EXHIBIT 10.1
EXECUTION COUNTERPART
CREDIT AGREEMENT
DATED AS OF APRIL 8, 2004
AMONG
MISSION RESOURCES CORPORATION
AS BORROWER,
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
AS LEAD ARRANGER AND ADMINISTRATIVE AGENT,
AND
THE LENDERS SIGNATORY HERETO
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS...................................................... 1
Section 1.01 Terms Defined Above..................................................................... 1
Section 1.02 Certain Defined Terms................................................................... 1
Section 1.03 Accounting Terms and Determinations..................................................... 18
ARTICLE II COMMITMENTS............................................................................. 19
Section 2.01 Loans and Letters of Credit............................................................. 19
Section 2.02 Borrowings, Continuations and Conversions, Letters of Credit............................ 19
Section 2.03 Changes of Revolving Credit Commitments................................................. 21
Section 2.04 Fees.................................................................................... 22
Section 2.05 Several Obligations..................................................................... 23
Section 2.06 Notes................................................................................... 23
Section 2.07 Prepayments............................................................................. 23
Section 2.08 Borrowing Base.......................................................................... 24
Section 2.09 Assumption of Risks..................................................................... 26
Section 2.10 Obligation to Reimburse and to Prepay................................................... 27
Section 2.11 Lending Offices......................................................................... 29
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST...................................................... 29
Section 3.01 Repayment of Loans...................................................................... 29
Section 3.02 Interest................................................................................ 29
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC......................................... 30
Section 4.01 Payments................................................................................ 30
Section 4.02 Pro Rata Treatment...................................................................... 31
Section 4.03 Computations............................................................................ 31
Section 4.04 Non-receipt of Funds by the Agent....................................................... 31
Section 4.05 Set-off, Sharing of Payments, Etc....................................................... 32
Section 4.06 Taxes................................................................................... 33
Section 4.07 Disposition of Proceeds................................................................. 35
ARTICLE V CAPITAL ADEQUACY AND ADDITIONAL COSTS................................................... 36
Section 5.01 Capital Adequacy and Additional Costs................................................... 36
Section 5.02 Limitation on LIBOR Loans............................................................... 38
Section 5.03 Illegality.............................................................................. 38
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and 5.03................................ 38
Section 5.05 Compensation............................................................................ 39
Section 5.06 Replacement Lenders..................................................................... 39
ARTICLE VI CONDITIONS PRECEDENT.................................................................... 40
Section 6.01 Initial Funding......................................................................... 40
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Section 6.02 Initial and Subsequent Loans and Letters of Credit...................................... 44
Section 6.03 Conditions Precedent for the Benefit of Lenders......................................... 44
Section 6.04 No Waiver............................................................................... 44
ARTICLE VII REPRESENTATIONS AND WARRANTIES.......................................................... 45
Section 7.01 Corporate Existence..................................................................... 45
Section 7.02 Financial Condition..................................................................... 45
Section 7.03 Litigation.............................................................................. 45
Section 7.04 No Breach............................................................................... 46
Section 7.05 Authority............................................................................... 46
Section 7.06 Approvals............................................................................... 46
Section 7.07 Use of Loans............................................................................ 46
Section 7.08 ERISA................................................................................... 47
Section 7.09 Taxes................................................................................... 48
Section 7.10 Titles, etc............................................................................. 48
Section 7.11 No Material Misstatements............................................................... 48
Section 7.12 Investment Company Act.................................................................. 49
Section 7.13 Public Utility Holding Company Act...................................................... 49
Section 7.14 Subsidiaries............................................................................ 49
Section 7.15 Location of Business and Offices........................................................ 49
Section 7.16 Defaults................................................................................ 49
Section 7.17 Environmental Matters................................................................... 49
Section 7.18 Compliance with the Law................................................................. 50
Section 7.19 Insurance............................................................................... 51
Section 7.20 Intentionally Deleted................................................................... 51
Section 7.21 Hedging Agreements...................................................................... 52
Section 7.22 Restriction on Liens.................................................................... 52
Section 7.23 Material Agreements..................................................................... 52
Section 7.24 Gas Imbalances.......................................................................... 52
Section 7.25 Partnership Agreement................................................................... 53
Section 7.26 Intentionally Deleted................................................................... 53
Section 7.27 Solvency................................................................................ 53
Section 7.28 Name Changes............................................................................ 53
Section 7.29 Taxpayer Identification Number.......................................................... 53
Section 7.30 State of Formation...................................................................... 53
ARTICLE VIII AFFIRMATIVE COVENANTS................................................................... 53
Section 8.01 Reporting Requirements.................................................................. 54
Section 8.02 Litigation.............................................................................. 56
Section 8.03 Maintenance, Etc........................................................................ 56
Section 8.04 Environmental Matters................................................................... 58
Section 8.05 Further Assurances...................................................................... 58
Section 8.06 Performance of Obligations.............................................................. 58
Section 8.07 Engineering Reports..................................................................... 59
Section 8.08 Title Information and Mortgage Coverage................................................. 60
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Section 8.09 Additional Collateral................................................................... 61
Section 8.10 Cash Collateral Account Agreement....................................................... 61
Section 8.11 Intentionally Deleted................................................................... 62
Section 8.12 ERISA Information and Compliance........................................................ 62
Section 8.13 Joinder and Guaranty Agreements......................................................... 62
ARTICLE IX NEGATIVE COVENANTS...................................................................... 62
Section 9.01 Debt.................................................................................... 63
Section 9.02 Liens................................................................................... 64
Section 9.03 Investments, Loans and Advances......................................................... 64
Section 9.04 Dividends, Distributions and Redemptions................................................ 65
Section 9.05 Sales and Leasebacks.................................................................... 65
Section 9.06 Nature of Business...................................................................... 65
Section 9.07 Limitation on Leases.................................................................... 65
Section 9.08 Mergers, Etc............................................................................ 65
Section 9.09 Proceeds of Notes; Letters of Credit.................................................... 66
Section 9.10 ERISA Compliance........................................................................ 66
Section 9.11 Sale or Discount of Receivables......................................................... 67
Section 9.12 Intentionally Deleted................................................................... 67
Section 9.13 Current Ratio........................................................................... 67
Section 9.14 Tangible Net Worth...................................................................... 67
Section 9.15 Leverage Ratio.......................................................................... 68
Section 9.16 Interest Coverage Ratio................................................................. 68
Section 9.17 Sale of Mortgaged Properties and Oil and Gas Properties................................. 68
Section 9.18 Intentionally Deleted................................................................... 68
Section 9.19 Environmental Matters................................................................... 68
Section 9.20 Transactions with Affiliates............................................................ 69
Section 9.21 Subsidiaries............................................................................ 69
Section 9.22 Negative Pledge Agreements.............................................................. 69
Section 9.23 Gas Imbalances, Take-or-Pay or Other Prepayments........................................ 69
Section 9.24 Ownership of Subsidiaries............................................................... 69
Section 9.25 Change in Borrower's or Subsidiary's Name or State of Formation......................... 70
Section 9.26 Material Agreements..................................................................... 70
Section 9.27 Partnership Agreement................................................................... 70
ARTICLE X EVENTS OF DEFAULT; REMEDIES............................................................. 70
Section 10.01 Events of Default....................................................................... 70
Section 10.02 Remedies................................................................................ 72
ARTICLE XI THE AGENT............................................................................... 73
Section 11.01 Appointment, Powers and Immunities...................................................... 73
Section 11.02 Reliance by Agent....................................................................... 74
Section 11.03 Defaults................................................................................ 74
Section 11.04 Rights as a Lender...................................................................... 74
Section 11.05 INDEMNIFICATION......................................................................... 74
Section 11.06 Non-Reliance on Agent and other Lenders................................................. 75
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Section 11.07 Action by Agent......................................................................... 75
Section 11.08 Resignation or Removal of Agent......................................................... 76
ARTICLE XII MISCELLANEOUS........................................................................... 76
Section 12.01 Waiver.................................................................................. 76
Section 12.02 Notices................................................................................. 76
Section 12.03 Payment of Expenses, Indemnities, etc................................................... 77
Section 12.04 Amendments, Etc......................................................................... 80
Section 12.05 Successors and Assigns.................................................................. 80
Section 12.06 Assignments and Participations.......................................................... 80
Section 12.07 Invalidity.............................................................................. 82
Section 12.08 Counterparts............................................................................ 82
Section 12.09 References; Use of Word "Including"..................................................... 82
Section 12.10 Survival................................................................................ 82
Section 12.11 Captions................................................................................ 82
Section 12.12 NO ORAL AGREEMENTS...................................................................... 83
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION............................................... 83
Section 12.14 Interest................................................................................ 84
Section 12.15 Confidentiality......................................................................... 85
Section 12.16 Effectiveness........................................................................... 85
Section 12.17 Exculpation Provisions.................................................................. 85
Section 12.18 Arbitration............................................................................. 86
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ANNEXES, EXHIBITS AND SCHEDULES
Annex I - List of Percentage Shares and Maximum Credit Amounts
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - List of Security Instruments
Exhibit E - Form of Assignment Agreement
Exhibit F - Form of Letter of Credit Application
Exhibit G - Joinder Agreement
Exhibit H - Guaranty Agreement
Schedule 2.08 - Borrowing Base
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships; Locations; Jurisdictions
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.21 - Hedging Agreements
Schedule 7.23 - Material Agreements
Schedule 7.24 - Gas Imbalances
Schedule 7.28 - Name Changes
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT dated as of April __, 2004 is among MISSION
RESOURCES CORPORATION, a corporation formed under the laws of the State of
Delaware (the "BORROWER"); each of the lenders that is a signatory hereto or
which becomes a signatory hereto as provided in Section 12.06 (individually,
together with its successors and assigns, a "LENDER" and, collectively, the
"LENDERS"); and ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, a national banking
association (in its individual capacity, "▇▇▇▇▇ FARGO"), as administrative agent
for the Lenders (in such capacity, together with its successors in such
capacity, the "AGENT").
RECITALS
A. The Borrower has requested that the Lenders provide certain
loans to and extensions of credit on behalf of the Borrower; and
B. The Lenders have agreed to make such loans and extensions of
credit subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement,
the terms "AGENT," "BORROWER," "LENDER," "LENDERS," and "▇▇▇▇▇ FARGO" shall have
the meanings indicated above.
Section 1.02 Certain Defined Terms. As used herein, the following terms shall
have the following meanings (all terms defined in this Article I or in other
provisions of this Agreement in the singular to have equivalent meanings when
used in the plural and vice versa):
"ADDITIONAL COSTS" shall have the meaning assigned such term in Section
5.01(c).
"AFFECTED LOANS" shall have the meaning assigned such term in Section
5.04.
"AFFILIATE" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such
CREDIT AGREEMENT
member or trust. For purposes of this definition, any Person which owns directly
or indirectly 10% or more of the securities having ordinary voting power for the
election of directors or other governing body of a corporation or 10% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to "CONTROL" (including,
with its correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH")
such corporation or other Person.
"AGGREGATE MAXIMUM REVOLVING CREDIT AMOUNTS" at any time shall equal
the sum of the Maximum Revolving Credit Amounts of the Lenders
($100,000,000.00), as the same may be reduced pursuant to Section 2.03(b). As of
the Closing Date, the Aggregate Maximum Revolving Credit Amounts equal
$100,000,000.00.
"AGGREGATE REVOLVING CREDIT COMMITMENTS" at any time shall equal the
amount calculated in accordance with Section 2.03.
"AGREEMENT" shall mean this Credit Agreement, as the same may from time
to time be amended or supplemented.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the lending office of such Lender (or an Affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
offices of such Lender (or of an Affiliate of such Lender) as such Lender may
from time to time specify to the Agent and the Borrower as the office by which
its Loans of such Type are to be made and maintained.
"APPLICABLE MARGIN" shall mean the applicable per annum percentage set
forth at the appropriate intersection in the table shown below, based on the
Borrowing Base Utilization as in effect from time to time:
BORROWING BASE UTILIZATION APPLICABLE MARGIN
------------------------------------------------------------------------------------
LIBOR BASE RATE REVOLVING CREDIT
LOANS LOANS COMMITMENT FEE
------------------------------------------------------------------------------------
Less than 33% 1.75% .25% .375%
Greater than or equal to 33%, 2.00% .50% .50%
but less than 50%
Greater than or equal to 50%, 2.25% .75% .50%
but less than 66%
Greater than or equal to 66%, 2.50% 1.00% .50%
but less than 90%
Greater than 90% 2.75% 1.25% .50%
CREDIT AGREEMENT
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Each change in the Applicable Margin resulting from a change in the Borrowing
Base Utilization shall take effect on the day such change in the Borrowing Base
Utilization occurs.
"ASSIGNMENT" shall have the meaning assigned such term in Section
12.06(b).
"BASE RATE" shall mean, with respect to any Base Rate Loan, for any
day, the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1% or
(ii) the Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.
"BASE RATE LOANS" shall mean Loans that bear interest at rates based
upon the Base Rate.
"BLACK HAWK" shall mean Black Hawk Oil Company, a Delaware corporation.
"BORROWING BASE" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.08.
"BORROWING BASE UTILIZATION" shall mean the sum of (i)(a) the aggregate
outstanding principal amount of the Loans plus (b) the aggregate face amount of
all undrawn and uncancelled Letters of Credit, plus (c) the aggregate of all
amounts drawn under all Letters of Credit and not yet reimbursed, divided by
(ii) the Borrowing Base.
"BUSINESS DAY" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas, and, where such
term is used in the definition of "Quarterly Date" or if such day relates to a
borrowing or continuation of, a payment or prepayment of principal of or
interest on, or a conversion of or into, or the Interest Period for, a LIBOR
Loan or a notice by the Borrower with respect to any such borrowing or
continuation, payment, prepayment, conversion or Interest Period, any day which
is also a day on which dealings in Dollar deposits are carried out in the London
interbank market.
"CASH COLLATERAL ACCOUNT AGREEMENT" shall mean that certain Cash
Collateral Account Agreement between the Borrower, its Subsidiaries and the
Agent in form and substance satisfactory to Agent and shall include a financing
statement in form and substance satisfactory to Agent covering and granting a
perfected first priority security interest to the Agent in the cash collateral,
and subject only to Liens or any other encumbrances satisfactory to Agent.
"CLOSING DATE" shall mean April 8, 2004.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"COMMITMENT" shall mean, for any Lender, its obligation to make Loans
and to participate in the Letters of Credit as provided in Section 2.01(b) up to
the lesser of (i) such Lender's Maximum Credit Amount and (ii) the Lender's
Percentage Share of the amount equal to the then effective Borrowing Base.
CREDIT AGREEMENT
3
"CONSOLIDATED NET INCOME" shall mean with respect to the Borrower and
its Consolidated Subsidiaries, for any period, the aggregate of the net income
(or loss) of the Borrower and its Consolidated Subsidiaries after allowances for
taxes for such period, determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (i) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and its Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in such period by such other Person to the Borrower
or to a Consolidated Subsidiary, as the case may be; (ii) the net income (but
not loss) of any Consolidated Subsidiary to the extent that the declaration or
payment of dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the terms
of its charter or any agreement, instrument or Governmental Requirement
applicable to such Consolidated Subsidiary, or is otherwise restricted or
prohibited in each case determined in accordance with GAAP; (iii) any
extraordinary gains or losses, including gains or losses attributable to
Property sales not in the ordinary course of business; and (iv) the cumulative
effect of a change in accounting principles and any gains or losses attributable
to write-ups or write-downs of assets.
"CONSOLIDATED SUBSIDIARIES" shall mean each Subsidiary of a Person
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of such Person in accordance with GAAP. Unless otherwise indicated,
each reference to the term "Consolidated Subsidiary" shall mean a Subsidiary
consolidated with the Borrower.
"CURRENT ASSETS" shall have the meaning assigned such term in Section
9.13.
"CURRENT LIABILITIES" shall have the meaning assigned such term in
Section 9.13.
"DEBT" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which such Person is liable (whether contingent or otherwise); (v) all Debt
(as described in the other clauses of this definition) and other obligations of
others secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person; (vi) all Debt (as described in the other clauses of
this definition) and other obligations of others guaranteed by such Person or in
which such Person otherwise assures a creditor against loss with respect to the
Debt or obligations of others; (vii) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or covenants
of others or to purchase the Debt or Property (if the obligation to purchase
Property is incurred to assure a creditor against loss) of others; (viii)
obligations to deliver goods or services including Hydrocarbons in consideration
of advance payments, except as permitted by
CREDIT AGREEMENT
4
Section 9.23 and disclosed by Section 8.07(c); (ix) obligations to pay for goods
or services whether or not such goods or services are actually received or
utilized by such Person; (x) any capital stock or other ownership interest of
such Person in which such Person has a mandatory obligation to redeem such stock
or other ownership interest prior to the Final Maturity Date; (xi) any Debt of a
Special Entity for which such Person is liable either by agreement or because of
a Governmental Requirement; (xii) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment; and (xiii) all net obligations of such Person
under Hedging Agreements excluding Hedging Agreements with Agent or any other
Lender.
"DEFAULT" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum of Consolidated Net Income
for such period plus the following charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes (including
franchise taxes calculated with respect to income), depreciation, depletion and
amortization and any other non-cash charges and non-cash revenues and after
eliminating extraordinary items. For the quarter ending June 30, 2004, September
30, 2004 and December 31, 2004, EBITDA shall be calculated by annualizing EBITDA
for the period beginning on April 1, 2004; e.g., for the quarter ending June 30,
2004, the calculation for said quarter of 2004 will be multiplied by four, for
the two quarters ending September 30, 2004, the calculation for said two
quarters will be multiplied by two, and for the three quarters ending December
31, 2004, the calculation for said three quarters of 2004 will be multiplied by
one and one-third. Thereafter, EBITDA shall be calculated on a rolling four
quarter basis. In addition, for any applicable period during which an
acquisition or disposition permitted by this Agreement is consummated, EBITDA
shall be determined on a pro forma basis (with such calculation to be acceptable
to, and approved by, the Agent) as if such acquisition or disposition were
consummated on the first day of such applicable period.
"EFFECTIVE DATE" shall have the meaning assigned such term in Section
12.16.
"ENGINEERING REPORTS" shall have the meaning assigned such term in
Section 2.08.
"ENVIRONMENTAL LAWS" shall mean any and all applicable Governmental
Requirements pertaining to health or the environment in effect in any and all
jurisdictions in which the Borrower or any Subsidiary is conducting or at any
time has conducted business, or where any Property of the Borrower or any
Subsidiary is located, including without limitation, OPA, the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and Liability
Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall have the
meaning specified in OPA, the terms "hazardous substance" and "release" (or
"threatened release") have the meanings specified in CERCLA, and the terms
"solid
CREDIT AGREEMENT
5
waste" and "disposal" (or "disposed") have the meanings specified in RCRA;
provided, however, that (i) in the event either OPA, CERCLA or RCRA is amended
so as to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment and (ii) to the
extent the laws of the state in which any Property of the Borrower or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor statute.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of Section 414 of the Code.
"ERISA EVENT" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of the
Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"EVENT OF DEFAULT" shall have the meaning assigned such term in Section
10.01.
"EXCEPTED LIENS" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due, which remain payable without penalty
or which are being contested in good faith by appropriate action and for which
adequate reserves have been maintained; (ii) Liens in connection with workmen's
compensation, unemployment insurance or other social security, old age pension
or public liability obligations not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (iii) operators', non-operators', vendors', carriers',
warehousemen's, repairmen's, mechanics', workmen's, materialmen's, construction
or other like Liens arising by operation of law in the ordinary course of
business or incident to the exploration, development, operation and maintenance
of Oil and Gas Properties or statutory landlord's liens, each of which is in
respect of obligations that have not been outstanding more than ninety (90) days
or which are being contested in good faith by appropriate proceedings and for
which adequate reserves have been maintained in accordance with GAAP; (iv) any
Liens reserved in leases, joint operating agreements, farmout agreements and
other similar agreements for rent or royalties and for compliance with the terms
of such agreements or leases in the case of leasehold estates, to the extent
that any such Lien referred to in this clause does not materially impair the use
of the Property covered by such Lien for the purposes for which such Property is
held by the Borrower or any Subsidiary or materially impair the value of such
Property subject thereto; (v) encumbrances (other than to secure the payment of
borrowed money or the deferred purchase
CREDIT AGREEMENT
6
price of Property or services), easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any rights of way or other
Property of the Borrower or any Subsidiary for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment, and
defects, irregularities, zoning restrictions and deficiencies in title of any
rights of way or other Property which in the aggregate do not materially impair
the use of such rights of way or other Property for the purposes of which such
rights of way and other Property are held by the Borrower or any Subsidiary or
materially impair the value of such Property subject thereto; (vi) deposits of
cash or securities to secure the performance of bids, trade contracts, leases,
statutory obligations and other obligations of a like nature incurred in the
ordinary course of business; (vii) Liens permitted by the Security Instruments;
and (viii) Liens given to secure the Second Lien Notes; provided that Liens in
this clause (viii) are subject to an intercreditor agreement in form and
substance satisfactory to Agent.
"EXISTING SENIOR SUBORDINATED UNSECURED NOTES" shall mean the 107/8%
Senior Subordinated Notes Due 2007, Series C issued by the Borrower and
outstanding in the principal amount of $87,426,000.00.
"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 a
member of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the date 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 (ii) 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.
"FEE LETTER" shall mean that certain letter agreement from ▇▇▇▇▇ Fargo
to the Borrower dated March 27, 2004, concerning certain fees in connection with
this Agreement and any agreements or instruments executed in connection
therewith, as the same may be amended or replaced from time to time.
"FINAL MATURITY DATE" shall mean the earlier to occur of (i) the third
anniversary of the Closing Date, (ii) the date that the Notes are prepaid in
full pursuant to Section 2.07 and neither the Agent nor any Lender is obligated
to make Revolving Credit Loans or advance other funds to Borrower hereunder, and
(iii) termination of this Agreement.
"FINANCIAL STATEMENTS" shall mean the financial statement or statements
of the Borrower and its Consolidated Subsidiaries described or referred to in
Section 7.02.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
CREDIT AGREEMENT
7
"GOVERNMENTAL AUTHORITY" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, the
Borrower, its Subsidiaries or any of their Property or the Agent, any Lender, or
any Applicable Lending Office.
"GOVERNMENTAL REQUIREMENT" shall mean any applicable law, statute,
code, ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
directive or requirement (having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.
"GUARANTOR" shall mean, individually and collectively, (i) each and
every Subsidiary of Borrower and all of their Subsidiaries (and so on and so
forth) existing as of the date hereof, and (ii) each and every Subsidiary and
all of their Subsidiaries (and so on and so forth) hereafter created, acquired
or otherwise owned by Borrower, and shall include, without limitation, Black
Hawk Oil Company, MSSN Holdings, and Mission E&P.
"GUARANTY AGREEMENT" shall mean any agreement executed by any Guarantor
in form and substance satisfactory to the Agent guarantying, unconditionally,
payment of the Obligations, as the same may be amended, modified or supplemented
from time to time.
"HEDGING AGREEMENTS" shall mean any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction.
"HIGHEST LAWFUL RATE" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on the Notes or on
any other Obligations under laws applicable to such Lender which are presently
in effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"HYDROCARBON INTERESTS" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"HYDROCARBONS" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"INDEMNIFIED PARTIES" shall have the meaning assigned such term in
Section 12.03(a)(ii).
CREDIT AGREEMENT
8
"INDEMNITY MATTERS" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent
negligence of such Person seeking indemnification.
"INITIAL FUNDING" shall mean the funding of the initial Loans or
issuance of the initial Letters of Credit upon satisfaction of the conditions
set forth in Sections 6.01 and 6.02.
"INITIAL RESERVE REPORT" shall mean the report of Netherland ▇▇▇▇▇▇ &
Associates, Inc., dated as of January 1, 2004, with respect to the Oil and Gas
Properties of the Borrower, a copy of which has been delivered to the Agent.
"INTEREST COVERAGE RATIO" shall have the meaning ascribed to such term
in Section 9.16.
"INTEREST PERIOD" shall mean, with respect to any LIBOR Loan, the
period commencing on the date such LIBOR Loan is made and ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Borrower may select as provided in Section 2.02 (or
such longer period as may be requested by the Borrower and agreed to by the
Majority Lenders), except that each Interest Period which commences on the last
Business Day of a calendar month (or on 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.
Notwithstanding the foregoing: (i) no Interest Period may end after the
Final Maturity Date; (ii) no Interest Period for any LIBOR Loan may end after
the due date of any installment, if any, provided for in Section 2.07(b) to the
extent that such LIBOR Loan would need to be prepaid prior to the end of such
Interest Period in order for such installment to be paid when due; (iii) each
Interest Period 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); and (iv) no Interest Period shall have a duration of less than
one month and, if the Interest Period for any LIBOR Loans would otherwise be for
a shorter period, such Loans shall not be available hereunder.
"ISSUING BANK" shall mean ▇▇▇▇▇ Fargo.
"LC COMMITMENT" at any time shall mean $3,000,000.00.
"LC EXPOSURE" at any time shall mean the difference between (i) the
aggregate face amount of all undrawn and uncancelled Letters of Credit plus the
aggregate of all amounts drawn under all Letters of Credit and not yet
reimbursed, minus (ii) the aggregate amount of all cash securing outstanding
Letters of Credit pursuant to Section 2.10(b).
"LENDER TERMINATION DATE" shall have the meaning assigned to such term
in Section 5.06(c).
CREDIT AGREEMENT
9
"LETTER OF CREDIT AGREEMENTS" shall mean the written agreements of the
Borrower or any of its Subsidiaries with the Issuing Bank, as issuing lender for
any Letter of Credit, executed in connection with the issuance by the Issuing
Bank of the Letters of Credit, such agreements to be on the Issuing Bank's
customary form for letters of credit of comparable amount and purpose as from
time to time in effect or as otherwise agreed to by the Borrower and the Issuing
Bank.
"LETTER OF CREDIT APPLICATION" shall mean a letter of credit
application, in form and substance satisfactory to the Issuing Bank, delivered
to the Agent requesting the issuance, reissuance, extension or renewal of any
Letter of Credit and containing the information set forth in Section 2.02(g).
"LETTERS IN LIEU" shall mean each and every letter in lieu in form and
substance reasonably satisfactory to Agent executed by the Borrower or any
Subsidiary, as applicable, to each of the purchasers of the Hydrocarbons of the
Borrower or any Subsidiary produced from the Borrower's and any of its
Subsidiaries' Oil and Gas Properties.
"LETTERS OF CREDIT" shall mean the letters of credit issued pursuant to
Section 2.01(b) and all reimbursement obligations pertaining to any such letters
of credit, and "Letter of Credit" shall mean any one of the Letters of Credit
and the reimbursement obligations pertaining thereto.
"LEVERAGE RATIO" shall mean, for any period, the ratio of Total Debt as
of the last day of such period to EBITDA for such period.
"LIBOR" shall mean, for each Interest Period for any LIBOR borrowing,
the rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%)
equal to the average of the offered quotations appearing on Telerate Page 3750
(or if such Telerate Page shall not be available, any successor or similar
service as may be selected by Agent and Borrower) as of 11:00 a.m., Houston,
Texas time (or, as soon thereafter as practicable) two (2) LIBOR Business Days
prior to the first day of such Interest Period for deposits in Dollars having a
term comparable to such Interest Period and in an amount comparable to the
principal amount of the LIBOR borrowing to which such Interest Period relates.
If none of such Telerate Page 3750 nor any successor or similar service is
available, then "LIBOR" shall mean, with respect to any Interest Period for any
applicable LIBOR borrowing, the rate of interest per annum, rounded upwards, if
necessary, to the nearest 1/16th of 1%, quoted by Agent at or before 11:00 a.m.,
Houston, Texas time (or, as soon thereafter as practicable), two (2) LIBOR
Business Days before the first day of such Interest Period, to be the arithmetic
average of the prevailing rates per annum at the time of determination and in
accordance with the then existing practice in the applicable market, for the
offering to Agent by one or more prime banks selected by Agent in its sole
discretion, in the London interbank market, of deposits in Dollars for delivery
on the first day of such Interest Period and having a maturity equal (or as
nearly equal as may be) to the length of such Interest Period and in an amount
equal (or as nearly equal as may be) to the LIBOR borrowing to which such
Interest Period relates. Each determination by Agent of LIBOR shall be
conclusive and binding, absent manifest error, and may be computed using any
reasonable averaging and attribution method.
"LIBOR LOANS" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "LIBOR Rate".
CREDIT AGREEMENT
10
"LIBOR RATE" shall mean, with respect to any LIBOR Loan, a rate per
annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by
the Agent to be equal to the quotient of (i) LIBOR for such Loan for the
Interest Period for such Loan divided by (ii) one (1) minus the Reserve
Requirement for such Loan for such Interest Period.
"LIEN" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments and the like payable
out of Oil and Gas Properties, except to the extent the reserves attributable
thereto are deducted from the applicable Reserve Report. The term "LIEN" shall
include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement, or leases
under a financing lease or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person in a transaction
intended to create a financing.
"LIMITED LIABILITY COMPANY AGREEMENT" shall mean the First Amended and
Restated Limited Liability Company Agreement of Mission Holdings LLC, a Delaware
Limited Liability Company, among its Members dated January 8, 2002.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, all Letters of
Credit, all Letter of Credit Agreements, all Letter of Credit Applications, the
Fee Letter and the Security Instruments.
"LOANS" shall mean the loans as provided for by Section 2.01. "Loans"
shall include the Revolving Credit Loans.
"LOCKBOX" shall mean the lockbox established pursuant to the Cash
Collateral Account Agreement and subject to the Lockbox Agreement.
"LOCKBOX AGREEMENT" shall mean that certain Lockbox Agreement between
the Borrower, its Subsidiaries, and the Agent in form and substance satisfactory
to Agent which shall grant a security interest in the contents therein and shall
include a financing statement in form and substance satisfactory to Agent
covering the contents therein.
"MAJORITY LENDERS" shall mean, at any time while no Loans are
outstanding, Lenders having at least sixty-six and two-thirds percent (66-2/3%)
of the Aggregate Revolving Credit Commitments and, at any time while Loans are
outstanding, Lenders holding at least sixty-six and two-thirds percent (66-2/3%)
of the outstanding aggregate principal amount of the Loans (without regard to
any sale by a Lender of a participation in any Loan under Section 12.06(c));
provided, however, Agent, alone, shall constitute the Majority Lenders at any
time that Agent is the sole Lender hereunder and if there are two or more
Lenders, it shall take at least two Lenders to constitute the "Majority
Lenders".
CREDIT AGREEMENT
11
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect on
(i) the assets, liabilities, financial condition, business, operations or
affairs of the Borrower and its Subsidiaries taken as a whole different from
those reflected in the Financial Statements or from the facts represented or
warranted in any Loan Document, or (ii) the ability of the Borrower and its
Subsidiaries taken as a whole to carry out their business as at the Closing Date
or as proposed as of the Closing Date to be conducted or meet their obligations
under the Loan Documents on a timely basis.
"MATERIAL AGREEMENTS" shall mean all agreements listed on SCHEDULE
7.23.
"MAXIMUM REVOLVING CREDIT AMOUNT" shall mean, as to each Lender, the
amount set forth opposite such Lender's name on ANNEX I under the caption
"Maximum Revolving Credit Amounts" (as the same may be reduced pursuant to
Section 2.03(b) pro rata to each Lender based on its Percentage Share), as
modified from time to time to reflect any assignments permitted by Section
12.06(b).
"MISSION E&P shall mean Mission E&P Limited Partnership, a Texas
limited partnership.
"MORTGAGES" shall mean, individually and collectively, each Amended and
Restated Consolidated Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement dated as of April 8, 2004, covering
certain of Borrower's and its Subsidiaries' Oil and Gas Properties in Texas and
Louisiana, and each Amended and Restated Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement dated as of April 8,
2004, covering certain of Mission E&P's Oil and Gas Properties in New Mexico,
together with any and all amendments, modifications, supplements and/or
restatements thereof.
"MORTGAGED PROPERTY" shall mean the Property owned by the Borrower and
its Subsidiaries and which is subject to the Liens existing and to exist under
the terms of the Security Instruments.
"MSSN HOLDINGS" shall mean Mission Holdings LLC, a Delaware limited
liability company.
"MULTIEMPLOYER PLAN" shall mean a Plan defined as such in Section 3(37)
or 4001(a)(3) of ERISA.
"NOTES" shall mean the Notes provided for by Section 2.06, together
with any and all renewals, extensions for any period, increases, rearrangements,
substitutions and/or modifications thereof.
"NOTICE OF TERMINATION" shall have the meaning assigned such term in
Section 5.06(a).
"OBLIGATIONS" shall mean all indebtedness, obligations and liabilities
of the Borrower or any Subsidiary to any of the Lenders, any of the Lenders'
Affiliates, the Agent, or the Issuing Bank, individually or collectively,
existing on the date of this Agreement or arising thereafter,
CREDIT AGREEMENT
12
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising or incurred
under any Hedging Agreement, under this Agreement or any of the other Loan
Documents or in respect of any of the Loans made or reimbursement obligations
incurred or any of the Notes, Letters of Credit or other instruments at any time
evidencing any thereof, including interest accruing subsequent to the filing of
a petition or other action concerning bankruptcy or other similar proceedings,
overdrafts to the Agent or ACH obligations to the Agent, or any other
obligations incurred under this Agreement or any of the Security Instruments and
all renewals, extensions, refinancings and replacements for the foregoing.
"OIL AND GAS PROPERTIES" shall mean Hydrocarbon Interests; any interest
of the Person owning such Hydrocarbon Interest in the Properties now or
hereafter pooled or unitized with such Hydrocarbon Interests; all presently
existing or future unitization, pooling agreements and declarations of pooled
units and the units created in connection therewith (including without
limitation all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon
Interests; all operating agreements, contracts and other agreements which relate
to any of the Hydrocarbon Interests or the production, sale, purchase, exchange
or processing of Hydrocarbons from or attributable to such Hydrocarbon
Interests; all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, including all oil in tanks, the lands
covered thereby and all rents, issues, profits, proceeds, products, revenues and
other incomes from or attributable to the Hydrocarbon Interests; all tenements,
hereditaments, appurtenances and Properties in any manner appertaining,
belonging, affixed or incidental to the Hydrocarbon Interests; and all
Properties, rights, titles, interests and estates described or referred to
above, including any and all Property, real or personal, now owned or
hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such Hydrocarbon
Interests or Property (excluding drilling rigs, automotive equipment or other
personal property which may be on such premises for the purpose of drilling a
well or for other similar temporary uses) and including any and all oil ▇▇▇▇▇,
gas ▇▇▇▇▇, injection ▇▇▇▇▇ or other ▇▇▇▇▇, buildings, structures, fuel
separators, liquid extraction plants, plant compressors, pumps, pumping units,
field gathering systems, tanks and tank batteries, fixtures, valves, fittings,
machinery and parts, engines, boilers, meters, apparatus, equipment, appliances,
tools, implements, cables, wires, towers, casing, tubing and rods, surface
leases, rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing.
"OPA" shall mean the Oil Pollution Act of 1990.
"OTHER TAXES" shall have the meaning assigned such term in Section
4.06(b).
"PARTNERS" shall mean Black Hawk Oil Company and MSSN Holdings.
"PARTNERSHIP AGREEMENT" shall mean the Agreement of Limited Partnership
of Mission E&P Limited Partnership among the Partners dated as of December 4,
2001.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
CREDIT AGREEMENT
13
"PERCENTAGE SHARE" shall mean (with respect to any Lender) the
percentage of the Aggregate Revolving Credit Commitments to be provided by such
Lender under this Agreement as indicated on ANNEX I hereto, as modified from
time to time to reflect any assignments permitted by Section 12.06(b).
"PERMITTED TRANSFER" shall mean (i) the sale of Hydrocarbons in the
ordinary course of business, (ii) the sale or transfer of equipment that is (A)
obsolete, worn-out, depleted or uneconomic and disposed of in the ordinary
course of business, (B) no longer necessary for the business of the Borrower or
such Guarantor or (C) contemporaneously replaced by equipment of at least
comparable value and use, (iii) the Transfer of any Oil and Gas Properties
having a zero or negative value in the most recent Reserve Report, and (iv) the
Transfer of Oil and Gas Properties of the Borrower or any Guarantor where the
aggregate fair market value of such Oil and Gas Properties Transferred since the
date hereof or, if one or more Redetermination Dates shall have occurred, since
the last Redetermination Date, is less than or equal to five percent (5%) of the
present value discounted at ten percent (10%) proved developed producing
reserves as reflected in the most recent Reserve Report.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
"PLAN" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained
or contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii)
was at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan
or any other amount payable by the Borrower under this Agreement or any other
Loan Document, a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to 2% per annum above the Base Rate
as in effect from time to time plus the Applicable Margin (if any), but in no
event to exceed the Highest Lawful Rate; provided however, for a LIBOR Loan, the
"Post-Default Rate" for such principal shall be, for the period commencing on
the date of occurrence of an Event of Default and ending on the earlier to occur
of the last day of the Interest Period therefor or the date all Events of
Default are cured or waived, four percent (4%) per annum above the interest rate
for such Loan as provided in Section 3.02(a)(ii), but in no event to exceed the
Highest Lawful Rate.
"PRIME RATE" shall mean the variable per annum rate of interest then
most recently announced within ▇▇▇▇▇ Fargo at its principal office in San
Francisco, California, as its "prime rate", with the understanding that ▇▇▇▇▇
Fargo's "prime rate" is one of its base rates and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto, and is evidenced by the recording thereof after its announcement in
such internal publication or publications as ▇▇▇▇▇ Fargo may designate. Each
change in any interest rate provided for herein based upon the Prime Rate
resulting from a change in the Prime Rate shall
CREDIT AGREEMENT
14
take effect on the day the change is announced within ▇▇▇▇▇ Fargo without notice
to the Borrower at the time of such change in the Prime Rate.
"PRINCIPAL OFFICE" shall mean the principal office of the Agent,
located in Houston, Texas, presently located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
"PROPERTY" or "PROPERTIES" shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or tangible or intangible.
"QUARTERLY DATES" shall mean the last day of each June, September,
December, and March, in each year, the first of which shall be June 30, 2004;
provided, however, that if any such day is not a Business Day, such Quarterly
Date shall be the next succeeding Business Day.
"REDETERMINATION DATE" shall have the meaning assigned to such term in
Section 2.08(a).
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including Regulation D)
or the adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders (including such Lender or its Applicable
Lending Office) of or under any Governmental Requirement (whether or not having
the force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"REPLACEMENT LENDERS" shall have the meaning assigned to such term in
Section 5.06(b).
"REQUIRED PAYMENT" shall have the meaning assigned such term in Section
4.04.
"RESERVE REPORT" shall mean a report, in form and substance
satisfactory to the Agent, setting forth, as of each January 1 and July 1 (or in
the event of an unscheduled redetermination, the effective date thereof); (i)
the oil and gas reserves attributable to the Borrower's and its Subsidiaries'
Oil and Gas Properties together with a projection of the rate of production and
future net income, taxes, operating expenses and capital expenditures with
respect thereto as of such date, based upon the pricing assumptions determined
by Agent at the time and (ii) such other information as the Agent may reasonably
request. The term "Reserve Report" shall also include the information to be
provided by the Borrower each year pursuant to Section 8.07(a).
"RESERVE REQUIREMENT" shall mean, for any Interest Period for any LIBOR
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding one billion Dollars against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves
CREDIT AGREEMENT
15
required to be maintained by such member banks by reason of any Regulatory
Change against (i) any category of liabilities which includes deposits by
reference to which LIBOR is to be determined as provided in the definition of
"LIBOR" or (ii) any category of extensions of credit or other assets which
include a LIBOR Loan.
"RESPONSIBLE OFFICER" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer" shall include the Chief
Financial Officer of such Person. Unless otherwise specified, all references to
a Responsible Officer herein shall mean a Responsible Officer of the Borrower.
"REVOLVING CREDIT COMMITMENT" shall mean, for any Lender, its
obligation to make Loans and participate in the issuance of Letters of Credit as
provided in Section 2.01 up to the lesser of (i) such Lender's Maximum Revolving
Credit Amount and (ii) such Lender's Percentage Share of the then effective
Borrowing Base.
"REVOLVING CREDIT LOANS" shall mean Loans made pursuant to Section
2.01(a).
"REVOLVING CREDIT NOTES" shall mean the promissory note or notes
(whether one or more) of the Borrower described in Section 2.06 and being in the
form of EXHIBIT A.
"REVOLVING CREDIT PERIOD" shall mean the period from the Closing Date
to and ending on the Revolving Credit Termination Date.
"REVOLVING CREDIT TERMINATION DATE" shall mean the earlier to occur of
(i) April 8, 2007, or (ii) the date that the Revolving Credit Commitments are
sooner terminated pursuant to Sections 2.03(b) or 10.02.
"SCHEDULED REDETERMINATION DATE" shall have the meaning assigned such
term in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"SECOND LIEN NOTES" shall mean those certain Notes dated April 8, 2004,
executed by the Borrower and payable to Guggenheim Corporate Funding, LLC in the
aggregate original principal amount of $25,000,000, together with any and all
renewals, extensions for any period, increases, rearrangements, substitutions,
and/or modifications thereof.
"SECOND LIEN NOTEHOLDER" shall mean, at any time, the holder or holders
of the Second Lien Notes.
"SECURITY INSTRUMENTS" shall mean the agreements or instruments
described or referred to in EXHIBIT D, and any and all other agreements or
instruments now or hereafter executed and delivered by the Borrower or any other
Person (other than participation or similar agreements between any Lender and
any other lender or creditor with respect to any Obligations pursuant to this
Agreement) in connection with, or as security for the payment or performance of,
the Notes,
CREDIT AGREEMENT
16
this Agreement, or reimbursement obligations under the Letters of Credit, as
such agreements may be amended, supplemented or restated from time to time.
"SENIOR UNSECURED NOTES" shall mean the 97/8% Senior Notes due 2011 in
the original principal amount of $130,000,000.00 issued by the Borrower pursuant
to the Senior Unsecured Notes Indenture.
"SENIOR UNSECURED NOTES INDENTURE" shall mean the Indenture to be dated
on or about the closing date, between the Borrower and The Bank of New York, as
Trustee.
"SPECIAL ENTITY" shall mean any joint venture, limited liability
company or partnership, general or limited partnership or any other type of
partnership or company other than a corporation in which a Person or one or more
of its other Subsidiaries is a member, owner, partner or joint venturer and
owns, directly or indirectly, at least a majority of the equity of such entity
or controls such entity, but excluding any tax partnerships that are not
classified as partnerships under state law. For purposes of this definition, any
Person which owns directly or indirectly an equity investment in another Person
which allows the first Person to manage or elect managers who manage the normal
activities of such second Person will be deemed to "control" such second Person
(e.g., a sole general partner controls a limited partnership).
"SUBSIDIARY" shall mean (i) any corporation or other legally formed
entity of which at least a majority of the outstanding shares of stock or other
ownership interest having by the terms thereof ordinary voting power to elect a
majority of the board of directors or other governing body of such entity
(irrespective of whether or not at the time stock or any other ownership
interest of any other class or classes of such entity shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by another Person or one or more of
such Person's Subsidiaries or by such Person and one or more of its Subsidiaries
(and, with respect to the Borrower, shall include, without limitation, Black
Hawk, Mission E&P, and MSSN Holdings) and (ii) any Special Entity. Unless
otherwise indicated herein, each reference to the term "Subsidiary" shall mean a
Subsidiary of the Borrower.
"SUPER MAJORITY LENDERS" shall mean, at any time while no Loans are
outstanding, Lenders having at least seventy five percent (75%) of the Aggregate
Revolving Credit Commitments and, at any time while Loans are outstanding,
Lenders holding at least seventy five percent (75%) of the outstanding aggregate
principal amount of the Loans (without regard to any sale by a Lender of a
participation in any Loan under Section 12.06(c)); provided, however, Agent,
alone, shall constitute the Super Majority Lenders at any time that Agent is the
sole Lender hereunder.
"TANGIBLE NET WORTH" shall mean, as at any date, the sum of the
following for the Borrower and its Consolidated Subsidiaries determined (without
duplication) in accordance with GAAP:
(i) the amount of preferred stock and common stock at par plus the
amount of additional paid in capital of the Borrower, plus
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17
(ii) the retained earnings (or, in the case of retained earnings
deficit, minus the amount of such deficit), minus
(iii) the sum of the following: cost of treasury shares and the book
value of all assets of the Borrower and its Consolidated Subsidiaries which
should be classified as intangibles (without duplication of deductions in
respect of items already deducted in arriving at additional paid in capital and
retained earnings) but in any event including as such intangibles the following:
goodwill, research and development costs, trademarks, trade names, copyrights,
patents and franchises, unamortized debt discount and expense, all reserves and
any writeup in the book value of assets resulting from a revaluation thereof or
resulting from any changes in GAAP subsequent to December 31, 2003.
"TAXES" shall have the meaning assigned such term in Section 4.06(a).
"TERMINATED LENDER" shall have the meaning assigned such term in
Section 5.06(a).
"TOTAL DEBT" shall mean, without duplication, the sum of: (i) all
indebtedness of the Borrower and its Subsidiaries for borrowed money including,
but not limited to, senior bank debt, senior notes, and subordinated debt; (ii)
capital leases; (iii) issued and outstanding letters of credit; and (iv)
contingent obligations for funded indebtedness of the types described in clauses
(i), (ii), and (iii).
"TRANSFER" shall mean any sale, assignment, farmout, conveyance or
other transfer of any Mortgaged Property or any Oil and Gas Property, or any
interest in any Mortgaged Property or any Oil and Gas Property (including,
without limitation, any working interest, overriding royalty interest,
production payment, net profits interest, royalty interest, or mineral fee
interest) of the Borrower or any Guarantor.
"TYPE" shall mean, with respect to any Loan, a Base Rate Loan or a
LIBOR Loan.
"WHOLLY-OWNED SUBSIDIARY" shall mean, as to any Person, any Subsidiary
of which all of the outstanding shares of capital stock or other equity
interests, on a fully-diluted basis, are owned by such Person or one or more of
its Wholly-Owned Subsidiaries or by such Person and one or more of its
Wholly-Owned Subsidiaries. Unless otherwise indicated, each reference to a
"Wholly-Owned Subsidiary" shall mean a Wholly-Owned Subsidiary of the Borrower.
Section 1.03 Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the audited financial statements of the Borrower referred to in Section 7.02
(except for changes concurred with by the Borrower's independent public
accountants).
CREDIT AGREEMENT
18
ARTICLE II
COMMITMENTS
Section 2.01 Loans and Letters of Credit.
(a) Loans. Each Lender severally agrees, on the terms and
conditions of this Agreement, to make loans to the Borrower during the
period from and including (i) the Closing Date or (ii) such later date
that such Lender becomes a party to this Agreement as provided in
Section 12.06(b), to but excluding, the Final Maturity Date in an
aggregate principal amount at any one time outstanding up to, but not
exceeding, the amount of such Lender's Revolving Credit Commitment as
then in effect less the amount of such Lender's Percentage Share of the
LC Exposure at such time. Subject to the terms of this Agreement,
during the period from the Closing Date to and up to, but excluding,
the Final Maturity Date, the Borrower may borrow, repay and reborrow as
provided in this Section 2.01(a).
(b) Letters of Credit. During the period from and
including the Closing Date to, but excluding, the Final Maturity Date,
the Issuing Bank, as issuing bank for the Lenders, agrees to extend
credit for the account of the Borrower or any Subsidiary at any time
and from time to time by issuing, renewing, extending or reissuing
Letters of Credit; provided however, the LC Exposure at any one time
outstanding shall not exceed the lesser of (i) the LC Commitment or
(ii) the Aggregate Revolving Credit Commitments, as then in effect,
minus the aggregate principal amount of all Loans then outstanding. The
Lenders shall participate in such Letters of Credit according to their
respective Percentage Shares. Each of the Letters of Credit shall (i)
be issued by the Issuing Bank, (ii) contain such terms and provisions
as are reasonably required by the Issuing Bank, (iii) be for the
account of the Borrower or a Subsidiary and (iv) expire not later than
five (5) days before the Final Maturity Date.
(c) Limitation on Types of Loans. Subject to the other
terms and provisions of this Agreement, at the option of the Borrower,
the Loans may be Base Rate Loans or LIBOR Loans; provided that, without
the prior written consent of the Majority Lenders, no more than five
(5) LIBOR Loans may be outstanding at any time.
Section 2.02 Borrowings, Continuations and Conversions,
Letters of Credit.
(a) Borrowings. The Borrower shall give the Agent (which
shall promptly notify the Lenders) advance notice as hereinafter
provided of each borrowing hereunder, which shall specify (i) the
aggregate amount of such borrowing, (ii) the Type, (iii) the date
(which shall be a Business Day) of the Loans to be borrowed, and (iv)
(in the case of LIBOR Loans) the duration of the Interest Period
therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings shall
be in amounts of at least $500,000.00 or the remaining balance of the
Aggregate Revolving Credit Commitments, if less, or any whole multiple
of $100,000.00 in excess thereof, and all
CREDIT AGREEMENT
19
LIBOR Loans shall be in amounts of at least $3,000,000.00 or any whole
multiple of $1,000,000.00 in excess thereof.
(c) Notices. All borrowings, continuations and
conversions shall require advance written notice to the Agent (which
shall promptly notify the Lenders) in the form of EXHIBIT B (or
telephonic notice promptly confirmed by such a written notice), which
in each case shall be irrevocable, from the Borrower to be received by
the Agent not later than 11:00 a.m. Houston, Texas time at least one
(1) Business Day prior to the date of each Base Rate Loan borrowing and
three Business Days prior to the date of each LIBOR Loan borrowing,
continuation or conversion. Without in any way limiting the Borrower's
obligation to confirm in writing any telephonic notice, the Agent may
act without liability upon the basis of telephonic notice believed by
the Agent in good faith to be from the Borrower prior to receipt of
written confirmation. In each such case, the Borrower hereby waives the
right to dispute the Agent's record of the terms of such telephonic
notice except in the case of gross negligence or willful misconduct by
the Agent.
(d) Continuation Options. Subject to the provisions made
in this Section 2.02(d), the Borrower may elect to continue all or any
part of any LIBOR Loan beyond the expiration of the then current
Interest Period relating thereto by giving advance notice as provided
in Section 2.02(c) to the Agent (which shall promptly notify the
Lenders) of such election, specifying the amount of such Loan to be
continued and the Interest Period therefor. In the absence of such a
timely and proper election, the Borrower shall be deemed to have
elected to convert such LIBOR Loan to a Base Rate Loan pursuant to
Section 2.02(e). All or any part of any LIBOR Loan may be continued as
provided herein, provided that (i) any continuation of any such Loan
shall be (as to each Loan as continued for an applicable Interest
Period) in amounts of at least $3,000,000.00 or any whole multiple of
$1,000,000.00 in excess thereof and (ii) no Event of Default shall have
occurred and be continuing. If an Event of Default shall have occurred
and be continuing, each LIBOR Loan shall be converted to a Base Rate
Loan on the last day of the Interest Period applicable thereto.
(e) Conversion Options. The Borrower may elect to convert
all or any part of any LIBOR Loan on the last day of the then current
Interest Period relating thereto to a Base Rate Loan by giving advance
notice to the Agent (which shall promptly notify the Lenders) of such
election. Subject to the provisions made in this Section 2.02(e), the
Borrower may elect to convert all or any part of any Base Rate Loan at
any time and from time to time to a LIBOR Loan by giving advance notice
as provided in Section 2.02(c) to the Agent (which shall promptly
notify the Lenders) of such election. All or any part of any
outstanding Loan may be converted as provided herein, provided that (i)
any conversion of any Base Rate Loan into a LIBOR Loan shall be (as to
each such Loan into which there is a conversion for an applicable
Interest Period) in amounts of at least $3,000,000.00 or any whole
multiple of $1,000,000.00 in excess thereof and (ii) no Default shall
have occurred and be continuing. If an Event of Default shall have
occurred and be continuing, no Base Rate Loan may be converted into a
LIBOR Loan.
CREDIT AGREEMENT
20
(f) Advances. Not later than 11:00 a.m. Houston, Texas
time on the date specified for each borrowing hereunder, each Lender
shall make available the amount of the Loan to be made by it on such
date to the Agent, to an account which the Agent shall specify, in
immediately available funds, for the account of the Borrower. The
amounts so received by the Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrower by
depositing the same, in immediately available funds, in an account of
the Borrower, designated by the Borrower and maintained at the
Principal Office.
(g) Letters of Credit. The Borrower shall give the
Issuing Bank (which shall promptly notify the Lenders of such request
and their Percentage Share of such Letter of Credit), a Letter of
Credit Application to be received by the Issuing Bank not later than
11:00 a.m. Houston, Texas, time not less than three (3) Business Days
prior thereto of each request for the issuance, and at least ten (10)
Business Days prior to the date of the renewal or extension, of a
Letter of Credit hereunder which request shall specify (i) the amount
of such Letter of Credit, (ii) the date (which shall be a Business Day)
such Letter of Credit is to be issued, renewed or extended, (iii) the
duration thereof, (iv) the name and address of the beneficiary thereof,
(v) the form and type of the Letter of Credit and (vi) such other
information as the Issuing Bank may reasonably request, all of which
shall be reasonably satisfactory to the Issuing Bank. Subject to the
terms and conditions of this Agreement, on the date specified for the
issuance, renewal or extension of a Letter of Credit, the Issuing Bank
shall issue, renew or extend such Letter of Credit to the beneficiary
thereof.
In conjunction with the issuance of each Letter of Credit, the
Borrower and the Subsidiary, if the account party, shall execute a
Letter of Credit Agreement. In the event of any conflict between any
provision of a Letter of Credit Agreement and this Agreement, the
Borrower, the Issuing Bank, the Agent and the Lenders hereby agree that
the provisions of this Agreement shall govern.
The Issuing Bank will send to the Borrower and each Lender,
immediately upon issuance of any Letter of Credit, or an amendment
thereto, a true and complete copy of such Letter of Credit, or such
amendment thereto.
Section 2.03 Changes of Revolving Credit Commitments.
(a) The Aggregate Revolving Credit Commitments shall at
all times be equal to the lesser of (i) the Aggregate Maximum Revolving
Credit Amounts after adjustments resulting from reductions pursuant to
Section 2.03(b) or (ii) the Borrowing Base as determined from time to
time.
(b) The Borrower shall have the right to terminate or to
reduce the amount of the Aggregate Maximum Revolving Credit Amounts at
any time, or from time to time, upon not less than three (3) Business
Days' prior notice to the Agent (which shall promptly notify the
Lenders) of each such termination or reduction, which notice shall
specify the effective date thereof and the amount of any such reduction
(which shall not
CREDIT AGREEMENT
21
be less than $5,000,000.00 or any whole multiple of $1,000,000.00 in
excess thereof) and shall be irrevocable and effective only upon
receipt by the Agent.
(c) The Aggregate Maximum Revolving Credit Amounts once
terminated or reduced may not be reinstated.
Section 2.04 Fees.
(a) Revolving Credit Commitment Fee. The Borrower shall
pay to the Agent for the account of each Lender a Revolving Credit
Commitment fee on the daily average unused amount of the Borrowing Base
for the period from and including the Closing Date up to, but
excluding, the earlier of the date the Aggregate Revolving Credit
Commitments are terminated or the Final Maturity Date at a rate per
annum equal to the amount reflected on the appropriate intersection in
the table set forth in the definition of "APPLICABLE MARGIN." Accrued
Revolving Credit Commitment fees shall be payable quarterly in arrears
on each Quarterly Date and on the earlier of the date the Aggregate
Revolving Credit Commitments are terminated or the Final Maturity Date.
(b) Intentionally Deleted.
(c) Letter of Credit Fees.
(i) The Borrower agrees to pay the Agent, for
the account of each Lender, commissions for issuing the
Letters of Credit on the daily average outstanding of the
maximum liability of the Issuing Bank existing from time to
time under such Letter of Credit (calculated separately for
each Letter of Credit) at the rate per annum equal to the
amount reflected on the appropriate "LIBOR LOANS" intersection
in the table set forth in the definition of "APPLICABLE
MARGIN". Each Letter of Credit shall be deemed to be
outstanding up to the full face amount of the Letter of Credit
until the Issuing Bank has received the canceled Letter of
Credit or a written cancellation of the Letter of Credit from
the beneficiary of such Letter of Credit in form and substance
acceptable to the Issuing Bank, or for any reductions in the
amount of the Letter of Credit (other than from a drawing),
written notification from the beneficiary of such Letter of
Credit. Such commissions are payable quarterly in arrears on
each Quarterly Date and upon cancellation or expiration of
each such Letter of Credit.
(ii) The Borrower shall pay to the Issuing Bank,
for its own account, the greater of $500.00 or one-eighth of
one percent (1/8%) as an issuing fee.
(iii) Upon each transfer of any Letter of Credit
to a successor beneficiary in accordance with its terms, the
Borrower shall pay to the Agent for its own account a sum in
an amount which is in accordance with the Agent's then-current
fee policy.
(iv) Upon each drawing of any Letter of Credit,
the Borrower shall pay to the Agent for its own account a
negotiation fee in an amount which is in
CREDIT AGREEMENT
22
accordance with the Agent's then-current fee policy; provided
that such fee shall not be a condition to any drawing.
(v) Upon each amendment of any Letter of Credit,
the Borrower shall pay to the Agent for its own account a sum
in an amount which is in accordance with the Agent's
then-current fee policy.
(d) Intentionally Deleted.
Section 2.05 Several Obligations. The failure of any Lender to
make any Loan to be made by it or to provide funds for disbursements or
reimbursements under Letters of Credit on the date specified therefor shall not
relieve any other Lender of its obligation to make its Loan or provide funds on
such date, but no Lender shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender or to provide funds to be
provided by such other Lender.
Section 2.06 Notes. The Loans made by each Lender shall be
evidenced by a single promissory note of the Borrower in substantially the form
of EXHIBIT A, dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Section 12.06(b), payable to the order of such Lender in
a principal amount equal to its Maximum Revolving Credit Amount as originally in
effect and otherwise duly completed and such substitute Notes as required by
Section 12.06(b). The date, amount, Type, interest rate and Interest Period of
each Loan made by each Lender, and all payments made on account of the principal
thereof, shall be recorded by such Lender on its books for its Note, and, prior
to any transfer may be endorsed by such Lender on the schedule attached to such
Note or any continuation thereof or on any separate record maintained by such
Lender. Failure to make any such notation or to attach a schedule shall not
affect any Lender's or the Borrower's rights or obligations in respect of such
Loans or affect the validity of such transfer by any Lender of its Note.
Section 2.07 Prepayments.
(a) Voluntary Prepayments. The Borrower may prepay the
Base Rate Loans upon not less than one (1) Business Day's prior notice
to the Agent (which shall promptly notify the Lenders), which notice
shall specify the prepayment date (which shall be a Business Day) and
the amount of the prepayment (which shall be at least $500,000.00 and a
multiple of $100,000.00 or the remaining aggregate principal balance
outstanding on the Notes) and shall be irrevocable and effective only
upon receipt by the Agent, provided that interest on the principal
prepaid, accrued to the prepayment date, shall be paid on the
prepayment date. The Borrower may prepay LIBOR Loans on the same
conditions as for Base Rate Loans (except that prior notice to the
Agent shall be not less than three (3) Business Days for LIBOR Loans)
and in addition such prepayments of LIBOR Loans shall be subject to the
terms of Section 5.05 and shall be in an amount equal to all of the
LIBOR Loans for the Interest Period prepaid.
CREDIT AGREEMENT
23
(b) Mandatory Prepayments.
(i) If, after giving effect to any termination
or reduction of the Aggregate Maximum Revolving Credit Amounts
pursuant to Section 2.03(b), the outstanding aggregate
principal amount of the Loans plus the LC Exposure exceeds the
Aggregate Maximum Revolving Credit Amounts, the Borrower shall
(i) prepay the Loans on the date of such termination or
reduction in an aggregate principal amount equal to the
excess, together with interest on the principal amount paid
accrued to the date of such prepayment and (ii) if any excess
remains after prepaying all of the Loans because of LC
Exposure, pay to the Agent on behalf of the Lenders an amount
equal to the excess to be held as cash collateral as provided
in Section 2.10(b) hereof.
(ii) Upon any redetermination of the amount of
the Borrowing Base in accordance with Section 2.08, if the
redetermined Borrowing Base is less than the aggregate
outstanding principal amount of the Loans plus the LC
Exposure, then the Borrower shall within thirty (30) days of
such Borrowing Base redetermination do one or any combination
of the following: (i) prepay the Loans in an aggregate
principal amount equal to such excess, together with interest
on the principal amount paid accrued to the date of such
prepayment, (ii) notify the Agent that Borrower will prepay,
in five (5) equal monthly installments commencing thirty (30)
days after such Borrowing Base redetermination and continuing
on the same day the next four months (unless there is no
corresponding day, in which event, it will be paid on the last
day of such month), the Loans in an aggregate principal amount
equal to such excess, together with interest on the principal
amount paid accrued to the date of such prepayment; or (iii)
provide additional collateral acceptable to the Agent to
increase the Borrowing Base to an amount at least equal to the
aggregate outstanding principal amounts of the Loans, and if a
Borrowing Base deficiency remains after prepaying all of the
Loans because of LC Exposure, the Borrower shall pay to the
Agent on behalf of the Lenders an amount equal to such
Borrowing Base deficiency to be held as cash collateral as
provided in Section 2.10(b).
(c) Generally. Prepayments permitted or required under
this Section 2.07 shall be without premium or PENALTY, except as
required under Section 5.05 for prepayment of LIBOR Loans. Any
prepayments on the Loans may be reborrowed subject to the then
effective Aggregate Revolving Credit Commitments.
Section 2.08 Borrowing Base.
(a) The Borrowing Base shall be determined in accordance
with Section 2.08(b) by the Agent with the concurrence of the
applicable number of required Lenders as provided in Section 2.08(b)
and is subject to redetermination in accordance with Section 2.08(d).
Upon any redetermination of the Borrowing Base, and Schedule 2.08 such
redetermination shall remain in effect until the next successive
Redetermination Date. "Redetermination Date" shall mean the date that
the redetermined
CREDIT AGREEMENT
24
Borrowing Base and Schedule 2.08 becomes effective subject to the
notice requirements specified in Section 2.08(e) both for scheduled
redeterminations and unscheduled redeterminations. So long as any of
the Revolving Credit Commitments are in effect or any LC Exposure or
Loans are outstanding hereunder, this facility shall be governed by the
then effective Borrowing Base and Schedule 2.08. During the period from
and after the Closing Date until the first redetermination pursuant to
Section 2.08(d) or adjusted pursuant to Section 8.08(c), the amount of
the Borrowing Base shall be $50,000,000.00, with $30,000,000 of the
initial Borrowing Base to be available for general corporate purposes
and $20,000,000.00 of the initial Borrowing Base to be available for
acquisitions of Oil and Gas Properties approved by the Majority
Lenders, and to the extent required by Section 8.08, such properties
must be mortgaged to the Agent by documents in form and substance
satisfactory to Agent and title work furnished satisfactory to Agent
and subject to no liens or encumbrances of any kind whatsoever except
those acceptable to Agent in Agent's sole discretion. Notwithstanding
the above, all Lenders shall have the right, at all Lenders' sole
discretion, at any time, to increase the amount of advances under the
Borrowing Base available for General Corporate Purposes and approved
acquisitions in an amount determined by all Lenders, in their sole
discretion. Notwithstanding the foregoing, as acquisitions of Oil and
Gas Properties are approved by the Majority Lenders, the Borrowing Base
available for general corporate purposes shall be increased by the
amount of the purchase price paid with respect to such acquisition (to
the extent approved by the Majority Lenders in their sole discretion),
and the Borrowing Base available for acquisitions shall be reduced by a
like amount.
(b) Upon receipt of the reports required by Section 8.07
and such other reports, data and supplemental information as may from
time to time be reasonably requested by the Agent (the "ENGINEERING
REPORTS"), the Agent will redetermine the Borrowing Base and Schedule
2.08. Such redetermination will be made in the sole discretion of the
Agent and the applicable number of required Lenders, as provided below,
in accordance with their normal and customary procedures for evaluating
oil and gas reserves and other related assets as such exist at that
particular time. Each Lender, in its sole discretion, may make
adjustments to the rates, volumes and prices and other assumptions set
forth therein in accordance with its normal and customary procedures
for evaluating oil and gas reserves and other related assets as such
exist at that particular time. The Agent shall propose to the Lenders a
new Borrowing Base and Schedule 2.08 within twenty (20) days following
receipt by the Agent and the Lenders of the Engineering Reports.
Lenders holding 100% of the Aggregate Commitments must approve
increases to the Borrowing Base, while the approval of the Super
Majority Lenders is required to approve a decrease in, or maintain, the
Borrowing Base. After having received notice of such proposal by the
Agent, all of the Lenders shall have ten (10) days to agree or disagree
with such proposal. If at the end of the ten (10) days, any Lender
shall have not communicated its approval or disapproval, such silence
shall be deemed to be an approval of the Agent's proposal, and the
Agent's proposal shall be the new Borrowing Base. If however, within
the time prescribed by the preceding sentence, (i) all the Lenders have
not approved (or have not been deemed to have
CREDIT AGREEMENT
25
approved) the Agent's proposal with respect to an increase in the
Borrowing Base, or (ii) the Super Majority Lenders have not approved
(or have not been deemed to have approved) the Agent's proposal with
respect to a decrease in, or maintenance of, the Borrowing Base, the
Agent and, as applicable, either all the Lenders (with respect to an
increase in the Borrowing Base) or the Super Majority Lenders (with
respect to a decrease in, or maintenance of, the Borrowing Base) shall,
within an additional ten (10) days, agree upon a new Borrowing Base and
Schedule 2.08.
If the Agent and, as applicable, either all the Lenders or the
Super Majority Lenders cannot otherwise agree on a redetermination of
the Borrowing Base within such additional ten (10) day period, then the
proposed Borrowing Base shall be set at the lesser of (i) the Borrowing
Base proposed by the Agent or (ii) the amount calculated by the Agent
as the "weighted arithmetic average" (as hereinafter calculated) of the
Borrowing Base, as determined by each individual Lender and
communicated to the Agent in writing, and such Borrowing Base shall
then become the Borrowing Base. However, the amount of the Borrowing
Base shall never be increased at any time without the unanimous consent
of the Lenders, notwithstanding anything else herein to the contrary.
For purposes of this paragraph, the "weighted arithmetic average" of
the Borrowing Base shall be determined by first multiplying the
Borrowing Base proposed in writing to the Agent by each Lender by the
ratio of such Lender's Percentage Share over the sum of the Percentage
Shares of all Lenders, and then adding the results of each such
calculation, with the resultant sum being the Borrowing Base.
(c) The Agent may exclude any Oil and Gas Property or
portion of production therefrom or any income from any other Property
from the Borrowing Base, at any time, because title information is not
reasonably satisfactory, such Property is not Mortgaged Property or
such Property is not assignable.
(d) So long as any of the Revolving Credit Commitments
are in effect and until payment in full of all Loans hereunder, on or
around the first Business Day of each April and October, commencing
October 1, 2004, (each being a "SCHEDULED REDETERMINATION DATE"), the
Lenders shall redetermine the amount of the Borrowing Base in
accordance with Section 2.08(b). In addition, the Borrower and Agent
may each initiate one unscheduled redetermination of the Borrowing Base
between each Scheduled Redetermination Date (or by the Borrower, prior
to October 1, 2004, if the Borrower acquires additional Oil and Gas
Properties) by specifying in writing to the non-initiating party the
date on which Borrower is to furnish a Reserve Report in accordance
with Section 8.07(b) and the date as of which such redetermination is
to occur.
(e) The Agent shall promptly notify in writing the
Borrower and the Lenders of the new Borrowing Base. Any redetermination
of the Borrowing Base shall not be in effect until written notice is
received by the Borrower.
Section 2.09 Assumption of Risks. The Borrower assumes all
risks of the acts or omissions of any beneficiary of any Letter of Credit or any
transferee thereof with respect to its use of such Letter of Credit. Neither the
Issuing Bank (except in the case of gross negligence or willful misconduct on
the part of the Issuing Bank or any of its employees), its correspondents nor
any Lender shall be responsible for the validity, sufficiency or genuineness of
certificates or
CREDIT AGREEMENT
26
other documents or any endorsements thereon, even if such certificates or other
documents should in fact prove to be invalid, insufficient, fraudulent or
forged; for errors, omissions, interruptions or delays in transmissions or
delivery of any messages by mail, telex, or otherwise, whether or not they be in
code; for errors in translation or for errors in interpretation of technical
terms; the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; the failure of any beneficiary or any
transferee of any Letter of Credit to comply fully with conditions required in
order to draw upon any Letter of Credit; or for any other consequences arising
from causes beyond the Issuing Bank's control or the control of the Issuing
Bank's correspondents. In addition, neither the Issuing Bank, the Agent nor any
Lender shall be responsible for any error, neglect, or default of any of the
Issuing Bank's correspondents; and none of the above shall affect, impair or
prevent the vesting of any of the Issuing Bank's, the Agent's or any Lender's
rights or powers hereunder [or under the Letter of Credit Agreements], all of
which rights shall be cumulative. The Issuing Bank and its correspondents may
accept certificates or other documents that appear on their face to be in order,
without responsibility for further investigation of any matter contained therein
regardless of any notice or information to the contrary. In furtherance and not
in limitation of the foregoing provisions, the Borrower agrees that any action,
inaction or omission taken or not taken by the Issuing Bank or by any
correspondent for the Issuing Bank in good faith in connection with any Letter
of Credit, or any related drafts, certificates, documents or instruments, shall
be binding on the Borrower and shall not put the Issuing Bank or its
correspondents under any resulting liability to the Borrower.
Section 2.10 Obligation to Reimburse and to Prepay.
(a) If a disbursement by the Issuing Bank is made under
any Letter of Credit, the Borrower shall pay to the Agent within two
(2) Business Days after notice of any such disbursement is received by
the Borrower, the amount of each such disbursement made by the Issuing
Bank under the Letter of Credit (if such payment is not sooner effected
as may be required under this Section 2.10 or under other provisions of
the Letter of Credit), together with interest on the amount disbursed
from and including the date of disbursement until payment in full of
such disbursed amount at a varying rate per annum equal to (i) the then
applicable interest rate for Base Rate Loans through the second
Business Day after notice of such disbursement is received by the
Borrower and (ii) thereafter, the Post-Default Rate for Base Rate Loans
(but in no event to exceed the Highest Lawful Rate) for the period from
and including the third Business Day following the date of such
disbursement to and including the date of repayment in full of such
disbursed amount. The obligations of the Borrower under this Agreement
with respect to each Letter of Credit shall be absolute, unconditional
and irrevocable and shall be paid or performed strictly in accordance
with the terms of this Agreement under all circumstances whatsoever,
including, without limitation, but only to the fullest extent permitted
by applicable law, the following circumstances: (i) any lack of
validity or enforceability of this Agreement, any Letter of Credit or
any of the Security Instruments; (ii) any amendment or waiver of
(including any default), or any consent to departure from this
Agreement (except to the extent permitted by any amendment or waiver),
any Letter of Credit or any of the Security Instruments; (iii) the
existence of any claim, set-off,
CREDIT AGREEMENT
27
defense or other rights which the Borrower may have at any time against
the beneficiary of any Letter of Credit or any transferee of any Letter
of Credit (or any Persons for whom any such beneficiary or any such
transferee may be acting), the Issuing Bank, the Agent, any Lender or
any other Person, whether in connection with this Agreement, any Letter
of Credit, the Security Instruments, the transactions contemplated
hereby or any unrelated transaction; (iv) any statement, certificate,
draft, notice or any other document presented under any Letter of
Credit proves to have been forged, fraudulent, insufficient or invalid
in any respect or any statement therein proves to have been untrue or
inaccurate in any respect whatsoever; (v) payment by the Issuing Bank
under any Letter of Credit against presentation of a draft or
certificate which appears on its face to comply, but does not comply,
with the terms of such Letter of Credit; and (vi) any other
circumstance or happening whatsoever, whether or not similar to any of
the foregoing.
Notwithstanding anything in this Agreement to the contrary, the
Borrower will not be liable for payment or performance that results
from the gross negligence or willful misconduct of the Issuing Bank,
except where the Borrower or any Subsidiary actually recovers the
proceeds for itself or the Issuing Bank of any payment made by the
Issuing Bank in connection with such gross negligence or willful
misconduct.
(b) In the event of the occurrence of any Event of
Default, a payment or prepayment pursuant to Section 2.07(b) or the
maturity of the Notes, whether by acceleration or otherwise, an amount
equal to the LC Exposure (or the excess in the case of Section 2.07(b))
shall be deemed to be forthwith due and owing by the Borrower to the
Agent as of the date of any such occurrence; and the Borrower's
obligation to pay such amount shall be absolute and unconditional,
without regard to whether any beneficiary of any such Letter of Credit
has attempted to draw down all or a portion of such amount under the
terms of a Letter of Credit, and, to the fullest extent permitted by
applicable law, shall not be subject to any defense or be affected by a
right of set-off, counterclaim or recoupment which the Borrower may now
or hereafter have against any such beneficiary, the Issuing Bank, the
Agent, the Lenders or any other Person for any reason whatsoever. Such
payments shall be held by the Agent on behalf of the Lenders as cash
collateral securing the LC Exposure in an interest-bearing account or
accounts (such interest being for the account of the Borrower, but must
remain pledged as security in favor of the Agent on behalf of the
Lenders) at the Principal Office; and the Borrower hereby grants to and
by its deposit with the Agent grants to the Agent a security interest
in such cash collateral. Upon request by the Agent, the Borrower shall
immediately execute and deliver to the Agent the Cash Collateral
Account Agreement. In the event of any such payment by the Borrower of
amounts contingently owing under outstanding Letters of Credit and in
the event that thereafter drafts or other demands for payment complying
with the terms of such Letters of Credit are not made prior to the
respective expiration dates thereof, the Agent agrees, if no Event of
Default has occurred and is continuing or if no other amounts are
outstanding under this Agreement, the Notes or the Security
Instruments, to remit to the Borrower amounts for which the contingent
obligations evidenced by the Letters of Credit have ceased.
CREDIT AGREEMENT
28
(c) Each Lender severally and unconditionally agrees that
it shall promptly reimburse the Issuing Bank an amount equal to such
Lender's Percentage Share of any disbursement made by the Issuing Bank
under any Letter of Credit that is not reimbursed according to this
Section 2.10.
(d) Notwithstanding anything to the contrary contained
herein, if no Default exists and subject to availability under the
Aggregate Revolving Credit Commitments (after reduction for LC
Exposure), to the extent the Borrower has not reimbursed the Issuing
Bank for any drawn upon Letter of Credit within one (1) Business Days
after notice of such disbursement has been received by the Borrower,
the amount of such Letter of Credit reimbursement obligation shall
automatically be funded by the Lenders as a Loan hereunder and used by
the Lenders to pay such Letter of Credit reimbursement obligation. If
an Event of Default has occurred and is continuing, or if the funding
of such Letter of Credit reimbursement obligation as a Loan would cause
the aggregate amount of all Loans outstanding to exceed the Aggregate
Revolving Credit Commitments (after reduction for LC Exposure), such
Letter of Credit reimbursement obligation shall not be funded as a
Loan, but instead shall accrue interest as provided in Section 2.10(a).
Section 2.11 Lending Offices. The Loans of each Type made by
each Lender shall be made and maintained at such Lender's Applicable Lending
Office for Loans of such Type.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans.
(a) Loans. On the Final Maturity Date the Borrower shall
repay the outstanding principal amount of the Revolving Credit Notes.
(b) Generally. The Borrower will pay to the Agent, for
the account of each Lender, the principal payments required by this
Section 3.01.
Section 3.02 Interest.
(a) Interest Rates. Except as otherwise provided in
Section 3.02(b), the Borrower will pay to the Agent, for the account of
each Lender, interest on the unpaid principal amount of each Loan made
by such Lender for the period commencing on the date such Loan is made
to, but excluding, the date such Loan shall be paid in full, at the
following rates per annum:
(i) if such a Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable
Margin, but in no event to exceed the Highest Lawful Rate; and
CREDIT AGREEMENT
29
(ii) if such a Loan is a LIBOR Loan, for each
Interest Period relating thereto, the LIBOR Rate for such Loan
plus the Applicable Margin (as in effect from time to time),
but in no event to exceed the Highest Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, the
Borrower will pay to the Agent, for the account of each Lender interest
at the applicable Post-Default Rate on any principal of any Loan made
by such Lender, and (to the fullest extent permitted by law) on any
other amount payable by the Borrower hereunder, under any Loan Document
or under any Note held by such Lender to or for account of such Lender,
for the period commencing on the date of an Event of Default until the
same is paid in full or all Events of Default are cured or waived.
(c) Due Dates. Accrued interest on Base Rate Loans and
LIBOR Loans shall be payable monthly on the first Business Day of each
month commencing on May 3, 2004, except that interest payable at the
Post-Default Rate shall be payable from time to time on demand and
interest on any LIBOR Loan that is converted into a Base Rate Loan
(pursuant to Section 5.04) shall be payable on the date of conversion
(but only to the extent so converted). Any accrued and unpaid interest
on the Loans shall also be paid on (i) the date of any prepayment
thereof, and (ii) the Final Maturity Date.
(d) Determination of Rates. Promptly after the
determination of any interest rate provided for herein or any change
therein, the Agent shall notify the Lenders to which such interest is
payable and the Borrower thereof. Each determination by the Agent of an
interest rate or fee hereunder shall, except in cases of manifest
error, be final, conclusive and binding on the parties.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Borrower under this Agreement, the Notes and the Letter of Credit Agreements
shall be made in Dollars, in immediately available funds, to the Agent at such
account as the Agent shall specify by notice to the Borrower from time to time,
not later than 11:00 a.m. Houston, Texas time on the date on which such payments
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). Such payments
shall be made without (to the fullest extent permitted by applicable law)
defense, set-off or counterclaim. Each payment received by the Agent under this
Agreement or any Note for account of a Lender shall be paid promptly to such
Lender in immediately available funds. Except as otherwise provided in the
definition of "INTEREST PERIOD", if the due date of any payment under this
Agreement or any Note 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.
At the time of each payment to the Agent of any principal of or interest on any
borrowing, the Borrower shall notify the Agent of the Loans to which such
payment shall apply. In the absence of such notice the
CREDIT AGREEMENT
30
Agent may specify the Loans to which such payment shall apply, but to the extent
possible such payment or prepayment will be applied first to the Loans comprised
of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent
otherwise provided herein each Lender agrees that: (i) each borrowing from the
Lenders under Section 2.01 and each continuation and conversion under Section
2.02 shall be made from the Lenders pro rata in accordance with their Percentage
Share, each payment of commitment fee or other fees under Section 2.04 shall be
made for account of the Agent or the Lenders pro rata (as applicable) in
accordance with their Percentage Share, and each termination or reduction of the
amount of the Aggregate Maximum Revolving Credit Amounts under Section 2.03(b)
shall be applied to the Revolving Credit Commitment of each Lender, pro rata
according to the amount of its respective Revolving Credit Commitment; (ii) each
payment of principal of Loans by the Borrower shall be made for account of the
Lenders pro rata in accordance with their respective Percentage Shares; and
(iii) each payment of interest on Loans by the Borrower shall be made for
account of the Lenders pro rata in accordance with their respective Percentage
Shares; and (iv) each reimbursement by the Borrower of disbursements under
Letters of Credit shall be made for account of the Issuing Bank or, if funded by
the Lenders, pro rata for the account of the Lenders, in accordance with their
respective Percentage Shares.
Section 4.03 Computations. Interest on LIBOR Loans and fees
shall be computed on the basis of a year of three hundred sixty (360) days and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable, unless such
calculation would exceed the Highest Lawful Rate, in which case interest shall
be calculated on the per annum basis of a year of three hundred sixty-five (365)
or three hundred sixty-six (366) days, as the case may be. Interest on Base Rate
Loans shall be computed on the basis of a year of three hundred sixty-five (365)
or three hundred sixty-six (366) days, as the case may be, and actual days
elapsed (including the first day but excluding the last day) occurring in the
period for which such interest is payable.
Section 4.04 Non-receipt of Funds by the Agent. Unless the
Agent shall have been notified by a Lender or the Borrower prior to the date on
which such notifying party is scheduled to make payment to the Agent (in the
case of a Lender) of the proceeds of a Loan or a payment under a Letter of
Credit to be made by it hereunder or (in the case of the Borrower) a payment to
the Agent for account of one or more of the Lenders hereunder (such payment
being herein called the "REQUIRED PAYMENT"), which notice shall be effective
upon receipt, that it does not intend to make the Required Payment to the Agent,
the Agent may assume that the Required Payment has been made and may, in
reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or the Borrower (as the case may be) has not in fact made the Required Payment
to the Agent, the recipient(s) of such payment shall, on demand, repay to the
Agent the amount so made available together with interest thereon in respect of
each day during the period commencing on the date such amount was so made
available by the Agent until, but excluding, the date the Agent recovers such
amount at a rate per annum which, for any Lender as recipient, will be equal to
the Federal Funds Rate, and for the Borrower as recipient, will be equal to the
Base Rate plus the Applicable Margin.
CREDIT AGREEMENT
31
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall have the right and be
entitled (after consultation with the Agent), at its option, to offset
balances held by it or by any of its Affiliates for account of the
Borrower [or any Subsidiary] at any of its offices, in Dollars or in
any other currency, against any principal of or interest on any of such
Lender's Loans, or any other amount payable to such Lender hereunder,
which is not paid when due (regardless of whether such balances are
then due to the Borrower), in which case it shall promptly notify the
Borrower and the Agent thereof, provided that such Lender's failure to
give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal
of or interest on any Loan made by it to the Borrower under this
Agreement (or reimbursement as to any Letter of Credit) through the
exercise of any right of set-off, banker's lien or counterclaim or
similar right or otherwise, and, as a result of such payment, such
Lender shall have received a greater percentage of the principal or
interest (or reimbursement) then due hereunder by the Borrower to such
Lender than the percentage received by any other Lenders, it shall
promptly (i) notify the Agent and each other Lender thereof and (ii)
purchase from such other Lenders participations in (or, if and to the
extent specified by such Lender, direct interests in) the Loans (or
participations in Letters of Credit) made by such other Lenders (or in
interest due thereon, as the case may be) in such amounts, and make
such other adjustments from time to time as shall be equitable, to the
end that all the Lenders shall share the benefit of such excess payment
(net of any expenses which may be incurred by such Lender in obtaining
or preserving such excess payment) pro rata in accordance with the
unpaid principal and/or interest on the Loans held by each of the
Lenders (or reimbursements of Letters of Credit). To such end all the
Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such payment is
rescinded or must otherwise be restored. The Borrower agrees that any
Lender so purchasing a participation (or direct interest) in the Loans
made by other Lenders (or in interest due thereon, as the case may be)
may exercise all rights of set-off, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such
Lender were a direct holder of Loans (or Letters of Credit) in the
amount of such participation. Nothing contained herein shall require
any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such
right with respect to any other indebtedness or obligation of the
Borrower. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a set-off
to which this Section 4.05 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this
Section 4.05 to share the benefits of any recovery on such secured
claim.
CREDIT AGREEMENT
32
Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the
Borrower hereunder shall be made, in accordance with Section 4.01, free
and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each
Lender, the Issuing Bank and the Agent, taxes imposed on its income,
and franchise or similar taxes imposed on it, by (i) any jurisdiction
(or political subdivision thereof) of which the Agent, the Issuing Bank
or such Lender, as the case may be, is a citizen or resident or in
which such Lender has an Applicable Lending Office, (ii) the
jurisdiction (or any political subdivision thereof) in which the Agent,
the Issuing Bank or such Lender is organized, or (iii) any jurisdiction
(or political subdivision thereof) in which such Lender, the Issuing
Bank or the Agent is presently doing business which taxes are imposed
solely as a result of doing business in such jurisdiction (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "TAXES"). If the
Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to the Lenders, the Issuing Bank
or the Agent (i) the sum payable shall be increased by the amount
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section
4.06) such Lender, the Issuing Bank or the Agent (as the case may be)
shall receive an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the
relevant taxing authority or other Governmental Authority in accordance
with applicable law.
(b) Other Taxes. In addition, to the fullest extent
permitted by applicable law, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made
hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement, any Assignment or any
Security Instrument (hereinafter referred to as "OTHER TAXES").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE ISSUING
BANK AND THE AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES
(INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY
GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.06) PAID
BY SUCH LENDER, THE ISSUING BANK OR THE AGENT (ON THEIR BEHALF OR ON
BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING
PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR
LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR
LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES
WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY
PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY
(30) DAYS AFTER THE DATE ANY LENDER, THE ISSUING BANK OR THE AGENT, AS
THE CASE
CREDIT AGREEMENT
33
MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER, THE ISSUING BANK
OR THE AGENT RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY TAXES OR
OTHER TAXES FOR WHICH SUCH LENDER, ISSUING BANK OR THE AGENT HAS
RECEIVED PAYMENT FROM THE BORROWER IT SHALL PROMPTLY NOTIFY THE
BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO DEFAULT HAS OCCURRED
AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER RECEIPT OF A REQUEST
BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE BORROWER HAS
REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY
AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER WITHOUT
INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT
THE BORROWER, UPON THE REQUEST OF SUCH LENDER, THE ISSUING BANK OR THE
AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST
OR OTHER CHARGES) TO SUCH LENDER OR THE AGENT IN THE EVENT SUCH LENDER
OR THE AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (1)
a banking association or corporation organized under the laws
of the United States of America or any state thereof or (2) it
is entitled to complete exemption from United States
withholding tax imposed on or with respect to any payments,
including fees, to be made to it pursuant to this Agreement
(A) under an applicable provision of a tax convention to which
the United States of America is a party or (B) because it is
acting through a branch, agency or office in the United States
of America and any payment to be received by it hereunder is
effectively connected with a trade or business in the United
States of America. Each Lender that is not a banking
association or corporation organized under the laws of the
United States of America or any state thereof agrees to
provide to the Borrower and the Agent on the Closing Date, or
on the date of its delivery of the Assignment pursuant to
which it becomes a Lender, and at such other times as required
by United States law or as the Borrower or the Agent shall
reasonably request, two accurate and complete original signed
copies of either (A) Internal Revenue Service Form W-8ECI (or
successor form) certifying that all payments to be made to it
hereunder will be effectively connected to a United States
trade or business (the "FORM W-8ECI CERTIFICATION") or (B)
Internal Revenue Service Form W-8BEN (or successor form)
certifying that it is entitled to the benefit of a provision
of a tax convention to which the United States of America is a
party which completely exempts from United States withholding
tax all payments to be made to it hereunder (the "FORM W-8BEN
CERTIFICATION"). In addition, each Lender agrees that if it
previously filed a Form W-8ECI Certification, it will deliver
to the Borrower and the Agent a new Form W-8ECI Certification
prior to the first payment date occurring in each of its
subsequent taxable years; and if it previously filed a Form
W-8BEN Certification, it will deliver to the Borrower and the
Agent a new certification prior to the first payment date
falling in the third year following the previous filing of
such certification. Each Lender also agrees to deliver to the
Borrower and the Agent such other or supplemental forms as may
CREDIT AGREEMENT
34
at any time be required as a result of changes in applicable
law or regulation in order to confirm or maintain in effect
its entitlement to exemption from United States withholding
tax on any payments hereunder, provided that the circumstances
of such Lender at the relevant time and applicable laws permit
it to do so. If a Lender determines, as a result of any change
in either (i) a Governmental Requirement or (ii) its
circumstances, that it is unable to submit any form or
certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any
such form or certificate previously submitted, it shall
promptly notify the Borrower and the Agent of such fact. If a
Lender is organized under the laws of a jurisdiction outside
the United States of America, unless the Borrower and the
Agent have received a Form W-8BEN Certification or Form W-8ECI
Certification satisfactory to them indicating that all
payments to be made to such Lender hereunder are not subject
to United States withholding tax, the Borrower shall withhold
taxes from such payments at the applicable statutory rate.
Each Lender agrees to indemnify and hold harmless the Borrower
or Agent, as applicable, from any United States taxes,
penalties, interest and other expenses, costs and losses
incurred or payable by (i) the Agent as a result of such
Lender's failure to submit any form or certificate that it is
required to provide pursuant to this Section 4.06 or (ii) the
Borrower or the Agent as a result of their reliance on any
such form or certificate which such Lender has provided to
them pursuant to this Section 4.06.
(ii) For any period with respect to which a
Lender has failed to provide the Borrower with the form
required pursuant to this Section 4.06, if any, (other than if
such failure is due to a change in a Governmental Requirement
occurring subsequent to the date on which a form originally
was required to be provided), such Lender shall not be
entitled to indemnification under Section 4.06 with respect to
taxes imposed by the United States which taxes would not have
been imposed but for such failure to provide such forms;
provided, however, that if a Lender, which is otherwise exempt
from or subject to a reduced rate of withholding tax, becomes
subject to taxes because of its failure to deliver a form
required hereunder, the Borrower shall take such steps as such
Lender shall reasonably request to assist such Lender to
recover such taxes.
(iii) Any Lender claiming any additional amounts
payable pursuant to this Section 4.06 shall use reasonable
efforts (consistent with legal and regulatory restrictions) to
file any certificate or document requested by the Borrower or
the Agent or to change the jurisdiction of its Applicable
Lending Office or to contest any tax imposed if the making of
such a filing or change or contesting such tax would avoid the
need for or reduce the amount of any such additional amounts
that may thereafter accrue and would not, in the sole
determination of such Lender, be otherwise disadvantageous to
such Lender.
Section 4.07 Disposition of Proceeds. The Mortgages contain an
assignment by the Borrower unto and in favor of the Agent for the benefit of the
Lenders of all production and all proceeds attributable thereto which may be
produced from or allocated to the Mortgaged
CREDIT AGREEMENT
35
Property, and the Mortgages further provide in general for the application of
such proceeds to the satisfaction of the Obligations and other indebtedness,
liabilities and obligations described therein and secured thereby.
Notwithstanding the assignment contained in the Mortgages, until the occurrence
of an Event of Default, the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Lenders, but the Lenders will instead permit
such proceeds to be paid to the Borrower.
ARTICLE V
CAPITAL ADEQUACY AND ADDITIONAL COSTS
Section 5.01 Capital Adequacy and Additional Costs.
(a) The Borrower shall pay directly to each Lender from
time to time on request such amounts as such Lender may determine to be
necessary to compensate such Lender or its parent or holding company
for any costs which it determines are attributable to the maintenance
by such Lender or its parent or holding company, pursuant to any
Governmental Requirement, of capital in respect of its Revolving Credit
Commitment or making, funding or maintaining any Loans or Letters of
Credit (such compensation to include, without limitation, an amount
equal to any reduction of the rate of return on assets or equity of
such Lender or its parent or holding company to a level below that
which such Lender or its parent or holding company could have achieved
but for such Governmental Requirement). Each Lender will notify the
Borrower that it is entitled to compensation pursuant to this Section
5.01(a) as promptly as practicable after it determines to request such
compensation.
(b) Determinations and allocations by any Lender for
purposes of this Article V shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
(c) LIBOR Regulations, etc. The Borrower shall pay
directly to each Lender from time to time such amounts as such Lender
may determine to be necessary to compensate such Lender for any costs
which it determines are attributable to its making or maintaining of
any LIBOR Loans or issuing or participating in Letters of Credit
hereunder or its obligation to make any LIBOR Loans or issue or
participate in any Letters of Credit hereunder, or any reduction in any
amount receivable by such Lender hereunder in respect of any of such
LIBOR Loans, Letters of Credit or such obligation (such increases in
costs and reductions in amounts receivable being herein called
"ADDITIONAL COSTS"), resulting from any Regulatory Change which: (i)
changes the basis of taxation of any amounts payable to such Lender
under this Agreement or any Note in respect of any of such LIBOR Loans
or Letters of Credit (other than taxes imposed on the overall net
income of such Lender or of its Applicable Lending Office for any of
such LIBOR Loans by the jurisdiction in which such Lender has its
principal office or Applicable Lending Office); or (ii) imposes or
modifies any reserve, special deposit, minimum capital, capital ratio
or similar requirements relating to any extensions of credit
CREDIT AGREEMENT
36
or other assets of, or any deposits with or other liabilities of such
Lender, or the Revolving Credit Commitment or Loans of such Lender or
the LIBOR interbank market; or (iii) imposes any other condition
affecting this Agreement or any Note (or any of such extensions of
credit or liabilities) or such Lender's Revolving Credit Commitment or
Loans. Each Lender will notify the Agent and the Borrower of any event
occurring after the Closing Date which will entitle such Lender to
compensation pursuant to this Section 5.01(c) as promptly as
practicable after it obtains knowledge thereof and determines to
request such compensation, and will 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
disadvantageous to such Lender, provided that such Lender shall have no
obligation to so designate an Applicable Lending Office located in the
United States. If any Lender requests compensation from the Borrower
under this Section 5.01(c), the Borrower may, by notice to such Lender,
suspend the obligation of such Lender to make additional Loans of the
Type with respect to which such compensation is requested until the
Regulatory Change giving rise to such request ceases to be in effect
(in which case the provisions of Section 5.04 shall be applicable).
(d) Regulatory Change. Without limiting the effect of the
provisions of Section 5.01(c), in the event that at any time (by reason
of any Regulatory Change or any other circumstances arising after the
Closing Date affecting (A) any Lender, (B) the LIBOR interbank market
or (C) such Lender's position in such market), the LIBOR Rate, as
determined in good faith by such Lender, will not adequately and fairly
reflect the cost to such Lender of funding its LIBOR Loans, then, if
such Lender so elects, by notice to the Borrower and the Agent, the
obligation of such Lender to make additional LIBOR Loans shall be
suspended until such Regulatory Change or other circumstances ceases to
be in effect (in which case the provisions of Section 5.04 shall be
applicable).
(e) Capital Adequacy. Without limiting the effect of the
foregoing provisions of this Section 5.01 (but without duplication),
the Borrower shall pay directly to any Lender from time to time on
request such amounts as such Lender may reasonably determine to be
necessary to compensate such Lender or its parent or holding company
for any costs which it determines are attributable to the maintenance
by such Lender or its parent or holding company (or any Applicable
Lending Office), pursuant to any Governmental Requirement following any
Regulatory Change, of capital in respect of its Revolving Credit
Commitment, its Note, or its Loans or any interest held by it in any
Letter of Credit, such compensation to include, without limitation, an
amount equal to any reduction of the rate of return on assets or equity
of such Lender or its parent or holding company (or any Applicable
Lending Office) to a level below that which such Lender or its parent
or holding company (or any Applicable Lending Office) could have
achieved but for such Governmental Requirement. Such Lender will notify
the Borrower that it is entitled to compensation pursuant to this
Section 5.01(e) as promptly as practicable after it determines to
request such compensation.
(f) Compensation Procedure. Any Lender notifying the
Borrower of the incurrence of Additional Costs under this Section 5.01
shall in such notice to the
CREDIT AGREEMENT
37
Borrower and the Agent set forth in reasonable detail the basis and
amount of its request for compensation. Determinations and allocations
by each Lender for purposes of this Section 5.01 of the effect of any
Regulatory Change pursuant to Section 5.01(c) or (d), or of the effect
of capital maintained pursuant to Section 5.01(e), on its costs or rate
of return of maintaining Loans or its obligation to make Loans or issue
Letters of Credit, or on amounts receivable by it in respect of Loans
or Letters of Credit, and of the amounts required to compensate such
Lender under this Section 5.01, shall be conclusive and binding for all
purposes, provided that such determinations and allocations are made on
a reasonable basis. Any request for additional compensation under this
Section 5.01 shall be paid by the Borrower within thirty (30) days of
the receipt by the Borrower of the notice described in this Section
5.01(f).
Section 5.02 Limitation on LIBOR Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any LIBOR Rate
for any Interest Period:
(i) the Agent determines (which determination
shall be conclusive, absent manifest error) that quotations of
interest rates for the relevant deposits referred to in the
definition of "LIBOR RATE" in Section 1.02 are not being
provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for
LIBOR Loans as provided herein; or
(ii) the Agent determines (which determination
shall be conclusive, absent manifest error) that the relevant
rates of interest referred to in the definition of "LIBOR
RATE" in Section 1.02 upon the basis of which the rate of
interest for LIBOR Loans for such Interest Period is to be
determined are not sufficient to adequately cover the cost to
the Lenders of making or maintaining LIBOR Loans;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional LIBOR Loans.
Section 5.03 Illegality. Notwithstanding any other provision
of this Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain LIBOR
Loans hereunder, then such Lender shall promptly notify the Borrower thereof and
such Lender's obligation to make LIBOR Loans shall be suspended until such time
as such Lender may again make and maintain LIBOR Loans (in which case the
provisions of Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02
and 5.03. If the obligation of any Lender to make LIBOR Loans shall be suspended
pursuant to Sections 5.01, 5.02 or 5.03 ("AFFECTED LOANS"), all Affected Loans
which would otherwise be made by such Lender shall be made instead as Base Rate
Loans (and, if an event referred to in Section 5.01 or Section 5.03 has occurred
and such Lender so requests by notice to the Borrower, all Affected Loans of
such Lender then outstanding shall be automatically converted into Base Rate
Loans on the date specified by such Lender in such notice) and, to the extent
that Affected Loans are so made as (or converted into) Base Rate Loans, all
payments of principal which would otherwise be applied to such Lender's Affected
Loans shall be applied instead to its Base Rate Loans.
CREDIT AGREEMENT
38
Section 5.05 Compensation. The Borrower shall pay to each
Lender within thirty (30) days of receipt of written request of such Lender
(which request shall set forth, in reasonable detail, the basis for requesting
such amounts and which shall be conclusive and binding for all purposes provided
that such determinations are made on a reasonable basis), such amount or amounts
as shall compensate it for any loss, cost, expense or liability which such
Lender determines are attributable to:
(i) any payment, prepayment or conversion of a
LIBOR Loan properly made by such Lender or the Borrower for
any reason (including, without limitation, the acceleration of
the Loans pursuant to Section 10.01) on a date other than the
last day of the Interest Period for such Loan; or
(ii) any failure by the Borrower for any reason
(including but not limited to, the failure of any of the
conditions precedent specified in Article VI to be satisfied)
to borrow, continue or convert a LIBOR Loan from such Lender
on the date for such borrowing, continuation or conversion
specified in the relevant notice given pursuant to Section
2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified for such borrowing) at the
applicable rate of interest for such Loan provided for herein over (ii) the
interest component of the amount such Lender would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Lender).
Section 5.06 Replacement Lenders.
(a) If any Lender has notified the Borrower and the Agent
of its incurring Additional Costs under Section 5.01 or has required
the Borrower to make payments for Taxes under Section 4.06, then the
Borrower may, unless such Lender has notified the Borrower and the
Agent that the circumstances giving rise to such notice no longer
apply, terminate, in whole but not in part, the Revolving Credit
Commitment of any Lender (other than the Agent) (the "TERMINATED
LENDER") at any time upon five (5) Business Days' prior written notice
to the Terminated Lender and the Agent (such notice referred to herein
as a "NOTICE OF TERMINATION").
(b) In order to effect the termination of the Revolving
Credit Commitment of the Terminated Lender, the Borrower shall: (i)
obtain an agreement with one or more Lenders to increase their
Revolving Credit Commitment or Revolving Credit Commitments and/or (ii)
request any one or more other banking institutions to become parties to
this Agreement in place and instead of such Terminated Lender and agree
to accept a Revolving Credit Commitment or Revolving Credit
Commitments; provided, however, that such one or more other banking
institutions are reasonably acceptable to
CREDIT AGREEMENT
39
the Agent and become parties by executing an Assignment (the Lenders or
other banking institutions that agree to accept in whole or in part the
Revolving Credit Commitment of the Terminated Lender being referred to
herein as the "REPLACEMENT LENDERS"), such that the aggregate increased
and/or accepted Revolving Credit Commitments of the Replacement Lenders
under clauses (i) and (ii) above equal the Revolving Credit Commitment
of the Terminated Lender.
(c) The Notice of Termination shall include the name of
the Terminated Lender, the date the termination will occur (the "LENDER
TERMINATION DATE"), and the Replacement Lender or Replacement Lenders
to which the Terminated Lender will assign its Revolving Credit
Commitment and, if there will be more than one Replacement Lender, the
portion of the Terminated Lender's Revolving Credit Commitment to be
assigned to each Replacement Lender.
(d) On the Lender Termination Date, (i) the Terminated
Lender shall by execution and delivery of an Assignment assign its
Revolving Credit Commitment to the Replacement Lender or Replacement
Lenders (pro rata, if there is more than one Replacement Lender, in
proportion to the portion of the Terminated Lender's Revolving Credit
Commitment to be assigned to each Replacement Lender) indicated in the
Notice of Termination and shall assign to the Replacement Lender or
Replacement Lenders each of its Loans (if any) then outstanding and
participation interests in Letters of Credit (if any) then outstanding
pro rata as aforesaid), (ii) the Terminated Lender shall endorse its
Note, payable without recourse, representation or warranty to the order
of the Replacement Lender or Replacement Lenders (pro rata as
aforesaid), (iii) the Replacement Lender or Replacement Lenders shall
purchase the Note held by the Terminated Lender (pro rata as aforesaid)
at a price equal to the unpaid principal amount thereof plus interest
and facility and other fees accrued and unpaid to the Lender
Termination Date, and (iv) the Replacement Lender or Replacement
Lenders will thereupon (pro rata as aforesaid) succeed to and be
substituted in all respects for the Terminated Lender with like effect
as if becoming a Lender pursuant to the terms of Section 12.06(b), and
the Terminated Lender will have the rights and benefits of an assignor
under Section 12.06(b). To the extent not in conflict, the terms of
Section 12.06(b) shall supplement the provisions of this Section
5.06(d). For each assignment made under this Section 5.06, the
Replacement Lender shall pay to the Agent the processing fee provided
for in Section 12.06(b). The Borrower will be responsible for the
payment of any breakage costs associated with termination and
Replacement Lenders, as set forth in Section 5.05.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding.
The obligation of the Lenders to make the Initial Funding is subject to
the receipt by the Agent and the Lenders of all fees payable pursuant to Section
2.04 on or before the Closing Date
CREDIT AGREEMENT
40
and the receipt by the Agent of the following documents (in sufficient original
counterparts, other than the Notes, for each Lender) and satisfaction of the
other conditions provided in this Section 6.01, each of which shall be
satisfactory to the Agent in form and substance:
(a) A certificate of the Secretary or an Assistant
Secretary of the Borrower setting forth (i) resolutions of its board of
directors with respect to the authorization of the Borrower to execute
and deliver the Loan Documents to which it is a party and to enter into
the transactions contemplated in those documents, (ii) the officers of
the Borrower (y) who are authorized to sign the Loan Documents to which
Borrower is a party and (z) who will, until replaced by another officer
or officers duly authorized for that purpose, act as its representative
for the purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of the authorized
officers, and (iv) the certificate of incorporation and bylaws of the
Borrower, certified as being true and complete. The Agent and the
Lenders may conclusively rely on such certificate until the Agent
receives notice in writing from the Borrower to the contrary.
(b) A certificate of the Secretary or an Assistant
Secretary of any Subsidiary that is a corporation or a limited
liability company (an "LLC") or a general partner of a Subsidiary
setting forth (i) resolutions of its board of directors with respect to
the authorization of the Subsidiary to execute and deliver the Loan
Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of the Subsidiary
(y) who are authorized to sign the Loan Documents to which the
Subsidiary is a party and (z) who will, until replaced by another
officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices
and other communications in connection with this Agreement and the
transactions contemplated hereby, (iii) specimen signatures of the
authorized officers, and (iv) the articles or certificate of
incorporation and bylaws (and the Regulations if such Subsidiary is an
LLC) of the Subsidiary, certified as being true and complete. The Agent
and the Lenders may conclusively rely on such certificate until they
receive notice in writing from the Subsidiary to the contrary.
(c) A certificate of each partner of each partnership
that is a Subsidiary setting forth (i) resolutions of its partners with
respect to the authorization of such Subsidiary to execute and deliver
the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the Persons of such
Subsidiary (y) who are authorized to sign the Loan Documents to which
such Subsidiary is a party and (z) who will, until replaced by another
Person duly authorized for that purpose, act as its representative for
the purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of the authorized
Persons, and (iv) the partnership agreement of such Subsidiary,
certified as being true and complete. The Agent and the Lenders may
conclusively rely on such certificate until they receive notice in
writing from the Borrower to the contrary.
CREDIT AGREEMENT
41
(d) Certificates of the appropriate state agencies with
respect to the existence, qualification and good standing of the
Borrower, Guarantor(s), and Subsidiaries.
(e) A compliance certificate which shall be substantially
in the form of EXHIBIT C, duly and properly executed by a Responsible
Officer and dated as of the date of the Initial Funding.
(f) The Notes, duly completed and executed.
(g) The Security Instruments, including those described
on EXHIBIT D, duly completed and executed in sufficient number of
counterparts for recording, if necessary.
(h) An opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., and Schully,
Roberts, Slattery, Jaubert & Marino, PC and ▇▇▇▇▇ ▇▇▇▇▇, Attorney at
Law, counsel to the Borrower, Guarantor, and the Subsidiaries, in form
and substance satisfactory to the Agent, as to such matters incident to
the transactions herein contemplated as the Agent may reasonably
request, including, without limitation, the enforceability of the
Mortgages and other Security Instruments and the validity, perfection,
and priority of the liens created thereby.
(i) A certificate of insurance coverage of the Borrower
evidencing that the Borrower is carrying insurance in accordance with
Section 7.19.
(j) Title information as the Agent may require from
attorneys satisfactory to the Agent setting forth the status of title
to at least eight-five percent (85%) of the value of the Oil and Gas
Properties included in the Initial Reserve Report.
(k) The Security Instruments and related financing
statements covering the Mortgaged Property shall have been delivered to
special counsel for the Agent for filing and recording in the
appropriate offices to perfect the Liens and security interests created
thereby in accordance with the requirements for perfection provided by
the attorneys who have furnished the legal opinions called for in (h)
above.
(l) Letters in Lieu executed by the Borrower or any
Subsidiary, as applicable, and a list of the purchasers of the
Hydrocarbons of the Borrower or any Subsidiary produced from the
Borrower's and any of its Subsidiaries' Oil and Gas Properties.
(m) The Agent shall have been furnished with appropriate
UCC search certificates reflecting the filing of all financing
statements required to perfect the Liens granted by the Security
Instruments and reflecting no prior Liens.
(n) The organizational chart of Borrower and its
Subsidiaries (unless there are no Subsidiaries).
(o) All consents in form and substance satisfactory to
all Lenders and of all Persons required by the Lenders.
CREDIT AGREEMENT
42
(p) [INTENTIONALLY DELETED.]
(q) Agent shall have received from the Borrower,
reviewed, and be satisfied, in Agent's sole discretion, of the
Borrower's and each Subsidiary's (i) existing corporate and partnership
documents; (ii) annual financial statements; (iii) most recent interim
financial statements; (iv) valuation information of assets proposed by
the Borrower to secure the Obligations; (v) all lien searches covering
any and all of the Mortgaged Property; (vi) other material documents
and agreements (including, without limitation, all: (1) Material
Agreements listed on SCHEDULE 7.23, and (2) all other material
documents and agreements as the Agent shall have requested); (vii) the
legal, corporate, partnership, and capital structure of the Borrower
and its Subsidiaries on the Closing Date and after giving effect to the
transactions contemplated hereby; (viii) evidence satisfactory to Agent
that prior to or concurrently with the closing, the Borrower shall have
received gross cash proceeds from the Second Lien Notes to the Borrower
of at least Twenty-Five Million Dollars ($25,000,000.00) (minus
reasonable fees and expenses not to exceed Seven Hundred Fifty Thousand
and No/100 Dollars ($750,000.00) on terms and conditions satisfactory
to the Agent, together with a intercreditor agreement executed by
Agent, Borrower, and the Second Lien Noteholder containing terms and
conditions satisfactory to Agent and satisfactory review and approval
of all loan documents and instruments executed in connection with the
Second Lien Notes; (ix) evidence satisfactory to Agent that prior to or
concurrently with the closing, the Borrower shall have received gross
cash proceeds from the Senior Unsecured Notes of at least One Hundred
Thirty Million Dollars ($130,000,000.00) on terms and conditions
satisfactory to the Agent and satisfactory review and approval by Agent
of all loan documents and instruments executed in connection with the
Senior Unsecured Notes; (x) evidence satisfactory to Agent that
concurrent with the closing of this transaction, all Debt of Borrower
and its Subsidiaries for borrowed money existing prior to closing,
shall have been repaid and/or provided for except for purchase money
indebtedness not to exceed $100,000.00 in the aggregate and insurance
premium financing notes not to exceed $100,000.00 in the aggregate; and
(xi) evidence satisfactory to Agent that all existing Hedging
Agreements executed by the Borrower and its Subsidiaries are acceptable
to the Agent with counterparties acceptable to the Agent and have been
provided to Agent for purposes of calculating the Borrowing Base.
(r) Such other documents, in form and substance
reasonably satisfactory to Agent, as the Agent or any Lender or special
counsel to the Agent may reasonably request, including, without
limitation, (i) documentation of all environmental and title matters
relating to all of the Borrower's Oil and Gas Properties including,
without limitation, the Mortgaged Properties and (ii) all Material
Agreements.
(s) A receipt from The Bank of New York for the funds to
be deposited with The Bank of New York in connection with the
redemption of the Existing Senior Subordinated Unsecured Notes, such
funds to be in the amount specified in the Certificate described in
subsection (t) below.
CREDIT AGREEMENT
43
(t) A copy of the Officer's Certificate to Trustee to be
provided by the Borrower to The Bank of New York in connection with the
redemption of the Existing Senior Subordinated Unsecured Notes, such
Officer's Certificate to contain, inter alia, a statement of the amount
required to be deposited with The Bank of New York in connection with
such redemption.
Section 6.02 Initial and Subsequent Loans and Letters of
Credit. The obligation of the Lenders to make Loans to the Borrower
upon the occasion of each borrowing hereunder and to issue, renew,
extend or reissue Letters of Credit for the account of the Borrower
(including the Initial Funding) is subject to the further conditions
precedent that, as of the date of such Loans and after giving effect
thereto:
(a) no Default shall exist;
(b) no Material Adverse Effect shall have occurred;
(c) the representations and warranties made by the
Borrower in Article VII and in the Security Instruments shall be true
on and as of the date of the making of such Loans or issuance, renewal,
extension or reissuance of a Letter of Credit with the same force and
effect as if made on and as of such date and following such new
borrowing, except to the extent such representations and warranties are
expressly limited to an earlier date or the Majority Lenders may
expressly consent in writing to the contrary; and
(d) after giving effect to the requested borrowing or
borrowings, no Default will exist under the Credit Agreement or any
other Loan Document.
Each request for a borrowing or issuance, renewal, extension or
reissuance of a Letter of Credit by the Borrower hereunder shall constitute a
certification by the Borrower to the effect set forth in Section 6.02(c) (both
as of the date of such notice and, unless the Borrower otherwise notifies the
Agent prior to the date of and immediately following such borrowing or issuance,
renewal, extension or reissuance of a Letter of Credit as of the date thereof).
Section 6.03 Conditions Precedent for the Benefit of Lenders.
All conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any Loan in the absence of strict
compliance with such conditions precedent.
Section 6.04 No Waiver. No waiver of any condition precedent
with respect to any Loan shall preclude the Agent or the Lenders from requiring
such condition to be met prior to making any subsequent Loan and the making of
any Loan by the Lenders, notwithstanding the existence of a Default, shall set
not preclude the Agent from exercising the remedies set forth in Section 10.02
in the event such Default becomes an Event of Default.
CREDIT AGREEMENT
44
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders that
(each representation and warranty herein (unless such representation and
warranty is given as of a particular date) is given as of the Closing Date and
shall be deemed repeated and reaffirmed on the dates of each borrowing and
issuance, renewal, extension or reissuance of a Letter of Credit as provided in
Section 6.02):
Section 7.01 Corporate Existence. Each of the Borrower and
each Subsidiary: (i) is a corporation, limited liability company, or a
partnership duly organized, legally existing and in good standing under the laws
of the jurisdiction of its organization; (ii) has all requisite corporate,
limited liability company, or partnership power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify would have a Material Adverse Effect.
Section 7.02 Financial Condition. The audited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at December
31, 2003, and the related consolidated statements of income, stockholders'
equity and cash flows of the Borrower and its Consolidated Subsidiaries for the
fiscal year ended on said date, with the opinion thereon of KPMG LLP heretofore
furnished to each of the Lenders are complete and correct and fairly present the
consolidated financial condition of the Borrower and its Consolidated
Subsidiaries as at said date and the results of their operations for the fiscal
year ended on said date, all in accordance with GAAP, as applied on a consistent
basis. Neither the Borrower nor any Subsidiary has on the Closing Date any
material Debt, contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the Financial
Statements or in SCHEDULE 7.02 or incurred since the date of the Financial
Statements in the ordinary course of business. Since December 31, 2003, there
has been no change or event having a Material Adverse Effect. Since the date of
the Financial Statements, neither the business nor the Properties of the
Borrower or any Subsidiary have been materially and 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 or of any public enemy.
Section 7.03 Litigation. Except as disclosed to the Lenders in
SCHEDULE 7.03 hereto, which matters could not reasonably be expected to cause a
Material Adverse Effect and except with respect to Environmental Matters which
are addressed in Section 7.17, which could not reasonably be expected to cause a
Material Adverse Effect, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of the Borrower threatened against or
affecting the Borrower or any Subsidiary which involves the possibility of any
judgment or liability against the Borrower
CREDIT AGREEMENT
45
or any Subsidiary not fully covered by insurance (except for normal
deductibles). There are no outstanding judgments against Borrower or any
Subsidiary.
Section 7.04 No Breach. Neither the execution and delivery of
the Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has not
been obtained as of the Closing Date under, the respective charter, by-laws, or
partnership agreement of the Borrower or any Subsidiary, or any Governmental
Requirement or any agreement or instrument to which the Borrower or any
Subsidiary is a party or by which it is bound or to which it or its Properties
are subject, or constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien upon any of the revenues or
assets of the Borrower or any Subsidiary pursuant to the terms of any such
agreement or instrument other than the Liens created by the Loan Documents.
Section 7.05 Authority. The Borrower and each Subsidiary have
all necessary corporate and partnership power and authority to execute, deliver
and perform its obligations under the Loan Documents to which it is a party; and
the execution, delivery and performance by the Borrower and each Subsidiary of
the Loan Documents to which it is a party, have been duly authorized by all
necessary corporate and partnership action on its part; and the Loan Documents
constitute the legal, valid and binding obligations of the Borrower and each
Subsidiary, enforceable in accordance with their terms, except as may be limited
by bankruptcy, insolvency, or other laws relating to or affecting the
enforcement of creditors' rights generally and general principles of equity.
Section 7.06 Approvals. No authorizations, approvals or
consents of, and no filings or registrations with, any Governmental Authority or
any Person are necessary for the execution, delivery or performance by the
Borrower or any Subsidiary of the Loan Documents or for the validity or
enforceability thereof, except for the recording and filing of the Security
Instruments as required by this Agreement.
Section 7.07 Use of Loans. The proceeds of the Loans shall be
used by the Borrower to:
(a) refinance existing indebtedness for borrowed money;
(b) pay fees and expenses incurred in connection with the
transactions contemplated hereby;
(c) provide for the working capital and general corporate
purpose needs of the Borrower and its Subsidiaries; and
(d) purchase Oil and Gas Properties approved by the Agent
and permitted by, and subject to, the terms of this Agreement.
Neither the Borrower nor any Subsidiary is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the
CREDIT AGREEMENT
46
Board of Governors of the Federal Reserve System) and no part of the proceeds of
any Loan hereunder will be used to buy or carry any margin stock.
Section 7.08 ERISA.
(a) The Borrower, each Subsidiary and each ERISA
Affiliate have complied in all material respects with ERISA and, where
applicable, the Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which
could result in imposition on the Borrower, any Subsidiary or any ERISA
Affiliate (whether directly or indirectly) of (i) either a civil
penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii)
breach of fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or
any trust created under any such Plan has been terminated since
September 2, 1974. No liability to the PBGC (other than for the payment
of current premiums which are not past due) by the Borrower, any
Subsidiary or any ERISA Affiliate has been or is expected by the
Borrower, any Subsidiary or any ERISA Affiliate to be incurred with
respect to any Plan. No ERISA Event with respect to any Plan has
occurred.
(e) Full payment when due has been made of all amounts
which the Borrower, any Subsidiary or any ERISA Affiliate is required
under the terms of each Plan or applicable law to have paid as
contributions to such Plan, and no accumulated funding deficiency (as
defined in section 302 of ERISA and section 412 of the Code), whether
or not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit
liabilities under each Plan which is subject to Title IV of ERISA does
not, as of the end of the Borrower's most recently ended fiscal year,
exceed the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to
such benefit liabilities. The term "ACTUARIAL PRESENT VALUE OF THE
BENEFIT liabilities" shall have the meaning specified in section 4041
of ERISA.
(g) None of the Borrower, any Subsidiary or any ERISA
Affiliate sponsors, maintains, or contributes to an employee welfare
benefit plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by the Borrower,
a Subsidiary or any ERISA Affiliate in its sole discretion at any time
without any material liability.
(h) None of the Borrower, any Subsidiary or any ERISA
Affiliate sponsors, maintains or contributes to, or has at any time in
the preceding six calendar years, sponsored, maintained or contributed
to, any Multiemployer Plan.
CREDIT AGREEMENT
47
(i) None of the Borrower, any Subsidiary or any ERISA
Affiliate is required to provide security under section 401(a)(29) of
the Code due to a Plan amendment that results in an increase in current
liability for the Plan.
Section 7.09 Taxes. Except as set out in SCHEDULE 7.09, each
of the Borrower and its Subsidiaries has filed all United States Federal income
tax returns and all other material tax returns which are required to be filed by
them and have paid all material taxes due pursuant to such returns or pursuant
to any assessment received by the Borrower or any Subsidiary. The charges,
accruals and reserves on the books of the Borrower and its Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of the
Borrower, adequate. No tax lien has been filed and, to the knowledge of the
Borrower, no claim is being asserted with respect to any such tax, fee or other
charge.
Section 7.10 Titles, etc.
(a) Except as set out in SCHEDULE 7.10, each of the
Borrower and its Subsidiaries has good and defensible title to its
material (individually or in the aggregate) Properties, free and clear
of all Liens, except Liens permitted by Section 9.02. Except as set
forth in SCHEDULE 7.10, after giving full effect to the Excepted Liens,
the Borrower owns the net interests in production attributable to the
Hydrocarbon Interests reflected in the most recently delivered Reserve
Report and the ownership of such Properties shall not in any material
respect obligate the Borrower to bear the costs and expenses relating
to the maintenance, development and operations of each such Property in
an amount in excess of the working interest of each Property set forth
in the most recently delivered Reserve Report. All information
contained in the most recently delivered Reserve Report is true and
correct in all material respects as of the date thereof.
(b) All leases and agreements necessary for the conduct
of the business of the Borrower and its Subsidiaries are valid and
subsisting, in full force and effect (including as to depths) and there
exists no default or event or circumstance which with the giving of
notice or the passage of time or both would give rise to a default
under any such lease or leases, which would adversely affect in any
material respect the conduct of the business of the Borrower and its
Subsidiaries.
(c) The rights, Properties and other assets presently
owned, leased or licensed by the Borrower and its Subsidiaries
including, without limitation, all easements and rights of way, include
all rights, Properties and other assets necessary to permit the
Borrower and its Subsidiaries to conduct their business in all material
respects in the same manner as its business has been conducted prior to
the Closing Date.
(d) All of the assets and Properties of the Borrower and
its Subsidiaries which are reasonably necessary for the operation of
its business are in good working condition and are maintained in
accordance with prudent business standards.
Section 7.11 No Material Misstatements. No written
information, statement, exhibit, certificate, document or report furnished to
the Agent and the Lenders (or any of them) by the Borrower or any Subsidiary in
connection with the negotiation of this Agreement
CREDIT AGREEMENT
48
contained any material misstatement of fact and all such information, taken
together, did not omit to state a material fact or any fact necessary to make
the statement contained therein not materially misleading in the light of the
circumstances in which made and with respect to the Borrower and its
Subsidiaries taken as a whole. There is no fact peculiar to the Borrower or any
Subsidiary which has a Material Adverse Effect or in the future could have (so
far as the Borrower can now foresee) a Material Adverse Effect and which has not
been set forth in this Agreement or the other documents, certificates and
statements furnished to the Agent by or on behalf of the Borrower or any
Subsidiary prior to, or on, the Closing Date in connection with the transactions
contemplated hereby.
Section 7.12 Investment Company Act. Neither the Borrower nor
any Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries. Except as set forth on SCHEDULE
7.14, the Borrower has no Subsidiaries.
Section 7.15 Location of Business and Offices. The Borrower's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement. The principal place of
business and chief executive office of each Subsidiary are located at the
addresses stated on SCHEDULE 7.14.
Section 7.16 Defaults. Neither the Borrower nor any Subsidiary
is in default nor has any event or circumstance occurred which, but for the
expiration of any applicable grace period or the giving of notice, or both,
would constitute a default under any Material Agreement or instrument to which
the Borrower or any Subsidiary is a party or by which the Borrower or any
Subsidiary is bound which could have a Material Adverse Effect. No Default
hereunder has occurred and is continuing.
Section 7.17 Environmental Matters. To the best of knowledge
of Borrower, except (i) as provided in SCHEDULE 7.17 which would not reasonably
be expected to have a Material Adverse Effect, or (ii) as would not have a
Material Adverse Effect (or with respect to (c), (d) and (e) below, where the
failure to take such actions would not have a Material Adverse Effect):
(a) Neither any Property of the Borrower or any
Subsidiary nor the operations conducted thereon violate any order or
requirement of any court or Governmental Authority or any Environmental
Laws;
(b) Without limitation of clause (a) above, no Property
of the Borrower or any Subsidiary nor the operations currently
conducted thereon (or, to the best knowledge of
CREDIT AGREEMENT
49
the Borrower, by any prior owner or operator of such Property or
operation), are in violation of or subject to any existing, pending or
threatened action, suit, investigation, inquiry or proceeding by or
before any court or Governmental Authority or to any remedial
obligations under Environmental Laws;
(c) All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection
with the operation or use of any and all Property of the Borrower and
each Subsidiary, including without limitation past or present
treatment, storage, disposal or release of a hazardous substance or
solid waste into the environment, have been duly obtained or filed, and
the Borrower and each Subsidiary are in compliance with the terms and
conditions of all such notices, permits, licenses and similar
authorizations;
(d) All hazardous substances, solid waste, and oil and
gas exploration and production wastes, if any, generated at any and all
Property of the Borrower or any Subsidiary have in the past been
transported, treated and disposed of in accordance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and, to the best knowledge
of the Borrower, all such transport carriers and treatment and disposal
facilities have been and are operating in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and are not the subject of
any existing, pending or threatened action, investigation or inquiry by
any Governmental Authority in connection with any Environmental Laws;
(e) The Borrower has taken all steps reasonably necessary
to determine and has determined that no hazardous substances, solid
waste, or oil and gas exploration and production wastes, have been
disposed of or otherwise released and there has been no threatened
release of any hazardous substances on or to any Property of the
Borrower or any Subsidiary except in compliance with Environmental Laws
and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment;
(f) To the extent applicable, all Property of the
Borrower and each Subsidiary currently satisfies all design, operation,
and equipment requirements imposed by the OPA or scheduled as of the
Closing Date to be imposed by OPA during the term of this Agreement,
and the Borrower does not have any reason to believe that such
Property, to the extent subject to OPA, will not be able to maintain
compliance with the OPA requirements during the term of this Agreement;
and
(g) Neither the Borrower nor any Subsidiary has any known
contingent liability in connection with any release or threatened
release of any oil, hazardous substance or solid waste into the
environment.
Section 7.18 Compliance with the Law. Neither the Borrower nor
any Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure could reasonably be expected to have (in the event such
violation or failure were asserted by any Person through appropriate
CREDIT AGREEMENT
50
action) a Material Adverse Effect. To the best knowledge of the Borrower, except
for such acts or failures to act as could not reasonably be expected to have a
Material Adverse Effect, and except with respect to Environmental Matters which
are addressed in Section 7.17, the Oil and Gas Properties (and properties
unitized therewith) operated by the Borrower or its Subsidiaries, and to
Borrower's knowledge, their non-operated Oil and Gas Properties, have been
maintained, operated and developed in conformity to standards customary in the
industry and in conformity with all applicable laws and all rules, regulations
and orders of all duly constituted authorities having jurisdiction and in
conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties; specifically in this
connection, except as could not reasonably expected to have a Material Adverse
Effect, (i) after the Closing Date, no Oil and Gas Property is subject to having
allowable production reduced below the full and regular allowable (including the
maximum permissible tolerance) because of any overproduction (whether or not the
same was permissible at the time) prior to the Closing Date and (ii) none of the
▇▇▇▇▇ comprising a part of the Oil and Gas Properties (or properties unitized
therewith) are deviated from the vertical more than the maximum permitted by
applicable laws, regulations, rules and orders, and such ▇▇▇▇▇ are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Oil and Gas Properties (or in the case of ▇▇▇▇▇ located on properties unitized
therewith, such unitized properties).
Section 7.19 Insurance. SCHEDULE 7.19 attached hereto contains
an accurate and complete description of all material policies of fire,
liability, workmen's compensation and other forms of insurance owned or held by
the Borrower and each Subsidiary. All such policies are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date of the closing have been paid, and no notice of cancellation
or termination has been received with respect to any such policy. Such policies
are sufficient for compliance with all requirements of law and of all agreements
to which the Borrower or any Subsidiary is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Borrower and each Subsidiary; will remain in full force and effect through the
respective dates set forth in SCHEDULE 7.19 without the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. SCHEDULE 7.19
identifies all material risks, if any, which the Borrower and its Subsidiaries
and their respective Board of Directors or officers have designated as being
self insured. Neither the Borrower nor any Subsidiary has been refused any
insurance with respect to its assets or operations, nor has its coverage been
limited below usual and customary policy limits, by an insurance carrier to
which it has applied for any such insurance or with which it has carried
insurance during the last three years. All such policies name Agent as
additional insured, loss payee, and contain endorsements for no cancellation
thereof without thirty (30) days' prior written notice to the Agent and the
Lenders on all such policies.
Section 7.20 Intentionally Deleted.
CREDIT AGREEMENT
51
Section 7.21 Hedging Agreements. SCHEDULE 7.21 sets forth, as
of the Closing Date, a true and complete list of all Hedging Agreements
(including commodity price swap agreements, forward agreements or contracts of
sale which provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of the Borrower and each Subsidiary, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net ▇▇▇▇ to market value thereof, all credit support
agreements relating thereto (including any margin required or supplied), and the
counter party to each such agreement.
Section 7.22 Restriction on Liens. Neither the Borrower nor
any of its Subsidiaries is a party to any agreement or arrangement (other than
the Second Amended and Restated Credit Agreement dated June 5, 2003, among the
Borrower, the lenders named therein, and ▇▇▇▇▇ Fargo Foothill, Inc., as
administrative agent, which agreement is to be terminated on the Closing Date),
or subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to the Agent for the benefit of
the Lenders as contemplated by this Agreement and the Security Instruments.
Section 7.23 Material Agreements. Set forth on SCHEDULE 7.23
hereto is a complete and correct list of all material agreements, leases,
indentures, purchase agreements, obligations in respect of letters of credit,
guarantees, and other instruments in effect or to be in effect as of the Closing
Date (other than Hedging Agreements) providing for, evidencing, securing or
otherwise relating to any Debt for borrowed money of the Borrower or any of its
Subsidiaries (other than the Debt hereunder, Debt evidenced by the Existing
Senior Subordinated Unsecured Notes and Debt to be paid off contemporaneously
with the Closing Date out of the proceeds of the Initial Funding and the
proceeds of the Senior Unsecured Notes), including the Senior Unsecured Notes
Indenture, the Purchase Agreement pursuant to which the Senior Unsecured Notes
are to be issued by the Borrower to the purchaser named therein and the Term
Loan Agreement pursuant to which the Second Lien Notes are to be issued, and
such list correctly sets forth the names of the debtor or lessee and creditor or
lessor with respect to the Debt (other than the Senior Unsecured Notes) or lease
obligations outstanding or to be outstanding and the Property subject to any
Lien securing such Debt or lease obligation. Also set forth on SCHEDULE 7.23
hereto is a complete and correct list of all material agreements of the Borrower
and its Subsidiaries relating to the sale and supply of Hydrocarbons, (other
than any such agreement with a term or cancelable by the Borrower or a
Subsidiary on notice, of less than twelve (12) months, any such agreement in
which commodity prices float with market indices and any agreement that is
expected to account for less than five percent (5%) of the sales of the Borrower
and its Subsidiaries during the Borrower's current fiscal year) in effect or to
be in effect as of the Closing Date. The Borrower has heretofore delivered to
the Agent a complete and correct copy of all such material agreements in effect
on the Closing Date. All of the Material Agreements of the Borrower and all of
its Subsidiaries together with all amendments and/or modifications thereto are
set forth on SCHEDULE 7.23.
Section 7.24 Gas Imbalances. Except as set forth on SCHEDULE
7.24 or on the most recent certificate delivered pursuant to Section 8.07(c), on
a net basis there are no gas imbalances, take or pay or other prepayments with
respect to the Borrower's Oil and Gas Properties which (taken together with the
imbalances, take or pay, or other prepayments on
CREDIT AGREEMENT
52
Schedule 7.24 or such certificate) would require the Borrower or its
Subsidiaries to deliver, in the aggregate, after netting all over-production and
under-production, three percent (3%) or more of the total volumes of proved,
producing reserves of Hydrocarbons (calculated on an mcf equivalent basis with
each barrel of oil being equivalent to six mcf of natural gas) reflected in the
Initial Reserve Report or the most recent Reserve Report delivered pursuant to
Section 8.07, as the case may be, from the Oil and Gas Properties of Borrower
and its Subsidiaries at some future time without then or thereafter receiving
full payment therefor.
Section 7.25 Partnership Agreement. The Partnership Agreement
has not been terminated, is in full force and effect as of the date hereof and
no default has occurred and is in continuance thereunder which would have a
Material Adverse Effect.
Section 7.26 Intentionally Deleted.
Section 7.27 Solvency. Borrower and its Subsidiaries (and with
respect to its Subsidiaries, after taking into account each Subsidiary's rights
of contribution), on an individual and a consolidated basis, are not insolvent,
Borrower's and its Subsidiaries' assets (and with respect to its Subsidiaries,
after taking into account each Subsidiary's rights of contribution), on an
individual and a consolidated basis, exceed their liabilities, and neither
Borrower nor any of its Subsidiaries (and with respect to its Subsidiaries,
after taking into account each Subsidiary's rights of contribution) will be
rendered insolvent by the execution and performance of this Agreement and the
Loan Documents.
Section 7.28 Name Changes. Borrower's official name as
recorded on its currently effective organizational documents which are filed
with the Secretary of State of its State of organization is the same as found on
the signature page of this Agreement. Borrower has not, during the preceding
five years, entered into any contract, agreement, security instrument or other
document using a name other than, or been known by or otherwise used any name
other than, the name used by Borrower herein and as set forth on SCHEDULE 7.28
attached hereto.
Section 7.29 Taxpayer Identification Number. Borrower's
Taxpayer Identification No. is ▇▇-▇▇▇▇▇▇▇ and each Subsidiary's Borrower's
Taxpayer Identification No. is set forth on SCHEDULE 7.14.
Section 7.30 State of Formation. Borrower is a corporation
organized under the laws of the State of Delaware. The Subsidiaries are
corporations, limited liability corporations, or partnerships organized under
the laws of the states set forth on SCHEDULE 7.14.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Revolving
Credit Commitments are in effect and until payment in full of all Loans
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder:
CREDIT AGREEMENT
53
Section 8.01 Reporting Requirements. The Borrower shall
deliver, or shall cause to be delivered, to the Agent with sufficient copies of
each for the Lenders:
(a) Annual Financial Statements. As soon as available and
in any event within ninety (90) days after the end of each fiscal year
of the Borrower, the audited consolidated statements of income,
stockholders' equity, changes in financial position and cash flows of
the Borrower and its Consolidated Subsidiaries for such fiscal year,
and the related consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such fiscal year, and
setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by the related
unqualified opinion of independent public accountants of recognized
national standing acceptable to the Agent which opinion shall state
that said financial statements fairly present the consolidated
financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries as at the end of, and for, such fiscal year
and that such financial statements have been prepared in accordance
with GAAP, except for such changes in such principles with which the
independent public accountants shall have concurred and such opinion
shall not contain a "going concern" or like qualification or exception,
and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge,
except as specifically stated, of any Default, together with
calculations confirming the Borrower's compliance with the financial
covenants set forth in Sections 9.13, 9.14, 9.15, and 9.16, certified
by a senior financial officer of Borrower.
(b) Quarterly Financial Statements. As soon as available
and in any event within forty-five (45) days after the end of each of
the first three fiscal quarterly periods of each fiscal year of the
Borrower, consolidated statements of income, stockholders' equity,
changes in financial position and cash flows of the Borrower and its
Consolidated Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and
the related consolidated balance sheets as at the end of such period,
and setting forth in each case in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year,
accompanied by the certificate of a Responsible Officer, which
certificate shall state that said financial statements fairly present
the consolidated financial condition and results of operations of the
Borrower and its Consolidated Subsidiaries in accordance with GAAP, as
at the end of, and for, such period (subject to normal year-end audit
adjustments), together with calculations confirming the Borrower's
compliance with all financial covenants, certified by a senior
financial officer of Borrower.
(c) Projected Financial Statements. As soon as available
and in any event within forty-five (45) days after the end of the
preceding fiscal year of the Borrower, the projected consolidated
statements of income and cash flows of the Borrower and its
Consolidated Subsidiaries for such projected fiscal year, and the
related consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as at the end of such fiscal year, and setting forth in
each case in comparative form the corresponding figures for the
preceding fiscal year, accompanied by the certificate of a Responsible
Officer,
CREDIT AGREEMENT
54
which certificate shall state that said financial projections have been
prepared on reasonable assumptions at the date presented.
(d) Notice of Default, Etc. Promptly after the Borrower
knows that any Default or any Material Adverse Effect has occurred, a
notice of such Default or Material Adverse Effect, describing the same
in reasonable detail and the action the Borrower proposes to take with
respect thereto.
(e) Other Accounting Reports. Promptly upon receipt
thereof, a copy of each other report or letter submitted to the
Borrower or any Subsidiary by independent accountants in connection
with any annual, interim or special audit made by them of the books of
the Borrower and its Subsidiaries, and a copy of any response by the
Borrower or any Subsidiary of the Borrower, or the Board of Directors
of the Borrower or any Subsidiary of the Borrower, to such letter or
report.
(f) SEC Filings, Etc. Promptly upon its becoming
available, each financial statement, report, notice or proxy statement
sent by the Borrower to stockholders generally and each regular or
periodic report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed
by the Borrower with or received by the Borrower in connection
therewith from any securities exchange or the SEC or any successor
agency.
(g) Notices Under Other Loan Agreements. Promptly after
the furnishing thereof, copies of any statement, report or notice
furnished to any Person pursuant to the terms of any material
indenture, loan or credit or other similar agreement, other than this
Agreement and not otherwise required to be furnished to the Lenders
pursuant to any other provision of this Section 8.01.
(h) Other Matters. From time to time such other
information regarding the business, affairs or financial condition of
the Borrower or any Subsidiary (including, without limitation, any Plan
or Multiemployer Plan and any reports or other information required to
be filed under ERISA) as any Lender or the Agent may reasonably
request.
(i) Hedging Agreements. As soon as available and in any
event within ten (10) Business Days after the last day of each calendar
quarter, a report, in form and substance satisfactory to the Agent,
setting forth as of the last Business Day of such calendar quarter, a
true and complete list of all Hedging Agreements (including commodity
price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or
other commodities) of the Borrower and each Subsidiary, the material
terms thereof (including the type, term, effective date, termination
date and notional amounts or volumes), the net ▇▇▇▇ to market value
therefor, any new credit support agreements relating thereto not listed
on SCHEDULE 7.21, any margin required or supplied under any credit
support document, and the counter party to each such agreement.
The Borrower will furnish to the Agent, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of EXHIBIT C
CREDIT AGREEMENT
55
executed by a Responsible Officer (i) certifying as to the matters set forth
therein and stating that no Default has occurred and is continuing (or, if any
Default has occurred and is continuing, describing the same in reasonable
detail), and (ii) setting forth in reasonable detail the computations necessary
to determine whether the Borrower is in compliance with Sections 9.13, 9.14,
9.15, and 9.16 as of the end of the respective fiscal quarter or fiscal year.
Section 8.02 Litigation. The Borrower shall promptly give to
the Agent notice of: (i) all legal or arbitral proceedings, and of all
proceedings before any Governmental Authority affecting the Borrower or any
Subsidiary, except proceedings which, if adversely determined, could not have a
Material Adverse Effect, and (ii) of any litigation or proceeding against or
adversely affecting the Borrower or any Subsidiary in which the amount involved
is not covered in full by insurance (subject to normal and customary deductibles
and for which the insurer has not assumed the defense), or in which injunctive
or similar relief is sought. The Borrower will, and will cause each of its
Subsidiaries to, promptly notify the Agent and each of the Lenders of any claim,
judgment, Lien or other encumbrance affecting any Property of the Borrower or
any Subsidiary if the value of the claim, judgment, Lien, or other encumbrance
affecting such Property shall exceed $250,000.00.
Section 8.03 Maintenance, Etc.
(a) Generally. The Borrower shall and shall cause each
Subsidiary to: preserve and maintain its corporate existence and all of
its material rights, privileges and franchises; keep books of record
and account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and activities;
comply with all Governmental Requirements if failure to comply with
such requirements will have a Material Adverse Effect; pay and
discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its Property
prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained; upon reasonable notice, permit
representatives of the Agent or any Lender, during normal business
hours, to examine, copy and make extracts from its books and records,
to inspect its Properties, and to discuss its business and affairs with
its officers, all to the extent reasonably requested by such Lender or
the Agent (as the case may be); and keep, or cause to be kept, insured
by financially sound and reputable insurers all Property of a character
usually insured by Persons engaged in the same or similar business
similarly situated against loss or damage of the kinds and in the
amounts customarily insured against by such Persons and carry such
other insurance as is usually carried by such Persons including,
without limitation, environmental risk insurance to the extent
reasonably available. The Borrower shall promptly obtain endorsements
to such insurance policies naming "▇▇▇▇▇ Fargo Bank, National
Association, as Agent for the Lenders" as joint loss payee, additional
insured, and containing provisions that such policies will not be
canceled without 30 days prior written notice having been given by the
insurance company to the Agent.
CREDIT AGREEMENT
56
(b) Proof of Insurance. Contemporaneously with the
delivery of the financial statements required by Section 8.01(a) to be
delivered for each year, the Borrower will furnish or cause to be
furnished to the Agent and the Lenders a certificate of insurance
coverage from the insurer in form and substance satisfactory to the
Agent and, if requested, will furnish the Agent and the Lenders copies
of the applicable policies.
(c) Operation of Properties. The Borrower will and will
cause each Subsidiary to operate its Properties or cause such
Properties to be operated in a careful and efficient manner in
accordance with the practices of the industry and in compliance with
all applicable contracts and agreements and in compliance in all
material respects with all Governmental Requirements.
(d) Oil and Gas Properties. The Borrower will and will
cause each Subsidiary to, at its own expense, do or cause to be done
and, in the case of non-operated Oil and Gas Properties, to use
reasonable commercial efforts to cause them to be done by the operators
all things reasonably necessary to preserve and keep in good repair,
working order and efficiency all of its Oil and Gas Properties and
other material Properties including, without limitation, all equipment,
machinery and facilities, and from time to time will make all the
reasonably necessary repairs, renewals and replacements so that at all
times the state and condition of its Oil and Gas Properties and other
material Properties will be preserved and maintained in accordance with
industry standards, except to the extent a portion of such Properties
is no longer capable of producing Hydrocarbons in economically
reasonable amounts. The Borrower will and will cause each Subsidiary or
use reasonable commercial efforts to cause the operator to do so, in
the case of non-operated properties to promptly: (i) pay and discharge,
or make reasonable and customary efforts to cause to be paid and
discharged, all delay rentals, royalties, expenses and indebtedness
accruing under the leases or other agreements affecting or pertaining
to its Oil and Gas Properties, (ii) perform or make reasonable and
customary efforts to cause to be performed, in accordance with industry
standards, the obligations required by each and all of the assignments,
deeds, leases, sub-leases, contracts and agreements affecting its
interests in its Oil and Gas Properties and other material Properties,
(iii) will and will cause each Subsidiary to do all other things
necessary to keep unimpaired, except for Liens described in Section
9.02, its rights with respect to its Oil and Gas Properties and other
material Properties and prevent any forfeiture thereof or a default
thereunder, except to the extent a portion of such Properties is
undeveloped or is no longer capable of producing Hydrocarbons in
economically reasonable amounts and except for dispositions permitted
by Section 9.17. The Borrower will and will cause each Subsidiary to
operate its Oil and Gas Properties and other material Properties or
cause or make reasonable and customary efforts to cause such Oil and
Gas Properties and other material Properties to be operated in a
careful and efficient manner in accordance with the practices of the
industry and in compliance with all applicable contracts and agreements
and in compliance in all material respects with all Governmental
Requirements.
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57
Section 8.04 Environmental Matters.
(a) Establishment of Procedures. The Borrower will and
will cause each Subsidiary to establish and implement such procedures
as may be reasonably necessary to continuously determine and assure
that any failure of the following does not have a Material Adverse
Effect: (i) all Property of the Borrower and its Subsidiaries and the
operations conducted thereon and other activities of the Borrower and
its Subsidiaries are in compliance with and do not violate the
requirements of any Environmental Laws, (ii) no oil, hazardous
substances or solid wastes are disposed of or otherwise released on or
to any Property owned by any such party except in compliance with
Environmental Laws, (iii) no hazardous substance will be released on or
to any such Property in a quantity equal to or exceeding that quantity
which requires reporting pursuant to Section 103 of CERCLA, and (iv) no
oil, oil and gas exploration and production wastes or hazardous
substance is released on or to any such Property so as to pose an
imminent and substantial endangerment to public health or welfare or
the environment.
(b) Notice of Action. The Borrower will promptly notify
the Agent and the Lenders in writing of any threatened action,
investigation or inquiry by any Governmental Authority of which the
Borrower has knowledge in connection with any Environmental Laws,
excluding routine testing and corrective action.
(c) Future Acquisitions. The Borrower will and will cause
each Subsidiary to provide environmental audits and tests in accordance
with American Society for Testing and Materials standards as reasonably
requested by the Agent and the Lenders (or as otherwise required to be
obtained by the Agent or the Lenders by any Governmental Authority) in
connection with any future acquisitions of Oil and Gas Properties or
other material Properties.
Section 8.05 Further Assurances. The Borrower will and will
cause each Subsidiary to cure promptly any defects in the creation and issuance
of the Notes and the execution and delivery of the Security Instruments and this
Agreement. The Borrower at its expense will and will cause each Subsidiary to
promptly execute and deliver to the Agent upon request all such other documents,
agreements and instruments to comply with or accomplish the covenants and
agreements of the Borrower or any Subsidiary, as the case may be, in the
Security Instruments and this Agreement, or to further evidence and more fully
describe the collateral intended as security for the Notes, or to correct any
omissions in the Security Instruments, or to state more fully the security
obligations set out herein or in any of the Security Instruments, or to perfect,
protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 8.06 Performance of Obligations. The Borrower will pay
the Notes according to the reading, tenor and effect thereof; and the Borrower
will and will cause each Subsidiary to do and perform every act and discharge
all of the obligations to be performed and discharged by them under the Security
Instruments and this Agreement, at the time or times and in the manner
specified.
CREDIT AGREEMENT
58
Section 8.07 Engineering Reports.
(a) Not less than thirty (30) days prior to each
Scheduled Redetermination Date, commencing with the Scheduled
Redetermination Date to occur on October 1, 2004, the Borrower shall
furnish to the Agent and the Lenders a Reserve Report. The Reserve
Report as of January 1 of each year shall be prepared by certified
independent petroleum engineers or other independent petroleum
consultant(s) acceptable to the Agent and the Reserve Report as of July
1 of each year shall be prepared by or under the supervision of the
chief engineer of the Borrower who shall certify such Reserve Report to
be true and accurate and to have been prepared in accordance with the
procedures used in the immediately preceding Reserve Report as of
January 1.
(b) In the event of an unscheduled redetermination, the
Borrower shall furnish to the Agent and the Lenders a Reserve Report
prepared by or under the supervision of the chief engineer of the
Borrower who shall certify such Reserve Report to be true and accurate
and to have been prepared in accordance with the procedures used in the
immediately preceding Reserve Report. For any unscheduled
redetermination requested by the Majority Lenders or the Borrower
pursuant to Section 2.08(d)), the Borrower shall provide such Reserve
Report with an "as of" date as required by the Agent as soon as
possible, but in any event no later than thirty (30) days following the
receipt of the request by the Agent.
(c) With the delivery of each Reserve Report, the
Borrower shall provide to the Agent and the Lenders, a certificate from
a Responsible Officer certifying that, to the best of his knowledge and
in all material respects: (i) the information contained in the Reserve
Report and any other information delivered in connection therewith is
true and correct, (ii) the Borrower owns good and defensible title to
the Oil and Gas Properties evaluated in such Reserve Report and such
Properties are free of all Liens except for Liens permitted by Section
9.02, (iii) except as set forth on an exhibit to the certificate, on a
net basis there are no gas imbalances, take or pay, or other
prepayments with respect to Borrower's Oil and Gas Properties which
(taken together with the imbalances, take or pay, or other prepayments
reflected on such exhibit to the certificate) would require Borrower or
its Subsidiaries to deliver, in the aggregate, after netting all
over-production and under-production, three percent (3%) or more of
total volumes of proved, producing reserves of Hydrocarbons (calculated
on an mcf equivalent basis with each barrel of oil being equivalent to
six mcf of natural gas) reflected in the Initial Reserve Report or the
most recent Reserve Report delivered pursuant to this Section 8.07, as
the case may be, which would require Borrower and/or any of its
Subsidiaries to deliver from the Oil and Gas Properties of Borrower and
its Subsidiaries at some future time without then receiving full
payment therefor which would require the Borrower to deliver
Hydrocarbons produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payment therefor, (iv)
none of its Oil and Gas Properties have been sold since the date of the
last Borrowing Base determination except as set forth on an exhibit to
the certificate, which certificate shall list all of its Oil and Gas
Properties sold and in such detail as reasonably required by the
Majority Lenders, (v) attached to the certificate is a list of its Oil
and Gas Properties added to and deleted from the
CREDIT AGREEMENT
59
immediately prior Reserve Report and a list showing any change in
working interest or net revenue interest in its Oil and Gas Properties
occurring and the reason for such change, (vi) attached to the
certificate is a list of all Persons disbursing proceeds to the
Borrower from its Oil and Gas Properties and (vii) except as set forth
on a schedule attached to the certificate, at least eighty-five percent
(85%), by value, of the Oil and Gas Properties of the Borrower and its
Subsidiaries are Mortgaged Property.
(d) As soon as available and in any event within sixty
(60) days after the end of each month, the Borrower shall furnish to
the Agent reports which shall include any direct or allocated general
and administrative expenses and production reports for its Oil and Gas
Properties, which reports shall include quantities or volume of
production, revenue, realized product prices, operating expenses,
taxes, capital expenditures and lease operating costs which have
accrued to the Borrower's accounts in such period, and such other
information with respect thereto as the Agent may require.
Section 8.08 Title Information and Mortgage Coverage.
(a) Mortgage and Title Coverage. The Borrower will
provide the Agent with (i) title information in form and substance
acceptable to the Agent and (ii) Mortgages on the Oil and Gas
Properties of the Borrower and its Subsidiaries, in form and substance
satisfactory to Agent, and subject only to Excepted Liens, which are,
at all times, sufficient to cause eighty-five percent (85%) of the
value of the proved Oil and Gas Properties of the Borrower and its
Subsidiaries to be covered both by such title information and by
Mortgages in favor of the Agent for the benefit of the Lenders (the
"85% Coverage Requirement").
(b) Cure of Title Defects. The Borrower shall promptly
proceed in good faith to cure any title defects or exceptions which are
not Excepted Liens raised by such title information, or substitute
acceptable Mortgaged Properties with no material title defects or
exceptions except for Excepted Liens covering Mortgaged Property
sufficient to cause the 85% Coverage Requirement to be maintained, as
promptly as reasonable, and in any event, within ninety (90) days after
a request by the Agent or the Lenders to cure such defects or
exceptions. With respect to this Section 8.08(b), "material title
defects or exceptions" shall mean the defects and exceptions relating
to all the Mortgaged Properties that could reasonably be expected to
affect the revenue stream attributable to such Mortgaged Properties and
the cost to cure such defects or exceptions could reasonably be
expected to exceed $200,000 individually or $2,000,000 in the aggregate
to cure.
(c) Failure to Cure Title Defects. If the Borrower is
unable to cure any title defect requested by the Agent or the Lenders
to be cured within the ninety (90)-day period or the Borrower does not
substitute acceptable Mortgage Properties sufficient to cause the 85%
Coverage Requirement to be maintained, such default shall not be a
Default or an Event of Default, but instead the Agent and the Lenders
shall have the right to exercise the following remedy in their sole
discretion from time to time, and any failure to so exercise this
remedy at any time shall not be a waiver as to future exercise of
CREDIT AGREEMENT
60
the remedy by the Agent or the Lenders. To the extent that the Agent or
the Lenders are not satisfied with title to any such Oil and Gas
Property after the time period in Section 8.08(b) has elapsed, such
unacceptable Oil and Gas Property shall not count towards the 85%
Coverage Requirement, and the Agent may send a notice to the Borrower
and the Lenders that the then outstanding Borrowing Base shall be
reduced by an amount as determined by all of the Lenders to cause the
Borrower to be in compliance with the requirement to provide acceptable
title information on eighty-five percent (85%) of the value of the Oil
and Gas Properties. This new Borrowing Base shall become effective
immediately after receipt of such notice.
Section 8.09 Additional Collateral.
(a) Lien in Acquired Oil and Gas Properties. Should the
Borrower or any of its Subsidiaries acquire any additional developed
Oil and Gas Properties or additional interests in its existing
developed Oil and Gas Properties, the Borrower will (i) grant to the
Agent as security for the Obligations a first-priority Lien and
security interest (subject only to Excepted Liens) on the Borrower's
interest in any such developed Oil and Gas Properties to the extent not
already subject to a Lien of the Security Instruments, which Lien will
be created and perfected by and in accordance with the provisions of
mortgages, deeds of trust, security agreements and financing
statements, or other Security Instruments, all in form and substance
satisfactory to the Agent in its sole discretion and in sufficient
executed (and acknowledged where necessary or appropriate) counterparts
for recording purposes, and (ii) will provide the Agent with title
information in form and substance satisfactory to the Agent on such
developed Oil and Gas Properties, to the extent required to maintain
the satisfaction of the 85% Coverage Requirement.
(b) Intentionally Deleted.
(c) Legal Opinions. Also, promptly after the filing of
any new Security Instrument in any state, upon the reasonable request
of the Agent, the Borrower will provide to the Agent an opinion
addressed to the Agent for the benefit of the Lenders in form and
substance satisfactory to the Agent in its sole discretion from counsel
acceptable to Agent, stating that the Security Instrument creates a
Lien and is valid, binding and enforceable in accordance with its terms
in legally sufficient form for such jurisdiction, and the means by
which to perfect the Lien created by such Security Instrument.
Section 8.10 Cash Collateral Account Agreement. Upon the
occurrence of a Default, the Borrower and all of its Subsidiaries shall cause
all proceeds arising from its Oil and Gas Properties, including without
limitation from the sale of Hydrocarbons, to be directed to a lockbox (and in
connection therewith, Borrower and all of its Subsidiaries shall execute a
Lockbox Agreement and financing statements in form and substance satisfactory to
the Agent) pursuant to letters acceptable to the Agent stating that such
directions may not be changed without the written consent of the Agent. The Cash
Collateral Account Agreement and the Liens and security interests established in
such Cash Collateral Account Agreement will continue until all the Obligations
under this Agreement are paid in full and this Agreement is terminated.
CREDIT AGREEMENT
61
Section 8.11 Intentionally Deleted.
Section 8.12 ERISA Information and Compliance. The Borrower
will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to the Agent with sufficient copies to the Lenders (i) promptly
after the filing thereof with the United States Secretary of Labor, the Internal
Revenue Service or the PBGC, copies of each annual and other report with respect
to each Plan or any trust created thereunder, (ii) immediately upon becoming
aware of the occurrence of any ERISA Event or of any "PROHIBITED TRANSACTION,"
as described in section 406 of ERISA or in section 4975 of the Code, in
connection with any Plan or any trust created thereunder, a written notice
signed by a Responsible Officer specifying the nature thereof, what action the
Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take
with respect thereto, and, when known, any action taken or proposed by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, and (iii) immediately upon receipt thereof, copies of any notice of the
PBGC's intention to terminate or to have a trustee appointed to administer any
Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower
will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full
and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.13 Joinder and Guaranty Agreements. The Borrower and
each of its Subsidiaries will cause each of their Subsidiaries, whether newly
formed, after acquired, or otherwise existing, upon the creation or acquisition
thereof, to become a Guarantor hereunder by way of a Joinder Agreement attached
hereto as EXHIBIT G, a Guaranty Agreement attached hereto as EXHIBIT H, a
Contribution Agreement by and among the Borrower and all Guarantors, and the
execution of mortgages, deeds of trusts, security agreements, pledges, and any
other instruments in form and substance satisfactory to Agent and in Agent's
sole discretion covering all of such Subsidiaries, assets, security for the
Obligations, together with evidence satisfactory to the Agent, in Agent's sole
discretion, that all such collateral will be a perfected first Lien on such
collateral in favor of the Agent, with only such Liens or other encumbrances of
any kind on such collateral that are acceptable to the Agent.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Revolving
Credit Commitments are in effect and until payment in full of Loans hereunder,
all interest thereon and all other amounts payable by the Borrower hereunder,
without the prior written consent of the Majority Lenders:
CREDIT AGREEMENT
62
Section 9.01 Debt. Neither the Borrower nor any Subsidiary
will incur, create, assume or permit to exist any Debt, except:
(a) the Notes or other Obligations or any guaranty of or
suretyship arrangement for the Notes or other Obligations;
(b) the Second Lien Notes, the Senior Unsecured Notes,
and Debt of the Borrower existing on the Closing Date which is
reflected in the Financial Statements or is disclosed in SCHEDULE 9.01,
and any renewals or extensions or refinancings (but not increases)
thereof;
(c) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary course
of business which, if greater than 90 days past the invoice or billing
date, are being contested in good faith by appropriate proceedings if
reserves adequate under GAAP shall have been established therefor;
(d) Debt under capital leases (as required to be reported
on the financial statements of the Borrower pursuant to GAAP) not to
exceed $100,000.00 in the aggregate at any time outstanding;
(e) Debt associated with bonds or surety obligations
required by contract or by Governmental Requirements in connection with
the operation of the Oil and Gas Properties, in the ordinary course of
business;
(f) Debt of the Borrower and its Subsidiaries under
Hedging Agreements, but only if (i) the provider of the Hedging
Agreements is a Lender or an unsecured counterparty acceptable to the
Agent; (ii) the total notional volume attributable to such Hedging
Agreement, if it is a Hedging Agreement with respect to Hydrocarbon
Interests, does not exceed more than seventy-five percent (75%) of
scheduled proved producing net production quantities in any period,
(iii) if the Hedging Agreement is an interest rate hedge, the notional
principal amount shall not exceed more than seventy-five percent (75%)
of Loans outstanding to the Borrower, provided, however, at no time
shall Borrower fail to maintain (x) a Hedging Agreement on fifty
percent (50%) of proved producing volumes projected to be produced over
the next 12 months after the Closing Date, and thereafter on a rolling
12-month basis until the Maturity Date; and (y) a Hedging Agreement on
twenty-five (25%) of proved producing production volumes projected to
be produced over the 13th through the 24th months after the Closing
Date, on a rolling 12-month basis; and (z) provided, further, that
Agent, in its discretion, may require the Borrower to hedge a
percentage of projected production volumes determined by the Agent in
its sole discretion, on terms acceptable to the Agent, whenever
Borrower has Loans and LC Exposure under this Agreement in excess of
seventy percent (70%) of the Borrowing Base available for general
corporate purposes; and
(g) any guaranty of Debt otherwise permitted under
Section 9.01.
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63
Section 9.02 Liens. Neither the Borrower nor any Subsidiary
will create, incur, assume or permit to exist any Lien on any of its Properties
(now owned or hereafter acquired), except:
(a) Liens securing the payment of any Obligations;
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.01(d),
but only on the Property under lease;
(d) Liens securing the Second Lien Notes and other Liens
disclosed on SCHEDULE 9.02;
(e) Liens on cash or securities of the Borrower securing
the Debt described in Section 9.01(e); and
(f) Certain permitted Liens allowed by Agent, at Agent's
sole discretion.
Section 9.03 Investments, Loans and Advances. Neither the
Borrower nor any Subsidiary will make or permit to remain outstanding any loans
or advances to or investments in any Person (other than the Borrower or any
Guarantor), except that the foregoing restriction shall not apply to:
(a) investments, loans or advances reflected in the
Financial Statements or which are disclosed to the Lenders in SCHEDULE
9.03;
(b) accounts receivable arising in the ordinary course of
business;
(c) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof, in each case maturing within one year from the date of
creation thereof;
(d) commercial paper maturing within one year from the
date of creation thereof rated in the highest grade by Standard &
Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.;
(e) deposits maturing within one year from the date of
creation thereof with, including certificates of deposit issued by, any
Lender or any office located in the United States of any other bank or
trust company which is organized under the laws of the United States or
any state thereof, has capital, surplus and undivided profits
aggregating at least $500,000,000 (as of the date of such Lender's or
bank or trust company's most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set
forth from time to time, by Standard & Poor's Corporation or ▇▇▇▇▇'▇
Investors Service, Inc., respectively;
CREDIT AGREEMENT
64
(f) deposits in money market funds investing at least
ninety-five percent (95%) of funds exclusively in investments described
in Section 9.03(c), 9.03(d) or 9.03(e);
(g) usual and customary travel and other similar expense
advances to employees, officers, directors or agents of the Borrower or
any Subsidiary not to exceed $100,000.00 outstanding in the aggregate
at any time;
(h) Hedging Agreements permitted to be incurred pursuant
to Section 9.01(f); and
(i) investments by the Borrower in direct ownership
interests in additional Oil and Gas Properties and gas gathering
systems related thereto.
Section 9.04 Dividends, Distributions and Redemptions. The
Borrower will not declare or pay any dividend, purchase, redeem or otherwise
acquire for value any of its stock now or hereafter outstanding, return any
capital to its stockholders or make any distribution of its assets to its
stockholders.
Section 9.05 Sales and Leasebacks. Neither the Borrower nor
any Subsidiary will enter into any arrangement, directly or indirectly, with any
Person whereby the Borrower or any Subsidiary shall sell or transfer any of its
Property, whether now owned or hereafter acquired, and whereby the Borrower or
any Subsidiary shall then or thereafter rent or lease as lessee such Property or
any part thereof or other Property which the Borrower or any Subsidiary intends
to use for substantially the same purpose or purposes as the Property sold or
transferred.
Section 9.06 Nature of Business. Neither the Borrower nor any
Subsidiary will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company.
Section 9.07 Limitation on Leases. Neither the Borrower nor
any Subsidiary will create, incur, assume or permit to exist any obligation for
the payment of rent or hire of Property of any kind whatsoever (real or personal
excluding capital leases, leases of Hydrocarbon Interests and leases of
automobiles, compression or other oilfield equipment leased in the ordinary
course of business), under leases or lease agreements which would cause the
aggregate amount of all payments made by the Borrower and its Subsidiaries
pursuant to all such leases or lease agreements to exceed $1,500,000.00 in any
period of twelve consecutive calendar months during the life of such leases.
Section 9.08 Mergers, Etc. Neither the Borrower nor any
Subsidiary will merge into or with or consolidate with any other Person, or
sell, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its Property or assets to any other
Person; provided, however, nothing shall prohibit Borrower or any Subsidiary
from: (i) acquiring (a) any domestic undeveloped Hydrocarbon Interests or (b)
domestic developed Oil and Gas Properties, so long as Borrower or such
Subsidiary pledges and/or mortgages to the Lenders all such developed Oil and
Gas Properties acquired pursuant thereto (to the extent necessary to maintain
Agent's Lien in at least eighty-five percent (85%) by value of the Oil and
CREDIT AGREEMENT
65
Gas Properties of Borrower and its Subsidiaries) by execution of documents in
form and substance satisfactory to Agent, granting perfected, first priority
Liens and security interests in such Oil and Gas Properties subject only to
Excepted Liens and other Liens acceptable to the Lenders; or (ii) merging (after
having given Agent thirty (30) days prior written notice) (a) any Guarantor into
another Guarantor or (b) any Guarantor into Borrower.
Section 9.09 Proceeds of Notes; Letters of Credit. The
Borrower will not permit the proceeds of the Notes or Letters of Credit to be
used for any purpose other than those permitted by Section 7.07. Neither the
Borrower nor any Person acting on behalf of the Borrower has taken or will take
any action which might cause any of the Loan Documents to violate Regulation T,
U or X or any other regulation of the Board of Governors of the Federal Reserve
System or to violate Section 7 of the Securities Exchange Act of 1934 or any
rule or regulation thereunder, in each case as now in effect or as the same may
hereinafter be in effect.
Section 9.10 ERISA Compliance. The Borrower will not at any
time:
(a) Engage in, or permit any Subsidiary or ERISA
Affiliate to engage in, any transaction in connection with which the
Borrower, any Subsidiary or any ERISA Affiliate could be subjected to
either a civil penalty assessed pursuant to section 502(c), (i) or (l)
of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA
Affiliate to terminate, any Plan in a manner, or take any other action
with respect to any Plan, which could result in any liability to the
Borrower, any Subsidiary or any ERISA Affiliate to the PBGC;
(c) Fail to make, or permit any Subsidiary or ERISA
Affiliate to fail to make, full payment when due of all amounts which,
under the provisions of any Plan, agreement relating thereto or
applicable law, the Borrower, a Subsidiary or any ERISA Affiliate is
required to pay as contributions thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA
Affiliate to permit to exist, any accumulated funding deficiency within
the meaning of section 302 of ERISA or section 412 of the Code, whether
or not waived, with respect to any Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to
permit, the actuarial present value of the benefit liabilities under
any Plan maintained by the Borrower, any Subsidiary or any ERISA
Affiliate which is regulated under Title IV of ERISA to exceed the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities. The term "ACTUARIAL PRESENT VALUE OF THE BENEFIT
LIABILITIES" shall have the meaning specified in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute
to, or permit any Subsidiary or ERISA Affiliate to contribute to or
assume an obligation to contribute to, any Multiemployer Plan;
CREDIT AGREEMENT
66
(g) Acquire, or permit any Subsidiary or ERISA Affiliate
to acquire, an interest in any Person that causes such Person to become
an ERISA Affiliate with respect to the Borrower, any Subsidiary or any
ERISA Affiliate if such Person sponsors, maintains or contributes to,
or at any time in the six-year period preceding such acquisition has
sponsored, maintained, or contributed to, (1) any Multiemployer Plan,
or (2) any other Plan that is subject to Title IV of ERISA under which
the actuarial present value of the benefit liabilities under such Plan
exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to
such benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to
incur, a liability to or on account of a Plan under sections 515, 4062,
4063, 4064, 4201 or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute
to, or permit any Subsidiary or ERISA Affiliate to contribute to or
assume an obligation to contribute to, any employee welfare benefit
plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to
amend, a Plan resulting in an increase in current liability such that
the Borrower, any Subsidiary or any ERISA Affiliate is required to
provide security to such Plan under section 401(a)(29) of the Code.
Section 9.11 Sale or Discount of Receivables. Neither the
Borrower nor any Subsidiary will discount or sell (with or without recourse) any
of its notes receivable or accounts receivable.
Section 9.12 Intentionally Deleted.
Section 9.13 Current Ratio. The Borrower will not permit its
ratio of (i) consolidated Current Assets (including, without limitation,
Borrowing Base availability for general corporate purposes) to (ii) consolidated
Current Liabilities (excluding current maturities of the Notes) to be less than
1.00 to 1.00 at any time. The current ratio shall be calculated and tested
quarterly as of the last day of each fiscal quarter of Borrower, beginning with
the quarter ending March 31, 2004. As used in this Section 9.13, "CURRENT
ASSETS" shall have the meaning of such term as defined by GAAP, except any
availability under the Borrowing Base shall be included in the definition of
Current Assets and "CURRENT LIABILITIES" shall have the meaning of such term as
defined by GAAP, except that current maturities of the Notes shall be excluded
from Current Liabilities. Current asset or liability accounts associated with
Hedging Agreements will be excluded from calculations of the Current Ratio.
Section 9.14 Tangible Net Worth. The Borrower will not permit,
at any time, its Tangible Net Worth to be less than eighty-five percent (85%) of
Tangible Net Worth as of March 31, 2004, plus fifty percent (50%) of positive
net income after tax distributions, plus one
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67
hundred percent (100%) of equity offerings after March 31, 2004, excluding any
asset impairment charges.
Section 9.15 Leverage Ratio. The Borrower will not permit its
Leverage Ratio on an annualized basis (until the passing of four (4) full fiscal
quarters after the date hereof), on the last day of each fiscal quarter to be
more than the ratio set forth below for the corresponding time.
Period Ending Maximum Leverage Ratio
------------- ----------------------
June 30, 2004 through September 30, 2004 3.75x
December 31, 2004 and thereafter 3.50x
Section 9.16 Interest Coverage Ratio. The Borrower will not
permit its Interest Coverage Ratio (on an annualized basis until the passing of
four fiscal quarters after the date hereof) as of the end of any fiscal quarter
of the Borrower (calculated quarterly at the end of each fiscal quarter) to be
less than the ratio set forth below for the corresponding time periods. For the
purposes of this Section 9.16, "INTEREST COVERAGE RATIO" shall mean the ratio of
(i) EBITDA for the four fiscal quarters ending on such date to (ii) cash
interest payments made for such four fiscal quarters of the Borrower and its
Consolidated Subsidiaries.
Period Ending Minimum Interest Coverage Ratio
------------- -------------------------------
June 30, 2004 through December 31, 2004 2.50x
March 30, 2005 through June 30, 2005 2.75x
September 30, 2005 and thereafter 3.00x
Section 9.17 Sale of Mortgaged Properties and Oil and Gas
Properties. The Borrower will not, and will not permit any Subsidiary to,
Transfer any Mortgaged Property, Oil and Gas Property or any interest in any
Mortgaged Property or Oil and Gas Property, except for Permitted Transfers.
Section 9.18 Intentionally Deleted.
Section 9.19 Environmental Matters. After the Effective Date
of this Agreement, Borrower and Borrower's Subsidiaries will remain in
substantial compliance with all state and federal environmental regulations and
Borrower will not place nor permit to be placed any hazardous substance on any
of the Mortgaged Property in violation of applicable state and federal
environmental laws. In the event Borrower shall discover any hazardous
substances on any of the Mortgaged Property which could result in a breach of
the foregoing covenant, Mortgagor shall notify Mortgagee within three (3) days
after such discovery. Borrower shall dispose of any hazardous substances
generated on a Mortgaged Property after the Effective Date only at facilities
and/or with carriers that maintain valid governmental permits under RCRA.
Neither the Borrower nor any Subsidiary will cause or permit any of its Property
to be in violation of, or do anything or permit anything to be done which will
subject any such Property
CREDIT AGREEMENT
68
to any remedial obligations under any Environmental Laws, assuming disclosure to
the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect.
Section 9.20 Transactions with Affiliates. Neither the
Borrower nor any Subsidiary will enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate unless such transactions are otherwise
permitted under this Agreement, are in the ordinary course of its business and
are upon fair and reasonable terms no less favorable to it than it would obtain
in a comparable arm's length transaction with a Person not an Affiliate.
Section 9.21 Subsidiaries. The Borrower shall not, and shall
not permit any Subsidiary to, create, acquire or otherwise own any additional
Subsidiaries unless Borrower concurrently pledges to the Agent for the benefit
of the Lenders all stock or other ownership interests of such Subsidiary, and
such Subsidiary is created, acquired or otherwise owned and in compliance with
Sections 9.03 and 9.08.
Section 9.22 Negative Pledge Agreements. Neither the Borrower
nor any Subsidiary will create, incur, assume or permit to exist any contract,
agreement or understanding (other than this Agreement and the Security
Instruments) which in any way prohibits or restricts the granting, conveying,
creation or imposition of any Lien on any of its Property in favor of the Agent,
for the benefit of the Lenders, or restricts any Subsidiary from paying
dividends to the Borrower, or which requires the consent of or notice to other
Persons in connection therewith, provided, however, the foregoing restrictions
will not apply to restrictions existing under or by reason of: (i) applicable
law, (ii) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (iii) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions on the property so acquired, (iv) agreements which restrict
the disposition or distribution of assets or property in oil and gas leases,
joint operating agreements, joint exploration and/or development agreements,
participation agreements and other similar agreements entered into in the
ordinary course of the oil and gas exploration and development business.
Section 9.23 Gas Imbalances, Take-or-Pay or Other Prepayments.
The Borrower will not allow gas imbalances, take-or-pay or other prepayments
with respect to the Oil and Gas Properties of the Borrower and its Subsidiary
which would require the Borrower and its Subsidiaries to deliver Hydrocarbons
produced on Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor in an aggregate amount, after netting
all over-production and all under-production, in excess of three percent (3%) or
more of the total volumes of proved, producing reserves of Hydrocarbons
(calculated on an mcf equivalent basis with each barrel of oil being equivalent
to six mcf of natural gas) reflected in the Initial Reserve Report or the most
recent Reserve Report delivered pursuant to Section 8.07, as the case may be.
Section 9.24 Ownership of Subsidiaries. The Borrower shall
fail to pledge, assign, deliver, and transfer to the Agent for the benefit of
the Lenders, and grant to the Agent for the benefit of the Lenders a continuing
security interest in one hundred percent (100%) of the
CREDIT AGREEMENT
69
stock or other ownership interests in the Subsidiaries existing as of the date
hereof and any Subsidiaries the Borrower shall create, acquire or otherwise own
hereafter.
Section 9.25 Change in Borrower's or Subsidiary's Name or
State of Formation. Without the prior written approval of Agent, (a) Borrower
will not (nor permit any Subsidiary to) change its name, identity or place of
organization and (b) Borrower will not (nor permit any Subsidiary to) engage in
any other business or transaction under any name other than Borrower's or each
Subsidiary's name hereunder. Should Agent approve, prior to doing any of the
aforesaid, Borrower shall provide (or cause each Subsidiary to provide) to Agent
all assignments, certificates, financing statements, financing statement
amendments or other documents determined necessary in Agent's sole judgment to
protect and continue Agent's interest in the collateral pledged by Borrower, any
Guarantor, or any other party to secure the Obligations.
Section 9.26 Material Agreements. Neither the Borrower nor any
Subsidiary, or Affiliate of Borrower will amend or permit to be amended any
Material Agreement to which it is a party, without prior written consent of the
Agent, if such amendment could reasonably be expected to result in a Material
Adverse Effect; provided, however, notwithstanding the foregoing, in any event
that the Borrower, any Subsidiary, or Affiliate of Borrower amends or permits
any Material Agreement to be amended in any manner whatsoever, the Borrower,
such Subsidiary, or Affiliate of Borrower shall furnish to the Agent a fully
executed copy of said amendment within five (5) Business Days after execution
thereof.
Section 9.27 Partnership Agreement. The Borrower will not
amend or permit to be amended the Partnership Agreement in any manner that could
adversely affect any of the Lenders without the prior written consent of the
Majority Lenders.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following
events shall constitute an "EVENT OF DEFAULT":
(a) the Borrower shall default in the payment or
prepayment when due of any principal of or interest on any Loan, or any
reimbursement obligation for a disbursement made under any Letter of
Credit, or any fees or other amount payable by it hereunder or under
any Security Instrument; or
(b) the Borrower or any Subsidiary shall default in the
payment when due of any principal of or interest on any of its other
Debt aggregating Five Hundred Thousand and No/100 Dollars ($500,000.00)
or more, or any event specified in any note, agreement, indenture or
other document evidencing or relating to any such Debt shall occur if
the effect of such event is to cause, or (with the giving of any notice
or the lapse of time or both) to permit the holder or holders of such
Debt (or a trustee or agent on behalf of such holder or holders) to
cause, such Debt to become due prior to its stated maturity; or
CREDIT AGREEMENT
70
(c) any representation, warranty or certification made or
deemed made herein or in any Security Instrument by the Borrower or any
Subsidiary, or any certificate furnished to any Lender or the Agent
pursuant to the provisions hereof or any Security Instrument, shall
prove to have been false or misleading as of the time made or furnished
in any material respect; or
(d) the Borrower shall default in the performance of any
of its obligations under Article IX or any other Article of this
Agreement other than under Article VIII; or the Borrower shall default
in the performance of any of its obligations under Article VIII or the
Borrower or any Subsidiary shall default in the performance of their
obligations under any Security Instrument (other than the payment of
amounts due which shall be governed by Section 10.01(a)) and such
default shall continue unremedied for a period of thirty (30) days
after the earlier to occur of (i) notice thereof to the Borrower by the
Agent or any Lender (through the Agent), or (ii) the Borrower otherwise
becoming aware of such default; or
(e) the Borrower shall admit in writing its inability to,
or be generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Federal Bankruptcy
Code (as now or hereafter in effect), (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, liquidation or composition or readjustment
of debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code, or (vi) take any
corporate action for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower of all or any substantial part of its assets, or
(iii) similar relief in respect of the Borrower under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of sixty (60) days; or (iv) an order for relief against
the Borrower shall be entered in an involuntary case under the Federal
Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in
excess of $500,000.00 in the aggregate shall be rendered by a court
against the Borrower or any Subsidiary and the same shall not be
discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within thirty (30)
days
CREDIT AGREEMENT
71
from the date of entry thereof and the Borrower or such Subsidiary
shall not, within said period of thirty (30) days, or such longer
period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) the Security Instruments after delivery thereof shall
for any reason, except to the extent permitted by the terms thereof,
cease to be in full force and effect and valid, binding and enforceable
in accordance with their terms, or cease to create a valid and
perfected Lien of the priority required thereby on any of the
collateral purported to be covered thereby, except to the extent
permitted by the terms of this Agreement, or the Borrower shall so
state in writing; or
(j) any Letter of Credit becomes the subject matter of
any order, judgment, injunction or any other such determination, or if
the Borrower or any other Person shall petition or apply for or obtain
any order restricting payment by the Agent under any Letter of Credit
or extending the Lenders' liability under any Letter of Credit beyond
the expiration date stated therein or otherwise agreed to by the Agent;
or
(k) an event having a Material Adverse Effect shall
occur; or
(l) the Borrower or any Subsidiary discontinues its usual
business or suffers to exist any material change in its organization or
ownership as of the date hereof, or ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
or any successors acceptable to Lender, fails to (i) be responsible for
running Borrower's or any Subsidiary's day to day operations or (ii)
act as Chief Executive Officer and Chief Financial Officer,
respectively, of Borrower or any Subsidiary.
(m) Guarantor takes, suffers or permits to exist any of
the events or conditions referred to in paragraphs (e), (f), (g) or (h)
or if any provision of any guaranty agreement related thereto shall for
any reason cease to be valid and binding on Guarantor or if Guarantor
shall so state in writing; or
(n) any Subsidiary takes, suffers or permits to exist any
of the events or conditions referred to in paragraphs (e), (f), (g) or
(h).
(o) the Existing Senior Subordinated Unsecured Notes
shall have failed to be redeemed in full on the redemption date
provided in the Officer's Certificate to Trustee described in Section
6.01(t), but in no event later than sixty (60) days from the date of
the Closing.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one
referred to in clauses (e), (f) or (g) of Section 10.01 or in clause
(m) or (n) to the extent it relates to clauses (e), (f) or (g), the
Agent, upon request of the Majority Lenders, shall, by notice to the
Borrower, cancel the Revolving Credit Commitments (in whole or part)
and/or declare the principal amount then outstanding of, and the
accrued interest on, the Loans and all other amounts
CREDIT AGREEMENT
72
payable by the Borrower hereunder and under the Notes (including,
without limitation, the payment of cash collateral to secure the LC
Exposure as provided in Section 2.10(b)) to be forthwith due and
payable, whereupon such amounts shall be immediately due and payable
without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which
are hereby expressly waived by the Borrower.
(b) In the case of the occurrence of an Event of Default
referred to in clauses (e), (f) or (g) of Section 10.01 or in clause
(m) or (n) to the extent it relates to clauses (e), (f) or (g), the
Revolving Credit Commitments shall be automatically canceled and the
principal amount then outstanding of, and the accrued interest on, the
Loans and all other amounts payable by the Borrower hereunder and under
the Notes (including without limitation the payment of cash collateral
to secure the LC Exposure as provided in Section 2.10(b)) shall become
automatically immediately due and payable without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or
other formalities of any kind, all of which are hereby expressly waived
by the Borrower.
(c) All proceeds received after maturity of the Notes,
whether by acceleration or otherwise shall be applied first to
reimbursement of expenses and indemnities provided for in this
Agreement and the Security Instruments; second to accrued interest on
the Notes; third to fees; fourth pro rata to principal outstanding on
the Notes and any other Obligations; fifth to serve as cash collateral
to be held by the Agent to secure the LC Exposure; and any excess shall
be paid to the Borrower or as otherwise required by any Governmental
Requirement.
ARTICLE XI
THE AGENT
Section 11.01 Appointment, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Agent to act as its agent
hereunder and under the Security Instruments with such powers as are
specifically delegated to the Agent by the terms of this Agreement and the
Security Instruments, together with such other powers as are reasonably
incidental thereto. The Agent (which term as used in this sentence and in
Section 11.05 and the first sentence of Section 11.06 shall include reference to
its Affiliates and its and its Affiliates' officers, directors, employees,
attorneys, accountants, experts and agents): (i) shall have no duties or
responsibilities except those expressly set forth in the Loan Documents, and
shall not by reason of the Loan Documents be a trustee or fiduciary for any
Lender; (ii) makes no representation or warranty to any Lender and shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement, or for the value, validity, effectiveness, genuineness, execution,
effectiveness, legality, enforceability or sufficiency of this Agreement, any
Note or any other document referred to or provided for herein or for any failure
by the Borrower or any other Person (other than the Agent) to perform any of its
obligations hereunder or thereunder or for the existence, value, perfection or
priority of any collateral security or the financial or other condition of the
CREDIT AGREEMENT
73
Borrower, its Subsidiaries or any other obligor or guarantor; (iii) except
pursuant to Section 11.07 shall not be required to initiate or conduct any
litigation or collection proceedings hereunder; and (iv) shall not be
responsible for any action taken or omitted to be taken by it hereunder or under
any other document or instrument referred to or provided for herein or in
connection herewith including its own ordinary negligence, except for its own
gross negligence or willful misconduct. The Agent may employ agents,
accountants, attorneys and experts and shall not be responsible for the
negligence or misconduct of any such agents, accountants, attorneys or experts
selected by it in good faith or any action taken or omitted to be taken in good
faith by it in accordance with the advice of such agents, accountants, attorneys
or experts. The Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof permitted hereunder shall have been filed with
the Agent. The Agent is authorized to release any collateral that is permitted
to be sold or released pursuant to the terms of the Loan Documents.
Section 11.02 Reliance by Agent. The Agent shall be entitled
to rely upon any certification, notice or other communication (including any
thereof by telephone, telex, telecopier, telegram or cable) believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Agent.
Section 11.03 Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees or failure to reimburse for Letter
of Credit drawings) unless the Agent has received notice from a Lender or the
Borrower specifying such Default and stating that such notice is a "NOTICE OF
DEFAULT." In the event that the Agent receives such a notice of the occurrence
of a Default, the Agent shall give prompt notice thereof to the Lenders. In the
event of a payment Default, the Agent shall give each Lender prompt notice of
each such payment Default.
Section 11.04 Rights as a Lender. With respect to its
Revolving Credit Commitments and the Loans made by it and its participation in
the issuance of Letters of Credit, ▇▇▇▇▇ Fargo (and any successor acting as
Agent) in its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not acting as the Agent, and the term "LENDER" or "LENDERS" shall, unless the
context otherwise indicates, include the Agent in its individual capacity. ▇▇▇▇▇
Fargo (and any successor acting as Agent) and its Affiliates may (without having
to account therefor to any Lender) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with the
Borrower (and any of its Affiliates) as if it were not acting as the Agent, and
▇▇▇▇▇ Fargo and its Affiliates may accept fees and other consideration from the
Borrower for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY
THE AGENT AND THE ISSUING BANK RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE
SHARES FOR THE INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT
INDEMNIFIED OR REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT WITHOUT
LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND FOR ANY
CREDIT AGREEMENT
74
AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE
WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT OR
THE ISSUING BANK IN ANY WAY RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT,
THE SECURITY INSTRUMENTS OR ANY OTHER DOCUMENTS CONTEMPLATED BY OR REFERRED TO
HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT
HAS OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES
INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE
ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT, ANY SECURITY INSTRUMENT OR OF
ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS
SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE AGENT OR THE
ISSUING BANK, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING
TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
AGENT.
Section 11.06 Non-Reliance on Agent and other Lenders. Each
Lender acknowledges and agrees that it has, independently and without reliance
on the Agent or any other Lender, and based on such documents and information as
it has deemed appropriate, made its own credit analysis of the Borrower and its
decision to enter into this Agreement, and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower of this Agreement, the Notes, the Security
Instruments or any other document referred to or provided for herein or to
inspect the properties or books of the Borrower. Except for notices, reports and
other documents and information expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of the Agent or any of its
Affiliates. In this regard, each Lender acknowledges that ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇ P.C. is acting in this transaction as special counsel to the Agent only,
except to the extent otherwise expressly stated in any legal opinion or any Loan
Document. Each Lender will consult with its own legal counsel to the extent that
it deems necessary in connection with the Loan Documents and the matters
contemplated therein.
Section 11.07 Action by Agent. Except for action or other
matters expressly required of the Agent hereunder, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder unless it shall (i)
receive written instructions from the Majority Lenders (or all of the Lenders as
expressly required by Section 12.04) specifying the action to be taken, and (ii)
be indemnified to its satisfaction by the Lenders against any and all liability
and expenses which may be incurred by it by reason of taking or continuing to
take any such action. The instructions of the Majority Lenders (or all of the
Lenders as expressly required by Section 12.04) and any action taken or failure
to act pursuant thereto by the Agent shall be binding on all of the Lenders. If
a Default has occurred and is continuing, the Agent shall take such action with
respect to such Default as shall be directed by the Majority Lenders (or all of
the Lenders as required by Section 12.04) in the written instructions (with
indemnities) described
CREDIT AGREEMENT
75
in this Section 11.07, provided that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default as
it shall deem advisable in the best interests of the Lenders. In no event,
however, shall the Agent be required to take any action which exposes the Agent
to personal liability or which is contrary to this Agreement and the Security
Instruments or applicable law.
Section 11.08 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Lenders and the Borrower, and
the Agent may be removed 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 thirty (30) days after the retiring Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent. Upon
the acceptance of such appointment hereunder by a successor Agent, such
successor Agent 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 hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article XI and Section 12.03 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section 12.02 Notices. All notices and other communications
provided for herein and in the other Loan Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement
or the other Loan Documents) shall be given or made by telex, telecopy, courier
or U.S. Mail or in writing and telexed, telecopied, mailed or delivered to the
intended recipient at the "ADDRESS FOR NOTICES" specified below its name on the
signature pages hereof or in the Loan Documents, except that all such notices
and communications sent to Agent shall also be sent to Agency Syndications as
follows:
AGENCY SYNDICATION:
▇▇▇▇▇ Fargo Bank, as Agent
▇▇▇▇ ▇▇▇▇▇
Syndications Specialist
CREDIT AGREEMENT
76
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇-▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or, as to any party, at such other address as shall be designated by
such party in a notice to each other party.
STANDARD PAYMENT INSTRUCTIONS:
Pay To: ▇▇▇▇▇ Fargo Bank, N.A.
ABA: ▇▇▇▇▇▇▇▇▇
Address: San Francisco, California
Acct. No.: ▇▇▇▇▇▇▇▇▇▇
Payee Name: Syndic/WFBCORP/Mission Resources
Ref: Mission Resources
with a facsimile copy to: ▇▇▇▇▇ Fargo Bank
Attention: ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
If you are a foreign bank, please forward a copy of the IRS form
W-8BEN.
Except as otherwise provided in this Agreement or in the other Loan Documents,
all such communications shall be deemed to have been duly given when
transmitted, if transmitted before 1:00 p.m. local time on a Business Day
(otherwise on the next succeeding Business Day) by telex or telecopier and
evidence or confirmation of receipt is obtained, or personally delivered or, in
the case of a mailed notice, three (3) Business Days after the date deposited in
the mails, postage prepaid, in each case given or addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc.
(a) The Borrower agrees:
(i) whether or not the transactions hereby
contemplated are consummated, to pay all reasonable expenses
of the Agent in the administration (both before and after the
execution hereof and including advice of counsel as to the
rights and duties of the Agent and the Lenders with respect
thereto) of, and in connection with the negotiation,
syndication, investigation, preparation, execution and
delivery of, recording or filing of, preservation of rights
under, enforcement of, and refinancing, renegotiation or
restructuring of, the Loan Documents and any amendment, waiver
or consent relating thereto (including, without limitation,
travel, photocopy, mailing, courier, telephone and other
similar expenses of the Agent, the cost of environmental
audits, surveys and appraisals at reasonable intervals, the
reasonable fees and disbursements of counsel and other outside
consultants for the Agent and, in the case of enforcement, the
reasonable fees and disbursements of counsel for the Agent and
any of the Lenders); and promptly reimburse the Agent for all
amounts expended, advanced or incurred by the Agent
CREDIT AGREEMENT
77
or the Lenders to satisfy any obligation of the Borrower under
this Agreement or any Security Instrument, including without
limitation, all costs and expenses of foreclosure;
(ii) TO INDEMNIFY THE AGENT AND EACH LENDER AND
EACH OF THEIR AFFILIATES AND EACH OF THEIR OFFICERS,
DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS,
ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD
EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY OR
REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE
INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM
(WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS
A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY
ACTUAL OR PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY
OF THE LOANS OR LETTERS OF CREDIT, (II) THE EXECUTION,
DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE
OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS
SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER OR ANY
SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT
OR THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V)
ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF
THE LOAN DOCUMENTS, (VI) THE ISSUANCE, EXECUTION AND DELIVERY
OR TRANSFER OF OR PAYMENT OR FAILURE TO PAY UNDER ANY LETTER
OF CREDIT, OR (VII) THE PAYMENT OF A DRAWING UNDER ANY LETTER
OF CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR
OTHER IMPROPER PRESENTATION OF THE MANUALLY EXECUTED DRAFT(S)
AND CERTIFICATION(S), (VIII) ANY ASSERTION THAT THE LENDERS
WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO
THE SECURITY INSTRUMENTS OR (IX) ANY OTHER ASPECT OF THE LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES
AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED
IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO
DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY
INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND
INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE
ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING
ALL INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS
BETWEEN THE LENDERS OR ANY LENDER AND THE AGENT OR A LENDER'S
SHAREHOLDERS AGAINST THE AGENT OR LENDER OR BY REASON OF THE
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF THE
INDEMNIFIED PARTY; AND
(iii) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO
TIME THE INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL
LOSSES, CLAIMS, COST RECOVERY ACTIONS, ADMINISTRATIVE ORDERS
OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY SUCH
PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR
PROPERTIES, INCLUDING WITHOUT LIMITATION,
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78
THE TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF
THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH OR
NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY
SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OR ANY
SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY
OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE
AT THE TIME, COULD RESULT IN PRESENT LIABILITY, (IV) THE
PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL OF
HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR
OPERATED BY THE BORROWER OR ANY SUBSIDIARY, OR (V) ANY OTHER
ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION WITH
THE LOAN DOCUMENTS; PROVIDED, HOWEVER, NO INDEMNITY SHALL BE
AFFORDED UNDER THIS SECTION 12.03(A)(III) IN RESPECT OF ANY
PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS
OF THE AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH SUCH
PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED
POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN
LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(b) No Indemnified Party may settle any claim to be
indemnified without the consent of the indemnitor, such consent not to
be unreasonably withheld; provided, that the indemnitor may not
reasonably withhold consent to any settlement that an Indemnified Party
proposes, if the indemnitor does not have the financial ability to pay
all its obligations outstanding and asserted against the indemnitor at
that time, including the maximum potential claims against the
Indemnified Party to be indemnified pursuant to this Section 12.03.
(c) In the case of any indemnification hereunder, the
Agent or Lender, as appropriate shall give notice to the Borrower of
any such claim or demand being made against the Indemnified Party and
the Borrower shall have the non-exclusive right to join in the defense
against any such claim or demand provided that if the Borrower provides
a defense, the Indemnified Party shall bear its own cost of defense
unless there is a conflict between the Borrower and such Indemnified
Party.
(d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE
INDEMNIFIED PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE
OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT
LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE
RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES
OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL
CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS
DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
CREDIT AGREEMENT
79
(e) The Borrower's obligations under this Section 12.03
shall survive any termination of this Agreement and the payment of the
Notes and shall continue thereafter in full force and effect.
(f) The Borrower shall pay any amounts due under this
Section 12.03 within thirty (30) days of the receipt by the Borrower of
notice of the amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement
or any Security Instrument may be amended, modified or waived with the
Borrower's and the Majority Lenders' prior written consent; provided that (i) no
amendment, modification or waiver which extends the final maturity of the Loans,
increases the Aggregate Maximum Revolving Credit Amounts, modifies the Borrowing
Base, forgives the principal amount of any Obligations outstanding under this
Agreement, releases any guarantor of any Obligations or releases all or
substantially all of the collateral, reduces the interest rate applicable to the
Loans or the fees payable to the Lenders generally, affects Section 2.03(a),
this Section 12.04 or Section 12.06(a) or modifies the definition of "MAJORITY
LENDERS" shall be effective without consent of all Lenders; (ii) no amendment,
modification or waiver which increases the Maximum Revolving Credit Amount or
the Revolving Credit Commitment of any Lender shall be effective without the
consent of such Lender; and (iii) no amendment, modification or waiver which
modifies the rights, duties or obligations of the Agent shall be effective
without the consent of the Agent.
Section 12.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 Assignments and Participations.
(a) The Borrower may not assign its rights or obligations
hereunder or under the Notes or any Letters of Credit without the prior
consent of all of the Lenders and the Agent.
(b) Any Lender may, upon the written consent of the Agent
and, if no Event of Default has occurred and is continuing, the
Borrower (which consent will not be unreasonably withheld), assign to
one or more assignees all or a portion of its rights and obligations
under this Agreement pursuant to an Assignment Agreement substantially
in the form of EXHIBIT E (an "ASSIGNMENT"); provided, however, that (i)
any such assignment shall be in the amount of at least $5,000,000.00 or
such lesser amount to which the Borrower has consented and (ii) the
assignee or assignor shall pay to the Agent a processing and
recordation fee of $3,000.00 for each assignment. Any such assignment
will become effective upon the execution and delivery to the Agent of
the Assignment and the consent of the Agent. Promptly after receipt of
an executed Assignment, the Agent shall send to the Borrower a copy of
such executed Assignment. Upon receipt of such executed Assignment, the
Borrower, will, at its own expense, execute and deliver new Notes to
the assignor and/or assignee, as appropriate, in accordance with their
respective interests as they appear. Upon the effectiveness of any
assignment pursuant to this Section 12.06(b), the assignee will become
a "LENDER", if not already a "LENDER," for all purposes of this
Agreement and the Security Instruments. The assignor shall be
CREDIT AGREEMENT
80
relieved of its obligations hereunder to the extent of such assignment
(and if the assigning Lender no longer holds any rights or obligations
under this Agreement, such assigning Lender shall cease to be a
"LENDER" hereunder except that its rights under Sections 4.06, 5.01,
5.05 and 12.03 shall not be affected). The Agent will prepare on the
last Business Day of each month during which an assignment has become
effective pursuant to this Section 12.06(b), a new ANNEX I giving
effect to all such assignments effected during such month, and will
promptly provide the same to the Borrower and each of the Lenders.
(c) Each Lender may transfer, grant or assign
participations in all or any part of such Lender's interests hereunder
pursuant to this Section 12.06(c) to any Person, provided that: (i)
such Lender shall remain a "LENDER" for all purposes of this Agreement
and the transferee of such participation shall not constitute a
"LENDER" hereunder; and (ii) no participant under any such
participation shall have rights to approve any amendment to or waiver
of any of the Loan Documents except to the extent such amendment or
waiver would (x) forgive any principal owing on any Obligations or
extend the final maturity of the Loans, (y) reduce the interest rate
(other than as a result of waiving the applicability of any
post-default increases in interest rates) or fees applicable to any of
the Revolving Credit Commitments or Loans or Letters of Credit in which
such participant is participating, or postpone the payment of any
thereof, or (z) release any guarantor of the Obligations or release all
or substantially all of the collateral (except as provided in the Loan
Documents) supporting any of the Revolving Credit Commitments or Loans
or Letters of Credit in which such participant is participating. In the
case of any such participation, the participant shall not have any
rights under this Agreement or any of the Security Instruments (the
participant's rights against the granting Lender in respect of such
participation to be those set forth in the agreement with such Lender
creating such participation), and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such
participation, provided that such participant shall be entitled to
receive additional amounts under Article V on the same basis as if it
were a Lender and be indemnified under Section 12.03 as if it were a
Lender. In addition, each agreement creating any participation must
include an agreement by the participant to be bound by the provisions
of Section 12.15.
(d) The Lenders may furnish any information concerning
the Borrower in the possession of the Lenders from time to time to
assignees and participants (including prospective assignees and
participants); provided that, such Persons agree to be bound by the
provisions of Section 12.15.
(e) Notwithstanding anything in this Section 12.06 to the
contrary, any Lender may assign and pledge its Note to any Federal
Reserve Bank 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 and/or pledge shall release the
assigning and/or pledging Lender from its obligations hereunder.
CREDIT AGREEMENT
81
(f) Notwithstanding any other provisions of this Section
12.06, no transfer or assignment of the interests or obligations of any
Lender or any grant of participations therein shall be permitted if
such transfer, assignment or grant would require the Borrower to file a
registration statement with the SEC or to qualify the Loans under the
"BLUE SKY" laws of any state.
(g) Borrower acknowledges that the Initial Reserve Report
will be furnished to all the Lenders and such Lenders must be
satisfied, in each such Lenders' sole discretion, that the Borrowing
Base is valued at $50,000,000.00, and if not, such Lenders will not
become one of the syndicated Lenders; and in connection therewith, if
such other Lenders need additional engineering information, Borrower
will provide same.
Section 12.07 Invalidity. In the event that any one or more of
the provisions contained in any of the Loan Documents or the Letters of Credit,
the Letter of Credit Agreements shall, for any reason, be held invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any other
Loan Document.
Section 12.08 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 12.09 References; Use of Word "INCLUDING". The words
"HEREIN," "HEREOF", "HEREUNDER" and other words of similar import when used in
this Agreement refer to this Agreement as a whole, and not to any particular
article, section or subsection. Any reference herein to a Section or Article
shall be deemed to refer to the applicable Section or Article of this Agreement
unless otherwise stated herein. Any reference herein to an exhibit, schedule, or
other attachment shall be deemed to refer to the applicable exhibit, schedule,
or other attachment attached hereto unless otherwise stated herein. The word
"INCLUDING", "INCLUDES" and words of similar import means "INCLUDING, WITHOUT
LIMITATION".
Section 12.10 Survival. The obligations of the parties under
Section 4.06, Article V, and Sections 11.05, 12.03, and 12.15 shall survive the
repayment of the Loans and the termination of the Revolving Credit Commitments.
To the extent that any payments on the Obligations or proceeds of any collateral
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, debtor in possession, receiver or
other Person under any bankruptcy law, common law or equitable cause, then to
such extent, the Obligations so satisfied shall be revived and continue as if
such payment or proceeds had not been received and the Agent's and the Lenders'
Liens, security interests, rights, powers and remedies under this Agreement and
each Security Instrument shall continue in full force and effect. In such event,
each Security Instrument shall be automatically reinstated and the Borrower
shall take such action as may be reasonably requested by the Agent and the
Lenders to effect such reinstatement.
Section 12.11 Captions. Captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
CREDIT AGREEMENT
82
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY
THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL
OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS,
EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER
TO CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE
SUCH LENDER IS LOCATED. CH. 346 OF THE TEXAS FINANCE CODE (WHICH
REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING
TRI-PARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE
LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR
OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS
NON-EXCLUSIVE AND DOES NOT PRECLUDE THE AGENT OR ANY LENDER FROM
OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING
JURISDICTION.
(c) THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS SAID ADDRESS,
SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT, ANY LENDER OR ANY
HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
BORROWER OR ITS PROPERTIES IN ANY OTHER JURISDICTION.
(d) THE BORROWER, THE AGENT AND EACH LENDER HEREBY (I)
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED
BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO
THIS AGREEMENT OR ANY LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
CREDIT AGREEMENT
83
THEREIN; (II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES,
OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE, AGENT OR COUNSEL FOR ANY
PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT
SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Obligations (or, to the extent that the principal amount of the Obligations
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Notes is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Obligations (or, to the
extent that the principal amount of the Obligations shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower). All sums paid
or agreed to be paid to any Lender for the use, forbearance or detention of sums
due hereunder shall, to the extent permitted by law applicable to such Lender,
be amortized, prorated, allocated and spread throughout the full term of the
Loans evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law. If at any time and from time to time (i) the
amount of interest payable to any Lender on any date shall be computed at the
Highest Lawful Rate applicable to such Lender pursuant to this Section 12.14 and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue
CREDIT AGREEMENT
84
to be computed at the Highest Lawful Rate applicable to such Lender until the
total amount of interest payable to such Lender shall equal the total amount of
interest which would have been payable to such Lender if the total amount of
interest had been computed without giving effect to this Section 12.14. To the
extent that Chapter 303 of the Texas Finance Code is relevant for the purpose of
determining the Highest Lawful Rate, such Lender elects to determine the
applicable rate ceiling under such Chapter by the indicated weekly rate ceiling
from time to time in effect.
Section 12.15 Confidentiality. In the event that the Borrower
provides to the Agent or the Lenders written confidential information belonging
to the Borrower, if the Borrower shall denominate such information in writing as
"CONFIDENTIAL", the Agent and the Lenders shall thereafter maintain such
information in confidence in accordance with the standards of care and diligence
that each utilizes in maintaining its own confidential information. This
obligation of confidence shall not apply to such portions of the information
which (i) are in the public domain, (ii) hereafter become part of the public
domain without the Agent or the Lenders breaching their obligation of confidence
to the Borrower, (iii) are previously known by the Agent or the Lenders from
some source other than the Borrower, (iv) are hereafter developed by the Agent
or the Lenders without using the Borrower's information, (v) are hereafter
obtained by or available to the Agent or the Lenders from a third party who owes
no obligation of confidence to the Borrower with respect to such information or
through any other means other than through disclosure by the Borrower, (vi) are
disclosed with the Borrower's consent, (vii) must be disclosed either pursuant
to any Governmental Requirement or to Persons regulating the activities of the
Agent or the Lenders, or (viii) as may be required by law or regulation or order
of any Governmental Authority in any judicial, arbitration or governmental
proceeding. Further, the Agent or a Lender may disclose any such information to
any other Lender, any independent petroleum engineers or consultants, any
independent certified public accountants, any legal counsel employed by such
Person in connection with this Agreement or any Security Instrument, including
without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective assignees and
participants) in the Loans; provided, however, that the Agent or the Lenders
shall receive a confidentiality agreement from the Person to whom such
information is disclosed such that said Person shall have the same obligation to
maintain the confidentiality of such information as is imposed upon the Agent or
the Lenders hereunder. Notwithstanding anything to the contrary provided herein,
this obligation of confidence shall cease three (3) years from the date the
information was furnished, unless the Borrower requests in writing at least
thirty (30) days prior to the expiration of such three year period, to maintain
the confidentiality of such information for an additional three year period. The
Borrower waives any and all other rights it may have to confidentiality as
against the Agent and the Lenders arising by contract, agreement, statute or law
except as expressly stated in this Section 12.15.
Section 12.16 Effectiveness. This Agreement shall be effective
on the Closing Date (the "EFFECTIVE DATE").
Section 12.17 Exculpation Provisions. Each of the parties
hereto specifically agrees that it has a duty to read this Agreement and the
Security Instruments and agrees that it is charged with notice and knowledge of
CREDIT AGREEMENT
85
the terms of this Agreement and the Security Instruments; that it has in fact
read this Agreement and is fully informed and has full notice and knowledge of
the terms, conditions and effects of this Agreement; that it has been
represented by independent legal counsel of its choice throughout the
negotiations preceding its execution of this Agreement and the Security
Instruments; and has received the advice of its attorney in entering into this
Agreement and the Security Instruments; and that it recognizes that certain of
the terms of this Agreement and the Security Instruments result in one party
assuming the liability inherent in some aspects of the transaction and relieving
the other party of its responsibility for such liability. Each party hereto
agrees and covenants that it will not contest the validity or enforceability of
any exculpatory provision of this Agreement and the Security Instruments on the
basis that the party had no notice or knowledge of such provision or that the
provision is not "CONSPICUOUS."
Section 12.18 Arbitration.
(a) Arbitration. The parties hereto agree, upon demand by
any party, to submit to binding arbitration all claims, disputes and
controversies between or among them (and their respective employees,
officers, directors, attorneys, and other agents), whether in tort,
contract or otherwise arising out of or relating to in any way (i) the
loan and related Loan Documents which are the subject of this Agreement
and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for
additional credit.
(b) Governing Rules. Any arbitration proceeding will (i)
proceed in a location in Texas selected by the American Arbitration
Association ("AAA"); (ii) be governed by the Federal Arbitration Act
(Title 9 of the United States Code), notwithstanding any conflicting
choice of law provision in any of the documents between the parties;
and (iii) be conducted by the AAA, or such other administrator as the
parties shall mutually agree upon, in accordance with the AAA's
commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be
conducted in accordance with the AAA's optional procedures for large,
complex commercial disputes (the commercial dispute resolution
procedures or the optional procedures for large, complex commercial
disputes to be referred to, as applicable, as the "RULES"). If there is
any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or
refuses to submit to arbitration following a demand by any other party
shall bear all costs and expenses incurred by such other party in
compelling arbitration of any dispute. Nothing contained herein shall
be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 U.S.C. Section 91 or any similar applicable
state law.
(c) No Waiver of Provisional Remedies, Self-Help and
Foreclosure. The arbitration requirement does not limit the right of
any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or
proceeds of collateral such as setoff or repossession; or (iii) obtain
provisional or ancillary remedies such as replevin, injunctive relief,
attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This
CREDIT AGREEMENT
86
exclusion does not constitute a waiver of the right or obligation of
any party to submit any dispute to arbitration or reference hereunder,
including those arising from the exercise of the actions detailed in
Sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration
proceeding in which the amount in controversy is $5,000,000.00 or less
will be decided by a single arbitrator selected according to the Rules,
and who shall not render an award of greater than $5,000,000.00. Any
dispute in which the amount in controversy exceeds $5,000,000.00 shall
be decided by majority vote of a panel of three arbitrators; provided,
however, that all three arbitrators must actively participate in all
hearings and deliberations. The arbitrator will be a neutral attorney
licensed in the State of Texas with a minimum of ten years experience
in the substantive law applicable to the subject matter of the dispute
to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator
will decide (by documents only or with a hearing at the arbitrator's
discretion) any pre-hearing motions which are similar to motions to
dismiss for failure to state a claim or motions for summary
adjudication. The arbitrator shall resolve all disputes in accordance
with the substantive law of Texas and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award.
The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the
arbitrator deems necessary to the same extent a judge could pursuant to
the Federal Rules of Civil Procedure, the Texas Rules of Civil
Procedure or other applicable law. Judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit
of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such
action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery
will be permitted in accordance with the Rules. All discovery shall be
expressly limited to matters directly relevant to the dispute being
arbitrated and must be completed no later than twenty (20) days before
the hearing date and within one hundred and eighty (180) days of the
filing of the dispute with the AAA. Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to
final determination by the arbitrator upon a showing that the request
for discovery is essential for the party's presentation and that no
alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution
of any dispute arising pursuant to the terms of this Agreement shall be
determined by a separate arbitration proceeding and such dispute shall
not be consolidated with other disputes or included in any class
proceeding.
(g) Payment of Arbitration Costs and Fees. The arbitrator
shall award all costs and expenses of the arbitration proceeding.
CREDIT AGREEMENT
87
(h) Miscellaneous. To the maximum extent practicable, the
AAA, the arbitrators and the parties shall take all action required to
conclude any arbitration proceeding within one hundred and eighty (180)
days of the filing of the dispute with the AAA. No arbitrator or other
party to an arbitration proceeding may disclose the existence, content
or results thereof, except for disclosures of information by a party
required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between
the parties potentially applies to a dispute, the arbitration provision
most directly related to the Loan Documents or the subject matter of
the dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Loan Documents or
any relationship between the parties.
[SIGNATURES BEGIN ON NEXT PAGE]
CREDIT AGREEMENT
88
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
BORROWER:
MISSION RESOURCES CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
Address for Notices:
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
With copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
CREDIT AGREEMENT
Signature Page
LENDER AND AGENT:
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
Vice President
Lending Office for Base Rate and LIBOR
Loans:
▇▇▇▇▇ Fargo Bank, National Association
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Address for Notices:
▇▇▇▇▇ Fargo Bank, National Association
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
[With copy to:]
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
CREDIT AGREEMENT
Signature Page
ANNEX I
LIST OF PERCENTAGE SHARES AND
MAXIMUM REVOLVING CREDIT AMOUNTS
MAXIMUM REVOLVING
NAME OF LENDER PERCENTAGE SHARE CREDIT AMOUNT
---------------------------------------------------------------------------------------------------------
▇▇▇▇▇ Fargo Bank, National Association ______% $ 50,000,000.00
---------------------------------------------------------------------------------------------------------
_________________________________ ______% $______________
---------------------------------------------------------------------------------------------------------
_________________________________ ______% $______________
---------------------------------------------------------------------------------------------------------
TOTAL 100% $ 50,000,000.00
Annex I-1
EXHIBIT A
FORM OF REVOLVING CREDIT NOTE
$_____________________________ ___________________, 200__
FOR VALUE RECEIVED, MISSION RESOURCES CORPORATION, a ____________
corporation (the "BORROWER") hereby promises to pay to the order of
______________________________ (the "LENDER"), at the Principal Office of ▇▇▇▇▇
FARGO BANK, NATIONAL ASSOCIATION (the "AGENT"), at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, the principal sum of _____________ Dollars ($____________)
(or such lesser amount as shall equal the aggregate unpaid principal amount of
the Loans made by the Lender to the Borrower under the Credit Agreement, as
hereinafter defined), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount of
each such Loan, at such office, in like money and funds, for the period
commencing on the date of such Loan until such Loan shall be paid in full, at
the rates per annum and on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate, Interest Period and maturity of
each Loan made by the Lender to the Borrower, and each payment made on account
of the principal thereof, shall be recorded by the Lender on its books and,
prior to any transfer of this Revolving Credit Note, endorsed by the Lender on
the schedules attached hereto or any continuation thereof.
This Revolving Credit Note is one of the Notes referred to in the
Credit Agreement dated as of April 8, 2004, among the Borrower, the Lenders
which are or become parties thereto (including the Lender) and the Agent (as the
same may be amended or supplemented from time to time, the "Credit Agreement"),
and evidences Loans made by the Lender thereunder. Capitalized terms used in
this Revolving Credit Note have the respective meanings assigned to them in the
Credit Agreement.
This Revolving Credit Note is issued pursuant to the Credit Agreement
and is entitled to the benefits provided for in the Credit Agreement and the
Security Instruments. The Credit Agreement provides for the acceleration of the
maturity of this Revolving Credit Note upon the occurrence of certain events,
for prepayments of Loans upon the terms and conditions specified therein and
other provisions relevant to this Revolving Credit Note.
THIS REVOLVING CREDIT NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
MISSION RESOURCES CORPORATION
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Exhibit A-1
EXHIBIT B
FORM OF BORROWING, CONTINUATION AND CONVERSION REQUEST
_____________________, 200__
MISSION RESOURCES CORPORATION, a Delaware corporation (the "BORROWER"),
pursuant to the Credit Agreement dated as of April 8, 2004, among the Borrower,
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, as Agent for the lenders (the "LENDERS")
which are or become parties thereto, and such Lenders (together with all
amendments, modifications, supplements, and/or restatements thereto, the "CREDIT
AGREEMENT"), hereby makes the requests indicated below (unless otherwise defined
herein, capitalized terms are defined in the Credit Agreement):
$_________________________ under the Revolving Credit Note
Requested funding date: _________________________.
[ ] 1. Revolving Credit Loans:
(a) Aggregate amount of new Revolving Credit Loans to be
$__________;
(b) Requested funding date is _________________, 200__;
(c) $_________________ of such borrowings are to be LIBOR
Loans; $_________________ of such borrowings are to
be Base Rate Loans; and
(d) Length of Interest Period for LIBOR Loans is:
__________________.
[ ] 2. LIBOR Loan Continuation for LIBOR Loans maturing on _________:
(a) Aggregate amount to be continued as LIBOR Loans is
$___________;
(b) Aggregate amount to be converted to Base Rate Loans is
$_________;
(c) Length of Interest Period for continued LIBOR Loans is
__________.
[ ] 3. Conversion of Outstanding Base Rate Loans to LIBOR Loans:
Convert $__________________ of the outstanding Base Rate Loans
to LIBOR Loans on ____________________ with an Interest Period
of ______________________.
[ ] 4. Conversion of outstanding LIBOR Loans to Base Rate Loans:
Convert $__________________ of the outstanding LIBOR Loans
with Interest Period maturing on ______________________, 200_,
to Base Rate Loans.
Exhibit B-1
The undersigned certifies that he is the _____________________ of the
Borrower, and that as such he is authorized to execute this certificate on
behalf of the Borrower. The undersigned further certifies, represents and
warrants on behalf of the Borrower that the Borrower is entitled to receive the
requested borrowing, continuation or conversion under the terms and conditions
of the Credit Agreement.
MISSION RESOURCES CORPORATION
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Exhibit B-2
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the ________________ of
MISSION RESOURCES CORPORATION, a Delaware corporation (the "BORROWER") and that
as such he is authorized to execute this certificate on behalf of the Borrower.
With reference to the Credit Agreement dated as of April 8, 2004, among the
Borrower, ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, as Agent for the lenders (the
"LENDERS") which are or become a party thereto, and such Lenders (together with
all amendments, modifications, supplements and/or restatements thereto being the
"CREDIT AGREEMENT"), the undersigned represents and warrants as follows (each
capitalized term used herein having the same meaning given to it in the Credit
Agreement unless otherwise specified):
(a) The representations and warranties of the Borrower
contained in Article VII of the Credit Agreement and in the Security
Instruments and otherwise made in writing by or on behalf of the
Borrower pursuant to the Credit Agreement and the Security Instruments
were true and correct when made, and are repeated at and as of the time
of delivery hereof and are true and correct at and as of the time of
delivery hereof, except to the extent any such representations and
warranties are expressly limited to an earlier date or the Majority
Lenders have expressly consented in writing to the contrary.
(b) The Borrower has performed and complied with all
agreements and conditions contained in the Credit Agreement and in the
Security Instruments required to be performed or complied with by it
prior to or at the time of delivery hereof.
(c) Neither the Borrower nor any Subsidiary has incurred
any material liabilities, direct or contingent, since December 31,
2003, except those set forth in SCHEDULE 9.01 to the Credit Agreement
and except those allowed by the terms of the Credit Agreement or
consented to by the Majority Lenders in writing.
(d) Since December 31, 2003, no change has occurred,
either in any case or in the aggregate, in the condition, financial or
otherwise, of the Borrower or any Subsidiary which would have a
Material Adverse Effect.
(e) There exists, and, after giving effect to the loan or
loans with respect to which this certificate is being delivered, will
exist, no Default under the Credit Agreement or any event or
circumstance which constitutes, or with notice or lapse of time (or
both) would constitute, an event of default under any loan or credit
agreement, indenture, deed of trust, security agreement or other
agreement or instrument evidencing or pertaining to any Debt of the
Borrower or any Subsidiary, or under any material agreement or
instrument to which the Borrower or any Subsidiary is a party or by
which the Borrower or any Subsidiary is bound.
(f) The financial statements furnished to the Agent with
this certificate fairly present the consolidated financial condition
and results of operations of the Borrower and its Consolidated
Subsidiaries as at the end of, and for, the [fiscal quarter] [fiscal
year]
Exhibit C-1
ending _________________________ and such financial statements have
been prepared in accordance with the accounting procedures specified in
the Credit Agreement.
(g) Attached hereto are the detailed computations
necessary to determine whether the Borrower and its Consolidated
Subsidiaries are in compliance with Sections 9.13, 9.14, 9.15 and 9.16
of the Credit Agreement as of the end of the [fiscal quarter] [fiscal
year] ending _________________________.
EXECUTED AND DELIVERED this ____ day of ______________.
MISSION RESOURCES CORPORATION
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Exhibit C-2
EXHIBIT D
SECURITY INSTRUMENTS
1. Amended, Restated and Consolidated Mortgages, Deed of Trust, Assignment
of Production, Security Agreement and Financing Statement of Borrower
(Texas) (Louisiana)
2. Amended, Restated and Consolidated Mortgages, Deed of Trust, Assignment
of Production, Security Agreement and Financing Statement of Mission
E&P (Texas) (Louisiana)
3. Amended and Restated Mortgages, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement of Mission E&P
(New Mexico)
4. Security Agreement of Borrower covering all assets of Borrower
5. UCC-1 Financing Statement (Delaware Secretary of State) relating to all
assets of Borrower
6. Third Party Security Agreement of Mission E&P covering all assets of
Mission E&P
7. UCC-1 Financing Statement (Texas Secretary of State) relating to all
assets of Mission E&P
8. Pledge Agreement by Borrower
9. Third Party Pledge Agreement by Black Hawk
10. UCC-1 Financing Statement (Delaware Secretary of State) relating to
Third Party Pledge Agreement by Black Hawk
11. Third Party Pledge Agreement by MSSN Holdings
12. UCC-1 Financing Statement (Delaware Secretary of State) relating to
Third Party Pledge Agreement by Mission Holdings
13. Guaranty - Mission E&P
14. Guaranty - Black Hawk
15. Guaranty - MSSN Holdings
16. Contribution and Indemnification Agreement between Borrower, Black
Hawk, Mission E&P, and MSSN Holdings.
17. Intercreditor Agreement by Agent, Borrower, Guarantors and Guggenheim
Corporate Funding, LLC
Exhibit D-1
18. Letters in Lieu
19. Section 26.02 Notice
Exhibit D-2
EXHIBIT E
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT ("AGREEMENT") dated as of
________________, 200___ between
_____________________________________________________ (the "ASSIGNOR") and
__________________________ (the "ASSIGNEE").
RECITALS
A. The Assignor is a party to the Credit Agreement dated as of
April 8, 2004 (as amended, modified, supplemented and/or restated and in effect
from time to time, the "CREDIT AGREEMENT") among MISSION RESOURCES CORPORATION,
a Delaware corporation (the "BORROWER"), each of the lenders that is or becomes
a party thereto as provided in Section 12.06 of the Credit Agreement
(individually, together with its successors and assigns, a "LENDER", and
collectively, together with their successors and assigns, the "LENDERS"), and
▇▇▇▇▇ Fargo Bank, National Association, in its individual capacity, ("▇▇▇▇▇
FARGO") and as agent for the Lenders (in such capacity, together with its
successors in such capacity, the "AGENT").
B. The Assignor proposes to sell, assign and transfer to the
Assignee, and the Assignee proposes to purchase and assume from the Assignor, a
portion of the Assignor's Revolving Credit Commitment, outstanding Loans and its
Percentage Share of the outstanding LC Exposure, all on the terms and conditions
of this Agreement.
C. In consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. All capitalized terms used but not defined
herein have the respective meanings given to such terms in the Credit Agreement.
Section 1.02 Other Definitions. As used herein, the following terms
have the following respective meanings:
"ASSIGNED INTEREST" shall mean all of Assignor's (in its
capacity as a "LENDER") rights and obligations under the Credit
Agreement and the other Security Instruments in respect of the
Revolving Credit Commitment of the Assignor relating to the Assignor's
Maximum Revolving Credit Amount in the principal amount equal to
$____________________ and the principal amount of the Loans outstanding
thereunder, currently in the amount of $_________________ (the "LOAN
BALANCE"), plus the interest and fees which will accrue from and after
the Assignment Date.
"ASSIGNMENT DATE" shall mean _____________________, 200__.
Exhibit E-1
ARTICLE II
SALE AND ASSIGNMENT
Section 2.01 Sale and Assignment. On the terms and conditions set forth
herein, effective on and as of the Assignment Date, the Assignor hereby sells,
assigns and transfers to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, all of the right, title and interest of the Assignor
in and to, and all of the obligations of the Assignor in respect of, the
Assigned Interest. Such sale, assignment and transfer is without recourse and,
except as expressly provided in this Agreement, without representation or
warranty.
Section 2.02 Assumption of Obligations. The Assignee agrees with the
Assignor (for the express benefit of the Assignor and the Borrower) that the
Assignee will, from and after the Assignment Date, perform all of the
obligations of the Assignor in respect of the Assigned Interest. From and after
the Assignment Date: (a) the Assignor shall be released from the Assignor's
obligations in respect of the Assigned Interest, and (b) the Assignee shall be
entitled to all of the Assignor's rights, powers and privileges under the Credit
Agreement and the other Security Instruments in respect of the Assigned
Interest.
Section 2.03 Consent by Agent. By executing this Agreement as provided
below, in accordance with Section 12.06(b) of the Credit Agreement, the Agent
hereby acknowledges notice of the transactions contemplated by this Agreement
and consents to such transactions.
ARTICLE III
PAYMENTS
Section 3.01 Payments. As consideration for the sale, assignment and
transfer contemplated by Section 2.01 hereof, the Assignee shall, on the
Assignment Date, assume Assignor's obligations in respect of the Assigned
Interest and pay to the Assignor an amount equal to the Loan Balance, if any. An
amount equal to all accrued and unpaid interest and fees shall be paid to the
Assignor as provided in Section 3.02 (iii) below. Except as otherwise provided
in this Agreement, all payments hereunder shall be made in Dollars and in
immediately available funds, without setoff, deduction or counterclaim.
Section 3.02 Allocation of Payments. The Assignor and the Assignee
agree that (i) the Assignor shall be entitled to any payments of principal with
respect to the Assigned Interest made prior to the Assignment Date, together
with any interest and fees with respect to the Assigned Interest accrued prior
to the Assignment Date, (ii) the Assignee shall be entitled to any payments of
principal with respect to the Assigned Interest made from and after the
Assignment Date, together with any and all interest and fees with respect to the
Assigned Interest accruing from and after the Assignment Date, and (iii) the
Agent is authorized and instructed to allocate payments received by it for
account of the Assignor and the Assignee as provided in the foregoing clauses.
Each party hereto agrees that it will hold any interest, fees or other amounts
that it may receive to which the other party hereto shall be entitled pursuant
to the preceding sentence for account of such other party and pay, in like money
and funds, any such amounts that it may receive to such other party promptly
upon receipt.
Exhibit E-2
Section 3.03 Delivery of Notes. Promptly following the receipt by the
Assignor of the consideration required to be paid under Section 3.01 hereof, the
Assignor shall, in the manner contemplated by Section 12.06(b) of the Credit
Agreement, (i) deliver to the Agent (or its counsel) the Notes held by the
Assignor and (ii) notify the Agent to request that the Borrower execute and
deliver new Notes to the Assignor, if Assignor continues to be a Lender, and the
Assignee, dated the date of this Agreement in respective principal amounts equal
to the respective Revolving Credit Commitments of the Assignor (if appropriate)
and the Assignee after giving effect to the sale, assignment and transfer
contemplated hereby.
Section 3.04 Further Assurances. The Assignor and the Assignee hereby
agree to execute and deliver such other instruments, and take such other
actions, as either party may reasonably request in connection with the
transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent. The effectiveness of the sale,
assignment and transfer contemplated hereby is subject to the satisfaction of
each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the
Assignor and the Assignee;
(b) the receipt by the Assignor of the payment required
to be made by the Assignee under Section 3.01 hereof; and
(c) the acknowledgment and consent by the Agent
contemplated by Section 2.03 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01 Representations and Warranties of the Assignor. The
Assignor represents and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has
taken all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignor and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Governmental
Requirement applicable to it;
(c) this Agreement has been duly executed and delivered
by it and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against it in accordance with its terms;
Exhibit E-3
(d) all approvals and authorizations of, all filings with
and all actions by any Governmental Authority necessary for the
validity or enforceability of its obligations under this Agreement have
been obtained;
(e) the Assignor has good title to, and is the sole legal
and beneficial owner of, the Assigned Interest, free and clear of all
Liens, claims, participations or other charges of any nature
whatsoever; and
(f) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignor.
Section 5.02 Disclaimer. Except as expressly provided in Section 5.01
hereof, the Assignor does not make any representation or warranty, nor shall it
have any responsibility to the Assignee, with respect to the accuracy of any
recitals, statements, representations or warranties contained in the Credit
Agreement or in any certificate or other document referred to or provided for
in, or received by any Lender under, the Credit Agreement, or for the value,
validity, effectiveness, genuineness, execution, effectiveness, legality,
enforceability or sufficiency of the Credit Agreement, the Notes or any other
document referred to or provided for therein or for any failure by the Borrower
or any other Person (other than Assignor) to perform any of its obligations
thereunder prior or for the existence, value, perfection or priority of any
collateral security or the financial or other condition of the Borrower or the
Subsidiaries or any other obligor or guarantor, or any other matter relating to
the Credit Agreement or any other Security Instrument or any extension of credit
thereunder.
Section 5.03 Representations and Warranties of the Assignee. The
Assignee represents and warrants to the Assignor as follows:
(a) it has all requisite power and authority, and has
taken all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignee and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Governmental
Requirement applicable to it;
(c) this Agreement has been duly executed and delivered
by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with
and all actions by any Governmental Authority necessary for the
validity or enforceability of its obligations under this Agreement have
been obtained;
(e) the Assignee has fully reviewed the terms of the
Credit Agreement and the other Security Instruments and has
independently and without reliance upon the Assignor, and based on such
information as the Assignee has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement;
Exhibit E-4
(f) the Assignee hereby affirms that the representations
contained in Section 4.06(d)(i) and (ii) of the Credit Agreement are
true and accurate as to it and, to the extent applicable, the Assignee
has contemporaneously herewith delivered to the Agent and the Borrower
such certifications as are required thereby to avoid the withholding
taxes referred to in Section 4.06; and
(g) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignee.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Notices. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telex or telecopy) to the intended recipient
at its "ADDRESS FOR NOTICES" specified below its name on the signature pages
hereof or, as to either party, at such other address as shall be designated by
such party in a notice to the other party.
Section 6.02 Amendment, Modification or Waiver. No provision of this
Agreement may be amended, modified or waived except by an instrument in writing
signed by the Assignor and the Assignee, and consented to by the Agent.
Section 6.03 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The representations and warranties made herein
by the Assignee are also made for the benefit of the Agent and the Borrower, and
the Assignee agrees that the Agent and the Borrower are entitled to rely upon
such representations and warranties.
Section 6.04 Assignments. Neither party hereto may assign any of its
rights or obligations hereunder except in accordance with the terms of the
Credit Agreement.
Section 6.05 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
Section 6.06 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be identical and all of which, taken
together, shall constitute one and the same instrument, and each of the parties
hereto may execute this Agreement by signing any such counterpart.
Section 6.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the State of Texas.
Section 6.08 Expenses. Each party hereto shall bear its own expenses in
connection with the execution, delivery and performance of this Agreement.
Exhibit E-5
Section 6.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR:
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
____________________________________________
Exhibit E-6
ASSIGNEE:
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Address for Notices:
____________________________________________
____________________________________________
____________________________________________
Telecopier No.: ____________________________
Telephone No.: _____________________________
Attention: _________________________________
ACKNOWLEDGED AND CONSENTED TO:
______________________________,
as Agent
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Exhibit E-7
EXHIBIT F
FORM OF LETTER OF CREDIT APPLICATION
Exhibit F-1
EXHIBIT G
FORM OF JOINDER AGREEMENT
This JOINDER AGREEMENT (the "Agreement"), dated as of ______________,
20___, is by and between __________________, a __________________ (the
"Subsidiary Guarantor"), and ▇▇▇▇▇ Fargo Bank, National Association, in its
capacity as Agent under that certain Credit Agreement dated April 8, 2004, by
and among Mission Resources Corporation, a Delaware corporation, and ▇▇▇▇▇ Fargo
Bank, National Association, as Agent (the "Agent") (as same may be amended,
modified, extended or restated from time to time, the "Credit Agreement").
Capitalized terms not otherwise defined in this Agreement shall have the
meanings given them in the Credit Agreement.
The Subsidiary Guarantor is a subsidiary of ________________, and,
consequently, _________________ is required by Section 8.13 of the Credit
Agreement to cause the Subsidiary Guarantor to become a "Guarantor" thereunder.
Accordingly, the Subsidiary Guarantor hereby agrees as follows with the
Agent, for the benefit of the Lenders:
1. The Subsidiary Guarantor hereby acknowledges, agrees and
confirms that, by its execution of this Agreement, the Subsidiary Guarantor will
be deemed to be a Subsidiary of Borrower and a Guarantor for all purposes of the
Credit Agreement and the other Loan Documents, and shall have all of the
obligations of a Guarantor thereunder. The Subsidiary Guarantor hereby (i)
jointly and severally together with the other Guarantors, guarantees to each
Lender, the Agent and the Issuing Bank as provided in the Credit Agreement the
prompt payment and performance of the Obligations of the Borrower in full when
due (whether at stated maturity, as a mandatory prepayment, by acceleration, as
a mandatory cash collateralization or otherwise) strictly in accordance with the
terms thereof and agrees that if any of such Obligations are not paid or
performed in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or
otherwise), the Subsidiary Guarantor will, jointly and severally together with
the other Guarantors, promptly pay and perform the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Obligations of the Borrower, the same will be promptly
paid in full when due (whether at extended maturity, as a mandatory prepayment,
by acceleration, as a mandatory cash collateralization or otherwise) in
accordance with the terms of such extension or renewal.
2. The Subsidiary Guarantor contemporaneously herewith shall
deliver on its behalf to Agent a fully executed Guaranty Agreement in the form
of Exhibit H to the Credit Agreement. Additionally, the Subsidiary Guarantor
hereby grants to Agent, for the benefit of the Lenders, as security for the
Obligations, a continuing, perfected, first priority lien and security interest
in, and a right of set off against any and all of the Subsidiary Guarantor's
assets, contemporaneously executing any and all documents required by Agent in
form and substance satisfactory to Agent.
3. The Subsidiary Guarantor acknowledges and confirms that it has
received a copy of the Credit Agreement and the schedules and exhibits thereto
and each Security Instrument and
Exhibit G-1
the schedules and exhibits thereto. The information on the schedules to the
Credit Agreement and the Security Instruments are hereby amended to provide the
information shown on the attached Schedule A.
4. The Borrower confirms that all of its obligations under the
Credit Agreement are, and upon the Subsidiary Guarantor becoming a Guarantor,
shall continue to be, in full force and effect. The parties hereto confirm and
agree that immediately upon the Subsidiary Guarantor becoming a Guarantor the
term "Obligations" as used in the Credit Agreement, shall include all
obligations of such Subsidiary Guarantor under the Subsidiary Guarantor's
Guaranty Agreement and under each other Security Instrument.
5. Each of the Borrower and the Subsidiary Guarantor agrees that
at any time and from time to time, upon the written request of the Agent, it
will execute and deliver such further documents and do such further acts and
things as the Agent may request in order to effect the purposes of this
Agreement.
6. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original but all of which when taken together
shall constitute one contract.
7. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Texas, without reference
to laws that would require the application of the laws of a jurisdiction other
than the State of Texas.
IN WITNESS WHEREOF, each of the Borrower and the Subsidiary Guarantor
has caused this Agreement to be duly executed by its authorized officer, and the
Agent, for the benefit of the Lenders, has caused the same to be accepted by its
authorized officer, as of the day and year first above written.
BORROWER:
MISSION RESOURCES CORPORATION,
a Delaware corporation
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Exhibit G-2
SUBSIDIARY GUARANTOR:
[SUBSIDIARY GUARANTOR],
a __________________________
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Acknowledged and accepted:
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
as Agent
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Exhibit G-3
EXHIBIT H
FORM OF GUARANTEE AGREEMENT
TO: ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION
1. GUARANTY; DEFINITIONS. In consideration of any credit or other
financial accommodation heretofore, now or hereafter extended or made to MISSION
RESOURCES CORPORATION, a Delaware corporation (whether one or more, "Borrower")
by ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, as Agent for itself and the Lenders
party to the hereinafter defined Credit Agreement ("Bank"), and for other
valuable consideration, the undersigned ________________________, a ____________
[corporation/limited partnership/limited liability company] (whether one or
more, "Guarantor"), jointly and severally and unconditionally guarantees and
promises to pay to Bank, or order, on demand in lawful money of the United
States of America and in immediately available funds, any and all Indebtedness
of any of the Borrower to Bank. The term "Indebtedness" means all "Obligations"
as defined in that certain Credit Agreement dated as of April __, 2004, between
Borrower, the Lenders party thereto and ▇▇▇▇▇ Fargo Bank, National Association
as Agent for itself and such Lenders, (as same may be amended, modified,
supplemented and/or restated, the "Credit Agreement"), together with any and all
renewals, extensions, rearrangements, modifications, restatements, amendments,
and/or increases to any of the aforesaid Indebtedness described in this
Agreement. All terms not otherwise defined herein shall have the meaning given
to them in the Credit Agreement or Obligations described in the Credit
Agreement. This Guaranty is a guaranty of payment and not collection.
2. SUCCESSIVE TRANSACTIONS; OBLIGATION UNDER OTHER GUARANTIES.
This is a continuing guaranty and all rights, powers and remedies hereunder
shall apply to all past, present and future Indebtedness of the Borrower to
Bank, including that arising under successive transactions which shall either
continue the Indebtedness, increase or decrease it, or from time to time create
new Indebtedness after all or any prior Indebtedness has been satisfied, and
notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of
the Borrower or Guarantor, or any other guarantor or other party now or
hereafter liable or obligated in any manner as guarantor or otherwise to pay or
perform all or any part of the Indebtedness (hereinafter such other party being
called an "Other Liable Party") or any other event or proceeding affecting the
Borrower, Guarantor, or any Other Liable Party.
3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF
STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY. The obligations hereunder
are joint and several and independent of the obligations of Borrower, and a
separate action or actions may be brought and prosecuted against Guarantor
whether action is brought against the Borrower or any other person, or whether
the Borrower or any other person is joined in any such action or actions.
Guarantor acknowledges that this Guaranty is absolute and unconditional, there
are no conditions precedent to the effectiveness of this Guaranty, and this
Guaranty is in full force and effect and is binding on Guarantor as of the date
written below, regardless of whether Bank obtains collateral or any guaranties
from others or takes any other
Exhibit H-1
action contemplated by Guarantor. Guarantor waives the benefit of any statute of
limitations affecting Guarantor's liability hereunder or the enforcement
thereof, and Guarantor agrees that any payment of any Indebtedness or other act
which shall toll any statute of limitations applicable thereto shall similarly
operate to toll such statute of limitations applicable to Guarantor's liability
hereunder. The liability of Guarantor hereunder shall be reinstated and revived
and the rights of Bank shall continue if and to the extent for any reason any
amount at any time paid on account of any Indebtedness guaranteed hereby is
rescinded or must otherwise be restored by Bank, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, all as though such
amount had not been paid. The determination as to whether any amount so paid
must be rescinded or restored shall be made by Bank in its sole discretion;
provided however, that if Bank chooses to contest any such matter at the request
of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and
against all costs and expenses, including reasonable attorneys' fees, expended
or incurred by Bank in connection therewith, including without limitation, in
any litigation with respect thereto.
4. AUTHORIZATIONS TO BANK. Guarantor authorizes Bank (either
before or after revocation hereof) without notice to or demand on Guarantor, and
without affecting Guarantor's liability hereunder, from time to time to: (a)
alter, compromise, renew, extend, accelerate or otherwise change the time for
payment of, or otherwise change the terms of the Indebtedness or any portion
thereof, including increase or decrease of the rate of interest thereon; (b)
take and hold security for the payment of this Guaranty or the Indebtedness or
any portion thereof, and exchange, enforce, waive, subordinate or release any
such security; (c) apply such security and direct the order or manner of sale
thereof, including without limitation, a non-judicial sale permitted by the
terms of the controlling security agreement, mortgage or deed of trust, as Bank
in its discretion may determine; (d) release or substitute any one or more of
the endorsers or any Other Liable Party or guarantor of the Indebtedness or
Other Liable Party, or any portion thereof, or any other party thereto; and (e)
apply payments received by Bank from the Borrower to any Indebtedness of the
Borrower to Bank, in such order as Bank shall determine in its sole discretion,
whether or not such Indebtedness is covered by this Guaranty, and Guarantor
hereby waives any provision of law regarding application of payments which
specifies otherwise. Bank may without notice assign this Guaranty in whole or in
part. Upon Bank's request, Guarantor agrees to provide to Bank copies of
Guarantor's financial statements.
5. REPRESENTATIONS AND WARRANTIES. Guarantor represents and
warrants to Bank that: (a) Guarantor is a ______________, duly organized and
legally existing under the laws of the State of ___________________; (b)
Guarantor is duly authorized and empowered to execute, deliver and perform this
Guaranty; (c) Guarantor's Guaranty may reasonably be expected to benefit,
directly or indirectly, Guarantor; (d) this Guaranty constitutes the valid and
binding obligation of Guarantor, enforceable in accordance with its terms except
as such enforceability may be limited by bankruptcy and insolvency laws and
general principles of equity; (e) this Guaranty will not violate any provisions
of organizational documents or any other contract, agreement, law, regulation,
order, injunction, judgment, decree or writ to which Guarantor is subject; (f)
Guarantor's execution, delivery and performance of this Guaranty does not
require the consent or approval of any other person or entity which has not
already been obtained; (g) this Guaranty is executed at Borrower' request; (h)
Guarantor shall not, without Bank's prior written consent, sell, lease, assign,
encumber, hypothecate, transfer or otherwise dispose of all or a substantial or
material part of Guarantor's assets except as may be permitted
Exhibit H-2
under Section 9.17 of the Credit Agreement or to the extent Section 9.17 of the
Credit Agreement is not applicable, other than in the ordinary course of
business unless expressly permitted by the Credit Agreement; (i) Bank has made
no representation to Guarantor as to the creditworthiness of the Borrower; and
(j) Guarantor has established adequate means of obtaining from the Borrower on a
continuing basis financial and other information pertaining to Borrower's
financial condition. Guarantor agrees to keep adequately informed from such
means of any facts, events or circumstances which might in any way affect
Guarantor's risks hereunder, and Guarantor further agrees that Bank shall have
no obligation to disclose to Guarantor any information or material about the
Borrower which is acquired by Bank in any manner.
6. GUARANTOR'S WAIVERS.
(a) Guarantor waives any right to require Bank to: (i)
proceed against the Borrower or any other person; (ii) marshal assets
or proceed against or exhaust any security held from the Borrower or
any other person; (iii) give notice of the terms, time and place of any
public or private sale or other disposition of personal property
security held from the Borrower or any other person, or otherwise
comply with the provisions of Section 9.615 of the Texas Business and
Commerce Code or the comparable provisions of the Delaware, Louisiana
or New Mexico Uniform Commercial Code; (iv) take any action or pursue
any other remedy in Bank's power; or (v) make any presentment or demand
for performance, or give any notices of any kind, including without
limitation, any notice of nonperformance, protest, notice of protest,
notice of dishonor, notice of intention to accelerate or notice of
acceleration hereunder or in connection with any obligations or
evidences of Indebtedness held by Bank as security for or which
constitute in whole or in part the Indebtedness guaranteed hereunder,
or in connection with the creation of new or additional Indebtedness.
(b) Guarantor waives any defense to its obligations
hereunder based upon or arising by reason of: (i) any disability or
other defense of the Borrower or any other person; (ii) the cessation
or limitation from any cause whatsoever, other than payment in full, of
the Indebtedness of the Borrower or any other person; (iii) any lack of
authority of any officer, director, partner, agent or any other person
acting or purporting to act on behalf of the Borrower which is a
corporation, partnership or other type of entity, or any defect in the
formation of any such Borrower; (iv) the application by the Borrower of
the proceeds of any Indebtedness for purposes other than the purposes
represented by Borrower to, or intended or understood by, Bank or
Guarantor; (v) any act or omission by Bank which directly or indirectly
results in or aids the discharge of the Borrower or any portion of the
Indebtedness by operation of law or otherwise, or which in any way
impairs or suspends any rights or remedies of Bank against the
Borrower; (vi) any impairment of the value of any interest in any
security for the Indebtedness or any portion thereof, including without
limitation, the failure to obtain or maintain perfection or recordation
of any interest in any such security, the release of any such security
without substitution, and/or the failure to preserve the value of, or
to comply with applicable law in disposing of, any such security; (vii)
any modification of the Indebtedness, in any form whatsoever, including
any modification made after revocation hereof to any Indebtedness
incurred prior to such revocation, and including, without limitation,
the renewal, extension, acceleration or other change in time for
payment of, or other change in the
Exhibit H-3
terms of, the Indebtedness or any portion thereof, including increase
or decrease of the rate of interest thereon; or (viii) any requirement
that Bank give any notice of acceptance of this Guaranty. Until all
Indebtedness shall have been paid in full, Guarantor shall have no
right of subrogation, and Guarantor waives any right to enforce any
remedy which Bank now has or may hereafter have against the Borrower or
any other person, and waives any benefit of, or any right to
participate in, any security now or hereafter held by Bank. Guarantor
further waives all rights and defenses Guarantor may have arising out
of (A) any election of remedies by Bank, even though that election of
remedies, such as a non-judicial foreclosure with respect to any
security for any portion of the Indebtedness, destroys Guarantor's
rights of subrogation or Guarantor's rights to proceed against the
Borrower for reimbursement, or (B) any loss of rights Guarantor may
suffer by reason of any rights, powers or remedies of the Borrower in
connection with any anti-deficiency laws or any other laws limiting,
qualifying or discharging Borrower's Indebtedness, whether by operation
of law or otherwise, including any rights Guarantor may have to a fair
market value hearing to determine the size of a deficiency following
any foreclosure sale or other disposition of any real property security
for any portion of the Indebtedness.
(c) By signing this Guaranty, Guarantor waives (i) each
and every right to which it may be entitled by virtue of any suretyship
law, including without limitation, any rights arising pursuant to Rule
31 of the Texas Rules of Civil Procedure, Section 17.001 of the Texas
Civil Practice and Remedies Code and Chapter 34 of the Texas Business
and Commerce Code, as the same may be amended from time to time, and
(ii) without limiting any of the waivers set forth herein, any other
fact or event that, in the absence of this provision, would or might
constitute or afford a legal or equitable discharge or release of or
defense to Guarantor.
7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S
POSSESSION. In addition to all liens upon and rights of setoff against the
monies, securities or other property of Guarantor given to Bank by law, Bank
shall have a lien upon and a right of setoff against all monies, securities and
other property of Guarantor now or hereafter in the possession of or on deposit
with Bank, whether held in a general or special account or deposit or for
safekeeping or otherwise, and every such lien and right of setoff may be
exercised without demand upon or notice to Guarantor. No lien or right of setoff
shall be deemed to have been waived by any act or conduct on the part of Bank,
or by any neglect to exercise such right of setoff or to enforce such lien, or
by any delay in so doing, and every right of setoff and lien shall continue in
full force and effect until such right of setoff or lien is specifically waived
or released by Bank in writing.
8. SUBORDINATION. Any Indebtedness of the Borrower now or
hereafter held by Guarantor is hereby subordinated to the Indebtedness of
Borrower to Bank. Such Indebtedness of Borrower to Guarantor is assigned to Bank
as security for this Guaranty and the Indebtedness and, if Bank requests, shall
be collected and received by Guarantor as trustee for Bank and paid over to Bank
on account of the Indebtedness of Borrower to Bank but without reducing or
affecting in any manner the liability of Guarantor under the other provisions of
this Guaranty. Any notes or other instruments now or hereafter evidencing such
Indebtedness of the Borrower to Guarantor shall be marked with a legend that the
same are subject to this Guaranty and, if Bank so requests, shall be delivered
to Bank. Bank is hereby authorized in the name of
Exhibit H-4
Guarantor from time to time to file financing statements and continuation
statements and execute such other documents and take such other action as Bank
deems necessary or appropriate to perfect, preserve and enforce its rights
hereunder.
9. REMEDIES; NO WAIVER. All rights, powers and remedies of Bank
hereunder are cumulative. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy hereunder shall affect or operate as a
waiver of such right, power or remedy; nor shall any single or partial exercise
of any such right, power or remedy preclude, waive or otherwise affect any other
or further exercise thereof or the exercise of any other right, power or remedy.
Any waiver, permit, consent or approval of any kind by Bank of any breach of
this Guaranty, or any such waiver of any provisions or conditions hereof, must
be in writing and shall be effective only to the extent set forth in writing.
10. COSTS, EXPENSES AND ATTORNEYS' FEES. Guarantor shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), expended or
incurred by Bank in connection with the enforcement of any of Bank's rights,
powers or remedies and/or the collection of any amounts which become due to Bank
under this Guaranty, and the prosecution or defense of any action in any way
related to this Guaranty, whether incurred at the trial or appellate level, in
an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by Bank
or any other person) relating to Guarantor or any other person or entity.
11. SUCCESSORS; ASSIGNMENT. This Guaranty shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Guarantor may not assign or transfer any of their interests or rights hereunder
without Bank's prior written consent. Guarantor acknowledges that Bank has the
right to sell, assign, transfer, negotiate or grant participations in all or any
part of, or any interest in, any Indebtedness of Borrower to Bank and any
obligations with respect thereto, including this Guaranty in accordance with the
terms of the Credit Agreement. In connection therewith, and subject to the
confidentiality provisions of the Credit Agreement, Bank may disclose all
documents and information which Bank now has or hereafter acquires relating to
Guarantor and/or this Guaranty, whether furnished by Borrower, Guarantor or
otherwise. Guarantor further agree that Bank may disclose such documents and
information to Borrower.
12. AMENDMENT. This Guaranty may be amended or modified only in
writing signed by Bank and Guarantor.
13. APPLICATION OF SINGULAR AND PLURAL. In all cases where there
is but a single Borrower, then all words used herein in the plural shall be
deemed to have been used in the singular where the context and construction so
require; and when there is more than one Borrower named herein, or when this
Guaranty is executed by more than one Guarantor, the word "Borrower" and the
word "Guarantor" respectively shall mean all or any one or more of them as the
context requires.
Exhibit H-5
14. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF
PROVISIONS. Guarantor warrants and agrees that each of the waivers set forth
herein is made with Guarantor's full knowledge of its significance and
consequences, and that under the circumstances, the waivers are reasonable and
not contrary to public policy or law. If any waiver or other provision of this
Guaranty shall be held to be prohibited by or invalid under applicable public
policy or law, such waiver or other provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such waiver or other provision or any remaining provisions of this Guaranty.
15. GOVERNING LAW. This Guaranty shall be governed by and
construed in accordance with the laws of the state of Texas, without reference
to laws that would require the application of the laws of a jurisdiction other
than the State of Texas.
16. ARBITRATION.
(a) Arbitration. The parties hereto agree, upon demand by
any party, to submit to binding arbitration all claims, disputes and
controversies between or among them (and their respective employees,
officers, directors, attorneys, and other agents), whether in tort,
contract or otherwise arising out of or relating to in any way (i) the
loan and related loan and security documents which are the subject of
this Guaranty and its negotiation, execution, collateralization,
administration, repayment, modification, extension, substitution,
formation, inducement, enforcement, default or termination; or (ii)
requests for additional credit.
(b) Governing Rules. Any arbitration proceeding will (i)
proceed in a location in Texas selected by the American Arbitration
Association ("AAA"); (ii) be governed by the Federal Arbitration Act
(Title 9 of the United States Code), notwithstanding any conflicting
choice of law provision in any of the documents between the parties;
and (iii) be conducted by the AAA, or such other administrator as the
parties shall mutually agree upon, in accordance with the AAA's
commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be
conducted in accordance with the AAA's optional procedures for large,
complex commercial disputes (the commercial dispute resolution
procedures or the optional procedures for large, complex commercial
disputes to be referred to, as applicable, as the "Rules"). If there is
any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or
refuses to submit to arbitration following a demand by any other party
shall bear all costs and expenses incurred by such other party in
compelling arbitration of any dispute. Nothing contained herein shall
be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 U.S.C. Section 91 or any similar applicable
state law.
(c) No Waiver of Provisional Remedies, Self-Help and
Foreclosure. The arbitration requirement does not limit the right of
any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or
proceeds of collateral such as setoff or repossession; or (iii) obtain
provisional or ancillary remedies such as replevin, injunctive relief,
attachment or the appointment of a
Exhibit H-6
receiver, before during or after the pendency of any arbitration
proceeding. This exclusion does not constitute a waiver of the right or
obligation of any party to submit any dispute to arbitration or
reference hereunder, including those arising from the exercise of the
actions detailed in sections (i), (ii) and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration
proceeding in which the amount in controversy is $5,000,000.00 or less
will be decided by a single arbitrator selected according to the Rules,
and who shall not render an award of greater than $5,000,000.00. Any
dispute in which the amount in controversy exceeds $5,000,000.00 shall
be decided by majority vote of a panel of three arbitrators; provided
however, that all three arbitrators must actively participate in all
hearings and deliberations. The arbitrator will be a neutral attorney
licensed in the State of Texas with a minimum of ten years experience
in the substantive law applicable to the subject matter of the dispute
to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator
will decide (by documents only or with a hearing at the arbitrator's
discretion) any pre-hearing motions which are similar to motions to
dismiss for failure to state a claim or motions for summary
adjudication. The arbitrator shall resolve all disputes in accordance
with the substantive law of Texas and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award.
The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the
arbitrator deems necessary to the same extent a judge could pursuant to
the Federal Rules of Civil Procedure, the Texas Rules of Civil
Procedure or other applicable law. Judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit
of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such
action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery
will be permitted in accordance with the Rules. All discovery shall be
expressly limited to matters directly relevant to the dispute being
arbitrated and must be completed no later than 20 days before the
hearing date and within 180 days of the filing of the dispute with the
AAA. Any requests for an extension of the discovery periods, or any
discovery disputes, will be subject to final determination by the
arbitrator upon a showing that the request for discovery is essential
for the party's presentation and that no alternative means for
obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution
of any dispute arising pursuant to the terms of this Guaranty shall be
determined by a separate arbitration proceeding and such dispute shall
not be consolidated with other disputes or included in any class
proceeding.
(g) Payment of Arbitration Costs and Fees. The arbitrator
shall award all costs and expenses of the arbitration proceeding.
Exhibit H-7
(h) Miscellaneous. To the maximum extent practicable, the
AAA, the arbitrators and the parties shall take all action required to
conclude any arbitration proceeding within 180 days of the filing of
the dispute with the AAA. No arbitrator or other party to an
arbitration proceeding may disclose the existence, content or results
thereof, except for disclosures of information by a party required in
the ordinary course of its business or by applicable law or regulation.
If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most
directly related to the documents between the parties or the subject
matter of the dispute shall control. This arbitration provision shall
survive termination, amendment or expiration of any of the documents or
any relationship between the parties.
17. NOTICES. All notices, requests, demands and other
communications provided for herein shall be given or made by telex, telecopy,
courier or U.S. Mail or in writing and telexed, telecopied, mailed or delivered
to the intended recipient at the "ADDRESS FOR NOTICES" specified below its name
on the signature pages hereof, except that all such notices and communications
sent to Secured Party shall also be sent to Agency Syndications, ▇▇▇▇▇ Fargo
Bank, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, C7300-034, Attention: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇ or, as to any party, at such other address as shall be designated by such
party in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted, if transmitted before 1:00 p.m. local time on a Business Day
(otherwise on the next succeeding Business Day) by telex or telecopier and
evidence or confirmation of receipt is obtained, or personally delivered or, in
the case of a mailed notice, three (3) Business Days after the date deposited in
the mails by certified mail, return receipt requested, postage prepaid, in each
case given or addressed as aforesaid.
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.
IN WITNESS WHEREOF, the undersigned Guarantor have executed this
Guaranty as of ______________, 20__.
____________________________________________
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
Exhibit H-8
ADDRESS:
____________________________________________
____________________________________________
____________________________________________
Attention: _________________________________
Telephone: _________________________________
Facsimile: _________________________________
SECURED PARTY:
▇▇▇▇▇ FARGO BANK,
NATIONAL ASSOCIATION
Address for Notices:
▇▇▇▇▇ Fargo Bank, National
Association
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
[With copy to:]
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Exhibit H-9
SCHEDULE 2.08
Date Determined
or Redetermined Amount
--------------- ------
Closing Date $50,000,000.00
Schedule 2.08