss, cost, expense, or
liability, including payments made by the Lender Group, expenses, and reasonable
attorneys fees incurred by the Lender Group arising out of or in connection with
any Hedging Agreement Undertaking other than loss, costs, expenses or
liabilities arising out of or resulting from the gross negligence or willful
misconduct of Agent or Lenders. Borrower agrees to be bound by the Arranging
Institution's regulations and interpretations of any Hedging Agreements
guarantied, indemnified, participated in or otherwise undertaken by the Lender
Group and opened to or for Borrower's account or by Agent's interpretations of
any Hedging Agreement Undertaking issued by the Lender Group to or for
Borrower's account, even though this interpretation may be different from
Borrower's own, and Borrower understands and agrees that the Lender Group shall
not be liable for any error, ordinary negligence, or mistake, whether of
omission or commission, in following Borrower's instructions or those contained
in the Hedging Agreements or any modifications,
40
48
amendments, or supplements thereto. Borrower understands that the Hedging
Agreement Undertakings may require the Lender Group to indemnify the Arranging
Institution for certain costs or liabilities arising out of claims by Borrower
against any Arranging Institution. Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless with respect to any loss, cost,
expense (including reasonable attorneys fees), or liability incurred by the
Lender Group under any Hedging Agreement Undertaking as a result of the Lender
Group's indemnification of any Arranging Institution.
(c) Supporting Materials. Borrower hereby authorizes and directs
each Arranging Institution to deliver to Agent all instruments, documents, and
other writings and property received by such Arranging Institution pursuant to
any Hedging Agreements, and, following Agent's notification to such Arranging
Institution that an Event of Default has occurred, to accept and rely upon
Agent's instructions and agreements with respect to all matters arising in
connection with such Hedging Agreement and the related application. Borrower may
or may not be the "applicant" or "account party" with respect to such letter of
credit.
(d) Compensation for Hedging Agreement Undertakings. Any and all
charges, commissions, fees, and costs incurred by Agent relating to the Hedging
Agreements guaranteed by the Lender Group and the Hedging Agreement Undertakings
shall be considered Lender Group Expenses for purposes of this Agreement and
immediately shall be reimbursable by Borrower to Agent.
(e) Cash Collateral. Immediately upon the termination of this
Agreement, Borrower agrees to either (i) provide cash collateral to be held by
Agent in an amount equal to 105% of the maximum amount of the Lender Group's
obligations under outstanding Hedging Agreement Undertakings, or (ii) cause to
be delivered to Agent releases of all of the Lender Group's obligations under
outstanding Hedging Agreement Undertakings. At Agent's discretion, any proceeds
of Collateral received by Agent after the occurrence and during the continuation
of an Event of Default may be held as the cash collateral required by this
Section 2.3(e).
(f) Increased Costs. If by reason of (i) any change in any
applicable law, treaty, rule, or regulation or any change in the interpretation
or application by any governmental authority of any such applicable law, treaty,
rule, or regulation, or (ii) compliance by any Arranging Institution or Agent
with any direction, request, or requirement (irrespective of whether having the
force of law) of any governmental authority or monetary authority including,
without limitation, Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect (and any successor thereto):
a. any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Hedging Agreement Undertaking or
Hedging Agreements guaranteed indemnified, participated in or with respect to
which there is any undertaking hereunder, or
41
49
b. there shall be imposed on any Arranging Institution or
Lender Group any other condition regarding any Hedging Agreement or Hedging
Agreement Undertaking;
and the result of the foregoing is to increase, directly or indirectly, the cost
to an Arranging Institution or the Lender Group of issuing, making,
guaranteeing, or maintaining any Hedging Agreement or Hedging Agreement
Undertaking, as applicable, or to reduce the amount receivable in respect
thereof by any Arranging Institution or the Lender Group, then, and in any such
case, the Lender Group may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall pay on demand such amounts as any Arranging Institution or
Agent may specify to be necessary to compensate the Arranging Institution or the
Lender Group for such additional cost or reduced receipt, together with interest
on such amount from the date of such demand until payment in full thereof at the
rate set forth in Section 2.6(a)(i) or (c)(i), as applicable. The determination
by any Arranging Institution or Agent, as the case may be, of any amount due
pursuant to this Section 2.3(f), as set forth in a certificate setting forth the
calculation thereof in reasonable detail, shall, in the absence of manifest or
demonstrable error, be final and conclusive and binding on all of the parties
hereto.
(g) Participations.
(1) Purchase of Participations. Immediately upon issuance of
any Hedging Agreement Undertaking in accordance with this Section 2.3, each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received without recourse or warranty, an undivided interest and participation
in the credit support or enhancement provided through Agent to such issuer in
connection with the issuance of such Hedging Agreement Undertaking, equal to
such Lender's Pro Rata Share of the face amount of such Hedging Agreement
Undertaking (including, without limitation, all obligations of Borrower with
respect thereto, and any security therefor or Undertaking pertaining thereto).
(2) Documentation. Upon the request of any Lender, Agent
shall furnish to such Lender copies of any Hedging Agreement, reimbursement
agreements executed in connection therewith, application for any Hedging
Agreement and credit support or enhancement provided through Agent in connection
with the entering into or arrangement of any Hedging Agreement guaranteed
hereunder or the issuance of any Hedging Agreement Undertaking, and such other
documentation as may reasonably be requested by such Lender.
(3) Obligations Irrevocable. The obligations of each Lender
to make payments to Agent with respect to any Hedging Agreement, Hedging
Agreement Undertaking or with respect to any credit support or enhancement
provided through Agent with respect to any Hedging Agreement or Hedging
Agreement Undertaking, and the obligations of Borrower to make payments to
Agent, for the account of the Lenders, shall be irrevocable, not subject to any
qualification or exception whatsoever, including any of the following
circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
42
50
(ii) the existence of any claim, setoff, defense or
other right which Borrower may have at any time against a counterparty to
any Hedging Agreement or any transferee of any Hedging Agreement (or any
Person for whom any such transferee may be acting), any Lender, Agent, any
Arranging Institution, or any other Person, whether in connection with this
Agreement, any Hedging Agreement, any Hedging Agreement Undertaking, the
transactions contemplated herein or any unrelated transactions (including
any underlying transactions between Borrower or any other Person and the
counterparty to the Hedging Agreement);
(iii) any draft, certificate or any other document
presented under any Hedging Agreement or Hedging Agreement Undertaking
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for
the performance or observance of any of the terms of any of the Loan
Documents; or
(v) the occurrence of any Default or Event of Default.
(h) Recovery or Avoidance of Payments. In the event any payment
by or on behalf of Borrower received by Agent with respect to any Hedging
Agreement Undertaking (or any guaranty by Borrower or reimbursement obligation
of Borrower relating thereto) and distributed by the Agent to the Lenders on
account of their respective participations therein, is thereafter set aside,
avoided or recovered from Agent in connection with any receivership, liquidation
or bankruptcy proceeding, the Lenders shall, upon demand by Agent, pay to Agent
their respective Pro Rata Shares of such amount set aside, avoided or recovered,
together with interest at the rate required to be paid by Agent upon the amount
required to be repaid by it.
2.4 PAYMENTS.
(a) Payments by Borrower.
(i) All payments to be made by Borrower shall be made
without set-off, recoupment, deduction, or counterclaim, except as otherwise
required by law. Except as otherwise expressly provided herein, all payments by
Borrower shall be made to Agent for the account of the Lenders at Agent's
address set forth in Section 12, and shall be made in immediately available
funds, no later than 11:00 a.m. (California time) on the date specified herein.
Any payment received by Agent later than 11:00 a.m. (California time), at the
option of Agent, shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue until such
following Business Day.
(ii) Whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
43
51
(iii) Unless Agent receives notice from Borrower prior to
the date on which any payment is due to the Lenders that Borrower will not make
such payment in full as and when required, Agent may assume that Borrower has
made such payment in full to Agent on such date in immediately available funds
and Agent may (but shall not be so required), in reliance upon such assumption,
distribute to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent Borrower has not made such payment in full
to Agent, each Lender shall repay to Agent on demand such amount distributed to
such Lender, together with interest thereon at the Reference Rate for each day
from the date such amount is distributed to such Lender until the date repaid.
(b) Apportionment, Application, and Reversal of Payments. Except
as otherwise provided with respect to Defaulting Lenders and except as may
otherwise be agreed among the Lenders, aggregate principal and interest payments
shall be apportioned ratably among the Lenders (according to the unpaid
principal balance of the Advances to which such payments relate held by each
Lender) and payments of the fees (other than fees designated for Agent's sole
and separate account) shall, as applicable, be apportioned ratably among the
Lenders. All payments shall be remitted to Agent and all such payments not
relating to principal or interest of specific Advances, or not constituting
payment of specific fees, and all proceeds of Accounts or other Collateral
received by Agent, shall be applied, first, to pay any fees, or expense
reimbursements then due to Agent from Borrower; second, to pay any fees or
expense reimbursements then due to the Lenders from Borrower; third, to pay
interest due in respect of all Advances (including Foothill Loans and Agent
Advances); fourth, to pay or prepay principal of Foothill Loans and Agent
Advances; fifth, ratably to pay principal of the Advances (other than Foothill
Loans and Agent Advances); sixth, to be held by Agent as cash collateral in
accordance with Section 2.2(e) hereof with respect to unreimbursed obligations
in respect of Letters of Credit; and seventh, ratably to pay any other
Obligations due to Agent or any Lender by Borrower.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations pursuant to Sections 2.1 and 2.2 is greater than either the Dollar
or percentage limitations set forth in Sections 2.1 or 2.2 (an "Overadvance"),
Borrower immediately shall pay to Agent, in cash, the amount of such excess,
which amount shall be used by Agent to reduce the Obligations in accordance with
the priority set forth in Section 2.4(b).
2.6 INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND
CALCULATIONS.
(a) Interest Rate. Except as provided in clause (c) and clause
(d) below, all Obligations (except for amounts undrawn under Letters of Credit
and Hedging Arrangement Usage) shall bear interest on the Daily Balance at a per
annum rate equal to the sum of (i) two and one-half percent (2.5%), plus (ii)
the Reference Rate.
(b) Letter of Credit Fee; Hedging Agreement Undertaking Fee.
Borrower shall pay Agent, for the ratable benefit of the Lender Group, a fee (in
addition to the charges, commissions, fees, and costs set forth in Section
2.2(d)) equal to 2% per annum times the amount of the undrawn Letters of Credit
(including, without limitation, the undrawn Rollover Letters of Credit).
Borrower shall pay Agent, for the ratable benefit of the Lender Group, a fee (in
44
52
addition to the charges, commissions, fees, and costs set forth in Section
2.3(d)) equal to 2% per annum times the amount of the Hedging Arrangements
Usage.
(c) Default Rate. Upon the occurrence and during the continuation
of an Event of Default, (i) all Obligations (except amounts undrawn under
Letters of Credit [including, without limitation, amounts undrawn under Rollover
Letters of Credit] and Hedging Arrangement Usage) shall bear interest at a per
annum rate equal to the sum of (A) 6.5%, plus (B) the Reference Rate, (ii) the
Letter of Credit fee provided in Section 2.6(b) shall be increased to 6.5% per
annum times the amount of the undrawn Letters of Credit that were outstanding
during the immediately preceding month, and (iii) the Hedging Agreement
Undertaking fee provided in Section 2.6(b) shall be increased to 6% per annum
times the amount of the Hedging Arrangement Usage that was outstanding during
the immediately preceding month.
(d) Minimum Interest. In no event shall the rate of interest
chargeable under Section 2.6(a) for any day be less than 8% per annum. To the
extent that interest accrued hereunder at the rate set forth in such section
would be less than the foregoing minimum daily rate, the interest rate
chargeable hereunder for such day automatically shall be deemed increased to the
minimum rate.
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Agent, at its option, without
prior notice to Borrower, to charge such interest and Letter of Credit fees, all
Lender Group Expenses (as and when incurred), the charges, commissions, fees,
and costs provided for in Section 2.2(d) (as and when accrued or incurred), the
fees and charges provided for in Section 2.11 (as and when accrued or incurred),
and all installments or other payments due under any Loan Document to Borrower's
Loan Account, which amounts thereafter shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded and shall thereafter accrue interest at the rate then applicable to
Advances hereunder.
(f) Computation. The Reference Rate as of the date of this
Agreement is ____% per annum. In the event the Reference Rate is changed from
time to time hereafter, the rate of interest provided for in Section 2.6(a) and
Section 2.6(c)(i) and (ii) automatically and immediately shall be increased or
decreased by an amount equal to such change in the Reference Rate. All interest
and fees chargeable under the Loan Documents shall be computed on the basis of a
360 day year for the actual number of days elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. It is the
intention of the parties hereto that the Agent or each Lender shall conform
strictly to usury laws applicable to it. Accordingly, if the transactions
contemplated hereby or by any other Loan Document would be usurious as to the
Agent or any Lender under laws applicable to it (including the laws of the
United States of America and the State of California or any other jurisdiction
whose laws may be mandatorily applicable to such Lender notwithstanding the
other provisions of this Agreement), then, in that event, notwithstanding
anything to the contrary in any of the Loan Documents or any agreement entered
into in connection with or as security for the Indebtedness, it is agreed as
follows: (i) the aggregate of all consideration which constitutes interest under
law
45
53
applicable to Agent or any Lender that is contracted for, taken, reserved,
charged or received by Agent or such Lender under any of the Loan Documents or
agreements or otherwise in connection with the Indebtedness shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited
by the Agent or such Lender on the principal amount of the Indebtedness (or, to
the extent that the principal amount of the Indebtedness shall have been or
would thereby be paid in full, refunded by the Agent or such Lender, as
applicable, to the Borrower); and (ii) in the event that the maturity of the
Indebtedness is accelerated by reason of an election of the holder thereof
resulting from any Event of Default under this Agreement or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to Agent or any Lender may never
include more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically by Agent or such Lender, as applicable, as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by Agent
or such Lender, as applicable, on the principal amount of the Indebtedness (or,
to the extent that the principal amount of the Indebtedness shall have been or
would thereby be paid in full, refunded by Agent or such Lender to the
Borrower). All sums paid or agreed to be paid to Agent or any Lender for the
use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to Agent or such Lender, be amortized, prorated,
allocated and spread throughout the full term of the Obligations until payment
in full so that the rate or amount of interest on account of any Obligations
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to Agent or
any Lender on any date shall be computed at the Highest Lawful Rate (as defined
below) applicable to Agent or such Lender pursuant to this Section 2.6(g) and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to Agent or such Lender would be less than the amount
of interest payable to Agent or such Lender computed at the Highest Lawful Rate
applicable to Agent or such Lender, then the amount of interest payable to Agent
or such Lender in respect of such subsequent interest computation period shall
continue to be computed at the Highest Lawful Rate applicable to Agent or such
Lender until the total amount of interest payable to Agent or such Lender shall
equal the total amount of interest which would have been payable to Agent or
such Lender if the total amount of interest had been computed without giving
effect to this Section 2.6(g). For purposes of this Section 2.6(g), the term
"applicable law" shall mean that law in effect from time to time and applicable
to the loan transaction between Borrower and the Lender Group that lawfully
permits the charging and collection of the highest permissible, lawful
non-usurious rate of interest on such loan transaction and this Agreement,
including laws of the State of California and, to the extent controlling, laws
of the United States of America. For purposes of this Section 2.6(g), "Highest
Lawful Rate" means, with respect to Agent or any Lender, the maximum
non-usurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Obligations under
the laws applicable to Agent or such Lender which are currently in effect or, to
the extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum non-usurious interest rate than
applicable laws now allow.
46
54
2.7 COLLECTION OF PROCEEDS OF COLLATERAL AND OTHER COLLECTIONS.
(a) Borrower shall at all times maintain lockboxes (the
"Lockboxes") at the Lockbox Banks and, immediately after the Closing Date (i)
shall and shall cause each of its Subsidiaries to instruct all Account Debtors
with respect to the Accounts, General Intangibles, and Negotiable Collateral of
Borrower or such Subsidiary, as the case may be, to remit all Collections in
respect thereof to such Lockboxes, and (ii) shall, and shall cause each of its
Subsidiaries to, deposit all other Collections received by Borrower from any
source immediately upon receipt into the Lockboxes, and (iii) shall request in
writing and otherwise take such steps as are necessary to ensure that all
Account Debtors forward payment directly to such Lockboxes. Borrower, each of
Borrower's Subsidiaries, Agent, and the Lockbox Banks shall enter into the
Lockbox Agreements, which among other things shall provide for the opening of a
Lockbox Account for the deposit of Collections at a Lockbox Bank. Borrower
agrees that all Collections and other amounts received by Borrower or any of its
Subsidiaries from any Account Debtor or any other source (other than the
Advances made under this Agreement) immediately upon receipt shall be deposited
into a Lockbox Account. No Lockbox Agreement or arrangement contemplated thereby
shall be modified by Borrower or any of its Subsidiaries without the prior
written consent of Agent. Upon the terms and subject to the conditions set forth
in the Lockbox Agreements, all amounts received in each Lockbox Account shall be
wired each Business Day into the Agent's Account; provided, however, that Agent
reserves the right, in its sole discretion, to require that any amounts received
in any Lockbox Account which may represent amounts attributable to trust funds
(i.e., production taxes, severance taxes, or payroll taxes) or amounts
attributable to Mineral Interests of third Persons be segregated by the Lockbox
Bank and held in a separate account or otherwise as directed by Agent.
(b) From time to time as requested by Agent, Borrower shall, and
shall cause each of its Subsidiaries to, execute and deliver Transfer Orders to
Agent, in form and substance satisfactory to Agent, with respect to all present
and future rights to payment relating to or arising from Oil and Gas Property
Collateral.
(c) The Lockboxes and Designated Account shall be cash collateral
accounts, with all cash, checks and similar items of payment in such accounts
securing payment of the Obligations and all other Indebtedness, and in which
each Loan Party shall have granted a Lien to Agent hereunder and pursuant to the
other Loan Documents.
(d) Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with such
Borrower (each a "Related Person") to (i) hold in trust for Agent all checks,
cash and other items of payment received by Borrower or any such Related Person,
and (ii) immediately upon receipt by Borrower or any Related Person of any
checks, cash or other items of payment, deposit the same into a Lockbox Account
of Borrower. Borrower and each Related Person thereof acknowledges and agrees
that all cash, checks or items of payment constituting proceeds of Collateral
are the property of Agent for the benefit of the Lenders. All proceeds of the
sale or other disposition of any Collateral, shall be deposited directly into
the applicable Lockbox Account.
47
55
2.8 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt of any
Collections by Agent (whether from transfers to Agent by the Lockbox Banks
pursuant to the Lockbox Agreements or otherwise) immediately shall be applied
provisionally to reduce the Obligations outstanding under Section 2.1, but shall
not be considered a payment on account unless such Collection item is a wire
transfer of immediately available federal funds and is made to the Agent Account
or unless and until such Collection item is honored when presented for payment;
provided, however, that Agent reserves the right, in its sole discretion, to
exclude from such provisional reduction and payment the amount of any such
Collections that Agent determines may constitute trust funds (e.g., production
taxes, severance taxes, or payroll taxes) or amounts attributable to Mineral
Interests of third Persons. From and after the Closing Date, Agent shall be
entitled to charge Borrower for two Business Days of `clearance' or `float' at
the rate set forth in Section 2.6(a) or Section 2.6(c)(i), as applicable, on all
Collections that are received by the Lockbox Banks or Agent (regardless of
whether forwarded by the Lockbox Banks to Agent, whether provisionally applied
to reduce the Obligations under Section 2.1, whether wire transferred or
otherwise paid to the Agent Account, or otherwise). This across-the-board two
Business Days clearance or float charge on all Collections is acknowledged by
the parties to constitute an integral aspect of the pricing of the Lender
Group's financing of Borrower, and shall apply irrespective of the
characterization of whether receipts are owned by Borrower or Agent, and whether
or not there are any outstanding Advances, the effect of such clearance or float
charge being the equivalent of charging two Business Days of interest on such
Collections. Should any Collection item not be honored when presented for
payment, then Borrower shall be deemed not to have made such payment, and
interest shall be recalculated accordingly. Anything to the contrary contained
herein notwithstanding, any Collection item shall be deemed received by Agent
only if it is received into the Agent Account on a Business Day on or before
11:00 a.m. California time. If any Collection item is received into the Agent
Account on a non-Business Day or after 11:00 a.m. California time on a Business
Day, it shall be deemed to have been received by Agent as of the opening of
business on the immediately following Business Day. Anything contained herein to
the contrary notwithstanding, the economic benefit of the two Business Days
clearance or float charge provided for in this Section 2.8 is not for the
ratable benefit of the Lenders, but instead shall be for the sole and separate
account of Agent.
2.9 DESIGNATED ACCOUNT. Agent, Foothill, and the Lenders are
authorized to make the Advances, and the Letters of Credit under this Agreement
based upon telephonic or other instructions received from anyone purporting to
be an Authorized Person, or without instructions if pursuant to Section 2.6(e).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the proceeds of the
Advances requested by Borrower and made by Agent, Foothill or the Lenders
hereunder. Unless otherwise agreed by Agent and Borrower, any Advance requested
by Borrower and made hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Agent
shall maintain an account on its books in the name of Borrower (the "Loan
Account") on which Borrower will be charged with all Advances made by Agent,
Foothill, or the Lenders to Borrower or for Borrower's account, including,
accrued interest, Lender Group Expenses, and any other payment Obligations of
Borrower. In accordance with Section 2.8, the Loan Account will be credited with
all payments received by Agent from Borrower or for Borrower's account,
including
48
56
all amounts received in the Agent Account from any Lockbox Bank. Agent shall
render statements regarding the Loan Account to Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Group Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and the Lender Group unless, within 30 days after
receipt thereof by Borrower, Borrower shall deliver to Agent written objection
thereto describing the error or errors contained in any such statements.
2.11 FEES. Borrower shall pay to Agent, for the ratable benefit of the
Lender Group (except as otherwise indicated), the following fees:
(a) Closing Fees. A closing fee of $200,000, which amount shall
be fully earned and nonrefundable as of the Closing Date, and which fee shall be
due and payable on the Closing Date.
(b) Unused Line Fee. On the first day of each month during the
term of this Agreement, an unused line fee in an amount equal to 0.50% per annum
times the Average Unused Portion of the Maximum Revolving Amount during the
immediately preceding month, payable in arrears.
(c) Financial Examination, Documentation, and Appraisal Fees. For
the sole and separate account of Agent: Agent's customary fee of $750 per day
per examiner, plus Agent's out-of-pocket expenses for each financial analysis
and examination (i.e., audits) of Borrower performed by personnel employed by
Agent; Agent's customary appraisal fee of $1,500 per day per appraiser, plus
Agent's out-of-pocket expenses for each appraisal of the Collateral performed by
personnel employed by Agent; and, the actual charges paid or incurred by Agent
if it elects to employ the services of one or more third Persons to perform such
financial analyses and examinations (i.e., audits) of Borrower or to appraise
the Collateral.
(d) Engineering Consultant Charges. For the sole and separate
account of Agent: the actual per hour charges paid or incurred by Agent to
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ or other engineering consultant to Agent as may be
selected by Agent in its sole discretion to perform reviews and analyses from
time to time of Borrower's authorities for expenditures, cash flow budgets,
reserve reports, development expenditures (including proposed future development
expenditures) and such other matters as may be determined by Agent, and to
provide consultation to Agent regarding the same. Notwithstanding the foregoing,
Borrower shall not be responsible for paying more than $6,000 in such charges
for any calendar month during the term of this Agreement.
(e) Loan Servicing Fee. For the sole and separate account of
Agent, on the first day of each month during the term of this Agreement, and
thereafter so long as any Obligations are outstanding, a loan servicing fee in
an amount equal to $10,000 per month, which amount shall be fully earned and
nonrefundable and be payable in arrears on the first day of each month.
49
57
(f) Extension Fee. If Borrower and the Lender Group agree to a
three month extension of the DIP Facility pursuant to Section 3.4 hereof, on the
date of such an extension an extension fee equal to the greater of (i) the
amount calculated as follows: (A) the aggregate amount of Advances outstanding
as of the close of business on the date which is 270 days after the Closing
Date, times (B) three-fourths of one percent (0.75%), or (ii) $25,000. This
extension fee shall be fully earned and non-refundable as of the date of such
extension.
2.12 PRIORITY OF ALL ADVANCES, LETTERS OF CREDIT AND HEDGING AGREEMENT
UNDERTAKINGS. All Advances made by the Lender Group to Borrower, all Letters of
Credit issued by the Lender Group for the account of Borrower and all Hedging
Agreement Undertakings issued by the Lender Group for the Borrower shall
constitute and be deemed a cost and expense of administration in the Chapter 11
Case and shall be entitled to priority under Section 364(c)(1) of the Bankruptcy
Code ahead of all other costs and expenses of administration of the kind
specified in Sections 503(b), 506(c), 507(a) or 507(b) of the Bankruptcy Code,
except the Professional Fee Carve-Out and except as otherwise provided in the
DIP Orders.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE ESTABLISHMENT OF THE DIP FACILITY.
Notwithstanding any other provision of this Agreement or any of the other DIP
Loan Documents and without affecting in any manner the rights of the Lender
Group under other Sections of this Agreement, it is understood and agreed that
the establishment of the DIP Facility and any obligation of the Lender Group (or
any member thereof) to fund any Advances or issue any Letter of Credit or enter
into any Hedging Agreement Undertaking is subject to the fulfillment to the
satisfaction of Agent and its counsel, of each of the following conditions,
which, as to required documents, may either be new documents acceptable to the
Agent and Lenders, or existing Pre-Petition Loan Documents affirmed and approved
by the Court to the satisfaction of Agent and its counsel:
(a) the Interim Financing Order shall have been entered on or
before June 30, 2000, the Interim Financing Order shall be in full force and
effect and shall not have been vacated, reversed, modified or stayed in any
respect (and, if such Order is the subject of any pending appeal, no performance
of any obligation of any party hereto shall have been stayed pending such
appeal);
(b) Agent shall have received each of the following documents, in
form and substance satisfactory to Agent, duly executed (and acknowledged, as
the case may be) by all parties and formalities contemplated thereunder, and
each such document shall be in full force and effect:
i. a Transfer Order Letter for each purchaser of Borrower's
production which has not previously executed a Transfer Order Letter in
connection with the Existing Credit Agreement, which shall be in form and
substance satisfactory to Agent;
ii. the April 1, 2000 Reserve Report; and
50
58
iii. such other documents as shall be reasonably required by
Agent.
(c) Agent shall have received a certificate from the Secretary of
Borrower attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other DIP Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same;
(d) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented by the Closing Date, certified
by the Secretary of Borrower;
(e) On the Closing Date, Borrower shall have not less than
$2,000,000 of Availability and unrestricted immediately available cash on hand
after making the payments described in Section 7.17(a) and the $200,000 due on
the Closing Date pursuant to Section 2.11(a) and after reserving as an
additional deduction from Availability an amount determined by Agent in its sole
discretion that would be sufficient to maintain Borrower's and its Subsidiaries'
Post-Petition accounts payable and other Post-Petition current liabilities
within reasonable terms;
(f) Agent shall have received evidence satisfactory to Agent
including, without limitation, a certificate executed by the Vice President -
Land and Legal of Borrower, to such effect, that, except as disclosed in
Schedule 3.1(f), no Material Adverse Change has occurred in the business,
assets, operations, prospects or financial or other condition of Borrower or any
of its Subsidiaries since January 12, 2000; and
(g) all other documents and legal matters in connection with the
transactions contemplated by this Agreement shall have been delivered, executed,
or recorded and shall be in form and substance satisfactory to Agent and its
counsel.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES, ALL LETTERS OF CREDIT AND
ALL HEDGING AGREEMENT UNDERTAKINGS. The following shall be conditions precedent
to all Advances, all Letters of Credit and all Hedging Agreement Undertakings
hereunder:
(a) the representations and warranties contained in this
Agreement and the other DIP Loan Documents shall be true and correct in all
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of any
nature prohibiting, directly or indirectly, the extending of such credit shall
have been issued and remain in force by any governmental authority against any
Borrower, Agent, the Lender Group, or any of their Designated Affiliates;
51
59
(d) the amount of the Revolving Facility Usage, after giving
effect to the requested Advance, Letter of Credit or Hedging Arrangement, shall
not exceed the Availability; and
(e) the Interim Financing Order shall be in full force and effect
and shall not have been vacated, reversed, modified or stayed in any respect
(and, if such Order is the subject of any pending appeal, no performance of any
obligation of any party hereto shall have been stayed pending such appeal).
The foregoing conditions precedent are not conditions to each Lender (i)
participating in or reimbursing Agent for such Lenders' Pro Rata Share of any
drawings under or any other amounts payable with respect to Letters of Credit
and Hedging Agreement Undertaking as provided herein, or (ii) participating in
or reimbursing Foothill or the Agent for such Lenders' Pro Rata Share of any
Foothill Loan or Agent Advance as provided herein.
3.3 CONDITION SUBSEQUENT. As a condition subsequent to the initial
establishment of the DIP Facility hereunder, Borrower shall cause the Permanent
Financing Order to be entered not later than 30 days after the date of this
Agreement (with the failure by Borrower to so cause such entry by such time to
constitute hereunder an Event of Default).
3.4 TERM.
(a) Subject to Lender Group's right at any time upon or after the
occurrence of an Event of Default to cease advancing money or extending credit
to or for the benefit of Borrower under this Agreement or under any of the DIP
Loan Agreements or under any other agreement between Borrower and the Lender
Group, this Agreement and the DIP Facility shall be in effect for the period of
time commencing on the date of entry of the Interim Financing Order and ending
on the sooner to occur of the following (the "Maturity Date"): (i) one year from
the Filing Date (provided that if Borrower has given Agent at least 30 days
prior written notice of its request for a three month extension, this period of
time may be extended for an additional three month period by written agreement
between Borrower and the Lender Group without further notice, hearing or order
of the Court), (ii) the dismissal of the Chapter 11 Case , (iii) the conversion
of the Chapter 11 Case to a case under Chapter 7, (iv) the consummation of any
Reorganization Plan, (v) the closing of a sale of all or substantially all of
the Collateral, (vi) 30 days after the entry of an order approving the sale of
all or substantially all of the Collateral (unless prior to the end of such 30
day period such proposed sale is terminated by either or both of the parties
thereto) or the contract for sale is breached by the Buyer (vii) the appointment
of a trustee or an examiner with the expanded powers in the Chapter 11 Case.
(b) The Lender Group shall have the right to terminate its
obligations under this Agreement immediately and without notice upon the
occurrence and during the continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement and the DIP Facility, all Obligations (including contingent
reimbursement obligations of Borrower with respect to any outstanding Letters of
Credit) immediately shall become due and payable
52
60
without notice or demand. No termination of the DIP Financing and this
Agreement, however, shall relieve or discharge Borrower of Borrower's duties,
obligations, or covenants hereunder or under the other DIP Loan Documents, and
Agent's continuing security interests in the Collateral, for the benefit of the
Lender Group, shall remain in effect until all Obligations have been fully and
finally discharged and the Lender Group's obligations to provide additional
credit hereunder have been terminated.
3.6 EARLY TERMINATION BY BORROWER. Borrower has the option, at any
time upon 30 days prior written notice to Agent, to terminate this Agreement and
the DIP Facility without prepayment premium or penalty by paying to Agent, for
the ratable benefit of the Lender Group, in cash, the Obligations (including an
amount equal to 105% of the undrawn amount of the Letters of Credit and the
Hedging Arrangement Usage to be held as Cash Collateral pursuant to Section
2.2(e) and 2.3(e) as applicable), in full.
3.7 [INTENTIONALLY OMITTED].
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Borrower hereby grants to Agent, for
the benefit of the Lender Group, continuing Liens on all right, title, and
interest of Borrower in and to all currently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the DIP Loan Documents (the "Agent's Liens"). The
Agent's Liens in and to the Collateral shall attach to all Collateral without
further act on the part of the Lender Group or Borrower. Anything contained in
this Agreement or any other Loan Document to the contrary notwithstanding,
except for the sale of Inventory to buyers in the ordinary course of business
and except as specifically permitted under Section 7.4, Borrower has no
authority, express or implied, to dispose of any item or portion of the
Collateral. Subject to Section 2.4(b), the secured claims of the Lender Group
secured by the Collateral shall be of equal priority, and ratable according to
the respective Obligations due each member of the Lender Group.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower
promptly shall, and shall cause each of its Subsidiaries to, endorse and deliver
physical possession of such Negotiable Collateral to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time, Agent or Agent's designee may (a) notify customers or
Account Debtors that the Accounts, General Intangibles, or Negotiable Collateral
have been assigned to Agent for the benefit of the Lender Group, or that Agent,
for the benefit of the Lender Group, has a security interest therein and (b)
collect the Accounts, General Intangibles, and Negotiable Collateral directly
and charge the collection costs and expenses to the Loan Account. Borrower
agrees that it will, and will cause each of its Subsidiaries to, hold in trust
for the Lender Group, as the Lender Group's trustee, any Collections that it
receives and immediately will deliver said Collections to Agent in their
original form as received by Borrower or any of its Subsidiaries, as the case
may be.
53
61
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. At any time upon
the request of Agent, Borrower shall, and shall cause each of its Subsidiaries
to, execute and deliver to Agent all financing statements, collateral
assignments, continuation financing statements, fixture filings, security
agreements, pledges, assignments, mortgages, leasehold mortgages, deeds of
trust, leasehold deeds of trust, endorsements of certificates of title,
applications for title, affidavits, reports, notices, schedules of accounts,
letters of authority, and all other documents that Agent reasonably may request,
in form satisfactory to Agent, to perfect and continue perfected the Agent's
Liens on the Collateral (whether now owned or hereafter arising or acquired) or
to give notice of perfection of Agent's Liens on the Collateral, and in order to
consummate fully all of the transactions contemplated hereby or under the other
DIP Loan Documents or under the DIP Orders. Without limiting the foregoing, in
the event that any of the Inventory, Equipment or other Property of Borrower
(including, without limitation, any of the Property described on Schedule
5.1(e)) from time to time constitutes a "vessel" as defined in the Ship Mortgage
Laws as codified in Chapter 313 of Title 46 of the United States Code, Borrower
shall, and shall cause each of its Subsidiaries to, execute and deliver to Agent
all preferred ship mortgages as may be necessary to create, to perfect and to
continue perfected a preferred ship mortgages Lien of Agent for the benefit of
the Lenders thereon.
4.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes, constitutes,
and appoints Agent (and any of Agent's officers, employees, or agents designated
by Agent) as Borrower's true and lawful attorney, with power to (a) if Borrower
refuses to, or fails timely to execute and deliver any of the documents
described in Section 4.4, sign the name of Borrower on any of the documents
described in Section 4.4, (b) at any time that an Event of Default has occurred
and is continuing, sign Borrower's name on any invoice or ▇▇▇▇ of lading
relating to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to Account
Debtors, (c) send requests for verification of Accounts, (d) endorse Borrower's
name on any Collection item that may come into the Lender Group's possession,
(e) at any time that an Event of Default has occurred and is continuing, notify
the post office authorities to change the address for delivery of Borrower's
mail to an address designated by Agent, to receive and open all mail addressed
to Borrower, and to retain all mail relating to the Collateral and forward all
other mail to Borrower, (f) at any time that an Event of Default has occurred
and is continuing, make, settle, and adjust all claims under Borrower's policies
of insurance and make all determinations and decisions with respect to such
policies of insurance, and (g) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the Accounts
directly with Account Debtors, for amounts and upon terms that Agent determines
to be reasonable, and Agent may cause to be executed and delivered any documents
and releases that Agent determines to be necessary. The appointment of Agent as
Borrower's attorney, and each and every one of Agent's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully and finally repaid and performed and the Lender Groups' obligations to
extend credit hereunder are terminated.
4.6 RIGHT TO INSPECT. Agent (through any of its officers, employees,
or agents) shall have the right, from time to time hereafter to inspect the
Books and to check, test, audit and appraise the Collateral in order to verify
Borrower's and its Subsidiaries' financial condition or the amount, quality,
value, condition of, or any other matter relating to, the Collateral (including
54
62
checks, tests and audits by a qualified engineer selected by Agent of Borrower's
and each of its Subsidiaries' onshore and offshore ▇▇▇▇▇, rigs, pipeline
distribution systems and operations).
4.7 CONTROL AGREEMENTS. Borrower agrees that it will not, and that it
will cause each of its Subsidiaries not to, transfer assets out of any
Securities Accounts other than as permitted under Section 7.22 and, if to
another securities intermediary, unless each of Borrower, such Subsidiary,
Agent, and the substitute securities intermediary have entered into a Control
Agreement. No arrangement contemplated hereby or by any Control Agreement in
respect of any Securities Accounts or other investment property shall be
modified by Borrower or any of its Subsidiaries without the prior written
consent of Agent. Upon the occurrence and during the continuance of a Default or
Event of Default, Agent may notify any securities intermediary to liquidate or
transfer the applicable Securities Account or any related investment property
maintained or held thereby and remit the proceeds thereof to the Agent Account.
4.8 PRE-PETITION LIENS. Borrower hereby agrees that the Pre-Petition
Liens shall and hereby do secure payment and performance of the Obligations, and
accordingly the Pre-Petition Loan Documents shall be and are hereby modified to
the extent necessary in order for the Obligations and indebtedness secured by
the Pre-Petition Liens created by the Pre-Petition Loan Documents to also
include the Obligations, and the Pre-Petition Liens shall be and are hereby
ratified, affirmed, extended and carried forward. Except for Liens that as of
the Filing Date were senior to the Pre-Petition Liens and except as otherwise
provided for in the DIP Orders and this Agreement, the Pre-Petition Liens shall
as to the Obligations constitute first priority, perfected Liens against the
Collateral.
4.9 CALIFORNIA FIELD PROPERTIES. Agent and Lenders agree that Borrower
shall not be required to execute an Oil and Gas Mortgage specifically covering
the California Field Properties provided that the DIP Orders satisfactorily
approve and establish and perfect the Lien against the California Field
Properties created herein.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement and
to establish the DIP Facility, Borrower makes the following representations and
warranties to the Lender Group which shall be true, correct, and complete in all
respects as of the date hereof, and shall be true, correct, and complete in all
respects as of the Closing Date, and at and as of the date of the making of each
Advance or Letter of Credit or Hedging Agreement Undertaking made thereafter, as
though made on and as of the date of the making of such Advance or Letter of
Credit or Hedging Agreement Undertaking (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement; provided, that, Borrower makes no representation or warranty with
respect to the California Field Properties, except that there has been no
material change regarding that property since the funding of the loan evidenced
by the Pre-Petition Loan Documents:
5.1 NO ENCUMBRANCES. Borrower has good, valid and Defensible Title to
the Collateral, free and clear of all Liens (except for Permitted Liens),
including but not limited to:
55
63
(a) Ownership of the Oil and Gas Properties listed on Schedule
5.1(a);
(b) The amount of the Working Interest and Net Revenue Interest
of the Oil and Gas Properties, as set forth on Schedule 5.1(b);
(c) All rights under the Material Contracts listed on Schedule
5.1(c);
(d) Ownership of the Real Property listed on Schedule 5.1(d); and
(e) Ownership of the Property listed on Schedule 5.1(e).
5.2 ELIGIBLE PROVED RESERVES; OWNERSHIP OF OIL AND GAS PROPERTIES.
(a) All Eligible Proved Reserves are Proved Reserves of which
Borrower has fee simple legal title to or valid leasehold interest in (in each
case, either good, marketable and indefeasible, or Defensible Title, except for
Permitted Liens), and of which Borrower is the beneficial owner of, to the full
extent of the quantity of interest specified in the most recent Reserve Report
delivered to Agent by Borrower, and all of the information with respect thereto
contained on Schedules 5.1(a), 5.1(b), 5.1(c) and 5.2(e) is true and correct.
All Mineral Interests of which the Eligible Proved Reserves are a part are in
full force and effect and Borrower is in full compliance with its obligations
thereunder. All ▇▇▇▇▇ drilled and Hydrocarbons produced with respect to such
Eligible Proved Reserves were drilled and produced in compliance in all material
respects with all applicable regulations. Schedule 5.2(a) attached hereto and
made a part hereof sets forth all authorities for expenditures outstanding as of
the date of this Agreement. There are no outstanding authorities for
expenditures which are not reflected in the most recent weekly cash flow
forecast delivered by Borrower to Agent pursuant to Section 6.2(i) hereof that
have been received by Borrower on or before the date of such weekly cash flow
forecast. Except as set forth on Schedule 5.2(a), there are no proposed, current
or completed operations under any operating agreement, unit agreement,
governmental order or otherwise associated with any Oil and Gas Properties with
respect to which Borrower has become or intends to become a non-consenting party
other than those operations commencing after the Closing Date as to which
Borrower shall have given to Agent prior written notice of Borrower's intention
to non-consent within the time periods specified in Section 7.25. All of such
Eligible Proved Reserves are a part of the Oil and Gas Properties described in
Schedule 5.1(a), are covered by the engineering reports which Borrower has
previously delivered to and which have been relied upon by Agent in connection
with this Agreement, are part of the Oil and Gas Property Collateral covered by
the Oil and Gas Property Mortgages, and are covered by Title Opinions and other
legal opinions supplemental thereto in form and substance satisfactory to Agent.
All bills (except for those which evidence Pre-Petition liabilities or are less
than 60 days past original invoice date, are not past due and do not give rise
to a Lien other than a Permitted Lien) and taxes have been paid with respect to
all Eligible Proved Reserves, other than those which are Pre-Petition
liabilities or are the subject of a bona fide dispute which is being contested
in good faith by Borrower by appropriate proceedings as to which a reserve is
established on the books of Borrower in an amount that is satisfactory to Agent
(and if a Lien secures the same or may secure the same, such Lien is subject to
a Permitted Protest).
56
64
(b) All Eligible Proved Developed Producing Reserves are Proved
Developed Producing Reserves of which Borrower has fee simple legal title to or
valid leasehold interest in (in each case, either good, marketable and
indefeasible, or Defensible Title, except for Permitted Liens), and of which
Borrower is the beneficial owner of, to the full extent of the quantity of
interest specified in the most recent Reserve Report delivered to Agent by
Borrower, and all of the information with respect thereto contained on Schedules
5.1(a), 5.1(b), 5.1(c), and 5.2(e) is true and correct.
(c) All Eligible Proved Developed Non-Producing Reserves are
Proved Developed Non-Producing Reserves of which Borrower has fee simple legal
title to or valid leasehold interest in (in each case, either good, marketable
and indefeasible, or Defensible Title, except for Permitted Liens), and of which
Borrower is the beneficial owner of, to the full extent of the quantity of
interest specified in the most recent Reserve Report delivered to Agent by
Borrower, and all of the information with respect thereto contained on Schedules
5.1(a), 5.1(b), 5.1(c), and 5.2(e) attached hereto is true and correct.
(d) All Eligible Proved Undeveloped Reserves are Proved
Undeveloped Reserves of which Borrower has fee simple legal title to or valid
leasehold interest in (in each case, either good, marketable and indefeasible,
or Defensible Title, except for Permitted Liens), and of which Borrower is the
beneficial owner of, to the full extent of the quantity of interest specified in
the most recent Reserve Report delivered to Agent by Borrower, and all of the
information with respect thereto contained on Schedules 5.1(a), 5.1(b), 5.1(c),
and 5.2(e) attached hereto is true and correct.
(e) All of Borrower's marketing arrangements with respect to its
Proved Reserves are valid, enforceable and in full force and effect. As of the
date of this Agreement, there do not exist any cumulative imbalances in gas
production or receipt of "take or pay" payments except as disclosed (as to both
existence and extent) on Schedule 5.2(e) attached hereto.
(f) Without limiting the foregoing, after giving full effect to
the Permitted Liens, Borrower owns the net revenue interests in production
attributable to the Oil and Gas Properties covered by the Oil and Gas Property
Mortgages as is reflected in the most recently delivered Reserve Report and the
ownership of such Properties shall not in any material respect obligate Borrower
to bear the costs and expenses relating to the maintenance, development and
operations of each such Property in an amount in excess of the working interest
of each such Property set forth in the most recently delivered Reserve Report.
All information contained in the most recently delivered Reserve Report is true
and correct in all material respects as of the date thereof.
(g) There has not been any Material Adverse Change in the Oil and
Gas Properties since the date of the most recent Reserve Report.
(h) Schedule 5.2(h) attached hereto and made a part hereof sets
forth as to each Oil and Gas Property owned by Borrower as of the date of this
Agreement and each Oil and Gas Property owned by Borrower as of the Closing Date
the name, location, lease description,
57
65
bonus, effective date, primary term expiration date (including whether or not
the lease covering such Oil and Gas Property is held by production), minimum
rental, rental due date, other lease payments and due dates thereof and
exploration and production status thereof.
5.3 OPERATIONS OF OIL AND GAS PROPERTIES. With respect to each Mineral
Interest which is a working interest, Borrower is the operator except as set
forth in Schedule 5.1(b) attached hereto.
5.4 EQUIPMENT. All of the Equipment is used or held for use in
Borrower's business and is fit for such purposes, subject to (a) normal wear and
tear and (b) dispositions permitted under Section 7.4.
5.5 LOCATION OF INVENTORY AND EQUIPMENT.
(a) The Inventory and Equipment are located on the Oil and Gas
Property Collateral or otherwise are located in Texas or Louisiana (or in the
Federal Outer Continental Shelf adjacent to such state). From time to time upon
the request of Agent, Borrower shall provide to Agent a list of the specific
locations of the Inventory and Equipment and the names and addresses of any
bailee, warehouseman or similar party with whom such Inventory or Equipment is
stored (and upon the reasonable request of Agent, Borrower shall obtain and
deliver to Agent a Collateral Access Agreement executed by each such bailee,
warehouseman or similar party with respect to such Inventory and Equipment).
(b) The primary accounting and business books, records and papers
of Borrower (including those pertaining to the Collateral) are kept and
maintained solely at Borrower's chief executive office set forth in the
beginning of this Agreement.
5.6 OIL AND GAS PROPERTY COLLATERAL RECORDS AND INVENTORY RECORDS.
Borrower keeps records that are correct and accurate in all material respects
itemizing and describing the kind, type, quality, and quantity of the Oil and
Gas Property Collateral and the Inventory, and Borrower's cost therefor.
5.7 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to this
Agreement and Borrower's FEIN is ▇▇-▇▇▇▇▇▇▇.
5.8 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Borrower is duly organized and existing and in good standing
under the laws of the jurisdiction of its incorporation and qualified and
licensed to do business in, and in good standing in, any state where the failure
to be so licensed or qualified could reasonably be expected to constitute a
Material Adverse Change. Each of Borrower's Subsidiaries is duly organized and
existing and in good standing under the laws of the jurisdiction of its
incorporation and qualified and licensed to do business in, and in good standing
in, any state where the failure to be so licensed or qualified could reasonably
be expected to constitute a Material Adverse Change.
58
66
(b) Set forth on Schedule 5.8, is a complete and accurate
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding and the number of such shares that are held in
Borrower's treasury. All such outstanding shares have been validly issued and,
as of the Closing Date, are fully paid, nonassessable shares free of contractual
preemptive rights. The issuance and sale of all such shares have been in
compliance with all applicable federal and state securities laws. Other than as
described on Schedule 5.8, there are no subscriptions, options, warrants, or
calls relating to any shares of Borrower's capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.
Neither Borrower nor any of its Subsidiaries is subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital Stock or any security convertible into or exchangeable for
any of its capital Stock.
(c) Borrower has no direct or indirect Subsidiaries.
5.9 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of this
Agreement and the DIP Loan Documents to which it is a party have been duly
authorized by all necessary corporate action and by the date of the initial
funding of the Advances hereunder will be authorized by the Interim Financing
Order pursuant to Sections 363 and 364 of the Bankruptcy Code.
(b) The execution, delivery, and performance by Borrower of this
Agreement and the DIP Loan Documents to which it is a party do not and will not
(i) following entry of the Interim Financing Order, violate any provision of
federal, state, or local law or regulation (including Regulations U and X of the
Federal Reserve Board) applicable to Borrower, the Governing Documents of
Borrower, or any order, judgment, or decree of any court or other Governmental
Authority binding on Borrower, (ii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
Material Contract or other material contractual obligation or material lease of
Borrower other than defaults under the Unsecured Notes Indenture, (iii) result
in or require the creation or imposition of any Lien of any nature whatsoever
upon any properties or assets of Borrower, other than Permitted Liens, or (iv)
require any approval of stockholders or any approval or consent of any Person
not previously obtained under any Material Contract or other material
contractual obligation of Borrower.
(c) Other than the taking of any action expressly required under
this Agreement and the DIP Loan Documents, the execution, delivery, and
performance by Borrower of this Agreement and the DIP Loan Documents to which
Borrower is a party do not and will not require any registration with, consent,
or approval of, or notice to, or other action with or by, any federal, state,
foreign, or other Governmental Authority or other Person.
(d) Upon entry of the Interim Financing Order and thereafter upon
entry of the Permanent Financing Order, this Agreement and the other DIP Loan
Documents to which Borrower is a party, and all other documents contemplated
hereby and thereby, when executed and delivered by Borrower will be the legally
valid and binding obligations of Borrower,
59
67
enforceable against Borrower in accordance with their respective terms, except
as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors' rights generally.
(e) Upon entry of the Interim Financing Order and thereafter upon
entry of the Permanent Financing Order, the Agent's Liens granted by Borrower to
Agent, for the benefit of the Lender Group, in and to its properties and assets
pursuant to this Agreement and the other Loan Documents are validly created,
enforceable and perfected Liens, which Liens have a first priority except to the
extent, if any, otherwise expressly provided in the DIP Orders.
(f) Neither the Borrower nor any of its Subsidiaries has
violated, and neither the Borrower, nor any Subsidiary will be in violation of,
any provisions of the Natural Gas Act or the Natural Gas Policy Act of 1978 or
any other Federal or State law or any of the regulations thereunder (including
those of the respective Conservation Commissions and Land Offices of the various
jurisdictions having authority over its Oil and Gas Properties) with respect to
its Oil and Gas Properties which would create a Material Adverse Change, and the
Borrower and each Subsidiary have or will have made all necessary rate filings,
certificate applications, well category filings, interim collection filings and
notices, and any other filings or certifications, and has or will have received
all necessary regulatory authorizations (including without limitation necessary
authorizations, if any, with respect to any processing arrangements conducted by
it or others respecting its Oil and Gas Properties or production therefrom)
required under said laws and regulations with respect to all of its Oil and Gas
Properties or production therefrom so as not to create a Material Adverse
Change. Said material rate filings, certificate applications, well category
filings, interim collection filings and notices, and other filings and
certifications contain no untrue statements of material facts nor do they omit
any statements of material facts necessary in said filings.
5.10 CLAIMS, DISPUTES, AND LITIGATION. There are no actions or
proceedings pending by or against Borrower before any court or administrative
agency and Borrower does not have knowledge or belief of any pending or
threatened litigation, governmental investigations, or claims, complaints,
actions, or prosecutions involving Borrower or any guarantor of the Obligations,
except for: (a) ongoing collection matters in which Borrower is the claimant,
petitioner or plaintiff; (b) matters disclosed on Schedule 5.10; and (c) matters
arising after the date hereof that, if decided adversely to Borrower, do not
result in and reasonably could not be expected to result in a Material Adverse
Change; and (d) the Chapter 11 Case.
5.11 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
Borrower or any guarantor of the Obligations that have been delivered by
Borrower to the Lender Group have been prepared in accordance with GAAP (except,
in the case of unaudited financial statements, for the lack of footnotes and
being subject to year-end audit adjustments) and fairly present Borrower's (or
such guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. Except as described
on Schedule 3.1(t), there has not been a Material Adverse Change with respect to
Borrower (or such guarantor, as applicable) since the date of the latest
financial statements submitted to the Lender Group on or before the Closing
Date.
60
68
5.12 NO FRAUDULENT TRANSFER. No transfer of property is being made by
Borrower and no obligation is being incurred by Borrower in connection with the
transactions contemplated by this Agreement or the other DIP Loan Documents (a)
with the intent to hinder, delay, or defraud either present or future creditors
of Borrower or (b) that constitutes a fraudulent conveyance or fraudulent
transfer under applicable law.
5.13 EMPLOYEE BENEFITS. None of Borrower, any of its Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan,
other than those listed on Schedule 5.13. Borrower, each of its Subsidiaries and
each ERISA Affiliate have satisfied the minimum funding standards of ERISA and
the IRC with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. None of Borrower or its Subsidiaries, any ERISA
Affiliate, or any fiduciary of any Plan is subject to any direct or indirect
liability with respect to any Plan under any applicable law, treaty, rule,
regulation, or agreement. None of Borrower or its Subsidiaries or any ERISA
Affiliate is required to provide security to any Plan under Section 401(a)(29)
of the IRC.
5.14 ENVIRONMENTAL CONDITION. None of the Oil and Gas Properties or
the Real Property has ever been designated or identified in any manner pursuant
to any Environmental Laws as a Hazardous Materials disposal site, or a candidate
for closure pursuant to any environmental protection statute. No Lien arising
under any Environmental Laws has attached to any revenues or to any real or
personal property owned or operated by Borrower or by any Subsidiary of
Borrower. Neither Borrower nor any Subsidiary of Borrower has received a
summons, citation, notice, or directive from the Environmental Protection Agency
or any other federal or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment in quantities which could reasonably be expected
to result in fines or penalties in excess of $50,000 in the aggregate, or in an
injunction, restraining order or similar action restricting or prohibiting
production at any Oil and Gas Property, or in a material loss of or decline in
production from any Oil and Gas Property, or in a Material Adverse Change. Each
of Borrower and each Subsidiary of Borrower has taken all steps reasonably
necessary to determine and, except as disclosed on Schedule 5.14 has determined
that no Hazardous Materials, solid waste, or oil and gas exploration and
production wastes, have been disposed of or otherwise released and there has
been no threatened release of any Hazardous Materials on or to any Property of
Borrower or any of its Subsidiaries except in compliance with Environmental Laws
and so as not to pose an imminent and substantial endangerment to public health
or welfare or the environment or only in quantities which could not reasonably
be expected to result in fines or penalties in excess of $50,000 in the
aggregate, or in an injunction, restraining order or similar action restricting
or prohibiting production at any Oil and Gas Property, or in a material loss of
or decline in production from any Oil and Gas Property, or in a Material Adverse
Change. To the extent applicable, all Property of Borrower and each of its
Subsidiaries currently satisfies, in all material respects, all design,
operation, except as disclosed on Schedule 5.14 and equipment requirements
imposed by the OPA or scheduled as of the Closing Date to be imposed by OPA
during the term of this Agreement, and Borrower does not have any reason to
believe that such Property, to the extent subject to OPA, will not be able to
maintain compliance, in all material respects, with the OPA requirements during
the term of this Agreement. Other than as disclosed on Schedule 5.14, neither
Borrower nor any of its
61
69
Subsidiaries has any known material contingent liability in connection with any
release or threatened release of any oil, Hazardous Material or solid waste into
the environment. All Hazardous Materials, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all Property of
Borrower or any of its Subsidiaries have in the past been transported, treated
and disposed of in all material respects in accordance with Environmental Laws
and so as not to pose an imminent and substantial endangerment to public health
or welfare or the environment, and all such transport carriers and treatment and
disposal facilities have been and are operating in material compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are not the
subject of any existing, pending or threatened action, investigation or inquiry
by any Governmental Authority in connection with any Environmental Laws.
5.15 COMPLIANCE WITH THE LAW. Neither Borrower nor any of its
Subsidiaries has violated any requirement of a Governmental Authority or failed
to obtain any license, permit, franchise or other governmental authorization
necessary for the ownership of the Property or the conduct of its business,
which violation or failure could reasonably be expected to result in (in the
event such violation or failure were asserted by any Person through appropriate
action) a Material Adverse Change. Except for such acts or failures to act as do
not result in and could not reasonably be expected to result in a Material
Adverse Change, the Oil and Gas Properties have been maintained, operated and
developed in a good and workmanlike manner and in conformity with all applicable
laws and all rules, regulations and orders of all duly constituted authorities
having jurisdiction and in conformity with the provisions of all leases,
subleases or other contracts comprising a part of the Mineral Interests and
other contracts and agreements forming a part of the Oil and Gas Properties;
specifically in this connection, (i) after the Closing Date, no Oil and Gas
Properties are subject to having allowable production reduced in any material
respect below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) prior to the Closing Date and (ii) none of the ▇▇▇▇▇
comprising a part of the Oil and Gas Properties are deviated from the vertical
more than the maximum permitted by applicable laws, regulations, rules and
orders, and such ▇▇▇▇▇ are, in fact, bottomed under and are producing (subject
to the exceptions provided in Section 5.30 with respect to production) from the
Oil and Gas Properties. Neither Borrower nor any of its Subsidiaries has entered
into, and the Oil and Gas Properties are not subject to, any agreements, consent
orders, administrative orders or similar obligations based on a violation or
alleged violation of Legal Requirements. Additionally, neither Borrower nor any
of its Subsidiaries has entered into, and the Oil and Gas Properties are not
subject to, any agreements, consent orders, administrative orders or similar
obligations based on a violation or alleged violation of Legal Requirements.
5.16 INSURANCE. Schedule 5.16 attached hereto contains an accurate and
complete description of all material policies of insurance owned or held by
Borrower and each Subsidiary. Except as set forth on Schedule 5.16, all such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Closing Date have been paid, and no
notice of cancellation or termination has been received with respect to any such
policy. Such policies are sufficient for compliance with all requirements of law
and of all agreements to which Borrower or any of its Subsidiaries is a party;
are valid, outstanding and enforceable policies; provide adequate insurance
coverage in at least such amounts and against at
62
70
least such risks (but including in any event public liability) as are usually
insured against in the same general area by companies engaged in the same or a
similar business for the assets and operations of Borrower and each of its
Subsidiaries; will remain in full force and effect through the respective dates
set forth in Schedule 5.16 without the payment of additional premiums except as
set forth on Schedule 5.16; and will not in any way be affected by, or terminate
or lapse by reason of, the transactions contemplated by this Agreement. Neither
Borrower nor any of its Subsidiaries has been refused any insurance with respect
to its assets or operations, nor has its coverage been limited below usual and
customary policy limits, by an insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the last three
years.
5.17 HEDGING AGREEMENT. Schedule 5.17 sets forth, as of the Closing
Date, a true and complete list of all Hedging Agreements (including commodity
price swap agreements, forward agreements or contracts of sale which provide for
prepayment for deferred shipment or delivery of oil, gas or other commodities)
of the Borrower and each of its Subsidiaries, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net ▇▇▇▇ to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied), and the
counterparty to each such agreement. Borrower has delivered true and correct
copies of each of the Hedging Agreements to Agent prior to the date of this
Agreement.
5.18 BROKERAGE FEES. No brokerage commission or finders fees has or
shall be incurred or payable in connection with or as a result of Borrower's
obtaining financing from the Lender Group under this Agreement, and neither
Borrower nor any of its Subsidiaries has utilized the services of any broker or
finder in connection with Borrower's obtaining financing from the Lender Group
under this Agreement.
5.19 PERMITS AND OTHER INTELLECTUAL PROPERTY. Except as set forth on
Schedule 5.19, Borrower owns or possesses adequate licenses or other rights to
use all Permits, patents, patent applications, trademarks, trademark
applications, service marks, service ▇▇▇▇ applications, trade names, copyrights,
trade secrets and know-how (collectively, the "Intellectual Property") that are
necessary for the operation of its business as currently conducted. No claim is
pending or threatened to the effect that Borrower infringes upon, or conflicts
with, the asserted rights of any other Person under any Intellectual Property,
and to the best of Borrower's knowledge there is no basis for any such claim
(whether pending or threatened). To the best of Borrower's knowledge, no claim
is pending or threatened to the effect that any such Intellectual Property owned
or licensed by Borrower, or in which Borrower otherwise has the right to use is
invalid or unenforceable by Borrower, and to the best of Borrower's knowledge
there is no basis for any such claim (whether or not pending or threatened). All
licenses and rights described on Schedule 5.19 pertain solely to the use or
exploitation of seismic data.
5.20 YEAR 2000 COMPATIBILITY. Borrower's management is of the
considered view that Borrower and its goods, products and services and all
suppliers and vendors to Borrower are Year 2000 Compliant.
63
71
5.21 CASH FLOW FORECAST. Borrower's reasonable best estimate of
Borrower's weekly cash flow forecast for the ten-week period commencing on June
19, 2000, is attached hereto as Schedule 5.21 and made a part hereof.
5.22 ABSENCE OF CERTAIN CHANGES. During the period from January 12,
2000 through the Closing Date, there has not been without Agent's prior written
consent:
(a) A waiver of any right relating to any of the Oil and Gas
Properties;
(b) A sale, lease or other disposition of any of the Oil and Gas
Properties;
(c) A mortgage, pledge or grant of a lien or security interest in
any of the Oil and Gas Properties other than Permitted Liens;
(d) A contract for the sale of products produced from any of the
Oil and Gas Properties;
(e) A contract between Borrower and any of its Subsidiaries; or
(f) A contract or commitment to do any of the foregoing.
5.23 OPERATING COSTS. As of the date of this Agreement, all costs and
expenses incurred in connection with the operation of the Properties have been
fully paid and discharged by Borrower, except (a) Pre-Petition liabilities, (b)
normal costs and expenses incurred in operating the Oil and Gas Properties for
which Borrower has not yet been billed, (c) costs and expenses which are the
subject of a bona fide dispute which is being contested in good faith by
Borrower by appropriate proceedings as to which a reserve is established on the
books of Borrower in an amount that is satisfactory to Agent (and if a Lien
secures or may secure such obligation, such Lien is subject to a Permitted
Protest), and (d) as disclosed on Schedule 5.23 attached hereto and made a part
hereof.
5.24 [INTENTIONALLY OMITTED.]
5.25 NO DEFAULT. Except for the Material Contracts set forth on
Schedule 5.1(c), no Material Contracts exist which pertain to the Oil and Gas
Properties of Borrower. The Material Contracts pertaining to the Oil and Gas
Properties are in full force and effect in accordance with their respective
terms, except as a result of the filing of the Chapter 11 case. Additionally,
except as a result of the filing of the Chapter 11 case, Borrower is not aware
of any event that with notice or lapse of time, or both, would constitute a
material violation or default under any Material Contracts.
5.26 LEASES. The oil and gas leases associated with the Oil and Gas
Properties are in full force and effect in accordance with their respective
terms, and there exist no material violations or defaults in the performance of
any obligation thereunder, except as a result of the filing of the Chapter 11
Case. Additionally, except as a result of the filing of the Chapter 11 Case,
64
72
Borrower is not aware of any event that with notice or lapse of time, or both,
would constitute a material violation or default under any such oil and gas
leases except as set forth on Schedule 5.26 attached hereto and made a part
hereof.
5.27 MARKETING AGREEMENTS. Except as set forth in Schedule 5.27, the
Oil and Gas Properties (and the production therefrom) are not subject to any
purchase agreement, sale agreement or similar marketing arrangement not
cancelable by Borrower on forty-five (45) days notice from the first day of the
next succeeding month, nor are any of the Properties subject to any agreements
with any companies affiliated with Borrower that cannot be terminated
immediately upon the Closing Date without penalty, cost or liability to
Borrower.
5.28 [INTENTIONALLY OMITTED.]
5.29 CONDITION OF EQUIPMENT. All of the ▇▇▇▇▇, facilities and
equipment associated with the Oil and Gas Properties are: (a) structurally sound
with no material defects known to Borrower, (b) in good operating condition, and
(c) have been and are maintained in accordance with prudent business standards.
5.30 ▇▇▇▇▇. Each oil or gas well located on the Oil and Gas Properties
is: (a) capable of producing in commercial quantities (except for up to 5
primary take-point ▇▇▇▇▇ which otherwise would be producing Hydrocarbons in
commercial quantities that have been off production for routine maintenance,
testing or repairs, temporary pipeline interruption, minor reworking operations
or minor production enhancement operations and are reasonably expected to return
to producing in commercial quantities within a reasonable time and Borrower will
use its best efforts to return them to production in commercial quantities as
soon as reasonably possible), (b) properly permitted, (c) to the best of
Borrower's knowledge, in compliance with all applicable Laws, and (d) within the
production tolerances allocated by the governmental entity or tribal authority
having appropriate jurisdiction. All of the leaseholds in which there are
located Mineral Interests of Borrower are producing Hydrocarbons in commercial
quantities except for those leaseholds which are in their primary term and have
had all rentals, delay rentals and other lease payments due under the leases and
other agreements relating thereto paid in full. Each of Borrower's producing
▇▇▇▇▇ listed on Schedule 5.1(b) is located on an Oil and Gas Property (i)
covered by title opinions and (ii) described in the legal description contained
in an Oil and Gas Property Mortgage which has been duly executed and delivered
to Agent.
5.31 NO VESSELS. None of the Inventory, Equipment or other Property of
Borrower or its Subsidiaries (including, but not limited to, any of the Property
described in Schedule 5.1(e)) constitutes a "vessel" as defined in the Ship
Mortgage Laws as codified in Chapter 313 of Title 46 of the United States Code.
5.32 SUBORDINATED DEBT. The outstanding balance owing under the Parent
Note on the date of this Agreement is a total of $30,049,412.33 plus Australian
Dollars AUS$13,155,166.87, plus interest which has accrued thereon since January
4, 2000. The outstanding balance owing under the Unsecured Notes and the
Unsecured Notes Indenture is a total of $104,750,000, plus interest which has
accrued thereon since December 15, 1999 at the rate of 9 1/2% per year.
65
73
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
shall, and shall cause each of its Subsidiaries to, do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a standard and modern system of
accounting that enables Borrower to produce financial statements in accordance
with GAAP and maintain records pertaining to the Collateral that contain
information as from time to time may be requested by Agent. Borrower also shall
keep a modern joint interest billing and remittance system with respect to each
of the Oil and Gas Properties on which it is the operator and a modern reporting
system that shows, among other things, the value, revenues and profits/losses of
the Oil and Gas Properties, volume of production and value of sales of
Hydrocarbon production, the location and condition of the Equipment and
Borrower's positions and liability exposure under the Hedging Agreements.
6.2 COLLATERAL REPORTING. Provide Agent with the following documents
at the following times in form satisfactory to Agent during the term of this
Agreement:
(a) By no later than the tenth day following the last day of each
month, a detailed update, for the previous month, of the Borrowing Base on the
form of the Borrowing Base Certificate which is attached hereto as Exhibit 6.2,
(which update shall be subject to review at Borrower's expense by ▇▇▇▇▇▇▇, ▇▇▇▇
& ▇▇▇▇▇▇▇▇ or such other petroleum engineering consultant to Agent as may be
selected by Agent in its sole discretion) or on such other form as Agent in its
sole discretion may require, including as of the end of the previous month, (i)
a detailed calculation of the NYMEX Value of each of the Oil and Gas Properties
(categorized by Proved Developed Producing Reserves, Proved Developed
Non-Producing Reserves and Proved Undeveloped Reserves, subcategories of
Eligible Proved Developed Producing Reserves, Eligible Proved Developed
Non-Producing Reserves and Eligible Proved Undeveloped Reserves, and "other"),
(ii) historical production data of the oil and gas reserves included in the Oil
and Gas Property Collateral since the date of the most recent Reserve Report,
(iii) the Oil and Gas Property Collateral prices received for production, lease
operating expenses and such other information as Agent may deem necessary or
appropriate, in Agent's sole discretion, (iv) any changes in the Oil and Gas
Property Collateral since the date of the most recent Reserve Report in
Borrower's (or such Subsidiaries', as the case may be) working interest or net
revenue interest, (v) any changes since the date of the most recent Reserve
Report in the categorization of any or all of the Oil and Gas Properties among
Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves and
Proved Undeveloped Reserves, subcategories of Eligible Proved Developed
Producing Reserves, Eligible Proved Developed Non-Producing Reserves and
Eligible Proved Undeveloped Reserves, and "other", (vi) a reconciliation and
explanation of the changes of categorization of any Oil and Gas Properties among
Proved Developed Producing Reserves, Proved Developed Non-Producing Reserves and
Proved Undeveloped Reserves, subcategories of Eligible Proved Developed
Producing Reserves, Eligible Proved Developed Non-Producing Reserves and
Eligible Proved Undeveloped Reserves, and "other", since the date of the
immediately preceding Borrowing Base Certificate, (vii) any changes in the
Borrower's working
66
74
interest or net revenue interest in the Oil and Gas Property Collateral since
the date of the previous month's Borrowing Base Certificate, and (viii) an
updated schedule, in substantially the form of Schedule 5.2(h) or such other
form as may be requested by Agent, setting forth as to each Oil and Gas Property
owned by Borrower the name, location, lease description, bonus, effective date
(including whether or not the lease covering such Oil and Gas Property is held
by production), primary term expiration date, minimum rental, rental due date,
other lease payments and due dates thereof and exploration and production status
thereof.
(b) By no later than the last day of each month, a detailed
statement of sales and revenues derived from all products produced from the Oil
and Gas Properties, for the previous month, including purchasers, prices
received, prior period adjustments to such revenues and prices, and any Material
Adverse Change affecting the sales or marketing agreements or arrangements with
the purchasers of such products;
(c) By no later than the last day of each month, a written report
to Agent, in form and substance reasonable acceptable to Agent, detailing and
aging Borrower's and each of its Subsidiaries' unpaid lease operating expenses
and unpaid other liabilities, for the previous month, with respect to which a
mineral lien, subcontractor's lien, mechanic's lien, materialmen's lien or other
Lien against any of the Collateral may arise which may have a priority superior
to Agent's Lien on such Collateral;
(d) By no later than the last day of each month, notice of all
claims, disputes, and litigation that have arisen since the date of the most
recent statement to Agent pursuant to this Section 6.2; except (i) ongoing
collection matters in which Borrower is the claimant or plaintiff; (ii) matters
that, if decided adversely to Borrower, do not result in and reasonably could
not be expected to result in a Material Adverse Change; and (iii) Pre-Petition
liabilities.
(e) By no later than the last day of each month, a written report
to Agent, in form and substance acceptable to Agent, detailing the costs
incurred and revenues received by Borrower under its Hedging Agreements for oil
and gas production;
(f) By the last day of the month following each calendar quarter
(i.e., the last day of April, July, October and January), a report, which report
is to be reviewed by ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ or such other independent
petroleum engineer consultant as designated by Agent in its sole discretion: (i)
listing the total amount actually paid by Borrower during the preceding quarter
for: (A) plugging and abandonment costs for previous or ongoing plugging and
abandonment operations pertaining to the Oil and Gas Properties, and (B) general
bond and supplemental bond payments pertaining to plugging and abandonment
costs; and (ii) estimating the future payments for (A) and (B), above, for each
of the succeeding two quarters;
(g) Reserve Reports (I) prepared as of each June 30 and December
31 (with such Reserve Reports to be delivered on or before the 60th day
following each such date), by ▇▇▇▇▇ ▇▇▇▇▇ Company or other qualified independent
petroleum engineering firm approved by Agent, and (II) prepared as of the last
day of April 2000 and thereafter as of the last day of each month (with such
Reserve Reports to be delivered on or before the 10th day following each such
67
75
date), by ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ or such other petroleum engineering
consultant to Agent as may be selected by Agent (which Reserve Reports described
in this subclause (II) shall be based upon the most recently delivered Reserve
Report described in subclause (I) above and such other information as may be
provided by Borrower, as adjusted by ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ or such other
petroleum engineering consultant, as the case may be, in such manner and to such
extent as such consultant deems appropriate in its reasonable discretion). Each
Reserve Report shall be in form and substance satisfactory to Agent, and shall:
(i) be accompanied by a certification of Borrower to the effect that nothing has
occurred since the date of the last Reserve Report that could reasonably be
expected to result in a Material Adverse Change, except that which has
previously been disclosed to Agent in writing; and (ii) contain such other
information as may be reasonably requested by Agent;
Each delivery of a Reserve Report or a Borrowing Base
Certificate by Borrower to Agent shall constitute a representation and warranty
by Borrower to Agent that, unless otherwise disclosed to Agent in writing on or
prior to the date of such delivery, Borrower (or its Subsidiary, as the case may
be) owns the Oil and Gas Properties described in the Reserve Report free and
clear of any Liens (except Permitted Liens);
(h) Upon request by Agent from time to time, copies of Borrower's
lease files, well files and contract files (including production reports on each
well, marketing contracts, and information regarding locations of and equipment
located on each well);
(i) By no later than the first Business Day of each week, a ten
week cash flow forecast for Borrower, accompanied by copies of any authorities
for expenditures reflected in such cash flow forecast, together with a
comparison for each week during the immediately preceding five week period of
Borrower's actual results to the cash flow forecasted by Borrower for such week
(which cash flow budgets, authorities for expenditures, actual results and
comparisons shall be subject to review at Borrower's expense for Agent by
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ or such other petroleum engineering consultant to Agent
as may be selected by Agent);
(j) Such other information, reports, statements, materials, and
data as to the ▇▇▇▇▇ operated by Borrower or in which Borrower otherwise has an
interest and the accounting and billing procedures utilized by Borrower in
connection with such ▇▇▇▇▇ as shall be reasonably requested by Agent, including,
without limitation, relevant computer programs, disks and tapes; and
(k) Such other reports as to the Collateral or the business or
financial condition of Borrower as Agent may reasonably request from time to
time.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Agent,
with copies to each Lender: (a) as soon as available, but in any event within 30
days after the end of each month during each of Borrower's fiscal years, a
company prepared balance sheet, income statement, and statement of cash flow
covering Borrower's operations during such period; and (b) as soon as available,
but in any event within 90 days after the end of each of Borrower's fiscal
years, financial statements of Borrower for each such fiscal year, audited by
independent certified public accountants reasonably acceptable to Agent and
certified, without any qualifications other
68
76
than a qualification as to Borrower's ability to continue as a going concern, by
such accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Agent stating that such accountants
do not have knowledge of the existence of any Default or Event of Default. Such
audited financial statements shall include a balance sheet, profit and loss
statement, and statement of cash flow and, if prepared, such accountants' letter
to management. Borrower also agrees to deliver quarterly unaudited and annual
audited financial statements prepared on a consolidated basis for Parent,
Borrower and Parent's other Subsidiaries. Upon request, Borrower agrees to
deliver to Agent the detail of all amounts paid to Parent or any of Borrower's
other Affiliates from time to time.
Together with the above, Borrower also shall deliver to Agent, with
copies to each Lender, Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual
Reports, and Form 8-K Current Reports, and any other filings made by Borrower
with the SEC, if any, as soon as the same are filed, or any other information
that is provided by Borrower to its shareholders, and any other information
reasonably requested by the Lender Group relating to the financial condition of
Borrower.
Each month, together with the financial statements provided pursuant
to Section 6.3(a), Borrower shall deliver to Agent, with copies to each Lender,
a certificate signed by its chief financial officer to the effect that: (i) all
financial statements delivered or caused to be delivered to any one or more
members of the Lender Group hereunder have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack of
footnotes and being subject to year-end audit adjustments) and fairly present
the financial condition of Borrower, (ii) the representations and warranties of
Borrower contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate, as
though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date), (iii) for each
month that also is the date on which a financial covenant in Section 7.20 is to
be tested, a Compliance Certificate demonstrating in reasonable detail
compliance at the end of such period with the applicable financial covenants
contained in Section 7.20, and (iv) on the date of delivery of such certificate
to Agent there does not exist any condition or event that constitutes a Default
or Event of Default (or, in the case of clauses (i), (ii), or (iii), to the
extent of any non-compliance, describing such non-compliance as to which he or
she may have knowledge and what action Borrower has taken, is taking, or
proposes to take with respect thereto).
As soon as available and in any event within forty-five (45) days
after the last day of each calendar quarter, a report, in form and substance
reasonably satisfactory to the Agent, setting forth as of the last Business Day
of such calendar quarter, a true and complete list of all Hedging Agreements
(including commodity price swap agreements, forward agreements or contracts of
sale which provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of the Borrower and each Subsidiary, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net ▇▇▇▇ to market values therefor, any new credit
support agreements relating thereto, any margin required or supplied under any
credit support document, and the counterparty to each such agreement.
69
77
Borrower shall have issued written instructions to its independent
certified public accountants authorizing them to communicate with Agent and to
release to Agent whatever financial information concerning Borrower that Agent
may request. Borrower hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Agent, at Borrower's expense,
copies of Borrower's financial statements, papers related thereto, and other
accounting records of any nature in their possession, and to disclose to Agent
any information they may have regarding Borrower's business affairs and
financial conditions.
Borrower shall cause its counsel in the Chapter 11 Case to provide
Agent's counsel with copies of all pleadings, motions, applications and other
papers to the Court.
6.4 TAX RETURNS. Deliver to Agent copies of each of Borrower's future
federal income tax returns, and any amendments thereto, within 30 days of the
filing thereof with the Internal Revenue Service.
6.5 GUARANTOR REPORTS. Cause any Guarantor of any of the Obligations
to deliver its annual financial statements at the time when Borrower provides
its audited financial statements to Agent and copies of all federal income tax
returns as soon as the same are available and in any event no later than 30 days
after the same are required to be filed by law.
6.6 [INTENTIONALLY OMITTED].
6.7 TITLE TO EQUIPMENT. Upon Agent's request, Borrower promptly shall
deliver to Agent, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment.
6.8 MAINTENANCE OF OIL AND GAS PROPERTY COLLATERAL AND EQUIPMENT;
OPERATION OF BUSINESS.
(a) At its expense, do or cause to be done all things necessary
to preserve and keep in good repair, working order and efficiency (except for
normal wear and tear) all of its Oil and Gas Property Collateral and other
material Properties relating to Borrower's business including, without
limitation, all equipment, machinery and facilities used in the operation of the
Borrower's business, and from time to time make all the necessary repairs,
renewals and replacements so that at all times the state and condition of its
Oil and Gas Property Collateral and other such material Property will be fully
preserved and maintained, allowing for depletion in the ordinary course of
business, except to the extent a portion of such Oil and Gas Property Collateral
is no longer capable of producing Hydrocarbons in commercial quantities (in
which case Borrower shall fully comply with all of its obligations and Legal
Requirements pertaining to plugging and abandoning its ▇▇▇▇▇ related to such
portion). Borrower shall, and shall cause each of its Subsidiaries to, promptly:
(i) pay and discharge, or make reasonable and customary efforts to cause to be
paid and discharged, all delay rentals, royalties, expenses and indebtedness
accruing under the leases or other agreements affecting or pertaining to its Oil
and Gas Property Collateral other than Pre-Petition obligations; (ii) perform or
make reasonable and customary efforts to cause to be performed, in accordance
with industry standards, all obligations required by each and all of the
assignments, deeds, leases, sub-leases, contracts and agreements
70
78
affecting its interests in its Oil and Gas Property Collateral and other
material Properties necessary or desirable to maintain its interests therein in
full force and effect, and all other material obligations required under such
assignments, deeds, leases, subleases, contracts and agreements other than
Pre-Petition obligations; (iii) do all other things necessary to keep
unimpaired, except for Permitted Liens, its rights with respect to each and all
of the assignments, deeds, leases, sub-leases, contracts and agreements
affecting its interests in its Oil and Gas Property Collateral and other
material Property and prevent any forfeiture thereof or a default thereunder
other than as a result of the filing of the Chapter 11 Case, except (A) to the
extent a portion of such Oil and Gas Property Collateral is no longer capable of
producing Hydrocarbons in economically reasonable amounts and (B) for
dispositions permitted by Section 7.4 hereof. Borrower shall, and shall cause
each of its Subsidiaries, to operate its Oil and Gas Property Collateral and
other material Property or cause or make reasonable and customary efforts to
cause such Oil and Gas Property Collateral and other material Properties to be
operated in a reasonably prudent manner in accordance with the practices of the
industry and in compliance in all material respects with all applicable
contracts and agreements and in compliance in all material respects with all
Legal Requirements.
(b) At its expense, maintain the Equipment in good operating
condition and repair (ordinary wear and tear excepted), and make all necessary
replacements thereto, so that the value and operating efficiency thereof shall
at all times be maintained and preserved. Other than those items of Equipment
that constitute fixtures attached to the lands covered by Mineral Interests
subject to the Oil and Gas Mortgages, Borrower shall not permit any item of
Equipment to become a fixture to real estate or an accession to other property,
and such Equipment shall at all times remain personal property.
(c) At its expense, (i) explore, develop and maintain the leases,
▇▇▇▇▇, units and acreage to which the Oil and Gas Property Collateral pertains
in a prudent and economical manner, (ii) act prudently and in accordance with
customary industry standards in managing or operating the Oil and Gas Property
Collateral, (iii) subject to Permitted Protests and Pre-Petition obligations,
pay and promptly discharge all rentals, delay rentals, royalties, overriding
royalties, payments of production and other indebtedness or obligations accruing
under the leases comprising the Oil and Gas Property Collateral, and perform
every act required to keep such leases in full force and effect, (iv) deliver to
Agent all operating agreements, pooling or unitization agreements, sales or
processing contracts, drilling and/or development agreements, pipeline
transportation agreements and other material agreements which pertain to the Oil
and Gas Property Collateral, (v) deliver to Agent production information on a
monthly basis, (vi) deliver to Agent contemporaneous notices of all reports,
forms and other documents and data submitted by Borrower or any of its
Subsidiaries to the Federal Energy Regulatory Commission, the applicable state
conservation agencies and any other applicable Governmental Authorities
pertaining to any event, occurrence or circumstance which could reasonably be
expected to result in fines or penalties in excess of $50,000 in the aggregate,
or in an injunction, restraining order or similar action restricting or
prohibiting production at any Oil and Gas Property, or in a material loss or
decline in production from any Oil and Gas Property, or is adverse to any of the
Lender Group, or has the potential to impair or otherwise adversely affect any
of the Liens held by Agent for the benefit of the Lender Group or could
reasonably be expected to result in a Material Adverse Change (and, upon request
by Agent, Borrower shall deliver to Agent copies of all such reports, forms and
other documents and data as are requested by Agent), (vii) not mortgage, pledge
or
71
79
otherwise encumber or sell the Oil and Gas Property Collateral except to the
limited extent specifically permitted under this Agreement, (viii) not alter any
Material Contract relating to the Oil and Gas Property Collateral except to the
limited extent specifically permitted under this Agreement, (ix) subject to
Permitted Protests, pay on or before the due date thereof all of Borrower's and
each of its Subsidiaries' lease operating expenses and other liabilities with
respect to which a mineral lien, subcontractor's lien, mechanic's lien,
materialmen's lien or other Lien against any of the Collateral may arise which
may have a priority superior to Agent's Lien on such Collateral, and (x) perform
all acts and execute such documents as Agent may require in order to maintain
the existence, perfection and first priority of Agent's Lien on the Oil and Gas
Property Collateral and the other Collateral subject to Permitted Liens.
6.9 TAXES.
(a) Cause all Post-Petition assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property or assets to be paid in full, before
delinquency or before the expiration of any extension period, except to the
extent that the validity of such assessment or tax (other than production taxes,
severance taxes, payroll taxes or taxes that are the subject of a United States
federal tax lien) shall be the subject of a Permitted Protest.
(b) Make due and timely payment or deposit of all Post-Petition
federal, state, and local taxes, assessments, or contributions required of it by
law, and will execute and deliver to Agent, on demand, appropriate certificates
attesting to the payment thereof or deposit with respect thereto.
(c) Make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws with respect to
Post-Petition tax liabilities, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Agent with proof satisfactory to Agent indicating
that Borrower has made such payments or deposits.
6.10 INSURANCE.
(a) At its expense, keep the Collateral insured against loss or
damage by fire, theft, explosion, sprinklers, and all other hazards and risks,
and in such amounts as are ordinarily insured against by other owners in similar
businesses. Borrower shall also maintain business interruption, public liability
and property damage insurance relating to Borrower's ownership and use of
Collateral. In addition to and not in limitation of the foregoing, Borrower
shall at its expense maintain the insurance policies described in Schedule 5.16
in full force and effect.
(b) At its expense, obtain and maintain (i) insurance of the type
necessary to insure the Improvements and Chattels (as such terms are
respectively defined in the Oil and Gas Mortgages and in the Real Property
Mortgages), for the full replacement cost thereof against any loss by fire,
lightning, windstorm, hail, explosion, aircraft, smoke damage, vehicle damage,
earthquakes, elevator collision, property damage by blowout and cratering,
completed
72
80
operations and broad form contractual liability as respects any contract in
which Borrower or any of its Subsidiaries may enter into under the terms of a
joint operating agreement, and other risks from time to time included under
"extended coverage" policies in such amounts and against such risks as Agent may
require, but in any event in amounts sufficient to prevent Borrower from
becoming a co-insurer under such policies; (ii) combined single limit bodily
injury and property damage insurance against any loss, liability or damages on,
about, or relating to each parcel of Oil and Gas Property Collateral and Real
Property Collateral, in an amount of not less than $50,000,000; (iii) operator's
extra expense insurance covering the costs of controlling a blowout, the
expenses involved in re-drilling or restoring the ▇▇▇▇▇, certain other related
costs and seepage and pollution liability (the limits of this insurance may vary
according to the depth and location of the well, all as is usual and customary
in the energy business); and (iv) insurance for such other risks as Agent may
require. Replacement costs, at Agent's option, may from time to time be
redetermined by an insurance appraiser, satisfactory to Agent.
(c) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be satisfactory to Agent. All
insurance required herein shall be written by companies which have a Best's
rating of A for capital and X for financial stability. All hazard insurance and
such other insurance as Agent shall specify, shall contain a mortgagee
endorsement satisfactory to Agent, showing Agent as sole loss payee thereof, and
shall contain a waiver of warranties. Every policy of insurance referred to in
this Section 6.10 shall contain an agreement by the insurer that it will not
cancel such policy except after 30 days prior written notice to Agent and that
any loss payable thereunder shall be payable notwithstanding any act or
negligence of Borrower or the Lender Group which might, absent such agreement,
result in a forfeiture of all or a part of such insurance payment and
notwithstanding (i) occupancy or use of the Collateral for purposes more
hazardous than permitted by the terms of such policy, (ii) any foreclosure or
other action or proceeding taken by the Lender Group pursuant to the Oil and Gas
Mortgages or the Real Property Mortgages upon the happening of an Event of
Default, or (iii) any change in title or ownership of the Collateral. Borrower
shall deliver to Agent certified copies of such policies of insurance and
evidence of the payment of all premiums therefor.
(d) Original policies or certificates thereof satisfactory to
Agent evidencing such insurance shall be delivered to Agent at least 30 days
prior to the expiration of the existing or preceding policies. Borrower shall
give Agent prompt notice of any loss covered by such insurance, and Borrower
shall have the right to adjust losses of up to $5,000,000 in the aggregate as
long as no Event of Default has occurred. Agent shall have the exclusive right
upon the occurrence and during the continuance of any Event of Default to adjust
all losses payable under any such insurance policies and in any event shall have
the right to adjust all losses of greater than $5,000,000 in the aggregate
regardless of the occurrence or existence of an Event of Default, in each case
without any liability to Borrower whatsoever in respect of such adjustments. Any
monies received as payment for any loss under any insurance policy including the
insurance policies mentioned above, shall be paid over to Agent to be applied at
the option of the Required Lenders either to the prepayment of the Obligations
without premium, in such order or manner as Agent may elect, or shall be
disbursed to Borrower under stage payment terms satisfactory to Agent for
application to the cost of repairs, replacements, or restorations. All repairs,
replacements, or restorations shall be effected with reasonable promptness and
shall be of a value at least equal to the value of the items or property
destroyed prior to such damage or destruction.
73
81
Upon the occurrence of an Event of Default, the Lender Group shall have the
right to apply all prepaid premiums to the payment of the Obligations in such
order or form as Agent shall determine.
(e) Borrower shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this Section 6.10, unless Agent is included thereon as named insured with
the loss payable to Agent under a standard mortgagee endorsement acceptable to
Agent. Borrower immediately shall notify Agent whenever such separate insurance
is taken out, specifying the insurer thereunder and full particulars as to the
policies evidencing the same, and originals of such policies immediately shall
be provided to Agent.
(f) Unless Borrower is responsible for, and is maintaining its
own insurance pursuant to the terms of the applicable operating agreement,
Borrower shall, and shall cause each of its Subsidiaries to, use its best
efforts to cause the operator of each Oil and Gas Property Collateral in which
Borrower or any of its Subsidiaries owns a non-operating working interest to
maintain for the benefit of all working interest owners insurance of the types
and in the coverage amounts and with reasonable deductibles as is usual and
customary, including those specified in Section 6.10(b), to name the
non-operating working interest owners, including Borrower and its Subsidiaries,
as an additional insured on the liabilities, and to otherwise have such
insurance comply with the requirements specified in Section 6.10(c). Borrower
shall, and shall cause each of its Subsidiaries to, use its best efforts to
obtain from its operators certificates of insurance evidencing coverage of the
Oil and Gas Property Collateral as set forth above as and when requested by
Agent.
6.11 NO SETOFFS OR COUNTERCLAIMS. Make payments hereunder and under
the other DIP Loan Documents by or on behalf of Borrower without setoff or
counterclaim and free and clear of, and without deduction or withholding for or
on account of, any federal, state, or local taxes.
6.12 LOCATION OF INVENTORY AND EQUIPMENT. Except to dispose of
Collateral to the extent permitted under Section 7.4, keep the Inventory and
Equipment only at the locations identified in Schedule 6.12, in the Oil and Gas
Property Mortgages and in other locations in Texas or Louisiana (or in the
Federal Outer Continental Shelf adjacent to such state); provided, however, that
Borrower may amend Schedule 6.12 so long as such amendment occurs by written
notice to Agent not less than 30 days prior to the date on which the Inventory
or Equipment is moved to such new location, so long as such new location is
within the continental United States, and so long as, at the time of such
written notification, Borrower provides any financing statements or fixture
filings necessary or advisable to perfect and continue perfected the Agent's
Liens on such assets and also provides to Agent a Collateral Access Agreement to
the extent requested by Agent.
6.13 COMPLIANCE WITH LAWS.
(a) Comply with the requirements of all applicable laws, rules,
regulations, and orders of any Governmental Authority, including all
Environmental Laws, the Fair Labor Standards Act, the Americans With
Disabilities Act, and the Bankruptcy Code other
74
82
than laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not result in and reasonably could not
be expected to result in a Material Adverse Change.
(b) Establish and implement such procedures as may be reasonably
necessary to continuously determine and assure that any failure of the following
would not result in and reasonably could not be expected to result in a Material
Adverse Change: (i) all Property of the Borrower and its Subsidiaries and the
operations conducted thereon and other activities of the Borrower and its
Subsidiaries are in compliance with and do not violate the requirements of any
Environmental Laws, (ii) no oil, Hazardous Materials or solid wastes are
disposed of or otherwise released on or to any Property owned by any such party
except in compliance with Environmental Laws, (iii) no Hazardous Materials will
be released on or to any such Property in a quantity equal to or exceeding that
quantity which requires reporting pursuant to Section 103 of CERCLA, and (iv) no
oil, oil and gas exploration and production wastes, or Hazardous Materials is
released on or to any such Property so as to pose an imminent and substantial
endangerment to public health or welfare or the environment.
(c) Promptly notify Agent in writing of any threatened action,
investigation or inquiry by any Governmental Authority of which Borrower or any
of its Subsidiaries has knowledge in connection with any Environmental Laws,
excluding routine testing and minor corrective action.
(d) Provide environmental audits and tests in accordance with
American Society for Testing and Materials standards, as requested by Agent
(such request to be based upon Agent's good faith belief that a release of
Hazardous Materials has occurred or other violation of any Environmental Laws
has occurred that could reasonably be expected to result in fines or penalties
in excess of $50,000 in the aggregate, or in an injunction, restraining order or
similar action restricting or prohibiting production at any Oil and Gas
Property, or in a material loss of or decline in production from any Oil and Gas
Properties, or in a Material Adverse Change) or as otherwise required to be
obtained by Agent or by any Governmental Authority in connection with Borrower's
existing and hereafter acquired Oil and Gas Properties or other material
Properties.
6.14 EMPLOYEE BENEFITS.
(a) Cause to be delivered to Agent: (i) promptly, and in any
event within 10 Business Days after Borrower or any of its Subsidiaries knows or
has reason to know that an ERISA Event has occurred that has resulted in or
reasonably could be expected to result in a Material Adverse Change, a written
statement of the chief financial officer of Borrower describing such ERISA Event
and any action that is being taking with respect thereto by Borrower, any such
Subsidiary or ERISA Affiliate, and any action taken or threatened by the IRS,
Department of Labor, or PBGC. Borrower or such Subsidiary, as applicable, shall
be deemed to know all facts known by the administrator of any Benefit Plan of
which it is the plan sponsor, (ii) promptly, and in any event within 3 Business
Days after the filing thereof with the IRS, a copy of each funding waiver
request filed with respect to any Benefit Plan and all communications received
by Borrower, any of its Subsidiaries or, to the knowledge of Borrower, any ERISA
75
83
Affiliate with respect to such request, and (iii) promptly, and in any event
within 3 Business Days after receipt by Borrower, any of its Subsidiaries or, to
the knowledge of Borrower, any ERISA Affiliate, of the PBGC's intention to
terminate a Benefit Plan or to have a trustee appointed to administer a Benefit
Plan, copies of each such notice.
(b) Cause to be delivered to Agent, upon Agent's request, each of
the following: (i) a copy of each Plan (or, where any such plan is not in
writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan; (v) a listing of all Multiemployer Plans, with the aggregate
amount of the most recent annual contributions required to be made by Borrower
or any ERISA Affiliate to each such plan and copies of the collective bargaining
agreements requiring such contributions; (vi) any information that has been
provided to Borrower or any ERISA Affiliate regarding withdrawal liability under
any Multiemployer Plan; and (vii) the aggregate amount of the most recent annual
payments made to former employees of Borrower or its Subsidiaries under any
Retiree Health Plan.
6.15 LEASES. Pay when due all rents and other amounts payable under
any leases to which Borrower is a party or by which Borrower's properties and
assets are bound, unless such payments are the subject of a Permitted Protest or
are in respect of Pre-Petition liabilities. To the extent that Borrower fails
timely to make payment of such rents and other amounts payable when due under
its leases, Agent shall be entitled, in its discretion, to reserve an amount
equal to such unpaid amounts against the Borrowing Base.
6.16 BROKER COMMISSIONS. Pay any and all brokerage commission or
finders fees incurred or payable in connection with or as a result of Borrower's
obtaining financing from the Lender Group under this Agreement.
6.17. OIL AND GAS PROPERTY TITLE INFORMATION.
(a) On or before the delivery to Agent of each Reserve Report
required by Section 2.1(b) or Section 6.2, Borrower will provide Agent with
current Title Opinions covering such of the Oil and Gas Property Collateral
acquired after the Closing Date as shall be required by Agent for which Title
Opinions have not previously been provided to Agent and such other Oil and Gas
Property Collateral as Agent may from time to time require so that at all times
the value of the Eligible Proved Reserves for which Title Opinions are or have
been provided to Agent shall equal or exceed ninety-five percent (95%) of the
NYMEX Value of all of the Oil and Gas Property Collateral (on an MMCF equivalent
basis based upon the industry standard 6:1 conversion ratio) as set forth in the
most recently delivered Reserve Report of Proved Reserves.
(b) Borrower shall cure all title defects or exceptions which are
not Permitted Liens, or substitute acceptable Oil and Gas Property Collateral
with no title defects or
76
84
exceptions except for Permitted Liens covering Oil and Gas Property Collateral
of an equivalent value, within 30 days after a request by Agent to cure such
defects or exceptions. If the Borrower is unable to cure any title defect
requested by Agent to be cured within the 30 day period, such failure to cure
shall not be a Default or an Event of Default, but instead such Property shall
remain excluded from the Borrowing Base as provided in Section 2.1 until such
time as title is satisfactory to Agent. Upon the discovery of any title defect
or exception which is not a Permitted Lien, Agent shall have the right to
exercise the right to remedy such title defect or exception in its sole
discretion from time to time (and any failure to so exercise this remedy at any
time shall not be a waiver as to future exercise of the remedy by Agent).
6.18 ADDITIONAL COLLATERAL.
(a) (i) Should Borrower or any of its Subsidiaries purchase,
otherwise acquire or own any Oil and Gas Property that is not already included
in the Oil and Gas Property Collateral and the subject of an Oil and Gas
Property Mortgage in favor of Agent for the benefit of the Lender Group,
Borrower will grant or cause to be granted to Agent as security for the
Obligations a first-priority Lien (subject only to Permitted Liens) on all of
Borrower's or such Subsidiary's, as the case may be, interest in such Oil and
Gas Properties not already subject to a Lien of such an Oil and Gas Property
Mortgage simultaneously with Borrower's or such Subsidiary's purchase,
acquisition or ownership of such Oil and Gas Property which Lien will be created
and perfected by and in accordance with the provisions of an Oil and Gas
Property Mortgage and other security agreements and financing statements, or
other security instruments, all in form and substance satisfactory to Agent in
its sole discretion and in sufficient executed (and acknowledged where necessary
or appropriate) counterparts for recording purposes; and (ii) should Borrower or
any of its Subsidiaries purchase, otherwise acquire or own any Real Property
that is not already included in the Real Property Collateral and the subject of
a Real Property Mortgage in favor of Agent for the benefit of the Lender Group,
Borrower will grant or cause to be granted to Agent as security for the
Obligations a first-priority Lien (subject only to Permitted Liens) on all of
Borrower's or such Subsidiary's, as the case may be, interest in such Real
Property not already subject to a Lien of such a Real Property Mortgage
simultaneously with Borrower's or such Subsidiary's purchase, acquisition or
ownership of such Real Property which Lien will be created and perfected by and
in accordance with the provisions of a Real Property Mortgage and other security
agreements and financing statements, or other security instruments, all in form
and substance satisfactory to Agent in its sole discretion and in sufficient
executed (and acknowledged where necessary or appropriate) counterparts for
recording purposes.
(b) Concurrently with the granting of the Lien or other action
referred to in Section 6.18(a) above as to Oil and Gas Property, Borrower will
provide to Agent title information and a title opinion in form and substance
satisfactory to Agent in its sole discretion with respect to Borrower's or such
Subsidiary's, as the case may be, interests in such Oil and Gas Properties, and
concurrently with the granting of the Lien or other action referred to in
Section 6.18(a) above as to Real Property, Borrower will provide to Agent title
information and a mortgagee title insurance commitment in form and substance
satisfactory to Agent in its sole discretion with respect to Borrower's or such
Subsidiary's, as the case may be, interests in such Real Property.
77
85
(c) Borrower shall cause all of its present and future
Subsidiaries that are 50% or more owned directly or indirectly by Borrower to
execute a Guaranty Agreement and Security Agreements.
6.19 HEDGING AGREEMENTS. Maintain in effect one or more Hedging
Agreements with respect to its Hydrocarbon production with one or more
investment grade counterparties, rated Aa1 or better by ▇▇▇▇▇'▇, A- or better
according to Standard & Poor's, or the equivalent by a rating agency acceptable
to Agent, the aggregate notional volumes of Hydrocarbons the subject of such
Hedging Agreements for the period ending not less than 3 months from the date of
determination of any compliance with this Section 6.19 shall constitute, at all
times, not less than 25% and not more than 75% of Borrower's forecasted
Hydrocarbon production (on an MMCF equivalent basis based upon the industry
standard 6:1 conversion ratio) for such period from Oil and Gas Properties
classified as Proved Developed Producing Reserves as of the date of the most
recent Reserve Report. Borrower shall use such Hedging Agreements solely as a
part of its normal business operations as a risk management strategy and/or
hedge against changes resulting from market conditions related to Borrower's and
its Subsidiaries' oil and gas operations and not as a means to speculate for
investment purposes on trends and shifts in financial or commodities markets.
Borrower shall notify Agent immediately upon becoming aware (in any event not
later than the close of business on the same Business Day) that its production
of Hydrocarbons could reasonably be expected to be insufficient to meet its
obligations under any Hedging Agreements.
6.20 FURTHER ASSURANCES. Cure promptly any defects in the creation or
issuance of the Obligations or the execution or delivery of the Obligations
and/or DIP Loan Documents, including this Agreement. Borrower at its expense
shall, and shall cause each or its Subsidiaries to promptly execute and deliver
to Agent upon request all such other documents, agreements and instruments to
comply with or accomplish the covenants and agreements of Borrower or any of its
Subsidiaries in the DIP Loan Documents, including this Agreement, or to further
evidence and more fully describe the collateral intended as security for the
Obligations, or to correct any omissions in the DIP Loan Documents, or to state
more fully the security obligations set out herein or in any of the DIP Loan
Documents, or to perfect, protect or preserve any Liens created pursuant to any
of the DIP Loan Documents, or to make any recordings, to file any notices or
obtain any consents, all as may be reasonably necessary or appropriate in
connection therewith.
6.21 FINANCIAL ADVISOR. Within ten (10) days after the Filing Date,
retain at Borrower's expense the services of a financial advisor reasonably
acceptable to the Agent and its counsel, to assist the Borrower in matters
related to the financial and business operations of Borrower during the Chapter
11 Case.
6.22 NOTICE OF COURSE OF ACTION. Within 180 days after the Filing
Date, deliver to Agent written notice as to whether Borrower has elected in the
Chapter 11 Case to sell its assets or rather has elected to reorganize its
business. In the event of an election by Borrower to sell its assets in the
Chapter 11 Case, such written notice shall contain an explanation of Borrower's
plan and strategy for the marketing and sale of Borrower's assets, including,
without limitation, a good faith, best efforts timetable for the sale of the
assets of Borrower and shall also contain an
78
86
explanation of the method and manner by which all of the Obligations will be
paid off in full in cash by the Maturity Date. In the event of an election by
Borrower to reorganize its business, such written notice shall include an
explanation of Borrower's plan and strategy for the reorganization of Borrower's
business, including, without limitation, (i) a summary of the anticipated
Reorganization Plan, and (ii) a good faith, best efforts timetable for the
period before final confirmation of the Reorganization Plan, and (iii) an
explanation of the method and manner by which all of the Obligations will be
paid off in full in cash upon the earlier to occur of the final confirmation of
the Reorganization Plan or the Maturity Date. Borrower hereby agrees that after
such written notice has been provided to Agent, if a material deviation in the
course of action so elected by Borrower occurs, such deviation shall constitute
a Material Adverse Change.
6.23 DELIVERY TO AGENT OF DOCUMENTATION REGARDING ANY PROPOSED SALE OF
ASSETS. Promptly deliver to Agent all written proposals, term sheets, commitment
letters, letters of intent, purchase agreements and related documents and
materials as to any proposed sale of the assets of Borrower or any Subsidiary of
Borrower.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, Borrower
will not, and will not permit any of its Subsidiaries to, do any of the
following without the Required Lenders' prior written consent:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth on Schedule 7.1;
(c) Indebtedness secured by Permitted Liens;
(d) Indebtedness evidenced by the Unsecured Notes which is
subordinated in right of payment and otherwise to the Obligations in a manner
satisfactory to Agent;
(e) Indebtedness evidenced by the Parent Note which is
subordinated in right of payment and otherwise to the Obligations pursuant to a
written Subordination Agreement;
(f) accounts payable (for the deferred purchase price of Property
or services) from time to time incurred in the ordinary course of business
which, if greater than 90 days past the invoice or billing date, are the subject
of a bona fide dispute which is being contested in good faith by Borrower by
appropriate proceedings as to which a reserve is established on the books of
Borrower in an amount that is satisfactory to Agent (and if a Lien secures the
same or may secure the same, such Lien is subject to a Permitted Protest);
79
87
(g) Indebtedness associated with bonds or surety obligations
required by Legal Requirements in connection with the operation of Borrower's
and its Subsidiaries' Oil and Gas Properties;
(h) Indebtedness under Hedging Agreements covering oil or gas
with Arranging Institutions, Agent or any Lender as a counterparty or with such
other investment grade counterparties, rated Aa1 or better by ▇▇▇▇▇'▇, A- or
better according to Standard & Poor's, or the equivalent by a rating agency
acceptable to Agent, entered into as a part of its normal business operations as
a risk management strategy and/or hedge against changes resulting from market
conditions related to Borrower's and its Subsidiaries' oil and gas operations
(but not as a means to speculate for investment purposes on trends and shifts in
financial or commodities markets) but only to the extent that the total volumes
hedged for any 12 month period are neither less than 25% nor greater than 75% of
Borrower's forecasted Hydrocarbon production for such period from Oil and Gas
Properties classified as Proved Developed Producing Reserves as indicated in the
most recent Reserve Report; and
(i) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) and under clauses (d) and
(e) of this Section 7.1, in each such case so long as: (i) the terms and
conditions of such refinancings, renewals, or extensions do not materially
impair the prospects of repayment of the Obligations by Borrower, (ii) the net
cash proceeds of such refinancings, renewals, or extensions do not result in an
increase in the aggregate principal amount of the Indebtedness so refinanced,
renewed, or extended, (iii) such refinancings, renewals, refundings, or
extensions do not result in a shortening of the average weighted maturity of the
Indebtedness so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to the Lender Group as those
applicable to the refinanced Indebtedness.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
Section 7.1(h) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its capital Stock.
(b) [INTENTIONALLY OMITTED]
(c) [INTENTIONALLY OMITTED]
80
88
7.4 DISPOSAL OF ASSETS. Sell, lease, assign, farm-out, convey,
transfer, or otherwise dispose of by any means (including creation of overriding
royalty interests and net profits interests) any of Borrower's or any of its
Subsidiaries' Properties or assets other than (a) sales of Inventory to buyers
in the ordinary course of Borrower's business as currently conducted, (b) the
sale or transfer for cash of Equipment (other than in connection with the sale
of an Oil and Gas Property, Equipment located on such Oil and Gas Property which
is an essential component of the existing Hydrocarbon production, if any, of the
▇▇▇▇▇ on such Oil and Gas Property), that is no longer necessary for the
business of Borrower or such Subsidiary, or is replaced by Equipment of at least
comparable value and use provided that (i) all of the net proceeds from such
sale or transfer are paid immediately to Agent for application to the
Obligations by wire transfer of immediately available funds to the Agent
Account, and (ii) the sales price is acceptable to Agent or is approved by Court
order, and (c) cash sales of the Oil and Gas Property Collateral, as long as (i)
no Default or Event of Default is existing or would result therefrom and (ii)
after payment to Agent of the net proceeds of such sale for application to the
Obligations, no Overadvance would result therefrom, and (iii) all of the net
proceeds of the sale of such Oil and Gas Property Collateral are immediately
paid to Agent for application to the Obligations by wire transfer of immediately
available funds to the Agent Account, and (iv) with respect to any Oil and Gas
Property Collateral that at the time of such sale has any Proved Reserves
attributable to it in the most recent applicable Reserve Report delivered to
Agent by Borrower, the sale price of such Oil and Gas Property Collateral is
equal to or greater than the Oil and Gas Property Collateral Release Price,
provided that (x) the Borrowing Base shall be decreased by an amount equal to
the portion of the Borrowing Base attributable to such Proved Reserves in the
most recently determined Borrowing Base, (y) at or prior to the closing date of
any such sale of any such Oil and Gas Property Collateral, and as a condition of
Borrower's authority to do so, Borrower shall deliver to Agent a certificate
executed by the chief executive officer or chief financial officer of Borrower
certifying (I) that no Default or Event of Default has occurred and is
continuing, (II) to the valuation of the Proved Reserves involved utilizing the
NYMEX Price for valuation purposes, (III) that the disposition will not result
in an Overadvance, and (IV) the consideration and manner of the payment thereof
to be received by Borrower for the disposition of the Proved Reserves involved,
and (z) the Reserves Against Availability contemplated by clauses (i) and (j) of
the definition of "Reserves Against Availability" shall be established.
7.5 CHANGE NAME. Change any Borrower's or any of its Subsidiaries'
name, FEIN, corporate structure (within the meaning of Section 9402(7) of the
Code), or identity, or add any new fictitious name.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of Borrower or which
are transmitted or turned over to Agent.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
Borrower's or any of its Subsidiaries' business as an independent oil and gas
exploration and production company.
81
89
7.8 PREPAYMENTS AND AMENDMENTS.
(a) Prepay, redeem, retire, defease, purchase, or otherwise
acquire any Indebtedness owing to any Person (including, but not limited to, the
Parent Notes and the Unsecured Notes), prior to the original scheduled maturity
date thereof, other than the Obligations in accordance with this Agreement; and
(b) Directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture (including, but not limited to, the Parent Notes, the Unsecured Notes
and the Unsecured Notes Indenture), or other writing evidencing or concerning
Indebtedness permitted under Sections 7.1(b), (c), or (d).
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 CONSIGNMENTS. Consign any Inventory or sell any Inventory on ▇▇▇▇
and hold, sale or return, sale on approval, or other conditional terms of sale.
7.11 DISTRIBUTIONS; REPURCHASES OF CAPITAL STOCK; PAYMENTS TO PEL OR
PETSEC USA. Make (i) any distribution or declare or pay any dividends (in cash
or other property, other than capital Stock) on, or purchase, acquire, redeem,
or retire any of Borrower's capital Stock, of any class, whether now or
hereafter outstanding; or (ii) any distribution, loan, advance or any payment of
money to PEL and/or any Affiliate of PEL, including, without limitation, Petsec
USA other than distributions to Petsec USA or PEL in an aggregate amount of
$500,000 annually to reimburse Petsec USA and PEL for Borrower's budgeted
operating expenses incurred by them on behalf of Borrower.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting or
enter into, modify, or terminate any agreement currently existing, or at any
time hereafter entered into with any third party accounting firm or service
bureau for the preparation or storage of Borrower's accounting records without
said accounting firm or service bureau agreeing to provide Agent information
regarding the Collateral or Borrower's financial condition. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Agent pursuant to or in accordance with this Agreement, and agrees that Agent
may contact directly any such accounting firm or service bureau in order to
obtain such information.
7.13 INVESTMENTS. Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection with (a) the
acquisition of the securities (whether debt or equity) of, or other interests
in, a Person, (b) loans, advances, capital contributions, or transfers of
property to a Person, or (c) the acquisition of all or substantially all of the
properties or assets of a Person.
7.14 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms, that are fully disclosed to
82
90
Agent, and that are no less favorable to Borrower than would be obtained in an
arm's length transaction with a non-Affiliate.
7.15 SUSPENSION. Suspend or go out of substantially all of its
business.
7.16 [INTENTIONALLY OMITTED.]
7.17 USE OF PROCEEDS. Use the proceeds of the Advances made hereunder
for any purpose other than (a) to pay off in full all the Pre-Petition Debt, the
intent of the parties hereto being that the proceeds of the initial Advance
under this Agreement will be used to pay off in full all the Pre-Petition Debt,
(b) to pay for post-Petition operating expenses of the Borrower, inclusive of
the payment of interest and other fees and expenses when due as to the
Pre-Petition Debt and Obligations as required by this Agreement, incurred in the
ordinary course of business, (c) to pay fees required to be paid to the office
of the United States Trustee pursuant to 28 U.S.C. Section 1930(a), (d) to pay
for other expenditures as may be authorized and approved by an order of the
Court as reasonable, necessary costs and expenses of preserving or disposing of
the properties and interests in property held by Borrower and in administering
its Estate (other than fees and disbursements described in Section 7.17(e) which
are indicated to be improper uses of the proceeds of Advances), and (e) those
fees and disbursements which are allowed by the Court and paid by Borrower to
Borrower's professionals and any statutory committee's professionals and any
fees and disbursements paid to the Lender Group and their professionals and
agents in accordance with this Agreement; provided, however, that no amounts
shall be paid pursuant to this Section 7.17(e) for fees and disbursements
incurred by Borrower or for which Borrower may be liable in connection with any
proceeding commenced, including, without limitation, any motion or other
pleading filed to contest (i) the attachment, perfection or priority of the
Liens created by the Pre-Petition Loan Documents, (ii) the validity, binding
effect or enforceability of the Pre-Petition Loan Documents or any of the DIP
Loan Documents, (iii) the amount of the Obligations or Pre-Petition Debt, or
(iv) any other rights or interests of the Lender Group or any member thereof
under the DIP Loan Documents. Notwithstanding the foregoing, at all times during
the term of this Agreement proceeds of the Advances that are used for
development expenditures shall be limited to expenditures for the conversion of
Eligible Proved Undeveloped Producing Reserves to Eligible Proved Developed
Producing Reserves or the conversion of Eligible Proved Developed Non-Producing
Reserves to Eligible Proved Developed Producing Reserves.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICES; INVENTORY AND
EQUIPMENT. Relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to Agent and so long as, at
the time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected the
Agent's Liens and also provides to Agent a Collateral Access Agreement to the
extent so requested by Agent with respect to such new location.
7.19 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described
83
91
in Sections 406 of ERISA or 4975 of the IRC for which a statutory or class
exemption is not available or a private exemption has not been previously
obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to terminate,
any Benefit Plan where such event would result in any liability of Borrower, any
of its Subsidiaries or any ERISA Affiliate under Title IV of ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to make
any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay
any required installment or any other payment required under Section 412 of the
IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a Plan
resulting in an increase in current liability for the plan year such that either
of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is required to
provide security to such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of Borrower to withdraw,
from any Multiemployer Plan where such withdrawal is reasonably likely to result
in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $50,000.
7.20 OPERATING BUDGET. Receive Cash Receipts of not less than
eighty-five percent (85%) of the budget and make capital expenditures that
exceed one hundred twenty percent (120%) of the budget for such expenditures
provided to Agent pursuant to Section 6.2(i).
7.21 [INTENTIONALLY OMITTED].
7.22 SECURITIES ACCOUNTS. Borrower shall not establish or maintain any
Securities Account unless Agent shall have received a Control Agreement, duly
executed and in full force and effect, in respect of such Securities Account.
Borrower agrees that it will not transfer assets out of any Securities Accounts;
provided, however, that, so long as no Event of
84
92
Default has occurred and is continuing or would result therefrom, Borrower may
use such assets to the extent permitted by this Agreement.
7.23 GAS IMBALANCES, TAKE-OR-PAY OR OTHER PREPAYMENTS. Borrower shall
not, and shall not permit any of its Subsidiaries to, enter into any contracts
or agreements which warrant production of Hydrocarbons (other than Hedging
Agreements otherwise permitted hereunder) and will not hereafter allow or accept
gas imbalances, take-or-pay or other prepayments with respect to its Oil and Gas
Properties which would require such Person to deliver Hydrocarbons produced from
such Oil and Gas at some future time without then or thereafter receiving full
payment therefor to exceed, in the aggregate, five percent (5%) of the current
aggregate monthly gas production for such monthly period from the Oil and Gas
Properties.
7.24 PAYMENTS ON THE PARENT NOTES AND THE UNSECURED NOTES.
(a) Make any payment of interest, principal, premium or other
amount on the Parent Notes; or
(b) use, or permit to be used, any proceeds of any Advance, or
any Collateral or proceeds thereof, to make any payment of interest, principal,
premium or other amounts on the Unsecured Notes or under the Unsecured Notes
Indenture.
7.25 NON-CONSENT OPERATIONS. Become a non-consenting party with
respect to any operations under any operating agreement, unit agreement,
governmental order or otherwise associated with any Oil and Gas Property unless
Borrower shall have provided reasonable prior written notice to Agent of
Borrower's intention to become a non-consenting party with respect thereto, such
notice to be not less than 5 days prior to Borrower becoming a non-consenting
party (except in cases in which the period for notice of non-consent under the
applicable agreement, order or other arrangement pertaining to the operation is
less than 5 days, in which case Borrower shall provide prior notice to Agent
which is not less than the period for notice of non-consent thereunder).
7.26 WAIVERS OF RIGHTS RELATING TO OIL AND GAS PROPERTIES. Waive any
right relating to any of the Oil and Gas Properties other than waivers and
consents relating to immaterial easements, rights of way and other similar
rights which the waiver thereof does not have an adverse effect on the value of
such Oil and Gas Property to which it pertains, does not impair or adversely
affect any Lien held by the Agent for the benefit of the Lender Group, and could
not reasonably be expected to result in a Material Adverse Change.
7.27 CONTRACTS FOR SALE OF PRODUCTION. Except for Hedging Arrangements
entered into in compliance with Section 6.19, enter into, renew, extend or
continue beyond its original scheduled maturing date any contract for the sale
of Hydrocarbons or other products produced from the Oil and Gas Properties (a)
for a period of one month or more at a fixed price or (b) for a period of one
year or more at (i) for gas, the applicable floating monthly index price for gas
as published Gas Daily Report or other similar publication, or (ii) for oil, the
applicable floating monthly price for West Texas Intermediate or Louisiana Sweet
crude oil quoted on the New York Mercantile Exchange.
85
93
7.28 FILING AND FORM AND SUBSTANCE OF DIP ORDERS, MOTIONS, PLEADINGS
AND APPLICATIONS. File any motion, pleadings, application or other relevant
document or instrument with the Court relating to either or both of DIP Orders
or any amendment, supplement or other modification to either or both of the DIP
Orders or in any way otherwise relating to the DIP Facility, if in the
reasonable credit judgment of Agent such motion, pleading, application or other
document or instrument adversely impacts the rights and interests of Agent
and/or Lender under this Agreement or the DIP Orders, unless such motion,
pleadings, application or other document or instrument shall have first been
submitted to Agent and its counsel and shall be in form and substance reasonably
satisfactory to Agent and its counsel.
7.29 COMPLIANCE WITH DIP ORDERS. Fail to comply with each of the
provisions of the Interim Financing Order and the Permanent Financing Order.
7.30 CONSENT TO AMENDMENT OF DIP ORDERS. Consent to any amendment
supplement or any other modification of any of the terms of the Interim
Financing Order or the Permanent Financing Order.
7.31 OTHER COURT FILINGS AND APPLICATIONS. Apply to the Court for
authority to take any action that is prohibited by the terms of any of the DIP
Loan Documents or refrain from taking any action that is required to be taken by
the terms of any of the DIP Loan Documents or permit any Indebtedness or claim
to be pari passu with or senior to any of the Obligations, except as provided by
this Agreement or the DIP Orders.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "Event of Default") under this Agreement:
8.1 If Borrower or any other Loan Party fails to pay when due and
payable or when declared due and payable, any portion of the Obligations
(whether of principal, interest (including any interest which, but for the
provisions of the Bankruptcy Code, would have accrued on such amounts), fees and
charges due the Lender Group, reimbursement of Lender Group Expenses, or other
amounts constituting Obligations) provided, however, that in the case of
Overadvances that are caused by charging of interest, fees or Lender Group
Expenses to the Loan Account, such event shall not constitute an Event of
Default if, within three (3) Business Days of incurring such Overadvances,
Borrower repays or otherwise eliminates such Overadvances;
8.2 (a) If Borrower fails or neglects to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in Section 6.2
(Collateral Reporting), 6.3 (Financial Statements, Reports, Certificates), 6.4
(Tax Returns), 6.7 (Title to Equipment), 6.12 (Location of Inventory and
Equipment), 6.13 (Compliance with Laws), 6.14 (Employee Benefits), 6.15 (Leases)
7.28 (Filing and Form and Substance of DIP Orders, Motions, Pleadings and
Applications), 7.29 (Compliance with DIP Orders), or 7.31 (Other Court Filings
or Applications) of this Agreement and such failure continues for a period of 5
Business Days; (b) If Borrower fails or neglects to perform, keep, or observe
any term, provision, condition, covenant, or agreement
86
94
contained in Section 6.1 (Accounting System) or 6.8 (Maintenance of Oil and Gas
Property Collateral and Equipment) of this Agreement and such failure continues
for a period of 15 Business Days; or (c) If Borrower or any other Loan Party
fails or neglects to perform, keep, or observe any other term, provision,
condition, covenant, or agreement contained in this Agreement, or in any of the
other DIP Loan Documents (giving effect to any grace periods, cure periods, or
required notices, if any, expressly provided for in such Loan Documents); in
each case, other than any such term, provision, condition, covenant, or
agreement that is the subject of another provision of this Section 8, in which
event such other provision of this Section 8 shall govern; provided that, during
any period of time that any such failure or neglect of Borrower or such other
Loan Party referred to in this paragraph exists, even if such failure or neglect
is not yet an Event of Default by virtue of the existence of a grace or cure
period or the pre-condition of the giving of a notice, neither Agent nor any
Lender shall be required during such period to make Advances to Borrower;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of Borrower's or any other Loan Party's
properties or assets is attached, seized, subjected to a writ or distress
warrant, or is levied upon, or comes into the possession of any third Person;
8.5 Borrower shall fail to file its Reorganization Plan and related
disclosure statement within the 120 day period after the Filing Date (without
extension) referred to in Section 1121(b) of the Bankruptcy Code.
8.6 A trustee shall be appointed in the Chapter 11 Case; an examiner
with expanded powers shall be appointed in the Chapter 11 Case (powers beyond
those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code) under
Section 1106(b) of the Bankruptcy Code; the Chapter 11 Case shall be dismissed
or converted to a case under Chapter 7; Borrower shall seek confirmation by the
Court of any Reorganization Plan other than a Reorganization Plan proposed or
accepted in writing by the Lender Group or any Reorganization Plan that is not
accepted in writing by the Lender Group shall be confirmed by order of the
Court, whether or not confirmation thereof is sought by Borrower, unless such
Reorganization Plan (i) provides for the payment in full in cash of all the
Obligations upon the effective date of the Reorganization Plan (which effective
date may not be later than the Maturity Date), (ii) does not adversely affect
the rights of the Lender Group or any member of the Lender Group, and (iii) does
not contain any claims by Borrower against the Lender Group or any member
thereof; Borrower shall file any motion to alter, amend, vacate, supplement,
modify, or reconsider, in any respect, any DIP Order or, without the Lender
Group's prior written consent, any of the DIP Orders are amended, vacated,
stayed, reversed or otherwise modified; the Court shall enter an order granting
to any Person other than Agent, for the benefit of the Lender Group, relief from
the automatic stay to foreclose upon a Lien with respect to any assets of
Borrower which have an aggregate value in excess of $100,000.00; or Borrower
shall challenge the validity, extent, priority or enforceability of any of the
Pre-Petition Loan Documents or Pre-Petition Debt.
8.7 If Borrower or any other Loan Party is enjoined, restrained, or in
any way prevented by court order from continuing to conduct all or any material
part of its business affairs;
87
95
8.8 If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrower's or any other Loan Party's properties or assets by
the United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, or if any
Post-Petition taxes or debts owing at any time hereafter to any one or more of
such entities becomes a Lien, whether ▇▇▇▇▇▇ or otherwise, upon any of
Borrower's or any other Loan Party's properties or assets and the same is not
paid on the payment date thereof;
8.9 If a judgment with respect to Post-Petition Liabilities, in excess
of $125,000 individually or in the aggregate for all judgments, becomes a Lien
or encumbrance upon any material portion of Borrower's or any other Loan Party's
properties or assets;
8.10 If a claim (other than a judgment), in excess of $125,000
individually or in the aggregate for all claims (other than judgments), becomes
a Lien or encumbrance (other than a Permitted Lien) upon any material portion of
Borrower's or any other Loan Party's properties or assets;
8.11 If there is a default (other than due to the commencement of the
Chapter 11 Case) in any material agreement to which Borrower or any other Loan
Party is a party with one or more third Persons and such default (a) occurs at
the final maturity of the obligations thereunder, or (b) results in a right by
such third Person(s), irrespective of whether exercised, to accelerate the
maturity of Borrower's or any other Loan Party's obligations thereunder, to
terminate such agreement, or to refuse to renew such agreement pursuant to an
automatic renewal right therein;
8.12 If Borrower or any other Loan Party makes any payment on account
of Indebtedness that has been contractually subordinated in right of payment to
the payment of the Obligations, or on account of any interest, principal,
premium or other amounts on the Unsecured Notes or the Unsecured Notes
Indenture;
8.13 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by Borrower or any other Loan Party or any officer, employee,
agent, or director of Borrower or any other Loan Party, or if any such warranty
or representation is withdrawn; or
8.14 If the obligation of any guarantor under its guaranty or other
third Person under any DIP Loan Document is limited or terminated by operation
of law or by the guarantor or other third Person thereunder, or any such
guarantor or other third Person becomes the subject of an Insolvency Proceeding.
8.15 Any covenant, agreement or obligation of Borrower contained in or
evidenced by any of the DIP Loan Documents shall cease to be enforceable or
shall be determined by a court of competent jurisdiction to be unenforceable in
accordance with its terms; Borrower shall deny or disaffirm its obligations
under any of the DIP Loan Documents or Liens granted in connection therewith or
ratified or reaffirmed thereby; or any Liens in any of the Collateral granted
under or ratified or reaffirmed by the DIP Loan Documents shall be determined by
a court of competent jurisdiction to be voidable, invalid or unperfected, or
subordinated or not given the
88
96
priority contemplated by this Agreement; provided, however, any legal challenge
by a party in interest (including any statutory committee of unsecured
creditors, but excluding the Borrower) to the validity, enforceability or
priority of the Agent's or Lenders' Liens made in accordance with paragraph 16
of the Interim Financing Order shall not be an Event of Default hereunder unless
or until an order, decree or judgment of any court of competent jurisdiction is
entered in favor of such legal challenge.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may, except to the
extent otherwise expressly provided or required below, authorize and instruct
Agent to do any one or more of the following on behalf of the Lender Group (and
Agent, acting upon the instructions of the Required Lenders, shall do the same
on behalf of the Lender Group), all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other DIP Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the DIP Loan Documents,
or under any other agreement between Borrower and the Lender Group;
(c) Terminate the DIP Facility and this Agreement and any of the
other DIP Loan Documents as to any future liability or obligation of the Lender
Group, but without affecting Agent's rights and security interests, for the
benefit of the Lender Group, in the Collateral and without affecting the
Obligations;
(d) Subject to any limitation of the DIP Orders, be permitted to
give notice to Borrower, the U.S. Trustee and any official statutory committee
created in connection with the administration of the Estate of the filing by
Agent of a motion seeking to lift the automatic stay pursuant to Section 362 of
the Bankruptcy Code, whereupon five Business Days after such notice has been
given Agent and/or Lenders shall be entitled to an emergency hearing before the
Court. Subject to the entry of an order modifying the automatic stay by the
Court, the Agent and/or Lenders shall be permitted without limitation to take
any or all of the following actions as may be provided by the Court:
(i) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Agent considers advisable,
and in such cases, Agent will credit Borrower's Loan Account with only the
net amounts received by Agent in payment of such disputed Accounts after
deducting all Lender Group Expenses incurred or expended in connection
therewith;
(ii) Cause Borrower to hold all returned Inventory in trust
for the Lender Group, segregate all returned Inventory from all other
property of Borrower or
89
97
in Borrower's possession and conspicuously label said returned Inventory as
the property of the Lender Group;
(iii) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Agent considers necessary
or reasonable to protect its security interests in the Collateral. Borrower
agrees to assemble the Personal Property Collateral if Agent so requires,
and to make the Personal Property Collateral available to Agent as Agent
may designate. Borrower authorizes Agent to enter the premises where the
Personal Property Collateral is located, to take and maintain possession of
the Personal Property Collateral, or any part of it, and to pay, purchase,
contest, or compromise any encumbrance, charge, or Lien that in Agent's
determination appears to conflict with the Agent's Liens and to pay all
expenses incurred in connection therewith. With respect to any of
Borrower's owned or leased premises, Borrower hereby grants Agent a license
to enter into possession of such premises and to occupy the same, without
charge, for up to 120 days in order to exercise any of the Lender Group's
rights or remedies provided herein, at law, in equity, or otherwise;
(iv) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (1) balances and
deposits of Borrower held by the Lender Group (including any amounts
received in the Lockbox Accounts), or (2) indebtedness at any time owing to
or for the credit or the account of Borrower held by the Lender Group;
(v) Hold, as cash collateral, any and all balances and
deposits of Borrower held by the Lender Group, and any amounts received in
the Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(vi) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Personal Property Collateral. Borrower hereby
grants to Agent a license or other right to use, without charge, Borrower's
labels, patents, copyrights, rights of use of any name, trade secrets,
trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Personal Property
Collateral, in completing production of, advertising for sale, and selling
any Personal Property Collateral and Borrower's rights under all licenses
and all franchise agreements shall inure to the Lender Group's benefit;
(vii) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including Borrower's premises) as Agent determines is commercially
reasonable. It is not necessary that the Personal Property Collateral be
present at any such sale;
(viii) Agent shall give notice of the disposition of the
Personal Property Collateral as follows:
90
98
(1) Agent shall give Borrower and each holder of a
security interest in the Personal Property Collateral who has filed with
Agent a written request for notice, a notice in writing of the time and
place of public sale, or, if the sale is a private sale or some other
disposition other than a public sale is to be made of the Personal Property
Collateral, then the time on or after which the private sale or other
disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12, at least 5 days
before the date fixed for the sale, or at least 5 days before the date on
or after which the private sale or other disposition is to be made; no
notice needs to be given prior to the disposition of any portion of the
Personal Property Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized
market. Notice to Persons other than Borrower claiming an interest in the
Personal Property Collateral shall be sent to such addresses as they have
furnished to Agent;
(3) If the sale is to be a public sale, Agent also
shall give notice of the time and place by publishing a notice one time at
least 5 days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(ix) The Lender Group may credit bid and purchase at any
public sale;
(x) The Lender Group shall have all other rights and
remedies available to it at law or in equity pursuant to any other DIP Loan
Documents, including, without limitation, the Oil and Gas Property
Mortgages; and
(xi) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Borrower. Any excess will be returned, without interest and subject to the
rights of third Persons, by Agent to Borrower.
9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender Group
under this Agreement, the other Loan Documents, and all other agreements shall
be cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, the Bankruptcy Code, the
Bankruptcy Rules, by law, or in equity. No exercise by the Lender Group of one
right or remedy shall be deemed an election, and no waiver by the Lender Group
of any Event of Default shall be deemed a continuing waiver. No delay by the
Lender Group shall constitute a waiver, election, or acquiescence by it. Nothing
in this Agreement in any way limits, impairs or reduces any rights of the Lender
Group under the Oil and Gas Property Mortgages or any of the other DIP Loan
Documents. The rights, remedies, powers and privileges of the Lender Group
hereunder and under the other DIP Loan Documents shall be in addition to and
cumulative with, and not in lieu of, all of the rights, remedies, powers and
91
99
privileges of the Lender Group under the Pre-Petition Loan Agreement and the
other Pre-Petition Loan Documents.
10. TAXES AND EXPENSES.
If Borrower fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable under such leases) due to third Persons, or fails to make
any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Agent
determines that such failure by Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to Borrower, Agent may do any
or all of the following: (a) make payment of the same or any part thereof; (b)
set up such reserves in Borrower's Loan Account as Agent deems necessary to
protect the Lender Group from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type described in Section 6.10,
and take any action with respect to such policies as Agent deems prudent. Any
such amounts paid by Agent shall constitute Lender Group Expenses. Any such
payments made by Agent shall not constitute an agreement by the Lender Group to
make similar payments in the future or a waiver by the Lender Group of any Event
of Default under this Agreement. Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of accounts, documents, instruments, chattel paper, and guarantees at any time
held by the Lender Group on which Borrower may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Borrower hereby
agrees that: (a) so long as the Lender Group complies with its obligations, if
any, under Section 9207 of the Code, the Lender Group shall not in any way or
manner be liable or responsible for: (i) the safekeeping of the Collateral; (ii)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (iii) any diminution in the value thereof; or (iv) any act or default
of any carrier, warehouseman, bailee, forwarding agency, or other Person; and
(b) all risk of loss, damage, or destruction of the Collateral shall be borne by
Borrower.
11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and hold
the Agent-Related Persons, the Lender-Related Persons with respect to each
Lender, each Participant, and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs and
expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted
against, imposed upon, or incurred by any of them in connection with or as a
result of or related to the execution, delivery, enforcement, performance, and
administration of
92
100
this Agreement and any other DIP Loan Documents or the transactions contemplated
herein, and with respect to any investigation, litigation, or proceeding related
to this Agreement, any other DIP Loan Document, or the use of the proceeds of
the credit provided hereunder (irrespective of whether any Indemnified Person is
a party thereto), or any act, omission, event or circumstance in any manner
related thereto (all the foregoing, collectively, the "Indemnified
Liabilities"). Borrower shall have no obligation to any Indemnified Person under
this Section 11.3 with respect to any Indemnified Liability that a court of
competent jurisdiction finally determines to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. This provision
shall survive the termination of this Agreement and the repayment of the other
Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other DIP Loan Document shall be in
writing and (except for financial statements and other informational documents
which may be sent by first-class mail, postage prepaid) shall be personally
delivered or sent by registered or certified mail (postage prepaid, return
receipt requested), overnight courier, or telefacsimile to the relevant party at
its address set forth below:
IF TO BORROWER: PETSEC ENERGY INC.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Chief Financial Officer
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
WITH COPIES TO: ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
IF TO AGENT OR
THE LENDER GROUP
IN CARE OF AGENT: FOOTHILL CAPITAL CORPORATION
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Business Finance Division Manager
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
WITH COPIES TO: ▇▇▇▇▇▇ ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
Fax No. ▇▇▇.▇▇▇.▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
93
101
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to all
other parties. All notices or demands sent in accordance with this Section 12,
other than notices by the Lender Group in connection with Sections 9504 or 9505
of the Code, shall be deemed received on the earlier of the date of actual
receipt or 3 days after the deposit thereof in the mail. Borrower acknowledges
and agrees that notices sent by the Lender Group in connection with Sections
9504 or 9505 of the Code shall be deemed sent when deposited in the mail or
personally delivered, or, where permitted by law, transmitted telefacsimile or
other similar method set forth above.
13. CHOICE OF LAW AND VENUE; SERVICE OF PROCESS; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER DIP LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers delivered
to any one or more members of the Lender Group may be destroyed or otherwise
disposed of by such member of the Lender Group 4 months after they are delivered
to or received by such member of the Lender Group, unless Borrower requests, in
writing, the return of said documents, schedules, or other papers and makes
arrangements, at Borrower's expense, for their return.
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of Agent, assign and
delegate to one or more assignees (provided that no written consent of Agent
shall be required in connection with any assignment and delegation by a Lender
to an Eligible Transferee) (each an "Assignee") all, or any ratable part of all,
of the Obligations, the Commitments and the other rights and obligations of such
Lender hereunder and under the other DIP Loan Documents, in a minimum amount of
$5,000,000 (except that such minimum amount shall not apply in connection with
any assignment and delegation by a Lender (x) to any Affiliate (other than
individuals) of, or any fund, money market account, investment account or other
account managed by, a pre-existing Lender under this Agreement or (y) of the
entire Obligations, Commitments and other rights and obligations of such Lender
hereunder and under the other DIP Loan Documents); provided, however, that
Borrower and Agent may continue to deal solely and directly with such Lender in
94
102
connection with the interest so assigned to an Assignee until (i) written notice
of such assignment, together with payment instructions, addresses and related
information with respect to the Assignee, shall have been given to Borrower and
Agent by such Lender and the Assignee; (ii) such Lender and its Assignee shall
have delivered to Borrower and Agent an Assignment and Acceptance ("Assignment
and Acceptance") in form and substance satisfactory to Agent; and (iii) the
assignor Lender or Assignee has paid to Agent for Agent's sole and separate
account a processing fee in the amount of $5,000. Anything contained herein to
the contrary notwithstanding, the consent of Agent shall not be required (and
payment of any fees shall not be required) if such assignment is in connection
with any merger, consolidation, sale, transfer, or other disposition of all or
any substantial portion of the business or loan portfolio of such Lender.
(b) From and after the date that Agent notifies the assignor
Lender that it has received an executed Assignment and Acceptance and payment of
the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the DIP Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other DIP Loan Documents have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights (except with respect to Section 11.3
hereof) and be released from its obligations under this Agreement (and in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement and the other DIP
Loan Documents, such Lender shall cease to be a party hereto and thereto), and
such assignment shall effect a novation between Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other DIP Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under this Agreement or any other DIP Loan Document furnished pursuant hereto;
(3) such Assignee confirms that it has received a copy of this Agreement,
together with such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance; (4) such Assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement; (5)
such Assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (6) such Assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
95
103
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "Participant") participating interests
in the Obligations, the Commitment, and the other rights and interests of that
Lender (the "originating Lender") hereunder and under the other DIP Loan
Documents (provided that no written consent of Agent shall be required in
connection with any sale of any such participating interests by a Lender to an
Eligible Transferee); provided, however, that (i) the originating Lender's
obligations under this Agreement shall remain unchanged, (ii) the originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) Borrower and Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
obligations under this Agreement and the other DIP Loan Documents, (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has the sole and exclusive right to approve any amendment to, or any
consent or waiver with respect to, this Agreement or any other DIP Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other DIP Loan Document would (A) extend the
final maturity date of the Obligations hereunder in which such Participant is
participating; (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating; (C) release all or a
material portion of the Collateral or guaranties (except to the extent expressly
provided herein or in any of the DIP Loan Documents) supporting the Obligations
hereunder in which such Participant is participating; (D) postpone the payment
of, or reduce the amount of, the interest or fees payable to such Participant
through such Lender; or (E) change the amount or due dates of scheduled
principal repayments or prepayments or premiums; and (v) all amounts payable by
Borrower hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement. The rights of any Participant only shall be derivative through the
originating Lender with whom such Participant participates and no Participant
shall have any direct rights as to the other Lenders, Agent, Borrower, the
Collections, the Collateral, or otherwise in respect of the Obligations. No
Participant shall have the right to participate directly in the making of
decisions by the Lenders among themselves.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrower or
Borrower's business.
(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A
96
104
of the Federal Reserve Bank or U.S. Treasury Regulation 31 CFR Section 203.14,
and such Federal Reserve Bank may enforce such pledge or security interest in
any manner permitted under applicable law.
15.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of
the respective successors and assigns of each of the parties; provided, however,
that Borrower may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void ab initio. No consent to assignment by the Lenders shall
release Borrower from its Obligations. A Lender may assign this Agreement and
the other DIP Loan Documents and its rights and duties hereunder and thereunder
pursuant to Section 15.1 hereof and, except as expressly required pursuant to
Section 15.1 hereof, no consent or approval by Borrower is required in
connection with any such assignment.
16. AMENDMENTS; WAIVERS
16.1 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
of this Agreement or any other DIP Loan Document, and no consent with respect to
any departure by Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Required Lenders (or by Agent at the written
request of the Required Lenders) and Borrower and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no such waiver, amendment, or
consent shall, unless in writing and signed by all the Lenders and Borrower and
acknowledged by Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other DIP Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other DIP
Loan Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other DIP Loan Document;
(d) change the percentage of the Commitments or Obligations, as
the case may be, that is required for the Lenders or any of them to take any
action hereunder;
(f) amend this Section or any provision of the Agreement
providing for consent or other action by all Lenders;
(g) release Collateral other than as permitted by Section 17.11;
(h) change the definition of "Required Lenders";
(i) release Borrower or Guarantor from any Obligation for the
payment of money; or
97
105
(j) amend any of the provisions of Article 17.
and, provided further, however, that no amendment, waiver or consent shall,
unless in writing and signed by Agent, affect the rights or duties of Agent
under this Agreement or any other DIP Loan Document; and, provided further,
however, that no amendment, waiver or consent shall, unless in writing and
signed by Foothill in its individual capacity as a Lender, affect the specific
rights or duties of Foothill in its individual capacity as a Lender (as
contrasted with rights or duties of Foothill as a member of the Lender Group)
under this Agreement or any other DIP Loan Document. The foregoing
notwithstanding, any amendment, modification, waiver, consent, termination, or
release of or with respect to any provision of this Agreement or any other DIP
Loan Document that relates only to the relationship of the Lender Group among
themselves, and that does not affect the rights or obligations of Borrower,
shall not require consent by or the agreement of Borrower.
16.2 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or any
Lender to exercise any right, remedy, or option under this Agreement, any other
DIP Loan Document, or any present or future supplement hereto or thereto, or in
any other agreement between or among Borrower and Agent or any Lender, or delay
by Agent or any Lender in exercising the same, will operate as a waiver thereof.
No waiver by Agent or any Lender will be effective unless it is in writing, and
then only to the extent specifically stated. No waiver by Agent or the Lenders
on any occasion shall affect or diminish Agent's and each Lender's rights
thereafter to require strict performance by Borrower of any provision of this
Agreement. Agent's and each Lender's rights under this Agreement and the other
DIP Loan Documents will be cumulative and not exclusive of any other right or
remedy which Agent or any Lender may have.
17. AGENT; THE LENDER GROUP.
17.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
designates and appoints Foothill as its agent under this Agreement and the other
DIP Loan Documents and each Lender hereby irrevocably authorizes Agent to take
such action on its behalf under the provisions of this Agreement and each other
DIP Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other DIP Loan
Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this Article 17.
The provisions of this Article 17 are solely for the benefit of Agent and the
Lenders, and Borrower shall have no rights as a third party beneficiary of any
of the provisions contained herein; provided, however, that certain of the
provisions of Section 17.10 hereof also shall be for the benefit of Borrower.
Any provision to the contrary contained elsewhere in this Agreement or in any
other DIP Loan Document notwithstanding, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or any other DIP Loan Document or otherwise exist
against Agent; it being expressly understood and agreed that the use of the word
"Agent" is for convenience only, that Foothill is merely the representative of
the Lenders, and has only the contractual duties set forth herein. Except as
expressly otherwise provided in this Agreement, Agent shall have and may use its
sole discretion with respect to exercising or refraining from
98
106
exercising any discretionary rights or taking or refraining from taking any
actions which Agent is expressly entitled to take or assert under or pursuant to
this Agreement and the other DIP Loan Documents. Without limiting the generality
of the foregoing, or of any other provision of the DIP Loan Documents that
provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Advances, the Letters of
Credit, the Collateral, the Collections, and related matters; (b) execute or
file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to the DIP Loan Documents; (c) make
Advances, and the Letters of Credit, for itself or on behalf of Lenders as
provided in the DIP Loan Documents; (d) exclusively receive, apply, and
distribute the Collections as provided in the DIP Loan Documents; (e) open and
maintain such bank accounts and lock boxes as Agent deems necessary and
appropriate in accordance with the DIP Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections; (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower, the Obligations, the Collateral, the Collections, or otherwise
related to any of same as provided in the DIP Loan Documents; and (g) incur and
pay such Lender Group Expenses as Agent may deem necessary or appropriate for
the performance and fulfillment of its functions and powers pursuant to the DIP
Loan Documents.
17.2 DELEGATION OF DUTIES. Except as otherwise provided in this
section, Agent may execute any of its duties under this Agreement or any other
DIP Loan Document by or through agents, employees or attorneys-in-fact and shall
be entitled to advice of counsel concerning all matters pertaining to such
duties. Agent shall not be responsible for the negligence or misconduct of any
agent or attorney-in-fact that it selects as long as such selection was made in
compliance with this section and without gross negligence or willful misconduct.
17.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other DIP Loan Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (ii) be responsible in any manner to any of the Lenders for any
recital, statement, representation or warranty made by Borrower or any
Subsidiary or Affiliate of Borrower, or any officer or director thereof,
contained in this Agreement or in any other DIP Loan Document, or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection with, this Agreement or any other
DIP Loan Document, or the validity, effectiveness, genuineness, enforceability
or sufficiency of this Agreement or any other DIP Loan Document, or for any
failure of Borrower or any other party to any DIP Loan Document to perform its
obligations hereunder or thereunder. No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other DIP Loan Document, or to inspect the properties, books or
records of Borrower or any of Borrower's Subsidiaries or Affiliates.
17.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegraph, facsimile, telex or telephone
message, statement or other document or conversation
99
107
believed by it to be genuine and correct and to have been signed, sent, or made
by the proper Person or Persons, and upon advice and statements of legal counsel
(including counsel to Borrower or counsel to any Lender), independent
accountants and other experts selected by Agent. Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any other DIP
Loan Document unless it shall first receive such advice or concurrence of the
Lenders as it deems appropriate and until such instructions are received, Agent
shall act, or refrain from acting, as it deems advisable. If Agent so requests,
it shall first be indemnified to its reasonable satisfaction by Lenders against
any and all liability and expense that may be incurred by it by reason of taking
or continuing to take any such action. Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other DIP Loan Document in accordance with a request or consent of the Lenders
and such request and any action taken or failure to act pursuant thereto shall
be binding upon all of the Lenders.
17.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to Agent for the account of the Lenders,
except with respect to Events of Default of which Agent has actual knowledge,
unless Agent shall have received written notice from a Lender or Borrower
referring to this Agreement, describing such Default or Event of Default, and
stating that such notice is a "notice of default." Agent promptly will notify
the Lenders of its receipt of any such notice or of any Event of Default of
which Agent has actual knowledge. If any Lender obtains actual knowledge of any
Event of Default, such Lender promptly shall notify the other Lenders and Agent
of such Event of Default. Each Lender shall be solely responsible for giving any
notices to its Participants, if any. Subject to Section 17.4, Agent shall take
such action with respect to such Default or Event of Default as may be requested
by the Required Lenders in accordance with Section 9; provided, however, that
unless and until Agent has received any such request, Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable.
17.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a DIP Loan Document, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrower. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other DIP Loan
Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of Borrower and any other Person (other than the
Lender Group) party to a DIP
100
108
Loan Document. Except for notices, reports and other documents expressly herein
required to be furnished to the Lenders by Agent, Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of Borrower and any other Person party to a DIP
Loan Document that may come into the possession of any of the Agent-Related
Persons.
17.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and pay
Lender Group Expenses to the extent Agent deems reasonably necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the DIP Loan Documents, including without limiting the
generality of the foregoing, court costs, reasonable attorneys fees and
expenses, costs of collection by outside collection agencies and auctioneer fees
and costs of security guards or insurance premiums paid to maintain the
Collateral, whether or not Borrower is obligated to reimburse Agent or Lenders
for such expenses pursuant to this Agreement or otherwise. Agent is authorized
and directed to deduct and retain sufficient amounts from Collections to
reimburse Agent for such out-of-pocket costs and expenses prior to the
distribution of any amounts to Lenders. In the event Agent is not reimbursed for
such costs and expenses from Collections, each Lender hereby agrees that it is
and shall be obligated to pay to or reimburse Agent for the amount of such
Lender's Pro Rata Share thereof. Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of Borrower
and without limiting the obligation of Borrower to do so), according to their
Pro Rata Shares, from and against any and all Indemnified Liabilities; provided,
however, that no Lender shall be liable for the payment to the Agent-Related
Persons of any portion of such Indemnified Liabilities resulting solely from
such Person's gross negligence or willful misconduct. Without limitation of the
foregoing, each Lender shall reimburse Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including attorneys fees and expenses)
incurred by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other DIP Loan Document,
or any document contemplated by or referred to herein, to the extent that Agent
is not reimbursed for such expenses by or on behalf of Borrower. The undertaking
in this section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.
17.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with Borrower and its
Subsidiaries and Affiliates and any other Person (other than the Lender Group)
party to any DIP Loan Documents as though Foothill were not Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, Foothill or its Affiliates may receive information
regarding Borrower or its Affiliates and any other Person (other than the Lender
Group) party to any DIP Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall be under no obligation to provide such information to them. With
respect to the Foothill Loans and Agent Advances, Foothill shall
101
109
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not Agent, and the terms "Lender" and
"Lenders" include Foothill in its individual capacity.
17.9 SUCCESSOR AGENT. Agent may resign as Agent upon 45 days notice to
the Lenders. If Agent resigns under this Agreement, the Required Lenders shall
appoint a successor Agent for the Lenders. If no successor Agent is appointed
prior to the effective date of the resignation of Agent, Agent shall appoint,
after consulting with the Lenders, a successor Agent and such appointed
successor Agent shall be deemed acceptable to the Lenders. If Agent has
materially breached or failed to perform any material provision of this
Agreement or of applicable law, the Required Lenders may agree in writing to
remove and replace Agent with a successor Agent from among the Lenders. In any
such event, upon the acceptance of its appointment as successor Agent hereunder,
such successor Agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor Agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 17 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement. If no successor Agent
has accepted appointment as Agent by the date which is 45 days following a
retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Lenders appoint a
successor Agent as provided for above.
17.10 WITHHOLDING TAX. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the IRC and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Sections 1441 or
1442 of the IRC, such Lender agrees with and in favor of Agent and Borrower, to
deliver to Agent and Borrower:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first calendar year
and before the payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender and in each succeeding
taxable year of such Lender during which interest may be paid under this
Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
102
110
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of Borrower to such Lender, such Lender agrees to
notify Agent of the percentage amount in which it is no longer the beneficial
owner of Obligations of Borrower to such Lender. To the extent of such
percentage amount, Agent will treat such Lender's IRS Form 1001 as no longer
valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrower to such Lender, such Lender agrees to undertake sole responsibility for
complying with the withholding tax requirements imposed by Sections 1441 and
1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify Agent fully for all amounts paid, directly
or indirectly, by Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the amounts payable to
Agent under this Section, together with all costs and expenses (including
attorneys fees and expenses). The obligation of the Lenders under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of Agent.
17.11 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, at its option
and in its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full by Borrower
of all Obligations; (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrower
certifies to Agent that the sale or disposition is permitted under Section 7.4
of this Agreement or the other DIP Loan Documents (and Agent may rely
conclusively on any such certificate, without further inquiry); (iii)
constituting property in which Borrower owned no interest at the time the
security interest was granted or at any time thereafter; or (iv) constituting
property leased to Borrower under a lease that has expired or is terminated in a
transaction permitted under this Agreement. Except as provided above, Agent will
not execute and deliver a release of any Lien on any Collateral without the
prior written authorization of (y) if the release is of all or substantially all
of the Collateral, of all of the Lenders, or (z) otherwise, all
103
111
of the Lenders. Upon request by Agent or Borrower at any time, the Lenders will
confirm in writing Agent's authority to release any such Liens on particular
types or items of Collateral pursuant to this Section 17.11; provided, however,
that (1) Agent shall not be required to execute any document necessary to
evidence such release on terms that, in Agent's opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2) such
release shall not in any manner discharge, affect, or impair the Obligations or
any Liens (other than those expressly being released) upon (or obligations of
Borrower in respect of) all interests retained by Borrower, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral. So long as no Event of Default exists, Borrower will not be charged
any fee or other amount in connection with any release of Collateral other than
Agent's out of pocket expenses related thereto.
(b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrower or is cared
for, protected, or insured or has been encumbered, or that the Agent's Liens
have been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the DIP Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, subject to the terms and conditions contained herein,
Agent may act in any manner it may deem appropriate, in its sole discretion
given Agent's own interest in the Collateral in its capacity as one of the
Lenders and that Agent shall have no other duty or liability whatsoever to any
Lender as to any of the foregoing, except as otherwise provided herein.
17.12 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS. (a)
Each of the Lenders agrees that it shall not, without the express consent of
Agent, and that it shall, to the extent it is lawfully entitled to do so, upon
the request of Agent, set off against the Obligations, any amounts owing by such
Lender to Borrower or any accounts of Borrower now or hereafter maintained with
such Lender. Each of the Lenders further agrees that it shall not, unless
specifically requested to do so by Agent, take or cause to be taken any action,
including, the commencement of any legal or equitable proceedings, to foreclose
any Lien on, or otherwise enforce any security interest in, any of the
Collateral the purpose of which is, or could be, to give such Lender any
preference or priority against the other Lenders with respect to the Collateral.
(b) Subject to Section 17.8, if, at any time or times any Lender
shall receive (i) by payment, foreclosure, setoff or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations arising under, or
relating to, this Agreement or the other DIP Loan Documents, except for any such
proceeds or payments received by such Lender from Agent pursuant to the terms of
this Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender promptly shall (1) turn
the same over to Agent, in kind, and with such endorsements as may be required
to negotiate the same to Agent, or in same day funds, as applicable, for the
account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (2) purchase,
without recourse or warranty, an undivided interest and participation in the
104
112
Obligations owed to the other Lenders so that such excess payment received shall
be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, however, that if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable, and the
applicable portion of the purchase price paid therefor shall be returned to such
purchasing party, but without interest except to the extent that such purchasing
party is required to pay interest in connection with the recovery of the excess
payment.
17.13 AGENCY FOR PERFECTION. Agent and each Lender hereby appoints
each other Lender as agent for the purpose of perfecting the Agent's Liens in
assets which, in accordance with Article 9 of the UCC can be perfected only by
possession. Should any Lender obtain possession of any such Collateral, such
Lender shall notify Agent thereof, and, promptly upon Agent's request therefor
shall deliver such Collateral to Agent or in accordance with Agent's
instructions.
17.14 PAYMENTS BY AGENT TO THE LENDERS. All payments to be made by
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds to:
If to Foothill: The Chase Manhattan Bank
New York, New York
ABA # ▇▇▇-▇▇▇-▇▇▇
Credit: Foothill Capital Corporation
Account No. 323-266193
Re: Petsec Energy
or pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to Agent. Concurrently with each such payment,
Agent shall identify whether such payment (or any portion thereof) represents
principal, premium or interest on revolving advances or otherwise.
17.15 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each
member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other DIP Loan Documents relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by Agent or all Lenders, as applicable, in accordance with the
terms of this Agreement or the other DIP Loan Documents relating to the
Collateral and the exercise by Agent or all Lenders, as applicable, of their
respective powers set forth therein or herein, together with such other powers
that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
17.16 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By signing this
Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a
105
113
"Report" and collectively, "Reports") prepared by Agent, and Agent shall so
furnish each Lender with such Reports;
(b) expressly agrees and acknowledges that neither Foothill nor
Agent (i) makes any representation or warranty as to the accuracy of any Report,
or (ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Borrower
and will rely significantly upon Borrower's books and records, as well as on
representations of Borrower's personnel;
(d) agrees to keep all Reports and other material, non-public
information regarding Borrower and its Subsidiaries and their operations,
assets, and existing and contemplated business plans in a confidential manner;
it being understood and agreed by Borrower that in any event such Lender may
make disclosures (a) to counsel for and other advisors, accountants, and
auditors to such Lender, (b) reasonably required by any bona fide potential or
actual Assignee, transferee, or Participant in connection with any contemplated
or actual assignment or transfer by such Lender of an interest herein or any
participation interest in such Lender's rights hereunder, (c) of information
that has become public by disclosures made by Persons other than such Lender,
its Affiliates, assignees, transferees, or participants, or (d) as required or
requested by any court, governmental or administrative agency, pursuant to any
subpoena or other legal process, or by any law, statute, regulation, or court
order; provided, however, that, unless prohibited by applicable law, statute,
regulation, or court order, such Lender shall notify Borrower of any request by
any court, governmental or administrative agency, or pursuant to any subpoena or
other legal process for disclosure of any such non-public material information
concurrent with, or where practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any such
other Lender preparing a Report harmless from any action the indemnifying Lender
may take or conclusion the indemnifying Lender may reach or draw from any Report
in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrower, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase of, a loan or
loans of Borrower; and (ii) to pay and protect, and indemnify, defend and hold
Agent and any such other Lender preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses and other amounts
(including, attorney costs) incurred by Agent and any such other Lender
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) Any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent that has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender promptly upon receipt thereof from
Borrower; (y) To the extent that Agent is entitled, under any provision of the
DIP Loan Documents, to request additional reports or information from Borrower,
any Lender may,
106
114
from time to time, reasonably request Agent to exercise such
right as specified in such Lender's notice to Agent, whereupon Agent promptly
shall request of Borrower the additional reports or information specified by
such Lender, and, upon receipt thereof from Borrower, Agent promptly shall
provide a copy of same to such Lender; and (z) Any time that Agent renders to
Borrower a statement regarding the Loan Account, Agent shall send a copy of such
statement to each Lender.
17.17 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that certain
of the DIP Loan Documents now or hereafter may have been or will be executed
only by or in favor of Agent in its capacity as such, and not by or in favor of
the Lenders, any and all obligations on the part of Agent (if any) to make any
credit available hereunder shall constitute the several (and not joint)
obligations of the respective Lenders on a ratable basis, according to their
respective Commitments, to make an amount of such credit not to exceed, in
principal amount, at any one time outstanding, the amount of their respective
Commitments. Nothing contained herein shall confer upon any Lender any interest
in, or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender. Each Lender shall
be solely responsible for notifying its Participants of any matters relating to
the DIP Loan Documents to the extent any such notice may be required, and no
Lender shall have any obligation, duty, or liability to any Participant of any
other Lender. Except as provided in Section 17.7, no member of the Lender Group
shall have any liability for the acts or any other member of the Lender Group.
No Lender shall be responsible to Borrower or any other Person for any failure
by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.
18. GENERAL PROVISIONS.
18.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower and each member of the Lender Group whose
signature is provided for on the signature pages hereof.
18.2 SECTION HEADINGS. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire Agreement.
18.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against the Lender Group or
Borrower, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
18.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
18.5 AMENDMENTS IN WRITING. This Agreement can only be amended by a
writing signed by Agent, the requisite Lenders, and Borrower.
107
115
18.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The forgoing shall apply to each other DIP Loan Document mutatis
mutandis.
18.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by Borrower or any guarantor of the Obligations or
the transfer by either or both of such parties to the Lender Group of any
property of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable payments
of money or transfers of property (collectively, a "Voidable Transfer"), and if
the Lender Group is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that the Lender
Group is required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrower or such guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
18.8 INTEGRATION. This Agreement, together with the other DIP Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
18.9 RELEASE. SUBJECT TO THE RESERVATION OF RIGHTS SET FORTH IN
DECRETAL PARAGRAPHS 4 AND 16 OF THE INTERIM FINANCING ORDER OF ANY PARTY IN
INTEREST (INCLUDING WITHOUT LIMITATION, THE STATUTORY COMMITTEE OF UNSECURED
CREDITORS APPOINTED IN THE BANKRUPTCY CASE, BORROWER AND EACH OTHER LOAN PARTY
HEREBY VOLUNTARILY AND KNOWINGLY RELEASE AND FOREVER DISCHARGE AGENT AND EACH OF
THE LENDERS, ITS PREDECESSORS, AGENTS, EMPLOYEES, ATTORNEYS, SUCCESSORS AND
ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES,
COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR
UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT
LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS
AGREEMENT IS EXECUTED, WHICH BORROWER AND SUCH OTHER LOAN PARTIES, INDIVIDUALLY
OR COLLECTIVELY, MAY NOW OR HEREAFTER HAVE AGAINST AGENT, ANY OF
108
116
THE LENDERS, ITS PREDECESSORS, AGENTS, EMPLOYEES, ATTORNEYS, SUCCESSORS AND
ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF
CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM
ANY ADVANCES, LETTERS OF CREDIT OR OTHER INDEBTEDNESS, INCLUDING, WITHOUT
LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR
RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE
OF ANY RIGHTS AND REMEDIES UNDER THE AGREEMENT OR OTHER TRANSACTION DOCUMENTS,
AND NEGOTIATION FOR AND EXECUTION OF THIS AGREEMENT.
18.10 LENDER GROUP FEES AND EXPENSES. Agent agrees to use its best
efforts to provide to the legal counsel of any statutory committee by the tenth
day of each calendar month following the entry of the Interim Financing Order a
statement detailing the fees and expenses paid by Borrower to the Lender Group
or otherwise billed to Borrower by the Lender Group, including a detailed
breakdown of time spent and expenses incurred by counsel to Lender Group (such
fees and expenses being referred to in this Agreement as the "Monthly Fees and
Expenses") (which statement shall be given, if practicable, by electronic mail
to such legal counsel). The statutory committee shall after receipt of such
statement have a ten day period to review such Monthly Fees and Expenses and to
submit in writing to Agent any objections to the reasonableness of such Monthly
Fees and Expenses. Upon receipt by Agent of a written objection by the statutory
committee to the reasonableness of such Monthly Fees and Expenses, Agent and the
statutory committee shall thereafter have a second ten day period to negotiate a
resolution of the statutory committee objections. If by the end of such second
ten day period Agent and the statutory committee have not resolved such
objections, the statutory committee shall have a third ten day period to file
with the Court a written objection to the Monthly Fees and Expenses and a
request for a hearing. Failure by the statutory committee to effectuate any of
the relevant actions during the relevant ten day period shall be deemed to be a
waiver by the statutory committee as to any right to object to or otherwise
contest the reasonableness of the relevant Monthly Fees and Expenses. Nothing in
this Section 18.10, including, without limitation, the setting forth of the
above-described procedure, shall be deemed to mean that payment or billing of
any Monthly Fees and Expenses is subject to the approval by or consent of such
statutory committee; this Section 18.10 is only intended to set forth a
procedure by which such statutory committee is given the opportunity to review,
and if necessary, object to, previously paid or billed Monthly Fees and
Expenses.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
109
117
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed.
BORROWER:
PETSEC ENERGY INC.,
a Nevada corporation, Debtor-in-Possession
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
Title: Vice President - Chief Financial Officer
----------------------------------------
AGENT:
FOOTHILL CAPITAL CORPORATION,
a California corporation, as Agent for the Lenders
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Title: Vice President
----------------------------------------
LENDERS:
FOOTHILL CAPITAL CORPORATION,
a California corporation, as a Lender
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
Title: Vice President
----------------------------------------