CREDIT AGREEMENT
Dated as of May 20,2005
among
EBS OIL AND GAS PARTNERS PRODUCTION CO., L.P.
as Borrower,
EBS OIL AND GAS PARTNERS PRODUCTION GP, LLC
and
EBS OIL AND GAS PARTNERS OPERATING CO., L.P.,
as Guarantors
and
PETRO CAPITAL II, LP,
as Administrative Agent and a Lender
and
the other parties hereto as Lenders
TABLE OF
CONTENTS
ARTICLE I. DEFINITIONS...................................................................................1
1.01 Certain Defined Terms..............................................................................1
1.02 Other Interpretive Provisions......................................................................8
1.03 Accounting Principles..............................................................................9
ARTICLE II. THE CREDIT...................................................................................9
2.01 Amounts and Terms of the Commitment................................................................9
2.02 Prepayment.........................................................................................9
2.03 Repayment..........................................................................................9
2.04 Fees..............................................................................................10
2.05 Computation of Fees and Interest..................................................................10
2.06 Payments by Borrower..............................................................................10
2.07 Interest Recapture................................................................................10
2.08 Taxes$............................................................................................11
2.09 Sharing of Payments, Etc..........................................................................11
ARTICLE III SECURlTY...................................................................................12
3.01 The Security..................................................:...................................12
3.02 Agreement to Deliver Security Documents.............................:.............................12
3.03 Perfection and Protection of Security Interests and Liens.........................................12
3.04 Offset............................................................................................13
3.05 Production Proceeds...............................................................................13
ARTICLE IV. CONDITIONS PRECEDENT.......................................................................14
4.01 Conditions of Initial Loan........................................................................14
ARTICLE V. REPRESENTATIONS AND WARRANTIES..............................................................15
5.01 Corporate Existence and Power.....................................................................15
5.02 Corporate Authorization; No Contravention.........................................................15
5.03 Governmental Authorization................................................................:.......16
5.04 Binding Effect....................................................................................16
5.05 Financial Condition...............................................................................16
5.06 Litigation........................................................................................16
5.07 No Default........................................................................................16
5.08 ERISA.............................................................................................16
5.09 Margin Regulations................................................................................16
5.10 Title to Properties...............................................................................16
5.11 Oil and Gas Reserves..............................................................................17
5.12 Initial Reserve Report............................................................................17
5.13 Gas Imbalances....................................................................................17
5.14 Taxes.............................................................................................17
5.15 Environmental Matters.............................................................................17
5.16 Regulated Entities................................................................................18
5.17 No Burdensome Restrictions........................................................................18
5.18 Solvency..........................................................................................18
5.19 Subsidiaries/Investments/Ownership................................................................18
5.20 Insurance.........................................................................................18
5.21 Full Disclosure...................................................................................18
ARTICLE VI. AFFIRMATIVE COVENANTS...........................................................................18
6.01 Financial Statements..............................................................................18
6.02 Certificates Other Production and Reserve Information.............................................19
6.03 Notices...........................................................................................20
6.04 Preservation of Corporate Existence, Etc..........................................................20
6.05 Maintenance of Property...........................................................................20
6.06 Insurance. .......................................................................................20
6.07 Payment of Obligations............................................................................20
6.08 Compliance with Laws..............................................................................21
6.09 Maintenance of Books and Records..................................................................21
6.10 Environmental Laws..................................:.............................................21
6.11 Use of Proceeds. .................................................................................21
6.12 Further Assurances. .........................................:....................................21
6.13 Guarantees..........:.............................................................................21
6.14 Security Documents................................................................................21
ARTICLE VII. NEGATIVE COVENANTS......................................................................21
7.0 I Limitation on Liens............................................................:..................22
7.02 Disposition of Assets.............................................................................22
7.03 Consolidations and Mergers........................................................................23
7.04 Loans and Investments.............................................................................23
7.05 Limitation on Indebtedness........................................................................23
7.06 EBI1DA to Interest Expense...............:...,....;...............................................24
7.07 Transactions with Affiliates.................................................................:... 24
7.08 Margin Stock......................................................................................24
7.09 Contingent Obligations..................,...............................~.........................24
7.10 Restricted Payments...............................................................................24
7.11 Change in Business, Organization Documents, Name and Address......................................24
7.12 Accounting Changes................................................................................24
7.13 Restrictions of Pledges.................................:..........,..............................24
ARTICLE VIII. EVENTS OF DEFAULT.............................................................................25
8.01 Event of Default..................................................................................25
8.02 Remedies....................................... ..................................................26
8.03 Set-off. .........................................................................................27
8.04 Payments Set Aside...............................................................................'27
8.05 Subordination of the Loan Party Liens.............................................................27
8.06 Rights Not Exclusive..............................................................................28
ARTICLE IX. ADMINISTRATIVE AGENT............................................................................28
9.01 Appointment and Authorization.....................................................................28
9.02 Delegation of Duties..............................................................................28
9.03 Liability of Administrative Agent.................................................................28
9.04 Reliance by Administrative Agent..................................................................28
9.05 Notice of Default.................................................................................29
9.06 Credit Decisions.............................................:.:..................................29
9.07 Indemnification...................................................................................30
9.08 Administrative Agent in Individual Capacity.......................................................30
9.09 Successor Administrative Agent.................................................~..................30
ARTICLE X. MISCELLANEOUS.........................................................................:..........31
10.01 Amendments and Waivers........................:...................................................31
10.02 Notices...........................................................................................31
10.03 No Waiver; Cumulative Remedies....................................................................32
10.04 Costs and Expenses................................................................................32
10.05 Indemnity.........................................................................................32
10.06 Environmental Indemnification.....................................................................32
10.07 Successors and Assigns............................................................................33
10.08 Interest..................................................................................:.......33
10.09 Counterparts and Facsimile Signatures.............................................................34
10.10 Severability......................................................................................34
10.11 No Third Parties Benefited........................................................................34
10.12 USA PATRIOT Act Notice............................................................................34
10.13 Governing Law.....................................................................................34
10.14 Submission To Jurisdiction........................................................................35
10.15 Waiver of Jury Trial..............................................................................35
10.16 Entire Agreement..................................................................................35
10.17 NO ORAL AGREEMENTS................................................................................36
APPENDIX
APPENDIX I Specific Terms, Fees and Conditions
SCHEDULES
SCHEDULE I Security Documents
EXHIBITS
Exhibit A Form of Promissory Note
Exhibit B Form of Letters in Lieu
CREDIT AGREEMENT
This CREDIT AGREEMMENT, dated as of May 20, 2005, is entered into
among EBS OIL AND GAS PARTNERS PRODUCTION CO., L.P., a Texas limited
partnership ("Borrower"), EBS OIL AND GAS PARTNERS PRODUCTION GP, LLC, a
Texas limited partnership ("EBS GP'), EBS OIL AND GAS PARTNERS OPERATING
CO., L.P., a Texas limited partnership ("EBS Op Co" and EBS Op Co and EBS GP
are each a "Guarantor' and collectively, "Guarantors"), and PETRO CAPITAL
II, L.P., a Texas limited partnership ("PC II"), as administrative agent for
the Lenders ("Administrative Agent') and the other Persons parties hereto as
lenders (collectively "Lenders").
In consideration of the mutual agreements, provisions and covenants
contained herein and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLEL
DEFINlTIONS
1.01 Certain Defined Terms. In addition to the terms defined
in the preamble of this Agreement, the fol1owing terms have the following
meanings herein:
"Acquisition" means any transaction or series of related transactions
for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of a Person, or of any
business or division of a Person, (b) the acquisition of in excess of 50% of
the capital stock of a corporation (or similar entity), which stock has
ordinary voting power for the election of the members of such entity's board
of directors or persons exercising similar functions (other than stock having
such power only by reason of the happening of a contingency), or the
acquisition of in excess of 50% of the partnership interests or equity of any
Person not a corpo~tion which acquisition gives the acqUiring Person the
power to direct or canse the direction of the management and policies of such
Person, or (c) a merg~r or consolidation or any other combination with
another Person provided that Borrower is the surviving entity.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct
or cause the direction of the management and policies of the other Person,
whether through the ownership of voting securities, by contract, or
otherwise. .
"Agent-Related Person" as to Administrative Agent, means Administrative
Agent, its Affiliates, and the officers, directors, employees, agents, and
attorneys-in-fact of Administrative Agent and its Affiliates.
"Agreemenf' means this Credit Agreement including all Appendices, Schedules
and Exhibits attached hereto, as same may be amended in writing from time to
time.
"Assignee" has the meaning specified in Subsection 11.08(b).
"Bankruptcy CotW' means the Federal Bankruptcy Reform Act of1978 (11 U.S.C.
ss.101, et seq.).
"Borrowing" means a borrowing hereunder consisting of Loans made to
Borrower by Lenders under Article O.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks located in the city of Administrative Agent's Payment
Office are authorized or required by law to close.
"Capital Lease" means, when used with respect to any Person, any lease in
respect of which any of the obligations of such Person thereunder constitute
Capitalized Lease Obligations.
"Capitalized Lease Oblig(ltions" means, all obligations of such Person to
pay rent or other amounts . under any lease of (or other aqangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations shall have been or should be, in accordance with GAAP, capitalized
on the books of such Person.
"Cash Equivalents" means: (a) securities issued or fully guaranteed or
insured by the United State~ Government or any agency thereof and backed by
the full faith and credit of the United States having matuiities of not more
than twelve (12) months from the date of acquisition; (b) certificates of
deposit, time deposits, Eurodollar time deposits, or bankers' acceptances
having in each case a tenor of not more than three (3) months from the date of
acquisition issued by any U.S. commercial bank or any branch or agency of a
non-U.S. commercial bank licensed to conduct business in the U.S. having
combined capital and surplus of not less than Five Hundred Million Dollars
($500,000,000); and (c) commercial paper of an issuer rated at least A-I by
S&P or P-l by Moody's at the time of acquisition, and in either case having a
tenor of not more than twelve (12) months.
"Change of Control' means (a) a purchase or acquisition, directly or
indirectly, by aoy "person" or "group" within the meaning of Section 13(d)(3)
and 14(d)(2) of the Securities and Exchange Act of 1934 (a "Group"), of
beneficial ownership" (as such term is defined in Rule 13d-3 under the
Exchange Act) of securities of Borrower which, together with any securities
owned beneficially by any "affiliates" or "associates" of such Group (as such
terms are defined in Rule 12b-2 under the Exchange Act), shall represent more
than twenty percent (20%) of the combined voting power of Borrower's
securities which are entitled to vote generally in the election of direc;tors
(or managers, in the case of a limited liability company) and which are
outstanding on the date immediately prior to the date of such purchase or
acquisition; or (b) a sale of twenty percent or more by value of the assets of
Borrower taken as a whole; or (c) the liquidation or dissolution- of Borrower;
or (d) the first day on which the Current Stakeholders cease to own directly
or indirectly at least fifty percent (50.0%) of the voting power of Borrower's
securities. As herein defined, "Current Stakeholder' means any individual
Person with direct or beneficial ownership and entitled to vote generally in
the election of directors (or managers, in the case of a limited liability
company) of Borrower as of the date of this Agreement as listed on Appendix I
hereto.
"Closing" means the date on which all conditions precedent set forth in
Section 4.01 are satisfied or waived by Administrative Agent and the Lenders.
"Code" means the Internal Revenue Code of 1986 and regulations promulgated
thereunder.
"Collateral' means all real and personal property of any kind owned by the
Borrower, including aU Oil and Gas Properties now owned or hereafter acquired
by the Borrower, which is subject to a Lien in favor of Collateral Agent for
the benefit of Lenders or which under the terms of any Security Document is
purported to be subject to such Lien.
"Collateral Agent' means Petro Capital in its capacity as Collateral Agent.
"Commitment' means Lenders' commitment to lend to Borrower under the Loan
Commitment.
"Contingent Obligation" means, as to any Person without duplication, any
direct or indirect liability of that Person with or without recourse, (a) with
respect to any Indebtedness, dividend, ▇▇▇▇▇▇ of credit or other similar
obligation (the "primary obligations") of another Person (the "primary
obigor), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii)
to advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance
sheet item, level of income or fmancial condition of the primary obligor,
(iii) to purchase property, securities or services primarily for the purpose
of assuring the owner of
2
any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; or (c) to purchase
any materials, supplies or other property trom, or to obtain the services of,
another Person if the relevant contract or other related doctunent or
obligation requires that payment for such materials, supplies or other
property, or for such services, shall be made regardless of whether delivery of
such materials, supplies or other property is ever made or tendered, or such
services are ever performed or tendered. The amount of any Contingent
Obligation shall, in the case of Guaranty Obligations, be deemed equal to the
maximum stated or determinable amount of the primary obligation in respect of
which such Guaranty Obligation is made or, if not stated or if indeterminable,
the maximum reasonably anticipated liability in respect thereof, and in the
case of other Contingent Obligations shall be equal to the maximum reasonably
anticipated liability in respect thereof.
"Contract Rate" has the meaning specified in Appendix I.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement
to which such Person is a party or by which it or any of its property is bound.
"Current Managemenf' means the current executive officers of Borrower or its
general partner, in the case of a limited partnership as specified in Appendix
I.
"Default' means any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Default Rate" has the meaning set forth in Subsection 2.05(b)(iii).
"Dollars", "dollars" and "$" each mean lawful money of the United States.
"EBITDA" means with respect to Borrower for any fiscal period, without
duplication (i) Net Income plus (ii) depreciation, depletion, amortization and
other non-cash items reducing Net Income plus (iii) Interest Expense plus (iv)
income tax expense.
"Effective Amount' means on any date, the aggregate outstanding principal
amount of Loans after giving effect to any prepayments or repayments of Loans
occurring on such date.
"Environmental Claims" means all material claims by any Governmental
Authority or other Person alleging potential liability or responsibility for
violation of any Environmental Law, or for release or injury to the
environment.
"Environmental Laws" means all material federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all material administrative orders, requests, licenses, authorizations and
permits of, 8nd agreements with, any Governmental Authorities, in each case
relating to environmental, health, and safety matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Borrower within the meaning of Section 414(b),
(c), (m) or (0) of the Code.
"ERISA Event' means (a) a Reportab(e Event with respect to a Plan; (b) a
withdrawal by the Borrower or any ERISA Affiliate from a Plan subject to Section
4063 of ERISA during a plan year in which it was a substantial employer (as
defined in Section 400 1 (a)(2) of ERISA) or a cessation of operations which is
treated as such a withdrawal under Section 4062( e) of ERlSA; ( c) a complete or
partial withdrawal by the Borrower or any ERISA Affiliate trom a Multiemployer
Plan or notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate (other than pursuant to Section 4041
(b)
3
of ERISA>> the treatment of a Plan amendment as a tennination under Section
4041(c) or 4041A of ERISA) or the commencement of proceedings by thePBGC to
teIminate a Plan or Multiemployer Plan; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for
the termination of. or the appointment of a trustee to administer) any Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title N of
ERISA. other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Borrower or any ERISA Affiliate.
"Event of Defaulf' means any of the events or circumstances specified in
Section 8.01.
"Exchange Act' means the Securities and Exchange Act of 1934) and
regulations promulgated thereunder.
"Existing Credit Agreement" means that certain Credit Agreement dated
February 1) 2005) between . Borrower and Petro Capital IT. LP, as same may be
amended, modified or restated from time to time.
"FBB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"GAAP" means generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financiill Accounting Standards Board.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetaIy or
regulatory authority) thereof, any entity exercising executive, legislative)
judicial) regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise) by any of the foregoing.
"Guaranty" means the guaranty of even date herewith executed by a Guarantor
in favor of Administrative Agent and Lenders.
"Hedge Agreements" means all future contracts, forward contracts, swap,
cap or collar contracts, option contracts, hedging contracts or other
derivative contracts or similar agreements covering Oil and Gas commodities
or prices or financial, monetaIy or interest rate instruments.
"Highest Lawful Rate" means) for each Lender) as of a particular date) the
maximum nonusurious interest rate that under applicable federal and Texas law
may then be contracted for, charged or received by Lenders in connection with
the Obligations. . .
"Hydrocarbon Interests" means leasehold and other interests in or under oil,
gas and other liquid or gaseous hydrocarbon leases with respect to Oil and Gas
Properties wherever located, mineral fee interests) overriding royalty and
royalty interests. net profit interests. and production payment interests
relating to oil, gas or other liquid or gaseous hydrocarbons wherever located,
including any reserved or residual interest of whatever nature.
"Indebtedness" of any Person means) without duplication. (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than
trade payables entered. into in the ordinary course of business on ordinary
terms); (c) all noncontingent reimbursement or payment obligations with respect
to Surety Instruments; (d) all obligations evidenced by notes, bonds.
debentures or similar instruments, including obligations so evidenced incurred
in connection with the acquisition of property) assets or businesses; (e) all
indebtedness created or arising under any conditional sale or other title
retention agreement, or incurred as fmancing) in either case with respect to
property acquired by the Person (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property) including, without limitation,
production payments) net profit interests and other Hydrocarbon Interests
subject to repayment out of future Oil and Gas production; (f) all obligations
with respect to Capital Leases; (g) all net obligations with respect to
Operating Leases; (h) all indebtedness referred to in clauses
4
(a) through (g) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien upon or in property (including accounts and contracts rights)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; and (i) all Guaranty Obligations
in respect of indebtedness or obligations of others of the kinds referred to
in clauses"(a) through" (g) above.
"Indemnified Environmental Liabilities" has the meaning specified in
Section 10.06.
"Indemnified Liabilities" has the meaning specified in Section 10.05.
"Indemnified Person" has the meaning specified in Section 10.05.
"Independent Auditor" has the meaning specified inSubsection 6.01(a).
"Initial Reserve Report" means the Reserve Report described in Section
4.01(c).
"Insolvency Proceeding" means (a) any case, action or proceeding relating
to bankruptcy, reorganization, insolvency, liquidation, receivership,
dissolution, winding up or relief of debtors, or (b) any general assignment
for the benefit of creditors, composition, marshalling of assets for
creditors, or other, similar ammgement in resPect of its creditors generally
or any substantial portion of its creditors; undertaken under U.S. Federal,
state or foreign law, including the Bankruptcy Code.
"Intercreditor Agreement' means that certaiIi Intercreditor and Collateral
Agency Agreement of even date herewith between Borrower, Petro Capital as
Lender under the Existing Credit Agreement, Administrative Agent under this
Credit Agreement and Collateral Agent and the Lenders party hereto.
"Interest Expense" means, with respect to Borrower and its Subsidiaries,
for any fiscal period, the aggregate amount of all costs, fees and expenses
paid by Borrower and its Subsidiaries in such fiscal period which are
classified as interest expense on the combined financial statements of
Borrower and its Subsidiaries, all as determined in conformity with GAAP.
"Interest Payment Date" means the last Business Day of each calendar month.
"Investor Rights Agreement" means that certain Investor Rights Agreement
executed in connection with the Existing Credit Agreement between Borrower and
Lenders dated February 1,2005, as amended, supplemented, restated or
otherwise modified as of the date hereof.
"IRS' means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Lender's Payment Office" means the principal address for each Lender as set
forth on Appendix I hereof or such other address as Lenders may from time to
time specify.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement; encumbrance, Lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising
under or evidenced by any conditional sale or other title retention agreement
and the interest of a lessor under a Capital Lease), any fmancing lease having
substantially the same economic effect as any of the foregoing, or the filing
of any financing statement naming the owner of the asset to which such Lien
relates as debtor, under the Uniform Commercial Code or any comparable law and
any contingent or other agreement to provide any of the foregoing.
"Loans" means an extension of credit by Lenders to Borrower under Section
2.01.
"Loan Documents" means this Agreement, the Note, the Guarantees, the
Investor Rights Agreement, the Security Documents and all other documents
delivered to Lenders in connection herewith.
"Margin Stock' means "margin stock" as such term is defined in Regulation
T, U or X of the FRB.
5
"Material Adverse Effect' means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, Properties or
fmancial condition of the Borrower; (b) a material impairment of the ability
of Borrower to perfonn under any Loan Document; or ( c) a material adverse
effect upon the legality, validity, binding effect or enforceability against
Borrower of any Loan Document.
"Maximum Loan Amount' means the amount set forth under Section 2.01, as
such amount may be reduced nom time to time pursuant to Section 2.03.
"Mortgages" means the Mortgages, Deeds of Trust, Assignments of Production,
Security Agreements and Financing Statements trom the Borrower for the
benefit of Lenders and all supplements, assignments, amendments and
restatements thereto (or any agreement in substitution therefor) which are
executed and delivered to Administrative Agent pursuant to Article IV of this
Agreement .
"Mortgaged Properties" means such properties upon which the Borrower has
purported to ▇▇▇▇▇ ▇ ▇▇▇▇ in favor of Administrative Agent for the benefit of
the Lenders pursuant to the Mortgages.
"Multiemployer Plan" means a "multiemployer plan," within the meaning of
Section 4001(a)(3) of ERISA, to which Borrower or any ERISA Affiliate makes,
is making, or is obligated to make contributions or, during the preceding
seven (7) calendar years, has made, or been obligated to make, contributions.
"Net Income' means, for any fiscal period, the net income (or net loss) of
Borrower for such period detennined in accordance with GAAP consistently
applied.
"Note" means a promissory note specified in Section 2.01, substantially in
the same form as Exhibit "A" issued by Borrower hereunder to each Lender
including any amendment, modification, renewal or replacement of such
promissory note, and "Notes" means each Note issued by Borrower hereunder to
the Lenders.
"Obligations" means the aggregate amount of all advances, debts,
liabilities, obligations, covenants and duties arising under any Loan Document
or owing by Borrower to any Lender, Administrative Agent or any Indemnified
Person, whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become, due, now existing or hereafter
arising.
"Oil and GaS" means petroleum, natural gas and other related hydrocarbons or
minerals or any of them and all other substances produced or extracted in
association therewith.
"0i1 and Gas Properties" means Hydrocarbon Interests now owned or
hereafter acquired by the . Borrower and contracts executed in connection
therewith and all tenements, hereditaments, appurtenances, and properties
belonging, affixed or incidental to such Hydrocarbon Interests, including,
without limitation, any and aU property, real or personal, now owned or
hereafter acquired by the Borrower and situated upon or to be situated upon, and
used, built for use, or useful in connection with the operating, working or
developing of such Hydrocarbon Interests, including, without limitation, any and
all petroleum and/or natural gas ▇▇▇▇▇, buildings, structures, field separators,
liquid extractors, plant compressors, pumps, pumping units, field gathering
systems, tank and tank batteries, fixtures, valves, fittings, machinery and
parts, engines, boilers, liters, apparatus, equipment, appliances, tools,
implements, cables, wires, towers, tubing and rods, surface leases, rights of-
way, easements and servitudes, and all additions, substitutions, replacements
for, fixtures and attachments to any and allof the foregoing owned directly or
indirectly by the Borrower. .
"Operating Lease" means an operating lease determined in accordance with GAAP.
"Organization Documents" means, for any corporation: the articles of
incorporation, the bylaws, any certificate of determination or instrument
relating to the rights of the shareholders of such corporation, any shareholder
rights agreement, and all applicable resolutions of the board of. directors (or
any committee thereot) of such corporation; for any limited liability company:
the articles of organization, the regulations or operating agreement,
certificate of organization and all applicable resolutions of the
6
members of such company; and for any limited partnership: the limited
partnership agreement and all Organization Documents for its general
partner as any of the foregoing have been amended or
supplemented nom time to time.
"Other Taxes" means any' present or future mortgage tax, stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise nom any payment made hereunder or nom the execution, delivery
or registration of, or otherwise with respect to, this Agreement or any other
Loan Documents. "
"PBGC' means the Pension Benefit Guaranty Corporation, or any Govenunental
Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defmed in Section 3(2) of ERISA
subject to Title IV of ERISA, other than a Multiemployer Plan, which Borrower
sponsors, maintains, or to which it makes, is making, or is obligated to make
contributions, or in the case of a Multiemployer Plan (as described in Section
4064(a) of ERISA) has made contributions at any time during the immediately
preceding five (5) plan years.
"Permitted Liens" has the meaning set forth in Section 7.01.
"Person" means an individual, partnership, limited partnership, corponttion,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental
Authority. "
"Plan" means an employee benefit plan (as defmed in Section 3(3) of ERISA)
which is subject to ERISA, other than a Multiemployer Plan, and which Borrower
sponsors or maintains or to which Borrower makes, is making, or is obligated to
make contributions and includes any Pension Plan.
"Principal Business" means the business of the exploration for, and
development, acquisition, production, gathering and upstream marketing of Oil
and Gas.
"Production Sales Contracts" mean those agreements now or hereafter executed
in connection with the sale by Borrower of Oil and Gas attributable to the Oil
and Gas Properties as" same may be amended from time to time. .
"Pro-Rata Share" means, as to any Lender at any time, the percentage set
forth opposite its name as its Pro-Rata Share on Appendix I hereto, as amended
from time to time.
"Regulation U" and "Regulation X' means Regulation U and Regulation X,
respectively, of the FRB.
"Requirement of Law" means, as to any Person, any law (statutory or common),
treaty, rule or regu~ation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Reserve Report' means a report, acceptable to Lenders, covering proved
developed, proved undeveloped and probable Oil and Gas reserves attributable to
the Borrower's Oil and Gas Properties and setting forth (i) the total quantity
of proved developed and proved undeveloped reserves (separately c1assified as
producing, shut-in, behind pipe, and undeveloped), (ii) the estimated future net
revenues and future Net Income and cumulative estimated future net revenues and
future Net Income, (iii) the discounted present value of future Net Income, and
(iv) such other information and data with respect to the Oil and Gas Properties
as Lenders may reasonably request
"Responsible Officer" means the president of the Borrower or such other
Person designated as a Responsible Officer by Borrower.
"SEC' means the Securities and Exchange Commission.
"Security Documents" means the Mortgage, collateral assignments, security
agreements, pledges, assignments and related fmancing statements listed on
Schedule I as same may be amended,
7
supplemented or modified from time to time and any and all other instruments
now or hereafter executed in connection with or as security for the payment of
the Obligations.
"Solvent' means, as to any Person at any time, that (a) the fair value of
all of the property of such Person is greater than the amount of such,
Person's liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated for
purPoses of Section 101(32) of the Bankruptcy Code; (b) the present fair
saleable value of all of the property of such Person is not less than the
amount that will be required to pay the probable liability of such Person on
its debts as they become absolute and matured; (c) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature; and (d) such
Person is not engaged in business or a transaction, and is not l!-bout to
engage in business or a transaction, for which such Person's property would
constitute unreasonably small capital.
"Stated Maturity Date' means the date set forth on Appendix I stated to be
the maturity date for the Notes.
"Status Report' means a status report prepared periodically (as specified on
Appendix I) by Borrower in form, scope and content acceptable to Lenders,
setting forth as of such period then ended (i) detailed production data from
the Mortgaged Properties by property, including, the volumes of Oil and Gas
produced and saved, the volumes of Oil and Gas sold, gross revenue, "Net
Income, related leasehold operating expenses, severance taxes, capital costs
and any production imbalances incurred during such period (ii) all new Oil
and Gas Properties acquired by the Borrower since the date of Borrower's last
Status Report, (iii) the current list of purchasers of production including
mailing address and the ▇▇▇▇▇ covered by such Production Sales Contracts, and
(iv) such additional information with respect to any of the Borrower's Oil
and Gas Properties as may be reasonably requested by Lenders.
"Subsidiary" of a Person means any corporation, association, partnership,
joint venture or other business entity of which more than 50% of the voting
stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof. Unless
the context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of Borrower.
"Surety Instruments" means all letters of credit (including standby),
banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar
instruments.
"Taxes' means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities' with respect thereto,
excluding such taxes (including income taxes or franchise taxes) as are imposed
on or measured by such Lender's Net Income by the jurisdiction (or any
political subdivision thereof) under the laws of which Lenders is organized or
maintains a lending office.
"Termination Date' means the earlier of (a) the Stated Maturity Date, or (b)
the date on which the Loans are due and payable in accordance with the
provisions of this Agreement.
"United States" and "U.S." each means the United States of America. '
1.02 Other Interpretive Provisions. The meanings of defined terms are
equally applicable to the singular and plural forms of the defined terms. Unless
otherwise specified or the context clearly requires otherwise, the words
"hereof', "herein", "hereunder" and similar words refer to this Agreement as a
whole and not to any particular provision of this Agreement; and Subsection,
Section, Schedule and Exhibit references are to this Agreement. The term
"documents" includes any and all instruments, documents, agreements,
certificates, indentureS, notices and other writings, however evidenced. The
tenn "including" is no~ limiting and means "including without limitation." In
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including"; the words "to" and "until"
each mean "to but excluding", and the word "through" means "to and including."
Unless otherwise expressly provided herein, (i) references to agreements
(including'this Agreement) and
8
other contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto, but only to the extent such
amendments and other modifications are not prohibited by the terms of any Loan
Document, and (ii) references to any statute or regulation are to be construed
as including all statutory and regulatory provisions consolidating, .amending,
replacing, supplementing or interpreting the statute or regulation. Tbe
captions and headings of this Agreement are for convenience of reference only
and shall not affect the interpretation of this Agreement. This Agreement and
the other Loan Documents are the result of negotiations among and have been
reviewed by counsel to Lenders and Borrower, and are the products of all
parties. Accordingly, they shall not be construed against Borrower, or Lenders
~erely because of Lenders' involvement in the preparation thereof.
1.03 Acconnting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defmed herein shall be construed, and all
financial computations required under this Agreement shall be made in
accordance with GAAP~ consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of Borrower.
(c) References herein to Borrower's financial statements or
balance sheets shall mean, respectively, the consolidated fmancial statements or
consolidated balance sheets of Borrower and its Subsidiaries, if any.
ARTICLE II
THE CREDIT
2.01 Amounts and Terms of the Commitment. Subject to the terms and
conditions herein each Lender hereby severally agrees to lend to Borrower their
Pro-Rata Share of $3,500,000 (the "Maximum Loan Amount'), and at Closing each
Lender shall fund to Borrower, at Borrower's direction, an amount equal to
their Pro-Rata Share. The obligation of Borrower to repay the aggregate amount
of such. Loans made by Lenders, together with interest accruing thereon, shall
be evidenced by Notes made payable by Borrower to the order of such Lender. If
Borrower pays or prepays any portion of the Loans ▇▇▇.▇▇ this Agreement, then
such portion may not be reborrowed. The Loans shall bear interest at the rates
provided for under Section 2.03 below. Lenders, at their sole discretion, shall
have the option to extend the Stated Maturity Date for a period and upon such
terms acceptable to Lenders; provided such right to extend shall not preclude
Borrower's right to prepay the Obligations in accordance with Section 2.02
below. .
2.02 Prepayment. Borrower may, at any time prepay the Obligations in
full, but not in part, upon irrevocable .notice to Lenders of not less than
five (5) Business Days. In the event the Obligations are paid prior to the
Stated Maturity Date for any reason (whether voluntary or by acceleration),
Borrower shall pay to Lenders the Yield Maintenance Premium in addition to all
principal, accrued but unpaid interest and expenses under the Notes.
2.03 Repayment.
(a) Principal. Borrower shall repay all outstanding principal
under the Not~s on the Tennination Date plus all accrued but unpaid interest
and oujstanding expenses hereunder or under the Loan Documents.
9
(b) Interest
(i) Principal outstanding under the Notes shall
bear interest trom the applicable Borrowing Date at a rate per annum
equal to the lesser of (a) the Contract Rate, or (b) the Highest
Lawful Rate. .
(ii) Interest shall be paid in arrears on each
Interest Payment Date and any accrued by unpaid interest shall be
due and payable in full on the Termination Date.
(iii) Notwithstanding SubsectiOn 2.03(h)(i), while
any Event of Default exists, Borrower shall pay interest (after as
well as before entry of judgment thereon to the extent permitted by
law) on the principal amount of all outstanding Loans, at a rate per
annum equal to the Highest Lawful Rate, until paid, regardless
whether payment is made before or after entry of a judgment (the
< lease or operation of
property or the conduct of its business requires such qualification
or license; and (d) is in compliance in all material respects with
all Requirements of Law.
5.02 . Corporate Authorization; No Contravention. Tbe
execution, delivery and performance by BOlTOwer of this Agreement
and each other Loan Document to which Borrower is a party, have
been duly authorized by all necessary corporate, partnership or
limited liability company action, as applicable, and do not and
will not (a) contravene the terms of any of Borrower's Organization
Documents; (b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any document
evidencing any Contractual Obligation to which Borrower is a party
or any order,
15
injunction, writ or decree of any Governmental Authority to which Borrower or
its property is subject; or ( c) violate any Requirement of Law.
5.03 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, Borrower of
this Agreement or any other Loan Document to which it is a party.
5.04 Binding Effect. This Agreement and each other Loan
Document to which Borrower is a party constitute the legal, valid and
binding obligations of Borrower, enforceable against Borrower in
accordance with their respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, or similar laws
affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
5.05 Financial Condition. Borrower has delivered to each Lender
copies of (a) its financial statements as of March 31, 2005, such rmancial
statements are true and correct, fairly represent the financial condition of
Borrower as of such date and was prepared in" accordance with GAAP; as of the
date hereof, there are no obligations, Liabilities, or Indebtedness
(including contingent and indirect Liabilities) of BOlTower which are
material and are not reflected in such financial statements. No Material
Adverse Effect has occurred since the date of such financial statements. .
5.06 Litigation. There are no actions, suits, proceedings, claims or
disputes pending, or to the knowledge of the Borrower, threatened or
contemplated, at law, in equity, in arbitration or before any Governmental
Atrthority, against Borrower, or any of its Properties. No injunction, writ,
temporary restraining order or any order of any nature has been issued by any
court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery or perfonnance of this Agreement or any other Loan
Document, or directing that the transactions provided for herein or therein
not be consummated as herein or therein provided.
5.07 No Default. No Default or Event of Default exists or would be
reasonably expected to result ftom the incurring of any Obligations by
BOlTower. As of the date on which Closing occurs, Borrower is not in default
under or with respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, would reasonably be expected
to have a Material Adverse Effect.
5.08 ERISA.
(a) Borrower has not had and currently does not have or
maintain a Plan.
(b) Borrower does not sponsor, maintain or contribute to, or
has at any time in the preceding six calendar years, sponsored, maintained or
contributed to, any Multiemployer Plan.
5.09 Margin Regulations. The proceeds of the Loans shall be used
solely for the purposes set forth in and permitted by Section 6.11. Borrower
is not generally engaged in the business of purchasing or selling Margin Stock
or extending credit for the purpose of purchasing or carrying Margin Stock.
5.10 Title to Properties. Borrower has good and defensible title to the
Mortgaged Properties and all other real property necessary or used in the
ordinary conduct of its business. As of the date on which Closing occurs, the
property of Borrower is subject to no Liens, other than Permitted Liens.
16
5.11 Oil and Gas Reserves. Borrower is and will hereafter be the
owner of the Oil and Gas that it purports to own :trom time to time in and
under its Oil and Gas Properties, together with the right to produce the
same. 'Such Oil and Gas Properties are not subject to any Lien other than
Permitted Liens. All Oil and Gas has been and will hereafter be produced,
sold and delivered in accordance with all applicable laws and regulations of
governmental authority; Borrower has complied and will comply with all
material terms of each oil, gas and mineral lease comprising its Oil and Gas
Properties and all other Contractual Obligations related thereto; and all
such oil, gas and mineral leases have been and will hereafter be maintained
in full force and effect. Provided, however that nothing in this Section 5.11
shall prevent Borrower from abandoning any well or forfeiting, surrendering,
releasing or defaulting unper any lease in the ordinary course of business
which is not disadvantageous in any way to Administrative Agent or Lenders
and yvhich, in the opinion of Borrower, is in the best interest of Borrower,
and Borrower is and will hereafter be in compliance with all obligations
hereunder.
5.12 Initial Reserve Report. To the knowledge of the Borrower (i) the
assumptions stated or used in.the preparation of the Initial Reserve Report
are reasonable, (ii) all information furnished in the preparation of the
Initial Reserve Report was accurate in all material respects, (iii) there has
been no material adverse change in the amount of the estimated Oil and Gas
shown in. the Initial Reserve Report since the date thereof, except for
changes which have occurred as a result of production from and after the
effective date thereof in the ordinary course of business, and (iv) the
Initial Reserve Report does not omit any statement or information necessary to
cause the same not to be misleading to Lenders.
5.13 Gas Imbalances. Except as disclosed to Lenders in writing prior
t9 the date of this Agreement. there are no gas imbalances in excess of two
percent (2%) of monthly projected deliveries from Borrower's Oil and Gas
Properties in the aggregate, and no take or payor other prepayments with
respect to any such Oil and Gas Properties which would require Borrower to
deliver Oil and Gas produced from any of its Oil and. Gas Properties at some
future time without receiving full. payment therefor within si:rty (60) days
of such production.
5.14 Taxes. Borrower has filed all Federal tax returns and reports
required to be filed, or if
not filed, for which an extension has been granted therefor, and has paid all
Federal taxes, assessments, fees and other governmental charges levied or
imposed upon its or its properties, income or assets otherwise due. and
payable, except those which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been provided in accordance
with GAAP. Borrower has flIed all state and other non-Federal tax returns and
reports required to be filed, and has paid all state and other non-Federitl
taxes, assessments, fees and other governmental charges levied or imposed upon
it or its properties, income or assets otherwise due and payable. To the
knowledge of Borrower, there is no proposed tax assessment against it that
would, if made, reasonably be expected to have a Material Adverse Effect.
5.15. Environmental Matters. Borrower conducts in the ordinary course
of business a review of the effect of existing Environmental Laws and
Environmental Claims, if any, on its business~ operations and Properties. and
such Properties which it is acquiring or planning to acquire. Borrower is in
compliance in all material respects with all Environmental Laws and does not
have any liability for any Environmental Claim.
17
5.16 Regulated Entities. None. of Borrower or any Person
controlling Borrower, is an "Investment Company" within the
meaning of the Investment Company Act of 1940. Borrower is not
subject to regulation under the Public Utility Holding Company Act
of 1935, the Federal Power Act, the Interstate Commerce Act, any
state public utilities code, or any other Federal or state statute
or regulation limiting its ability to incur Indebtedness.
5.17 No Burdensome Restrictions. Borrower is not a party
to or bound by any Contractual Obligation, or subject to any
restriction in any Organization Document, or any Requirement
of Law, which would reasonably be expected to have a Material
Adverse Effect.
5.18 Solvency. As of the date on which Closing occurs,
Borrower is Solvent.
5.19 Subsidiaries/Investments/Ownership. As of the date on
which Closing occurs, Borrower has no Subsidiaries and has no
material equity investments in any other corporation or entity.
Borrower, Guarantors and their general partners are owned as set
forth on Appendix I.
5.20 Insurance. The Oil and Gas Properties and all other
property of Borrower and Guarantors are insured with financially
sound and reputable insurance cQmpanies not Affiliates of such
Person, in such amounts, with such dequctibies and covering such
risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where
Borrower's Oil and Gas Properties and Guarantors' properties and
operations are located.
5.21 Full Disclosure. None of the representations or warranties made
by the Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none. of the statements contained in
any exhibit, report, written statement or certificate furnished by or on behalf
of Borrower in connection with the Loan Documents contains any untrue statement
of a material fact or omits any material fact requii-ed to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading as of the time when made or
delivered.
ARTICLE VI.
AFFIRMATIVE COVENANTS
So long as any Loan or other Obligation shall remain unpaid or
unsatisfied, unless Administrative Agent and Lenders waive
compliance in writing:
6.01 Financial Statements. Borrower shall maintain a
system of accounting established and administered in accordance
with GAAP and deliver to Lenders:
(a) as soon as available, but not later than
ninety (90) days after the last day of each fiscal year of Borrower
prepared by an Independent Auditor, commencing with the 2004 fiscal
year, a copy of the annual audited financial statements of Borrower
as of the end of such year including the related balance sheet and
statements of income, owner's equity and cash flows for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year and certified by a Responsible Officer as
presenting fairly the financial positiQn of Borrower and its
Subsidiaries, if any, for the periods indicated in conformity with
GAAP; .
(b) as soon as available, but not later than forty-five
(45) days after the last day of each qu~rly fiscal period (except the
last) of each fiscal year of Borrower, a copy of the unaudited .
balance sheets of Borrower as of the end of such quarter including
the related statements of income, owner's equity and cash flows for
the period commencing on the first day and ending on the last day of
18
such quarter, in comparative form the figures for the same period of the
previous fiscal year, and certified by a Responsible Officer as fairly
presenting the financial position of the Borrower and its Subsidiaries for
the period indicated, in accordance with GAAP; and
(c) Borrower shall deliver on Closing and or before
December 1 everY year thereafter, an annual development plan for its Oil and
Gas Properties, as approved by Borrower's Board of Directors, which outlines
operations, budget and use of Loan proceeds to finance the development plan.
.
6.02 Certificates Other Production and Reserve Information.
Borrower shall furnish to Administrative Agent:
(a) - as soon as available, but not later than the dates
provided in Appendix 1, Status Reports executed by a Responsible Officer in
form reasonably acceptable to Lenders, as of the last day of the reported
periods;
(b) concurrently with the delivery of each of the
statements and reports referred to in Subsections 6.01(a) - (b) and 6.02(a),
a Compliance Certificate executed by a Responsible Officer;
(c) a Reserve Report prepared by Borrower's. in-house
petroleum engineer(s) covering the Borrower' Oil and Gas Properties on or
before June 30 of each' year commencing June 30, 2005, (the "In-house Reserve
Report Due Date") and ~ Reserve Report prepared by an independent petroleum
engineer retained by Borrower and acceptable to Lenders covering the
Borrower' Oil and Gas Properties (all foregoing Reserve Reports ▇.▇▇▇▇
acceptable to Lenders) on or before December 31 of each year commencing
December 31, 2005 (the "Third Party Reserve Report Due Date");
(d) . Concurrently with the delivery of each Reserve Report
provided under Subsection 6.02(c) above, Borrower shall provide updated
information to Administrative Agent's counsel for the Mortgage Matching
Schedule identifying (i) any additional ▇▇▇▇▇ covered by the new Reserve
Report which were not covered by the most recent prior Reserve Report and
(ii) any ▇▇▇▇▇ covered by the most recent prior Reserve Report which are not
covered by the new Reserve Report;
. (e) promptly upon the request of Lenders, such copies of all
geological, engineering and related data contained in the Borrower' files or
readily accessible to the Borrower relating to its Oil and Gas Properties;
(f) promptly upon the. request by Lenders, title and
mortgage Lien evidence satisfactory to Lenders covering such Oil and Gas
Properties as may be designated by Lenders, covering the Borrower' title
thereto and certifying that the Obligations are secured by Liens and security
interests as provided in this Agreement and the Security Documents;
(g) before the close of business on Friday of each week, a
report of accounts payable and a copy of related invoices evidencing the use
of Loan proceeds in accordance with Section 6.11 below. Such report shall
separately reflect accounts payable (i) which were outstanding as of Closing.
(ii)
. which are related to new drilling operations, and (iii) which are related to
well completion operations; and
(h) promptly upon the request of Administrative Agent or
Lenders, such additional information regarding the business, operations,
finaricial or corporate affairs of the Borrower as Administrative Agent or
L~ders may nom time to time reasonably request.
19
6.03. Notices. Borrower shall promptly notify Lenders:
(a) of the occurrence of any Default or Event of Default. and
of the occurrence or existence of any event or circumstance that would
reasonably be expected to become a Default or Event of Default;
(b) of any matter that has. resulted or may reasonably be
expected to result in a Material Adverse Effect. including (i) breach or
non-performance of, or any default under, any Contractual Obligation of
Borrower; (ii) any dispute, litigation, investigation, proceeding or
suspension between Borrower and any Governmental Authority; or (ii) the
commencement of, or any material development in, any litigation or proceeding
affecting Borrower (including pursuant to any applicable Environmental Laws);
(c) of any material change in accounting policies or
financial reporting practices by Borrower; and
(d) of the formation or acquisition by Borrower or any
Guarantor of any Subsidiary.
Each notice under this Section shall be accompanied by a written statement by
a Responsible Officer setting forth details of the occurrence .referred to
therein, and stating what action the Borrower propose to take with respect
thereto and at what time. .
6.04 Preservation of Corporate Existence, Etc. Borrower shall:
.. (a) preserve and maintain ill full force and effect its separate, legal
existence, and maintain its good standing under the laws of its state or
jurisdiction of incorporation or organization, as applicable; and
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary for the normal conduct of its business.
6.05 Maintenance of Property Borrower shall maintain and preserve all
its property which is used or useful in its business in good working order and
condition, ordinary wear and tear excepted and shall use the reasonably
prudent standard of care typical in the industry in the operation and
maintenance of its Oil and Gas Properties and Gathering System Properties.
6.06 Insurance. Borrower and each Guarantor shall each maintain, with
financially sound and reputable independent insurers, insurance with respect to
its operations and its Oil and Gas Properties and other properties and business
against loss or damage of the kinds customarily insuted against by Persons
engaged in the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances which insurance shall name
Administrative Agent and Lenders as "additional insured" and as a "loss payee,"
as applicable.
6.07 Payment of Obligations. Borrower and each Guarantor shall each pay
and discharge as the same shall become due and payable, aU of its obligations
and liabilities, including: (a) all tax liabilities, assessments and
governmental charges or levies upon it or its Properties or assets, unless the
same are being contested in good faith by appropriate proceedings and adequate
reserves iri accordance with GAAP are being maintained; (b) all lawful claims
which, if unpaid, would by law become a Lien upon its Property; and (c ) all
Indebtedness, as and when due ~d payable, but subject to any subordination
provisions contained in any instrument or agreement evidencing such
indebtedness. .
20
6.08 Compliance with Laws. Borrower and each Guarantor shall each
comply in all material respects with all Requirements of Law of any
Governmental Authority, having jurisdiction over it or its business except
such as roay be contested in good faith or as to which a bona fide dispute may
exist'
6.09 Maintenance of Books and Records. Borrower shall maintain proper
books of record and account. in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all of its
fmancialtransactions and matters involving its assets and business.
6.10 Environmental Laws. Borrower and each Guarantor shall each
conduct its operations and keep and maintain and use commercially reasonable
efforts to cause third Persons conducting operations on its Property to keep
and maintain such Property in compliance with all Environmental Laws.
6.11 Use of Proceeds. Borrower shall use the proceeds of the Loan to
pay (a) at least $1,300,000.00 of outstanding accounts payable, (b)
$1,087,000.00 in costs and expenses associated with new drilling operations,
(c) $600,000.00 in costs and expenses associated with well completion
operations, (d) up to $283,000.00 for the cost of acquisition and expansion
of ▇▇▇▇▇▇▇ extension of existing gathering SyStems, and (e) $230,000.00 to
fmance Borrower's expenses associated with this Agreement.
6.12 Further Assurances. BOITower and Guarantors shall promptly cure
any defects in the creation and issuance of the Notes and the execution and
delivery of this Agreement. the Investor Rights Agreement. the Intercreditor
Agreement. the Security Documents, or any other instruments refened to or
mentioned herein or therein to which each is a party. Bon:ower at its expense
will promptly do aU acts and things, and will execute and file or record, all
instrumentS 'reasonably requested by Lenders, to establish, perfect. maintain
and continue the perfected security interests of Administrative Agent in or the
Lien of Administrative Agent on the Collateral. Borrower will pay the
reasonable costs and expenses of all filings and recordings and all searches
deemed necessary by Administrative Agent to establish and determine the
validity and the priority of the Liens created or intended to be created by the
Security Documents; and Borrower shall satisfy all other claims and charges
which in the reasonable opinion of Administrative , Agent might prejudice,
impair or otherwise a:ff~t any of the Collateral or any Lien thereon in favor
of Administrative Agent.
6.13
Guarantees.
Borrower shall cause eaCh Guarantor to execute the Guaranty and if, at any
time after the date of this Agreement. BOITower or either Guarantor shall
create or acquire any' Subsidiary that is not a Guarantor then BOITOwer shall
cause each such Subsidiary to execute and deliver a Guaranty to Lenders and
such Subsidiary shall become a Party to this Agreement
6.14 Security Documents. BOITower shall promptly execute and deliver to
Administrative Agent such Security Documents as may be required pursuant to
Section 3.02 to ensure that the Borrower' Oil and G~ Properties are covered by
a Lien and security interest in favor of Administrative Agent for the benefit
of Lenders Oat all times.
ARTICLE VII.
NEGATIVE COVENANTS
So long as any Loan or other Obligation shall remain' unpaid or
unsatisfied, unless Lenders waive compiiance in writing:
21
7.01 Limitation on Liens. Borrower and each Guarantor agrees that it
shall not directly or indirectly, make, create, incur, assume or suffer to
exist any Lien upon or with respect to any part of its property, whether now
owned or hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien created under any Loan Document;
(b) Liens securing the Existing Credit Agreement to the extent
permitted under the Intercreditor Agreement;
(c) Liens securing Alternative Financings to the extent
permitted under Section 7.05;
(d) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or to the
extent that nonpayment thereof is permitted by Section 6.07; .
(e) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary
course of business securing obligations which are not delinquent or remain
payable without penalty or which are being cO!ltested in good faith and by
appropriate proceedings. which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;
(f) Liens consisting of pledges or deposits required in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other social security legislation;
(g) Liens securing (i) the non-delinquent performance of bids,
trade contracts (other than for borrowed money), statutory obligations, (ii)
contingent obligations, Surety Instruments (other than those providing credit
support for borrowed money), and (iii) other non-delinquent obligations of a
like nature; in each case, incurred in the ordinary course of business;
(h) easements, rights-of-way, restrictions, defects or other
exceptions to title and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate. are not substantial in amount, are
not incurred to secure Indebtedness, and which do not in any case materially
detract from the value of the property subject thereto or interfere with the
ordinary conduct of Borrower's business; and
(i) . Liens arising solely by virtue of any statutory or common
law provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by Borrower, and (ii) Borrower maintains (subject to such right of set
off) dominion and control over such account(s).
7.02 Disposition of Assets.. Borrower shall not directly or
indirectly, sell. assign, lease, convey, transfer or otherwise dispose of
(whether in one or a series of transactions) (collectively, "Dispositions") any
property (including accounts and notes receivable. with or without recourse) or
enter into any agreement to do any of the foregoing, except, so long as no
Default or Event of Default results therefrom:
(a) Dispositions of inventory including produced Oil and Gas in
the ordinary course of business for cash on a current basis;
22
(b) Dispositions of obsolete or worn-out equipment in the
ordinary course of business;
(c) Dispositions of Oil and Gas Properties
contractually held by BOlTOwer for the benefit of BOITower's
investors upon receipt of-payment trom such investors of all
amounts due and owning to BOITower attributable to such interests;
and
(d) Disposition of BOlTOwer's Oil and Gas
Properties on a promoted basis to third parties to the extent such
Oil and Gas Properties are not included in the Col1ateral.
provided, however, nothing contained herein shall restrict or
prohibit Dispositions of net revenue and working interests in the
Oil and Gas Properties contractually held by Borrower for the
benefit of Borrower's investors in compliance with the terms of
such agreements.
. 7.03 . Consolidations and Mergers. Borrower shall not merge,
consolidate witb or into, or
convey, transfer, lease or otherwise disP9se of (whether in one
transaction or in a series of transactions) all or. substantially
all of its assets (whether now owned or hereafter acquired) to or
in favor of any .Person. Notwithstanding the foregoing, nothing in
this Section 7.03. 5ha11 prohibit Borrower trom merging or
consolidating with one or more other BOlTower, provided that to
the extent BOITower is a party to such merger or consolidation,
BOlTower shall be the surviving entity; and further, Drovided.
that no such merger or consolidation shall affect the Liens or
security interests of Administrative Agent in and to the
Collateral.
7.04 Loans and Investments. Borrower shall not purchase or acquire or
make any commitment therefor, any capital stock, equity interest, or any
obligations or other securities of; or any interest in, any Person, or .make or
commit to make any Acquisitions, or make or commit to make any advance, loan,
extension of credit or capital contribution to or any other investment in, any
Person including any .A.ff1liate of Borrower, except for: (a) investments in
Cash Equivalents; (b) extensions of credit in the nature of accounts receivable
or notes receivable arising from the sale or lease of goods. or services in the
ordinary course of business; (c) extensions of credit or other advances in an
amount not to exceed $20,000 in the estimation of anticipated travel or other
reimbursable expenses to any employees, officers, directors or Lenders.
7.05 Limitation on Indebtedness. Borrower shall not create,
incur, assume, suffer to exist, or otherwise becOD;lC or remain
directly or indirectly liable with respect to any Indebtedness,
except (a) Indebtedness incurred pursuant to the Loan Documents,
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 7.08; (c) Indebtedness under the Existing
Credit Agreement and other Indebtedness in favor of third parties
(i) on terms and conditions first offered to Lenders which Leriders
has. declined to provide to Borrower within ten (10) Business Days
of notice thereof; (ii) Lenders have consented to such Indebtedness
trom such third party lender, which consent shall not be
unreasonably withheld, and (iii) such Indebtedness shall be subject
to an intercreditor agreement between Lenders and any such third
party lender on terms and conditions reasonably satisfactory to
Lenders ("Alternative Finandngs") provided that, (A) Lenders' prior
consent shall not be required in the event Bon-ower arranges
financing which pays in full at one time all of Borrower's
Obligations and (B) in the event Borrower proposes to drill any
future well ("Proposed Well") on the Oil and Properties
constituting a portion of the Collateral, to the extent such
Proposed Well is properly permitted, conforms with existing spacing
rules, and is not a replacement, reworking, redriI1ing or sidetrack
of the existing well bore of any ▇▇▇▇▇ constituting a portion of
the Collateral, in the event Lender declines to provide such
financing and BOlTower finds Alternative Financing, Borrower can
require a release of the Mortgage Property insofar as the lands and
l~es included within pro ration unit sUlTounding the Proposed Wen
and Lender shall deliver a release ▇▇.▇▇ such Proposed Well within
ten (10) Business Days.ofBoITower's request (provided
23
periods, if any, whether at stated maturity or otherwise; (ii) commences any
Insolvency Proceeding with respect to itself, or (iii) takes any action to
effectuate or authorize any of the foregoing; or
. (g) Involuntarv Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against Borrower or any Guarantor or any
writ, judgment, wan-ant of attachment, execution or similar process; is issued
or levied against all or a substantial part of Borrower's or any Guarantor's
Properties, and any such proceeding or petition shall not be dismissed, or
such writ, judgment, warrant of attachment, execution or similar process shall
not be released, vacated or fully bonded within 60 days after commencement,
filing or levy; (ii) BOlTower or any Guarantor admits the material allegations
of a petition against it or any of its Subsidiaries in any Insolvency
Proceeding, or an
order for relief is ordered in any Insolvency Proceeding; or (iii) Borrower
or any Guarantor acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator. mortgagee in possession (or Administrative
Agent therefor), or other similar Person for itself or a substantial portion
of its property or business; or
(h) Monetary Judgments. One or more judgments, orders. decrees
or arbitration awards is entered against BOlTOwer or any Guarantor involving
in the aggregate a liability (to the extent
not covered by independent third-party insurance as to which the insurer does
not dispute coverage) as to 'any single or related series of transactions,
incidents or conditions in exce-ss of $100.000. and the 'same shall remain
unsatisfied, unvacated and unstayed pending appeal for a period of thirty (30)
days after the entry thereof, or
(i) Loss of Petmit Any Governmental Authority revokes or fails
to renew any material license, permit or ftanchise of Borrower or any Guarantor
or of any of their Subsidiaries, or any such Person for any reason loses any
material license. permit or franchise, or suffers the imposition of any
restraining order, escrow, suspension or impound of funds in connection with
any proceeding (judicial or administrative) with respect to any material
license, permit or franchise; or ,
(j) Adverse Change. There occurs any event or circumstance
which has a Material Adverse Effect; or
(k) ▇▇▇▇▇;e of Control or Mana2ement. There occurs any Change
of Control or a change of management such that any of the Current Management
shall cease or fail for any reason to serve and function in their current
capacity as an executive officer of Borrower and shall not be succeeded in such
position by a Person acceptable to Lenders; or
(l) Invaliditv of Loan Documents. The Loan Documents, or any
of them. after delivery thereof. shall for any reason, except to the extent
permitted by the terms thereof. cease to be in full force and effect and valid,
binding and enforceable in accordance with their terms. or, with respect to the
Security Documents. cease to create a valid and perfected Lien or security
interest, as the case may be, 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 Borrower or any Guarantor shall so state in
writing.
8.02 Remedies. If any Event of Default occurs and is continuing,
Lenders shall:
(a) exercise all rights and remedies available to them under
the Loan Documents or applicable law without presentment, demand, protest,
notice of intention to accelerate, notice of acceleration or any other no~ce
of any kind, all of which are hereby expressly waived by the Borrower and
26
. (b) Notwithstanding the foregoing. upon the occurrence of any
event specified in Subsection 8.01U),or (g), the obligation of
Lenders to make Loans shall automatically tenninate and the unpaid
principal amount of all outstanding Loans and all interest and
other amounts as aforesaid shall automatically become due and
payable without further act of Lenders.
8.03 Set-off: In addition to any rights and remedies of
Lenders provided by law, if an Event of Default exists, Lenders are
authorized at any time and from time to time, without prior notice
to Borrower or any Guarantor, any'such notice being waived by
BOlTQwer and each Guarantor tQ.the fullest extent permitted by law,
set off and apply any and all deposits (gen.eral or special, time
or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by Lenders to or for .the credit or
the account of Borrower against any and all Obligations owing to
Lenders, now or hereafter existing, irrespective of whether Lenders
shall have made demand under. this Agreement or any Loan Document
and although such Obligations may be contingent or unmatured.
8.04 Payments Set Aside. To the extent that Borrower or any
Guarantor makes a payment to Lenders, or a Lenders exercises its
right of set-off, and such payment or the proceeds of such set-off
or any part thereof are subsequently invalidated, declare~ to be
ftaudulent or preferential, set aside or required (including
pursuant to any settlement entered into by such Lenders in its
discretion) to be repaid to a trustee, receiver or any other party,
in connection with any Insolvency Proceeding or otherwise, then to
the extent of such recovery the obligation or part thereof
originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or
such set-off had not occurred.
8.05 Subordination of the Loan Party Liens.
(a) Each Guarantor hereby subordinates and assigns in favor of
Administrative Agent any and all Liens, statutory or otherwise and any rights
of offset it has or may have in the future against BOlTower's interests in the
Collateral including the Mortgaged Properties and the Contracts and Records
(defined below).
(b) Following the occurrence and during the
continuance of any Event of Default,
. Lenders are expressly granted the right at their option, to visit
and inspect (i) each Guarantor's offices wherein contracts and
records regarding any of the Collateral are located, including all
books and records, farmout agreements, area of mutual interest
agreements, development agreements, geologic and geophysical survey
agreements, operating agreements, contracts and other agreements
that relate to any of the Mortgaged Properties, proprietary seismic,
geological and geophysical, drilling and production data and
records, all accounting records, joint interest billing records,
division order records, land files, and contracts and records
referring to the production, sale, purchase, exchange or processing
of Oil and Gas whether such data, information or agreements are in
written form or electronic format (collectively "Contracts a"d
Records't), and to examine, take copies and extracts therefrom, at
Borrower's expense and (ii) any of the Mortgaged Properties.
(c) Following the occurrence and during the
continuance of an Event of Default, each Guarantor acknowledges that
Lenders is expressly granted the right to exercise any and all
LieD$, statutory or otherwise, rights of offset or recoupment it has
and to receive the monies, income, proceeds, or benefits
attributable to the sale of Oil and Gas from or attributable to the
Mortgaged Properties, to hold the same as security for the
Obligations and to apply it on the principal and' interest or other
amounts owning on any of the Obligations, whether or not then due,
in such order or manner as Lenders may elect.
. (d) In the event of a foreclosure, deed in lieu of
foreclosure, appointment of a receiver, custodian or keeper or other
transfer of record or beneficial ownership or operations of the
27
Collateral~ each Guarantor, as bailee, agrees to cooperate and assist
Administrative Agent, its officers, Administrative Agents and counsel in
the peaceful transfer and delivery of such Contracts and Records to such
party or parties as Administrative Agent may in writing direct.
8.06 Rights Not Exclusive. The rights provided for in this Agreement
and the other Loan Documents are cumulative and are not exclusive of any
other rights, powers, privileges or remedies provided by law or in equity,
or under any other instrument, document or agreement now existing or
hereafter arising.
ARTICLE IX.
ADMINISTRATIVE AGENT
9.01 Appointment and Authorization. Each Lender hereby irrevocably
(subject to Section 9.09) appoints. designates and authorizes Administrative
Agent to take such action on its behalf under the provisions of this
Agreement and each other Loan Document and to exercise such powers and
perform such duties as are expressly delegated tp it by the terms of this
Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Each Lender hereby irrevocably (Subject to
Section 9.09) appoints and designates Administrative Agent as Collateral
Agent, and authorizes Administrative Agent in such capacity as Collateral
Agent to take such action on its behalf. Notwithstanding any provision to
the contrary contained elsewhere- in this Agreement or in any other Lom
Document, Administrative Agent shall have only such duties or
responsibilities. as expressly set forth herein, Administrative Agent shall
not have or be deemed to have any fiduciary relationship with any Lender,
and no implied covenants, functions. responsibilities. duties. obligations
or liabilities shall be read into this Agreement or any other Loan Document
or otherwise exist against Administrative Agent.
9.02 Delegation of Duties. Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. Administrative
Agent shall not be responsible for the negligence or misconduct of any agent
or attorney-in-fact that it selects with reasonable care.
- 9.03 Liability of Administrative Agent. None of the Agent-Related Persons
shall (i) be liable for any action taken - or omitted to be taken by any of
them under or in connection with this Agreement or any other Loan Document
or the transactions contemplated hereby or thereby (except for its own gross
negligence or willful misconduct). or (ii) be responsible in any manner to
any of the Lenders or any Affiliate of any Len~er for any recital,
statement, representation or warranty made by any Loan Party or any
Affiliate of a Loan Party. or any officer thereof, contained in this
Agreement or in any other Loan Document, or in any certifIcate, report,
statement or other document referred to or provided for in. or received by
Administrative Agent under or in connection with. this Agreement or any
other Loan Document, or the validity. effectiveness (other than such
Agent-Related Person's own due execution and delivery), genuineness,
enforceability or sufficiency of this Agreement or any other Loan
Document. or for any failure of any Loan Party or any other party to any
Loan Document to perform its obligations hereunde~ or thereunder. No
Agent-Related Person shall be under any obligation to anyLender to ascertain
or to inquire as to the observance or performance of any oftlie agreements
contained in, or conditions of, this Agreement or any other Loan Document,
or to inspect the properties. books or records of any Loan Party or any
Affiliate of any Loan.
9.04 Reliance by Administrative Agent.
(a) Administrative Agent shall be entitled to rely, and
shall be fully protected in relying, - upon any writing. resolution, notice.
consent, certificate; affidavit, letter. telegram, electronic
28
mail, facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice and statements
of legal counsel, independent accountants and other experts selected by
Administrative Agent. Administrative Agent shall be fully justified in failing
or refusing to take any action under this Agreement or any .other Loan
Document unless it shall fJrSt receive such advice or concurrence of the
Lenders as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders and their Affiliates against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. Administrative Agent shall
in all cases be fully protected in acting. or in refraining nom acting, under
this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the
conditions specified in Section 4.01, each Lender that has made available to
Administrative Agent its Pro Rata Share of the initial Loan or subsequent
Loan, as the case may be, shall be deemed to have consented to; approved or
accepted or to be satisfied with, each document or other matter either sent by
Administrative Agent to such Lender for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approv~ by or
acceptable or satisfactory to the Lender as a condition precedent to such
initial Loan or subsequent Loan, as applicable.
9.05 Notice of Default. Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
unless Administrative Agent shall have received written notice from a Lender
or Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is.a "notice of default'. Administrative
Agent will notify the Lenders of its receipt of any such notice. Subject to
Suhsection 9.04(a), Administrative Agent shall taICe such action with respect
to such Default or Event of Default as may be requested unanimously by the
Llenders in accordance with Article VIII; provided that unless and until
Administrative Agent has received any such request, Administrative Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action. with respect to such Default .or Event of Default as it shall deem
advisable or in the best interest of the Lenders.
. 9.06 Credit Decisions. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that
no act by any Agent-Related Person hereafter taken, including any review of the
affairs of Borrower, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
Administrative Agent that it has, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter
into this Agreement and to extend credit to Borrower hereunder. Each Lender
also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and the other Loan Documents and Hedge Agreements, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, fmancial and other condition and
creditworthiness of Borrower. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by Administrative
Agent, Administrative Agent shall not have any duty or responsibility to
provide any Lenoer with any credit or other information concerning the
business, prospects, operations, property, fmancial and other condition or
creditworthiness of Borrower which may come into the possession of any of the
Agent-Related Persons.
29
9.07 . INDEMNIFICATION. Whether or not the transactions
contemplated hereby are consummated, the Lenders and any
Affiliates of the Lenders shall indemnify upon demand
the Agent Related Persons (to the extent not reimbursed by or on
behalf of Borrower and without limiting the obligation of Borrower
to do so>>) pro rata according to each respective Lender's Pro
Rata Share) each Agent-Related Person from and against any and
all Indemnified Liabilities INCLUDING SUCH INDEMNIFIED
LIABILITIES AS MAY ARISE OR BE CAUSED BY THE NEGLIGENCE, SOLE,
JOINT) CONCURRENT, COMPARATIVE OR OTHERWISE OF SUCH AGENT-RELATED
PERSONS; provided) however, that no Lender shall be liable for the
payment to any Agent-Related Persons of any portion of such
Indemnified Liabilities to the extent the same arise from (i) the
gross negligence or willful misconduct of any Agent-Re~▇▇▇ Person
or (ii) a claim or action asserted by one or more other
Agent-Related Persons. WIthout limitation of the foregoing, each
Lender shall reimburse
Administrative Agent upon demand for its ratable. share of any
costs or out-of-pocket expenses (including Attorney Costs)
incurred by Administrative Agent in connection with the
preparation) execution, delivery, administration) modificatJon,
amendment or enforcement (whether through negotiations) legal
proceedings or otherwise) of, or legal advice in respect of rights
or responsibilities under, this Agreement, any other Loan
Document) or any document contemplated by or referred to herein,
to the extent that Administrative Agent is not reimbursed for such
expenses by or on behalf of Borrower. The undertaking in this
Section shall sUrvive the payment of all Obligations hereunder
and. the resignation or replacement of Administrative Agent.
9.08 Administrative Agent in Individual Capacity. Administrative Agent,
in its individual capacity, may make loans to acquire equity interests in and
generally engage in any kind of banking, trust, fmancial advisory) underwriting
or other business with. Borrower of any Affiliate thereof as though
Administrative Agent were not Administrative Agent hereunder and without notice
to or consent of the Lenders. The Lenders acknowledge that, pursuant to such
activities, Administrative Agent qr its Affiliates may receive infonnation
regarding Borrower (including infonnation that may be subject to confidentiality
obligations in favqr of Borrower) and acknowledge that the Agent-Related Persons
shall be under no obligation to provide such information to them. With respect
to its Loans) Administrative Agent, in its individual capacity as a Lender)
shall.have the same rights and powers under this Agreement as any other Lender
and may exercise the same as though. it were not Administrative Agent or the
Issuing Lender.
9.09 Successor Administrative Agent. Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Lenders.
If Administrative Agent resigns under this Agreement, the Lenders
shall appoint ftom among the Lenders a successor administrative
agent in the same capacity as the retiring Administrative Agent for
the Lenders: If no successor administrative agent is appointed
prior to the effective date of the resignation of such retiring
Administrative Agent, such retiring Administrative Agent may
appoint, after consulting with the Lenders, a successor
administrative agent from: among the Lenders. Upon tb,e acceptance
of its appointment as successor administrative agent hereunder,
such successor administrative agent shall succeed to all. the
rights, powers and duties of the retiring Administrative Agent and
the tenn "Administrative Agenf' shall mean such successor
administrative agent and the retiring Administrative Agent's
appointment, powers and duties as Administrative Agent.
shall be terminated. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of
this Article IX and Sections 10.04,10.05 and 10.06 shall inure to
its benefit as to any actiops taken or omitted to be taken by it
while it was Administrative Agent under this Agreement. If no
successor administrative agent has accepted appointment as
Administrative Agent in the same capacity as the retiring
Administrative Agent by the date which is 30 days followirig a
retiring Administrative Agent) s notice of resignation, the
retiring Administrative Agent shall either withdraw its resignation
or may appoint as a successor administrative agent a commercial
bank organized under the laws of the United States of America or of
any State thereof.
30
ARTICLE X
MISCELLANEOUS
10.01 Amendments and Waivers. No amendment or waiver of any provision
of this Agreement or any other Loan Document, and no consent with respect to
any departure by Borrower therefrom, shall be effective unless the same shall
be in writing and signed by Administrative Agent,
. Lenders and Borrower and then any such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
10.02 Notices.
(a) Subject to the limitations set forth in
Subsection lO.02(d) below, Borrower is authorized to receive on behalf of
itself and e~h Guarantor all notices from Lenders at the address, facsimile
number and electronic mail address for Borrower set out on Appendix I; and
all notices to Lenders shall be sent to Lenders at each Lenders' address,
facsimile number and electronic mail address set forth on Appendix I.
(b) All notices, requests, consents and other
communications required or permitted hereunder or under any other Loan
Document shall be in writing and mailed, faxed, delivered, or (subject to
Subsection lO.02(d) below) transmitted by electronic mail, to the address,
facsimile number, or electronic mail address specified for notices; or, as
directed to Borrower, Lenders to such other address as shall be designated by
such Person in a written notice to the other parties, and as directed to any
other party, at such other address as shall be designated by such party in a
written notice to Borrower, Administrative Agent and Lenders.
(c) All such notices, requests, consents and communications
shall be deemed to be given or made, and shall be effective; upon the earlier
to occur of (i) actual receipt by the intended recipient or (ii) (A) if
delivered by hand or by courier, when signed for by the intended recipient or
an authorized representative of such recipient; (B) if delivered by mail, the
third Business Day after the date on which such mail, postage prepaid was
depQsited in the U.S. mail; (C) if delivered by facsimile, when
.. transmitted in legible form by facsimile machine; and (D) if delivered by
electronic mail or via internet or intranet websites (which form of delivCIy
is subject to the provisions of Subsection lO.02(d) below), when delivered;
provided, however, that notice and other communications to Administrative
Agent or Lenders pursuant to Article II or Article VI shall not be effective
until actually receiyed by Administrative Agent or the Lender to which such
notice was addressed.
(d) Electronic mail and interIiet and intranet websites may
be used only to distribute routine communications, such as financial
statements and other information, and to distribute Loan Documents for
execution by the parties hereto, and shall not be recognized for any other
purpose.
(e) Any agreement of any Administrative Agent or Lenders
herein to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of the Borrower. Administrative Agent and
Lenders shall be entitled to rely on the authority of any Person purporting to
be a Person authorized by Borrower t6 give such notice and neither
Administrative Agent nor Lenders shall not have any liability to Borrower on
account of any action taken or not taken by Administrative Agent or Lenders in
reliance upon such telephonic or facsimile notice. The obligation of Borrower
to repay the Loans shall not be affected in any way or to any extent by any
failure by Administrative Agent or Lenders to receive written conflfIDation of
any telephonic or facsimile notice or the receipt by Administrative Agent or
Lenders of a confumat~on which is at variance with the terms understood by
Lenders to be contained in the telephonic or facsimile notice.
31
10.03 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of Administrative Agent or Lenders, any
right, remedy; power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of aily right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.
10.04 Costs and Expenses. Borrower shall whether or not the
transactions contemplated hereby are consummated, pay or reimburse
Administrative Agent and Lenders within five (5) Business Days after demand
(or the date of Closing if sooner) for all reasonable costs and expenses
incurred by Administrative Agent and Lenders in connection with the
development, preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including attorney costs
incurred by Adnlinistrative Agent and Lenders with respect thereto.
10.05 Indemnity. Whether or not the transactions contemplated hereby
are consummated, Borrower and each Guarantor shall jointly and severally
indeDlllifY and hold Administrative Agent and each Lender, and each of its
Affiliates, officers, directors, employees, counsel, Administrative Agents and
attorneys-in-fact (each an "Indemnified Person") harmless trom and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, charges, expenses and disbursements (including
attorneys' fees and expenses) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Loans) be imposed on,
incurred by or asserted against any Indemnified Person in any way relating tp
or arising out of this Agreement or "any document contemplated by or referred
to herein, or the transactions contemplated hereby, or any action taken or
omitted by any Indemnified Person under or in connection with any of the
foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding)
related to or arising out of this Agreement or the Loans or the use of the
proceeds thereof, whether or not any Indemnified Person is a party thereto (all
the foregoing, collectively, the "Indemnified Liabilities") WHETHER OR NOT SUCH
INDEMNIFIED LIABILITIES ARISE OUT OF OR AS A RESULT OF ANY INDEMNIFIED PERSONS
NEGLIGENCE IN WHOLE OR IN PART, INCLUDING, WITHOUT LIMITATION, THOSE CLAIMS
WHICH RESULT FROM THE SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE
INDEMNIFIED PERSON, OR ANY ONE OR MORE OF THEM, provided that Borrower shall
not have any obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities to the extent same arise trom the gross negligence or
willful misconduct of such Indemnified Person as determined by a final judgment
rendered by a court of competent jurisdiction, or that arise solely by reason
of claims among Indemnified Persons; provided, however, no indemnity shall be
afforded under this Section 10.05 in respect of any property for any occurrence
arising from the acts or omissions of Administrative Agent or any Lender during
the period after which Borrower, its successors or assigns, or their
Administrative Agents or representatives, shall have obtained possession of
such Property (whether by foreclosure or deed in lieu of foreclosure, as
mortgagee-in-possession or otherwise). The agreements in this Section shall
survive payment of aU other Obligations. "
10.06 Environmental Indemnification. In addition to the
indemnifications hereunder and under any other Loan Documents, the Borrower,
jointly and severally, shall indemnify, protect and hold each Indemnified
Person hannless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, proceedings, costs,
expenses (including, without limitation, all attorneys' fees and legal expenses
whether or not suit is brought) and disbursements of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or asserted against
such Indemnified Person, with respect to or as a direct or indirect result of
the violation by Borrower or each Guarantor of
32
any Environmental Law; or with respect to or as a direct or indirect result of
Borrower's or each Guarantor's use, generation, manufacture, production,
storage, release, threatened release, discharge, disposal or presence in
connection with the Mortgaged Properties of a hazardous substance including,
without limitation, (a) all damages of any sucb use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal or
presence, or (b) the costs of any reasonably required or necessary
environmental investigation, monitoring, repair, cleanup or detoxification
and the preparation and implementation of any closure, remedial or other plans
(all the foregoing, collectively, the "Indemnified Environmental
Liabilities"). Each of Borrower and each Guarantor agree to indemnify and hold
each Indemnified Person harmless as provided in this Section 1O.06, WHETHER OR
NOT THE INDEMNIFIED ENVIRONMENTAL LIABILITIES ARISE OUT OF OR AS A RESULT OF
ANY INDEMNIFIED PERSON'S NEGliGENCE IN WHOLE OR IN PART, INCLUDING, WITHOUT
LIMITATION, THOSE INDEMNIFIED ENVIRONMENTAL LIABILITIES WHICH RESULT FROM
THE SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE OF THE INDEMNIFIED
PERSON, OR ANY ONE OR MORE OF THEM provided; that Borrower and each Guarantor
shall not have any obligation hereunder to any Indemnified Person with respect
to Indemnified Environmental Liabilities to the extent same arise from the
gross negligence or willful misconduct of such ~demnified Person as
determined by a final judgment rendered by a court of competent jurisdiction.
The provisions of and undertakings and indemnification set forth in this
Section 10.06 shall survive (x) the satisfaction and payment of the
Obligations and termination of this Agreement, and (y) the release of any
Liens securing the Obligations or the extinguishment of such Liens by
foreclosure or action in lieu thereof.
10.07 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that neither Borrower nor either
Guarantor may assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of Lenders. Either Lender may at
any time assign and delegate to one or more Persons (each an "Assignee") all,
or any ratable part of all, of its Loans and the other rights and 9bligations
of Lenders hereunder.
10.08 Interest
(a) It is the intention of the parties hereto to comply with
applicable usury laws; accordingly, notwithstanding any provision to the
contrary in this Agreement, the Notes or in any of the" other Loan Documents
securing the payment hereof or otherwise relating hereto, in no event shall this
Agreement, the Notes or such other Loan Documents require the payment or pennit
the payment, taking, reserving, receiving, collection, or charging of any sums
constituting interest under applicable laws, if any, which exceed the maximum
amount permitted by such laws. If any such excess interest is called" for,
contracted for, charged, taken, reserved, or received in connection with the
Loans evidenced by the Notes or in any of the Loan Documents securing the
payment thereof or otherwise relating thereto, or in any communication by
Lenders or any other person to Borrower or any other person, or in the event all
or part of the principal "or interest thereof shall be prepaid or accelerated,
so that under
any of such circumstances or under any other circumstance whatsoever the amount
of interest contracted for, charged, taken, reserved, or received on the amount
of principal aCtually outstanding from time to time under the Notes shall exceed
the maximum amount of interest permitted by applicable usury laws, then in any
such event it is agreed as follows: (i) the provisions of this paragraph shall
govern and control, (ii) neither Borrower nor any other person or entity now or
hereafter liable for the payment and performance of the Obligations shall be
obligated to pay the amount of such interest to the extent such interest is in
excess of the maximum amount of interest permitted by applicable usury laws,
(iii) any such excess which is or has been received notwithstanding this
paragraph shall be credited against the then unpaid principal balance of the"
Notes or, if the Notes have been or would be paid in full, refunded to Borrower,
and (iv) the provisions of this Agreement, the Notes and the other Loan
Documents securing the payment hereof and
33
otherwise relating hereto, and any communication to Borrower, shaH
immediately be deemed reformed and such excess interest reduced,
without the necessity of executing any other document, to the
Highest Lawful Rate allowed under applicable laws as now or
hereafter construed by courts having jurisdiction.
hereof or thereof. Without limiting the foregoing, all
calculations of the rate of the interest contracted for, charged,
taken, reserved, or received in connection with the Notes or this
Agreement which are made for the purpose of determining whether
such rate exceeds the Highest Lawful Rate shall be made to the
extent pennitted by applicable laws by amortizing, prorating,
allocating and spreading during the period of the full tennof the
Loans, including all prior and subsequent renewals and extensions,
all interest at any time contracted for, charged, tak~n, reserved,
or received. The tenns of this paragraph shall be deemed to be
mcorporated in every document and communication relating to the
Note, the Loans or any other Loan Document.
(b) Texas Finance Code, Chapter 346 (which
regulates certain revolving loan accounts and revolving tri-party
accounts) shall not apply to any Loans.
(c) To the extent that the interest rate laws of
the State of Texas are applicable to the Loans, the applicable
interest rate ceiling is the indicated (weekly) ceiling from time
to time in affect under Texas Finance Code ss.303.001, as limited
by Texas Finance Code ss.303.009, and to the extent that this
Agreement is deemed an "open end account" as such term is defined
in Texas Finance Code ss.301.002(a)(14). Lenders retain the right
to modify the interest rate in accordance with applicable law.
10.09 Counterparts and FacsimUe Signatures. This Agreement may be
executed in any number of separate counterparts. each of which. when so
executed, shall be deemed an original, and all of said counterparts taken
together shall be deemed to constitute but one and the same instrument. The
Loan Documents may be transmitted and/or signed by facsimile. The
effectiveness of any such documents and signatures shall, subject to
applicable law, have the same force and effect as manually-signed originals
and shall be binding on Borrower, each Guarantor. Administrative Agent and
Lenders may also require that any such documents and signatures be confirmed
by a manually-signed original thereof; provided, however. that the failure to
request or deliver the same shall not limit the effectiveness of any
facsimile document or signature.
10.10 Severability. The illegality or unenforceability of
any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the
legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder. .
10.11 No Third Parties Benefited. This Agreement and
the other Loan Documents are made and entered into for the sole
protection. and legal benefit of borrower, each Guarantor,
Administrative Agent and Lenders. and their permitted successors
and assigns, and no other Person shall be a direct or
indirect legal beneficiary of, or have any direct or indirect
cause of action or claim in connection with this Agreement or any
of the other Loan Documents.
10.12 USA PATRIOT Act Notice. Each Lender hereby notifies
Borrower and each Guarantor that pursuant to the requirements of
the USA Patriot Act (Title m of Pub. L. 107-56 (signed into law
October 26, 2001) (the "Acf') it is required to obtain, verify
and record information that identifies Borrower and each Guarantor.
which information includes the name and address of BOlTower and
each Guarantor and other information that will allow Lenders to
identify Borrower and each Guarantor in accordance with the Act.
10.13 Governing Law. This Agreement, the. Note, the
Guarantees, the Investor Rights Agreement, the Security Documents,
and the other Loan Documents shall be governed by construed and
34
interpreted in accordance with, the laws of the State of Texas, except to the
extent that federal laws of the United States of America apply.
10.14 Submission To Jurisdiction. With respect to any and all
disputes arising hereunder, or under the Note, the Security Documents, the
other Loan Documents, or any of the other instruments and documents executed
in connection herewith or therewith Dot settled, each of Borrower, each
Guarantor, Administrative Agent and Lenders hereby irrevocably and
unconditionally:
(a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement, the Notes and any document to which it
is a party, or for recognition and enforcement of any judgment in respect of
any thereof, to the non-exclusive general jurisdiction of the courts of the
State of Texas, the courts of the United States of America for the Northern
District of Texas, and appellate courts trom any thereof;
(b) consents that any such action or proceeding may be brought
in such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to ▇▇▇ in any other jurisdiction; ,
(d) agrees that service upon it or its authorized agent shall,
to the fullest extent permitted by law, constitutes valid and effective'
personal service upon it, as the case' may be, and that the failure of any such
authorized agent to give any notice of such' service to it shall not impair or
affect in any way the validity ,of such service or any judgment rendered in any
action or proceeding based thereon; and
(e) waives, to the fullest extent permitted by applicable law,
any objection, including 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 action or proceeding in such jurisdiction in respect of this
agreement or any document related hereto.
10.15 Waiver of Jury Trial. Borrower and each Guarantor each waives, to
the fullest extent permitted by applicable law, its rights to a trial by jury
of any claim or cause of action based upon or arising out of or related to this
Agreement, the Note, the Security Documents, the Investor Rights Agreement, the
other Loan Documents, or the transactions contemplated hereby or thereby, in
any action, proceeding or other litigation of any type brought by any of the
parties against any other party or any Indemnified Person, or assignee thereof,
whether with respect to contract claims, tort claims, or otherwise. Borrower
and each Guarantor, to the fullest extent permitted by applicable law, each
agrees that any such claim or cause of action shall be tried by a court trial
without a jury. Without limiting the foregoing, to the fullest extent permitted
by applicable law, Borrower and each Guarantor each further agrees that its
respective right to a trial by jwy is waived by operation of this section as to
any action, counterclaim or other proceeding which seeks, in whole or in part,
to challenge the validity or enforceability of this Agreement or the other Loan
Documents or any provision hereof or thereof. This waiver shall apply to any
subsequent amendments, renewals, supplements or modifications to this Agreement
and the other Loan Documents.
10.16 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Borrower,
Guarantors, Administrative Agent and
35
Lenders and supersedes aU prior or contemporaneous agreements and
understandings of such Persons, verbal or written. relating to the subject
matter hereof and thereof.
10.17 NO ORAL AGREEMENTS. THIS WRITfEN LOAN AGREEMENT, TOGETHER WITH
THE OTHER WRITIEN LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITII. REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[The Remainder of/his Page Intentionally left
Blank. Signature Pages to Follow.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Dallas, Texas by their proper and duly
authorized officers as of the day and year first above written.
BORROWER:
EBS OIL AND GAS PARTNERS PRODUCl10N CO., LP.
By:
EBS OIL AND GAS PARTNERS PRODUCTION GP, LLC, its General Partner
By:
GUARANTORS:
EBS OIL AND GAS PARTNERS PRODUCTION GP, LLC
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Member & Board Member
EBS OIL AND GAS PARTNERS OPERATING CO., LoP.
By:
EBS OIL AND GAS PARTNERS OPERATING GP, LLC, its General Partner
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Member & Board Member
ADMINISTRATIVER AGENT
PETRO CAPITAL II L.P., a Texas limited partnership
By:
Petro/EBS Management, LLC. a Texas limited liability company,
its General Partner
By:
LENDER
LEVY FAMILY PARTNERS, LLC
---------------------
By;
Name:
Title:
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER
X-MEN, L.L.C.
By:
Name:
Title:
Address:
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER
BARGUS PARTNERSHIP
By:
AUGUST ▇. ▇▇▇▇▇▇▇▇, ▇▇, its general ▇▇▇▇▇▇
-------------------------
Address:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER
▇▇▇▇▇ ▇▇▇▇
Address:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ and Congress
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Tel:
Fax:
LENDER
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address: .
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER
PETRO CAPITAL ADVISORS, LLC
By:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Manager
.. Address:
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ill
Address:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
CREDIT AGREEMENT
dated as of May 20, 2005 between Petro Capital II, L.P.
("Administrative Agent") and EBS Oil and Gas Partners
Production Co., L.P. ("Borrower')
This Appendix I is attached to and made a part of the Credit
Agreement. All capitalized tenns not otherwise defme4 in this Appendix I
are defmed "in the Credit Agreement.
Administrative Agent:
Petro Capital IT, L.P.
Attn: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Borrower:
EBS Oil and Gas Partners Production Co., L.P.
Attn: ▇▇▇▇▇ ▇ ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇.▇.▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
Guarantors:
EBS Oil and Gas Partners Production GP, LLC.
Attn: ▇▇▇▇▇ ▇ ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇.▇.▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
EBS Oil and Gas Partners Operating Co., L.P.
Attn: ▇▇▇▇▇ ▇ ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇.▇.▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
Borrower's General Partners: Managers/Officers:
Borrower is managed by EBS Oil and Gas Partners Production GP, LLC. There are
no officers of Borrower. EBS Oil and Gas Partners Production GP, LLC is
managed by a three member Management Committee comprised of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇ ▇ ▇▇▇▇▇▇ ▇▇, and ▇▇▇▇▇ ▇. Rather, there are no officers of Borrower.
EBS Oil and Gas Partners Operating Company, L.P. is managed by EBS Oil and Gas
Partners Operatin1 GP, LLC. There are no officers ofEBS Oil and Gas Partners
Operating Company, L.P.. EBS Oil and Gas Partners Operating GP, LLC is managed
by a three member Management Committee comprised of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇ I
Staleyll, and ▇▇▇▇▇ ▇. Rather, there are no officers of Borrower.
Ownership'ofBorrower and Guarantors
Borrower.
EBS on and Gas Partners Production Company, L.P. .
EBS Oil and Gas Partners
Production GP, LLC, General Partner 0.1 percent general partner interest
▇▇▇▇▇ 1. ▇▇▇▇▇▇, II 33.3 percent limited partner interest
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 33.3 percent limited partner interest
Enexco, Inc. 33.3 percent limited partner interest
Petro Capital II, L.P. 100 percent Class B limited partner
interes
EBS Oil and Gas Partners Production GP. LLC
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,▇▇ 33.34 percent membership interest
.. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 33.33 percent membership interest
Enexco, Inc. 33.33 percent membership interest
EBS Oil and Gas Partners Operating Company, L.P.
EBS Oil and Gas Partners
Operating GP, LLC, General Partner 0.1 percent general partner interest
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ 33.3 percent limited partner interest
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 33.3 percent limited partner interest
Enexco, Inc. 33.3 percent limited partner interest
EBS Oil and Gas Partners Operating GP. LLC
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇ 33.34 percent membership interest
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 33.33 percent membership interest
Enexco, Inc. 33.33 percent membership interest
1. LOAN TERMS
A. Maximum Loan Amount - (Section 1.01): $3,500,000.00
B. Lenders' Pro Rata Share:
(i) Levy Family Partners, LLC 28.57% ($1,000,000.00)
(ii) X-Men, L.L.C. 30.29% ($1,060,000.00)
(iii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 14.29% ($500,000.00)
(iv) Bargus Partnership 7.71% ($270,060.00)
(v) ▇▇▇▇▇ ▇▇▇▇ 7.71% ($270,000.00)
(vi) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 5.71% ($200,000.00)
(vii) ▇▇▇▇▇ 1. ▇▇▇▇▇▇▇ 2.86% (SI00,000.00)
(viii) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 1.07% ($37,500.00)
(ix) Petro Capital Advisors, LLC 1.43% ($50,000.00)
(x) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, III 0.36% ($12,500.00)
C. Pricing - (Section 2.03 )
Contract Rate: The per annum rate to equal to twelve percent (12%).
Default Rate: lesser of:
(i) Contract Rate plus 5% or
(ii) Highest Lawful Rate
Stated Maturity Date (Section 1.02): Ninety (90) days from Closing
Fees (Section 2.04)
Origination Fee (Petro Capital Securities, LLC): 6% of Maximmum Loan Amount
ADDITIONAL CLOSING CONDITIONS (if any) (Subsection 4.01(f):
A.Borrower shall have delivered to Lenders, fully executed and completed Letters
in Lieu in th form of Exhibit B hereto and as described. in Subsection 3.05(a),
addressed to each c Borrowers purchasers of production in such number as Lenders
may require.
B. Borrower shall ~ave defensible title to the Oil and Gas Properties With not
more than the undivided working interest (WI) and not less than the undivided
net revenue interest (NRI) se forth on Schedule I hereto.
Borrower shall have delivered to Lenders fully executed original counterpart of
Intercreditor Agreement and such amendments to the Existing Credit Agreement as
may required under the Intercreditor Agreement.
Borrower shall bve delivered to Lenders a fully executed' Amended and Restated
Limi Partnership Agreement evidencing Lenders' aggregate ownership of a 3 1/2%
limited partnersi interest in Borrower.
SCHEDULE I
SECURITY DOCUMENTS
I. Security Documents:
1. Oil and Gas Properties
Borrower's lien and security interest limited to the Working
Interests (WI) and Net Revenue Interests (NRI) in and to the Oil and Gas
Properties covering the following ▇▇▇▇▇:
ST COUNTY FIELD CAT PROPERTY WI NRI
-- ----- ------------- ----- ----------- -------- --------
TX WISE NEW ARK. EAST PDP ▇▇▇▇▇▇▇▇ 2 0.125000 0.100000
TX WISE NEWARK EAST PDP ▇▇▇▇▇▇▇ 2 0.200000 0.156000
TX WISE NEWARK EAST PDP ▇▇▇▇▇▇▇ 1 0.180000 0.142200
TX WISE NEWARK EAST PDP ▇▇▇▇▇▇▇▇ 1 0.185000 0.148000
TX DENTON NEWARK EAST PDP MONROE 1 * 0.300000 0.237500
TX WISE NEWARK EAST PDP ▇▇▇▇▇▇▇ 1 0.200000 0.156000
TX WISE NEW ARK EAST PDNP ▇▇▇▇ 2 0.154500. 0.123600
TX WISE NEWARK EAST PDP PRUETI 2 0.140000 0.109200
TX WISE NEW ARK EAST PDP ▇▇▇▇ 1 0.154500 0.123600
TX DENTON NEWARK EAST PDNP ▇▇▇▇▇▇▇ 1 0.217500 0.171825
TX WISE NEWARK EAST PDP PRUEIT 1 0.140000 0.109200
TX WISE NEWARK EAST PDP ▇▇▇▇▇▇▇▇ 1 0.125000 0.100000
TX MONTAGUE NEWARKEAST PDNP ▇▇▇▇ 0.130000 0.115500
TX MONTAGUE NEWARK EAST PDNP ▇▇▇▇▇▇▇▇ 1 0.120000 0.090000
TX ▇▇▇▇ ▇▇▇▇▇▇▇ 0.170000 0.132600
▇▇▇▇▇▇
TX MONTAGUE LITILE
TX MONTAGUE ▇▇▇▇▇
▇▇▇▇▇▇▇▇
TX WISE BARNETT
and,
Borrower's undivided 49% interest in and to the Gas Gathering
Properties acquired from Central Crude, Inc. shall be evidenced by:
A. Mortgage, Deed of Trust, Security Agreement, Assignment of
Production and Financing State~ent covering Borrower's Oil
and Gas Properties located in:
County State
----- ------
(i) ▇▇▇▇ Texas
(ii) Denton Texas
( iii) Montague Texas
(iv) Wise Texas
B. As amended by First Amendment to Mortgage, Deed of Trust,
Security Agreement, Assignment of Production and Financing
Statement covering Borrower's Oil imd Gas Properties
located in:
County State
----- ------
(1) ▇▇▇▇ Texas
(ii) Denton Texas
(iii) Montague Texas
(iv) Wise Texas
2. Security Agreements.
A Commercial Security Agreement by and among EBS OIL AND GAS
PARTNERS PRODUCTION GP LLC, a Texas limited liability company and PETRO CAPITAL
II, L.P. as amended by First Amendment to Commercial Security Agreement by and
among EBS OIL AND GAS PARTNERS PRODUCTION GP LLC, a Texas limited liability
company and PETRO CAPITAL n, L.P., as Collateral Agent.
B Commercial Security Agreement by and among EBS OIL AND GAS
PARTNERS OPERATING COMPANY LP, a Texas limited partnership and PETRO CAPITAL
II, L.P., as amended by First Amendment to Commerc~al Security Agreement by and
among EBS OIL AND GAS PARTNERS OPERATING C0MPANY LP, a Texas limited
partnership and PETRO CAPITAL II, L.P. .
3. Financing Statements
A. Financing Statement - Borrower
Jurisdiction: Secretary of State of Texas
B. Financing Statement - Operating Co.
Jurisdiction: Secretary of State of Texas
C. Financing Statement - Production Co.
Jurisdiction: Secretary of State of Texas
FORM OF PROMISSORY NOTE
PROMISSORY NOTE
May --,2005 $___________
FOR VALUE RECEIVED, the undersigned, EBS OIL AND GAS PARTNERS PRODUCTION,
COMPANY, L.P., a Texas limited partnership ("Maker'), promises to pay to the
order of (herein called "Payee", which term shall herein in every instance
refer to any owner or holder of this Note) the sum of ($. .00) or so much
thereof as may be advanced to Maker by Payee from time to time,
together with interest on the principal hereof outstanding until maturity,
said principal and interest being payable in lawful money.
of the United States of America as more particularly provided in that certain
Credit Agreement of even .date herewith, be~een between Maker, PETRO CAPITAL
II, LP, as administrative agent (the "Administrative Agent') for the financial
institutions designated as parties thereto (the "Lenders") and the Lenders (as
such may be amended or restated from time to time, the "Credit Agreemenf').
Capitalized terms used, but not otherwise defined, herein shall have the
meaning given such terms in the Credit Agreement.
Maker may prepay this Note in whole or in part as provided
in the Credit Agreement without . being required to pay any penalty or
premium for such privilege. All prepayments hereunder, whether designated as
payments of principal or interest, shall be applied in Payee's discretion to
the principal or interest of this Note or to expenses provided for herein, or
any combination of the foregoing.
Maker and any and all sureties, guarantors and. endorsers of this Note
and all other parties now or hereafter liable hereon, severally waive grace,
demand, presentment for payment, protest, notice of any kind (including, but
not limited to, notice of dishonor, notice of protest,. notice of intention to
accelerate and notice of acceleration) and diligence in collecting and
bringing suit against any party hereto and agree (i) to all extensions and
partial payments, with or without notice, before or after maturity, (ii) to
any substitution, exchange or release of any security now or hereafter given
for this Note, (Hi) to the release of any party primarily or secondarily
liable hereon, and (iv) that it will not be necessary for Payee, in order to
enforce payment of this Note, to first institute or exhaust Payee's remedies
against Maker or any other party liable therefor or against any security for
this Note.
If any sum payable under this Note or under the Credit Agreement is
not paid when due (whether the same becomes due by acceleration or otherwise)
and this .Note is placed in the hands of an attorney for collection or
enforcement of this Note or the Credit Agreement, or if this Note is collected
through any legal pf9ceedings, including, but not limited: to suit, probate,
insolvency or bankruptcy proceedings, Maker agrees to pay all reasonable
attorneys' fees and all reasonable expenses of collection and costs of court.
Regardless of any provision contained in this Note or any other Loan
Document executed or delivered in connection therewith, Payee shall never be
deemed to have contracted for or be entitled. to receive, collect or apply as
interest on this Note (whether termed interest herein or deemed to be interest
by ▇▇▇▇~ial determination or operation of law), any amount in excess of the
Highest Lawful Rate (hereafter defmed), and, in the event that Payee ever
receives, collects or applies as interest any such excess, such amount which
would be excessive interest shaH be applied to the reduction of the unpaid
principal balance of this Note; and, if the principal balance of this Note is
paid in full, any remaining
excess shall forthwith be paid to Maker. In determining whether or not the
interest paid or payable under any specific contingency exceeds the Highest
Lawful Rate, Maker and Payee shall, to the maximum extent pennitted under
applicable law, (a) characterize any non principal payment (other than payments
which are expressly designated as interest payments hereunder) as an expense or
fee rather than as interest, (b) exclude voluntary pre payments and the effect
thereof, and (c) spread the total amount of interest throughout the entire
contemplated term of this Note so that the interest rate is unifonn throughout
such tenn; provided that if this Note is paid and performed in full prior to
the end of the full contemplated tenn hereof, and if the interest received for
the actual period of existence thereof exceeds the Highest Lawful Rate, if any,
then Payee or any holder hereof shall refund to Maker the amount of such
excess, or credit the amount of such ~xcess against the aggregate unpaid
principal balance of aU advances made by Payee or any holder hereof under this
Note at the time in question. Texas Finance Code, Chapter 346, which regulates
certain revolving loan accounts and revolving tri-party accounts, shall not
apply to any revolving loan accounts created under this Note or the other Loan
Documents or maintained in connection therewith.
Maker warrants that this Note is executed solely for business or
commercial purposes, other than agricultural purposes and warrants that it is
specifically exempted under Section 226.3(a) of Regulation Z issued by the
Board of Governors of the Federal Reserve System and under Title I (Truth in
Lending Act) and Title V (General Provisions) of the Consumer Credit Protection
Act, and that no disclosures are required to be given under such regulations
and ederal laws in connection with the above transaction.
Any check, draft, money order or other instrument given in payment of
all or any portion hereof .may be accepted by Payee and handled in
collection in the customary manner, but the same shall not
constitute payment hereunder or diminish any rights of Payee except to the
extent that actual cash proceeds of such instrument are unconditionally
received by Payee.
Except to the extent required by federal law, this Note shall be
governed by and construed under the laws of the State of Texas.
EBS OIL AND GAS PARTNERS PRODUCTION
COMPANY, L.P. a Texas limited partnership,
By: EBS Oil and Gas Partners Production GP
LLC, its general partner
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Member and Board Member
-MAKER
EXHIBIT B
FORM OF LETTER IN LIEU
__________________________________
__________________________________
__________________________________
Attn: Division Order Department
Re: Letter in Lieu of Transfer Order
Gentlemen:
EBS OIL AND GAS PARTNERS PRODUCTION COMPANY, L.P., as
Mortgagor, has executed the mortgages and f'mancing statements
descn1>ed on Exhibit A attached hereto (collectively, the "Mortgage")
for the benefit of PETRO CAPITAL II, LP, ("Collateral Agenr), granting
a mortgage on and pledging those certain properties and certain
specified interests of Mortgagor in said properties (the "Pledged
Properties") described in the Mortgage to secure certain obligations
also descn1>ed in the Mortgage. Enclosed is a copy of the Mortgage
covering the Pledged Properties.
Exhibit B attached hereto lists the properties which are
subject to the Mortgage for which you are accounting to Mortgagor and
the decimal interest in production heretofore paid to Mortgagor with
respect to its interest in each given property.
Pursuant to the assignment of production provision in the Mortgage,
Mortgagor transferred and assigned all of its interests in the Pledged
Properties to Collateral Agent. Therefore, Mortgagor hereby authorizes and
instructs you that all future payments attributable to Mortgagor's interest in
the Pledged Properties, which would otherwise be paid to Mortgagor, should be
made by check payable to:
Petro Capital II, L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇.,
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
until notified in writing by Collateral Agent to discontinue such
payments. Also, Mortgagor hereby requests that you change your
reco.rds to reflect that Collateral Agent is entitled to the proceeds
of production attributable to the Pledged Properties.
In consideration of your acceptance of this Letter-in-Lieu of
Transfer Order, Collateral Agent and Mortgagor agree as follows:
1. Mortgagor has heretofore executed Transfer or Division
Orders to you covering each of the properties referred to in
Exhibit B attached to this letter. This letter is being
executed by the undersigned in lieu of execution of separate
Transfer or Division Orders. With respect to proceeds from the
sale of oil, gas and other hydrocarbons as to which you
account hereunder, Collateral Agent agrees that it will be
bound by the terms, conditions, warranties and covenants of
all such Transfer or Division .Orders heretofore executed by
Mortgagor now in force, with the
same effect. as though it had executed the originals thereof;
provided, however, the aggregate liability of Collateral Agent with
respect to any warranty, representation, covenant or indemnification
contained therein or in this letter shall be limited to an amount
equal to the amounts disbursed by you to Collateral Agent hereunder.
2. . Mortgagor hereby agrees that you are relieved of any
responsibility in connection with the application of the proceeds paid
by you to CoUateral Agent as hereinabove specified and payment made by
you to Collateral Agent shall be binding and conclusive as between you
and Mortgagor.
In the absence of a question about the enclosed schedule, you are
respectfully requested to make disbursement to Collateral Agent as instructed
herein and NOT TO SUSPEND OR DELAY any payments by virtue of the assigmnent of
production from Mortgagor to Collateral Agent. Should you require additional
documentation prior to implementing the manner of disbursement requested
herein, notwithstanding the warranties and indemnifications contained
hereinabove, please suspend disbursements to Mortgagor, pending execution of
such additional documentation as you may reasonably require.
In order that we may have a record evidencing your. acceptance of this
Letter-in-Lieu of Transfer Order, we request that you execute one copy of
this letter in the space provided below and return the same to Collateral
Agent in the enclosed self-addressed envelope.
Very truly yours,
EBS OIL AND GAS PARTNERS PRODUCTION COMPANY, L.P. a Texas
limited partnership,
By: EBS OIL AND GAS PARTNERS PRODUCTION GP., LLC, a Texas
limited liability company, its general partner
By:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇
Member and Board Member
Petro Capital II, LP,
a Texas limited partnership
By: Petro/EBS Management, LLC, a Texas limited liability company,
its General Partner
By:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Manager
ACCEPTED this __ day 0f ___, 20__.
___________________________________Purchaser of Production
By:
Name:
Title:
THE MORTGAGE
PLEDGED PROPERTIES