EXHIBIT 10.4
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of July 20, 2000
Among
SPINNAKER EXPLORATION COMPANY, L.L.C.,
AS BORROWER
and
CERTAIN FINANCIAL INSTITUTIONS,
AS LENDERS,
TORONTO DOMINION (TEXAS), INC.,
AS ADMINISTRATIVE AGENT,
CREDIT SUISSE FIRST BOSTON,
AS DOCUMENTATION AGENT
and
TD SECURITIES (USA) INC., AND
CREDIT SUISSE FIRST BOSTON
AS CO-ARRANGERS
$75,000,000
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SECOND AMENDED AND
RESTATED CREDIT AGREEMENT
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THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"),
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dated as of July 20, 2000, by and among SPINNAKER EXPLORATION COMPANY, L.L.C., a
Delaware limited liability company ("Borrower"), TORONTO DOMINION (TEXAS), INC.
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("TD") and such other various financial institutions as are or may become
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parties hereto, as lenders (collectively, together with their respective
successors and permitted assigns, the "Lenders"), CREDIT SUISSE FIRST BOSTON
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("CSFB"), as documentation agent (in such capacity, the "Documentation Agent")
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for the Lenders, and TORONTO DOMINION (TEXAS), INC., as administrative agent (in
such capacity together with its successors in such capacity, the "Administrative
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Agent") for the Lenders.
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WHEREAS, Borrower, CSFB as administrative agent, Bank of Montreal,
acting through certain U.S. branches or agencies ("Bank of Montreal"), as
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syndication agent, NationsBank, N.A. (now known as Bank of America, N.A.) as
documentation agent, and certain banks (the "1998 Banks") have heretofore
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entered into that certain Credit Agreement, dated as of September 30, 1998, as
amended by that certain First Amendment to Credit Agreement, dated as of March
15, 1999, by that certain Second Amendment to Credit Agreement, dated as of
August 19, 1999, and that certain Third Amendment to Credit Agreement, dated as
of September 27, 1999 (the "1998 Credit Agreement"), providing for commitments
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from the 1998 Banks to make loans and issue letters of credit for the benefit of
Borrower on the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower and the 1998 Banks amended and restated the 1998
Credit Agreement pursuant to an Amended and Restated 364-Day Credit Agreement
dated as of October 29, 1999 among the Borrower, the financial institutions
named therein (the "Existing Banks"), Bank of Montreal, as administrative agent
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for the Existing Banks, and CSFB as documentation agent for the Existing Banks
(such agreement, the "Existing Credit Agreement"), which Existing Credit
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Agreement renewed, extended and continued the indebtedness of the Borrower
pursuant to the 1998 Credit Agreement;
WHEREAS, the Borrower desires to amend and restate the Existing Credit
Agreement in order to restructure, rearrange, renew, extend and continue all
indebtedness evidenced by and outstanding under the Existing Credit Agreement
(the "Prior Indebtedness"), and to assign and modify the commitments from the
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Existing Banks pursuant to which Revolving Loans will be made by the Lenders to
the Borrower and Letters of Credit will be issued by the Issuer (as hereinafter
defined) under the several responsibilities of the Lenders for the account of
the Borrower from time to time prior to the Conversion Date (as hereinafter
defined) and Term Loans shall be made on the Conversion Date;
WHEREAS, the Lenders and the Issuer are willing, on the terms and
subject to the conditions hereinafter set forth (including Article IV), to amend
and restate the Existing Credit Agreement in order to restructure, rearrange,
renew, extend and continue all Prior Indebtedness and
to modify the commitments and make such Loans to the Borrower and issue and
participate in such Letters of Credit for the account of the Borrower; and
WHEREAS, the proceeds of such Loans and Letters of Credit will be used
(a) for restructuring, rearranging, renewing, extending and continuing the debt
of Borrower under the Existing Credit Agreement; (b) for general corporate
purposes including working capital purposes of the Borrower; and (c) for the
acquisition, exploration, development and production of oil and gas properties
and other energy related assets including, without limitation, the acquisition
of hydrocarbon interests;
NOW, THEREFORE, the parties hereto agree that the Existing Credit
Agreement is amended and restated in its entirety as follows:
ARTICLE I - Definitions and References
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Section 1.1 Defined Terms. As used in this Agreement, each of the
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following terms has the meaning given it in this Section 1.1 or in the sections
and subsections referred to below:
"1998 Banks" has the meaning given it in the first recital.
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"1998 Credit Agreement" has the meaning given it in the first recital.
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"Accepting Lenders" has the meaning given it in Section 2.2.
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"Adjusted LIBOR Rate" means, with respect to each particular LIBOR Rate
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Portion and the associated LIBOR Rate and Reserve Percentage, the rate per annum
calculated by Administrative Agent (rounded upwards, if necessary, to the next
higher 1/100%) determined on a daily basis pursuant to the following formula:
Adjusted LIBOR Rate =
LIBOR Rate + LIBOR Spread
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100.0% - Reserve Percentage
"Affiliate" means, as to any Person, each other Person that directly or
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indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses,
directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing general
partners; or
(b) to direct or cause the direction of the management and policies of
such Person whether by contract or otherwise.
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"Administrative Agent" has the meaning given it in the preamble.
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"Agreement" has the meaning given it in the preamble.
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"Arranger" means each of TD Securities (USA) Inc. and Credit Suisse
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First Boston.
"Bank of Montreal" has the meaning given it in the first recital.
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"Base Rate" means, on any date and with respect to all Base Rate Loans,
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a fluctuating rate of interest per annum equal to (a) the higher of (i) the rate
of interest most recently announced by The Toronto-Dominion Bank at its New
York, New York office as its base rate for dollar advances made in the United
States or (ii) the Federal Funds Rate most recently determined by the
Administrative Agent plus 1/2% (0.5%) per annum, plus (b) the Base Rate Spread.
The Base Rate is not necessarily intended to be the lowest rate of interest
determined by The Toronto-Dominion Bank or any Lender in connection with
extensions of credit. Changes in the rate of interest on that portion of any
Loans maintained as Base Rate Loans will take effect simultaneously with each
change in the Base Rate. The Administrative Agent will give notice to the
Borrower of changes in the Base Rate promptly upon receipt of notice of any such
change from The Toronto-Dominion Bank.
"Base Rate Loan" means any Loan which bears interest at the Base Rate.
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"Base Rate Portion" means that portion of the unpaid principal balance
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of the Loans which is not made up of LIBOR Rate Portions.
"Base Rate Spread" means, with respect to any Loan bearing interest at
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the Base Rate for any time prior to the Final Maturity Date, the applicable
margin set forth below under the caption "Base Rate Spread", determined by
reference to the percentage of the Borrowing Base that the sum of all Loans
outstanding plus all LC Obligations represent at that time.
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Percentage of
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Borrowing Base Base Rate Spread
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Usage
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* 90% 1.75%
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* 75% but +90% 1.00%
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* 60% but +75% .50%
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* 40% but +60% .25%
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+ 40% 0%
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+ represents less than
* represents greater than or equal to
"Borrower" has the meaning given it in the preamble.
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"Borrower's Adjusted Consolidated Net Income" means for any period,
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Borrower's consolidated net income for such period, provided that there shall be
excluded from such net income (to the extent otherwise included therein) the
following: (a) the net income of any Person in which Borrower or any
consolidated Subsidiary of Borrower has an interest (which interest does not
cause the net income of such other Person to be consolidated with the net income
of Borrower 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 of Borrower, as the case may be;
(b) the net income (but not loss) of any consolidated Subsidiary of Borrower 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,
law, rule or regulation applicable to such consolidated Subsidiary, or is
otherwise restricted or prohibited in each case determined in accordance with
GAAP; (c) any extraordinary gains or losses, including gains or losses
attributable to sales of property not in the ordinary course of business; and
(d) the cumulative effect of a change in accounting principles and any gains or
losses attributable to writeups or writedowns of assets.
"Borrower's Consolidated Interest Expense" shall mean, for any period
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as to Borrower and its consolidated Subsidiaries, the sum of (a) the aggregate
amount of interest actually paid during such period on Borrower's consolidated
Indebtedness, including the interest portion of payments under capital lease
obligations and any capitalized interest (excluding any interest on any
Indebtedness owed to any other Related Person to the extend permitted by Section
6.2(g)(ii) hereof), plus (b) the net amount payable or paid by such Person
pursuant to any interest rate exchange agreements accruing during such period,
minus (c) the net amount paid to such Persons pursuant to any interest rate
exchange agreements accruing during such period.
"Borrowing Base" means, at the particular time in question, either the
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amount provided for in Section 2.12 or the amount determined by Administrative
Agent in accordance with the provisions of Section 2.13, as reduced by Borrower
pursuant to Section 2.14; provided, however, that in no event shall the
Borrowing Base ever exceed the amount equal to the Maximum Loan Amount.
"Borrowing Base Deficiency" has the meaning given it in Section 2.10.
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"Business Day" means a day, other than a Saturday or Sunday, on which
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commercial banks are open for business with the public in Houston, Texas and New
York, New York. Any Business Day in any way relating to LIBOR Rate Portions
(such as the day on which an Interest Period begins or ends) means any Business
Day on which dealings in U.S. dollar deposits are carried on in the London
interbank market and on which commercial banks are open for domestic and
international business (including dealings in U.S. dollar deposits) in London,
England.
"Capitalized Lease Obligations" shall mean as to any Personal monetary
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obligations of such Person or any of its Subsidiaries under any leasing or
similar arrangement which, in accordance with GAAP, would be classified as
capitalized leases, and, for purposes of this Agreement and each other
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Loan Document, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Certificate of Extension" means a certificate of Borrower executed by
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an officer of the Borrower and delivered to the Administrative Agent, in
substantially the form of Exhibit J hereto, which requests an extension of the
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then scheduled Conversion Date and the then scheduled Final Maturity Date
pursuant to Section 2.2.
"Change in Control" means the occurrence of any of the following: (a)
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Spinnaker Exploration Company and WP Spinnaker Holdings, Inc. shall cease to own
100% of the membership interest of the Borrower; (b) the sale, lease or
transfer, in one or a series of related transactions, of all or substantially
all of Borrower's assets to any Person or Group (as such term is used in Section
13(d)(3) of the Exchange Act); (c) the acquisition, directly or indirectly, by
any Person or Group (other than the Sponsors) of beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of more than 50% of the aggregate
voting power of the voting stock of Spinnaker Exploration Company (for the
purposes of this definition, such other Person shall be deemed to beneficially
own any voting stock of a specified Person held by a parent Person, if such
other Person is the beneficial owner (as defined above) directly or indirectly,
of more than 35% of the voting power of the membership interests or similar
equity interests of such parent Person); or (d) individuals who at the Closing
Date constituted the Board of Directors of Spinnaker Exploration Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders of Spinnaker Exploration
Company was approved by a vote of 66 2/3% of the directors of Spinnaker
Exploration Company then still in office who were either directors at the
Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Spinnaker Exploration Company then in office.
"Change in Law" means (a) the adoption of any law, rule or regulation
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after the date of this Agreement, (b) any change in any law, rule or regulation
or in the interpretation or application thereof by any Governmental Authority
after the date of this Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.16(b), by any lending office of such Lender
or by such Lender's or the Issuing Bank's holding company, if any) with any
request, guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Closing Date" means the date on which the conditions specified in
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Section 4.1 are satisfied (or waived in accordance with Section 10.1).
"Collateral" means all property of any kind which is subject to a Lien
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in favor of Lenders (or in favor of Administrative Agent for the benefit of
Lenders) or which, under the terms of any Security Document, is purported to be
subject to such a Lien.
"Commitment Fee Rate" means for any time prior to the Conversion Date,
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a rate equal to .50% per annum.
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"Commitments" means, (a) at any time prior to the Conversion Date, the
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amount of Revolving Loans the Lenders are then obligated to advance hereunder,
as such amount may be increased or reduced from time to time pursuant to the
terms hereof and (b) on and after the Conversion Date, the sum of the principal
of all Revolving Loans plus all LC Obligations existing on the Conversion Date;
provided that, after the Conversion Date, no Lender shall have any Commitment
except as set forth in Section 2.1(b) and; provided further that at no time
shall the Commitments exceed the Borrowing Base.
"Consolidated" refers to the consolidation of any Person, in accordance
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with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Conversion Date" means the Original Conversion Date, or such later
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date as may result from any extension requested by Borrower and consented to by
the Administrative Agent and Lenders pursuant to Section 2.2.
"CSFB" has the meaning given it in the preface.
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"Declining Lenders" has the meaning given it in Section 2.2(c).
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"Default" means any Event of Default and any default, event or
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condition which would, with the giving of any requisite notices and the passage
of any requisite periods of time, constitute an Event of Default.
"Determination Date" has the meaning given it in Section 2.13.
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"Disclosure Report" means either a notice given by Borrower under
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Section 6.1(d) or a certificate given by Borrower's chief financial officer
under Section 6.1 (b)(ii).
"Disclosure Schedule" means Schedule 1 hereto and the documents
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attached thereto or referred to therein.
"Documentation Agent" has the meaning given it in the preface.
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"Domestic Office" with respect to the Administrative Agent or any
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Lender, means the office of the Administrative Agent or any Lender specified as
its "Domestic Office" on the signature pages hereto or such other office of the
Administrative Agent or any Lender as the Administrative Agent or any Lender may
from time to time specify to the Borrower and (in the case of a Lender) the
Administrative Agent.
"EBITDAX" means, with respect to the Borrower on a consolidated basis
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for any fiscal period, without duplication, (i) Borrower's Adjusted Consolidated
Net Income plus (ii) Borrower's
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consolidated depreciation, depletion, amortization and other non-cash items
reducing Borrower's Adjusted Consolidated Net Income plus (iii) Borrower's
Consolidated Interest Expense plus (iv) consolidated income tax expense, plus
(v) exploration expenses, all determined in accordance with GAAP plus (vi) the
aggregate amount of interest accrued during such period on Borrower's
Indebtedness to any other Related Person to the extent permitted by Section
6.2(g)(ii) hereof.
"Engineering Report" means the Initial Engineering Report and each
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engineering report delivered pursuant to Section 6.1(b)(iv).
"Environmental Laws" means all laws, rules, regulations, codes,
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ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any employee pension benefit plan subject to Title
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IV of ERISA maintained by any Related Person or any Affiliate thereof with
respect to which any Related Person has a fixed or contingent liability.
"Evaluation Date" means each of the following:
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(a) Each date which either Borrower or Majority Lenders, at their
respective options, specifies as a date as of which the Borrowing Base is to be
redetermined, provided that neither Borrower nor Majority Lenders shall be
entitled to request any such redetermination more than once during any six-month
period;
(b) Each date which the Administrative Agent pursuant to Section
2.10(b)(ii) or 6.2(d)(iii), at its option, specifies as a date as of which the
Borrowing Base is to be redetermined; and
(c) March 15 and August 15 of each year occurring prior to the Final
Maturity Date, beginning August 15, 2000.
"Event of Default" has the meaning given it in Section 8.1.
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"Excluded Taxes" means, with respect to the Administrative Agent, any
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Lender, the Issuing Bank or any other recipient of any payment to be made by or
on account of any obligation of the Borrower hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of
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America or any similar tax imposed by any other jurisdiction in which the
Borrower is located, (c) any jurisdiction (or political subdivision thereof) in
which any recipient of any payment to be made by or on account of any obligation
of the Borrower hereunder is presently doing business in which taxes are imposed
solely as a result of doing business in such jurisdiction and (d) in the case of
a Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 2.19(b) unless such assignee so agrees in writing), any
withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender's failure to comply
with Section 2.18(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.18(a).
"Existing Banks" has the meaning given it in the second recital.
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"Existing Credit Agreement" has the meaning given it in the second
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recital.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
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per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it. For purposes of this Agreement,
any change in the Base Rate due to a change in the Federal Funds Rate shall be
effective on the effective date of such change in the Federal Funds Rate. If the
Administrative Agent shall have determined (which determination shall be
conclusive and binding, absent manifest error) that it is unable to ascertain
the Federal Funds Rate for any reason, including, without limitation, the
inability or failure of the Administrative Agent to obtain sufficient bids or
publications in accordance with the terms hereof, the Base Rate shall be the
rate described in clause (i) of the definition thereof until the circumstances
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giving rise to such inability no longer exist.
"Fee Letter" means that certain Fee Letter dated as of July 20, 2000
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between TD and Borrower.
"Final Maturity Date" means on any date, the earlier of (i) (x) with
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respect to any Revolving Loan or Matured LC Obligation which is not continued as
a Term Loan, the Conversion Date then in effect and (y) with respect to any Term
Loan, the date one year after the Conversion Date then in effect and (ii) the
date on which the Notes become due and payable.
"Fiscal Quarter" means a three-month period ending on March 31, June
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30, September 30 or December 31 of any year.
"Fiscal Year" means a twelve-month period ending on December 31 of any
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year.
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"Foreign Lender" means any Lender that is organized under the laws of a
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jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"GAAP" means those generally accepted accounting principles and
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practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor). Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided,
however, that if GAAP shall change after the Closing Date in a manner affecting
any of the covenants set forth herein, then, at the request of Borrower or the
Administrative Agent, the parties shall negotiate in good faith in an effort to
agree upon appropriate adjustments to such covenants and, following the
execution of an amendment to the Loan Documents giving effect to any such
agreement, such accounting or financial terms shall for purposes of determining
compliance with such covenants be construed in accordance with GAAP as so
changed (it being understood that such terms shall be construed in accordance
with GAAP as in effect prior to such change at all times following any such
request and before the execution of any such amendment).
"Governmental Authority" means the government of the United States of
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America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person shall mean any obligation, contingent
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or otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
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manner, whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
"Guarantor" means Spinnaker Exploration Company and WP Spinnaker
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Holdings, Inc., a Delaware corporation, and any Subsidiary of Borrower which now
or hereafter executes and delivers a guaranty to Administrative Agent pursuant
to Section 7.5.
"Guaranty" means (i) that certain Amended and Restated Guaranty, dated
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as of October 29, 1999, executed by Spinnaker Exploration Company, as guarantor,
in favor of Bank of Montreal, as administrative agent under the Existing Credit
Agreement, as the same may be assigned, amended, supplemented, amended and
restated or otherwise modified from time to time, (ii) that certain Amended and
Restated Guaranty, dated as of October 29, 1999, executed by WP Spinnaker
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Holdings, Inc., a Delaware corporation, as guarantor, in favor of Bank of
Montreal, as administrative agent under the Existing Credit Agreement, as the
same may be assigned, amended, supplemented, amended and restated or otherwise
modified from time to time and (iii) any Guaranty executed and delivered
pursuant to Section 4.1(g) or Section 7.5 by any Guarantor substantially in the
form of Exhibit L hereto with appropriate deletions and insertions acceptable to
Administrative Agent, as amended, supplemented, restated or otherwise modified
from time to time.
"Hazardous Materials" means all explosive or radioactive substances or
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wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" shall mean any interest rate protection agreement,
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foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Highest Lawful Rate" has the meaning given to it in Section 10.6.
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"Indebtedness" of any Person shall mean, without duplication, (a) all
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obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all net obligations of such Person in respect of
Hedging Agreements, (j) all obligations of such Person as an account party in
respect of letters of credit and bankers' acceptances, (k) 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 (1) obligations
to deliver goods or services including hydrocarbons in consideration of advance
payments other than (i) obligations to sell or purchase hydrocarbons, (ii)
obligations with pipelines for firm transportation of natural gas of such
Person, and (iii) oil and gas balancing agreements, take or pay agreements or
other prepayment obligations in respect of hydrocarbons, in each case, incurred
in the ordinary course of business and which are customary in the oil and gas
industry. The Indebtedness of any Person shall include the Indebtedness of any
partnership in which such Person is a general partner.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
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"Initial Engineering Report" means the engineering report concerning
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oil and gas properties of Related Persons dated January 1, 2000, prepared by
▇▇▇▇▇ ▇▇▇▇▇ Company, covering all existing proved reserves of Borrower.
"Initial Financial Statements" means, as to the Related Persons, the
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audited balance sheet, income statement and statement of cash flow of Spinnaker
Exploration Company for the fiscal year end and the quarterly period ended
December 31, 1999.
"Interest Payment Date" means (a) with respect to any Base Rate Loan,
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the last day of each Fiscal Quarter and (b) with respect to any LIBOR Loan, the
last day of the Interest Period applicable to such Loan and, in the case of an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"Interest Period" means, with respect to each particular LIBOR Rate
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Portion of a Loan, a period of 1, 2, 3 or 6 months, as specified in the Rate
Election applicable thereto, beginning on and including the date specified in
such Rate Election (which must be a Business Day), and ending on but not
including the same day of the month as the day on which it began (e.g., a period
beginning on the third day of one month shall end on but not include the third
day of another month), provided that each Interest Period which would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day (unless such next succeeding Business Day is the first Business Day
of a calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day). No Interest Period may be elected which
would extend past the date on which the associated Note is due and payable in
full.
"Issuing Bank" or "Issuer" means The Toronto-Dominion Bank in its
------------ ------
capacity as the issuer of Letters of Credit hereunder, and its successors in
such capacity.
"Late Payment Rate" means, with respect to each Lender, the Base Rate
-----------------
otherwise in effect with respect to the principal amount in question, plus two
percent (2%) per annum, but in no event to exceed the Highest Lawful Rate.
"LC Application" means any application for a letter of credit hereafter
--------------
made by Borrower to Issuing Bank.
"LC Collateral" has the meaning given it in Section 3.6.
-------------
"LC Conditions" has the meaning given it in Section 3.1.
-------------
"LC Disbursement" means a payment made by the Issuing Bank pursuant to
---------------
a Letter of Credit.
"LC Obligations" means at the time in question, the sum of the Matured
--------------
LC Obligations plus the Maximum Drawing Amount.
11
"Lenders" has the meaning given it in the preamble.
-------
"Lender Schedule" shall mean the Lender Schedule attached hereto.
---------------
"Letter of Credit" means any standby or commercial letter of credit
----------------
issued by Issuing Bank at the application of Borrower, which may be issued for
the account of any Related Person, provided, any and all reimbursement
obligations, fees and other amounts payable in connection with any and all such
Letters of Credit shall be Obligations of Borrower as set forth in Article III.
"LIBOR Rate" shall mean, with respect to any LIBOR Rate Portion within
----------
a LIBOR Tranche and with respect to the related Interest Period, the rate per
annum determined by the Administrative Agent, at approximately 11:00 a.m.
(London time) on the date which is two Business Days prior to the beginning of
the relevant Interest Period by reference to the British Bankers' Association
Interest Settlement Rate for deposits in U.S. dollars (as set forth by any
service which has been nominated by the British Bankers' Association as an
authorized information vendor for the purpose of displaying such rates) for a
period equal to such Interest Period, provided that, to the extent that an
interest rate is not ascertainable pursuant to the foregoing provision of this
definition, the "LIBOR Rate" shall be the interest rate per annum, determined by
the Administrative Agent to be the average of the rates per annum at which
deposits in U.S. dollars are offered for such relevant Interest Period to major
banks in the London interbank market in London, England by the Administrative
Agent at approximately 11:00 a.m. (London time) on the date which is two
Business Days prior to the beginning of such Interest Period.
"LIBOR Rate Loan" means any Loan which bears interest at the Adjusted
---------------
LIBOR Rate.
"LIBOR Rate Portion" means any portion of the unpaid principal balance
------------------
of a Loan which Borrower designates as such in a Rate Election.
"LIBOR Spread" means with respect to any Loan bearing interest at the
------------
LIBOR Rate for any time prior to the Final Maturity Date, the applicable margin
set forth below under the caption "LIBOR Rate Spread," determined by reference
to the percentage of the Borrowing Base that the sum of all Loans outstanding
plus all LC Obligations represents at that time.
==================================================
Percentage of Borrowing LIBOR Rate
----------------------- ----------
Base Usage Spread
---------- ------
--------------------------------------------------
**90% 3.25%
--------------------------------------------------
**75% but *90% 2.50%
--------------------------------------------------
**60% but *75% 2.00%
--------------------------------------------------
**40% but *60% 1.75%
--------------------------------------------------
*40% 1.50%
==================================================
* less than
** greater than or equal to
12
"LIBOR Tranche" has the meaning given it in Section 2.6.
-------------
"Lien" means, with respect to any property or assets, any right or
----
interest therein of a creditor to secure Indebtedness owed to such creditor or
any other arrangement with such creditor which provides for the payment of such
Indebtedness out of such property or assets or which allows him to have such
Indebtedness satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security interest,
pledge, deposit, production payment, rights of a vendor under any title
retention or conditional sale agreement or lease substantially equivalent
thereto, tax lien, mechanic's or materialman's lien, or any other charge or
encumbrance for security purposes, whether arising by law or agreement or
otherwise, but excluding any right of offset which arises without agreement in
the ordinary course of business. "Lien" also means any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would serve
to perfect a Lien described in the preceding sentence, regardless of whether
such financing statement is filed, such registration is made, or such
arrangement or action is undertaken before or after such Lien exists.
"Loan" means any Revolving Loan or Term Loan.
----
"Loan Documents" means this Agreement, the Notes, the LC Applications,
--------------
the Letters of Credit, the Security Documents, the Pledge Agreements, the
Guaranties and all other written agreements, certificates, documents,
instruments and writings at any time delivered in connection herewith or
therewith and any Hedging Agreement between the Borrower and any Lender or any
Affiliate of any Lender now or hereafter existing.
"Majority Lenders" means, at any time, Lenders holding at least 66b% of
----------------
the unpaid principal amounts outstanding under the Notes.
"Material Adverse Effect" means any material adverse effect on (a) the
-----------------------
financial condition, business, properties, assets or operations of the Related
Persons, taken as a whole, or (b) the ability of any Related Person to perform
its respective obligations under any Loan Document or any Subject Hedging
Agreement to which it is a party on a timely basis or (c) the ability of
Administrative Agent or any Lender to enforce the Obligations of any Related
Person under the Loan Documents.
"Matured LC Obligations" means all amounts paid by Issuing Bank on
----------------------
drafts or demands for payment drawn or made under or purported to be under any
Letter of Credit (or under or in connection with any LC Application) which have
not been repaid to Issuing Bank (with the proceeds of a Loan or otherwise).
"Maximum Drawing Amount" means at the time in question the sum of the
----------------------
maximum amounts which Issuing Bank might then or thereafter be called upon to
advance under all Letters of Credit then outstanding.
"Maximum Loan Amount" means the amount of $75,000,000.
-------------------
13
"Mortgage" means (i) that certain Mortgage, Deed of Trust, Assignment
--------
of Production, Security Agreement and Financing Statement, dated as of September
30, 1998, executed by Borrower, as mortgagor and debtor in favor of CSFB, as
administrative agent under the 1998 Credit Agreement, as the same may be
amended, supplemented, restated or otherwise modified from time to time,
including without limitation, as amended and supplemented by that certain First
Amendment to Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement dated as of October 29, 1999, (ii) that
certain Mortgage, Assignment of Production, Security Agreement and Financing
Statement, dated as of September 30, 1998, executed by Borrower, as mortgagor
and debtor, in favor of CSFB, as administrative agent under the 1998 Credit
Agreement, as the same may be amended, supplemented, restated or otherwise
modified from time to time, including without limitation, as amended and
supplemented by that certain First Amendment to Mortgage, Assignment of
Production, Security Agreement and Financing Statement dated as of October 29,
1999 and by any assignment, supplement, amendment or amendment and restatement
delivered pursuant to Section 4.1(g) or 4.1(j), and (iii) any mortgage executed
and delivered pursuant to Section 4.1(g), 4.1(j), 7.2 or 7.5 in form and
substance satisfactory to Administrative Agent, as amended, supplemented,
restated or otherwise modified from time to time.
"Mortgaged Property" has the meaning given it in the Mortgage.
------------------
"Net Proceeds of Debt" means the aggregate amount of all cash proceeds
--------------------
received by or paid to or for the account of any Related Person from time to
time (whether as initial consideration or through payment or disposition of
deferred consideration) from the issuance of promissory notes or other
instruments or debt securities (other than Indebtedness permitted by Section
6.2(a)) deducting therefrom only (without duplication) (a) reasonable
out-of-pocket costs and fees, and (b) the amount of taxes payable in connection
with or as a result of such transaction, in each case to the extent, but only to
the extent that the amounts so deducted are, at the time of receipt of such
cash, actually paid to a Person that is not an Affiliate of such Related Person
and are properly attributable to such transaction.
"Net Proceeds of Equity" means an amount equal to the aggregate amount
----------------------
of all cash proceeds received by or paid to or for the account of any Related
Person thereof (other than from another Related Person) from time to time
(whether as initial consideration or through payment or disposition of deferred
consideration) from the sale of any capital stock or other ownership or profit
interest, any securities convertible into or exchangeable for capital stock or
other ownership or profit interest or any warrants, rights, options or other
securities to acquire capital stock or other ownership or profit interest in any
Related Person (or any other Person which directly or indirectly owns 100% of
Borrower) deducting therefrom only (without duplication) (a) reasonable
out-of-pocket costs and fees, and (b) the amount of taxes payable in connection
with or as a result of such transaction, in each case to the extent, but only to
the extent, that the amounts so deducted are, at the time of receipt of such
cash, actually paid to a Person that is not an Affiliate of such Related Person
and are properly attributable to such transaction.
"Net Sales Proceeds" means, with respect to any sale, lease, transfer
------------------
or other disposition of any asset by any Related Person, the aggregate amount of
cash received by or paid to or for the
14
account of any such Related Person from time to time (whether as initial
consideration or through payment or disposition of deferred consideration) by or
on behalf of such Person in connection with such transaction after deducting
therefrom only (without duplication) (a) reasonable out-of-pocket costs and
fees, (b) the amount of taxes payable in connection with or as a result of such
reaction and (c) the amount of any Indebtedness permitted by Section 6.2(a)
hereof secured by a Lien on such asset permitted by Section 6.2(b) hereof that,
by the terms of the agreement or instrument governing such Indebtedness, is
required to be repaid or may be prepaid upon such disposition, in each case to
the extent, but only to the extent, that the amounts so deducted are, at the
time of receipt of such cash, actually paid to a Person that is not an Affiliate
of such Related Person and are properly attributable to such transaction or to
the asset that is the subject thereof.
"Note" has the meaning given it in Section 2.1(c) and also means all
----
other promissory notes accepted from time to time in substitution therefor or
renewal thereof.
"Obligations" means all Indebtedness from time to time owing by any
-----------
Related Person to Administrative Agent, any Lender or any Affiliate of any
Lender under or pursuant to any of the Loan Documents, including all LC
Obligations. "Obligation" means any part of the Obligations.
"Original Conversion Date" means that day occurring 364 days after the
------------------------
Closing Date or the earlier date of termination in whole of the Commitments
pursuant to Section 8.1.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
"Percentage Share" means, with respect to any Lender (a) when used in
----------------
Sections 2.1, 2.2, 2.6 or 3.3, in any Request for Advance or when no Loans are
outstanding hereunder, the percentage set forth opposite such Lender's name on
the Lender Schedule attached hereto, and (b) when used otherwise, the percentage
obtained by dividing (i) the unpaid principal balance of such Lender's Loans at
the time in question plus the Matured LC Obligations which such Lender has
funded pursuant to Section 3.3(c) plus the portion of the Maximum Drawing Amount
which such Lender might be obligated to fund under Section 3.3(c), by (ii) the
sum of the aggregate unpaid principal balance of all Loans at such time plus the
aggregate amount of LC Obligations outstanding at such time.
"Permitted Investments" means investments:
---------------------
(a) in open market commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating given
by either Rating Agency;
(b) in marketable obligations, maturing within 12 months after
acquisition thereof, issued or unconditionally guaranteed by the United States
of America or an instrumentality or agency thereof and entitled to the full
faith and credit of the United States of America;
15
(c) in demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with any
office of any Lender or with a domestic office of any national or state bank or
trust company which is organized under the laws of the United States of America
or any state therein, which has capital, surplus and undivided profits of at
least $500,000,000, and whose certificates of deposit have at least the third
highest credit rating given by either Rating Agency;
(d) in money market funds as defined in paragraphs (c)(2) through (4)
of Rule 2a-7 of the Investment Company Act; and
(e) investments pursuant to investment advisory agreements that meet
the investment guidelines set forth on Schedule 4.
"Person" means an individual, corporation, partnership, limited
------
liability company, association, joint stock company, trust or trustee thereof,
estate or executor thereof, unincorporated organization or joint venture, court
or governmental unit or any agency or subdivision thereof, or any other legally
recognizable entity.
"PGS" means Petroleum Geo-Services ASA, a Norwegian joint-stock
---
company.
"PGS Data Contract" means that certain Amended and Restated Data
-----------------
Contribution Agreement dated January 6, 1998, by PGS, Seismic Energy Holdings,
Inc., Spinnaker Exploration Company and the Borrower, as amended, modified or
restated from time to time.
"Pledge Agreement" means (i) that certain Pledge and Security
----------------
Agreement, dated as of September 30, 1998, by Spinnaker Exploration Company, as
grantor in favor of CSFB, as administrative agent under the 1998 Credit
Agreement, as the same may be assigned, amended, supplemented, restated or
otherwise modified from time to time, including without limitation as amended by
the First Amendment to Pledge and Security Agreement dated as of October 29,
1999, (ii) that certain Pledge and Security Agreement, dated as of September 30,
1998, by WP Spinnaker Holdings, Inc., a Delaware corporation, as grantor, in
favor of CSFB, as administrative agent under the 1998 Credit Agreement, as the
same may be assigned, amended, supplemented, restated or otherwise modified from
time to time, including, without limitation, as amended by that certain First
Amendment to Pledge and Security Agreement dated as of October 29, 1999, as the
same may be further assigned, amended, supplemented, restated or otherwise
modified from time to time, and (iii) each Pledge Agreement or amendment to a
pledge agreement executed and delivered pursuant to Section 4.1(f) or Section
7.5 substantially in the form of Exhibit K hereto with appropriate deletions and
insertions acceptable to the Administrative Agent, as amended, supplemented,
restated or otherwise modified from time to time.
"Prior Indebtedness" has the meaning given it in the third recital.
------------------
"Prohibited Lien" means any Lien not expressly allowed under Section
---------------
6.2(b).
16
"Rate Election" has the meaning given it in Section 2.6.
-------------
"Rating Agency" means either Standard & Poor's Ratings Group (a
-------------
division of McGraw Hill, Inc.) or ▇▇▇▇▇'▇ Investors Service, Inc., or their
respective successors.
"Regulation D" means Regulation D of the Board of Governors of the
------------
Federal Reserve System as from time to time in effect.
"Related Person" means any of Borrower, each Subsidiary of Borrower and
--------------
each Guarantor.
"Replacement Lenders" has the meaning given it in Section 2.2(c)(ii).
-------------------
"Request for Advance" means a written or telephonic request, or a
-------------------
written confirmation, made by Borrower which meets the requirements of Section
2.4.
"Reserve Percentage" means, on any day with respect to each particular
------------------
LIBOR Rate Portion in a Tranche, the maximum reserve requirement as determined
by Administrative Agent (including without limitation any basic, supplemental,
marginal, emergency or similar reserves and taking into account any transitional
adjustments or other scheduled changes in reserve requirements), expressed as a
percentage, which would then apply under Regulation D with respect to
"Eurocurrency liabilities" (as such term is defined in Regulation D) equal in
amount to each Lender's LIBOR Rate Portion in such Tranche, were such Lender to
have any such "Eurocurrency liabilities". If such reserve requirement shall
change after the date hereof, the Reserve Percentage shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each such change in such reserve requirement.
"Revolving Loan" has the meaning given to it in Section 2.1(a).
--------------
"Security Documents" means the instruments listed in the Security
------------------
Schedule and any other security agreements, deeds of trust, mortgages, chattel
mortgages, pledges, guaranties, financing statements, continuation statements,
extension agreements and other agreements or instruments now, heretofore, or
hereafter delivered by any Person to Administrative Agent in connection with
this Agreement or any transaction contemplated hereby to secure or guarantee the
payment of any part of the Obligations or any Related Party's payment of its net
obligations pursuant to the Subject Hedging Agreements or the performance of any
Related Person's other duties and obligations under the Loan Documents.
"Security Schedule" means Schedule 2 hereto.
----------------- ----------
"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.
17
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).
"Spinnaker Exploration Company" shall mean Spinnaker Exploration
-----------------------------
Company, a Delaware corporation, and its successors and permitted assigns.
"Sponsors" means PGS and Warburg, together with any successors thereof.
--------
"Subject Hedging Agreements" means those Hedging Agreements between a
--------------------------
Related Party and Bank of Montreal in effect on the Closing Date, as listed in
the Disclosure Schedule, entered into pursuant to the Existing Credit Agreement
and secured by the Security Documents in effect thereunder; provided, that no
extension or additional confirmations of such Hedging Agreements shall
constitute a Subject Hedging Agreement.
"Subsidiary" shall mean (i) any corporation of which at least a
----------
majority of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation 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 a Person or one or more of its Subsidiaries or by a Person and one
or more of its Subsidiaries and (ii) any Special Entity. Unless otherwise
indicated herein, each reference to the term "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Systems" has the meaning given to it in Section 5.1(s).
-------
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"TD" has the meaning given to it in the preface.
--
"Term Loan" has the meaning given to it in Section 2.1(b).
---------
"Term Loan Payment Date" means each March 31, June 30, September 30 and
----------------------
December 31 occurring after the Conversion Date.
"Termination Event" means (a) the occurrence with respect to any ERISA
-----------------
Plan of (i) a reportable event described in Sections 4043(b)(5) or (6) of ERISA
or (ii) any other reportable event described in Section 4043(b) of ERISA other
than a reportable event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation pursuant to a waiver by such corporation
under Section 4043(a) of ERISA, or (b) the withdrawal of any Related Person or
of any Affiliate of any Related Person from an ERISA Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA,
or (c) the filing of a notice of intent to terminate any
18
ERISA Plan or the treatment of any ERISA Plan amendment as a termination under
Section 4041 of ERISA, or (d) the institution of proceedings to terminate any
ERISA Plan by the Pension Benefit Guaranty Corporation under Section 4042 of
ERISA, or (e) 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 ERISA Plan.
"Warburg" means, collectively, Warburg, ▇▇▇▇▇▇ Ventures, L.P., a
-------
Delaware limited partnership, and WPV, Inc., a Delaware corporation.
Section 1.2 Exhibits and Schedules; Additional Definitions. All
----------------------------------------------
Exhibits and Schedules attached to this Agreement are a part hereof for all
purposes. Reference is hereby made to the Security Schedule for the meaning of
certain terms defined therein and used but not defined herein; which definitions
are incorporated herein by reference.
Section 1.3 Amendment of Defined Instruments. Unless the context
--------------------------------
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document or
related exhibits, schedules, appendices or similar attachments thereto also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document or related exhibits,
schedules, appendices or similar attachments thereto, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4 References and Titles. All references in this Agreement to
---------------------
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof', "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including without
limitation". Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
Section 1.5 Calculations and Determinations. All calculations under the
-------------------------------
Loan Documents of interest chargeable with respect to LIBOR Rate Portions shall
be made on the basis of actual days elapsed (including the first day but
excluding the last) and a year of 360 days. All other calculations of interest
made under the Loan Documents and all fees shall be made on the basis of actual
days elapsed (including the first day but excluding the last) and a year of 365
or 366 days, as appropriate. Unless otherwise expressly provided herein or
unless Majority Lenders otherwise consent all financial statements and reports
furnished to Administrative Agent or any Lender hereunder shall
19
be prepared and all financial computations and determinations pursuant hereto
shall be made in accordance with GAAP.
ARTICLE II - The Loans
---------
Section 2.1 Loans. Subject to the terms and conditions hereof, each
-----
Lender agrees to make loans and advances to Borrower as set forth below:
(a) Revolving Loans. Upon request from time to time prior to the
---------------
Conversion Date, each Lender agrees to make loans to the Borrower (such Lender's
"Revolving Loans") so long as (a) each Revolving Loan by such Lender does not
---------------
exceed such Lender's Percentage Share of the aggregate amount of Revolving Loans
then requested from all Lenders, (b) the sum of (i) the aggregate amount of such
Lender's Revolving Loans outstanding at any time plus (ii) the Maximum Drawing
Amount for which such Lender is liable to purchase participations under Section
3.3 (c), plus (iii) the Matured LC Obligations which have been funded by such
Lender under such section, does not exceed such Lender's Percentage Share of the
Borrowing Base then outstanding and (c) the aggregate amount of all Revolving
Loans outstanding plus all LC Obligations does not exceed the Borrowing Base
then outstanding. The aggregate amount of all Revolving Loans requested of all
Lenders in any Request for Advance must be greater than or equal to $500,000 (or
a higher integral multiple of $100,000) or, subject to the $500,000 minimum
aggregate amount applicable to any LIBOR Tranche in any Rate Election, may equal
the unadvanced portion of the Borrowing Base or an amount required to finance
the reimbursement of an LC Disbursement as contemplated by Section 3.3. Subject
to provisions of this Agreement, the Revolving Loans may be prepaid and
reborrowed prior to the Conversion Date.
(b) Term Loans. Each Lender severally agrees, on the terms and
----------
conditions set forth herein, to make a loan to the Borrower (each such loan, a
"Term Loan") such that, on the Conversion Date such Lender's Revolving Loans and
---------
Matured LC Obligations shall be converted, in whole or in part, into a Term Loan
in the amount of such Lender's Percentage Share of the aggregate amount of all
Revolving Loans plus all Matured LC Obligations, or such lesser amount as the
Borrower may request. Each Lender's obligation to make a Term Loan is subject to
the condition that (a) the sum of (i) the aggregate principal amount of the Term
Loan which such Lender shall be requested to make hereunder to the Borrower plus
(ii) the Maximum Drawing Amount for which such Lender is liable to purchase
participations under Section 3.3(c), shall not exceed such Lender's Percentage
Share of the Borrowing Base, as in effect on the Conversion Date. Revolving
Loans which are LIBOR Rate Loans with Interest Periods ending after the
Conversion Date shall be continued as Term Loans which are LIBOR Rate Loans with
the same Interest Period. Amounts borrowed as Term Loans which are repaid or
prepaid by the Borrower may not be reborrowed. After making its Term Loan
pursuant to this clause (b), no Lender shall have any further commitment to
lend, except for its obligations to participate in or make Loans with respect to
any Matured LC Obligation arising after the Conversion Date with respect to a
Letter of Credit in effect on the Conversion Date pursuant to Sections 3.3(a)
and 3.3(c).
20
(c) Notes. The obligation of Borrower to repay to each Lender the
-----
aggregate amount of all Revolving Loans and the Term Loan made by such Lender
(such Lender's "Loan"), together with interest accruing in connection therewith,
----
shall be evidenced by a single promissory note (such Lender's "Note") made by
----
Borrower payable to the order of such Lender in the form of Exhibit A with
---------
appropriate insertions. The amount of principal owing on any Lender's Note at
any given time shall be the aggregate amount of all Loans theretofore made by
such Lender minus all payments of principal theretofore received by such Lender
on such Note; provided that, for purposes of calculating the principal
outstanding pursuant to its Note, the proceeds of the Term Loan made by any
Lender shall be deemed to be applied to the repayment of Revolving Loans on the
Conversion Date. Interest on each Note shall accrue and be due and payable as
provided herein and therein. The entire unpaid principal balance of the Loans
and all interest accrued thereon shall be due and payable in full on the Final
Maturity Date.
Section 2.2 Extension of Conversion Date and of Commitments.
-----------------------------------------------
(a) Subject to the other provisions of this Agreement, each Lender's
commitment to make Revolving Loans shall be effective for an initial period from
the Closing Date to the Original Conversion Date; provided that the Conversion
Date, and concomitantly such commitments and the Final Maturity Date, may be
extended for successive 364 day periods, each expiring on the date which is 364
days from the then scheduled Conversion Date or Final Maturity Date (as the case
may be). If Borrower shall request in a Certificate of Extension delivered to
the Administrative Agent not more than sixty (60) days and not less than
forty-five (45) days prior to the Conversion Date that the Conversion Date be
extended for 364 days from the then scheduled Conversion Date, then the
Administrative Agent shall promptly notify each Lender of such request and each
Lender shall notify the Administrative Agent in writing, no later than thirty
(30) days after receipt by the Lenders of the Certificate of Extension, whether
such Lender, in the exercise of its sole discretion, will extend the Conversion
Date for such 364 day period. Any Lender which shall not timely notify the
Administrative Agent whether it will extend the Conversion Date shall be deemed
to not have agreed to extend the Conversion Date. No Lender shall have any
obligation whatsoever to agree to extend the Conversion Date. Any agreement to
extend the Conversion Date by any Lender shall be irrevocable, except as
provided in clause (c) of this Section.
----------
(b) If all Lenders notify the Administrative Agent pursuant to clause
------
(a) of this Section of their agreement to extend the Conversion Date, then the
---
Administrative Agent shall so notify each Lender and Borrower, and such
extension shall be effective without other or further action by any party hereto
and the Conversion Date and the Final Maturity Date shall be extended for an
additional 364 day period.
(c) If any Lenders approve the extension of the then scheduled
Conversion Date (such Lenders agreeing to extend the Conversion Date herein
called the "Accepting Lenders") and if one or more Lenders shall notify, or be
-----------------
deemed to notify, the Administrative Agent pursuant to clause (a) of this
----------
Section that they will not extend the then scheduled Conversion Date (such
Lenders herein called the "Declining Lenders"), then (A) the Administrative
-----------------
Agent shall promptly so notify the Borrower and the Accepting Lenders and the
Declining Lenders; (B) the Accepting Lenders shall,
21
upon Borrower's election to extend the then scheduled Conversion Date as set
forth in clause (i) below, extend the then scheduled Conversion Date; and (C)
----------
Borrower shall, pursuant to a notice delivered to the Administrative Agent, the
Accepting Lenders and the Declining Lenders, no later than the tenth (10th) day
following the date by which each Lender is required pursuant to clause (a) of
----------
this Section to approve or disapprove the requested extension of the total
Commitments, either:
(i) elect to extend the Conversion Date with respect to the
Accepting Lenders. Upon such election, the Borrower shall, and, prior
to or no later than the then scheduled Conversion Date, (A) replace
each of the Declining Lenders with another lender or lenders reasonably
acceptable to the Administrative Agent (such lenders herein called the
"Replacement Lenders") and (B) the Replacement Lender or Replacement
-------------------
Lenders shall purchase, and the Declining Lender or Declining Lenders
shall sell, all of each Declining Lender's or Declining Lenders' rights
and obligations hereunder without recourse or expense to, or warranty
by, such Declining Lender or Declining Lenders being replaced for a
purchase price equal to the aggregate outstanding principal amount of
the Obligations payable to such Declining Lender or Declining Lenders
plus any accrued but unpaid interest on such Obligations and accrued
but unpaid fees or other amounts owing in respect of such Declining
Lender's or Declining Lenders' Loans and Commitments hereunder. Upon
the payment of such amounts to the Administrative Agent on behalf of
the Declining Lenders and the execution of an Agreement to be Bound, by
the Replacement Lender or Replacement Lenders and the Declining Lender
or Declining Lenders (which each such Declining Lender agrees to
execute promptly), the Replacement Lender or Replacement Lenders shall
each constitute a Lender hereunder and the Declining Lender or
Declining Lenders being so replaced shall no longer constitute a
Lender, and shall no longer have any obligations hereunder, other than
to the Administrative Agent pursuant to Article IX; or
----------
(ii) elect to revoke and cancel the extension request in such
Certificate of Extension by giving notice of such revocation and
cancellation to the Administrative Agent (which shall promptly notify
the Lenders thereof) no later than the tenth (10th) day following the
date by which each Lender is required, pursuant to clause (a) of this
----------
Section, to approve or disapprove the requested extension of the
Conversion Date, and concomitantly the commitments of the Lenders to
make Revolving Loans and the Final Maturity Date.
If Borrower fails to timely provide the election notice referred to in
this clause (c), Borrower shall be deemed to have revoked and canceled the
----------
extension request in the Certificate of Extension and to have elected not to
extend the Conversion Date, and, on the then scheduled Conversion Date, subject
to the provisions of this Agreement, the Revolving Loans and Matured LC
Obligations of the Borrower shall be deemed repaid with the proceeds of Term
Loans.
Section 2.3 [Reserved].
--------
Section 2.4 Requests for Loans. Borrower must give to Administrative
------------------
Agent not later than 11:00 am., Central time, at least one Business Day's prior
written notice of any requested Revolving Loans which shall bear interest at the
Base Rate and not later than 11:00 a.m., Central
22
time, at least three Business Day's prior written notice of any requested
Revolving Loans which shall bear interest at the Adjusted LIBOR Rate, after
which Administrative Agent shall give each Lender prompt notice thereof. Each
such written request must be made in the form and substance of the "Request for
Advances" attached hereto as Exhibit C, duly completed. If all conditions
---------
precedent to such Revolving Loans have been met, each Lender will not later than
12:00 noon, Central time, on the date requested promptly remit to Administrative
Agent at Administrative Agent's office at 909 ▇▇▇▇▇▇, Suite 1700, Houston,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, the amount of such Lender's Revolving Loans in immediately
available funds, and upon receipt of such funds, unless to its actual knowledge
any conditions precedent to such Revolving Loans have been neither met nor
waived as provided herein, Administrative Agent shall promptly make the
Revolving Loans available to Borrower in immediately available funds. Each
Request for Revolving Loans shall be irrevocable and binding on Borrower. Unless
Administrative Agent shall have received prompt notice from a Lender that such
Lender will not make available to Administrative Agent such Lender's Revolving
Loans, Administrative Agent may in its discretion assume that such Lender has
made such Revolving Loans available to Administrative Agent in accordance with
this section and Administrative Agent may if it chooses, in reliance upon such
assumption, make such Revolving Loan available to Borrower. If and to the extent
such Lender shall not so make its Revolving Loan available to Administrative
Agent, such Lender and Borrower severally agree to pay or repay to
Administrative Agent within two Business Days after demand the amount of such
Revolving Loan together with interest thereon, for each day from the date such
amount is made available to Borrower until the date such amount is paid or
repaid to Administrative Agent, to be calculated as to such Lender at the
Federal Funds Rate, and to be calculated as to Borrower at the interest rate
applicable at the time to the other Revolving Loans made on such date. If any
Lender fails to make such payment to Administrative Agent within such two
Business Day period, such Lender shall in addition to such amount pay interest
thereon, for each day from the date such Revolving Loan is made available to
Borrower until the date such amount is paid or repaid to Administrative Agent,
at the interest rate applicable at the time to the other Revolving Loans made on
such date. The failure of any Lender to make any Revolving Loan to be made by it
hereunder shall not relieve any other Lender of its obligation hereunder, if
any, to make its Revolving Loan, but no Lender shall be responsible for the
failure of any other Lender to make any Revolving Loan to be made by such other
Lender.
Section 2.5 Use of Proceeds. Borrower shall use all funds from Loans
---------------
for general corporate purposes in its existing lines of business (which include
the exploration, operation and development of oil and gas properties) and
acquisition of oil and gas reserves. In no event shall the funds from any Loan
or Letter of Credit be used directly or indirectly by any Person for personal,
family, household or agricultural purposes or for the purpose, whether
immediate, incidental or ultimate, of purchasing, acquiring or carrying any
"margin stock" or any "margin" securities; (as such terms are defined
respectively in Regulation U and Regulation G promulgated by the Board of
Governors of the Federal Reserve System) or to extend credit to others directly
or indirectly for the purpose of purchasing or carrying any such margin stock or
margin securities. Borrower represents and warrants to Lenders that Borrower is
not engaged principally, or as one of Borrower's important activities, in the
business of extending credit to others for the purpose of purchasing or carrying
such margin stock or margin securities.
23
Section 2.6 Rate Elections: Interest Rates.
------------------------------
(a) Borrower may from time to time designate all or any portions of the
Loans (including any yet to be made Loans which are to be made prior to or at
the beginning of the designated Interest Period but excluding any portions of
the Loans which are required to be repaid prior to the end of the designated
Interest Period) as a "LIBOR Tranche", which term refers to a set of LIBOR Rate
Portions with identical Interest Periods and with each Lender participating in
such LIBOR Tranche in accordance with its Percentage Share. Borrower may make no
such election during the continuance of a Default and Borrower may make such an
election with respect to already existing LIBOR Rate Portions only if such
election will take effect at or after the termination of the Interest Period
applicable thereto. Each election by Borrower of a LIBOR Tranche shall:
(i) Be made in writing in the form and substance of the
"Rate Election" attached hereto as Exhibit D, duly completed;
---------
(ii) Specify the aggregate amount of the Loans which Borrower
desires to designate as such LIBOR Tranche, the first day of the
Interest Period which is to apply thereto, and the length of such
Interest Period; and
(iii) Be received by Administrative Agent not later than 11:00
a.m., Central time, on the third Business Day preceding the first day
of the specified Interest Period.
Promptly after receiving any such election (a "Rate Election" ) which meets the
-------------
requirements of this section, Administrative Agent shall notify each Lender
thereof. Each Rate Election shall be irrevocable. Borrower may make no Rate
Election which does not specify an Interest Period complying with the definition
of "Interest Period" in Section 1.1, and the aggregate amount of the LIBOR
Tranche elected in any Rate Election must be $500,000 or a higher integral
multiple of $100,000. Upon the termination of each Interest Period the portion
of each Loan within the related LIBOR Tranche shall, unless the subject of a new
Rate Election then taking effect, automatically become a part of the Base Rate
Portion of such Loan and become subject to all provisions of the Loan Documents
governing such Base Rate Portion. Borrower shall have no more than nine (9)
LIBOR Tranches in effect at any time; provided, however, that for purposes of
calculating such limitation, any LIBOR Tranche as to which all Lenders have not
participated shall not be included.
(b) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and upon the Final Maturity Date; provided
that (i) interest accrued at the Late Payment Rate shall be payable on demand,
(ii) in the event of any repayment or prepayment of any Loan (other than
repayment of Revolving Loans deemed to be made with the proceeds of a Term Loan
on the Conversation Date), accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and (iii)
in the event of any conversion of any LIBOR Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
Closing Date of such conversion.
24
Section 2.7 Commitment Fees. In consideration of each Lender's
---------------
commitment to make Revolving Loans, during the period from the Closing Date
through the Conversion Date, Borrower will pay to Administrative Agent for the
account of each Lender a commitment fee determined on a daily basis by applying
the applicable Commitment Fee Rate to such Lender's Percentage Share of the
unused portion of the Borrowing Base on each day, determined for each such day
by deducting from the amount of the Borrowing Base at the end of such day the
sum of (i) the aggregate unpaid principal balance of the Revolving Loans at the
end of such day plus (ii) the amount of all LC Obligations at the end of such
day. This commitment fee shall be due and payable in arrears, with the first
payment due on September 30, 2000, and thereafter on the last day of each
Fiscal Quarter and on the Conversion Date.
Section 2.8 Administrative Agent's Fees. Borrower agrees to pay to the
---------------------------
Administrative Agent, for its own account, fees payable in the amounts and at
the times set forth in the Fee Letter.
Section 2.9 [Reserved].
--------
Section 2.10 Repayments and Prepayments. The Borrower shall repay in
--------------------------
full the unpaid principal amount of each Loan on the Final Maturity Date.
(a) Term Loan Repayments. Borrower shall, on each Term Loan Payment
--------------------
Date, make a scheduled repayment of all Term Loans and/or a contribution of LC
Collateral as set forth in Section 3.6(a) in an aggregate amount equal to the
lesser of (i) one-fourth of the aggregate principal of the Term Loans made on
the Conversion Date plus the Maximum Drawing Amount in effect on the Conversion
Date and (ii) the principal of all Loans outstanding on such Term Loan Payment
Date plus the Maximum Drawing Amount in effect on such Term Loan Payment Date;
provided that to the extent that the termination or expiration of any Letter of
Credit shall reduce the sum of (x) Term Loans plus (y) LC Obligations, the
repayment required on the Term Loan Payment Date following such reduction shall
be reduced by an amount equal to such reduction.
(b) Mandatory Prepayments. Borrower shall make the following
---------------------
prepayments of the Loans:
(i) Borrowing Base Deficiency. If at any time the aggregate unpaid
-------------------------
principal balance of the Loans plus the aggregate amount of LC
Obligations exceeds the Borrowing Base (the "Borrowing Base
--------------
Deficiency"), Borrower shall, within thirty (30) days after
----------
Administrative Agent sends written notice of such fact to Borrower,
either (1) prepay the principal of the Loans (and, upon repayment of
all Loans, shall provide LC Collateral as set forth in Section 3.6) in
an aggregate amount at least equal to such Borrowing Base Deficiency
(in this section, a "Mandatory Prepayment Amount"), or (2) give notice
---------------------------
to Administrative Agent electing to prepay such Mandatory Prepayment
Amount in three (3) (or fewer) monthly installments, or (3) within
thirty (30) days after receipt of notice of such Borrowing Base
Deficiency, deliver to the Administrative Agent such deeds of trust and
mortgages, in form and substance satisfactory to Administrative Agent,
on oil and gas properties of the Borrower not then currently included
in the Borrowing Base and having,
25
in the sole and absolute discretion of the Lenders, an incremental
Borrowing Base value at least equal to one hundred percent (100%) of
such Borrowing Base Deficiency, or (4) will cure such Borrowing Base
Deficiency by a combination of the actions required by this Section
2.10(b)(i), within the time periods required thereby. Each such
installment shall equal or exceed one-third of such Borrowing Base
Deficiency; the first such installment shall be paid with in sixty (60)
days of the giving of such notice by the Borrower and the subsequent
installments shall be due and payable at one month intervals thereafter
until such Borrowing Base Deficiency has been eliminated.
(ii) Net Sales Proceeds of Asset Sales.
---------------------------------
(A) Borrower shall prepay the Loans or provide LC
Collateral in an aggregate amount equal to 100% of the Net Sales
Proceeds from the sale of any property included in the Borrowing
Base except pursuant to the first sentence of Section 6.2(d)(iii)
within one (1) Business Day of receipt of any such net proceeds.
Such prepayments shall be applied first to the principal of the
Loans until the Loans are paid in full and then shall be held as
LC Collateral in an amount equal to the aggregate amount of LC
Obligations pursuant to Section 3.6.
(B) In the event a Borrowing Base Deficiency exists and
is continuing, Borrower shall prepay the Loans in an amount equal
to such Borrowing Base Deficiency from the Net Sales Proceeds
from the sale of any property (excluding sales of inventory in
the ordinary course) not included in the Borrowing Base within
one (1) Business Day of receipt of any such net proceeds.
Application of such Net Sales Proceeds shall be applied to the
principal of the Loans until the Loans are paid in full and then
shall be held as LC Collateral in an amount equal to the
aggregate amount of LC Obligations pursuant to Section 3.6.
(c) Optional Prepayments. Borrower may, upon one Business Day's
--------------------
notice to Administrative Agent, from time to time and without premium or penalty
prepay the Notes, in whole or in part, so long as the aggregate amounts of all
partial prepayments of principal on the Notes equals $500,000 or any higher
integral multiple of $100,000 or the outstanding balance on the applicable
Notes, if less. Such prepayments shall be applied as directed by Borrower.
(d) General Provisions Regarding Payments. Each prepayment of
-------------------------------------
principal of the Loans under this section shall be accompanied by all interest
then accrued and unpaid on the principal so prepaid. Any principal or interest
prepaid pursuant to this section shall be in addition to, and not in lieu of,
all payments otherwise required to be paid under the Loan Documents at the time
of such prepayment; provided that, if any payment made on a Term Loan Payment
Date pursuant to clause (a) shall eliminate an existing Borrowing Base
Deficiency, additional payments pursuant to clause (b) shall not be required so
long as no Borrowing Base Deficiency shall exist.
Section 2.11 Payments to Lenders. Borrower will make each payment
-------------------
which it owes under the Loan Documents to Administrative Agent for the account
of the Lender to whom such payment
26
is owed. Each such payment must be received by Administrative Agent not later
than 11:00 a.m., Central time, on the date such payment becomes due and payable,
in lawful money of the United States of America, without set-off, deduction or
counterclaim, and in immediately available funds. Any payment received by
Administrative Agent after such time will be deemed to have been made on the
next following Business Day. Should any such payment become due and payable on a
day other than a Business Day, the maturity of such payment shall be extended to
the next succeeding Business Day, and, in the case of a payment of principal or
past due interest, interest shall accrue and be payable thereon for the period
of such extension as provided in the Loan Document under which such payment is
due. When Administrative Agent collects or receives money on account of the
Obligations, Administrative Agent shall distribute all money so collected or
received, and Lenders shall apply all such money they receive from
Administrative Agent, as follows:
(a) first, for the payment of all Obligations which are then due (and
if such money is insufficient to pay all such Obligations, first to any
reimbursements due Administrative Agent under Section 6.1(i) or 8.3 or Issuing
Bank under Section 3.3(a), and then to the partial payment of all other
Obligations then due in proportion to the amounts thereof, or as Lenders shall
otherwise agree);
(b) then for the prepayment of amounts owing under the Loan Documents
(other than principal on the Notes) if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid;
(d) then, for the payment or prepayment of any other Obligations; and
(e) last, for the pro rata payment of any other indebtedness or
obligations to Lenders secured by the Security Documents.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Section
2.10. All distributions of amounts described in any of subsections (b), (c) or
(d) above shall be made by Administrative Agent pro rata to Administrative Agent
and each Lender then owed Obligations described in such subsection in proportion
to all amounts owed to Administrative Agent and all Lenders which are described
in such subsection; provided that if any Lender then owes payments to Issuing
Bank for the purchase of a participation under Section 3.3(c) hereof, any
amounts otherwise distributable under this section to such Lender shall be
deemed to belong to Issuing Bank, to the extent of such unpaid payments, and
Administrative Agent shall apply such amounts to make such unpaid payments
rather than such amounts to such Lender.
Section 2.12 Initial Borrowing Base. During the period from the date
----------------------
hereof to the first Evaluation Date the Borrowing Base shall be $40,000,000.
27
Section 2.13 Subsequent Determinations of Borrowing Base.
-------------------------------------------
(a) By each Evaluation Date Borrower shall furnish to each Lender all
information, reports and data which Administrative Agent has then reasonably
requested concerning Related Persons' businesses and properties (including
Related Persons' oil and gas properties and interests and the reserves and
production relating thereto), together with the Engineering Report described in
Section 6.1(b)(iv), if an Engineering Report is then due. Within thirty (30)
days after receiving such information, reports and data, or as promptly
thereafter as practicable, all Lenders shall agree upon an amount for the
Borrowing Base, which, if all Lenders do not agree on such amount, shall be the
lowest amount determined by any Lender, and Administrative Agent shall by notice
to Borrower designate such amount as the new Borrowing Base available to
Borrower hereunder, which designation shall take effect immediately on the date
such notice is sent (a "Determination Date") and shall remain in effect until
------------------
but not including the next date as of which the Borrowing Base is redetermined.
If Borrower does not furnish all such information, reports and data by the date
specified in the first sentence of this section, Administrative Agent may
nonetheless designate the Borrowing Base at any amount which Lenders determine,
and may redesignate the Borrowing Base from time to time thereafter at any
amount which all Lenders redetermine, until each Lender receives all such
information, reports and data, whereupon Lenders shall designate a new Borrowing
Base as described above. Lenders shall determine the amount of the Borrowing
Base based upon the loan collateral value which they, in their sole discretion
and in accordance with their respective normal practices and standards for oil
and gas loans as such practices and standards exist at the particular time,
assign to the various oil and gas properties of Related Persons at the time in
question and based upon such other factors (including without limitation the
assets, liabilities, fixed charges, cash flow, business, properties, prospects,
management and ownership of Borrower and its Related Persons) as they, in their
sole discretion and in accordance with their respective normal practices and
standards for oil and gas loans as such practices and standards exist at the
particular time, deem significant. It is expressly understood that Lenders and
Administrative Agent have no obligation to agree upon or designate the Borrowing
Base at any particular amount, whether in relation to the Maximum Loan Amount or
otherwise, and that Lenders' commitments to advance funds hereunder is
determined by reference to the Borrowing Base from time to time in effect, which
Borrowing Base shall be used for calculating commitment fees under Section
2.7(a) and, to the extent permitted by law and regulatory authorities, for the
purposes of Section 2.15. Semiannual redeterminations and additional
redeterminations at the request of the Lenders or Administrative Agent shall be
at no cost to Borrower. Additional redeterminations at Borrower's request shall
be subject to a $5,000 engineering fee payable by Borrower to the Administrative
Agent for its own account.
(b) The Borrower may include additional oil and gas properties of the
Borrower acquired from time to time as Collateral for the Obligations, which may
then be included in the calculation of the Borrowing Base, by the Borrower (A)
giving written notice to the Administrative Agent of such properties to be
included, (B) subjecting such properties to liens securing the Obligations
(pursuant to Security Documents satisfactory to the Administrative Agent), (C)
including such properties in an Engineering Report submitted to the
Administrative Agent and (D) delivering to the Administrative Agent title
opinions addressed to the Administrative Agent for the benefit of the Lenders
covering all of such properties and other legal opinions from counsel acceptable
to the
28
Administrative Agent, in its sole discretion, in form, scope and substance
acceptable to the Administrative Agent opining favorably as to, among such other
matters as may be required by the Administrative Agent, (1) the Borrower's
ownership of such properties and (2) matters of the type covered by the opinions
delivered pursuant to Section 4.1 (m) and the opinion attached hereto as Exhibit
-------
F.
-
(c) In addition to the any scheduled determination or discretionary
determination of the Borrowing Base, the Borrowing Base shall be redetermined
upon the sale or transfer of any oil and gas property of the Borrower included
in the Borrowing Base in an amount as required by Section 6.2(d)(iii).
Section 2.14 Borrower's Reduction of Borrowing Base. Until the
--------------------------------------
Conversion Date Borrower may, during the fifteen-day period beginning on each
Determination Date (each such period in this section, an "Option Period"),
-------------
reduce the Borrowing Base from the amount designated by Administrative Agent to
any lesser amount. To exercise such option Borrower must within an Option Period
send notice to Administrative Agent of the amount of the Borrowing Base chosen
by Borrower. If Borrower does not affirmatively exercise this option during an
Option Period the Borrowing Base shall be the amount designated by
Administrative Agent. Any choice by Borrower of a Borrowing Base shall be
effective as of the first day of the Option Period during which such choice was
made and shall continue in effect the next date as of which the Borrowing Base
is redetermined.
Section 2.15 Alternate Rate of Interest. If prior to the commencement
--------------------------
of any Interest Period for a LIBOR Rate Portion:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBOR Rate or the LIBOR Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Majority Lenders that
the Adjusted LIBOR Rate for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (or Lender) of making or maintaining their
Loans (or its Loan) included in such LIBOR Rate Portion for such Interest
Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Lenders that the circumstances
giving rise to such notice no longer exist, (i) any Rate Election that requests
the conversion of any Base Rate Portion to, or continuation of any LIBOR Rate
Portion as, a LIBOR Rate Portion shall be ineffective and (ii) any requests for
a Loan as a LIBOR Rate Portion shall be made as a Base Rate Portion.
29
Section 2.16 Increased Costs. (a) If any Change in Law shall:
---------------
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Lender (except any such
reserve requirement reflected in the Adjusted LIBOR Rate) or the
Issuing Bank; or
(ii) impose on any Lender or the Issuing Bank or the London
interbank market any other condition affecting this Agreement or LIBOR
Rate Loans made by such Lender or any Letter of Credit or participation
therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any LIBOR Rate Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender's or the Issuing Bank's capital or on the capital of
such Lender's or the Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company could have achieved but for such Change in Law (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Banks holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender's or the Issuing Banks
holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth in
reasonable detail the amount or amounts necessary to compensate such Lender or
the Issuing Bank or its holding company, as the case may be, as specified in
paragraph (a) or (b) of this Section shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower shall pay such Lender or
the Issuing Bank, as the case may be, the amount shown as due on any such
certificate within ten (10) days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or
30
reductions incurred more than ninety (90) days prior to the date that such
Lender or the Issuing Bank, as the case may be, notifies the Borrower of the
Change in Law giving rise to such increased costs or reductions and of such
Lender's or the Issuing Bank's intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 90-day period referred to above shall be
extended to include the period of retroactive effect thereof.
Section 2.17 Break Funding Payments. In the event of (a) the payment of
----------------------
any principal of any LIBOR Rate Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any LIBOR Rate Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any LIBOR Rate Loan on the date specified in any notice delivered
pursuant hereto, or (d) the assignment of any LIBOR Rate Loan other than on the
last day of the Interest Period applicable thereto as a result of a request by
the Borrower pursuant to Section 2.19, then, in any such event, the Borrower
shall compensate each Lender for the loss, cost and expense attributable to such
event. In the case of a LIBOR Rate Loan, such loss, cost or expense to any
Lender shall be deemed to include an amount determined by such Lender to be the
excess, if any, of (i) the amount of interest which would have accrued on the
principal amount of such Loan had such event not occurred, at the LIBOR Rate
that would have been applicable to such Loan, for the period from the date of
such event to the last day of the then current Interest Period therefor (or, in
the case of a failure to borrow, convert or continue, for the period that would
have been the Interest Period for such Loan), over (ii) the amount of interest
which would accrue on such principal amount for such period at the interest rate
which such Lender would bid were it to bid, at the commencement of such period,
for dollar deposits of a comparable amount and period from other banks in the
eurodollar market. A certificate of any Lender setting forth in reasonable
detail any amount or amounts that such Lender is entitled to receive pursuant to
this Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within ten (10) days after receipt thereof.
Section 2.18 Taxes. (a) Any and all payments by or on account of any
-----
obligation of the Borrower hereunder shall be made free and clear of and without
deduction for any Indemnified Taxes or Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent, Lender or
Issuing Bank (as the case may be) receives 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 Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent each Lender
and the Issuing Bank, within ten (10) days after written demand therefor, for
the full amount of any Indemnified
31
Taxes or Other Taxes paid by the Administrative Agent, such Lender or the
Issuing Bank, as the case may be, on or with respect to any payment by or on
account of any obligation of the Borrower hereunder (including Indemnified Taxes
or Other Taxes imposed or asserted on or attributable to amounts payable under
this Section) and any penalties, interest and removable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or the Issuing Bank, or by the
Administrative Agent on its own behalf or on behalf of a Lender or the Issuing
Bank, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed by applicable
law or reasonably requested by the Borrower as will permit such payments to be
made without withholding or at a reduced rate.
Section 2.19 Mitigation Obligations; Replacement of Lenders. (a) If any
----------------------------------------------
Lender requests compensation under Section 2.16, or if the Borrower is required
to pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.17, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.16 or 2.18, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender.
(b) If any Lender requests compensation under Section 2.16, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.18,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 10.11), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent and
the Issuing Bank, which consent shall not unreasonably be withheld, (ii) such
Lender shall have received
32
payment of an amount equal to the outstanding principal of its Loans and
participations in LC Disbursements, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 2.16 or payments required
to be made pursuant to Section 2.18, such assignment will result in a reduction
in such compensation or payments.
ARTICLE III - Letters of Credit
-----------------
Section 3.1 Letters of Credit. Subject to the terms and conditions
-----------------
hereof, Borrower may until the Conversion Date request Issuing Bank to issue one
or more Letters of Credit, provided that, after taking such Letter of Credit
into account:
(a) the sum of the aggregate amount of Revolving Loans outstanding at
such time plus the aggregate amount of LC Obligations at such time, does not
exceed the Borrowing Base at such time;
(b) the aggregate amount of LC Obligations at such time does not exceed
$20,000,000;
(c) the expiration date of such Letter of Credit is on or prior to the
Final Maturity Date;
(d) such Letter of Credit is to be used for general corporate purposes
of Related Persons;
(e) such Letter of Credit is not directly or indirectly used to assure
payment of or otherwise support any Person's Indebtedness for borrowed money;
(f) the issuance of such Letter of Credit will be in compliance with
all applicable governmental restrictions, policies, and guidelines and will not
subject Issuing Bank to any cost not anticipated on the date hereof;
(g) the form and terms of such Letter of Credit are acceptable to
Administrative Agent and Issuing Bank in their sole and absolute discretion; and
(h) all other conditions in this Agreement to the issuance of such
Letter of Credit have been satisfied.
Issuing Bank will honor any such request if the foregoing conditions (a) through
(h) (in this Section 3.1 called the "LC Conditions") have been met as of the
-------------
date of issuance of such Letter of Credit. The expiration date of a Letter of
Credit may not be extended on or after the Conversion Date and no Letter of
Credit may be renewed, replaced or increased on or after the Conversion Date.
Section 3.2 Requesting Letters of Credit. Borrower must make written
----------------------------
application for any Letter of Credit at least three Business Days before the
date on which Borrower desires for Issuing Bank to issue such Letter of Credit.
By making any such written application Borrower shall
33
be deemed to have represented and warranted that the LC Conditions described in
Section 3.1 will be met as of the date of issuance of such Letter of Credit.
Each such written application for a standby or commercial Letter of Credit must
be made in writing using the forms therefor customarily used by Issuing Bank,
the terms and provisions of which are hereby incorporated herein by reference
(or in such other form as may mutually be agreed upon by Issuing Bank and
Borrower).
Section 3.3 Reimbursement and Participations.
--------------------------------
(a) Reimbursement by Borrower. Each Matured LC Obligation shall
-------------------------
constitute a Loan by Issuing Bank to Borrower. The Borrower hereby agrees to
reimburse the Issuing Bank, forthwith, for each payment or disbursement made by
the Issuing Bank to settle its obligations under any draft drawn under any
Letter of Credit, with interest on the amount so paid or disbursed by the
Issuing Bank from and including the date of payment or disbursement to, but not
including, the date the Issuing Bank is reimbursed therefor or the Lenders are
deemed to have made a Loan in respect thereof pursuant to the following proviso,
as the case may be, at the rate set forth for Base Rate Loans; provided,
however, that (i) if any such payment or disbursement shall not be reimbursed to
the Issuing Bank after any grace period for the payment thereof as provided in
Section 8.1 herein and if the Final Maturity Date shall not have occurred or
(ii) if any Matured LC Obligation shall be outstanding on the Conversion Date,
then the Matured LC Obligation in respect thereof shall automatically, without
notice from or to the Borrower and without any further authorization from the
Borrower (and whether or not the amount thereof satisfies the conditions of
Section 2.1 and whether or not the conditions of Article IV are satisfied), be
deemed to be a Loan, made by each of the Lenders to the Borrower in their
respective Percentage Shares of the Issuing Bank's payments or disbursements
bearing interest determined pursuant to Section 2.6 and the related Matured LC
Obligation shall be deemed paid simultaneously with such funding of the deemed
Loan; provided further, however, that if any such payment or disbursement shall
not be reimbursed to the Issuing Bank and a Loan shall not be deemed to have
been made notwithstanding the preceding proviso for any reason, then the Matured
LC Obligation in respect thereof shall be due and payable, with interest
accruing thereon at the Late Payment Rate.
(b) Letter of Credit Loans. If the beneficiary of any Letter of Credit
----------------------
makes a draft or other demand for payment thereunder prior to the Conversion
Date then Borrower may, during the interval between the making thereof and the
honoring thereof by Issuing Bank, request Lenders to make Revolving Loans to
Borrower in the amount of such draft or demand, which Revolving Loans shall be
made concurrently with Issuing Bank's payment of such draft or demand and shall
be immediately used by Issuing Bank to repay the amount of the resulting Matured
LC Obligation. Such a request by Borrower shall be made in compliance with all
of the provisions hereof, provided that for the purposes of clauses (b) and (c)
of the first sentence of Section 2.1 the amount of such Revolving Loans shall be
considered but the amount of the Matured LC Obligation to be concurrently paid
by such Revolving Loans shall not be considered.
(c) Participation by Lenders. Issuing Bank irrevocably agrees to grant
------------------------
and hereby grants to each Lender, and to induce Issuing Bank to issue Letters of
Credit hereunder, each Lender irrevocably agrees to accept and purchase and
hereby accepts and purchases from Issuing Bank, on
34
the terms and conditions hereinafter stated and for such Lender's own account
and risk an undivided interest equal to such Lender's Percentage Share of
Issuing Bank's obligations and rights under each Letter of Credit issued
hereunder and the amount of each Matured LC Obligation paid by Issuing Bank
thereunder. Each Lender unconditionally and irrevocably agrees with Issuing Bank
that, if a Matured LC Obligation is paid under any Letter of Credit for which
Issuing Bank is not reimbursed in full by Borrower in accordance with the terms
of this Agreement and the related LC Application (including any reimbursement by
means of concurrent Loans or by the application of LC Collateral), such Lender
shall within two (2) Business Days (in all circumstances and without set-off or
counterclaim) pay to Issuing Bank on demand, in immediately available funds at
Issuing Bank's address for notices hereunder, such Lender's Percentage Share of
such Matured LC Obligation (or any portion thereof which has not been reimbursed
by Borrower), together with interest thereon, for each day from the date such
amount was paid by Issuing Bank under such Letter of Credit until the date such
amount is paid to Administrative Agent at the Federal Funds Rate. If any Lender
fails to make such payment to Issuing Bank within such two Business Day period,
such Lender shall in addition to such amount pay interest thereon, for each day
from the date such amount was paid by Issuing Bank under such Letter of Credit
until the date such amount is paid or repaid to Administrative Agent, at the
Base Rate. Each Lender's obligation to pay Issuing Bank pursuant to the terms of
this subsection is irrevocable and unconditional.
(d) Distributions to Participants. Whenever Issuing Bank has in
-----------------------------
accordance with this section received from any Lender payment of such Lender's
Percentage Share of any Matured LC Obligation, if Issuing Bank thereafter
receives any payment of such Matured LC Obligation or any payment of interest
thereon (whether directly from Borrower or by application of LC Collateral or
otherwise, and excluding only interest for any period prior to Issuing Bank's
demand that such Lender make such payment of its Percentage Share), Issuing Bank
will distribute to such Lender its Percentage Share of the amounts so received
by Issuing Bank; provided, however, that if any such payment received by Issuing
Bank must thereafter be returned by Issuing Bank, such Lender shall return to
Issuing Bank the portion thereof which Issuing Bank has previously distributed
to it.
(e) Calculations. A written advice setting forth in reasonable detail
------------
the amounts owing under this section, submitted by Issuing Bank to Borrower or
any Lender from time to time, shall be conclusive, absent manifest error, as to
the amounts thereof.
Section 3.4 Letter of Credit Fees. In consideration of Issuing Bank's
---------------------
issuance of Letters of Credit, Borrower agrees to pay (i) to the Administrative
Agent for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at the LIBOR Spread then
in effect with respect to Loans after giving effect thereto on the average daily
amount of such Lender's Percentage Share of the LC Obligations during the period
from and including the Closing Date to but excluding the later of the date on
which such Lender's Commitment to make Loans terminates and the date on which
such Lender ceases to participate in any LC Obligations, and (ii) to the Issuing
Bank a fronting fee, which shall accrue at the rate of 0.125% per annum on the
average daily amount of the LC Obligations during the period from and including
the Closing Date to but excluding the later of the date of termination of the
Commitments and the date on which there cease to be any LC Obligations, as well
as the Issuing Bank's standard
35
fees with respect to the amendment, renewal or extension of any Letter of Credit
or processing of drawings thereunder. Participation fees and fronting fees shall
be due and payable in arrears, on the last Business Day of each Fiscal Quarter
and on the Final Maturity Date commencing on the first such date to occur after
the Closing Date; provided that all such fees shall be payable on the date on
which the Commitments terminate and any such fees accruing after the date on
which the Commitments terminate shall be payable on demand. Any other fees
payable to the Issuing Bank pursuant to this paragraph shall be payable within
ten (10) days after demand. All participation fees and fronting fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed (including the first day but excluding the last day).
Section 3.5 No Duty to Inquire.
------------------
(a) Drafts and Demands. Issuing Bank is authorized and instructed to
------------------
accept and pay drafts and demands for payment under any Letter of Credit without
requiring, and without responsibility for, any determination as to the existence
of any event giving rise to said draft, either at the time of acceptance of
payment or thereafter. Issuing Bank and Lenders may act in reliance upon any
drafts or demand for payment believed in good faith to have been authorized,
whether or not made by an authorized officer, representative or agent of any
beneficiary under any Letter of Credit, and payment by Issuing Bank to a
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved. Borrower agrees to hold Issuing Bank
and each Lender harmless and indemnified against any liability or claim in
connection with or arising out of the subject matter of this section, WHICH
INDEMNITY SHALL APPLY WHETHER OR NOT ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY
OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION
OF ANY KIND BY ISSUING BANK OR ANY LENDER, provided only that Issuing Bank or
such Lender shall not be entitled to indemnification for that portion, if any,
of any liability or claim which is proximately caused by its own individual
gross negligence or willful misconduct as determined in a final judgment.
(b) Extension of Maturity. If the maturity of any Letter of Credit is
---------------------
extended by its terms or by law or governmental action, if any extension of the
maturity or time for presentation of drafts or any other modification of the
terms of any Letter of Credit is made at the request of any Related Person, or
if the amount of any Letter of Credit is increased at the request of any Related
Person, this Agreement shall be binding upon all Related Persons with respect to
such Letter of Credit as so extended, increased or otherwise modified, with
respect to drafts and property covered thereby, and with respect to any action
taken by Issuing Bank or any of Issuing Bank's correspondents in accordance with
such extension, increase or other modification.
(c) Transferees of Letters of Credit. If any Letter of Credit provides
--------------------------------
that it is transferable, Issuing Bank shall have no duty to determine the proper
identity of anyone appearing as transferee of such Letter of Credit, nor shall
Issuing Bank be charged with responsibility of any nature or character for the
validity or correctness of any transfer or successive transfers, and payment by
Issuing Bank to any purported transferee or transferees as determined by Issuing
Bank is hereby authorized and approved, and Borrower further agrees to hold
Issuing Bank and each
36
Lender harmless and indemnified against any liability or claim in connection
with or arising out of the foregoing, WHICH INDEMNITY SHALL APPLY WHETHER OR NOT
ANY SUCH LIABILITY OR CLAIM IS IN ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR
IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ISSUING BANK OR ANY
LENDER, provided only that Issuing Bank or such Lender shall not be entitled to
indemnification for that portion, if any, of any liability or claim which is
caused by its own individual gross negligence or willful misconduct.
Section 3.6 LC Collateral.
-------------
(a) LC Obligations in Excess of Borrowing Base or upon Termination of
-----------------------------------------------------------------
Commitments. (i) If, after the making of all mandatory prepayments required
-----------
under Section 2.10, the aggregate amount of all Loans outstanding plus all LC
Obligations outstanding excluding LC Obligations secured by cash collateral
pursuant to Section 3.6 will exceed the Borrowing Base, then Borrower will
immediately pay to Issuing Bank an amount in cash equal to such excess, or (ii)
should any LC Obligations remain outstanding on the Final Maturity Date, then
Borrower will immediately pay Issuing Bank an amount in cash equal to the
aggregate amount of such Issuing Bank's LC Obligations. Issuing Bank will hold
such amount as security for the remaining LC Obligations ("LC Collateral") until
such LC Obligations become Matured LC Obligations, at which time such LC
Collateral may be applied to such Matured LC Obligations. Neither this
subsection nor the following subsection shall, however, limit or impair any
rights which Issuing Bank may have under any other document or agreement
relating to any Letter of Credit or LC Obligation, including any LC Application,
or any rights which Issuing Bank or Lenders may have to otherwise apply any
payments by Borrower and LC Collateral under Section 2.11.
(b) Acceleration of LC Obligations. If the Obligations or any part
------------------------------
thereof become immediately due and payable pursuant to Section 8.1 then, unless
Majority Lenders otherwise specifically elect to the contrary (which election
may thereafter be retracted by Majority Lenders at any time), all LC Obligations
shall become immediately due and payable without regard to whether or not actual
drawings or payments on the Letters of Credit have occurred, and Borrower shall
be obligated to pay to Issuing Bank immediately an amount equal to the aggregate
LC Obligations which are then outstanding. All amounts so paid shall first be
applied to Matured LC Obligations and then held by Issuing Bank as LC Collateral
until such LC Obligations become Matured LC Obligations, at which time such LC
Collateral shall be applied to such Matured LC Obligations.
(c) Investment of LC Collateral. Pending application thereof, all LC
---------------------------
Collateral shall be invested by Issuing Bank in such interest-bearing
investments as Issuing Bank may choose in its sole discretion reasonably
exercised. All interest on such investments shall be reinvested or applied to
Matured LC Obligations. When all Obligations have been satisfied in full,
including all LC Obligations, all Letters of Credit have expired or been
terminated, and all of Borrower's reimbursement obligations in connection
therewith have been satisfied in full, Issuing Bank shall release any remaining
LC Collateral. Borrower hereby assigns and grants to Issuing Bank a continuing
security interest in all LC Collateral paid by it to Issuing Bank, all
investments purchased
37
with such LC Collateral, and all proceeds thereof to secure its Matured LC
Obligations and its Obligations under this Agreement, the Notes, and the other
Loan Documents, and Borrower agrees that such LC Collateral and investments
shall be subject to all of the terms and conditions of the Mortgage. Borrower
further agrees that Issuing Bank shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code as adopted in the State of Texas
with respect to such security interest and that an Event of Default under this
Agreement shall constitute a default for purposes of such security interest.
ARTICLE IV - Conditions Precedent to Lending
-------------------------------
Section 4.1 Documents to be Delivered. No Lender has any obligation to
-------------------------
make its first Revolving Loan, and Issuing Bank has no obligation to issue the
first Letter of Credit, unless Administrative Agent shall have received all of
the following duly executed and delivered in multiple counterparts for each
Lender and in form, substance and date satisfactory to Administrative Agent:
(a) This Agreement and any other documents that Lenders are to execute
in connection herewith.
(b) Each Note.
(c) The following certificates of Borrower:
(i) An "Omnibus Certificate" of the Secretary or Assistant
Secretary of Borrower, as applicable, which shall contain the names and
signatures of the officers of Borrower authorized to execute Loan
Documents and which shall certify to the truth, correctness and
completeness of the following exhibits attached thereto: (1) a copy of
resolutions duly adopted by the members of Borrower and in full force
and effect at the time this Agreement is entered into, authorizing the
execution of this Agreement and the other Loan Documents delivered or
to be delivered in connection herewith and the consummation of the
transactions contemplated herein and therein, (2) a copy of the Limited
Liability Company Agreement of Borrower and all amendments thereto,
certified by the Secretary of State of Delaware, and (3) a copy of the
regulations of Borrower; and
(ii) A "Compliance Certificate" of the Chief Financial Officer of
the Borrower of even date with such Loan in which such officer
certifies to the satisfaction of the conditions set out in subsections
(a), (b) and (c) of Section 4.2.
(d) A certificate (or certificates) of the due formation, valid
existence and good standing of Borrower in its state of organization, issued by
the appropriate authorities of such jurisdiction.
(e) A favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., counsel for the
Related Persons, substantially in the form set forth in Exhibit F.
---------
38
(f) An amendment to each Pledge Agreement, dated as of the date hereof,
duly executed by Spinnaker Exploration Company or WP Spinnaker Holdings, Inc.,
as the case may be, together with the certificates, if any, evidencing the
membership or other interests pledged pursuant to the Pledge Agreement, which
certificates shall in each case be accompanied by undated powers of attorney
duly executed in blank, or, if any securities pledged pursuant to a Pledge
Agreement are uncertificated securities, confirmation and evidence satisfactory
to Administrative Agent that the security interest in such uncertificated
securities has been transferred to and perfected by Administrative Agent in
accordance with the Uniform Commercial Code, as in effect in the State of Texas.
(g) An amendment and restatement of each Guaranty, dated as of the date
hereof, duly executed by Spinnaker Exploration Company, a Delaware corporation,
and WP Spinnaker Holdings, Inc., a Delaware corporation, and such favorable
opinions of counsel as Administrative Agent shall request.
(h) An amendment to the Mortgage duly executed and delivered by the
Borrower concerning those oil and gas properties listed on Schedule 5 in form
and substance satisfactory to the Administrative Agent for the prompt completion
of all recording and filing of the Security Documents as may be necessary or, in
the reasonable opinion of the Administrative Agent, desirable to create or
continue, as appropriate, a valid perfected first Lien against the Collateral
covered by the Mortgage, together with executed copies of proper Uniform
Commercial Code Form UCC-1 and UCC-3 statements, necessary or in the opinion of
the Administrative Agent, desirable, to create in the Administrative Agent for
the benefit of the Administrative Agent, the Issuer and the Lenders all Liens
and other rights of any Person as a valid, perfected first priority Lien in the
Collateral described in the Mortgage.
(i) [Reserved]
(j) To the extent not covered above, a copy of each Security Document
listed in the Security Schedule, or an amendment thereto or an amendment and
restatement thereto, together with the delivery of such certificate, stock
powers and instruments required to be delivered pursuant to the Security
Documents.
(k) Certificates of Borrower's good standing and due qualification to
do business, issued by appropriate officials in any states in which Borrower
owns property subject to Security Documents.
(l) Documents similar to those specified in subsections (c)(i) and (d)
of this section with respect to each Guarantor and its Guaranty.
(m) True and correct copies of such other documents or instruments as
may be reasonably requested by Administrative Agent including, without
limitation, any debt instrument security agreement or other material contract to
which any Related Party may be a party.
39
(n) True and complete copies of detailed consolidated annual
projections for Spinnaker Exploration Company, certified as of the Closing Date
by the chief financial officer of Borrower as having been prepared in good faith
by Borrower, which certificate shall state that such officer has no reason to
believe that the projections are incorrect or misleading in any material
respect, it being recognized by Administrative Agent and Lenders that such
projections as to future events depend on such assumptions and are not to be
viewed as facts and that actual results during the period covered by any such
projections may differ from the projected results.
(o) [Reserved]
(p) Borrower's payment to Administrative Agent of all fees then due to
Administrative Agent and Lenders hereunder and under the Fee Letter and all
reasonable legal fees of Administrative Agent's counsel for which invoices in
reasonable detail are received at least ten (10) days prior to the date of the
first Loan.
(q) A certificate of insurance of the Borrower evidencing that the
Borrower is carrying insurance in accordance with Section 6.1 (h) hereof and as
to the insurance of each Related Person set forth in the Disclosure Schedule and
that such insurance is in full force and effect.
(r) Title information and opinions as required pursuant to Section 7.2,
together with letters, as necessary and as requested, allowing the
Administrative Agent to rely on such opinions and other information to the same
extent as if such opinions or information had been addressed to it.
Section 4.2 Additional Conditions Precedent. No Lender has any
-------------------------------
obligation to make any Revolving Loan (including its first) or to continue any
Revolving Loan as a Term Loan (including its first) or to participate in any
Letter of Credit, and Issuing Bank has no obligation to issue any Letter of
Credit (including the first) unless the following conditions precedent have been
satisfied:
(a) In the case of all Loans and Letters of Credit, all representations
and warranties made by any Related Person in any Loan Document shall be true on
and as of the date of such Loan or the date of issuance of such Letter of Credit
and after giving effect thereto as if such representations and warranties had
been made as of the date of such Loan or the date of issuance of such Letter of
Credit, unless any such representation or warranty was expressly limited to
earlier date.
(b) In the case of all Loans and Letters of Credit, no Default shall
exist at the date of such Loan or the date of issuance of such Letter of Credit
or result therefrom.
(c) In the case of all Loans and Letters of Credit, no act, event or
condition shall have occurred which has resulted in a Material Adverse Effect.
(d) The making of such Loan or the issuance of such Letter of Credit
shall not be prohibited by any law or any regulation or order of any court or
governmental agency or authority
40
and shall not subject any Lender or Issuing Bank to any penalty or other onerous
condition under or pursuant to any such law, regulation or order.
(e) No suit, action, investigation, inquiry or other proceeding
(including, without limitation, the enactment or promulgation of a statute or
rule) by or before any arbitrator or any Governmental Authority shall be pending
and no preliminary or permanent injunction or order by a state or federal court
shall have been entered in connection with any Loan Document, or any of the
transactions contemplated hereby or thereby, which, in the judgment of
Administrative Agent, would have a Material Adverse Effect.
(f) The Administrative Agent shall have received (i) with respect to
each Revolving Loan, a Request for Advance duly completed, executed and
delivered by Borrower as required by Section 2.4, and (ii) with respect to
Letters of Credit, a written application as required by Section 3.2.
ARTICLE V - Representations and Warranties
------------------------------
Section 5.1 Borrower's Representations and Warranties. To confirm each
-----------------------------------------
Lender's understanding concerning Related Persons and Related Persons'
businesses, properties and obligations and to induce Administrative Agent, the
Issuing Bank and each Lender to enter into this Agreement and to make the Loans
and issue or participate in Letters of Credit, Borrower represents and warrants
to Administrative Agent, the Issuing Bank and each Lender that:
(a) No Default. Neither Borrower, any Guarantor nor any Subsidiary is
----------
in default in the performance of any of the covenants and agreements contained
herein or in any other Loan Documents or pursuant to any Subject Hedging
Agreement. No event has occurred and is continuing which constitutes a Default.
(b) Organization and Good Standing. Each Related Person is duly
------------------------------
organized, validly existing and in good standing under the laws of its state of
organization, having all powers required to carry on its business and enter into
and carry out the reactions contemplated hereby. Each such Related Person is
duly qualified, in good standing, and authorized to do business in all other
jurisdictions within the United States wherein the character of the properties
owned or held by it, if any, or the nature of the business transacted by it
makes such qualification necessary, except where the failure so to qualify will
not have any Material Adverse Effect. Each such Related Person has taken all
actions and procedures customarily taken in order to enter, for the purpose of
conducting business or owning property, each jurisdiction outside the United
States wherein the character of the properties owned or held by it, if any, or
the nature of the business transacted by it, if any, makes such actions and
procedures desirable.
(c) Authorization. Each Related Person has duly taken all action
-------------
necessary to authorize the execution and delivery by it of the Loan Documents to
which it is a party and to authorize the consummation of the transactions
contemplated thereby and the performance of its obligations thereunder. Borrower
is duly authorized to borrow funds hereunder.
41
(d) No Conflicts or Consents. The execution and delivery by the various
------------------------
Related Persons of the Loan Documents to which each is a party, the performance
by each of its obligations under such Loan Documents, and the consummation of
the transactions contemplated by the various Loan Documents, do not and will not
(i) conflict with any provision of (1) any domestic or foreign law, statute,
rule or regulation, (2) the organizational documents of any Related Person, or
(3) any agreement, judgment, license, order or permit applicable to or binding
upon any Related Person, (ii) result in the acceleration of any Indebtedness
owed by any Related Person, or (iii) result in or require the creation of any
Lien upon any assets or properties of any Related Person except as expressly
contemplated in the Loan Documents. Except as expressly contemplated in the Loan
Documents, no consent, approval, authorization or order of, and no notice to or
filing with any court or Governmental Authority or third party is required in
connection with the execution, delivery or performance by any Related Person of
any Loan Document or to consummate any transactions contemplated by the Loan
Documents.
(e) Enforceable Obligations. This Agreement is, and the other Loan
-----------------------
Documents when duly executed and delivered will be, legal, valid and binding
obligations of each Related Person which is a party hereto or thereto,
enforceable in accordance with their terms except as such enforcement may be
limited by bankruptcy, insolvency or similar laws of general application
relating to the enforcement of creditors' rights and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
(f) Initial Financial Statements. The Initial Financial Statements of
----------------------------
Spinnaker Exploration Company fairly present (i) Spinnaker Exploration Company's
consolidated, financial position at the date thereof, (ii) the consolidated
results of Spinnaker Exploration Company, and (iii) Spinnaker Exploration
Company's consolidated cash flows for the period thereof. Since the date of the
audited annual Initial Financial Statements no act, event or condition has
occurred which would have a material adverse effect upon the assets, business,
properties, operations or financial condition, of the Related Persons, taken as
a whole. The Initial Financial Statements of Spinnaker Exploration Company were
prepared in accordance with GAAP.
(g) Other Restrictions. No Related Person is subject to or restricted
------------------
by any franchise, contract, deed, charter restriction, or other instrument or
restriction which may be reasonably expected to have a Material Adverse Effect.
(h) Full Disclosure. No certificate, statement or other information
---------------
delivered in writing herewith or heretofore by any Related Person to
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or in connection with any transaction contemplated hereby contains any
untrue statement known to a Related Person of a material fact or omits to state
any material fact known to any Related Person necessary to make the statements
contained herein or therein not materially misleading as of the date made or
deemed made, taken as a whole. There is no fact known to any Related Person that
has not been disclosed to Administrative Agent and each Lender in writing (other
than industry-wide risks normally associated with the types of businesses
conducted by the Related Persons) which could materially and adversely affect
Borrower's consolidated properties, assets, operations businesses, or condition
(financial or otherwise). To the
42
best knowledge of Borrower, there are no statements or conclusions in any
Engineering Report which are based upon or include misleading information or
fail to take into account material information regarding the matters reported
therein, it being understood that each Engineering Report is necessarily based
upon professional opinions, estimates and projections and that Borrower does not
warrant that such opinions, estimates and projections will ultimately prove to
have been accurate. Borrower has heretofore delivered to Administrative Agent
and each Lender true, correct and complete copies of the Initial Financial
Statements and the Initial Engineering Report.
(i) Litigation. There are no actions, suits or legal, equitable,
----------
arbitrative or administrative proceedings pending, or to the knowledge of any
Related Person threatened, against any Related Person before any federal, state,
municipal or other court, department, commission, body, board, bureau, agency,
or instrumentality, domestic or foreign, which do or may have a Material Adverse
Effect, and there are no outstanding judgments, injunctions, writs, rulings or
orders by any such governmental entity against any Related Person or any Related
Person's property, which have or may have a reasonable possibility of causing a
Material Adverse Effect.
(j) ERISA Liabilities. No Termination Event has occurred with respect
-----------------
to any ERISA Plan and the Related Persons are in compliance with ERISA in all
material respects. No Related Person is required to contribute to, or has any
other absolute or contingent liability in respect of, any "multiemployer plan"
as defined in Section 4001 of ERISA. Except as disclosed in Item 5.1(j) ("ERISA
Liabilities") of the Disclosure Schedule, no "accumulated funding deficiency"
(as defined in Section 412(a) of the Internal Revenue Code of 1986, as amended)
exists with respect to any ERISA Plan, whether or not waived by the Secretary of
the Treasury or his delegate, and the current value of each ERISA Plan's
benefits does not exceed the current value of such ERISA Plan's assets available
for the payment of such benefits by more than $500,000.
(k) Environmental and Other Laws. Except as would not have a Material
----------------------------
Adverse Effect (or with respect to (iii), (iv) and (v) below, where the failure
to take such actions would not have a Material Adverse Effect):
(i) Neither any property of any Related Person or any Subsidiary
nor the operations conducted thereon violate any Environmental Laws;
(ii) Without limitation of clause (a) above, no property of any
Related Person or any Subsidiary nor the operations currently conducted
thereon or, to the best knowledge of any of the Related Persons, by any
prior owner or operator of such property or operation, are in violation
of or subject to any existing, pending or, to the Related Person's
knowledge, threatened action, suit, investigation, inquiry or
proceeding by or before any Governmental Authority or to any remedial
obligations under Environmental Laws;
(iii) All notices, permits, licenses or similar authorizations, if
any, required pursuant to Environmental Laws to be obtained or filed in
connection with the operation or use of the property of any Related
Persons and each Subsidiary have been duly obtained or
43
filed, and the Related Persons and each Subsidiary are in compliance
with the terms and conditions of all such notices, permits, licenses
and similar authorizations;
(iv) All Hazardous Materials, solid waste, and oil and gas
exploration and production wastes, if any, generated at the property of
any Related Person 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 each
Related Person, 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, to each Related Person's knowledge,
threatened action, investigation or inquiry by any Governmental
Authority in connection with any Environmental Laws;
(v) The Related Persons have taken all steps reasonably
necessary to determine and have determined that no Hazardous Materials,
solid waste, or oil and gas exploration and production wastes, have
been disposed of or otherwise released and there has been no threatened
release of any Hazardous Materials on or to any property of the Related
Persons or any Subsidiary except, in each case, 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
(vi) None of the Related Persons nor any Subsidiary has any known
contingent liability in connection with any release or threatened
release of any oil, Hazardous Materials or solid waste into the
environment.
(l) Names and Places of Business. No Related Person has, during the
----------------------------
preceding five Years, been known by, or used any other corporate, trade, or
fictitious name (except Spinnaker Exploration Company's name previously was
Spinco Exploration Corp.). Except as otherwise indicated pursuant to Section
6.1(d), the chief executive office and principal place of business of each
Related Person is located at the address set out in Section 10.3. Except as
indicated in the Disclosure Schedule or a Disclosure Report, no Related Person
has any other office or place of business.
(m) Borrower's Subsidiaries. As of the Closing Date, Borrower does not
-----------------------
have any Subsidiary or own any interest in any other Person except those listed
in the Disclosure Schedule or a Disclosure Report. As of the Closing Date, no
Related Person is a member of any general or limited partnership, joint venture
or association of any type whatsoever except associations, joint ventures or
other relationships (i) which are established pursuant to a standard form
operating agreement or similar agreement or which are partnerships for purposes
of federal income taxation only, (ii) which are not corporations or partnerships
(or subject to the Uniform Partnership Act) under applicable state law, and
(iii) whose businesses are limited to the exploration, development and operation
of oil, gas or mineral properties and interests owned directly by the parties in
such associations, joint ventures or relationships. As of the Closing Date,
Borrower owns, directly or
44
indirectly, the equity interest in each of its Subsidiaries which is indicated
in the Disclosure Schedule.
(n) Title to Properties. Each Related Person has valid and defensible
-------------------
title to, or a valid leasehold or like interest in, all of the real property
interests constituting the Mortgaged Property and all of its other material
properties and assets, free and clear of all Prohibited Liens and of all
material impediments to the use of such properties and assets in such Related
Person's ordinary course of business.
(o) Government Regulation. No Related Person is subject to regulation
---------------------
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Investment Company Act of 1940 (as any of the preceding acts have been amended)
or any other statute, law, regulation or decree which regulates the incurring by
such Person of Indebtedness, including statutes, laws, regulations or decrees
relating to common contract carriers or the sale of electricity, gas, steam,
water or other public utility services.
(p) Permits and Licenses. Each Related Person possesses all permits,
--------------------
licenses, patents, patent rights or licenses, trademarks, trademark rights,
trade names and copyrights which are material to the conduct of its business.
(q) Taxes. Each Related Person has filed or caused to be filed all tax
-----
returns which, to the knowledge of such Related Person, are required to be filed
and has paid all taxes shown to be due and payable on said returns or on any
assessments made against it or any of its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority
(other than (i) where extensions have been obtained and (ii) any such
impositions as to which the amount or validity is currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of such Related Person); no
tax Lien has been filed, and, to the knowledge of Borrower, no claim is being
asserted, with respect to any such tax, fee or other charge.
(r) Insurance. The Disclosure Schedule sets forth a complete and
---------
correct list of all insurance policies and programs in effect on the Closing
Date with respect to the properties and businesses of each Related Person
specifying for each such policy and program, (i) the amount thereof, (ii) the
risks insured against thereby, (iii) the name of the insurer and each insured
party thereunder and (iv) the policy or other identification number thereof.
(s) Priority of Obligations. The obligations of the Borrower to pay the
-----------------------
principal of and interest on the Loans made hereunder and the Notes and all
other amounts payable by the Borrower hereunder constitute direct and general
obligations of the Borrower and rank in right of payment prior to or pari passu
with all indebtedness and liabilities for borrowed money, or other obligations
arising out of the extension of credit, of the Borrower. The Borrower does not
have outstanding any such indebtedness, liability or obligation which is
subordinated to any other such indebtedness, liability or obligation but which
is not subordinated to all indebtedness of the Borrower for money borrowed
hereunder and under the Notes.
45
(t) Solvency. Upon the consummation of the transactions contemplated by
--------
the Loan Documents, based upon certain valuations and the most recently
delivered financial statements:
(i) The present fair salable value of the assets of the
Borrower on a consolidated basis will exceed the amount that the Borrower will
be required to pay (after giving effect to amounts that reasonably could be
received by reason of indemnity, offset, insurance or similar arrangements)
because of the probable liability on the existing Indebtedness (whether matured
or unmatured, liquidated or unliquidated, absolute, fixed or contingent) of the
Borrower on a consolidated basis as they become absolute and matured;
(ii) The sum of the debts (whether matured or unmatured,
liquidated or unliquidated, absolute, fixed or contingent) of the Borrower on a
consolidated basis (after giving effect to amounts that reasonably could be
received by reason of indemnity, offset, insurance or similar arrangements) will
not exceed all of the property of the Borrower on a consolidated basis at a fair
valuation;
(iii) The capital of the Borrower is not and will not be
unreasonably small for the Borrower to carry on its businesses; and
(iv) The Borrower does not intend to, or believe it will, by
virtue of consummating the transactions and incurring obligations contemplated
hereby or by any other of the Loan Documents, Indebtedness that will be beyond
its ability to pay as they mature.
ARTICLE VI - Covenants of Borrower
---------------------
Section 6.1 Affirmative Covenants. To conform with the terms and
---------------------
conditions under which each Lender is willing to have credit outstanding to
Borrower, and to induce Administrative Agent and each Lender and Issuing Bank to
enter into this Agreement and make the Loans and issue or participate in Letters
of Credit, Borrower warrants, covenants and agrees that until the full and final
payment of the Obligations and the termination of this Agreement, unless
Majority Lenders have previously agreed otherwise:
(a) Payment and Performance. Borrower will pay all amounts due by
-----------------------
Borrower under the Loan Documents to which it is a party in accordance with the
terms thereof and will observe, perform and comply with every covenant, term and
condition expressed or implied in the Loan Documents applicable to Borrower.
Borrower will cause the other Related Persons to observe, perform and comply
with every such term, covenant and condition applicable to the other Related
Persons in the Loan Documents to which they are a party.
(b) Books, Financial Statements and Reports. Each Related Person will
---------------------------------------
at all times obtain full and accurate books of account and records. Borrower
will maintain and will cause each Related Person to maintain a standard system
of accounting and will furnish the following statements and reports to
Administrative Agent and Lender at Borrower's expense:
46
(i) As soon as available, and in any event within ninety (90) days
after the end of each Fiscal Year, complete audited consolidated financial
statements of Spinnaker Exploration Company together with an annual budget
for the current year in form and substance satisfactory to the
Administrative Agent in its sole discretion and all notes thereto, prepared
in reasonable detail in accordance with GAAP in all material respects,
together with an opinion, based on an audit using generally accepted
auditing standards, by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ or other independent certified
public accountants of recognized national standing selected by Spinnaker
Exploration Company and acceptable to the Administrative Agent, stating
that such consolidated financial statements have been so prepared. These
financial statements shall contain a consolidated balance sheet as of the
end of such Fiscal Year and consolidated statements of earnings, of cash
flows, and of changes in owners' equity for such Fiscal Year, each setting
forth in comparative form the corresponding figures for the preceding
Fiscal Year. In addition, within ninety (90) days after the end of each
Fiscal Year Borrower will furnish a certificate signed by such accountants
stating that in making the examination and reporting on the consolidated
financial statements described above they did not conclude that any Default
existed at the end of such Fiscal Year or at the time of their report, or,
if they did conclude that a Default existed, specifying its nature and
period of existence.
(ii) As soon as available, and in any event within sixty (60) days
after the end of each Fiscal Quarter, complete unaudited consolidated
financial statements from Spinnaker Exploration Company and consolidated
balance sheet as of the end of such Fiscal Quarter and consolidated
statements of earnings and cash flows for the period from the beginning of
the then current Fiscal Year to the end of such Fiscal Quarter, all in
reasonable detail and prepared in accordance with GAAP, subject to changes
resulting from normal year-end adjustments and without footnotes. In
addition Borrower will, together with each such set of financial statements
and each set of financial statements furnished under subsection (b)(i) of
this section furnish a certificate in the form of Exhibit E signed by the
---------
chief financial officer of Borrower stating that such financial statements
are accurate and complete in all material respects, stating that he/she has
reviewed the Loan Documents, containing calculations showing compliance (or
non-compliance) at the end of such Fiscal Quarter with the requirements of
Sections 6.2(a), (k) and (1), and stating that no Default exists at the end
of such Fiscal Quarter or at the time of such certificate or specifying the
nature and period of existence of any such Default.
(iii) Promptly upon their becoming available, copies of all (A)
financial statements, reports, notices and proxy statements sent by any
Related Person to its stockholders or members and (B) all statements and
reports sent to any Related Person or filed with or otherwise provided to
any Governmental Authority (including without limitation, the Federal
Energy Regulatory Commission or the Texas Natural Resource Conservation
Committee and any successor agencies) which describe or relate to any event
which could reasonably be expected to have a Material Adverse Effect;
47
(iv) By March 15 of each year, an Engineering Report prepared as of
January 1 of such year by ▇▇▇▇▇ ▇▇▇▇▇ Company, or other independent
petroleum engineers chosen by Borrower and reasonably acceptable to
Administrative Agent, and by August 15 of each year, an Engineering Report
prepared by Borrower's in-house engineering staff as of July 1 of such
year. Each such report shall cover all proved oil and gas reserves
attributable to the properties and interests owned by any Related Person
which are (i) located in or offshore of the United States and (ii) to
comprise the Borrowing Base. Each such report shall take into account any
"over-produced" status under gas balancing arrangements, and shall contain
information and analysis comparable in scope to that contained in the
Initial Engineering Report, and shall be accompanied by such additional
data concerning pricing, operating costs, quantities of production from the
oil and gas properties of the Related Persons, purchasers of production,
and other information and engineering and geological data as Administrative
Agent may reasonably request.
(v) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Quarter, (A) a report describing by lease or
unit the gross volume of production, oil and gas prices and sales
attributable to production during such Fiscal Quarter from the properties
described in subsection (b)(iv) above and comparing (and describing) the
related severance taxes, other taxes, and leasehold operating expenses and
capital costs attributable thereto and incurred during such Fiscal Quarter
to such annual budget as has been previously delivered pursuant to
subsection (b)(i) above, (B) a summary prepared by the Borrower of its cost
of undeveloped leasehold and internal reserve estimate and PV-10 for proved
oil and gas reserves not included in the most recent Engineering Report and
(C) an update of the Borrower providing a qualitative discussion of
drilling operations for such quarter, including, but not limited to,
drilling successes and failures.
(vi) As soon as available, and in any event within thirty (30) days
after the end of each Fiscal Quarter, a hedging report prepared by Borrower
regarding any Hedging Agreement entered into by Borrower and in effect as
of the end of such Fiscal Quarter. Each such hedging report shall be in
form satisfactory to Administrative Agent and shall include unit volumes,
pricing, term, counterparty and date of such contracts.
(vii) Within ten (10) days after entering into a contract, whether
written or oral, for the sale or transfer of any Mortgaged Property, a
schedule of all of the Mortgaged Property so sold since the date of the
most recent Engineering Report, cross-referencing same to the Engineering
Report last delivered hereunder, and the details of such sales including
the Net Sales Proceeds received by the Borrower in connection with each
sale. Contemporaneously with the consummation of any such sale or transfer
with respect to Mortgaged Property included in the Borrowing Base, the
Borrowing Base shall be subject to adjustment, if any, pursuant to Section
6.2(d)(iii) hereof.
(viii) As soon as available, and in any event within thirty (30) days
after the end of each calendar month of Borrower, a lease operating
statement for such month, concerning those fields that comprise at least
ninety percent (90%) of the Borrower's total production.
48
(ix) Promptly after sending or filing thereof, copies of all
reports which the Borrower sends to any of its securityholders, and all
reports and registration statements which the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission or any
successor agency or any national securities exchange.
(c) Other Information and Inspections. Each Related Person will, and will
---------------------------------
cause each of its Subsidiaries to, keep books and records which accurately
reflect all its business affairs and transactions. Each Related Person will
furnish to Administrative Agent and each Lender any information which
Administrative Agent may from time to time reasonably request in writing
concerning any covenant, provision or condition of the Loan Documents or any
matter in connection with the Related Persons' businesses and operations. At any
reasonable time and from time to time, upon reasonable notice, each Related
Person shall, and shall cause its Subsidiaries to, permit the Administrative
Agent and any Lender or any of its agents or representatives thereof, to (a)
examine and make copies of and abstracts from the records and books of account
of, and visit and inspect at its reasonable discretion the properties of, any
such Related Person and any such Subsidiary, and (b) discuss the affairs,
finances and accounts of any such Related Person and any such Subsidiary with
any of their respective officers or directors; provided, however,
notwithstanding the provisions of 8.3 the Administrative Agent or the Lender for
whose benefit such inspection and visitation is made assumes sole responsibility
for the condition of any property of any such Related Person or its Subsidiaries
so visited and inspected, the access and egress thereto (including, but not
limited to wharves, docks, and helicopter landing areas), and any vice or defect
therein or thereon, and assumes all responsibility for and hereby releases and
indemnifies each Related Person, its Affiliates, and their officers, directors,
employees, and agents against any claim for damage or injury to or by the
Administrative Agent or such Lender (or the representatives thereof) or to any
such Related Person's or its Subsidiaries' property which may be occasioned by
inspection and visitation of any such Related Person's or its Subsidiaries'
property; provided, however, that neither any Related Person nor any of its
Subsidiaries shall be required to disclose to the Administrative Agent, any
Lender or any agents or representatives thereof any information which is the
subject of attorney-client privilege or attorney's work-product privilege
properly asserted by the applicable Person to prevent the loss of such privilege
in connection with such information. The expense of any exercise by the
Administrative Agent or any Lender of its rights under this Section 6.1 (c)
shall not be incurred by the Borrower unless a Default has occurred and is
continuing at the time of the request or visit.
(d) Notice of Material Events and Change of Address. Borrower will
-----------------------------------------------
promptly, after it has knowledge, notify Administrative Agent and each Lender:
(i) of the occurrence of any act, condition or event which is
reasonably likely to have a Material Adverse Effect;
(ii) of the occurrence of any Default;
(iii) of the acceleration of the maturity of any Indebtedness owed by
any Related Person or of any default by any Related Person under any indenture,
mortgage, agreement,
49
contract or other instrument to which any of them is a party or by which any of
them or any of their properties is bound, if such acceleration or default might
have a Material Adverse Effect;
(iv) of the occurrence of any Termination Event;
(v) of any claim in an amount equal to 1% of Spinnaker Exploration
Company's consolidated shareholder equity (based upon the most recent financial
statements delivered pursuant to Section 6.1(b)), or more, any notice of
potential liability under any Environmental Laws which might exceed such amount,
or any other claim asserted against any Related Person or with respect to any
Related Person's properties which might exceed such amount;
(vi) of the institution of any material action, suit, proceedings,
governmental investigation or arbitration against or affecting any Related
Person not previously disclosed in writing to Administrative Agent pursuant to
this Section 6.1 or any material development in action, suit, proceeding,
governmental investigation or arbitration already disclosed in either case which
is likely to constitute a Material Adverse Effect;
(vii) copies of all notices of default, notices, amendments, waivers
and other documents delivered or received by any Related Person pursuant to the
terms of the PGS Data Contract (excluding minor correspondence, notices of
delivery of data and the like); and
(viii) the creation, acquisition or other formation of a Subsidiary of
the Borrower.
Upon the occurrence of any of the foregoing the Related Persons will take all
necessary or appropriate steps to remedy promptly any such material adverse
change, Default, acceleration, default or Termination Event to protect against
any such adverse claim, to defend any such suit or proceeding, and to resolve
all controversies on account of any of the foregoing. Borrower will also notify
Administrative Agent in writing at least thirty (30) days prior to the date that
any Related Person changes its name or the location of its chief executive
office or principal place of business or the place where it keeps its books and
records concerning the Collateral, furnishing with such notice any necessary
financing statement amendments or requesting Administrative Agent and its
counsel to prepare the same.
(e) Maintenance of Properties. Each Related Person will maintain,
-------------------------
preserve, protect, and keep all Collateral and all other material property
(specifically excluding properties no longer capable of producing hydrocarbons
in economically reasonable quantities) used or useful in the conduct of its
business in good condition, ordinary wear and tear excepted, and in compliance
with all applicable laws, rules and regulations (except where non-compliance is
not reasonably likely to have a Material Adverse Effect), and will from time to
time make all repairs, renewals and replacements needed to enable the business
and operations carried on in connection therewith to be conducted at all times.
Without limitation of the foregoing, (i) each Related Person shall, or shall
50
make reasonable and customary efforts to, cause its oil and gas properties to be
maintained, developed, protected and operated in a good and workmanlike manner
in material compliance with all title documents, laws and contracts and (ii)
each Related Person shall, or shall make reasonable and customary efforts to,
use its reasonable efforts to cause its oil and gas properties to be developed
in accordance with Spinnaker Exploration Company's annual budget provided to
Administrative Agent (A) prior to the Closing Date and (B) subsequent to the
Closing Date pursuant to subsection (b)(i) above, in each case as such plans and
projections may be revised by Borrower thereafter (such revisions to be
delivered to Administrative Agent upon its reasonable request). All hydrocarbons
which any Related Person takes and/or markets from its oil and gas properties
shall be sold at such prices and on such terms as would be sought and obtained
by a reasonably prudent operator.
(f) Maintenance of Existence and Qualifications. Each Related Person
-------------------------------------------
will maintain and preserve its existence and its material rights, privileges,
permits, licenses and franchises necessary to conduct its business in full force
and effect and will qualify to do business in all states or jurisdictions where
required by applicable law, except where the failure so to qualify will not have
any Material Adverse Effect.
(g) Payment of Trade Debt, Taxes, etc. Each Related Person will (i)
---------------------------------
timely file (including any automatic extensions for filing) all required tax
returns; (ii) timely pay all taxes, assessments, and other governmental charges
or levies imposed upon it or upon its income, profits or property; (iii) within
ninety (90) days after the same becomes due pay all Indebtedness owed by it on
ordinary trade terms to vendors, suppliers and other Persons providing goods and
services used by it in the ordinary course of its business; (iv) pay all other
material claims (including, without limitation, claims for labor, services,
materials and supplies) that have become due and payable and that by law have or
may become a Lien on its such property or assets, prior to the time when any
penalty or fine may be incurred with respect thereto; and (v) maintain
appropriate accruals and reserves for all of the foregoing in accordance with
GAAP. Each Related Person may, however, delay paying or discharging and of the
foregoing so long as it is in good faith contesting the validity thereof by
appropriate proceedings and has set aside on its books adequate reserves
therefor.
(h) Insurance. Each Related Person will keep or cause to be kept
---------
adequately insured by financially sound and reputable insurers its equipment,
vehicles and all other property of a character usually insured by similar
Persons engaged in the same or similar businesses and reasonably satisfactory to
Administrative Agent. Each Related Person shall at all times maintain insurance
against its liability for injury to persons or property as is customary for the
industry, which insurance shall be by financially sound and reputable insurers
and reasonably satisfactory to Administrative Agent.
(i) Payment of Expenses. Whether or not the transactions contemplated
-------------------
by this Agreement are consummated, Borrower will promptly (and in any event,
within thirty (30) days after any invoice or other statement or notice) pay all
reasonable costs (excluding advertising costs) and expenses incurred by or on
behalf of (i) Administrative Agent and its Affiliates (including reasonable
attorneys' fees) in connection with (1) the negotiation, syndication,
preparation, execution and delivery of the Loan Documents, and any and all
consents, waivers or other
51
documents or instruments relating thereto, (2) the filing, recording, refiling
and re-recording of any Loan Documents and any other documents or instruments or
further assurances required to be filed or recorded or refiled or rerecorded by
the terms of any Loan Document, and (3) the borrowings hereunder and other
action reasonably required in the course of administration hereof, and (ii)
Administrative Agent or any Lender (including reasonable attorneys' fees) in
connection with the defense or enforcement of the Loan Documents or the defense
of Administrative Agent's or any Lender's exercise of its rights thereunder
(including costs and expenses of determining whether and how to carry out such
defense or enforcement).
(j) Preservation of Oil and Gas Properties. Borrower shall at all times
--------------------------------------
at Borrower's own expense use reasonable commercial efforts to do all things
reasonably necessary to keep unimpaired each Related Person's rights and
remedies in its oil and gas properties. Without limiting the foregoing, each
Related Person shall use reasonable commercial efforts to pay or cause to be
paid, promptly as and when due and payable, all delay rentals, royalties and
other indebtedness payable to the lessor of such oil and gas properties. Should
any adverse claim be made against, or a cloud develop upon, or material title
defect exist upon, the title of any Related Person to any part of its oil and
gas properties, such Related Person agrees that it will promptly defend such
claim or take appropriate action to remove such cloud or clear such title defect
at such Related Person's expense. Subject to Section 6.2(d), each Related Person
shall maintain at all times title to all their respective properties as
represented by Section 5.1(n), free and clear of Liens, other than the Liens
permitted by Section 6.2(b). Notwithstanding the foregoing, nothing in this
Section 6.1(j) shall prevent any Related Person from plugging and abandoning any
▇▇▇▇▇ if, based on its good faith assessment, it is economical to do so, or
prevent any Related Person from assigning leases by customary farm-ins or non-
consent provisions in the good faith exercise of the prudent operator standard.
(k) Compliance with Agreements and Law. Each Related Person will
----------------------------------
perform all material obligations it is required to perform under the terms of
each indenture, mortgage, deed of trust, security agreement, lease, franchise,
agreement, contract or other instrument or obligation to which it is a party or
by which it or any of its properties is bound. Each Related Person will conduct
its business and affairs in material compliance with all laws, regulations, and
orders applicable thereto, including Environmental Laws and ERISA.
Section 6.2 Negative Covenants. To conform with the terms and
------------------
conditions under which each Lender is willing to have credit outstanding to
Borrower, and to induce Administrative Agent and each Lender and Issuing Bank to
enter into this Agreement and make the Loans and issue or participate in Letters
of Credit, Borrower warrants, covenants and agrees that until the full and final
payment of the Obligations and the termination of this Agreement, unless
Majority Lenders have previously agreed otherwise:
(a) Indebtedness. No Related Person will create, incur, assume or
------------
suffer to exist any Indebtedness except:
(i) the Obligations;
52
(ii) Indebtedness arising under Hedging Agreements as permitted
hereunder;
(iii) miscellaneous items of Indebtedness not described in
subsections (i) and (ii), incurred for purchase money indebtedness, Capitalized
Lease Obligations and leases substantially equivalent to title retention or
conditional sales agreements, sales and leasebacks, and other Indebtedness
incurred in the ordinary course of business for the purchase of equipment,
computers, furniture, automobiles and similar incidentals (and not for working
capital or acquisitions) which do not in the aggregate (taking into account all
such Indebtedness of all Related Persons) exceed $1,000,000 at any one time
outstanding; and
(iv) Indebtedness owing to another Related Person permitted by
Section 6.2(g).
(b) Limitation on Liens. No Related person will create, incur, assume
-------------------
or suffer or permit to exist any Lien upon any of the properties or assets which
it now owns or hereafter acquires, except:
(i) Liens which secure Obligations and the obligations of the
Borrower pursuant to the Subject Hedging Agreements only;
(ii) Liens which secure Indebtedness permitted by Section
6.2(a)(iii);
(iii) Liens for taxes or assessments on real or personal property
which are not yet past due, or Liens for taxes and assessments on real or
personal property which are past due but for which adequate reserves with
respect thereto are maintained on its books in accordance with GAAP and which
are being diligently contested in good faith by appropriate proceedings and have
not proceeded to judgment;
(iv) imperfections and irregularities in title to any property
(which indirectly or together with any other such property has an aggregate fair
market value in excess of $500,000) which in the aggregate do not materially
impair the fair market value or use of such property for the purposes for which
it is or may reasonably be expected to be held;
(v) easements, exceptions, reservations, servitudes, permits,
surface leases and other rights in respect of surface leases, zoning, planning,
environmental and similar restrictions, laws or ordinances or agreements for the
purpose of pipelines, conduits, cables, wire communication lines, power lines
and substations, streets, roads, trails, walkways, drainage, irrigation, water,
and sewage purposes, dikes, canals, ditches, the removal of oil, gas, coal, or
other minerals, or for the joint or common use of real property or rights-of-way
and other like purposes affecting real property (which indirectly or together
with any other such property has an aggregate fair market value in excess of
$500,000) which in the aggregate, are not substantial in amount, and which do
not, in any case, materially burden or impair the fair market value or use of
such property for the purposes for which it is or may reasonably be expected to
be held;
53
(vi) non-consensual Liens imposed by law (other than a Lien imposed
by ERISA), including carrier's, mechanics', materialmen's, landlord's,
warehousemen's or other similar Liens, with respect to obligations not
incurred in connection with any violations of law and which are not
delinquent or, if delinquent, are being diligently contested in good faith
by appropriate proceedings, and for which adequate reserves with respect
thereto are maintained on its books in accordance with GAAP;
(vii) Liens consisting of pledges or deposits made in connection
with obligations under unemployment insurance, social security, workers'
compensation laws or similar legislation;
(viii) Liens consisting of pledges or deposits of property to secure
insurance in the ordinary course of business, the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases,
licenses, franchises, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
(ix) Liens consisting of deposits of property to secure statutory
obligations of Borrower in the ordinary course of its business;
(x) Liens consisting of pledges or deposits of cash or cash
equivalents to secure Hedging Agreements (other than the Subject Hedging
Agreements) with counterparties that are not Lenders are affiliates of
Lenders; provided that no more than $5,000,000 is subject to such Liens at
any one time in the aggregate; provided further that the conditions of
Section 6.2(n)(iii) are satisfied;
(xi) Liens consisting of deposits of property to secure (or in lieu
of surety, appeal or customer bonds) in proceedings to which Borrower is a
party in the ordinary course of its business;
(xii) Liens arising under operating, farmout, pooling or unitization
agreements of Borrower of the scope and nature customary in the oil and gas
industry; and
(xiii) Liens for lessor's royalties, overriding royalties, and
division orders and sales contracts covering hydrocarbons, reversionary
interests and similar burdens; and any operator's Liens or similar Liens
arising in the ordinary course of the oil and gas operations of the Related
Persons and securing obligations that are not past due;
provided that no Lien referred to above in subsections (ii) through (iii),
inclusive, shall (1) secure Indebtedness (except in subsection (ii)), (2) in the
aggregate materially detract from the value of the oil and gas properties of the
Related Persons or materially impair the use thereof in the operation of the
business of the Related Persons, (3) individually or in the aggregate, operate
to reduce the net revenue interest of the Related Persons in any of the
Mortgaged Property owned by the Related Persons to less than the net revenue
interest set forth in the Engineering Report most recently
54
delivered by Borrower to the Administrative Agent, or (4) be disadvantageous in
any material respect to Administrative Agent and the Lenders.
(c) Limitation on Fundamental Changes, Issuances of Securities. Except
----------------------------------------------------------
as expressly provided in this subsection, no Related Person shall enter into any
transaction or acquisition of a Person or merger, consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets. Any Subsidiary of
Borrower may, however, be merged into or consolidated with (i) another
Subsidiary of Borrower, so long as a direct wholly-owned Subsidiary of Borrower
which is a Guarantor is the surviving business entity, or (ii) Borrower, so long
as Borrower is the surviving business entity. In addition, any Person may be
merged into or consolidated with any Related Person so long as such Related
Person is the surviving business entity and no Default exists or will be created
thereby. Any wholly-owned Subsidiary of Borrower may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to Borrower or any other direct wholly-owned Subsidiary of Borrower
which is a Guarantor. Borrower will not issue any membership interests other
than common membership interests in Borrower and any options or warrants giving
the holders thereof only the right to acquire such interests. No Subsidiary of
Borrower will issue any additional securities or any options, warrants or other
rights to acquire such additional securities except to Borrower and only to the
extent not otherwise forbidden under the terms hereof. No Subsidiary of Borrower
will allow any diminution of Borrower's interest (direct or indirect) therein.
Borrower will not suffer to exist any sale, transfer or other disposition of the
stock of or rights with respect to Borrower or any Subsidiary, and Borrower will
not issue any additional securities or any options, warrants or other rights to
acquire such additional securities.
(d) Limitation on Sales of Property. No Related Person will sell,
-------------------------------
transfer, lease, exchange, alienate or dispose of any properties valued in the
Borrowing Base or any of its other assets or properties or any interest therein
except:
(i) equipment which is worthless or obsolete or which is
replaced by equipment of equal suitability and value;
(ii) inventory (including oil and gas sold as produced and
seismic data) which is sold for cash only in the ordinary course of
business on ordinary trade terms;
(iii) in the period subsequent to the then most recent
Determination Date, sales of interests in oil and gas properties, or
portions thereof, which are included in the Borrowing Base whose
value, if any, as set forth in the Engineering Report most recently
finished to Administrative Agent and Lenders as of the time of sale
does not in the aggregate in such period exceed $500,000. In the event
the Lenders, in their sole discretion, permit any Related Person to
sell any such properties which are included in the Borrowing Base in
excess of such $500,000 in any such period, (1) Administrative Agent
shall have the right to require a Borrowing Base re-determination, at
Borrower's cost, and (2) the Net Sales Proceeds therefrom shall be
applied as set forth in Section 2.10(b)(ii)(B). Any sale, transfer
55
or other disposition of Mortgaged Property shall contemporaneously
with the consummation of such sale, transfer or other disposition,
reduce the Borrowing Base then in effect by an amount equal to the
loan value (as reasonably determined by the Lenders in accordance with
the standards stated in this Agreement), attributable to all Mortgaged
Property so sold, transferred or disposed;
(iv) provided that no Event of Default exists and is
continuing, sales of interests in oil and gas properties, or portions
thereof, which are not proved reserves as shown in the most recent
Engineering Report delivered pursuant hereto; and
(v) second licenses to information under the PGS Data
Contract, provided that in the event a Borrowing Base Deficiency
exists and is continuing, Borrower shall prepay the Loans (and, upon
payment of all Loans,) shall in an amount equal to the lesser of such
Borrowing Base Deficiency or the Net Sales Proceeds from the sale of
such second licenses within one (1) Business Day of receipt of any
such net proceeds. Application of such Net Sales Proceeds shall be
applied to the principal of the Loans until the Loans are paid in full
and then to be held as LC Collateral in an amount equal to the
aggregate amount of Matured LC Obligations pursuant to Section 3.6.
(e) Limitation on Dividends and Redemption. No Related Person will
--------------------------------------
declare or pay any dividends on or make any other distribution in respect of any
interest in it, nor will any Related Person directly or indirectly make any
capital contribution to or purchase, redeem, acquire or retire any securities
issued by any Related Person (whether such interests are now or hereafter
issued, outstanding or created), or cause or permit any reduction or retirement
of the capital stock of any Related Person, except as expressly provided in this
section or to redeem, purchase or defease any Indebtedness which is subordinated
in right of payment to any Indebtedness hereunder. Such dividends,
distributions, contributions, purchases, redemptions, acquisitions, retirements
or reductions may be made (i) by any Related Person other than Borrower without
limitation to Borrower; (ii) by any Related Person to Guarantors which are
Subsidiaries of Borrower, to the extent that such Guarantors are using funds so
contributed or paid for activities in which Borrower could invest directly under
Section 6.2(f); (iii) by Borrower to the members of Borrower, provided such
distribution is solely used directly or indirectly to pay either current taxes
or employee compensation paid within the ordinary course of business (including)
bonuses and payments under employment contracts existing on the Closing Date)
and (iv) by Spinnaker Exploration Company as provided in Section 2(c) of the
Certificate of Designation, Preferences and Rights of Series A Convertible
Preferred Stock as such section exists on the Closing Date; provided that no
such dividends, distributions, contributions, purchases, redemptions,
acquisitions, retirements or reductions shall be permitted if (a) a Default or
Event of Default has occurred and is continuing, (b) a Default or Event of
Default would occur as a result thereof, or (c) a Borrowing Base Deficiency
exists. The Borrower may make a dividend in the form of the conversion of some
of its equity owned by Spinnaker Exploration Company to subordinated
Indebtedness owing to Spinnaker Exploration Company in the aggregate amount of
$25,000,000 to the extent such Indebtedness is permitted by Section 6.2(g)(ii)
hereof.
56
(f) Limitation on Investments. No Related Person will make any
-------------------------
significant acquisitions or, or capital contributions to, or other investments
in, any properties or Person, other than:
(i) Permitted Investments; investments permitted by Section
6.2(g); and demand and time deposits with The Frost National Bank not
to exceed $250,000 at any one time;
(ii) in its existing lines of business;
(iii) to Subsidiaries of the Borrower which are Guarantors;
(iv) pledges or deposits of cash or cash equivalents to secure
Hedging Agreements (other than the Subject Hedging Agreements) with
counterparties that are not Lenders or affiliates of Lenders; provided
that no more than $5,000,000 is subject to such Liens at any one time
in the aggregate; provided further that the conditions of Section
6.2(n)(iii) are satisfied;
(v) investments in connection with or related to farm-out,
farm-in, joint operating, joint venture or area of mutual interest
agreements, gathering systems, pipelines or other similar or customary
arrangements entered into in the ordinary course of business only
insofar as they do not (i) reduce the net revenue interest of the
Related Persons in any property included in the Borrowing Base below
the undivided net revenue interest specified for such Related Persons
in the most recent Engineering Report utilized by the Lenders in
determining the then effective Borrowing Base and/or (ii) increase the
undivided working interest without a corresponding increase in the net
revenue interest specified for such Related Persons in the most recent
Engineering Report utilized by the Lenders in determining the then
effective Borrowing Base.
Notwithstanding the foregoing, investments by Spinnaker Exploration
Company and WP Spinnaker Holdings, Inc. shall be limited to their interests in
Borrower or Permitted Investments and investments permitted by Section 6.2(g).
(g) Limitation on Credit Extensions. Except for Permitted
-------------------------------
Investments, no Related Person will extend credit, make advances or make loans
other than (i) normal and prudent extensions of credit to customers buying goods
and services in the ordinary course of business, which extensions shall not be
for longer periods than those extended by similar businesses operated in a
normal and prudent manner, (ii) loans to another Related Person that is a
Guarantor or to the Borrower (to the extent (and only to the extent) repayment
thereof shall be subordinated by an agreement in the form of Exhibit I to
---------
payment of the Obligations); provided that, in addition to the limits set forth
in Exhibit I, any payment of interest made before the Final Maturity Date on any
---------
such subordinated debt shall be permitted only if (A) such payment is solely
used directly or indirectly to pay either current taxes or employee compensation
paid within the ordinary course of business (including bonuses and payments
under employment contracts existing on the Closing Date and (B) no Borrowing
Base Deficiency exists, and (iii) advances to operators under operating
agreements entered into by the Borrower in the ordinary course of business.
57
(h) Transactions with Affiliates. No Related Person will engage in any
----------------------------
transaction with any of its Affiliates on terms which are less favorable to it
than those which would have been obtainable at the time in arm's-length dealing
with Persons other than such Affiliates, provided that such restrictions shall
not apply to transactions among Related Persons.
(i) Certain Contracts; Amendments; Multiemployer ERISA Plans. Except
--------------------------------------------------------
as expressly provided for in the Loan Documents, no Related Person will,
directly or indirectly, enter into, create, or otherwise allow to exist any
contract or other consensual restriction on the ability of any Subsidiary of
Borrower: (i) to pay dividends or make other distributions to Borrower, (ii) to
redeem equity interests held in it by Borrower, (iii) to repay loans and other
indebtedness owing by it to Borrower, or (iv) to transfer any of its assets to
Borrower. No Related Person will enter into any "take-or-pay"contract or other
contract or arrangement for the purchase of goods or services which obligates it
to pay for such goods or service regardless of whether they are delivered or
furnished to it. No Related Person will amend or permit any amendment to its
charter documents or bylaws or the PGS Data Contract to the material detriment
of Administrative Agent or any Lender. No Related Person will incur any
obligation to contribute to any "multiemployer plan" as defined in Section 4001
of ERISA.
(j) Fiscal Year. No Related Person will change its fiscal year.
-----------
(k) Current Ratio. The ratio of Borrower's consolidated current assets
-------------
as of the end of each Fiscal Quarter to Borrower's consolidated current
liabilities as of the end of such Fiscal Quarter will never be less than 1.00 to
1.00. For purposes of this subsection, Borrower's consolidated current ratio
will be calculated (i) including availability under this Agreement as current
assets, and (ii) excluding as current liabilities any payments of principal on
the Notes which are required to be repaid within one year from the time of
calculation.
(l) Interest Coverage Ratio. The ratio of the Borrower's EBITDAX to
-----------------------
Borrower's Consolidated Interest Expense shall not be less than 5.00 to 1.00 on
an annualized basis for (i) the Fiscal Quarter ending September 30, 2000; (ii)
the two Fiscal Quarters ending December 31, 2000; (iii) the three Fiscal
Quarters ending March 31, 2001; and (iv) any period of four consecutive Fiscal
Quarters ending on or subsequent to June 30, 2001.
(m) Business Activities. The Borrower will not, and will not permit
-------------------
any of its Subsidiaries to, engage in any business activities except the
exploration for, production of and sale of oil and gas, and such activities as
may be incidental or related thereto.
(n) Hedging. Borrower will not enter into any Hedging Agreement except
-------
for Hedging Agreements that do not violate the following requirements:
(i) at no time will the aggregate amounts maturing in any month
under any floor hedging contracts or collar hedging contracts entered
into prior to the date hereof exceed at any time one hundred percent
(100%) of (x) the estimated production for such month from
58
proved producing reserves of Related Persons, less (y) any such
estimated production subject to forward sales transactions permitted
under clause (ii) below.
(ii) at no time will amounts maturing in any month under any
forward sales transactions, calls or other derivative products (except
as expressly provided above) for the sale of crude oil and/or natural
gas exceed at any time fifty percent (50%) of (x) the estimated
production for such month from proved producing reserves of Related
Persons, less (y) any such estimated production subject to floor or
collar permitted by clause (i) immediately preceding oil and gas
contracts permitted under clause (i) above.
(iii) at no time will any Hedging Agreement of any nature
(including any such contracts described in clauses (i) and (ii) above)
(x) contain any term or provision which could require Borrower to meet
margin calls, or otherwise to put up any money, Letter of Credit or
other asset against the event of its nonperformance, prior to actual
default in performing its obligations thereunder where the aggregate
amount of any such money, Letter of Credit and other assets exceeds
$5,000,000 (or, if less, the amount available to Borrower hereunder
immediately prior to putting up such money, Letter of Credit or other
asset) or (y) have a counterparty with a minimum long-term unsecured
Indebtedness rating less than "BBB" by Standard & Poors Corporation or
"Baa" by ▇▇▇▇▇'▇ Investors Services, Inc.
ARTICLE VII - Security
--------
Section 7.1 The Security. The Obligations and the obligations of the
------------
Borrower to Bank of Montreal pursuant to the Subject Hedging Agreements will be
secured by the Security Documents listed in the Security Schedule and any
additional Security Documents hereafter delivered by any Related Person and
accepted by Administrative Agent.
Section 7.2 Agreement to Deliver Security Documents. Borrower agrees
---------------------------------------
to deliver and to cause its Subsidiaries to deliver, to further secure the
Obligations and the obligations of the Borrower to Bank of Montreal pursuant to
the Subject Hedging Agreements whenever requested by Administrative Agent in its
sole and absolute discretion, deeds of trust, mortgages, chattel mortgages,
security agreements, financing statements and other Security Documents in form
and substance satisfactory to Administrative Agent for the purpose of granting,
confirming, and perfecting first and prior liens or security interests in at
least eighty percent (80%) of the present value of the Borrower's proved oil and
gas properties (which shall include at least ninety-five percent (95%) of the
proved developed producing reserves) to which value is given in the
determination of the then current Borrowing Base and all of the equity interests
of the Borrower and is Subsidiaries now owned or hereafter acquired by any of
the Related Persons, subject only to Liens permitted by Section 6.2(b) hereof.
Borrower also agrees to deliver to the extent not already delivered , whenever
requested by Administrative Agent in its sole and absolute discretion (a)
favorable title information (including, if reasonably requested by the
Administrative Agent, title opinions) acceptable to Administrative Agent with
respect to any Related Person's properties and interests covering oil and gas
properties as described on Schedule 3 hereto (as such Schedule may be amended,
supplemented or otherwise modified from time to time) constituting at least 80%
of
59
the present value, determined by the Lenders in their sole and absolute
discretion and in accordance with their normal practices and standards for oil
and gas loans as it exists at the particular time, of the Related Persons'
Properties and demonstrating that such Related Person has good and defensible
title to such properties and interests, free and clear of all Prohibited Liens
and covering such other matters as Administrative Agent may reasonably request
and (b) favorable opinions of counsel satisfactory to Administrative Agent in
its sole discretion opining that the forms of Mortgage are sufficient to create
valid first deed of trust or mortgage liens in such properties and interests and
first priority assignments of and security interests in the oil and gas
attributable to such properties and interests and proceeds thereof. In the case
of any Related Person granting a Lien in favor of Administrative Agent upon any
assets having a present value in excess of $1,000,000 located in a new
jurisdiction, Borrower will at its own expense, obtain and furnish to
Administrative Agent all such opinions of legal counsel as Administrative Agent
may reasonably request in connection with any such security, instrument or act
of such Related Person.
Section 7.3 Perfection and Protection of Security Interests and Liens.
---------------------------------------------------------
Borrower will from time to time deliver to Administrative Agent any financing
statements, continuation statements, extension agreements and other documents,
properly completed and executed (and acknowledged when required) by the Related
Persons in form and substance satisfactory to Administrative Agent, which
Administrative Agent requests for the purpose of perfecting, confirming, or
protecting any Liens or other rights in Collateral securing any Obligations.
Section 7.4 Bank Accounts; Offset. To ensure the repayment of the
---------------------
Obligations, Borrower hereby grants to Administrative Agent, each of its
Affiliates and each Lender and Issuing Bank a security interest, a lien, and a
right of offset, each of which shall be in addition to all other interests,
liens, and rights of Administrative Agent or any Lender or Issuing Bank at
common law, under the Loan Documents, or otherwise, and each of which shall be
upon and against (a) any and all moneys, securities or other property (and the
proceeds therefrom) of Borrower now or hereafter held or received by or in
transit to Administrative Agent or any Lender or Issuing Bank from or for the
account of Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, (b) any and all deposits (general or special, time or
demand, provisional or final), other than deposits of funds held by Borrower for
the benefit of third parties, of Borrower with Administrative Agent or any
Lender or Issuing Bank, and (c) any other credits and claims of Borrower at any
time existing against Administrative Agent or any Lender or Issuing Bank,
including claims under certificates of deposit. At any time and from time to
time after the occurrence of any Default, each of Administrative Agent and any
Lender and Issuing Bank is hereby authorized to foreclose upon, or to offset
against the Obligations then due and payable (in either case without notice to
Borrower), any and all items hereinabove referred to. The remedies of
foreclosure and offset are separate and cumulative, and either may be exercised
independently of the other without regard to procedures or restrictions
applicable to the other.
Section 7.5 Additional Subsidiaries. Within five (5) Business Days
-----------------------
after Borrower or any Subsidiary creates, acquires or otherwise forms a
Subsidiary, Borrower shall:
60
(a) execute and deliver, or cause the Person owning all of the
outstanding equity interests in such Subsidiary to execute and deliver, to
Administrative Agent on behalf of the Lenders, a Pledge Agreement, pursuant to
which all of the outstanding equity interests in such Subsidiary shall be
pledged to Administrative Agent on behalf of the Lenders, together with any
certificates representing all equity interests so pledged, if any, and for each
such certificate representing shares of stock, a stock power executed in blank;
(b) cause such Subsidiary to execute and deliver to Administrative
Agent on behalf of the Lenders (i) a guaranty (ii) an agreement substantially
similar to the security agreements executed and delivered on the Closing Date
and (iii) a Mortgage as to all real property interests containing any proved
reserves owned or leased by such Subsidiary;
(c) cause such Subsidiary to execute and deliver to Administrative
Agent on behalf of the Lenders appropriate financing statements covering the
Collateral of such Subsidiary;
(d) deliver or cause to be delivered to Administrative Agent on behalf
of the Lenders all agreements, documents, instruments and other writings
described in Section 4.1(c)(i), (d) and (k), with respect to such Subsidiary;
and
(e) deliver or cause to be delivered to Administrative Agent on behalf
of the Lenders all such information regarding the condition (financial or
otherwise), business and operations of such Subsidiary as Administrative Agent
or any Lender through Administrative Agent may reasonably request.
Section 7.6 Production Proceeds. Notwithstanding that, by the terms of
-------------------
the various Security Documents, Related Persons are and will be assigning to
Administrative Agent and Lenders all of the "Production Proceeds" (as defined
therein) accruing to the property covered thereby, so long as no Event of
Default has occurred Related Persons may continue to receive from the purchasers
of production all such Production Proceeds, subject, however, to the Liens
created under the Security Documents, which Liens are hereby affirmed and
ratified. Upon the occurrence of an Event of Default, Administrative Agent and
Lenders may exercise all rights and remedies granted under the Security
Documents, including the right to obtain possession of all Production Proceeds
then held by any Related Person or to receive directly from the purchasers of
production all other Production Proceeds. In no case shall any failure, whether
purposed or inadvertent, by Administrative Agent or Lenders to collect directly
any such Production Proceeds constitute in any way a waiver, remission or
release of any of their rights under the Security Documents, nor shall any
release of any Production Proceeds by Administrative Agent or Lenders to any
Related Person constitute a waiver, remission, or release of any other
Production Proceeds or of any rights of Administrative Agent or Lenders to
collect other Production Proceeds thereafter.
ARTICLE VIII - Events of Default and Remedies
------------------------------
Section 8.1 Events of Default. Each of the following events constitutes
-----------------
an Event of Default under this Agreement:
61
(a) Any Related Person fails to pay any interest within three (3) days
of the date when due, or any Related Person fails to pay any other Obligation
when due and payable or fails to make any payment pursuant to a Subject Hedging
Agreement, whether at a date for the payment of a fixed installment or as a
contingent or other payment becomes due and payable or as a result of
acceleration or otherwise;
(b) Any Related Person fails (other than as referred to in subsection
(a) above) to duly observe, perform or comply with any covenant, agreement,
condition or provision of Section 6.2.
(c) Any Related Person fails (other than as referred to in subsection
(a) and (b) above) to duly observe, perform or comply with any covenant,
agreement, condition or provision of this Agreement or any other Loan Document
or the Subject Hedging Agreements and such failure remains unremedied for a
period of thirty (30) days from such failure or, in the case of any Subject
Hedge Agreement, for the applicable grace period provided therein;
(d) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of any Related Person in connection with any
Loan Document shall prove to have been false or incorrect in any material
respect on any date on or as of which made, or any Loan Document at any time
ceases to be valid, binding and enforceable as warranted in Section 5.1(e) for
any reason other than its release or subordination by Administrative Agent, or
any Related Person or any Affiliate thereof shall so assert;
(e) [Reserved]
(f) Any Related Person fails to duly comply with any material term of
any agreement or instrument, if such agreement or instrument is materially
significant to Spinnaker Exploration Company on a consolidated basis, and such
failure is not remedied within the applicable period of grace (if any) provided
in such agreement or instrument;
(g) Any Related Person shall (i) fail to pay Indebtedness having a
principal amount in excess of $1,000,000 in the aggregate (other than the
amounts referred to in Section 8.1 (a)), or any interest or premium thereon,
when due (or, if permitted by the terms of the relevant document, within any
applicable grace period), whether such Indebtedness shall become due by
scheduled maturity, by required prepayment, by acceleration, by demand or
otherwise; or (ii) fail to perform any term, covenant or condition on its part
to be performed under any agreement or instrument evidencing, securing or
relating to Indebtedness having a principal amount in excess of $1,000,000 in
the aggregate, when required to be performed, and such failure shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such failure is to accelerate, or to permit the
holder or holders of such Indebtedness to accelerate, the maturity of such
Indebtedness;
(h) A Change in Control shall occur;
62
(i) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess of
$100,000 exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, or (ii) any Termination Event occurs
with respect to any ERISA Plan and the then current value of such ERISA Plan's
benefit liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than $100,000 (or
in the case of a Termination Event involving the withdrawal of a substantial
employer, the withdrawing employer's proportionate share of such excess exceeds
such amount);
(j) The PGS Data Contract shall terminate, expire or cease to be in
full force and effect and the Borrower is required to return or is prohibited
from using substantially all of the data received under such contract;
(k) Any Related Person:
(i) suffers the entry against it of a judgment, decree or order
for relief by a court of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or
other similar law of any jurisdiction now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended, or
has any such proceeding commenced against it which remains undismissed
for a period of sixty (60) days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended; or applies for
or consents to the entry of an order for relief in an involuntary case
under any such law; or makes a general assignment for the benefit of
creditors; or fails generally to pay (or admits in writing its
inability to pay) its debts as such debts become due; or takes action
to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within sixty (60) days after the making
hereof, or such appointment or taking possession is at any time
consented to, requested by, or acquiesced to by it; or
(iv) suffers the entry against it of one or more final judgments,
orders, writs, warrants of attachment or similar process for the
payment of money in excess of $100,000 in the aggregate, unless the
same is discharged within thirty (30) days after the date of entry
thereof or an appeal or appropriate proceeding for review thereof is
taken within such period and a stay of execution pending such appeal is
obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any court against all or any substantial part
of its assets or any part of the Collateral, and
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such writ or warrant of attachment or any similar process is not stayed
or released within fifteen (15) days after the entry or levy thereof or
after any stay is vacated or set aside; or
(l) any of the Security Documents shall cease, for any reason, to be in
full force and effect, or any Related Person or any Affiliate thereof shall so
assert or any of the security interests created by the Security Documents shall
cease to be enforceable and of the same effect and priority purported to be
created thereby, and such shall not be remedied with fifteen (15) days after
notice from Administrative Agent.
Upon the occurrence of an Event of Default described in subsection
(k)(i), (k)(ii) or (k)(iii) of this section, all of the Obligations shall
thereupon be immediately due and payable, without demand, presentment, notice of
demand or of dishonor and nonpayment, protest, notice of protest, notice of
intention to accelerate, declaration or notice of acceleration, or any other
notice or declaration of any kind, all of which are hereby expressly waived by
Borrower and each other Related Person who at any time ratifies or approves this
Agreement. During the continuance of any other Event of Default, Administrative
Agent at any time and from time to time may (and upon written instructions from
Majority Lenders, Administrative Agent shall), without notice to Borrower and
any other Related Person, declare any or all of the Obligations immediately due
and payable, and all such Obligations shall thereupon be immediately due and
payable (including the Obligation of the Borrower to pay all LC Obligations
pursuant to Section 3.6(b)), without demand, presentment, notice of demand or of
dishonor and nonpayment, protest, notice of protest, notice of intention to
accelerate, declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived by Borrower
and each other Related Person who at any time ratifies or approves this
Agreement. After any such acceleration (whether automatic or due to any
declaration by Administrative Agent), any obligation of any Lender to make any
further Loans or Issuing Bank to issue any additional Letters of Credit shall be
permanently terminated.
Section 8.2 Remedies. If any Default shall occur, each Lender may
--------
protect and enforce its rights under the Loan Documents by any appropriate
proceedings, including proceedings for specific performance of any covenant or
agreement contained in any Loan Document, and each Lender may enforce the
payment of any Obligations due it; or enforce any other legal or equitable right
which it may have. All rights, remedies and powers conferred upon Administrative
Agent and Lenders under the Loan Documents shall be deemed cumulative and not
exclusive of any other rights, remedies or powers available under the Loan
Documents or at law or in equity.
Section 8.3 Payment of Expenses, Indemnities, etc. The Borrower agrees:
-------------------------------------
(a) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Administrative Agent in the
administration (both before and after the execution hereof and including advice
of counsel as to the rights and duties of the Administrative 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, the reasonable
64
fees and disbursements of counsel and other outside consultants for the
Administrative Agent and, in the case of enforcement, the reasonable fees and
disbursements of counsel for the Administrative Agent and any of the Lenders);
and promptly reimburse the Administrative Agent for all amounts expended,
advanced or incurred by the Administrative Agent or the Lenders to satisfy any
obligation of the Borrower under this Agreement or any other Loan Document,
including without limitation, all costs and expenses of foreclosure;
(b) TO INDEMNIFY THE ADMINISTRATIVE 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 RELATED PERSON AND
THE SUBSIDIARIES, (IV) THE FAILURE OF ANY RELATED PERSON TO COMPLY WITH THE
TERMS OF ANY OTHER LOAN DOCUMENT OR THIS AGREEMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OF ANY RELATED PERSON 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, (VII) ANY ASSERTION THAT THE LENDERS WERE NOT
ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE LOAN DOCUMENTS OR
(VIII) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION,
THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER REASONABLE
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 ANY
INDEMNIFIED PARTY; AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE INDEMNIFIED
PARTY 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 ANY
RELATED PERSON OR ANY OF ITS PROPERTIES, INCLUDING WITHOUT LIMITATION, THE
TREATMENT OR DISPOSAL OF
65
HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH
OR NON-COMPLIANCE BY ANY RELATED PERSON WITH ANY ENVIRONMENTAL LAW APPLICABLE TO
ANY RELATED PERSON, (III) DUE TO PAST OWNERSHIP BY ANY RELATED PERSON OF ANY OF
ITS PROPERTIES OR PAST ACTIVITY ON ANY OF ITS PROPERTIES WHICH, THOUGH LAWFUL
AND FULLY PERMISSIBLE AT THE TIME, RESULTS 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 ANY RELATED PERSON 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
8.3(C) 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, OR THEIR AGENTS OR REPRESENTATIVES, SHALL HAVE
OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF
FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) 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, without limitation, the maximum
potential claims pending or to the knowledge of the indemnitee threatened
against the Indemnified Party to be indemnified pursuant to this Section 8.3.
(e) In the case of any indemnification hereunder, the Administrative
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.
(f) 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
66
OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SUCH INDEMNIFIED PARTY.
ARTICLE IX - Administrative Agent
--------------------
Section 9.1 Appointment and Authority. Each Lender hereby irrevocably
-------------------------
authorizes Administrative Agent, and Administrative Agent hereby undertakes, to
receive payments of principal, interest and other amounts due hereunder as
specified herein and to take all other actions and to exercise such powers under
the Loan Documents as are specifically delegated to Administrative Agent by the
terms hereof or thereof, together with all other powers reasonably incidental
thereto. The relationship of Administrative Agent to Lenders is only that of one
commercial bank acting as administrative agent for others, and nothing in the
Loan Documents shall be construed to constitute Administrative Agent a trustee
or other fiduciary for any holder of any of the Notes or of any participation
therein nor to impose on Administrative Agent duties and obligations other than
those expressly provided for in the Loan Documents. With respect to any matters
not expressly provided for in the Loan Documents and any matters which the Loan
Documents place within the discretion of Administrative Agent, Administrative
Agent shall not be required to exercise any discretion or take any action, and
it may request instructions from Lenders with respect to any such matter, in
which case it shall be required to act or to refrain from acting (and shall be
fully protected and free from liability to all Lenders in so acting or
refraining from acting) upon the instructions of Majority Lenders (including
itself), provided, however, that Administrative Agent shall not be required to
take any action which exposes it to a risk of personal liability that it
considers unreasonable or which is contrary to the Loan Documents or to
applicable law. Upon receipt by Administrative Agent from Borrower of any
communication calling for action on the part of Lenders or upon notice from any
Lender to Administrative Agent of any Default or Event of Default,
Administrative Agent shall promptly notify each Lender thereof.
Section 9.2 Exculpation, Administrative Agent's Reliance, Etc. None of
-------------------------------------------------
the Administrative Agent, any Arranger or any of the directors, officers,
agents, attorneys, or employees of either, shall be liable for any action taken
or omitted to be taken by any of them under or in connection with the Loan
Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that each shall be
liable for its own gross negligence or willful misconduct. Without limiting the
generality of the foregoing, (a) Administrative Agent may treat the payee of any
Note as the holder thereof until Administrative Agent receives written notice of
the assignment or transfer thereof in accordance with this Agreement, signed by
such payee and in form satisfactory to Administrative Agent; (b) each of the
Administrative Agent and each Arranger may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) neither the Administrative Agent nor any Arranger makes any
warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with the Loan Documents; (d) neither the Administrative Agent nor any
Arranger shall have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of the Loan Documents on
the part of any Related Person, or to inspect the property
67
(including the books and records) of any Related Person; (e) neither the
Administrative Agent nor any Arranger shall be responsible to any Lender for the
due execution, legality, validity, enforceability, genuineness, sufficiency or
value of any Loan Document or any instrument or document furnished in connection
therewith; (f) may rely upon the representations and warranties of the Related
Persons and the Lenders in exercising its powers hereunder; and (g) neither the
Administrative Agent nor any Arranger shall incur any liability under or in
respect of the Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (including any telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or Persons.
Section 9.3 Lenders' Credit Decisions. Each Lender acknowledges that it
-------------------------
has, independently and without reliance upon Administrative Agent, any Arranger
or any other Lender, made its own analysis of Borrower and the transactions
contemplated hereby and its own independent decision to enter into this
Agreement and the other Loan Documents. Each Lender also acknowledges that it
will independently and without reliance upon Administrative Agent, any Arranger
or any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents.
Section 9.4 Indemnification. Each Lender agrees to indemnify
---------------
Administrative Agent and each Arranger (to the extent not reimbursed by Borrower
within ten (10) days after demand) from and against such Lenders' Percentage
Share of any and all liabilities, obligations, claims, losses, damages,
penalties, fines, actions, judgments, suits, settlements, costs, expenses or
disbursements (including reasonable fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever (in this section collectively called
"liabilities and costs") which to any extent (in whole or in part) may be
imposed on, incurred by, or asserted against Administrative Agent or any
Arranger growing out of, resulting from or in any other way associated with any
of the Collateral, the Loan Documents and the transactions and events (including
the enforcement thereof) at any time associated therewith or contemplated
therein (including any violation or noncompliance with any Environmental Laws by
any Person or any liabilities or duties of any Person with respect to Hazardous
Materials found in or released into the environment). THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY
WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY ADMINISTRATIVE AGENT OR ANY ARRANGER, PROVIDED ONLY THAT
NO LENDER SHALL BE OBLIGATED UNDER THIS SECTION TO INDEMNIFY ADMINISTRATIVE
AGENT OR ANY ARRANGER FOR THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS
WHICH IS PROXIMATELY CAUSED BY SUCH PERSON'S OWN INDIVIDUAL GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL JUDGMENT. Cumulative of the
foregoing, each Lender agrees to reimburse Administrative Agent promptly upon
demand for such Lender's Percentage Share of any costs and expenses to be paid
to Administrative Agent by Borrower under Section 6.1(i) to the extent that
Administrative Agent is not timely reimbursed for such expenses by Borrower as
provided in such section. As used in this section the term "Administrative
Agent"
68
and "Arranger" shall refer not only to the Person designated as such in
Section 1.1. but also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Person.
Section 9.5 Rights as Lender. In its capacity as a Lender,
----------------
Administrative Agent shall have the same rights and obligations as any Lender
and may exercise such rights as though it were not Administrative Agent. TD, any
successor Administrative Agent, or any of their respective Affiliates may accept
deposits from, lend money to, act as Trustee under indentures of, and generally
engage in any kind of business with any Related Person or their Affiliates,
including without limitation equity investments by TD or any of its Affiliates,
all as if TD were not Administrative Agent hereunder and without any duty to
account therefor to any other Lender.
Section 9.6 Sharing of Set-Offs and Other Payments. Each of
--------------------------------------
Administrative Agent and Lender agrees that if it shall, whether through the
exercise of rights under Security Documents or rights of banker's lien, set off,
or counterclaim against any Related Person or otherwise, obtain payment of a
portion of the aggregate Obligations owed to it which, taking into account all
distributions made by Administrative Agent under Section 2.11, causes
Administrative Agent or such Lender to have received more than it would have
received had such payment been received by Administrative Agent and distributed
pursuant to Section 2.11, then (a) it shall be deemed to have simultaneously
purchased and shall be obligated to purchase interests in the Obligations as
necessary to cause Administrative Agent and all lenders to share all payments as
provided for in Section 2.11, and (b) such other adjustments shall be made from
time to time as shall be equitable to ensure that Administrative Agent and all
Lenders share all payments of Obligations as provided in Section 2.11; provided,
however, that nothing herein contained shall in any way affect the right of
Administrative Agent or any Lender to obtain payment (whether by exercise of
rights of banker's lien, set-off or counterclaim or otherwise) of indebtedness
other than the Obligations. Borrower expressly consents to the foregoing
arrangements and agrees that any holder of any such interest or other
participation in the Obligations, whether or not acquired pursuant to the
foregoing arrangements, may to the fullest extent permitted by law exercise any
and all rights of banker's lien, set-off, or counterclaim as fully as if such
holder were a holder of the Obligations in the amount of such interest or other
participation. If all or any part of any funds transferred pursuant to this
section is thereafter recovered from the seller under this section which
received the same, the purchase provided for in this section shall be deemed to
have been rescinded to the extent of such recovery, together with interest, if
any, if interest is required pursuant to court order to be paid on account of
the possession of such funds prior to such recovery.
Section 9.7 Investments. Whenever Administrative Agent in good faith
-----------
determines that it is uncertain about how to distribute to Lenders any funds
which it has received, or whenever Administrative Agent in good faith determines
that there is any dispute among Lenders about how such funds should be
distributed, Administrative Agent may choose to defer distribution of the funds
which are the subject of such uncertainty or dispute. If Administrative Agent in
good faith believes that the uncertainty or dispute will not be promptly
resolved, or if Administrative Agent is otherwise required to invest funds
pending distribution to Lenders, Administrative Agent shall invest such funds
pending distribution; all interest on any such investment shall be distributed
upon the distribution of such investment and in the same proportion and to the
same Persons as such
69
investment. All moneys received by Administrative Agent for distribution to
Lenders (other than to the Person which is Administrative Agent in its separate
capacity as a Lender) shall be held by Administrative Agent pending such
distribution solely as Administrative Agent for such Lenders, and Administrative
Agent shall have no equitable title to any portion thereof.
Section 9.8 Benefit of Article IX. The provisions of this Article
---------------------
(other than the following Section 9.9) are intended solely for the benefit of
Administrative Agent and Lenders, and no Related Person shall be entitled to
rely on any such provisions or assert any such provision in a claim or defense
against Administrative Agent or any Lender. Administrative Agent and Lenders may
waive or amend such provisions as they desire without any notice to or consent
of Borrower or any other Related Person.
Section 9.9 Resignation. Administrative Agent may (and upon written
-----------
direction of Directing Lenders collectively having Percentage Shares totaling in
the aggregate (i) prior to the occurrence of an Event of Default, eighty percent
(80%) of all Directing Lenders' Percentage Shares and (ii) upon the occurrence
and during the continuance of an Event of Default, at least sixty-six and
two-thirds percent (66 2/3%) of all Directing Lenders' Percentage Shares,
Administrative Agent shall) resign at any time by giving written notice thereof
to Lenders and Borrower. For purposes of the foregoing sentence, "Directing
Lenders" means all Lenders other than Administrative Agent. Each such notice
shall set forth the date of such resignation. Upon any such resignation Majority
Lenders shall have the right to appoint a successor Administrative Agent,
subject to Borrower's written consent, such consent not to be unreasonably
withheld. A successor must be appointed for any retiring Administrative Agent,
and such Administrative Agent's resignation shall become effective when such
successor accepts such appointment. If, within thirty (30) days after the date
of the retiring Administrative Agent's resignation, no successor Administrative
Agent has been appointed and has accepted such appointment then the refiring
Administrative Agent may appoint a successor Administrative Agent, which shall
be a commercial bank organized or licensed to conduct a banking or trust
business under the laws of the United States of America or of any state thereof.
Upon the acceptance of any appointment as Administrative Agent hereunder by a
successor Administrative Agent, the retiring Administrative Agent shall be
discharged from its duties and obligations under this Agreement and other Loan
Documents. After any retiring Administrative Agent's resignation hereunder the
provisions of this Article IX shall continue to inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent
under the Loan Documents.
Section 9.10 Bank of Montreal. Bank of Montreal hereby irrevocably
----------------
authorizes TD, and TD hereby undertakes, to act as agent for Bank of Montreal
for purposes of the Security Documents and the exercise of such rights and
powers pursuant to the Security Documents as are specifically delegated to TD as
agent thereunder by the terms thereof, together with all other powers reasonably
incidental thereto. The relationship of TD in its capacity as agent for Bank of
Montreal is only that of one commercial bank acting as agent for others, and
nothing herein, in any other Loan Document or in any Security Document shall be
construed to constitute TD in such capacity as a trustee or other fiduciary for
Bank of Montreal. The provisions of this Article IX shall govern the
relationship of TD, in its capacity as agent, and Bank of Montreal, except: (i)
each reference to the
70
"Administrative Agent" shall be deemed to be a reference to TD in its capacity
as agent pursuant to the Security Documents and (ii) for purposes of this
Section 9.10, Bank of Montreal shall have the obligations of a Lender which are
set forth in Sections 9.2 and 9.4 to the extent of its portion of Indebtedness
secured by the Security Documents.
Section 9.11 Documentation Agent. The Documentation Agent shall not
-------------------
have any obligations, liabilities, responsibilities or duties under this
Agreement or the other Loan Documents. Without limiting the foregoing, the
Documentation Agent shall not have or be deemed to have any fiduciary
relationship with any Lender or the Administrative Agent. Each Lender
acknowledges that it has not relied, and will not rely, on any of the Lenders so
identified or on the Documentation Agent in deciding to enter into this
Agreement or in taking or not taking action hereunder.
ARTICLE X - Miscellaneous
-------------
Section 10.1 Waivers and Amendments; Acknowledgments.
---------------------------------------
(a) Waivers and Amendments. No failure or delay (whether by course of
----------------------
conduct or otherwise) by Administrative Agent or any Lender in exercising any
right, power or remedy which Administrative Agent or such Lender may have under
any of the Loan Documents shall operate as a waiver thereof or of any other
right, power or remedy, nor shall any single or partial exercise by
Administrative Agent or such Lender of any such right, power or remedy preclude
any other or further exercise thereof or of any other right, power or remedy. No
waiver of any provision of any Loan Document and no consent to any departure
therefrom shall ever be effective unless it is in writing and signed as provided
below in this section, and then such waiver or consent shall be effective only
in the specific instances and for the purposes for which given and to the extent
specified in such writing. No notice to or demand on any Related Person shall in
any case of itself entitle any Related Person to any other or further notice or
demand in similar or other circumstances. This Agreement and the other Loan
Documents set forth the entire understanding between the parties hereto with
respect to the transactions contemplated herein and therein and supersede all
prior discussions and understandings with respect to the subject matter hereof
and thereof, and no waiver, consent, release, modification or amendment or of
supplement to this Agreement or the other Loan Documents shall be valid or
effective against any party hereto unless the same is in writing and signed by
(i) if such party is Borrower, by Borrower, (ii) if such party is Administrative
Agent, by Administrative Agent, (iii) if such party is a Lender, by such Lender
or by Administrative Agent on behalf of Lenders with the written consent of
Majority Lenders and (iv) if such party is Bank of Montreal, in its capacity as
counterparty to the Secured Hedging Agreements, by Bank of Montreal.
Notwithstanding the foregoing or anything to the contrary herein, Administrative
Agent shall not without the prior consent of each individual Lender, execute and
deliver on behalf of such Lender any waiver or amendment which would: (1) waive
any of the conditions specified in Article IV, (2) increase the Maximum Loan
Amount applicable to Lender, as the case may be, or subject such Lender to any
additional obligations, (3) reduce any fees hereunder, or the principal of, or
interest on, such Lender's Notes, (4) postpone any date fixed for any payment of
any fees hereunder, or principal of, or interest on, such Lender's Notes, (5)
amend the definition herein of "Majority Lenders" or otherwise change the
aggregate amount of Percentage Shares which is
71
required for Administrative Agent, Lenders or any of them to take any particular
action under the Loan Documents, (6) release Borrower from its obligation to pay
such Lender's Notes or any Guarantor from its guaranty of such payment, (7)
reduce the number of Lenders required to agree on the Borrowing Base, (8) reduce
the number of Lenders required to or to consent to an assignment or transfer of
any Related Person's rights, duties or obligations under Section 10.4 to less
than all Lenders, or (9) in any period between Determination Dates, release any
Collateral valued in the Borrowing Base whose aggregate value exceeds $500,000.
(b) Acknowledgments and Admissions. Borrower hereby represents,
------------------------------
warrants, acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
representation, warranty, covenant or undertaking by Administrative Agent or any
Lender, whether written, oral or implicit, other than as expressly set out in
this Agreement or in another Loan Document delivered on or after the date
hereof, (iii) there are no representations, warranties, covenants, undertakings
or agreements by Administrative Agent or any Lender as to the Loan Documents
except as expressly set out in this Agreement or in another Loan Document
delivered on or after the date hereof, (iv) neither Administrative Agent nor any
Lender has any fiduciary obligation toward Borrower with respect to any Loan
Document or the transactions contemplated thereby, (v) the relationship pursuant
to the Loan Documents between Borrower, on one hand, and Administrative Agent
and each Lender, on the other hand, is and shall be solely that of debtor and
creditor, respectively, (vi) no partnership or joint venture exists with respect
to the Loan Documents between any of Borrower, Administrative Agent and Lenders,
(vii) Administrative Agent is not Borrower's Administrative Agent, but
Administrative Agent for Lenders, (viii) should an Event of Default or Default
occur or exist Administrative Agent and each Lender will determine in its sole
discretion and for its own reasons what remedies and actions it will or will,
not exercise or take at that time, (ix) without limiting any of the foregoing,
Borrower is not relying upon any representation or covenant by Administrative
Agent or any Lender, or any representative thereof and no such representation or
covenant has been made, that Administrative Agent or any Lender will, at the
time of an Event of Default or Default, or at any other time, waive, negotiate,
discuss, or take or refrain from taking any action permitted under the Loan
Documents with respect to any such Event of Default or Default or any other
provision of the Loan Documents, and (x) Administrative Agent and all Lenders
have relied upon the truthfulness of the acknowledgments in this section in
deciding to execute and deliver this Agreement and to make their Loans.
Section 10.2 Survival of Agreements; Cumulative Nature. All of the
-----------------------------------------
Related Persons' various representations, warranties, covenants and agreements
in the Loan Documents shall survive the execution and delivery of this Agreement
and the other Loan Documents and the performance hereof and thereof, including
the making or granting of the Loans and the delivery of the Notes and the other
Loan Documents, and shall further survive until all of the Obligations are paid
in full to Administrative Agent, Lenders and Issuing Bank and all of
Administrative Agent's, Lenders' and Issuing Bank's obligations to Borrower are
terminated. The rights, powers, and privileges granted to Administrative Agent,
Lenders and Issuing Bank in the Loan Documents, are cumulative, and, except for
expressly specified waivers and consents, no Loan Document shall be construed in
the
72
context of another to diminish, nullify, or otherwise reduce the benefit to
Administrative Agent, any Lender or Issuing Bank of any such right, power or
privilege.
Section 10.3 Notices. All notices, requests, consents, demands and
-------
other communications required or permitted under any Loan Document shall be in
writing, unless otherwise specifically provided in such Loan Document (provided
that Administrative Agent may give telephonic notices to Lenders), and shall be
deemed sufficiently given or furnished if delivered by personal delivery, by
telecopy or telex, by delivery service with proof of delivery, or by registered
or certified United States mail, postage prepaid, to Borrower and the other
Related Persons at the address of Borrower specified on the signature pages
hereto and to Administrative Agent, Issuing Bank and the other Lenders at their
addresses specified on the signature pages hereto (unless changed by similar
notice in writing given by the particular Person whose address is to be
changed). Any such notice or communication shall be deemed to have been given
(a) in the case of personal delivery or delivery service, as of the date of
first attempted delivery during regular business hours at the address provided
herein, (b) in the case of telecopy of telex, upon receipt, or (c) in the case
of registered or certified United States mail, three (3) days after deposit in
the mail; provided, however, that no Request for Advance or Rate Election shall
become effective until actually received by Administrative Agent.
Section 10.4 Parties in Interest. All grants, covenants and
-------------------
agreements contained in the Loan Documents shall bind and inure to the benefit
of the parties thereto and their respective successors and assigns; provided,
however, that no Related Person may assign or transfer any of its rights or
delegate any of its duties or obligations under any Loan Document without the
prior written consent of all Lenders. Neither Borrower nor any Affiliates of
Borrower shall directly or indirectly purchase or otherwise retire any
Obligations owed to any Lender nor will any lender accept any offer to do so,
unless each Lender shall have received substantially the same offer with respect
to the same Percentage Share of the Obligations owed to it. If Borrower or any
Affiliate of Borrower at any time purchases some but less than all of the
Obligations owed to Administrative Agent, Issuing Bank and all Lenders, such
purchaser shall not be entitled to any rights of Administrative Agent, Issuing
Bank or Lender under the Loan Documents unless and until Borrower or its
Affiliates have purchased all of the Obligations.
Section 10.5 Governing Law; Submission to Process.
------------------------------------
Except to the extent that the law of another jurisdiction is expressly
elected in a Loan Document, the Loan Documents shall be deemed contracts and
instruments made under the laws of the State of Texas and shall be construed and
enforced in accordance with and governed by the laws of the State of Texas and
the laws of the United States of America. Borrower hereby irrevocably submits
itself to the non-exclusive jurisdiction of the state and federal courts sitting
in the State of Texas or in the United States District Court for the Southern
District of Texas and agrees and consents that service of process may be made
upon it, in any legal proceeding relating to the Loan Documents or the
Obligations by any means allowed under Texas or federal law. The parties hereto
hereby waive and agree not to assert, by way of motion, as a defense or
otherwise, that any such proceeding is brought in an inconvenient forum or that
venue thereof is improper and further agrees
73
to a transfer of any such proceeding to a federal court sitting in the Southern
District for the State of Texas, to the extent that it has subject matter
jurisdiction, and otherwise to a state court in Texas, upon request therefor by
Administrative Agent, if such proceeding is originally brought in another court.
Section 10.6 Maximum Interest. It is the intention of the parties
----------------
hereto to conform strictly to applicable usury laws and, anything herein to the
contrary notwithstanding, the obligations of each Borrower to each Lender and
the Issuer under this Agreement shall be subject to the limitation that payments
of interest shall not be required to the extent that receipt thereof would be
contrary to provisions of law applicable to such Lender or the Issuer limiting
rates of interest which may be charged or collected by such Lender or the
Issuer. Accordingly, if the transactions contemplated hereby would be usurious
under applicable law (including the Federal and state laws of the United States
of America, or of any other jurisdiction whose laws may be mandatorily
applicable) with respect to a Lender or the Issuer then, in that
event, notwithstanding anything to the contrary in this Agreement, it is agreed
as follows: (i) the provisions of this Section 10.6 shall govern and control;
(ii) the aggregate of all consideration which constitutes interest under
applicable law that is contracted for, charged or received under this Agreement,
or under any of the other aforesaid agreements or otherwise in connection with
this Agreement by such Lender or the Issuer shall under no circumstances exceed
the maximum amount of interest allowed by applicable law (such maximum lawful
interest rate, if any, with respect to such Lender or the Issuer herein called
the "Highest Lawful Rate"), and any excess shall be credited to such Borrower by
-------------------
such Lender or the Issuer (or, if such consideration shall have been paid in
full, such excess promptly refunded to such Borrower); (iii) all sums paid, or
agreed to be paid, to such Lender or the Issuer for the use, forbearance and
detention of the indebtedness of such Borrower to such Lender or the Issuer
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the actual rate of interest is uniform throughout
the full term thereof; and (iv) if at any time the interest provided pursuant to
Article II together with any other fees payable pursuant to this Agreement and
deemed interest under applicable law, exceeds that amount which would have
accrued at the Highest Lawful Rate, the amount of interest and any such fees to
accrue to such Lender or the Issuer pursuant to this Agreement shall be limited,
notwithstanding anything to the contrary in this Agreement to that amount which
would have accrued at the Highest Lawful Rate, but any subsequent reductions, as
applicable, shall not reduce the interest to accrue to such Lender or the Issuer
pursuant to this Agreement below the Highest Lawful Rate until the total amount
of interest accrued pursuant to this Agreement and such fees deemed to be
interest equals the amount of interest which would have accrued to such Lender
or the Issuer if a varying rate per annum equal to the interest provided
pursuant to Article II had at all times been in effect, plus the amount of fees
----
which would have been received but for the effect of this Section 10.6. For
purposes of Tex. Fin. Code ▇▇▇. Ch. 303, as amended, to the extent, if any,
applicable to a Lender or the Issuer, each Borrower agrees that the Highest
Lawful Rate shall be the "weekly ceiling" as defined in said Article, provided
that such Lender and the Issuer may also rely, to the extent permitted by
applicable laws, on alternative maximum rates of interest under other laws
applicable to such Lender or such Issuer, as the case may be, if greater. Tex.
Fin. Code ▇▇▇. Ch. 346 (which regulates certain revolving credit loan accounts
and revolving tri-party accounts) shall not apply to this Agreement or the
Notes.
74
Section 10.7 Termination; Limited Survival. In its sole and absolute
-----------------------------
discretion Borrower may at any time that no Obligations are owing elect in a
written notice delivered to Administrative Agent to terminate this Agreement.
Upon receipt by Administrative Agent of such a notice, if no obligations are
then owing this Agreement and all other Loan Documents shall thereupon be
terminated and the parties thereto released from all prospective obligations
thereunder. Notwithstanding the foregoing or anything herein to the contrary,
any waivers or admissions made by any Related Person in any Loan Document any
Obligations under Sections 2.15 through 2.19, and any obligations which any
Person may have to indemnify or compensate Administrative Agent or any Lender
shall survive any termination of this Agreement or any other Loan Document. At
the request and expense of Borrower, Administrative Agent shall prepare and
execute all necessary instruments to reflect and effect such termination of the
Loan Documents. Administrative Agent is hereby authorized to execute all such
instruments on behalf of all Lenders, without the joinder of or further action
by any Lender.
Section 10.8 Severability. If any term or provision of any Loan
------------
Document shall be determined to be illegal or unenforceable all other terms and
provisions of the Loan Documents shall nevertheless remain effective and shall
be enforced to the fullest extent permitted by applicable law.
Section 10.9 Counterparts. This Agreement may be separately executed
------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute one
and the same Agreement.
Section 10.10 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF
--------------------------------------------
BORROWER, ADMINISTRATIVE AGENT AND LENDERS HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY (a) WAIVES, TO THE MAXIMUM EXTENT IT MAY LAWFULLY
AND EFFECTIVELY DO SO, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION
CONTEMPLATED THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (b)
WAIVES, TO THE MAXIMUM EXTENT IT MAY LAWFULLY AND EFFECTIVELY DO SO, 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; AND (c) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED
IN TIES SECTION.
Section 10.11 Assignments and Participations.
------------------------------
(a) Assignments. Each Lender shall have the right to sell, assign or
-----------
transfer all or any part of such Lender's Notes, commitment to make Loans and
rights and obligations relating to
75
Letters of Credit and the associated rights and obligations under all Loan
Documents to one or more purchasers; provided, (i) each such sale, assignment,
or transfer shall be with the consent of Borrower and the consent of
Administrative Agent, which in each case will not be unreasonably withheld, (ii)
no such consent of the Borrower shall be required if an Event of Default exists,
and (iii) any such sale, assignment or transfer shall be pro rata among the
Commitments. The assignee, transferee or recipient shall have, to the extent of
such sale, assignment, or transfer, the same rights, benefits and obligations as
it would if it were such Lender and a holder of such Notes, including, without
limitation, the right to vote on decisions requiring consent or approval of all
Lenders or Majority Lenders and the obligation to fund its Percentage Share of
any Loans and payments made under Letters of Credit. Each Lender in making each
such sale, assignment, or transfer must dispose of a pro rata portion of each
Loan made by such Lender and such Lender's LC Obligations, each such sale,
assignment or transfer shall be in a principal amount not less than $5,000,000
(except assignments to Affiliates of Administrative Agent or any Lender which
may be in an amount equal to or greater than $1,000,000) and no Lender may offer
to sell its Notes and Loans or interests therein in violation of any securities
laws. No such assignment shall become effective until (i) the assigning Lender
delivers to Administrative Agent copies of all written assignments and other
documents evidencing any such assignment or related thereto and an Agreement to
be Bound in the form of Exhibit H, providing for the assignee's ratification and
---------
agreement to be bound by the terms of this Agreement and the other Loan
Documents and (ii) Administrative Agent shall have received from assignor or
assignee an assignment fee in the amount of $3,500. Within five (5) Business
Days after its receipt of notice that the Administrative Agent has received
copies of any assignment and the other documents relating thereto, the assignee
shall notify Borrower of the outstanding principal balance of the Notes payable
to such Lender and shall execute and deliver to Administrative Agent (for
delivery to the relevant assignee) new Notes evidencing such assignee's assigned
Loans and, if the assignor Lender has retained a portion of its Loans,
replacement Notes in the principal amount of the Loans retained by the assignor
Lender (such Notes to be in exchange for, but not in payment of, the Notes held
by such Lender). Anything in this Section 10.11 to the contrary notwithstanding,
any Lender may at any time, without the consent of Borrower or Administrative
Agent, assign and pledge all or any portion of its Commitments and the Loans
owing to it to any Federal Reserve Bank (and its transferees) as collateral
security pursuant to Regulation A and any Operating Circular issued by the
Federal Reserve Bank. No such assignment shall release the assigning Lender from
its obligations hereunder.
(b) Participations. Each Lender shall have the right to grant
--------------
participations in all or any part of such Lender's Notes, commitment to make
Loans and rights and Obligations relating to Letters of Credit and the
associated rights and obligations under all Loan Documents to one or more
purchasers; provided that (i) each Lender granting a participation shall retain
the right to vote hereunder, and no participant shall be entitled to vote
hereunder on decisions requiring consent or approval of Majority Lenders (except
as set forth in (iii) below) or with respect to determining the Borrowing Base,
(ii) each Lender and Borrower shall be entitled to deal with the Lender granting
a participation in the same manner as if no participation had been granted,
(iii) no participant shall ever have any right by reason of its participation to
exercise any of the rights of Lenders hereunder, except that any Lender may
agree with any participant that such Lender will not, without the consent of
such participant, consent to any amendment or waiver described in Section
10.1(a) requiring
76
approval of 100% of the Lenders, and (iv) without the Borrower's prior written
consent (not to be unreasonably withheld) no Lender will offer any participation
to any prospective participant if such participant or any affiliates thereof, to
the knowledge of the Lenders selling the participations, is in the energy
industry. Borrower agrees that if amounts outstanding under this Agreement and
the Notes are due or unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each participant
shall be deemed to have the right of set off in respect of its participating
interest in amounts owing under this Agreement and any Note to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement or any Note, provided that such participant shall
only be entitled to such right of set off if it shall have agreed in the
agreement pursuant to which it shall have acquired its participating interest to
share with the Lenders and the proceeds thereof as provided in subsection 9.6.
The Company also agrees that each participant shall be entitled to the benefits
of subsections 2.15, 2.16, 2.18 and 8.3 with respect to its participation in the
Commitments and the Loans outstanding from time to time; provided, that no
participant shall be entitled to receive any greater amount pursuant to such
subsections than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such participant had no such transfer occurred.
(c) Distribution of Information. It is understood and agreed that any
---------------------------
Lender may provide to assignees and participants and prospective assignees and
participants financial information and reports and data concerning the Related
Persons and their and properties and operations which was provided to such
Lender pursuant to this Agreement, subject to Section 10.12.
(d) [Reserved].
----------
(e) Blue Sky Limitation. Notwithstanding any other provision of
-------------------
Section 10.11(a) or (b), 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 Securities and Exchange Commission or to
qualify the Loans under the "Blue Sky" laws of any state.
Section 10.12 Confidentiality. In the event that the Borrower or any
---------------
other Related Person (hereinafter called the "Subject Entities") provides to the
----------------
Administrative Agent or the Lenders written confidential information or, if
communicated as confidential, oral confidential information belonging to any
Subject Entity, the Administrative 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 Administrative Agent or the Lenders breaching
their obligation of confidence to any Subject Entity, (iii) are previously known
by the Administrative Agent or the Lenders from some source other than any
Subject Entity, (iv) are hereafter developed by the Administrative Agent or the
Lenders without using a Subject Entity's information, (v) are hereafter obtained
by or available to the Administrative Agent or the Lenders from a third party
who owes no obligation of confidence to any Subject Entity with respect to such
information, (vi) are disclosed
77
with a Subject Entity's consent, (vii) must be disclosed either pursuant to any
governmental requirement or to Persons regulating the activities of the
Administrative 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 Administrative 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
other Loan Document, including without limitation, the enforcement or exercise
of all rights and remedies thereunder, or any assignee or participant (including
prospective assignees to which the Borrower has consented and participants) in
the Loans; provided, however, that the Administrative Agent or the Lenders shall
receive a written confidentiality agreement with the same terms as this
confidentiality provision 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 Administrative Agent
and 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.
Section 10.13 Renewal and Continuation of Existing Loans. On the
------------------------------------------
Closing Date, all of the Prior Indebtedness outstanding on such date shall
hereby be restructured, rearranged, renewed, extended and continued as provided
in this Agreement and all Loans outstanding under the Existing Credit Agreement
shall on the Closing Date become Loans outstanding hereunder. Each of the
Existing Banks assigns, and each of the Lenders accepts an assignment of its
Applicable Percentage of, such Existing Bank's Prior Indebtedness and rights,
title and interests under the Existing Credit Agreement and other Loan Documents
(as defined in the Existing Credit Agreement). Bank of Montreal hereby assigns
its rights, title and interests as administrative agent pursuant to the Existing
Credit Agreement and the Loan Documents (as defined in the Existing Credit
Agreement) to Toronto Dominion (Texas), Inc., in its capacity as Administrative
Agent for the Lenders. Such assignments are without representations, warranties
or recourse whatsoever, except that the assignor has not assigned or transferred
any such rights, title or interests to any other Person and that same are free
and clear of all liens created by, through or under such assignor.
78
THIS WRITTEN AGREEMENT AND THE OTHER 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.
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
BORROWER: SPINNAKER EXPLORATION COMPANY, L.L.C.
--------
By: SPINNAKER EXPLORATION COMPANY,
as Managing Member
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: VP, CFO, Secretary
Address:
Two ▇▇▇▇▇ Center
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
S-1
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC.,
--------------------
Administrative Agent
By: /s/ ▇▇▇▇ ▇▇▇▇
------------------------------
Name:
Title:
Address:
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
DOCUMENTATION AGENT: CREDIT SUISSE FIRST BOSTON,
-------------------
Documentation Agent
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
Address:
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
S-2
LENDERS: TORONTO DOMINION (TEXAS), INC.,
-------
as a Lender
By: /s/ ▇▇▇▇ ▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: Vice President
Address:
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
CREDIT SUISSE FIRST BOSTON, as a Lender
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
Address:
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇-▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇,
with respect to Articles VII and IX and
Section 10.13 only
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
Address:
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
S-4
ISSUER: THE TORONTO-DOMINION BANK,
as Issuer
By: /s/ ▇▇▇▇ ▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: Manager, Syndication &
Credit Administration
Address:
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
S-5
LENDER SCHEDULE
Lender Percentage Share Principal Amount
------ ---------------- ----------------
Toronto Dominion (Texas), Inc. 50% $37,500,000
Credit Suisse First Boston 50% $37,500,000