Exhibit 10.117
------------------------------------------------------------------------------
LOAN AGREEMENT
among
CASTLE EXPLORATION COMPANY, INC.,
CASTLE TEXAS PRODUCTION LIMITED PARTNERSHIP,
CASTLE TEXAS PIPELINE LIMITED PARTNERSHIP,
CEC GAS MARKETING LIMITED PARTNERSHIP,
as Borrowers,
CASTLE PIPELINE COMPANY,
CEC MARKETING COMPANY,
CASTLE PRODUCTION COMPANY,
as General Partners,
CASTLE ENERGY CORPORATION,
and
COMMERCIAL NATIONAL BANK IN SHREVEPORT,
Dated as of April 30, 1996
------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS.......................................................... 1
SECTION 2. AMOUNT AND TERM OF TERM LOAN......................................... 2
2.1 Term Loan..................................................... 2
2.2 Term Note..................................................... 2
2.3 Use of Proceeds............................................... 2
2.4 Prepayments................................................... 2
2.5 Interest Rate and Payment Dates............................... 3
2.6 Payments and Payment Dates.................................... 3
2.7 Computation of Interest and Fees.............................. 4
2.8 Applicable Law................................................ 4
2.9 Joint and Several Obligations................................. 4
2.10 Commitment Fee................................................ 4
SECTION 3. REPRESENTATIONS AND WARRANTIES....................................... 4
3.1 Financial Statements.......................................... 4
3.2 Corporate Existence and Business.............................. 5
3.3 Subsidiaries.................................................. 6
3.4 Compliance with Law........................................... 6
3.5 Power and Authorization; Enforceable Obligations.............. 6
3.6 Governmental Approvals and Other Consents and Approvals....... 8
3.7 No Legal Bar.................................................. 8
3.8 No Proceeding or Litigation................................... 8
3.9 No Default, Event of Default or Event of Loss................. 9
3.10 Ownership of Property; Liens.................................. 9
3.11 Indebtedness.................................................. 9
3.12 Taxes......................................................... 10
3.13 Regulation U.................................................. 10
3.14 ERISA......................................................... 10
3.15 Investment Company Act........................................ 11
3.16 Public Utility Holding Company................................ 11
3.17 Full Disclosure............................................... 11
3.18 Project Documents............................................. 11
3.19 Environmental Matters......................................... 11
3.20 Intellectual Property......................................... 12
3.21 Intentionally Left Blank...................................... 12
3.22 Chief Executive Office........................................ 12
3.23 Solvency...................................................... 12
3.24 Joint Venture................................................. 13
-i-
TABLE OF CONTENTS
(Continued)
Page
----
3.25 No Fees....................................................... 13
3.26 Validity of Leases............................................ 13
3.27 Collateral Security Documents................................. 13
3.28 Pipeline Contracts............................................ 13
3.29 No Obligations................................................ 13
3.30 Prepayment.................................................... 14
3.31 Gas Contracts................................................. 14
3.32 FERC Jurisdiction............................................. 14
3.33 Lone Star Contract............................................ 15
SECTION 4. CONDITIONS PRECEDENT................................................. 15
4.1 Conditions to Term Loan....................................... 15
SECTION 5. AFFIRMATIVE COVENANTS................................................ 21
5.1 Conduct of Business, Maintenance of Existence, Etc............ 21
5.2 Payment of Obligations........................................ 21
5.3 Performance Under Other Agreements............................ 21
5.4 Partnership Insurance Coverage................................ 21
5.5 Inspection of Property; Books and Records..................... 24
5.6 Compliance with Laws.......................................... 25
5.7 Financial Statements.......................................... 25
5.8 Certificates; Operating Statements; Other Information......... 25
5.9 Taxes......................................................... 28
5.10 Maintenance of Property....................................... 28
5.11 Notices....................................................... 28
5.12 Employee Plans................................................ 30
5.13 Management Letters............................................ 30
5.14 Easements..................................................... 31
5.15 Hazardous Materials........................................... 31
5.16 Use of Proceeds............................................... 31
5.17 Servicers..................................................... 31
5.18 Intentionally Left Blank...................................... 32
5.19 Further Assurances............................................ 32
5.20 Assignment of Additional Contracts; Future Mortgages.......... 32
5.21 Annual Opinion of Counsel..................................... 33
5.22 Fiscal Year................................................... 33
5.23 Environmental Compliance and Management Program............... 33
5.24 FERC Jurisdiction............................................. 34
5.25 Cover Damages................................................. 34
-ii-
TABLE OF CONTENTS
(Continued)
Page
----
5.26 Proceeds from the Production Payment and Receivables
from Lone Star Contract.................................... 34
5.27 Post-Closing Title Opinions................................... 35
SECTION 6. NEGATIVE COVENANTS................................................... 35
6.1 Merger, Sale of Assets, Etc................................... 35
6.2 Purchases of Assets........................................... 35
6.3 Indebtedness.................................................. 35
6.4 Distributions, Etc............................................ 35
6.5 Liens......................................................... 35
6.6 Nature of Business............................................ 36
6.7 Amendment of Contracts, Etc................................... 36
6.8 Investments................................................... 36
6.9 Leases........................................................ 36
6.10 Change of Office.............................................. 36
6.11 Change of Name................................................ 36
6.12 Compliance with ERISA......................................... 36
6.13 Transactions with Affiliates and Others....................... 37
6.14 Approval of Additional Contracts.............................. 37
6.15 Alteration or Abandonment..................................... 37
6.16 Capital Expenditures; Operating Expenses, Etc................. 37
6.17 Sale and Leaseback............................................ 37
6.18 Sale of Partnership Interests................................. 38
6.19 Servicers; Service Agreements................................. 38
6.20 Hazardous Materials........................................... 38
6.21 Intentionally Left Blank...................................... 38
6.22 Executive Offices............................................. 38
6.23 Fiscal Year................................................... 38
6.24 FERC Jurisdiction............................................. 38
6.25 Lone Star Contract............................................ 38
SECTION 7. EVENTS OF DEFAULT.................................................... 38
SECTION 8. MISCELLANEOUS........................................................ 42
8.1 Amendments and Waivers........................................ 42
8.2 Notices....................................................... 42
8.3 No Waiver; Cumulative Remedies................................ 44
8.4 Survival...................................................... 44
8.5 Expenses and Taxes............................................ 44
-iii-
TABLE OF CONTENTS
(Continued)
Page
----
8.6 INDEMNIFICATION............................................... 45
8.7 Successors and Assigns; Transferees; Transferred Interests.... 46
8.8 Severability.................................................. 46
8.9 Headings...................................................... 46
8.10 Counterparts.................................................. 47
8.11 GOVERNING LAW................................................. 47
8.12 Submission to Jurisdiction; Waivers........................... 47
8.13 Maximum Interest Rate......................................... 47
8.14 Release of Collateral......................................... 48
8.15 Publicity..................................................... 48
8.16 Recourse to Borrowers......................................... 48
8.17 No Release.................................................... 48
8.18 Collateral Security........................................... 48
8.19 Intercreditor Agreement....................................... 48
-iv-
APPENDIX A Definitions
SCHEDULES
Schedule 1 Indebtedness
Schedule 2 Project Documents
Schedule 3 Project Document Amendments
Schedule 4 Governmental Approvals
Schedule 5 Recordings and Filings
Schedule 6 Form of Operating Budget
Schedule 7 Post-Closing Title Work
EXHIBITS
Exhibit A Form of Term Note
Exhibit B-1 Matters to be Addressed by Legal Opinion of Counsel to the
Borrowers and Castle
Exhibit B-2 Matters to be Addressed by Legal Opinion of Pennsylvania Counsel to
the Borrowers and Castle
Exhibit C-1 Form of Borrower Security Agreement
Exhibit C-2 Form of Security Agreement
Exhibit D-1 Form of Borrower Deed of Trust
Exhibit D-2 Form of Borrower Mortgage
Exhibit D-3 Form of Castle Deed of Trust
Exhibit D-4 Form of Castle Mortgage
Exhibit E Form of Utility Security Notice
Exhibit F Form of General Partner Pledge Agreement
Exhibit G Form of Limited Partner Pledge Agreement
Exhibit H Form of Castle Pledge Agreement
Exhibit I Exploration Pledge Agreement
Exhibit J Form of Castle Guaranty
Exhibit K Form of Lockbox Operating Agreement
-v-
LOAN AGREEMENT, dated as of April 30, 1996 (this "Agreement"), by and
among CASTLE TEXAS PIPELINE LIMITED PARTNERSHIP, a Texas limited partnership
("Pipeline"), CEC GAS MARKETING LIMITED PARTNERSHIP, a Texas limited partnership
("Marketing"), CASTLE EXPLORATION COMPANY, INC., a Pennsylvania corporation
("Exploration"), CASTLE TEXAS PRODUCTION LIMITED PARTNERSHIP, a Texas limited
partnership ("Production"; and together with Pipeline, Marketing, and
Exploration, the "Borrowers"), CASTLE PIPELINE COMPANY, a Texas corporation,
CASTLE PRODUCTION COMPANY, a Texas corporation, CEC MARKETING COMPANY, a Texas
corporation (collectively, the "General Partners"); CASTLE ENERGY CORPORATION, a
Delaware corporation (solely with respect to Section 3 of this Agreement)
("Castle"); and COMMERCIAL NATIONAL BANK IN SHREVEPORT ("Lender").
W I T N E S S E T H :
WHEREAS, the Borrowers have requested that the Lender make available to
them a term loan in the aggregate principal amount of Three Million Eight
Hundred Thousand and No/100 Dollars ($3,800,000.00); and
WHEREAS, the Lender is willing to make such term loan to the Borrowers
on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, it is agreed:
SECTION 1. DEFINITIONS
(a) All terms defined in this Agreement or in Appendix A shall have
their defined meanings when used herein or in any certificate or other document
made or delivered pursuant hereto (such definitions to be equally applicable to
both the singular and plural forms of the terms defined).
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined herein or in Appendix A
and accounting terms partly defined herein or in Appendix A to the extent not
defined, shall have the respective meanings given to them under GAAP.
(c) 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, and section, subsection,
appendix, schedule and exhibit references are to this Agreement unless otherwise
specified.
(d) References to agreements defined herein or in Appendix A shall,
unless otherwise specified, include such agreements as they may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions of the Basic Documents.
LOAN AGREEMENT - Page 1
(e) Terms defined in this Agreement or in Appendix A by reference to
any other agreement, document or instrument shall have the meanings assigned to
them in such agreement, document or instrument, whether or not such agreement,
document or instrument is then in effect.
SECTION 2. AMOUNT AND TERM OF TERM LOAN
2.1 Term Loan. Subject to and upon the terms and conditions set forth
herein, Lender agrees on the Closing Date to make a term loan (the "Term Loan")
in the principal amount of Three Million Eight Hundred Thousand Dollars
($3,800,000.00) to the Borrowers, on a joint and several basis. The Borrowers
shall give the Lender not less than three Business Days prior written notice of
the proposed Closing Date.
2.2 Term Note. The Term Loan made by Lender shall be evidenced by a
single promissory note of the Borrowers, substantially in the form of Exhibit A
(the "Term Note"), with appropriate insertions, payable to the order of Lender
and in the aggregate principal amount equal to the Term Loan. The Term Note
shall (i) be dated the Closing Date, (ii) represent the joint and several
obligations of the Borrowers to pay the principal amount of and interest on the
Term Loan, (iii) provide for the payment of interest in accordance with
subsection 2.5, (iv) be entitled to the benefit of this Agreement and the
Collateral Security Documents, (v) mature on August 29, 1997, and (vi) be
payable in nine (9) consecutive monthly installments in an amount equal to
ninety-five thousand fifteen dollars ($95,015.00) each, applied first to all
accrued and unpaid interest and then to outstanding principal, commencing on
June 4, 1996, and continuing on each Installment Payment Date thereafter until
and including February 4, 1997, and thereafter five (5) monthly installments in
the principal amount of five hundred thirty-one thousand six hundred seventy-six
and 53/100 dollars ($531,676.53) each, plus accrued and unpaid interest thereon
shall be due and payable on each Installment Payment Date, with a final
installment in the amount of all outstanding principal of the Term Loan, plus
all accrued and unpaid interest thereon due and payable on August 29, 1997.
2.3 Use of Proceeds. The proceeds of the Term Loan shall be used by the
Borrowers (a) to refinance the outstanding principal balance of and accrued and
unpaid interest on the Existing BTCC Loans, (b) to establish an escrow account
in the amount of $1,800,000.00 for the purpose of settling various accounts
payable associated with the CORE Refining Corp. transaction as set forth on
Schedule 1 hereto, and (c) for general corporate purposes. To the extent such
accounts are settled for less than $1,800,000.00, the excess shall be released
to Borrower.
2.4 Prepayments. (a) Mandatory Prepayments.
(i) If an Event of Loss shall occur, the Borrowers shall prepay in
full the unpaid principal amount of the then outstanding Term Note,
together with accrued interest thereon to the date of prepayment and
all other amounts owing hereunder and under the Collateral Security
Documents, on the earlier of (A) the date occurring 60 days after the
date of such Event of Loss and (B) the date on which insurance proceeds
are received with respect to such Event of Loss.
LOAN AGREEMENT - Page 2
(ii) Notwithstanding anything to the contrary otherwise contained
in this Agreement, in the event that (A) the Senior Loan Termination
Date has not occurred on or before September 4, 1997, (B) the principal
amount of the Senior Obligations is increased (other than in accordance
with the terms of the Senior Loan Agreement as in effect on the date
hereof) to an amount in excess of the principal amount of the Senior
Obligations outstanding on the date hereof, or (C) the Term Loan
Interest Rate (as defined in the GE Capital Loan Agreement) is modified
such that it is greater than 8.33%, the Obligations shall become
immediately due and payable and the Borrowers shall, within three (3)
days of such event, prepay in full the unpaid principal amount of the
then outstanding Term Note, together with accrued and unpaid interest
thereon to the date of prepayment and all other amounts owing hereunder
and under the Collateral Security Documents.
(b) Optional Prepayments. The Borrowers may on at least three (3)
Business Days prior notice to Lender, at any time and from time to time prepay
the Term Loan, in whole or in part, without premium or penalty but with accrued
and unpaid interest to the date of prepayment on the amount so prepaid. Partial
prepayments shall be in a principal amount of $100,000.00 or an integral
multiple thereof.
(c) Partial Prepayments. Partial prepayment of the Term Loan shall be
applied to the installments thereof in the inverse order of maturity.
2.5 Interest Rate and Payment Dates. (a) The Term Loan shall bear
interest on the unpaid principal amount thereof at the Term Loan Interest Rate.
(b) If all or a portion of the principal amount of the Term Loan made
hereunder or any other amount due and payable hereunder shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), the Term
Loan or other amount shall bear interest at a rate per annum which is 2% above
the Term Loan Interest Rate from the date of such non-payment until paid in full
(as well after as before judgment).
(c) Interest on the unpaid principal amount of the Term Loan shall be
payable monthly in arrears on each Installment Payment Date and on the date the
Term Loan is paid in full; provided that interest accruing pursuant to
subsection 2.5(b) shall be payable from time to time on demand.
2.6 Payments and Payment Dates. (a) All payments (including prepayments
hereunder) due hereunder or under the Term Note on account of principal,
interest, fees, or any other obligation incurred hereunder shall be paid to the
Lender at its office at 333 Texas Street, P.O. Box 21119, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, in freely transferable Dollars and in immediately available funds without
set-off or counterclaim. Borrowers shall, at the time of making each such
payment, specify to Lender the sums payable by Borrowers under this Agreement,
the Term Note or other Loan Documents to which such payment is to be applied
(and in the event Borrowers fail to so specify or if an Event of Default has
occurred and is continuing, Lender may apply such payment to the Obligations in
such order and manner as it may elect in its sole discretion). All payments
LOAN AGREEMENT - Page 3
hereunder shall be made without any presentment of the Term Note to the
Borrowers, but upon payment in full of the Term Note, the holder thereof shall
cancel it and return it to the Borrowers.
(b) If any payment hereunder becomes due and payable on a day other
than a Business Day, such payment shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
2.7 Computation of Interest and Fees. Interest on the Term Loan and all
fees hereunder shall be calculated on the basis of a 360-day year and the actual
number of days elapsed (including the first day but excluding the last day of
any relevant period).
2.8 Applicable Law. In the event that Lender shall have determined that
any change in any Applicable Law regarding capital adequacy or in the
interpretation or application thereof or compliance by Lender or any corporation
controlling Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any Governmental Authority made
subsequent to the date hereof does or shall have the effect of reducing the rate
of return on Lender's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which Lender or such corporation
could have achieved but for such change or compliance (taking into consideration
Lender's or such corporation's policies with respect to capital adequacy) by an
amount deemed by Lender to be material, then from time to time, after submission
by Lender to the Borrowers of a written request therefor, the Borrowers shall
pay to Lender such additional amount or amounts as will compensate Lender for
such reduction. A certificate as to any additional amounts payable pursuant to
this subsection 2.8 submitted by Lender to the Borrowers shall be conclusive in
the absence of manifest error.
2.9 Joint and Several Obligations. The Borrowers shall, subject to the
terms of the Intercreditor Agreement with respect to Pipeline and Marketing, be
jointly and severally liable for all payments of principal and interest on the
Term Note and for the observance and performance of all obligations, covenants,
conditions, indemnities and other terms and provisions hereunder applicable to
the Borrowers or to any Borrower.
2.10 Commitment Fee. The Borrowers have agreed pursuant to the
commitment letter dated March 14, 1996, to pay to Lender a non-refundable
commitment fee in the aggregate amount of $388,000, which shall be payable on
the date this Agreement is executed.
SECTION 3. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
the Term Loan, each Borrower, each General Partner and Castle (collectively, the
"Representing Parties") represent and warrant to the Lender that:
3.1 Financial Statements. (a) The balance sheet of each Borrower, each
General Partner, each Limited Partner and Castle, and the related statements of
LOAN AGREEMENT - Page 4
income and of cash flows furnished to the Lender pursuant to subsection 4.1(q)
and certified by a Responsible Officer of such Person is complete and correct in
all material respects and fairly presents the financial condition of such Person
on such date and the results of such Person's operations and cash flows for the
fiscal year then ended, all in conformity with GAAP applied on a consistent
basis. All liabilities, direct and contingent, of such Person on such date
required to be disclosed pursuant to GAAP are disclosed on such balance sheet.
(b) None of the Borrowers, the General Partners, the Limited Partners
nor Castle had, at the date of its balance sheet referred to in subsection
3.1(a), any material Guarantee Obligations, contingent liabilities or
liabilities for taxes, or any long term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction, which is not reflected in the financial statements
referred to in subsection 3.1(a) or in the notes thereto.
(c) Since the dates of the financial statements referred to in
subsection 3.1(a) no material adverse change has occurred in (A) the financial
condition of any Borrower, any General Partner, any Limited Partner or Castle,
(B) the properties, business, operations or prospects of any Borrower, any
General Partner, any Limited Partner or Castle or (C) any Borrower's, any
General Partner's, any Limited Partner's or Castle's ability to perform its
obligations under this Agreement and the other Basic Documents to which it is or
is to become a party.
3.2 Corporate Existence and Business. (a) Each Borrower (other than
Exploration) is a limited partnership duly organized and validly existing and in
good standing under the laws of the State of Texas. Exploration is a corporation
duly organized and validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Each Borrower is duly qualified to do business
under the laws of each jurisdiction in which the conduct of its business or the
ownership, lease or operation of its property so requires. The Certificate of
Limited Partnership of each Borrower (other than Exploration) has been duly
filed in the office of the Secretary of State of Texas; the Certificate of
Incorporation of Exploration has been duly filed in the Office of the Secretary
of State of the Commonwealth of Pennsylvania; and no other filing, recording,
publishing or other act is necessary or appropriate in connection with the
existence or the business of any Borrower except those which have been duly made
or performed.
(b) Each General Partner is duly organized and validly existing and in
good standing under the laws of Texas, is duly qualified to do business under
the laws of each jurisdiction in which the conduct of its business so requires
and has the corporate power and authority and the legal right to own and operate
its property and to conduct the business in which it is currently engaged.
(c) Pipeline GP is the sole general partner of Pipeline. Marketing GP
is the sole general partner of Marketing. Production GP is the sole general
partner of Production. Pipeline GP, Marketing GP and Production GP are engaged
solely in the business of being the general partners of Pipeline, Marketing and
Production, respectively, and activities incident thereto.
LOAN AGREEMENT - Page 5
(d) Each Limited Partner is duly organized and validly existing and in
good standing under the laws of Pennsylvania, is duly qualified to do business
under the law of each jurisdiction in which the conduct of its business so
requires and has the corporate power and authority and the legal right to own
and operate its property and to conduct the business in which it is currently
engaged.
(e) Pipeline LP is the sole limited partner of Pipeline. Marketing LP
is the sole limited partner of Marketing. Production LP is the sole limited
partner of Production.
3.3 Subsidiaries. (a) None of the Borrowers has any subsidiaries or any
equity interests in any other Person. None of the General Partners nor the
Limited Partners has any equity interests in any other Person other than in the
Borrower of which it is a general partner or a limited partner, as the case may
be.
(b) Castle directly owns 100% of the issued and outstanding capital
stock of each General Partner and each Limited Partner.
3.4 Compliance with Law. Each Borrower, each General Partner and each
Limited Partner is in compliance with all Requirements of Law applicable to it
(including, without limitation, all Relevant Environmental Laws).
3.5 Power and Authorization; Enforceable Obligations. (a) Each Borrower
has full power and authority and the legal right to conduct its business as now
conducted and as proposed to be conducted by it, to execute, deliver and perform
this Agreement, the Term Note and the other Basic Documents (other than the OWI
Contracts) to which it is or is to become a party, to take all action as may be
necessary to complete the transactions contemplated hereunder and thereunder, to
grant the Liens and security interests provided for in the Collateral Security
Documents to which it is a party and to borrow hereunder. Each Borrower has
taken all necessary partnership and legal action to authorize the borrowings
hereunder on the terms and conditions of this Agreement, the Term Note and the
other Basic Documents (other than the OWI Contracts) to which it is a party, to
grant the Liens and security interests provided for in the Collateral Security
Documents to which it is a party and to authorize the execution, delivery and
performance of this Agreement, the Term Note and the other Basic Documents
(other than the OWI Contracts) to which it is a party or is to become a party.
No consent or authorization of, filing with, or other act by or in respect of
any other Person, that has not been made, obtained or complied with, is required
in connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Agreement, the Term Note or the
other Basic Documents (other than the OWI Contracts). Each of this Agreement,
the Term Note and the other Basic Documents (other than the OWI Contracts) to
which any Borrower is a party has been duly executed and delivered by such
Borrower and, assuming the due authorization and delivery hereof and thereof by
the other parties hereto and thereto, constitutes, and each of the other Basic
Documents (other than the OWI Contracts) to which such Borrower is to become a
party will upon execution and delivery thereof by such Borrower and, assuming
the due authorization and delivery thereof by the other parties thereto (if
any), constitute a legal, valid and binding obligation of such Borrower
LOAN AGREEMENT - Page 6
enforceable against such Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors
generally and by general principles of equity (whether such enforcement is
sought in a proceeding at law or in equity); all Project Documents (other than
the OWI Contracts) to which such Borrower is a party are in full force and
effect.
(b) Each General Partner has full power and authority and the legal
right to own its properties and to conduct its business as now conducted and
proposed to be conducted by it, to execute, deliver and perform this Agreement
and the other Basic Documents to which it is or is to become a party and to take
all action as may be necessary to complete the transactions contemplated
hereunder and thereunder. Each General Partner has taken all necessary corporate
action to authorize the execution, delivery and performance of this Agreement
and the other Basic Documents to which it is or is to become a party. No consent
or authorization of, filing with, or other act by or in respect of any other
Person that has not been made, obtained or complied with is required in
connection with the execution, delivery, performance, validity or enforceability
of this Agreement or the other Basic Documents to which such General Partner is
a party or is to become a party. Each of this Agreement, the Term Note and the
other Basic Documents to which any General Partner is a party has been duly
executed and delivered by such General Partner and, assuming the due
authorization, execution and delivery thereof by the other parties thereto,
constitutes, and each of the other Basic Documents to which such General Partner
is to become a party will upon execution and delivery thereof by such General
Partner and, assuming the due authorization, execution and delivery thereof by
the other parties thereto (if any), constitute a legal, valid and binding
obligation of such General Partner enforceable against such General Partner in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
rights of creditors generally and by general principles of equity (whether such
enforcement is sought in a proceeding at law or in equity).
(c) Castle has full power and authority and the legal right to own its
properties and to conduct its business as now conducted and proposed to be
conducted by it, to execute, deliver and perform this Agreement and the other
Basic Documents to which it is or is to become a party and to take all action as
may be necessary to complete the transactions contemplated hereunder and
thereunder. Castle has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the other Basic
Documents to which it is or is to become a party. No consent or authorization
of, filing with, or other-act by or in respect of any other Person that has not
been made, obtained or complied with is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement
or the other Basic Documents to which it is a party or is to become a party.
Each of this Agreement and the other Basic Documents to which Castle is a party
has been duly executed and delivered by Castle and, assuming the due
authorization, execution and delivery thereof by the other parties thereto,
constitutes, and each of the other Basic Documents to which Castle is to become
a party will upon execution and delivery thereof by Castle and, assuming the due
authorization, execution and delivery thereof by the other parties thereto (if
any), constitute a legal, valid and binding obligation of Castle enforceable
against Castle in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the rights of creditors generally and by general
principles of equity (whether such enforcement is sought in a proceeding at law
or in equity).
LOAN AGREEMENT - Page 7
3.6 Governmental Approvals and Other Consents and Approvals. No
Governmental Approvals or other consents, actions or approvals are required in
connection with (i) the participation by any Borrower, any General Partner or
any Limited Partner in the transactions contemplated by this Agreement and the
other Basic Documents, (ii) the use, ownership, maintenance or operation of the
Assets in accordance with the applicable provisions of the Basic Documents and
in compliance with all Applicable Laws, (iii) the validity and enforceability of
the Lone Star Contract, the Supply Agreement and the other Basic Documents, (iv)
the participation by Lender in the transactions contemplated by this Agreement
and the other Basic Documents to which it is a party (other than any
Governmental Approvals, consents, actions or approvals under any law, rule or
regulation of (or administered by) any federal or state regulatory body
primarily responsible for regulating the activities of Lender) and (v) the grant
by the Borrowers, the General Partners, the Limited Partners and Castle of the
Liens created pursuant to the Collateral Security Documents and the validity,
perfection and enforceability thereof and the exercise by the Lender of its
rights and remedies thereunder, except in each case for those Governmental
Approvals set forth on Schedule 4. The continuation, validity and effectiveness
of each such Governmental Approval set forth on Schedule 4 will in no way be
adversely affected by the transactions contemplated by this Agreement or the
Collateral Security Documents. No Borrower is in breach of, or in default under
the terms of, and has not engaged in any activity which would cause revocation
or suspension of, any such Governmental Approval and, to such Representing
Party's knowledge after diligent investigation, no action or proceeding looking
to or contemplating the revocation or suspension of any thereof is pending or
threatened.
3.7 No Legal Bar. The execution delivery and performance of this
Agreement, the Term Note and the other Basic Documents, the borrowings by the
Borrowers hereunder and the use of the proceeds thereof will not violate any law
applicable to, or any Requirement of Law or Contractual Obligation of, any
Borrower, any General Partner or any Limited Partner and will not result in, or
require, the creation or imposition of any Lien on any of the Assets or any of
the other properties, assets or revenues of any Borrower, any General Partner,
any Limited Partner or Castle, pursuant to any Requirement of Law or Contractual
Obligation, except for the Liens created pursuant to the Collateral Security
Documents.
3.8 No Proceeding or Litigation. Except as disclosed in the Form 10Q
for the quarter ended December 31, 1995 filed by Castle with the Securities and
Exchange Commission, no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of
such Representing Party, after due inquiry, threatened against or affecting any
Borrower, any General Partner or any Limited Partner or against or affecting any
of their respective properties, rights, revenues or assets (including the
Assets), or which could result in a rescission, termination or suspension of any
Governmental Approval, consent or approval or could have a Material Adverse
Effect.
LOAN AGREEMENT - Page 8
3.9 No Default, Event of Default or Event of Loss. No Borrower or
General Partner is in default in any material respect under or with respect to
any Basic Document or any other Contractual Obligation to which such Person is a
party; and no notice of default has been given to any Borrower or any General
Partner under any of the Basic Documents. To such Person's knowledge, no other
party to a Basic Document (other than any OWI Contract) is in default
thereunder. No Default or Event of Default has occurred and is continuing. No
Event of Loss has occurred.
3.10 Ownership of Property; Liens. (a) Pipeline has Marketable Title in
and to the Pipeline Assets, free and clear of any claim, Lien or other
encumbrance other than Permitted Liens. Each of Castle, Production and Marketing
has good title to all of its property and assets (including, without limitation
with respect to Marketing, the Lone Star Contract), free and clear of any claim,
Lien or other encumbrance other than Permitted Liens.
(b) Except for Permitted Liens, prior to the satisfaction in full of
the Obligations, no Borrower shall directly or indirectly reserve or retain any
recorded or unrecorded interest in the Collateral, and shall not reserve any
recorded executory rights therein, upon which a Lien is not created in favor of
the Lender by any Borrower pursuant to the Collateral Security Documents.
(c) Except for Permitted Liens, the GE Capital Loan Agreement, the
Senior Collateral Documents, this Agreement and the Collateral Security
Documents, as of the Closing Date, there will be no unrecorded documents or
agreements which may result in impairment or loss of any Borrower's rights to
convey or assign any Assets held by it.
(d) Except for Permitted Liens, Pipeline has all beneficial right,
title and interest in and to the Pipeline Assets and has the exclusive right to
sell and use the same. Pipeline has succeeded to all right, title and interest
of Tabasco in and to the Interconnect Agreement and the Transportation Agreement
(Marketing). Marketing has succeeded to all of the right, title and interest of
ARCO in and to (i) the Lone Star Contract and (ii) the Transportation Agreement
(Marketing). Production has succeeded to all of the right, title and interest of
ARCO in and to the oil and gas assets purchased from ARCO pursuant to the
Purchase and Sale Agreement dated September 3, 1992. Exploration has succeeded
to all of the right, title and interest of ARCO in and to the Production
Payment.
(e) Part A of Schedule 5 hereto lists all UCC-1 financing statements
and all mortgages, security agreements, pledge agreements and deeds of trust on
file in any jurisdiction prior to the date hereof on or with respect to any
Borrower, any General Partner or any Limited Partner or any of their respective
properties and assets. Part B of Schedule 5 hereto lists all UCC-1 financing
statements and all mortgages, security agreements, pledge agreements and deeds
of trust on file in any jurisdiction prior to the date hereof on or with respect
to Castle's ownership interest in the General Partners and the Limited Partners.
3.11 Indebtedness. (a) Schedule 1 correctly describes, as of the dates
indicated therein, all outstanding Indebtedness of the Borrowers.
LOAN AGREEMENT - Page 9
(b) No Borrower is the lessor or lessee under any lease other than (i)
leases constituting part of the Pipeline Interests or (ii) leases permitted
pursuant to subsection 6.9.
(c) No Borrower is or will be a party to any "take or pay" contract or
settlement or any other contract or agreement which (i) allows the gas purchaser
thereunder to take gas previously paid for out of future gas production or (ii)
provides for a cash rebate to such gas purchaser if reimbursement of take or pay
monies is not made through gas production, other than (x) the Supply Agreement,
(y) the Lone Star Contract, and (z) the gas balancing liabilities shown on the
balance sheet of Production delivered pursuant to subsection 4.1(q).
3.12 Taxes. (a) Each Borrower, each General Partner, each Limited
Partner and each corporation which has been affiliated with either Borrower,
either General Partner or either Limited Partner in any form of combined,
unitary or consolidated tax group (a "Tax Affiliate") has filed or caused to be
filed all tax returns which are required to be filed by it, and has paid or
caused to be paid all taxes shown to be due and payable on such returns or on
any assessments made against it, or any of its property and all other taxes,
fees or other charges imposed on it or any of its property by any Governmental
Authority including, without limitation, all ad valorem, property, production,
excise, severance, windfall profit and similar taxes and assessments based on or
measured by the ownership of property or the production or removal of
Hydrocarbons or the receipt of proceeds therefrom or from the Assets have been
timely paid; no tax Lien has been filed, and, to the knowledge of such Person no
claim is being asserted, with respect to any such tax, fee or other charge;
provided, however, that in the case of a Tax Affiliate, this subsection 3.12(a)
shall only apply in respect of taxes for which either Borrower (or any General
Partner or Limited Partner) could be held liable.
(b) Neither the execution and delivery of this Agreement, the Term Note
or any other Basic Document, nor the consummation of any of the transactions
contemplated hereby or thereby, will result in any tax, levy, impost, duty,
charge or withholding imposed by the United States or any agency or taxing
authority thereof, or by any state of the United States or any political
subdivision or taxing authority thereof or therein, on or with respect to such
execution, delivery or consummation, or upon or with respect to the Lender.
3.13 Regulation U. No part of the proceeds of the Term Loan will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors.
3.14 ERISA. No Borrower nor any General Partner is in violation of any
applicable provisions of ERISA and the regulations and published interpretations
thereunder with respect to any Plan. No Borrower nor any General Partner
maintains or is required under ERISA to maintain, any Plan.
LOAN AGREEMENT - Page 10
3.15 Investment Company Act. None of the Borrowers, the General
Partners nor the Limited Partners is an "investment company" or a company
"controlled" by an "investment company" or an "investment adviser", within the
meaning of the Investment Company Act of 1940, as amended.
3.16 Public Utility Holding Company. None of the Borrowers, the General
Partners nor the Limited Partners is a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" or a
"public utility" within the meaning of the Public Utility Holding Company Act of
1935, as amended.
3.17 Full Disclosure. No representation, warranty or other statement
made by such Representing Party in this Agreement or in any other Basic Document
or in any certificate, written statement or other document furnished to the
Lender by or on behalf of such Representing Party, contains, at the time made,
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading (unless
corrected or disclosed prior to the date hereof), which misstatement or omission
has had a Material Adverse Effect or which could have a Material Adverse Effect;
and there is no fact known to such Representing Party, whether related to
Governmental Approvals, the Basic Documents or otherwise, that has not been
disclosed in writing to the Lender that has had a Material Adverse Effect or
which could have a Material Adverse Effect.
3.18 Project Documents. (a) Each of the Project Documents (other than
the OWI Contracts) constitutes the legal, valid and binding obligation of each
of the parties thereto, and is enforceable against each such party in accordance
with its terms except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity. All Governmental
Approvals and other consents or approvals required in connection with the
execution, delivery and performance of each of the Project Documents by the
parties thereto have been duly obtained or made and are Final.
(b) No Borrower is party to any contract (other than employment
contracts and contracts involving less than $100,000, in the aggregate,
annually) other than the contracts listed on Schedule 2 and the OWI Contracts;
true and complete copies of all such contracts listed on Schedule 2 have been
delivered to the Lender pursuant to subsection 4.1(c).
(c) Other than the amendments listed on Schedule 3, no Project Document
has been amended, supplemented or otherwise modified prior to the date hereof.
3.19 Environmental Matters. (a) To the knowledge of each of the
Representing Parties the Mortgaged Properties do not contain, and have not
previously contained, any Hazardous Materials in concentrations which violate,
or could reasonably be expected to give rise to liability under, Relevant
Environmental Laws.
LOAN AGREEMENT - Page 11
(b) To the knowledge of each of the Representing Parties the Mortgaged
Properties and all operations of either Borrower are in compliance with all
Relevant Environmental Laws, and there is no Hazardous Materials contamination
which could materially interfere with the continued operation of the Mortgaged
Properties or the operations of any Borrower or materially impair the fair
saleable value thereof.
(c) No Borrower has received any notice of violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with or liability under any Relevant
Environmental Law, nor is any Borrower aware that any person is contemplating
delivering to such Borrower any such notice.
(d) To the knowledge of each of the Representing Parties Hazardous
Materials have not been transferred, transported, or disposed of by any Borrower
at any location in violation of, or in a manner that could give rise to
liability under, a Relevant Environmental Law.
(e) There are no judicial proceedings or governmental administrative
actions pending or, to the knowledge of the Borrowers, contemplated under any
Relevant Environmental Law to which any Borrower is or will be named as a party.
(f) Each of the representations and warranties set forth in subsections
3.19(a) through (e) is true and correct with respect to each parcel of real
property owned or operated by any Borrower.
3.20 Intellectual Property. No licenses, trademarks, patents or
agreements with respect to the use of technology (other than any thereof which
have been obtained and are in full force and effect and have been assigned to
the Agent under the GE Capital Loan Agreement and the Lender) are necessary for
the ownership, operation and maintenance of the Assets and the conduct of any
Borrower's business. Each Borrower owns, or is licensed to use, all trademarks,
tradenames, copyrights, technology, know-how and processes necessary for the
conduct of its business as currently conducted that are material to the
condition (financial or other), business, or operations of such Borrower (the
"Intellectual Property"). No claim has been asserted and is pending by any
Person with respect to the use of any such Intellectual Property in connection
with the Assets or the conduct of any Borrower's business, or challenging or
questioning the validity or effectiveness of any such Intellectual Property and
such Borrower does not know of any valid basis for any such claim. The use of
such Intellectual Property by such Borrower does not infringe on the rights of
any Person.
3.21 Intentionally Left Blank.
3.22 Chief Executive Office. The chief executive office of each
Borrower and of each General Partner is at the address set forth in subsection
8.2.
3.23 Solvency. Each Borrower, each General Partner and each Limited
Partner are Solvent. Castle is generally able to meet its debts as they come
due.
LOAN AGREEMENT - Page 12
3.24 Joint Venture. None of the Borrowers, the General Partners nor the
Limited Partners is engaged in any joint venture or partnership with any other
Person except as contemplated by the Basic Documents.
3.25 No Fees. No broker's or finder's fees or commissions have been
paid or will be payable by any Borrower to any Person in connection with the
transactions contemplated by this Agreement. The Borrowers will indemnify Lender
and its officers, directors, employees and agents from and against, and hold
each of such parties harmless on demand from, all liabilities, costs, damages
and expenses, including, but not limited to, attorneys' fees and disbursements
relating to any third parties concerning finders', brokerage or similar fees
arising from or relating to the transactions contemplated under this Agreement.
3.26 Validity of Leases. The leases and easements constituting a part
of the Pipeline Interests are in full force and effect in accordance with their
terms.
3.27 Collateral Security Documents. Upon execution and delivery
thereof, the Collateral Security Documents to which any Borrower is a party will
be effective to create, in favor of the Lender, legal, valid and enforceable
liens on and security interests in all right, title, estate and interest of the
Borrowers in and to the Collateral and, prior to the Closing Date hereunder, all
necessary and appropriate recordings and filings will have been duly effected in
all appropriate public offices so that the liens and security interests created
by each of the Collateral Security Documents to which the Borrowers are parties
will constitute perfected first (except with respect to the security interests
granted by Marketing, Marketing GP, Marketing LP, Pipeline, Pipeline GP,
Pipeline LP and Castle in the Subject Party Collateral) liens on and prior
perfected security interests in all right, title, estate and interest of the
Borrowers in and to the Collateral described therein, prior and superior to all
other Liens, existing or future, except Permitted Liens. The recordings and
filings shown on Schedule 5 are all the recordings, filings and other action
necessary and appropriate in order to establish, protect and perfect the
Lender's lien on and security interest in the right, title, estate and interest
of the Borrowers in and to the Collateral.
3.28 Pipeline Contracts. Pipeline, with respect to the Pipeline Assets,
has fulfilled all requirements for filings, certificates, disclosures of parties
in interest, and other similar matters contained in (or otherwise applicable
thereto by law, rule or regulation) any lease unit agreement, pooling agreement,
communitization agreement, Basic Document or other document granting or
governing the operation or maintenance of such interests and assets, and
Pipeline is qualified to own, hold and exercise such rights under such lease
unit agreements, pooling agreements, communitization agreements, Basic Documents
or other documents.
3.29 No Obligations. Except for (i) obligations pursuant to the Project
Documents, no Borrower has any obligation owing to, or any Indebtedness in favor
of, MGTF or any other MG Affiliate, or (ii) the Senior Obligations, no Borrower
has any obligation owing to, or any indebtedness in favor of GE Capital or any
of its Affiliates.
LOAN AGREEMENT - Page 13
3.30 Prepayment. Marketing has fully and irrevocably prepaid a quantity
of Natural Gas (a) from Production pursuant to the Production $2.90 Contract
equal to the aggregate sum of the Tier II Minuends (as defined in the Supply
Agreement) for each Day in the period from August 1, 1993 through May 31, 1999,
inclusive, as set forth in Exhibit B to the Supply Agreement, and (b) from MGNG
pursuant to the Supply Agreement equal to all Tier II and Tier III Gas (as
defined therein) to be delivered thereunder.
3.31 Gas Contracts. (a) Except pursuant to the Supply Agreement and the
OWI Contracts, Marketing is not a party to any contract providing for the
purchase of gas by it nor is it otherwise obligated to purchase gas from any
other source.
(b) Marketing has no obligation to purchase any specified minimum
quantity of gas pursuant to any OWI Contract, nor does it have any other
obligations under any OWI Contract other than the obligation to pay for any gas
actually taken thereunder (i) in the case of the Owner OWI Contracts, at a price
of $2.90 per MMBtu fixed for the life of such contract and (ii) in the case of
the Production $2.90 Contract, at a price of $2.90 per MMBtu fixed for the life
of such contract, such price having been irrevocably prepaid; provided, however,
that Marketing is not permitted to discriminate against producers within any
field from which it purchases Natural Gas or unjustly and unreasonably
discriminate between fields.
3.32 FERC Jurisdiction. (a) None of the Assets, nor any portion
thereof, is subject to the jurisdiction of FERC.
(b) No Representing Party is aware of any assertion by any Governmental
Authority or any other Person, or any proceeding asserting, that the Assets, or
any portion thereof, are subject to the jurisdiction of FERC.
(c) No transportation of Natural Gas by Pipeline, Marketing,
Exploration or Production constitutes transportation of Natural Gas in
interstate commerce subject to the jurisdiction of FERC under the NGA.
(d) No Natural Gas sales by Marketing, including the gas sold to Lone
Star under the Lone Star Contract, or by Production or Exploration are sales in
interstate commerce for resale subject to the jurisdiction of the FERC under the
NGA.
(e) The Natural Gas which MGNG or any Affiliate of Marketing purchases
and subsequently sells to Marketing for resale to Lone Star is purchased by MGNG
or such Affiliate only in sales that are not a sale in interstate commerce for
resale subject to FERC jurisdiction under the NGA and that sales of such gas by
MGNG or such Affiliate to Marketing do not constitute a sale in interstate
commerce for resale subject to FERC jurisdiction under the NGA.
(f) The purchase of gas by Marketing from any other source does not
constitute a sale in interstate commerce for resale subject to FERC jurisdiction
under the NGA.
LOAN AGREEMENT - Page 14
3.33 Lone Star Contract. As of the date hereof, Lone Star has not made
a payment under the Lone Star Contract during the current Operating Year in
respect of any natural gas which it has not already taken, nor does it have any
outstanding credit thereunder permitting it to take any natural gas in the
future without paying for the same.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Term Loan. The agreement of Lender to make the Term
Loan is subject to the satisfaction on or prior to the Closing Date of each of
the following conditions:
(a) Term Note. The Lender shall have received the Term Note, conforming
to the requirements of subsection 2.2, and duly executed and delivered by each
Borrower.
(b) Loan Documents. The Lender shall have received each of the
following documents:
(i) this Agreement, executed and delivered by a duly authorized
officer of each Borrower, each General Partner and Castle;
(ii) the Borrower Security Agreement, executed and delivered by a
duly authorized officer of each Borrower;
(iii) the Security Agreement, executed and delivered by a duly
authorized officer of Pennsylvania Castle Energy Corporation, a Texas
corporation, as general partner of Deerlick Creek Field Limited
Partnership;
(iv) the Utility Security Notice, executed and delivered by a duly
authorized officer of Pipeline;
(v) the Exploration Mortgages, executed and delivered by a duly
authorized officer of Exploration;
(vi) the Exploration Deed of Trust, executed and delivered by a
duly authorized officer of Exploration;
(vii) the Castle Deeds of Trust, executed and delivered by a duly
authorized officer of Castle;
(viii) the Castle Mortgages, executed and delivered by a duly
authorized officer of Castle;
(ix) the Pipeline Dead of Trust, executed and delivered by a duly
authorized officer of Pipeline;
LOAN AGREEMENT - Page 15
(x) the Production Deed of Trust, executed and delivered by a duly
authorized officer of Production;
(xi) the GP Pledge Agreement, executed and delivered by a duly
authorized officer of each General Partner;
(xii) the LP Pledge Agreement, executed and delivered by a duly
authorized officer of each Limited Partner;
(xiii) the Castle Pledge Agreement, executed and delivered by a
duly authorized officer of Castle;
(xiv) the Exploration Pledge Agreement, executed and delivered by a
duly authorized officer of Exploration; and
(xv) the Castle Guaranty, executed and delivered by a duly
authorized officer of Castle.
(c) Project Documents. The Lender shall have received each of the
following documents:
(i) a true and complete copy of the Pipeline Partnership Agreement,
duly certified by a Responsible Officer of Pipeline; a true and
complete copy of the Marketing Partnership Agreement, duly certified by
a Responsible Officer of Marketing; and a true and complete copy of the
Production Partnership Agreement, duly certified by a Responsible
Officer of Production;
(ii) a true and complete copy of the Assignment Agreement, duly
certified by a Responsible Officer of each of Pipeline, Marketing and
Production;
(iii) a true and complete copy of the Assignment Agreement (Lone
Star Agreement and Transportation Agreement), duly certified by a
Responsible Officer of Marketing;
(iv) a true and complete copy of the ARCO Purchase and Sale
Agreement, duly certified by a Responsible Officer of Pipeline,
Marketing and Production;
(v) a true and complete copy of the Lone Star Contract, duly
certified by a Responsible officer of Marketing;
(vi) a true and complete copy of the Assignment Agreement (Gas
Contracts), duly certified by a Responsible Officer of Marketing;
(vii) a true and complete copy of the Interconnect Agreement, duly
certified by a Responsible officer of Pipeline;
LOAN AGREEMENT - Page 16
(viii) a true and complete copy of the Assignment Agreement
(Pipeline Assets), duly certified by a Responsible Officer of Pipeline;
(ix) a true and complete copy of the Transportation Agreement
(Marketing), duly certified by a Responsible officer of Marketing;
(x) Intentionally Left Blank;
(xi) a true and complete copy of the Transportation Agreement
(MGNG), duly certified by a Responsible officer of Pipeline;
(xii) a true and complete copy of the Management Agreement
Amendment, duly certified by a Responsible Officer of Pipeline;
(xiii) a true and complete copy of the Supply Agreement Amendment,
duly certified by a Responsible Officer of Marketing;
(xiv) a true and complete copy of the Service Agreement Amendment,
duly certified by a Responsible Officer of Marketing;
(xv) Intentionally Left Blank;
(xvi) Intentionally Left Blank;
(xvii) a counterpart of each Consent, executed and delivered by a
duly authorized officer of the parties thereto;
(xviii) true and complete copies of the GE Capital Loan Agreement
and all instruments, documents and agreements executed in connection
therewith and any and all amendments and modifications thereto;
(xix) Intentionally Left Blank;
(xx) a certificate of a Responsible Officer of each Borrower that
other than the Project Documents delivered to the Lender pursuant to
this subsection 4.1(c), such Borrower is not party to any other Project
Document on the date hereof or any other contract on the date hereof
(other than employment contracts and contracts involving less than
$100,000 annually); and
(xxi) a true and complete copy of the Contribution Agreement, duly
certified by a Responsible Officer of each Borrower.
(d) Corporate Documents. The Lender shall have received each of the
following documents:
LOAN AGREEMENT - Page 17
(i) a copy of the charter of Castle, Exploration, each General
Partner and each Limited Partner, duly certified by the Secretary of
State of the appropriate jurisdiction, within five (5) days prior to
the Closing Date;
(ii) a Certificate of Good Standing of Castle, Exploration, each
General Partner and each Limited Partner in the jurisdiction in which
it was chartered, certified by the Secretary of State of such
jurisdiction, dated within five (5) days prior to the Closing Date;
(iii) certificates of existence and good standing of each Borrower
in the State of Texas, certified by the Secretary of State of the State
of Texas, dated within five (5) days prior to the Closing Date;
(iv) copies of each Borrower's Certificate of Limited Partnership
certified by the Secretary of State of the State of Texas, dated within
five (5) days prior to the Closing Date; and
(v) a certificate from the Secretary of Castle, Exploration, each
General Partner and each Limited Partner, dated the Closing Date,
certifying (A) there have been no amendments to the charter of such
Person from that delivered pursuant to clause (i) above, (B) a copy of
the by-laws of such Person, (C) corporate resolutions of its Board of
Directors authorizing its (and, in the case of each General Partner,
the relevant Borrower's) execution, delivery and performance of the
Basic Documents to which such Person (or such Borrower) is a party and,
in the case of such General Partner, authorizing the borrowing by the
relevant Borrower hereunder, (D) the incumbency of its officers
executing the Basic Documents to which such Person (or the relevant
Borrower) is a party and all related documentation.
(e) Intercreditor Agreement. The Intercreditor Agreement duly executed
by GE Capital, as agent and each of the Subject Parties.
(f) Authorizing Actions. All partnership, corporate and other
proceedings in connection with the transactions contemplated by this Agreement
and the other Basic Documents, and all documents and instruments incident
thereto, shall be reasonably satisfactory in form and substance to the Lender
and its counsel; and the Lender and its counsel shall have received such
counterpart originals or certified or other copies of all such documents and
instruments and of all records of partnership and corporate proceedings in
connection with such transactions, and such incumbency and signature
certificates of officers of the Borrowers, the General Partners, the Limited
Partners and Castle as the Lender or its counsel may reasonably request,
together with certificates of good standing and payment of franchise taxes in
the jurisdiction of each such Person's organization.
(g) No Violation. The consummation of the transactions contemplated
hereby shall not contravene, violate or conflict with, nor involve the Lender in
any violation of any Applicable Law.
(h) Opinions. The Lender shall have received (i) the legal opinion of
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P., Texas counsel to Castle, the
LOAN AGREEMENT - Page 18
Borrowers, the General Partners and the Limited Partners, addressing the matters
set forth on Exhibit B-1, (ii) the legal opinion of ▇▇▇▇▇▇▇, Kotjarapoglus &
▇▇▇▇▇▇▇, special Pennsylvania counsel to Castle, the Borrowers, the General
Partners and the Limited Partners addressing the matters set forth on Exhibit
B-2, and (iii) the legal opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., special
Louisiana counsel to Castle, the Borrowers, the General Partners and the Limited
Partners addressing the matters set forth on Exhibit B-3.
(i) Representations and Warranties. Each of the representations and
warranties made pursuant to this Agreement or made by any Representing Party
pursuant to any other Basic Document shall be true and correct in all material
respects on and as of the Closing Date.
(j) No Default. No Default or Event of Default shall have occurred and
be continuing on the Closing Date. No Event of Loss shall have occurred.
(k) Additional Documents. The Lender shall have received each
additional document, instrument, legal opinion or item of information reasonably
requested by it, including, without limitation, a copy of any debt instrument,
security agreement or other material contract to which any Borrower or any other
party hereto may be a party.
(l) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Basic Documents shall
be satisfactory in form and substance to the Lender, and the Lender shall have
received such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.
(m) Environmental Information. The Lender shall have received such
information as the Lender may reasonably request and such information shall not
disclose any unusual environmental risks associated with the Assets or the
business or properties of the Borrowers and shall otherwise be satisfactory in
form and substance to the Lender.
(n) Updated Reports of Consultants. The Lender shall have received the
following:
(i) a copy of the ▇▇▇▇▇ ▇▇▇▇▇ Company Report;
(ii) a copy of the ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Report; and
(iii) a copy of the ENSR Consulting and Engineering Report.
(o) Existing BTCC Obligations; Release of Liens. The Lender shall have
received satisfactory evidence that all obligations of the Borrowers (other than
any obligations specifically provided for pursuant to that certain Agreement
Regarding Release and Instruction dated as of April 30, 1996 among Castle,
Production GP, Castle LP, BTCC, Production and Lender) under the Existing BTCC
Loan Agreement and any agreement executed and delivered in connection therewith
have been or upon funding of the Term Loan, will be satisfied and that all
documents, instruments and financing statements (including, without limitation,
LOAN AGREEMENT - Page 19
Uniform Commercial Code financing statements) requested by the Lender to release
all Liens granted by Castle and the Borrowers in favor of BTCC in connection
with the Existing BTCC Loan Agreement have been executed, delivered and filed
or, upon funding of the Term Loan will be filed.
(p) Perfection of Liens and Security Interests. All filings, recordings
and other actions that are necessary or desirable in order to establish,
protect, preserve and perfect the Lender's Lien on and perfected security
interest in all right, title, estate and interest of the Borrowers, the General
Partners, the Limited Partners or Castle, as the case may be, in and to all
Collateral covered by the Collateral Security Documents, prior and superior to
all other Liens (other than the Liens of GE Capital pursuant to the Senior
Collateral Documents), existing or future, shall have been duly made or taken
and all fees, taxes and other charges relating to such filings and recordings
and other actions shall have been paid by the Borrowers, the General Partners,
the Limited Partners or Castle, as the case may be, or filings for exemptions
therefrom shall have been made. The Lender shall have received authenticated
copies or other evidence of all filings, recordings and other actions obtained
or made in order to create and perfect such Lien on and perfected security
interest in the right, title, estate and interest of the Borrowers, the General
Partners, the Limited Partners or Castle, as the case may be, in and to all
Collateral covered by the Collateral Security Documents.
(q) Insurance. Insurance complying with the provisions of subsection
5.4 shall be in full force and effect and the Lender shall have received (i)
certificates of insurance signed in each case by the insurer or any agent
authorized to bind the insurer, conforming to the requirements of subsection
5.4(d) and (ii) an opinion of an independent insurance broker acceptable to the
Lender, conforming to the requirements of subsection 5.4(e).
(r) Financial Statements. The Lender shall have received (i) the most
recent balance sheet and related financial statements of each Borrower, each
General Partner and each Limited Partner, in each case certified by a
Responsible Officer of such Person and (ii) the most recent annual audited
balance sheet and related financial statements of Castle and Enserch, each of
which financial statements shall be satisfactory to the Lender.
(s) No Material Adverse Change. In the opinion of the Lender, since the
dates of the financial statements referred to in subsection 4.1(q), no material
adverse change has occurred in (A) the financial condition of any Borrower, any
General Partner, any Limited Partner, Castle or Lone Star, (B) the properties,
business, operations or prospects of any Borrower, any General Partner, any
Limited Partner, Castle or Lone Star, or (C) any Borrower's, any General
Partner's, any Limited Partner's, Castle's or Lone Star's ability to perform its
obligations under this Agreement and/or the other Basic Documents to which it is
or is to become a party.
(t) Project Documents. Each of the Project Documents (other than any
OWI Contract) shall be in full force and effect. No default shall exist and be
continuing under any Project Document (other than any OWI Contract).
LOAN AGREEMENT - Page 20
SECTION 5. AFFIRMATIVE COVENANTS
Each Borrower and each General Partner (as to each General Partner,
only as to subsections 5.1, 5.3 and 5.6) covenants and agrees that, so long as
the Term Note remains outstanding and unpaid or any other amount is owing to
Lender hereunder or under the Collateral Security Documents, such Borrower and
such General Partner shall:
5.1 Conduct of Business, Maintenance of Existence, Etc. (a) Continue to
engage in business of the same general type as now conducted by it and preserve,
renew and keep in full force and effect its corporate or partnership existence
and take all reasonable action to maintain all of its rights, privileges and
franchises necessary or desirable in the normal conduct of its business; comply
with all Contractual Obligations and Requirements of Law; maintain, or cause
each Servicer to maintain, all licenses, permits, charters and registrations
necessary to conduct its business.
(b) The General Partners will engage solely in the business of being
general partners of the Borrowers.
(c) Pipeline GP shall remain at all times the sole general partner of
Pipeline. Marketing GP shall remain at all times the sole general partner of
Marketing. Production GP shall remain at all times the sole general partner of
Production.
5.2 Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of its
obligations under the Basic Documents and all of its other obligations of
whatever nature, including, without limitation, any payments due to lessors,
suppliers, vendors and tax authorities, except, in the case of such other
obligations, when (a) the amount or validity thereof is currently being
contested in good faith by appropriate actions or proceedings and such contest
does not involve any risk of the sale, forfeiture or loss of any of the
Collateral, (b) adequate cash reserves shall have been established in respect
thereof and (c) any action or proceeding instituted to enforce such obligations
shall have been effectively stayed.
5.3 Performance Under Other Agreements. Duly perform and observe all of
the covenants, agreements and conditions on its part to be performed and
observed hereunder and under the Term Note and the Collateral Security Documents
to which it is or is to become a party and, unless the Lender otherwise consents
in writing, duly perform and observe in all respects all of the covenants,
agreements and conditions on its part to be performed and observed under the
other Basic Documents (other than the OWI Contracts) to which it is or is to
become a party; and diligently enforce all of its rights under each Assigned
Contract to which it is or is to become a party.
5.4 Partnership Insurance Coverage. (a) Each Borrower shall, without
limiting any of the other obligations or liabilities of such Borrower under this
Agreement, at all times maintain, at no cost to the Lender, the following
minimum insurance coverages (such coverage shall be written by insurers and be
in such form and contain terms and conditions as are acceptable to the Lender
and with deductibles in the amounts as specified below):
LOAN AGREEMENT - Page 21
(i) Workers' Compensation and Employer's Liability Insurance
covering the employees of the Borrowers and Castle engaged in
operations hereunder and under the Basic Documents in compliance
with all applicable state and federal laws, and written with
statutory limits and containing $50,000,000 (when combined with
umbrella and excess limits) of employers liability. Such
coverage shall not contain an occupational disease exclusion.
The deductible shall not exceed $10,000;
(ii) Comprehensive General Liability Insurance written in an amount
not less than $50,000,000 (when combined with umbrella and
excess limits) of which the primary $25,000,000 shall be written
on an occurrence basis. Such coverage shall include: premises
and operations; broad form contractual; broad form property
damage; underground resources; sudden and accidental pollution;
x.c.u. (explosion, collapse and underground perils); and
independent contractors. The deductible shall not exceed
$10,000;
(iii) Comprehensive Automobile Liability Insurance covering all owned,
non-owned and hired vehicles in an amount not less than
$50,000,000 (when combined with umbrella and excess limits). The
deductible shall not exceed $10,000;
(iv) Business Interruption Insurance and Extra Expense on the
Pipeline Assets and above ground equipment written in an amount
not less than the equivalent of 90 days' net income and
continuing expenses of the Borrowers. Such policy shall include
loss of net profits and continuing expenses for a period of not
less than 90 days and shall be written with an agreed amount
endorsement waiving any coinsurance penalty. The deductible
shall not exceed 10 days or the dollar equivalent of 10 days
loss of net profits and continuing expenses;
(v) All Risk Property Insurance with limits of not less than
$15,000,000 on the Pipeline Assets, the above ground equipment
and the other property covered by the Collateral Security
Documents written on a 100% replacement cost basis including not
but limited to fire and extended coverage, comprehensive boiler
machinery perils with a combined property damage/business
interruption limits of not less than $10,000,000, flood and
earthquake coverage with limits of not less than $5,000,000.
Such policy shall contain an agreed amount endorsement waiving
any coinsurance penalty. The deductible shall not exceed
$50,000; and
(vi) such insurance as any Borrower is required to maintain pursuant
to the provisions of any other Basic Documents.
(b) Without limiting in anyway the foregoing, each Borrower shall keep
all of its property insured for replacement value of like kind and quality by
insurance companies licensed to do business in the State of Texas and reasonably
satisfactory to the Lender against loss or damage by fire or other risk usually
insured against by other owners or users of such properties in similar
businesses under extended coverage endorsement and against theft, burglary and
LOAN AGREEMENT - Page 22
pilferage together with other insurance covering such other hazards as the
Lender may from time to time reasonably request, in amounts customary with
industry standards. Subject to any obligation to deliver the original policies
of insurance to GE Capital under the GE Capital Loan Agreement, each Borrower
shall deliver the policy or policies of such insurance (or, in the event such
policies have previously been delivered to GE Capital, true and complete copies
thereof) or certificates of insurance to the Lender if the Lender so requests
and whether or not so delivered such policies and all proceeds thereof shall be
security for all Obligations.
(c) Each Borrower shall cause the insurance carried in accordance with
this subsection 5.4 to be endorsed as follows:
(i) with the exception of workers compensation insurance, the
Borrowers shall be the named insured[s] and the Lender shall be an
additional named insured, as its interest may appear with the
understanding that any obligation of the Borrowers (including without
limitation the liability to pay premiums) shall be the sole obligation
of the Borrowers;
(ii) the interest of the Lender shall not be invalidated by any
action or inaction of any Borrower or any other Person and of any
breach or violation by any Borrower or any other Person of any
warranties, declarations or conditions in such policies;
(iii) the insurer thereunder shall waive all rights of subrogation
against the Lender, any right of setoff or counterclaim and any other
right to deduction, whether by attachment or otherwise;
(iv) such insurance shall be primary without right of contribution
of any other insurance carried by or on behalf of the Lender with
respect to its interest as such in the Assets or other insured
property;
(v) if such insurance is canceled for any reason whatsoever,
including nonpayment of premium, or any changes are initiated by the
carrier which reduces the limits or which otherwise affects the
interest of the Lender, such cancellation or change shall not be
effective as to the Lender for 60 days, except for nonpayment of
premium which shall be 30 days, after receipt by the Lender of written
notice sent by registered mail from such insurer of such cancellation
or change;
(vi) shall be endorsed to provide that, inasmuch as the policy is
written to cover more than one insured, all terms, conditions, insuring
agreements and endorsements, with the exception of limits of liability,
shall operate in the same manner as if there were a separate policy
covering each insured; and
(vii) shall include a standard Lender's loss payable endorsement in
favor of the Lender, as its interest may appear. Deductibles or self
insured retentions shall be subject to approval by the Lender.
LOAN AGREEMENT - Page 23
(d) Evidence of Insurance. At the Closing Date and at each policy
anniversary date, but not less than annually, the Borrowers shall furnish the
Lender with approved certification of all required insurance. Such certification
shall be executed by each insurer or by an authorized representative of each
insurer where it is not practical for such insurer to execute the certificate
itself. Such certification shall identify underwriters, the type of insurance,
the insurance limits and the policy term, and shall specifically list the
special provisions enumerated for such insurance required by paragraph (a) of
this subsection 5.4). Upon request, the Borrowers will furnish the Lender with
copies of all insurance policies, binders and cover notes or other evidence of
such insurance relating to the Assets.
(e) Insurance Report. Concurrently with the furnishing of the
certification referred to in paragraph (d), the Borrowers shall furnish the
Lender with an opinion of each insurance broker stating that all premiums then
due have been paid and that, in the opinion of such broker, the insurance then
carried and maintained with respect to the Assets is in accordance with the
terms of this Agreement. Furthermore, the Borrowers shall cause each insurer or
such broker to advise the Borrowers in writing of any default in the payment of
any premiums or any other act or omission on the part of the Borrowers which
might invalidate or render unenforceable, in whole or in part, any insurance
provided hereunder. The Lender may at its sole option obtain such insurance if
not provided by the Borrowers and, in such event, the Borrowers shall reimburse
the Lender upon demand for the cost thereof.
(f) Notwithstanding anything to the contrary herein, no provision of
this subsection 5.4 or any provision of any other Basic Document shall impose on
the Lender any duty or obligation to verify the existence or adequacy of the
insurance coverage maintained by such Borrower, nor shall the Lender be
responsible for any representations or warranties made by or on behalf of any
Borrower to any insurance company or underwriter.
5.5 Inspection of Property; Books and Records. (a) Keep proper books of
records and accounts in which full, true and correct entries in accordance with
GAAP and all Requirements of Law shall be made of all of its dealings and
transactions in relation to its business and activities; and permit, and cause
Castle to permit, representatives of the Lender to visit and inspect any of its
properties and examine and make abstracts from any of its books and records (in
the case of Castle, only such books and records relating to the Borrowers or the
transactions contemplated by the Basic Documents) at any reasonable time and as
often as may reasonably be desired and to discuss the business, operations,
properties and financial and other condition of the Borrowers with officers and
employees of the Borrowers and with their independent certified public
accountants. Permit the Lender to select and retain consultants to advise the
Lender as to technical matters pertaining to the Borrowers' businesses and
operations and the Assets.
(b) Upon the request of the Lender, promptly undertake a diligent
investigation of the Assets for the purpose of enabling any Borrower to enforce,
if necessary, the environmental or title indemnities relating to the Assets
provided to Castle by ARCO and assigned to the Borrowers.
LOAN AGREEMENT - Page 24
5.6 Compliance with Laws. Comply with all Requirements of Law, and from
time to time obtain and comply with all Governmental Approvals as shall now or
hereafter be necessary under all Applicable Laws (except any thereof the
non-compliance with which would not have a material adverse effect on the
Borrowers or the Assets, the Borrowers' ability to perform their obligations
under the Project Documents or the rights or interests of the Lender), in
connection with the ownership, operation or maintenance of its properties and
the Assets.
5.7 Financial Statements. Furnish or cause to be furnished to the
Lender:
(a) as soon as available, but in any event within 105 days (or, in
the case of Enserch, as soon as publicly available) after the end of
each fiscal year of each Borrower, each General Partner, each Limited
Partner, Castle and Enserch (each a "Reporting Party"), a copy of the
balance sheet of such Reporting Party as of the end of such fiscal year
and the related statements of income, retained earnings (or partners'
capital) and changes in cash flows of such Reporting Party for such
fiscal year, setting forth in each case in comparative form the figures
for the previous fiscal year, certified without qualification or
exception as to the scope of its audit by independent public
accountants of national standing; and
(b) as soon as available, but in any event within 45 days after the
end of each quarterly period of each fiscal year of each Reporting
Party (other than Castle and Enserch), the unaudited balance sheet of
such Reporting Party as of the end of such quarterly period and the
related unaudited statements of income and retained earnings (or
partners' capital) and changes in cash flows of such Reporting Party
for such quarterly period and for the portion of the fiscal year then
ended, setting forth in each case in comparative form the figures for
the previous period, certified by a Responsible Officer of such
Reporting Party as being fairly stated in all material respects
(subject to normal audit adjustments);
All such financial statements (other than the financial statements of Enserch,
which shall be the financial statements in the form filed by Enserch on Form
10-K with the Securities and Exchange Commission) shall be complete and correct
in all material respects and shall be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein and with prior periods (except for changes approved or required by the
independent public accountants certifying such statements and disclosed
therein).
5.8 Certificates; Operating Statements; Other Information. Furnish or
cause to be furnished to the Lender:
(a) concurrently with the delivery of the financial statements of
the Borrowers referred to in subsection 5.7(a), a certificate of the
independent public accountants which certified such financial
statements stating that in making the examination necessary for the
audit thereof no knowledge was obtained of any Default or Event of
Default, except as specified in such certificate;
LOAN AGREEMENT - Page 25
(b) concurrently with the delivery of the financial statements of
the Borrowers referred to in subsections 5.7(a) and (b), a certificate
of a Responsible Officer of such Borrower, stating that such officer
has reviewed, or caused to be reviewed, by individuals under his or her
supervision, this Agreement and each other Basic Document to which such
Borrower is a party and has made, or caused to be made under his
supervision, a review of the transactions contemplated hereby and
thereby and to the best of such Responsible Officer's knowledge after
such review, such Borrower has observed and performed all of its
covenants and other agreements hereunder, and satisfied every material
condition, contained in this Agreement, the Term Note and the other
Basic Documents to be observed, performed or satisfied by it, and that
such Responsible Officer in the course of such review has obtained no
knowledge of any Default or Event of Default hereunder at any time
during such period or on the date of such certificate and no knowledge
of any default or event which with the giving of notice or the lapse of
time or both would constitute a default under any of the other Basic
Documents at any time during such period or on the date of such
certificate (or, if any such Default or Event of Default or default or
event shall have occurred, a statement setting forth the nature thereof
and the steps being taken by such Borrower to remedy the same);
(c) as soon as practicable, but in any event within 45 days after
the and of each calendar month, an operating report of each Borrower as
at the end of such period and for the period of such Operating Year
then ended, setting forth the revenues of such Borrower received during
such month and the expenses and extraordinary items disbursed during
such month and containing, (i) with respect to Pipeline, a summary
transportation statement and (ii) with respect to Marketing, a summary
of Natural Gas sales and purchases, and such other information as shall
be agreed to by the Lender and the Borrowers setting forth in
comparative form the corresponding figures for the corresponding
periods in the preceding Operating Year (if applicable) and the
corresponding figures for the corresponding periods contained in the
current Operating Budget, accompanied by a certificate of a Responsible
officer of such Borrower, which certificate shall state that such
report is true and correct to the best of his knowledge.
(d) not later than 135 days prior to the end of each Operating
Year, a copy of the monthly Operating Budget of each Borrower for the
next Operating Year of such Borrower, such Operating Budget to be
approved by the Lender and to include, on a cash basis, a budget for
each Operating Year specifying on a monthly basis for such Operating
Year the principal items of (i) revenue anticipated to be received in
respect of the operation of such Borrower's business and (ii) costs and
expenses anticipated to be incurred in connection with the maintenance,
administration, operation of such Borrower's business including,
without limitation, taxes, premiums for insurance policies required to
be maintained pursuant to the Loan Agreement and any fees and expenses
payable to the Lender pursuant to the Loan Documents, together with a
manpower forecast and periodic inspection, maintenance and repair
schedule and any other items necessary to calculate "operating income"
in the proposed Operating Budget and (iii) a revised estimate (and
related schedule) of costs, if any, to be incurred by such Borrower in
respect of major maintenance items during the next two year period. The
Operating Budget and projections shall be accompanied by (A) a
LOAN AGREEMENT - Page 26
forecasted Operating Budget for the next succeeding Operating Year
specifying, in the same format, on an annual basis the items described
in clauses (i), (ii) and (iii) above for each such Operating Year, (B)
a discussion of any significant changes from the approved Operating
Budget for the previous year, (C) a discussion of any significant
changes from the forecasted Operating Budget delivered the previous
year, (D) a discussion of any anticipated changes to the terms and
conditions, coverages, policies or carriers of the insurance required
to be maintained pursuant to subsection 5.4, (E) a discussion of any
contemplated changes to agreements or elections covering the
production, removal, supply, sale, purchase or transportation of
Natural Gas and (F) a certificate of a Responsible Officer of such
Borrower to the effect that such Operating Budget and projections have
been prepared in good faith on a reasonable basis and that such officer
has no reason to believe they are incorrect or misleading in any
material respect;
(e) promptly after the same are sent, copies of all financial
statements and reports which any Borrower sends to its partners;
(f) promptly after the filing thereof, the "Annual Returns" (Form
5500 series) and attachments filed annually with the IRS with respect
to each Single Employer Plan, if any, of each Borrower;
(g) promptly after delivery or receipt thereof, a copy of each
material notice, demand or other communication (not to include routine
correspondence) delivered or received by any Borrower or any General
Partner pursuant to any Basic Document, including without limitation,
the certificate delivered to Marketing pursuant to Paragraph 11.1 of
the Supply Agreement, the reports delivered to Marketing pursuant to
Section 3 of Exhibit A of the Service Agreement and each report
delivered to Pipeline pursuant to paragraphs (a) and (c) of Section 4
of Exhibit A to the Management Agreement;
(h) promptly, such additional financial and other information with
respect to the Borrowers or any other Reporting Party or the Assets as
the Lender may from time to time reasonably request;
(i) with respect to any Single Employer Plan adopted or amended by
any Borrower or any Commonly Controlled Entity on or after the date
hereof, any determination letters received from the IRS with respect to
the qualification for such Plan, as initially adopted or amended under
Section 401(a) of the Code;
(j) copies of each Governmental Approval or other consent or
approval obtained or made by any Borrower;
(k) promptly after any material diminution in (other than ordinary
month to month variations of volume), or interruption of, the supply of
Natural Gas to Marketing, or the flow of Natural Gas through the
Pipeline Assets, a notice describing the circumstances of such
diminution or interruption; and
LOAN AGREEMENT - Page 27
(l) as soon as practicable, but in any event within 15 days after
the end of each Operating Year (or, in the event that the Lone Star
Contract terminates prior to the end of an Operating Year, within 15
days from the date of such termination), Marketing shall deliver to the
Lender a certificate (together with such back-up information as may be
reasonably requested to confirm the information contained in such
certificate) of a Responsible Officer of Marketing setting forth the
quantity of gas that Lone Star purchased during such Operating Year (or
such shorter period if applicable) under the Lone Star Contract
together with an itemized statement setting forth whether Lone Star
purchased the quantity of gas required to be purchased under the Lone
Star Contract for such period. In the event that Lone Star shall fail
to purchase the quantity of gas required to be purchased under the Lone
Star Contract for any Operating Year (or shorter period if applicable)
then, simultaneously with the delivery of the certificate referred to
in this paragraph (l), Marketing shall notify Lone Star in writing
(with a copy to the Lender) of such failure in accordance with
paragraph 7.2 of the Lone Star Contract.
5.9 Taxes. Each Borrower and each General Partner shall, and shall
cause each Limited Partner and each Tax Affiliate to, pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or on its
income or profits or on any of its property or on the transportation or sale of
Hydrocarbons or on the receipt of proceeds therefrom prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
Lien upon the property of such Borrower, General Partner, Limited Partner or Tax
Affiliate; provided, that, if no Event of Default shall have occurred and be
continuing, such Borrower, General Partner, Limited Partner or Tax Affiliate may
contest in good faith the validity or amount of any such tax, assessment,
charge, levy or claim by proper proceedings timely instituted, and may permit
the taxes, assessments, charges, levies or claims so contested to remain unpaid
during the period of such contest if: (a) such Borrower, diligently prosecutes
such contest, (b) such Borrower, sets aside adequate cash reserves with respect
to the contested items, (c) during the period of such contest the enforcement of
any contested item is effectively stayed, and (d) in the reasonable opinion of
the Lender, such contest will not involve any material danger of the sale,
forfeiture or loss of any part of the Collateral, title thereto or any interest
therein and will not interfere with the performance of the Basic Documents. Each
Borrower will promptly pay or cause to be paid any valid, final judgment
enforcing any such tax, assessment, charge, levy or claim and cause the same to
be satisfied of record. The foregoing notwithstanding, this subsection 5.9 shall
only apply in the case of a Tax Affiliate with respect to those taxes for which
any Borrower, any General Partner or any Limited Partner could be held liable.
5.10 Maintenance of Property. At its expense, keep all property useful
and necessary in its business in good working order and condition and make all
repairs, replacements and renewals with respect thereto.
5.11 Notices. Promptly give notice to the Lender:
(a) of the occurrence of any Default, Event of Default or Event of
Loss;
(b) of any default or event of default under any Project Document;
LOAN AGREEMENT - Page 28
(c) of any litigation, investigation or proceeding which may exist
at any time between any Borrower or any General Partner and any
Governmental Authority including, without limitation, any litigation,
investigation or proceeding to revoke or modify any license or
Governmental Approval required for the ownership or operation of such
Person's business;
(d) of any litigation or proceeding affecting any Borrower in which
the amount involved is $50,000 or more and not covered by insurance or
in which injunctive or similar relief is sought;
(e) of any litigation, investigation or proceeding affecting any
Borrower or, if it knows or has reason to know thereof, affecting any
other Person party to a Project Document which, if adversely
determined, could reasonably be expected to have a Material Adverse
Effect;
(f) of the following events, as soon as possible and in any event
within 30 days after any Borrower or any General Partner knows or has
reason to know thereof: (i) the occurrence or expected occurrence of
any Reportable Event with respect to any Plan, or any withdrawal from,
or the termination, Reorganization or Insolvency of any Multiemployer
Plan, or (ii) the institution of proceedings or the taking or expected
taking of any other action by PBGC or any Borrower to terminate,
withdraw or partially withdraw from any Plan, or (iii) the
reorganization or insolvency of any Multiemployer Plan, and, in
addition to such notice, deliver to the Lender whichever of the
following may be applicable: (A) a certificate of a Responsible Officer
of such Borrower, setting forth details as to such Reportable Event and
the action that such Borrower proposes to take with respect thereto,
together with a copy of any notice of such Reportable Event that may be
required to be filed with PBGC, or (B) any notice delivered by PBGC
evidencing its intent to institute such proceedings or any notice to
PBGC that such Plan is to be terminated, or (C) any notice of
Reorganization or Insolvency of a Multiemployer Plan received by such
Borrower;
(g) of any Material Adverse Effect or any event which could result
in a Material Adverse Effect or of any change of law, rule or
regulation which has or could have a Material Adverse Effect;
(h) of any loss or damage to the Collateral in excess of $50,000;
(i) of the proposed execution and delivery of any Additional
Contract;
(j) of the cancellation or expiration (without renewal or
replacement) of any insurance required to be maintained under
subsection 5.4;
(k) of the initiation of any condemnation proceedings against any
of the Collateral;
(l) of any Lien or claim against any Collateral other than
Permitted Liens;
LOAN AGREEMENT - Page 29
(m) of any event constituting force majeure under any of the Basic
Documents or any claim by any party to any Basic Document alleging that
a force majeure event thereunder has occurred;
(n) the failure by Marketing on any day to supply Lone Star with
the quantity of gas which Lone Star has requested (and which Marketing
is required to deliver) for such day pursuant to the Lone Star
Contract;
(o) of any notice sent to Marketing pursuant to Section 7.6 of the
Supply Agreement (in each case, with a copy of such notice received by
Marketing);
(p) of discovery of any Hazardous Materials at any Borrower's
property that is in violation of any Relevant Environmental Law or that
could reasonably be expected to require remediation or similar action
at any time in the reasonably foreseeable future under any Relevant
Environmental Law or of any litigation or proceeding relating to
environmental matters concerning any of the Borrowers or their
respective assets and properties (including receipt by such Borrower of
any notice of any proceeding involving a Relevant Environmental Law or
any discharge of Hazardous Materials); and
(q) of the receipt by any General Partner or Borrower of any notice
or declaration by any Governmental Authority or of any assertion by any
Governmental Authority or any written assertion by any other Person
which relates to, or could result in, the Assets, or any portion
thereof, becoming subject to the jurisdiction of FERC.
Each notice pursuant to this subsection 5.11 shall be accompanied by a statement
of a Responsible Officer of the applicable Borrower setting forth details of the
occurrence referred to therein and stating what action such Borrower proposes to
take with respect thereto and, with respect to a notice given pursuant to clause
(i), shall be accompanied by a copy of the Additional Contract. For all purposes
of clause (f) of this subsection, the Borrowers shall be deemed to have all
knowledge or knowledge of all facts attributable to the administrator of such
Plan.
5.12 Employee Plans. For each Plan adopted by a Borrower, (a) use its
best efforts to seek and receive determination letters from the IRS to the
effect that such Plan is qualified within the meaning of Section 401(a) of the
Code; and (b) from and after the date of adoption of any Plan, cause such Plan
to be qualified within the meaning of Section 401(a) of the Code and to be
administered in all material respects in accordance with the requirements of
ERISA and Section 401(a) of the Code.
5.13 Management Letters. Promptly deliver to the Lender a copy of each
report delivered to any Borrower by its independent public accountants in
connection with any annual or interim audit of its books, including, without
limitation, any letters or reports addressed to such Borrower or any of its
officers or partners relating to internal controls, adequacy of records or the
like.
LOAN AGREEMENT - Page 30
5.14 Easements. Submit to the Lender for the Lender's approval, which
shall not be unreasonably withheld, copies of all prospective easements,
licenses, restrictive covenants or other similar agreements affecting the Assets
prior to their execution, together with a drawing or survey showing the location
thereof.
5.15 Hazardous Materials. (a) Provide such information as is reasonably
requested by the Lender about all Hazardous Materials and the storage, handling
or disposal thereof which may exist at any Borrower's properties.
(b) Comply with, and undertake all reasonable efforts to ensure that
all tenants and subtenants, if any, comply with, all Relevant Environmental
Laws.
(c) Defend, indemnify and hold harmless the Lender, its Affiliates,
successors and assigns, and any of their respective employees, agents, officers
and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or nature
known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability under any Relevant
Environmental Laws applicable to any of the Borrowers, their operations or the
Mortgaged Properties, or any orders, requirements or demands of Governmental
Authorities related thereto, including, without limitation, reasonable
attorneys' and consultants' fees, investigation and laboratory fees,
environmental audits, response costs, court costs and litigation expenses,
except to the extent that any of the foregoing arise out of the gross negligence
or willful misconduct of the party seeking indemnification therefor. This
indemnity shall continue in full force and effect regardless of the termination
of this Agreement and the payment of the Term Note and all other amounts payable
hereunder.
(d) Operate, and cause each Servicer to operate, any property owned or
operated by the Borrowers (whether or not such property constitutes a "facility"
as defined by CERCLA) so that no clean up or other obligation arises in respect
of CERCLA or other in respect of any Applicable Law.
5.16 Use of Proceeds. Use the proceeds of the Term Loan for the
purposes set forth in subsection 2.3.
5.17 Servicers. (a) Cause each applicable Servicer to provide services
with respect to the Pipeline Assets in a manner substantially similar to other
prudent managers of similar Projects or providers of such services. Pipeline
shall, and shall cause each applicable Servicer to, give immediate notice to the
Lender of any problem which may result in a significant diminution in, or
cessation of, transportation of Natural Gas by, or involve a significant risk of
loss to, the Pipeline Assets.
(b) Cause each applicable Servicer to administer the Gas Contracts in
accordance with prudent business practices. Marketing shall, and shall cause
each applicable Servicer to, give immediate notice to the Lender of any problem
which is reasonably likely to involve a significant risk of loss relating to the
Gas Contracts.
LOAN AGREEMENT - Page 31
(c) Cause, and cause each applicable Servicer to: (i) maintain the
Pipeline Assets and the Gas Contracts in full force and effect in accordance
with prudent operator standards and comply with all express and implied
covenants with respect thereto; (ii) use its best efforts to pay or cause to be
paid all costs and expenses incurred in connection with the Pipeline Assets or
the Gas Contracts before they become delinquent; and (iii) furnish the Lender
with copies of all authorizations for expenditures on material operations prior
to the commencement thereof.
(d) Upon the Lender's request, obtain opinions from independent
consultants (or, if appropriate, legal counsel) reasonably satisfactory to the
Lender that each Servicer has all of the necessary Environmental Protection
Agency permits and other Governmental Approvals and licenses and that the
planned operation of the Pipeline Assets is in compliance with Applicable Laws.
(e) In the event of a failure by any Servicer to perform its
obligations under any Project Service Agreement which is not cured within the
applicable cure period, immediately, upon the request of the Lender, remove such
Servicer, seek indemnification or damages from such Servicer and its successors
or assigns under the Project Service Agreements for any loss or liability
incurred by it in accordance with the terms and conditions of the Project
Service Agreements and cause such Servicer to deliver to the successor operator
all books, agreements, contracts, papers, records, and any and all documents,
written, printed or computerized, which may be pertinent in any way to the
operations to be conducted by such successor, or which may have formerly been
conducted by such Servicer, and shall cause such Servicer to fully cooperate
with such successor to ensure that no portion of the Assets serviced are
terminated or their value diminished by virtue of such resignation or removal,
and cause such Servicer to take all steps necessary to ensure such results as
may be directed by such successor.
5.18 Intentionally Left Blank.
5.19 Further Assurances. Cause to be promptly and duly taken, executed,
acknowledged and delivered all such further acts, documents and assurances as
may be necessary or as the Lender from time to time may reasonably request in
order to carry out more effectively the intent and purposes of this Agreement
and the other Basic Documents, and the transactions contemplated hereby and
thereby.
5.20 Assignment of Additional Contracts; Future Mortgages. (a) Upon
entering into any Additional Contract, each Borrower will use reasonable efforts
to obtain any required consent to the assignment by such Borrower to the Lender
of such Additional Contract (as security for the Obligations) and of all of the
right, title, interest, privilege and benefit of such Borrower under such
Additional Contract. Such Borrower shall grant such assignment to the Lender
promptly upon receipt of such required consent.
(b) If any Borrower shall at any time acquire any property or leasehold
or other interest in real property, such Borrower shall promptly notify the
Lender of such acquisition and shall promptly execute, deliver, record and file
LOAN AGREEMENT - Page 32
instruments and documents (including, without limitation, a supplement to the
applicable Deed of Trust and the Borrower Security Agreement) as the Lender
shall request in order to create a perfected Lien thereon in favor of the
Lender.
5.21 Annual Opinion of Counsel. The Borrowers shall furnish to the
Lender within 90 days after the end of each calendar year, beginning with the
calendar year ending December 31, 1996, an opinion of counsel addressed to the
Lender (i) stating that such action has been taken with respect to the filing,
recording, re-filing and re-recording of the Collateral Security Documents
and/or financing statements and continuation statements with respect thereto as
is necessary to protect and preserve the Lender's liens on and security
interests in and to the Collateral created by the Collateral Security Documents
and reciting the details of such action or referring to prior opinions of
counsel in which such details are given and (ii) stating what, if any, action of
the foregoing nature may reasonably be expected to become necessary during the
next succeeding twelve months in order to protect and preserve the Lender's
liens on and security interests in the Collateral created by the Collateral
Security Documents.
5.22 Fiscal Year. The fiscal year of each Borrower shall be the
twelve-month period ending on September 30 of each year.
5.23 Environmental Compliance and Management Program. Pipeline shall
maintain an environmental program to (i) ensure that it, its Assets and its
operations are and remain in compliance with all Relevant Environmental Laws,
and (ii) minimize prudently any liabilities or potential liabilities that it,
its Assets or operations may have under any Relevant Environmental law.
The program shall include the following:
(a) By each anniversary following the Closing Date until all other
obligations under this Agreement are discharged, Pipeline shall, at its
expense, have arranged for and received from an Environmental
Consultant an updated and reasonably comprehensive review of its
operations, similar in scope and nature to the ENSR Consulting and
Engineering Report and expected to involve approximately 70 hours of
the Environmental Consultant's professional time, identifying issues
that could give rise to Pipeline's noncompliance with or liability
under any Relevant Environmental Law. In addition, at any reasonable
time following written notice to Pipeline, the Lender (or any
environmental consultant that the Lender in its sole discretion may
designate) may have reasonable access to any property owned or operated
by Pipeline and to any documents in the possession or control of
Pipeline, Pipeline's agents or other representatives, and may interview
knowledgeable Pipeline employees, agents, or other representatives, for
the purpose of reviewing Pipeline's compliance with or potential
liability under any Relevant Environmental Law, provided that Pipeline
shall not be responsible for any of the costs of the Lender or the
Lender's environmental consultant in connection with such additional
review, and provided further that no more than one such review shall
take place per calendar year unless Pipeline consents to any additional
reviews, which consent shall not be unreasonably withheld.
(b) Following each review identified in (a) of this section,
Pipeline shall (i) promptly implement any measures that it has
LOAN AGREEMENT - Page 33
reasonably determined through such review to be necessary to comply
with any Relevant Environmental Laws, and (ii) prudently implement any
other measures to minimize its liability under any Relevant
Environmental Laws.
(c) Pipeline shall provide the Lender with quarterly reports
addressing the status of its environmental program. At the reasonable
request of the Lender, Pipeline shall make available to the Lender or
its designated representative any information, any documents, or any of
Pipeline's employees, agents, or other representatives, relating to
such quarterly reports.
5.24 FERC Jurisdiction. (a) Marketing shall sell all gas, including all
gas sold to Lone Star under the Lone Star Contract, only in sales that do not
constitute a sale in interstate commerce for resale subject to the jurisdiction
of the FERC under the NGA.
(b) Marketing shall purchase all of its gas, including from MGNG, only
in sales that do not constitute a sale in interstate commerce for resale subject
to the jurisdiction of the FERC under the NGA.
5.25 Cover Damages. With respect to any Delivery Default (as defined in
the Supply Agreement), Marketing shall, upon consulting with the Lender, obtain
Cover Supplies (as defined in the Supply Agreement).
5.26 Proceeds from the Production Payment and Receivables from Lone
Star Contract. All proceeds received (i) by Exploration from the Production
Payment after April 1, 1996, and (ii) by Marketing under the Lone Star Contract
after the Senior Loan Termination Date, shall be payable directly to a lockbox
under the control of Lender which shall then be deposited by Lender into a
lockbox account in accordance with the terms of the Lockbox Operating Agreement.
Unless an Event of Default has occurred, all such amounts so deposited shall be
transferred to such Borrower's operating account maintained with Lender within
two Business Days of the deposit thereof in the lockbox account. On each
Installment Payment Date prior to the Senior Loan Termination Date, Lender will
make the required payment by debiting Exploration's and Production's operating
accounts in the aggregate amount of such payment. Following the Senior Loan
Termination Date, Lender may debit the Borrowers' operating accounts in the
aggregate amount of such payment. In the event the aggregate amount on deposit
in such operating accounts is insufficient to make the required payment on any
Installment Payment Date, the Borrowers shall, subject to the terms of the
Intercreditor Agreement with respect to Pipeline and Marketing, remain liable
for the deficiency and agree to promptly pay same. If an Event of Default has
occurred, Lender may, subject to the terms of the Intercreditor Agreement with
respect to Pipeline and Marketing, apply all such amounts on deposit in the
lockbox account or the operating accounts to the Obligations in such order and
manner as it may elect in its sole discretion. Exploration and Marketing shall
each execute and deliver notices to the applicable Persons with respect to the
Production Payment and the Lone Star Contract to effectuate the direct payment
thereunder to the lockbox established pursuant to the Lockbox Agreement.
LOAN AGREEMENT - Page 34
5.27 Post-Closing Title Opinions. Within thirty (30) days after the
Closing Date, Borrowers shall deliver to Lender title opinions in form and
substance satisfactory to Lender with respect to the Mortgaged Properties
identified on Schedule 7 hereto.
SECTION 6. NEGATIVE COVENANTS
Each Borrower and each General Partner (as to each General Partner,
only as to subsections 6.1, 6.2 and 6.6(b)) covenants and agrees that, so long
as the Term Note remains outstanding and unpaid or any other amount is owing to
Lender hereunder or under any Collateral Security Document, it shall not:
6.1 Merger, Sale of Assets, Etc. Merge into or consolidate with any
other Person, change its form of organization or its business, or liquidate or
dissolve itself (or suffer any liquidation or dissolution), or sell, lease,
transfer or otherwise dispose of any assets other than (i) Hydrocarbons in the
ordinary course of such Borrower's business and pursuant to the Project
Documents and (ii) obsolete or worn-out equipment.
6.2 Purchases of Assets. Purchase or acquire any assets other than the
purchase of assets in the ordinary course of business of such Borrower required
in connection with the operation and maintenance of such Borrower's business in
accordance with the Basic Documents and the Operating Budget of such Borrower.
6.3 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness arising under the Basic Documents (as in existence
on the date hereof); and
(b) Permitted Indebtedness.
6.4 Distributions, Etc. Without the prior written consent of the
Lender, make any distributions to its General Partner, to its Limited Partner or
to any other Person in respect of any partnership interest in such Borrower or
any payments of management fees to its General Partner or its Limited Partner,
whether in cash, securities or other property, or redeem, purchase or otherwise
acquire any interest of its General Partner or its Limited Partner, or permit
its General Partner or its Limited Partner to withdraw any capital from such
Borrower.
6.5 Liens. Create or suffer to exist any Lien on any of its properties
or assets securing any Indebtedness or other ligation of such Borrower or any
other Person, other than (i) Liens in favor of the Lender created pursuant to
the Collateral Security Documents and (ii) Permitted Liens. The Borrowers agree
that they will, at their own cost and expense, take such action as may be
necessary to duly discharge and satisfy in full any such Lien.
LOAN AGREEMENT - Page 35
6.6 Nature of Business. (a) With respect to the Borrowers, engage in
any business other than the transportation, purchase or sale of, Natural Gas, as
the case may be, as contemplated by and in accordance with the Basic Documents.
(b) With respect to the General Partners and the Limited Partners,
engage in any business other than being the general partner or the limited
partner, as the case may be, of its respective Borrower.
6.7 Amendment of Contracts, Etc. Without the prior written consent of
the Lender, agree to or permit (a) the cancellation, suspension or termination
of any Basic Document (other than any OWI Contract), except upon the expiration
of the stated term thereof, (b) the assignment of the rights or obligations of
any party to any Basic Document (other than any OWI Contract), except (i) as
contemplated by this Agreement or the Collateral Security Documents or (ii) as
permitted without the consent of such Borrower by the terms of such Basic
Document or (c) any amendment, supplement, or modification of, or waiver with
respect to any of the provisions of, any Basic Document.
6.8 Investments. Make any investments (whether by purchase of stock,
bonds, notes or other securities, loan, advance or otherwise).
6.9 Leases. Enter into, or be or become liable under, any agreement for
the lease, hire or use of any real property or of any personal property, except
for (a) pipeline-related leases, or any extensions or renewals thereof, entered
into in the ordinary course of business and (b) other leases of personal
property in the ordinary course of business of such Borrower which are not
Capital Leases the aggregate annual rental under which shall not exceed, in the
aggregate for all Borrowers, $25,000 per Operating Year.
6.10 Change of Office. Change the location of its chief executive
office or principal place of business or the office where it keeps its records
concerning its property and assets and all contracts relating thereto from that
existing on the date of this Agreement and specified in subsection 3.22.
6.11 Change of Name. Change its name.
6.12 Compliance with ERISA. (a) Terminate any Single Employer Plan so
as to result in any material liability to PBGC, (b) engage in or permit any
Affiliate to engage in any "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Code) involving any Plan which would subject
such Person, to any material tax, penalty or other liability, (c) incur or
suffer to exist any material "accumulated funding deficiency" (as defined in
section 302 of ERISA), whether or not waived, involving any Plan subject to
Section 412 of the Code or Part 3 of Title I(b) of ERISA, (d) allow or permit to
exist any event (including a Reportable Event) or condition which represents a
material risk of incurring a material liability to PBGC, or (e) permit the
present value of all benefits vested under all Single Employer Plans subject to
LOAN AGREEMENT - Page 36
Title IV of ERISA, based on those assumptions used to fund the Plans, as of any
valuation date with respect to such Plans to exceed the value of the assets of
the Plans allocable to such benefits.
6.13 Transactions with Affiliates and Others. Directly or indirectly,
purchase, acquire, exchange or lease any property from, or sell, transfer or
lease any property to, or borrow any money from, or enter into any management or
similar fee arrangement with, any Affiliate of such Borrower (or of any partner
of such Borrower) or any officer, director or employee of such Borrower (or of
any partner of such Borrower) except for (a) the transactions contemplated by
the Basic Documents and (b) transactions in the ordinary course of business and
upon fair and reasonable terms no less favorable than such Borrower could
obtain, or could become entitled to, in an arm's length transaction with a
Person which is not an Affiliate of such Borrower (or any partner of such
Borrower).
6.14 Approval of Additional Contracts. Without the consent of the
Lender, enter into any Additional Contract.
6.15 Alteration or Abandonment. (a) Alter, remodel, add to,
reconstruct, improve or demolish any part of the Assets or any other Collateral
covered by the Collateral Security Documents, in any manner that could impair
the value of the security provided by the Collateral Security Documents, or (b)
release or abandon the Assets or any other Collateral covered by the Collateral
Security Documents, or (c) allow the Assets to be developed, maintained,
operated or administered in a manner less favorable than with prior operations,
or (d) enter into any agreement for the sale, disposition, encumbrance or
assignment of any of the Assets or any of the services or oil and gas production
attributable thereto, except in the ordinary course of business.
6.16 Capital Expenditures; Operating Expenses, Etc. (a) Directly or
indirectly, make or commit to make any expenditure in respect of the purchase or
other acquisition (including installment purchases or financing leases) of fixed
or capital assets (excluding normal replacements and maintenance which are
properly charged to current operations), except for expenditures in the ordinary
course of business of such Borrower not exceeding, in the aggregate for all
Borrowers, the amount allocated therefor in the Operating Budget for the then
current operating Year.
(b) Allow, or permit any Servicer to allow, without the prior written
consent of the Lender, the commencement of any operation with respect to the
Pipeline Assets which is anticipated to exceed fifty thousand dollars
($50,000.00) (except for operations provided for in the Operating Budget for the
then current Operating Year, emergency operations, operations required under the
Basic Documents in existence on the date hereof and under any applicable
governmental agreement or order).
6.17 Sale and Leaseback. Enter into any arrangement with any Person
providing for the leasing by any Borrower of real or personal property which has
been or is to be sold or transferred by such Borrower to such Person or to any
other Person to whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of such Borrower.
LOAN AGREEMENT - Page 37
6.18 Sale of Partnership Interests. (a) With respect to the Borrowers,
sell or create any partnership interest, of whatever nature, not in existence on
the date hereof.
(b) With respect to the General Partners, transfer, sign sell or
otherwise encumber any of its interests in any Borrower, except as provided in
the Collateral Security Documents.
6.19 Servicers; Service Agreements. Without the prior written consent
of the Lender, (i) remove, replace or substitute any Servicer, (ii) enter into
any Project Service Agreement not in existence on the date hereof and (iii)
permit (to the extent such Person can influence) the resignation, replacement or
withdrawal of any Servicer as such, unless a new Servicer satisfactory to the
Lender has been appointed.
6.20 Hazardous Materials. Use or permit the Pipeline Assets or any part
thereof to be used to generate, treat, store, handle, transport or dispose of
Hazardous Materials except in strict compliance with all applicable Relevant
Environmental Laws. Upon the occurrence of any release of Hazardous Materials,
the Borrowers shall promptly commence and perform, or cause to be promptly
commenced and performed, without cost to the Lender, all investigations,
studies, sampling and testing, and all remedial, removal and other actions
necessary to clean up and remove all Hazardous Materials so released, in
compliance with the requirements of all applicable Relevant Environmental Laws.
6.21 Intentionally Left Blank.
6.22 Executive Offices. Transfer its executive offices or transfer its
registered office in the State of Texas (if any) or change its corporate or
partnership name or keep Collateral at any locations other than those at which
the same are presently kept or maintained.
6.23 Fiscal Year. Change its fiscal year.
6.24 FERC Jurisdiction. Take any action, or omit to take any action,
which will subject any Borrower, the Assets, or any portion thereof, to the
jurisdiction of the FERC under the NGA.
6.25 Lone Star Contract. Without the consent of Lender, Marketing shall
not, nor shall it permit any Servicer to, seek to redetermine the price under
the Lone Star Contract.
SECTION 7. EVENTS OF DEFAULT
If any of the Events of Default listed below in this Section 7 shall
occur and be continuing, the Lender may (x) declare the entire unpaid principal
amount of the Term Loan and the then outstanding Term Note, all interest accrued
and unpaid thereon, and all other Obligations to be forthwith due and payable,
whereupon such amounts shall become and be forthwith due and payable, without
presentment, demand, protest, or notice of any kind, all of which are hereby
expressly waived by each of the Borrowers; and/or (y) subject to the terms of
the Intercreditor Agreement with respect to Pipeline and Marketing, foreclose on
LOAN AGREEMENT - Page 38
any or all of the Collateral; and/or (z) subject to the terms of the
Intercreditor Agreement with respect to Pipeline and Marketing, proceed to
enforce all other remedies available to it under applicable law.
Notwithstanding the foregoing, if an Event of Default referred to in paragraph
(h) or (i) below shall occur, automatically and without notice, the actions
described in clause (x) above shall be deemed to have occurred.
Such Events of Default are the following:
(a) Any principal of or interest on the Term Loan shall not be paid
when due; or any fee or any other amount payable to Lender hereunder,
under the Term Note or under any other Loan Document shall not be paid
when due and shall remain unpaid for five or more days; or
(b) Any representation or warranty made or deemed made by any
Borrower, any General Partner or Castle in any Basic Document to which
such Person is a party, or any representation, warranty or statement in
any certificate, financial statement or other document furnished to the
Lender by or on behalf of the Borrowers or any such other Person
hereunder or under any Basic Document, shall prove to have been false
or misleading in any material respect as of the time made or deemed
made; or
(c) (i) Any Borrower or any General Partner shall fail to perform
or observe any of its covenants in subsection 5.4 or in Section 6 of
this Agreement or (ii) any Borrower or any General Partner shall fail
to perform or observe any other of its covenants contained in this
Agreement (other than those referred to in paragraphs (a) and (b) above
or in clause (i) of this paragraph (c)) and such failure shall continue
unremedied or unwaived for a period for 30 days after written notice
thereof from the Lender to such party; or
(d) Any Borrower, any General Partner or Castle shall fail to
perform or observe any of its covenants or obligations (other than the
covenants and obligations referred to in paragraphs (a), (b) and (c)
above) contained in any of the Basic Documents and such failure shall
continue unremedied for a period of 30 days after written notice
thereof from the Lender to such party; or
(e) Any Borrower or any General Partner shall (i) default in any
payment of principal of or interest on any Indebtedness (other than the
Term Note) or in the payment of any Guarantee Obligation, for a period
in excess of the period of grace, if any, provided in the instrument
and agreement under which such Indebtedness or Guarantee Obligation was
created; or (ii) default in the observance or performance of any other
agreement or condition contained in any agreement or instrument
relating to any such other Indebtedness or Guarantee Obligation or
contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such other Indebtedness or
beneficiary or beneficiaries of such Guarantee Obligation (or a trustee
or agent on behalf of such holder or holders or beneficiary or
beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such
Guarantee Obligation to become payable or to realize upon any
collateral given as security therefor; or
LOAN AGREEMENT - Page 39
(f) Any material provision of any Basic Document (other than any
OWI Contract) shall at any time for any reason cease to be valid and
binding or in full force and effect or any party thereto shall so
assert in writing; or any material provision of any Basic Document
(other than any OWI Contract) shall be declared to be null and void or
the validity or enforceability thereof shall be contested by any party
thereto (other than the Lender) or any Governmental Authority; or any
party to any Basic Document (other than any OWI Contract), other than
the Lender, shall deny that it has any liability or obligation under
any Basic Document (other than any OWI Contract), except upon
fulfillment of its obligations thereunder; provided that with respect
to any Project Document (other than the Supply Agreement and the Lone
Star Contract) it shall not be a default under this paragraph (f) if
the Borrowers shall obtain a replacement agreement reasonably
satisfactory in form and substance to the Lender with a Person
reasonably satisfactory to the Lender within 30 days after such
invalidity, contest or denial shall have occurred; or
(g) Lone Star, MGNG or MGCC shall fail to perform or observe any of
its material covenants or obligations contained in any of the Basic
Documents to which it is a party within the grace period, if any,
provided for in such Basic Documents which failure shall continue
unremedied for a period of 30 days after notice by Lender to the
Borrowers; or
(h) Any Borrower, any General Partner, Castle, MGNG, MGAG, MGCC,
Lone Star (or Enserch) shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
assets or property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as such debts become due, (iii) make
a general assignment for the benefit of its creditors, (iv) commence a
voluntary case under the Bankruptcy Code (as now or hereafter in
effect), (v) file or consent to the filing of a petition seeking to
take advantage of any other law (domestic or foreign law or existing in
future law) relating to bankruptcy, insolvency, reorganization, winding
up, or composition or readjustment of debts, (vi) fail to controvert in
a timely and appropriate manner, or acquiesce in writing to, any
petition filed against such Person in an involuntary case under the
Bankruptcy Code, or (vii) take any partnership or corporate action for
the purpose of effecting any of the foregoing; or
(i) A proceeding or case shall be commenced without the application
or consent of any Borrower, any General Partner, Castle, MGNG, MGAG,
MGCC, Lone Star (or Enserch) in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution, winding-up,
or the composition or readjustment of debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of such Person
under any law (domestic or foreign law or existing or future law)
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts or (iii) a warrant of attachment,
execution or similar process against all or a substantial part of the
LOAN AGREEMENT - Page 40
assets or property of such Person, and such proceeding or case shall
continue undismissed, or any order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed
and in effect, for a period of 60 or more days, or any order for relief
against such Person shall be entered in an involuntary case under the
Bankruptcy Code; or
(j) A judgment or judgments for the payment of money in excess of
$150,000 shall be rendered against any Borrower or any General Partner,
and such judgment or judgments shall remain in effect and unstayed and
unbonded for a period of 30 or more consecutive days; or
(k) Any Collateral Security Document shall cease, for any reason,
to be in full force and effect or any party thereto shall so assert in
writing; any Collateral Security Document shall cease to be effective
to grant a perfected Lien to the Lender on the Collateral described
therein with the priority purported to be created thereby; or
(l) Any General Partner shall at any time cease to be the General
Partner of the Borrower of which it is general partner or, shall
transfer, sell, assign, mortgage, pledge or otherwise dispose of its
equity interest in such Borrower except in accordance with the
Collateral Security Documents or with the Lender's prior written
consent; or
(m) Castle shall, at any time, transfer, sell, assign, mortgage,
pledge or otherwise dispose of its equity interests in any General
Partner or any Limited Partner, except in accordance with the
Collateral Security Documents or with the Lender's prior written
consent; or
(n) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving
any Plan, (ii) any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall exist with respect
to any Plan, or (iii) a Reportable Event shall occur with respect to,
or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate any Single Employer
Plan, which Reportable Event or institution of proceedings is, in the
reasonable opinion of the Lender, likely to result in the termination
of such Plan for purposes of Title IV of ERISA, or (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, or (v)
any Borrower, any General Partner or any Commonly Controlled Entity
shall, or is, in the reasonable opinion of the Lender, likely to incur
any liability in connection with a withdrawal from, or the insolvency
or reorganization of, a Multiemployer Plan, or (vi) any other event or
condition shall occur or exist with respect to a Plan; and in each case
in clauses (i) through (vi) above, such event or condition, together
with all other such events or conditions, if any, could subject any
Borrower or any General Partner to any tax, penalty or other
liabilities in the aggregate material in relation to the business,
operations, property or financial or other condition of any Borrower or
any General Partner; or
(o) An Event of Loss shall have occurred; or
LOAN AGREEMENT - Page 41
(p) (i) Any Governmental Approval required to be obtained by any
Borrower pursuant to subsection 5.6 shall be revoked, terminated,
withdrawn, suspended, modified or withheld or shall cease to be in full
force and effect, and Lender shall have determined that such
revocation, termination, withdrawal, suspension, modification,
withholding or cessation could reasonably be expected to have a
Material Adverse Effect; or (ii) any proceeding which could reasonably
be expected to have a Material Adverse Effect shall be commenced by or
before any Governmental Authority for the purpose of so revoking,
terminating, withdrawing, suspending, modifying or withholding any such
Governmental Approval and the Lender shall have determined that such
proceeding could reasonably be expected to have a Material Adverse
Effect and such proceeding shall not have been dismissed or stayed
within 90 days, or notice shall be given by such Governmental Authority
for such purpose and shall have remained uncontested for 30 days; or
(q) The sale of gas by Marketing under the Lone Star Contract, or
any of Marketing, Lone Star and/or its facilities, or Pipeline and/or
the Pipeline Assets, shall become subject to regulation pursuant to the
NGA, or any rules or regulations promulgated pursuant thereto; or
Upon the occurrence of and during the continuance of any Event of
Default, but subject to the terms of the Intercreditor Agreement with respect to
Pipeline and Marketing, the rights, powers and privileges provided in this
Section and all other remedies available to the Lender under this Agreement or
any Collateral Security Document or by statute or by rule of law may be
exercised by the Lender at any time and from time to time whether or not the
Term Loan shall be due and payable, and whether or not the Lender shall have
instituted any foreclosure or other action for the enforcement of any of the
Basic Documents. For the purpose of carrying out the provisions and exercising
the rights, powers and privileges granted by this paragraph, each of the
Borrowers hereby irrevocably constitutes and appoints the Lender its true and
lawful attorney-in-fact to execute, acknowledge and deliver any instruments and
to do and to perform, subject to the terms of the Intercreditor Agreement, any
acts such as are referred to in this paragraph in the name and on behalf of such
Borrower. This power of attorney is a power coupled with an interest and cannot
be revoked.
SECTION 8. MISCELLANEOUS
8.1 Amendments and Waivers. No provision of this Agreement or of any
other Loan Document to which the Lender is a party may be amended, supplemented
or modified, except in writing and signed by the parties hereto.
8.2 Notices. (a) All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing, by telecopier or,
if available, by telex and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or when deposited
in the mail, first class postage prepaid, or in the case of transmission by
telecopier, when confirmation of receipt is obtained, or in the case of telex
notice, when sent, answerback received, addressed as follows in the case of the
LOAN AGREEMENT - Page 42
Borrowers, the Lender and the other parties below, or to such other address as
may be hereafter notified by the respective parties hereto and any future
holders of the Term Note:
If to a Borrower: Castle Texas Pipeline Limited Partnership,
CEC Gas Marketing Limited Partnership or
Castle Texas Production Limited Partnership
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Castle Exploration Company, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to the applicable General Partner
If to a General Partner: Castle Pipeline Company,
CEC Marketing Company or
Castle Production Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: Castle Energy Corporation
One Radnor Corporate Center-Suite 250
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to Castle: Castle Energy Corporation
One Radnor Corporate Center-Suite 250
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Lender: Commercial National Bank In Shreveport
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Vice President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
LOAN AGREEMENT - Page 43
(b) Any notice, request or demand duly given or made upon any Borrower
in accordance with the provisions of subsection 8.2(a), shall be deemed to have
been duly given or made upon all Borrowers.
8.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law. When the Lender is pursuing its rights and remedies hereunder
against any Borrower, the Lender may, but shall be under no obligation to,
pursue such rights and remedies as it may have against any other Borrower or
Person or against any collateral security or guaranty for the Obligations or any
right of offset with respect thereto, and any failure by the Lender to pursue
such other rights or remedies or to collect any payments from such other
Borrower or Person or to realize any such right of offset, or any release of
such other Borrower or any such other Person or of any such collateral security,
guaranty or right of offset, shall not impair or affect the rights and remedies,
whether express, implied or available as a matter of law, of the Lender against
such Borrower.
8.4 Survival. All representations and warranties made in this Agreement
and in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the Term Note.
8.5 Expenses and Taxes. Whether or not the Term Loan is made or any of
the other transactions contemplated by this Agreement are consummated, the
Borrowers shall, on a joint and several basis:
(a) pay all reasonable out-of-pocket expenses incurred by Lender in
connection with the negotiation, preparation, execution and delivery of
this Agreement and the other Basic Documents, any and all transactions
contemplated hereby or thereby and the preparation of any document
reasonably required hereunder or thereunder, including, without
limiting the generality of the foregoing, all reasonable fees and
expenses of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., counsel for Lender, all
title and conveyancing charges, recording and filing fees and taxes,
mortgage taxes, intangible personal property taxes, escrow fees,
revenue and tax stamp expenses, insurance premiums (including title
insurance premiums), placement and other fees of investment bankers of
the Borrowers, court costs, and surveyors', appraisers', architects',
engineers', environmental, gas and other consultants' and accountants'
reasonable fees and disbursements;
LOAN AGREEMENT - Page 44
(b) pay all reasonable out-of-pocket expenses incurred by the
Lender with respect to (i) any amendments, waivers or supplements to
any of the Basic Documents or (ii) any request of the Borrowers for a
consent, waiver or other action in connection with the Assigned
Contracts and with respect to enforcement of their rights and remedies
hereunder;
(c) pay the Lender for all their reasonable out-of-pocket costs and
expenses incurred in connection with, and to pay, indemnify and hold
the Lender harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever
arising out of or in connection with, the enforcement or preservation
of any rights under this Agreement and the other Basic Documents and
any such other documents, including without limitation, reasonable fees
and disbursements of counsel to the Lender incurred in connection with
the foregoing and in connection with advising the Lender with respect
to its rights and responsibilities under this Agreement, the other
Basic Documents and the documentation relating thereto; and
(d) pay, indemnify, and hold the Lender harmless from and against,
any and all recording and filing fees and any and all liabilities with
respect to, or resulting from any delay in paying, stamp, excise and
other similar taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or the
consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent
under or in respect of, this Agreement and the other Basic Documents
and any such other documents;
provided, that the Borrower, shall have no obligation hereunder with respect to
indemnified liabilities of the Lender or its Affiliates or any of their
respective officers and directors to the extent that such indemnified liability
resulted from the gross negligence or willful misconduct of the Lender. The
Lender may pay or deduct from the Term Loan proceeds any of such expenses and
any Term Loan proceeds so applied shall be deemed advances under this Agreement
and secured by the Collateral Security Documents. The agreements in this
subsection 8.5 shall survive repayment of the Term Note and all other amounts
payable hereunder.
8.6 INDEMNIFICATION. EACH BORROWER AGREES TO PAY, INDEMNIFY AND HOLD
THE LENDER AND ITS AFFILIATES, DIRECTORS AND OFFICERS HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND WHATSOEVER WHICH
MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, AT ANY TIME FOLLOWING THE
PAYMENT OF THE TERM NOTE) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY
SUCH PERSON BY A THIRD PARTY IN ANY WAY RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR THE OTHER BASIC DOCUMENTS, OR ANY DOCUMENTS CONTEMPLATED BY OR
REFERRED TO HEREIN OR THEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY
(ALL OF THE FOREGOING, COLLECTIVELY, THE "INDEMNIFIED LIABILITIES"), PROVIDED,
LOAN AGREEMENT - Page 45
THAT SUCH PERSON SHALL HAVE NO OBLIGATION HEREUNDER TO THE LENDER WITH RESPECT
TO INDEMNIFIED LIABILITIES ARISING FROM (I) THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY SUCH PERSON, OR (II) LEGAL PROCEEDINGS COMMENCED AGAINST ANY
SUCH PERSON BY ANY SECURITY HOLDER OR CREDITOR OF ANY SUCH PERSON ARISING OUT
OF AND BASED UPON RIGHTS AFFORDED ANY SUCH SECURITY HOLDER OR CREDITOR SOLELY IN
ITS CAPACITY AS SUCH. THE AGREEMENTS IN THIS SUBSECTION SHALL SURVIVE REPAYMENT
OF THE TERM NOTE AND ALL OTHER AMOUNTS PAYABLE HEREUNDER.
8.7 Successors and Assigns; Transferees; Transferred Interests. (a)
This Agreement shall be binding upon and inure to the benefit of the parties
hereto, all future holders of the Term Note and their respective successors and
assigns, except that no Borrower may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Lender.
(b) The Borrowers acknowledge that Lender may at any time grant
participations in this Agreement and the Collateral Security Documents
(collectively, "Participations") to one or more Persons (such Persons being
herein called "Transferees"); provided, however, that (i) Lender's obligations
under this Agreement and under any Collateral Security Document shall remain
unchanged, (ii) Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Transferees shall be
entitled to the benefit of the provisions contained in subsection 2.8, and (iv)
the Borrowers shall continue to deal solely and directly with Lender in
connection with Lender's rights and obligations under this Agreement and under
any Collateral Security Document.
(c) The Borrowers authorize Lender to disclose to any prospective
Transferee pursuant to paragraph (b) of this subsection 8.7 which has entered
into a confidentiality agreement all financial or other necessary information in
Lender's possession concerning the Borrowers, any General Partner, Lone Star,
Castle, MGAG or any MG Affiliate which has been delivered to Lender pursuant to
this Agreement or any other Basic Document or which has been delivered to Lender
by or on behalf of the Borrowers or any such other party in connection with such
Lender's credit evaluation of the Borrowers and the transactions contemplated
hereby prior to or after entering into this Agreement.
(d) The Borrowers shall not bear the costs of due diligence of any
Transferee.
8.8 Severability. Any provision hereof which 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 without affecting the validity or enforceability
of any provision in any other jurisdiction.
8.9 Headings. The headings of the various sections and paragraphs of
this Agreement are for convenience of reference only, do not constitute a part
hereof and shall not affect the meaning or construction of any provision hereof.
LOAN AGREEMENT - Page 46
8.10 Counterparts. This Agreement may be executed by one or more of the
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
8.11 GOVERNING LAW. THIS AGREEMENT AND THE TERM NOTE AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE TERM NOTE SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF LOUISIANA.
8.12 Submission to Jurisdiction; Waivers. (a) Each of the parties
hereto hereby irrevocably and unconditionally:
(i) Submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Basic Document, or
for recognition and enforcement of any judgment in respect thereof, to
the non-exclusive general jurisdiction of the courts of the State of
Louisiana, the courts of the United States of America for the Western
District of Louisiana, and Appellate Courts from any thereof;
(ii) Consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have
to the venue of any such action or proceeding in any such court or that
such action or proceeding was brought in any inconvenient court and
agrees not to plead or claim the same;
(iii) Agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Borrower at its address set forth in subsection 8.2 or
at such other address of which the Lender shall have been notified
pursuant thereto; and
(iv) Agrees that nothing herein shall affect the right to effect
service of process in any-other manner permitted by law or shall limit
the right to ▇▇▇ in any other jurisdiction.
(b) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF LENDER IN THE NEGOTIATION, ADMINISTRATION,
OR ENFORCEMENT THEREOF.
8.13 Maximum Interest Rate. Anything to the contrary notwithstanding,
the Lender shall not charge, take or receive and the Borrowers shall not be
obligated to pay to the Lender, any amounts constituting interest on the Term
Loan in excess of the maximum rate permitted by applicable law. The Term Loan is
made for commercial and business purposes as contemplated by La. R.S. 9:3509.
LOAN AGREEMENT - Page 47
8.14 Release of Collateral. Following the payment in full of all
obligations, the Lender shall release the Collateral under the Collateral
Security Documents.
8.15 Publicity. Each party hereto agrees to consult in good faith with
the other parties hereto before disseminating any publicity which is related to
this Agreement and the transactions contemplated hereby and which mentions such
other party by name; provided, however, the Lender shall have the right to
publish "tombstone" advertisements regarding this Agreement and the transactions
contemplated hereby without the obligation to consult with any other party
hereto.
8.16 Recourse to Borrowers. Subject to the terms of the Intercreditor
Agreement, there shall be full recourse to the Borrowers and all of their assets
for the liabilities and obligations of the Borrowers under this Agreement and
the Term Note, but in no event shall there be any recourse against any partners
or any officer, director, employee, shareholder or holder of any equity interest
in any Borrower or any partner, or any affiliate thereof, nor shall any partners
or any officer, director, employee, shareholder or holder of any equity interest
in any Borrower or any partner, or any affiliate thereof, be personally liable
or obligated for such liabilities and obligations of the Borrowers, except that
each party hereto shall be liable for (i) any representations and warranties
made by it and (ii) any obligations of such party specifically provided for in
any other Loan Document to which such Person is a party. Subject to the terms of
the Intercreditor Agreement with respect to Pipeline and Marketing, nothing
herein contained shall limit or be construed to limit the liabilities and
obligations of any such Person for any representations made by it or limit such
Person's obligations and liabilities set forth in any other Basic Document
creating such liabilities and obligations to which such Person is a party.
8.17 No Release. No payment or payments made by any Borrower or any
other Person or received or collected by the Lender from any Borrower or any
other Person by virtue of any action or proceeding, at any time or from time to
time, in reduction of or in payment of the obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Borrower
hereunder which shall remain obligated hereunder, notwithstanding any such
payment or payments, until the obligations are paid in full.
8.18 Collateral Security. As to any Borrower, such Borrower agrees that
any collateral security or guaranty to the extent provided by any other Person
(including any other Borrower), at any time held by the Lender for the payment
of the obligations, may be sold, exchanged, waived, surrendered or released
without the giving of notice to, or obtaining the consent of, such Borrower.
8.19 Intercreditor Agreement. Anything to the contrary contained in
this Agreement notwithstanding, certain of the rights of the Lender (including
any successor or assignee thereof) hereunder and under applicable law are
subject to the terms of the Intercreditor Agreement. The Intercreditor Agreement
provides, among other things (a) that all obligations of Pipeline, Pipeline GP,
Pipeline LP, Marketing, Marketing GP and Marketing LP hereunder and under the
other Loan Documents (whether in respect of any obligation hereunder or
thereunder, the breach of any covenant or representation or warranty, any
indemnity claim or otherwise, or whether in respect of its several obligations
or in respect of another Person's obligations hereunder or thereunder) are
LOAN AGREEMENT - Page 48
subordinated and junior in right of payment to the prior payment in full of the
Senior Obligations, and (b) limitations with respect to the Lender's ability to
exercise certain rights hereunder, under any other Loan Document or under
applicable law with respect to the obligations hereunder or thereunder of
Pipeline, Pipeline GP, Pipeline LP, Marketing, Marketing GP and Marketing LP
(and each such Person's joint and several obligations with respect to another
Person's obligations), and the Subject Party Collateral.
LOAN AGREEMENT - Page 49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
CASTLE TEXAS PIPELINE LIMITED PARTNERSHIP
By: CASTLE PIPELINE COMPANY,
its General Partner
By:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
CASTLE PIPELINE COMPANY
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
CEC GAS MARKETING LIMITED PARTNERSHIP
By: CEC MARKETING COMPANY,
its General Partner
By:
----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
CEC MARKETING COMPANY
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
LOAN AGREEMENT - Page ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ PRODUCTION
LIMITED PARTNERSHIP
By: CASTLE PRODUCTION COMPANY
By:
-----------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
CASTLE PRODUCTION COMPANY
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
CASTLE EXPLORATION COMPANY, INC.
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
CASTLE ENERGY CORPORATION
By:
---------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Vice President
LOAN AGREEMENT - Page 51
COMMERCIAL NATIONAL BANK IN SHREVEPORT
By:
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Assistant Vice President
LOAN AGREEMENT - Page 52