EXHIBIT 4.3
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CREDIT AGREEMENT
AMONG
▇▇▇▇▇▇▇▇ PETROLEUM COMPANY, L.L.C.,
AS BORROWER
COMPASS BANK,
AS AGENT AND AS A LENDER
AND
THE OTHER LENDERS NOW OR HEREAFTER
PARTIES HERETO
January 31, 2001
REVOLVING LINE OF CREDIT
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Table of Contents
Page
ARTICLE I DEFINITIONS AND INTERPRETATION................................... 1
1.1 Terms Defined Above............................................... 1
1.2 Additional Defined Terms.......................................... 1
1.3 Undefined Financial Accounting Terms.............................. 15
1.4 References........................................................ 15
1.5 Articles and Sections............................................. 15
1.6 Number and Gender................................................. 15
1.7 Incorporation of Exhibits......................................... 15
ARTICLE II TERMS OF FACILITY............................................... 15
2.1 Revolving Line of Credit.......................................... 15
2.2 Use of Loan Proceeds.............................................. 16
2.3 Interest.......................................................... 17
2.4 Repayment of Loans and Interest................................... 17
2.5 Outstanding Amounts............................................... 17
2.6 Time, Place, and Method of Payments............................... 18
2.7 Borrowing Base Determinations..................................... 18
2.8 Mandatory Prepayments............................................. 19
2.9 Voluntary Prepayments............................................. 19
2.10 Commitment Fee; Reduction of Commitment Amount.................... 19
2.11 Loans to Satisfy Obligations of Borrower.......................... 19
2.12 Security Interest in Accounts; Right of Offset.................... 20
2.13 General Provisions Relating to Interest........................... 20
2.14 Yield Protection.................................................. 21
2.15 Limitation on Types of Loans...................................... 23
2.16 Illegality........................................................ 24
2.17 Limitations on Interest Periods................................... 24
2.18 Power of Attorney................................................. 24
2.19 Facility Fee...................................................... 25
ARTICLE III CONDITIONS..................................................... 25
3.1 Receipt of Loan Documents and Other Items......................... 25
3.2 The Acquisition Portion........................................... 27
3.3 Each Loan......................................................... 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES.................................. 29
4.1 Due Authorization................................................. 29
4.2 Corporate Existence............................................... 29
4.3 Valid and Binding Obligations..................................... 29
4.4 Security Instruments.............................................. 29
4.5 Title to Assets................................................... 29
4.6 Scope and Accuracy of Financial Statements........................ 30
4.7 No Material Misstatements......................................... 30
4.8 Liabilities, Litigation, and Restrictions......................... 30
4.9 Authorizations; Consents.......................................... 30
4.10 Compliance with Laws.............................................. 30
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Table of Contents
(continued)
Page
4.11 ERISA............................................................. 30
4.12 Environmental Laws................................................ 31
4.13 Compliance with Federal Reserve Regulations....................... 31
4.14 Investment Company Act Compliance................................. 31
4.15 Public Utility Holding Company Act Compliance..................... 31
4.16 Proper Filing of Tax Returns; Payment of Taxes Due................ 31
4.17 Refunds........................................................... 32
4.18 Gas Contracts..................................................... 32
4.19 Intellectual Property............................................. 32
4.20 Casualties or Taking of Property.................................. 32
4.21 Locations of Borrower and Guarantors.............................. 32
4.22 Subsidiaries...................................................... 32
4.23 Scope of Collateral............................................... 33
ARTICLE V AFFIRMATIVE COVENANTS............................................ 33
5.1 Maintenance and Access to Records................................. 33
5.2 Quarterly Financial Statements; Compliance Certificates........... 33
5.3 Annual Financial Statements; Compliance Certificates.............. 33
5.4 Oil and Gas Reserve Reports....................................... 33
5.5 Hedging Position.................................................. 34
5.6 Title Opinions; Title Defects..................................... 34
5.7 Notices of Certain Events......................................... 34
5.8 Letters in Lieu of Transfer Orders; Division Orders............... 36
5.9 Additional Information............................................ 36
5.10 Compliance with Laws.............................................. 36
5.11 Payment of Assessments and Charges................................ 37
5.12 Maintenance of Corporate Existence and Good Standing.............. 37
5.13 Further Assurances................................................ 37
5.14 Fees and Expenses................................................. 37
5.15 Operation of Oil and Gas Properties............................... 38
5.16 Maintenance and Inspection of Properties.......................... 38
5.17 Maintenance of Insurance.......................................... 38
5.18 Maintenance of Operating Accounts................................. 38
5.19 Indemnification................................................... 39
ARTICLE VI NEGATIVE COVENANTS.............................................. 39
6.1 Indebtedness; Contingent Obligations.............................. 40
6.2 Liens............................................................. 40
6.3 Sales of Assets................................................... 40
6.4 Leasebacks........................................................ 41
6.5 Loans; Advances; Investments...................................... 41
6.6 Changes in Corporate Structure.................................... 41
6.7 Dividends and Distributions....................................... 41
6.8 Transactions with Affiliates...................................... 41
6.9 Lines of Business................................................. 41
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Table of Contents
(continued)
Page
6.10 ERISA Compliance.................................................. 42
6.11 Consolidated Tangible Net Worth................................... 42
6.12 EBITDAX to Interest Expense Ratio................................. 42
6.13 Current Ratio..................................................... 42
ARTICLE VII EVENTS OF DEFAULT.............................................. 42
7.1 Enumeration of Events of Default.................................. 42
7.2 Remedies.......................................................... 44
ARTICLE VIII THE AGENT..................................................... 45
8.1 Appointment of Agent.............................................. 45
8.2 Limitation on Liability of Agent.................................. 46
8.3 Agent also a Lender............................................... 46
8.4 Credit Decision by Each Lender.................................... 46
8.5 Agent Not Required to Act......................................... 47
8.6 Agent's Knowledge................................................. 47
8.7 Agent May Resign.................................................. 47
8.8 Lending Procedures................................................ 48
8.9 Letters of Credit................................................. 48
8.10 Receipts to be Shared............................................ 49
ARTICLE IX MISCELLANEOUS................................................... 49
9.1 Transfers; Participations......................................... 49
9.2 Survival of Representations, Warranties, and Covenants............ 50
9.3 Notices and Other Communications.................................. 50
9.4 Parties in Interest............................................... 50
9.5 Rights of Third Parties........................................... 51
9.6 No Waiver; Rights Cumulative...................................... 51
9.7 Survival Upon Unenforceability.................................... 51
9.8 Amendments; Waivers............................................... 51
9.9 Controlling Agreement............................................. 51
9.10 Release by Borrower............................................... 52
9.11 Governing Law..................................................... 52
9.12 Jurisdiction and Venue............................................ 52
9.13 Waiver of Rights to Jury Trial.................................... 52
9.14 Entire Agreement.................................................. 52
9.15 Counterparts...................................................... 52
9.16 Release of Security Instruments................................... 53
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CREDIT AGREEMENT
This CREDIT AGREEMENT is made and entered into this 31st day of
January, 2001, by and among ▇▇▇▇▇▇▇▇ PETROLEUM COMPANY, L.L.C., a Louisiana
limited liability company (the "Borrower"), the financial institutions
(collectively, the "Lenders") now or hereafter party hereto, and COMPASS BANK,
an Alabama state chartered banking institution (the "Agent"), acting as agent
for the Lenders, and is joined in for the limited purpose of making the
representations, warranties, and covenants set forth in Articles IV, V, and VI
only by ▇▇▇▇▇▇▇▇ PETROLEUM CORPORATION, a Delaware corporation ("▇▇▇▇▇▇▇▇") and
by ▇▇▇▇▇▇▇▇ PETROLEUM COMPANY - LAFITTE, L.L.C., a Louisiana limited liability
company ("Lafitte").
W I T N E S S E T H:
In consideration of the mutual covenants and agreements herein
contained, the Borrower, the Agent and the Lenders hereby agree as follows,
amending and restating in its entirety the Credit Agreement dated as of
September 23, 1999, by and between the Borrower and Compass Bank, as heretofore
amended, restated, or supplemented (the "Existing Credit Agreement"):
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above. As used in this Credit Agreement, the terms
"Borrower," "Existing Credit Agreement," "▇▇▇▇▇▇▇▇," "Lafitte," "Agent" and
"Lenders," shall have the meaning assigned to them hereinabove.
1.2 Additional Defined Terms. As used in this Credit Agreement, each of
the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"Acquisition Portion" means that portion of the Loan Balance in excess
of (i) for the period from and after the date hereof through and including
January 31, 2001, $22,350,000, (ii) for the period from and after February
1, 2001 through and including February 28, 2001, $21,800,000 and (iii) for
the period from and after March 1, 2001 through and including March 31,
2001, $21,250,000. From and after April 1, 2001, the Acquisition Portion
shall be $0.
"Affiliate" shall mean any Person directly or indirectly controlling,
or under common control with, the Borrower and includes any Subsidiary of
the Borrower and any "affiliate" of the Borrower within the meaning of Reg.
(S)240.12b-2 of the Securities Exchange Act of 1934, as amended, with
"control," as used in this definition, meaning possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies or action through ownership of voting securities, contract, voting
trust, or membership in management or in the group appointing or electing
management or otherwise through formal or informal arrangements or business
relationships.
"Additional Costs" shall mean costs which any Lender reasonably
determines are attributable to its obligation to make or its making or
maintaining any LIBO Rate Loan, or any reduction in any amount receivable
by such Lender in respect of any such obligation or any LIBO Rate Loan,
resulting from any Regulatory Change which (a) changes the basis of
taxation of any amounts payable to such Lender under this Agreement or its
Note in respect of any LIBO Rate Loan (other than taxes imposed on the
overall net income of such Lender), (b) imposes or modifies any reserve,
special deposit, minimum capital, capital rates, or similar requirements
relating to any extensions of credit or other assets of, or any deposits
with or other liabilities of, such Lender (including LIBO Rate Loans and
Dollar deposits in the London interbank market in connection with LIBO Rate
Loans), or any commitments of such Lender hereunder, or (c) imposes any
other condition affecting this Agreement or any of such extensions of
credit, liabilities, or commitments.
"Agreement" shall mean this Credit Agreement, as it may be amended,
supplemented, or restated from time to time.
"Applicable LIBO Rate" shall mean, for any Interest Period for any
LIBO Rate Loan, an interest rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined by the Agent to be equal to the sum
of the LIBO Rate for such Interest Period for such LIBO Rate Loan plus the
Applicable Margin for LIBO Rate Loans, but in no event shall such rate
exceed the Highest Lawful Rate.
"Applicable Margin" shall mean, as to each Floating Rate Loan, zero
percent (0%), and as to each LIBO Rate Loan, 2.25% at all times that the
Borrowing Base Utilization is greater than 75%, 2.00% at all times that the
Borrowing Base Utilization is greater than 50% but less than or equal to
75% and 1.75% at all times that the Borrowing Base Utilization is less than
or equal to 50%.
"Applications" shall have the meaning ascribed to such term in the
Letter of Credit Agreement.
"Available Commitment" shall mean, at any time, an amount equal to the
remainder, if any, of (a) the lesser of the Commitment Amount or the
Borrowing Base in effect at such time minus (b) the Loan Balance at such
time.
"Borrower Membership Interests" shall mean all of the issued and
outstanding equity interests in and to the Borrower which are owned by
▇▇▇▇▇▇▇▇.
"Borrowing Base" shall mean, at any time, the amount determined in
accordance with Section 2.7 and then in effect.
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"Borrowing Base Utilization" for any calendar quarter means the ratio
(expressed as a percentage) of (i) the aggregate unpaid principal balance
of the Obligations as of the last day of the preceding calendar quarter to
(ii) the amount by which the Maximum Borrowing Base exceeds the Acquisition
Amount as of the last day of the preceding calendar quarter; provided,
however that the Borrowing Base Utilization for the period from the date
hereof through March 31, 2001 shall be 39%. The Borrowing Base Utilization
applicable to each calendar quarter shall determined on the basis of a
written certification by the Borrower delivered to the Agent within five
(5) days after the end of the preceding calendar quarter (in the absence of
which the Borrowing Base Utilization shall be presumed to be 100%).
"Borrowing Request" shall mean each written request, in substantially
the form attached hereto as Exhibit I, by the Borrower to the Agent for a
borrowing, conversion, or prepayment pursuant to Sections 2.1 or 2.9 or
issuance of a Letter of Credit, each of which shall:
(a) be signed by a Responsible Officer of the Borrower;
(b) specify the amount and type of the Loan or Letter of Credit
requested, and, as applicable, the Loan to be converted or prepaid and the
date of the borrowing, conversion or prepayment or Letter of Credit
issuance(which shall be a Business Day);
(c) when requesting a Floating Rate Loan, be delivered to the Agent
no later than 10:00 a.m., Central Standard or Daylight Savings Time, as the
case may be, on the Business Day of the requested borrowing, conversion or
prepayment; and
(d) when requesting a LIBO Rate Loan, be delivered to the Agent no
later than 10:00 a.m., Central Standard or Daylight Savings Time, as the
case may be, the second Business Day preceding the requested borrowing,
conversion, or prepayment and designate the Interest Period requested with
respect to such LIBO Rate Loan.
"Business Day" shall mean a day other than a day when commercial banks
are authorized or required to close in the State of Texas and, with respect
to all requests, notices, and determinations in connection with, and
payments of principal and interest on, LIBO Rate Loans, which is a day for
trading by and between banks in Dollar deposits in the London interbank
market.
"Change of Control" shall mean a change resulting when any Unrelated
Person or any Unrelated Persons acting together which would constitute a
Group together with any Affiliates or Related Persons thereof (in each case
also constituting Unrelated Persons) shall at any time either (i)
Beneficially Own more than 50% of the aggregate voting power of all classes
of Voting Stock of ▇▇▇▇▇▇▇▇ or (ii) succeed in having sufficient of its or
their nominees elected to the Board of Directors of ▇▇▇▇▇▇▇▇ such that such
nominees, when added to any existing director remaining on the Board of
Directors of ▇▇▇▇▇▇▇▇ after such election who is an Affiliate or Related
Person of such Person or Group, shall constitute a majority of the Board of
Directors of ▇▇▇▇▇▇▇▇. As used herein (a)
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"Beneficially Own" means "beneficially own" as defined in Rule 13d-3 of the
United States Securities Exchange Act of 1934, as amended, or any successor
provision thereto; provided, however, that, for purposes of this
definition, a Person shall not be deemed to Beneficially Own securities
tendered pursuant to a tender or exchange offer made by or on behalf of
such Person or any of such Person's Affiliates until such tendered
securities are accepted for purchase or exchange; (b) "Group" means a
"group" for purposes of Section 13(d) of the United States Securities
Exchange Act of 1934, as amended; (c) "Unrelated Person" means at any time
any Person (I) other than ▇▇▇▇▇▇▇▇ or any of its Subsidiaries and (II)
other than any trust for any employee benefit plan of ▇▇▇▇▇▇▇▇ or any of
its Subsidiaries; (d) "Related Person" of any Person shall mean any other
Person owning (1) 5% or more of the outstanding common stock of such Person
or (2) 5% or more of the Voting Stock of such Person; and (e) "Voting
Stock" of any Person shall mean capital stock of such Person which
ordinarily has voting power for the election of directors (or persons
performing similar functions) of such Person, whether at all times or only
so long as no senior class of securities has such voting power by reason of
any contingency.
"Closing Date" shall mean January 31, 2001.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
"Collateral" shall mean the Mortgaged Properties, the Lafitte
Membership Interests, the Borrower Membership Interests, all other Property
of the Borrower and Lafitte and any other Property now or at any time used
or intended as security for the payment or performance of all or any
portion of the Obligations.
"Commitment" shall mean the obligation of the Lenders, subject to
applicable provisions of this Agreement, to make Loans to or for the
benefit of the Borrower pursuant to this Agreement or to issue (or acquire
participation interests in) Letters of Credit. The initial Commitments of
the respective Lenders are set forth on the signature pages hereto.
"Commitment Amount" shall mean $50,000,000.
"Commitment Period" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"Commitment Termination Date" shall mean April 1, 2003.
"Commonly Controlled Entity" shall mean any Person which is under
common control with the Borrower or any Guarantor within the meaning of
Section 4001 of ERISA.
"Compliance Certificate" shall mean each certificate, substantially in
the form attached hereto as Exhibit II, executed by a Responsible Officer
of the Borrower and the
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Guarantors and furnished to the Agent from time to time in accordance with
the terms hereof.
"Consolidated Net Income" shall mean, for any period, the net income
of ▇▇▇▇▇▇▇▇ and its Subsidiaries, on a consolidated basis, for such period,
determined in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, without duplication,
total assets, as would, in accordance with GAAP, be reflected on a
consolidated balance sheet of ▇▇▇▇▇▇▇▇ and its Subsidiaries, exclusive of
Intellectual Property, experimental or organization expenses, franchises,
licenses, permits, and other intangible assets, treasury stock, unamortized
underwriters' debt discount and expenses, and goodwill, minus (d) total
liabilities, as would, in accordance with GAAP, be reflected on a
consolidated balance sheet of ▇▇▇▇▇▇▇▇ and its Subsidiaries.
"Contingent Obligation" shall mean, as to any Person, any obligation
of such Person guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends, or other obligations of any other Person (for purposes
of this definition, a "primary obligation") in any manner, whether directly
or indirectly, including, without limitation, any obligation of such
Person, regardless of whether such obligation is contingent, (a) to
purchase any primary obligation or any Property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any primary obligation, or (ii) to maintain working
or equity capital of any other Person in respect of any primary obligation,
or otherwise to maintain the net worth or solvency of any other Person, (c)
to purchase Property, securities or services primarily for the purpose of
assuring the owner of any primary obligation of the ability of the Person
primarily liable for such primary obligation to make payment thereof, or
(d) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof, with the amount of any
Contingent Obligation being deemed to be equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as determined
by such Person in good faith.
"Cover" shall have the meaning ascribed to such term in the Letter of
Credit Agreement.
"Default" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"Default Rate" shall mean a per annum interest rate equal to the Index
Rate from time to time in effect plus five percent (5%), but in no event
exceeding the Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
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"EBITDAX" shall mean, for any period, (a) Consolidated Net Income for
such period plus (b) Interest Expense (without duplicate addition of
capitalized cash interest payments), taxes, exploration expense,
depreciation, amortization, depletion, and other non-cash expenses for such
period deducted in the determination of Consolidated Net Income minus (c)
capitalized general and administrative expenses for such period included in
the determination of Consolidated Net Income minus (d) non-cash income for
such period included in the determination of Consolidated Net Income.
"Environmental Complaint" shall mean any written or oral complaint,
order, directive, claim, citation, notice of environmental report or
investigation, or other notice by any Governmental Authority or any other
Person with respect to (a) air emissions, (b) spills, releases, or
discharges to soils, any improvements located thereon, surface water,
groundwater, or the sewer, septic, waste treatment, storage, or disposal
systems servicing any Property of any Related Party, (c) solid or liquid
waste disposal, (d) the use, generation, storage, transportation, or
disposal of any Hazardous Substance, or (e) other environmental, health, or
safety matters affecting any Property of any Related Party or the business
conducted thereon.
"Environmental Laws" shall mean (a) the following federal laws as they
may be cited, referenced, and amended from time to time: the Clean Air
Act, the Clean Water Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Endangered Species Act, the Hazardous
Materials Transportation Act of 1986, the Occupational Safety and Health
Act, the Oil Pollution Act of 1990, the Resource Conservation and Recovery
Act of 1976, the Safe Drinking Water Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state, as they may be cited,
referenced and amended from time to time; (c) any rules or regulations
promulgated under or adopted pursuant to the above federal and state laws;
and (d) any other equivalent federal, state, or local statute or any
requirement, rule, regulation, code, ordinance, or order adopted pursuant
thereto, including, without limitation, those relating to the generation,
transportation, treatment, storage, recycling, disposal, handling, or
release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations thereunder and
interpretations thereof.
"Event of Default" shall mean any of the events specified in Section
7.1.
"Existing Notes" shall mean the Note, as such term is defined in the
Existing Credit Agreement, in existence prior to the Closing Date.
"Existing Loan Documents" shall mean the Loan Documents, as such term
is defined in the Existing Credit Agreement, in existence prior to the
Closing Date.
"Existing Security Instruments" shall mean the Security Instruments,
as such term is defined in the Existing Credit Agreement, in existence
prior to the Closing Date.
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"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers on
such day, as published by the Federal Reserve Bank of Dallas, Texas, on the
Business Day next succeeding such day, provided that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day,
and (b) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Agent on such
day on such transactions as determined by the Agent.
"Financial Statements" shall mean statements of the financial
condition as at the point in time and for the period indicated and
consisting of at least a balance sheet and related statements of
operations, common stock and other stockholders' equity, and cash flows
and, when required by applicable provisions of this Agreement to be
audited, accompanied by the unqualified certification of a nationally-
recognized firm of independent certified public accountants or other
independent certified public accountants acceptable to the Majority Lenders
and footnotes to any of the foregoing, all of which shall be prepared in
accordance with GAAP consistently applied and in comparative form with
respect to the corresponding period of the preceding fiscal period.
"Floating Rate" shall mean an interest rate per annum equal to the
greater of (i) the Index Rate from time to time in effect plus the
Applicable Margin for Floating Rate Loans or (b) the Federal Funds Rate
from time to time in effect plus 1/2%, but in no event exceeding the
Highest Lawful Rate.
"Floating Rate Loan" shall mean any Loan and any portion of the
aggregate unpaid principal balance of the Loans which the Borrower has
requested, in the initial Borrowing Request for such Loan or a subsequent
Borrowing Request for such portion of the aggregate unpaid principal
balance of the Loans, bear interest at the Floating Rate, or which pursuant
to the terms hereof is otherwise required to bear interest at the Floating
Rate.
"GAAP" shall mean generally accepted accounting principles established
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants and in effect in the United States from time
to time.
"Governmental Authority" shall mean any nation, country, commonwealth,
territory, government, state, county, parish, municipality, or other
political subdivision and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guaranties" shall mean, collectively, the Guaranty of each Guarantor
dated the Closing Date, in each case guaranteeing the payment and
performance of the Obligations
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as provided therein, as each may be ratified, amended, restated, or
supplemented from time to time.
"Guarantors" shall mean ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and any other Person
hereafter executing a guaranty of the Obligations.
"Hazardous Substances" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum, petroleum products, associated oil or natural gas exploration,
production, and development wastes, or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes," or "toxic
substances" under the Comprehensive Environmental Response, Compensation
and Liability Act, as amended, the Superfund Amendments and Reauthorization
Act, as amended, the Hazardous Materials Transportation Act, as amended,
the Resource Conservation and Recovery Act, as amended, the Toxic
Substances Control Act, as amended, or any other Requirement of Law.
"Hedging Agreement" shall mean (a) any interest rate or currency swap,
rate cap, rate floor, rate collar, forward agreement, or other exchange or
rate protection agreement or any option with respect to any such
transaction and (b) any swap agreement, cap, floor, collar, exchange
transaction, forward agreement, or other exchange or protection agreement
relating to hydrocarbons or any option with respect to any such
transaction.
"Highest Lawful Rate" shall mean the maximum non-usurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable laws of the State of Texas
or the United States of America, whichever authorizes the greater rate, as
such laws are presently in effect or, to the extent allowed by applicable
law, as such laws may hereafter be in effect and which allow a higher
maximum non-usurious interest rate than such laws now allow.
"Indebtedness" shall mean, as to any Person, without duplication, (a)
all liabilities (excluding reserves for deferred income taxes, deferred
compensation liabilities, and other deferred liabilities and credits) which
in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet, (b) all obligations of
such Person evidenced by bonds, debentures, promissory notes, or similar
evidences of indebtedness, (c) all other indebtedness of such Person for
borrowed money and capitalized leases, and (d) all obligations of others,
to the extent any such obligation is secured by a Lien on the assets of
such Person (whether or not such Person has assumed or become liable for
the obligation secured by such Lien).
"Index Rate" shall mean, on any day, the prime rate as published in
The Wall Street Journal's "Money Rates" table for such day. If multiple
prime rates are quoted in such table, then the highest prime rate quoted
therein shall be the Index Rate. In the event that a prime rate is not
published in The Wall Street Journal's "Money Rates" table,
8
the Agent will choose a substitute Index Rate, for purposes of calculating
the Floating Rate, which is based on comparable information, until such
time as a prime rate is published in The Wall Street Journal's "Money
Rates" tables.
"Insolvency Proceeding" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or
of all or a substantial part of the Property of such Person, or the filing
of a petition (whether voluntary or instituted by another Person)
commencing a case under Title 11 of the United States Code, seeking
liquidation, reorganization, or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief, or other similar law of the United
States, the State of Texas, or any other jurisdiction.
"Insolvent" or "Insolvency" shall mean, with respect to any
Multiemployer Plan, that such Plan is insolvent within the meaning of such
term as used in Section 4245 of ERISA.
"Intellectual Property" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
"Interest Expense" for any period means cash interest payments
(including capitalized cash interest payments) on all Indebtedness,
including the Obligations, during such period.
"Interest Period" shall mean, subject to the limitations set forth in
Section 2.17, with respect to any LIBO Rate Loan, a period commencing on
the date such Loan is made or converted from a Loan of another type
pursuant to this Agreement or the last day of the next preceding Interest
Period with respect to such Loan and ending on the numerically
corresponding day in the calendar month that is one, two or three months
thereafter, as the Borrower may request in the Borrowing Request for such
Loan.
"Investment" in any Person shall mean any stock, bond, note, or other
evidence of Indebtedness, or any other security of, or investment or
partnership interest in, such Person.
"Lafitte Membership Interests" shall mean all of the issued and
outstanding equity interests in and to Lafitte.
"Letter of Credit" shall have the meaning ascribed to such term in the
Letter of Credit Agreement.
"Letter of Credit Agreement" means the Letter of Credit Agreement
dated concurrently herewith executed by and among Borrower, Agent and
Lenders, as it may from time to time be amended, modified, restated or
supplemented.
9
"Letter of Credit Documents" means the Letter of Credit Agreement, the
Letters of Credit and the Applications.
"Letter of Credit Liabilities" shall have the meaning ascribed to such
term in the Letter of Credit Agreement.
"LIBO Rate" shall mean, with respect to any Interest Period for any
LIBO Rate Loan, the rate for deposits in Dollars for a period equal to such
Interest Period which appears on the Telerate Page 3750 at approximately
11:00 a.m., London time, two Business Days prior to the commencement of
such Interest Period. If, for any reason, such rate is not available, then
"LIBO Rate" shall mean, with respect to any Interest Period, the rate per
annum determined by the Agent to be the arithmetic average (rounded
upwards, if necessary, to the nearest 1/16th of 1%) of the rate per annum
as quoted to Agent by leading reference banks at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period for settlement in immediately available funds by leading reference
banks in the London interbank market for a period equal to such Interest
Period and in the approximate amount of such LIBO Rate Loan.
"LIBO Rate Loan" shall mean any Loan and any portion of the aggregate
unpaid principal balance of the Loans which the Borrower has requested, in
the initial Borrowing Request for such Loan or a subsequent Borrowing
Request for such portion of the aggregate unpaid principal balance of the
Loans, bear interest at the Applicable LIBO Rate and which is permitted by
the terms hereof to bear interest at the Applicable LIBO Rate.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of such Property, whether
such interest is based on common law, statute, or contract, and including,
but not limited to, the lien or security interest arising from a mortgage,
ship mortgage, encumbrance, pledge, security agreement, conditional sale or
trust receipt, or a lease, consignment, or bailment for security purposes
(other than true leases or true consignments), liens of mechanics,
materialmen, and artisans, maritime liens and reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions,
restrictions, leases, and other title exceptions and encumbrances affecting
Property which secure an obligation owed to, or a claim by, a Person other
than the owner of such Property (for the purpose of this Agreement, any
Person shall be deemed to be the owner of any Property which it has
acquired or holds subject to a conditional sale agreement, financing lease,
or other arrangement pursuant to which title to the Property has been
retained by or vested in some other Person for security purposes), and the
filing or recording of any financing statement or other security instrument
in any public office.
"Limitation Period" shall mean any period while any amount remains
owing on the Notes and interest on such amount, calculated at the
applicable interest rate, plus any fees or other sums payable under any
Loan Document and deemed to be interest under
10
applicable law, would exceed the amount of interest which would accrue at
the Highest Lawful Rate.
"Loan" shall mean any loan made by the Lenders to or for the benefit
of the Borrower pursuant to this Agreement.
"Loan Balance" shall mean, at any time, the sum of the aggregate
outstanding principal balance of the Notes and the aggregate outstanding
Letter of Credit Liabilities at such time.
"Loan Documents" shall mean this Agreement, the Notes, the Guaranties,
the Security Instruments, the Letter of Credit Documents, and all other
documents and instruments now or hereafter delivered pursuant to the terms
of or in connection with this Agreement, the Notes, the Guaranties, the
Security Instruments, the Loans or the Letters of Credit, and all renewals
and extensions of, amendments and supplements to, and restatements of, any
or all of the foregoing from time to time in effect.
"Majority Lenders" means Lenders with 75% or more of the Commitment
(or, at any time that the Commitment has been terminated, 75% or more of
the aggregate outstanding principal balance of the Obligations).
"Material Adverse Effect" shall mean (a) any material adverse effect
on the business, operations, properties, condition (financial or
otherwise), or prospects of the Borrower or any Guarantor, (b) any adverse
effect upon the business operations, properties, condition (financial or
otherwise), or prospects of the Borrower or any Guarantor which increases
the risk that any of the Obligations will not be repaid as and when due, or
(c) any adverse effect upon the Collateral.
"Maximum Borrowing Base Amount" means (i) for the period from and
after the date hereof through and including January 31, 2001, $30,000,000,
(ii) for the period from and after February 1, 2001 through and including
February 28, 2001, $23,800,000, (iii) for each calendar month thereafter
through and including April, 2001, the Maximum Borrowing Base Amount for
the immediately preceding calendar month minus $1,550,000 and (iv) for each
calendar month thereafter, the Maximum Borrowing Base Amount for the
immediately preceding calendar month minus $550,000.
"Mortgaged Properties" shall mean all Oil and Gas Properties of the
Borrower and Lafitte subject to a perfected first-priority Lien in favor of
the Agent, subject only to Permitted Liens, as security for the
Obligations.
"Multiemployer Plan" shall mean a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Notes" shall mean the promissory notes of the Borrower payable to the
order of the respective Lenders in an original principal amount equal to
their pro rata share of the
11
Commitment, together with all renewals, extensions for any period,
increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all Indebtedness
evidenced by the Notes or arising under the Letters of Credit, (b) the
obligation of the Borrower for the payment of fees and expenses pursuant to
the Loan Documents, (c) the obligations of the Guarantors under the
Guaranties, and (d) all other obligations and liabilities of the Borrower
or the Guarantors to the Agent or any Lender, now existing or hereafter
incurred, under, arising out of or in connection with any Loan Document,
and to the extent that any of the foregoing includes or refers to the
payment of amounts deemed or constituting interest, only so much thereof as
shall have accrued, been earned and which remains unpaid at each relevant
time of determination.
"Oil and Gas Properties" shall mean fee, leasehold, or other interests
in or under mineral estates or oil, gas, and other liquid or gaseous
hydrocarbon leases with respect to Properties situated in the United States
or offshore from any State of the United States, including, without
limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests, and mineral
fee interests, together with contracts executed in connection therewith and
all tenements, hereditaments, appurtenances, and Properties appertaining,
belonging, affixed, or incidental thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any entity succeeding to any
or all of its functions under ERISA.
"Permitted Liens" shall mean (a) Liens for taxes, assessments, or
other governmental charges or levies not yet due or which (if foreclosure,
distraint, sale, or other similar proceedings shall not have been
initiated) are being contested in good faith by appropriate proceedings,
and such reserve as may be required by GAAP shall have been made therefor,
(b) Liens in connection with workers' compensation, unemployment insurance
or other social security (other than Liens created by Section 4068 of
ERISA), old-age pension, or public liability obligations which are not yet
due or which are being contested in good faith by appropriate proceedings,
if such reserve as may be required by GAAP shall have been made therefor,
(c) Liens in favor of vendors, carriers, warehousemen, repairmen,
mechanics, workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of
obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (d) Liens in favor of operators and
non-operators under joint operating agreements or similar contractual
arrangements arising in the ordinary course of the business to secure
amounts owing, which amounts are not yet due or are being contested in good
faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (e) Liens under production sales
agreements, division orders, operating agreements, and other agreements
customary in the oil and gas business for processing, producing, and
selling hydrocarbons securing obligations not constituting
12
Indebtedness and provided that such Liens do not secure obligations to
deliver hydrocarbons at some future date without receiving full payment
therefor within 90 days of delivery, (f) easements, rights of way,
restrictions, and other similar encumbrances, and minor defects in the
chain of title which are customarily accepted in the oil and gas financing
industry, none of which interfere with the ordinary conduct of the business
of the owner of the relevant Property or materially detract from the value
or use of the Property to which they apply, and other Liens expressly
permitted under the Security Instruments and (g) Liens securing the
obligations and liabilities under letters of credit issued by Compass Bank
as described in Section 6.1(g) hereof (which Liens shall be evidenced by
the Security Instruments and shall be pari passu with the Liens securing
the Obligations).
"Person" shall mean an individual, corporation, partnership, trust,
unincorporated organization, government, any agency or political
subdivision of any government, or any other form of entity.
"Plan" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower, any Guarantor, or
any Commonly Controlled Entity is (or, if such plan were terminated at such
time, would under Section 4069 of ERISA be deemed to be) an "employer" as
defined in Section 3(5) of ERISA.
"Principal Office" shall mean the principal office of the Agent in
Houston, Texas, presently located at ▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"Prohibited Transaction" shall have the meaning assigned to such term
in Section 4975 of the Code.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System, as the same may be amended or supplemented from
time to time.
"Regulatory Change" shall mean the passage, adoption, institution, or
modification of any federal, state, local, or foreign Requirement of Law
(including, without limitation, Regulation D), or any interpretation,
directive, or request (whether or not having the force of law) of any
Governmental Authority or monetary authority charged with the enforcement,
interpretation, or administration thereof, occurring after the Closing Date
and applying to a class of banks including the applicable Lender or its
applicable lending office.
"Related Party" shall mean any of the Borrower, the Guarantors or the
Subsidiaries of ▇▇▇▇▇▇▇▇. "Related Parties" shall mean the Borrower, the
Guarantors and all Subsidiaries of ▇▇▇▇▇▇▇▇.
13
"Release of Hazardous Substances" shall mean any emission, spill,
release, disposal, or discharge, except in accordance with a valid permit,
license, certificate, or approval of the relevant Governmental Authority,
of any Hazardous Substance into or upon (a) the air, (b) soils or any
improvements located thereon, (c) surface water or groundwater, or (d) the
sewer or septic system, or the waste treatment, storage, or disposal system
servicing any Property of the Borrower or any Guarantor.
"Reorganization" shall mean, with respect to any Multiemployer Plan,
that such Plan is in reorganization within the meaning of such term in
Section 4241 of ERISA.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the thirty-day notice
period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC
Reg. (S)2615.
"Requirement of Law" shall mean, as to any Person, any applicable law,
treaty, ordinance, order, judgment, rule, decree, regulation, or
determination of an arbitrator, court, or other Governmental Authority,
including, without limitation, rules, regulations, orders, and requirements
for permits, licenses, registrations, approvals, or authorizations, in each
case as such now exist or may be hereafter amended and are applicable to or
binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
"Reserve Report" shall mean each report delivered to the Agent
pursuant to Section 5.4.
"Responsible Officer" shall mean, as to any Person, its President or
chief financial officer.
"Security Instruments" shall mean the Existing Security Instruments,
the security instruments executed and delivered in satisfaction of the
condition set forth in Section 3.1, and all other documents and instruments
at any time executed as security for all or any portion of the Obligations,
as such instruments may be amended, restated, or supplemented from time to
time.
"Single Employer Plan" shall mean any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
"Subsidiary" shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority
of the board of directors or other managers of such corporation are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
14
"Superfund Site" shall mean those sites listed on the Environmental
Protection Agency National Priority List and eligible for remedial action
or any comparable state registries or list in any state of the United
States.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
1.3 Undefined Financial Accounting Terms. Undefined financial accounting
terms used in this Agreement shall be defined according to GAAP at the time in
effect.
1.4 References. References in this Agreement to Exhibit, Article, or
Section numbers shall be to Exhibits, Articles, or Sections of this Agreement,
unless expressly stated to the contrary. References in this Agreement to
"hereby," "herein," "hereinafter," "hereinabove," "hereinbelow," "hereof,"
"hereunder" and words of similar import shall be to this Agreement in its
entirety and not only to the particular Exhibit, Article, or Section in which
such reference appears.
1.5 Articles and Sections. This Agreement, for convenience only, has been
divided into Articles and Sections; and it is understood that the rights and
other legal relations of the parties hereto shall be determined from this
instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural; and
likewise, the plural shall be understood to include the singular. Definitions of
terms defined in the singular or plural shall be equally applicable to the
plural or singular, as the case may be, unless otherwise indicated. Words
denoting sex shall be construed to include the masculine, feminine and neuter,
when such construction is appropriate; and specific enumeration shall not
exclude the general but shall be construed as cumulative.
1.7 Incorporation of Exhibits. The Exhibits attached to this Agreement
are incorporated herein and shall be considered a part of this Agreement for all
purposes.
ARTICLE II
TERMS OF FACILITY
2.1 Revolving Line of Credit.
(a) Upon the terms and conditions and relying on the representations
and warranties contained in this Agreement, each Lender agrees, during the
Commitment Period, to make Loans (pro rata based upon their respective
Commitments) to or for the benefit of the Borrower. Loans shall be made in
such amounts as the Borrower may request; provided, however, no Loan shall
be made in an amount exceeding the then existing Available Commitment, and
the Loan Balance shall not exceed at any time the
15
lesser of the Commitment Amount or the Borrowing Base then in effect. Loans
shall be made in immediately available funds at the Principal Office from
time to time on any Business Day designated by the Borrower in its
Borrowing Request.
(b) Subject to the terms of this Agreement, during the Commitment
Period, the Borrower may borrow, repay, and reborrow and convert Loans of
one type or with one Interest Period into Loans of another type or with a
different Interest Period. Each borrowing, conversion, and prepayment of
principal of Loans shall be in an amount at least equal to $250,000. Each
borrowing, prepayment, or conversion of or into a Loan of a different type
or, in the case of a LIBO Rate Loan, having a different Interest Period,
shall be deemed a separate borrowing, conversion, and prepayment for
purposes of the foregoing, one for each type of Loan or Interest Period.
Anything in this Agreement to the contrary notwithstanding, the aggregate
principal amount of LIBO Rate Loans having the same Interest Period shall
be at least equal to $1,000,000; and if any LIBO Rate Loan would otherwise
be in a lesser principal amount for any period, such Loan shall be a
Floating Rate Loan during such period.
(c) The Borrower and the Lenders agree pursuant to Chapter 346
("Chapter 346") of the Texas Finance Code, that Chapter 346 (which relates
to open-end line of credit revolving loan accounts) shall not apply to this
Agreement, the Notes or any of the Obligations and that neither the Notes
nor any of the Obligations shall be governed by Chapter 346 or subject to
its provisions in any manner whatsoever.
(d) The Loans shall be evidenced by the Notes.
(e) The obligations of Lenders hereunder are several and not joint,
and the provisions of this Agreement will give rise to certain
inappropriate results if special provisions are not made to accommodate the
failure of a Lender to fund a Loan as and when required by this Agreement;
therefore, notwithstanding anything herein to the contrary, (I) no Lender
shall be required to make Loans at any one time outstanding in excess of
such Lender's pro rata share of the Available Commitment and (II) if a
Lender fails to make a Loan as and when required hereunder and Borrower
subsequently makes a repayment on the Loans, such repayment shall be split
among the non-defaulting Lenders ratably in accordance with their
respective pro rata shares of the Commitment until each Lender has its pro
rata share of all of the outstanding Loans, and the balance of such
repayment shall be divided among all of the Lenders in accordance with
their respective pro rata shares.
2.2 Use of Loan Proceeds. (a) As of the Closing Date, indebtedness in the
amount of $9,275,000 is outstanding under the Existing Credit Agreement.
Such indebtedness shall be renewed, extended, and rearranged pursuant to the
terms of this Agreement, the Notes, and the relevant Borrowing Request and shall
for all purposes be deemed a borrowing hereunder. Proceeds of all subsequent
Loans and all Letters of Credit shall be used solely for general corporate
purposes of the Borrower and the Guarantors; provided, however, that the
Acquisition Portion may only be used for the acquisition of oil and gas
reserves.
16
2.3 Interest. Subject to the terms of this Agreement (including, without
limitation, Section 2.13), interest on the Loans shall accrue and be payable at
a rate per annum equal to the Floating Rate for each Floating Rate Loan and the
Applicable LIBO Rate for each LIBO Rate Loan. Interest on all Loans shall be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) during the period for which payable.
Notwithstanding the foregoing, interest on past-due principal and, to the extent
permitted by applicable law, past-due interest, shall accrue at the Default
Rate, computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) during the period for which
payable, and shall be payable upon demand at any time as to all or any portion
of such interest. In the event that the Borrower fails to select the duration
of any Interest Period for any LIBO Rate Loan within the time period and
otherwise as provided herein, such Loan (if outstanding as a LIBO Rate Loan)
will be automatically converted into a Floating Rate Loan on the last day of the
then current Interest Period for such Loan or (if outstanding as a Floating Rate
Loan) will remain as, or (if not then outstanding) will be made as, a Floating
Rate Loan. Interest provided for herein shall be calculated on unpaid sums
actually advanced and outstanding pursuant to the terms of this Agreement and
only for the period from the date or dates of such advances until repayment. If
any payment remains past due for ten (10) days, a late charge equal to five
percent (5%) of such payment shall also be due and payable (subject, however, to
the provisions of Section 20 hereof).
2.4 Repayment of Loans and Interest.
(a) Accrued and unpaid interest on each outstanding Floating Rate
Loan shall be due and payable monthly commencing on the first day of
January, 2001, and continuing on the first day of each calendar month
thereafter while any Floating Rate Loan remains outstanding, the payment in
each instance to be the amount of interest which has accrued and remains
unpaid in respect of the relevant Floating Rate Loan. Accrued and unpaid
interest on each outstanding LIBO Rate Loan shall be due and payable on the
last day of the Interest Period for such LIBO Rate Loan and, in the case of
any Interest Period in excess of three months, on the day of the third
calendar month following the commencement of such Interest Period
corresponding to the day of the calendar month on which such Interest
Period commenced, the payment in each instance to be the amount of interest
which has accrued and remains unpaid in respect of the relevant LIBO Rate
Loan. The aggregate unpaid principal balance of the Loans, together with
all accrued and unpaid interest thereon, shall be due and payable on the
Commitment Termination Date.
(b) At the time of making each payment hereunder or under the Notes,
the Borrower shall specify to the Agent the Loans or other amounts payable
by the Borrower hereunder to which such payment is to be applied. In the
event the Borrower fails to so specify, or if an Event of Default has
occurred and is continuing, the Agent may apply such payment as it may
elect in its sole discretion.
2.5 Outstanding Amounts. Each Lender is irrevocably authorized by the
Borrower to attach to and make a part of its Note a ledger reflecting amounts
advanced to or paid by the Borrower and to attach to and make a part of such
Note a continuation of any such schedule of
17
advances and payments, as and when required. All Loans and all payments and
prepayments made on account of the principal thereof and all conversions of
Loans shall be reflected by an appropriate notation on such ledger or any
continuation thereof attached to the applicable Notes; provided, however, the
failure of any Lender to do so shall not relieve the Borrower of its liability
hereunder or under the Notes or subject the Borrower to additional liability
hereunder or under the Notes. The outstanding principal balance of the Notes
reflected by the notations by the Lenders on their records or ledger sheets
affixed to the Notes shall be deemed rebuttably presumptive evidence of the
principal amount owing on the Notes. The liability for payment of principal and
interest evidenced by the Notes shall be limited to principal amounts actually
advanced and outstanding pursuant to this Agreement and interest on such amounts
calculated in accordance with this Agreement.
2.6 Time, Place, and Method of Payments. All payments required by
Borrower pursuant to this Agreement, the Notes, or any other Loan Document shall
be made in lawful money of the United States of America and in immediately
available funds, shall be deemed received by the Agent on the next Business Day
following receipt if such receipt is after 2:00 p.m., Houston, Texas, time on
any Business Day, and shall be made at the Principal Office. Except as provided
to the contrary herein, if the due date of any payment under any Loan Document
would otherwise fall on a day which is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
2.7 Borrowing Base Determinations. The Borrowing Base as of the date
hereof is acknowledged by the Borrower, the Agent and the Lenders to be
$30,000,000, inclusive of the Acquisition Portion. The Borrowing Base shall be
redetermined each April 1 and October 1 during the Commitment Period on the
basis of information supplied by the Borrower in compliance with the provisions
of this Agreement, including, without limitation, Reserve Reports, and all other
information available to the Lenders. In addition, the Lenders shall, in the
normal course of business following a request of the Borrower, redetermine the
Borrowing Base; provided, however, the Lenders shall not be obligated to respond
to more than two such requests during any calendar year, and in no event shall
the Lenders be required to redetermine the Borrowing Base more than once in any
three-month period, including, without limitation, each scheduled semi-annual
redetermination provided for above. Notwithstanding the foregoing, the Lenders
may at their discretion redetermine the Borrowing Base at any time and from time
to time. Upon each determination of the Borrowing Base by the Lenders, the
Agent shall notify the Borrower in writing of such determination, and the
Borrowing Base so communicated to the Borrower shall become effective upon such
written notification and shall remain in effect until the next subsequent
determination of the Borrowing Base. The Borrowing Base shall represent the
determination by the Lenders, in accordance with the applicable definitions and
provisions herein contained and their customary lending practices for loans of
this nature, of the value, for loan purposes, of the Mortgaged Properties,
subject, in the case of any increase in the Borrowing Base, to the approval of
the Borrower and the credit approval process of the Lenders. Furthermore, the
Borrower acknowledges that the determination of the Borrowing Base contains an
equity cushion (market value in excess of loan value), which is acknowledged by
the Borrower to be essential for the adequate protection of the Lenders.
Notwithstanding anything to the contrary set forth herein, the Borrowing Base
shall not exceed the Maximum Borrowing Base
18
Amount unless the Lenders shall have given their prior written approval, which
may be given or denied in their sole and absolute discretion (and which approval
may be conditioned upon payment to the Lenders of additional facility fees in an
amount equal to or greater than 3/8% times the amount by which the Borrowing
Base is so permitted to exceed $30,000,000).
2.8 Mandatory Prepayments. If at any time the Loan Balance exceeds the
lesser of the Commitment Amount or the Borrowing Base then in effect, the
Borrower shall, within 30 days of notice from the Agent of such occurrence, (a)
prepay, or make arrangements acceptable to the Lenders for the prepayment of
(or, in respect of Letter of Credit Liabilities, provide Cover for), the amount
of such excess for application on the Loan Balance (such prepayment may be made
in the form of up to six (6) monthly installments, each in an amount equal to or
greater than 1/6th of the amount of such excess, to be due and payable on the
first day of each of the next six (6) calendar months), (b) provide additional
collateral, of character and value satisfactory to the Lenders in their sole
discretion, to secure the Obligations by the execution and delivery to the Agent
of security instruments in form and substance satisfactory to the Lenders, or
(c) effect any combination of the alternatives described in clauses (a) and (b)
of this Section and acceptable to the Lenders in their sole discretion.
2.9 Voluntary Prepayments. Subject to applicable provisions of this
Agreement, the Borrower shall have the right at any time or from time to time to
prepay Loans and to convert Loans of one type or with one Interest Period into
Loans of another type or with a different Interest Period; provided, however,
that (a) the Borrower shall give the Agent notice of each such prepayment or
conversion of all or any portion of a LIBO Rate Loan no less than two Business
Days prior to prepayment or conversion, (b) any LIBO Rate Loan may be prepaid or
converted only on the last day of an Interest Period for such Loan, (c) the
Borrower shall pay all accrued and unpaid interest on the amounts prepaid or
converted, and (d) no such prepayment or conversion shall serve to postpone the
repayment when due of any Obligation.
2.10 Commitment Fee; Reduction of Commitment Amount. To compensate the
Lenders for maintaining funds available, the Borrower shall pay to the Agent,
for the account of each Lender, a commitment fee in the amount of (i) at all
times that the Borrowing Base Utilization is greater than 50%, 0.50% per annum
and (ii) at all times that the Borrowing Base Utilization is less than or equal
to 50%, 0.375% per annum, calculated on the basis of a year of 360 days and
actual days elapsed (including the first day but excluding the last day), on the
average daily amount of the Available Commitment of each Lender. Such accrued
commitment fees shall be due and payable on the first day of January, 2001, the
first day of each third calendar month thereafter during the Commitment Period,
and on the Commitment Termination Date. The Borrower may, with 30 days' written
notice to the Agent, reduce the Commitment Amount (and any such reduction shall
be irrevocable); provided that Borrower may not thereby decrease the Available
Commitment to an amount less than the Loan Balance.
2.11 Loans to Satisfy Obligations of Borrower. The Lenders may, but shall
not be obligated to, make Loans for the benefit of the Borrower and apply
proceeds thereof to the satisfaction of any condition, warranty, representation,
or covenant of the Borrower or any Guarantor contained in this Agreement or any
other Loan Document. Such Loans shall be
19
evidenced by the Notes, shall bear interest at the Default Rate, and shall be
payable upon demand.
2.12 Security Interest in Accounts; Right of Offset. As security for the
payment and performance of the Obligations, the Borrower hereby transfers,
assigns, and pledges to the Agent and grants to the Agent a security interest in
all funds of the Borrower now or hereafter or from time to time on deposit with
any Lender, with such interest of such Lender to be retransferred, reassigned,
and/or released by such Lender, as the case may be, at the expense of the
Borrower upon payment in full and complete performance of all Obligations. All
remedies as secured party or assignee of such funds shall be exercisable by the
Agent upon the occurrence of any Event of Default, regardless of whether the
exercise of any such remedy would result in any penalty or loss of interest or
profit with respect to any withdrawal of funds deposited in a time deposit
account prior to the maturity thereof. Furthermore, the Borrower hereby grants
to the Agent the right, exercisable at such time as any Obligation shall mature,
whether by acceleration of maturity or otherwise, of offset or banker's lien
against all funds of the Borrower now or hereafter or from time to time on
deposit with any Lender, regardless of whether the exercise of any such remedy
would result in any penalty or loss of interest or profit with respect to any
withdrawal of funds deposited in a time deposit account prior to the maturity
thereof.
2.13 General Provisions Relating to Interest.
(a) It is the intention of the parties hereto to comply strictly
with all applicable usury laws. In this connection, there shall never
be collected, charged, or received on the sums advanced hereunder
interest in excess of that which would accrue at the Highest Lawful
Rate.
(b) Notwithstanding anything herein or in the Notes to the
contrary, during any Limitation Period, the interest rate to be
charged on amounts evidenced by the Notes shall be the Highest Lawful
Rate, and the obligation, if any, of the Borrower for the payment of
fees or other charges deemed to be interest under applicable law shall
be suspended. During any period of time following a Limitation Period,
to the extent permitted by applicable laws of the State of Texas or
the United States of America, the interest rate to be charged
hereunder shall remain at the Highest Lawful Rate until such time as
there has been paid to the Lenders (i) the amount of interest in
excess of that accruing at the Highest Lawful Rate that the Lenders
would have received during the Limitation Period had the interest rate
remained at the otherwise applicable rate, and (ii) all interest and
fees otherwise payable to the Lenders but for the effect of such
Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on
the Notes or under this Agreement or any other Loan Document include
amounts which by law are deemed interest and which would exceed the
amount permitted if the Highest Lawful Rate were in effect, the
Borrower stipulates that such payment and collection will have been
and will be deemed to have been, to the extent permitted by applicable
laws of the State of Texas or the United States of
20
America, the result of mathematical error on the part of the Borrower
and the Lenders; and the Lenders shall promptly refund the amount of
such excess (to the extent only of such interest payments in excess of
that which would have accrued and been payable on the basis of the
Highest Lawful Rate) upon discovery of such error by the Lenders or
notice thereof from the Borrower. In the event that the maturity of
any Obligation is accelerated, by reason of an election or otherwise,
or in the event of any required or permitted prepayment, then the
consideration constituting interest under applicable laws may never
exceed the Highest Lawful Rate; and excess amounts paid to the Lenders
which by law are deemed interest, if any, shall be credited by the
Lenders on the principal amount of the Obligations, or if the
principal amount of the Obligations shall have been paid in full,
refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lenders for the
use, forbearance and detention of the proceeds of any advance
hereunder shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full term
hereof until paid in full so that the actual rate of interest is
uniform but does not exceed the Highest Lawful Rate throughout the
full term hereof.
(e) On each day, if any, that the Texas Finance Code establishes
the Highest Lawful Rate, the Highest Lawful Rate shall be the "weekly
ceiling" (as defined in (S)303 of the Texas Finance Code) for that
day. The Lenders may from time to time, as to current and future
balances, implement any other ceiling under the Texas Finance Code by
notice to the Borrower, if and to the extent permitted by the Texas
Finance Code.
2.14 Yield Protection.
(a) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the
Lenders from time to time such amounts as the Lenders may determine
are necessary to compensate them for any Additional Costs incurred by
the Lenders.
(b) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the
Lenders from time to time on request such amounts as the Lenders may
determine are necessary to compensate the Lenders for any costs
attributable to the maintenance by the Lenders (or any applicable
lending office of a Lender), pursuant to any Regulatory Change, of
capital in respect of their pro rata shares of the Commitment, such
compensation to include, without limitation, an amount equal to any
reduction of the rate of return on assets or equity of the Lenders (or
any Applicable Lending Office) to a level below that which the
applicable Lender (or any applicable lending office of a Lender) could
have achieved but for such Regulatory Change.
21
(c) Without limiting the effect of the other provisions of this
Section (but without duplication), the Borrower shall pay to the
Lenders such amounts as shall be sufficient in the reasonable opinion
of the Lenders to compensate them for any loss, cost, or expense
incurred by and as a result of:
(i) any payment, prepayment, or conversion by the Borrower
of a LIBO Rate Loan on a date other than the last day of an
Interest Period for such Loan; or
(ii) any failure by the Borrower to borrow a LIBO Rate Loan
or to convert a Floating Rate Loan into a LIBO Rate Loan on the
date for such borrowing or conversion specified in the relevant
Borrowing Request;
such compensation to include, without limitation, with respect to any
LIBO Rate Loan, an amount equal to the excess, if any, of (A) the
amount of interest which would have accrued on the principal amount so
paid, prepaid, converted, or not borrowed or converted for the period
from the date of such payment, prepayment, conversion, or failure to
borrow or convert to the last day of the then current Interest Period
for such Loan (or, in the case of a failure to borrow or convert, the
Interest Period for such Loan which would have commenced on the date
of such failure to borrow or convert) at the applicable rate of
interest for such Loan provided for herein over (B) the interest
component (as reasonably determined by the Lenders) of the amount (as
reasonably determined by the Lenders) the Lenders would have bid in
the London interbank market for Dollar deposits of amounts comparable
to such principal amount and maturities comparable to such period.
(d) Determinations by any Lender for purposes of this Section of
the effect of any Regulatory Change on capital maintained, its costs
or rate of return, maintaining Loans, its obligation to make Loans, or
on amounts receivable by it in respect of Loans or such obligations,
and the additional amounts required to compensate such Lender under
this Section shall be conclusive, absent manifest error, provided that
such determinations are made on a reasonable basis. The applicable
Lender shall furnish the Borrower (with a copy to Agent) with a
certificate setting forth in reasonable detail the basis and amount of
increased costs incurred or reduced amounts receivable as a result of
any such event, and the statements set forth therein shall be
conclusive, absent manifest error. The applicable Lender shall (i)
notify the Borrower and Agent, as promptly as practicable after such
Lender obtains knowledge of any Additional Costs or other sums payable
pursuant to this Section and determines to request compensation
therefor, of any event occurring after the Closing Date which will
entitle such Lender to compensation pursuant to this Section and (ii)
designate a different applicable lending office for the Loans of such
Lender affected by such event if such designation will avoid the need
for or reduce the amount of such compensation and will not, in the
sole opinion of such Lender, be
22
disadvantageous to such Lender. If any Lender requests compensation
from the Borrower under this Section, the Borrower may, by notice to
Agent, require that the Loans by the Lenders of the type with respect
to which such compensation is requested be converted into Floating
Rate Loans in accordance with Section. Any compensation requested by
any Lender pursuant to this Section shall be due and payable to such
Lender within five days of delivery of any such notice by such Lender
to the Borrower.
(e) Each Lender agrees that it shall not request, and the
Borrower shall not be obligated to pay, any sums payable pursuant to
this Section unless (i) the applicable costs or sums shall have been
paid or incurred not more than ninety (90) days prior to such request
and (ii) similar additional costs and other sums payable are also
generally assessed by such Lender against other customers of such
Lender similarly situated where such customers are subject to
documents providing for such assessment.
(f) Amounts becoming due under this Section shall be payable
within twenty (20) days after demand therefor by the applicable Lender
to the Borrower.
2.15 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, no more than three separate Loans shall be outstanding at any
one time, with, for purposes of this Section, all Floating Rate Loans
constituting one Loan, and all LIBO Rate Loans for the same Interest Period
constituting one Loan. Anything herein to the contrary notwithstanding, if, on
or prior to the determination of any interest rate for any LIBO Rate Loan for
any Interest Period therefor:
(a) the Agent determines (which determination shall be
conclusive) that quotations of interest rates for the deposits
referred to in the definition of "LIBO Rate" in Section 1.2 are not
being provided in the relevant amounts or for the relevant maturities
for purposes of determining the rate of interest for such Loan as
provided in this Agreement; or
(b) the Agent determines (which determination shall be
conclusive) that the rates of interest referred to in the definition
of "LIBO Rate" in Section 1.2 upon the basis of which the rate of
interest for such Loan for such Interest Period is to be determined do
not accurately reflect the cost to the Lenders of making or
maintaining such Loan for such Interest Period,
then the Agent shall give the Borrower prompt notice thereof. So long as such
condition remains in effect, the Lenders shall be under no obligation to make
LIBO Rate Loans or to convert Loans of any other type into LIBO Rate Loans; and
the Borrower shall, on the last day of the then current Interest Period for each
outstanding LIBO Rate Loan, either prepay such LIBO Rate Loan or convert such
Loan into another type of Loan in accordance with Section 2.9. Before giving
such notice pursuant to this Section, the Lenders will designate a different
available applicable lending office for LIBO Rate Loans or take such other
action as the Borrower may request if such designation or action will avoid the
need to suspend the obligation of the Lenders
23
to make LIBO Rate Loans hereunder and will not, in the opinion of the Lenders,
be disadvantageous to the Lenders.
2.16 Illegality. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or any Lender's applicable
lending office to (a) honor its obligation to make LIBO Rate Loans hereunder or
(b) maintain LIBO Rate Loans hereunder, then the Agent shall promptly notify the
Borrower thereof; and the obligation of the Lenders hereunder to make LIBO Rate
Loans and to convert Floating Rate Loans into LIBO Rate Loans shall be suspended
until such time as each Lender may again make and maintain LIBO Rate Loans, and
the outstanding LIBO Rate Loans shall be converted into Floating Rate Loans in
accordance with Section 2.9. Before giving such notice pursuant to this Section,
the Lenders will designate a different available Applicable Lending Office for
LIBO Rate Loans or take such other action as the Borrower may request if such
designation or action will avoid the need to suspend the obligation of the
Lenders to make LIBO Rate Loans and will not, in the opinion of the Lenders, be
disadvantageous to the Lenders.
2.17 Limitations on Interest Periods. Each Interest Period selected by the
Borrower (a) which commences on the last Business Day of a calendar month (or,
with respect to any LIBO Rate Loan, any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Business Day of the appropriate subsequent calendar month, (b) which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or, if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day), (c) which
would otherwise commence before and end after the Commitment Termination Date
shall end on the Commitment Termination Date, and (d) shall have a duration of
not less than one month, as to any LIBO Rate Loan, and, if any Interest Period
would otherwise be a shorter period, the relevant Loan shall be a Floating Rate
Loan during such period.
2.18 Power of Attorney. The Borrower hereby designates the Agent as its
agent and attorney-in-fact, to act in its name, place, and stead for the purpose
of completing and delivering any and all of the letters in lieu of transfer
orders delivered by the Borrower to the Lender pursuant to Section 3.1 or
Section 5.5, including, without limitation, completing any blanks contained in
such letters and attaching exhibits thereto describing the relevant Collateral.
The Borrower hereby ratifies and confirms all that the Agent shall lawfully do
or cause to be done by virtue of this power of attorney and the rights granted
with respect to such power of attorney. This power of attorney is coupled with
the interests of the Agent in the Collateral, shall commence and be in full
force and effect as of the Closing Date and shall remain in full force and
effect and shall be irrevocable so long as any Obligation remains outstanding or
unpaid or any Commitment exists. The powers conferred on the Agent by this
appointment are solely to protect the interests of the Agent and the Lenders
under the Loan Documents and shall not impose any duty upon the Agent to
exercise any such powers. The Agent shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers and shall not be
responsible to the Borrower or any other Person for any act or failure to act
with respect to such powers, except for gross negligence or willful misconduct.
24
2.19 Facility Fee. The Borrower hereby agrees to pay to Compass Bank,
concurrently with the execution and delivery of this Agreement, a facility fee
in the amount of $10,000. The Borrower hereby further agrees to pay to each
Lender as of the date hereof other than Compass Bank, concurrently with the
execution and delivery of this Agreement, a facility fee in an amount equal to
3/8% times the pro rata share of each Lender in the Maximum Borrowing Base
Amount (and, to the extent additional Lenders are added after the date hereof by
reason of an assignment from Compass Bank with the prior written consent of the
Borrower, Borrower agrees that it shall pay to such Lenders, concurrently with
the effective date of such assignments, facility fees in an amount equal to 3/8%
times the pro rata shares of such Lenders in the Maximum Borrowing Base Amount).
ARTICLE III
CONDITIONS
The obligations of the Lenders to enter into this Agreement and to make
Loans (and the obligations of Compass Bank to Issue any Letter of Credit) are
subject to the satisfaction of the following conditions precedent:
3.1 Receipt of Loan Documents and Other Items. The Lenders shall have no
obligation under this Agreement unless and until all matters incident to the
consummation of the transactions contemplated herein shall be satisfactory to
the Lenders, and the Lenders shall have received, reviewed, and approved the
following documents and other items, appropriately executed when necessary and,
where applicable, acknowledged by one or more authorized officers of the
applicable Person or Persons, all in form and substance satisfactory to the
Lenders and dated, where applicable, of even date herewith or a date prior
thereto and acceptable to the Lenders:
(a) multiple counterparts of this Agreement, as requested by the
Lenders;
(b) the Notes;
(c) the Guaranties;
(d) copies of the organizational documents and all amendments
thereto of the Borrower and each Guarantor, accompanied by a
certificate issued by the secretary or an assistant secretary of the
Borrower or such Guarantor, as the case may be, to the effect that
each such copy is correct and complete;
(e) certificates of incumbency and signatures of all officers of
the Borrower and each Guarantor who are authorized to execute Loan
Documents on behalf of such entities, each such certificate being
executed by the secretary or an assistant secretary of the Borrower or
such Guarantor, as the case may be;
25
(f) copies of resolutions approving the Loan Documents and
authorizing the transactions contemplated herein and therein, duly
adopted by the boards of directors of the Borrower and each Guarantor,
accompanied by certificates of the secretary or an assistant secretary
of the Borrower or such Guarantor, as the case may be, to the effect
that such copies are true and correct copies of resolutions duly
adopted at a meeting or by unanimous consent of the board of directors
of the Borrower or such Guarantor, as the case may be, and that such
resolutions constitute all the resolutions adopted with respect to
such transactions, have not been amended, modified, or revoked in any
respect, and are in full force and effect as of the date of such
certificate;
(g) multiple counterparts, as requested by the Lenders, of the
following documents establishing Liens in favor of the Agent in and to
the Collateral securing the Obligations:
(i) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement from the
Borrower covering all Oil and Gas Properties of the Borrower and
all improvements, personal property, and fixtures related thereto,
and Financing Statements constituent thereto;
(ii) Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production, and Financing Statement from Lafitte
covering all Oil and Gas Properties of Lafitte and all
improvements, personal property, and fixtures related thereto, and
Financing Statements constituent thereto;
(iii) Security Agreements from the Borrower and the
Guarantors covering the Borrower Membership Interests, the Lafitte
Membership Interests and all other personal Property of the
Borrower and the Guarantors, and Financing Statements constituent
thereto; and
(iv) undated letters, in form and substance satisfactory to
the Agent, from the Borrower and Lafitte to each purchaser of
production and disburser of the proceeds of production from or
attributable to the Mortgaged Properties, together with additional
letters with the addressees left blank, authorizing and directing
the addressees to make future payments attributable to production
from the Mortgaged Properties directly to the Agent (with the use
of such letters of lieu to be subject to the restrictions set
forth in Section 5.8 hereof);
(h) certificates evidencing the Lafitte Membership Interests and
the Borrower Membership Interests, with stock powers or transfer
instruments, as the case may be, endorsed in blank, and Federal
Reserve Forms U-1 properly completed and executed;
26
(i) certificates dated as of a recent date from the Secretary of
State or other appropriate Governmental Authority evidencing the
existence or qualification and good standing of each of the Borrower
and the Guarantors in their jurisdictions of organization and in any
other jurisdictions where they do business;
(j) results of searches of the UCC Records of (i) the Secretary
of State of the States of Louisiana and Texas, in the name of the
Borrower, (ii) of the Secretary of State of the States of Louisiana
and Texas in the name of ▇▇▇▇▇▇▇▇ and (iii) of the Secretary of State
of the States of Louisiana and Texas in the name of Lafitte, each from
a source acceptable to the Agent and reflecting no Liens other than
Permitted Liens and no Liens against any Collateral;
(k) confirmation, acceptable to the Lenders, of the title to the
Mortgaged Properties, free and clear of Liens other than Permitted
Liens;
(l) all operating, lease, sublease, royalty, sales, exchange,
processing, farmout, bidding, pooling, unitization, communitization,
and other agreements relating to the Mortgaged Properties requested by
the Lenders;
(m) engineering reports covering the Mortgaged Properties;
(n) the opinion of counsel to the Borrower and the Guarantors
acceptable to the Lenders, in form and substance acceptable to the
Lenders;
(o) certificates evidencing the insurance coverage required
pursuant to Section 5.17 ;
(p) receipt by the Agent and the Lenders of all fees then
required to be paid pursuant to this Agreement or any of the other
Loan Documents; and
(q) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lenders may
reasonably request.
3.2 The Acquisition Portion. In addition to the conditions precedent
stated elsewhere herein, the Lenders shall not be obligated to make any Loan
which includes any of the Acquisition Portion unless the Lenders shall be
satisfied that the purchase price of the applicable acquisition is less than or
equal to 85% of the present net worth (discounted at 9%) of the reserves to be
acquired as determined by Lenders based on the Compass Bank Policy Price
Guidelines and that at least 85% of the reserves to be acquired are classified
as proved developed producing.
3.3 Each Loan. In addition to the conditions precedent stated elsewhere
herein, the Lenders shall not be obligated to make any Loan (and Compass Bank
shall not be obligated to issue any Letter of Credit) unless:
27
(a) the Borrower shall have delivered to the Agent a Borrowing
Request at least the requisite time prior to the requested date for
the relevant Loan or Letter of Credit; each statement or certification
made in such Borrowing Request shall be true and correct in all
material respects on the requested date for such Loan or Letter of
Credit;
(b) no Event of Default or Default shall exist or will occur as a
result of the making of the requested Loan or Letter of Credit;
(c) if requested by the Lenders, the Borrower shall have
delivered evidence satisfactory to the Lenders substantiating any of
the matters contained in this Agreement which are necessary to enable
the Borrower to qualify for such Loan or Letter of Credit;
(d) the Lenders shall have received, reviewed, and approved such
additional documents and items as described in Section 3.1 as may be
requested by the Lenders with respect to such Loan or Letter of
Credit;
(e) no event shall have occurred which, in the reasonable opinion
of the Lenders, could have a Material Adverse Effect;
(f) each of the representations and warranties contained in this
Agreement shall be true and correct and shall be deemed to be repeated
by the Borrower as if made on the requested date for such Loan or
Letter of Credit;
(g) the Guaranties and all of the Security Instruments shall be
in full force and effect and provide to the Agent the security
intended thereby;
(h) neither the consummation of the transactions contemplated
hereby nor the making of such Loan or Letter of Credit shall
contravene, violate, or conflict with any Requirement of Law;
(i) each of the Borrower and the Guarantors shall hold full legal
title to the Collateral pledged by such entity and be the sole
beneficial owner thereof;
(j) the Borrower shall have paid all fees and expenses payable by
the Borrower hereunder for which invoices have been presented as of or
prior to the date of the relevant Loan or Letter of Credit, including,
without limitation, estimated fees charged by filing officers and
other public officials incurred or to be incurred in connection with
the filing and recordation of any Security Instruments, for which
invoices have been presented as of or prior to the date of the
requested Loan or Letter of Credit; and
(k) all matters incident to the consummation of the transactions
hereby contemplated shall be satisfactory to the Lenders.
28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and extend credit to the
Borrower, each of the Borrower and the Guarantors represents and warrants to the
Lenders (which representations and warranties shall survive the delivery of the
Notes) that:
4.1 Due Authorization. The execution and delivery by the Borrower of this
Agreement and the borrowings hereunder, the execution and delivery by the
Borrower of the Notes, the repayment of the Notes and interest and fees provided
for in the Notes and this Agreement, the execution and delivery of the Security
Instruments by the Borrower and the performance of all obligations of the
Borrower under the Loan Documents are within the power of the Borrower, have
been duly authorized by all necessary corporate action by the Borrower, and do
not and will not (a) require the consent of any Governmental Authority, (b)
contravene or conflict with any Requirement of Law or the certificate or
articles of incorporation and bylaws or other organizational or governing
documents of the Borrower, (c) contravene or conflict with any indenture,
instrument, or other agreement to which the Borrower is a party or by which any
Property of the Borrower may be presently bound or encumbered, or (d) result in
or require the creation or imposition of any Lien in or upon any Property of the
Borrower other than as contemplated by the Loan Documents.
4.2 Corporate Existence. Each Related Party is duly organized, legally
existing, and in good standing under the laws of its state of organization and
is duly qualified as a foreign entity and is in good standing in all
jurisdictions wherein the ownership of Property or the operation of its business
necessitates same, other than those jurisdictions wherein the failure to so
qualify will not have a Material Adverse Effect.
4.3 Valid and Binding Obligations. All Loan Documents to which the
Borrower is a party, when duly executed and delivered by the Borrower, will be
the legal, valid, and binding obligations of such entity, enforceable against
the Borrower in accordance with their respective terms, subject, however, to the
effect of bankruptcy, insolvency, reorganization, moratorium, and similar laws
from time to time in effect relating to the rights and remedies of creditors and
to general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.4 Security Instruments. The provisions of each Security Instrument are
effective to create in favor of the Agent a legal, valid, and enforceable Lien
in the Collateral described therein, which Liens, assuming the possession by the
Agent of the certificates evidencing the Lafitte Membership Interests and the
Borrower Membership Interests, and the accomplishment of recording and filing in
accordance with applicable laws prior to the intervention of rights of other
Persons, shall constitute fully perfected first-priority Liens.
4.5 Title to Assets. Each Related Party has good and indefeasible title
to all of its Properties, free and clear of all Liens except Permitted Liens.
29
4.6 Scope and Accuracy of Financial Statements. The Financial Statements
of ▇▇▇▇▇▇▇▇ as of December 31, 1999 and as of September 30, 2000 provided to the
Lenders present fairly the financial position and results of operations and cash
flows of ▇▇▇▇▇▇▇▇ and its Subsidiaries in accordance with GAAP as at the
relevant point in time or for the period indicated, as applicable. No event or
circumstance has occurred since September 30, 2000, which could reasonably be
expected to have a Material Adverse Effect.
4.7 No Material Misstatements. No information, exhibit, statement, or
report furnished to the Lenders by or at the direction of any Related Party in
connection with this Agreement contains any material misstatement of fact or
omits to state a material fact or any fact necessary to make the statements
contained therein not misleading as of the date made or deemed made.
4.8 Liabilities, Litigation, and Restrictions. Other than as listed under
the heading "Liabilities" on Exhibit III, no Related Party has any liabilities,
direct, or contingent, which may materially and adversely affect its business or
operations or its ownership of any Collateral. Except as set forth under the
heading "Litigation" on Exhibit III, no litigation or other action of any nature
affecting any Related Party is pending before any Governmental Authority or, to
the best knowledge of the Borrower, threatened against or affecting any Related
Party. No unusual or unduly burdensome restriction, restraint or hazard exists
by contract, Requirement of Law, or otherwise relative to the business or
operations of any Related Party or the ownership and operation of its Property
other than such as relate generally to Persons engaged in business activities
similar to those conducted by such Related Party.
4.9 Authorizations; Consents. Except as expressly contemplated by this
Agreement, no authorization, consent, approval, exemption, franchise, permit, or
license of, or filing with, any Governmental Authority or any other Person is
required to authorize or is otherwise required in connection with the valid
execution and delivery by the Borrower or any Guarantor of the Loan Documents to
which it is a party or any instrument contemplated hereby, the repayment by the
Borrower of the Notes and interest and fees provided in the Notes and this
Agreement, or the performance by the Borrower or any Guarantor of its
Obligations.
4.10 Compliance with Laws. Each Related Party and its Properties are in
compliance with all applicable Requirements of Law, including, without
limitation, Environmental Laws, the Natural Gas Policy Act of 1978, as amended,
and ERISA.
4.11 ERISA. No Reportable Event has occurred with respect to any Single
Employer Plan, and each Single Employer Plan has complied with and been
administered in all material respects in accordance with applicable provisions
of ERISA and the Code. To the best knowledge of the Borrower, (a) no Reportable
Event has occurred with respect to any Multiemployer Plan, and (b) each
Multiemployer Plan has complied with and been administered in all material
respects with applicable provisions of ERISA and the Code. The present value of
all benefits vested under each Single Employer Plan (based on the assumptions
used to fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed the value of the assets of such Plan allocable to such vested
benefits. Neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan for
30
which there is any withdrawal liability. As of the most recent valuation date
applicable to any Multiemployer Plan, neither the Borrower nor any Commonly
Controlled Entity would become subject to any liability under ERISA if the
Borrower or such Commonly Controlled Entity were to withdraw completely from
such Multiemployer Plan. Neither the Borrower nor any Commonly Controlled Entity
has received notice that any Multiemployer Plan is Insolvent or in
Reorganization. To the best knowledge of the Borrower, no such Insolvency or
Reorganization is reasonably likely to occur. Based upon GAAP existing as of the
date of this Agreement and current factual circumstances, the Borrower has no
reason to believe that the annual cost during the term of this Agreement to the
Borrower and all Commonly Controlled Entities for post-retirement benefits to be
provided to the current and former employees of the Borrower and all Commonly
Controlled Entities under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) will, in the aggregate, have a Material Adverse Effect.
4.12 Environmental Laws. Except as described on Exhibit III under the
heading "Environmental Matters:"
(a) no Property of any Related Party is currently on or has ever
been on, or is adjacent to any Property which is on or has ever been
on, any federal or state list of Superfund Sites;
(b) no Hazardous Substances have been generated, transported,
and/or disposed of by any Related Party at a site which was, at the
time of such generation, transportation, and/or disposal, or has since
become, a Superfund Site;
(c) no Release of Hazardous Substances by any Related Party or
from, affecting, or related to any Property of any Related Party or
adjacent to any Property of any Related Party has occurred; and
(d) no Environmental Complaint has been received by any Related
Party.
4.13 Compliance with Federal Reserve Regulations. No transaction
contemplated by the Loan Documents is in violation of any regulations
promulgated by the Board of Governors of the Federal Reserve System, including,
without limitation, Regulations T, U, or X.
4.14 Investment Company Act Compliance. No Related Party is or is directly
or indirectly controlled by or acting on behalf of any Person which is an
"investment company" or an "affiliated person" of an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
4.15 Public Utility Holding Company Act Compliance. No Related Party is a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.16 Proper Filing of Tax Returns; Payment of Taxes Due. Each Related
Party has duly and properly filed its United States income tax return and all
other tax returns which are required to be filed and has paid all taxes due
except such as are being contested in good faith
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and as to which adequate provisions and disclosures have been made. The
respective charges and reserves on the books of each Related Party with respect
to taxes and other governmental charges are adequate.
4.17 Refunds. Except as described on Exhibit III under the heading
"Refunds," no orders of, proceedings pending before, or other requirements of,
the Federal Energy Regulatory Commission, the Texas Railroad Commission, or any
Governmental Authority exist which could result in any Related Party being
required to refund any material portion of the proceeds received or to be
received from the sale of hydrocarbons from any of its Properties.
4.18 Gas Contracts. Except as described on Exhibit III under the heading
"Gas Contracts," no Related Party (a) is obligated in any material respect by
virtue of any prepayment made under any contract containing a "take-or-pay" or
"prepayment" provision or under any similar agreement to deliver hydrocarbons
produced from or allocated to any of its Properties at some future date without
receiving full payment therefor within 90 days of delivery, or (b) is subject to
or has produced gas, in any material amount, subject to, or owns Properties
subject to, balancing rights of third parties or balancing duties under
governmental requirements, except as to such matters for which such Related
Party has established monetary reserves adequate in amount to satisfy such
obligations and has segregated such reserves from other accounts.
4.19 Intellectual Property. Each Related Party owns or is licensed to use
all Intellectual Property necessary to conduct all business material to its
condition (financial or otherwise), business, or operations as such business is
currently conducted. No claim has been asserted or is pending by any Person
with the respect to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any such Intellectual Property; and
neither the Borrower nor any Guarantor knows of any valid basis for any such
claim. The use of such Intellectual Property by the relevant Related Party does
not infringe on the rights of any Person, except for such claims and
infringements as do not, in the aggregate, give rise to any material liability
on the part of any Related Party.
4.20 Casualties or Taking of Property. Except as disclosed on Exhibit III
under the heading "Casualties," since September 30, 2000, neither the business
nor any Property of any Related Party has been materially adversely affected as
a result of any fire, explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance, embargo, requisition or taking of
Property, or cancellation of contracts, permits, or concessions by any
Governmental Authority, riot, activities of armed forces, or acts of God.
4.21 Locations of Borrower and Guarantors. The principal place of business
and chief executive office of the Borrower and Guarantors is located at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or at such other location
as the Borrower may have, by proper written notice hereunder, advised the Agent,
provided that such other location is within a state in which appropriate
financing statements from the Borrower or the applicable Guarantor, as the case
may be, in favor of the Agent have been filed.
4.22 Subsidiaries. ▇▇▇▇▇▇▇▇ has no Subsidiaries except the Borrower and
Lafitte, the Borrower has no Subsidiaries except Lafitte and Lafitte has no
Subsidiaries.
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4.23 Scope of Collateral. The Collateral constitutes all of the real and
personal Property owned by the Borrower and the Guarantors.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any Commitment
exists, the Borrower shall and shall cause each of its Subsidiaries to, and
▇▇▇▇▇▇▇▇ and Lafitte shall and shall cause each of their respective
Subsidiaries, to:
5.1 Maintenance and Access to Records. Keep adequate records, in
accordance with GAAP, of all its transactions so that at any time, and from time
to time, its true and complete financial condition may be readily determined,
and promptly following the reasonable request of the Agent, make such records
available for inspection by the Agent or any Lender and, at the expense of the
Borrower, allow the Agent or any Lender to make and take away copies thereof.
5.2 Quarterly Financial Statements; Compliance Certificates. Deliver to
each Lender, on or before the 45th day after the close of each quarterly period
of each fiscal year of ▇▇▇▇▇▇▇▇, (a) a copy of the unaudited consolidated and
consolidating Financial Statements of ▇▇▇▇▇▇▇▇ as at the close of such quarterly
period and from the beginning of such fiscal year to the end of such period,
such Financial Statements to be certified by the chief financial officer of
▇▇▇▇▇▇▇▇ as having been prepared in accordance with GAAP consistently applied
and as a fair presentation of the condition of ▇▇▇▇▇▇▇▇ and its Subsidiaries,
subject to changes resulting from normal year-end audit adjustments, and (b) a
Compliance Certificate.
5.3 Annual Financial Statements; Compliance Certificates. Deliver to each
Lender, on or before the 120th day after the close of each fiscal year of
▇▇▇▇▇▇▇▇, (a) a copy of the annual audited consolidated Financial Statements of
▇▇▇▇▇▇▇▇, together with the audit report issued in connection therewith, (b) a
copy of the annual unaudited consolidating Financial Statements of ▇▇▇▇▇▇▇▇, and
(c) a Compliance Certificate.
5.4 Oil and Gas Reserve Reports.
(a) Deliver to each Lender, no later than the last day of March
of each year during the term of this Agreement, engineering reports in
form and substance satisfactory to the Majority Lenders, certified by
any nationally- or regionally-recognized independent consulting
petroleum engineers acceptable to the Majority Lenders as fairly and
accurately setting forth (i) the proven and producing, shut-in,
behind-pipe, and undeveloped oil and gas reserves (separately
classified as such) attributable to the Oil and Gas Properties of each
of the Related Parties (designated by entity) as of January 1 of the
year for which such reserve reports are furnished, (ii) the aggregate
present value of the future net income with respect to such Oil and
Gas Properties, discounted at a stated per annum discount rate of such
reserves, (iii) projections of the annual rate of production,
33
gross income, and net income with respect to such reserves, and (iv)
information with respect to the "take-or-pay," "prepayment," and gas-
balancing liabilities of the Related Parties (designated by entity).
(b) Deliver to each Lender, no later than the last day of
September of each year during the term of this Agreement, engineering
reports in form and substance satisfactory to the Majority Lenders
prepared by or under the supervision of the chief petroleum engineer
or geologist of the Related Parties evaluating the Oil and Gas
Properties of the Related Parties (designated by entity) as of July 1
of the year for which such reserve reports are furnished and updating
the information provided in the reports pursuant to Section 5.4(a).
(c) Deliver to each Lender, on or before the 45th day after the
close of each month, a report of monthly production of its Oil and Gas
Properties, setting forth production volumes for oil, gas, other
hydrocarbons and water, broken out by major fields or by major ▇▇▇▇▇,
in each case to the satisfaction of the Majority Lenders.
(d) Each of the reports provided pursuant to clauses (a) and (b)
of this Section shall be submitted to the Lenders in ARIES or other
compatible electronic format. Each of the reports provided pursuant to
this Section shall be accompanied by additional data concerning
pricing, quantities of production from the Oil and Gas Properties,
volumes of production sold, purchasers of production, gross revenues,
expenses, and such other information and engineering and geological
data with respect thereto as the Majority Lenders may reasonably
request.
5.5 Hedging Position. Deliver to each Lender, on or before the 45th
day after the close of each month, a report of the position of the Borrower and
the Guarantors in respect of Hedging Agreements and of all Indebtedness with
respect to Hedging Agreements.
5.6 Title Opinions; Title Defects. Promptly upon the request of the
Agent, furnish to the Agent title opinions, in form and substance and by counsel
satisfactory to the Agent, or other confirmation of title acceptable to the
Agent, covering such Oil and Gas Properties of the Borrower as may be requested
by the Agent; and promptly, but in any event within 30 days after notice by the
Agent of any defect, material in the opinion of the Agent in value, in the title
of the Borrower to any of its Oil and Gas Properties, clear such title defects,
and, in the event any such title defects are not cured in a timely manner, pay
all related costs and fees incurred by the Agent or any Lender to do so.
5.7 Notices of Certain Events. Deliver to each Lender, immediately upon
having knowledge of the occurrence of any of the following events or
circumstances, a written statement with respect thereto, signed by a Responsible
Officer of the Borrower and setting forth the relevant event or circumstance and
the steps being taken with respect to such event or circumstance:
34
(a) any Default or Event of Default;
(b) any default or event of default under any contractual
obligation of any Related Party, or any litigation, investigation, or
proceeding between any Related Party and any Governmental Authority
which, in either case, if not cured or if adversely determined, as the
case may be, could reasonably be expected to have a Material Adverse
Effect;
(c) any litigation or proceeding involving any Related Party as a
defendant or in which any Property of any Related Party is subject to
a claim and in which the amount involved is $500,000 or more and which
is not covered by insurance or in which injunctive or similar relief
is sought;
(d) the receipt by any Related Party of any Environmental
Complaint;
(e) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority or other Person concerning
the environmental condition of, or relating to, any Property of any
Related Party, or adjacent to any Property of any Related Party
following any allegation of a violation of any Requirement of Law;
(f) any Release of Hazardous Substances by any Related Party or
from, affecting, or related to any Property of any Related Party, or
adjacent to any Property of any Related Party, or the violation of any
Environmental Law, or the revocation, suspension, or forfeiture of or
failure to renew, any permit, license, registration, approval, or
authorization which could reasonably be expected to have a Material
Adverse Effect;
(g) any Reportable Event or imminently expected Reportable Event
with respect to any Plan; any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan; the
institution of proceedings or the taking of any other action by the
PBGC, the Borrower or any Commonly Controlled Entity or Multiemployer
Plan with respect to the withdrawal from, or the termination,
Reorganization or Insolvency of, any Single Employer Plan or
Multiemployer Plan; or any Prohibited Transaction in connection with
any Plan or any trust created thereunder and the action being taken by
the Internal Revenue Service with respect thereto;
(h) the change in identity or address of any Person remitting to
the Borrower proceeds from the sale of hydrocarbon production from or
attributable to any Mortgaged Property;
(i) any change in the senior management of the Borrower or any
Guarantor;
35
(j) the Borrower's or any Guarantor's acquisition or ownership of
any estate (fee simple or leasehold) of real or personal Property,
wherever located, which is not included in the Collateral; and
(k) any other event or condition which could reasonably be
expected to have a Material Adverse Effect.
5.8 Letters in Lieu of Transfer Orders; Division Orders. Promptly
upon request by the Agent at any time and from time to time, and without
limitation on the rights of the Agent pursuant to Section 2.18, execute (or
cause to be executed) such letters in lieu of transfer orders, in addition to
the letters signed by the Borrower and Lafitte and delivered to the Agent in
satisfaction of the condition set forth in Section 3.1(h) and/or division and/or
transfer orders as are necessary or appropriate to transfer and deliver to the
Agent proceeds from or attributable to any Mortgaged Property. The Agent agrees
that none of the letters in lieu of transfer or division orders provided by the
Borrower pursuant to this Agreement will be sent to the addressees thereof and
the Agent shall not otherwise direct any purchaser of production from the
Mortgaged Property to make payments with respect thereto to the Agent prior to
the occurrence and except during the occurrence of an Event of Default, at which
time the Agent may, at its option and in addition to the exercise of any of its
other rights and remedies, send any or all of such letters and direct purchasers
of production from the Mortgaged Property to make payments with respect thereto
to the Agent.
5.9 Additional Information. Furnish to each Lender, within five days
after any material report (other than financial statements) or other
communication is sent by any Related Party to its stockholders or filed by any
Related Party with the Securities and Exchange Commission or any successor or
analogous Governmental Authority, copies of such report or communication and,
promptly upon the request of the Agent, such additional financial or other
information concerning the assets, liabilities, operations, and transactions of
any Related Party as the Agent may from time to time request; and notify the
Agent not less than ten Business Days prior to the occurrence of any condition
or event that may change the proper location for the filing of any financing
statement or other public notice or recording for the purpose of perfecting a
Lien in any Collateral, including, without limitation, any change in name or the
location of the principal place of business or chief executive office of any
Related Party; and upon the request of the Agent, execute such additional
Security Instruments as may be necessary or appropriate in connection therewith.
5.10 Compliance with Laws. Comply with all applicable Requirements of Law,
including, without limitation, (a) the Natural Gas Policy Act of 1978, as
amended, (b) ERISA, (c) Environmental Laws, and (d) all permits, licenses,
registrations, approvals, and authorizations (i) related to any natural or
environmental resource or media located on, above, within, in the vicinity of,
related to or affected by any Property of any Related Party, (ii) required for
the performance of the operations of any Related Party, or (iii) applicable to
the use, generation, handling, storage, treatment, transport, or disposal of any
Hazardous Substances; and cause all employees, crew members, agents,
contractors, subcontractors, and future lessees (pursuant to appropriate lease
provisions) of each Related Party, while such Persons are acting within the
36
scope of their relationship with such Related Party, to comply with all such
Requirements of Law as may be necessary or appropriate to enable such Related
Party to so comply.
5.11 Payment of Assessments and Charges. Pay all taxes, assessments,
governmental charges, rent, and other Indebtedness which, if unpaid, might
become a Lien against its Property, except any of the foregoing being contested
in good faith and as to which adequate reserve in accordance with GAAP has been
established or unless failure to pay would not have a Material Adverse Effect.
5.12 Maintenance of Corporate Existence and Good Standing. Maintain its
corporate existence or qualification and good standing in its jurisdictions of
incorporation and in all jurisdictions wherein the Property now owned or
hereafter acquired or business now or hereafter conducted necessitates same.
5.13 Further Assurances. Promptly cure any defects in the execution and
delivery of any of the Loan Documents and all agreements contemplated thereby,
and execute, acknowledge, and deliver such other assurances and instruments as
shall, in the opinion of the Lenders, be necessary to fulfill the terms of the
Loan Documents.
5.14 Fees and Expenses.
(a) Upon request by the Agent, promptly pay all reasonable fees
and expenses of the Agent in connection with the preparation,
negotiation, syndication, execution, delivery, administration, and
enforcement of this Agreement and the other Loan Documents and any
amendments, restatements, or supplements thereto, the satisfaction of
the conditions precedent set forth herein, the filing and recordation
of Security Instruments, and the consummation of the transactions
contemplated in the Loan Documents, including, without limitation,
fees and expenses of legal counsel.
(b) Upon request by the Agent, promptly pay (to the fullest
extent permitted by law) for all amounts reasonably expended,
advanced, or incurred by or on behalf of the Agent or any Lender to
satisfy any obligation of the Borrower or any Guarantor under any of
the Loan Documents; to collect the Obligations; to enforce the rights
of the Agent or any Lender under any of the Loan Documents; and to
protect the Properties or business of the Borrower and the Guarantors,
including, without limitation, the Collateral, which amounts shall be
deemed compensatory in nature and liquidated as to amount upon notice
to the Borrower by the Agent and which amounts shall include, but not
be limited to (i) all court costs, (ii) reasonable fees and expenses
of legal counsel, auditors and accountants, engineers, and
environmental and insurance consultants, (iii) fees and expenses
incurred in connection with the participation by the Agent or the
applicable Lender as a member of the creditors' committee in a case
commenced under any Insolvency Proceeding, (iv) fees and expenses
incurred in connection with lifting the automatic stay prescribed in
(S)362 Title 11 of the United States Code, and (v) fees and expenses
incurred in connection with any action pursuant to (S)1129 Title
37
11 of the United States Code, all reasonably incurred by the Agent or
the applicable Lender in connection with the collection of any sums
due under the Loan Documents, together with interest at the per annum
interest rate equal to the Default Rate, calculated on a basis of a
calendar year of 360 days, counting the actual number of days elapsed,
on each such amount from the date of notification that the same was
expended, advanced, or incurred by the Agent or the applicable Lender
until the date it is repaid, with the obligations under this Section
surviving the non-assumption of this Agreement in a case commenced
under any Insolvency Proceeding and being binding upon the Borrower
and/or a trustee, receiver, custodian, or liquidator of the Borrower
appointed in any such case.
5.15 Operation of Oil and Gas Properties. Develop, maintain, and operate
its Oil and Gas Properties in a prudent and workmanlike manner in accordance
with industry standards. All contract operators shall be paid monthly and all
royalties shall either be paid monthly or set aside in a separate account for
future funding in a manner acceptable to the Agent.
5.16 Maintenance and Inspection of Properties. Maintain all of its
tangible Properties in good repair and condition, ordinary wear and tear
excepted; make all necessary replacements thereof and operate such Properties in
a good and workmanlike manner; and permit any authorized representative of the
Agent or any Lender to visit and inspect, any tangible Property of any Related
Party. So long as no Event of Default shall have occurred and be continuing,
the Borrower shall not be required to reimburse any costs or expenses of such
visits and inspections. If an Event of Default has occurred and is continuing,
such visits and inspections shall be at the expense of the Borrower.
5.17 Maintenance of Insurance. Maintain insurance with respect to its
Properties and businesses against such liabilities, casualties, risks, and
contingencies as is customary in the relevant industry and sufficient to prevent
a Material Adverse Effect, all such insurance to be in amounts and from insurers
acceptable to the Lenders and naming the Agent as loss payee, and, upon any
renewal of any such insurance and at other times upon request by the Agent,
furnish to the Agent evidence, satisfactory to the Lenders, of the maintenance
of such insurance. The Agent shall have the right to collect, and the Borrower
hereby assigns to the Agent, any and all monies that may become payable under
any policies of insurance relating to business interruption or by reason of
damage, loss, or destruction of any of the Collateral. In the event of any
damage, loss, or destruction for which insurance proceeds relating to business
interruption or Collateral exceed $2,000,000, the Agent may, at its option (and
shall, upon written request by the Majority Lenders), apply all such sums or any
part thereof received by it toward the payment of the Obligations, whether
matured or unmatured, application to be made first to interest and then to
principal, and shall deliver to the Borrower the balance, if any, after such
application has been made. In the event of any such damage, loss, or
destruction for which insurance proceeds are $2,000,000 or less or insurance
proceeds which are not attributable to Collateral or business interruption,
provided that no Default or Event of Default has occurred and is continuing, the
Agent shall deliver any such proceeds received by it to the Borrower.
5.18 Maintenance of Operating Accounts. Maintain its primary operating
banking accounts with the Agent.
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5.19 Indemnification. INDEMNIFY AND HOLD THE AGENT, THE LENDERS AND THEIR
SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND
AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE AGENT OR ANY LENDER UNDER ANY
SECURITY INSTRUMENT HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, LOSSES,
DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES, ADMINISTRATIVE AND JUDICIAL
PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS, REQUIREMENTS AND
ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES INCURRED IN
CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND
EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF ANY
RELATED PARTY, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY
CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF ANY RELATED PARTY, WHETHER
PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY ANY RELATED PARTY, OR ANY
PREDECESSOR IN TITLE, EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF ANY
RELATED PARTY OR ANY OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH
PROPERTY, IN CONNECTION WITH THE HANDLING, TREATMENT, REMOVAL, STORAGE,
DECONTAMINATION, CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS
SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY
RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF ANY RELATED PARTY, (D) ANY
CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH
THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCES BY ANY RELATED PARTY, OR ANY EMPLOYEE, AGENT, CONTRACTOR,
OR SUBCONTRACTOR OF ANY RELATED PARTY WHILE SUCH PERSONS ARE ACTING WITHIN THE
SCOPE OF THEIR RELATIONSHIP WITH ANY RELATED PARTY, IRRESPECTIVE OF WHETHER ANY
OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE
REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY LOAN
DOCUMENT, OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING, WITHOUT
LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM NEGLIGENCE,
WHETHER SOLE OR CONCURRENT, ON THE PART OF THE AGENT OR ANY LENDER OR ANY OF
THEIR SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT,
OR AFFILIATES OR ANY TRUSTEE FOR THE BENEFIT OF THE AGENT OR ANY LENDER UNDER
ANY SECURITY INSTRUMENT, BUT EXCLUDING ANY OCCURRENCE RESULTING FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH PERSONS; WITH THE FOREGOING INDEMNITY
SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or any Commitment
exists, the Borrower will not, and will not permit any of its Subsidiaries to,
and ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ will not, and will not permit any of their respective
Subsidiaries to:
39
6.1 Indebtedness; Contingent Obligations. Create, incur, assume, or suffer
to exist any Indebtedness or Contingent Obligation, whether by way of loan or
otherwise; provided, however, the foregoing restriction shall not apply to (a)
the Obligations, (b) unsecured accounts payable incurred in the ordinary course
of business, which are not unpaid in excess of 60 days beyond invoice date or
are being contested in good faith and as to which such reserve as is required by
GAAP has been made (accounts payable on extended terms shall not be allowed
under this exception), (c) performance guarantees, escrow accounts, and
performance surety or other bonds provided in the ordinary course of business,
(d) Indebtedness with respect to Hedging Agreements entered into with a Person
acceptable to the Lenders, provided that such Hedging Agreements relating to
hydrocarbons cover not more than 75% of the projected monthly production from
proved developed producing Oil and Gas Properties of the Borrower and Lafitte,
and provide for strike prices which, at the time any such Hedging Agreement is
entered into, are not less than the energy product pricing guidelines of the
Agent at such time, (e) performance guaranties, escrow accounts, performance
surety or other bonds provided with respect to the plugging and abandonment
obligations owed by Lafitte to Stone Energy Corporation with respect to Oil and
Gas Properties in which Lafitte owns a working interest, (f) trade credit
(including authorizations for expenditures with respect to Oil and Gas
Properties) incurred or operating leases entered into in the ordinary course of
business; (g) letters of credit issued by Compass Bank for the benefit of
▇▇▇▇▇▇▇▇ or any of its subsidiaries solely for the purpose of supporting hedging
transactions permitted hereunder in an aggregate face amount not to exceed, at
any one time outstanding, $3,000,000.
6.2 Liens. Create, incur, assume, or suffer to exist any Lien on any of
its Properties, whether now owned or hereafter acquired; provided, however, the
foregoing restrictions shall not apply to Permitted Liens.
6.3 Sales of Assets. Without the prior written consent of the Lenders,
sell, transfer, or otherwise dispose of, in one or any series of transactions,
any stock of any Subsidiary, any Collateral, or any other assets, whether now
owned or hereafter acquired, or enter into any agreement to do so; provided,
however, that, so long as no Default or Event of Default shall have occurred
which is continuing and no Borrowing Base deficiency shall then exist, the
foregoing restriction shall not apply to (a) the sale of hydrocarbons or
inventory in the ordinary course of business provided that no contract for the
sale of hydrocarbons shall obligate any Related Party to deliver hydrocarbons
produced from any Property at some future date without receiving full payment
therefor within 90 days of delivery, (b) the sale or other disposition of
Property destroyed, lost, worn out, damaged, or having only salvage value or no
longer used or useful in its business, (c) the sale or other disposition of
other assets (excluding any stock of any Subsidiary) which are not material to
the operations of ▇▇▇▇▇▇▇▇ and its Subsidiaries, taken as a whole, provided that
any mandatory prepayment required as a result thereof is made at the time of
such sale or disposition or (d) the sale or other disposition of Mortgaged
Properties constituting not more than ten percent (10%) of the net present value
of the oil and gas properties which comprise the Borrowing Base, as determined
by Agent, in the aggregate during the term of this Agreement, in which event the
Borrowing Base shall be adjusted by Agent and any mandatory prepayment required
as a result thereof is made at the time of such sale or disposition.
40
6.4 Leasebacks. Enter into any agreement to sell or transfer any Property
and thereafter rent or lease as lessee such Property or other Property intended
for the same use or purpose as the Property sold or transferred.
6.5 Loans; Advances; Investments. Make or agree to make or allow to
remain outstanding any loans or advances to or Investments in, or purchase or
otherwise acquire all or substantially all of the assets of any Person, or form
any new Subsidiaries; provided, however, the foregoing restrictions shall not
apply to (a) advances or extensions of credit in the form of accounts receivable
incurred in the ordinary course of business and upon terms common in the
industry for such accounts receivable, (b) advances to employees for the payment
of expenses in the ordinary course of business, (c) loans, advances, or
Investments by the Borrower to any Guarantor, by any Guarantor to the Borrower
or by any Guarantor to any other Guarantor, (d) Investments in the form of (i)
debt securities issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof, with maturities of
no more than one year, (ii) commercial paper of a domestic issuer rated at the
date of acquisition at least P-2 by ▇▇▇▇▇'▇ Investor Service, Inc. or A-2 by
Standard & Poor's Ratings Services and with maturities of no more than one year
from the date of acquisition, or (iii) repurchase agreements covering debt
securities or commercial paper of the type permitted in this Section,
certificates of deposit, demand deposits, eurodollar time deposits, overnight
bank deposits and bankers' acceptances, with maturities of no more than one year
from the date of acquisition, issued by or acquired from or through any Lender
or any bank or trust company organized under the laws of the United States or
any state thereof and having capital surplus and undivided profits aggregating
at least $100,000,000, (e) other short-term Investments similar in nature and
degree of risk to those described in clause (d) of this Section, or (f) other
Investments not to exceed $1,000,000 in the aggregate.
6.6 Changes in Corporate Structure. Without the prior written consent of
the Lenders, which will not be unreasonably withheld, enter into any transaction
of consolidation, merger, or amalgamation; liquidate, wind up, or dissolve (or
suffer any liquidation or dissolution).
6.7 Dividends and Distributions. Declare, pay, or make, whether in cash
or other Property, any dividend or distribution on, any share of any class of
its capital stock or other equity interests at any time; provided, however, the
foregoing restrictions shall not apply to dividends on the preferred stock of
▇▇▇▇▇▇▇▇ under the present terms of such preferred stock so long as no Default
or Event of Default shall have occurred which is continuing (or would arise by
reason of payment of such dividends).
6.8 Transactions with Affiliates. Directly or indirectly, enter into any
transaction (including the sale, lease, or exchange of Property or the rendering
of service) with any of its Affiliates, other than upon fair and reasonable
terms no less favorable than could be obtained in an arm's length transaction
with a Person which was not an Affiliate.
6.9 Lines of Business. Expand, on its own or through any Subsidiary, into
any line of business other than those in which it is engaged as of the date
hereof.
41
6.10 ERISA Compliance. Permit any Plan maintained by it or any Commonly
Controlled Entity to (a) engage in any Prohibited Transaction, (b) incur any
"accumulated funding deficiency," as such term is defined in Section 302 of
ERISA, or (c) terminate in a manner which could result in the imposition of a
Lien on any Property of any Related Party pursuant to Section 4068 of ERISA; or
assume an obligation to contribute to any Multiemployer Plan; or acquire any
Person or the assets of any Person which has now or has had at any time an
obligation to contribute to any Multiemployer Plan.
6.11 Consolidated Tangible Net Worth. Permit, as of the close of each
fiscal quarter ending on or after September 30, 2000, Consolidated Tangible Net
Worth to be less than the sum of (i) $22,500,000, plus (ii) for each fiscal
quarter after September 30, 2000 with positive Consolidated Net Income, 50% of
the Consolidated Net Income of such fiscal quarter, plus (iii) 100% of all cash
equity proceeds of each offering transaction, net of expenses incurred in
connection therewith, after September 30, 2000.
6.12 EBITDAX to Interest Expense Ratio. Permit, as of the close of each
fiscal quarter ending on or after September 30, 2000, the ratio of EBITDAX for
such fiscal quarter to Interest Expense for such fiscal quarter to be less than
3.00 to 1.00.
6.13 Current Ratio. Permit, as of the close of each fiscal quarter ending
on or after September 30, 2000, the ratio of (a) the sum of current assets of
▇▇▇▇▇▇▇▇ (determined on a consolidated basis and in accordance with GAAP) plus
the Available Commitment to (b) current liabilities of ▇▇▇▇▇▇▇▇ (determined on a
consolidated basis and in accordance with GAAP) (other than any such current
liabilities representing obligations to pay the Loans or to reimburse Letter of
Credit Liabilities) to be less than 1.00 to 1.00.
ARTICLE VII
EVENTS OF DEFAULT
7.1 Enumeration of Events of Default. Any of the following events shall
constitute an Event of Default:
(a) default shall be made in the payment when due of any
installment of principal or interest under this Agreement or the Notes
or in the payment when due of any fee or other sum payable under any
Loan Document and, with respect to the payment of interest only, such
default shall continue for three days;
(b) default shall be made by the Borrower or any Guarantor in the
due observance or performance of any of their respective obligations
under the Loan Documents, other than as described in Section 7.1(a)
above or Section 7.1(c) below, and with respect to default in the
observance or performance of obligations under Article V or under
Section 6.11 only, such default shall continue for 30 days after the
earlier of notice thereof to the Borrower by the Agent or knowledge
thereof by the Borrower or any Guarantor;
42
(c) any representation or warranty made by the Borrower or any
Guarantor in any of the Loan Documents proves to have been untrue in
any material respect or any representation, statement (including
Financial Statements), certificate, or data furnished or made to the
Agent or any Lender in connection herewith proves to have been untrue
in any material respect as of the date the facts therein set forth
were stated or certified;
(d) default shall be made by any Related Party (as principal or
guarantor or other surety) in the payment or performance of any bond,
debenture, note, or other Indebtedness exceeding $100,000 or under any
credit agreement, loan agreement, indenture, promissory note, or
similar agreement or instrument executed in connection with any of the
foregoing, and such default shall remain unremedied for in excess of
the period of grace, if any, with respect thereto;
(e) any Related Party shall (i) apply for or consent to the
appointment of a receiver, trustee, or liquidator of it or all or a
substantial part of its assets, (ii) file a voluntary petition
commencing an Insolvency Proceeding, (iii) make a general assignment
for the benefit of creditors, (iv) be unable, or admit in writing its
inability, to pay its debts generally as they become due, or (v) file
an answer admitting the material allegations of a petition filed
against it in any Insolvency Proceeding;
(f) an order, judgment, or decree shall be entered against any
Related Party by any court of competent jurisdiction or by any other
duly authorized authority, on the petition of a creditor or otherwise,
granting relief in any Insolvency Proceeding or approving a petition
seeking reorganization or an arrangement of its debts or appointing a
receiver, trustee, conservator, custodian, or liquidator of it or all
or any substantial part of its assets, and such order, judgment, or
decree shall not be dismissed or stayed within 30 days;
(g) the levy against any significant portion of the Property of
any Related Party, or any execution, garnishment, attachment,
sequestration, or other writ or similar proceeding which is not
permanently dismissed or discharged within 30 days after the levy;
(h) a final and non-appealable order, judgment, or decree shall
be entered against any Related Party for money damages and/or
Indebtedness due in an amount in excess of $1,000,000, and such order,
judgment, or decree shall not be dismissed or stayed within 30 days;
(i) any Related Party shall have (i) concealed, removed, or
diverted, or permitted to be concealed, removed, or diverted, any part
of its Property, with intent to hinder, delay, or defraud its
creditors or any of them, (ii) made any transfer of its Property to or
for the benefit of a creditor at a time when other creditors similarly
situated have not been paid, or (iii) shall have suffered or
permitted, while insolvent, any creditor to obtain a Lien upon any of
its Property
43
through legal proceedings or distraint which is not vacated within 30
days from the date thereof;
(j) any Guaranty shall for any reason cease to be in full force
and effect or the Security Instruments shall for any reason not, or
cease to, create valid and perfected first-priority Liens against all
of the real and personal Property of the Borrower and the Guarantors
(including the Borrower Membership Interests and the Lafitte
Membership Interests);
(k) any payment of royalties on Oil and Gas Properties of any
Related Party shall not be made when due or any account payable of any
Related Party (except as the Lenders may expressly agree in writing)
shall not be paid within sixty (60) days of invoice date; or
(l) any Change of Control shall occur; or
(m) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving
any Plan; any "accumulated funding deficiency" (as defined in Section
302 of ERISA), whether or not waived, shall exist with respect to any
Plan for which an excise tax is due or would be due in the absence of
a waiver; 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 commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Lenders,
likely to result in the termination of such Plan for purposes of Title
IV of ERISA; any Single Employer Plan shall terminate for purposes of
Title IV of ERISA; the Borrower or any Commonly Controlled Entity
shall incur, or in the reasonable opinion of the Lenders, be likely to
incur any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer Plan; or any other
event or condition shall occur or exist with respect to a Plan and the
result of such events or conditions referred to in this Section 7.1(n)
could subject the Borrower or any Commonly Controlled Entity to any
tax (other than an excise tax under Section 4980 of the Code), penalty
or other liabilities which taken in the aggregate would have a
Material Adverse Effect and any such circumstance shall exist for in
excess of 30 days.
7.2 Remedies.
(a) Upon the occurrence of an Event of Default specified in
Section 7.1(g) or Section 7.1(h), immediately and without notice, (i)
all Obligations shall automatically become immediately due and
payable, without presentment, demand, protest, notice of protest,
default, or dishonor, notice of intent to accelerate maturity, notice
of acceleration of maturity, or other notice of any kind, except as
may be provided to the contrary elsewhere herein, all of which are
hereby expressly waived by the Borrower; (ii) the Commitment shall
44
immediately cease and terminate unless and until reinstated by the
Agent in writing; and (iii) the Agent is hereby authorized to at any
time and from time to time (and shall, upon written instructions from
the Majority Lenders), without notice to the Borrower (any such notice
being expressly waived by the Borrower), set-off and apply any and all
deposits (general or special, time or demand, provisional or final)
held by the Agent or any Lender and any and all other indebtedness at
any time owing by the Agent or any Lender to or for the credit or
account of the Borrower against any and all of the Obligations.
(b) Upon the occurrence of any Event of Default other than those
specified in Section 7.1(g) or Section 7.1(h), (i) the Agent may (and
shall, upon written instructions from the Majority Lenders), by notice
to the Borrower, declare all Obligations immediately due and payable,
without presentment, demand, protest, notice of protest, default, or
dishonor, notice of intent to accelerate maturity, notice of
acceleration of maturity, or other notice of any kind, except as may
be provided to the contrary elsewhere herein, all of which are hereby
expressly waived by the Borrower; (ii) the Commitment shall
immediately cease and terminate unless and until reinstated by the
Agent in writing; (iii) the Agent may (and shall, upon written
instructions from the Majority Lenders) require Borrower to pay to
Agent, in immediately available funds, an amount equal to the then
aggregate amount available for drawings under all Letters of Credit
(which funds shall be held by Agent as Cover) and (iv) the Agent is
hereby authorized to at any time and from time to time (and shall,
upon written instructions from the Majority Lenders), without notice
to the Borrower (any such notice being expressly waived by the
Borrower), set-off and apply any and all deposits (general or special,
time or demand, provisional or final) held by the Agent or any Lender
and any and all other indebtedness at any time owing by the Agent or
any Lender to or for the credit or account of the Borrower against any
and all of the Obligations although such Obligations may be unmatured.
(c) Upon the occurrence of any Event of Default, the Agent may,
in addition to the foregoing in this Section, exercise any or all of
its rights and remedies provided by law or pursuant to the Loan
Documents.
ARTICLE VIII
The Agent
8.1 Appointment of Agent. Each Lender hereby irrevocably appoints and
authorizes Agent to act on such Lender's behalf and to exercise such powers
under the Loan Documents as are specifically delegated to or required of Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by the Loan Documents
(including, without limitation, enforcement or collection of the Notes), Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Lenders,
and such instructions shall be binding upon all Lenders and
45
all holders of the Notes; provided that Agent shall not be required to take any
action which it reasonably believes may (1) expose it to personal liability or
(2) be contrary to the Credit Documents or applicable Legal Requirements.
8.2 Limitation on Liability of Agent. Neither Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it under or in connection with the Loan Documents (1)
with the consent or at the request of the Majority Lenders or (2) in the absence
of its or their own gross negligence or willful misconduct (IT BEING THE EXPRESS
INTENTION OF LENDERS THAT AGENT AND ITS DIRECTORS, OFFICERS, AGENTS AND
EMPLOYEES SHALL HAVE NO LIABILITY FOR ACTIONS AND OMISSIONS UNDER THE CREDIT
DOCUMENTS RESULTING FROM ITS OR THEIR ORDINARY OR CONTRIBUTORY NEGLIGENCE).
Without limiting the generality of the foregoing, Agent (1) may treat the payee
of each Note as the holder thereof until it receives written notice of the
assignment or transfer thereof, in form and substance satisfactory to Agent,
signed by such payee; (2) may consult with legal counsel (including counsel for
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (3)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations made in or in
connection with the Loan Documents, other than those made by Agent; (4) except
as otherwise expressly provided herein, shall not have any duty to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions of the Loan Documents or to inspect the Property (including the books
and records) of Borrower; (5) shall not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Loan Documents, and (6) shall incur no liability under or with respect to
the Loan Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopier, cable or telex)
reasonably believed by it to be genuine and signed or sent by the proper party
or parties.
8.3 Agent also a Lender. With respect to its Loans and Notes and its pro
rata share of the Commitment, Compass Bank shall have the same rights and powers
under the Loan Documents as any other Lender and may exercise the same as though
it were not Agent. The term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include Compass Bank in its individual capacity. Compass
Bank and its Affiliates may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with, Borrower
and any Person who may do business with or own securities of Borrower, all as if
it was not the Agent and without any duty to account therefor to Lenders.
8.4 Credit Decision by Each Lender. Each Lender acknowledges and agrees
that it has, independently and without reliance upon Agent or any other Lender
and based on the financial statements referred to in Section 4.6 hereof and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges and agrees that it will, independently and without reliance upon
Agent or any other Lender and based on such documents and information as it
46
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement.
8.5 Agent Not Required to Act. Agent shall not be required to take any
action hereunder or to prosecute or defend any suit in respect of the Loan
Documents unless indemnified to its satisfaction by Lenders against loss, cost,
liability and expense. If any indemnity furnished to Agent shall become
impaired, it may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given. In addition,
Lenders agree to indemnify Agent (to the extent not reimbursed by Borrower), pro
rata in accordance with their respective Commitments, from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by, or asserted against Agent in any way relating to
or arising out of the Loan Documents or any action taken or omitted by Agent
under the Loan Documents; provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of the Agent. EACH LENDER AGREES, HOWEVER,
THAT IT EXPRESSLY INTENDS UNDER THIS SECTION TO INDEMNIFY AGENT RATABLY AS
AFORESAID FOR ALL SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE AGENT. Without
limitation of the foregoing, each Lender agrees to reimburse Agent promptly upon
demand, pro rata in accordance with their respective Commitments, for any out-
of-pocket expenses (including reasonable counsel fees) incurred by Agent in
connection with the preparation, execution, administration, or enforcement of,
or legal advice in respect of rights or responsibilities under, the Loan
Documents to the extent that Agent is not reimbursed for such expenses by
Borrower. The provisions of this Section shall survive the termination of this
Agreement and/or the payment or assignment of any of the Notes.
8.6 Agent's Knowledge. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless it
shall have received notice from Borrower, a Guarantor or a Lender referring to
this Agreement, describing such Default or Event of Default and stating that
such notice is a "notice of default." If Agent receives such a notice, it shall
give notice thereof to Lenders; provided that if such notice is received from a
Lender, Agent also shall give notice thereof to Borrower. Agent shall be
entitled to take action or refrain from taking action with respect to such
Default or Event of Default as provided in this Article.
8.7 Agent May Resign. Agent may resign at any time by giving written
notice thereof to Lenders and Borrower and may be removed as Agent under the
Loan Documents at any time with or without cause by the Majority Lenders. Upon
any such resignation or removal, the Majority Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed
by the Majority Lenders, and shall have accepted such appointment, within 30
days after the notice of resignation or removal, then the retiring Agent may, on
behalf of Lenders, appoint a successor, which shall be a commercial bank
organized under the laws of the United States or of any State thereof and having
a combined capital and surplus of at least
47
$100,000,000. Upon the acceptance of any appointment as Agent under the Loan
Documents by a successor, such successor shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent
and the retiring Agent shall be discharged from its duties and obligations under
the Loan Documents. After the resignation or removal of Agent under the Credit
Documents, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
8.8 Lending Procedures. Agent shall forward a copy of each Borrowing
Request to Lenders promptly upon each receipt. Each Lender shall provide Agent
with such Lender's pro rata share (based on their respective Commitments) of
each requested Loan in immediately available funds no later than the date
Borrower has requested such Loan to be made. If any Lender fails to so provide
funds to Agent, then Agent may (but shall not be obligated to) advance to
Borrower such Lender's pro rata share of such requested Loan; such advance shall
be payable by such Lender on demand and shall bear interest at the same rate as
such Loan. Agent shall disburse to Lenders all funds received by it from or on
account of Borrower pursuant to the Loan Documents pro rata in accordance with
the respective Commitment by wire transfer of immediately available funds (1) if
such funds are received by Agent prior to 12:00 noon, Houston time, then on the
day of receipt and (2) if such funds are received by Agent after 12:00 noon,
then during the next Business Day, without interest, premium or penalty thereon.
If Agent does not so disburse such funds, then such funds shall be payable by
Agent on demand and shall bear interest from the day when due at the Federal
Funds Rate. If a Lender owes any amount to Agent pursuant to this Agreement,
then Agent shall give notice thereof, specifying the amount thereof and
reasonable detail as to the determination thereof, to such Lender and the same
shall be due and payable 15 days after the date of such notice and the provision
of such detail. If a Lender does not pay the amount so due from such Lender by
such date, then such amount shall be payable on demand and shall bear interest
from the date when due at the Federal Funds Rate (except as provided herein
regarding the failure of a Lender to advance its pro rata share of any Loan or
any draw under a Letter of Credit).
8.9 Letters of Credit. Each Lender hereby irrevocably agrees to purchase,
and Compass Bank hereby irrevocably agrees to sell, an undivided interest in
each Letter of Credit and each draw under each Letter of Credit in an amount
equal to such Lender's pro rata share (based on their respective Commitments) of
such draw, without further action by any party hereto. Compass Bank shall
notify each Lender of the occurrence of a draw and such Lender's pro rata share
thereof, and each Lender shall deliver immediately available funds equal to its
pro rata share of such draw to Compass Bank no later than the Business Day after
such Lender receives such notice; if a Lender fails to so deliver its portion of
a draw to Compass, then such portion shall bear interest at the Past Due Rate
until paid; provided that no Lender shall be obligated to pay to Compass Bank
its pro rata share of any unreimbursed draw under a Letter of Credit to the
extent it arises out of a wrongful payment made by Compass Bank as a result of
its own gross negligence or willful misconduct. Upon each reimbursement of a
draw (whether by Borrower or a Guarantor and whether in whole or in part)
received by Compass Bank, Compass Bank shall immediately deliver the same to
Agent for distribution in accordance with this Agreement.
48
8.10 Receipts to be Shared. If a Lender obtains payment from or on account
of the Borrower, whether directly, as a result of an offset or otherwise, then
such Lender shall promptly acquire interests in the Loans, the Loan Documents
and the Commitment from the other Lenders with the result that each Lender will
maintain its pro rata share of the Obligations.
ARTICLE IX
MISCELLANEOUS
9.1 Transfers; Participations.
(a) The Borrower may not assign any of its rights or obligations
under any Loan Document without the prior consent of the Agent and the
Lenders.
(b) Any Lender may grant participations in the Obligations or any
portion thereof to any investment or commercial bank, savings and loan
institution, insurance company, trust company, or affiliate of such
Lender (such grantee, a "Participant"), provided that such Lender
shall retain the exclusive right and obligation to administer the
Loans and Letters of Credit and the grant of any participation shall
not relieve such Lender of its obligations under this Agreement or
under any of the other Loan Documents. In addition, with the consent
of the Agent and (so long as no Event of Default shall have occurred
which is continuing) the Borrower, which will not be unreasonably
withheld, any Lender may sell, transfer, or assign the Obligations or
any portion thereof to any financial institution (such assignee, a
"Transferee"). The Borrower agrees that each Transferee may exercise
all rights (including, without limitation, rights of set-off) with
respect to the portion of the Obligations held by it as fully as if
such Transferee were the direct holder thereof, subject to any
agreements between such Transferee and the transferor to such
Transferee, and the transferor to such Transferee shall be relieved of
its obligations under the Loan Documents to the extent such
obligations are assumed by such Transferee. Any Lender may forward to
each Participant and Transferee and prospective Participant and
Transferee all documents and information relating to the Obligations,
whether furnished by the Borrower or otherwise obtained, as such
Lender determines necessary or desirable.
(c) Notwithstanding anything in this Section to the contrary, any
Lender may assign and pledge its Note or any interest therein to any
Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such
Federal Reserve System and/or such Federal Reserve Bank. No such
assignment or pledge shall release such Lender from its obligations
hereunder.
(d) Notwithstanding any other provisions of this Section, no
transfer or assignment of the interests or obligations of any Lender
or grant of participations
49
therein shall be permitted if such transfer, assignment, or grant
would require the Borrower to file a registration statement with the
Securities and Exchange Commission or any successor or analogous
Governmental Authority or qualify the Loans under the "Blue Sky" laws
of any state.
9.2 Survival of Representations, Warranties, and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Notes and the
Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
9.3 Notices and Other Communications. Except as to oral notices expressly
authorized herein, which oral notices shall be confirmed in writing, all
notices, requests, and communications hereunder shall be in writing (including
by telecopy). Unless otherwise expressly provided herein, any such notice,
request, demand, or other communication shall be deemed to have been duly given
or made when delivered by hand, or, in the case of delivery by mail, two
Business Days after deposited in the mail, certified mail, return receipt
requested, postage prepaid, or, in the case of telecopy notice, when receipt
thereof is acknowledged orally or by written confirmation report, addressed as
follows:
(a) if to the Agent, to:
Compass Bank, as Agent
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Energy Banking Group
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Borrower, to:
▇▇▇▇▇▇▇▇ Petroleum Company, L.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to a Lender other than Compass Bank, to such address as such
Lender may have provided to Agent for notices.
Any party may, by proper written notice hereunder to the others, change the
individuals or addresses to which such notices to it shall thereafter be sent.
9.4 Parties in Interest. All covenants and agreements herein contained by
or on behalf of the Borrower, any Guarantor, the Agent or any Lender shall be
binding upon the Borrower, such Guarantor, the Agent or the applicable Lender,
as the case may be, and their respective legal representatives, successors, and
assigns.
50
9.5 Rights of Third Parties. All provisions herein are imposed solely and
exclusively for the benefit of the Borrower and the Agent and the Lenders and
their successors and assigns. No other Person (including, without limitation,
the Guarantors) shall have any right, benefit, priority, or interest hereunder
or as a result hereof or have standing to require satisfaction of provisions
hereof in accordance with their terms.
9.6 No Waiver; Rights Cumulative. No course of dealing on the part of the
Agent, the Lenders, their officers or employees, nor any failure or delay by the
Agent or any Lender with respect to exercising any of their rights under any
Loan Document shall operate as a waiver thereof. The rights of the Agent and
the Lender under the Loan Documents shall be cumulative and the exercise or
partial exercise of any such right shall not preclude the exercise of any other
right. The making of any Loan or the issuance of any Letter of Credit shall not
constitute a waiver of any of the covenants, warranties, or conditions of the
Borrower contained herein. In the event the Borrower is unable to satisfy any
such covenant, warranty, or condition, the making of any Loan or the issuance of
any Letter of Credit shall not have the effect of precluding the Lender from
thereafter declaring such inability to be an Event of Default as hereinabove
provided.
9.7 Survival Upon Unenforceability. In the event any one or more of the
provisions contained in any of the Loan Documents or in any other instrument
referred to herein or executed in connection with the Obligations shall, for any
reason, be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
of any Loan Document or of any other instrument referred to herein or executed
in connection with such Obligations.
9.8 Amendments; Waivers. Neither this Agreement nor any provision hereof
may be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
amendment, waiver, discharge, or termination is sought. No amendment,
modification or waiver of any Loan Document may be enforced against the Lenders
unless it has been signed by the Majority Lenders and it does not involve (a)
the forgiveness of any principal due on the Obligations; (b) the reduction of
any interest rate accruing on the Obligations; (c) the reduction of any
commitment fee due under this Agreement; (d) the deferral of any principal,
interest or fee payment due under the Loan Documents, (e) amendment of the
definition of "Borrowing Base" or any of the provisions regarding the
determination of the Borrowing Base in any material respect or (f) the release
of any obligor or any material portion of the Collateral securing the
Obligations. Whenever any of the Loan Documents refers to "Lenders" it shall
mean the Majority Lenders unless the applicable provision involves any of the
matters described in the foregoing clauses (a) through (f) above, but any
amendment, modification or waiver of any Loan Document involving any of the
matters described in the foregoing clauses (a) through (f) above shall require
execution by all of the Lenders.
9.9 Controlling Agreement. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall
51
control.
9.10 Release by Borrower. The Borrower hereby releases and discharges the
Agent and each Lender from all obligations, claims, losses, causes of action,
and liabilities, of whatsoever kind or nature, whether heretofore or hereafter
accruing, whether now known or unknown, arising under or in connection with any
Existing Loan Document or any act or omission under or in connection with any
Existing Loan Document; provided, however, nothing set forth in this Section
shall relieve the Agent or any Lender from its obligations and liabilities under
the Loan Documents to which it is a party.
9.11 Governing Law. THIS AGREEMENT, THE NOTES, AND THE GUARANTIES AND ALL
ISSUES ARISING IN CONNECTION THEREWITH AND THE TRANSACTIONS CONTEMPLATED THEREBY
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
TEXAS, WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW.
9.12 Jurisdiction and Venue. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO,
ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE
DISCRETION AND ELECTION OF THE AGENT OR THE APPLICABLE LENDER, IN COURTS HAVING
SITUS IN HOUSTON, ▇▇▇▇▇▇ COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE
JURISDICTION OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, ▇▇▇▇▇▇
COUNTY, TEXAS, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE
THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY THE AGENT OR
ANY LENDER IN ACCORDANCE WITH THIS SECTION.
9.13 Waiver of Rights to Jury Trial. The Borrower, the agent and each
Lender hereby knowingly, voluntarily, intentionally, irrevocably, and
unconditionally waive all rights to trial by jury in any action, suit,
proceeding, counterclaim, or other litigation that relates to or arises out of
any of this Agreement or any other Loan Document or the acts or omissions of the
agent or any Lender in the enforcement of any of the terms or provisions of this
Agreement or any other Loan Document or otherwise with respect thereto. The
provisions of this section are a material inducement for the agent and each
Lender entering into this Agreement.
9.14 Entire Agreement. This Agreement amends, restates, and replaces the
Existing Credit Agreement and constitutes the entire agreement among the parties
hereto with respect to the subject hereof and shall supersede any prior
agreement among the parties hereto, whether written or oral, relating to the
subject hereof, including, without limitation, the Existing Credit Agreement.
Furthermore, in this regard, this Agreement and the other written Loan Documents
represent, collectively, the final agreement among the parties thereto and may
not be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of such parties. There are no unwritten oral agreements among such
parties.
9.15 Counterparts. For the convenience of the parties, this Agreement may
be executed in multiple counterparts and by different parties hereto in separate
counterparts, each of which for all purposes shall be deemed to be an original
and all of which together shall constitute one and the same Agreement.
52
9.16 Release of Security Instruments. At such time as all of the
Obligation shall have been paid in full and the Commitments shall have been
terminated, the Agent shall, upon request by and at the cost and expense of the
Borrower, release the Liens of the Security Instruments.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
53
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
▇▇▇▇▇▇▇▇ PETROLEUM COMPANY,
L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
_____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
Senior Vice President
54
COMPASS BANK, as Agent and as a Lender
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
____________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Senior Vice President
Initial Commitment:
$20,000,000
55
BANK ONE TEXAS, NATIONAL
ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: First Vice President
Initial Commitment:
$10,000,000
56
Joining in the execution hereof for the limited purpose of making the
representations, warranties, and covenants set forth in Articles IV, V, and
VI only:
▇▇▇▇▇▇▇▇ PETROLEUM CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
Senior Vice President
▇▇▇▇▇▇▇▇ PETROLEUM COMPANY -
LAFITTE, L.L.C.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
Senior Vice President
57
EXHIBIT I
[FORM OF BORROWING REQUEST]
Compass Bank, as Agent
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Energy Banking Group
Re: Credit Agreement dated as of January ____, 2001, by and among ▇▇▇▇▇▇▇▇
Petroleum Company, L.L.C., certain financial institutions therein
named and Compass Bank, as Agent (as amended, restated, or
supplemented from time to time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby makes the
requests a [_____] new Loan or [______] Letter of Credit [CHECK ONE] as
indicated below:
1. Loans
(a) Amount: $________________
(b) Requested funding or issuance date: _______________, 200___
(c) $_________________ of such Loan is to be a Floating Rate Loan; and
$_________________ of such Loan is to be a LIBO Rate Loan.
(d) Requested Interest Period for LIBO Rate Loan: _____ months.
2. Continuation or conversion of LIBO Rate Loan maturing on
______________, 200____.
(a) Amount to be continued as a LIBO Rate Loan is $______________,
with an Interest Period of _____ months; and
(b) Amount to be converted to a Floating Rate Loan is
$______________.
3. Conversion of Floating Rate Loan:
(a) Request conversion date: ________________, 200__.
EXHIBIT I
(b) Amount to be converted to a LIBO Rate Loan is $______________,
with an Interest Period of _______ months.
The undersigned certifies that [s]he is the [______________] of the
Borrower, has obtained all consents necessary, and as such is authorized to
execute this request on behalf of the Borrower. The undersigned further
certifies, represents, and warrants on behalf of the Borrower that no Default or
Event of Default exists, and the Borrower is entitled to receive the requested
borrowing under the terms and conditions of the Credit Agreement.
Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
Very truly yours,
▇▇▇▇▇▇▇▇ PETROLEUM COMPANY,
L.L.C.
By:____________________________
Name:__________________________
Title:_________________________
EXHIBIT I
[FORM OF COMPLIANCE CERTIFICATE]
________, 20___
Compass Bank, as Agent
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Energy Banking Group
Re: Credit Agreement dated as of January ____, 2001, by and among ▇▇▇▇▇▇▇▇
Petroleum Company, L.L.C., certain financial institutions therein named
and Compass Bank, as Agent (as amended, restated, or supplemented from
time to time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement, the
undersigned, as Responsible Officers of the Borrower and the Guarantors, hereby
certify to you the following information as true and correct as of the date
hereof or for the period indicated, as the case may be:
[1. To the best of the knowledge of the undersigned, no Default or Event of
Default exists as of the date hereof or has occurred since the date of
our previous certification to you, if any.]
[1. To the best of the knowledge of the undersigned, the following Defaults
or Events of Default exist as of the date hereof or have occurred since
the date of our previous certification to you, if any, and the actions
set forth below are being taken to remedy such circumstances:]
2. The compliance of the Related Parties with the financial covenants of
the Credit Agreement, as of the close of business on , is evidenced
by the following:
(a) Section 6.11: Consolidated Tangible Net Worth
Required Actual
________ ______
Not less than the sum of $22,500,000
plus 50% of Consolidated Net Income
for each positive fiscal quarter after
September 30, 2000 plus 100% of cash
equity proceeds, net of expenses $_______________
EXHIBIT II
(b) Section 6.12: EBITDAX to Interest Expense Ratio
Required Actual
________ ______
Not less than 3.00 to 1.00 ____to 1.0
(c) Section 6.13: Current Ratio
Required Actual
________ ______
Not less than 1.00 to 1.00 ____to 1.0
3. No Material Adverse Effect has occurred since the date of the Financial
Statements dated as of _______________________.
Each capitalized term used but not defined herein shall have the meaning
assigned to such term in the Credit Agreement.
Very truly yours,
▇▇▇▇▇▇▇▇ PETROLEUM COMPANY,
L.L.C.
By:____________________________
Name:__________________________
Title:_________________________
EXHIBIT II
▇▇▇▇▇▇▇▇ PETROLEUM CORPORATION
By:____________________________
Name:__________________________
Title:_________________________
EXHIBIT II
EXHIBIT III
DISCLOSURES
Section 4.8 Liabilities -- NONE
Litigation -- SEE ATTACHED SCHEDULE 1
Section 4.12 Environmental Matters -- NONE, EXCEPT AS REFLECTED ON
SCHEDULE I
Section 4.17 Refunds -- NONE
Section 4.18 Gas Contracts -- NONE
Section 4.20 Casualties -- NONE