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CREDIT AGREEMENT
AMONG
PETROQUEST ENERGY, INC.
(a Louisiana corporation)
("Borrower")
PETROQUEST ENERGY ONE, L.L.C.
(a Louisiana limited liability company)
("Borrower")
PETROQUEST ENERGY, INC.
(a Delaware corporation)
("Guarantor")
AND
COMPASS BANK
("Lender")
September 24, 1998
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REDUCING REVOLVING LINE OF CREDIT OF UP TO $25,000,000
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND INTERPRETATION
1.1 Terms Defined Above.........................................................................1
1.2 Additional Defined Terms....................................................................2
1.3 Undefined Financial Accounting Terms.......................................................13
1.4 References.................................................................................13
1.5 Articles and Sections......................................................................13
1.6 Number and Gender..........................................................................13
1.7 Incorporation of Exhibits..................................................................13
ARTICLE II TERMS OF FACILITY
2.1 Revolving Line of Credit...................................................................14
2.2 Letter of Credit Facility..................................................................14
2.3 Use of Loan Proceeds and Letters of Credit.................................................14
2.4 Interest...................................................................................15
2.5 Repayment of Loans and Interest............................................................15
2.6 Outstanding Amounts........................................................................15
2.7 Time, Place, and Method of Payments........................................................15
2.8 Borrowing Base Determinations..............................................................16
2.9 Mandatory Prepayments......................................................................16
2.10 Voluntary Prepayments of Loans.............................................................17
2.11 Commitment Fee.............................................................................17
2.12 Engineering Fee............................................................................17
2.13 Facility Fee...............................................................................17
2.14 Letter of Credit Fee.......................................................................17
2.15 Loans to Satisfy Obligations of Borrower...................................................18
2.16 Security Interest in Accounts; Right of Offset.............................................18
2.17 General Provisions Relating to Interest....................................................18
2.18 Letters in Lieu of Transfer Orders.........................................................19
2.19 Limited Power of Attorney..................................................................19
ARTICLE III CONDITIONS
3.1 Receipt of Loan Documents and Other Items..................................................20
3.2 Each Loan and Letter of Credit. ..........................................................23
ARTICLE IV REPRESENTATIONS AND WARRANTIES
4.1 Due Authorization..........................................................................25
4.2 Existence..................................................................................25
4.3 Valid and Binding Obligations..............................................................25
4.4 Security Instruments.......................................................................25
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4.5 Title to Assets............................................................................26
4.6 Scope and Accuracy of Financial Statements.................................................26
4.7 No Material Misstatements..................................................................26
4.8 Liabilities, Litigation, and Restrictions..................................................26
4.9 Authorizations; Consents...................................................................26
4.10 Compliance with Laws.......................................................................26
4.11 ERISA......................................................................................27
4.12 Environmental Laws.........................................................................27
4.13 Compliance with Federal Reserve Regulations................................................27
4.14 Investment Company Act Compliance..........................................................27
4.15 Public Utility Holding Company Act Compliance..............................................27
4.16 Proper Filing of Tax Returns; Payment of Taxes Due.........................................27
4.17 Refunds....................................................................................28
4.18 Gas Contracts..............................................................................28
4.19 Intellectual Property......................................................................28
4.20 Casualties or Taking of Property...........................................................28
4.21 Locations of Guarantor and Borrower........................................................28
4.22 Subsidiaries...............................................................................29
ARTICLE V AFFIRMATIVE COVENANTS
5.1 Maintenance and Access to Records..........................................................29
5.2 Quarterly Financial Statements; Compliance Certificates....................................29
5.3 Annual Financial Statements................................................................29
5.4 Oil and Gas Reserve Reports................................................................29
5.5 Title Opinions; Title Defects..............................................................30
5.6 Notices of Certain Events..................................................................30
5.7 Letters in Lieu of Transfer Orders; Division Orders........................................32
5.8 Additional Information.....................................................................32
5.9 Compliance with Laws.......................................................................32
5.10 Payment of Assessments and Charges.........................................................32
5.11 Maintenance of Limited Liability Company Existence and Good Standing.......................32
5.12 Payment of Note; Performance of Obligations................................................33
5.13 Further Assurances.........................................................................33
5.14 Initial Fees and Expenses of Counsel to Lender.............................................33
5.15 Subsequent Fees and Expenses of Lender.....................................................33
5.16 Operation of Oil and Gas Properties........................................................34
5.17 Maintenance and Inspection of Properties...................................................34
5.18 Maintenance of Insurance...................................................................34
5.19 INDEMNIFICATION............................................................................34
ARTICLE VI NEGATIVE COVENANTS
6.1 Indebtedness...............................................................................35
6.2 Contingent Obligations.....................................................................36
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6.3 Liens......................................................................................36
6.4 Sales of Assets............................................................................36
6.5 Leasebacks.................................................................................36
6.6 Loans or Advances..........................................................................36
6.7 Investments................................................................................37
6.8 Dividends, Distributions and Redemptions...................................................37
6.9 Changes in Structure.......................................................................37
6.10 Transactions with Affiliates Structure.....................................................37
6.11 Lines of Business..........................................................................38
6.12 Plan Obligations...........................................................................38
6.13 Cash Flow Coverage.........................................................................38
6.14 Tangible Net Worth.........................................................................38
ARTICLE VII EVENTS OF DEFAULT
7.1 Enumeration of Events of Default...........................................................38
7.2 Remedies...................................................................................40
ARTICLE VIII MISCELLANEOUS
8.1 Transfers; Participations..................................................................41
8.2 Survival of Representations, Warranties, and Covenants.....................................41
8.3 Notices and Other Communications...........................................................41
8.4 Parties in Interest........................................................................42
8.5 Rights of Third Parties....................................................................42
8.6 Renewals; Extensions.......................................................................43
8.7 No Waiver; Rights Cumulative...............................................................43
8.8 Survival Upon Unenforceability.............................................................43
8.9 Amendments; Waivers........................................................................43
8.10 Controlling Agreement......................................................................43
8.11 Disposition of Collateral..................................................................43
8.12 GOVERNING LAW..............................................................................43
8.13 JURISDICTION AND VENUE.....................................................................44
8.14 WAIVER OF RIGHTS TO JURY TRIAL.............................................................44
8.15 ENTIRE AGREEMENT...........................................................................44
8.16 Counterparts...............................................................................45
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LIST OF EXHIBITS
Exhibit I - Form of Note
Exhibit II - Form of Borrowing Request
Exhibit III - Form of Compliance Certificate
Exhibit IV - Form of Opinion of Counsel
Exhibit V - Disclosures
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EXHIBIT 10.6
EXHIBIT 10.6
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is made and
entered into this 24th day of September, 1998, by and among PETROQUEST ENERGY,
INC., a Louisiana corporation (the "Borrower"), successor to Optima Energy
(U.S.) Corporation, a Nevada corporation ("Optima Energy"), by way of merger,
and PETROQUEST ENERGY ONE, L.L.C., a Louisiana limited liability company (the
"Borrower") successor to American Explorer L.L.C., a Louisiana limited
liability company ("American Explorer"), PETROQUEST ENERGY, INC., a Delaware
corporation (the "Guarantor"), successor to Optima Petroleum Corporation, a
Canadian corporation ("Optima Petroleum"), by way of merger, and COMPASS BANK,
a Texas state chartered banking institution (the "Lender"). PetroQuest Energy
Inc., and PetroQuest Energy One, L.L.C., shall be collectively referred to as
("Borrower").
W I T N E S S E T H:
WHEREAS, American Explorer and the Lender entered into that
certain Credit Agreement dated October 16, 1997 (the "American Explorer Credit
Agreement");
WHEREAS, Optima Energy and Comerica Bank-Texas, a Texas state
chartered banking institution ("Comerica"), entered into that certain Letter
Loan Agreement dated as of June 1, 1995, as amended to the date hereof (as so
amended, the "Optima Energy Loan Agreement" and the American Explorer Credit
Agreement and the Optima Energy Loan Agreement being, collectively, the
"Existing Credit Agreements");
WHEREAS, American Explorer has changed its name to PetroQuest
Energy One, L.L.C., and Optima Energy has merged with and into PetroQuest
Energy, Inc., (a Louisiana corporation).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Borrower, the Guarantor and the Lender hereby
agree as follows, amending and restating in its entirety each of the Existing
Credit Agreements:
ARTICLE I
DEFINITIONS AND INTERPRETATION
I.1 Terms Defined Above. As used in this Amended and Restated
Credit Agreement, each of the terms "American Explorer," "American Explorer
Credit Agreement," "Borrower," "Comerica," "Existing Credit Agreements,"
"Guarantor," "Lender," "Optima Energy,"
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"Optima Energy Loan Agreement," and "Optima Petroleum" shall have the meaning
assigned to such term hereinabove.
I.2 Additional Defined Terms. As used in this Amended and
Restated Credit Agreement, each of the following terms shall have the meaning
assigned thereto in this Section, unless the context otherwise requires:
"Affiliate" shall mean any Person directly or indirectly
controlling, or under common control with, the Borrower and includes
any Subsidiary of the Borrower and any "affiliate" of the Borrower
within the meaning of Reg. ss.240.12b-2 of the Securities Exchange Act
of 1934, as amended, with "control," as used in this definition,
meaning possession, directly or indirectly, of the power to direct or
cause the direction of management, policies or action through
ownership of voting securities, contract, voting trust, or membership
in management or in the group appointing or electing management or
otherwise through formal or informal arrangements or business
relationships.
"Agreement" shall mean this Amended and Restated Credit
Agreement, as it may be amended, supplemented, or restated from time
to time.
"Available Commitment" shall mean, at any time, an amount
equal to the remainder, if any, of (a) the Borrowing Base in effect at
such time minus (b) the sum of the Loan Balance at such time plus the
L/C Exposure at such time.
"Borrowing Base" shall mean, at any time, the amount
determined by the Lender in accordance with Section 2.8 and then in
effect.
"Borrowing Request" shall mean each written request, in
substantially the form attached hereto as Exhibit II, by the Borrower
to the Lender for a borrowing pursuant to Section 2.1, each of which
shall:
(a) be signed by a Responsible Officer of the
Borrower;
(b) specify the amount of the Loan requested and the
date of the borrowing (which shall be a Business Day); and
(c) be delivered to the Lender no later than 11:00
a.m., Central Standard or Daylight Savings Time, as the case
may be, on the Business Day of the requested borrowing.
"Business Day" shall mean a day other than a Saturday,
Sunday, legal holiday for commercial banks under the laws of the State
of Texas, or any other day when banking is suspended in the State of
Texas.
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"Cash Flow" shall mean for any fiscal quarter, Net Income
from continuing operations of Guarantor for such quarter, on a
consolidated basis with its Consolidated Subsidiaries, (a) plus (i)
depreciation, depletion, and amortization, (ii) intangible drilling
costs and oil and gas exploration costs, (iii) accrued plugging and
abandonment expenses, and (iv) losses on the sale of assets and other
non-cash expenses of the Guarantor, on a consolidated basis with its
Consolidated Subsidiaries, (b) less (i) income attributable to
Subsidiaries which have incurred non-recourse debt, (ii) gains on the
sale of assets, (iii) cash payments made in association with plugging
and abandonment liabilities (iv) any other non-cash income of the
Guarantor, on a consolidated basis with its Consolidated Subsidiaries.
"Closing Date" shall mean the effective date of this
Agreement.
"Collateral" shall mean the Mortgaged Properties, the issued
and outstanding capital stock of the Borrower and any other Property
now or at any time used or intended as security for the payment or
performance of all or any portion of the Obligations.
"Commitment" shall mean the obligation of the Lender, subject
to applicable provisions of this Agreement, to make Loans to or for
the benefit of the Borrower pursuant to Section 2.1 and to issue
Letters of Credit for the account of the Borrower pursuant to Section
2.2.
"Commitment Fee" shall mean each fee payable to the Lender by
the Borrower pursuant to Section 2.11.
"Commitment Period" shall mean the period from and including
the Closing Date to, but not including, the Commitment Termination
Date.
"Commitment Termination Date" shall mean June 1, 2000.
"Commonly Controlled Entity" shall mean any Person which is
under common control with the Guarantor or any of its Subsidiaries
(including the Borrower) within the meaning of Section 4001 of ERISA.
"Compliance Certificate" shall mean each certificate, in
substantially the form attached hereto as Exhibit III, executed by a
Responsible Officer of the Guarantor and furnished to the Lender from
time to time in accordance with Section 5.2.
"Consolidated Subsidiaries" shall mean, as to any Person,
those Subsidiaries of such Person which are consolidated with such
Person for financial accounting purposes in accordance with GAAP.
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"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends, or other obligations of any other
Person (for purposes of this definition, a "primary obligation") in
any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, regardless of whether such
obligation is contingent, (a) to purchase any primary obligation or
any Property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working or equity capital of any other
Person in respect of any primary obligation, or otherwise to maintain
the net worth or solvency of any other Person, (c) to purchase
Property, securities or services primarily for the purpose of assuring
the owner of any primary obligation of the ability of the Person
primarily liable for such primary obligation to make payment thereof,
or (d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof, with the amount of
any Contingent Obligation being deemed to be equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.
"Debt Service" shall mean, for any fiscal quarter, an amount
equal to (i) actual principal amounts paid during the relevant fiscal
quarter on Indebtedness of the Guarantor, on a consolidated basis with
its Consolidated Subsidiaries, other than the Obligations and any
Indebtedness of Subsidiaries of the Guarantor which is fully
non-recourse to the Guarantor and the Borrower and is secured, if at
all, only by Property purchased with proceeds of the borrowing giving
rise to such Indebtedness, plus (ii) required principal payments made
on the Obligations during such fiscal quarter.
"Default" shall mean any event or occurrence which with the
lapse of time or the giving of notice or both would become an Event of
Default.
"Default Rate" shall mean a per annum interest rate equal to
the Index Rate plus five percent (5%), but in no event exceeding the
Highest Lawful Rate.
"Dollars" and "$" shall mean dollars in lawful currency of
the United States of America.
"Engineering Fee" shall mean each fee payable to the Lender
by the Borrower pursuant to Section 2.12.
"Environmental Complaint" shall mean any written or oral
complaint, order, directive, claim, citation, notice of environmental
report or investigation, or other
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notice by any Governmental Authority or any other Person with respect
to (a) air emissions, (b) spills, releases, or discharges to soils,
any improvements located thereon, surface water, groundwater, or the
sewer, septic, waste treatment, storage, or disposal systems servicing
any Property of the Guarantor or the Borrower or any Property of
another Person adjacent to any Property of the Guarantor or the
Borrower, (c) solid or liquid waste disposal, (d) the use, generation,
storage, transportation, or disposal of any Hazardous Substance, or
(e) other environmental, health, or safety matters affecting any
Property of the Guarantor or the Borrower or any Property of another
Person adjacent to any Property of the Guarantor or the Borrower or
the business conducted thereon.
"Environmental Laws" shall mean (a) the following federal
laws as they may be cited, referenced, and amended from time to time:
the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act,
the Comprehensive Environmental Response, Compensation and Liability
Act, the Endangered Species Act, the Resource Conservation and
Recovery Act, the Occupational Safety and Health Act, the Hazardous
Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, and the Toxic Substances Control Act; (b) any and
all equivalent environmental statutes of any state in which Property
of the Guarantor or the Borrower is situated, as they may be cited,
referenced and amended from time to time; (c) any rules or regulations
promulgated under or adopted pursuant to the above federal and state
laws; and (d) any other equivalent federal, state, or local statute or
any requirement, rule, regulation, code, ordinance, or order adopted
pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal,
handling, or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the regulations
thereunder and interpretations thereof.
"Event of Default" shall mean any of the events specified in
Section 7.1.
"Existing Notes" shall mean, collectively, the promissory
notes issued by American Explorer or Optima Energy, as the case may
be, and outstanding under the American Explorer Credit Agreement or
the Optima Energy Loan Agreement, as the case may be.
"Facility Fee" shall mean the fee payable to the Lender by
the Borrower pursuant to Section 2.13.
"Final Maturity" shall mean June 1, 2000.
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"Financial Statements" shall mean statements of the financial
condition of the Guarantor or the Borrower as at the point in time and
for the period indicated and consisting of at least a balance sheet
and related statements of operations, shareholders equity, and cash
flows and, when required by applicable provisions of this Agreement to
be audited, accompanied by the unqualified certification of a
nationally-recognized firm of independent certified public accountants
or other independent certified public accountants acceptable to the
Lender and footnotes to any of the foregoing, all of which shall be
prepared in accordance with GAAP, consistently applied and in
comparative form with respect to the corresponding period of the
preceding fiscal period.
"Floating Rate" shall mean an interest rate per annum equal
to the Index Rate from time to time in effect plus one-half of one
percent (1/2%), but in no event exceeding the Highest Lawful Rate.
"GAAP" shall mean generally accepted accounting principles
established by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants and in effect in
the United States from time to time.
"Governmental Authority" shall mean any nation, country,
commonwealth, territory, government, state, county, parish,
municipality, or other political subdivision and any entity having
jurisdiction and exercising proper and legally authorized executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
"Guaranty" shall mean an unconditional guarantee by the
Guarantor of payment of the Obligations in form and substance
acceptable to the Lender.
"Hazardous Substances" shall mean flammables, explosives,
radioactive materials, hazardous wastes, asbestos, or any material
containing asbestos, polychlorinated biphenyls (PCBs), toxic
substances or related materials, petroleum, petroleum products,
associated oil or natural gas exploration, production, and development
wastes, or any substances defined as "hazardous substances,"
"hazardous materials," "hazardous wastes," or "toxic substances" under
the Comprehensive Environmental Response, Compensation and Liability
Act, as amended, the Superfund Amendments and Reauthorization Act, as
amended, the Hazardous Materials Transportation Act, as amended, the
Resource Conservation and Recovery Act, as amended, the Toxic
Substances Control Act, as amended, or any other law or regulation now
or hereafter enacted or promulgated by any Governmental Authority.
"Highest Lawful Rate" shall mean the maximum non-usurious
interest rate, if any (or, if the context so requires, an amount
calculated at such rate), that at any
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time or from time to time may be contracted for, taken, reserved,
charged, or received under applicable laws of the State of Texas or
the United States of America, whichever authorizes the greater rate,
as such laws are presently in effect or, to the extent allowed by
applicable law, as such laws may hereafter be in effect and which
allow a higher maximum non-usurious interest rate than such laws now
allow.
"Indebtedness" shall mean, as to any Person, without
duplication, (a) all liabilities (excluding reserves for deferred
income taxes, deferred compensation liabilities, and other deferred
liabilities and credits) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability
side of a balance sheet, (b) all obligations of such Person evidenced
by bonds, debentures, promissory notes, or similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed
money, and (d) all obligations of others, to the extent any such
obligation is secured by a Lien on the assets of such Person (whether
or not such Person has assumed or become liable for the obligation
secured by such Lien).
"Index Rate" shall mean the prime rate established in The
Wall Street Journal's "Money Rates" or similar table. If multiple
prime rates are quoted in the table, then the highest prime rate will
be the Index Rate. In the event that the prime rate is no longer
published by The Wall Street Journal in the "Money Rates" or similar
table, then Lender may select an alternative published index based
upon comparable information as a substitute Index Rate. Upon the
selection of a substitute Index Rate, the applicable interest rate
shall thereafter vary in relation to the substitute index. Such
substitute index shall be the same index that is generally used as a
substitute by Lender on all Index Rate loans.
"Insolvency Proceeding" shall mean application (whether
voluntary or instituted by another Person) for or the consent to the
appointment of a receiver, trustee, conservator, custodian, or
liquidator of any Person or of all or a substantial part of the
Property of such Person, or the filing of a petition (whether
voluntary or instituted by another Person) commencing a case under
Title 11 of the United States Code, seeking liquidation,
reorganization, or rearrangement or taking advantage of any
bankruptcy, insolvency, debtor's relief, or other similar law of the
United States, the State of Texas, or any other jurisdiction.
"Intellectual Property" shall mean patents, patent
applications, trademarks, tradenames, and copyrights, together with
all proprietary technology, know-how, and other proprietary processes.
"Investment" in any Person shall mean any stock, bond, note,
or other evidence of Indebtedness, or any other security (other than
current trade and customer accounts) of, investment or partnership
interest in or loan to, such Person.
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"L/C Exposure" shall mean, at any time, the aggregate maximum
amount available to be drawn under outstanding Letters of Credit at
such time.
"Letter of Credit" shall mean any standby letter of credit
issued by the Lender for the account of the Borrower pursuant to
Section 2.2.
"Letter of Credit Application" shall mean the standard letter
of credit application employed by the Lender from time to time in
connection with letters of credit.
"Letter of Credit Fee" shall mean each fee payable to the
Lender by the Borrower pursuant to Section 2.14 upon or in connection
with the issuance of a Letter of Credit.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of
such Property, whether such interest is based on common law, statute,
or contract, and including, but not limited to, the lien or security
interest arising from a mortgage, ship mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt, or a lease,
consignment, or bailment for security purposes (other than true leases
or true consignments), liens of mechanics, materialmen, and artisans,
maritime liens and reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Property which secure an
obligation owed to, or a claim by, a Person other than the owner of
such Property (for the purpose of this Agreement, the Guarantor or the
Borrower, as the case may be, shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale
agreement, financing lease, or other arrangement pursuant to which
title to the Property has been retained by or vested in some other
Person for security purposes), and the filing or recording of any
financing statement or other security instrument in any public office.
"Limitation Period" shall mean any period while any amount
remains owing on the Note and interest on such amount, calculated at
the applicable interest rate, plus any fees or other sums payable
under any Loan Document and deemed to be interest under applicable
law, would exceed the amount of interest which would accrue at the
Highest Lawful Rate.
"Loan" shall mean any loan made by the Lender to or for the
benefit of the Borrower pursuant to this Agreement.
"Loan Balance" shall mean, at any time, the outstanding
principal balance of the Note at such time and any payment made by the
Lender under a Letter of Credit.
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"Loan Documents" shall mean this Agreement, the Note, the
Letter of Credit Applications, the Letters of Credit, the Security
Instruments, the Guaranty, and all other documents and instruments now
or hereafter delivered pursuant to the terms of or in connection with
this Agreement, the Note, the Letter of Credit Applications, the
Letters of Credit, the Security Instruments or the Guaranty, and all
renewals and extensions of, amendments and supplements to, and
restatements of, any or all of the foregoing from time to time in
effect.
"Material Adverse Effect" shall mean (a) any adverse effect
on the business, operations, properties, condition (financial or
otherwise), or prospects of the Guarantor or the Borrower, which
increases the risk that any of the Obligations will not be repaid as
and when due, or (b) any adverse effect upon the Collateral.
"Mortgaged Properties" shall mean all Oil and Gas Properties
of the Borrower subject to a perfected first-priority Lien in favor of
the Lender, subject only to Permitted Liens, as security for the
Obligations.
"Net Income" shall mean, as to any Person and for any period,
the net income of such Person for such period, determined in
accordance with GAAP.
"Note" shall mean the promissory note of the Borrower in the
form attached hereto as Exhibit I, together with all renewals,
extensions for any period, increases, and rearrangements thereof.
"Obligations" shall mean, without duplication, (a) all
Indebtedness evidenced by the Note, (b) the Reimbursement Obligations,
(c) the undrawn, unexpired amount of all outstanding Letters of
Credit, (d) the obligation of the Borrower for the payment of
Commitment Fees, Letter of Credit Fees, Facility Fees and Engineering
Fees, and (e) all other obligations and liabilities of the Borrower to
the Lender, now existing or hereafter incurred, under, arising out of
or in connection with any Loan Document, and to the extent that any of
the foregoing includes or refers to the payment of amounts deemed or
constituting interest, only so much thereof as shall have accrued,
been earned and which remains unpaid at each relevant time of
determination.
"Oil and Gas Properties" shall mean fee, leasehold, or other
interests in or under mineral estates or oil, gas, and other liquid or
gaseous hydrocarbon leases with respect to Properties situated in the
United States or offshore from any State of the United States,
including, without limitation, overriding royalty and royalty
interests, leasehold estate interests, net profits interests,
production payment interests, and mineral fee interests, together with
contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Properties appertaining, belonging,
affixed, or incidental thereto.
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"Permitted Indebtedness" shall mean the plugging and
abandonment liability of the Borrower associated with xxxxx in
Lafourche Parish, Louisiana, and Indebtedness of any Subsidiary of the
Guarantor which is fully non-recourse to the Guarantor and the
Borrower and is secured, if at all, only by Property purchased by such
Subsidiary with proceeds of the borrowing giving rise to such
Indebtedness.
"Permitted Liens" shall mean (a) Liens for taxes,
assessments, or other governmental charges or levies not yet due or
which (if foreclosure, distraint, sale, or other similar proceedings
shall not have been initiated) are being contested in good faith by
appropriate proceedings, and such reserve as may be required by GAAP
shall have been made therefor, (b) Liens in connection with workers'
compensation, unemployment insurance or other social security (other
than Liens created by Section 4068 of ERISA), old-age pension, or
public liability obligations which are not yet due or which are being
contested in good faith by appropriate proceedings, if such reserve as
may be required by GAAP shall have been made therefor, (c) Liens in
favor of vendors, carriers, warehousemen, repairmen, mechanics,
workmen, materialmen, construction, or similar Liens arising by
operation of law in the ordinary course of business in respect of
obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required
by GAAP shall have been made therefor, (d) Liens in favor of operators
and non-operators under joint operating agreements or similar
contractual arrangements arising in the ordinary course of the
business of the Guarantor or the Borrower to secure amounts owing,
which amounts are not yet due or are being contested in good faith by
appropriate proceedings, if such reserve as may be required by GAAP
shall have been made therefor, (e) Liens under production sales
agreements, division orders, operating agreements, and other
agreements customary in the oil and gas business for processing,
producing, and selling hydrocarbons securing obligations not
constituting Indebtedness and provided that such Liens do not secure
obligations to deliver hydrocarbons at some future date without
receiving full payment therefor within 90 days of delivery, (f)
easements, rights of way, restrictions, and other similar
encumbrances, and minor defects in the chain of title which are
customarily accepted in the oil and gas financing industry, none of
which interfere with the ordinary conduct of the business of the
Guarantor or the Borrower or materially detract from the value or use
of the Property to which they apply, (g) Liens granted by any
Subsidiary of the Guarantor against Property of such Subsidiary to
secure Indebtedness of such Subsidiary incurred to acquire the
relevant assets, so long as such Indebtedness is fully non-recourse to
the Guarantor and the Borrower.
"Person" shall mean an individual, corporation, limited
liability company, partnership, trust, unincorporated organization,
government, any agency or political subdivision of any government, or
any other form of entity.
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"Plan" shall mean, at any time, any employee benefit plan
which is covered by ERISA and in respect of which the Guarantor, the
Borrower, or any Commonly Controlled Entity is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed
to be) an "employer" as defined in Section 3(5) of ERISA.
"Principal Office" shall mean the principal office of the
Lender in Houston, Texas, presently located at 00 Xxxxxxxx Xxxxx, 00xx
Xxxxx, Xxxxxxx, Xxxxx 00000.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, tangible or intangible.
"Regulatory Change" shall mean the passage, adoption,
institution, or amendment of any federal, state, local, or foreign
Requirement of Law, or any interpretation, directive, or request
(whether or not having the force of law) of any Governmental Authority
or monetary authority charged with the enforcement, interpretation, or
administration thereof, occurring after the Closing Date and applying
to a class of banks including the Lender.
"Reimbursement Obligation" shall mean the obligation of the
Borrower to provide to the Lender or reimburse the Lender for any
amounts payable, paid, or incurred by the Lender with respect to
Letters of Credit.
"Release of Hazardous Substances" shall mean any emission,
spill, release, disposal, or discharge, except in accordance with a
valid permit, license, certificate, or approval of the relevant
Governmental Authority, of any Hazardous Substance into or upon (a)
the air, (b) soils or any improvements located thereon, (c) surface
water or groundwater, or (d) the sewer or septic system, or the waste
treatment, storage, or disposal system servicing any Property of the
Guarantor or the Borrower or any Property of another Person adjacent
to any Property of the Guarantor or the Borrower.
"Requirement of Law" shall mean, as to any Person, the
certificate or articles of incorporation and by-laws, certificate or
articles of organization and regulations or other organizational or
governing documents of such Person, and any applicable law, treaty,
ordinance, order, judgment, rule, decree, regulation, or determination
of an arbitrator, court, or other Governmental Authority, including,
without limitation, rules, regulations, orders, and requirements for
permits, licenses, registrations, approvals, or authorizations, in
each case as such now exist or may be hereafter amended and are
applicable to or binding upon such Person or any of its Property or to
which such Person or any of its Property is subject.
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"Reserve Report" shall mean each report delivered to the
Lender pursuant to Section 5.4.
"Responsible Officer" shall mean, as to any Person, its
President, Chief Executive Officer or Chief Financial Officer.
"Security Instruments" shall mean the security instruments
executed and delivered in satisfaction of the condition set forth in
Section 3.1(h), and all other documents and instruments at any time
executed as security for all or any portion of the Obligations, as
such instruments may be amended, restated, or supplemented from time
to time.
"Subsidiary" shall mean, as to any Person, a corporation,
limited liability company or partnership of which shares of stock or
other evidence of ownership having ordinary voting power (other than
stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation are at the time owned, or the management
of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person.
"Superfund Site" shall mean those sites listed on the
Environmental Protection Agency National Priority List and eligible
for remedial action or any comparable state registries or list in any
state of the United States.
"Tangible Net Worth" shall mean (a) total assets, as would be
reflected on a balance sheet of the Guarantor prepared on a
consolidated basis with its Consolidated Subsidiaries and in
accordance with GAAP, exclusive of (i) loans or advances from
shareholders and/or other related Persons, which Persons are not
consolidated with the Guarantor and its Consolidated Subsidiaries for
financial accounting purposes, (ii) the book value of any Investment
in or loans or advances to a Subsidiary of the Guarantor formed for
the purpose of acquiring Oil and Gas Properties in part with financing
which is non-recourse to the Guarantor and the Borrower and is
secured, if at all, solely by Liens existing against the Oil and Gas
Property so acquired, (iii) Intellectual Property, experimental or
organization expenses, franchises, licenses, permits, and other
intangible assets, (iv) treasury stock, (v) unamortized underwriters'
debt discount and expenses, and (vi) goodwill minus (b) total
liabilities, as would be reflected on a balance sheet of the Guarantor
prepared on a consolidated basis with its Consolidated Subsidiaries
and in accordance with GAAP.
"Transferee" shall mean any Person to which the Lender has
sold, assigned, transferred, or granted a participation in any of the
Obligations, as authorized pursuant to Section 8.1, and any Person
acquiring, by purchase, assignment, transfer,
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or participation, from any such purchaser, assignee, transferee, or
participant, any part of such Obligations.
"UCC" shall mean the Uniform Commercial Code as from time to
time in effect in the State of Texas.
I.3 Undefined Financial Accounting Terms. Undefined financial
accounting terms used in this Agreement shall be defined according to GAAP, at
the time in effect.
I.4 References. References in this Agreement to Exhibit,
Article, or Section numbers shall be to Exhibits, Articles, or Sections of this
Agreement, unless expressly stated to the contrary. References in this
Agreement to "hereby," "herein," "hereinafter," "hereinabove," "hereinbelow,"
"hereof," "hereunder" and words of similar import shall be to this Agreement in
its entirety and not only to the particular Exhibit, Article, or Section in
which such reference appears.
I.5 Articles and Sections. This Agreement, for convenience
only, has been divided into Articles and Sections; and it is understood that
the rights and other legal relations of the parties hereto shall be determined
from this instrument as an entirety and without regard to the aforesaid
division into Articles and Sections and without regard to headings prefixed to
such Articles or Sections.
I.6 Number and Gender. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural; and likewise, the plural shall be understood to include the singular.
Definitions of terms defined in the singular or plural shall be equally
applicable to the plural or singular, as the case may be, unless otherwise
indicated. Words denoting gender shall be construed to include the masculine,
feminine and neuter, when such construction is appropriate; and specific
enumeration shall not exclude the general but shall be construed as cumulative.
I.7 Incorporation of Exhibits. The Exhibits attached to this
Agreement are incorporated herein and shall be considered a part of this
Agreement for all purposes.
ARTICLE II
TERMS OF FACILITY
II.1 Revolving Line of Credit. (a) Upon the terms and
conditions (including, without limitation, the right of the Lender to decline
to make any Loan so long as any Default or Event of Default exists) and relying
on the representations and warranties contained in this Agreement, the Lender
agrees, during the Commitment Period, to make Loans, in immediately available
funds at the Principal Office, to or for the benefit of the Borrower, from time
to time on
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any Business Day designated by the Borrower following receipt by the Lender of
a Borrowing Request; provided, however, no Loan shall exceed the then existing
Available Commitment.
(b) Subject to the terms of this Agreement, during the
Commitment Period, the Borrower may borrow, repay, and reborrow such funds.
Except for prepayments made pursuant to Section 2.9, each borrowing and
prepayment of principal of Loans shall be in an amount at least equal to
$100,000. Each borrowing or prepayment shall be deemed a separate borrowing or
prepayment for purposes of the foregoing.
(c) The Loans shall be made and maintained at the Principal
Office and shall be evidenced by the Note.
II.2 Letter of Credit Facility. (a) Upon the terms and
conditions (including, without limitation, the right of the Lender to decline
to issue any Letter of Credit so long as any Default or Event of Default
exists) and relying on the representations and warranties contained in this
Agreement, the Lender agrees, during the Commitment Period, to issue Letters of
Credit following the receipt not less than three Business Days prior to the
requested date for issuance of the relevant Letter of Credit, of a Letter of
Credit Application executed by the Borrower; provided, however, (a) no Letter
of Credit shall have an expiration date which is more than 360 days after the
issuance thereof or subsequent to the Commitment Termination Date, and (b) the
Lender shall not be obligated to issue any Letter of Credit if (i) the face
amount thereof would exceed the Available Commitment, or (ii) after giving
effect to the issuance thereof, (A) the L/C Exposure, when added to the Loan
Balance then outstanding, would exceed the Borrowing Base then in effect, or
(B) the L/C Exposure would exceed $1,000,000.
(b) Should the Lender be called upon by the beneficiary of
any Letter of Credit to honor all or any portion of the commitment thereunder,
whether upon the presentation of drafts or otherwise, such payment by the
Lender on account of such Letter of Credit shall be treated, for all purposes,
as a Loan and an advance against the Note.
II.3 Use of Loan Proceeds and Letters of Credit. (a) The
initial Loan hereunder shall be in the amount necessary to purchase from
Comerica the Existing Notes and to thereupon renew, but not as a novation or
discharge of the Indebtedness of the Borrower evidenced by, the Existing Notes.
The Borrower shall use proceeds of additional Loans for hydrocarbon reserve
acquisitions, development drilling and other general company purposes.
(b) Letters of Credit shall be used for general corporate
purposes of the Borrower; provided, however, no Letter of Credit may be used in
lieu or in support of stay or appeal bonds.
II.4 Interest. Subject to the terms of this Agreement
(including, without limitation, Section 2.17), interest on the Loans shall
accrue and be payable at a rate per annum equal to the Floating Rate. Interest
on all Loans shall be computed on the basis of a year of 365 or 366 days, as
the case may be, and actual days elapsed (including the first day but excluding
the last day) during the period for which payable. Interest provided for herein
shall be calculated on unpaid sums
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actually advanced and outstanding pursuant to the terms of this Agreement and
only for the period from the date or dates of such advances until repayment.
Notwithstanding the foregoing, interest on past-due principal and, to the
extent permitted by applicable law, past-due interest, shall accrue at the
Default Rate, computed on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed (including the first day but excluding the last
day) during the period for which payable, and shall be payable upon demand by
the Lender at any time as to all or any portion of such interest.
II.5 Repayment of Loans and Interest. Accrued and unpaid
interest on the aggregate outstanding Loan Balance shall be due and payable
monthly commencing on the first day of October, 1998, and continuing on the
first day of each calendar month thereafter while any amount of the Loan
Balance remains outstanding, the payment in each instance to be the amount of
interest which has accrued and remains unpaid in respect of the Loan Balance.
The Loan Balance, together with all accrued and unpaid interest thereon, shall
be due and payable on the Commitment Termination Date.
II.6 Outstanding Amounts. The outstanding principal balance
of the Note reflected by the notations by the Lender on its records shall be
deemed rebuttably presumptive evidence of the principal amount owing on the
Note. The liability for payment of principal and interest evidenced by the Note
shall be limited to principal amounts actually advanced and outstanding
pursuant to this Agreement and interest on such amounts calculated in
accordance with this Agreement.
II.7 Time, Place, and Method of Payments. All payments
required pursuant to this Agreement or the Note shall be made in lawful money
of the United States of America and in immediately available funds, shall be
deemed received by the Lender on the next Business Day following receipt if
such receipt is after 2:00 p.m., Central Standard or Daylight Savings Time, as
the case may be, on any Business Day, and shall be made at the Principal
Office. Except as provided to the contrary herein, if the due date of any
payment hereunder or under the Note would otherwise fall on a day which is not
a Business Day, such date shall be extended to the next succeeding Business
Day, and interest shall be payable for any principal so extended for the period
of such extension.
II.8 Borrowing Base Determinations. (a) The Borrowing Base as
of the Closing Date is acknowledged by the Borrower and the Lender to be
$4,300,000. Commencing on October 1, 1998, and continuing thereafter on the
first day of each calendar month through the Commitment Termination Date, the
amount of the Borrowing Base shall be reduced by $200,000.
(b) The Borrowing Base and the amount by which the Borrowing
Base shall be reduced each calendar month shall be redetermined no less
frequently than semi-annually beginning February 1, 1999, on the basis of
information supplied by the Borrower in compliance with the provisions of this
Agreement, including, without limitation, Reserve Reports, and all other
information available to the Lender. Notwithstanding the foregoing, the Lender
may at its discretion
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redetermine the Borrowing Base and the amount by which the Borrowing Base shall
be reduced each calendar month as set forth in Section 2.8 (a) at any time and
from time to time. In addition, the Lender shall, in the normal course of
business following a request of the Borrower, redetermine the Borrowing Base
and the amount by which the Borrowing Base is to be reduced each calendar
month, provided, however, that Lender shall not be obligated to respond to more
than four requests during any calendar year, and in no event shall the Lender
be required to comply with such request to redetermine the Borrowing Base and
the amount by which the Borrowing Base is to be reduced each calendar month,
more than once in any three-month period, including, without limitation, each
scheduled semi-annual redetermination provided for above.
(c) Upon each determination of the Borrowing Base by the
Lender, the Lender shall notify the Borrower orally (confirming such notice
promptly in writing) of such determination, and the Borrowing Base and the
amount by which the Borrowing Base shall be reduced so communicated to the
Borrower shall become effective upon written notification and shall remain in
effect until the next subsequent determination of the Borrowing Base and the
amount by which the Borrowing Base shall be reduced.
(d) The Borrowing Base shall represent the determination by
the Lender, in accordance with the applicable definitions and provisions herein
contained and its customary lending practices for loans of this nature, of the
value, for loan purposes, of the Mortgaged Properties, subject, in the case of
any increase in the Borrowing Base, to the credit approval process of the
Lender. Furthermore, the Borrower acknowledges that the determination of the
Borrowing Base contains an equity cushion (market value in excess of loan
value), which is acknowledged by the Borrower to be essential for the adequate
protection of the Lender.
II.9 Mandatory Prepayments. If at any time the sum of the
Loan Balance and the L/C Exposure exceeds the Borrowing Base then in effect,
the Borrower shall, within 30 days of notice from the Lender of such
occurrence, (a) prepay, or make arrangements acceptable to the Lender for the
prepayment of, the amount of such excess for application on the Loan Balance,
(b) provide additional collateral, of character and value satisfactory to the
Lender in its sole discretion, to secure the Obligations by the execution and
delivery to the Lender of security instruments in form and substance
satisfactory to the Lender, or (c) effect any combination of the alternatives
described in clauses (a) and (b) of this Section and acceptable to the Lender
in its sole discretion.
II.10 Voluntary Prepayments of Loans. Subject to applicable
provisions of this Agreement, the Borrower shall have the right at any time or
from time to time to prepay Loans without prepayment penalty provided, however,
(a) the Borrower shall pay all accrued and unpaid interest on the amounts
prepaid, and (b) no such prepayment shall serve to postpone the repayment when
due of any Obligation.
II.11 Commitment Fee. In addition to interest on the Note as
provided herein and the Engineering Fees and Facility Fees payable hereunder
and to compensate the Lender for maintaining funds available, the Borrower
shall pay to the Lender, in immediately available funds,
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on the first day of October, 1998, and on the first day of each third calendar
month thereafter during the Commitment Period, and on the Commitment
Termination Date, a fee in the amount of one-half percent (1/2%) per annum,
calculated on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed (including the first day but excluding the last day), on
the average daily amount of the Available Commitment during the preceding
quarterly period. The Commitment Fee due on October 1, 1998, shall be
calculated for the period beginning on the Closing Date through September 30,
1998, and the Commitment Fee due on the Commitment Termination Date shall be
calculated from the due date of the immediately preceding Commitment Fee
payment through the Commitment Termination Date.
II.12 Engineering Fee. In addition to interest on the Note as
provided herein and the Commitment Fees and Facility Fees payable hereunder and
to compensate the Lender for the costs of evaluating the Mortgaged Properties
and reviewing the Reserve Reports, the Borrower shall pay to the Lender, in
immediately available funds, on the date of each semi-annual redetermination of
the Borrowing Base and any redetermination of the Borrowing Base at the request
of the Borrower, an engineering fee in the amount of $3,500.
II.13 Facility Fee. In addition to interest on the Note as
provided herein and Commitment Fees and Engineering Fees payable hereunder and
to compensate the Lender for the costs of the extension of credit hereunder,
the Borrower shall pay to the Lender, upon each increase in the Borrowing Base
subsequent to the Closing Date, a fee in an amount equal to one-half percent
(1/2%) of the amount of the relevant increase in the Borrowing Base.
II.14 Letter of Credit Fee. In addition to interest on the
Note as provided herein and Commitment Fees, Engineering Fees and Facility Fees
payable hereunder, the Borrower agrees to pay to the Lender, on the date of
issuance of each Letter of Credit, a fee equal to one and one-half percent (1-
1/2%) per annum, calculated on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but excluding the
last day), on the face amount of such Letter of Credit for the period for which
such Letter of Credit is issued, provided however, the fee with respect to any
Letter of Credit shall never be less than $500; further provided, however, in
the event any such Letter of Credit is canceled prior to its original expiry
date or a payment is made by the Lender with respect to such Letter of Credit,
the Lender shall, within 30 days after such cancellation or the making of such
payment, rebate to the Borrower the unearned portion of any Letter of Credit
Fee. The Borrower also agrees to pay to the Lender on demand its customary
letter of credit transactional fees, including, without limitation, amendment
fees, payable with respect to each Letter of Credit.
II.15 Loans to Satisfy Obligations of Borrower. The Lender
may, but shall not be obligated to, make Loans for the benefit of the Borrower
and apply proceeds thereof to the satisfaction of any condition, warranty,
representation, or covenant of the Borrower contained in this Agreement or any
other Loan Document to which the Borrower is a party. Any such Loan shall be
evidenced by the Note.
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II.16 Security Interest in Accounts; Right of Offset. As
security for the payment and performance of the Obligations, the Borrower
hereby transfers, assigns, and pledges to the Lender and grants to the Lender a
security interest in all funds of the Borrower now or hereafter or from time to
time on deposit with the Lender, with such interest of the Lender to be
retransferred, reassigned, and/or released by the Lender, as the case may be,
at the expense of the Borrower upon payment in full and complete performance by
the Borrower of all Obligations. All remedies as secured party or assignee of
such funds shall be exercisable by the Lender upon the occurrence of any Event
of Default, regardless of whether the exercise of any such remedy would result
in any penalty or loss of interest or profit with respect to any withdrawal of
funds deposited in a time deposit account prior to the maturity thereof.
Furthermore, the Borrower hereby grants to the Lender the right, exercisable at
such time as any Obligation shall mature, whether by acceleration of maturity
or otherwise, of offset or banker's lien against all funds of the Borrower now
or hereafter or from time to time on deposit with the Lender, regardless of
whether the exercise of any such remedy would result in any penalty or loss of
interest or profit with respect to any withdrawal of funds deposited in a time
deposit account prior to the maturity thereof.
II.17 General Provisions Relating to Interest. (a) It is the
intention of the parties hereto to comply strictly with the usury laws of the
State of Texas and the United States of America. In this connection, there
shall never be collected, charged, or received on the sums advanced hereunder
interest in excess of that which would accrue at the Highest Lawful Rate. The
Borrower agrees that, to the extent the Highest Lawful Rate is determined with
reference to the laws of the State of Texas, the Highest Lawful Rate shall be
the "weekly" rate as defined in Chapter 1D of Subtitle 1 of Title 79, Texas
Revised Civil Statutes, provided that the Lender may, at its election,
substitute for the "weekly" rate ceiling the "amount" or "quarterly" ceiling,
as such terms are defined in the aforesaid statute, upon the giving of notices
provided in such statute and effective upon the giving of such notices. The
Lender may also rely, to the extent permitted by applicable laws of the State
of Texas or the United States of America, on alternative maximum rates of
interest under other laws of the State of Texas or the United States of America
applicable to the Lender, if greater.
(b) Notwithstanding anything herein or in the Note to the
contrary, during any Limitation Period, the interest rate to be charged on
amounts evidenced by the Note shall be the Highest Lawful Rate, and the
obligation, if any, of the Borrower for the payment of fees or other charges
deemed to be interest under applicable law shall be suspended. During any
period or periods of time following a Limitation Period, to the extent
permitted by applicable laws of the State of Texas or the United States of
America, the interest rate to be charged hereunder shall remain at the Highest
Lawful Rate until such time as there has been paid to the Lender (i) the amount
of interest in excess of that accruing at the Highest Lawful Rate that the
Lender would have received during the Limitation Period had the interest rate
remained at the otherwise applicable rate, and (ii) all interest and fees
otherwise payable to the Lender but for the effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid
on the Note or under this Agreement or any other Loan Document include amounts
which by law are deemed interest and which would exceed the amount permitted if
the Highest Lawful Rate were in effect, the Borrower
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stipulates that such payment and collection will have been and will be deemed
to have been, to the extent permitted by applicable laws of the State of Texas
or the United States of America, the result of mathematical error on the part
of the Borrower and the Lender; and the Lender shall promptly refund the amount
of such excess (to the extent only of such interest payments in excess of that
which would have accrued and been payable on the basis of the Highest Lawful
Rate) upon discovery of such error by the Lender or notice thereof from the
Borrower. In the event that the maturity of any Obligation is accelerated, by
reason of an election by the Lender or otherwise, or in the event of any
required or permitted prepayment, then the consideration constituting interest
under applicable laws may never exceed the Highest Lawful Rate; and excess
amounts paid which by law are deemed interest, if any, shall be credited by the
Lender on the principal amount of the Obligations, or if the principal amount
of the Obligations shall have been paid in full, refunded to the Borrower.
(d) All sums paid, or agreed to be paid, to the Lender for
the use, forbearance and detention of the proceeds of any advance hereunder
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full term hereof until paid in full so
that the actual rate of interest is uniform but does not exceed the Highest
Lawful Rate throughout the full term hereof.
II.18 Letters in Lieu of Transfer Orders. The Lender agrees
that none of the letters in lieu of transfer or division orders provided by the
Borrower pursuant to Section 3.1(h)(iii) or Section 5.7 will be sent to the
addressees thereof prior to the occurrence of an Event of Default, at which
time the Lender may, at its option and in addition to the exercise of any of
its other rights and remedies, send any or all of such letters.
II.19 Limited Power of Attorney. The Borrower hereby
designates the Lender as its agent and attorney-in-fact, to act in its name,
place, and stead for the limited purposes of completing and, upon the
occurrence of an Event of Default, delivering any and all of the letters in
lieu of transfer orders delivered by the Borrower to the Lender pursuant to
Section 3.1(h)(iii) or Section 5.7, including, without limitation, completing
any blanks contained in such letters and attaching exhibits thereto describing
the relevant Collateral. The Borrower hereby ratifies and confirms all that the
Lender shall lawfully do or cause to be done by virtue of this power of
attorney and the rights granted with respect to this power of attorney. This
limited power of attorney is coupled with the interests of the Lender in the
Collateral, shall commence and be in full force and effect as of the Closing
Date and shall remain in full force and effect and shall be irrevocable so long
as any Obligation remains outstanding or unpaid or any Commitment exists. The
limited powers conferred on the Lender by this appointment are solely to
protect the interests of the Lender under the Loan Documents and shall not
impose any duty upon the Lender to exercise any such powers. The Lender shall
be accountable only for amounts that it actually receives as a result of the
exercise of such powers and shall not be responsible to the Borrower or any
other Person for any act or failure to act with respect to such powers, except
for gross negligence or willful misconduct.
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ARTICLE III
CONDITIONS
The obligations of the Lender to enter into this Agreement
and to make Loans and issue Letters of Credit are subject to the satisfaction
of the following conditions precedent:
III.1 Receipt of Loan Documents and Other Items. The Lender
shall have no obligation under this Agreement unless and until all matters
incident to the consummation of the transactions contemplated herein,
including, without limitation, the review by the Lender or its counsel of the
title of the Borrower to its Oil and Gas Properties, shall be satisfactory to
the Lender, and the Lender shall have received, reviewed, and approved the
following documents and other items, appropriately executed when necessary and,
where applicable, acknowledged by one or more authorized officers of the
Borrower or the Guarantor, as the case may be, all in form and substance
satisfactory to the Lender and dated, where applicable, of even date herewith
or a date prior thereto and acceptable to the Lender:
(a) multiple counterparts of this Agreement, as requested by
the Lender;
(b) the Note;
(c) copies of the Certificate of Incorporation or Articles of
Incorporation, as the case may be, and the Bylaws and all amendments
to any of the foregoing of the Guarantor and the Borrower, accompanied
by a certificate issued by the secretary or an assistant secretary of
the relevant party, to the effect that each such copy is correct and
complete;
(d) certificates of incumbency and specimen signatures of all
officers of the Guarantor and the Borrower who are authorized to
execute Loan Documents on behalf of the relevant entity, each such
certificate being executed by the secretary or an assistant secretary
of the relevant entity;
(e) copies of resolutions of the directors approving the Loan
Documents to be executed by the relevant entity and authorizing the
transactions contemplated herein and therein, duly adopted by the
Guarantor and the Borrower, accompanied by certificates of the
secretary or an assistant secretary of the relevant entity, to the
effect that such copies are true and correct copies of resolutions
duly adopted at a meeting or by unanimous consent of the directors of
the relevant entity and that such resolutions constitute all the
resolutions adopted with respect to such transactions, have not been
amended, modified, or revoked in any respect, and are in full force
and effect as of the date of such certificate;
(f) copy of the Certificate of Domestication evidencing the
continuation of Optima Petroleum into the State of Delaware under
Canadian law and the
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Domestication of Optima Petroleum under Delaware law certified by the
Secretary of State of the State of Delaware as being a true and
correct copy of such document as filed in the office of such Secretary
of State;
(g) copies of the Articles of Merger evidencing the merger of
American Optima Energy into PetroQuest Energy, Inc., a Louisiana
corporation the Borrower certified in each case by the Secretary of
State of the State of Louisiana as being a true and correct copy of
the relevant documents filed in the office of such Secretary of State;
(h) the following documents establishing Liens in favor of
the Lender in and to the Collateral;
(i) Ratification and Amendment of the existing mortgage
documents in the name of American Explorer;
(j) Assignment of (i) all promissory notes executed by Optima
Energy and Optima Petroleum in favor of Comerica Bank and (ii) all
Liens against any Property of Optima Energy and Optima Petroleum in
favor of Comerica Bank.
(k) Ratification and Amendment of Mortgage documents in the
name of Optima Energy;
(l) The following documents establishing liens in favor of
the Lender in and to the Collateral: (i) Mortgage, Pledge, Assignment
of Production and Security Agreement from the Borrower covering those
of its Oil and Gas Properties situated in or offshore the State of
Louisiana designated by the Lender and all improvements, personal
property, fixtures, contracts and accounts related to such Oil and Gas
Properties and Deed of Trust, Security Agreement, Financing Statement
and Assignment of Production from the Borrower covering those of its
Oil and Gas Properties situated in or offshore the State of Texas
designated by the Lender and all improvements, personal property,
fixtures, contracts and accounts related to such Oil and Gas
Properties;
(ii) Financing Statements from the Borrower, as
debtor, constituent to the instruments described in clause
(i) above;
(iii) undated letters, in form and substance
satisfactory to the Lender, from the Borrower to each
purchaser of production and disburser of the proceeds of
production from or attributable to the Mortgaged Properties,
together with additional letters with the addressees left
blank, authorizing and directing the addressees to make
future payments attributable to production from the Mortgaged
Properties directly to the Lender;
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(m) Security Agreement (Pledge) by the Guarantor covering the
issued and outstanding capital stock of the Borrower;
(n) compiled pro-forma balance sheet of Optima Petroleum,
prepared as of March 31, 1998, and the compiled pro-forma combined
statements of operations of Optima Petroleum and American Explorer,
for the three months ended March 31, 1998, and for the year ended
December 31, 1997 (such pro-forma financial statements included in the
Proxy Statement/Information Circular/Prospectus filed with the SEC by
Optima Petroleum on or about July 20, 1998).
(o) certificates dated as of a recent date from the Secretary
of State or other appropriate Governmental Authority evidencing the
existence or qualification and good standing of each of the Guarantor
and the Borrower in its jurisdiction of incorporation and, as to the
Borrower, in the State of Texas;
(p) results of searches of the UCC Records of the Secretary
of State of the State of Louisiana and the Secretary of State of the
State of Texas from a source acceptable to the Lender and reflecting
no Liens, other than Permitted Liens, against any of the Collateral as
to which perfection of a Lien is accomplished by the filing of a
financing statement;
(q) copies of all operating, lease, sublease, royalty, sales,
exchange, processing, farmout, bidding, pooling, unitization,
communitization, and other agreements relating to the Mortgaged
Properties as reasonably requested by the Lender;
(r) the opinion of Xxxxxxx, Xxxxxxx, Torian, Diaz, XxXxxxxx &
Xxxx, counsel to the Guarantor and the Borrower, in substantially the
form attached hereto as Exhibit IV, with such changes to such form as
may be approved by the Lender;
(s) engineering reports covering the Oil and Gas Properties
of the Borrower;
(t) certificates evidencing the insurance coverage required
pursuant to Section 5.18; and
(u) such other agreements, documents, instruments, opinions,
certificates, waivers, consents, and evidence as the Lender may
reasonably request.
III.2 Each Loan and Letter of Credit. In addition to the
conditions precedent stated elsewhere herein, the Lender shall not be obligated
to make any Loan or issue any Letter of Credit unless:
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(a) the Borrower shall have delivered to the Lender (i) a
Borrowing Request at least the requisite time prior to the requested
date for the relevant Loan or (ii) a Letter of Credit Application at
least three Business Days prior to the requested issuance date for the
relevant Letter of Credit, as the case may be, and each statement or
certification made in such Borrowing Request or Letter of Credit
Application, as the case may be, shall be true and correct in all
material respects on the requested date for such Loan or the issuance
date of such Letter of Credit;
(b) no Event of Default or Default shall exist or will occur
as a result of the making of the requested Loan or the issuance of the
requested Letter of Credit;
(c) if requested by the Lender, Borrower shall have delivered
evidence satisfactory to the Lender substantiating any of the matters
contained in this Agreement which are necessary to enable the Borrower
to qualify for such Loan or the issuance of such Letter of Credit;
(d) the Lender shall have received, reviewed, and approved
such additional documents and items as described in Section 3.1 as may
be requested by the Lender with respect to such Loan or Letter of
Credit;
(e) no event shall have occurred which, in the reasonable
opinion of the Lender, could have a Material Adverse Effect;
(f) each of the representations and warranties contained in
this Agreement shall be true and correct and shall be deemed to be
repeated by the Guarantor and the Borrower as if made on the requested
date for such Loan or the issuance date of such Letter of Credit;
(g) all of the Security Instruments shall be in full force
and effect and provide to the Lender the security intended thereby;
(h) neither the consummation of the transactions contemplated
hereby nor the making of such Loan nor the issuance of such Letter of
Credit shall contravene, violate, or conflict with any Requirement of
Law;
(i) the Guarantor or the Borrower, as the case may be, shall
hold full legal title to the Collateral provided by it and be the sole
beneficial owner thereof;
(j) the Lender shall have received the payment of all
Commitment Fees, Engineering Fees, Facility Fees, Letter of Credit
Fees and other fees payable to the Lender hereunder and the Lender
shall have received reimbursement from the Borrower, or special legal
counsel for the Lender shall have received payment from the Borrower,
for (i) all reasonable fees and expenses of counsel to the Lender for
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which the Borrower is responsible pursuant to applicable provisions of
this Agreement and for which invoices have been presented as of or
prior to the date of the relevant Loan or Letter of Credit
Application, and (ii) estimated fees charged by filing officers and
other public officials incurred or to be incurred in connection with
the filing and recordation of any Security Instruments, for which
invoices have been presented as of or prior to the date of the
requested Loan or Letter of Credit Application; and
(k) all matters incident to the consummation of the
transactions hereby contemplated shall be reasonably satisfactory to
the Lender.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make
the Loans and issue Letters of Credit, the Guarantor and the Borrower represent
and warrant to the Lender (which representations and warranties shall survive
the delivery of the Note) that:
IV.1 Due Authorization. The execution and delivery by the
Borrower of this Agreement and the borrowings hereunder, the execution and
delivery by the Borrower of the Note, the payment by the Borrower of the Note
and interest and fees provided for in the Note and this Agreement, the
execution and delivery of the Security Instruments by the Borrower or the
Guarantor, as the case may be, and the performance of all obligations of the
Borrower or the Guarantor, as the case may be, under the Loan Documents are
within the power of the Borrower or the Guarantor, as the case may be, have
been duly authorized by all necessary corporate company action by the Borrower
or the Guarantor, as the case may be, and do not and will not (a) require the
consent of any Governmental Authority, (b) contravene or conflict with any
Requirement of Law, (c) contravene or conflict with any indenture, instrument,
or other agreement to which the Borrower or the Guarantor, as the case may be,
is a party or by which any Property of the Borrower or the Guarantor, as the
case may be, may be presently bound or encumbered, or (d) result in or require
the creation or imposition of any Lien in, upon or of any Property of the
Borrower or the Guarantor, as the case may be, under any such indenture,
instrument, or other agreement, other than the Loan Documents.
IV.2 Existence. Each of the Guarantor and the Borrower is a
corporation duly organized, legally existing, and in good standing under the
laws of its state of incorporation and is duly qualified as a foreign
corporation and is in good standing in all jurisdictions wherein the ownership
of Property or the operation of its business necessitates such qualification,
other than those jurisdictions wherein the failure to so qualify will not have
a Material Adverse Effect.
IV.3 Valid and Binding Obligations. All Loan Documents to
which it is a party, when duly executed and delivered by it, will be the legal,
valid, and binding obligations of the
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Borrower or the Guarantor, as the case may be, enforceable against such entity
in accordance with their respective terms.
IV.4 Security Instruments. The provisions of each Security
Instrument are effective to create, in favor or for the benefit of the Lender,
a legal, valid, and enforceable Lien in all right, title, and interest of the
Borrower or the Guarantor, as the case may be, in the Collateral described
therein, which Liens, assuming the accomplishment of recording and filing in
accordance with applicable laws prior to the intervention of rights of other
Persons, shall constitute fully perfected first-priority Liens.
IV.5 Title to Assets. Each of the Borrower and the Guarantor
has good and marketable title to all of its Properties, free and clear of all
Liens except Permitted Liens.
IV.6 Scope and Accuracy of Financial Statements. The
unaudited pro-forma Financial Statements referred to in clause (n) of Section
3.1 present fairly the financial position and results of operations of the
Guarantor, on a consolidated basis with its Consolidated Subsidiaries and in
accordance with GAAP, as at the relevant point in time or for the period
indicated, as applicable. No event or circumstance has occurred since July 2,
1998, which could reasonably be expected to have a Material Adverse Effect.
IV.7 No Material Misstatements. No information, exhibit,
statement, or report furnished to the Lender by or at the direction of the
Guarantor or the Borrower in connection with this Agreement contains any
material misstatement of fact or omits to state a material fact or any fact
necessary to make the statements contained therein not misleading as of the
date made or deemed made.
IV.8 Liabilities, Litigation, and Restrictions. Other than as
listed under the heading "Liabilities" on Exhibit V attached hereto, neither
the Guarantor nor the Borrower has any liabilities, direct, or contingent,
which may materially and adversely affect its business or operations or its
ownership of any Collateral. Except as set forth under the heading "Litigation"
on Exhibit V hereto, no litigation or other action of any nature affecting the
Guarantor or the Borrower is pending before any Governmental Authority or, to
the best knowledge of the Guarantor or the Borrower, as the case may be,
threatened against or affecting the Guarantor or the Borrower. No unusual or
unduly burdensome restriction, restraint or hazard exists by contract,
Requirement of Law, or otherwise relative to the business or operations of the
Guarantor or the Borrower or the ownership and operation of the Collateral
other than such as relate generally to Persons engaged in business activities
similar to those conducted by the Guarantor or the Borrower.
IV.9 Authorizations; Consents. Except as expressly
contemplated by this Agreement, no authorization, consent, approval, exemption,
franchise, permit, or license of, or filing with, any Governmental Authority or
any other Person is required to authorize or is otherwise required in
connection with the valid execution and delivery by the Guarantor or the
Borrower of those of the Loan Documents or any instrument contemplated hereby
to which it is a party, the
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payment by the Borrower of the Note and interest and fees provided in the Note
and this Agreement, or the performance by the Borrower of the other
Obligations.
IV.10 Compliance with Laws. Each of the Guarantor and the
Borrower and its Property, including, without limitation, the Mortgaged
Property, are in compliance with all applicable Requirements of Law, including,
without limitation, Environmental Laws, the Natural Gas Policy Act of 1978, as
amended, and ERISA, except to the extent non-compliance with any such
Requirements of Law could not reasonably be expected to have a Material Adverse
Effect.
IV.11 ERISA. Neither the Guarantor nor the Borrower maintains
or has maintained any Plan or currently contributes to or has any obligation to
contribute to or otherwise has any liability with respect to any Plan.
IV.12 Environmental Laws. To the best knowledge and belief of
the Guarantor and the Borrower, except as would not have a Material Adverse
Effect, or as described on Exhibit V under the heading "Environmental Matters:"
(a) no Property of either the Guarantor or the Borrower is
currently on or has ever been on, or is adjacent to any Property which
is on or has ever been on, any federal or state list of Superfund
Sites;
(b) no Hazardous Substances have been generated, transported,
and/or disposed of by the Guarantor or the Borrower at a site which
was, at the time of such generation, transportation, and/or disposal,
or has since become, a Superfund Site;
(c) except in accordance with applicable Requirements of Law
or the terms of a valid permit, license, certificate, or approval of
the relevant Governmental Authority, no Release of Hazardous
Substances by the Guarantor or the Borrower or from, affecting, or
related to any Property of the Guarantor or the Borrower or adjacent
to any Property of the Guarantor or the Borrower has occurred; and
(d) no Environmental Complaint has been received by the
Guarantor or the Borrower.
IV.13 Compliance with Federal Reserve Regulations. No
transaction contemplated by the Loan Documents is in violation of any
regulations promulgated by the Board of Governors of the Federal Reserve
System, including, without limitation, Regulations G, T, U, or X.
IV.14 Investment Company Act Compliance. Neither the
Guarantor nor the Borrower is directly or indirectly controlled by or acting on
behalf of any Person which is, an "investment company" or an "affiliated
person" of an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
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IV.15 Public Utility Holding Company Act Compliance. Neither
of the Guarantor nor the Borrower is a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
IV.16 Proper Filing of Tax Returns; Payment of Taxes Due.
Each of the Guarantor and the Borrower has duly and properly filed all United
States income tax return and all other tax returns which are required to be
filed by it and has paid all taxes due except such as are being contested in
good faith and as to which adequate provisions and disclosures have been made.
The respective charges and reserves on the books of each such entity with
respect to taxes and other governmental charges are adequate.
IV.17 Refunds. No orders of, proceedings pending before, or
other requirements of, the Federal Energy Regulatory Commission, the Texas
Railroad Commission, or any other Governmental Authority exist which could
result in the Borrower being required to refund any material portion of the
proceeds received or to be received from the sale of hydrocarbons constituting
part of the Mortgaged Property.
IV.18 Gas Contracts. Except as described on Exhibit V under
the heading "Gas Contracts," the Borrower (a) is not obligated in any material
respect by virtue of any prepayment made under any contract containing a
"take-or-pay" or "prepayment" provision or under any similar agreement to
deliver hydrocarbons produced from or allocated to any of the Mortgaged
Properties at some future date without receiving full payment therefor within
90 days of delivery, and (b) has not produced gas, in any material amount,
subject to, and neither the Borrower nor any of the Mortgaged Properties is
subject to, balancing rights of third parties or subject to balancing duties
under governmental requirements, except as to such matters for which the
Borrower has established monetary reserves adequate in amount to satisfy such
obligations and has segregated such reserves from other accounts.
IV.19 Intellectual Property. Each of the Guarantor and the
Borrower owns or is licensed to use all Intellectual Property necessary to
conduct all business material to its condition (financial or otherwise),
business, or operations as such business is currently conducted. No claim has
been asserted or is pending by any Person with respect to the use of any such
Intellectual Property or challenging or questioning the validity or
effectiveness of any such Intellectual Property; and neither the Guarantor nor
the Borrower knows of any valid basis for any such claim. The use of such
Intellectual Property by the Guarantor or the Borrower does not infringe on the
rights of any Person, except for such claims and infringements as do not, in
the aggregate, give rise to any material liability on the part of the Guarantor
or the Borrower.
IV.20 Casualties or Taking of Property. Except as disclosed
on Exhibit V under the heading "Casualties," since July 2, 1998, neither the
business nor any Property of either the Guarantor or the Borrower has been
materially adversely affected as a result of any fire, explosion, earthquake,
flood, drought, windstorm, accident, strike or other labor disturbance,
embargo,
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requisition or taking of Property, or cancellation of contracts, permits, or
concessions by any Governmental Authority, riot, activities of armed forces, or
acts of God.
IV.21 Locations of Guarantor and Borrower. The principal
place of business and chief executive office of each of the Guarantor and the
Borrower is located at the address of such entity set forth in Section 8.3 or
at such other location as such entity may have, by proper written notice
hereunder, advised the Lender, provided that such other location is within a
state in which appropriate financing statements from such entity in favor of
the Lender have been filed.
IV.22 Subsidiaries. Except for the Borrower, which are
Subsidiaries of the Guarantor, neither the Guarantor nor the Borrower has any
Subsidiaries.
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or
any Commitment exists:
V.1 Maintenance and Access to Records. Each of the Guarantor
and the Borrower shall keep adequate records, in accordance with GAAP, of all
its transactions so that at any time, and from time to time, its true and
complete financial condition may be readily determined, and promptly following
the reasonable request of the Lender, make such records available for
inspection by the Lender and, at the reasonable expense of the Borrower, allow
the Lender to make and take away copies thereof; provided, however, if there is
no Default or Event of Default, such reasonable expenses payable by the
Borrower hereunder shall be limited to reasonable copying charges, and shall
not include fees payable to outside accountants or other professional service
providers.
V.2 Quarterly Financial Statements; Compliance Certificates.
The Guarantor shall deliver to the Lender, (a) on or before the 45th day after
the close of each quarterly period of each fiscal year of the Guarantor, a copy
of the unaudited Financial Statements of the Guarantor, on a consolidated basis
with its Consolidated Subsidiaries, as at the close of such quarterly period
and from the beginning of such fiscal year to the end of such period, and the
beginning of such quarterly period to the end of such period as appropriate,
such Financial Statements to be certified by a Responsible Officer of the
Guarantor as having been prepared in accordance with GAAP consistently applied
and as a fair representation of the condition of the Guarantor and its
Consolidated Subsidiaries, subject to changes resulting from normal year-end
audit adjustments, and (b) on or before the 45th day after the close of each
such quarterly period and 120 days from fiscal year end, a Compliance
Certificate, together with a work sheet which supports such certificate.
V.3 Annual Financial Statements. The Guarantor shall deliver
to the Lender, on or before the 120th day after the close of each fiscal year
of the Guarantor, a copy of the annual audited (by an accounting firm
acceptable to the Lender) Financial Statements of the Guarantor, on a
consolidated basis with its Consolidated Subsidiaries.
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V.4 Oil and Gas Reserve Reports. (a) The Borrower shall
deliver to the Lender no later than April 1 of each year during the term of
this Agreement, engineering reports in form and substance satisfactory to the
Lender, certified by any nationally or regionally-recognized independent
consulting petroleum engineers acceptable to the Lender, as fairly and
accurately setting forth (i) the proved and producing, shut-in, behind-pipe,
and undeveloped oil and gas reserves (separately classified as such)
attributable to the Oil and Gas Properties as of January 1 of the year for
which such reserve reports are furnished, (ii) the aggregate present value of
the future net income with respect to such Oil and Gas Properties, discounted
at a stated per annum discount rate of proved and producing reserves, (iii)
projections of the annual rate of production, gross income, and net income with
respect to such proved and producing reserves, and (iv) information with
respect to the "take-or-pay," "prepayment," and gas-balancing liabilities of
the Borrower.
(b) The Borrower shall deliver to the Lender no later than
October 1 of each year during the term of this Agreement, engineering reports
in form and substance satisfactory to the Lender prepared by or under the
supervision of either the chief petroleum engineer of the Borrower or an
independent petroleum engineer evaluating the Oil and Gas Properties as of July
1 of the year for which such reserve reports are furnished and updating the
information provided in the reports submitted pursuant to Section 5.4(a).
(c) The Borrower shall also deliver to the Lender no later
than April 1 and October 1 of each year, additional data with respect to the
Oil and Gas Properties concerning pricing, quantities of production, volumes of
production sold, purchasers of production, gross revenues, expenses, and such
other information and engineering and geological data with respect thereto as
the Lender may reasonably request.
V.5 Title Opinions; Title Defects. Promptly upon the request
of the Lender, the Borrower shall furnish to the Lender title opinions, in form
and substance and by counsel satisfactory to the Lender, or other confirmation
of title acceptable to the Lender, covering Oil and Gas Properties constituting
a percentage of value acceptable to the Lender and such value, determined by
the Lender in its sole discretion, of the Mortgaged Properties; and promptly,
but in any event within 60 days after notice by the Lender of any defect,
material in value in the opinion of the Lender, in the title of the Borrower to
any of its Oil and Gas Properties, clear such title defect, and, in the event
any such title defect is not cured in a timely manner, pay all related costs
and fees incurred by the Lender to do so.
V.6 Notices of Certain Events. Each of the Guarantor and the
Borrower shall deliver to the Lender, immediately upon having knowledge of the
occurrence of any of the following events or circumstances, a written statement
with respect thereto, signed by a Responsible Officer of the relevant entity
and setting forth the relevant event or circumstance and the steps being taken
by the relevant entity with respect to such event or circumstance:
(a) any Default or Event of Default;
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(b) any default or event of default under any contractual
obligation of the Guarantor or the Borrower, or any litigation,
investigation, or proceeding between the Guarantor or the Borrower and
any Governmental Authority which, in either case, if not cured or if
adversely determined, as the case may be, could reasonably be expected
to have a Material Adverse Effect;
(c) any litigation or proceeding involving the Guarantor or
the Borrower as a defendant or in which any Property of the Guarantor
or the Borrower is subject to a claim and in which the amount involved
is $50,000 or more and which is not covered by insurance or in which
injunctive or similar relief is sought;
(d) the receipt by the Guarantor or the Borrower of any
Environmental Complaint;
(e) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority or other Person of which
the Guarantor or the Borrower has actual knowledge concerning the
environmental condition of, or relating to, any Property of the
Guarantor or the Borrower or any Property of another Person adjacent
to any Property of the Guarantor or the Borrower following any
allegation of a violation of any Requirement of Law;
(f) any Release of Hazardous Substances of which the
Guarantor or the Borrower has actual knowledge from, affecting, or
related to any Property of the Guarantor or the Borrower or any
Property of another Person adjacent to any Property of the Guarantor
or the Borrower except in accordance with applicable Requirements of
Law or the terms of a valid permit, license, certificate, or approval
of the relevant Governmental Authority, or the violation of any
Environmental Law, or the revocation, suspension, or forfeiture of or
failure to renew, any permit, license, registration, approval, or
authorization which could reasonably be expected to have a Material
Adverse Effect;
(g) the change in identity or address of any Person remitting
to the Borrower proceeds from the sale of hydrocarbon production from
or attributable to any Mortgaged Property;
(h) any change in the senior management of the Guarantor or
the Borrower; and
(i) any other event or condition which could reasonably be
expected to have a Material Adverse Effect.
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V.7 Letters in Lieu of Transfer Orders; Division Orders.
Promptly upon request by the Lender at any time and from time to time, and
without limitation on the rights of the Lender pursuant to Sections 2.18 and
2.19, the Borrower shall execute such letters in lieu of transfer orders, in
addition to the letters signed by the Borrower and delivered to the Lender in
satisfaction of the condition set forth in Section 3.1(h)(iii) and/or division
and/or transfer orders as are necessary or appropriate to transfer and deliver
to the Lender proceeds from or attributable to any Mortgaged Property.
V.8 Additional Information. Each of the Guarantor and the
Borrower shall furnish to the Lender, promptly upon the reasonable request of
the Lender, such additional financial or other information concerning the
assets, liabilities, operations, and transactions of the Guarantor or the
Borrower as the Lender may from time to time request; and notify the Lender not
less than ten Business Days prior to the occurrence of any condition or event
that may change the proper location for the filing of any financing statement
or other public notice or recording for the purpose of perfecting a Lien in any
Collateral, including, without limitation, any change in its name or the
location of its principal place of business or chief executive office; and upon
the reasonable request of the Lender, execute such additional Security
Instruments as may be necessary or appropriate in connection therewith.
V.9 Compliance with Laws. Except to the extent the failure to
comply or to cause compliance would not have a Material Adverse Effect, each of
the Guarantor and the Borrower shall comply with all applicable Requirements of
Law, including, without limitation, (a) the Natural Gas Policy Act of 1978, as
amended, (b) ERISA, (c) Environmental Laws, and (d) all permits, licenses,
registrations, approvals, and authorizations (i) related to any natural or
environmental resource or media located on, above, within, in the vicinity of,
related to or affected by any Property of the Guarantor or the Borrower, (ii)
required for the performance of the operations of the Guarantor or the
Borrower, or (iii) applicable to the use, generation, handling, storage,
treatment, transport, or disposal of any Hazardous Substances; and, on a best
efforts basis, the Guarantor and the Borrower shall cause all employees, crew
members, agents, contractors, subcontractors, and future lessees (pursuant to
appropriate lease provisions) of the Guarantor or the Borrower, while such
Persons are acting within the scope of their relationship with the Guarantor or
the Borrower, to comply with all such Requirements of Law as may be necessary
or appropriate to enable the Guarantor or the Borrower to so comply.
V.10 Payment of Assessments and Charges. Each of the
Guarantor and the Borrower shall pay all taxes, assessments, governmental
charges, rent, and other Indebtedness which, if unpaid, might become a Lien
against the Property of the Guarantor or the Borrower, except any of the
foregoing being contested in good faith and as to which adequate reserve in
accordance with GAAP has been established or unless failure to pay would not
have a Material Adverse Effect.
V.11 Maintenance of Corporate and Limited Liability Company
Existence and Good Standing. Each of the Guarantor and the Borrower shall
maintain its corporate or limited liability company existence or qualification
and good standing in its jurisdiction of organization and
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in all jurisdictions wherein the Property now owned or hereafter acquired by it
or the business now or hereafter conducted by it necessitates such
qualification, unless the failure to do so would not have a Material Adverse
Effect.
V.12 Payment of Note; Performance of Obligations. The
Borrower shall pay the Note according to the reading, tenor, and effect
thereof, as modified hereby, and do and perform every act and discharge all of
the other Obligations.
V.13 Further Assurances. Each of the Guarantor and the
Borrower shall promptly cure any defects in the execution and delivery of any
of the Loan Documents to which it is a party and all agreements contemplated
thereby, and execute, acknowledge, and deliver such other assurances and
instruments as shall, in the opinion of the Lender, be necessary to fulfill the
terms of the Loan Documents to which it is a party.
V.14 Initial Fees and Expenses of Counsel to Lender. Upon
request by the Lender, the Borrower shall reimburse the Lender promptly for all
reasonable fees and expenses of Xxxxxxx Xxxxxx L.L.P., special counsel to the
Lender, in connection with the preparation of this Agreement and all
documentation contemplated hereby, the satisfaction of the conditions precedent
set forth herein, the filing and recordation of Security Instruments, and the
consummation of the transactions contemplated in this Agreement.
V.15 Subsequent Fees and Expenses of Lender. Upon request by
the Lender, the Borrower shall reimburse the Lender promptly (to the fullest
extent permitted by law) for all amounts reasonably expended, advanced, or
incurred by or on behalf of the Lender to satisfy any obligation of the
Guarantor or the Borrower under any of the Loan Documents; to collect the
Obligations; to ratify, amend, restate, or prepare additional Loan Documents,
as the case may be; for the filing and recordation of Security Instruments; to
enforce the rights of the Lender under any of the Loan Documents; and to
protect the Properties or business of the Guarantor or the Borrower, including,
without limitation, the Collateral, which amounts shall be deemed compensatory
in nature and liquidated as to amount upon notice to the Borrower by the Lender
and which amounts shall include, but not be limited to (a) all court costs, (b)
reasonable attorneys' fees, (c) reasonable fees and expenses of auditors and
accountants incurred to protect the interests of the Lender, (d) fees and
expenses incurred in connection with the participation by the Lender as a
member of the creditors' committee in a case commenced under any Insolvency
Proceeding, (e) fees and expenses incurred in connection with lifting the
automatic stay prescribed in ss.362 Title 11 of the United States Code, and (f)
fees and expenses incurred in connection with any action pursuant to ss.1129
Title 11 of the United States Code all reasonably incurred by the Lender in
connection with the collection of any sums due under the Loan Documents,
together with interest at the per annum interest rate equal to the Floating
Rate, calculated on a basis of a calendar year of 365 or 366 days, as the case
may be,, counting the actual number of days elapsed, on each such amount from
the date of notification that the same was expended, advanced, or incurred by
the Lender until the date it is repaid to the Lender, with the obligations
under this Section surviving the non-assumption of this Agreement in a case
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commenced under any Insolvency Proceeding and being binding upon the Borrower
and/or a trustee, receiver, custodian, or liquidator of the Borrower appointed
in any such case.
V.16 Operation of Oil and Gas Properties. The Borrower shall
develop, maintain, and operate its Oil and Gas Properties in a prudent and
workmanlike manner in accordance with industry standards.
V.17 Maintenance and Inspection of Properties. Each of the
Guarantor and the Borrower shall maintain all of its tangible Properties in
good repair and condition, ordinary wear and tear excepted; make all necessary
replacements thereof and operate such Properties in a good and workmanlike
manner; and permit any authorized representative of the Lender, at their sole
risk, to visit and inspect, at the reasonable expense of the Borrower, any
tangible Property of the Guarantor or the Borrower.
V.18 Maintenance of Insurance. Each of the Guarantor and the
Borrower shall maintain insurance with respect to its Properties and businesses
against such liabilities, casualties, risks, and contingencies as is customary
in the relevant industry and sufficient to prevent a Material Adverse Effect,
all such insurance to be in amounts and from insurers acceptable to the Lender
and, within 60 days of the Closing Date for property damage insurance covering
Collateral and business interruption insurance, if any, maintained by the
Borrower, and, upon any renewal of any such insurance and at other times upon
request by the Lender, furnish to the Lender evidence, satisfactory to the
Lender, of the maintenance of such insurance naming the Lender as loss payee.
The Lender shall have the right to collect, and the Borrower hereby assigns to
the Lender, any and all monies that may become payable under any policies of
insurance relating to business interruption or by reason of damage, loss, or
destruction of any of the Collateral. In the event of any damage, loss, or
destruction for which insurance proceeds relating to business interruption or
Collateral exceed $25,000, the Lender may, at its option, apply all such sums
or any part thereof received by it toward the payment of the Obligations,
whether matured or unmatured, application to be made first to interest and then
to principal, and shall deliver to the Borrower the balance, if any, after such
application has been made. In the event of any such damage, loss, or
destruction for which insurance proceeds are $25,000 or less, provided that no
Default or Event of Default has occurred and is continuing, the Lender shall
deliver any such proceeds received by it to the Borrower. In the event the
Lender receives insurance proceeds from any insurance maintained by the
Borrower but not attributable to any Collateral or business interruption, the
Lender shall deliver any such proceeds to the Borrower.
V.19 INDEMNIFICATION. EACH OF THE GUARANTOR AND THE BORROWER
SHALL INDEMNIFY AND HOLD THE LENDER AND ITS SHAREHOLDERS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE
BENEFIT OF THE LENDER UNDER ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES,
ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL
ACTIONS,
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REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES
INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS'
FEES AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM
(A) THE PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF
THE GUARANTOR OR THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B)
ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE GUARANTOR
OR THE BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY THE
GUARANTOR OR THE BORROWER OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT,
CONTRACTOR, OR SUBCONTRACTOR OF THE GUARANTOR OR THE BORROWER OR ANY OTHER
PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH
THE HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP,
TRANSPORTATION, OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR
PRESENT ON OR UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER
ANY PROPERTY OF THE GUARANTOR OR THE BORROWER, (D) ANY CONTAMINATION OF ANY
PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH THE GENERATION, USE,
HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY
THE GUARANTOR OR THE BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR, OR
SUBCONTRACTOR OF THE GUARANTOR OR THE BORROWER WHILE SUCH PERSONS ARE ACTING
WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE GUARANTOR OR THE BORROWER,
IRRESPECTIVE OF WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN
ACCORDANCE WITH APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND
ENFORCEMENT OF ANY LOAN DOCUMENT, ANY ALLEGATION BY ANY BENEFICIARY OF A LETTER
OF CREDIT OF A WRONGFUL DISHONOR BY THE LENDER OF A CLAIM OR DRAFT PRESENTED
THEREUNDER, OR ANY OTHER ACT OR OMISSION IN CONNECTION WITH OR RELATED TO ANY
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY, WITH THE FOREGOING
INDEMNITY SURVIVING SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT.
ARTICLE VI
NEGATIVE COVENANTS
So long as any Obligation remains outstanding or unpaid or
any Commitment exists;
VI.1 Indebtedness. Neither the Guarantor nor the Borrower
shall create, incur, assume, or suffer to exist any Indebtedness, whether by
way of loan or otherwise; provided, however, the foregoing restriction shall
not apply to (a) the Obligations, (b) the Permitted Indebtedness, (c) unsecured
accounts payable incurred in the ordinary course of business, which are
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not unpaid in excess of 60 days beyond invoice date or are being contested in
good faith and as to which such reserve as is required by GAAP has been made,
and (d) as to the Borrower only, crude oil, natural gas, or other hydrocarbon
floor, collar, cap, price protection, or swap agreements, in form and substance
and with a Person acceptable to the Lender, provided that (i) each commitment
issued under such agreement, must also be approved by the Lender, (ii) such
agreements shall not be entered into with respect to Mortgaged Properties
constituting more than 75% of the monthly production as forecast by the Lender,
and (iii) that the strike prices in such agreements are not less than the
prices used by the Lender in its most recent Borrowing Base determination, and
(iv) the Lender shall receive a security interest in the hedging contracts.
VI.2 Contingent Obligations. Neither the Guarantor nor the
Borrower shall create, incur, assume, or suffer to exist any Contingent
Obligation; provided, however, the foregoing restriction shall not apply to the
Guaranty or performance guarantees and performance surety or other bonds
provided in the ordinary course of business.
VI.3 Liens. Neither the Guarantor nor the Borrower shall
create, incur, assume, or suffer to exist any Lien on any of its Property,
whether now owned or hereafter acquired; provided, however, the foregoing
restriction shall not apply to Permitted Liens.
VI.4 Sales of Assets. Without the prior written consent of
the Lender, neither the Guarantor nor the Borrower shall sell, transfer, or
otherwise dispose of, in one or any series of transactions, any Property,
whether now owned or hereafter acquired, or enter into any agreement to do so;
provided, however, the foregoing restriction shall not apply to (a) the sale of
hydrocarbons or inventory in the ordinary course of business, provided that no
contract of the Borrower for the sale of hydrocarbons shall obligate the
Borrower to deliver hydrocarbons produced from any of the Mortgaged Properties
at some future date without receiving full payment therefor within 90 days of
delivery, (b) the sale or other disposition of Property destroyed, lost, worn
out, damaged, or having only salvage value or no longer used or useful in the
business of the Guarantor or the Borrower, or (c) the sale of assets
representing up to ten percent (10%) of the net present value of the Oil and
Gas Properties of the Borrower which comprise the Borrowing Base, provided that
the Borrowing Base shall be reduced, and if necessary, proceeds of such sale in
an amount equal to the loan value attributable to such assets, shall be applied
to reduce amounts outstanding on the Note.
VI.5 Leasebacks. Neither the Guarantor nor the Borrower shall
enter into any agreement to sell or transfer any Property and thereafter rent
or lease as lessee such Property or other Property intended for the same use or
purpose as the Property sold or transferred.
VI.6 Loans or Advances. Neither the Guarantor nor the
Borrower shall make or agree to make or allow to remain outstanding any loan or
advance to any Person in excess of $100,000 in the aggregate; provided,
however, the foregoing restriction shall not apply to (a) advances or
extensions of credit in the form of accounts receivable incurred in the
ordinary course of business and upon terms common in the industry for such
accounts receivable, (b) advances to employees of the Guarantor or the Borrower
for the payment of expenses incurred in the ordinary course of the business of
the Guarantor or the Borrower and (c) advances by the
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Guarantor to Subsidiaries formed for the purpose of acquiring Oil and Gas
Properties financed, in whole or in part, with Indebtedness of any such
Subsidiary which is fully non-recourse to the Guarantor and the Borrower and is
secured, if at all, solely by the acquired Oil and Gas Properties, provided
that the Guarantor is not in breach of Section 6.14 and no other Default or
Event of Default exists or would exist as a result of such advances.
VI.7 Investments. Neither the Guarantor nor the Borrower
shall acquire Investments in excess of $100,000, or purchase or otherwise
acquire all or substantially all of the assets of, any Person; provided,
however, the foregoing restriction shall not apply to the purchase or
acquisition of (a) Oil and Gas Properties, (b) Investments in the form of (i)
debt securities issued or directly and fully guaranteed or insured by the
United States Government or any agency or instrumentality thereof, with
maturities of no more than one year, (ii) commercial paper of a domestic issuer
rated at the date of acquisition at least P-2 by Xxxxx'x Investor Service, Inc.
or A-2 by Standard & Poor's Corporation and with maturities of no more than one
year from the date of acquisition, or (iii) repurchase agreements covering debt
securities or commercial paper of the type permitted in this Section,
certificates of deposit, demand deposits, eurodollar time deposits, overnight
bank deposits and bankers' acceptances, with maturities of no more than one
year from the date of acquisition, issued by or acquired from or through the
Lender or any bank or trust company organized under the laws of the United
States or any state thereof and having capital surplus and undivided profits
aggregating at least $100,000,000, (c) other short-term Investments similar in
nature and degree of risk to those described in clause (b) of this Section, (d)
money-market funds or (e) the capital stock of Subsidiaries for the purpose of
acquiring Oil and Gas Properties financed, in whole or in part, with
Indebtedness of any such Subsidiary which is fully non-recourse to the
Guarantor and the Borrower and is secured, if at all, solely by the acquired
Oil and Gas Properties, provided such investment causes no Default or Event of
Default.
VI.8 Dividends, Distributions and Redemptions. Neither the
Guarantor nor the Borrower shall pay any dividend or make any distribution to
any of its shareholders or repurchase or redeem any of its capital stock;
provided, however, the foregoing restriction shall not apply to any dividend
payable wholly in capital stock of the relevant entity.
VI.9 Changes in Structure. Neither the Guarantor nor the
Borrower shall enter into any transaction of consolidation, merger, or
amalgamation; liquidate, wind up, or dissolve (or suffer any liquidation or
dissolution).
VI.10 Transactions with Affiliates. Neither the Guarantor nor
the Borrower shall directly or indirectly, enter into any transaction
(including the sale, lease, or exchange of Property or the rendering of
service) with any of its Affiliates, other than upon fair and reasonable terms
no less favorable than could be obtained in an arm's length transaction with a
Person which was not an Affiliate.
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VI.11 Lines of Business. Neither the Guarantor nor the
Borrower shall expand into any line of business other than those in which it is
engaged as of the date hereof, without the prior written consent of the Lender.
VI.12 Plan Obligations. Neither the Guarantor nor the
Borrower shall assume or otherwise become subject to an obligation to
contribute to or maintain any Plan or acquire any Person which has at any time
had an obligation to contribute to or maintain any Plan.
VI.13 Cash Flow Coverage. The Guarantor shall not permit, as
of the close of any fiscal quarter, the ratio of Cash Flow to Debt Service to
be less than 1.25 to 1.00.
VI.14 Tangible Net Worth. The Guarantor shall not permit, at
the close of any fiscal quarter, its tangible net worth to be less than
$17,000,000, plus (a) 50% of positive Net Income for all quarterly periods
after September 30, 1998 and (b) 100% of equity raised for all quarterly
periods after September 30, 1998. (An allowance of up to $10,000,000 shall be
made for non-cash writedowns of Oil and Gas Properties prior to or at fiscal
year end 1998).
VI.15 Subsidiaries. No new Subsidiaries may be formed without
the prior written consent of the Lender; provided, however, that Subsidiaries
may be formed to purchase Oil and Gas Properties if such purchase is fully
non-recourse to the Guarantor and the Borrower and is secured, if at all,
solely by the acquired Oil and Gas Properties.
ARTICLE VII
EVENTS OF DEFAULT
VII.1 Enumeration of Events of Default. Any of the following
events shall constitute an Event of Default:
(a default shall be made by the Borrower in the payment when
due of any installment of principal or interest under this Agreement
or the Note or in the payment when due of any fee or other sum payable
under any Loan Document and such default as to interest or fees only
shall have continued for three days;
(b default shall be made by the Borrower or the Guarantor in
the due observance or performance of any of their respective
obligations under the Loan Documents, and such default shall continue
for 30 days after the earlier of notice thereof to the Borrower by the
Lender or knowledge thereof by the Borrower;
(c any representation or warranty made by the Borrower or the
Guarantor in any of the Loan Documents proves to have been untrue in
any material respect or any
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representation, statement (including Financial Statements),
certificate, or data furnished or made to the Lender in connection
herewith proves to have been untrue in any material respect as of the
date the facts therein set forth were stated or certified;
(d default shall be made by the Borrower or the Guarantor (as
principal or guarantor or other surety) in the payment or performance
of any bond, debenture, note, or other Indebtedness or under any
credit agreement, loan agreement, indenture, promissory note, or
similar agreement or instrument executed in connection with any of the
foregoing, including, but not limited to, the Borrower's escrow
obligations in connection with its plugging and abandonment liability,
and such default shall remain unremedied for in excess of the period
of grace, if any, with respect thereto;
(e the Borrower or the Guarantor shall be unable to satisfy
any condition or cure any circumstance specified in Article III, the
satisfaction or curing of which is precedent to the right of the
Borrower to obtain a Loan or the issuance of a Letter of Credit, and
such inability shall continue for a period in excess of 30 days;
(f the Borrower or the Guarantor shall (i) apply for or
consent to the appointment of a receiver, trustee, or liquidator of it
or all or a substantial part of its assets, (ii) file a voluntary
petition commencing an Insolvency Proceeding, (iii) make a general
assignment for the benefit of creditors, (iv) be unable, or admit in
writing its inability, to pay its debts generally as they become due,
or (v) file an answer admitting the material allegations of a petition
filed against it in any Insolvency Proceeding;
(g an order, judgment, or decree shall be entered against the
Borrower or the Guarantor by any court of competent jurisdiction or by
any other duly authorized authority, on the petition of a creditor or
otherwise, granting relief in any Insolvency Proceeding or approving a
petition seeking reorganization or an arrangement of its debts or
appointing a receiver, trustee, conservator, custodian, or liquidator
of it or all or any substantial part of its assets, and such order,
judgment, or decree shall not be dismissed or stayed within 30 days;
(h the levy against any significant portion of the Property
of the Borrower or the Guarantor or any execution, garnishment,
attachment, sequestration, or other writ or similar proceeding which
is not permanently dismissed or discharged within 30 days after the
levy;
(i a final and non-appealable order, judgment, or decree
shall be entered against the Borrower or the Guarantor for money
damages and/or Indebtedness due in an amount in excess of $100,000,
and such order, judgment, or decree shall not be dismissed or stayed
within 30 days;
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(j any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against the Borrower or the
Guarantor under the Racketeering Influence and Corrupt Organizations
Statute (18 U.S.C. ss.1961 et seq.), the result of which could be the
forfeiture or transfer of any material Property of the Borrower or the
Guarantor subject to a Lien in favor of the Lender without (i)
satisfaction or provision for satisfaction of such Lien, or (ii) such
forfeiture or transfer of such Property being expressly made subject
to such Lien;
(k the Borrower or the Guarantor shall have (i) concealed,
removed, or diverted, or permitted to be concealed, removed, or
diverted, any part of its Property, with intent to hinder, delay, or
defraud its creditors or any of them, (ii) made or suffered a transfer
of any of its Property which may be fraudulent under any bankruptcy,
fraudulent conveyance, or similar law, (iii) made any transfer of its
Property to or for the benefit of a creditor at a time when other
creditors similarly situated have not been paid, or (iv) shall have
suffered or permitted, while insolvent, any creditor to obtain a Lien
upon any of its Property through legal proceedings or distraint which
is not vacated within 30 days from the date thereof;
(l any Security Instrument shall for any reason not, or cease
to, create valid and perfected first-priority Liens against the
Collateral purportedly covered thereby;
(m the Guarantor shall cease to be the legal and beneficial
owner of all of the issued and outstanding capital stock of the
Borrower; or
(n the occurrence of a Material Adverse Effect and the same
shall remain unremedied for in excess of 30 days after notice given by
the Lender.
VII.2 Remedies. (a Upon the occurrence of an Event of Default
specified in Sections 7.1(f) or 7.1(g), immediately and without notice, (i) all
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest, notice of protest, default, or dishonor, notice
of intent to accelerate maturity, notice of acceleration of maturity, or other
notice of any kind, except as may be provided to the contrary elsewhere herein,
all of which are hereby expressly waived by the Borrower; (ii) the Commitment
shall immediately cease and terminate unless and until reinstated by the Lender
in writing; and (iii) the Lender is hereby authorized at any time and from time
to time, without notice to the Borrower (any such notice being expressly waived
by the Borrower), to set-off and apply any and all deposits (general or
special, time or demand, provisional or final) held by the Lender, and any and
all other indebtedness at any time owing by the Lender to or for the credit or
account of the Borrower against any and all of the Obligations.
(b Upon the occurrence of any Event of Default other than
those specified in Sections 7.1(f) or 7.1(g), (i) the Lender may, by notice to
the Borrower, declare all Obligations
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immediately due and payable, without presentment, demand, protest, notice of
protest, default, or dishonor, notice of intent to accelerate maturity, notice
of acceleration of maturity, or other notice of any kind, except as may be
provided to the contrary elsewhere herein, all of which are hereby expressly
waived by the Borrower; (ii) the Commitment shall immediately cease and
terminate unless and until reinstated by the Lender in writing; and (iii) the
Lender is hereby authorized at any time and from time to time, without notice
to the Borrower (any such notice being expressly waived by the Borrower), to
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) held by the Lender, and any and all other indebtedness at
any time owing by the Lender to or for the credit or account of the Borrower
against any and all of the Obligations.
(c Upon the occurrence of any Event of Default, the Lender
may, in addition to the foregoing in this Section, exercise any or all of its
rights and remedies provided by law or pursuant to the Loan Documents.
ARTICLE VIII
MISCELLANEOUS
VIII.1 Transfers; Participations. The Lender may, after 5
business days notice to the Borrower, at any time, sell, transfer, assign, or
grant participations in the Obligations or any portion thereof; and the Lender
may forward to each Transferee and prospective Transferee all documents and
information relating to such Obligations, whether furnished by the Borrower or
otherwise obtained, as the Lender determines necessary or desirable. Each of
the Borrower and the Guarantor agrees that each Transferee, regardless of the
nature of any transfer to it, may exercise all rights (including, without
limitation, rights of set-off) with respect to the portion of the Obligations
held by it as fully as if such Transferee were the direct holder thereof,
subject to any agreements between such Transferee and the transferor to such
Transferee.
VIII.2 Survival of Representations, Warranties, and
Covenants. All representations and warranties of the Borrower or the Guarantor
and all covenants and agreements herein made by the Borrower or the Guarantor
shall survive the execution and delivery of the Note and the Security
Instruments and shall remain in force and effect so long as any Obligation is
outstanding or any Commitment exists.
VIII.3 Notices and Other Communications. Except as to verbal
notices expressly authorized herein, which verbal notices shall be confirmed in
writing, all notices, requests, and communications hereunder shall be in
writing (including by telecopy). Unless otherwise expressly provided herein,
any such notice, request, demand, or other communication shall be deemed to
have been duly given or made when delivered by hand, or, in the case of
delivery by mail, when deposited in the mail, certified mail, return receipt
requested, postage prepaid, or, in the case of telecopy notice, when receipt
thereof is acknowledged orally or by written confirmation report, addressed as
follows:
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(a if to the Lender, to:
Compass Bank
00 Xxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Energy Lending Group
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b if to the Borrower to:
PetroQuest Energy One, L.L.C.
PetroQuest Energy, Inc.
000 X. Xxxxxxx Xxxxxx Xx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(c if to the Guarantor, to:
PetroQuest Energy, Inc.
000 X. Xxxxxxx Xxxxxx Xx., Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Any party may, by proper written notice hereunder to the
others, change the individuals or addresses to which such notices to it shall
thereafter be sent.
VIII.4 Parties in Interest. Subject to applicable
restrictions contained herein, all covenants and agreements herein contained by
or on behalf of the Borrower, the Guarantor or the Lender shall be binding upon
and inure to the benefit of the Borrower, the Guarantor or the Lender, as the
case may be, and their respective legal representatives, successors, and
assigns.
VIII.5 Rights of Third Parties. All provisions herein are
imposed solely and exclusively for the benefit of the Lender, the Borrower and
the Guarantor. No other Person shall have any right, benefit, priority, or
interest hereunder or as a result hereof or have standing to require
satisfaction of provisions hereof in accordance with their terms, and any or
all of such provisions may be freely waived in whole or in part by the Lender
at any time if in its sole discretion it deems it advisable to do so.
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VIII.6 Renewals; Extensions. All provisions of this Agreement
relating to the Note shall apply with equal force and effect to each promissory
note hereafter executed which in whole or in part represents a renewal or
extension of any part of the Indebtedness of the Borrower under this Agreement,
the Note, or any other Loan Document.
VIII.7 No Waiver; Rights Cumulative. No course of dealing on
the part of the Lender, its officers or employees, nor any failure or delay by
the Lender with respect to exercising any of its rights under any Loan Document
shall operate as a waiver thereof. The rights of the Lender under the Loan
Documents shall be cumulative and the exercise or partial exercise of any such
right shall not preclude the exercise of any other right. Neither the making of
any Loan nor the issuance of a Letter of Credit shall constitute a waiver of
any of the covenants, warranties, or conditions of the Borrower contained
herein. In the event the Borrower or the Guarantor is unable to satisfy any
such covenant, warranty, or condition, neither the making of any Loan nor the
issuance of a Letter of Credit shall have the effect of precluding the Lender
from thereafter declaring such inability to be an Event of Default as
hereinabove provided.
VIII.8 Survival Upon Unenforceability. In the event any one
or more of the provisions contained in any of the Loan Documents or in any
other instrument referred to herein or executed in connection with the
Obligations shall, for any reason, be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of any Loan Document or of any other
instrument referred to herein or executed in connection with such Obligations.
VIII.9 Amendments; Waivers. Neither this Agreement nor any
provision hereof may be amended, waived, discharged, or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement
of the amendment, waiver, discharge, or termination is sought.
VIII.10 Controlling Agreement. In the event of a conflict
between the provisions of this Agreement and those of any other Loan Document,
the provisions of this Agreement shall control.
VIII.11 Disposition of Collateral. Notwithstanding any term
or provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure, or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of the Lender; provided, however, that in no event shall the
Lender violate applicable law or exercise rights and remedies other than those
provided in such Security Instruments or otherwise existing at law or in
equity.
VIII.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE
DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF
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RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL
STATUTES, ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT
LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY.
VIII.13 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS
WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF,
RELATED TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED,
AT THE SOLE DISCRETION AND ELECTION OF THE LENDER, IN COURTS HAVING SITUS IN
HOUSTON, XXXXXX COUNTY, TEXAS. THE BORROWER HEREBY SUBMITS TO THE JURISDICTION
OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED IN HOUSTON, XXXXXX COUNTY, TEXAS,
AND EACH OF THE BORROWER AND THE GUARANTOR HEREBY WAIVES ANY RIGHTS IT MAY HAVE
TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF ANY LITIGATION BROUGHT
AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.
VIII.14 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWER, THE
GUARANTOR AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY,
IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR
ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR
OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO.
THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER
ENTERING INTO THIS AGREEMENT.
VIII.15 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER
WRITTEN LOAN DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO
WITH RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT
AMONG THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT
HEREOF, INCLUDING, WITHOUT LIMITATION, THE SUMMARY OF TERMS AND CONDITIONS
DATED AUGUST 7, 1998. FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER
WRITTEN LOAN DOCUMENTS REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE
PARTIES THERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF SUCH PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.
43
49
VIII.16 Counterparts. For the convenience of the parties,
this Agreement may be executed in multiple counterparts, each of which for all
purposes shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same Agreement.
IN WITNESS WHEREOF, this Agreement is deemed executed
effective as of the date first above written.
BORROWER:
PETROQUEST ENERGY, INC.
(a Louisiana corporation)
By:/s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxx
President
PETROQUEST ENERGY ONE, L.L.C.
(a Louisiana limited liability company)
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxx
President
GUARANTOR:
PETROQUEST ENERGY, INC.
(a Delaware corporation)
By:/s/ Xxxxxxx X. Xxxxxxx
------------------------------------
Xxxxxxx X. Xxxxxxx
President
44
50
LENDER:
COMPASS BANK
By:/s/ Xxxxxxx Xxxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxxxx Xxxxxx
Senior Vice President
45
51
EXHIBIT I
[FORM OF NOTE]
PROMISSORY NOTE
$25,000,000 Houston, Texas September 24, 1998
FOR VALUE RECEIVED and WITHOUT GRACE, the undersigned
("Maker") promises to pay to the order of Compass Bank ("Payee"), at its
banking quarters in Houston, Xxxxxx County, Texas, the sum of TWENTY-FIVE
MILLION DOLLARS ($25,000,000) or so much thereof as may be advanced against
this Note pursuant to the Amended and Restated Credit Agreement dated of even
date herewith by and between Maker and Payee (as amended, restated, or
supplemented from time to time, the "Credit Agreement"), together with interest
at the rates and calculated as provided in the Credit Agreement.
Reference is hereby made to the Credit Agreement for matters
governed thereby, including, without limitation, certain events which will
entitle the holder hereof to accelerate the maturity of all amounts due
hereunder. Capitalized terms used but not defined in this Note shall have the
meanings assigned to such terms in the Credit Agreement.
This Note is issued pursuant to, is the "Note" under, and is
payable as provided in the Credit Agreement. Subject to compliance with
applicable provisions of the Credit Agreement, Maker may at any time pay the
full amount or any part of this Note without the payment of any premium or fee,
but such payment shall not, until this Note is fully paid and satisfied, excuse
the payment as it becomes due of any payment on this Note provided for in the
Credit Agreement.
Without being limited thereto or thereby, this Note is
secured by the Security Instruments.
This Note represents, in whole or in part, a renewal of, but
not a novation or discharge of the Indebtedness of the Borrower evidenced by,
the Existing Notes.
THIS NOTE SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT VERNON'S TEXAS CIVIL STATUTES,
ARTICLE 5069, CHAPTER 15 (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN
ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS NOTE.
PETROQUEST ENERGY, INC.
(a Louisiana corporation)
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
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52
PETROQUEST ENERGY ONE, L.L.C.
(a Louisiana limited liability company)
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
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53
EXHIBIT II
[FORM OF BORROWING REQUEST]
Compass Bank
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Energy Lending Group
Re: Amended and Restated Credit Agreement dated as of September
24, 1998, by and among PetroQuest Energy, Inc., a Louisiana
corporation, PetroQuest Energy One, L.L.C. a Louisiana
limited liability company, PetroQuest Energy, Inc., a
Delaware corporation, and Compass Bank, a Texas state
chartered banking institution (as amended, restated, or
supplemented from time to time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to the Credit Agreement, the Borrower hereby
requests a Loan on the date and in the amount as follows:
Amount: $________
Requested funding date: _________, 19
The undersigned certifies that [s]he is the [___________] of
the Borrower, has obtained all consents necessary, and as such [s]he is
authorized to execute this request on behalf of the Borrower. The undersigned
further certifies, represents, and warrants on behalf of the Borrower that the
Borrower is entitled to receive the requested Loan under the terms and
conditions of the Credit Agreement.
To the best of the knowledge of the undersigned, no Default
or Event of Default exists as of the date hereof.
Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
Very truly yours,
PETROQUEST ENERGY, INC.
(a Louisiana corporation)
By:
-----------------------------
Printed Name:
-------------------
Title:
--------------------------
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54
PETROQUEST ENERGY ONE, L.L.C.
(a Louisiana limited liability company)
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
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55
EXHIBIT III
[FORM OF COMPLIANCE CERTIFICATE]
_______, 19
Compass Bank
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Energy Lending Group
Re: Amended and Restated Credit Agreement dated as of September
24, 1998, by and among PetroQuest Energy, Inc., a Louisiana
corporation, PetroQuest Energy One, L.L.C. a Louisiana
limited liability company, PetroQuest Energy, Inc., a
Delaware corporation, and Compass Bank, a Texas state
chartered banking institution (as amended, restated, or
supplemented from time to time, the "Credit Agreement")
Ladies and Gentlemen:
Pursuant to applicable requirements of the Credit Agreement,
the undersigned, as a Responsible Officer of the Guarantor, hereby certifies to
you the following information as true and correct as of the date hereof or for
the period indicated, as the case may be:
[1. To the best of the knowledge of the undersigned, no Default or
Event of Default exists as of the date hereof or has occurred since
the date of our previous certification to you, if any.]
[1. To the best of the knowledge of the undersigned, the following
Defaults or Events of Default exist as of the date hereof or have
occurred since the date of our previous certification to you, if any,
and the actions set forth below are being taken to remedy such
circumstances:]
2. The compliance of the Guarantor and the Borrower with the financial
covenants of the Credit Agreement is as follows as of the close of
business on _______________: (a) 6.1 Indebtedness. Neither the
Guarantor nor the Borrower has created, incurred, assumed, or suffered
to exist any Indebtedness, whether by way of loan or otherwise, except
as permitted under Section 6.1 of the Credit Agreement.
(b) 6.13 Cash Flow Coverage.
III-i
56
Required Actual
1.25 to 1.00 ______ to 1.00
(c) 6.14 Tangible Net Worth.
Required Actual
$___________ $___________
3. No Material Adverse Effect has occurred since the date of the
Financial Statements dated as of __________.
Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Credit Agreement.
Very truly yours,
PETROQUEST ENERGY, INC.
(a Louisiana corporation)
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
PETROQUEST ENERGY ONE, L.L.P.
(a Louisiana limited liability company)
By:
------------------------------------
Printed Name:
--------------------------
Title:
---------------------------------
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EXHIBIT IV
[FORM OF OPINION OF COUNSEL]
[Closing Date]
Compass Bank
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Energy Lending Group
Re: Amended and Restated Credit Agreement dated as of September
24, 1998, by and among PetroQuest Energy, Inc., a Louisiana
corporation, PetroQuest Energy One, L.L.C. a Louisiana
limited liability company, PetroQuest Energy, Inc., a
Delaware corporation, and Compass Bank, a Texas state
chartered banking institution (as amended, restated, or
supplemented from time to time, the "Credit Agreement")
Ladies and Gentlemen:
We have acted as counsel to PetroQuest Energy, Inc., a
Louisiana corporation (the "Borrower"), and PetroQuest Energy, Inc., a Delaware
corporation (the "Guarantor"), in connection with the transactions contemplated
in the Credit Agreement. This Opinion is delivered pursuant to Section 3.1(n)
of the Credit Agreement, and the Lender is hereby authorized to rely upon this
Opinion in connection with the transactions contemplated in the Credit
Agreement. Each capitalized term used but not defined herein shall have the
meaning assigned to such term in the Credit Agreement.
In our representation of the Borrower and the Guarantor, we
have examined an executed counterpart of each of the following (the "Loan
Documents"):
(a the Credit Agreement;
(b the Note;
[INCLUDE IN THIS LISTING ANY RATIFICATIONS OF EXISTING MORTGAGE
DOCUMENT(S) EXECUTED BY AMERICAN EXPLORER AND ANY AMENDMENTS AND
RESTATEMENTS OF EXISTING MORTGAGE DOCUMENTS EXECUTED BY OPTIMA ENERGY
IN FAVOR OF COMERICA]
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58
(c Mortgage, Deed of Trust, Indenture, Security Agreement,
Assignment of Production dated of even date herewith from the Borrower
in favor of the Lender (the "Mortgage");
(d Deed of Trust, Security Agreement, Financing Statement and
Assignment of Production dated of even date herewith from the Borrower
in favor of _______________, as Trustee for the Lender (the "Deed of
Trust");
(e Financing Statements from the Borrower, as debtor,
constituent to the Mortgage and the Deed of Trust (the "Financing
Statements");
(f Guaranty dated of even date herewith by the Guarantor in
favor of the Lender; and
(g Security Agreement (Pledge) dated of even date herewith
from the Guarantor in favor of the Lender (the "Stock Pledge").
We have also examined the originals, or copies certified to
our satisfaction, of such other records of the Borrower and the Guarantor,
certificates of public officials and of officers of the Borrower and the
Guarantor, agreements, instruments, and documents as we have deemed necessary
as a basis for the opinions hereinafter expressed.
In making such examinations, we have, with your permission,
assumed:
(a the genuineness of all signatures to the Loan Documents
other than those of the Borrower and the Guarantor;
(b the authenticity of all documents submitted to us as
originals and the conformity with the originals of all documents
submitted to us as copies;
(c that the Lender is authorized and has the power to enter
into and perform its obligations under the Credit Agreement;
(d the due authorization, execution, and delivery of all Loan
Documents by each party thereto other than the Borrower and the
Guarantor; and
(e that the Borrower has title to all Property covered or
affected by the Mortgage or the Deed of Trust, as the case may be.
Based upon the foregoing and subject to the qualifications
set forth herein, we are of the opinion that:
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59
1. Each of the Borrower and the Guarantor is a corporation
duly organized, legally existing, and in good standing under the laws
of its state of incorporation and is duly qualified as a foreign
corporation and is in good standing in all jurisdictions wherein the
ownership of its Property or the operation of its business
necessitates such qualification.
2. The execution and delivery by the Borrower of the Credit
Agreement and the borrowings thereunder, the execution and delivery by
the Borrower of the other Loan Documents to which the Borrower is a
party, the payment and performance by the Borrower of all Obligations
the execution and delivery by the Guarantor of those of the Loan
Documents to which it is a party and the performance of the
obligations of the Guarantor thereunder are within the power of the
Borrower or the Guarantor, as the case may be, have been duly
authorized by all necessary corporate action on the part of the
Borrower or the Guarantor, as the case may be, and do not (a) require
the consent of any Governmental Authority, (b) contravene or conflict
with any Requirement of Law, (c) to our knowledge after due inquiry,
contravene or conflict with any indenture, instrument, or other
agreement to which the Borrower or the Guarantor, as the case may be,
is a party or by which any Property of the Borrower or the Guarantor,
as the case may be, may be presently bound or encumbered, or (d)
result in or require the creation or imposition of any Lien upon any
Property of the Borrower or the Guarantor, as the case may be, other
than as contemplated by the Loan Documents.
3. The Loan Documents to which the Borrower is a party
constitute legal, valid, and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective
terms.
4. The Loan Documents to which the Guarantor is a party
constitute legal, valid, and binding obligations of the Guarantor
enforceable against the Guarantor in accordance with their respective
terms.
5. The forms of the Mortgage [, THE DEED OF TRUST] and the
Financing Statements and the description of the Mortgaged Property (as
such term is defined in the Mortgage [OR THE DEED OF TRUST, AS THE
CASE MAY BE,] and so used herein) satisfy all applicable Requirements
of Law of the State of Louisiana [OR THE STATE OF TEXAS, AS THE CASE
MAY BE,] and are legally sufficient under the laws of the State of
Louisiana [OR THE STATE OF TEXAS, AS THE CASE MAY be,] to enable the
Lender to realize the practical benefits purported to be afforded by
the Mortgage [OR THE DEED OF TRUST, AS THE CASE MAY BE,].
6. [EACH OF] The Mortgage [AND THE DEED OF TRUST] (a) creates
a lien upon and security interest in all Mortgaged Property to secure
the Indebtedness (as
IV-iii
60
such term is defined in the Mortgage [OR THE DEED OF TRUST, AS THE
CASE MAY BE,] and so used herein), and (b) provides for nonjudicial
foreclosure remedies customarily used in the State of Louisiana [OR
THE STATE OF TEXAS, AS THE CASE MAY BE].
7. The Mortgage [OR THE DEED OF TRUST, AS THE CASE MAY BE]
and the Financing Statements are in satisfactory form for filing and
recording in the offices described below.
8. The filing and/or recording, as the case may be, of (a)
the Mortgage in the office of the parish [OR COUNTY] clerk of each
parish [OR COUNTY] in the State of Louisiana [OR THE STATE OF TEXAS,
AS THE CASE MAY BE,] in which any portion of the Mortgaged Property is
located, and (b) the Financing Statement in the Uniform Commercial
Code records in parish [OR COUNTY] in the State of Louisiana [OR THE
STATE OF TEXAS, AS THE CASE MAY BE,] in which any portion of the
Mortgaged Property is located [AND IN THE OFFICE OF THE SECRETARY OF
STATE OF THE STATE OF TEXAS] are the only recordings or filings in the
State of Louisiana [OR THE STATE OF TEXAS, AS THE CASE MAY BE,]
necessary to perfect the liens and security interests in the Mortgaged
Property created by the Mortgage [OR THE DEED OF TRUST, AS THE CASE
MAY BE,] or to permit the Lender to enforce in the State of Louisiana
[OR THE STATE OF TEXAS, AS THE CASE MAY BE,] its rights under the
Mortgage [OR THE DEED OF TRUST, AS THE CASE MAY BE]. No subsequent
filing, re-filing, recording, or re-recording will be required in the
State in order to continue the perfection of the liens and security
interests created by the Mortgage [OR THE DEED OF TRUST, AS THE CASE
MAY BE] except that (a) a continuation statement must be filed with
respect to each filed Financing Statement within six months prior to
the expiration of five years from the date of the relevant initial
Financing Statement filing, (b) a subsequent continuation statement
must be filed within six months prior to the expiration of each
subsequent five-year period from the date of each initial financing
statement filing, and (c) amendments or supplements to each filed
Financing Statement and/or additional financing statements may be
required to be filed in the event of a change in the name, identity,
or structure of the Borrower or in the event any such Financing
Statement filing otherwise becomes inaccurate or incomplete.
9. No state or local mortgage recording tax, stamp tax, or
other similar fee, tax, or governmental charge (other than statutory
filing and recording fees to be paid upon filing) is required to be
paid to the State of Louisiana [OR THE STATE OF TEXAS, AS THE CASE MAY
BE,] or any subdivision thereof in connection with the execution,
delivery, filing, or recording of any of the Loan Documents or the
consummation of the transactions contemplated therein.
10. It is not necessary for the Lender to qualify to do
business in the State of Louisiana [OR THE STATE OF TEXAS] or file in
the State of Louisiana [OR THE STATE
IV-iv
61
OF TEXAS] any designation for service of process or reports solely by
reason of the interests conveyed or assigned to it or for its benefit
under the Mortgage [OR THE DEED OF TRUST, AS THE CASE MAY be,], nor
will such conveyances or assignments alone result in the imposition
upon the Lender of any taxes by the State of Louisiana [OR THE STATE
OF TEXAS, AS THE CASE MAY BE,] or by any subdivision thereof,
including, without limitation, franchise, license, tax on interest
received or income taxes, other than recording and filing fees in
connection with the filings referred to in paragraph 8 above and taxes
which the Lender may owe in the event it becomes the actual and record
owner of any Mortgaged Property situated in the State of Louisiana [OR
THE STATE OF TEXAS, AS THE CASE MAY BE,].
11. The foreclosure of, or exercise of the power of sale
under, the Mortgage [OR THE DEED OF TRUST, AS THE CASE MAY BE] will
not in any manner restrict, affect or impair the liability of the
Borrower with respect to the Indebtedness or the rights and remedies
of the Lender with respect to the foreclosure or enforcement of any
other security interests or liens securing the Indebtedness to the
extent any deficiency remains unpaid after application to the
Indebtedness of the proceeds of such foreclosure or the exercise of
such power of sale.
12. The priority of the liens and security interests created
by the Mortgage [OR THE DEED OF TRUST, AS THE CASE MAY BE] with
respect to Indebtedness incurred by the Borrower on or before the date
on which the Mortgage [OR THE DEED OF TRUST, AS THE CASE MAY BE,] is
filed in the appropriate recording offices referred to hereinabove
will be determined by the dates of such filings. The priority of the
liens and security interests created by the Mortgage [OR THE DEED OF
TRUST, AS THE CASE MAY BE,] with respect to Indebtedness incurred by
the Borrower after the date the Mortgage [OR THE DEED OF TRUST, AS THE
CASE MAY BE,] is recorded also will be determined by the dates of such
filings.
13. The priority of the liens and security interests created
by the Mortgage [OR THE DEED OF TRUST, AS THE CASE MAY BE,] will not
be affected by any prepayment of a portion, but less than all, of the
Indebtedness, or any reduction or increase of the outstanding amount
of the Indebtedness from time to time.
14. The limitations period for enforcement of the Mortgage in
the State is . [THE LIMITATIONS PERIOD FOR ENFORCEMENT OF THE DEED OF
TRUST IN THE STATE OF TEXAS IS ____________________.]
15. The shares of the capital stock of the Borrower described
in and subjected to the security interest of the Stock Pledge (a) are
registered on the books of the Borrower in the name of the Guarantor,
(b) constitute all of the outstanding capital stock of the Borrower,
(c) have been duly authorized and validly issued, (d) are fully paid
and nonassessible, (e) were issued free of preemptive rights, and (f)
to our knowledge, are not subject to any agreements or understandings
with respect to voting or transfer.
XX-x
00
00. There are presently outstanding no (a) securities of the
Borrower convertible into or exchangeable for shares of the capital
stock of the Borrower or any other securities of the Borrower, (b)
options or other rights to acquire from the Borrower, and no
obligation of the Borrower to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital
stock or voting securities of the Borrower, (c) equity equivalents,
interests in the ownership or earnings of the Borrower, or other
similar rights, or (d) obligations of the Borrower to repurchase,
redeem or otherwise acquire any shares of the capital stock of the
Borrower or any other securities of the Borrower.
17. To our knowledge after due inquiry, except as disclosed
in Exhibit V to the Credit Agreement, no litigation or other action of
any nature affecting the Borrower or the Guarantor is pending before
any Governmental Authority or threatened against the Borrower or the
Guarantor. To our knowledge after due inquiry, no unusual or unduly
burdensome restrictions, restraint, or hazard exists by contract,
Requirement of Law, or otherwise relative to the business or
operations of the Borrower or the Guarantor or the ownership and
operation of any Properties of the Borrower or the Guarantor other
than such as relate generally to Persons engaged in business
activities similar to those conducted by the Borrower or the
Guarantor.
18. No authorization, consent, approval, exemption,
franchise, permit or license of, or filing (other than filing of
Security Instruments in appropriate filing offices) with, any
Governmental Authority or any other Person is required to authorize or
is otherwise required in connection with the valid execution and
delivery by the Borrower or the Guarantor of the Loan Documents to
which it is a party or any instrument contemplated thereby, or the
payment or performance by the Borrower of the Obligations.
19. No transaction contemplated by the Loan Documents is in
violation of any regulations promulgated by the Board of Governors of
the Federal Reserve System, including, without limitation, Regulations
G, T, U, or X.
20. Neither the Borrower nor the Guarantor is, or is directly
or indirectly controlled by or acting on behalf of any Person which
is, an "investment company" or an "affiliated person" of an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
21. Neither the Borrower nor the Guarantor is a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
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The opinions expressed herein are subject to the following
qualifications and limitations:
A. We are licensed to practice law only in the State of
Louisiana [, THE STATE OF TEXAS] and other jurisdictions whose laws
are not applicable to the opinions expressed herein; accordingly, the
foregoing opinions are limited solely to the laws of the State of
Louisiana [, THE STATE OF TEXAS], the General Corporation Law of the
State of Delaware and applicable United States federal law.
B. The validity, binding effect, and enforceability of the
Loan Documents may be limited or affected by bankruptcy, insolvency,
moratorium, reorganization, or other similar laws affecting rights of
creditors generally, including, without limitation, statutes or rules
of law which limit the effect of waivers of rights by a debtor or
grantor; provided, however, that the limitations and other effects of
such statutes or rules of law upon the validity and binding effect of
the Loan Documents should not differ materially from the limitations
and other effects of such statutes or rules of law upon the validity
and binding effect of credit agreements, promissory notes, guaranties,
and security instruments generally.
C. The enforceability of the respective obligations of the
Borrower and the Guarantor under the Loan Documents is subject to
general principles of equity (whether such enforceability is
considered in a suit in equity or at law).
This Opinion is furnished us solely for the benefit of the
Lender in connection with the transactions contemplated by the Loan Documents
and is not to be quoted in whole or in part or otherwise referred to or
disclosed in any other transaction.
Very truly yours,
IV-vii
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EXHIBIT V
DISCLOSURES
Section 4.8 Liabilities
Litigation
Section 4.12 Environmental Matters
Section 4.17 Refunds
Section 4.18 Gas Contracts
Section 4.20 Casualties
V-i
