ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1.1. Amended and Restated Note Purchase Agreement dated March 27,
1997 between UNEXCO and RIMCO.
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UNEXCO, INC.
$5,500,000
12% Senior Secured General Obligation Notes
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AMENDED AND RESTATED NOTE PURCHASE AGREEMENT
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Dated as of March 27, 1997
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AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
AMENDED AND RESTATED NOTE PURCHASE AGREEMENT dated as of March 27, 1997
among UNEXCO, INC., a Delaware corporation (the "Company"), and RIMCO PARTNERS,
L.P., a Delaware limited partnership, RIMCO PARTNERS, ▇.▇. ▇▇, a Delaware
limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited partnership,
and RIMCO PARTNERS, ▇.▇. ▇▇, a Delaware limited partnership (collectively, the
"Noteholders").
A. The Company and the Noteholders entered into that certain Note
Purchase Agreement dated as of December 20, 1996 (the "Original Note
Agreement"), whereby the Noteholders purchased those certain 12% Senior Secured
General Notes in the aggregate principal amount of $4,000,000.
B. The Company and the Noteholders desire to amend and restate the
Original Note Agreement in its entirety as set forth herein.
In consideration of the mutual covenants herein contained, the Company
and the Noteholders agree to amend and restate the Original Note Agreement as
follows:
ARTICLE I
DEFINITIONS, ECT.
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the respective meanings
set forth in Annex A attached hereto (such meanings to be equally applicable to
both singular and plural forms of the terms defined).
Section 1.02. Covenant Construction. Each covenant contained herein
shall be construed (absent express provision to the contrary) as being
independent of each other covenant construed herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Persons, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
Section 1.03. Other Rules of Construction. The words "hereof,""herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. All references herein to articles, sections, annexes, exhibits and
schedules shall, unless the context requires a different construction, be deemed
to be references to the articles and sections of this Agreement and the annexes,
exhibits and schedules attached hereto and made a part hereof. In this
Agreement, unless a clear contrary intention appears, the word "including" (and
with correlative meaning "include") means including, without limiting the
generality of any description preceding such term. The headings of various
articles and sections of this Agreement are for convenience only and shall not
affect the meaning of the terms and conditions of this Agreement. No provision
of this Agreement shall be interpreted or construed against any party solely
because that party or its legal representative drafted such provision.
ARTICLE II
COMMITMENTS AND NOTES
Section 2.01. Notes. (a) Subject to the terms and conditions of this
Agreement, each Noteholder severally agrees to make advances to the Company
(each an "Advance") during the period from the date hereof through June 30, 1998
(the "Commitment Period") in an aggregate amount not exceeding the principal
amount specified opposite such Noteholder's name in Schedule A (such amount, as
it may be reduced or terminated pursuant to this Agreement, is herein referred
to as such Noteholder's "Commitment"). Each funding of Advances shall be made on
the same dare ratably be the Noteholders. The Advances made by each Noteholder
shall be evidenced by the Note issued to such Noteholder. Within the limits set
forth herein and subject to the terms and conditions of this Agreement, the
Company may borrow, repay pursuant to Section 7.03, prepay pursuant to Section
7.04 and reborrow under this Article II.
(b) The Company will authorize the issue and sale of $5,500,00
aggregate principal amount of its Amended and Restated 12% Senior Secured
General Obligation Notes (the "Notes"). Subject to the terms and conditions of
this Agreement, at the Closing provided for in Article III, the Company will
issue to each Noteholder a Note in the principal amount of such Noteholder's
Commitment. The Notes shall be substantially in the form set out in Exhibit
2.01, with such changes therefrom, if any, as may be approved by the Noteholders
and the Company. Each Noteholder will note on its internal records, to the
extent applicable, the date and amount of each Advance made by such Noteholder
to the Company hereunder, and the amount of each payment in respect thereof and
will prior to any transfer of its Note endorse on the reverse side thereof the
outstanding principal amount of Advances evidenced thereby. Failure to make any
such notation shall not affect the Company's obligations in respect of such
Advance. Absence manifest error, any Noteholder's records or notations on its
Note as to the outstanding principal amount of its Advances shall be conclusive.
(c) Notwithstanding any other term hereof, no Advance shall be made if
after giving effect to the making of such Advance the aggregate amount of
Advances outstanding would exceed the Total Commitment.
(d) If a Change of Control shall occur, the Commitment of each
Noteholder shall automatically terminate.
Sections 2.02. Guaranty Agreement. Universal Seismic Associates, Inc., a
Delaware corporation ("USA"), at the Closing provided for in Article III will
execute an Amended and Restated Guaranty Agreement (the "Guaranty Agreement")
pursuant to which USA will
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guarantee payment of the Notes. The Guaranty Agreement shall be substantially in
the form set out in Exhibit 2.02, with such changes therefrom, if any, as may be
approved by the Noteholders and USA.
Section 2.03. Procedures for Advances Under the Notes. (a) The
Noteholders have previously made Advances of $4,000,000 which Advances remain
outstanding as of the date hereof. Subject to the terms and conditions of this
Agreement, on the day of Closing, the Noteholders shall make Advances in the
aggregate amount of $500,000.
(b) Whenever the Company desires to obtain a funding of additional
Advances, it shall, no less than 20 Business Days prior to the proposed funding
date for such Advances, provide the Noteholders with the following:
(i) a description of the Oil and Gas Properties to be acquired by the
Company in connection with such proposed Advance or the oil and gas
operations to be conducted with the proceeds of such proposed Advance, a
summary describing the material terms of such acquisition or operations,
copies of all documents relating to such acquisition or operations, title
opinions or other title information covering such Oil and Gas Properties in
form and substance reasonably satisfactory to the Noteholders, and such
other information pertaining to the Oil and Gas Properties to be acquired,
or oil and gas operation to be conducted, by the Company in connection with
such proposed Advances as the Noteholders may reasonably request,
(ii) a copy of all geological, geophysical, engineering and other
technical data in the possession of the Company, or to which the Company has
access, pertaining to the Oil and Gas Properties to be acquired or developed
in connection with such proposed Advances and such other technical
information as may be reasonably requested by the Noteholders, and
(iii) a schedule describing the proposed use of the proceeds of such
Advances, which uses shall be permitted under Section 5.13.
(c) Within 10 Business Days after receipt of such information and such
other information as the Noteholders shall reasonably request, the Noteholders
shall provide the Company with a written notice (an "Availability Notice")
stating the amount, if any, of Advances that the Noteholders are willing to
fund (as determined by the Noteholders in their sole absolute discretion),
subject to the other terms and conditions hereof, including the conditions
specified in Article IV, as well as any other conditions precedent to the
funding of such Advances that the Noteholders may specify.
(d) Subject to the other terms and conditions set forth herein, each
funding of Advances shall be made upon the written, telecopied or facsimile
transmitted request of the Company, given to the Noteholders not later than
12:00 Noon (Houston time) on the fifth Business Day prior to the proposed date
of such Advances. Each request for Advances (an "Advance
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Request") shall conform to the requirements of the related Availability Notice
and shall specify therein: (a) the proposed date for such Advances;(b) the
aggregate amount of such Advances; and (c) the wire transfer instructions for
such Advances.
(e) Upon satisfaction of all conditions to any Advance, the
Noteholders will make their respective Advances available to the Company by
delivery to the Company or its order of immediately available funds in the
amount, stated in the Advance Request by wire transfer of immediately available
funds for the account of the Company to the bank stated in the Advance Request.
ARTICLE III
CLOSING
The sale and purchase of the Notes to be purchased by the Noteholders
shall occur at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, at 10:00 a.m., Houston time, at a closing (the "Closing") on March
27, 1997. At the Closing, the Company will deliver to each Noteholder the Note
to be purchased by such Noteholder, registered in such Noteholder's name. If at
the Closing the Company shall fail to tender such Notes to the Noteholders as
provided above in this Article III, or any of the conditions specified below
shall not have been fulfilled to the Noteholders' election, be relieved of all
further obligations under this Agreement, without thereby waiving any rights the
Noteholders may have by reason of such failure or such nonfulfillment.
The effectiveness of this Agreement is subject to the fulfillment to the
Noteholders' reasonable satisfaction, prior to or at the Closing, of the
following condition:
Section 3.01. Execution of Documents. The Noteholder shall have received
the following agreements (together with this Agreement and any agreements
delivered pursuant to Section 4.01 or Section 9.07, collectively, the
"Transaction Documents"), in such number of counterparts as the Noteholders may
reasonably request, each dated the date of the Closing duly executed by the
Persons indicated below:
(a) the Notes duly executed by the Company;
(b) the Guaranty Agreement duly executed by USA;
(c) the Pledge Agreement duly executed by USA together with
certificates representing all of the issued and outstanding common stock of
the Company and related stock powers duly executed in blank by Parent;
(d) amendments to the USA Note Agreements duly executed by USA, in
form and substance satisfactory to the Noteholders; and
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(e) the Security Agreement duly executed by the Company, together with
related financing statements.
Section 3.02. Certificates. The Company and USA shall have delivered
to the Noteholders:
(a) an Officer's Certificate from the Company, dated the date of the
Closing, certifying that the conditions specified in Section 3.04 and
Section 3.05 have been fulfilled;
(b) an Officer's Certificate from USA, dated the date of the Closing,
certifying that the conditions specified in Section 3.04 and Section 3.05
have been fulfilled;
(c) a certificate certifying as to the resolutions attached thereto
and other corporate proceedings relating to the authorization, execution
and delivery of this Agreement and the other Transaction Documents; and
(d) certificates of appropriate public officials as to the corporate
existence and good standing of, and the payment of all franchise taxes
owing by, the Company in the States of Delaware, Texas and Louisiana and
USA in the States of Delaware and Texas.
Section 3.03. Opinion of Counsel. The Noteholders shall have received
opinions in form and substance satisfactory to the Noteholders, dated the date
of the Closing from ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇, Incorporated, counsel for the
Company, covering such matters incident to the transactions contemplated hereby
as the Noteholders or the Noteholders' counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to the
Noteholders).
Section 3.04. Representations and Warranties. The representations and
warranties of the Company and USA in this Agreement and the other Transaction
Documents shall be true and correct when made and at the time of the Closing.
Section 3.05. Performance; No Default. The Company and USA shall have
performed and compiled with all agreements and conditions contained in this
Agreement or the other Transaction Documents required to be performed or
complied with by them prior to or at the Closing and after giving effect to the
issue and sale of the Notes no Default or Event of Default shall have occurred
and be continuing.
Section 3.06. Payment of Special Counsel Fees. Without limiting the
provisions of Section 13.01, the Company or USA shall have paid on or before the
Closing the reasonable fees, charges and disbursements of the Noteholders'
special counsel to the extent reflected in a statement of such counsel rendered
to the Company at least one Business Day prior to the Closing.
Section 3.07. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and all documents and
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instruments incident to such transactions shall be satisfactory to the
Noteholders and the Noteholders' special counsel, and the Noteholders and the
Noteholders' special counsel shall have received all such counterpart originals
or certified or other copies of such documents as the Noteholders or they may
reasonably request.
ARTICLE IV
CONDITIONS TO ADVANCES
Unless otherwise waived by the Noteholders, the Noteholders' obligation to
fund any Advance is subject to the fulfillment to the Noteholders' reasonable
satisfaction, prior to or on the date of such Advance, of the following
conditions:
Section 4.01. Execution of Documents. The Noteholders shall have received
the following agreements, in such number of counterparts as the Noteholders may
reasonably request, each duly executed by the Persons indicated below:
(a) the Security Documents dated the date of such Advance and duly executed
by the Company granting a first priority Lien in favor of the Noteholders on the
Oil and Gas Properties and other related assets to be acquired or developed by
the Company in connection with such Advance; and
(b) to the extent such Advance is to be used to acquire Oil and Gas
Properties, assignments of such Oil and Gas Properties acquired by the Company
and duly executed by the Person from whom the Company is acquiring such Oil and
Gas Properties in form and substance satisfactory to the Noteholders.
Section 4.02. Perfection of Liens. The Noteholders shall have received
evidence, in form and substance satisfactory to the Noteholders, that the Liens
contemplated by the Security Documents have been duly perfected in accordance
with applicable law and, upon funding of the Advance and consummation of the
acquisition of the Oil and Gas Properties, will constitute a first priority Lien
on the Oil and Gas Properties and other related assets to be acquired or
developed by the Company in connection with such Advance, including filing of
mortgages, deeds of trust and financing statements in all appropriate filing
jurisdictions.
Section 4.03. Certificates. The Company shall have delivered to the
Noteholders:
(a) an Officer's Certificate from the Company, dated the date of such
Advance, certifying that the conditions specified in Section 4.05 and Section
4.06 have been fulfilled; and
(b) an Officer's Certificate from USA, dated the date of such Advance,
certifying that the conditions specified in Section 4.05 and Section 4.06 have
been fulfilled.
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Section 4.04. Insurance. The Noteholders shall have received evidence in
form and substance satisfactory to the Noteholders, that the Company has the
insurance required under Section 9.02 covering the Oil and Gas Properties and
other related assets to be acquired in connection with such Advance.
Section 4.05. Representations and Warranties. The representations and
warranties of the Company and USA in this Agreement and the other Transaction
Documents shall be correct when made and at the time of such Advance.
Section 4.06. Performance; No Default. After giving effect to such Advance
(and the application of the proceeds thereof as contemplated by Section 5.13) no
Default or Event of Default shall have occurred and be continuing.
Section 4.07. Payment of Special Counsel Fees. Without limiting the
provisions of Section 13.01, the Company shall have paid on or before the date
of such Advance the reasonable fees, charges and disbursements of the
Noteholders' special counsel to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to the date of
such Advance.
Section 4.08. Proceedings and Documents. All corporate and other
proceedings in connection with the transactions related to such Advance and all
documents and instruments incident to such transactions shall be reasonably
satisfactory to the Noteholders and the Noteholders' special counsel, and the
Noteholders and the Noteholders' special counsel shall have received all such
counterpart originals or certified or other copies of such documents as the
Noteholders or they may reasonably request.
Section 4.09. No Material Adverse Change. No event shall have occurred
which, in the opinion of the Noteholders shall have a Material Adverse Effect on
the Company, USA or the Oil and Gas Properties to be acquired or developed by
the Company in connection with such Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Noteholders that:
Section 5.01. Organization; Power and Authority. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified as a foreign corporation and is
in good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
or in good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the corporate power
and authority to own or hold under lease the properties it purports to own or
hold under lease, to transact the business it transacts
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and proposes to transact, to execute and deliver this Agreement and the other
Transaction Documents and to perform the provisions hereof and thereof.
Section 5.02. Authorization, etc. This Agreement and the other
Transaction Documents to which it is a party have been duly authorized by all
necessary corporate action on the part of the Company, and this Agreement
constitutes, and upon execution and delivery thereof each other Transaction
Document to which it is a party will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (b) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section 5.03. Compliance with Laws, Other Instruments, etc. The
execution, delivery and performance by the Company of this Agreement and the
other Transaction Documents to which it is a party will not (a) contravene,
result in any breach of, or constitute a default under, or result in the
creation of any Lien in respect of any property of the Company under, any
indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,
corporate charter or by-laws, or any other agreement or instrument to which the
Company is bound or by which the Company or any of its properties may be bound
or affected, (b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to the Company or (c) violate
any provision of any statute or other rule or regulation or any Governmental
Authority applicable to the Company.
Section 5.04. Governmental Authorizations, etc. No consent, approval
or authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the execution, delivery or
performance by the Company of this Agreement or the other Transaction Documents.
Section 5.05. Subsidiaries. The Company has no Subsidiaries.
Section 5.06. Disclosure. This Agreement, the documents,
certificates or other writings delivered to the Noteholders by or on behalf of
the Company in connection with the transactions contemplated hereby, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not misleading.
There is no fact known to the Company that could reasonably be expected to have
a Material Adverse Effect that has not been set forth herein or in the other
documents, certificates and other writings delivered to the Noteholders by or on
behalf of the Company specifically for use in connection with the transactions
contemplated hereby.
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Section 5.07. Litigation. Except as disclosed in Schedule 5.07, there are
no actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any property of the Company in
any court or before any arbitrator or any kind or before or by any Governmental
Authority that, individually or in the aggregate, could reasonably be expected
to have a Material Adverse Effect.
Section 5.08. Observance of Agreements, Statutes and Orders. The Company
is not in default under any term of any agreement or instrument to which it is a
party or by which it is bound, or any order, judgment, decree or ruling of any
court, arbitrator or Governmental Authority and is not in violation of any
applicable law, ordinance, rule or regulation (including without limitation
Environmental Laws) of any Governmental Authority, which default or violation,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
Section 5.09. Taxes. The Company has filed all tax returns that are
required to have been filed in any jurisdiction, and has paid all taxes shown to
be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material or (ii) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company has established adequate
reserves in accordance with GAAP. The Company knows of no basis for any other
tax or assessment that, if imposed, could reasonably be expected to have a
Material Adverse Effect. The charges, accruals and reserves on the books of the
Company in respect of Federal, state or other taxes for all fiscal periods are
adequate in all material respects.
Section 5.10. Title to Property. The Company has good and sufficient title
to its Oil and Gas Properties, if any, and its other Material properties, if
any, in each case free and clear of Liens other than those permitted by this
Agreement. All leases that individually or in the aggregate are Material are
valid and subsisting and are in full force and effect in all material respects.
Section 5.11. Licenses, Permits, etc. The Company owns or possesses all
licenses, permits, franchises, authorizations, patents, copyrights, service
marks, trademarks and trade names, or rights thereto, that individually or in
the aggregate are Material, without known conflict with the rights of others. To
the best knowledge of the Company, (a) no product of the Company infringes in
any material respect any license, permit, franchise, authorization, patent,
copyright, service ▇▇▇▇, trademark, trade name or other right owned by any other
Person, and (b) there is no Material violation by any Person of any right of the
Company with respect to any patent, copyright, service ▇▇▇▇, trademark, trade
name or other right owned or used by the Company.
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Section 5.12. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and administered
each Plan, if any, in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
ERISA Affiliate has incurred any liability pursuant to Title I or IV or ERISA
or the penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event, transaction or
condition has occurred or exists that could reasonably be expected to result in
the incurrence of any such liability by the Company or any ERISA Affiliate, or
in the imposition of any Lien on any of the rights, properties or assets of the
Company or any ERISA Affiliate, in either case pursuant to Title I or IV of
ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or
412 of the Code, other than such liabilities or Liens as would not be
individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each of
the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has the
meaning specified in section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B of
the Code) of the Company is not Material.
Section 5.13. Use of Proceeds; Margin Regulations. The Company shall use
the Advances made at Closing under Section 2.03(a) to repay Indebtedness owing
to USA. The Company will apply the proceeds of all other Advances to pay for the
acquisition, exploration and development of Oil and Gas Properties acquired or
developed by the Company in connection with such Advances and for other working
capital purposes, in each case, as described in the applicable schedule provided
to the Noteholders under Section 2.03(b)(iii). No part of the proceeds of any
Advance will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207), or for the purpose of
buying or carrying or trading in any securities under such circumstances as to
involve the Company in a violation of Regulation X of said Board (12 C.F.R.
224) or to involve any broker or dealer in a violation of Regulation T of said
Board (12 C.F.R. 220).
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Section 5.14. Status under Certain Statutes. The company is not subject
to regulation under the Investment Company Act of 1940,as amended,the Public
Utility Holding Company Act of 1935,as amended, the Interstate Commerce Act,as
amended,or the Federal Power Act, as amended.
Section 5.15. Securities Matters. Other than offers to accredited
Investors, neither the Company nor anyone acting on its behalf has directly or
indirectly offered the Notes or any part thereof or any similar securities for
sale to, solicited any offer to buy any of the same from,or otherwise approached
or negotiated in respect thereof with,anyone other than the Noteholders named in
Schedule A. Neither the Company nor anyone acting on its behalf has taken or
will take any action which would subject the issuance and sale of the Notes to
the registration and prospectus delivery provisions of the Securities Act.
Section 5.16. Environmental Matters. The Company has no knowledge of
any claim and has not received any notice of any claim,and no proceeding has
been instituted raising any claim against the Company or any of its real
properties now or formerly owned,leased or operated by the Company or other
assets,alleging nay damage to the environment or violation of any Environmental
Laws, except,in each case,such as could not reasonably be excepted to result in
a Material Adverse Effect. Except as otherwise disclosed to the Noteholders in
writing,(a) the Company has no Knowledge of any facts which would give rise to
any claim, public or private,of violation of Environmental Laws or damage to
the environment emanating from,occurring on or in any way related to real
properties now formerly owned,leased or operated by the Company or to other
assets or their use, expect,in each case, such as could not reasonably be
excepted to result in a Material Adverse Effect; (b) Company has not stored
any Hazardous Materials on real properties now or formerly owned,leased or
operated by the Company and has not disposed of nay Hazardous Materials in a
manner contrary to any Environmental Laws in each case in any manner that
could reasonably be expected to result in a Material Adverse Effect; and (c)
all buildings on all real properties now owned,leased or operated by the
Company are in compliance with applicable Environmental Laws, except where
failure to comply could not reasonably be excepted to result in a Material
Adverse Effect.
ARTICLE VI
REPRESENTATIONS OF THE PURCHASER
Section 6.01. Purchase for Investment. Each Noteholder
represents that it is acquiring its Notes for its own account or for one of its
separate accounts (or for the account of trusts for which it is trustee) for
investment with no intention of presently distributing or reselling the
same,subject,nevertheless,to its right to dispose of, in compliance with all
applicable securities laws,its respective Notes,or any part of any thereof held
by it, if at some future time in its sole discretion it deems it advisable so to
do. each Noteholder hereby agrees that it will not sell, transfer or otherwise
dispose of its Notes in violation of the Securities Act.
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Section 6.02. Status; No Registration. Each Noteholder represents that
it is an Accredited Investor. Each Noteholder acknowledges that the Notes have
not been registered under the Securities Act, and that such Notes must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available.
ARTICLE VII
PAYMENT OF THE NOTES
Section 7.01. Place of Payment. The Company will pay all sums becoming
due to any Noteholder under any Transaction Document by the method and at the
address specified for such purpose below such Noteholder's name in Schedule A,
or by such other method or at such other address as such Noteholder shall have
from time to time specified to the Company in writing for such purpose, without
the presentation or surrender of such Note or the making of any notation
thereon, except that upon written request of the Company made concurrently with
or reasonably promptly after payment or prepayment in full of any Note, the
Noteholders shall surrender such Note for cancellation, reasonably promptly
after any such request, to the Company at its principal executive office.
Section 7.02. Payments Due on Non-Business Days. Anything in this
Agreement or the Notes to the contrary notwithstanding, any payment of principal
of or interest on any Note that is due on a date other than a Business Day shall
be made on the next succeeding Business Day without including the additional
days elapsed in the computation of the interest payable on such next succeeding
Business Day.
Section 7.03. Mandatory Repayment of Notes. The Notes shall be due and
payable as follows:
(a) from time to time payments in such amounts as shall be necessary
so that the aggregate amount of Advances outstanding shall not be in excess
of the Total Commitment. Any repayment required by this Section 7.03(a)
shall include a payment of accrued but unpaid interest to the date of
payment on the principal amount paid and shall be due and payable on the
date such payment accrues pursuant to the preceding sentence;
(b) on each Monthly Payment Date, a payment equal to the greater of
(i) all accrued, but unpaid interest on the Notes or (ii) 100% of the Net
Revenues for the immediately preceding month (or, if less, the entire unpaid
principal of, and accrued interest on, the Notes) shall be due and payable;
(c) on December 1, 1999, the entire unpaid principal of the Notes,
together with all accrued, but unpaid interest on the Notes, shall be fully
and finally due and payable; and
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(d) if a Change of Control shall occur, the entire unpaid principal
of the Notes, together with all accrued, but unpaid interest on the Notes,
shall be fully and finally due and payable on the date one day after such
Change of Control occurs.
All payments on the Notes shall be applied pro rata, in accordance with the
principal amounts outstanding on the Notes, first to accrued but unpaid
interest on the Notes and the remainder, if any, to the principal amount
outstanding on the Notes.
Section 7.04. Optional Prepayment of Notes. The Company may, at its
option, without notice, penalty, premium or fee, prepay at any time all, or from
time to time any part of, the Notes at 100% of the principal amount so prepaid,
plus accrued and unpaid interest on such principal amount. In the case of each
partial prepayment of the Notes, the principal amount of the Notes to be
prepaid shall be allocated among all of the Notes at the time outstanding in
proportion to the respective unpaid principal amounts thereof.
Section 7.05. Purchase of Notes. The Company will not, and will not
permit any Affiliate to, purchase, redeem, prepay or otherwise acquire,
directly or indirectly, any of the outstanding Notes except upon the payment of
the Notes in accordance with the terms of this Agreement and the Notes. The
Company will promptly cancel all Notes acquired by it or any Affiliate pursuant
to any payment or purchase of Notes pursuant to any provision of this Agreement
and no Notes may be issued in substitution or exchange for any such Notes.
ARTICLE VIII
INFORMATION AS TO THE COMPANY
Section 8.01. Financial and Business Information. The Company shall
deliver to each of the Noteholders:
(a) Within 45 days the end of each quarterly fiscal period in each
fiscal year of the Company, copies of (i) a consolidated balance sheet of the
Company as at the end of such quarter, and (ii) consolidated statements of
income, changes in shareholders' equity and cash flows of the Company, for such
quarter and for the portion of the fiscal year ending with such quarter, setting
forth in each case in comparative form the figures for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP applicable to quarterly financial statements generally, and certified
by a Senior Financial Officer of the Company as fairly presenting, in all
material respects, the financial position of the companies being reported on and
their results of operations and cash flows, subject to changes resulting from
year-end adjustments.
(b) Within 90 days after the end of each fiscal year of the Company,
copies of (i) a consolidated balance sheet of the Company, as at the end of such
year, and (ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company, for such year, setting forth in each case
in comparative form the figures for the previous fiscal year, all in
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reasonable detail, prepared in accordance with GAAP, and accompanied (A) by an
opinion thereon of independent certified public accountants of recognized
national standing, which opinion shall state that such financial statements
present fairly, in all material respects, the financial position of the
companies being reported upon and their results of operations and cash flows and
have been prepared in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been made in
accordance with generally accepted auditing standards, and that such audit
provides a reasonable basis for such opinion in the circumstances, and (B) a
certificate of such accountants stating that they have reviewed this Agreement
and stating further whether, in making their audit, they have become aware of
any condition or event that then constitutes a Default or Event of Default, and,
if they are aware that any such condition or event then exists, specifying the
nature and period of the existence thereof.
(c) Within 25 days after the end of each calendar month, copies of (i) a
consolidated balance sheet of the Company as at the end of such month, and (ii)
consolidated statements of income, changes in shareholders' equity and cash
flows of the Company, for such month and for the portion of the fiscal year
ending with such month, setting forth in each case in comparative form the
figures for the corresponding periods in the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP applicable to monthly
financial statements generally, and certified by a Senior Financial Officer of
the Company as fairly presenting, in all material respects, the financial
position of the companies being reported on and their results of operations and
cash flows, subject to changes resulting from year-end adjustments.
(d) By March 1 and September 1 of each calendar year, beginning September
1, 1997, a reserve report (each a "Reserve Report") in form and substance
satisfactory to the Noteholders, prepared by an independent petroleum
engineering firm satisfactory to the Noteholders setting forth as of the
immediately preceding December 31 or June 30, as applicable, the Future Net
Revenue for the Company's Oil and Gas Properties. With the delivery of each
Reserve Report, the Company shall deliver to the Noteholder a certificate from a
Responsible Officer of the Company certifying that the information in the
Reserve Report is true and correct in all Material respects.
(e) On or before the 20th day of each month, a production report prepared
by the Company setting forth in reasonable detail, the production from, and
Gross Production Proceeds and Deductible Costs attributable to, the Company's
Oil and Gas Properties for the immediately preceding month and such other
information as the Noteholders may reasonably request (each a "Monthly
Production Report").
(f) Promptly, and in any event within five days after a Responsible
Officer of the Company becoming aware of the existence of any Default or Event
of Default or that any Person has given any notice or taken any action with
respect to a claimed default hereunder or that any Person has given any notice
or taken any action with respect to a claimed default of the type referred to in
Section 1.01, a written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with respect
thereto.
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(g) Promptly, and in any event within five days after a Responsible
Officer of the Company becoming aware of any of the following, a written notice
setting forth the nature thereof and the action, if any, that the Company or an
ERISA Affiliate proposes to take with respect thereto: (i) with respect to any
Plan, any reportable event, as defined in section 4043(b) of ERISA and the
regulations thereunder, for which notice thereof has not been waived pursuant to
such regulations as in effect on the date hereof; or (ii) the taking by the PBGC
of steps to institute, or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by the Company
or any ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any
event, transaction or condition that could result in the incurrence of any
liability by the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans, or in the imposition of any Lien on any of the rights, properties
or assets of the Company or any ERISA Affiliate pursuant to Title I or IV ERISA
or such penalty or excise tax provisions, if such liability or Lien, taken
together with any other such liabilities or Liens then existing, could
reasonably be expected to be Material.
(h) Promptly, and in any event within 30 days of receipt thereof, copies
of any notice to the Company from any Federal or state Governmental Authority
relating to any order, ruling, statute or other law or regulations that could
reasonably be expected to have a Material Adverse Effect.
(i) Within 10 days after the Company acquires, or enters into an
agreement to acquire, any Oil and Gas Properties that are not acquired by way of
an Advance under the Notes, written notice of such acquisition, including the
terms of the acquisition, a description of the Oil and Gas Properties acquired
or to be acquired and such other information related thereto as the Noteholders
may reasonably request.
(j) With reasonable promptness, such other data and information relating
to the business, operations, affairs, financial condition, assets or properties
of the Company or relating to the ability of the Company to perform its
obligations hereunder and under the Notes as from time to time may be reasonably
requested by any of Noteholder.
Section 8.02. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 8.01(a), Section 8.01(b) or
Section 8.01(c) shall be accompanied by a certificate of a Senior Financial
Officer of the Company stating that such officer has reviewed the relevant terms
hereof and has made, or caused to be made, under his or her supervision, a
review of the transactions and conditions of the Company from the beginning of
the monthly, quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not have
disclosed the existence during such period of any condition or event that
constitutes a Default or an Event of Default or, if any such condition or event
existed or exists (including, without limitation, any such event or condition
resulting from the failure of the Company to comply with any Environmental Law),
specifying the nature and period of
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existence thereof and what action the Company shall have taken or proposes to
take with respect thereto.
Section 8.03. Inspection. The Company shall permit the representatives of
each Noteholder, at the expense of the Company and upon reasonable prior notice
to the Company, to visit and inspect any of the offices or properties of the
Company, to examine all their respective books of account, records, reports and
other papers, to make copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company authorizes
said accountants to discuss the affairs, finances and accounts of the Company),
all at such times and as often as may be requested.
ARTICLE IX
AFFIRMATIVE COVENANTS
The Company covenants that so long as any of the Commitments remain in
effect or any of the Notes are outstanding:
Section 9.01. Compliance with Law; Contracts. The Company will comply with
all laws, ordinances or governmental rules or regulations to which it is
subject, including, without limitation, Environmental Laws, and will obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of its properties or to
the conduct of its businesses, in each case to the extent necessary to ensure
that non-compliance with such laws, ordinances or governmental rules or
regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company will comply with, and perform its obligations under,
each contract or agreement to which it is a party, unless, in the good faith
judgement of the Company, the failure to so comply or perform could not
reasonably be expected to have a Material Adverse Effect.
Section 9.02. Insurance. The Company will maintain, with financially sound
and reputable insurers, insurance with respect to its properties and businesses
against such casualties and contingencies, of such types, on such terms and in
such amounts (including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as is customary in the
case of entities of established reputations engaged in the same or a similar
business and similarly situated.
Section 9.03. Maintenance of Properties. The Company will maintain and
keep, or cause to be maintained and kept, its properties in good repair, working
order and condition (other than ordinary wear and tear), so that the business
carried on in connection therewith may be properly conducted at all times,
provided that this Section shall not prevent the Company from discontinuing the
operation and the maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
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Section 9.04. Payment of Taxes and Claims. The Company will file all tax
returns required to be filed in any jurisdiction and to pay and discharge all
taxes shown to be due and payable on such returns and all other taxes,
assessments, governmental charges, or levies imposed on them or any of their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company, provided that the Company
need not pay any such tax or assessment or claims if (i) the amount,
applicability or validity thereof is contested by the Company on a timely basis
in good faith and in appropriate proceedings, and the Company has established
adequate reserves therefor in accordance with GAAP on the books of the Company
or (ii) the nonpayment of all such taxes and assessments in the aggregate could
not reasonably be expected to have a Material Adverse Effect.
Section 9.05. Corporate Existence, etc. The Company will at all times
preserve and keep in full force and effect its corporate existence. The Company
will at all times preserve and keep in full force and effect all rights and
franchises of the Company unless, in the good faith judgment of the Company, the
termination of or failure to preserve and keep in full force and effect such
corporate existence, right or franchise could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section 9.06. Conduct of Operations. Prior to the end of the Commitment
Period, the Company shall conduct, or cause to be conducted, and pay for each
of the exploration and development operations described in the schedules
delivered to the Noteholders under Section 2.03(b)(iii) on the Oil and Gas
Properties acquired or developed in connection with Advances by the Noteholders.
Section 9.07. Lien on Oil and Gas Properties. In addition to Liens granted
in favor of the Noteholders under Article IV, upon the written request of the
Noteholders the Company shall immediately execute and deliver to the Noteholders
Security Documents granting a first priority Lien on all other Oil and Gas
Properties and related assets acquired or owned by the Company.
ARTICLE X
NEGATIVE COVENANTS
The Company covenants that so long as any of the Commitments remain in
effect or any of the Notes are outstanding:
Section 10.01. Restrictions on Indebtedness. The Company will not
create, incur, assume, Guaranty or permit to exist any Indebtedness, except the
Notes.
Section 10.02. Restrictions on Liens. The Company will not create,
incur, assume, or permit to exist any Lien with respect to any asset now owned
or hereafter acquired, except:
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(a) Liens in favor of the Noteholders;
(b) encumbrances consisting of easements of ingress or egress over real
property, where the same do not materially detract from the use or
enjoyment of such property by, or the value of such property to, the
Company;
(c) Liens for taxes or assessments or governmental charges or levies, if
payment shall not at the time be required to be made in accordance with
the provisions of Section 9.04;
(d) any judgment lien, unless the judgment it secures shall not, within
30 days after the entry thereof, have been discharged or execution thereof
stayed pending appeal, or shall not have been discharged within 30 days
after the expiration of any such stay;
(e) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, laborers and materialmen incurred in the ordinary course of
business for sums not yet due or being contested in good faith; and
(f) Liens (other than liens by section 4068 of ERISA) incurred on
pledges or deposits made in the ordinary course of business in connection
with workmen's compensation, unemployment insurance, social security laws
or similar legislation.
Section 10.03. Restricted Payments. The Company will not directly or
indirectly make or pay (a) any dividend or other distribution on any shares
of the Company's capital stock (including any dividends payable in shares
of capital stock), (b) any payment on account of the purchase, redemption,
retirement or acquisition of any shares of the Company's capital stock or
any option, warrant or other right to acquire such shares, or (c) any
payments or other distributions to Sierra Management, Inc.
Section 10.04. Merger, Consolidation, etc. The Company shall not
consolidate with or merge with any other Person or convey, transfer or
lease all or substantially all of its assets in a single transaction or
series of transactions to any Person.
Section 10.05. Restrictions on Asset Sales. Without the Noteholders'
prior written consent, the Company will not sell, transfer, assign, convey
or otherwise dispose of an interest in any asset now owned or hereafter
acquired, except for the sale of oil and gas production in the ordinary
course of business.
Section 10.06. Transactions with Affiliates. The Company will not enter
into directly or indirectly any Material transaction or Material group of
related transactions (including without limitation the purchase, lease,
sale or exchange of properties of any kind or the rendering of any service)
with any Affiliate, except in the ordinary course and pursuant to the
reasonable requirements of the Company's business and upon fair and
reasonable terms no less favorable to the
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Company than would be obtainable in a comparable arm's-length transaction with a
Person not an Affiliate.
Section 10.07. Change in Business. The Company will not directly or
indirectly engage to a material extent in any business other than those in which
it is presently engaged or that are directly related thereto, or discontinue any
of its existing lines of business or substantially alter its method of doing
business.
ARTICLE XI
DEFAULT AND REMEDIES
Section 11.01. Events of Default. An "Event of Default" shall exist if any
of the following conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or interest on
any Note when the same becomes due and payable, whether at maturity, by
declaration or otherwise; or
(b) the Company defaults in the performance of or compliance with any term
contained in Article X, or USA defaults in the performance or compliance with
any term of Article VII of the Guaranty Agreement; or
(c) the Company or USA defaults in the performance of or compliance with
any term contained in the Transaction Documents to which they are a party
(other than those referred to in paragraph (a) and (b) of this Section 11.01)
and such default is not remedied within 30 days after the earlier of (i) a
Responsible Officer obtains actual knowledge of such default or (ii) the
Company receives written notice of such default from any holder of a Note; or
(d) any representation or warranty made in writing by or on behalf of the
Company or USA or by any officer of the Company or USA in this Agreement or
the other Transaction Documents or in any writing furnished in connection with
the transactions contemplated hereby or thereby proves to have been false or
incorrect in any Material respect on the date as of which made; or
(e) (i) USA, the Company or any other Subsidiary of USA is in default (as
principal or as guarantor or other surety) in the payment of any principal of or
premium or interest on any Indebtedness that is outstanding in an aggregate
principal amount of at least $100,000 beyond any period of grace provided with
respect thereto, or (ii) USA, the Company or any other Subsidiary of USA is in
default in the performance of or compliance with any term of any evidence of any
Indebtedness in an aggregate outstanding principal amount of at least $100,000
or of any mortgage, indenture or other agreement relating thereto or any other
condition exists, and as a consequence of such default or condition such
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Indebtedness has become, or has been declared (or one or more Persons are
entitled to declare such Indebtedness to be), due and payable before its stated
maturity or before its regularly scheduled dates of payment, or (iii) as a
consequence of the occurrence or continuation of any event or condition (other
than the passage of time or the right of the holder of Indebtedness to convert
such Indebtedness into equity interests), (x) USA, the Company or any other
Subsidiary of USA has become obligated to purchase or repay Indebtedness before
its regular maturity or before its regularly scheduled dates of payment, in an
aggregate outstanding principal amount of at least $100,000 or (y) one or more
Persons have the right to require USA, the Company or any other Subsidiary of
USA to purchase or repay such Indebtedness; or
(f) USA, the Company or any other Subsidiary of USA (i) is generally not
paying, or admits in writing its inability to pay, its debts as they become due,
(ii) files, or consents by answer or otherwise to the filing against it of, a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction, (iii) makes
an assignment for the benefit of its creditors, (iv) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for
the purpose of any of the foregoing; or
(g) a court or governmental authority of competent jurisdiction enters an
order appointing, without consent by USA, the Company or any other Subsidiary of
USA, a custodian, receiver, trustee or other officer with similar powers with
respect to it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of USA, the Company or any other
Subsidiary of USA, or any such petition shall be filed against USA, the Company
or any other Subsidiary of USA and such petition shall not be dismissed within
60 days; or
(h) a final judgment or judgments for the payment of money aggregating in
excess of $250,000 are rendered against one or more of USA, the Company and any
other Subsidiary of USA and such judgments are not, within 60 days after entry
thereof, bonded, discharged or stayed pending appeal, or are not discharged
within 60 days after the expiration of such stay; or
(i) an "Event of Default" exists under any of the USA Note Agreements; or
(j) USA fails to own (both beneficially and of record) 100% of the common
stock and other equity securities of the Company; or
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(k) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified USA, the Company or any ERISA Affiliate that a
Plan may become a subject to any such proceedings (iii) the aggregate
"amount of unfunded benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in accordance with Title
IV of ERISA, shall exceed $25,000, (iv) USA, the Company or any ERISA
Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plan, (v) USA, the
Company or any ERISA Affiliate withdraws from any Multiemployer Plan, (vi)
USA, the Company or any ERISA AFFiliate fails to make any contribution due,
or payment to, any employee benefit plan, or (vii) USA, the Company or any
other Subsidiary of USA establishes or amends any employee welfare benefit
plan that provides post-employment welfare benefits in a manner that would
increase the liability of USA, the Company or any Subsidiary thereunder,
and any such event or events described in clauses (i) through (vii) above,
either individually or together with any other such event or events, could
reasonably be expected to have a Material Adverse Effect. As used in this
Section 11.01(j), the terms "employee benefit plan" and "employee welfare
benefit plan" shall have the respective meanings assigned to such terms in
Section 3 or ERISA.
Section 11.02. Acceleration.
(a) If an Event of Default with respect to the Company described in
paragraph (f) or (g) of Section 11.01 (other than an Event of Default described
in clause (i) of paragraph (f) or described in clause (vi) of paragraph (f) by
virtue of the fact that such clause encompasses clause (i) of paragraph (f) has
occurred, (i) all unfunded Commitments shall automatically terminate and (ii)
all amounts then outstanding under the Notes shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred and is continuing, the
Required Holders at any time at its or their option, by notice or notices to the
Company, (i) terminate all unfunded Commitments and (ii) declare all amount then
outstanding under the Notes to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) of Section
11.01 has occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, (i) terminate their respective
Commitments and (ii) declare all amounts then outstanding under the Notes held
by it or them to be immediately due and payable.
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Upon any Notes becoming due and payable under this Section 11.02,
whether automatically or by declaration, such Notes will forthwith mature and
the entire unpaid principal amount of such Notes, plus all accrued and unpaid
interest thereon, shall all be immediately due and payable, in each and every
case without presentment, demand, notice of default, notice of intent to
accelerate, notice of acceleration, protest or further notice, all of which are
hereby waived.
Section 11.03. Other Remedies. If any Default or Event of Default has
occurred and is continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 11.02, the holder
of any Note at the time outstanding may proceed to protect and enforce the
rights of such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise.
Section 11.04. No Waivers or Election of Remedies, Expenses, etc. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 13.01, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all reasonable costs and expenses of such holder incurred in
any enforcement or collection under this Article XI, including, without
limitation, reasonable attorneys' fees, expenses and disbursements, together
with interest on such amounts at the Default Rate accruing from the date of
demand.
ARTICLE XII
REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES
Section 12.01. Registration of Notes. The Company shall keep at its
principal executive office a register for the registration and registration of
transfers of Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee of one or more
Notes shall be registered in such register. Prior to due presentment for
registration of transfer, the Person in whose name any Note shall be registered
shall be deemed and treated as the owner and holder thereof for all purposes
hereof, and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note promptly upon request
therefor, a complete and correct copy of the names and addresses of all
registered holders of Notes.
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Section 12.02. Transfer and Exchange of Notes. Subject to compliance
with all applicable securities laws, upon surrender of any Note at the principal
executive office of the Company for registration of transfer or exchange (and in
the case of a surrender for registration of transfer, duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or his attorney duly authorized in writing and accompanied
by the address for notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, at the Company's expense, one or more new
Notes (as requested by the holder thereof) in exchange therefor, in an aggregate
principal amount equal to the unpaid principal amount of the surrendered Note.
Each such new Note shall be payable to such Person as such holder may request
and shall be substantially in the form specified herein. Each such new Note
shall be dated and bear interest from the date to which interest shall have been
paid on the surrendered Note or dated the date of the surrendered Note if no
interest shall have been paid thereon.
Section 12.03. Replacement of Notes. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note, and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it (provided that if the
holder of such Note is, or is a nominee for, an original Noteholder, such
Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or (b) in the case of mutilation, upon surrender and cancellation
thereof, the Company at its own expense shall execute and deliver, in lieu
thereof, a new Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Note or dated
the date of such lost, stolen, destroyed or mutilated Note if no interest shall
have been paid thereon.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, the Company will pay all reasonable costs
and expenses (including reasonable attorneys' fees of a special counsel and any
local or other counsel) incurred by the Noteholders or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the other Transaction
Documents (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the reasonable costs and expenses incurred in
enforcing or defending (or determining whether or how to enforce or defend) any
rights under this Agreement or the other Transaction Documents or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the other Transaction Documents, or by
reason of being a holder of any Note, (b) the reasonable costs and expenses of
negotiation, preparation and execution of this Agreement and the other
Transaction Documents, and (c) the reasonable costs and expenses, including
reasonable financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of the Company or in connection with any work-out or restructuring
of the transactions contemplated hereby and by the Notes. The Company will pay,
and will save the Noteholders and each other holder of a Note harmless from, all
claims in respect of any fees, costs or expenses if any, of brokers and finders
(other that those retained by the Noteholders).
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The obligations of the Company under this Section 13.01 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the other Transaction Documents, and the
termination of this Agreement.
Section 13.02. Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by the
Noteholders of any Note or portion thereof or interest therein and the payment
of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of the
Noteholders or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of the
Company under this Agreement.
Section 13.03. Amendment and Waiver. This Agreement and the Notes may be
amended, and the observance of any term hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Articles II, III, IV or V, or any defined
term (as it is used therein), will be effective as to the Noteholders unless
consented to by all of the Noteholders in writing, and (b) no such amendment or
waiver may, without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of Article XI
relating to acceleration or rescission, change the amount or time of any payment
of principal of, or reduce the rate or change the time of payment or method of
computation of interest on, the Notes, or (ii) change the percentage of the
principal amount of the Notes the holders of which are required to consent to
any such amendment or waiver. Any amendment or waiver consented to as provided
in this Section 13.03 applies equally to all holders of the Notes and is binding
upon them and upon each future holder of any Note and upon the Company without
regard to whether such Note has been marked to indicate such amendment or
waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or waived
or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note.
Section 13.04. Notices. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (b) by registered or certified mail with return
receipt requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent: if to a
Noteholder, to its address specified for such communications in Schedule A, or
at such other address as it shall have specified to the Company in writing, if
to the Company, to the Company at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, Telecopy No. ▇▇▇-▇▇▇-▇▇▇▇, or at such other address as the Company
shall have specified to the holder of each Note in writing. Notices under this
Section 13.04 will be deemed given only when actually received.
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Section 13.05. Limitation on Interest. Each provision in this Agreement and
each other Transaction Document is expressly limited so that in no event
whatsoever shall the amount paid, or otherwise agreed to be paid, by the Company
for the use, forbearance or detention of the money to be loaned under this
Agreement or any other Transaction Document or otherwise (including any sums
paid as required by any covenant or obligation contained herein or in any other
Transaction Document which is for the use, forbearance or detention of such
money), exceed that amount of money which would cause the effective rate of
interest thereon to exceed the Highest Lawful Rate, and all amounts owned under
this Agreement and each other Transaction Document shall be held to be subject
to reduction to the effect that such amounts so paid or agreed to be paid which
are for the use, forbearance or detention of money under this Agreement or such
Transaction Document shall in no event exceed that amount of money which would
cause the effective rate of interest thereon to exceed the Highest Lawful Rate.
Notwithstanding the provisions of Section 13.14, to the extent that the Highest
Lawful Rate applicable to a Noteholder is at any time determined by Texas law,
such rate shall be the "indicated rate ceiling" described in Section (a)(1) of
Article 1.04 of Chapter 1, Title 79, of the Revised Civil Statutes of Texas,
1925, as amended; provided, however, to the extent permitted by such Article,
the Noteholders from time to time by notice to Company may revise the aforesaid
election of such interest rate ceiling as such ceiling affects the then-current
or future balances of the loans outstanding under the Notes. Notwithstanding any
provision in this Agreement or any other Transaction Document to the contrary,
if the maturity of the Notes or the obligations in respect of the other
Transaction Documents are accelerated for any reason, or in the event of
prepayment of all or any portion of the Notes or the obligations in respect of
the other Transaction Documents by the Company or in any other event, earned
interest on the Notes and such other obligations of the Company may never exceed
the maximum amount permitted by applicable law, and any unearned interest
otherwise payable under the Notes or the obligations in respect of the other
Transaction Documents that is in excess of the maximum amount permitted by
applicable law shall be canceled automatically as of the date of such
acceleration or prepayment or other such event and, if theretofore paid, shall
be credited on the principal of the Notes or, if the principal of the Notes has
been paid in full, refunded to the Company. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Highest
Lawful Rate, the Company and the Noteholders shall, to the maximum extent
permitted by applicable law, amortize, prorate, allocate and spread, in equal
parts during the period of the actual term of this Agreement, all interest at
any time contracted for, charged, received or reserved in connection with the
Transaction Documents.
Section 13.06. Indemnification. The Company agrees to indemnify, defend and
hold each Noteholder, their partners and their respective officers, employees,
agents, directors, partners, affiliates and shareholders (collectively,
"Indemnified Persons") harmless from and against any and all loss, liability,
damage, judgment, claim, deficiency or reasonable expense (including interest,
penalties, reasonable attorneys' fees and amounts paid in settlement) incurred
by or asserted against any Indemnified Person arising out of, in any way
connected with, or as a result of (a) the execution and delivery of this
Agreement and the other documents contemplated hereby, the performance by the
parties hereto and thereto of their respective obligations hereunder and
thereunder and consummation of the transactions contemplated hereby and thereby,
(b) the
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actual or proposed use of the proceeds of the loans contemplated hereby, (c) any
violation by the Company or any of its Subsidiaries of any requirement of law,
including but not limited to Environmental Laws, (d) any Noteholder being deemed
an operator of any real or personal property of the Company in circumstances in
which no Noteholder is generally operating or generally exercising control over
such property, to the extent such losses, liabilities, damages, judgments,
claims, deficiencies or expenses arise out of or result from any Hazardous
Materials located in, on or under such property or (e) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnified Person is a party thereto; provided that such indemnity shall not
apply to any such losses, claims, damages, liabilities or related expenses that
are determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of, or
willful violation of the Transaction Documents by, such Indemnified Person.
WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, IT IS THE EXPRESS INTENTION OF THE PARTIES THAT EACH INDEMNIFIED
PERSON SHALL BE INDEMNIFIED AND HELD HARMLESS AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DEFICIENCIES, JUDGMENTS AND REASONABLE EXPENSES ARISING OUT
OF OR RESULTING FROM THE ORDINARY NEGLIGENCE (WHETHER SOLE, CONCURRENT OR
CONTRIBUTORY) OF SUCH INDEMNIFIED PERSON. Each Indemnified Person will attempt
to consult with the Company prior to entering into any settlement of any lawsuit
or proceeding that could give rise to a claim for indemnity under this Section
13.06, although nothing herein shall give the Company the right to direct, or
control any such settlement negotiations or any related lawsuit or proceeding on
behalf of such Indemnified Party. The obligations of the Company under this
Section 13.06 shall survive the termination of this Agreement and repayment of
the Notes.
Section 13.07. Successors and Assigns. All covenants and other agreements
contained in this Agreement by or on behalf of any of the parties hereto bind
and inure to the benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so expressed or
not.
Section 13.08. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 13.09. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one instrument. Each counterpart may consist of a number of
copies hereof, each signed by less than all, but together signed by all, of the
parties hereto.
Section 13.10. Confidentiality. In connection with the negotiation and
administration of this Agreement and the other Transaction Documents, the
Company has furnished
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and will from time to time furnish the Noteholders certain written information
(such information, other than any such information which (i) was publicly
available, or otherwise known to the Noteholders, at the time of disclosure,
(ii) subsequently becomes publicly available other than through any act or
omission by the Noteholders or (iii) otherwise subsequently becomes known to the
Noteholders, being hereinafter referred to as "Confidential Information"). The
Noteholders will maintain the confidentiality of any Confidential Information in
accordance with such procedures as the Noteholders apply generally to
information of that nature. Subject to the prohibitions and restrictions
imposed on the Noteholders with respect to the Confidential Information under
applicable securities laws, it is understood that the foregoing will not
restrict the Noteholders' ability to exchange such Confidential Information with
their current or prospective investors, assignees of the Notes and advisors. It
is further understood that the foregoing will not prohibit the disclosure of any
or all Confidential Information if and to the extent that such disclosure may be
required or requested (w) by a Governmental Authority, (x) pursuant to court
order, subpoena or other legal process or in connection with any pending or
threatened litigation hereunder, (y) otherwise as required by law, or (z) in
order to protect its interests or its rights or remedies hereunder or under the
other Transaction Documents; in the event of any required disclosure under
clause (w), (x), or (y) above, the Noteholders agree to use reasonable efforts
to inform the Company as promptly as practicable. With respect to Confidential
Information provided to the Noteholders under Section 2.03(a) that relates to
Oil and Gas Properties on which the Noteholders elect not to make the Advance
requested by the Company, the Noteholders (i) shall promptly return such
Confidential Information to the Company (including all copies thereof) upon
written request from the Company, (ii) shall not use, and shall not permit any
other Person to use, such Confidential Information for any purpose other than
evaluating the proposed Advance and (iii) acknowledge that such Confidential
Information shall remain the exclusive property of the Company (subject only to
any rights the Noteholders may have to such Confidential Information under the
Security Documents).
Section 13.11. Final Agreement of the Parties. THIS AGREEMENT AND THE
OTHER TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
Section 13.12. Jury Waiver. THE COMPANY AND THE NOTEHOLDERS HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 13.13. Choice of Forum. THE COMPANY AND THE NOTEHOLDERS AGREE
THAT ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE FEDERAL AND STATE
COURTS OF ▇▇▇▇▇▇ COUNTY, TEXAS, OTHER THAN LEGAL PROCEEDINGS INSTITUTED BY THE
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NOTEHOLDERS WITH RESPECT TO THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS, WHICH PROCEEDINGS MAY BE BROUGHT IN THE FEDERAL OR STATE COURTS OF
▇▇▇▇▇▇ COUNTY, TEXAS OR THE COURTS OF ANY OTHER JURISDICTION DEEMED APPROPRIATE
BY THE NOTEHOLDERS TO ENFORCE THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS.
Section 13.14. Governing Law. This Agreement and the Notes shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the law of the State of New York excluding choice-of-law
principles of the law of such State that would require the application of the
laws of a jurisdiction other than such State.
IN WITNESS WHEREOF, the Company and the Noteholders have caused this
Agreement to be executed by their respective representatives thereunto duly
authorized effective as of the date first above written.
UNEXCO, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, ▇.▇. ▇▇,
RIMCO PARTNERS, L.P. III, and
RIMCO PARTNERS, ▇.▇. ▇▇
By: Resource Investors Management Company
Limited Partnership, their general partner
By: RIMCO Associates, Inc.,
its general partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
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SCHEDULE A
INFORMATION RELATING TO NOTEHOLDERS
Principal Amount of
Name and Address of Noteholder Notes to be Purchased
------------------------------ ---------------------
RIMCO PARTNERS, L.P. $1,430,000
RIMCO PARTNERS, ▇.▇. ▇▇ 1,650,000
RIMCO PARTNERS, L.P. III 660,000
RIMCO PARTNERS, ▇.▇. ▇▇ 1,760,000
$5,500,000
==========
(1) All payments by wire transfer
of immediately available
funds to:
Fleet Bank, N.Y.
ABA No. ▇▇▇▇▇▇▇▇▇
Account Name: Universal Seismic Associates, Inc.
Automatic Clearing Account
Account No. 9390641743
with sufficient information to identify the source and application of such
funds.
(2) All notices of payments and
written confirmations of such
wire transfers:
Resource Investors Management Company
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Schedule A-1
(3) All other communications:
Resource Investors Management Company
Suite 6875
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to
Resource Investors Management Company
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Schedule A-2
ANNEX A
DEFINED TERMS
"Accredited Investor" means an "accredited investor" as such term is
defined in Regulation D, Rule 501, promulgated by the Securities and Exchange
Commission.
"Advance" is defined in Section 2.01.
"Advance Request" is defined in Section 2.03.
"Affiliate" means, at any time, and with respect to any Person, (a) any
other Person that at such time directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common Control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of the
Company or any Subsidiary or any corporation of which the Company and its
Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly,
10% or more of any class of voting or equity interests. As used in this
definition, "Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Unless the context otherwise clearly requires, any reference to an "Affiliate"
is a reference to an Affiliate of the Company.
"Agreement" means this Amended and Restated Note Purchase Agreement, as
amended, modified or restated from time to time.
"Availability Notice" is defined in Section 2.03.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banks in Houston, Texas or New York, New York are required or
authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Change of Control" means any of (a) the acquisition by any Person or two
or more Persons (excluding underwriters in the course of their distribution of
voting stock in an underwritten public offering) acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Security Exchange Act of 1934, as amended) of 35% or more of the outstanding
shares of voting stock of USA, (b) 50% or more of the members of the Board of
Directors of USA on any date shall not have been (i) members of the Board of
Directors of USA on the date 12 months prior to such date or (ii) approved (by
recommendation, nomination, election or otherwise) by Persons who constitute at
least a majority of the members of the Board of Directors of USA as constituted
on the date 12 months prior to such date, (c) all or substantially all of the
assets of USA or the Company are sold in a single transaction or series or
related transactions to any Person, or (d) USA merges with or consolidates with
any other Person.
"Closing" is defined in Article III.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
"Commitment Period" is defined in Section 2.01.
"Commitment" is defined in Section 2.01.
"Company" is defined in the introduction to this Agreement.
"Current Assets" means, as of any date, all assets of USA and its
Subsidiaries that would be reflected as current assets on a consolidated balance
sheet of USA and its Subsidiaries prepared on such date in accordance with GAAP
consistently applied.
"Current Liabilities" means, as of any date, all liabilities of USA and its
Subsidiaries that would be reflected as current liabilities on a consolidated
balance sheet of USA and its Subsidiaries prepared on such date in accordance
with GAAP consistently applied.
"Deductible Costs" means, for any month, the sum of the following amounts,
to the extent such amounts were not deducted in calculating Gross Production
Proceeds, and without duplication, (a) Lease Operating Expenses for such month
and severance and production taxes attributable to Gross Proceeds for such
month.
"Default" means an event or condition the occurrence or existence of which
would, with the lapse of time or the giving of notice or both, become an Event
of Default.
"Default Rate" means fifteen percent (15%) per annum, but in no event to
exceed the Highest Lawful Rate.
"Environmental Laws" means any and all Federal, state, local, and foreign
statues, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time in effect.
-2-
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that is treated as a single employer together with the Company under section 414
of the Code.
"Event of Default" is defined in Section 11.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fidelity Funding Agreement" means, collectively, that certain Loan and
Security Agreement dated as of August 31, 1995, between Universal Seismic
Acquisition, Inc. and Fidelity Funding, Inc. and that certain Loan and Security
Agreement, dated August 31, 1995, between Universal Seismic Technologies, Inc.
and Fidelity Funding, Inc.
"Future Net Revenue" means the aggregate of the estimated future net
revenues for each of the Company's Oil and Gas Properties, discounted at 10%,
attributable to the proved Hydrocarbon reserves for each such Oil and Gas
Property using average product prices and Lease Operating Expenses for the
six-month period preceding the date of determination of such future net
revenues. The product prices and Lease Operating Expenses for each such Oil and
Gas Property shall not be escalated over the life of such Oil and Gas Property.
Each determination of Future Net Revenue under the terms of this Agreement shall
also take into account cumulative production from the Oil and Gas Properties
since the last determination and such other criteria that are required by sound
petroleum engineering practice.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Authority" means (a) the government of (i) the United States
of America or any State or other political subdivision thereof, or (ii) any
jurisdiction in which the Company or any Subsidiary conducts all or any part of
its business, or which asserts jurisdiction over any properties of the Company
or any Subsidiary, or (b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to, any such
government.
"Gross Production Proceeds" means, for any month, the gross proceeds
accruing from the sale of Hydrocarbons produced from the Company's Oil and Gas
Properties during such month.
"Guaranty" means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person: (a) to
purchase such indebtedness or obligation or any property constituting security
therefor; (b) to advance or supply funds (i) for the purchase or payment of such
indebtedness or obligation, or (ii) to maintain any working capital or other
balance sheet condition or any income statement condition of any other Person or
otherwise to advance or make available funds for the purchase or payment of such
-3-
indebtedness or obligation; (c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such indebtedness or
obligation of the ability of any other Person to make payment of the
indebtedness or obligation; or (d) otherwise to assure the owner of such
indebtedness or obligation against loss in respect thereof. In any computation
of the indebtedness or other liabilities of the obligor under any Guaranty, the
indebtedness or other obligations that are the subject of such Guaranty shall be
assumed to be direct obligations of such obligor.
"Guaranty Agreement" is defined in Section 2.02.
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances that might pose a hazard to health or safety, the
removal of which may be required or the generation, manufacture, refining,
production, processing, treatment, storage, handling, transportation, transfer,
use, disposal, release, discharge, spillage, seepage, or filtration of which is
or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polycholorinated biphenyls).
"Highest Lawful Rate" means with respect to any indebtedness owed to any
Noteholder under any Transaction Document, the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received by such Noteholder with respect to such
indebtedness under law applicable to such Noteholder.
"Hydrocarbons" means oil, natural gas, condensate and all other liquid or
gaseous hydrocarbons and all products produced or separated therefrom.
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
12.01.
"Indebtedness" with respect to any Person means, at any time, without
duplication, (a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock; (b) its
liabilities for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property); (c) all
liabilities appearing on its balance sheet in accordance with GAAP in respect of
Capital Leases; (d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities); (e) all its liabilities in
respect of letters of credit or instruments serving a similar function issued or
accepted for its account by banks and other financial institutions (whether or
not representing obligations for borrowed money); (f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities of a type described
in any of clauses (a) through (f) hereof. Indebtedness of any Person shall
include all obligations of such Person of the character described in clauses (a)
through (g) to the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be extinguished under
GAAP.
-4-
"Indemnified Person" is defined in Section 13.06.
"Investment" means, with respect to any Person, any direct or
indirect purchase or other acquisition by such Person of stock or other
securities of any other Person, or any direct or indirect loan, advance or
capital contribution by such Person to any other Person, and any other item
which would be classified as an "investment" on a balance sheet of such Person
prepared in accordance with GAAP.
"Lease Operating Expenses" means, for any month, direct out-of-pocket
costs and expenses incurred during such month by the Company to operate and
maintain the ▇▇▇▇▇ located on the Company's Oil and Gas Properties, including
fixed overhead costs payable under applicable operating agreements. Without
limiting the foregoing, Lease Operating Expenses shall not include any land and
legal fees incurred by the Company, leasehold, seismic or other property
acquisition costs, or costs to drill, test, complete, equip, deepen, sidetrack,
recomplete or plug and abandon any well or internal overhead costs.
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance of any kind (whether voluntary or
involuntary), or any interest or title of any vendor, lessor, lender or other
secured party to such Person under any conditional sale or other title retention
agreement or Capital Lease, upon or with respect to any property or asset of
such Person (including in the case of stock, stockholder agreements, voting
trust agreements and all similar arrangements).
"Material" means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of (a) the
Company or (b) USA and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company, or USA and its Subsidiaries taken as a whole, or (b) the ability of the
Company or USA, as the case may be, to perform their respective obligations
under this Agreement and the other Transaction Documents, or (c) the validity or
enforceability of this Agreement or the other Transaction Documents.
"Monthly Payment Date" means the first day of each calender month
commencing April 1, 1997.
"Monthly Production Report" is defined in Section 8.01(e).
"Multiemployer Plan" means any Plan that is a "multiemployer plan"
(as such term is defined in section 4001(a)(3) of ERISA).
"Net Income" means, for any period, the consolidated net earnings of
USA and its Subsidiaries for such period, determined in accordance with GAAP.
-5-
"Net Production Revenue" means, for any month, an amount equal to the
excess, if any, of Gross Production Proceeds for such month over Deductible
Costs for such month.
"Net Revenue" means, for any month, the sum of (a) the Net Sales
Proceeds for such month plus (b) the Net Production Revenues for the immediately
preceding month.
"Net Sales Proceeds" means, for any month, the gross proceeds received
during such month by the Company from the sale of any of its Oil and Gas
Properties, less the reasonable fees, taxes and expenses paid by the Company
and directly related to the consummation of any such sales transactions.
"Noteholders" is defined in the introduction to this Agreement.
"Notes" is defined in Section 2.01.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company or USA, as applicable, whose
responsibilities extend to the subject matter of such certificate.
"Oil and Gas Properties" means oil and gas leasehold interests,
overriding royalty interests, mineral interests, royalty interests, net profits
interests, oil payments, production payments, carried interests, operating
rights and other similar properties or interests, including contractual rights
to any of the foregoing.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which contributions are or, within the preceding five years,
have been made or required to be made, by the Company or any ERISA Affiliate or
with respect to which the Company or any ERISA Affiliate may have any liability.
"Pledge Agreement" means that certain Amended and Restated Pledge
Agreement of even date herewith executed by USA in favor of the Noteholders
pledging all of the common stock of the Company, as amended from time to time.
"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
-6-
"Required Holders" means, at any time, the holder or holders of at least
51% in principal amount of the Notes at the time outstanding (exclusive of Notes
then owned by the Company or any of its Affiliates).
"Reserve Report" is defined in Section 8.01(d).
"Responsible Officer" means any Senior Financial Officer and any other
officer of the Company or USA, as applicable, with responsibility for the
administration of the relevant portion of this Agreement.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Security Agreement" means that certain Security Agreement of even date
herewith executed by the Company in favor of the Noteholders as same may be
amended or restated from time to time.
"Security Documents" means the Security Agreement and mortgages, deeds of
trust, security agreements and assignments of production in form and substance
satisfactory to the Noteholders granting a first priority Lien in favor of the
Noteholders on the Oil and Gas Properties and other related assets of the
Company and such other security agreements, guaranties, pledges, instruments,
financing statements or other documents which may be executed to secure the
obligations of the Company and USA with respect to the Notes and this Agreement
and the other Transaction Documents.
"Senior Financial Officer" means any of the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company or USA, as
applicable.
"Subsidiary" means, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a 50% interest in the profits or capital thereof is owned by such Person
or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of USA.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such
-7-
determination, if any agreement relating to such Swap provides for the netting
of amounts payable by and to such Person thereunder or if any such agreement
provides for the simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligation shall be the net amount so
determined.
"Tangible Net Worth" means, as of any date, the total shareholder's
equity (including capital stock, additional paid-in capital and retained
earnings after deducting treasury stock) which would appear on a consolidated
balance sheet of USA and its Subsidiaries prepared as of such date in accordance
with GAAP, minus (i) the amount of any assets resulting from capitalization of
goodwill, organizational expenses, research and development expenses,
trademarks, trade names, copyrights patents, patent applications, licenses and
rights in any thereof, and other similar intangibles, (ii) cash held in a
sinking or other analogous fund established for the purpose of redemption,
retirement or prepayment of capital stock or Indebtedness, and (iii) the amount
of any other items which are treated as intangible assets in accordance with
GAAP.
"Total Commitment" means, as of any date, an amount equal to the sum
of the Noteholders' Commitments, as of such date.
"Transaction Documents" is defined in Section 4.01.
"USA" is defined in Section 2.02.
"USA Note Agreements" means, collectively, (i) that certain Note
Purchase Agreement, dated January 19, 1996, among USA and the Noteholders, as
amended by that certain First Amendment dated as of May 28, 1996, that certain
Second Amendment dated as of August 13, 1996, that certain Third Amendment dated
as of December 20, 1996, that certain Fourth Amendment dated of even date
herewith and as same may be amended or restated in the future, (ii) that certain
Note Purchase Agreement, dated May 28, 1996, among USA and the Noteholders
(other than RIMCO Partners, L.P. III), as amended by that certain First
Amendment dated as of December 20, 1996, that certain Second Amendment and
Amendment of Notes dated of even date herewith and as same may be amended or
restated in the future, and that certain Note Purchase Agreement dated of even
date herewith, among USA and the Noteholders, as same may be amended or restated
in the future.
"USA Notes" means the 10% Senior Secured General Obligation Notes in
the aggregate principal amount of $10,000,000 and the 12% Senior Secured General
Obligation Notes in the aggregate principal amount of $2,000,000 issued by USA
under the USA Note Agreements, together with any replacements, substitutions,
extensions, modifications and restatements thereof.
-8-
SCHEDULE 5.07
Litigation
None
Exhibit 2.01
UNEXCO, INC.
AMENDED AND RESTATED
12% SENIOR SECURED GENERAL OBLIGATION NOTE
No. SN-1 March ___, 1997
$__________
FOR VALUE RECEIVED, the undersigned, UNEXCO, INC., a Delaware
corporation (the "Company"), hereby promises to pay to ______________________, a
Delaware limited partnership, or registered assigns, the principal sum of
______________________ and ____/100 DOLLARS ($______________), or, if less, the
aggregate unpaid principal amount of all Advances (as defined in the Note
Purchase Agreement referred to below) or made by __________________ under the
Original Note (as defined below) or this Note, together with interest (computed
on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid
principal balance hereof at the rate of twelve percent (12%) per annum from the
date hereof, until the principal hereof shall have become due and payable, and
(b) on any overdue payment of principal or interest, at a rate per annum from
time to time equal to fifteen percent (15%); provided, however, in no event
shall such rate of interest ever exceed the Highest Lawful Rate (as defined in
the Note Purchase Agreement referred to below).
This Note is one of a series of Amended and Restated 12% Senior Secured
General Obligation Notes (herein called the "Notes") issued pursuant to the
Amended and Restated Note Purchase Agreement dated of even date herewith (as
from time to time amended, the "Note Purchase Agreement") between the Company
and the Noteholders named therein and is entitled to the benefits, and otherwise
subject to the provisions, thereof, including, without limitation, the
limitations on interest set forth in Section 13.05 thereof. This Note is secured
by the Security Documents referred to in the Note Purchase Agreement.
This Note is in substitution, modification, renewal and increase, but
not in extinguishment, novation or discharge, of the indebtedness originally
evidenced by that certain 12% Senior Secured General Obligation Note dated
December 20, 1996 in the original principal amount of ________________________
($___________) issued by the Company in favor of ______________ (the "Original
Note"). The Company agrees that the obligations of the Company under the Note
Purchase Agreement, the Security Documents and the other Transaction Documents
(as defined in the Note Purchase Agreement) executed in connection with or as
security for the Original Note, as amended, or the indebtedness evidenced
thereby, or by this Note are renewed, ratified, brought forward
and extended for the benefit of ___________________ until the indebtedness
evidenced hereby shall have been fully paid and discharged.
The principal balance of this Note and accrued interest thereon shall
be due and payable at the places, the times and in the manner specified in the
Note Purchase Agreement. Each Advance made by _______________ to the Company and
all payments made on account of the principal amount thereof shall be entered by
______________ in its records or on the grid attached hereto which is part of
this Note.
All payments made by the Company on this Note shall be applied first,
to the accrued, but unpaid interest hereon, and the remainder, if any, shall be
applied to the principal balance hereof.
Payments of principal of and interest on this Note are to be made in
lawful money of the United States of America at places designated in the Note
Purchase Agreement.
This Note is a registered Note and, as provided in the Note Purchase
Agreement, upon surrender of this Note for registration of transfer, duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the registered holder hereof or such holder's attorney duly authorized in
writing, a new Note for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration of transfer, the Company may treat the person in whose name this
Note is registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice to
the contrary.
If an Event of Default, as defined in the Note Purchase Agreement,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price and with the effect
provided in the Note Purchase Agreement.
This Note shall be governed by and construed in accordance with the
laws of the State of New York, excluding the choice of law rules thereof.
UNEXCO, INC.
By:
------------------------------
Name:
----------------------------
Title:
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Page 2
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Advance Advance Principal Paid Balance By
or Prepaid
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Page 3
Exhibit 2.02
AMENDED AND RESTATED GUARANTY AGREEMENT
This AMENDED AND RESTATED GUARANTY AGREEMENT dated as of March 27, 1997
is from UNIVERSAL SEISMIC ASSOCIATES, INC., a Delaware corporation ("USA"), to
RIMCO PARTNERS, L.P., a Delaware limited partnership, RIMCO PARTNERS, ▇.▇. ▇▇,
a Delaware limited partnership, RIMCO PARTNERS, L.P. III, a Delaware limited
partnership, and RIMCO PARTNERS, ▇.▇. ▇▇, a Delaware limited partnership
(collectively, the "Noteholders").
PRELIMINARY STATEMENT
The Noteholders entered into a Note Purchase Agreement dated as of
December 20, 1996 (the "Original Note Agreement") with UNEXCO, INC. (the
"Company"), a wholly-owned subsidiary of USA, whereby the Noteholders purchased
from the Company its 12% Senior Secured General Obligation Notes in the maximum
aggregate principal amount of $4,000,000. USA executed and delivered to the
Noteholders that certain Guaranty Agreement dated December 20, 1996, whereby USA
unconditionally and irrevocably guaranteed the Company's obligations under the
Original Note Agreement (the "Original Guaranty Agreement"). The Company and the
Noteholders have entered into that certain Amended and Restated Note Purchase
Agreement (the "Amended Note Agreement"), dated of even date herewith, whereby
the Company and the Noteholders amended and restated the Original Note Agreement
and whereby the Noteholders purchased from the Company its Amended and Restated
12% Senior Secured General Obligation Notes in the maximum aggregate principal
amount of $5,500,000 (such notes, together with all substitutions,
replacements, extensions, modifications and restatements thereof, being
referred to herein, collectively as the "Notes"), which Notes are in
substitution, modification, renewal and increase, but not in extinguishment,
novation or discharge, of the indebtedness evidenced by the Company's 12% Senior
Secured General Obligation Notes issued under the Original Note Agreement. USA
and the Noteholders desire to amend and restate the Original Guaranty Agreement
to provide for USA's unconditional and irrevocable guarantee of the Company's
obligations under the Amended Note Agreement and the Notes, all as more
particularly set forth herein. It is a condition precedent to the obligation of
the Noteholders to make Advances under the Amended Note Agreement that the
Guarantor shall have executed and delivered this Agreement. USA has determined
that it will receive a substantial benefit if Advances are made to the Company
under the Amended Note Agreement.
In consideration of the premises and other good and valuable
consideration, USA and the Noteholders agree to amend and restate the Original
Guaranty Agreement as follows:
ARTICLE I
DEFINITIONS, ETC.
Section 1.01. Certain Defined Terms. Capitalized terms used in this
Agreement and not otherwise defined herein shall have the respective meanings
set forth in the Amended Note Agreement and the Annex A attached thereto (such
meanings to be equally applicable to both singular and plural forms of the terms
defined).
Section 1.02. Covenant Construction. Each covenant contained herein
shall be construed (absent express provision to the contrary) as being
independent of each other covenant contained herein, so that compliance with any
one covenant shall not (absent such an express contrary provision) be deemed to
excuse compliance with any other covenant. Where any provision herein refers to
action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person.
Section 1.03. Other Rules of Construction. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement. All references herein to articles, sections, annexes, exhibits
and schedules shall, unless the context requires a different construction, be
deemed to be references to the articles and sections of this Agreement and
the annexes, exhibits and schedules attached hereto and made a part hereof. In
this Agreement, unless a clear contrary intention appears, the word "including"
(and with correlative meaning "include") means including, without limiting the
generality of any description preceding such term. The headings of the various
articles and sections of this Agreement are for convenience only and shall not
affect the meaning of the terms and conditions of this Agreement. No provision
of this Agreement shall be interpreted or construed against any party solely
because that party or its legal representative drafted such provision.
ARTICLE II
GUARANTY
Section 2.01. Guaranty. USA hereby unconditionally and irrevocably
guarantees the full and punctual payment when due, whether at stated maturity or
earlier by acceleration or otherwise, of any and all debts, liabilities and
obligations of the Company now or hereafter existing under the Amended Note
Agreement, the Notes or any of the other Transaction Documents whether for
principal, interest (including, without limitation, all interest that accrues
after the commencement of any proceeding by or against the Company under any
bankruptcy, insolvency, liquidation, moratorium, receivership, reorganization or
other similar debtor relief law), fees, expenses or otherwise (such obligations
being the "Obligations"), and agrees to pay any and all reasonable costs and
expenses (including counsel fees and legal expenses) incurred by the Noteholders
in connection with the protection, defense or enforcement of any rights under
this Agreement and any of the other Transaction Documents.
-2-
Section 2.02. Guaranty Absolute. USA unconditionally guarantees that the
Obligations will be paid strictly in accordance with the terms of the Amended
Note Agreement, the Notes and the other Transaction Documents, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Noteholders with respect
thereto. The liability of USA under this Agreement shall be absolute and
unconditional irrespective of: (a) any lack of validity or enforceability of
the Amended Note Agreement, the Notes, the other Transaction Documents or any
other agreement or instrument relating thereto; (b) any change in the time,
manner or place of payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to departure
from the Amended Note Agreement, the Notes or the other Transaction Documents;
(c) any taking, exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Obligations; (d) any manner of application of
collateral, or proceeds thereof, to all or any of the Obligations, or any manner
of sale or other disposition of any collateral for all or any of the Obligations
or any other assets of the Company; (e) any change, restructuring or termination
of the corporate structure or existence of the Company; or (f) any other
circumstances which might otherwise constitute a defense available to, or a
discharge of, the Company or a guarantor.
The obligations of USA under this Agreement shall not be subject to
reduction, termination or other impairment by reason of any setoff, recoupment,
counterclaim or defense or for any other reason. This Agreement is to be in
addition to and is not to prejudice or be prejudiced by any other securities or
guaranties (including any guaranty signed by USA) which the Noteholders may now
or hereafter hold from or on account of the Company and is to be binding on USA
as a continuing security notwithstanding any payments from time to time made to
the Noteholders or any settlement of account or disability or incapacity
affecting USA or any other thing whatsoever. This Agreement is a continuing
guaranty and shall remain in full force and effect until payment in full of the
Obligations and all other amounts payable under this Agreement.
Section 2.03. Waiver. USA hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Obligations and this
Agreement and any liability to which this Agreement applies or may apply, and
waives presentment, demand of payment, notice of intent to accelerate, notice of
acceleration, notice of dishonor or nonpayment, and any requirement that the
Noteholders institute suit, collection proceedings or take any other action to
collect the Obligations including any requirement that the Noteholders protect,
secure, perfect or insure any security interest or lien or any property subject
thereto or exhaust any right or take any action against the Company or any other
person or entity or any collateral (it being the intention of the Noteholders
and USA that this Agreement is to be a guaranty of payment and not of
collection) or that the Company or any other person be joined in any action
hereunder. Notwithstanding the provisions of Section 8.13, USA hereby expressly
waives each and every right to which it may be entitled by virtue of the
suretyship laws of the State of Texas, including, without limitation, any and
all right it may have pursuant to Rule 31 or Rule 32, Texas Rules of Civil
Procedure, Section 17.001 of the Texas Civil Practice and Remedies Code and
Chapter 34 of the Texas Business and Commerce Code. USA hereby waives
marshalling of assets and liabilities, sale in inverse order of
-3-
alienation, notice by the Noteholders of any indebtedness or liability to which
it applies or may apply any amounts received by the Noteholders, and of the
creation, advancement, increase, existence, extension, renewal, rearrangement
and/or modification of the Obligations.
Section 2.04. Waiver of Subrogation; Ect. USA will not have any
rights of subrogation under this Agreement, by any payment made hereunder or
otherwise, until such time as the Noteholders have received full payment of the
Obligations, and all such rights are hereby waived. If, notwithstanding the
preceding sentence, any amount shall be paid it USA on account of subrogation
rights at any time when all the Obligations shall not have been paid in full,
such amount shall be held in trust for the benefit of the Noteholders and shall
forthwith be paid to the Noteholders to be credited and applied upon the
Obligations in accordance with the terms of the Amended Note Agreement.
USA hereby subordinates all indebtedness owing to it from the Company
to all indebtedness of the Company to the Noteholders, and agrees that upon the
occurrence and continuance of an Event of Default or any event which with the
giving of notice or lapse of time could become an Event of Default, it shall not
accept any payment on the same until payment in full of the Obligations, and
shall in no circumstance whatsoever attempt to set off or reduce any Obligations
hereunder because of such indebtedness. USA further subordinates any lien or
security interest that it has or may have on any collateral and security
securing payment of the Obligations to the liens and security interest on said
collateral and security in favor of the Noteholders, but the forgoing shall in
no event imply or be construed to imply the Noteholders' agreement or consent to
the existence of any such security interests in favor of USA.
Section 2.05. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default the Noteholders are hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by the
Noteholders to or for the credit or the account of USA against any and all of
the obligations of USA now or hereafter existing under this Agreement,
irrespective of whether or not the Noteholders shall have made any demand under
this Agreement and although such obligations may be contingent and unmatured.
The Noteholders agrees promptly to notify USA after any such set-off and
application, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of the Noteholders under
this Section are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which the Noteholders may have.
Section 2.06. Transaction Documents. USA acknowledges that it has
full and complete access to the Amended Note Agreement, the Notes and all other
instruments and documents executed by the Company, or any Person in connection
with the Amended Note Agreement, has fully reviewed same and is fully aware of
their contents.
Section 2.07. Effect of Bankruptcy Proceeding, Etc. This Agreement
shall continue to be effective, or be automatically reinstated, as the case may
be, if at any time payment,
-4-
in whole or in part, of any of the sums due any Noteholders pursuant to the
terms of the Amended Note Agreement or hereunder is rescinded or must otherwise
by restored or returned by the Noteholders upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company or USA, or upon or as
a result of the appointment of a custodian, receiver, trustee or other officer
with similar powers with respect to the Company or USA or any substantial part
of their property, or otherwise, all as though such payments had not been made.
If an Event of Default shall at any time have occurred and be continuing and
declaration of such Event of Default shall at such time be prevented by reason
of the pendency against the Company of a case or proceeding under a bankruptcy
or insolvency law, USA agrees that, for purposes of this Agreement and its
obligations hereunder, the Amended Note Agreement shall be deemed to have been
declared in default with the same effect as if the Amended Note Agreement had
been declared in default in accordance with the terms thereof, and USA shall
forthwith pay the amounts specified by the Noteholders to be paid thereunder,
any interest thereon and any other amounts guaranteed thereunder without further
notice or demand.
Section 2.08. No Waiver; Remedies. No failure on the part of the
Noteholders to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 2.09. Security. USA's obligations under this Agreement are
secured by the Pledge Agreement in favor of the Noteholders.
Section 2.10. Further Assurances. USA hereby agrees to execute and
deliver all such instruments and take all such action as the Noteholders may
from time to time reasonably request in order to fully effectuate the purpose of
the Agreement.
ARTICLE III
Intentionally Omitted.
ARTICLE IV
REPRESENTATION AND WARRANTIES OF USA
USA represents and warrants to the Noteholders that:
Section 4.01. Organization; Power and Authority. USA is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, and is duly qualified as a foreign corporation and is
in good standing in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be so qualified
or in good standing could not, individually or in the aggregate, reasonably be
expected to
-5-
have a Material Adverse Effect. USA has the corporate power and authority to own
or hold under lease the properties it purports to own or hold under lease, to
transact the business it transacts and proposes to transact, to execute and
deliver this Agreement and the other Transaction Documents and to perform the
provisions hereof and thereof.
Section 4.02. Authorization, etc. This Agreement and the other
Transaction Documents to which USA is a party have been duly authorized by all
necessary corporate action on the part of USA, and this Agreement constitutes,
and upon execution and delivery thereof each other Transaction Document to which
USA is a party will constitute, a legal, valid, and binding obligation of USA
enforceable against USA in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 4.03. Compliance with Laws, Other Instruments, etc. The
execution, delivery and performance by USA of this Agreement and the other
Transaction Documents to which USA is a party will not (a) contravene, result in
any breach of, or constitute a default under, or result in the creation of any
Lien in respect of any property of USA or any Subsidiary under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument to which USA or any
Subsidiary is bound or by which USA or any Subsidiary or any of their respective
properties may be bound or affected, (b) conflict with or result in a breach of
any of the terms, conditions or provisions or any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority applicable to USA or
any Subsidiary or (c) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to USA or any Subsidiary.
Section 4.04. Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any Governmental
Authority is required in connection with the execution, delivery or performance
by USA of this Agreement or the other Transaction Documents.
Section 4.05. Subsidiaries. Schedule 4.05 contains complete and correct
lists of USA's Subsidiaries, showing, as to each Subsidiary, the correct name
thereof, the jurisdiction of its organization, and the percentage of shares of
each class of its capital stock or similar equity interests outstanding owned by
USA and each other Subsidiary. No Subsidiary is a party to, or otherwise subject
to any legal restriction or any agreement (other than this Agreement and
customary limitations imposed by corporate law statutes) restricting the ability
of such Subsidiary to pay dividends out of profits or make any other similar
distributions of profits to USA or any of its Subsidiaries that owns outstanding
shares of capital stock or similar equity interests of such Subsidiary.
Section 4.06. Financial Statements. The consolidated balance sheet of
USA and its Subsidiaries as at June 30, 1996, and the related consolidated
statements of income, retained
-6-
earnings and cash flows for the 12-month period then ended, copies of which USA
has delivered to each Noteholder, fairly present in all material respects the
consolidated financial position of USA and its Subsidiaries as of such date and
the consolidated results of their operations and cash flows for such period and
have been prepared in accordance with GAAP consistently applied throughout the
periods involved except as set forth in the notes thereto (subject, in case of
any interim financial statements, to normal year-end adjustments).
Section 4.07. Disclosure. This Agreement, the documents, certificates or
other writing delivered to the Noteholders by or on behalf of USA in connection
with the transactions contemplated hereby and the financial statements referred
to in Section 4.06, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. Except as disclosed in the financial
statements referred to in Section 4.06, since June 30, 1996, there has been no
change in the financial condition, operations, business, properties or prospects
of USA or any Subsidiary except changes that individually or in the aggregate
could not reasonably be excepted to have a Material Adverse Effect. There is no
fact known to USA that could reasonably be expected to have a Material Adverse
Effect that has not been set forth herein or in the other documents,
certificates and other writing (including the financial statements referred to
in Section 4.06) delivered to the Noteholders by or on behalf of USA
specifically for use in connection with the transactions contemplated hereby.
Section 4.08. Litigation. Except as disclosed in Schedule 4.08, there are
no actions, suits or proceedings pending or, to the knowledge of USA, threatened
against or affecting USA or any Subsidiary or any property of USA or any
Subsidiary in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
Section 4.09. Observance of Agreements, Statutes and Orders. Neither USA
nor any Subsidiary is in default under any term of any agreement or instrument
to which it is a party or by which it is bound, or any order, judgment, decree
or ruling of any court, arbitrator or Governmental Authority or is in violation
of any applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Authority, which default or
violation, individually or in the aggregate, could reasonably be excepted to
have a Material Adverse Effect.
Section 4.10. Taxes. USA and its Subsidiaries have filed all tax returns
that are required to have been filed in any jurisdiction, and have paid all
taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (i) the amount
of which is not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith by
appropriate proceedings and with respect to which USA or a Subsidiary, as the
case may be, has established adequate reserves in accordance with GAAP. USA
knows of no basis for any other tax or assessment that, if imposed, could
reasonably be
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expected to have a Material Adverse Effect. The charges, accruals and reserves
on the books of USA and its Subsidiaries in respect of Federal, state or other
taxes for all fiscal periods are adequate in all respects. The Federal income
tax liabilities of USA and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended June 30, 1996.
Section 4.11. Title to Property. USA and its Subsidiaries have good
and sufficient title to their respective properties that individually or in the
aggregate are Material, including all such properties reflected in the most
recent audited balance sheet referred to in Section 4.06 or purported to have
been acquired by USA or any Subsidiary after said date, in each case free and
clear of Liens other than those permitted by this Agreement. All leases that
individually or in the aggregate are Material are valid and subsisting and are
in full force and effect in all material respects.
Section 4.12. Licenses, Permits, etc. USA and its Subsidiaries own
or possess all licenses, permits, franchises, authorizations, patents,
copyrights, service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known conflict with the
rights of others. To the best knowledge of USA, (a) no product of USA infringes
in any material respect any license, permit, franchise, authorization, patent,
copyright, service ▇▇▇▇, trademark, trade name or other right owned by any other
Person; and (b) there is no Material violation by any Person of any right of USA
or any of its Subsidiaries with respect to any patent, copyright, service ▇▇▇▇,
trademark, trade name or other right owned or used by USA or any of its
Subsidiaries.
Section 4.13. Compliance with ERISA.
(a) USA and each ERISA Affiliate have operated and administered each
Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither USA nor any ERISA Affiliate has
incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by USA or any ERISA Affiliate, or in the imposition of any Lien on any
of the rights, properties or assets of USA or any ERISA Affiliate, in either
case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate Material.
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has the
meaning specified in
-8-
section 4001 of ERISA and the terms "current value" and "present value" have the
meaning specified in section 3 of ERISA.
(c) USA and its ERISA Affiliates have not incurred withdrawal
liabilities (and are not subject to contingent withdrawal liabilities) under
section 4201 or 4204 of ERISA in respect of Multiemployer Plans that
individually or in the aggregate are Material.
(d) The expected post-retirement benefit obligation (determined as of
the last day of USA's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by section 4980B or
the Code) of USA and its Subsidiaries is not Material.
Section 4.14. Status under Certain Statutes. Neither USA nor any
Subsidiary is subject to regulation under the Investment Company Act of 1940, as
amended, the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as amended.
Section 4.15. Capitalization. The authorized capital stock of USA consists
solely of 20,000,000 shares of $.0001 par common stock, of which 5,234,109
shares are issued and outstanding.
Section 4.16. Environmental Matters. Neither USA nor any Subsidiary has
knowledge of any claim or has received any notice of any claim, and no
proceeding has been instituted raising any claim against USA or any of its
Subsidiaries or any of their respective real properties now or formerly owned,
leased or operated by any of them or other assets, alleging any damage to the
environment or violation of any Environmental Laws, except, in each case, such
as could not reasonably be expected to result in a Material Adverse Effect.
Except as otherwise disclosed to the Noteholders in writing, (a) neither USA nor
any Subsidiary has knowledge of any facts which would give rise to any
claim, public or private, of violation of Environmental Laws or damage to the
environment emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them or to other
assets or their use, except, in each case, such as could not reasonably be
expected to result in a Material Adverse Effect; (b) neither USA nor any of its
Subsidiaries has stored any Hazardous Materials on real properties now or
formerly owned, leased or operated by any of them and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws in each case
in any manner that could reasonably be expected to result in a Material Adverse
Effect; and (c) all buildings on all real properties now owned, leased or
operated by USA or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
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ARTICLE V
INFORMATION AS TO COMPANY
Section 5.01. Financial and Business Information. USA shall deliver
to each of the Noteholders:
(a) Within 45 days after the end of each quarterly fiscal period in
each fiscal year of USA, copies of (i) a consolidated balance sheet of USA and
its Subsidiaries as at the end of such quarter, and (ii) consolidated statements
of income, changes in shareholders' equity and cash flows of USA and its
Subsidiaries, for such quarter and for the portion of the fiscal year ending
with such quarter, setting forth in each case in comparative form the figures
for the corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer of USA as
fairly presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments.
(b) Within 90 days after the end of each fiscal year of USA, copies
of (i) a consolidated balance sheet of USA and its Subsidiaries, as at the end
of such year, and (ii) consolidated statements of income, changes in
shareholders' equity and cash flows of USA and its Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied (A) by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects, the financial
position of the companies being reported upon and their results of operations
and cash flows and have been prepared in conformity with GAAP, and that the
examination of such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards, and that
such audit provides a reasonable basis for such opinion in the circumstances,
and (B) a certificate of such accountants stating that they have reviewed this
Agreement and stating further whether, in making their audit, they have become
aware of any condition or event that then constitutes a Default or an Event of
Default, and, if they are aware that any such condition or event then exists,
specifying the nature and period of the existence thereof.
(c) Within 20 days after the end of each calendar month, copies of
(i) a consolidated balance sheet of USA and its Subsidiaries as at the end of
such month, and (ii) consolidated statements of income, changes in shareholders'
equity and cash flows of USA and its Subsidiaries, for such month and for the
portion of the fiscal year ending with such month, setting forth in each case in
comparative form the figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to monthly financial statements generally, and certified by a Senior
Financial Officer of USA as fairly presenting, in all material respects, the
financial position of the companies being reported on and their results of
operations and cash flows, subject to changes resulting from year-end
adjustments.
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(d) Promptly upon their becoming available, one copy of (i) each
financial statement, report, notice or proxy statement sent by USA or any
Subsidiary to public securities holders generally, and (ii) each regular or
periodic report, each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus and all amendments
thereto filed by USA or any Subsidiary with the Securities and Exchange
Commission and of all press releases and other statements made available
generally by USA or any Subsidiary to the public concerning developments that
are Material.
(e) Promptly, and in any event within five days after a Responsible
Officer of USA becoming aware of any of the following, a written notice setting
forth the nature thereof and the action, if any, that USA or an ERISA Affiliate
proposes to take with respect thereto: (i) with respect to any Plan, any
reportable event, as defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or (ii) the taking by the PBGC of
steps to institute, or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by USA or any
ERISA Affiliate of a notice from a Multi-employer Plan that such action has been
taken by the PBGC with respect to such Multi-employer Plan; or (iii) any event,
transaction or condition that could result in the incurrence of any liability by
USA or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of USA or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax
provisions, if such liability or Lien, taken together with any other such
liabilities or Liens then existing, could reasonably be expected to be Material.
(f) Promptly, and in any event within 30 days of receipt thereof,
copies of any notice to USA or any Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or other law or
regulation that could reasonably be expected to have a Material Adverse Effect;
and
(g) With reasonable promptness, such other data and information
relating to the business, operations, affairs, financial condition, assets or
properties of USA or any of its Subsidiaries or relating to the ability of USA
to perform its obligations hereunder and under the Notes as from time to time
may be reasonably requested by any of Noteholder.
Section 5.02. Officer's Certificate. Each set of financial statements
delivered to a holder of Notes pursuant to Section 5.01(a), Section 5.01(b) or
Section 5.01(c) shall be accompanied by a certificate of a Senior Financial
Officer of USA setting forth: (a) the information (including detailed
calculations) required in order to establish whether USA was in compliance with
the requirements of Section 7.03 hereof during the monthly, quarterly or annual
period covered by the statements then being furnished (including with respect to
each such Section, where applicable, the calculations of the maximum or minimum
amount, ratio or percentage, as the case may be, permissible under the terms of
such Sections, and the calculation of the amount, ratio or percentage then in
existence); and (b) a statement that such officer has reviewed the relevant
terms hereof and
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has made, or caused to be made, under his or her supervision, a review of the
transactions and conditions of USA and its Subsidiaries from the beginning of
the monthly, quarterly or annual period covered by the statements then being
furnished to the date of the certificate and that such review shall not have
disclosed the existence during such period of any condition or event that
constitutes a Default or an Event of Default or, if any such condition or event
existed or exists (including, without limitation, any such event or condition
resulting from the failure of USA or any Subsidiary to comply with any
Environmental law), specifying the nature and period of existence thereof and
what action USA shall have taken or proposes to take with respect thereto.
Section 5.03. Inspection. USA shall permit the representatives of each
Noteholder, at the expense of USA and upon reasonable prior notice to USA, to
visit and inspect any of the offices or properties of USA or any Subsidiary, to
examine all their respective books of account, records, reports and other
papers, to make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and independent
public accountants (and by this provision USA authorizes said accountants to
discuss the affairs, finances and accounts of USA and its Subsidiaries), all at
such times and as often as may be requested.
ARTICLE VI
AFFIRMATIVE COVENANTS
USA covenants that so long as any of the Commitments remain in effect or
any of the Notes are outstanding:
Section 6.01. Compliance with Law; Contracts. USA will, and will cause
each of its Subsidiaries to, comply with all laws, ordinances or governmental
rules or regulations to which each of them is subject, including, without
limitation, Environmental Laws, and will obtain and maintain in effect all
licenses, certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective properties or to
the conduct of their respective businesses, in each case to the extent necessary
to ensure that non-compliance with such laws, ordinances or governmental rules
or regulations or failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental authorizations could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. USA will, and will cause each of its Subsidiaries to, comply
with, and perform their respective obligations under, each contract or agreement
to which each is a party, unless, in the good faith judgment of USA, the failure
to so comply or perform could not reasonably be expected to have a Material
Adverse Effect.
Section 6.02. Insurance. USA will, and will cause each of its
Subsidiaries to, maintain, with financially sound and reputable insurers,
insurance with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and in such
amounts (including deductibles, co-insurance and self-insurance, if adequate
reserves are maintained with respect thereto) as is customary in the case of
entities of established reputations
-12-
engaged in the same or a similar business and similarly situated, including the
insurance described in Schedule 6.02.
Section 6.03. Maintenance of Properties. USA will, and will cause each
of its Subsidiaries to, maintain and keep, or cause to be maintained and kept,
their respective properties in good repair, working order and condition (other
than ordinary wear and tear), so that the business carried on in connection
therewith may be properly conducted at all times, provided that this Section
shall not prevent USA or any Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is desirable in the
conduct of its business and USA has concluded that such discontinuance could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 6.04. Payment of Taxes and Claims. USA will, and will cause each
of its Subsidiaries to, file all tax returns required to be filed in any
jurisdiction and to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental charges, or levies
imposed on them or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and before they
have become delinquent and all claims for which sums have become due and payable
that have or might become a Lien on properties or assets of USA or any
Subsidiary, provided that neither USA nor any Subsidiary need pay any such tax
or assessment or claims if (i) the amount, applicability or validity thereof is
contested by USA or such Subsidiary on a timely basis in good faith and in
appropriate proceedings, and USA or a Subsidiary has established adequate
reserves therefor in accordance with GAAP on the books of USA or such Subsidiary
or (ii) the nonpayment of all such taxes and assessments in the aggregate could
not reasonably be expected to have a Material Adverse Effect.
Section 6.05. Corporate Existence, etc. USA will at all times preserve
and keep in full force and effect its corporate existence. USA will at all times
preserve and keep in full force and effect the corporate existence of each of
its Subsidiaries and all rights and franchises of USA and its Subsidiaries
unless, in the good faith judgment of USA, the termination of or failure to
preserve and keep in full force and effect such corporate existence, right or
franchise could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
ARTICLE VII
NEGATIVE COVENANTS
USA covenants that so long as any of the Commitments remain in effect or
any of the Notes are outstanding:
Section 7.01. Restrictions on Indebtedness. USA will not, and will not
permit any Subsidiary to, create, incur, assume, Guaranty or permit to exist any
Indebtedness, except:
(a) the Notes;
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(b) the USA Notes;
(c) Indebtedness outstanding under the Fidelity Funding Agreement;
(d) Indebtedness with respect to the financing of insurance premiums over
the term in which the applicable insurance coverage is in place and not to
exceed one year, which financing is currently conducted through AFCO
Financing.
Section 7.02. Restrictions on Liens. USA will not, and will not permit any
Subsidiary to, create, incur, assume, or permit to exist any Lien with respect
to any asset now owned or hereafter acquired, except:
(a) Liens in favor of the Noteholders;
(b) Liens existing on the date hereof and described on Schedule 7.02;
(c) Liens in favor of the Noteholders under the USA Note Agreements;
(d) encumbrances consisting of easements of ingress or egress over real
property, where the same do not materially detract from the use or enjoyment
of such property by, or the value of such property to, USA;
(e) Liens for taxes or assessments or governmental charges or levies, if
payment shall not at the time be required to be made in accordance with the
provisions of Section 6.04;
(f) any judgment lien, unless the judgment it secures shall not, within 30
days after the entry thereof, have been discharged or execution thereof stayed
pending appeal, or shall not have been discharged within 30 days after the
expiration of any such stay;
(g) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, laborers and materialmen incurred in the ordinary course of
business for sums not yet due or being contested in good faith; and
(h) Liens (other than liens created by section 4068 of ERISA) incurred on
pledges or deposits made in the ordinary course of business in connection with
workmen's compensation, unemployment insurance, social security laws or
similar legislation.
Section 7.03. Financial Covenants. USA will not permit:
(a) its Current Assets at any time to be less than the sum of (i) its
Current Liabilities as at such date, minus (ii) any portion of such Current
Liabilities consisting of
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amounts outstanding under the Fidelity Funding Agreement that are not due
within one year of such date;
(b) its Tangible Net Worth at any time to be less than $7,000,000; and
(c) the sum, determined as of the last day of each calendar month, of
(i) its Net Income for the twelve month period then ended, plus (ii) any
interest expense deducted in the calculation of Net Income for such twelve
month period, plus (iii) any depreciation and amortization expense deducted
in the calculation of Net Income for such twelve month period, plus (iv)
any Federal income taxes deducted in the calculation of Net Income for such
twelve month period, to be less than $2,500,000.
Section 7.04. Restricted Payments. USA will not, and will not permit
any Subsidiary, directly or indirectly, to make or pay (a) any dividend or other
distribution on any shares of USA's capital stock (including any dividends
payable in shares of capital stock), (b) any payment on account of the purchase,
redemption, retirement or acquisition of any shares of USA's capital stock or
any option, warrant or other right to acquire such shares, or (c) any payments
or other distributions to Sierra Management, Inc.
Section 7.05. Merger, Consolidation, etc. USA shall not consolidate
with or merge with any other Person or convey, transfer or lease all or
substantially all of its assets in a single transaction or series of
transactions to any Person.
Section 7.06. Restrictions on Asset Sales. USA will not, and will not
permit any Subsidiary to, sell, transfer, assign, convey or otherwise dispose of
an interest in any asset now owned or hereafter acquired.
Section 7.07. Transactions with Affiliates. USA will not, and will not
permit any Subsidiary to, enter into directly or indirectly any Material
transaction or Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of any kind or
the rendering of any service) with any Affiliate (other than USA or another
Subsidiary), except in the ordinary course and pursuant to the reasonable
requirements of USA's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to USA or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
Section 7.08. Change in Business. Except for oil and gas exploration
and production operations to be conducted by the Company, USA will not, and will
not permit any of its Subsidiaries to, directly or indirectly engage to a
material extent in any business other than those in which it is presently
engaged or that are directly related thereto, or discontinue any of its existing
lines of business or substantially alter its method of doing business. Without
limiting the generality of the foregoing, USA and its Subsidiaries (other than
the Company) shall not engage in any oil and gas exploration and production
operations or business.
-15-
Section 7.09. Fidelity Funding Agreement. Without the prior written consent
of the Noteholders, USA will not, and will not permit any of its Subsidiaries
to, amend, modify or extend the Fidelity Funding Agreement.
Section 7.10. Restriction on Investment. Other than (a) the common stock of
the Company owned by USA on the date hereof, (b) Oil and Gas Properties
transferred to the Company prior to the date hereof and (c) capital
contributions to the Company that are applied directly by the Company to pay the
Indebtedness owing on the Notes, USA will not, and will not permit any of its
Subsidiaries to, make any Investment in the Company without the Noteholders'
prior written consent.
ARTICLE VIII
MISCELLANEOUS
Section 8.01. Transaction Expenses. Whether or not the transactions
contemplated hereby are consummated, USA will pay all reasonable costs and
expenses (including reasonable attorneys' fees of a special counsel and any
local or other counsel) incurred by the Noteholders or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the other Transaction
Documents (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the reasonable costs and expenses incurred in
enforcing or defending (or determining whether or how to enforce or defend) any
rights under this Agreement or the other Transaction Documents or in responding
to any subpoena or other legal process or informal investigative demand issued
in connection with this Agreement or the other Transaction Documents, or by
reason of being a holder of any Note, (b) the reasonable costs and expenses of
negotiation, preparation and execution of this Agreement and the other
Transaction Documents, and (c) the reasonable costs and expenses, including
reasonable financial advisors' fees, incurred in connection with the insolvency
or bankruptcy of USA or any Subsidiary or in connection with any work-out or
restructuring of the transactions contemplated hereby and by the Notes. USA will
pay, and will save the Noteholders and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by the Noteholders). The obligations of
USA under this Section 8.01 will survive the payment or transfer of any Note,
the enforcement, amendment or waiver of any provision of this Agreement or the
other Transaction Documents, and the termination of this Agreement.
Section 8.02. Survival of Representations and Warranties. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement and the Notes, the purchase or transfer by the
Noteholders of any Note or portion thereof or interest therein and the payment
of any Note, and may be relied upon by any subsequent holder of a Note,
regardless of any investigation made at any time by or on behalf of the
Noteholders or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of USA pursuant to
this Agreement shall be deemed representations and warranties of USA under this
Agreement.
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Section 8.03. Amendment and Waiver. This Agreement may be amended,
and the observance of any term hereof may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Required
Holders, except that no amendment or waiver may, without the written consent of
the holder of each Note at the time outstanding affected thereby, release USA
from its obligations hereunder. Any amendment or waiver consented to as
provided in this Section 8.03 applies equally to all holders of Notes and is
binding upon them and upon each future holder of any Note and upon USA without
regard to whether such Note has been marked to indicate such amendment or
waiver. No such amendment or waiver will extend to or affect any obligation,
covenant or agreement not expressly amended or waived or impair any right
consequent thereon. No course of dealing between USA and the holder of any Note
nor any delay in exercising any rights hereunder or under any Note shall
operate as a waiver of any rights of any holder of such Note.
Section 8.04. Notices. All notices and communications provided for
hereunder shall be in writing and sent (a) by telecopy if the sender on the same
day sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (b) by registered or certified mail with return
receipt requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent: if to a
Noteholder, to its address specified for such communications in Schedule A to
the Amended Note Agreement, or at such other address as it shall have specified
to USA in writing, if to USA, to USA at ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇, or at such other address as
USA shall have specified to the holder of each Note in writing. Notices under
this Section 8.04 will be deemed given only when actually received.
Section 8.05. Limitation on Interest. Each provision in this
Agreement and each other Transaction Document is expressly limited so that in no
event whatsoever shall the amount paid, or otherwise agreed to be paid, by USA
for the use, forbearance or detention of the money to be loaned under this
Agreement or any other Transaction Document or otherwise (including any sums
paid as required by any covenant or obligation contained herein or in any other
Transaction Document which is for the use, forbearance or detention of such
money), exceed that amount of money which would cause the effective rate of
interest thereon to exceed the Highest Lawful Rate, and all amounts owed under
this Agreement and each other Transaction Document shall be held to be subject
to reduction to the effect that such amounts so paid or agreed to be paid which
are for the use, forbearance or detention of money under this Agreement or such
Transaction Document shall in no event exceed that amount of money which would
cause the effective rate of interest thereon to exceed the Highest Lawful Rate.
Section 8.06. Successors and Assigns. All covenants and other
agreements contained in this Agreement by or on behalf of any of the parties
hereto bind and inure to the benefit of their respective successors and assigns
(including, without limitation, any subsequent holder of a Note) whether so
expressed or not.
-17-
Section 8.07. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by law)
not invalidate or render unenforceable such provision in any other jurisdiction.
Section 8.08. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
Section 8.09. Confidentiality. In connection with the negotiation and
administration of this Agreement and the other Transaction Documents, USA has
furnished and will from time to time furnish the Noteholders (such information,
other than any such information which (i) was publicly available, or otherwise
known to the Noteholders, at the time of disclosure, (ii) subsequently becomes
publicly available other than through any act or omission by the Noteholders or
(iii) otherwise subsequently becomes known to the Noteholders, being hereinafter
referred to as "Confidential Information"). The Noteholders will maintain the
confidentiality of any Confidential Information in accordance with such
procedures as the Noteholders apply generally to information of that nature. It
is understood, however, that the foregoing will not restrict the Noteholders'
ability to freely exchange such Confidential Information with current or
prospective investors, assignees and advisors. Subject to the prohibitions and
restrictions imposed on the Noteholders with respect to the Confidential
Information under applicable securities laws, it is further understood that the
foregoing will not prohibit the disclosure of any or all Confidential
Information if and to the extent that such disclosure may be required or
requested (w) by a Governmental Authority, (x) pursuant to court order, subpoena
or other legal process or in connection with any pending or threatened
litigation hereunder, (y) otherwise as required by law, or (z) in order to
protect its interests or its rights or remedies hereunder or under the other
Transaction Documents; in the event of any required disclosure under clause (w),
(x), or (y) above, the Noteholders agree to use reasonable efforts to inform USA
as promptly as practicable.
Section 8.10. Final Agreement of the Parties. THIS AGREEMENT AND THE OTHER
TRANSACTION DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
Section 8.11. Jury Waiver. USA AND THE NOTEHOLDERS HEREBY IRREVOCABLY WAIVE
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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Section 8.12. Choice of Forum. USA AND THE NOTEHOLDERS AGREE THAT ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL BE BROUGHT IN THE FEDERAL OR STATE COURTS
OF ▇▇▇▇▇▇ COUNTY, TEXAS, OTHER THAN LEGAL PROCEEDINGS INSTITUTED BY THE
NOTEHOLDERS WITH RESPECT TO THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS, WHICH PROCEEDINGS MAY BE BROUGHT IN THE FEDERAL OR STATE COURTS OF
▇▇▇▇▇▇ COUNTY, TEXAS OR THE COURTS OF ANY OTHER JURISDICTION DEEMED APPROPRIATE
BY THE NOTEHOLDERS TO ENFORCE THEIR RIGHTS AND REMEDIES UNDER THE SECURITY
DOCUMENTS.
Section 8.13. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the law of the State of New York excluding choice-of-law principles of the law
of such State that would require the application of the laws of a jurisdiction
other than such State.
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IN WITNESS WHEREOF, USA and the Noteholders have caused this Agreement to
be executed by their respective representatives thereunto duly authorized
effective as of the date first above written.
UNIVERSAL SEISMIC ASSOCIATES, INC.
By:
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
RIMCO PARTNERS, L.P.,
RIMCO PARTNERS, ▇.▇. ▇▇,
RIMCO PARTNERS, L.P. III, and
RIMCO PARTNERS, ▇.▇. ▇▇
By: Resource Investors Management Company
Limited Partnership, their general partner
By: RIMCO Associates, Inc.,
its general partner
By:
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
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SCHEDULE 4.05
Subsidiaries
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Schedule 4.05
SCHEDULE 4.08
Litigation
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Schedule 4.08
SCHEDULE 6.02
Insurance
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Schedule 6.02
SCHEDULE 7.02
Schedule 7.02