AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of
APRIL 27, 2004
among
GULFWEST OIL & GAS COMPANY
as Borrower,
HIGHBRIDGE/▇▇▇▇▇ SPECIAL OPPORTUNITIES FUND, L.P.
as Administrative Agent,
and
THE LENDERS PARTY HERETO
Sole Lead Arranger
PETROBRIDGE INVESTMENT MANAGEMENT LLC
TABLE OF CONTENTS
Page
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ARTICLE I Definitions and Accounting Matters......................................................................1
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Section 1.01 Terms Defined Above....................................................................1
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Section 1.02 Certain Defined Terms..................................................................1
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Section 1.03 Terms Generally; Rules of Construction................................................17
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Section 1.04 Accounting Terms and Determinations; GAAP.............................................17
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ARTICLE II The Credits...........................................................................................18
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Section 2.01 Commitments...........................................................................18
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Section 2.02 Loans and Borrowings..................................................................18
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Section 2.03 Requests for Borrowings...............................................................18
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Section 2.04 Funding of Borrowings.................................................................18
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Section 2.05 Termination of Commitments............................................................19
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ARTICLE III Payments of Principal and Interest; Prepayments; Fees................................................19
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Section 3.01 Repayment of Loans....................................................................19
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Section 3.02 Interest..............................................................................19
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Section 3.03 Prepayments...........................................................................19
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Section 3.04 Cash Sweep............................................................................20
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Section 3.05 Mandatory Repayments..................................................................20
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Section 3.06 Fees..................................................................................20
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ARTICLE IV Payments; Pro Rata Treatment; Sharing of Set-offs.....................................................20
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Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs...........................20
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Section 4.02 Presumption of Payment by the Borrower................................................22
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Section 4.03 Certain Deductions by the Administrative Agent........................................22
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ARTICLE V Increased Costs; Taxes.................................................................................22
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Section 5.01 Increased Costs.......................................................................22
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Section 5.02 Taxes.................................................................................22
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ARTICLE VI Conditions Precedent..................................................................................23
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Section 6.01 Effective Date........................................................................23
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ARTICLE VII Representations and Warranties.......................................................................27
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Section 7.01 Organization; Powers..................................................................27
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Section 7.02 Authority; Enforceability.............................................................27
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Section 7.03 Approvals; No Conflicts...............................................................27
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Section 7.04 Financial Condition; No Material Adverse Change.......................................28
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Section 7.05 Litigation............................................................................28
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Section 7.06 Environmental Matters.................................................................28
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Section 7.07 Compliance with the Laws and Agreements; No Defaults..................................29
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Section 7.08 Investment Company Act................................................................30
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Section 7.09 Public Utility Holding Company Act....................................................30
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Section 7.10 Taxes.................................................................................30
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Section 7.11 ERISA.................................................................................30
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Section 7.12 Disclosure; No Material Misstatements.................................................31
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Section 7.13 Insurance.............................................................................32
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Section 7.14 Restriction on Liens..................................................................32
i
Section 7.15 Subsidiaries..........................................................................32
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Section 7.16 Location of Business and Offices......................................................32
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Section 7.17 Properties; Titles, Etc...............................................................33
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Section 7.18 Maintenance of Properties.............................................................33
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Section 7.19 Gas Imbalances, Prepayments...........................................................34
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Section 7.20 Marketing of Production...............................................................34
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Section 7.21 Hedging Contracts.....................................................................35
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Section 7.22 Use of Loans..........................................................................35
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Section 7.23 Solvency..............................................................................35
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Section 7.24 Casualty Events.......................................................................35
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Section 7.25 Material Agreements...................................................................36
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Section 7.26 No Brokers............................................................................36
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Section 7.27 Investments and Guaranties............................................................36
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Section 7.28 Payments by Purchasers of Production..................................................36
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Section 7.29 Existing Accounts Payable.............................................................36
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Section 7.30 Reliance..............................................................................36
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ARTICLE VIII Affirmative Covenants...............................................................................37
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Section 8.01 Financial Statements; Other Information...............................................37
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Section 8.02 Notices of Material Events............................................................40
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Section 8.03 Existence; Conduct of Business........................................................41
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Section 8.04 Payment of Obligations................................................................41
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Section 8.05 Performance of Obligations under Loan Documents.......................................41
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Section 8.06 Operation and Maintenance of Properties...............................................41
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Section 8.07 Insurance.............................................................................43
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Section 8.08 Books and Records; Inspection Rights..................................................43
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Section 8.09 Compliance with Laws..................................................................43
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Section 8.10 Environmental Matters.................................................................43
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Section 8.11 Further Assurances....................................................................44
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Section 8.12 Reserve Reports.......................................................................45
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Section 8.13 Title Information.....................................................................45
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Section 8.14 Additional Collateral; Additional Guarantors..........................................46
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Section 8.15 ERISA Compliance......................................................................47
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Section 8.16 Hedging Contracts.....................................................................47
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Section 8.17 Marketing of Production...............................................................47
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Section 8.18 Overriding Royalty Interests..........................................................47
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Section 8.19 Right of First Refusal................................................................48
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Section 8.20 Contract Operating Agreement..........................................................48
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Section 8.21 Separate Entity.......................................................................49
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ARTICLE IX Negative Covenants....................................................................................49
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Section 9.01 Financial Covenants...................................................................49
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Section 9.02 Debt..................................................................................50
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Section 9.03 Liens.................................................................................51
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Section 9.04 Restricted Payments...................................................................51
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Section 9.05 Investments, Loans and Advances.......................................................51
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Section 9.06 Nature of Business....................................................................51
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Section 9.07 Limitation on Leases..................................................................52
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Section 9.08 Sale and Leasebacks...................................................................52
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Section 9.09 Proceeds of Notes.....................................................................52
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Section 9.10 ERISA Compliance......................................................................52
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Section 9.11 Sale or Discount of Receivables.......................................................53
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Section 9.12 Mergers, Etc..........................................................................53
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Section 9.13 Sale of Properties....................................................................54
ii
Section 9.14 Environmental Matters.................................................................54
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Section 9.15 Transactions with Affiliates..........................................................54
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Section 9.16 Capital Expenditures..................................................................54
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Section 9.17 Material Agreements...................................................................54
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Section 9.18 Subsidiaries..........................................................................54
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Section 9.19 Negative Pledge Agreements; Dividend Restrictions.....................................55
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Section 9.20 Gas Imbalances, Take-or-Pay or Other Prepayments......................................55
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Section 9.21 Hedging Contracts.....................................................................55
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Section 9.22 Certain Activities....................................................................55
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Section 9.23 G& A Costs.............................................................................56
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Section 9.24 Net Sales.............................................................................56
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Section 9.25 Press Release.........................................................................56
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Section 9.26 Not Abandon ▇▇▇▇▇; Participate in Operations..........................................56
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ARTICLE X Events of Default; Remedies............................................................................56
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Section 10.01 Events of Default.....................................................................56
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Section 10.02 Remedies..............................................................................59
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Section 10.03 Disposition of Proceeds...............................................................59
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ARTICLE XI The Administrative Agent..............................................................................60
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Section 11.02 Duties and Obligations of Administrative Agent........................................60
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Section 11.03 Action by Administrative Agent........................................................60
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Section 11.04 Reliance by Administrative Agent......................................................61
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Section 11.05 Subagents.............................................................................61
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Section 11.06 Resignation or Removal of Administrative Agent........................................61
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Section 11.07 Agents as Lenders.....................................................................62
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Section 11.08 No Reliance...........................................................................62
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Section 11.09 Authority of Administrative Agent to Release Collateral and Liens.....................63
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ARTICLE XII Miscellaneous........................................................................................63
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Section 12.01 Notices...............................................................................63
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Section 12.02 Waivers; Amendments...................................................................63
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Section 12.03 Expenses, Indemnity; Damage Waiver....................................................64
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Section 12.04 Successors and Assigns................................................................66
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Section 12.05 Survival; Revival; Reinstatement......................................................69
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Section 12.06 Counterparts; Integration; Effectiveness..............................................69
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Section 12.07 Severability..........................................................................70
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Section 12.08 Right of Setoff.......................................................................70
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Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS............................70
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Section 12.10 Headings..............................................................................71
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Section 12.11 Confidentiality.......................................................................72
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Section 12.12 Interest Rate Limitation..............................................................72
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Section 12.13 EXCULPATION PROVISIONS................................................................73
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Section 12.14 No Third Party Beneficiaries..........................................................74
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Section 12.15 Securitization........................................................................74
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iii
Annexes, Exhibits and Schedules
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Annex I List of Maximum Credit Amounts
Exhibit A Form of Note
Exhibit B Form of Borrowing Request
Exhibit C Form of Conveyance of Overriding Royalty Interest
Exhibit D Form of Compliance Certificate
Exhibit E-1 Form of Legal Opinion of ▇▇▇▇▇ & ▇▇▇▇, special counsel to the Borrower
Exhibit E-2 Form of Legal Opinion of Local Counsel
Exhibit F-1 Security Instruments
Exhibit F-2 Form of Guarantee and Collateral Agreement
Exhibit G Form of Assignment and Assumption
Exhibit H Form of Warrant
Exhibit I Form of Letter in Lieu
Schedule 1.02 Approved Counterparties
Schedule 7.05 Litigation
Schedule 7.06 Environmental Matters
Schedule 7.13 Insurance
Schedule 7.15 Subsidiaries and Partnerships
Schedule 7.17 Properties
Schedule 7.18 ▇▇▇▇▇ to PA
Schedule 7.19 Gas Imbalances
Schedule 7.20 Marketing Contracts
Schedule 7.21 Hedging Contracts
Schedule 7.25 Material Agreements
Schedule 7.29 Accounts Payable
Schedule 8.02(e) Notice of Certain Events
Schedule 8.07 Parent's Insurance
Schedule 9.02 Debt
Schedule 9.03 Liens
Schedule 9.05 Investments
Schedule 9.23 Sales Volume Schedule
iv
This AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 27, 2004, is
among: GulfWest Oil Gas Company, a corporation duly formed and existing under
the laws of the State of Texas, (the "Borrower"); each of the Lenders from time
to time party hereto; -------- Highbridge/▇▇▇▇▇ Special Opportunities Fund L.P.
(in its individual capacity, "Drawbridge"), as administrative agent for the
Lenders ---------- (in such capacity, together with its successors in such
capacity, the "Administrative Agent").
R E C I T A L S
---------------
A. The Borrower entered into that certain Credit Agreement (as
heretofore amended, the "Original Credit Agreement") with Aquila
Energy Capital Corporation ("Aquila") dated as of April 5, 2000.
------
▇. ▇▇▇▇▇▇ assigned to the Second Lenders (defined below) the
Original Credit Agreement and the notes and liens related thereto
pursuant to the Assignment of Notes, Liens and Security Interests
dated as of December 19, 2002, between Aquila and Concert Capital
Resources A, L.P., Concert Capital Resources B, L.P., and Concert
Capital Resources C, L.P., ("Second Lenders").
C. Second Lenders has assigned the Original Credit Agreement and
the notes and Liens thereunder to the Lenders pursuant to the
Assignment of Notes, Liens and Security Interests dated as of April
27, 2004, between. Second Lenders and Administrative Agent.
D. The Borrower, the Lenders and the Administrative Agent desire
to amend and restate in its entirety the Original Credit Agreement as
set forth herein.
E. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments
hereinafter referred to, the parties hereto agree as follows:
ARTICLE I
Definitions and Accounting Matters
Section 1.01 Terms Defined Above. As used in this Agreement, each term
defined above has the meaning indicated above. -------------------
Section 1.02 Certain Defined Terms. As used in this Agreement, the
following terms have the meanings specified below: ---------------------
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more --------- intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Aggregate Maximum Credit Amounts" at any time shall equal the sum of the
Maximum Credit Amounts of all Lenders. --------------------------------
"Agreement" means this Credit Agreement, as the same may from time to time be
amended, modified, supplemented or restated. ---------
1
"Applicable Percentage" means, with respect to any Lender, the percentage
set forth on Annex I.
"Applicable Rate" means, for any day, with respect to any Loan, until the
Maturity Date, the Reference Rate plus eleven percent (11%) per annum; provided
that after the Target Date the Applicable Rate shall increase by seventy-five
hundredths percent -------- (.75%) per annum per month on the 27th day of each
month thereafter until the Loans have been paid in full, but in no event to
exceed the Highest Lawful Rate.
"Approved Counterparty" means (a) any Lender or any Affiliate of a Lender,
(b) any other Person whose long term senior unsecured debt rating is A-/A3 by
SP or ▇▇▇▇▇'▇ (or their equivalent) or higher, or (c) with regard to Hedging
Contracts in respect of commodities, and subject to the conditions set forth
therein, any other Person listed on Schedule 1.02.
"Approved GA Costs" means General and Administrative Costs at a level
equal to or below those provided in Section 9.23. ------------------
"Approved Petroleum Engineers" means ▇▇▇▇▇▇▇▇ Petroleum Consultants and any
other independent petroleum engineers reasonably acceptable to the
Administrative Agent.
"Arranger" means Petrobridge Investment Management LLC, in its capacities
as the sole lead arranger hereunder.
"Assignment and Assumption" means an assignment and assumption entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 12.04(b)), and accepted by the Administrative Agent, in the
form of Exhibit G or any --------- other form approved by the Administrative
Agent.
"Board" means the Board of Governors of the Federal Reserve System of the
United States of America or any successor Governmental Authority.
"Borrowing" means Loans made on the same date.
"Borrowing Request" means a request by the Borrower for a Borrowing in
accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed.
"Capital Expenditures" means, in respect of any Person, for any period, the
aggregate (determined without duplication) of all exploration and development
expenditures and costs that are capital in nature and any other expenditures
that are capitalized on the balance sheet of such Person in accordance with
GAAP.
"Capital Leases" means, in respect of any Person, all leases which shall
have been, or should have been, in accordance with GAAP, recorded as capital
leases on the balance sheet of the Person liable (whether contingent or
otherwise) for the payment of rent thereunder.
2
"Cash Receipts" means all cash or cash equivalents received by or on behalf
of the Borrower and its Subsidiaries with respect to the following: (a) sales of
Hydrocarbons from the Oil and Gas Properties, (b) cash representing operating
revenue earned or to be earned by the Borrower and its Subsidiaries, (c) any
insurance proceeds received by the Borrower or its Subsidiaries, (d) any
proceeds from Hedging Contracts, and (e) any other cash or cash equivalents
received by the Borrower or its Subsidiaries from whatever source; provided that
advances under the Loan, shall not constitute "Cash Receipts".
"Casualty Event" means any loss, casualty or other insured damage to, or
any nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Subsidiaries
having a fair market value in excess of $100,000.
"Change in Control" means the acquisition of ownership, directly or
indirectly, beneficially or of record, by anyone other than Parent of any Equity
Interests of the Borrower or the acquisition of ownership, directly or
indirectly, beneficiary of record by anyone other than Borrower of any Equity
Interest of GulfWest Louisiana or any other Subsidiary of Borrower.
"Change in Law" means (a) the adoption of any law, rule or regulation 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, for purposes of
Section 5.01(a)), by any lending office of such Lender or by such Lender'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.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"Collateral" means all (a) Oil and Gas Properties, pipelines, rights of
way, and all other rights related to the foregoing of the Borrower and its
Subsidiaries, (b) all accounts receivable, equipment, inventory, general
intangibles and any other asset or property of the Borrower and its
Subsidiaries, (c) Equity Interest of the Borrower and (d) any other asset or
property in which an interest is granted or pledged under a Security Instrument.
"Commitment" means, with respect to each Lender, the commitment of such
Lender to make Loans hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender's Loan hereunder. The amount representing each
Lender's Commitment is set forth on Annex I. The aggregate amount of the
Commitments of the Lenders is $18,000,000.
"Consolidated Interest Expense" means, for any period, total interest
expense and prepayment charges (including that which is capitalized and that
which is attributable to capital leases, in accordance with GAAP) of the
Borrower and its Consolidated Subsidiaries, or of Parent and its Consolidated
Subsidiaries, as appropriate, on a consolidated basis with respect to all
outstanding indebtedness of the Borrower and its Consolidated Subsidiaries, or
Parent, as appropriate, including, without limitation, all commissions,
discounts and other fees and charges owed with respect to any letters of credit,
amortization of debt, discount, expense, other deferred financing costs.
3
"Consolidated Net Income" means with respect to the Borrower and the
Consolidated Subsidiaries, or with respect to Parent and its Consolidated
Subsidiaries, as appropriate, for any period, the aggregate of the net income
(or loss) of the Borrower and the Consolidated Subsidiaries, or the aggregate of
the net income (or loss) of Parent and its Consolidated Subsidiaries, as
appropriate, after allowances for taxes for such period determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from such net income (to the extent otherwise included therein) the
following: (a) the net income of any Person in which the Borrower or any
Consolidated Subsidiary or Parent has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
the Borrower and the Consolidated Subsidiaries or with the net income of Parent
and its Consolidated Subsidiaries, as appropriate, in accordance with GAAP),
except to the extent of the amount of dividends or distributions actually paid
in cash during such period by such other Person to the Borrower or to a
Consolidated Subsidiary or to Parent, as the case may be; (b) the net income
(but not loss) during such period of any Consolidated Subsidiary to the extent
that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted
by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary or is
otherwise restricted or prohibited, in each case determined in accordance with
GAAP; (c) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (d) any extraordinary non-cash gains or losses during such period;
(e) any gains on collections from insurance policies or settlement; and (f) any
gains or losses attributable to writeups or writedowns of assets, including
ceiling test writedowns; and provided further that if the Borrower or any
Consolidated Subsidiary or Parent, as appropriate, shall acquire or dispose of
any Property during such period, then Consolidated Net Income shall be
calculated after giving pro forma effect to such acquisition or disposition, as
if such acquisition or disposition had occurred on the first day of such period
"Consolidated Subsidiaries" means each Subsidiary of the Borrower (whether
now existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.
"Contract Operating Agreement" means that certain Operating Agreement dated
November 8, 2003 between Operator and Borrower.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing body of a Person (other than as a limited partner of such other
Person) will be deemed to "control" such other Person. "Controlling" and
"Controlled" have meanings correlative thereto.
4
"Debt" means, for any Person, the sum of the following (without
duplication): (a) all obligations of such Person for borrowed money or evidenced
by bonds, bankers' acceptances, debentures, notes or other similar instruments;
(b) all obligations of such Person (whether contingent or otherwise) in respect
of letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by a Lien on any Property of such Person, whether or not such Debt is
assumed by such Person; (g) all Debt (as defined in the other clauses of this
definition) of others guaranteed by such Person or in which such Person
otherwise assures a creditor against loss of the Debt (howsoever such assurance
shall be made) to the extent of the lesser of the amount of such Debt and the
maximum stated amount of such guarantee or assurance against loss; (h) all
obligations or undertakings of such Person to maintain or cause to be maintained
the financial position or covenants of others or to purchase the Debt or
Property of others; (i) obligations to deliver commodities, goods or services,
including, without limitation, Hydrocarbons, in consideration of one or more
advance payments, other than gas balancing arrangements in the ordinary course
of business; (j) obligations to pay for goods or services whether or not such
goods or services are actually received or utilized by such Person; (k) any Debt
of a partnership for which such Person is liable either by agreement, by
operation of law or by a Governmental Requirement but only to the extent of such
liability; (l) Disqualified Capital Stock; and (m) the undischarged balance of
any production payment created by such Person or for the creation of which such
Person directly or indirectly received payment. The Debt of any Person shall
include all obligations of such Person of the character described above to the
extent such Person remains legally liable in respect thereof notwithstanding
that any such obligation is not included as a liability of such Person under
GAAP.
"Default" means any event or condition which constitutes an Event of
Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Development Plan" means a plan of development for Borrower's and its
Subsidiaries' Oil and Gas Properties that has been submitted to the Lenders and
approved by the Lenders in their sole discretion.
"Disqualified Capital Stock" means any Equity Interest that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans or other
obligations hereunder outstanding and all of the Commitments are terminated.
"dollars" or "$" refers to lawful money of the United States of America.
"EBITDA" means, for any period, the sum of Consolidated Net Income for such
period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes, depreciation,
depletion, amortization and other similar noncash charges, minus all noncash
income added to Consolidated Net Income. Further, the Borrower shall exclude the
impact of the Hedging Contracts which were in place immediately prior to
entering into this Agreement and that are being terminated in connection with
this Agreement. Any amounts distributed to Parent by Borrower or any Subsidiary
will be included as general and administrative expense in calculating EBITDA.
5
"Effective Date" means the date on which the conditions specified in
Section 6.01 are satisfied (or waived in accordance with Section 12.02).
"Environmental Laws" means any and all Governmental Requirements pertaining
in any way to health, safety the environment or the preservation or reclamation
of natural resources, in effect in any and all jurisdictions in which the
Borrower or any Subsidiary is conducting or at any time has conducted business,
or where any Property of the Borrower or any Subsidiary is located, including
without limitation, the Oil Pollution Act of 1990 ("OPA"), as amended, the Clean
Air Act, as amended, the Comprehensive Environmental, Response, Compensation,
and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as ----
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection Governmental Requirements. The term
"oil" shall have the meaning specified in OPA, the terms "hazardous substance"
and "release" (or "threatened release") have the meanings
specified in CERCLA, the terms "solid waste" and "disposal" (or "disposed") have
the meanings specified in RCRA and the term "oil and gas waste" shall have the
meaning specified in Section 91.1011 of the Texas Natural Resources Code
("Section 91.1011"); provided, however, that (a) in the event either OPA,
CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and (b) to the extent the laws of the state or
other jurisdiction in which any Property of the Borrower or any Subsidiary is
located establish a meaning for "oil," "hazardous substance," "release," "solid
waste," "disposal" or "oil and gas waste" which is broader than that specified
in either OPA, CERCLA, RCRA or Section 91.1011, such broader meaning shall
apply.
"Equity Interests" means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with the Borrower or a Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
6
"ERISA Event" means (a) a "Reportable Event" described in section 4043 of
ERISA and the regulations issued thereunder, (b) the withdrawal of the Borrower,
a Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it
was a "substantial employer" as defined in section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to Section 4202 of ERISA or (f) any other event or
condition which might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
"Event of Default" has the meaning assigned such term in Section 10.01.
"Excepted Liens" means: (a) Liens for Taxes, assessments or other governmental
charges or levies that are not yet due or that are being contested in good faith
by appropriate action and for which adequate reserves have been maintained in
accordance with GAAP in an account controlled by Administrative Agent; (b) Liens
in connection with workers' compensation, unemployment insurance or other social
security, old age pension or public liability obligations that are not yet due
or that are being contested in good faith by appropriate action and for which
adequate reserves have been maintained in accordance with GAAP in an account
controlled by Administrative Agent; (c) statutory landlord's liens, operators',
vendors', carriers', warehousemen's, repairmen's, mechanics', suppliers',
workers', materialmen's, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Properties each of which
is in respect of obligations that have not been outstanding for more than 60
days and are being contested in good faith by appropriate action and for which
adequate reserves have been maintained in accordance with GAAP; (d) contractual
Liens which arise in the ordinary course of business under operating agreements,
joint venture agreements, oil and gas partnership agreements, oil and gas
leases, farm-out agreements, division orders, contracts for the sale,
transportation or exchange of oil and natural gas, unitization and pooling
declarations and agreements, area of mutual interest agreements, overriding
royalty agreements, marketing agreements, processing agreements, net profits
agreements, development agreements, gas balancing or deferred production
agreements, injection, repressuring and recycling agreements, salt water or
other disposal agreements, seismic or other geophysical permits or agreements,
and other agreements that are usual and customary in the oil and gas business
and are for claims that have not been outstanding for more than 60 days and are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP, provided that any such
Lien referred to in this clause does not materially impair the use of the
Property covered by such Lien for the purposes for which such Property is held
by the Borrower or any Subsidiary or materially impair the value of such
Property subject thereto; (e) easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any Property of the
Borrower or any Subsidiary for the purpose of roads, pipelines, transmission
lines, transportation lines, distribution lines for the removal of gas, oil,
coal or other minerals or timber, and other like purposes, or for the joint or
common use of real estate, rights of way, facilities and equipment, which in the
aggregate do not materially impair the use of such Property for the purposes of
which such Property is held by the Borrower or any Subsidiary or materially
impair the value of such Property subject thereto; (f) Liens on cash or
securities pledged to secure performance of tenders, surety and appeal bonds,
government contracts, performance and return of money bonds, bids, trade
contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business; and
(g) Liens securing the Obligations of the Borrower to [Macquarie] related to
Hedging Contracts which Administrative Agent is serving as Collateral Agent with
respect thereto; provided, further that Liens described in clauses (a) through
(d) shall remain "Excepted Liens" only for so long as no action to enforce such
Lien has been commenced and no intention to subordinate the first priority Lien
granted in favor of the Administrative Agent and the Lenders is to be hereby
implied or expressed by the permitted existence of such Excepted Liens.
7
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, or any other recipient of any payment to be made by or on account of any
obligation of the Borrower or any Guarantor hereunder or under any other Loan
Document, (a) income or franchise taxes imposed on (or measured by) its net
income by the United States of America or such other 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, and (b) any branch profits taxes imposed by the United States of
America or any similar tax imposed by any other jurisdiction in which the
Borrower or any Guarantor is located.
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person. Unless
otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.
"Financial Statements" means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time subject to the terms and conditions
set forth in Section 1.04.
"General and Administrative Costs" means normal and customary expenses and
costs that are classified as general and administrative costs, including salary,
rent, supplies, travel and entertainment, shareholder and board member expense,
insurance, accounting, legal, engineering and broker related fees, required to
manage the affairs of the Borrower and certain overhead charges of the Parent
(that are approved by the Lenders) which relates to costs that would be General
and Administrative Costs if incurred by Borrower.
"Governmental Authority" means the government of the United States of
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 over the Borrower, any Subsidiary, any of their Properties, the
Agent, or any Lender.
8
"Governmental Requirement" means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
"Guarantor" means: (a) GulfWest Energy Inc. (b) GulfWest Louisiana, (c)
Borrower and (d) each Subsidiary of Borrower (other than GulfWest Louisiana)
that guarantees the Indebtedness pursuant to Section 8.14(b).
"Guarantee and Collateral Agreement" means an agreement executed by the
Guarantors in substantially the form of Exhibit F-2 unconditionally guarantying
on a joint and several basis, payment of the Indebtedness, as the same may be
amended, modified or supplemented from time to time.
"GulfWest Louisiana" means GulfWest Oil Gas Company (Louisiana) LLC, a
Louisiana limited liability company.
"Hedging Contract" means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement, whether
exchange traded, "over-the-counter" or otherwise, involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no -------- phantom stock
or similar plan providing for payments only on account of services provided by
current or former directors, officers, employees or consultants of the Borrower
or the Subsidiaries shall be a Hedging Contract.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on the Notes or on other
Indebtedness under laws applicable to such Lender that are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.
"Hydrocarbon Interests" means all rights, titles, interests and estates now
or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases,
or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
9
"Indebtedness" means any and all amounts owing or to be owing by the
Borrower, any Subsidiary or any Guarantor: (a) to the Administrative Agent or
any Lender under any Loan Document; (b) to any Lender or any Affiliate of a
Lender under any Hedging Contract between the Borrower or any Subsidiary and
such Lender or Affiliate of a Lender while such Person (or in the case of its
Affiliate, the Person affiliated therewith) is a Lender hereunder and (c) all
renewals, extensions and/or rearrangements of any of the above.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning assigned such term in Section 12.03(b).
"Intercreditor and Collateral Agency Agreement" means that certain
Intercreditor and Collateral Agency Agreement among Borrower, GulfWest Oil Gas
Company (Louisiana) LLC, [Macquarie] and Administrative Agent.
"Information" has the meaning assigned to such term in Section 12.11.
"Initial Reserve Report" means the report of ▇▇▇▇▇▇▇▇ Petroleum Consultants
dated as of March 29, 2004, with respect to certain Oil and Gas Properties of
the Borrower and its Subsidiaries as of April 1, 2004.
"Interest Expense" means, for any period, the interest expense (as
determined in accordance with GAAP) of the Borrower and the Consolidated
Subsidiaries for such period. For purposes of calculating Interest Expense for
the second quarter of 2004, the Interest Expense relating to the loans with
Concert Capital and its affiliates that have been refinanced pursuant to this
Agreement ("Concert Debt") will be excluded and in lieu thereof, Borrower will
compute the pro-forma Interest Expense that would have been incurred during the
period the Concert Debt was outstanding had this Agreement had been in place
rather than the Concert Debt.
"Investment" means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person, the contribution of capital to any other Person, or any agreement to
make any such acquisition (including, without limitation, any "short sale" or
any sale of any securities at a time when such securities are not owned by the
Person entering into such short sale) or capital contribution; (b) the making of
any deposit with, or advance, loan or other extension of credit to, any other
Person (including the purchase of Property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such Property to
such Person, but excluding any such advance, loan or extension of credit having
a term not exceeding ninety (90) days representing the purchase price of
inventory or supplies sold by such Person in the ordinary course of business) or
(c) the entering into of any guarantee of, or other contingent obligation
(including the deposit of any Equity Interests to be sold) with respect to, Debt
or other liability of any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person
..
"Lenders" means the Persons listed on Annex I, any Person that shall have
become a party hereto pursuant to an Assignment and Assumption, other than any
such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.
"Liabilities" has the meaning assigned such term in Section 12.15.
10
"Lien" means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) royalties, production payments and the like payable
out of Oil and Gas Properties. The term "Lien" shall include easements,
restrictions, servitudes, permits, conditions, covenants, encroachments,
exceptions, title exceptions or reservations. For the purposes of this
Agreement, the Borrower and its Subsidiaries shall be deemed to be the owner of
any Property which it has acquired or holds subject to a conditional sale
agreement, or leases under a financing lease or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person
in a transaction intended to create a financing.
"Loan Documents" means this Agreement, the Notes, the Security Instruments,
the ORRI Conveyance and the Warrants.
"Loans" means the loans made by the Lenders to the Borrower pursuant to
this Agreement.
"Lockbox Account" has the meaning assigned such term in Section 3.04.
"Lockbox Disbursement" means a payment from the Lockbox Account by the
Administrative Agent, which shall be made by such Person in the following order
of priority (to the extent funds remain available):
(a) the amounts to the Borrower to (i) pay royalties and overriding royalty
interests constituting Excepted Liens, and (ii) to remit any revenues
attributable to the working interests of third parties that were paid to or
received by Borrower, in each case, as indicated in any operator reports or
statement provided by the Borrower to the Administrative Agent and Lenders
pursuant to Section 8.01 (or if any such operator report or statement is not
delivered in such month or the Administrative Agent determines in its good faith
discretion that any such report or statement is not accurate, as the
Administrative Agent determines is reasonably accurate in its good faith
discretion) and any applicable severance tax or ad-valorem tax;
(b) payment to any third party (including any Lender or its Affiliates) of
any amounts due under any Hedging Contract of Borrower approved by the Lender;
(c) payment of any cash or cash equivalents representing proceeds of
insurance policies with respect to any Casualty Event, but only to the extent
that such amounts are required to restore or replace the Property that was
subject to the Casualty Event;
(d) payment of the Operating Costs as approved by the Administrative Agent
and the Arranger;
(e) payment of all fees owed to any Lender, the Administrative Agent, or
the Arranger then due and unpaid under this Agreement;
(f) payment of all interest then accrued and unpaid on the Loans;
11
(g) payment of Approved GA Costs;
(h) payment to any Lender, the Administrative Agent, and the Arranger of
any other amounts due (other than principal on the Loan) under this Agreement
and any of the other Loan Documents;
(j) payment of all principal then due under any Loan hereunder; and
(i) the balance to the Borrower, to an account designated by the Borrower
in a written notice given by the Borrower to the bank at which the Lockbox
Account is held and to the Lender from time to time, not later than 11:00 a.m.
New York City time on a day that is two Business Days prior to the date such
Lockbox Disbursement shall become due.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, Properties, condition (financial or otherwise),
management, shareholders' equity, prospects, or results of operations of the
Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower,
any Subsidiary or any Guarantor to perform any of its obligations under any Loan
Document, (c) the validity or enforceability of any Loan Document or (d) the
rights and remedies of or benefits available to the Administrative Agent or any
Lender under any Loan Document.
"Material Agreements" has the meaning assigned such term in Section 7.25.
"Material Indebtedness" means Debt (other than the Loans), or obligations
in respect of one or more Hedging Contracts, of any one or more of the Borrower,
Parent or their Subsidiaries.
"Maturity Date" means the date that is eighteen (18) months after the
Effective Date.
"Maximum Credit Amount" means, as to each Lender, the amount set forth
opposite such Lender's name on Annex I under the caption "Maximum Credit
Amounts", as the same may be modified from time to time pursuant to any
assignment permitted by Section 12.04(b).
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any successor thereto
that is a nationally recognized rating agency.
"Mortgaged Property" means any Property owned by the Borrower or any
Guarantor which is subject to the Liens existing and to exist under the terms of
the Security Instruments.
"Multiemployer Plan" means a Plan which is a multiemployer plan as defined
in section 3(37) or 4001 (a)(3) of ERISA.
"Net Present Value" means, in respect of either of the Proved Developed
Producing Reserves and Total Proved Reserves, respectively, of the Oil and Gas
Properties, the present value of future cash flows (discounted at 10% per annum)
calculated by the Arranger in its sole and reasonable judgment (including using
a price curve determined by Arranger) after having reviewed the information from
the most recent Reserve Report delivered by the Borrower pursuant to Section
6.01 or Section 8.12 and taking into account all other factors which the
Collateral Agent deems material.
12
"Notes" means the promissory notes of the Borrower described in Section
2.02(c) and being substantially in the form of Exhibit A, together with all
amendments, modifications, replacements, extensions and rearrangements thereof.
"Oil and Gas Properties" means (a) Hydrocarbon Interests; (b) the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c)
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
Governmental Authority) which may affect all or any portion of the Hydrocarbon
Interests; (d) all operating agreements, contracts and other agreements,
including production sharing contracts and agreements, which relate to any of
the Hydrocarbon Interests or the production, sale, purchase, exchange or
processing of Hydrocarbons from or attributable to such Hydrocarbon Interests;
(e) all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, including all oil in tanks, and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment, rental equipment or other personal Property which
may be on such premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil ▇▇▇▇▇, gas ▇▇▇▇▇, injection ▇▇▇▇▇
or other ▇▇▇▇▇, buildings, structures, fuel separators, liquid extraction
plants, plant compressors, pumps, pumping units, field gathering systems, tanks
and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements, cables,
wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements
and servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing.
"OPA" has the meaning given such term in the definition of Environmental
Laws.
"Operating Costs" means all costs (net to Borrower and its Subsidiaries)
associated with the direct exploration, operation, or development of Borrower's
and its Subsidiaries' Oil and Gas Properties.
"Operator" means Setex Oil Gas Company, a Texas corporation.
"ORRI Conveyance" means any Conveyance of Overriding Royalty Interest from
the Borrower to each of the Lenders in the form of Exhibit C attached hereto.
"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 and any other Loan Document.
"Parent" means GulfWest Energy Inc., a Texas corporation.
13
"Participant" has the meaning set forth in Section 12.04(c)(i).
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any employee pension benefit plan, as defined in section 3(2)
of ERISA, which (a) is currently or hereafter sponsored, maintained or
contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at
any time during the six calendar years preceding the date hereof, sponsored,
maintained or contributed to by the Borrower or a Subsidiary or an ERISA
Affiliate.
"Post Default Rate" shall mean, in respect of the principal of any Loan or
any other amount payable by the Borrower under this Agreement or any other Loan
Document, a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to the applicable rate plus four
percent (4%) per annum, but in no event to exceed the Highest Lawful Rate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, including, without
limitation, cash, securities, accounts and contract rights.
"Proved Developed Producing Reserves" shall be as defined in the SPE
definitions.
"Rating Agencies" has the meaning assigned such term in Section 12.15.
"Reference Rate" means the rate of interest per annum publicly announced
from time to time by JPMorgan Chase Bank as its prime rate in effect at its
principal office in New York City; each change in JPMorgan Chase Bank's Prime
Rate shall be effective from and including the date such change is publicly
announced as being effective.
"Redemption" means with respect to any Debt, the repurchase, redemption,
prepayment, repayment or defeasance (or the segregation of funds with respect to
any of the foregoing) of such Debt. "Redeem" has the correlative meaning
thereto.
"Register" has the meaning assigned such term in Section 12.04(b)(iv).
"Regulation D" means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors (including attorneys, accountants and experts) of such Person and
such Person's Affiliates.
"Remedial Work" has the meaning assigned such term in Section 8.10(a).
14
"Reserve Report" means a report, in form and substance reasonably
satisfactory to the Administrative Agent, setting forth, as of each January 1st
and July 1st the oil and gas reserves attributable to the Oil and Gas Properties
of the Borrower and the Subsidiaries, together with a projection of the rate of
production and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of such date, based upon the pricing
assumptions provided by Lenders.
"Residual Balance" means the balance in the Lockbox Account on the date of
in which a Lockbox Disbursement is made, after the payment of the Lockbox
Disbursements described in subparagraphs (a) through (h).
"Responsible Officer" means, as to any Person, the Chief Executive Officer,
the President, any Financial Officer or any Vice President of such Person.
Unless otherwise specified, all references to a Responsible Officer herein shall
mean a Responsible Officer of the Borrower.
"Restricted Payment" means any dividend or other distribution (whether in
cash, securities or other Property) with respect to any Equity Interests in the
Borrower, or any payment (whether in cash, securities or other Property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in the Borrower or any option, warrant or other right to
acquire any such Equity Interests in the Borrower.
"Sales Volume Schedule" means Schedule 9.01 attached hereto.
"SEC" means the Securities and Exchange Commission or any successor
Governmental Authority.
"Securitization" has the meaning assigned such term in Section 12.15.
"Securitization Parties" has the meaning assigned such term in Section
12.15.
"Security Instruments" means the Guarantee and Collateral Agreement,
mortgages, deeds of trust and other agreements, instruments or certificates
described or referred to in Exhibit F-1, and any and all other agreements,
guarantees, instruments or certificates now or hereafter executed and delivered
by the Borrower or any other Person (other than Hedging Contracts with the
Lenders or any Affiliate of a Lender or participation or similar agreements
between any Lender and any other lender or creditor with respect to any
Indebtedness pursuant to this Agreement) in connection with, or as security for
the payment or performance of the Indebtedness, the Notes, this Agreement, as
such agreements may be amended, modified, supplemented or restated from time to
time.
"SP" means Standard Poor's Ratings Group, a division of The ▇▇▇▇▇▇-▇▇▇▇
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.
"SPE Definitions" means, with respect to any term, the definition thereof
adopted by the Board of Directors, Society for Petroleum Engineers (SPE) Inc.,
March 1997.
15
"Subsidiary" means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person 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 the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner. Unless otherwise indicated herein, each reference to the term
"Subsidiary"shall mean a Subsidiary of the Borrower.
"Synthetic Leases" means, in respect of any Person, all leases which shall
have been, or should have been, in accordance with GAAP, treated as operating
leases on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.
"Target Date" means January 27, 2005.
"Taxes" means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
"Termination Date" means the earlier of the Maturity Date or the date of an
Event of Default that is continuing and not waived hereunder.
"Total Debt" means, at any date, all Debt of the Borrower and the
Consolidated Subsidiaries on a consolidated basis including, any Debt under any
Hedging Contracts (up to a maximum amount of the lesser of (i) the ▇▇▇▇ to
market exposure with respect to such Hedging Contracts or the (ii) the Maximum
Hedging Exposure (as such term is defined in the Intercreditor and Collateral
Agency Agreement). Notwithstanding the preceding, Total Debt shall not include
any accounts payable of the Borrower or any consolidated subsidiary to the
extent that such accounts payable have not been outstanding for more than 60
days.
"Total Proved Reserves" shall be as defined in the SPE definitions.
"Transactions" means, with respect to (a) the Borrower, the execution,
delivery and performance by the Borrower of this Agreement and each other Loan
Document to which it is a party, the borrowing of Loans, the use of the proceeds
thereof, and the grant of Liens by the Borrower on Mortgaged Properties and
other Properties pursuant to the Security Instruments and (b) each Guarantor,
the execution, delivery and performance by such Guarantor of each Loan Document
to which it is a party, the guaranteeing of the Indebtedness and the other
obligations under the Guarantee and Collateral Agreement by such Guarantor and
such Guarantor's grant of the security interests and provision of collateral
thereunder, and the grant of Liens by such Guarantor on Mortgaged Properties and
other Properties pursuant to the Security Instruments.
16
"Warrant Agreement" means that certain Warrant Agreement in the Form
attached hereto as Exhibit H from the Borrower to each of the Lenders as the
same may be amended, modified or supplemented from time to time.
"Wholly-Owned Subsidiary" means any Subsidiary of which all of the
outstanding Equity Interests (other than any directors' qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by the Borrower
or one or more of the Wholly-Owned Subsidiaries or by the Borrower and one or
more of the Wholly-Owned Subsidiaries.
Section 1.03 Terms Generally; Rules of Construction. The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument or other document
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any law shall be construed as referring to such law
as amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, (c) any reference herein to any Person shall be construed to
include such Person's successors and assigns (subject to the restrictions
contained herein), (d) the words "herein", "hereof" and "hereunder", and words
of similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (e) with respect to the
determination of any time period, the word "from" means "from and including" and
the word "to" means "to and including" and (f) any reference herein to Articles,
Sections, Annexes, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Annexes, Exhibits and Schedules to, this
Agreement. No provision of this Agreement or any other Loan Document shall be
interpreted or construed against any Person solely because such Person or its
legal representative drafted such provision.
Section 1.04 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which Borrower's independent
certified public accountants concur and that are disclosed to Administrative
Agent on the next date on which financial statements are required to be
delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the
Borrower and -------- the Lenders shall otherwise agree in writing, no such
change shall modify or affect the manner in which compliance with the covenants
contained herein is computed such that all such computations shall be conducted
utilizing financial information presented consistently with prior periods.
17
ARTICLE II
The Credits
Section 2.01 Commitments. Subject to the terms and conditions set forth
herein, each Lender agrees to make a Loan to the Borrower on the Effective Date
in an aggregate principal amount equal to the Lender's Commitment; provided that
the aggregate amount of the Loans of all Lenders shall not exceed
$18,000,000. The Borrower may not reborrow any Loan.
Section 2.02 Loans and Borrowings.
(a) Borrowings; Several Obligations. The Loan shall be made by the
Lenders ratably in accordance with their respective Applicable Percentages.
The failure of any Lender to make its Loan required to be made by it shall
not relieve any other Lender of its obligations hereunder; provided that
the Commitments of the Lenders are several and no Lender shall be
responsible for any other Lender's failure to make its Loan as required.
(b) Minimum Amount. The Borrowing shall be in the full amount of the
Commitment.
(c) Notes. The Loan made by each Lender shall be evidenced by a single
promissory note of the Borrower in substantially the form of Exhibit A,
dated, in the case of (i) any Lender party hereto as of the date of this
Agreement, as of the date of this Agreement, or (ii) any Lender that
becomes a party hereto pursuant to an Assignment and Assumption, as of the
effective date of the Assignment and Assumption, payable to the order of
such Lender in a principal amount equal to its Maximum Credit Amount as in
effect on such date, and otherwise duly completed. In the event that any
Lender's Maximum Credit Amount increases or decreases for any reason
(whether pursuant to Section 12.04(b) or otherwise), the Borrower shall
deliver or cause to be delivered on the effective date of such increase or
decrease, a new Note payable to the order of such Lender in a principal
amount equal to its Maximum Credit Amount after giving effect to such
increase or decrease, and otherwise duly completed.
Section 2.03 Requests for Borrowings. The Borrowing shall require advance
written notice to the Administrative Agent and the Arranger in the form of
Exhibit B which shall be irrevocable, from the Borrower to be received by the
Administrative Agent and the Arranger not later than 11:00 a.m. (EST)
at least two Business Days prior to the date of the Borrowing.
Section 2.04 Funding of Borrowings.
(a) Funding by Lenders. Each Lender shall make the Loan to be made by
it hereunder on the proposed date thereof by wire - transfer of immediately
available funds by 1:00 p.m., New York City time, to the account of the
Administrative Agent most recently designated by it for such purpose by
notice to the Lenders. The Administrative Agent will make such Loans
available to the Borrower by promptly crediting the amounts so received, in
like funds, to an account designated by the Borrower in the applicable
Borrowing Request.
18
(b) Presumption of Funding by the Lenders. Unless the Administrative
Agent shall have received notice from a Lender prior to the proposed date
of the Borrowing that such Lender will not make available to the
Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share
available on such date in accordance with Section 2.04(a) and may, in
reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its
share of the applicable Borrowing available to the Administrative Agent,
then the applicable Lender and the Borrower severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is
made available to the Borrower to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation
or (ii) in the case of the Borrower, the Applicable Rate. If such Lender
pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
Section 2.05 Termination of Commitments(a) . The Lenders shall have no
further Commitments on the Effective Date immediately after the Loan is advanced
to the Borrower. ARTICLE III Payments of Principal and Interest; Prepayments;
Fees
Section 3.01 Repayment of Loans. The Borrower hereby unconditionally
promises to pay to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Loan on the Termination Date.
Section 3.02 Interest.
(a) Loans. The Loans for the Borrowing shall bear interest at the
Applicable Rate, but in no event to exceed the Highest Lawful Rate.
(b) Interest Payment Dates. Accrued interest on each Loan shall be
payable in arrears on the last day of each calendar month and on the
Termination Date; provided that (i) interest accrued after the Termination
Date shall be payable on demand, and (ii) in the event of any repayment or
prepayment of any Loan, accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment.
(c) Interest Rate Computations. All interest hereunder shall be
computed on the basis of a year of 360 days, unless such computation would
exceed the Highest Lawful Rate, in which case interest shall be computed on
the basis of a year of 365 days (or 366 days in a leap year), and in each
case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).
Section 3.03 Prepayments.
(a) Optional Prepayments. The Borrower shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part,
subject to prior notice in accordance with Section 3.03(b).
(b) Notice and Terms of Optional Prepayment. Each prepayment permitted
hereunder shall require not less than three (3) Business Day's prior notice
to the Administrative Agent and the Arranger, which notice shall specify
the prepayment date (which shall be a Business Day) and the amount of the
prepayment. Each such notice shall be irrevocable and effective only upon
receipt by the Administrative Agent and the Arranger. Each prepayment of a
Borrowing shall be applied ratably to the Loans included in the prepaid
Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 3.02
19
(c) No Premium or Penalty. Prepayments permitted under this Section
3.03 shall be without premium or penalty.
Section 3.04 Cash Sweep. If the Indebtedness has not been paid in full as
of the Target Date or any Event of Default shall occur and be continuing, (i)
prior to the Target Date, or upon the date of an occurrence of an Event of
Default, Borrower shall establish and maintain, at the Borrower's expense, an
account under the Administrative Agent's control (the "Lockbox Account") with a
bank reasonably acceptable to the Administrative Agent that has entered into an
account agreement satisfactory to the Administrative Agent pursuant to which all
Cash Receipts to be received by the Borrower shall be deposited, (ii) Borrower
shall direct each payor of any Cash Receipts at such time to make payment to
such Lockbox Account, and (iii) the Borrower shall pay principal (through the
Administrative Agent directing payment of such amounts as a Lockbox
Disbursement) by an amount equal to 100% of the Residual Balance in the Lockbox
Account, after the Maturity Date or any Event of Default that is continuing.
Section 3.05 Mandatory Repayments. In the event that Borrower or its
Subsidiaries sell, assign or otherwise dispose of any of their Oil and Gas
Properties, then the Borrower shall prepay the Loan on the date such sale or
other disposition of the Oil and Gas Properties occur in an aggregate principal
amount equal to the proceeds of such sale or disposition.
Section 3.06 Fees.
(a) Commitment Fee. The Borrower agrees to pay to the Administrative
Agent for the account of each Lender on the Effective Date a commitment fee
of $180,000.
(b) Administrative Fee. The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender a quarterly fee in the
amount of $25,000 payable on the Effective Date and on the first day of
each fiscal quarter thereafter.
(c) Termination Fee. On the earlier of the Maturity Date or any other
date in which the loans are paid in full, the Borrower agrees to pay to the
Administrative Agent, for the account of each Lender a termination fee in
the amount of $360,000 on such date.
(d) Origination Fee. The Borrower agrees to pay to the
Administrative Agent for the account of each Lender on the Effective
Date an origination fee of $1,000,000.
20
ARTICLE IV
Payments; Pro Rata Treatment; Sharing of Set-offs.
Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) Payments by the Borrower. The Borrower shall make each payment
required to be made by it hereunder (whether of principal, interest, fees,
or of amounts payable under Section 5.01, Section 5.02 or otherwise) prior
to 12:00 noon, New York City time, on the date when due, in immediately
available funds, without defense, deduction, recoupment, set-off or
counterclaim. Fees, once paid, shall not be refundable under any
circumstances. Any amounts received after such time on any date may, in the
discretion of the Administrative Agent, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest
thereon. All such payments shall be made to the Administrative Agent at its
offices specified in Section 12.01, except that payments pursuant to
Section 5.01, Section 5.02 and Section 12.03 shall be made directly to the
Persons entitled thereto. The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the
case of any payment accruing interest, interest thereon shall be payable
for the period of such extension. All payments hereunder shall be made in
dollars.
(b) Application of Insufficient Payments. If at any time insufficient
funds are received by and available to the Administrative Agent to pay
fully all amounts of principal, interest and fees then due hereunder, such
funds shall be applied (i) first, towards payment of interest and fees then
due hereunder, ratably among the parties entitled thereto in accordance
with the amounts of interest and fees then due to such parties, and (ii)
second, towards payment of principal then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of principal then
due to such parties.
(c) Sharing of Payments by Lenders. If any Lender shall, by exercising
any right of set-off or counterclaim or otherwise, obtain payment in
respect of any principal of or interest on any of its Loans resulting in
such Lender receiving payment of a greater proportion of the aggregate
amount of its Loans and accrued interest thereon than the proportion
received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the
Loans of other Lenders to the extent necessary so that the benefit of all
such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective
Loans; provided that (i) if any such participations are purchased and all
or any portion of the payment giving rise thereto is recovered, such
participations shall be rescinded and the purchase price restored to the
extent of such recovery, without interest, and (ii) the provisions of this
Section 4.01(c) shall not be construed to apply to any payment made by the
Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans to any
assignee or participant, other than to the Borrower or any Subsidiary or
Affiliate thereof (as to which the provisions of this Section 4.01(c) shall
apply). The Borrower consents to the foregoing and agrees, to the extent it
may effectively do so under applicable law, that any Lender acquiring a
participation pursuant to the foregoing arrangements may exercise against
the Borrower rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation. 21
Section 4.02 Presumption of Payment by the Borrower. Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders the amount due. In such event, if the Borrower has not in fact made such
payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation. Section
4.03 Certain Deductions by the Administrative Agent. If any Lender shall
fail to make any payment required to be made by it pursuant to Section 2.04(b)
or Section 4.02 then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender's obligations under such Sections until all such unsatisfied
obligations are fully paid.
ARTICLE V
Increased Costs; Taxes
Section 5.01 Increased Costs.
(a) Capital Requirements. If any Lender 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 capital or on the capital of such
Lender's holding company, if any, as a consequence of this Agreement or the
Loans made by Lenders hereunder, to a level below that which such Lender or
such Lender's holding company could have achieved but for such Change in
Law (taking into consideration such Lender's policies and the policies of
such Lender's holding company with respect to capital adequacy), then from
time to time the Borrower will pay to such Lender, as the case may be, such
additional amount or amounts as will compensate such Lender or such
Lender's holding company for any such reduction suffered.
(b) Certificates. A certificate of a Lender setting forth the amount
or amounts necessary to compensate such Lender or its holding company, as
the case may be, as specified in the immediately preceding subsection (a)
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 10 days after receipt thereof.
(c) Effect of Failure or Delay in Requesting Compensation. Failure or
delay on the part of any Lender to demand compensation pursuant to this
Section 5.01 shall not constitute a waiver of such Lender's right to demand
such compensation.
22
Section 5.02 Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor 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 5.02(a)), the Administrative Agent or Lender (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 or such Guarantor shall make such
deductions and (iii) the Borrower or such Guarantor shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law. (b) Payment of Other Taxes by the Borrower. The Borrower shall pay any
Other Taxes to the relevant Governmental Authority in accordance with applicable
law.
(c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent and each Lender within 10 days after written demand
therefore, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent or such Lender, 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 5.02) and any penalties,
interest and reasonable 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 of the
Administrative Agent or a Lender as to the amount of such payment or liability
under this Section 5.02 shall be delivered to the Borrower and shall be
conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower or a Guarantor 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. ARTICLE VI Conditions Precedent
Section 6.01 Effective Date. The obligations of the Lenders to make Loans
hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 12.02):
(a) The Administrative Agent, the Arranger and the Lenders shall have
received all fees and other amounts due and payable on or prior to the Effective
Date, including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.
23
(b) The Administrative Agent shall have received a certificate of the
Secretary or an Assistant Secretary of the Borrower and each Guarantor
setting forth (i) resolutions of its board of directors, members, managers
(or other equivalent body) with respect to the authorization of the
Borrower or such Guarantor to execute and deliver the Loan Documents to
which it is a party and to enter into the transactions contemplated in
those documents, (ii) the officers or other authorized persons of the
Borrower or such Guarantor (y) who are authorized to sign the Loan
Documents to which the Borrower or such Guarantor is a party and (z) who
will, until replaced by another officer or officers or other authorized
persons duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other communications
in connection with this Agreement and the transactions contemplated hereby,
(iii) specimen signatures of such authorized officers or other authorized
persons, and (iv) the articles or certificate of incorporation or
formations and bylaws, regulations or operating agreement (as applicable)
of the Borrower and such Guarantor, certified as being true and complete.
The Administrative Agent and the Lenders may conclusively rely on such
certificate until the Administrative Agent receives notice in writing from
the Borrower to the contrary.
(c) The Administrative Agent shall have received certificates of the
appropriate State agencies with respect to the existence, qualification and
good standing of the Borrower and each Guarantor.
(d) The Administrative Agent shall have received a compliance
certificate which shall be substantially in the form of Exhibit D, duly and
properly executed by a Responsible Officer and dated as of the date of
Effective Date.
(e) The Administrative Agent shall have received from each party
hereto counterparts (in such number as may be requested by the
Administrative Agent) of this Agreement signed on behalf of such party.
(f) The Administrative Agent shall have received duly executed Notes
payable to the order of each Lender in a principal amount equal to its
Maximum Credit Amount dated as of the date hereof.
(g) The Borrower shall have delivered to the Administrative Agent a
Borrowing Request in the amount of $18,000,000.
(h) The Administrative Agent shall have received from Parent duly
executed counterparts of the Warrant Agreement for each Lender.
(i) The Administrative Agent shall have received from each party
thereto duly executed counterparts (in such number as may be requested by
the Administrative Agent) of the Security Instruments, including the
Guarantee and Collateral Agreement and the other Security Instruments
described on Exhibit F-1. In connection with the execution and delivery of
the Security Instruments, the Administrative Agent shall:
(i) be reasonably satisfied that the Security Instruments create first
priority, perfected Liens on the Collateral, such Liens being subject only
to Excepted Liens identified in clauses (a) through (e) of the definition
thereof, but subject to the provisos at the end of such definition; and
24
(ii) have received certificates, together with undated, blank stock powers
for each such certificate, representing all of the issued and outstanding Equity
Interests of each of the Borrower and each of its Subsidiaries.
(j) The Administrative Agent shall have received an opinion of (i)
▇▇▇▇▇ ▇▇▇▇, L.L.P., special counsel to the Borrower, substantially in the
form of Exhibit E-1 hereto, and local counsel in each of the following
states: Louisiana and Colorado and any other jurisdictions requested by the
Administrative Agent, substantially in the form of Exhibit E-2.
(k) The Administrative Agent shall have received a certificate of
insurance coverage of the Borrower evidencing that the Borrower is carrying
insurance in accordance with Section 7.13.
(l) The Administrative Agent shall have received title information as
the Administrative Agent may require satisfactory to the Administrative
Agent setting forth the status of title to the Oil and Gas Properties
evaluated in the Initial Reserve Report.
(m) The Administrative Agent shall be satisfied with the environmental
condition of the Oil and Gas Properties of the Borrower and its
Subsidiaries and have received a Phase I Environmental Report in form and
scope satisfactory to the Administrative Agent and the Lenders with respect
to such Oil and Gas Properties.
(n) The Administrative Agent shall have received a certificate of a
Responsible Officer of the Borrower certifying that the Borrower and its
Subsidiaries has received all consents and approvals required by Section
7.03.
(o) The Administrative Agent shall have received (i) the financial
statements referred to in Section 7.04(a), (ii) the Initial Reserve Report
accompanied by a certificate covering the matters described in Section
8.12(b), (iii) copies of all material contracts or agreements, including,
but not limited to, all operating agreements covering the Oil and Gas
Properties, as well as all marketing, transportation, and processing
agreements related to such Oil and Gas Properties.
(p) The Administrative Agent shall have received appropriate UCC
search certificates reflecting no prior Liens encumbering the Properties
the Borrower and the Subsidiaries for each of the following jurisdictions:
Texas, Louisiana and Colorado and any other jurisdiction requested by the
Administrative Agent.
(q) The Administrative Agent shall have received evidence that the
Borrower and/or its Subsidiaries has purchased Hedging Contracts acceptable
to Administrative Agent and the Arranger (i) with one or more Approved
Counterparties, and (ii) that have aggregate notional volumes of not less
than 70% of the reasonably estimated projected Hydrocarbon production of
currently producing ▇▇▇▇▇ of Borrower for a minimum of the first 18 months
following the date hereof.
(r) The Administrative Agent shall be satisfied that there are no
negative price deviations in the oil and gas prices that would have a
Material Adverse Effect on the value of the Borrower's and its
Subsidiaries' Oil and Gas Properties.
25
(s) The Administrative Agent shall be satisfied that there has been no
Material Adverse Effect to the Borrower and its Subsidiaries since February
1, 2004.
(t) The Administrative Agent shall have received Letters-in-Lieu in
the form of Exhibit I executed in blank by the Borrower and its
Subsidiaries, in such quantity as the Administrative Agent may reasonably
request.
(u) Since February 1, 2004, there shall not have been any disruption
or adverse change in the financial or capital markets.
(v) Completion by the Administrative Agent and the Lenders of a
satisfactory due diligence review, including, but not limited to the review
of all engineering, operations, land, title, environmental and financial
data or information.
(w) Satisfactory due diligence review of the Borrower's and its
Subsidiaries material agreements, including, but not limited to,
satisfactory review of the operating agreements governing the Oil and Gas
Properties, marketing agreements, transportation agreements and processing
agreements.
(x) The Borrower and the Lenders shall have agreed upon the
Development Plan.
(y) The Administrative Agent shall have received a letter from Ct
Corporation evidencing the appointment of CT Corporation as authorized
agent for service of process on each of the Borrower and each Guarantor (as
defined in the Guarantee and Collateral Agreement) under each Loan Document
to which it is a party.
(z) The Administrative Agent and [Macquarie] shall have entered into
an Intercreditor Agreement satisfactory to Administrative Agent with
respect to the Liens supporting the Hedging Contracts with [Macquarie].
(aa) The Administrative Agent shall have received copies of the
Assignments from Dutch West Oil Gas to the Borrower with respect to
certain of its oil and gas properties in form and substance satisfactory to
the Administrative Agent.
(bb) The Administrative Agent shall have received such other documents
as the Administrative Agent or special counsel to the Administrative Agent
may reasonably request.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 12.02) at or prior to 2:00 p.m., New York City time, on May
1, 2004 (and, in the event such conditions are not so satisfied or waived, the
Commitments shall terminate at such time).
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ARTICLE VII
Representations and Warranties
The Borrower represents and warrants to the Lenders that:
Section 7.01 Organization; Powers. Each of the Borrower and the
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as now
conducted, and is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where failure to have
such power, authority, licenses, authorizations, consents, approvals and
qualifications could not reasonably be expected to have a Material Adverse
Effect.
Section 7.02 Authority; Enforceability. The Transactions are within the
Borrower's and each Guarantor's corporate or other organizational powers and
have been duly authorized by all necessary corporate or company, as applicable,
and, if required, stockholder or member/manager action (including, without
limitation, any action required to be taken by any class of directors of the
Borrower, whether interested or disinterested, in order to ensure the due
authorization of the Transactions). Each Loan Document to which the Borrower and
each Guarantor is a party has been duly executed and delivered by the Borrower
and such Guarantor and constitutes a legal, valid and binding obligation of the
Borrower and such Guarantor, as applicable, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require
any consent or approval of, registration or filing with, or any other action by,
any Governmental Authority or any other third Person (including shareholders or
any class of directors, whether interested or disinterested, or members of the
Borrower or any other Person), nor is any such consent, approval, registration,
filing or other action necessary for the validity or enforceability of any Loan
Document or the consummation of the transactions contemplated thereby, except
such as have been obtained or made and are in full force and effect other than
(i) the recording and filing of the Security Instruments as required by this
Agreement and (ii) those third party approvals or consents that, if not made or
obtained, would not cause a Default hereunder, could not reasonably be expected
to have a Material Adverse Effect or do not have an adverse effect on the
enforceability of the Loan Documents, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of the
Borrower or any Subsidiary or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or other
instrument binding upon the Borrower or any Subsidiary or its Properties, or
give rise to a right thereunder to require any payment to be made by the
Borrower or such Subsidiary and (d) will not result in the creation or
imposition of any Lien on any Property of the Borrower or any Subsidiary (other
than the Liens created by the Loan Documents).
27
Section 7.04 Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Administrative Agent
and the Arranger its consolidated balance sheet and statements of income,
stockholders equity and cash flows for the Borrower and its Consolidated
Subsidiaries (i) as of and for the fiscal year ended 2003, reported on by
▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, L.L.P., independent public accountants, certified by
its chief financial officer. Such financial statements present fairly, in
all material respects, the financial position and results of operations and
cash flows of the Borrower and its Consolidated Subsidiaries as of such
dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the unaudited
quarterly financial statements.
(b) Since December 31, 2003, (i) there has been no event, development
or circumstance that has had or could reasonably be expected to have a
Material Adverse Effect and (ii) the business of the Borrower and its
Subsidiaries has been conducted only in the ordinary course consistent with
past business practices.
(c) Neither the Borrower nor any of its Subsidiaries has on the date
hereof any material Debt (including Disqualified Capital Stock) or any
contingent liabilities, off-balance sheet liabilities or partnerships,
liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except
as referred to or reflected or provided for in the Financial Statements.
Section 7.05 Litigation.
(a) Except as set forth on Schedule 7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any Subsidiary (i) is not fully
covered by insurance (except for normal deductibles), (ii) that involve any
Loan Document or the Transactions.
(b) Since the date of this Agreement, there has been no negative
change in the status of the matters disclosed in Schedule 7.05.
Section 7.06 Environmental Matters. Except as set forth on Schedule 7.06:
(a) neither any Property of the Borrower or any Subsidiary nor the
operations conducted thereon violate any order or requirement of any court
or Governmental Authority or any Environmental Laws.
(b) no Property of the Borrower or any Subsidiary nor the operations
currently conducted thereon or, to the knowledge of the Borrower, by any
prior owner or operator of such Property or operation, are in violation of
or subject to any existing, pending or threatened action, suit,
investigation, inquiry or proceeding by or before any court or Governmental
Authority or to any remedial obligations under Environmental Laws.
(c) all notices, permits, licenses, exemptions, approvals or similar
authorizations, if any, required to be obtained or filed in connection with
the operation or use of any and all Property of the Borrower and each
Subsidiary, including, without limitation, past or present treatment,
storage, disposal or release of a hazardous substance, oil and gas waste or
solid waste into the environment, have been duly obtained or filed, and the
Borrower and each Subsidiary are in compliance with the terms and
conditions of all such notices, permits, licenses and similar
authorizations.
28
(d) all hazardous substances, solid waste and oil and gas waste, if
any, generated at any and all Property of the Borrower or any Subsidiary
have in the past been transported, treated and disposed of in accordance
with Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and, to the
knowledge of the Borrower, all such transport carriers and treatment and
disposal facilities have been and are operating in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are not
the subject of any existing, pending or threatened action, investigation or
inquiry by any Governmental Authority in connection with any Environmental
Laws.
(e) the Borrower has taken all steps reasonably necessary to determine
and has determined that no oil, hazardous substances, solid waste or oil
and gas waste, have been disposed of or otherwise released and there has
been no threatened release of any oil, hazardous substances, solid waste or
oil and gas waste on or to any Property of the Borrower or any Subsidiary
except in compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment.
(f) to the extent applicable, all Property of the Borrower and each
Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA, and the Borrower does not have any reason
to believe that such Property, to the extent subject to the OPA, will not
be able to maintain compliance with the OPA requirements during the term of
this Agreement.
(g) neither the Borrower nor any Subsidiary has any known contingent
liability or Remedial Work in connection with any release or threatened
release of any oil, hazardous substance, solid waste or oil and gas waste
into the environment.
(h) neither the Borrower's nor any Subsidiary's oil and gas operations
on its Oil and Gas Properties will be subject to any environmental
assessment requirements under the National Environmental Policy Act or any
analogous Governmental Regulation or any other environmental review or
assessment requirements in excess of environmental review and assessment
requirements required in connection with Borrower and its Subsidiaries
obtaining any permits or other required in completing recent ▇▇▇▇▇ on their
Oil and Gas Policies.
Section 7.07 Compliance with the Laws and Agreements; No Defaults.
(a) Each of the Borrower and each Subsidiary is in compliance with all
Governmental Requirements applicable to it or its Property and all
agreements and other instruments binding upon it or its Property, and
possesses all licenses, permits, franchises, exemptions, approvals and
other governmental authorizations necessary for the ownership of its
Property and the conduct of its business.
29
(b) Neither the Borrower nor any Subsidiary is in default nor has any
event or circumstance occurred that, but for the expiration of any
applicable grace period or the giving of notice, or both, would constitute
a default or would require the Borrower or a Subsidiary to Redeem or make
any offer to Redeem under any indenture, note, credit agreement or
instrument pursuant to which any Material Indebtedness is outstanding or by
which the Borrower or any Subsidiary or any of their Properties is bound.
(c) No Default has occurred and is continuing.
Section 7.08 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.
Section 7.09 Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," or a "public utility" within the meaning of, or subject
to regulation under, the Public Utility Holding Company Act of 1935, as amended.
Section 7.10 Taxes. Each of the Borrower and its Subsidiaries has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves in accordance with GAAP in an account
controlled by Administrative Agent. The charges, accruals and reserves on the
books of the Borrower and its Subsidiaries in respect of Taxes and other
governmental charges are, in the reasonable opinion of the Borrower, adequate.
No Tax Lien has been filed and, to the knowledge of the Borrower, no claim is
being asserted with respect to any such Tax or other such governmental charge.
Section 7.11 ERISA.
(a) The Borrower, the Subsidiaries and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could result in
imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of
fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974. No
liability to the PBGC (other than for the payment of current premiums that
are not past due) by the Borrower, any Subsidiary or any ERISA Affiliate
has been or is expected by the Borrower, any Subsidiary or any ERISA
Affiliate to be incurred with respect to any Plan. No ERISA Event with
respect to any Plan has occurred.
30
(e) Full payment when due has been made of all amounts which the
Borrower, the Subsidiaries or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as contributions to such
Plan as of the date hereof, and no accumulated funding deficiency (as
defined in section 302 of ERISA and section 412 of the Code), whether or
not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA does not, as of the end of the
Borrower's most recently ended fiscal year, exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities. The term
"actuarial present value of the benefit liabilities" shall have the meaning
specified in section 4041 of ERISA.
(g) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such
plan maintained to provide benefits to former employees of such entities,
that may not be terminated by the Borrower, a Subsidiary or any ERISA
Affiliate in its sole discretion at any time without any material
liability.
(h) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year
period preceding the date hereof sponsored, maintained or contributed to,
any Multiemployer Plan.
(i) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the
Plan.
Section 7.12 Disclosure; No Material Misstatements. The Borrower has
disclosed to the Administrative Agent, the Arranger, or the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the other reports, financial statements,
certificates or other information furnished by or on behalf of the Borrower or
any Subsidiary to the Administrative Agent or any of their Affiliates in
connection with the negotiation of this Agreement or any other Loan Document or
delivered hereunder or under any other Loan Document (as modified or
supplemented by other information so furnished) contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that, with respect to projected financial
information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time. There
is no fact peculiar to the Borrower or any Subsidiary which could reasonably be
expected to have a Material Adverse Effect or in the future is reasonably likely
to have a Material Adverse Effect and which has not been set forth in this
Agreement or the Loan Documents or the other documents, certificates and
statements furnished to the Administrative Agent or the Arranger by or on behalf
of the Borrower or any Subsidiary prior to, or on, the date hereof in connection
with the transactions contemplated hereby. There are no statements or
conclusions in any Reserve Report that are based upon or include misleading
information or fail to take into account material information regarding the
matters reported therein. Section
31
7.13 Insurance. Schedule 7.13 attached hereto contains an accurate and
complete description of all material policies of fire, liability, workmen's
compensation and other forms of insurance that are owned or held by or on behalf
of the Borrower and its Subsidiaries. All such policies are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date of the closing have been paid, and no notice of cancellation
or termination has been received with respect to any such policy. Such policies
are sufficient for compliance with all Governmental Requirements and of all
agreements to which the Borrower or any of its Subsidiaries is a party; are
valid, outstanding and enforceable policies; provide adequate insurance coverage
for the assets and operations of the Borrower and its Subsidiaries in at least
such amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Borrower; will remain in full force and effect through the respective dates set
forth in Schedule 7.13 without the payment of additional premiums; and will not
in any way be affected by, or terminate or lapse by reason of, the transactions
contemplated by this Agreement and the Loan Documents. None of the Borrower or
any of its Subsidiaries (and to Borrower's knowledge no prior owner of the Oil
and Gas Properties) has been refused any insurance with respect to its assets or
operations, nor has it been limited below usual and customary policy limits, by
an insurance carrier to which it has applied for any insurance or with which it
has carried insurance during the last three years. The Administrative Agent and
the Lenders have been named as additional insureds in respect of such liability
insurance policies and the Administrative Agent has been named as loss payee
with respect to Property loss insurance.
Section 7.14 Restriction on Liens. Neither the Borrower nor any of the
Subsidiaries is a party to any material agreement or arrangement, or subject to
any order, judgment, writ or decree, that either restricts or purports to
restrict its ability to grant Liens to the Administrative Agent and the Lenders
on or in respect of their Properties to secure the Indebtedness and the Loan
Documents.
Section 7.15 Subsidiaries. Except as set forth on Schedule 7.15 the
Borrower has no Subsidiaries and Borrower's Subsidiaries have no Subsidiaries.
Section 7.16 Location of Business and Offices. The Borrower's jurisdiction
of organization is Texas, the name of the Borrower as listed in the public
records of its jurisdiction of organization is GulfWest Oil Gas Company; and
the organizational identification number of the Borrower in its jurisdiction of
organization is 0152508500 (or, in each case, as set forth in a notice delivered
to the Administrative Agent pursuant to Section 8.01(o) in accordance with
Section 12.01). The Borrower's principal place of business and chief executive
offices are located at the address specified in Section 12.01 (or as set forth
in a notice delivered pursuant to Section 8.01(o) and Section 12.01(c)). Each
Subsidiary's jurisdiction of organization, name as listed in the public records
of its jurisdiction of organization, organizational identification number in its
jurisdiction of organization, and the location of its principal place of
business and chief executive office is stated on Schedule 7.15 (or as set forth
in a notice delivered pursuant to
Section 8.01(o)).
32
Section 7.17 Properties; Titles, Etc.
(a) After giving full effect to the Excepted Liens and except for the
ORRI Conveyance, the Borrower owns the working interests and net interests
in production attributable to the Oil and Gas Properties reflected in the
Initial Reserve Report and set forth in Schedule 7.17 and the ownership of
such Oil and Gas Properties shall not in any material respect obligate the
Borrower and its Subsidiaries to bear the costs and expenses relating to
the maintenance, development and operations of each such Property in an
amount in excess of the working interest of each Oil and Gas Property set
forth in Schedule 7.17. All information contained in the most recently
delivered Reserve Report is true and correct in all material respects as of
the date thereof. No litigation or claims are currently pending, or the
best knowledge of the Borrower, threatened which would question the
Borrower's or its Subsidiaries title to the Oil and Gas Properties. (b) All
leases and agreements referenced in the Initial Reserve Report delivered in
connection with the Initial Funding are valid and subsisting, in full force
and effect and there exists no default or event or circumstance which with
the giving of notice or the passage of time or both would give rise to a
default under any such lease or leases, which would affect in any material
respect the conduct of the business of the Borrower.
(c) The Property presently owned, leased or licensed by the Borrower
and its Subsidiaries including, without limitation, all easements and
rights of way, is all of the Property necessary to permit the Borrower and
its Subsidiaries to conduct their business in all material respects in the
manner contemplated by the Transaction Documents.
(d) All fixtures, improvements and personal property included in the
Properties of the Borrower and its Affiliates which are reasonably
necessary for the operation of its business are in good working condition
and are maintained in accordance with prudent business standards.
(e) The Borrower and each Subsidiary owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual Property
material to its business, and the use thereof by the Borrower and such
Subsidiary does not infringe upon the rights of any other Person. The
Borrower and its Subsidiaries either own or have valid licenses or other
rights to use all databases, geological data, geophysical data, engineering
data, seismic data, maps, interpretations and other technical information
used in their businesses as presently conducted, subject to the limitations
contained in the agreements governing the use of the same, which
limitations are customary for companies engaged in the business of the
exploration and production of Hydrocarbons.
33
Section 7.18 Maintenance of Properties. The Oil and Gas Properties (and
Properties unitized therewith) have been maintained, operated and developed in a
good and workmanlike manner and in conformity with all Government Requirements
and customary industry standards and in conformity with the provisions of all
leases, subleases or other contracts comprising a part of the Hydrocarbon
Interests and other contracts and agreements forming a part of the Oil and Gas
Properties. Specifically in connection with the foregoing (i) no Oil and Gas
Property is subject to having allowable production reduced below the full and
regular allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) and (ii)
none of the ▇▇▇▇▇ comprising a part of the Oil and Gas Properties (or Properties
unitized therewith) is deviated from the vertical more than the maximum
permitted by Government Requirements, and such ▇▇▇▇▇ are, in fact, bottomed
under and are producing from, and the well bores are wholly within, the Oil and
Gas Properties (or in the case of ▇▇▇▇▇ located on Properties unitized
therewith, such unitized Properties). All pipelines, ▇▇▇▇▇, gas processing
plants, platforms and other material improvements, fixtures and equipment owned
in whole or in part by the Borrower or any of its Subsidiaries that are
necessary to conduct normal operations are being maintained in a state adequate
to conduct normal operations in accordance with customary industry standards,
and with respect to such of the foregoing that are operated by the Borrower or
any of its Subsidiaries, in a manner consistent with the Borrower's or its
Subsidiaries' past practices (other than those the failure of which to maintain
in accordance with this Section 7.07 could not reasonably be expect to have a
Material Adverse Effect). Except as set forth on Schedule 7.18, there are no dry
holes ------------- or otherwise inactive ▇▇▇▇▇ located on the Oil and Gas
Properties or pooled or unitized therewith (including any ▇▇▇▇▇ which would, if
located in Texas, require compliance with Railroad Commission Rule 3.14(b)(2))
except for ▇▇▇▇▇ that have been properly plugged and abandoned.
Section 7.19 Gas Imbalances, Prepayments. As of the date hereof, except as
set forth on Schedule 7.19, on a net basis there are no gas imbalances, take or
pay or other prepayments that would require the Borrower or any of its
Subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor.
Except as set forth on Schedule 7.19, no material gas imbalances presently exist
with respect to any of the Oil and Gas Properties of Borrower or any of its
Subsidiaries. Except as set forth in Schedule 7.19, none of the Oil and Gas
Properties of Borrower or any of its Subsidiaries are subject to any contractual
or other arrangement whereby payment for production therefrom is to be deferred
for a substantial period of time after the month in which such production is
delivered (i.e., in the case of oil, not in excess of 60 days, and in the case
of gas, not in excess of 90 days). Except as set forth on Schedule 7.19, none of
the Oil and Gas Properties of the Borrower or its Subsidiaries is subject to a
contractual or other arrangement for the sale of oil or gas production for a
fixed price which cannot be canceled on 90 days (or less) notice or which
contains terms which are not customary in the industry. None of the Oil and Gas
Properties of Borrower or its Subsidiaries is subject at present to any
regulatory refund obligation and no facts exist which might cause the same to be
imposed.
Section 7.20 Marketing of Production. Except for contracts listed and in
effect on the date hereof on Schedule 7.20, and thereafter either disclosed in
writing to the Administrative Agent or included in the most recently delivered
Reserve Report (with respect to all of which contracts the Borrower represents
that it or its Subsidiaries are receiving a price for all production sold
thereunder which is computed substantially in accordance with the terms of the
relevant contract and are not having deliveries curtailed substantially below
the subject Property's delivery capacity), no material agreements exist that are
not cancelable on 60 days notice or less without penalty or detriment for the
sale of production from the Borrower's or its Subsidiaries' Hydrocarbons
(including, without limitation, calls on or other rights to purchase,
production, whether or not the same are currently being exercised) that (a)
pertain to the sale of production at a fixed price and (b) have a maturity or
expiry date of longer than six (6) months from the date hereof. All proceeds
from the sale of the Borrower's and its Subsidiaries' interests in Hydrocarbons
from its Oil and Gas Properties are currently being paid in full to the Borrower
or its Subsidiaries by the purchaser thereof on a timely basis, and none of such
proceeds are currently being held in suspense by such purchaser or any other
Person.
34
Section 7.21 Hedging Contracts. Schedule 7.21, as of the date hereof, and
after the date hereof, each report required to be delivered by the Borrower
pursuant to Section 8.01(f), sets forth, a true and complete list of all Hedging
Contracts of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net ▇▇▇▇ to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.
Section 7.22 Use of Loans. The proceeds of the Loans shall be used to
provide working capital for exploration, development, and production operations,
for general corporate purposes approved by the Lenders, reduce existing Debt,
pay the costs associated with projects provided for in the approved Development
Plan, pay the commitment and origination fees referenced in Section 3.06, and
pay the other costs of the transactions related to this Agreement. The Borrower
and its Subsidiaries are not engaged principally, or as one of its or their
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the Board). No part of the
proceeds of any Loan will be used for any purpose which violates the provisions
of Regulations T, U or X of the Board.
Section 7.23 Solvency. After giving effect to the transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be received by reason of indemnity, offset, insurance or any similar
arrangement), at a fair valuation, of the Borrower and the Guarantors, taken as
a whole, will exceed the aggregate Debt of the Borrower and the Guarantors on a
consolidated basis, as the Debt becomes absolute and matures, (b) each of the
Borrower and the Guarantors will not have incurred or intended to incur, and
will not believe that it will incur, Debt beyond its ability to pay such Debt
(after taking into account the timing and amounts of cash to be received by each
of the Borrower and the Guarantors and the amounts to be payable on or in
respect of its liabilities, and giving effect to amounts that could reasonably
be received by reason of indemnity, offset, insurance or any similar
arrangement) as such Debt becomes absolute and matures and (c) each of the
Borrower and the Guarantors will not have (and will have no reason to believe
that it will have thereafter) unreasonably small capital for the conduct of its
business.
Section 7.24 Casualty Events. Since December 31, 2003, neither the business
nor any Properties of the Borrower or any Subsidiary have been materially and
adversely affected as a result of any fire, explosion, earthquake, flood,
drought, windstorm, accident, strike or other labor disturbance, embargo,
requisition or taking of Property or cancellation of contracts, permits or
concessions by any domestic or foreign Governmental Authority, riot, activities
or armed forces or acts of God or of any public enemy.
35
Section 7.25 Material Agreements. Set forth on Schedule 7.25 hereto is a
complete and correct list of all material agreements and other instruments of
the Borrower or any Subsidiary setting forth each counterparty thereto (other
than the Loan Documents) relating to the purchase, transportation by pipeline,
gas processing, marketing, sale and supply of Hydrocarbons, farmout arrangements
or other material contract to which Borrower or any Subsidiary is a party or by
which its Properties is bound (collectively "Material Agreements") and copies of
such documents have been provided to the Administrative Agent. All such
agreements are in full force and effect and neither Borrower nor any Subsidiary
is in default thereunder, nor is there any uncured default by any Affiliate
predecessor in interest to Borrower or any Subsidiary or, to Borrower's
knowledge, by any predecessor in interest to Borrower (other than an Affiliate
predecessor) or counterparty thereto, and none of the Borrower nor any of its
Subsidiaries has altered any material item of such agreements without the prior
written consent of Lenders.
Section 7.26 No Brokers. Other than the payment of $______________ to Petro
Capital Advisors, LLC no Person is entitled to any brokerage fee or finders fee
or similar fee or commission in connection with arranging the Loans contemplated
by this Agreement.
Section 7.27 Investments and Guaranties. The Borrower or such Subsidiary
has not made any investments in, advances to or guaranties of the obligations of
any Person, except as reflected in the financial statements described in Section
7.04(a).
Section 7.28 Payments by Purchasers of Production. All proceeds from the
sale of the Borrower's or any of its Subsidiary's interests in Hydrocarbons from
its Oil and Gas Properties are currently being paid in full to the Borrower or
such Subsidiary by the purchaser thereof on a timely basis and at prices and
terms comparable to market prices and terms generally available at the time such
prices and terms were negotiated for oil and gas production from producing areas
situated near such Oil and Gas Properties, and none of such proceeds are
currently being held in suspense by such purchaser or any other Person.
Section 7.29 Existing Accounts Payable. Set forth on Schedule 7.29 hereto
is a complete and correct list of all existing accounts payable of the Borrower
or any Subsidiary that are more than 30 days past due.
Section 7.30 Reliance. In connection with the negotiation of and the
entering into this Agreement, the Borrower acknowledges and represents that none
of the Lenders, the Administrative Agent, the Arranger, or any representative of
any of the foregoing is acting as a fiduciary or financial or investment advisor
for it; it is not relying upon any representations (whether written or oral) of
such Persons it has consulted with its own legal, regulatory, tax, business
investment, financial and accounting advisors to the extent it has deemed
necessary, and it has made its own investment, hedging, and trading decisions
based upon its own judgment and upon any advice from such advisors as it has
deemed necessary and not upon any view expressed by any Lender, the
Administrative Agent, the Arranger, or any representative of any of the
foregoing; it has not been given by any Lender, the Administrative Agent, the
Arranger, or any representative of any of the foregoing (directly or indirectly
through any other Person) any advice, counsel, assurance, guarantee, or
representation whatsoever as to the expected or projected success,
profitability, return, performance, result, effect, consequence, or benefit
(either legal, regulatory, tax, financial, accounting, or otherwise) of this
Agreement or the transactions contemplated hereby; and it is entering into this
Agreement and the other Loan Documents with a full understanding of all of the
risks hereof and thereof (economic and otherwise), and it is capable of assuming
and willing to assume (financially and otherwise) those risks.
36
ARTICLE VIII
Affirmative Covenants
Until the principal of and interest on each Loan and all fees payable
hereunder and all other amounts payable under the Loan Documents shall have been
paid in full, the Borrower covenants and agrees with the Lenders that:
Section 8.01 Financial Statements; Other Information. The Borrower will
furnish to the Administrative Agent and the Arranger:
(a) Annual Financial Statements. As soon as available, but in any
event in accordance with then applicable law and not later than 90 days
after the end of each fiscal year of the Borrower, its audited consolidated
balance sheet and related statements of operations, stockholders' equity
and cash flows as of the end of and for such year, setting forth in each
case in comparative form the figures for the previous fiscal year, all
reported on by ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇, L.L.P. or other independent public
accountants of recognized national standing (without a "going concern" or
like qualification or exception and without any qualification or exception
as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the Borrower and its Consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied.
(b) Quarterly Financial Statements. As soon as available, but in any
event in accordance with then applicable law and not later than 45 days
after the end of each of the first three fiscal quarters of each fiscal
year of the Borrower, its consolidated balance sheet and related statements
of operations, stockholders' equity and cash flows as of the end of and for
such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the
corresponding period or periods of (or, in the case of the balance sheet,
as of the end of) the previous fiscal year, all certified by one of its
Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Borrower and its
Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes.
(c) Certificate of Financial Officer - Compliance. Concurrently with
any delivery of financial statements under Section 8.01(a) or Section
8.01(b), a certificate of a Financial Officer in substantially the form of
Exhibit D hereto (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any action
taken or proposed to be taken with respect thereto, (ii) setting forth
reasonably detailed calculations demonstrating compliance with Section
8.13(b) and Section 9.01, and (iii) stating whether any change in GAAP or
in the application thereof has occurred since the date of the audited
financial statements referred to in Section 7.04 and, if any such change
has occurred, specifying the effect of such change on the financial
statements accompanying such certificate.
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(d) Certificate of Accounting Firm - Defaults. Concurrently with any
delivery of financial statements under Section 8.01(a), a certificate of
the accounting firm that reported on such financial statements stating
whether they obtained knowledge during the course of their examination of
such financial statements of any Default (which certificate may be limited
to the extent required by accounting rules or guidelines).
(e) Certificate of Financial Officer - Consolidating Information. If,
at any time, all of the Consolidated Subsidiaries of the Borrower are not
Consolidated Subsidiaries, then concurrently with any delivery of financial
statements under Section 8.01(a) or Section 8.01(b), a certificate of a
Financial Officer setting forth consolidating spreadsheets that show all
Consolidated Subsidiaries and the eliminating entries, in such form as
would be presentable to the auditors of the Borrower.
(f) Certificate of Financial Officer - Hedging Contracts. Concurrently
with any delivery of financial statements under Section 8.01(a) and Section
8.01(b), a certificate of a Financial Officer, in form and substance
satisfactory to the Administrative Agent, setting forth as of the last
Business Day of such fiscal quarter or fiscal year, a true and complete
list of all Hedging Contracts of the Borrower and each Subsidiary, the
material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net ▇▇▇▇-to-market
value therefore, any new credit support agreements relating thereto not
listed on Schedule 7.20, any margin required or supplied under any credit
support document, and the counterparty to each such agreement.
(g) Certificate of Insurer - Insurance Coverage. Concurrently with any
delivery of financial statements under Section 8.01(a), a certificate of
insurance coverage from each insurer with respect to the insurance required
by Section 8.07, in form and substance satisfactory to the Administrative
Agent, and, if requested by the Administrative Agent or the Arranger, all
copies of the applicable policies.
(h) Other Accounting Reports. Promptly upon receipt thereof, a copy of
each other report or letter submitted to the Borrower or any of its
Subsidiaries by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Borrower or any
such Subsidiary, and a copy of any response by the Borrower or any such
Subsidiary, or the Board of Directors of the Borrower or any such
Subsidiary, to such letter or report.
(i) Cash Flow. Promptly after the end of each calendar month, a
current operating forecast of the Borrower and its Subsidiaries as of the
end of such calendar month and as of the fiscal year to date.
(j) SEC and Other Filings; Reports to Shareholders. Promptly after the
same become publicly available, copies of all periodic and other reports,
proxy statements and other materials filed by Parent, by the Borrower or
any Subsidiary with the SEC, or with any national securities exchange, or
distributed by the Borrower to its shareholders generally, as the case may
be.
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(k) Notices Under Material Instruments. Promptly after the furnishing
thereof, copies of any financial statement, report or notice furnished to
or by any Person pursuant to the terms of any preferred stock designation,
indenture, loan or credit or other similar agreement, other than this
Agreement and not otherwise required to be furnished to the Administrative
Agent or the Arranger pursuant to any other provision of this Section 8.01.
(l) Lists of Purchasers. Concurrently with the delivery of any Reserve
Report to the Administrative Agent pursuant to Section 8.12, a list of all
Persons purchasing Hydrocarbons from the Borrower or any Subsidiary.
(m) Notice of Sales of Oil and Gas Properties. In the event the
Borrower or any Subsidiary intends to sell, transfer, assign or otherwise
dispose of any Oil or Gas Properties or any Equity Interests in any
Subsidiary in accordance with Section 9.13, prior written notice of such
disposition, the price thereof and the anticipated date of closing.
(n) Notice of Litigation/Casualty Events. Prompt written notice, and
in any event within three Business Days, of the delivery of any demand,
letter, or the filing of any lawsuit or arbitration proceeding with an
expected potential liability in excess of $250,000, or the occurrence of
any Casualty Event or the commencement of any action or proceeding that
could reasonably be expected to result in a demand notice, lawsuit,
arbitration proceeding, or Casualty Event with respect to Borrower or any
of its Subsidiaries.
(o) Information Regarding Borrower and Guarantors. Prompt written
notice (and in any event within ten (10) days prior thereto) of any change
(i) in the Borrower or any Guarantor's corporate name or in any trade name
used to identify such Person in the conduct of its business or in the
ownership of its Properties, (ii) in the location of the Borrower or any
Guarantor's chief executive office or principal place of business, (iii) in
the Borrower or any Guarantor's identity or corporate structure or in the
jurisdiction in which such Person is incorporated or formed, (iv) in the
Borrower or any Guarantor's jurisdiction of organization or such Person's
organizational identification number in such jurisdiction of organization,
and (v) in the Borrower or any Guarantor's federal taxpayer identification
number.
(p) Production Report and Lease Operating Statements. Within 25 days
after the end of each calendar month, (i) a report setting forth, for such
calendar month, the volume of production and sales attributable to
production (and the prices at which such sales were made and the revenues
derived from such sales) for such calendar month from the Oil and Gas
Properties, and setting forth the related ad valorem, severance and
production taxes and lease operating expenses attributable thereto and
incurred for such calendar month, and (ii) a drilling schedule for all Oil
and Gas Properties in which the Borrower or any Subsidiary owns, controls,
or participates in.
(q) Operating Reports. The Borrower shall prepare and provide to the
Lenders and Administrative Agent the following reports:
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(i) If the cash sweep provisions of Section 3.04 are in effect on
a monthly basis by the 25th of each month a cumulative report through
the end of the prior month setting forth all amounts to be disbursed
pursuant to Section 3.01 and the definition of "Lockbox Disbursements"
including, a schedule identifying each category of payments identified
as subparagraphs (a) through (h), with a detailed schedule of all
items in each such subparagraph.
(ii) such other information as the Lenders may reasonably request
with respect to drilling, operation or property status matters,
including notice of any material changes with regard to oil and gas
prices received, contracts or production expenses or any material
litigation affecting the operation of the Oil and Gas Properties of
the Borrower or any Subsidiary.
(r) ORRI Payments. Promptly, but in any event within 5 days thereof,
Borrower shall deliver to the Arranger a statement of all amounts paid to
the Lenders under any ORRI Conveyance. (s) Board Materials. Promptly
following any request therefore, such materials and minutes for meetings of
the Board of ---------------- Directors of Parent and the Borrower (other
than any materials or information governed by a confidentiality agreement
prohibiting the sharing of such information with the Administrative Agent
or the Lenders).
(t) Notices of Certain Changes. Promptly, but in any event within five
(5) Business Days after the execution thereof, copies of any amendment,
modification or supplement to the certificate or articles of incorporation,
certificate of formation, by-laws, limited liability company agreement, any
preferred stock designation or any other organic document of the Borrower
or any Subsidiary.
(u) Other Requested Information. Promptly following any request
therefore, such other information regarding (i) the operations, business
affairs and financial condition of the Borrower or any Subsidiary
(including, without limitation, any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA), or (ii)
compliance with the terms of this Agreement or any other Loan Document, in
each case, as the Administrative Agent or the Arranger may reasonably
request.
Section 8.02 Notices of Material Events. The Borrower will furnish to the
Administrative Agent and the Arranger prompt written notice of the following:
(a) the occurrence of any Default or the occurrence of any event that
with notice or lapse of time, or both, would constitute and Event of
Default;
(b) the filing or commencement of, or the threat in writing of, any
action, suit, proceeding, investigation or arbitration by or before any
arbitrator or Governmental Authority against or affecting the Borrower or
any Affiliate thereof not previously disclosed in writing to the
Administrative Agent or the Arranger or any material adverse development in
any action, suit, proceeding, investigation or arbitration previously
disclosed to the Administrative Agent or the Arranger that, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect;
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(c) the filing or commencement of any action, suit, proceeding, or
arbitration by or on behalf of the Borrower or any of its Affiliates
claiming or asserting damages in favor of the Borrower of its Affiliates
valued in excess of $100,000;
(d) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate
amount exceeding $100,000;
(e) the occurrence of any event described in Schedule 8.02(e);
(f) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 8.02 shall be accompanied by
a statement of a Responsible Officer setting forth the details of the event
or development requiring such notice and any action taken or proposed to be
taken with respect thereto.
Section 8.03 Existence; Conduct of Business. The Borrower will, and will
cause each Subsidiary and Parent to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which its Oil and Gas Properties is located or the
ownership of its Properties requires such qualification; provided that the
foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 9.12.
Section 8.04 Payment of Obligations. The Borrower will, and will cause each
Subsidiary to, pay its obligations (including Tax liabilities of the Borrower
and all of its Subsidiaries and any agreement material to the business or
operations of the Borrower or its Affiliates) before the same shall become
delinquent or in default.
Section 8.05 Performance of Obligations under Loan Documents. The Borrower
will pay the Notes according to the reading, tenor and effect thereof, and the
Borrower will, and will cause each Subsidiary to, do and perform every act and
discharge all of the obligations to be performed and discharged by them under
the Loan Documents, including, without limitation, this Agreement, at the time
or times and in the manner specified.
Section 8.06 Operation and Maintenance of Properties. The Borrower, at its
own expense, will, and will cause each Subsidiary to:
(a) operate its Oil and Gas Properties and other material Properties
or cause such Oil and Gas Properties and other material Properties to be
operated in a careful and efficient manner in accordance with the practices
of the industry and in compliance with all applicable contracts and
agreements and in compliance with all Governmental Requirements, including,
without limitation, applicable pro ration requirements and Environmental
Laws, and all applicable laws, rules and regulations of every other
Governmental Authority from time to time constituted to regulate the
development and operation of its Oil and Gas Properties and the production
and sale of Hydrocarbons and other minerals therefrom. (
41
b) keep, preserve and maintain all Oil and Gas Properties and any
other Property material to the conduct of its business in good repair,
working order and condition, ordinary wear and tear excepted preserve,
maintain and keep in good repair, working order and efficiency (ordinary
wear and tear excepted) all of its material Oil and Gas Properties and
other material Properties, including, without limitation, all equipment,
machinery and facilities.
(c) promptly pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Oil and Gas Properties and will do all other
things necessary to keep unimpaired their rights with respect thereto and
prevent any forfeiture thereof or default thereunder.
(d) promptly perform or make reasonable and customary efforts to cause
to be performed, in accordance with industry standards, the obligations
required by each and all of the assignments, deeds, leases, sub-leases,
contracts and agreements affecting its interests in its Oil and Gas
Properties and other material Properties.
(e) operate its Oil and Gas Properties and other material Properties
or cause or make reasonable and customary efforts to cause such Oil and Gas
Properties and other material Properties to be operated in accordance with
the practices of the industry and in material compliance with all
applicable contracts and agreements and in compliance in all material
respects with all Governmental Requirements.
(f) to the extent the Borrower is not the operator of any Property,
the Borrower shall use reasonable efforts to cause the operator to comply
with this Section 8.06
..
(g) The Borrower and each Subsidiary will do or cause to be done, or
shall participate in, such development work as may be reasonably necessary
to the prudent and economical operation of the Oil and Gas Properties in
accordance with the approved practices of prudent operators in the
industry, including, without limitation, all to be done that may be
appropriate to protect from diminution the productive capacity of the Oil
and Gas Properties and each producing well thereon, except where the
failure to do so could not reasonably be expected to have a Material
Adverse Effect.
(h) Upon the request of the Administrative Agent, and at reasonable
times and intervals, the Borrower will and will cause each Subsidiary to
(a) permit the Administrative Agent and the Lenders, as the case may be,
and its respective designated representatives to enter upon any part of the
Oil and Gas Properties under the control of the Borrower or the
Subsidiaries, and (b) cause the operator of any part of the Oil and Gas
Properties not under the control of the Borrower or the Subsidiaries to
permit the Administrative Agent or Lenders, as the case may be, and its
designated representatives to enter upon the same (to the extent and
subject to the conditions under which the Borrower or the Subsidiaries may
so enter), for the purposes of inspecting the condition and operation
thereof.
(i) If the Operator breaches the Contract Operating Agreement by
failing to perform any of the covenants or obligations imposed upon it
thereunder, then the Administrative Agent or the Lenders shall have the
right to terminate the Contract Operating Agreement upon written notice to
the Borrower and Operator, and the Contract Operating Agreement shall
terminate after the expiration of 30 days after receipt by the Operator of
such notice if the Operator fails to remedy such default. Borrower shall
cause the Operator to pay on or before the due date thereof all royalties,
burdens, lease operating expenses, insurance and other maintenance expenses
payable by the Operator on any of the Oil and Gas Properties.
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Section 8.07 Insurance. The Borrower will, and will cause each Subsidiary
and Parent to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations but in any event it will maintain at a minimum the
types of insurance and in such amounts as reflected on Schedule 7.13. The loss
payable clauses or provisions in said insurance policy or policies insuring any
of the collateral for the Loans shall be endorsed in favor of and made payable
to the Administrative Agent as its interests may appear and such policies shall
name the Administrative Agent and the Lenders as "additional insureds" and
provide that the insurer will endeavor to give at least 30 days prior notice of
any cancellation to the Administrative Agent.
Section 8.08 Books and Records; Inspection Rights. The Borrower will, and
will cause each Subsidiary to, keep proper books of record and account in which
full, true and correct entries are made of all dealings and transactions in
relation to its business and activities. The Borrower will, and will cause each
Subsidiary to, permit any representatives designated by the Administrative Agent
or the Arranger, upon reasonable prior notice, to visit and inspect its
Properties, to examine and make extracts from its books and records, undertake
appraisals (at the expense of the Borrower) of such Properties and to discuss
its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably requested.
Section 8.09 Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 8.10 Environmental Matters.
(a) The Borrower shall at its sole expense: (i) comply, and shall
cause its Properties and operations and each Subsidiary and each
Subsidiary's Properties and operations to comply, with all applicable
Environmental Laws; (ii) not dispose of or otherwise release, and shall
cause each Subsidiary not to dispose of or otherwise release, any oil, oil
and gas waste, hazardous substance, or solid waste on, under, about or from
any of the Borrower's or its Subsidiaries' Properties or any other Property
to the extent caused by the Borrower's or any of its Subsidiaries'
operations except in compliance with applicable Environmental Laws; (iii)
timely obtain or file, and shall cause each Subsidiary to timely obtain or
file, all notices, permits, licenses, exemptions, approvals, registrations
or other authorizations, if any, required under applicable Environmental
Laws to be obtained or filed in connection with the operation or use of the
Borrower's or its Subsidiaries' Properties, which failure to obtain or file
could reasonably be expected to have a Material Adverse Effect; (iv)
promptly commence and diligently prosecute to completion, and shall cause
each Subsidiary to promptly commence and diligently prosecute to
completion, any assessment, evaluation, investigation, monitoring,
containment, cleanup, removal, repair, restoration, remediation or other
remedial obligations (collectively, the "Remedial Work") in the event any
Remedial Work is required or reasonably necessary under applicable
Environmental Laws because of or in connection with the actual or suspected
past, present or future disposal or other release of any oil, oil and gas
waste, hazardous substance or solid waste on, under, about or from any of
the Borrower's or its Subsidiaries' Properties, which failure to commence
and diligently prosecute to completion; and (v) establish and implement,
and shall cause each Subsidiary to establish and implement, such procedures
as may be necessary to continuously determine and assure that the
Borrower's and its Subsidiaries' obligations under this Section 8.10(a) are
timely and fully satisfied.
43
(b) The Borrower will promptly, but in no event later than five days
of the occurrence of a triggering event, notify the Administrative Agent
and the Arranger in writing of any threatened action, investigation or
inquiry by any Governmental Authority or any threatened demand or lawsuit
by any landowner or other third party against the Borrower or its
Subsidiaries or their Properties of which the Borrower has knowledge in
connection with any Environmental Laws (excluding routine testing and
corrective action) if the Borrower reasonably anticipates that such action
will result in liability (whether individually or in the aggregate) in
excess of $500,000, not fully covered by insurance, subject to normal
deductibles.
(c) The Borrower will, and will cause each Subsidiary to, provide
environmental audits and tests in accordance with American Society of
Testing Materials standards upon request by the Administrative Agent and
the Arranger and no more than once per year in the absence of any Event of
Default (or as otherwise required to be obtained by the Administrative
Agent or the Arranger by any Governmental Authority), in connection with
any future acquisitions of Oil and Gas Properties or other Properties.
Section 8.11 Further Assurances.
(a) The Borrower at its expense will, and will cause each Subsidiary
to, promptly execute and deliver to the Administrative Agent all such other
documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of the Borrower or any
Subsidiary, as the case may be, in the Loan Documents, including the Notes,
or to further evidence and more fully describe the collateral intended as
security for the Indebtedness, or to correct any omissions in this
Agreement or the Security Instruments, or to state more fully the
obligations secured therein, or to perfect, protect or preserve any Liens
created pursuant to this Agreement or any of the Security Instruments or
the priority thereof, or to make any recordings, file any notices or obtain
any consents, all as may be reasonably necessary or appropriate, in the
sole discretion of the Administrative Agent, in connection therewith.
(b) The Borrower hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of the Mortgaged Property without the signature
of the Borrower or any other Guarantor where permitted by law. A carbon,
photographic or other reproduction of the Security Instruments or any
financing statement covering the Mortgaged Property or any part thereof
shall be sufficient as a financing statement where permitted by law.
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Section 8.12 Reserve Reports
(a) On or before each February 15th and August 15th the Borrower shall
furnish to the Administrative Agent and the Arranger a Reserve Report
effective as the previous January 1st and July 1st, as applicable. Each
such Reserve Report shall be prepared by one or more Approved Petroleum
Engineers.
(b) With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Arranger a certificate from a
Responsible Officer certifying that in all material respects: (i) the
information contained in the Reserve Report and any other information
delivered in connection therewith is true and correct, (ii) the Borrower or
its Subsidiaries owns good and defensible title to the Oil and Gas
Properties evaluated in such Reserve Report and such Properties are free of
all Liens except for Liens permitted by Section 9.03, (iii) except as set
forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take or pay or other prepayments in excess of the volume
specified in Section 7.19 with respect to its Oil and Gas Properties
evaluated in such Reserve Report which would require the Borrower or any
Subsidiary to deliver Hydrocarbons either generally or produced from such
Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefore, (iv) none of their Oil and Gas Properties
have been sold since the date of the previous Reserve Report delivered
except as set forth on an exhibit to the certificate, which certificate
shall list all of its Oil and Gas Properties sold and in such detail as
reasonably required by the Administrative Agent, (v) attached to the
certificate is a list of all marketing agreements entered into subsequent
to the later of the date hereof or the most recently delivered Reserve
Report which the Borrower could reasonably be expected to have been
obligated to list on Schedule 7.20 had such agreement been in effect on the
date hereof and all of the Oil and Gas Properties evaluated by such Reserve
Report are Mortgaged Properties.
(c) In connection with the delivery of the Reserve Reports to be
delivered in Section 8.12(a) above, the Borrower shall also furnish to the
Administrative Agent and the Arranger a reserve report with respect to the
Oil and Gas Properties conveyed to the Lenders as part of any ORRI
Conveyance provided to the Lenders under this Agreement.
Section 8.13 Title Information.
(a) On or before the delivery to the Administrative Agent and the
Arranger of each Reserve Report required by Section 8.12(a), the Borrower
will deliver title information in form and substance acceptable to the
Administrative Agent covering enough of the Oil and Gas Properties
evaluated by such Reserve Report that were not included in the immediately
preceding Reserve Report, so that the Administrative Agent shall have
received together with title information previously delivered to the
Administrative Agent, satisfactory title information on all of the Oil and
Gas Properties evaluated by such Reserve Report.
45
(b) If the Borrower has provided title information for additional
Properties under Section 8.13(a), the Borrower shall, within 60 days of
notice from the Administrative Agent that title defects or exceptions exist
with respect to such additional Properties, either (i) cure any such title
defects or exceptions (including defects or exceptions as to priority) that
are not permitted by Section 9.03 raised by such information, (ii)
substitute acceptable Mortgaged Properties with no title defects or
exceptions except for Excepted Liens (other than Excepted Liens described
in clauses (e), (g) and (h) of such definition) having an equivalent value
or (iii) deliver title information in form and substance acceptable to the
Administrative Agent so that the Administrative Agent shall have received,
together with title information previously delivered to the Administrative
Agent, satisfactory title information on all of the value of the Oil and
Gas Properties evaluated by such Reserve Report.
Section 8.14 Additional Collateral; Additional Guarantors.
(a) Promptly after the end of each month, the Borrower shall review
the current Mortgaged Properties to ascertain whether all Oil and Gas
Properties are Mortgaged Properties. If the Mortgaged Properties do not
represent all such Properties, then the Borrower shall, and shall cause its
Subsidiaries to, grant to the Administrative Agent as security for the
Indebtedness a senior Lien interest (subject only to Excepted Liens of the
type described in clauses (a) to (e) of the definition thereof, but subject
to the provisos at the end of such definition) on additional Oil and Gas
Properties not already subject to a Lien of the Security Instruments such
that after giving effect thereto, the Mortgaged Properties will represent
all such Properties. All such Liens will be created and perfected by and in
accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and
substance reasonably satisfactory to the Administrative Agent and in
sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes. In order to comply with the foregoing,
if any Subsidiary places a Lien on its Oil and Gas Properties and such
Subsidiary is not a Guarantor, then it shall become a Guarantor and comply
with Section 8.14(b).
(b) The Borrower shall promptly cause each Subsidiary to guarantee the
Indebtedness pursuant to the Guarantee and Collateral Agreement. In
connection with any such guaranty, the Borrower shall, or shall cause such
Subsidiary to: (A) execute and deliver such Guarantee and Collateral
Agreement, (B) pledge all of the Equity Interests of such Subsidiary
(including, without limitation, delivery of original stock or other equity
certificates evidencing the Equity Interests of such Subsidiary, together
with an appropriate undated stock power for each certificate duly executed
in blank by the registered owner thereof), (C) ▇▇▇▇▇ ▇ ▇▇▇▇ in and to all
of the Properties of such Subsidiary (including, without limitation, the
Oil and Gas Properties of such Subsidiary) pursuant to the Guarantee and
Collateral Agreement and such other deeds of trust, mortgages, agreements
and instruments, in form and substance satisfactory to the Administrative
Agent, as the Administrative Agent may request and (D) execute and deliver
such other additional closing documents, certificates and legal opinions as
shall reasonably be requested by the Administrative Agent.
(c) The Borrower will at all times cause the other material tangible
and intangible assets of the Borrower and each Subsidiary to be subject to
a Lien of the Security Instruments.
(d) (i) all of the issued and outstanding Equity Interests of the
Borrower shall at all times be pledged to the Administrative Agent pursuant
to the Guarantee and Collateral Agreement (other than any Equity Interests
that may be issued pursuant to the Warrant Agreement) and (ii)all of the
issued and outstanding Equity Interests of Borrower's Subsidiaries shall at
all times be pledged to the Administrative Agent pursuant to the Guarantee
and Collateral Agreement.
46
Section 8.15 ERISA Compliance. The Borrower will promptly furnish and will
cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) promptly after the filing thereof with the United
States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA
Event or of any "prohibited transaction," as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by the President or the principal Financial
Officer, the Subsidiary or the ERISA Affiliate, as the case may be, specifying
the nature thereof, what action the Borrower, the Subsidiary or the ERISA
Affiliate is taking or proposes to take with respect thereto, and, when known,
any action taken or proposed by the Internal Revenue Service, the Department of
Labor or the PBGC with respect thereto, and (iii) immediately upon receipt
thereof, copies of any notice of the PBGC's intention to terminate or to have a
trustee appointed to administer any Plan. With respect to each Plan (other than
a Multiemployer Plan), the Borrower will, and will cause each Subsidiary and
ERISA Affiliate to, (i) satisfy in full and in a timely manner, without
incurring any late payment or underpayment charge or penalty and without giving
rise to any lien, all of the contribution and funding requirements of section
412 of the Code (determined without regard to subsections (d), (e), (f) and (k)
thereof) and of section 302 of ERISA (determined without regard to sections 303,
304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a
timely manner, without incurring any late payment or underpayment charge or
penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.
Section 8.16 Hedging Contracts. The Borrower shall maintain, and shall
cause its Subsidiaries to maintain, the hedged position established by the
Hedging Contracts required under Section 6.01(q) during the period specified
therein and shall neither assign, terminate or unwind any such Hedging Contracts
nor sell any Hedging Contracts if the effect of such action (when taken together
with any other Hedging Contracts executed contemporaneously with the taking of
such action) would have the effect of canceling its positions under such Hedging
Contracts required hereby. The Borrower and/or its Subsidiaries shall from time
to time enter into Hedging Contracts in respect of commodities so that the
notional volumes of all Hedging Contracts, in the aggregate, are more than 70%
of the reasonably anticipated projected production from Borrower's and its
Subsidiaries' Proved Developed Producing Reserves for each month during the term
of this Agreement. Notwithstanding anything to the contrary in this Agreement,
the Borrower shall not, and shall cause its Subsidiaries to not, assign,
terminate or unwind any Hedging Contract entered into on or before the Effective
Date.
Section 8.17 Marketing of Production. All Hydrocarbons produced from the
Oil and Gas Properties shall be marketed on an arms-length basis using one or
more Persons that are not Affiliates of the Borrower, as reasonably satisfactory
to the Arranger.
Section 8.18 Overriding Royalty Interests.
(a) As additional consideration for the making of the Loans by the
Lenders, in the event that any Loans remain outstanding after the Target
Date, the Borrower agrees to convey to the Lenders, in undivided shares
proportionate to their respective Commitments, on the Target Date and each
month thereafter on the monthly anniversary date of the Target Date an
overriding royalty interest in the aggregate amount specified below in and
to the Oil and Gas Properties referred to below. The overriding royalty
shall be conveyed with respect to all of the Oil and Gas Properties then
currently owned by the Borrower.
47
(b) The overriding royalty interest in any Oil and Gas Property
required to be conveyed with respect to any well shall equal fifty
hundredths percent (.50%) of 8/8ths (proportionately reduced) in the Oil
and Gas Properties of the Borrower. The overriding royalty shall be subject
to the terms and conditions set forth in the form of the ORRI Conveyance.
(c) An overriding royalty required to be conveyed hereby: (i) with
respect to any well now in existence shall be effective as of the first day
of the calendar month in which this Agreement is executed and with respect
to any future well the first day of the calendar month in which the
relevant well was completed, and (ii) shall survive any termination of the
Credit Agreement.
(d) If, prior to finalization of the division order process, the
Borrower receives proceeds of production from a well with respect to which
the Borrower is required to convey an overriding royalty under this Section
8.18, the Borrower shall estimate the amount of such revenue payable on
account of the overriding royalty and shall pay such estimated proceeds to
the Lenders; provided that, upon the completion of the division order
process, if any amounts are determined to have been overpaid or underpaid
to the Lenders, the Borrower and the Lenders shall promptly make
appropriate adjustments among themselves to give effect to the correct
division of interests, retroactive to the effective date of such overriding
royalty.
(e) Within twenty days (20) after the end of each fiscal quarter, the
Borrower will prepare a summary of all ▇▇▇▇▇ spudded during the preceding
fiscal quarter. Such summary shall indicate the date each well was
completed (or anticipated to be completed) and those ▇▇▇▇▇ for which an
Override pursuant to (c) above has been recorded in the appropriate land
records and delivered to the Lenders. For those ▇▇▇▇▇ where no override has
been filed of record, an approximate date of when the Borrower expects such
override to be recorded.
Section 8.19 Right of First Refusal. If at any time during the term of this
Agreement, Borrower desires to develop any development project or other project
for which there is insufficient funding available from Borrower's equity
capital, Borrower shall present to Arranger a financing request for such
projects, including, without limitation, all financial data that Borrower has
developed with respect to such projects and such other documentation required
under this Agreement with respect to a development project that is to be funded
under this Agreement, and any other information which Arranger may reasonably
request so as to enable Arranger to evaluate and determine whether Arranger
shall offer to finance such proposed project through this Agreement or another
facility agented by the Administrative Agent and with the Lenders as the lenders
thereunder.
Section 8.20 Contract Operating Agreement. Borrower will not amend,
restate, modify or waive any material provision of the Contract Operating
Agreement without the consent of the Lenders.
48
Section 8.21 Separate Entity. Borrower and its Subsidiaries will, (a) take
all necessary steps to maintain its separate entity and records, (b) will not
commingle any assets or business functions with any other Person, (c) maintain
separate financial statements, (d) not assume or guarantee the debts,
liabilities or obligations of others, (e) hold itself out to the public and
creditors as an entity separate from others, (f) not commit any fraud or misuse
of the separate entity legal status or any other injustice or unfairness, (g)
not maintain its assets in such a manner that it will be costly or difficult to
segregate ascertain or identify its individual assets from those of its partners
or Affiliates, (h) not take any action that might cause it to become insolvent,
(i) not fail to hold appropriate meetings (or act by unanimous written consent)
to authorize all appropriate actions, or fail in authorizing such actions, to
observe all formalities required by the Texas Business Corporation Act, or fail
to observe all formalities required by its organizational documents, (j) not
hold itself out to be responsible for the debts of another Person and (k) not
share any common logo with or hold itself out as or be considered as a
department or division of its partners, an Affiliate, or any other person or
entity.
ARTICLE IX
Negative Covenants
Until the principal of and interest on each Loan and all fees payable
hereunder and all other amounts payable under the Loan Documents have been paid
in full, the Borrower covenants and agrees with the Lenders that:
Section 9.01 Financial Covenants.
(a) Ratio of Total Debt to EBITDA. The Borrower will not, at any time,
(i)from and after the Effective Date, permit its ratio of Total Debt as of
such time to annualized EBITDA as of the time periods set forth below to be
greater than the ratio established for such time period as set forth below:
-------------------------------------------------------------------------------
DEBT/EBITDA
Time Period Ratio
Second Quarter 2004 6.00:1.00
Third Quarter 2004 4.50:1.00
Fourth Quarter 2004 2.10:1.00
and thereafter
The foregoing ratios shall be annualized by multiplying EBITDA by four.
(b) Ratio of EBITDA to Interest and Rents. The Borrower, will not
permit on the last day of any fiscal quarter, its ratio of EBITDA to
Consolidated Interest Expense as of the time periods set forth below to be
less than the ratio established for such time period as set forth below:
49
--------------------------------------------------------------------------
EBITDA/INTEREST
--------------------------------------------------------------------------
Time Period Ratio
Second Quarter 2004 1.25:1.00
Third Quarter 2004 1.75:1.00
Fourth Quarter 2004 and
thereafter 3.10:1.00
(c) Current Ratio. The Borrower will not permit, as of the last day of
any fiscal quarter, from and after the Effective Date, its ratio of (i)
consolidated current assets (including the unused amount of the total
Commitments, as appropriate, but excluding non-cash assets under FAS 133)
to (ii) consolidated current liabilities (excluding (A) non-cash
obligations under FAS 133, (B) ▇▇▇▇ to market ▇▇▇▇▇▇ and (C) the current
portion of any Debt under this Agreement), to be less than 1.00:1.00.
(d) Reserve Ratios of Total Proved Developed Producing to Total Debt.
The Borrower will not permit, as of the last day of any fiscal quarter,
from and after the Effective Date, (i) its ratio of the Net Present Value
of Proved Developed Producing Reserves, to Total Debt to be less than
1.00:1.00, and (ii) its ratio of the Net Present Value of Total Proved
Reserves divided by Total Debt to be less than 2:00:1.00. The foregoing
ratios shall be determined by reference to the most recent Reserve Report,
based on a price curve determined by Arranger.
Section 9.02 Debt. The Borrower will not, and will not permit any
Subsidiary or Parent to, incur, create, assume or suffer to exist any Debt,
except:
(a) the Notes or other Indebtedness arising under the Loan Documents
or any guaranty of or suretyship arrangement for the Notes or other
Indebtedness arising under the Loan Documents.
(b) Debt of the Parent, Borrower and its Subsidiaries existing on the
date hereof that is reflected in the Financial Statements (and any
refinancing or rearrangement of such Debt, provided that the total amount
of Debt outstanding is not increased from the amount currently reflected on
the Financial Statements for such Debt).
(c) accounts payable and accrued expenses, liabilities or other
obligations to pay the deferred purchase price of Property or services,
from time to time incurred in the ordinary course of business that are not
greater than thirty (30) days past the date of invoice or delinquent or
that are being contested in good faith by appropriate action and for which
adequate reserves have been maintained in accordance with GAAP.
(d) Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil and
Gas Properties.
(e) Debt as set forth on Schedule 9.02.
(f) Debt arising under Hedging Contracts permitted under this
Agreement.
Section 9.03 Liens. Except as set forth on Schedule 9.03, the Borrower will
not, and will not permit any Subsidiary or Parent to, create, incur, assume or
permit to exist any Lien on any of its Properties (now owned or hereafter
acquired), except:
(a) Liens securing the payment of any Indebtedness.
(b) Excepted Liens.
Section 9.04 Restricted Payments. The Borrower will not, and will not
permit any of its Subsidiaries or Parent to, declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, return any capital to its
stockholders or make any distribution of its Property to its Equity Interest
holders. Provided, however, the preceding will not prevent any Subsidiary of
Borrower from making Restricted Payments to the Borrower.
Section 9.05 Investments, Loans and Advances. The Borrower will not, and
will not permit any Subsidiary or Parent to, make or permit to remain
outstanding any Investments in or to any Person, except that the foregoing
restriction shall not apply to:
(a) Investments reflected in the Financial Statements or that are
disclosed to the Administrative Agent or the Arranger in Schedule 9.05.
(b) accounts receivable arising in the ordinary course of business.
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each
case maturing within one year from the date of creation thereof.
(d) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by SP or ▇▇▇▇▇'▇.
(e) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or
any office located in the United States of any other bank or trust company
which is organized under the laws of the United States or any state
thereof, has capital, surplus and undivided profits aggregating at least
$100,000,000 (as of the date of such bank or trust company's most recent
financial reports) and has a short term deposit rating of no lower than A2
or P2, as such rating is set forth from time to time, by SP or ▇▇▇▇▇'▇,
respectively.
(f) deposits in money market funds investing exclusively in
Investments described in Section 9.05(c), Section 9.05(d) or Section
9.05(e).
Section 9.06 Nature of Business. None of the Borrower, the Parent or any
Subsidiary will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company. From
and after the date hereof, the Borrower and its Subsidiaries will not acquire or
make any other expenditure (whether such expenditure is capital, operating or
otherwise) in or related to, any Oil and Gas Properties not located within the
geographical boundaries of the United States.
Section 9.07 Limitation on Leases. Neither the Borrower nor any Subsidiary
will create, incur, assume or suffer to exist any obligation for the payment of
rent or hire of Property of any kind whatsoever (real or personal but excluding
Capital Leases and leases of Hydrocarbon Interests), under leases or lease
agreements which would cause the aggregate amount of all payments made by the
Borrower and the Subsidiaries pursuant to all such leases or lease agreements,
including, without limitation, any residual payments at the end of any lease, to
exceed $25,000 in any period of twelve consecutive calendar months during the
life of such leases without the approval of the Lenders.
Section 9.08 Sale and Leasebacks. None of the Borrower or any Subsidiary
will enter into any arrangement, directly or indirectly, with any Person whereby
such Person shall sell or transfer any of its Property, whether now owned or
hereafter acquired, and whereby such Person shall then or thereafter rent or
lease such Property or any part thereof or other Property that such Person
intends to use for substantially the same purpose or purposes as the Property
sold or transferred.
Section 9.09 Proceeds of Notes. The Borrower will not permit the proceeds
of the Notes to be used for any purpose other than those permitted by Section
7.22. Neither the Borrower nor any Person acting on behalf of the Borrower has
taken or will take any action which might cause any of the Loan Documents to
violate Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect. If requested by the Administrative Agent, the Borrower will furnish to
the Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.
Section 9.10 ERISA Compliance. The Borrower and the Subsidiaries will not
at any time:
(a) engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrower, a Subsidiary or any
ERISA Affiliate could be subjected to either a civil penalty assessed
pursuant to subsections (c), (i) or (l) of section 502 of ERISA or a tax
imposed by Chapter 43 of Subtitle D of the Code.
(b) terminate, or permit any ERISA Affiliate to terminate, any Plan in
a manner, or take any other action with respect to any Plan, which could
result in any liability of the Borrower, a Subsidiary or any ERISA
Affiliate to the PBGC.
(c) fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower, a Subsidiary or
any ERISA Affiliate is required to pay as contributions thereto.
(d) permit to exist, or allow any ERISA Affiliate to permit to exist,
any accumulated funding deficiency within the meaning of section 302 of
ERISA or section 412 of the Code, whether or not waived, with respect to
any Plan.
(e) permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by the
Borrower, a Subsidiary or any ERISA Affiliate which is regulated under
Title IV of ERISA to exceed the current value of the assets (computed on a
plan termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities. The term "actuarial present value of
the benefit liabilities" shall have the meaning specified in section 4041
of ERISA.
(f) contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute
to, any Multiemployer Plan.
(g) acquire, or permit any ERISA Affiliate to acquire, an interest in
any Person that causes such Person to become an ERISA Affiliate with
respect to the Borrower or a Subsidiary or with respect to any ERISA
Affiliate of the Borrower or a Subsidiary if such Person sponsors,
maintains or contributes to, or at any time in the six-year period
preceding such acquisition has sponsored, maintained, or contributed to,
(1) any Multiemployer Plan, or (2) any other Plan that is subject to Title
IV of ERISA under which the actuarial present value of the benefit
liabilities under such Plan exceeds the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA)
of such Plan allocable to such benefit liabilities.
(h) incur, or permit any ERISA Affiliate to incur, a liability to or
on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA.
(i) contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute
to, any employee welfare benefit plan, as defined in section 3(1) of ERISA,
including, without limitation, any such plan maintained to provide benefits
to former employees of such entities, that may not be terminated by such
entities in their sole discretion at any time without any material
liability.
(j) amend, or permit any ERISA Affiliate to amend, a Plan resulting in
an increase in current liability such that the Borrower, a Subsidiary or
any ERISA Affiliate is required to provide security to such Plan under
section 401(a)(29) of the Code.
Section 9.11 Sale or Discount of Receivables. Except for receivables
obtained by the Borrower or any Subsidiary out of the ordinary course of
business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, neither the Borrower nor any
Subsidiary will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable.
Section 9.12 Mergers, Etc. Neither the Borrower nor any Subsidiary or
Parent will merge into or with or consolidate with any other Person, or sell,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its Property to any other Person (any
such transaction, a "consolidation").
Section 9.13 Sale of Properties. The Borrower will not, and will not permit
any Subsidiary to, sell, assign, farm-out, convey or otherwise transfer
(including through the sale of a Production Payment or overriding royalty
interest) any Property except for (a) the sale of Hydrocarbons in the ordinary
course of business; (b) the sale or transfer of equipment that is no longer
necessary for the business of the Borrower or such Subsidiary or is replaced by
equipment of at least comparable value and use; and (c) the sale or transfer any
Property that, taken together with the sale of any other Properties, in the
aggregate, during any calendar year, has a fair market value of less than
$50,000.
Section 9.14 Environmental Matters. The Borrower will not, and will not
permit any Subsidiary to, cause or permit any of its Property to be in violation
of, or do anything or permit anything to be done which will subject any such
Property to any Remedial Work under any Environmental Laws, assuming disclosure
to the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations could reasonably be expected to have a Material Adverse
Effect.
Section 9.15 Transactions with Affiliates. The Borrower will not, and will
not permit any Subsidiary to, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate (other than the Guarantors (except Parent)
and Wholly-Owned Subsidiaries of the Borrower) unless such transactions are
otherwise permitted under this Agreement are in the ordinary course of business
of Borrower or such Subsidiary and are upon fair and reasonable terms no less
favorable to it than it would obtain in a comparable arm's length transaction
with a Person not an Affiliate.
Section 9.16 Capital Expenditures. Except as provided for in the
Development Plan or as expressly approved in writing by the Lender, the Borrower
will not, and will not permit any of its Subsidiaries to, make any Capital
Expenditures or incur costs associated with the exploration and development of
Borrower's and its Subsidiaries' Oil and Gas Properties (excluding normal lease
operating expenses) except for Capital Expenditures together with all other
costs totaling $50,000 or less in the aggregate during any consecutive twelve
month period.
Section 9.17 Material Agreements. The Borrower will not, and will not
permit any Subsidiary to, enter into any contract or agreement that involves an
individual commitment from such Person of more than $15,000 in the aggregate in
any consecutive twelve month period (except for such contracts and agreements
that relate to the projects contemplated in the Development Plan).
Section 9.18 Subsidiaries. The Borrower will not, and will not permit any
Subsidiary to, create or acquire any additional Subsidiary unless the Borrower
gives written notice to the Administrative Agent of such creation or acquisition
and complies with Section 8.14(b). The Borrower shall not, and shall not permit
any Subsidiary to, sell, assign or otherwise dispose of any Equity Interests in
any Subsidiary. Neither the Borrower nor any Subsidiary shall have any
Subsidiaries that are organized under the laws other than the United States of
America or any state thereof or the District of Columbia.
Section 9.19 Negative Pledge Agreements; Dividend Restrictions. The
Borrower will not, and will not permit any Subsidiary to, create, incur, assume
or suffer to exist any contract, agreement or understanding (other than this
Agreement and the Security Instruments) that in any way prohibits or restricts
the granting, conveying, creation or imposition of any Lien on any of its
Property in favor of the Administrative Agent and the Lenders or restricts any
Subsidiary from paying dividends or making distributions to the Borrower or any
Guarantor, or which requires the consent of or notice to other Persons in
connection therewith.
Section 9.20 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower
will not allow gas imbalances, take-or-pay or other prepayments with respect to
the Oil and Gas Properties of the Borrower or any Subsidiary that would require
the Borrower or such Subsidiary to deliver Hydrocarbons at some future time
without then or thereafter receiving full payment therefore to exceed 200 mmcf
(on an mmcf equivalent basis) in the aggregate.
Section 9.21 Hedging Contracts. The Borrower will not, and will not permit
any Subsidiary to, enter into any Hedging Contracts with any Person other than
(a) Hedging Contracts in respect of commodities (i) with an Approved
Counterparty and (ii) the notional volumes for which (when aggregated with other
commodity Hedging Contracts then in effect other than basis differential swaps
on volumes already hedged pursuant to other Hedging Contracts), in the
aggregate, do not exceed 85% of the reasonably anticipated projected production
from Proved Developed Producing Reserves for each month during the period during
which such Hedging Contract(s) is in effect for each of crude oil and natural
gas, calculated separately; and (b) Hedging Contracts in respect of interest
rates with an Approved Counterparty, as follows: (i) Hedging Contracts
effectively converting interest rates from fixed to floating, the notional
amounts of which (when aggregated with all other Hedging Contracts of the
Borrower and its Subsidiaries then in effect effectively converting interest
rates from fixed to floating) do not exceed 50% of the then outstanding
principal amount of the Borrower's Debt for borrowed money which bears interest
at a fixed rate and (ii) Hedging Contracts effectively converting interest rates
from floating to fixed, the notional amounts of which (when aggregated with all
other Hedging Contracts of the Borrower and its Subsidiaries then in effect
effectively converting interest rates from floating to fixed) do not exceed 75%
of the then outstanding principal amount of the Borrower's Debt for borrowed
money which bears interest at a floating rate, and (c) Hedging Contracts
required under Section 6.01(q). Except as approved by the Lenders, no Hedging
Contract shall contain any requirement, agreement or covenant for the Borrower
or any Subsidiary to post collateral or margin to secure their obligations under
such Hedging Contract or to cover market exposures.
Section 9.22 Certain Activities. The Borrower shall not, and shall not
permit any Subsidiary to, without the written consent of each Lender, (a) take
any action not in the ordinary course of the business of the Borrower (unless
such action could not reasonably be expected to have a Material Adverse Effect),
(b) file or settle any litigation or arbitral proceedings, or release claim, for
amount in excess of $100,000 in the aggregate, (c) either singly or jointly,
directly or indirectly, commence, join any other Person in commencing, or
authorize a trustee or other Person acting on its behalf or on behalf of others
to commence, any voluntary bankruptcy, reorganization, arrangement, insolvency,
liquidation, or receivership under the laws of the United States or any state
thereof, or (d) make a general assignment for the benefit of its creditors.
Section 9.23 GA Costs. From the Effective Date through the Target Date,
the Borrower shall not and shall not permit any Subsidiary to incur General and
Administrative Costs on an monthly basis in excess of $183,333. From and after
the Target Date the Borrower shall not and shall not permit any Subsidiary to
incur General and Administrative Costs on an monthly basis in excess of $80,000.
Section 9.24 Net Sales. The Borrower shall not permit the net sales volume
of Hydrocarbons from the Borrower's and its Subsidiaries' Oil and Gas Properties
for the periods indicated on Schedule 9.23 to be less than the amount for such
period as set forth in Column 2 of Schedule 9.23.
Section 9.25 Press Release. Without the prior consent of the Lenders, such
consent not to be unreasonably withheld, neither the Borrower nor any Subsidiary
shall issue any press release or make any public announcement of the this
Agreement or the credit facility being provided in connection therewith.
Section 9.26 Not Abandon ▇▇▇▇▇; Participate in Operations. Except as may be
required by applicable Governmental Requirements, neither the Borrower nor any
Subsidiary will, without prior written consent of the Lenders, abandon, or
consent to the abandonment of, any well producing from the Oil and Gas
Properties (or properties unitized therewith) so long as such well is capable
(or is subject to being made capable through drilling, reworking or other
operations which it would be commercially feasible to conduct) of producing
Hydrocarbons or other minerals in commercial quantities (as determined without
considering the effect of this Instrument). If an Event of Default shall have
occurred and be continuing, then neither the Borrower nor any Subsidiary will,
without prior written consent of the Lenders, elect not to participate in a
proposed operation on any of the Oil and Gas Properties where the effect of such
election would be the forfeiture either temporarily (i.e. until a certain sum of
money is received out of the forfeited interest) or permanently of any material
interest in the Oil and Gas Properties.
ARTICLE X
Events of Default; Remedies
Section 10.01 Events of Default. One or more of the following events shall
constitute an "Event of Default":
(a) the Borrower shall fail to pay any principal of any Loan when and
as the same shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment thereof or otherwise.
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in Section 10.01(a))
payable under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for one Business Day.
(c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Affiliates in or in connection with any Loan
Document or any amendment or modification of any Loan Document or waiver
under such Loan Document, or in any report, certificate, financial
statement or other document furnished pursuant to or in connection with any
Loan Document or any amendment or modification thereof or waiver
thereunder, shall prove to have been incorrect when made or deemed made.
(d) the Borrower or any Subsidiary shall fail to observe or perform
any covenant, condition or agreement contained in Section 8.01(k), Section
8.01(o), Section 8.02, Section 8.03, Section 8.07, Section 8.15 or in
ARTICLE IX.
(e) the Borrower or any of its Affiliates shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement
(other than those specified in Section 10.01(a), Section 10.01(b) or
Section 10.01(d)) or any other Loan Document, and such failure shall
continue unremedied for a period of 15 days after the earlier to occur of
(A) notice thereof from the Administrative Agent to the Borrower (which
notice will be given at the request of any Lender) or (B) a Responsible
Officer of the Borrower or such Affiliate otherwise becoming aware of such
default.
(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of
any Material Indebtedness, when and as the same shall become due and
payable.
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the Redemption thereof or any offer to Redeem to be made
in respect thereof, prior to its scheduled maturity or any event of
condition requires the Borrower or any Subsidiary to make an offer in
respect thereof.
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Borrower or any of its Affiliates or its debts, or
of a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any of
its Affiliates or for a substantial part of its assets, and, in any such
case, such proceeding or petition shall continue undismissed for 30 days or
an order or decree approving or ordering any of the foregoing shall be
entered.
(i) the Borrower or any of its Affiliates shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or petition described in Section
10.01(h), (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower or any of its Affiliates or for a substantial part of its assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting
any of the foregoing.
(j) the Borrower or any of its Affiliates shall become unable, admit
in writing its inability or fail generally to pay its debts as they become
due.
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $100,000 shall be rendered against the Borrower, any
Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the Borrower or any
Subsidiary to enforce any such judgment.
(l) the Loan Documents after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full
force and effect and valid, binding and enforceable in accordance with
their terms against the Borrower or a Guarantor party thereto or shall be
repudiated by any of them, or cease to create a valid and perfected Lien of
the priority required thereby on any of the collateral purported to be
covered thereby, except to the extent permitted by the terms of this
Agreement, or the Borrower or any Subsidiary or any of their Affiliates
shall so state in writing.
(m) an ERISA Event shall have occurred that, in the opinion of the
Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse
Effect.
(n) a Change in Control shall occur.
(o) Operator shall default under the Contract Operating Agreement or
Borrower defaults under the Contract Operating Agreement and Operator has
not waived such default.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than those described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time
thereafter during the continuance of such Event of Default, the
Administrative Agent may, and at the request of the Lenders, shall, by
notice to the Borrower, declare the Notes and the Loans then outstanding to
be due and payable in whole (or in part, in which case any principal not so
declared to be due and payable may thereafter be declared to be due and
payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower and the Guarantors accrued hereunder and under
the Notes and the other Loan Documents, shall become due and payable
immediately, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other notice of any kind, all of
which are hereby waived by the Borrower and each Guarantor; and in case of
an Event of Default described in Section 10.01(h), Section 10.01(i) or
Section 10.01(j), the Notes and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and the
other obligations of the Borrower and the Guarantors accrued hereunder and
under the Notes and the other Loan Documents, shall automatically become
due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower and each
Guarantor.
(b) In the case of the occurrence of an Event of Default, the
Administrative Agent is authorized to complete the Letters-in-Lieu and
deliver same, and the Administrative Agent and the Lenders will have all
other rights and remedies available at law and equity.
(c) All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Notes, whether by
acceleration or otherwise, shall be applied: first, to reimbursement of
expenses and indemnities provided for in this Agreement and the Security
Instruments; second, to accrued interest on the Notes; third, to fees;
fourth, pro rata to principal outstanding on the Notes and Indebtedness
referred to in clause (b) of the definition of "Indebtedness" owing to a
Lender or an Affiliate of a Lender; and any excess shall be paid to the
Borrower or as otherwise required by any Governmental Requirement.
(d) From and after the existence of any Event of Default, Agent shall
have the right to terminate the Contract Operating Agreement without any
liability or obligation of the Lenders, the Agent or the Borrower to the
Operator with respect to such termination or otherwise, upon written notice
delivered by the Lenders or the Collateral Agent to the Borrower and the
Operator, and upon delivery of such notice such termination shall be
effective 30 days thereafter with no right of the Operator to cure.
Section 10.03 Disposition of Proceeds. The Security Instruments contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower's or
each Guarantor's interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property. The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby. Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower and its
Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to
take such actions as may be necessary to cause such proceeds to be paid to the
Borrower and/or such Subsidiaries.
ARTICLE XI
The Administrative Agent
(a) Appointment; Powers. Each of the Lenders hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the
Administrative Agent to take such actions on its behalf and to exercise
such powers as are delegated to the Administrative Agent by the terms
hereof and the other Loan Documents, together with such actions and powers
as are reasonably incidental thereto.
Section 11.02 Duties and Obligations of Administrative Agent. The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Administrative Agent shall not have any duty to take
any discretionary action or exercise any discretionary powers, except as
provided in Section 11.03, and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in ARTICLE VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent
or as to those conditions precedent expressly required to be to the
Administrative Agent's satisfaction, (vi) the existence, value, perfection or
priority of any collateral security or the financial or other condition of the
Borrower and its Subsidiaries or any other obligor or guarantor, or (vii) any
failure by the Borrower or any other Person (other than itself) to perform any
of its obligations hereunder or under any other Loan Document or the performance
or observance of any covenants, agreements or other terms or conditions set
forth herein or therein.
Section 11.03 Action by Administrative Agent. The Administrative Agent
shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that the Administrative Agent is required to exercise in
writing as directed by the Lenders and in all cases the Administrative Agent
shall be fully justified in failing or refusing to act hereunder or under any
other Loan Documents unless it shall (a) receive written instructions from the
Lenders specifying the action to be taken and (b) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions as aforesaid and any action taken or failure to act pursuant
thereto by the Administrative Agent shall be binding on all of the Lenders. If a
Default has occurred and is continuing, then the Administrative Agent shall take
such action with respect to such Default as shall be directed by the Lenders in
the written instructions (with indemnities) described in this Section 11.03,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interests of the Lenders. In no
event, however, shall the Administrative Agent be required to take any action
which exposes the Administrative Agent to personal liability or which is
contrary to this Agreement, the Loan Documents or applicable law. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Lenders, and otherwise the
Administrative Agent shall not be liable for any action taken or not taken by it
hereunder or under any other Loan Document or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith INCLUDING ITS OWN ORDINARY NEGLIGENCE, except for its own
gross negligence or willful misconduct.
Section 11.04 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing believed by it to be genuine and to have been signed or sent by
the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and each of the
Borrower and the Lenders hereby waives the right to dispute the Administrative
Agent's record of such statement, except in the case of gross negligence or
willful misconduct by the Administrative Agent. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts. The Administrative Agent may deem and treat the
payee of any Note as the holder thereof for all purposes hereof unless and until
a written notice of the assignment or transfer thereof permitted hereunder shall
have been filed with the Administrative Agent.
Section 11.05 Subagents. The Administrative Agent may perform any and all
its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.
Section 11.06 Resignation or Removal of Administrative Agent. Subject to
the appointment and acceptance of a successor Administrative Agent as provided
in this Section 11.06, the Administrative Agent may resign at any time by
notifying the Lenders and the Borrower, and the Administrative Agent may be
removed at any time with or without cause by all of the Lenders. Upon any such
resignation or removal, the Lenders shall have the right, in consultation with
the Borrower, to appoint a successor. If no successor shall have been so
appointed by the Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation or
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent.
Upon the acceptance of its appointment as the Administrative Agent hereunder by
a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this ARTICLE XI
and Section 12.03 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or omitted to be taken by any of them while it was
acting as Administrative Agent.
Section 11.07 Agents as Lenders. The party serving as the Administrative
Agent hereunder shall have the same rights and powers in its capacity as a
Lender as any other Lender and may exercise the same as though it were not the
Administrative Agent, and such party and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of business with the
Borrower or any Subsidiary or other Affiliate thereof as if it were not the
Administrative Agent hereunder.
Section 11.08 No Reliance. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party. Each Lender also acknowledges that
it will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document, any
related agreement or any document furnished hereunder or thereunder. The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower or any of its Subsidiaries of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrower or its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, neither the Administrative Agent nor the Arranger shall have any duty
or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of such Agent or any of
its Affiliates. In this regard, each Lender acknowledges that ▇▇▇▇▇▇ ▇▇▇▇▇▇
L.L.P. is acting in this transaction as special counsel to the Administrative
Agent only, except to the extent otherwise expressly stated in any legal opinion
or any Loan Document. Each other party hereto will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.
Section 11.09 Authority of Administrative Agent to Release Collateral and
Liens. Each Lender hereby authorizes the Administrative Agent to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan Documents. Each Lender hereby authorizes the Administrative Agent to
execute and deliver to the Borrower, at the Borrower's sole cost and expense,
any and all releases of Liens, termination statements, assignments or other
documents reasonably requested by the Borrower in connection with any sale or
other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.13 or is otherwise authorized by the terms
of the Loan Documents.
ARTICLE XII
Miscellaneous
Section 12.01 Notices.
(a) Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to Section 12.01(b)), all
notices and other communications provided for herein shall be in writing
and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopy, as follows:
(i) if to the Borrower, to it at ▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇. ▇.,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, Attention of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (Telecopy
No. 281-260-8488);
(ii) if to the Administrative Agent, to it at Highbridge/▇▇▇▇▇
Special Opportunities Fund, L.P., ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (Telecopy No. (646)
344-4676).
(iii) if to the Arranger, to it at Petrobridge Investment
Management LLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇,
Attention of ▇▇▇▇ ▇▇▇▇▇▇ (Telecopy No. (▇▇▇) ▇▇▇-▇▇▇▇);
(iv) if to any other Lender, to it at its address (or telecopy
number) set forth on its applicable signature page.
(b) Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and
ARTICLE V unless otherwise agreed by the Administrative Agent and the
applicable Lender. The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by
it; provided that approval of such procedures may be limited to particular
notices or communications.
(c) Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have
been given on the date of receipt.
Section 12.02 Waivers; Amendments.
(a) No failure on the part of the Administrative Agent, any Lender, or
the Arranger to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege, or any abandonment
or discontinuance of steps to enforce such right, power or privilege, under
any of the Loan Documents shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, power or privilege under any of
the Loan Documents preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies of
the Administrative Agent and the Lenders hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this
Agreement or any other Loan Document or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be
permitted by Section 12.02(b), and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a
Loan shall not be construed as a waiver of any Default, regardless of
whether the Administrative Agent or any Lender may have had notice or
knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by
the Borrower and the Lenders or by the Borrower and the Administrative
Agent with the consent of all of the Lenders.
Section 12.03 Expenses, Indemnity; Damage Waiver.
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including, without
limitation, the reasonable fees, charges and disbursements of counsel and
other outside consultants for the Administrative Agent, the reasonable
travel, photocopy, mailing, courier, telephone and other similar expenses,
and the cost of environmental audits and surveys and appraisals, in
connection with the ongoing enforcement and performance of the credit
facilities provided for herein as Administrative Agent deems appropriate,
the preparation, negotiation, execution, delivery and administration (both
before and after the execution hereof and including advice of counsel to
the Administrative Agent as to the rights and duties of the Administrative
Agent and the Lenders with respect thereto) of this Agreement and the other
Loan Documents and any amendments, modifications or waivers of or consents
related to the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all
costs, expenses, Taxes, assessments and other charges incurred by the
Administrative Agent or any Lender in connection with any filing,
registration, recording or perfection of any security interest contemplated
by this Agreement or any Security Instrument or any other document referred
to therein, (iii) all out-of-pocket expenses incurred by the Administrative
Agent or any Lender, including the fees, charges and disbursements of any
counsel for any the Administrative Agent or any Lender, in connection with
the enforcement or protection of its rights in connection with this
Agreement or any other Loan Document, including its rights under this
Section 12.03, including, without limitation, all such out-of-pocket
expenses incurred during any workout, restructuring or negotiations in
respect of such Loans and any appraisal costs incurred by the
Administrative Agent or the Lenders.
(b) THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE
ARRANGER, AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE") AGAINST, AND HOLD
EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND
DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED
AGAINST ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT
OF (i) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE
PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY OTHER LOAN DOCUMENT
OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR THE CONSUMMATION
OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN DOCUMENT, (ii)
THE FAILURE OF THE BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS OF
ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF
ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY
OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS
DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR THE USE OF THE PROCEEDS
THEREFROM, (v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS
OF THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND
ITS SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO
RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY INSTRUMENTS, (viii)
ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY
OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE PRESENCE,
GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT, DISPOSAL,
ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID
WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix) THE BREACH
OR NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL
LAW APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST OWNERSHIP BY
THE BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY
ON ANY OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT
THE TIME, COULD RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE,
RELEASE, STORAGE, TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE,
TRANSPORT, ARRANGEMENT FOR TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL,
OIL AND GAS WASTES, SOLID WASTES OR HAZARDOUS SUBSTANCES ON OR AT ANY OF
THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR ANY SUBSIDIARY OR ANY
ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY
PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES,
(xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY
OF ITS SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY
CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY ACTUAL OR
PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY
OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
SHALL EXTEND TO EACH INDEMNITEE 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 INDEMNITEES OR BY REASON OF STRICT
LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNITEES;
PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE
TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED
EXPENSES ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND
NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNITEE.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent under Section 12.03(a) or (b),
each Lender severally agrees to pay to such Administrative Agent such
Lender's Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was
incurred by or asserted against such Administrative Agent in its capacity
as such.
(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any other Loan Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or
the use of the proceeds thereof.
(e) All amounts due under this Section 12.03 shall be payable promptly
after written demand therefore.
Section 12.04 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that
(i) the Borrower may not assign or otherwise transfer any of its
rights or obligations hereunder without the prior written consent of
each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and
(ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section 12.04.
Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants (to
the extent provided in Section 12.04(c)) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative
Agent and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b)
(i) Subject to the conditions set forth in Section 12.04(b)(ii),
any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it)
without the prior written consent of the Borrower:
(ii) Assignments shall be subject to the following conditions:
(A) except in the case of an assignment to a Lender or an
Affiliate of a Lender or an assignment of the entire remaining
amount of the assigning Lender's Commitment, the amount of the
Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and
Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $100,000 unless each
of the Borrower and the Administrative Agent otherwise consent,
provided that no such consent of the Borrower shall be required
if an Event of Default has occurred and is continuing;
(B) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and
obligations under this Agreement; (C) the parties to each
assignment shall execute and deliver to the Administrative Agent
an Assignment and Assumption, together with a processing and
recordation fee of $500; and
(D) the assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent any information reasonably requested
by the Administrative Agent;
(iii) Subject to Section 12.04(b)(iv) and the acceptance and
recording thereof, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment
and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of
the interest assigned by such Assignment and Assumption, be released
from its obligations under this Agreement (and, in the case of an
Assignment and Assumption covering all of the assigning Lender's
rights and obligations under this Agreement, such Lender shall cease
to be a party hereto but shall continue to be entitled to the benefits
of Section 5.01, Section 5.02 and Section 12.03). Any assignment or
transfer by a Lender of rights or obligations under this Agreement
that does not comply with this Section 12.04 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation
in such rights and obligations in accordance with Section 12.04(c).
(iv) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices a copy of
each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Maximum
Credit Amount of, and principal amount of the Loans owing to, each
Lender pursuant to the terms hereof from time to time (the
"Register"). The entries in the Register shall be conclusive, and the
Borrower, the Administrative Agent, and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower, and any Lender, at any
reasonable time and from time to time upon reasonable prior notice. In
connection with any changes to the Register, if necessary, the
Administrative Agent will reflect the revisions on Annex I and forward
a copy of such revised Annex I to the Borrower and each Lender.
(v) Upon its receipt of a duly completed Assignment and
Assumption executed by an assigning Lender and an assignee, the
assignee's providing any information reasonably requested by the
Administrative, the processing and recordation fee referred to in
Section 12.04(b) and any written consent to such assignment required
by Section 12.04(b), the Administrative Agent shall accept such
Assignment and Assumption and record the information contained therein
in the Register. No assignment shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in
this Section 12.04(b).
(c) Any Lender may, without the consent of the Borrower or the
Administrative Agent, sell participations to one or more banks or other
entities (a "Participant") in all or a portion of such Lender's rights and
obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (A) such Lender's
obligations under this Agreement shall remain unchanged, (B) such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrower, the Administrative
Agent, and the other Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations
under this Agreement. Any agreement or instrument pursuant to which a
Lender sells such a participation shall provide that such Lender shall
retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement;
provided that such agreement or instrument may provide that such Lender
will not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the proviso to Section 12.02 that
affects such Participant. In addition such agreement must provide that the
Participant be bound by the provisions of Section 12.03. Subject to Section
12.04(c)(ii), the Borrower agrees that each Participant shall be entitled
to the benefits of Section 5.01 and Section 5.02 to the same extent as if
it were a Lender and had acquired its interest by assignment pursuant to
Section 12.04(b). To the extent permitted by law, each Participant also
shall be entitled to the benefits of Section 12.08 as though it were a
Lender, provided such Participant agrees to be subject to Section 4.01(c)
as though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater
payment under Section 5.01 or Section 5.02 than the applicable Lender
would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrower's prior written consent.
(d) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any pledge or assignment to secure obligations to
a Federal Reserve Bank, and this Section 12.04(d) shall not apply to any
such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any
of its obligations hereunder or substitute any such pledgee or assignee for
such Lender as a party hereto.
Section 12.05 Survival; Revival; Reinstatement.
(a) All covenants, agreements, representations and warranties made by
the Borrower herein and in the certificates or other instruments delivered
in connection with or pursuant to this Agreement or any other Loan Document
shall be considered to have been relied upon by the other parties hereto
and shall survive the execution and delivery of this Agreement and the
making of any Loans, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Administrative Agent or
any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder,
and shall continue in full force and effect as long as the principal of or
any accrued interest on any Loan or any fee or any other amount payable
under this Agreement is outstanding and unpaid and so long as the
Commitments have not expired or terminated. The provisions of Section 5.01,
Section 5.02 and Section 12.03 and ARTICLE XI shall survive and remain in
full force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loans, and the Commitments or the
termination of this Agreement, any other Loan Document or any provision
hereof or thereof.
(b) To the extent that any payments on the Indebtedness or proceeds of
any collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law
or equitable cause, then to such extent, the Indebtedness so satisfied
shall be revived and continue as if such payment or proceeds had not been
received and the Administrative Agent's and the Lenders' Liens, security
interests, rights, powers and remedies under this Agreement and each Loan
Document shall continue in full force and effect. In such event, each Loan
Document shall be automatically reinstated and the Borrower shall take such
action as may be reasonably requested by the Administrative Agent and the
Lenders to effect such reinstatement.
Section 12.06 Counterparts; Integration; Effectiveness.
(a) This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute
an original, but all of which when taken together shall constitute a single
contract.
(b) This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Administrative Agent
constitute the entire contract among the parties relating to the subject
matter hereof and thereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof and
thereof. This Agreement and the other Loan Documents represent the final
agreement among the parties hereto and thereto 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.
(c) Except as provided in Section 6.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and
when the Administrative Agent shall have received counterparts hereof
which, when taken together, bear the signatures of each of the other
parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement
by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.
Section 12.07 Severability. Any provision of this Agreement or any other
Loan Document held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and
enforceability of the remaining provisions hereof or thereof; and the invalidity
of a particular provision in a particular jurisdiction shall not invalidate such
provision in any other jurisdiction.
Section 12.08 Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind) at any time owing by such Lender or Affiliate to or for the credit or the
account of the Borrower or any Subsidiary against any of and all the obligations
of the Borrower or any Subsidiary owed to such Lender now or hereafter existing
under this Agreement or any other Loan Document, irrespective of whether or not
such Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations may be unmatured. The rights of each
Lender under this Section 12.08 are in addition to other rights and remedies
(including other rights of setoff) which such Lender or its Affiliates may have.
Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO THE EXTENT
THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR, CHARGE,
RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE
STATE WHERE SUCH LENDER IS LOCATED.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND
(TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO
JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE A PARTY FROM OBTAINING
JURISDICTION OVER ANOTHER PARTY IN ANY COURT OTHERWISE HAVING JURISDICTION.
(c) THE BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS
AND HEREBY CONFERS AN IRREVOCABLE SPECIAL POWER, AMPLE AND SUFFICIENT, TO
CT Corporation System, WITH OFFICES ON THE DATE HEREOF AT ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ AS ITS DESIGNEE, APPOINTEE AND AGENT WITH
RESPECT TO ANY SUCH ACTION OR PROCEEDING IN NEW YORK TO RECEIVE, ACCEPT AND
ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE
OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE
SERVED IN ANY SUCH PROCEEDING AND AGREES THAT THE FAILURE OF SUCH AGENT TO
GIVE ANY ADVICE OF ANY SUCH SERVICE OF PROCESS TO THE BORROWER SHALL NOT
IMPAIR OR AFFECT THE VALIDITY OF SUCH SERVICE OR OF ANY CLAIM BASED
THEREON. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE
TO BE AVAILABLE TO ACT AS SUCH, THE BORROWER AGREES TO DESIGNATE A NEW
DESIGNEE, APPOINTEE AND AGENT IN NEW YORK REASONABLY SATISFACTORY TO THE
ADMINISTRATIVE AGENT ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION.
EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT
THE ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER ADDRESS AS IS
SPECIFIED PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND ASSUMPTION),
SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF A NOTE TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY IN ANY OTHER
JURISDICTION.
(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR
ANY COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT
NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES,
OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY
PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS, AND (iv) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, THE LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED IN THIS SECTION 12.09.
Section 12.10 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
Section 12.11 Confidentiality. Each of the Administrative Agent and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement or any other Loan Document, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section 12.11, to
(i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any Hedging Contract
relating to the Borrower and its obligations, (g) with the consent of the
Borrower or (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section 12.11 or (ii) becomes
available to the Administrative Agent or any Lender on a non-confidential basis
from a source other than the Borrower. For the purposes of this Section 12.11,
"Information" means all information received from the Borrower or any Subsidiary
relating to the Borrower or any Subsidiary and their businesses, other than any
such information that is available to the Administrative Agent or any Lender on
a non-confidential basis prior to disclosure by the Borrower or a Subsidiary;
provided that, in the case of information -------- received from the Borrower or
any Subsidiary after the date hereof, such information is clearly identified at
the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 12.11 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
Notwithstanding anything herein to the contrary, each of the parties hereto (and
each employee, representative or other agent of such party) may disclose to any
and all Persons, without limitation of any kind, the U.S. federal income tax
treatment and tax structure of the transaction contemplated herein (as used in
this Section 12.11, the "Transaction") and all materials of any kind (including
opinions and other tax analyses) that are provided to the parties hereto
relating to such tax treatment and tax structure. For this purpose, "tax
structure" is limited to facts relevant to the U.S. federal income tax treatment
of the Transaction and does not include information relating to the identity of
the parties hereto, its affiliates, agents or advisors.
Section 12.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the States of Texas or New York or any other jurisdiction whose laws
may be mandatorily applicable to such Lender notwithstanding the other
provisions of this Agreement), then, in that event, notwithstanding anything to
the contrary in any of the Loan Documents or any agreement entered into in
connection with or as security for the Notes, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under law applicable
to any Lender that is contracted for, taken, reserved, charged or received by
such Lender under any of the Loan Documents or agreements or otherwise in
connection with the Notes shall under no circumstances exceed the maximum amount
allowed by such applicable law, and any excess shall be canceled automatically
and if theretofore paid shall be credited by such Lender on the principal amount
of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower); and (ii) in the event that the maturity of the Notes is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
required or permitted prepayment, then such consideration that constitutes
interest under law applicable to any Lender may never include more than the
maximum amount allowed by such applicable law, and excess interest, if any,
provided for in this Agreement or otherwise shall be canceled automatically by
such Lender as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited by such Lender on the principal amount of
the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the stated term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.12 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.12.
Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 12.14 No Third Party Beneficiaries. This Agreement, the other Loan
Documents, and the agreement of the Lenders to make Loans hereunder are solely
for the benefit of the Borrower, and no other Person (including, without
limitation, any Subsidiary of the Borrower, any obligor, contractor,
subcontractor, supplier or materialsman) shall have any rights, claims, remedies
or privileges hereunder or under any other Loan Document against the
Administrative Agent or any Lender for any reason whatsoever. There are no third
party beneficiaries.
Section 12.15 Securitization. The Borrower hereby acknowledges that the
Lenders and their Affiliates may sell or securitize the Loans (a
"Securitization") through the pledge of the Loans as collateral security for
loans to the Lenders or their Affiliates or through the sale of the Loans or the
issuance of direct or indirect interests in the Loans, which loans to the
Lenders or their Affiliates or direct or indirect interests will be rated by
▇▇▇▇▇'▇, Standard Poor's or one or more other rating agencies (the "Rating
Agencies"). The Borrower shall cooperate with the Lenders and their Affiliates
to effect the Securitization including, without limitation, by (a) amending this
Agreement and the other Loan Documents, and executing such additional documents,
as reasonably requested by the Lenders in connection with the Securitization,
provided that (i) any such amendment or additional documentation does not impose
material additional costs on the Borrower and (ii) any such amendment or
additional documentation does not materially adversely affect the rights, or
materially increase the obligations, of the Borrower under the Loan Documents or
change or affect in a manner adverse to the Borrower the financial terms of the
Loans, (b) providing such information as may be reasonably requested by the
Lenders in connection with the rating of the Loans or the Securitization, and
(c) providing in connection with any rating of the Loans a certificate (i)
agreeing to indemnify the Lenders and their Affiliates, any of the Rating
Agencies, or any party providing credit support or otherwise participating in
the Securitization (collectively, the "Securitization Parties") for any losses,
claims, damages or liabilities (the "Liabilities") to which the Lenders, their
Affiliates or such Securitization Parties may become subject insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Loan Document or in any
writing delivered by or on behalf of any Loan Party to the Lenders in connection
with any Loan Document or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and such indemnity shall survive any
transfer by the Lenders or their successors or assigns of the Loans and (ii)
agreeing to reimburse the Lenders and their Affiliates for any legal or other
expenses reasonably incurred by such Persons in connection with defending the
Liabilities.
[SIGNATURES BEGIN NEXT PAGE]
[Signature Page to Credit Agreement] S-5 The parties hereto have caused
this Agreement to be duly executed as of the day and year first above written.
BORROWER: GULFWEST OIL GAS COMPANY
By:__\s\ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
ADMINISTRATIVE AGENT: HIGHBRIDGE/▇▇▇▇▇ SPECIAL
OPPORTUNITIES FUND, L.P., as Administrative Agent
By: \s\ ▇. ▇. ▇▇▇▇▇ Co., L.P.
LENDER: HIGHBRIDGE/▇▇▇▇▇ SPECIAL
OPPORTUNITIES FUND, L.P.
By: ▇.▇. ▇▇▇▇▇ Co., L.P.
Address: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER: DRAWBRIDGE SPECIAL OPPORTUNITIES FUND LP
By: \s\ Drawbridge Special Opportunities GP LLC
Address: 1251 Avenue of the Americas
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
Telecopy:
JOINDER BY Setex Oil Gas Company
Setex Oil Gas Company, a Texas corporation, hereby joins in the execution
of this Credit Agreement to evidence its acknowledgment and agreement (i) to
undertake to perform all obligations which under the terms of the Agreement or
any other Loan Document Borrower is required to cause Operator to perform, (ii)
not to do any action which the Borrower under the terms of the Agreement or any
other Loan Document is obligated not to permit Operator to do, (iii) to Agent's
right to terminate the Contract Operating Agreement between the Borrower and
Operator as provided in Sections 8.06(i) and 10.02(d), and (iv) to not amend,
modify, restate or change in any fashion the Contract Operating Agreement. Note
Setex Oil Gas Company, is not a party to the Agreement and is no way liable
for or responsible for the payment of any Loans that are or maybe in the future
outstanding under the Agreement; its joinder hereby is solely for the purposes
set forth above in this paragraph and no other.
Setex Oil Gas Company
By: \s\ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
Address for Notices:
Setex Oil Gas Company
▇▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇. ▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telecopy No. ▇▇▇-▇▇▇-▇▇▇▇
Annex I
ANNEX I
LIST OF MAXIMUM CREDIT AMOUNTS
Aggregate Maximum Credit Amounts
Name of Lender Applicable Maximum
Percentage Credit Amount
Drawbridge Special Opportunities Fund LP 50% $9,000,000
Highbridge/▇▇▇▇▇ Special Opportunities Fund, L.P. 50% $9,000,000
TOTAL 100.00% 18,000,000
Exhibit B
EXHIBIT A
FORM OF AMEDED AND RESTATED NOTE
$18,000,000 April 27, 2004
FOR VALUE RECEIVED, GulfWest Oil Gas Company, a Texas corporation (the
"Borrower"), hereby promises to pay to the order of [ ] (the "Lender"), at the
principal office of Highbridge/▇▇▇▇▇ Special Opportunities Fund, L.P. (the
"Administrative Agent"), at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, the principal sum of EIGHTEEN MILLION Dollars ($18,000,000), in lawful
money of the United States of America and in immediately available funds, on the
dates and in the principal amounts provided in the Credit Agreement, and to pay
interest on the unpaid principal amount of each such Loan, at such office, in
like money and funds, for the period commencing on the date of such Loan until
such Loan shall be paid in full, at the rates per annum and on the dates
provided in the Credit Agreement.
The date and amount of the Loan made by the Lender to the Borrower, and
each payment made on account of the principal thereof, shall be recorded by the
Lender on its books and, prior to any transfer of this Amended and Restated
Note, may be endorsed by the Lender on the schedules attached hereto or any
continuation thereof or on any separate record maintained by the Lender. Failure
to make any such notation or to attach a schedule shall not affect any Lender's
or the Borrower's rights or obligations in respect of such Loans or affect the
validity of such transfer by any Lender of this Amended and Restated Note.
This Amended and Restated Note is one of the Notes referred to in the
Credit Agreement dated as of April 27, 2004 among the Borrower, the
Administrative Agent, and the other agents and lenders signatory thereto
(including the Lender), and evidences Loans made by the Lender thereunder (such
Credit Agreement as the same may be amended, supplemented or restated from time
to time, the "Credit Agreement"). Capitalized terms used in this Amended and
Restated Note have the respective meanings assigned to them in the Credit
Agreement.
This Amended and Restated Note is issued pursuant to the Credit Agreement
and is entitled to the benefits provided for in the Credit Agreement and the
other Loan Documents. The Credit Agreement provides for the acceleration of the
maturity of this Amended and Restated Note upon the occurrence of certain
events, for prepayments of Loans upon the terms and conditions specified therein
and other provisions relevant to this Amended and Restated Note.
This Amended and Restated Note represents a renewal, rearrangement and
modification to that certain Amended and Restated Advancing Note dated effective
as of April 5, 2000, made by Borrower in the stated original amount of
$36,102,000 ("Prior Note"). All collateral given to secure the Prior Note shall
also secure this Amended and Restated Note.
THIS AMENDED AND RESTATED NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
GULFWEST OIL GAS COMPANY
By: \s\ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
EXHIBIT B
FORM OF BORROWING REQUEST
_________, 200__
GulfWest Oil Gas Company, a Texas corporation (the "Borrower"), pursuant
to Section 2.03 of the Credit Agreement dated as -------- of April 27, 2004
(together with all amendments, restatements, supplements or other modifications
thereto, the "Credit Agreement") among the Borrower, Highbridge/▇▇▇▇▇ Special
Opportunities Fund, L.P., as Administrative Agent and the other agents and
lenders (the "Lenders") that are or become parties thereto (unless otherwise
defined herein, each capitalized term used herein is defined in the Credit
Agreement), hereby requests a Borrowing as follows:
(i)______Aggregate amount of the requested Borrowing is $18,000,000;
(ii)_____Date of such Borrowing is [ ], 2004; and
(iii)___Location and number of the Borrower's account to which funds are to
be disbursed, which shall comply with the requirements of Section 2.04 of the
Credit Agreement, is as follows:
[-----------------]
[-----------------]
[-----------------]
[-----------------]
[-----------------]
The undersigned certifies that he/she is the [ ] of the Borrower,
and that as such he/she is authorized to execute this certificate on
behalf of the Borrower. The undersigned further certifies, represents and
warrants on behalf of the Borrower that the Borrower is entitled to receive the
requested Borrowing under the terms and conditions of the Credit Agreement.
GULFWEST OIL GAS COMPANY
By:
Name:
Title:
Exhibit D
EXHIBIT D
FORM OF
COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he/she is the [ ] of GulfWest Oil
Gas Company, a Texas corporation (the "Borrower"), and that as such he/she is
authorized to execute this certificate on behalf of the Borrower. With reference
to the Credit Agreement dated as of April 27, 2004 (together with all
amendments, restatements, supplements or other modifications thereto being the
"Agreement") among the Borrower, Highbridge/▇▇▇▇▇ Special Opportunities Fund,
L.P. as Administrative Agent, and the other agents and lenders (the "Lenders")
that are or become a party thereto, and such Lenders, the undersigned represents
and warrants as follows (each capitalized term used herein having the same
meaning given to it in the Agreement unless otherwise specified):
(a)______The representations and warranties of the Borrower contained
in ARTICLE VII of the Agreement and in the Loan Documents and otherwise
made in writing by or on behalf of the Borrower pursuant to the Agreement
and the Loan Documents were true and correct when made, and are repeated at
and as of the time of delivery hereof and are true and correct in all
material respects at and as of the time of delivery hereof, except to the
extent such representations and warranties are expressly limited to an
earlier date or the Lenders have expressly consented in writing to the
contrary.
(b)______The Borrower has performed and complied with all agreements
and conditions contained in the Agreement and in the Loan Documents
required to be performed or complied with by it prior to or at the time of
delivery hereof [or specify default and describe].
(c)______Since [same date as audited financials in Section 7.04(a)],
no change has occurred, either in any case or in the aggregate, in the
condition, financial or otherwise, of the Borrower or any Subsidiary which
could reasonably be expected to have a Material Adverse Effect [or specify
event].
(d)______There exists no Default or Event of Default [or specify
Default and describe].
(e)______Attached hereto are the detailed computations necessary to
determine whether the Borrower is in compliance with Section 9.01 and
Section 8.14 as of the end of the [fiscal quarter][fiscal year] ending [ ].
EXECUTED AND DELIVERED this [ ] day of [ ].
GULFWEST OIL GAS COMPANY
By:
Name:
Title:
EXHIBIT E-1
FORM OF LEGAL OPINION OF [ ]
EXHIBIT E-2
FORM OF LEGAL OPINION OF LOCAL COUNSEL
[ ] [ ], 2004
as Administration Agent
Re: Credit Agreement dated as of April ___, 2004 among GulfWest Oil Gas
Company, a ______________ corporation (the "Borrower"), the banks now
or hereafter signatory thereto (the "Lenders"), and [ ], as
administrative agent for the Lenders (in such capacity the
"Administrative Agent"), and other agents for the Lenders (the "Credit
Agreement").
Gentlemen:
We have acted as special [ ] counsel to the Borrower and its Subsidiaries,
including [ ], a [ ] corporation ("Mortgagor"), in connection with the execution
and delivery of that certain Deed of Trust, Mortgage, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement dated [ ] [ ], 2002 by
the Mortgagor in favor of the Administrative Agent, for its benefit and the
benefit of the Lenders and others (the "Mortgage"). This opinion is being
furnished to you pursuant to Section 6.01(j)(ii) of the Credit Agreement. All
capitalized terms not defined herein shall have the same meanings assigned to
them in the Credit Agreement. In connection with the opinions set forth herein,
we have examined originals, or copies certified or otherwise identified to our
satisfaction, of the following documents (the "Loan Documents"):
[(A)] the Mortgage[; and]
[(B) the UCC-1 Financing Statement covering as-extracted collateral
and goods that are or are to become fixtures prepared in connection with
the Mortgage (the "Financing Statement")].
In rendering the opinions set forth herein, we have relied upon
certificates of officers of the Mortgagor, certificates or telegrams of public
officials and such other documents, records and information as we have deemed
necessary or appropriate. We have assumed that all signatures are genuine; that
all documents submitted to us as originals are authentic; that all documents
submitted to us as copies conform to the originals; and that the facts stated in
all such documents are true and correct. In rendering this opinion, we have not
made any independent investigation as to accuracy or completeness of any facts
or representations, warranties, data or other information, whether written or
oral, that may have been made by or on behalf of the parties, except as
specifically set forth herein.
Based upon the foregoing, and subject to the qualifications set forth
herein, it is our opinion that:
1. The form of the Mortgage, including the form of acknowledgments
thereto, [and the Financing Statement,] comply with the laws of the State
of [ ], including all applicable recording, filing and registration laws
and regulations, and are adequate and legally sufficient for the purposes
intended to be accomplished thereby.
2. The descriptions of those portions of the Mortgaged Property
located within the State of [ ] that are shown on Exhibit "A" attached to
the Mortgage are legally sufficient descriptions for the purpose of
creating and maintaining the Liens purported to be created by the Mortgage
and for the purposes of all applicable recording, filing and registration
laws in the State of [ ].
3. The Mortgagor is duly qualified as a foreign corporation to do
business and to own its Property and is in good standing in the State of
[ ].
4. So far as the law of the State of [ ] is concerned, the Mortgage
constitutes legal, valid and binding obligations of the Mortgagor
enforceable against it in accordance with their terms except as limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application relating to or affecting creditors' rights generally
and to general principles of equity.
5. The Mortgage is effective to create in favor of the Administrative
Agent (or the Trustee named therein, as applicable) for the benefit of the
Administrative Agent and the Lenders, for the payment of the obligations
described therein, a valid mortgage Lien on all of the Mortgagor's right,
title and interest in and to the portion of the Mortgaged Property
constituting real property described in the Mortgage as being mortgaged
thereby and a valid security interest in all of the Mortgagor's right,
title and interest in and to as-extracted collateral located in the county
in which the Mortgaged Property is situated and all fixtures located on the
real property described in the Mortgage.
6. Fully executed counterparts of the Mortgage and the Financing
Statement should be filed for record in each county in the State of [ ]
where any portion of the Mortgaged Property is located [or if other, please
specify]. Other than the foregoing, no authorization, consent, approval,
license or exemption of, or filing or registration with, any Governmental
Authority of the State of [ ] is necessary for either the due execution and
delivery by the Mortgagor of the Mortgage, the perfection of the Liens
intended to be created thereby or with the holding and enforcement by the
Administrative Agent of the Mortgage or the obligations secured thereby.
7. After the recordings and filings specified in paragraph 6 have
occurred, the Liens created by the Mortgage will be perfected.
8. After the recordings and filings specified in paragraph 6 have
occurred, no instruments need be recorded, registered or filed or
re-recorded, re-registered or re-filed in any public office in the State of
[ ] in connection with the execution and delivery of the Mortgage in order
to maintain the perfection and priority of the Liens created thereby after
the date of recordation, other than [state rule if necessary] and
continuation statements as required by the Uniform Commercial Code as in
effect in the State of [ ].
9. No state or local recording tax, stamp tax or other similar fee,
tax or governmental charge (other than statutory filing and recording fees
to be paid upon the filing of the Mortgage [or the Financing Statement]) is
required to be paid in connection with the filing and recording of [either]
the Mortgage [or the Financing Statement][, except as follows: explain if
necessary].
10. The execution, delivery and performance by the Mortgagor of its
obligations under the Mortgage will not result in a violation of any laws,
rules and regulations of the State of [ ] which, in our experience,
exercising customary professional diligence, are normally applicable to
transactions of the type provided for in the Loan Documents.
11. A [ ] state court of competent jurisdiction or a federal court
sitting in the State of [ ] of competent jurisdiction and applying
conflicts of laws principles of the State of [ ], if properly presented
with a choice of law issue, will honor the choice of New York law to govern
the Credit Agreement, the Notes and the Mortgage that state such documents
shall be governed by the laws of the State of New York.
The foregoing opinions are subject to the following additional assumptions
and qualifications:
[add appropriate qualifications, if any].
The opinions rendered herein are for the sole benefit of, and may only be
relied upon by, the addressee and the Persons from time to time Lenders under
the Credit Agreement, and the opinions herein expressed are not to be used,
circulated or otherwise referred to in connection with any transaction other
than those contemplated by the Loan Documents. This opinion is specifically
limited to the presently effective laws of the State of [ ]. We have not been
asked to, and we do not, render any opinion as to any matter except as
specifically set forth herein.
Very truly yours,
EXHIBIT F-1
SECURITY INSTRUMENTS
1) Guarantee and Collateral Agreement dated as of April 27, 2004, by the
Borrower and GulfWest Energy, Inc. a Texas corporation and GulfWest Oil Gas
Company (Louisiana) LLC, a Louisiana limited liability company, as the
Guarantors, in favor of the Administrative Agent and the Lenders.
2) Financing Statements in respect of item 1, by each of:
a) the Borrower
b) GulfWest Oil Gas Company (Louisiana) LLC
c) GulfWest Energy, Inc
3) Stock Powers delivered in respect of item 1.
a) GulfWest Energy, Inc. a Texas corporation
4) Amended and Restated Deed of Trust, Mortgage, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement dated as of April 27,
2004 by the Borrower and GulfWest Oil Gas Company (Louisiana) LLC, each as
mortgagor, in favor of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Trustee, for the benefit the
Administrative Agreement, the Lenders and others.
5) Financing Statement in respect of item 4. by each of:
a) the Borrower
b) GulfWest Oil Gas Company (Louisiana) LLC
6) Amended and Restated Deed of Trust, Mortgage, Assignment of As-Extracted
Collateral, Security Agreement and Financing Statement dated as of April 27,
2004 by the Borrower, as mortgagor, in favor of the Public Trustee, as Trustee,
for the benefit the Administrative Agreement, the Lenders and others.
7) Financing Statement in respect of item 6. by the Borrower
EXHIBIT F-2
FORM OF GUARANTEE AND COLLATERAL AGREEMENT
EXHIBIT G
FORM OF ASSIGNMENT AND ASSUMPTION
Reference is made to the Credit Agreement dated as of [ ], 200[ ] (as
amended and in effect on the date hereof, the "Credit Agreement"), among [ ], a
[ ], the Lenders named therein and [ ], as Administrative Agent for the Lenders.
Terms defined in the Credit Agreement are used herein with the same meanings.
The Assignor named herein hereby sells and assigns, without recourse, to
the Assignee named herein, and the Assignee hereby purchases and assumes,
without recourse, from the Assignor, effective as of the Assignment Date set
forth herein, the interests set forth on the grid below (the "Assigned
Interest") in the Assignor's rights and obligations under the Credit Agreement,
including, without limitation, the interests set forth on the grid below in the
Maximum Credit Amount of the Assignor on the Assignment Date and Loans owing to
the Assignor that are outstanding on the Assignment Date, but excluding accrued
interest and fees to and excluding the Assignment Date. The Assignee hereby
acknowledges receipt of a copy of the Credit Agreement and the other Loan
Documents. From and after the Assignment Date (i) the Assignee shall be a party
to and be bound by the provisions of the Credit Agreement and, to the extent of
the Assigned Interest, have the rights and obligations of a Lender thereunder
and (ii) the Assignor shall, to the extent of the Assigned Interest, relinquish
its rights and be released from its obligations under the Credit Agreement.
As consideration for the sale and assignment contemplated hereby, the
Assignee shall, on the Assignment Date, pay to the Assignor an amount equal to
the principal amount of Loans assigned by the Assignor to the Assignee as set
forth in the grid below. Except as otherwise provided in this Agreement, all
payments hereunder shall be made in Dollars and in immediately available funds,
without setoff, deduction or counterclaim.
The Assignor and the Assignee agree that (i) the Assignor shall be entitled
to any payments of principal with respect to the Assigned Interest made prior to
the Assignment Date, together with any interest and fees with respect to the
Assigned Interest accrued prior to the Assignment Date, (ii) the Assignee shall
be entitled to any payments of principal with respect to the Assigned Interest
made from and after the Assignment Date, together with any and all interest and
fees with respect to the Assigned Interest accruing from and after the
Assignment Date, and (iii) the Administrative Agent is authorized and instructed
to allocate payments received by it for account of the Assignor and the Assignee
as provided in the foregoing clauses. Each party hereto agrees that it will hold
any interest, fees or other amounts that it may receive to which the other party
hereto shall be entitled pursuant to the preceding sentence for account of such
other party and pay, in like money and funds, any such amounts that it may
receive to such other party promptly upon receipt.
The Assignor does not make any representation or warranty, nor shall it
have any responsibility to the Assignee, with respect to the accuracy of any
recitals, statements, representations or warranties contained in the Loan
Documents, or for the value, validity, effectiveness, genuineness, execution,
effectiveness, legality, enforceability or sufficiency of the Loan Documents or
any other document referred to or provided for therein or for any failure by the
Borrower or any other Person to perform any of its obligations thereunder or for
the existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrower or any of its Subsidiaries or any
other obligor or guarantor, or any other matter relating to the Loan Documents
or any extension of credit thereunder.
Promptly following the receipt by the Assignor of the consideration
required to be paid to it by the Assignee hereunder, the Assignor shall, in the
manner contemplated by Section 2.02(d) of the Credit Agreement: (i) deliver to
the Administrative Agent the Note held by the Assignor, and (ii) notify the
Administrative Agent to request that the Borrower execute and deliver a new Note
to (A) the Assignee, dated as of the Assignment Date, in the principal amount
equal to the Maximum Credit Amount of the Assignee after giving effect to the
sale and assignment contemplated hereby and (B) the Assignor, if the Assignor
has assigned less than the full amount of its Maximum Credit Amount to the
Assignee, dated as of the Assignment Date, in the principal amount equal to the
Maximum Credit Amount of the Assignor after giving effect to the sale and
assignment contemplated hereby.
This Assignment and Assumption is being delivered to the Administrative
Agent together with, if the Assignee is not already a Lender under the Credit
Agreement, any information reasonably requested by the Administrative Agent.
[The [Assignee/Assignor] shall pay the fee payable to the Administrative Agent
pursuant to Section 12.04(b) of the Credit Agreement.] [The Administrative Agent
hereby waives the fee payable to the Administrative Agent pursuant to Section
12.04(b) of the Credit Agreement.]
This Assignment and Assumption shall be governed by and construed in
accordance with the laws of the State of New York.
Legal Name of the Assignor: [ ]
Legal Name of Assignee: [ ]
Assignee's Address for Notices: [ ]
[ ]
Effective Date of Assignment ("Assignment Date"): [ ], 200[ ]
Applicable Percentage
Assigned (set forth as a
Maximum Principal percentage of the
Credit Amount Aggregate Maximum Credit
Amount of Loans Amounts)
Assignors Assigned Assigned
[ ] $[ ],000,000.00 $[ ],000,000.00 [ ]%
[ ] $[ ],000,000.00 $[ ],000,000.00 [ ]%
[ ] $[ ],000,000.00 $[ ],000,000.00 [ ]%
[ ] $[ ],000,000.00 $[ ],000,000.00 [ ]%
[ ] $[ ],000,000.00 $[ ],000,000.00 [ ]%
Totals $[ ],000,000.00 $[ ],000,000.00 [ ]%
Exhibit G - 2 IN WITNESS WHEREOF, the parties hereto have caused this
Assignment and Assumption to be executed by their respective officers thereunto
duly authorized, as of the Assignment Date.
ASSIGNORS: _________ [ ], as Assignor
_________ By:______________________________
Name:
Title:
[ ],
as Assignor
_________ By:______________________________
Name:
Title:
_________ [ ],
as Assignor
_________ By:______________________________
Name:
Title:
ASSIGNEE: _________ [ ],
as Assignee
_________ By: ______________________________
Name:
Title:
The undersigned hereby consent to the within assignments:1
[Borrower] _________ [ ],
as Administrative Agent,
By: By:
[Name] _________ [Name]
[Title _________ [Title]
SCHEDULE 1.02
APPROVED COUNTERPARTIES
None.
SCHEDULE 7.05
LITIGATION
SCHEDULE 7.06
ENVIRONMENTAL MATTERS
SCHEDULE 7.13
INSURANCE
SCHEDULE 7.15
SUBSIDIARIES AND PARTNERSHIPS
Jurisdiction of Organizational Principal Place of
Subsidiaries Organization Identification Business
Number and Chief Executive
Office
Partnerships
SCHEDULE 7.19
GAS IMBALANCES
SCHEDULE 7.20
MARKETING CONTRACTS
Long Term Crude Oil Sales Agreements
PROPERTY TERM
[ ] [ ]
Long Term Natural Gas Sales Agreements
FIELD STATE TERM
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ] [ ]
SCHEDULE 7.21
HEDGING CONTRACTS
SCHEDULE 7.25
MATERIAL AGREEMENTS
SCHEDULE 7.29
ACCOUNTS PAYABLE
SCHEDULE 8.02(e)
NOTICE OF CERTAIN EVENTS
Borrower shall provide notice to Lenders upon the occurrence of each
Environmental Event, Loss Event, Tax Event, Third Party Failure Event or Title
Event as such terms are defined below.
"Environmental Event" means any of the following events, if such event could reasonably be expected to cause or result in a
Material Reduction in Value (defined below) of the Collateral: any representation or warranty made by the Borrower or any other
Person pursuant to any of the Loan Documents with respect to compliance with Environmental Laws shall fail to be correct in any
material respect when made or deemed to be made; or any claim (whether based on tort, contractual liability, statutory or otherwise)
on account of failure to comply with any Environmental Law or otherwise for damages or injury to the environment arising from, or
relating to, or in respect of, any Collateral shall be asserted against any Collateral, the Borrower, or any Environmental Violation
(defined below) shall have occurred, or any investigation shall be commenced with respect to the Collateral.
"Loss Event" means any of the following events, if such event could reasonably be expected to cause or result in a Material
Reduction in Value of the affected Collateral: any damage or destruction or casualty or theft, loss or disappearance or any taking
or appropriation by any Governmental Authority under the power of eminent domain or otherwise affecting (a) any or all of the
Collateral or (b) any equipment which is material to the operation, production, development, processing or the transporting of any
hydrocarbons produced from the Collateral.
"Tax Event" means, on any date, any of the following events, if such event could reasonably be expected to cause or result
in a Material Reduction in Value of the Collateral: (a) any failure by Borrower or any other Person to pay any property tax or
severance tax with respect to any Collateral when due and/or (b) any tax claim is asserted against the Borrower with respect to any
Collateral or which is related in any way to income therefrom, to the Loans, or to any of the Loan Documents.
"Third Party Failure Event" means any of the following events, if such event could reasonably be expected to cause or result
in a Material Reduction in Value of the Collateral: (a) any default by Borrower under any Loan Document; (b) the occurrence of an
event which excuses or could excuse performance under any Loan Document; (c) the occurrence of any event of the type described in
Section 10.01(h), (i), or (j) with respect to any operator of the Collateral; (d) any representation or warranty made by Borrower in
any document entered into in connection with this Agreement or in any certificate delivered pursuant to any document entered into in
connection with this Agreement is incorrect in any material respect when made or deemed made; or (e) the occurrence of any event or
circumstance that could reasonably be expected to change the value or nature of the Collateral.
"Title Event" means, on any date, any of the following events, if such event could reasonably be expected to cause or result
in a Material Reduction in Value of the Collateral: (a) the failure of Borrower to be the true and lawful owner of, and to have good
and indefeasible title to, any oil and gas property, or lease interest forming part of the Collateral free and clear of all Liens
other than Excepted Liens or the Liens permitted pursuant to Section 9.03 of the Agreement; (b) the failure of any oil and gas lease
or other interest described in any Security Agreement to be valid and subsisting and in full force and effect, insofar as it covers
or relates to any Collateral; (c) any material agreement affecting the Collateral shall at any time cease to be valid, binding and
enforceable against the Borrower in accordance with the terms of such document; (d) any Lien shall exist with respect to any
Collateral other than Excepted Liens or the Liens permitted pursuant to Section 9.03 of the Agreement; (e) the Borrower shall suffer
a writ or warrant of attachment or similar process to be issued by any court or any other creditor's right shall be exercised or
attempted to be exercised against any Collateral; or (f) any material representation or warranty with respect to title or ownership
or lack of liens made by the Borrower under any Loan Document shall fail to be correct in any material respect; or (g) any Collateral
shall become the subject matter of litigation which would or might, in the reasonable opinion of the Lenders, upon final
determination result in impairment of ownership or title to the Collateral.
As used in this schedule, the following terms shall have the meaning as set forth below:
"Environmental Violation" means (a) any violation (by the Borrower or any other Person) of (i) any Environmental Law or (ii)
of any contractual obligation of such Borrower, or any other Person contained in any agreement relating to activities regulated by
Environmental Law in each such case, with respect to any Collateral or (b) any act or omission (by the Borrower or any other Person)
that requires or will require any remedial, clean-up or similar action with respect to the Collateral under any applicable
Environmental Law or otherwise including any tort claim, to the extent any such violation, act or omission in any way relates to the
Collateral to any activities carried out on any such property constituting Collateral, or to any hazardous substances located on any
such property or associated with activities on any such property. Included among "Environmental Violations" are (i) any action which
is prohibited by (or which requires or will require any remedial, clean-up or similar action under) any applicable Environmental Law
or otherwise including any tort claim at the time such action is taken, (ii) any action relating to disposal from or to any such
property or to the transportation of hazardous substances to or from such property and (iii) any failure to take action which is
required by applicable Environmental Law, whether such failure is the failure to carry on operations in compliance with current
applicable Environmental Law or otherwise including any tort claim or the failure to remediate or clean up earlier activities or
omissions which were legal when taken or omitted, in each case to the extent such action or failure to act relates to the Borrower or
the Mortgaged Properties.
"Material Reduction in Value" means a material reduction in the aggregate value of the Collateral securing the
Indebtedness. With regard to the foregoing, it is understood and agreed that an adverse effect on the Borrower (including on the
financial condition, business, or operations or on the ability of Borrower to carry out its business or to meet its obligations under
any Loan Document on a timely basis) or on any Hydrocarbons, including any effect on when such Hydrocarbons may be produced or
delivered or, whether any Lien on the Collateral may be challenged, and any and all such effects, as well as any other relevant
effects, shall be considered in determining whether there has been a Material Reduction in Value.
SCHEDULE 9.05
INVESTMENTS
SCHEDULE 9.23
NET SALES VOLUME SCHEDULE
2Q2004 460
3Q2004 700
4Q2004 930
1Q2005 1,140
2Q2005 1,120
3Q2005 1,100
4Q2005 1,000
1Q2006 1,000
2Q2006 1,000
1 Consents to be included to the extent required by Section 12.04(b) of the
Credit Agreement.