SUBORDINATED CREDIT AGREEMENT
Dated as of October 31, 2000
Among
XXXXXXX OIL & GAS, L.P.
as Borrower,
SHELL CAPITAL INC.,
as Agent,
and
THE LENDERS SIGNATORY HERETO
Article 1 Definitions and Accounting Matters..............................1
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Section 1.01 Terms Defined Above....................................1
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Section 1.02 Certain Defined Terms..................................2
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Section 1.03 Accounting Terms and Determinations...................16
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Article 2 Commitments....................................................16
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Section 2.01 Loans.................................................16
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Section 2.02 Borrowings, Continuations and Conversions.............16
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Section 2.03 Changes of Commitments................................17
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Section 2.04 Fees..................................................18
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Section 2.05 Several Obligations...................................18
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Section 2.06 Notes.................................................18
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Section 2.07 Prepayments...........................................18
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Section 2.08 Lending Offices.......................................19
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Article 3 Payments of Principal and Interest.............................19
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Section 3.01 Repayment of Loans...................................19
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Section 3.02 Interest.............................................19
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Article 4 Payments; Pro Rata Treatment; Computations; Etc................20
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Section 4.01 Payments.............................................20
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Section 4.02 Pro Rata Treatment...................................20
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Section 4.03 Computations.........................................20
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Section 4.04 Non-receipt of Funds by the Agent....................20
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Section 4.05 Set-off, Sharing of Payments, Etc....................21
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Section 4.06 Taxes................................................22
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Article 5 [Intentionally Omitted]........................................25
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Article 6 Conditions Precedent...........................................25
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Section 6.01 Initial Funding......................................25
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Section 6.02 Initial, Subsequent Loans............................27
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Section 6.03 Conditions Precedent for the Benefit of Lenders......28
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Section 6.04 No Waiver............................................28
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Article 7 Representations and Warranties.................................28
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Section 7.01 Corporate Existence..................................28
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Section 7.02 Financial Condition..................................28
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Section 7.03 Litigation...........................................29
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Section 7.04 No Breach............................................29
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Section 7.05 Authority............................................29
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Section 7.06 Approvals............................................29
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Section 7.07 Use of Loans.........................................30
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Section 7.08 ERISA................................................30
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Section 7.09 Taxes................................................31
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Section 7.10 Titles, etc..........................................31
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Section 7.11 No Material Misstatements............................32
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Section 7.12 Investment Company Act...............................32
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Section 7.13 Public Utility Holding Company Act...................32
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Section 7.14 Subsidiaries.........................................33
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Section 7.15 Location of Business and Offices.....................33
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Section 7.16 Defaults.............................................33
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Section 7.17 Environmental Matters................................33
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Section 7.18 Compliance with the Law..............................34
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Section 7.19 Insurance............................................35
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Section 7.20 Hedging Agreements...................................35
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Section 7.21 Restriction on Liens.................................35
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Section 7.22 Material Agreements..................................35
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Section 7.23 Gas Imbalances.......................................36
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Section 7.24 Partnership Agreement................................36
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Article 8 Affirmative Covenants..........................................36
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Section 8.01 Financial Statements and Other Reports...............36
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Section 8.02 Litigation...........................................39
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Section 8.03 Maintenance, Etc.....................................39
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Section 8.04 Environmental Matters................................41
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Section 8.05 Further Assurances...................................41
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Section 8.06 Performance of Obligations..............................42
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Section 8.07 Engineering Reports..................................42
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Section 8.08 Reserved.............................................43
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Section 8.09 Additional Collateral................................43
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Section 8.10 ERISA Information and Compliance.....................44
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Section 8.11 Subsidiary Security..................................45
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Section 8.12 Payment of Trade Payables............................45
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Article 9 Negative Covenants.............................................45
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Section 9.01 Debt.................................................45
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Section 9.02 Liens................................................46
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Section 9.03 Investments, Loans and Advances......................46
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Section 9.04 Dividends, Distributions and Redemptions.............48
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Section 9.05 Sales and Leasebacks.................................48
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Section 9.06 Nature of Business...................................48
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Section 9.07 Limitation on Leases.................................48
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Section 9.08 Mergers, Etc.........................................48
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Section 9.09 Proceeds of Notes....................................48
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Section 9.10 ERISA Compliance.....................................48
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Section 9.11 Sale or Discount of Receivables......................52
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Section 9.12 [Intentionally Omitted]..............................50
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Section 9.13 Sale of Oil and Gas Properties.......................50
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Section 9.14 Environmental Matters................................50
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Section 9.15 Transactions with Affiliates.........................50
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Section 9.16 Subsidiaries.........................................50
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Section 9.17 Negative Pledge Agreements...........................50
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Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments.....51
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Section 9.19 Borrower as Operator.................................51
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Section 9.20 Restrictions While Outstanding Indebtedness
------------ Exceeds the Borrowing Base...........................51
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Section 9.21 Debt to RAPRV........................................52
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iii
Article 10 Events of Default; Remedies...................................52
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Section 10.01 Events of Default....................................52
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Section 10.02 Remedies.............................................54
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Section 10.03 Production and Proceeds..............................55
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Article 11 The Agent.....................................................56
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Section 11.01 Appointment, Powers and Immunities...................56
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Section 11.02 Reliance by Agent....................................56
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Section 11.03 Defaults.............................................56
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Section 11.04 Rights as a Lender...................................57
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Section 11.05 INDEMNIFICATION......................................57
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Section 11.06 Non-Reliance on Agent and other Lenders..............57
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Section 11.07 Action by Agent......................................58
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Section 11.08 Resignation or Removal of Agent......................58
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Article 12 Miscellaneous.................................................59
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Section 12.01 Waiver...............................................59
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Section 12.02 Notices..............................................59
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Section 12.03 Payment of Expenses, Indemnities, etc................59
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Section 12.04 Amendments, Etc......................................62
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Section 12.05 Successors and Assigns...............................62
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Section 12.06 Assignments and Participations.......................62
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Section 12.07 Invalidity...........................................64
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Section 12.08 Counterparts.........................................64
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Section 12.09 References...........................................64
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Section 12.10 Survival.............................................64
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Section 12.11 Captions.............................................64
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Section 12.12 NO ORAL AGREEMENTS...................................64
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Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION............65
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Section 12.14 Interest.............................................66
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Section 12.15 Confidentiality......................................67
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Section 12.16 Effectiveness........................................67
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Section 12.17 EXCULPATION PROVISIONS...............................67
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Section 12.18 RELEASE..............................................68
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iv
THIS CREDIT AGREEMENT dated as of October 31, 2000 is among: XXXXXXX
OIL & GAS, L.P., a limited partnership formed under the laws of the State of
Delaware (the "BORROWER") and Shell Capital Inc., individually ("SCI"), and any
other lender which becomes a signatory hereto as provided in Section 12.06
(individually, together with its successors and assigns, a "LENDER" and
collectively, "the LENDERS"), and SCI, in its capacity as agent for the Lenders
(in such capacity, together with its successors in such capacity, the "Agent").
R E C I T A L S
A. Reference is made to that certain Amended and Restated Credit
Agreement (the "SENIOR CREDIT AGREEMENT") dated as of February 17, 2000, as
amended by that certain First Amendment to Amended and Restated Credit Agreement
of even date herewith and as further amended or supplemented from time to time
in accordance with the Subordination Agreement described below, among the
Borrower, BANK OF MONTREAL, a Canadian bank, in its individual capacity (in its
individual capacity, "BMO"), and BMO, in its capacity as agent (in such
capacity, together with its successors in such capacity, the "SENIOR AGENT"),
Societe Generale, Southwest Agency ("SOC-GEN") and SCI. BMO, Soc-Gen and SCI and
their respective successors and assigns in the capacity as lenders under the
Senior Credit Agreement are herein collectively called "SENIOR LENDERS".
B. The Lenders have agreed to provide senior subordinated debt in the
amount of up to $20,000,000 (plus any amount of interest paid in kind pursuant
to Section 3.02(b) hereof) consisting of advances to the Borrower for purposes
set out below, and the Borrower, the Agent and the Lenders now desire to set
forth their agreements with respect to such credit facility.
C. Pursuant to that certain Intercreditor and Subordination Agreement
dated as of October 31, 2000, among BMO, Soc-Gen, SCI, Senior Agent, Lenders and
Agent (as from time to time amended or supplemented, the "SUBORDINATION
AGREEMENT") the Indebtedness (as hereinafter defined) is expressly subordinated
to the Senior Indebtedness (as hereinafter defined).
D. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
ARTICLE 1
Definitions and Accounting Matters
Section 1.01 TERMS DEFINED ABOVE. As used in this Agreement, the
terms "AGENT," "BMO," "BORROWER," "Lender," "LENDERS," "SENIOR CREDIT
AGREEMENT," "PRIOR NOTES", "SCI", "SENIOR AGENT", "SENIOR LENDERS", "SOC-GEN"
and Subordination Agreement shall have the meanings indicated above.
1
Section 1.02 CERTAIN DEFINED TERMS. As used herein, the following
terms shall have the following meanings (all terms defined in this Article I or
in other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"AFFILIATE" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. For purposes of this definition, any
Person which owns directly or indirectly 20% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 20% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to "CONTROL" (including, with its correlative meanings, "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") such corporation or other Person.
"AGENT'S FEE LETTER" shall mean that certain letter agreement from the
Agent to the Borrower dated of even date with this Agreement concerning certain
fees in connection with this Agreement and any agreements or instruments
executed in connection therewith, as the same may be amended or replaced from
time to time.
"AGREEMENT" shall mean this Subordinated Credit Agreement, as the same
may from time to time be amended or supplemented.
"AGGREGATE COMMITMENTS" at any time shall equal the amount calculated
in accordance with Section 2.03 hereof.
"AGGREGATE MAXIMUM CREDIT AMOUNTS" shall mean the amount of
$20,000,000, plus any amount of interest paid in kind pursuant to Section
3.02(b) hereof, as the same may be reduced pursuant to Section 2.03(b) and
Section 2.07(c).
"APPLICABLE LENDING OFFICE" shall mean, for each Lender, the lending
office of such Lender (or an Affiliate of such Lender) designated on the
signature pages hereof or such other offices of such Lender (or of an Affiliate
of such Lender) as such Lender may from time to time specify to the Agent and
the Borrower as the office by which its Loans are to be made and maintained.
"ASSIGNMENT" shall have the meaning assigned such term in Section
12.06(b).
"BORROWING BASE" has the meaning assigned to it now and from time to
time hereafter in the Senior Credit Agreement.
"XXXXXXX EXPLORATION" shall mean Xxxxxxx Exploration Company, a
Delaware corporation and owner of 100% of the capital stock of the General
Partner.
"BUSINESS DAY" shall mean any day other than a day on which commercial
banks are authorized or required to close in Houston, Texas.
2
"CAPEX PLAN" shall mean each Capital Expenditures Plan detailing the
projected capital expenditures of the Borrower for the twelve month period
covered thereby the first of which is to be submitted on the Closing Date with
similar plans for each succeeding twelve month period to be submitted in
accordance with Section 8.01(l).
"CLOSING DATE" shall mean October 31, 2000, or any date thereafter
acceptable to Borrower and Agent.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"COMMITMENT" shall mean, for any Lender, its obligation to make Loans
up to such Lender's Maximum Credit Amount .
"CONSOLIDATED NET INCOME" shall mean with respect to Xxxxxxx
Exploration and its Consolidated Subsidiaries, for any period, the aggregate of
the net income (or loss) of Xxxxxxx Exploration and its Consolidated
Subsidiaries after allowances for taxes for such period, determined on a
consolidated basis in accordance with GAAP; PROVIDED that there shall be
excluded from the calculation of such net income (to the extent otherwise
included therein) the following: (i) the net income of any Person in which
Xxxxxxx Exploration or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of Xxxxxxx Exploration and its Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in such period by such other Person to Xxxxxxx
Exploration or to a Consolidated Subsidiary, as the case may be; (ii) the net
income (but not loss) of any Consolidated Subsidiary to the extent that the
declaration or payment of dividends or similar distributions or transfers or
loans by that Consolidated Subsidiary is not at the time permitted by operation
of the terms of its charter or any agreement, instrument or Governmental
Requirement applicable to such Consolidated Subsidiary, or is otherwise
restricted or prohibited in each case determined in accordance with GAAP; (iii)
the net income (or loss) of any Person acquired in a pooling-of-interests
transaction for any period prior to the date of such transaction; (iv) any
extraordinary gains or losses, including gains or losses attributable to
Property sales not in the ordinary course of business; and (v) the cumulative
effect of a change in accounting principles and any gains or losses attributable
to writeups or writedowns of assets.
"CONSOLIDATED SUBSIDIARIES" shall mean each Subsidiary of Xxxxxxx
Exploration (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of Xxxxxxx Exploration in accordance with GAAP,
including, without limitation, the Borrower.
"CONVERSION AGREEMENT" shall mean that certain Equity Conversion
Agreement dated as of February 17, 2000 by and among Borrower, Xxxxxxx
Exploration and SCI.
"COVENANT RELEASE DATE" means the first Borrowing Base Redetermination
Date on which the outstanding Senior Indebtedness (excluding any obligation of
any kind under any Hedging Agreement) is less than or equal to the Borrowing
Base set by the Senior Lenders pursuant to the Senior Credit Agreement.
3
"CREDIT ADVANCES TERMINATION DATE" shall mean, unless the Commitments
are sooner terminated pursuant to Sections 2.03(b) or 10.02 hereof, the Covenant
Release Date.
"DEBT" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money) excluding Trade Payables; (iv) all obligations under leases
which shall have been, or should have been, in accordance with GAAP, recorded as
capital leases in respect of which such Person is liable (whether contingent or
otherwise); (v) all obligations under leases (other than capital leases and oil
and gas leases) which require such Person or its Affiliate to make payments
exceeding $100,000 over the term of such lease, including payments at
termination, which are substantially equal to at least eighty percent (80%) of
the purchase price of the Property subject to such lease plus interest at an
imputed market rate of interest; (vi) all Debt (as described in the other
clauses of this definition) of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person; (vii) all Debt (as
described in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt of others; (viii) all obligations or undertakings of such Person to
maintain or cause to be maintained the financial position or covenants of others
including without limitation agreements expressed as an agreement to purchase
the Debt or Property of others or otherwise; (ix) obligations to deliver
Hydrocarbons in consideration of advance payments; (x) obligations to pay for
goods or services whether or not such goods or services are actually received or
utilized by such Person; (xi) any capital stock of such Person in which such
Person has a mandatory obligation to redeem such stock; (xii) any Debt of a
Special Entity for which such Person is liable either by agreement or because of
a Governmental Requirement; (xiii) the undischarged balance of any production
payment created by such Person or for the creation of which such Person directly
or indirectly received payment; and (xiv) all obligations of such Person under
Hedging Agreements.
"DEFAULT" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum of Consolidated Net
Income for such period PLUS the following expenses or charges to the extent
deducted from Consolidated Net Income in such period: interest, taxes,
depreciation, depletion and amortization, and other noncash charges, MINUS (i)
all non cash income added to Consolidated Net Income in such period and (ii)
capitalized general and administrative charges for such period.
"ECT" shall mean Enron Capital & Trade Resources Corp., a Delaware
corporation.
"ECT MERCHANT" shall mean ECT Merchant Investments Corp., a Delaware
corporation.
4
"EFFECTIVE DATE" shall have the meaning assigned such term in Section
12.16.
"ENRON INDEBTEDNESS" shall mean any and all Debt incurred under the
Indenture and/or secured by the Enron Mortgages.
"ENRON MORTGAGES" shall mean the Mortgage, Deed of Trust, Assignment
of Production, Security Agreement and Financing Statement agreements executed by
Borrower pursuant to the terms and provisions of the Indenture.
"ENRON NOTES" means the promissory notes issued pursuant to the
Indenture or the Securities Purchase Agreement.
"ENRON SHARES" shall mean both (a) the 263,158 shares of common stock
in Xxxxxxx Exploration that Xxxxxxx Exploration issued to ECT pursuant to the
Securities Purchase Agreement, as evidenced by certificate number 0089, as
replaced by certificate number 0131 issued in favor of ECT Merchant evidencing
the change in Ownership from ECT to ECT Merchant and (b) the 789,474 shares in
Xxxxxxx Exploration that Xxxxxxx Exploration issued to JEDI-II, as evidenced by
certificate number 0131.
"ENRON WARRANTS" shall mean the warrants issued by Xxxxxxx Exploration
to ECT (as predecessor to ECT Merchant) and JEDI-II pursuant to the Securities
Purchase Agreement for the purchase of an aggregate of 1,000,000 shares of
common stock of Xxxxxxx Exploration, and any warrants issued upon the transfer
thereof or in substitution therefore, pursuant to any warrant certificates
issued in accordance with the Securities Purchase Agreement.
"ENVIRONMENTAL LAWS" shall mean any and all Governmental Requirements
pertaining to the environment in effect in any and all jurisdictions in which
the Borrower or any Subsidiary is conducting or at any time has conducted
business, or where any Property of the Borrower or any Subsidiary is located,
including without limitation, the Oil Pollution Act of 1990 ("OPA"), the Clean
Air Act, as amended, the Comprehensive Environmental, Response, Compensation,
and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. As used in the provisions hereof
relating to Environmental Laws, the term "oil" shall have the meaning specified
in OPA, the terms "hazardous substance" and "release" (or "threatened release")
have the meanings specified in CERCLA, and the terms "solid waste" and
"disposal" (or "disposed") have the meanings specified in RCRA; provided,
however, that (i) in the event either OPA, CERCLA or RCRA is amended so as to
broaden the meaning of any term defined thereby, such broader meaning shall
apply subsequent to the effective date of such amendment and (ii) to the extent
the laws of the state in which any Property of the Borrower or any Subsidiary is
located establish a meaning for "oil," "hazardous substance," "release," "solid
waste" or "disposal" which is broader than that specified in either OPA, CERCLA
or RCRA, such broader meaning shall apply.
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"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary of the Borrower
would be deemed to be a "single employer" within the meaning of section
4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the
Code.
"ERISA EVENT" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder (other than such an event
with respect to which the requirement to give notice has been waived), (ii) the
withdrawal of the Borrower or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a Plan (other than a
defined contribution Plan) or the treatment of an amendment to such a Plan as a
termination under Section 4041 of ERISA, (iv) the institution of proceedings to
terminate a Plan by the PBGC or (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"EVENT OF DEFAULT" shall have the meaning assigned such term in
Section 10.01.
"EXCEPTED LIENS" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (ii) Liens in connection with workmen's compensation,
unemployment insurance or other social security, old age pension or public
liability obligations not yet due or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary course of business or incident
to the exploration, development, operation and maintenance of Oil and Gas
Properties or customary landlord's liens, each of which is in respect of
obligations that have not been outstanding more than 90 days or which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been maintained in accordance with GAAP; (iv) any Liens reserved
in leases or farmout agreements for rent or royalties and for compliance with
the terms of the farmout agreements or leases in the case of leasehold estates,
to the extent that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held or materially impair the value of such Property subject
thereto; (v) encumbrances (other than to secure the payment of borrowed money or
the deferred purchase price of Property or services), easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations in any
rights of way or other Property for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment, and
defects, irregularities, zoning restrictions and deficiencies in title of any
rights of way or other Property which in the aggregate do not materially impair
the use of such rights of way or other Property for the purposes of which such
rights of way and other Property are held or materially impair the value of such
Property subject thereto; (vi) deposits of cash or securities to secure the
performance of bids, trade contracts,
6
leases, statutory obligations and other obligations of a like nature incurred in
the ordinary course of business; (vii) Liens permitted by the Loan Documents;
and (viii) Liens securing the Senior Indebtedness; and (ix) liens securing any
Debt described in Section 9.01(f) hereof that is owing, at the time such Debt is
incurred, to either a Senior Lender, a Lender, an Affiliate of a Senior Lender
or an Affiliate of a Lender.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with a
member of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the date for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Agent on such day on such transactions as determined by the
Agent.
"FINAL MATURITY DATE" means October 31, 2005.
"FINANCIAL STATEMENTS" shall mean the financial statement or
statements described or referred to in Section 7.02.
"FIXED RATE" means 10.75% per annum, but in no event to exceed the
Highest Lawful Rate.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"GENERAL PARTNER" shall mean Xxxxxxx, Inc., a Nevada corporation,
general partner of the Borrower.
"GOVERNMENTAL AUTHORITY" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, the
Borrower, the Subsidiaries or any of their Property or the Agent, any Lender or
any Applicable Lending Office.
"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement (in the case of banking regulatory authorities whether or not having
the force of law), including, without limitation, Environmental Laws, energy
regulations and occupational, safety and health standards or controls, of any
Governmental Authority.
7
"GUARANTORS" shall mean Xxxxxxx Exploration, the General Partner,
Xxxxxxx Holdings I, LLC and Xxxxxxx Holdings II, LLC and any other Person who
becomes party to a Guaranty Agreement pursuant to the terms of Section 8.11.
"GUARANTY AGREEMENTS" shall mean the agreements executed by the
Guarantors in form and substance satisfactory to the Agent guarantying,
unconditionally, payment of the Indebtedness, as the same may be amended,
modified or supplemented from time to time.
"HEDGING AGREEMENTS" shall mean any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction.
"HIGHEST LAWFUL RATE" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on the Notes or on
other Indebtedness under laws applicable to such Lender which are presently in
effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"HYDROCARBON INTERESTS" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"HYDROCARBONS" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"INDEBTEDNESS" shall mean any and all amounts owing or to be owing by
the Borrower to the Agent and/or Lenders in connection with the Loan Documents.
"INDEMNIFIED PARTIES" shall have the meaning assigned such term in
Section 12.03(b).
"INDEMNITY MATTERS" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent
negligence of such Person seeking indemnification.
"INDENTURE" shall mean that certain Indenture dated as of August 20,
1998 between Xxxxxxx Exploration, as the issuer of the Subordinated Debt, and
Chase Bank of Texas, National Association, as the trustee as amended by that
First Amendment to Indenture dated March 26, 1999 and that Second Amendment to
Indenture dated as of February 17, 2000.
8
"INITIAL FUNDING" shall mean the funding of the initial Loans pursuant
to Section 6.01 hereof.
"INITIAL RESERVE REPORT" shall mean the report of Xxxxxx, Xxxxxxxxx &
Associates with respect to the Oil and Gas Properties of the Borrower as of
December 31, 1999, a copy of which has been delivered to the Agent.
"INTEREST COVERAGE RATIO" shall have the meaning assigned such term in
the Guaranty Agreement dated as of the date hereof, as from time to time
amended, executed by Xxxxxxx Exploration.
"INTEREST PAYMENT DATES" has the meaning assigned to it in Section
3.02.
"JEDI-II" shall mean Joint Energy Development Investments II Limited
Partnership, a Delaware limited partnership.
"LENDING RELATIONSHIP" shall refer to this Agreement and the other
Loan Documents, together with any and all negotiations, discussions, acts,
omissions, renewals, extensions, and other agreements or events related to this
Agreement and such other Loan Documents, the parties' obligations thereunder and
the transactions contemplated thereby, including, without limitation, any such
negotiations, discussions, acts, omissions, renewals, extensions, other
agreements or events that may occur on the date hereof and the instruments and
documents executed and delivered in connection herewith or relating hereto.
"LIEN" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments and the like payable
out of Oil and Gas Properties. The term "LIEN" shall include reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purposes of this Agreement, a Person shall be deemed to be the
owner of any Property which it has acquired or holds subject to a conditional
sale agreement, or leases under a financing lease or other arrangement pursuant
to which title to the Property has been retained by or vested in some other
Person in a transaction intended to create a financing.
"LOAN DOCUMENTS" shall mean this Agreement, the Subordination
Agreement, the Notes, the Agent's Fee Letter, the Warrant Agreement (and any
warrants issued pursuant thereto), the agreements or instruments described or
referred to in Exhibit D, and any and all other agreements or instruments now or
hereafter executed and delivered by the Borrower or any Subsidiary or Affiliate
of the Borrower including, without limitation, Xxxxxxx Exploration (other than
assignments, participation or similar agreements between any Lender and any
other lender or creditor with respect to any Indebtedness pursuant to this
Agreement) in connection with, or as security for the payment or performance of
the Notes, or this Agreement, as such agreements may be amended, supplemented or
restated from time to time.
9
"LOANS" shall mean the loans as provided for by Section 2.01.
"MAJORITY LENDERS" means at any time while no Loans are outstanding,
Lenders having at least seventy-five percent (75%) of the Aggregate Commitments
of the Lenders and, at any time while Loans are outstanding, Lenders holding at
least seventy-five percent (75%) of the outstanding aggregate principal amount
of the portion of the Loans allocable to the Lenders (without regard to any sale
by a Lender of a participation in any Loan under Section 12.06(c)).
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect
on (i) the assets, liabilities, financial condition, business, operations or
affairs of Xxxxxxx Exploration and its Subsidiaries taken as a whole or the
Borrower and its Subsidiaries taken as a whole, from those reflected in the
Financial Statements or from the facts represented or warranted in any Loan
Document, or (ii) the ability of Xxxxxxx Exploration or the Borrower or Xxxxxxx
Exploration or the Borrower and their respective Subsidiaries taken as a whole
to carry out their business as at the Closing Date or as proposed as of the
Closing Date to be conducted or meet their obligations under the Loan Documents
on a timely basis.
"MAXIMUM CREDIT AMOUNT" shall mean, as to each Lender, the amount set
forth opposite such Lender's name on Annex I under the caption "Maximum Credit
Amounts" plus such Lender's Percentage Share of any amount of interest paid in
kind pursuant to Section 3.02(b) hereof (as the same may be reduced pursuant to
Section 2.03(b) hereof as modified from time to time to reflect any assignments
permitted by Sections 12.06(b) and (c)).
"MORTGAGES" shall mean, collectively, any Standard Mortgages and any
New Mortgages.
"MORTGAGED PROPERTY" shall mean the Property owned by the Borrower and
which is subject to the Liens existing and to exist under the terms of the Loan
Documents.
"MULTIEMPLOYER PLAN" shall mean a Plan defined as such in Section
3(37) or 4001(a)(3) of ERISA.
"NET SEISMIC AND LAND EXPENDITURES" shall mean those costs incurred
after the Closing Date for seismic services, seismic data, and acquisition of
undeveloped Hydrocarbon Interests, less the net proceeds, if any, received after
the Closing Date through the sale or licensing of interests in undeveloped
Hydrocarbon Interests and/or seismic data.
"NEW MORTGAGE" shall mean, collectively, the "New Mortgages" referred
to in item 11 of Exhibit D and any mortgages and supplements executed pursuant
to Section 8.09 (a) hereof.
"NOTES" shall mean the Notes provided for by Section 2.06, together
with any and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
"NSLE LIMIT" shall have the meaning set forth in Section 9.20(a).
10
"OIL AND GAS PROPERTIES" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization, pooling agreements and declarations of
pooled units and the units created thereby (including without limitation all
units created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil xxxxx, gas xxxxx, injection xxxxx or other xxxxx,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, appliances, tools, implements, cables, wires, towers, casing,
tubing and rods, similar equipment, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing.
"OTHER TAXES" shall have the meaning assigned such term in Section
4.06(b).
"PARTNERS" shall mean the General Partner, Xxxxxxx Holdings I, LLC and
Xxxxxxx Holdings II, LLC.
"PARTNERSHIP AGREEMENT" shall mean the written partnership agreement
of the Borrower among the Partners dated December 30, 1997, as amended from time
to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"PDNP RESERVES" shall mean proved, developed, non-producing
Hydrocarbon reserves, as determined in conformity with the guidelines in effect
from time to time as promulgated by the Society of Petroleum Engineers or its
successor association.
"PDP RESERVES" shall mean proved, developed, producing Hydrocarbon
reserves, as determined in conformity with the guidelines in effect from time to
time as promulgated by the Society of Petroleum Engineers or its successor
association.
"PERCENTAGE SHARE" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
Annex I hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b) or (c).
11
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, limited liability company,
unincorporated organization or government or any agency, instrumentality or
political subdivision thereof, or any other form of entity.
"PLAN" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained
or contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii)
was at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Loan or any other amount payable by the Borrower under this Agreement or any
Note, a rate per annum during the period commencing on the date of an Event of
Default until such amount is paid in full or all Events of Default are cured or
waived equal to 2% per annum above the Fixed Rate, but in no event to exceed the
Highest Lawful Rate.
"PRINCIPAL OFFICE" shall mean the principal office of the Agent,
presently located at 000 Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"PROVED RESERVES" means PDP, PDNP and PUD Reserves.
"PUD RESERVES" shall mean proved, undeveloped Hydrocarbon reserves, as
determined in conformity with the guidelines in effect from time to time as
promulgated by the Society of Petroleum Engineers or its successor association.
"PV7%" shall mean the present value, determined utilizing the Agent's
price forecast (which will take into account any Hedging Agreements of Xxxxxxx
Exploration, Borrower or any Subsidiary) and applying the Agent's reasonable
adjustments (positive or negative) to the engineering analysis prepared by
Xxxxxxx Exploration's independent reserve engineers or in-house reserve
engineers, whichever the case may be, of the forecasted future cash flow
attributable to the subject Hydrocarbon reserves, discounted at an annual rate
of 7%.
"PV10%" shall mean the present value, determined utilizing the Agent's
price forecast (which will take into account any Hedging Agreements of Xxxxxxx
Exploration, Borrower or any Subsidiary) and applying the Agent's reasonable
adjustments (positive or negative) to the engineering analysis prepared by
Xxxxxxx Exploration's independent reserve engineers or in-house reserve
engineers, whichever the case may be, of the forecasted future cash flow
attributable to the subject Hydrocarbon reserves, discounted at an annual rate
of 10%.
"RAPRV 10%" means the risk adjusted proved reserve value which is
equal to the lesser of (i) 100% of the PV10% of the Borrower's and any
Guarantor's PDP Reserves, and (ii) the sum of 65% of the PV10% of the Borrower's
and any Guarantor's PDP Reserves, plus 43% of the PV10% of the Borrower's and
any Guarantor's PDNP Reserves, plus 33% of the
12
PV7% of the Borrower's and any Guarantor's PUD Reserves. For purposes of this
definition, only Proved Reserves subject to a Mortgage shall be included.
"RAPRV 7%" means the risk adjusted proved reserve value which is equal
to the lesser of (i) 100% of the PV7% of the Borrower's and any Guarantor's PDP
Reserves, and (ii) the sum of 65% of the PV7% of the Borrower's and any
Guarantor's PDP Reserves, plus 43% of the PV7% of the Borrower's and any
Guarantor's PDNP Reserves, plus 33% of the PV7% of the Borrower's and any
Guarantor's PUD Reserves. For purposes of this definition, only Proved Reserves
subject to a Mortgage shall be included.
"REGULATION D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including Regulation D)
or the adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders (including such Lender or its Applicable
Lending Office) of or under any Governmental Requirement (whether or not having
the force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"RELEASED CLAIMS" shall mean any and all claims (including without
limitation any liabilities, damages, demands and causes of action arising
therefrom), whether (a) at law or in equity, (b) on the alleged commission of a
tort, (c) on the alleged breach (or anticipatory breach or repudiation) of any
contract, duty, or warranty (whether oral or written, express or implied), (d)
on the alleged violation of any statute, tariff, or regulation (whether
promulgated by the United States, any state thereof, any foreign state or
country, or any other governmental agency or entity, wherever located), or (e)
on any other factual, legal or equitable theory, including, without limitation,
any claim for damages of any type or nature, for injunctive or other relief, for
attorneys' fees, interest or any other liability whatsoever on any theory,
including without limitation any loss, cost or damage in connection with or
based upon "lender liability", unfair dealing, duress, coercion, control or
undue influence, extortion or commercial bribery, breach of an implied covenant
or duty of good faith and fair dealing, material misrepresentation or omission,
overreaching, unconscionability, conflict of interest, bad faith, malpractice,
disparate bargaining position, detrimental reliance, promissory estoppel,
estoppel by deed, waiver, laches, or any other equitable theory, equitable
subordination, breach of fiduciary duty or any other duty, or tortious
inducement to commit such breach, tortious interference with contract or
prospective business relations, negligent performance of contractual
obligations, or other theories of negligence, negligent or intentional
infliction of emotional distress, slander, libel, other defamation, fraudulent
transfer, conversion, trespass to (or clouding the title of) property, usury,
violations of the Racketeer Influenced and Corrupt Organizations Act, deceptive
trade practices, conspiracy, or any theory of liability as partners or joint
venturers, that any Releasing Party may have as of the date hereof against any
Released Party with respect to the Lending Relationship.
"RELEASED PARTY" shall mean each of the Agent, the Lenders and their
respective predecessors, successors, assigns, directors, officers, partners,
employees, agents, attorneys,
13
principals and Affiliates and all other Persons liable or who might be claimed
to be liable on their behalf (collectively, the "Released Parties").
"RELEASING PARTY" shall mean each of the Borrower and the Guarantors
and their respective predecessors, successors, assigns, directors, officers,
partners, employees, agents, attorneys, principals, Affiliates and all other
Persons who might have a claim against any Released Party (collectively, the
"Releasing Parties").
"REQUIRED PAYMENT" shall have the meaning assigned such term in
Section 4.04.
"RESERVE REPORT" shall mean a report, in form satisfactory to the
Agent, setting forth, as of the dates set forth in Section 8.07(a) and (b) (or
such other date in the event of an unscheduled redetermination); (i) the proved
oil and gas reserves attributable to the Borrower's and its Subsidiaries'
Hydrocarbon Interests together with a projection of the rate of production and
future net income, taxes, operating expenses and capital expenditures with
respect thereto as of such date, based upon the pricing assumptions consistent
with SEC reporting requirements at the time (or other pricing provided by the
Agent) and (ii) such other information as the Agent may reasonably request. The
term "Reserve Report" shall also include the Initial Reserve Report, the
supplemental Reserve Reports described in Section 8.07(a), and the information
to be provided by the Borrower of each year pursuant to Section 8.07(c).
"RESPONSIBLE OFFICER" shall mean, as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person and the
Chief Financial Officer of such Person. Unless otherwise specified, all
references to a Responsible Officer herein shall mean a Responsible Officer of
the Borrower.
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"SECURITIES PURCHASE AGREEMENT" shall mean that certain Securities
Purchase Agreement dated August 20, 1998 among Xxxxxxx Exploration, ECT (as
predecessor to ECT Merchant) and JEDI-II, as agent for such purchasers regarding
the Subordinated Debt, as heretofore amended.
"SENIOR INDEBTEDNESS" shall mean any and all amounts owing or to be
owing by Borrower, Xxxxxxx Exploration or any Subsidiary of Borrower or Xxxxxxx
Exploration in connection with (a) the Senior Loan Documents, and/or (b) any
Hedging Agreements now or hereafter existing between (i) Borrower and BMO and
its successors or assigns (a "BMO Hedge Party") and Soc-Gen and its successors
or assigns (a "Soc-Gen Hedge Party") entered into while such BMO Hedge Party or
such Soc-Gen Hedge Party is a Senior Lender; and (ii) Borrower and SCI and its
successors or assigns (with Loans or Commitments of $20 million or more) or any
Affiliate of SCI (SCI and any Affiliate of SCI a "SCI Hedge Party") entered into
while such SCI Hedge Party or Fathom Energy Capital I, L.L.C, is a Senior Lender
and permitted by the terms of the Senior Credit Agreement and all renewals,
extensions and/or rearrangements of any of the above.
"SENIOR LOAN DOCUMENTS" means the "Loan Documents" as such term is at
this time and from time to time defined in the Senior Credit Agreement.
14
"SPECIAL ENTITY" shall mean any joint venture, limited liability
company or partnership, general or limited partnership or any other type of
partnership or company other than a corporation in which a Person or one or more
of its other Subsidiaries is a member, owner, partner or joint venturer and
owns, directly or indirectly, at least a majority of the equity of such entity
or controls such entity, but excluding any tax partnerships that are not
classified as partnerships under state law. For purposes of this definition, any
Person which owns directly or indirectly an equity investment in another Person
which allows the first Person to manage or elect managers who manage the normal
activities of such second Person will be deemed to "control" such second Person
(e.g. a sole general partner controls a limited partnership).
"STANDARD MORTGAGE" shall mean, collectively, the "Standard Mortgages"
referred to in item 10 of Exhibit D and any mortgages and supplements executed
pursuant to Section 8.09 (b) hereof.
"SUBORDINATION AGREEMENT" means that certain Intercreditor and
Subordination Agreement of even date herewith by and between Borrower, Senior
Agent, Senior Lenders, Agent and Lenders, as from time to time amended,
supplemented or modified.
"SUBSIDIARY" shall mean (i) any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by a Person or one or more of its Subsidiaries or by a Person and one
or more of its Subsidiaries and (ii) any Special Entity. Unless otherwise
indicated herein, each reference to the term "Subsidiary" shall mean a
Subsidiary of the Borrower.
"TANGIBLE NET WORTH" shall mean, as at any date, the sum of the
following for Xxxxxxx Exploration and its Consolidated Subsidiaries determined
(without duplication) in accordance with GAAP (determined without regard to any
write up or write down resulting from any changes in GAAP subsequent to
September 30, 1999):
(i) the amount of preferred stock and common stock at par plus
the amount of surplus of Xxxxxxx Exploration, PLUS
(ii) the retained earnings (or, in the case of retained earnings
deficit, MINUS the amount of such deficit), MINUS
(iii) the sum of the following: cost of treasury shares and the
book value of all assets of Xxxxxxx Exploration and its
Consolidated Subsidiaries which should be classified as
intangibles (without duplication of deductions in respect of
items already deducted in arriving at surplus and retained
earnings) but in any event including as such intangibles the
following: goodwill, research and development costs,
trademarks, trade names, copyrights, patents and franchises,
unamortized debt discount and expense, all
15
reserves and any writeup in the book value of assets
resulting from a revaluation thereof.
"TAXES" shall have the meaning assigned such term in Section 4.06(a).
"TERM ORRI" shall mean the term overriding royalty interest created
pursuant to that certain Conveyance of Adjustable Term Overriding Royalty
Interest between Borrower, ECT Merchant and JEDI-II.
"TRADE PAYABLES" shall mean customary trade payables incurred in the
ordinary course of business.
"WARRANT AGREEMENT" means as agreement in substantially the form
attached hereto as Schedule 6.01(o).
"WHOLLY-OWNED SUBSIDIARY" shall mean, as to a Person, any Subsidiary
of which all of the outstanding shares of stock (or other ownership interests)
having by the terms thereof ordinary voting power to elect the board of
directors (or other managing persons) of such entity, other than directors'
qualifying shares, are owned or controlled by such Person or one or more of the
Wholly-Owned Subsidiaries or by such Person and one or more of the Wholly-Owned
Subsidiaries.
Section 1.03 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Agent or the Lenders hereunder shall be
prepared, in accordance with GAAP, applied on a basis consistent with the
audited financial statements of the Borrower referred to in Section 7.02 (except
for changes concurred with by the Borrower's independent public accountants).
ARTICLE 2
COMMITMENTS
Section 2.01 LOANS. Each Lender severally agrees, on the terms of this
Agreement, to make Loans to the Borrower during the period from and including
(i) the Closing Date or (ii) such later date that such Lender becomes a party to
this Agreement as provided in Section 12.06(b), to but excluding, the Credit
Advances Termination Date in an aggregate principal amount at any one time
outstanding up to but not exceeding the amount of such Lender's Commitment as
then in effect; provided, however, that the aggregate principal amount of all
such Loans by all Lenders hereunder at any one time outstanding shall not exceed
the Aggregate Commitments. The principal amount of the Loans which are repaid
may not be reborrowed.
Section 2.02 BORROWINGS, CONTINUATIONS AND CONVERSIONS.
(a) BORROWINGS. The Borrower shall give the Agent
(which shall promptly notify the Lenders) advance notice as
hereinafter provided of each borrowing
16
hereunder, which shall specify the aggregate amount of such borrowing,
and the date (which shall be a Business Day) of the Loans to be
borrowed.
(b) MINIMUM AMOUNTS. Any borrowings shall be in amounts of at
least $1,000,000 or any whole multiple of $1,000,000 in excess
thereof.
(c) NOTICES. All borrowings, continuations and conversions shall
require advance written notice to the Agent (which shall
promptly notify the Lenders) in the form of Exhibit B hereto (or
telephonic notice promptly confirmed by such a written notice), which
in each case shall be irrevocable, from the Borrower to be received by
the Agent not later than 11:00 a.m. Houston, Texas time at least three
Business Days prior to the date of each borrowing. Without in any way
limiting the Borrower's obligation to confirm in writing any
telephonic notice, the Agent may act without liability upon the basis
of telephonic notice believed by the Agent in good faith to be from
the Borrower prior to receipt of written confirmation. In each such
case, the Borrower hereby waives the right to dispute the Agent's
record of the terms of such telephonic notice except in the case of
gross negligence or willful misconduct by the Agent.
(d) ADVANCES. Not later than 11:00 a.m. Houston, Texas time on
the date specified for each borrowing hereunder, each Lender shall
make available the amount of the Loan to be made by it on such date to
the Agent, to an account which the Agent shall specify, in immediately
available funds for the account of the Borrower. The amounts so
received by the Agent shall, subject to the terms and conditions of
this Agreement, be made available to the Borrower by depositing the
same, in immediately available funds, in an account of the Borrower,
designated by the Borrower and maintained at the Principal Office.
Section 2.03 CHANGES OF COMMITMENTS.
(a) The Aggregate Commitments shall at all times be equal to the
Aggregate Maximum Credit Amounts.
(b) The Borrower shall have the right to terminate or to reduce
the amount of the Aggregate Maximum Credit Amounts at any time or from
time to time upon not less than three (3) Business Days' prior notice
to the Agent (which shall promptly notify the Lenders) of each such
termination or reduction, which notice shall specify the effective
date thereof and the amount of any such reduction (which shall not be
less than $1,000,000 or any whole multiple of $1,000,000 in excess
thereof) and shall be irrevocable and effective only upon receipt by
the Agent.
(c) The Aggregate Maximum Credit Amounts once terminated or
reduced may not be reinstated.
17
Section 2.04 FEES.
(a) COMMITMENT FEE. The Borrower shall pay to the Agent (to be
allocated to the Lenders) a commitment fee on the daily average unused
amount of the Aggregate Commitments for the period from and including
the Closing Date up to but excluding the earlier of the date the
Aggregate Commitments are terminated or the Credit Advances
Termination Date at a rate per annum equal to 5/8 of 1%. Accrued
commitment fees shall be payable quarterly in arrears on each
Quarterly Date and on the earlier of the date the Aggregate
Commitments are terminated or the Credit Advances Termination Date.
(b) The Borrower shall pay to the Agent for its account such
other fees as are set forth in the Agent's Fee Letter on the dates
specified therein to the extent not paid prior to the Closing Date.
Section 2.05 SEVERAL OBLIGATIONS. The failure of any Lender to make
any Loan to be made by it on the date specified therefor shall not relieve any
other Lender of its obligation to make its Loan or provide funds on such date,
but no Lender shall be responsible for the failure of any other Lender to make a
Loan to be made by such other Lender or to provide funds to be provided by such
other Lender.
Section 2.06 NOTES. The Loans made by each Lender shall be evidenced
by a single promissory note of the Borrower in substantially the form of Exhibit
A hereto, dated (i) the Closing Date or (ii) the effective date of an Assignment
pursuant to Sections 12.06(b) and (c), payable to the order of such Lender in a
principal amount equal to its Maximum Credit Amount as in effect plus such
Lender's Percentage Share of $3,000,000 (to accommodate deemed advances through
payment in kind pursuant to Section 3.02(b) hereof) and otherwise duly completed
and such substitute Notes as required by Section 12.06(d). The date, amount,
interest rate and Interest Period of each Loan made by each Lender, and all
payments made on account of the principal thereof, shall be recorded by such
Lender on its books for its Note, and, prior to any transfer, may be endorsed by
such Lender on a schedule attached to such Note or any continuation thereof or
on any separate record maintained by such Lender. Failure to make any such
notation or to attach a schedule shall not affect any Lender's or the Borrower's
rights or obligations in respect of such Loans or affect the validity of such
transfer by any Lender of its Note.
Section 2.07 PREPAYMENTS.
(a) The Borrower may prepay the Loans upon not less than one (1)
Business Day's prior notice to the Agent (which shall promptly notify
the Lenders), which notice shall specify the prepayment date (which
shall be a Business Day) and the amount of the prepayment (which shall
be at least $1,000,000 or the remaining aggregate principal balance
outstanding on the Notes) and shall be irrevocable and effective only
upon receipt by the Agent, provided that interest on the principal
prepaid, accrued to the prepayment date, shall be paid on the
prepayment date.
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(b) If, after giving effect to any termination or reduction of
the Aggregate Maximum Credit Amounts pursuant to Section 2.03, the
outstanding aggregate principal amount of the Loans exceeds the
Aggregate Maximum Credit Amounts, the Borrower shall prepay the Loans
on the date of such termination or reduction in an aggregate principal
amount equal to the excess, together with interest on the principal
amount paid to the date of such prepayment.
(c) Prepayments permitted or required under this Section 2.07
shall be without premium or penalty. All payments of principal on the
Loans shall reduce the Aggregate Maximum Credit Amounts.
Section 2.08 LENDING OFFICES. The Loans made by each Lender shall be
made and maintained at such Lender's Applicable Lending Office.
ARTICLE 3
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 REPAYMENT OF LOANS. On the Final Maturity Date the
Borrower shall repay the outstanding aggregate principal and accrued and unpaid
interest under the Notes.
Section 3.02 INTEREST.
(a) The Borrower will pay to the Agent, for the account of each
Lender, interest on the unpaid principal amount of each Loan made by such Lender
for the period commencing on the date such Loan is made to but excluding the
date such Loan shall be paid in full, either in cash or, if permitted under
Section 3.02 (b) in kind, at the Fixed Rate.
Notwithstanding the foregoing, the Borrower will pay to the Agent, for the
account of each Lender interest at the applicable Post-Default Rate on any
principal of any Loan made by such Lender, and (to the fullest extent permitted
by law) on any other amount payable by the Borrower hereunder, under any Loan
Document or under any Note held by such Lender to or for account of such Lender,
for the period commencing on the date of an Event of Default until the same is
paid in full or all such Events of Default are cured or waived. Accrued interest
on Loans shall be payable on the last day of each January, April, July and
October, through the Final Maturity Date, starting January 31, 2001
(individually, an "Interest Payment Date" and, collectively, the "Interest
Payment Dates"), except that interest payable at the Post-Default Rate shall be
payable from time to time on demand.
The foregoing rates shall apply to interest paid in cash and to interest paid in
kind.
(b) On any Interest Payment Date occurring on or before October, 2002,
Borrower shall have the absolute right to pay 50% of all accrued interest on the
Notes in kind, instead of in cash, as provided in this Section 3.02(b). In the
event any accrued interest due on any particular Interest Payment Date is paid
in kind, it shall be deemed an advance of principal under the Notes and, as of
the Interest Payment Date, shall be added to the outstanding principal balance
of the Notes (notwithstanding that the outstanding principal balance may exceed,
in the aggregate, the face amount of the Notes). In order to exercise its option
to pay interest in kind under this
19
Section 3.02(b), the Borrower shall, on or, at any time, before the applicable
Interest Payment Date, deliver written notice to the Agent, executed by a
Responsible Officer, specifying its election to pay interest in kind. Should
Borrower fail to deliver such written notice in a timely fashion, Borrower shall
be deemed to have irrevocably elected to make payment of such accrued interest
in cash. In the event Borrower elects to pay interest in kind, such interest
shall be calculated at the Fixed Rate.
ARTICLE 4
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 PAYMENTS. Except to the extent otherwise provided herein,
all payments of principal, interest and other amounts to be made by the Borrower
under the Loan Documents shall be made in Dollars, in immediately available
funds, to the Agent at such account as the Agent shall specify by notice to the
Borrower from time to time, not later than noon Houston, Texas time on the date
on which such payments shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding Business
Day). Such payments shall be made without (to the fullest extent permitted by
applicable law) defense, set-off or counterclaim. Each payment received by the
Agent under this Agreement or any Note for account of a Lender shall be paid
promptly to such Lender in immediately available funds. If the due date of any
payment under this Agreement or any Note would otherwise fall on a day which is
not a Business Day such date shall be extended to the next succeeding Business
Day and interest shall be payable for any principal so extended for the period
of such extension.
Section 4.02 PRO RATA TREATMENT. Except to the extent as otherwise
provided herein each Lender agrees that: (i) each borrowing from the Lenders
under Section 2.01 shall be made from the Lenders pro rata in accordance with
their Percentage Share, each payment of commitment fee or other fees under
Sections 2.04(a) and (b) shall be made for account of the Lenders pro rata in
accordance with their Percentage Share, and each termination or reduction of the
amount of the Aggregate Maximum Credit Amounts under Section 2.03(b) shall be
applied to the Commitment of each Lender, pro rata according to the amounts of
its respective Commitment; (ii) each payment of principal of Loans by the
Borrower shall be made for account of the Lenders pro rata in accordance with
the respective unpaid principal amount of the Loans held by the Lenders; and
(iii) each payment of interest on Loans by the Borrower shall be made for
account of the Lenders pro rata in accordance with the amounts of interest due
and payable to the respective Lenders.
Section 4.03 COMPUTATIONS. Interest on 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) occurring in the period for
which such interest is payable.
Section 4.04 NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Agent shall
have been notified by a Lender or the Borrower prior to the date on which such
notifying party is scheduled to make payment to the Agent (in the case of a
Lender) of the proceeds of a Loan or (in the case of the Borrower) a payment to
the Agent for account of one or more of the Lenders hereunder (such payment
being herein called the "REQUIRED PAYMENT"), which notice shall be
20
effective upon receipt, that it does not intend to make the Required Payment to
the Agent, the Agent may assume that the Required Payment has been made and may,
in reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or the Borrower (as the case may be) has not in fact made the Required Payment
to the Agent, the recipient(s) of such payment shall, on demand, repay to the
Agent the amount so made available together with interest thereon in respect of
each day during the period commencing on the date such amount was so made
available by the Agent until but excluding the date the Agent recovers such
amount at a rate per annum which, for any Lender as recipient, will be equal to
the Federal Funds Rate, and for the Borrower as recipient, will be equal to the
Fixed Rate.
Section 4.05 SET-OFF, SHARING OF PAYMENTS, ETC.
(a) The Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall have the right and be
entitled (after consultation with the Agent), at its option, to offset
balances held by it or by any of its Affiliates for account of the
Borrower at any of its offices, in Dollars or in any other currency,
against any principal of or interest on any of such Lender's Loans, or
any other amount payable to such Lender hereunder, which is not paid
when due (regardless of whether such balances are then due to the
Borrower), in which case it shall promptly notify the Borrower and the
Agent thereof, provided that such Lender's failure to give such notice
shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on any Loan made by it to the Borrower under this Agreement
through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise, and, as a result of such
payment, such Lender shall have received a greater percentage of the
principal or interest then due hereunder by the Borrower to such
Lender than the percentage received by any other Lenders, it shall
promptly (i) notify the Agent and each other Lender thereof and (ii)
purchase from such other Lenders participations in (or, if and to the
extent specified by such Lender, direct interests in) the Loans made
by such other Lenders (or in interest due thereon, as the case may be)
in such amounts, and make such other adjustments from time to time as
shall be equitable, to the end that all the Lenders shall share the
benefit of such excess payment (net of any expenses which may be
incurred by such Lender in obtaining or preserving such excess
payment) pro rata in accordance with the unpaid principal and/or
interest on the Loans held by each of the Lenders. To such end all the
Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such payment is
rescinded or must otherwise be restored. The Borrower agrees that any
Lender so purchasing a participation (or direct interest) in the Loans
made by other Lenders (or in interest due thereon, as the case may be)
may exercise all rights of set-off, banker's lien, counterclaim or
similar rights with respect to such participation as fully as if such
Lender were a direct holder of Loans in the amount of such
participation. Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to
exercise, and
21
retain the benefits of exercising, any such right with respect to any
other indebtedness or obligation of the Borrower. If under any
applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a set-off to which this Section
4.05 applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent
with the rights of the Lenders entitled under this Section 4.05 to
share the benefits of any recovery on such secured claim.
Section 4.06 TAXES.
(a) PAYMENTS FREE AND CLEAR. Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 4.01, free and
clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, EXCLUDING, in the case of each
Lender and the Agent, taxes imposed on its income, and franchise or
similar taxes imposed on it, by (i) any jurisdiction (or political
subdivision thereof) of which the Agent or such Lender, as the case
may be, is a citizen or resident or in which such Lender has an
Applicable Lending Office, (ii) the jurisdiction (or any political
subdivision thereof) in which the Agent or such Lender is organized,
or (iii) any jurisdiction (or political subdivision thereof) in which
such Lender or the Agent is presently doing business in which taxes
are imposed solely as a result of doing business in such jurisdiction
(all such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"TAXES"). If the Borrower shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder to the Lenders or the
Agent (i) the sum payable shall be increased by the amount necessary
so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 4.06) such
Lender or the Agent (as the case may be) shall receive an amount equal
to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower
shall pay the full amount deducted to the relevant taxing authority or
other Governmental Authority in accordance with applicable law.
(b) OTHER TAXES. In addition, to the fullest extent permitted by
applicable law, the Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to,
this Agreement, any Assignment or any other Loan Document (hereinafter
referred to as "OTHER TAXES").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE AGENT
FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT
LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL
AUTHORITY ON AMOUNTS PAYABLE UNDER
22
THIS SECTION 4.06) PAID BY SUCH LENDER OR THE AGENT (ON THEIR BEHALF
OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH
RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE
CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT
CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES
OR OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE
WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER OR THE AGENT, AS THE
CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER OR THE AGENT
RECEIVES A REFUND OR CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR
WHICH SUCH LENDER OR THE AGENT HAS RECEIVED PAYMENT FROM THE BORROWER
IT SHALL PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND
SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY
(30) DAYS AFTER RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON
RECEIPT, IF THE BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR
CREDIT PURSUANT HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT
TO THE BORROWER WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR
CREDITED), PROVIDED THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER
OR THE AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES,
INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE AGENT IN THE EVENT
SUCH LENDER OR THE AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) LENDER REPRESENTATIONS.
(i) Each Lender represents that it is either (1) a corporation
or banking association organized under the laws of the
United States of America or any state thereof or (2) it is
entitled to complete exemption from United States
withholding tax imposed on or with respect to any payments,
including fees, to be made to it pursuant to this Agreement
(A) under an applicable provision of a tax convention to
which the United States of America is a party or (B) because
it is acting through a branch, agency or office in the
United States of America and any payment to be received by
it hereunder is effectively connected with a trade or
business in the United States of America. Each Lender that
is not a corporation or banking association organized under
the laws of the United States of America or any state
thereof agrees to provide to the Borrower and the Agent on
the Closing Date, or on the date of its delivery of
23
the Assignment pursuant to which it becomes a Lender, and at
such other times as required by United States law or as the
Borrower or the Agent shall reasonably request, two accurate
and complete original signed copies of either (A) Internal
Revenue Service Form 4224 (or successor form) certifying
that all payments to be made to it hereunder will be
effectively connected to a United States trade or business
(the "FORM 4224 CERTIFICATION") or (B) Internal Revenue
Service Form 1001 (or successor form) certifying that it is
entitled to the benefit of a provision of a tax convention
to which the United States of America is a party which
completely exempts from United States withholding tax all
payments to be made to it hereunder (the "FORM 1001
CERTIFICATION"). In addition, each Lender agrees that if it
previously filed a Form 4224 Certification, it will deliver
to the Borrower and the Agent a new Form 4224 Certification
prior to the first payment date occurring in each of its
subsequent taxable years; and if it previously filed a Form
1001 Certification, it will deliver to the Borrower and the
Agent a new certification prior to the first payment date
falling in the third year following the previous filing of
such certification. Each Lender also agrees to deliver to
the Borrower and the Agent such other or supplemental forms
as may at any time be required as a result of changes in
applicable law or regulation in order to confirm or maintain
in effect its entitlement to exemption from United States
withholding tax on any payments hereunder, PROVIDED that the
circumstances of such Lender at the relevant time and
applicable laws permit it to do so. If a Lender determines,
as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to
submit any form or certificate that it is obligated to
submit pursuant to this Section 4.06, or that it is required
to withdraw or cancel any such form or certificate
previously submitted, it shall promptly notify the Borrower
and the Agent of such fact. If a Lender is organized under
the laws of a jurisdiction outside the United States of
America, unless the Borrower and the Agent have received a
Form 1001 Certification or Form 4224 Certification
satisfactory to them indicating that all payments to be made
to such Lender hereunder are not subject to United States
withholding tax, the Borrower shall withhold taxes from such
payments at the applicable statutory rate. Each Lender
agrees to indemnify and hold harmless the Borrower or Agent,
as applicable, from any United States taxes, penalties,
interest and other expenses, costs and losses incurred or
payable by (i) the Agent as a result of such Lender's
failure to submit any form or certificate that it is
required to provide pursuant to this Section 4.06 or (ii)
the Borrower or the Agent as a result of their reliance on
any such
24
form or certificate which such Lender has provided to them
pursuant to this Section 4.06.
(ii) For any period with respect to which a Lender has failed to
provide the Borrower with the form required pursuant to this
Section 4.06, if any, (other than if such failure is due to
a change in a Governmental Requirement occurring subsequent
to the date on which a form originally was required to be
provided), such Lender shall not be entitled to
indemnification under Section 4.06 with respect to taxes
imposed by the United States which taxes would not have been
imposed but for such failure to provide such forms;
PROVIDED, HOWEVER, that should a Lender, which is otherwise
exempt from or subject to a reduced rate of withholding tax
becomes subject to taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps
as such Lender shall reasonably request to assist such
Lender to recover such taxes.
(iii) Any Lender claiming any additional amounts payable pursuant
to this Section 4.06 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file
any certificate or document requested by the Borrower or the
Agent or to change the jurisdiction of its Applicable
Lending Office or to contest any tax imposed if the making
of such a filing or change or contesting such tax would
avoid the need for or reduce the amount of any such
additional amounts that may thereafter accrue and would not,
in the sole determination of such Lender, be otherwise
disadvantageous to such Lender.
ARTICLE 5
[INTENTIONALLY OMITTED]
ARTICLE 6
CONDITIONS PRECEDENT
Section 6.01 INITIAL FUNDING.
The obligation of the Lenders to make the Initial Funding is subject
to the receipt by the Agent and the Lenders of all fees payable pursuant to
Section 2.04 on or before the Closing Date and the receipt by the Agent of the
following documents and satisfaction of the other conditions provided in this
Section 6.01, each of which shall be satisfactory to the Agent in form and
substance:
(a) A certificate of the Secretary or an Assistant Secretary of
each of Xxxxxxx Exploration, the General Partner and the manager of
each other
25
Guarantor setting forth (i) resolutions of its board of directors with
respect to its authorization to execute and deliver the Loan Documents
to which it is a party and to enter into the transactions contemplated
in those documents, (ii) the officers (y) who are authorized to sign
the Loan Documents to which it is a party and (z) who will, until
replaced by another officer or officers duly authorized for that
purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection
with this Agreement and the transactions contemplated hereby, (iii)
specimen signatures of its authorized officers, and (iv) its articles
or certificate of incorporation and bylaws or operating agreement,
certified as being true and complete. The Agent and the Lenders may
conclusively rely on such certificate until the Agent receives notice
in writing from the Borrower to the contrary.
(b) Certificates of the appropriate state agencies with respect
to the existence, qualification and good standing of the Borrower and
the Guarantors.
(c) A compliance certificate which shall be substantially in the
form of Exhibit C-1, duly and properly executed by a Responsible
Officer and dated as of the Closing Date.
(d) The Notes, duly completed and executed.
(e) The Loan Documents listed on Exhibit D hereto, duly completed
and, where necessary or appropriate, executed in sufficient
counterparts for recording.
(f) Evidence satisfactory to the Agent that the Enron
Indebtedness has been paid and satisfied in full, the Enron Mortgages
and all other Liens securing the Enron Indebtedness have been fully
released in proper recordable form, the Term ORRI has be reconveyed to
the Borrower, the Enron Warrants have been cancelled, and the Enron
Shares returned to Xxxxxxx Exploration by payment by Xxxxxxx
Exploration of a sum not to exceed $20,000,000 plus reasonable Enron
legal fees.
(g) Execution and delivery of the Subordination Agreement.
(h) An opinion of Xxxxxxxx & Knight LLP, special counsel to the
Borrower and the Guarantors in form reasonably satisfactory to the
Agent.
(i) A certificate of insurance coverage of the Borrower
evidencing that the Borrower is carrying insurance in accordance with
Section 7.19 hereof.
(j) The Agent shall be reasonably satisfied with the
environmental condition of the Mortgaged Properties.
(k) Appropriate UCC search certificates reflecting no prior liens
or security interests, except those securing the Senior Indebtedness.
26
(l) Borrower shall have submitted to the Lenders the initial
CAPEX Plan, which CAPEX Plan shall be satisfactory in form and
substance to the Majority Lenders.
(m) Borrower shall have submitted to the Lenders the Hedging
Agreements described on Schedule 7.20, which Hedging Agreements shall
be satisfactory in form and substance to the Majority Lenders.
(n) Execution and delivery of the Agent's Fee Letter.
(o) The Warrant Agreement, duly executed and delivered.
(p) Execution and delivery of the Ancillary Agreement between SCI
and Borrower pertaining to the reduction, under certain circumstances,
of a portion of SCI's outstanding indebtedness under the Senior Credit
Agreement.
(q) The issuance by Xxxxxxx Exploration of preferred equity
securities for a consideration of not less than $20,000,000, before
deduction of fees and commissions, and otherwise on terms reasonably
acceptable to the Agent.
(r) Such other documents as the Agent or any Lender or special
counsel to the Agent may reasonably request.
Notwithstanding the foregoing, the execution and delivery of the Loan
Documents may occur at any time on or before November 3, 2000 and, in connection
therewith, Borrower will deliver a supplementary or replacement opinion of
counsel that supplements or replaces the original opinion delivered pursuant to
subsection (h) above, with such opinion to cover Xxxxxxx Holdings I, LLC and
Xxxxxxx Holdings II, LLC additionally and to the same effect as the original
opinion delivered pursuant to subsection (h) above. Failure to deliver the
documents described in this paragraph shall constitute an "Event of Default"
under this Agreement.
Section 6.02 INITIAL, SUBSEQUENT LOANS. The obligation of the Lenders
to make Loans to the Borrower upon the occasion of each borrowing hereunder
(including the Initial Funding) is subject to the further conditions precedent
that, as of the date of such Loans and after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) no Material Adverse Effect shall have occurred and be
continuing; and
(c) the representations and warranties made by the Borrower in
Article VII and in the Loan Documents or by any Guarantor in any other
Loan Document shall be true in all material respects on and as of the
date of the making of such Loans with the same force and effect as if
made on and as of such date and following such new borrowing, except
to the extent such representations and warranties (i) are expressly
limited to an earlier date or the Majority Lenders may expressly
consent in writing to the contrary or (ii) in the case only of the
representations and warranties made by the Borrower in subsections
7.09 and 7.22
27
of Article VII, if not true in all material respects, such failure
does not give rise a Material Adverse Effect or a Default.
Each request for a borrowing by the Borrower hereunder shall
constitute a certification by the Borrower to the effect set forth in Section
6.02(a), (b) and (c) above (as of the date of such notice and, unless the
Borrower otherwise notifies the Agent prior to the date of and immediately
following such borrowing).
Section 6.03 CONDITIONS PRECEDENT FOR THE BENEFIT OF LENDERS. All
conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any Loan in the absence of strict
compliance with such conditions precedent.
Section 6.04 NO WAIVER. No waiver of any condition precedent shall
preclude the Agent or the Lenders from requiring such condition to be met prior
to making any subsequent Loan or preclude the Lenders from thereafter declaring
that a subsequent failure of the Borrower to satisfy such condition precedent
constitutes a Default.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders that
(each representation and warranty herein is given as of the Closing Date and
shall be deemed repeated and reaffirmed on the dates of each borrowing as
provided in Section 6.02):
Section 7.01 CORPORATE EXISTENCE. The Borrower: (i) is a limited
partnership duly organized, legally existing and in good standing under the laws
of the jurisdiction of its formation; (ii) has all requisite power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify would have a Material Adverse Effect.
Section 7.02 FINANCIAL CONDITION. The audited consolidated balance
sheet of Xxxxxxx Exploration and its Consolidated Subsidiaries as at December
31, 1999 and the related consolidated statement of income, stockholders' equity
and cash flow of Xxxxxxx Exploration and its Consolidated Subsidiaries for the
fiscal year ended on said date, with the opinion thereon of Price Waterhouse
heretofore furnished to each of the Lenders and the unaudited consolidated
balance sheet of Xxxxxxx Exploration and its Consolidated Subsidiaries as at
June 30, 2000, and their related consolidated statements of income,
stockholders' equity and cash flow of Xxxxxxx Exploration and its Consolidated
Subsidiaries for the six-month period ended on such date heretofore furnished to
the Agent, are complete and correct and fairly present the consolidated
financial condition of Xxxxxxx Exploration and its Consolidated Subsidiaries as
at said dates and the results of its operations for the fiscal year and the
six-month period on said dates, all in
28
accordance with GAAP, as applied on a consistent basis (subject, in the case of
the interim financial statements, to normal year-end adjustments). Neither
Xxxxxxx Exploration nor any Consolidated Subsidiary has on the Closing Date any
material Debt, Trade Payables, contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments or unrealized or anticipated losses
from any unfavorable commitments, except as referred to or reflected or provided
for in the Financial Statements or in Schedule 7.02. Since December 31, 1999,
there has been no change or event having a Material Adverse Effect, except as
disclosed to the Agent in writing. Since the date of the Financial Statements,
neither the business nor the Properties of Xxxxxxx Exploration Consolidated
Subsidiaries, taken as a whole, have been materially and adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any Governmental Authority,
riot, activities of armed forces or acts of God or of any public enemy.
Section 7.03 LITIGATION. Except as disclosed to the Lenders in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of the Borrower threatened against or
affecting the Borrower or any Subsidiary which both (a) involves the possibility
of any judgment or liability against the Borrower or any Subsidiary not fully
covered by insurance (except for normal deductibles), and (b) would be more
likely than not to have a Material Adverse Effect.
Section 7.04 NO BREACH. Neither the execution and delivery of the Loan
Documents, nor compliance with the terms and provisions hereof will conflict
with or result in a breach of, or require any consent which has not been
obtained as of the Closing Date under, the Partnership Agreement, the respective
charter or by-laws of any Subsidiary or any Governmental Requirement or any
material agreement or instrument to which the Borrower or any Subsidiary is a
party or by which it is bound or to which it or its Properties are subject, or
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien upon any of the material revenues or assets
of the Borrower or any Subsidiary pursuant to the terms of any such agreement or
instrument other than the Liens created by the Loan Documents.
Section 7.05 AUTHORITY. The Borrower and each Subsidiary has all
necessary power and authority to execute, deliver and perform its obligations
under the Loan Documents to which it is a party; and the execution, delivery and
performance by the Borrower and each Subsidiary of the Loan Documents to which
it is a party, have been duly authorized by all necessary action on its part;
and the Loan Documents constitute the legal, valid and binding obligations of
the Borrower and each Subsidiary, enforceable in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent transfer and similar laws affecting creditors' rights generally or by
general principles of equity.
Section 7.06 APPROVALS. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by the Borrower or any Subsidiary of
the Loan Documents or for the validity or enforceability thereof.
29
Section 7.07 USE OF LOANS. Subject to the terms and conditions
elsewhere herein, the proceeds of the Loans shall be used (a) to pay fees and
payables, (b) to provide additional drilling capital and (c) for general working
capital purposes; provided, however, the proceeds of the Loans shall not be used
to pay any of the Senior Indebtedness. In no event shall the proceeds of the
Loans be used to finance in whole or in part any hostile acquisition. The
Borrower is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying margin stock (within the meaning of
Regulation U or X of the Board of Governors of the Federal Reserve System) and
no part of the proceeds of any Loan hereunder will be used to buy or carry any
margin stock.
Section 7.08 ERISA.
(a) The Borrower and each ERISA Affiliate have complied in all
material respects with ERISA and, where applicable, the Code regarding
each Plan.
Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
No act, omission or transaction has occurred which could result
in imposition on the Borrower or any ERISA Affiliate (whether directly
or indirectly) of an amount of $100,000 or more as (i) either a civil
penalty assessed pursuant to section 502(c), (i) or (1) of ERISA or a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii)
breach of fiduciary duty liability damages under section 409 of ERISA.
No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2,
1974. No liability to the PBGC in excess of $100,000 (other than for
the payment of current premiums which are not past due) by the
Borrower or any ERISA Affiliate has been or is expected by the
Borrower or any ERISA Affiliate to be incurred with respect to any
Plan. No ERISA Event with respect to any Plan has occurred which could
reasonably be expected to result in liabilities of $100,000 or more.
Full payment when due has been made of all amounts which the
Borrower or any ERISA Affiliate is required under the terms of each
Plan or applicable law to have paid as contributions to such Plan, and
no accumulated funding deficiency in an amount of $100,000 or more (as
defined in section 302 of ERISA and section 412 of the Code), whether
or not waived, exists with respect to any Plan.
The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA does not, as of the end of
the Borrower's most recently ended fiscal year, exceed the current
value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities by $100,000 or more. The term "actuarial present
value of the benefit liabilities" shall have the meaning specified in
section 4041 of ERISA.
30
None of the Borrower or any ERISA Affiliate sponsors, maintains,
or contributes to an employee welfare benefit plan, as defined in
section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities,
that may not be terminated by the Borrower or any ERISA Affiliate in
its sole discretion at any time without any material liability.
None of the Borrower or any ERISA Affiliate sponsors, maintains
or contributes to, or has at any time in the preceding six calendar
years, sponsored, maintained or contributed to, any Multiemployer
Plan.
None of the Borrower or any ERISA Affiliate is required to
provide security under section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the
Plan.
Section 7.09 TAXES. Except as set out in Schedule 7.09, the Borrower
has filed all United States Federal income tax returns and all other tax returns
which are required to be filed by it and has paid all material taxes due
pursuant to such returns or pursuant to any assessment received by the Borrower,
except for any taxes which are being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained. The
charges, accruals and reserves on the books of the Borrower in respect of taxes
and other governmental charges are, in the opinion of the Borrower, adequate. No
tax lien has been filed and, to the knowledge of the Borrower, no claim is being
asserted with respect to any such tax, fee or other charge, except for any
taxes, fees or other charges which are being contested in good faith and by
proper proceedings and against which adequate reserves are being maintained.
Section 7.10 TITLES, ETC.
(a) Subject to the matters set out in Schedule 7.10, each of the
Borrower and the Subsidiaries has good and defensible title to (i) the
Oil and Gas Properties that are both evaluated (A) in the most
recently delivered Reserve Report and (B) described in a Standard
Mortgage, free and clear of all Liens except Liens permitted by
Section 9.02, and (ii) to the best of Borrower's knowledge, the
balance of Borrower's material (individually or in the aggregate) Oil
and Gas Properties (and/or those of the Subsidiaries) that are
described in any other Mortgage or that are otherwise evaluated in the
most recently delivered Reserve Report, free and clear (to the best of
Borrower's knowledge) of all Liens except Liens permitted by Section
9.02. Except for immaterial divergences, after giving full effect to
the Excepted Liens and the matters set forth in Schedule 7.10, the
Borrower owns the net interests in production attributable to the
Hydrocarbon Interests that are both (A) evaluated in the most recently
delivered Reserve Report and (b) reflected in a Standard Mortgage, and
the ownership of such Hydrocarbon Interests shall not in any material
respect obligate the Borrower to bear the costs and expenses relating
to the maintenance, development and operations of each such
Hydrocarbon Interest in an amount in excess of the working interest of
such Hydrocarbon Interest set forth in a Standard Mortgage (without a
corresponding increase in net revenue interest). The Borrower does not
believe, based upon
31
information in its possession, that its most recently delivered
Reserve Report materially overstates its oil and gas reserves, bearing
in mind that reserves are evaluated based upon estimates and
assumptions with respect to which reasonable minds of competent
reserve engineers may differ.
(b) All leases and agreements necessary for the conduct of the
business of the Borrower and the Subsidiaries are valid and
subsisting, in full force and effect and there exists no default or
event or circumstance which with the giving of notice or the passage
of time or both would give rise to a default under any such lease or
leases, which would affect in any material respect the conduct of the
business of the Borrower and the Subsidiaries.
(c) The Properties presently owned, leased or licensed by the
Borrower and the Subsidiaries, including, without limitation, all
easements and rights of way, include all Properties necessary to
permit the Borrower and the Subsidiaries to conduct their business in
all material respects in the same manner as its business has been
conducted prior to the Closing Date.
(d) All of the Properties of the Borrower and the Subsidiaries
which are reasonably necessary for the operation of their business are
in good working condition in all material respects and are maintained
in accordance with prudent business standards.
Section 7.11 NO MATERIAL MISSTATEMENTS. Taken as a whole, the written
information, statements, exhibits, certificates, documents and reports furnished
to SCI by the Borrower or any Guarantor in connection with the negotiation of
this Agreement do not contain any material misstatement of fact or omit to state
a material fact or any fact necessary to make the statements contained therein
not materially misleading in the light of the circumstances in which made and
with respect to the Borrower or any Guarantor. As of the Closing Date, there is
no fact peculiar to the Borrower or Guarantor which has a Material Adverse
Effect or in the future is reasonably likely to have (so far as the Borrower can
now foresee) a Material Adverse Effect and which has not been set forth in this
Agreement or the other documents, certificates and statements furnished to SCI
by or on behalf of the Borrower or any Guarantor prior to, or on, the Closing
Date in connection with the transactions contemplated hereby or the Senior Loan
Documents.
Section 7.12 INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any Subsidiary is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
32
Section 7.14 SUBSIDIARIES. Except as set forth on Schedule 7.14 or as
allowed by Section 9.16, the Borrower has no Subsidiaries.
Section 7.15 LOCATION OF BUSINESS AND OFFICES. As of the Closing Date,
the Borrower's principal place of business and chief executive offices are
located at the address stated on the signature page of this Agreement. The
principal place of business and chief executive office of each Subsidiary are
located at the addresses stated on Schedule 7.14.
Section 7.16 DEFAULTS. The Borrower is not in default nor has any
event or circumstance occurred which, but for the expiration of any applicable
grace period or the giving of notice, or both, would constitute a default under
any material agreement or instrument to which the Borrower is a party or by
which the Borrower is bound which default would have a Material Adverse Effect.
No Default hereunder or under the Senior Credit Agreement has occurred and is
continuing or will result from the execution, delivery and performance of this
Agreement and the other Loan Documents.
Section 7.17 ENVIRONMENTAL MATTERS. Except as provided in Schedule
7.17 or for matters which are more likely than not to not to have a Material
Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to
take such actions is more likely than not to not have a Material Adverse
Effect):
(a) Neither any Property of Xxxxxxx Exploration or any of its
Subsidiaries nor the operations conducted thereon violate any order or
requirement of any court or Governmental Authority or any
Environmental Laws;
(b) Without limitation of clause (a) above, no Property of
Xxxxxxx Exploration or any of its Subsidiaries nor the operations
currently conducted thereon or, to the best knowledge of the Borrower,
by any prior owner or operator of such Property or operation, are in
violation of or subject to any existing, pending or threatened action,
suit, investigation, inquiry or proceeding by or before any court or
Governmental Authority or to any remedial obligations under
Environmental Laws;
(c) All notices, permits, licenses or similar authorizations, if
any, required to be obtained or filed by Xxxxxxx Exploration or any of
its Subsidiaries in connection with the operation or use of any and
all Property of Xxxxxxx Exploration and each of its Subsidiaries,
including without limitation present, or to the best of Borrower's
knowledge, past treatment, storage, disposal or release of a hazardous
substance or solid waste into the environment, have been duly obtained
or filed, and Xxxxxxx Exploration and each Subsidiary thereof are in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all
Property of Xxxxxxx Exploration and each of its Subsidiaries have in
the past, during the tenure of ownership of Xxxxxxx Exploration and
its Subsidiaries and to the best of
33
Borrower's knowledge, prior thereto, been transported, treated and
disposed of in accordance with Environmental Laws and so as not to
pose an imminent and substantial endangerment to public health or
welfare or the environment, and, to the best knowledge of the
Borrower, all such transport carriers and treatment and disposal
facilities have been and are operating in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment, and are
not the subject of any existing, pending or threatened action,
investigation or inquiry by any Governmental Authority in connection
with any Environmental Laws;
(e) The Borrower has taken all steps reasonably necessary to
determine and has determined that no hazardous substances, solid
waste, or oil and gas exploration and production wastes, have been
disposed of or otherwise released and there has been no threatened
release of any hazardous substances on or to any Property of Xxxxxxx
Exploration or any of its Subsidiaries except in compliance with
Environmental Laws and so as not to pose an imminent and substantial
endangerment to public health or welfare or the environment;
(f) To the extent applicable, all Property of Xxxxxxx Exploration
and each of its Subsidiaries currently satisfies all design,
operation, and equipment requirements imposed by the OPA or scheduled
as of the Closing Date to be imposed by OPA during the term of this
Agreement, and the Borrower does not have any reason to believe that
such Property, to the extent subject to OPA, will not be able to
maintain compliance with the OPA requirements during the term of this
Agreement; and
(g) Neither Xxxxxxx Exploration nor any of its Subsidiaries has
any known contingent liability in connection with any release or
threatened release of any oil, hazardous substance or solid waste into
the environment.
Section 7.18 COMPLIANCE WITH THE LAW. Neither the Borrower nor any
Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
Except for such acts or failures to act as would not have a Material Adverse
Effect, the Oil and Gas Properties (and properties unitized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all applicable laws and all rules, regulations and orders of all
duly constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties; specifically in this connection, but subject to the
Material Adverse Effect qualification set forth above, (i) after the Closing
Date, no Oil and Gas Property is subject to having allowable production reduced
below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) prior to the Closing Date and (ii) none of the xxxxx
comprising a part of the Oil and Gas Properties (or properties unitized
therewith) are deviated from the vertical more
34
than the maximum permitted by applicable laws, regulations, rules and orders,
and such xxxxx are, in fact, bottomed under and are producing from, and the well
bores are wholly within, the Oil and Gas Properties (or in the case of xxxxx
located on properties unitized therewith, such unitized properties).
Section 7.19 INSURANCE. Schedule 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by the
Borrower and each Subsidiary as of the Closing Date. Schedule 7.19 shall be
updated by the Borrower as appropriate from time to time and the representations
in this Section 7.19 shall apply to such updated Schedules. All such policies
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the Closing Date have been paid, and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with all requirements of law and of
all agreements to which the Borrower or any Subsidiary is a party; are valid,
outstanding and enforceable policies; provide adequate insurance coverage in at
least such amounts and against at least such risks (but including in any event
public liability) as are usually insured against in the same general area by
companies engaged in the same or a similar business for the assets and
operations of the Borrower and each Subsidiary; will remain in full force and
effect through the respective dates set forth in Schedule 7.19 without the
payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement. Schedule 7.19 identifies all material risks, if any, which the
General Partner of the Borrower, the Subsidiaries and their respective Board of
Directors or officers have designated as being self insured. Neither the
Borrower nor any Subsidiary has been refused any insurance with respect to its
assets or operations, nor has its coverage been limited below usual and
customary policy limits, by an insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the last three
years.
Section 7.20 HEDGING AGREEMENTS. Schedule 7.20 sets forth, as of the
Closing Date, a true and complete list of all Hedging Agreements (including
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other
commodities) of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net xxxx to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied), and the
counterparty to each such agreement.
Section 7.21 RESTRICTION ON LIENS. Neither the Borrower nor any
Subsidiary is a party to or subject to any agreement or arrangement (other than
the Loan Documents, the Senior Loan Documents, the Indenture, and any other
documents permitted under Section 9.02(f)), or subject to any order, judgment,
writ or decree, which either restricts or purports to restrict its ability to
grant Liens to other Persons on or in respect of their respective assets or
Properties.
Section 7.22 MATERIAL AGREEMENTS. Set forth on Schedule 7.22 hereto is
a complete and correct list of all material agreements, leases, indentures,
purchase agreements, obligations in respect of letters of credit, guarantees,
joint venture agreements, and other instruments in effect or to be in effect as
of the Closing Date (other than Hedging Agreements)
35
providing for, evidencing, securing or otherwise relating to any material Debt
of the Borrower or any Subsidiary, and all obligations of the Borrower or any
Subsidiary to issuers of surety or appeal bonds (excluding operator's bonds,
plugging and abandonment bonds, and similar surety obligations obtained in the
ordinary course of business) issued for account of the Borrower or any such
Subsidiary, and such list correctly sets forth the names of the debtor or lessee
and creditor or lessor with respect to the Debt or lease obligations outstanding
or to be outstanding and the property subject to any Lien securing such Debt or
lease obligation.
Section 7.23 GAS IMBALANCES. As of the Closing Date, except as set
forth in the most recent Reserve Report furnished to Agent or on Schedule 7.23
or on the most recent certificate delivered pursuant to Section 8.07(b), on a
net basis there are no gas imbalances, take or pay or other prepayments with
respect to the Borrower's or any Subsidiary's Hydrocarbon Interests which would
require the Borrower or such Subsidiary to deliver five percent (5%) or more of
the monthly production from the Borrower's and its Subsidiaries' Hydrocarbons
produced on a monthly basis from the Hydrocarbon Interests, at some future time
without then or thereafter receiving full payment therefor.
Section 7.24 PARTNERSHIP AGREEMENT. The Partnership Agreement has not
been terminated, is in full force and effect as of the date hereof and no
default has occurred and is in continuance thereunder which would have a
Material Adverse Effect.
ARTICLE 8
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the
Commitments are in effect and until payment in full of all Indebtedness
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder:
Section 8.01 FINANCIAL STATEMENTS AND OTHER REPORTS. The Borrower
shall deliver, or shall cause to be delivered, to the Agent with sufficient
copies of each for the Lenders:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any
event within 90 days after the end of each fiscal year of Xxxxxxx
Exploration, the audited consolidated statements of income,
stockholders' equity, changes in financial position and cash flow of
Xxxxxxx Exploration and its Consolidated Subsidiaries for such fiscal
year, and the related consolidated and unaudited consolidating balance
sheets of Xxxxxxx Exploration and its Consolidated Subsidiaries as at
the end of such fiscal year, and setting forth in each case in
comparative form the corresponding figures for the preceding fiscal
year, and accompanied by the related opinion of independent public
accountants of recognized national standing acceptable to the Agent
which opinion shall state that said financial statements fairly
present the consolidated financial condition and results of operations
of Xxxxxxx Exploration and its Consolidated Subsidiaries as at the end
of, and for, such fiscal year and that such financial statements have
been prepared in accordance with GAAP except for such changes
36
in such principles with which the independent public accountants shall
have concurred and such opinion shall not contain a "going concern" or
like qualification or exception.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in
any event within 60 days after the end of each of the first three
fiscal quarterly periods of each fiscal year of Xxxxxxx Exploration,
consolidated statements of income, stockholders' equity, changes in
financial position and cash flow of Xxxxxxx Exploration and its
Consolidated Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and
the related consolidated and consolidating balance sheets as at the
end of such period, and setting forth in each case in comparative form
the corresponding figures for the corresponding period in the
preceding fiscal year, accompanied by the certificate of a Responsible
Officer, which certificate shall state that said financial statements
fairly present the consolidated financial condition and results of
operations of Xxxxxxx Exploration and its Consolidated Subsidiaries in
accordance with GAAP, as at the end of, and for, such period (subject
to normal year-end audit adjustments).
(c) MONTHLY FINANCIAL STATEMENTS. As soon as available and in any
event within forty-five (45) days after the end of each calendar month
that is not also the end of one of Xxxxxxx Exploration's first three
fiscal quarterly periods or of Xxxxxxx Exploration's fiscal year,
consolidated statements of income and changes in financial position of
Xxxxxxx Exploration and its Consolidated Subsidiaries for such period
and for the period from the beginning of the respective fiscal year to
the end of such period, and the related consolidated balance sheets as
at the end of such period and beginning statements setting forth in
each case in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year, accompanied by the
certificate of a Responsible Officer, which certificate shall state
that such financial statements fairly present the consolidated
financial condition and results of operations of Xxxxxxx Exploration
and its Consolidated Subsidiaries in accordance with GAAP, as at the
end of, and for, such period (subject to normal year-end audit
adjustments).
(d) NOTICE OF DEFAULT. Promptly after the Borrower knows that any
Default or any Material Adverse Effect has occurred, a notice of such
Default or Material Adverse Effect, describing the same in reasonable
detail and the action the Borrower proposes to take with respect
thereto.
(e) OTHER ACCOUNTING REPORTS. Promptly upon receipt thereof, a
copy of each other report or letter (excluding routine correspondence)
submitted to the Borrower or Xxxxxxx Exploration by independent
accountants in connection with any annual, interim or special audit
made by them of the books of the Borrower or Xxxxxxx Exploration, and
a copy of any response by the Borrower or Xxxxxxx Exploration to such
letter or report.
37
(f) SEC FILINGS, ETC. Promptly, upon its becoming available, each
financial statement, report, notice or proxy statement sent by Xxxxxxx
Exploration to stockholders generally and each regular or periodic
report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof
filed by Xxxxxxx Exploration with or received by Xxxxxxx Exploration
in connection therewith from any securities exchange or the SEC or any
successor agency.
(g) NOTICES UNDER OTHER LOAN AGREEMENTS. Promptly after the
furnishing thereof, copies of any statement, report or notice
furnished to any Person pursuant to the terms of any indenture, loan
or credit or other similar agreement including, but not limited to,
any statement, report or notice furnished to any Person pursuant to
the Senior Credit Agreement, other than this Agreement and not
otherwise required to be furnished to the Lenders pursuant to any
other provision of this Section 8.01.
(h) OTHER MATTERS. Subject to any applicable restrictions on
disclosure, from time to time such other information regarding the
business, affairs or financial condition of the Borrower or Xxxxxxx
Exploration (including, without limitation, any Plan or Multiemployer
Plan and any reports or other information required to be filed under
ERISA) as any Lender or the Agent may reasonably request.
(i) ANNUAL BUDGETS. On or before January 31 of each year, a
one-year financial projection for Xxxxxxx Exploration and its
Subsidiaries in form acceptable to the Agent, which projection shall
include revenues, expenses and capital expenditures.
(j) MONTHLY OPERATING STATEMENTS. As soon as available and in any
event within 30 days after the end of each month, monthly operating
statements of the Borrower for the month preceding the month during
which the written request was received, including, without limitation,
production reports and general and administrative cost summaries by
lease for its Oil and Gas Properties, which reports shall include
quantities or volume of production, revenue, realized product prices,
taxes, capital expenditures by category and lease operating costs
which have accrued to the Borrower's accounts in such period, and such
other information with respect thereto as the Agent may require.
(k) WEEKLY CASH BUDGETS. For the period required under the Senior
Credit Agreement, the Borrower will cause Xxxxxxx Exploration to
deliver weekly cash budgets reasonably satisfactory to the Agent and
each Lender and weekly cash flow statements reasonably satisfactory to
the Agent and each Lender based on such form, with variance analysis
to budget (including accounts receivables and accounts payables
reporting) not later than the Friday following the week to which such
budgets and statements relate.
38
(l) CAPEX PLANS. A CAPEX Plan, delivered simultaneously with each
of the Reserve Reports to be delivered in March and September of each
year; the first such CAPEX Plan, to be submitted on the Closing Date,
shall be for the twelve month period beginning September 1, 2000, and
ending August 31, 2000, and each subsequent CAPEX Plan shall cover the
next succeeding twelve-month period. Each such CAPEX Plan shall
include a blended risk profile that does not deviate materially from
the risk profile of the CAPEX Plan required under the Senior Credit
Agreement for so long as the Senior Lenders require a CAPEX Plan and,
thereafter, from that submitted on the Closing Date.
The Borrower will furnish to the Agent, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of Exhibit C-2 hereto executed by a Responsible
Officer (i) certifying as to the matters set forth therein and stating that no
Default has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail), (ii) setting forth in
reasonable detail the computations necessary to determine whether Xxxxxxx
Exploration is in compliance with Sections 5.2(q), (r) and (s) of its Guaranty
Agreement as of the end of the respective fiscal quarter or fiscal year, and
(iii) certifying that said financial statements fairly present the consolidated
and consolidating financial condition and consolidated results of operations in
accordance with GAAP, as at the end of, and for, such period (subject to normal
year-end audit adjustments).
Section 8.02 LITIGATION. The Borrower shall promptly give to the Agent
notice of: (i) all legal or arbitral proceedings, and of all proceedings before
any Governmental Authority involving the Borrower or any Guarantor, except
proceedings which, if adversely determined within any reasonable range of loss,
would not have a Material Adverse Effect, and (ii) of any material litigation or
material proceeding against the Borrower or any Guarantor in which the amount
involved is not covered in full by insurance (subject to normal and customary
deductibles), or in which injunctive or similar relief is sought. The Borrower
will, and will cause each of the Guarantors to, promptly notify the Agent and
each of the Lenders of any claim, judgment, Lien or other encumbrance affecting
any Property of the Borrower or any Guarantor if the value of the claim,
judgment, Lien, or other encumbrance affecting such Property shall exceed
$1,000,000.
Section 8.03 MAINTENANCE, ETC.
(a) The Borrower shall and shall cause each Subsidiary to:
preserve and maintain its corporate existence and all of its material
rights, privileges and franchises; keep books of record and account in
which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; comply with
all Governmental Requirements if failure to comply with such
requirements will have a Material Adverse Effect; pay and discharge
all taxes, assessments and governmental charges or levies imposed on
it or on its income or profits or on any of its Property prior to the
date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate
reserves are being maintained; upon reasonable notice, permit
39
representatives of the Agent or any Lender (accompanied by the Agent),
during normal business hours, to examine, copy and make extracts from
its financial books and records, to inspect its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or the Agent (as the case may be);
and keep, or cause to be kept, insured by financially sound and
reputable insurers all Property of a character usually insured by
Persons engaged in the same or similar business similarly situated
against loss or damage of the kinds and in the amounts customarily
insured against by such Persons and carry such other insurance as is
usually carried by such Persons including, without limitation,
environmental risk insurance to the extent reasonably available.
(b) Contemporaneously with the delivery of the financial
statements required by Section 8.01(a) to be delivered for each year,
the Borrower will furnish or cause to be furnished to the Agent and
the Lenders a certificate of insurance coverage from the insurer in
form and substance satisfactory to the Agent and, if requested by the
Agent, will furnish the Agent and the Lenders copies of the applicable
policies.
(c) The Borrower will and will cause each Subsidiary to operate
its Oil and Gas Properties or cause such Oil and Gas Properties to be
operated in a good and workmanlike manner in accordance with the
practices of the industry and in compliance in all material respects
with all applicable contracts and agreements and in compliance in all
material respects with all Governmental Requirements.
(d) The Borrower will and will cause each Subsidiary to, at its
own expense, do or cause to be done (to the extent it has the power to
do so) all things reasonably necessary to preserve and keep in good
repair, working order and efficiency all of its Oil and Gas Properties
and other material Properties including, without limitation, all
equipment, machinery and facilities, and from time to time will make
all the reasonably necessary repairs, renewals and replacements so
that at all times the state and condition of its Oil and Gas
Properties and other material Properties will be fully preserved and
maintained, except to the extent a portion of such Properties is not
capable of producing Hydrocarbons in economically reasonable amounts.
The Borrower will and will cause each Subsidiary to promptly: (i) pay
and discharge, or make reasonable and customary efforts to cause to be
paid and discharged, all delay rentals, royalties, expenses and
indebtedness accruing under the leases or other agreements affecting
or pertaining to its Oil and Gas Properties, (ii) perform or make
reasonable and customary efforts to cause to be performed, in
accordance with industry standards, the obligations required by each
and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and
other material Properties, (iii) will and will cause each Subsidiary
to do all other things necessary to keep unimpaired, except for Liens
described in Section 9.02, its rights with respect to its Oil and Gas
Properties and other material Properties and prevent any forfeiture
thereof or a default thereunder, except to the extent a portion of
such Properties is no longer capable of producing Hydrocarbons in
40
economically reasonable amounts. The Borrower will and will cause each
Subsidiary to operate its Oil and Gas Properties and other material
Properties or cause or make reasonable and customary efforts to cause
such Oil and Gas Properties and other material Properties to be
operated in a good and workmanlike manner in accordance with the
practices of the industry and in compliance with all applicable
contracts and agreements and in compliance in all material respects
with all Governmental Requirements. The covenants contained in this
Section 8.03(d) shall not apply to insignificant Properties unless a
failure of such covenant could have a Material Adverse Effect.
(e) The Borrower will provide to the Agent from time to time upon
request by the Agent the certificate of a Responsible Officer of the
Borrower stating that, except as disclosed in a schedule thereto, the
Borrower has not received written notice that any mechanics' liens
have been filed or will be filed on the Mortgaged Properties; provided
that mere receipt of an invoice for services rendered shall not
constitute written notice that a mechanics' lien will be filed.
Section 8.04 ENVIRONMENTAL MATTERS.
(a) To the extent that a reasonably prudent owner or operator
would do so under the same or similar circumstances, the Borrower will
and will cause each Subsidiary to establish and implement such
procedures as may be reasonably necessary to periodically determine
and assure that any failure of the following does not have a Material
Adverse Effect: (i) all Property of the Borrower and the Subsidiaries
and the operations conducted thereon and other activities of the
Borrower and the Subsidiaries are in compliance with and do not
violate the requirements of any Environmental Laws, (ii) no oil,
hazardous substances or solid wastes are disposed of or otherwise
released on o r to any Property owned by any such party except in
compliance with Environmental Laws, (iii) no hazardous substance will
be released on or to any such Property in a quantity equal to or
exceeding that quantity which requires reporting pursuant to Section
103 of CERCLA, and (iv) no oil, oil and gas exploration and production
wastes or hazardous substance is released on or to any such Property
so as to pose an imminent and substantial endangerment to public
health or welfare or the environment.
(b) The Borrower will promptly notify the Agent and the Lenders
in writing of any threatened action, investigation or inquiry by any
Governmental Authority of which the Borrower has knowledge in
connection with any Environmental Laws with respect to the Property of
the Borrower or any Subsidiary, excluding routine testing, compliance
and corrective action.
Section 8.05 FURTHER ASSURANCES. The Borrower will and will cause each
Guarantor to cure promptly any defects in the creation and issuance of the Notes
and the execution and delivery of the Loan Documents. The Borrower at its
expense will and will cause each Guarantor to promptly execute and deliver to
the Agent upon request all such other documents, agreements and instruments to
comply with or accomplish the covenants and
41
agreements of the Borrower or any Guarantor, as the case may be, in the Loan
Documents, or to further evidence and more fully describe the collateral
intended as security for the Notes, or to correct any omissions in the Loan
Documents, or to state more fully the security obligations set out herein or in
any of the Loan Documents, or to perfect, protect or preserve any Liens created
pursuant to any of the Loan Documents, or to make any recordings, to file any
notices or obtain any consents, all as may be necessary or appropriate in
connection therewith.
Section 8.06 PERFORMANCE OF OBLIGATIONS. The Borrower will pay the
Notes according to the reading, tenor and effect thereof; and the Borrower will
and will cause each Guarantor to do and perform every act and discharge all of
the obligations to be performed and discharged by them under the Loan Documents,
at the time or times and in the manner specified.
Section 8.07 ENGINEERING REPORTS.
(a) Not later than March 30 and September 30 of each year, the
Borrower shall furnish to the Agent and the Lenders a Reserve Report
as of the preceding December 31 and June 30, respectively. The Reserve
Report to be furnished in March of each year shall be prepared by
certified independent petroleum engineers or other independent
petroleum consultant(s) acceptable to the Agent and the Reserve
Reports to be furnished in September of each year shall be prepared by
or under the supervision of the chief engineer or Vice President of
Operations of the Borrower who shall certify such Reserve Report to
have been prepared in accordance with the procedures used in the
immediately preceding March Reserve Report. At Borrower's option, the
Reserve Report to be furnished in September of each year may instead
consist of a report from the independent petroleum engineers referred
to above on any new xxxxx and a roll-forward by Borrower on any xxxxx
previously reported in the Reserve Report described in the immediately
preceding March.
(b) In the event of an unscheduled Borrowing Base
redetermination, under the Senior Credit Agreement, the Borrower shall
furnish to the Agent and the Lenders a copy of any Reserve Report that
is furnished to the Senior Agent.
(c) With the delivery of each Reserve Report, the Borrower shall
provide to the Agent and the Lenders:
(A) a certificate from a Responsible Officer certifying
that, to the best of his knowledge and in all material respects:
(i) the most recently delivered Reserve Report does not in the
belief of such officer and based upon information in the
Borrower's possession, materially overstate the oil and gas
reserves of the Borrower and the Subsidiaries as a whole bearing
in mind that reserves are evaluated based upon estimates and
assumptions with respect to which reasonable minds of competent
engineers may differ, (ii) except as set forth in such Reserve
Report or on an exhibit to the certificate, on a net basis there
are no gas imbalances, take or pay or other prepayments with
respect to its Oil and Gas Properties evaluated in such Reserve
Report which would violate Section 9.18, (iii) none of its
42
proved Hydrocarbon Interests have been sold since the date of the
last Borrowing Base determination except as set forth on an
exhibit to the certificate, which certificate shall list all of
its proved Hydrocarbon Interests sold and in such detail as
reasonably required by the Majority Lenders, (iv) attached to the
certificate is a list of its proved Hydrocarbon Interests added
to and deleted from the immediately prior Reserve Report and a
list showing any change in working interest or net revenue
interest in its Hydrocarbon Interests occurring, (v) at the
Agent's request, attached to the certificate is a list of all
Persons disbursing proceeds to the Borrower from its Oil and Gas
Properties and (vi) except as set forth on a schedule attached to
the certificate all of proved Hydrocarbon Interests evaluated by
such Reserve Report are Mortgaged Property; and
(B) a certificate from a Responsible Officer certifying
that, to the best of his knowledge and in all material respects
(i) the representations of the Borrower in Section 7.10 are true
and correct and apply to the Hydrocarbon Interests evaluated in
the Reserve Report that are described in a Standard Mortgage and
(ii) the Borrower has, with respect to those material Hydrocarbon
Interests that are evaluated in the most recently delivered
Reserve Report, but that are not covered by a Standard Mortgage,
conducted overall title due diligence that, in all material
respects, equals or exceeds industry standards given the
applicable facts and circumstances.
Section 8.08 RESERVED.
Section 8.09 ADDITIONAL COLLATERAL.
(a) The Borrower will grant and will cause each of its
Subsidiaries to grant to the Agent as security for the Indebtedness a
perfected Lien on the Borrower's or such Subsidiary's interest in any
Oil and Gas Properties that are (i) acquired after the date hereof at
the cash acquisition cost to the Borrower or such Subsidiary equal to
or exceeding $1,000,000, and (ii) do not constitute Proved Reserves,
which Lien will be created and perfected by and in accordance with the
provisions of deeds of trust, security agreements and financing
statements, or other Loan Documents, all in form substantially the
same as the New Mortgage (subject to such changes as are necessary as
a result of, to reflect and/or to account for changes in applicable
law) and in sufficient executed (and acknowledged where necessary or
appropriate) counterparts for recording purposes.
(b) The Borrower will grant and will cause each of its
Subsidiaries to grant to the Agent as security for the Indebtedness a
Lien interest (subject only to Excepted Liens and the matters set
forth on Schedule 7.10 hereto) on the Borrower's or such Subsidiary's
interest in any Oil and Gas Properties identified after the Closing
Date as containing Proved Reserves, which Lien will be created and
perfected by and in accordance with the provisions of deeds of trust,
security
43
agreements and financing statements, or other Loan Documents, all in
form substantially the same as the Standard Mortgage (subject to such
changes as are necessary as a result of, to reflect and/or to account
for changes in applicable law) and in sufficient executed (and
acknowledged where necessary or appropriate) counterparts for
recording purposes.
(c) Concurrently with the granting of the Lien or other action
referred to in Section 8.09(b) above, the Borrower will provide to the
Agent title information in form and substance satisfactory to the
Agent in its sole discretion with respect to the Borrower's and its
Subsidiaries' interests in such Oil and Gas Properties to the extent
needed to cause the Agent to have received, together with title
information previously delivered to the Agent, satisfactory title
information on at least 90% of the value of the proved Hydrocarbon
Interests evaluated by the most recent Reserve Report.
(d) Also, promptly after the filing of any new Loan Document in
any state, other than the New Mortgage and any other mortgage filed
pursuant to subsection (a) of this Section 8.09 or any other mortgage
substantially in the form of the New Mortgage, upon the reasonable
request of the Agent, the Borrower will provide to the Agent an
opinion addressed to the Agent for the benefit of the Lenders in form
and substance reasonably satisfactory to the Agent in its sole
discretion from counsel acceptable to Agent, stating that such Loan
Document is valid, binding and enforceable in accordance with its
terms and in legally sufficient form for such jurisdiction.
Section 8.10 ERISA INFORMATION AND COMPLIANCE. The Borrower will
promptly furnish and will cause any ERISA Affiliate to promptly furnish to the
Agent with sufficient copies to the Lenders (i) if requested by the Agent
promptly after the filing thereof with the United States Secretary of Labor, the
Internal Revenue Service or the PBGC, copies of each annual and other report
with respect to each Plan or any trust created thereunder, (ii) immediately upon
becoming aware of the occurrence of any ERISA Event or of any "prohibited
transaction," as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by a Responsible Officer specifying the nature thereof, what
action the Borrower or the ERISA Affiliate is taking or proposes to take with
respect thereto, and, when known, any action taken or proposed by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto, and
(iii) immediately upon receipt thereof, copies of any notice of the PBGC's
intention to terminate or to have a trustee appointed to administer any Plan.
With respect to each Plan (other than a Multiemployer Plan), the Borrower will,
and will cause each ERISA Affiliate to, (i) satisfy in full and in a timely
manner, without incurring any late payment or underpayment charge or penalty and
without giving rise to any lien, all of the contribution and funding
requirements of section 412 of the Code (determined without regard to
subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
44
Section 8.11 SUBSIDIARY SECURITY. Should the Borrower create or
acquire any Subsidiary pursuant to Section 9.16 hereof it will promptly grant to
the Agent for the benefit of the Lenders a security interest and pledge of all
the capital stock of such Subsidiary in form and substance satisfactory to the
Agent, such security interest and pledge to be second to any such security
interest and pledge granted to secure the Senior Indebtedness and the Borrower
will cause such Subsidiary to enter into a guaranty of the Indebtedness in form
and substance satisfactory to the Agent, and such guaranty to be subordinate to
any similar guaranty guaranteeing the Senior Indebtedness. The delivery of such
security and guaranty shall be accompanied by such back up corporate authority
and opinions of counsel (addressed to the Agent as well as the Senior Agent) as
furnished to the Senior Agent, or as the Agent may reasonably request.
Section 8.12 PAYMENT OF TRADE PAYABLES. The Borrower will pay and
cause all of its Subsidiaries to pay all of their Trade Payables now or
hereafter incurred within 60 days of the date the invoice is received by
Borrower, unless subject to legal offset or unless being contested in good faith
by appropriate proceedings and reserves adequate under GAAP shall have been
established therefor.
ARTICLE 9
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the
Commitments are in effect and until payment in full of the Indebtedness
hereunder, all interest thereon and all other amounts payable by the Borrower
hereunder, without the prior written consent of the Majority Lenders:
Section 9.01 DEBT. Neither the Borrower nor any Subsidiary will incur,
create, assume or suffer to exist any Debt, except:
(a) the Notes or other Indebtedness arising under the Loan
Documents or any guaranty of or suretyship arrangement for the Notes
or other Indebtedness arising under the Loan Documents;
(b) Debt of the Borrower existing on the Closing Date which is
reflected in the Financial Statements or is disclosed in Schedule
9.01, and any renewals or extensions (but not increases) thereof;
(c) accounts payable for the deferred purchase price of Property
or services (other than Trade Payables) from time to time incurred in
the ordinary course of business which, if greater than 60 days past
the date the invoice is received by Borrower, are being contested in
good faith by appropriate proceedings if reserves adequate under GAAP
shall have been established therefor;
(d) Debt owing to the Borrower or a Guarantor which is
subordinated to the Indebtedness.
45
(e) Debt of the Borrower under capital leases (as required to be
reported on the financial statements of the Borrower pursuant to GAAP)
not to exceed $2,000,000;
(f) Debt of the Borrower under Hedging Agreements made with a
Person that is made (i) with a Person that is, at the time such
Hedging Agreement is made, either a Senior Lender or an Affiliate of a
Senior Lender, or (ii) with another investment grade counterparty,
provided that the aggregate notional amounts under all such Hedging
Agreements do not exceed 80% of Borrower's anticipated oil and/or gas
production to be produced during the term of such Hedging Agreements
and that such Hedging Agreements are entered into as a part of its
normal business operations as a risk management strategy and/or hedge
against changes resulting from market conditions related to the
Borrower's and its Subsidiaries' operations;
(g) Debt associated with bonds or surety obligations required by
Governmental Requirements in connection with the operation of the Oil
and Gas Properties; and
(h) Debt of the Borrower described on Schedule 9.01(h) and such
other Debt of the Borrower related to the acquisition of software and
licensing rights related thereto that does not exceed $100,000 at any
one time outstanding.
(i) The Senior Indebtedness and any other Debt arising under or
otherwise in relation to the Senior Loan Documents.
Section 9.02 LIENS. Neither the Borrower nor any Subsidiary will
create, incur, assume or permit to exist any Lien on any of its Properties (now
owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness;
(b) Excepted Liens;
(c) Liens securing leases allowed under Section 9.01(e) but only
on the Property under lease;
(d) Liens disclosed on Schedule 9.02;
(e) Any Permitted Encumbrances as described in any Mortgage.
(f) Liens securing the Senior Indebtedness.
Section 9.03 INVESTMENTS, LOANS AND ADVANCES. Neither the Borrower nor
any Subsidiary will make or permit to remain outstanding any loans or advances
to or investments in any Person, except that the foregoing restriction shall not
apply to:
46
(a) investments, loans or advances reflected in the Financial
Statements or which are disclosed to the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of
business;
(c) for the Borrower only, direct obligations of the United
States or any agency thereof, or obligations guaranteed by the United
States or any agency thereof, in each case maturing within one year
from the date of creation thereof;
(d) for the Borrower only, commercial paper maturing within one
year from the date of creation thereof rated in the highest grade by
Standard & Poors Corporation or Xxxxx'x Investors Service, Inc.;
(e) for the Borrower only, deposits maturing within one year from
the date of creation thereof with, including certificates of deposit
issued by, any Lender or any office located in the United States,
Canada, or England of any other bank or trust company which is
organized under the laws of the United States, Canada or England or
any state or province thereof, has capital, surplus and undivided
profits aggregating at least $100,000,000.00 (as of the date of such
Lender's or bank or trust company's most recent financial reports) and
has a short term deposit rating of no lower than A2 or P2, as such
rating is set forth from time to time, by Standard & Poors Corporation
or Xxxxx'x Investors Service, Inc., respectively;
(f) for the Borrower only, deposits in money market funds
investing exclusively in investments described in Section 9.03(c),
9.03(d) or 9.03(e);
(g) intentionally omitted;
(h) investments by the Borrower in direct or indirect (through a
Subsidiary to the extent permitted by Section 9.16 below) ownership
interests in additional Oil and Gas Properties and gas gathering
systems, gas plants, and similar assets related thereto;
(i) investments, distributions, loans and advances by a
Subsidiary to the Borrower; and
(j) investments, distributions, loans and advances by the
Borrower:
(a) to Xxxxxxx Exploration, Xxxxxxx, Inc., Xxxxxxx Holdings
I, LLC and/or Xxxxxxx Holdings II, LLC to pay Federal or State
taxes owing by any of them, payroll and payroll related taxes and
other reasonable general and administrative expenses, or
consisting of forgiveness of indebtedness; and
(b) to Subsidiaries which are Guarantors.
47
Section 9.04 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS. The Borrower
will not declare or pay any dividend, purchase, redeem or otherwise acquire for
value any of its stock now or hereafter outstanding, return any capital to its
stockholders or make any distribution of its assets to its partners, except as
permitted under Section 9.03(j)(a) above.
Section 9.05 SALES AND LEASEBACKS. Neither the Borrower nor any
Subsidiary will enter into any arrangement, directly or indirectly, with any
Person whereby the Borrower or any Subsidiary shall sell or transfer any of its
Property, whether now owned or hereafter acquired, and whereby the Borrower or
any Subsidiary shall then or thereafter rent or lease as lessee such Property or
any part thereof or other Property which the Borrower or any Subsidiary intends
to use for substantially the same purpose or purposes as the Property sold or
transferred.
Section 9.06 NATURE OF BUSINESS. Neither the Borrower nor any
Subsidiary will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company. Among
other things, a transfer of a substantial portion of Borrower's seismic data and
Hydrocarbon Interests which do not contain identified proved Hydrocarbon
reserves (other than transfers to participants of any participation interest
earned by them in the ordinary course of Borrower's business and abandonment of
prospects) shall be considered a material change in Borrower's business.
Section 9.07 LIMITATION ON LEASES. Neither the Borrower nor any
Subsidiary will create, incur, assume or suffer to exist any obligation for the
payment of rent or hire of Property of any kind whatsoever (real or personal
including capital leases but excluding leases of Hydrocarbon Interests and the
equipment used thereon), under leases or lease agreements which would cause the
aggregate amount of all payments made by the Borrower and the Subsidiaries
pursuant to all such leases or lease agreements to exceed $2,000,000 in any
period of twelve consecutive calendar months during the life of such leases.
Section 9.08 MERGERS, ETC.. The Borrower will not and will not permit
any Subsidiary to merge into or with or consolidate with any other Person or
sell, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its Property or assets to any other
Person unless the Borrower, Xxxxxxx Exploration or any Guarantor whose Guaranty
Agreement is in full force and effect is the surviving entity and no Default
exists or will be created thereby.
Section 9.09 PROCEEDS OF NOTES. The Borrower will not permit the
proceeds of the Notes to be used for any purpose other than those permitted by
Section 7.07. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation U or X or any other regulation of the Board of
Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
Section 9.10 ERISA COMPLIANCE. The Borrower will not at any time:
(a) Engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrower or any ERISA
Affiliate could be subjected
48
to either a civil penalty assessed pursuant to section 502(c), (i) or
(1) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code
in excess of $100,000;
(b) Terminate, or permit any ERISA Affiliate to terminate, any
Plan in a manner, or take any other action with respect to any Plan,
which could reasonably be expected to result in any liability of the
Borrower or any ERISA Affiliate to the PBGC in excess of $100,000;
(c) Fail to make, or permit any ERISA Affiliate to fail to make,
full payment when due of all amounts under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower or any
ERISA Affiliate is required to pay as contributions thereto;
(d) Permit to exist, or allow any ERISA Affiliate to permit to
exist, any accumulated funding deficiency in excess of $100,000 within
the meaning of Section 302 of ERISA or section 412 of the Code,
whether or not waived, with respect to any Plan;
(e) Permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by
the Borrower or any ERISA Affiliate which is regulated under Title IV
of ERISA to exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities by an amount in excess of
$100,000. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of
ERISA;
(f) Contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation to
contribute to, any Multiemployer Plan;
(g) Acquire, or permit any ERISA Affiliate to acquire, an
interest in any Person that causes such Person to become an ERISA
Affiliate with respect to the Borrower or any ERISA Affiliate if such
Person sponsors, maintains or contributes to, or at any time in the
six-year period preceding such acquisition has sponsored, maintained,
or contributed to, (1) any Multiemployer Plan, or (2) any other Plan
that is subject to Title IV of ERISA under which the actuarial present
value of the benefit liabilities under such Plan exceeds the current
value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities; (h) Incur, or permit any ERISA Affiliate to
incur, a liability to or on account of a Plan under sections 515,
4062, 4063, 4064, 4201 or 4204 of ERISA which the aggregate for all
such liability exceeds $100,000;
(i) Contribute to or assume an obligation to contribute to, or
permit any ERISA Affiliate to contribute to or assume an obligation to
contribute to, any employee welfare benefit plan, as defined in
section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former
49
employees of such entities, that may not be terminated by such
entities in their sole discretion at any time without any material
liability; or
(j) Amend or permit any ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that the Borrower
or any ERISA Affiliate is required to provide security to such Plan
under section 401(a)(29) of the Code.
Section 9.11 SALE OR DISCOUNT OF RECEIVABLES. Neither the Borrower nor
any Subsidiary will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable.
Section 9.12 [INTENTIONALLY OMITTED]
Section 9.13 SALE OF OIL AND GAS PROPERTIES. The Borrower will not,
and will not permit any Subsidiary to, sell, assign, farm-out, convey or
otherwise transfer any Hydrocarbon Interests except for (i) the sale of
Hydrocarbons in the ordinary course of business; and (ii) the sale or transfer
of equipment that is no longer necessary for the business of the Borrower or
such Subsidiary or is replaced by equipment of at least comparable value and
use.
Section 9.14 ENVIRONMENTAL MATTERS. Neither the Borrower nor any
Subsidiary will knowingly cause or permit any of its Property to be in violation
of, or knowingly do anything or permit anything to be done which will subject
any such Property to any remedial obligations under any Environmental Laws,
assuming disclosure to the applicable Governmental Authority of all relevant
facts, conditions and circumstances, if any, pertaining to such Property where
such violations or remedial obligations would have a Material Adverse Effect.
Section 9.15 TRANSACTIONS WITH AFFILIATES. Neither the Borrower nor
any Subsidiary will enter into any transaction, including, without limitation,
any purchase, sale, lease or exchange of Property or the rendering of any
service, with any Affiliate unless such transactions are otherwise not in
violation of this Agreement, are in the ordinary course of its business and are
upon fair and reasonable terms no less favorable to it than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
Section 9.16 SUBSIDIARIES. The Borrower will not, and will not permit
any Subsidiary to, create any additional Subsidiaries or make any additional
investment in a Subsidiary. All Subsidiaries together at no time shall own or
hold Oil and Gas Properties having proved reserves with a net discounted present
value calculated in the same manner as in the most recent Reserve Report in
excess of 10% of the total net discounted present value of Proved Reserves of
the Borrower and its Subsidiaries as reflected in said Reserve Report (plus such
Subsidiaries' proved reserves not included in such Reserve Report). No
Subsidiary may enter into any agreement other than the Loan Documents or the
Senior Loan Documents which limits upstream transfer of dividends to the
Borrower No assets may be transferred to a Subsidiary which is not a Guarantor.
Section 9.17 NEGATIVE PLEDGE AGREEMENTS. The Borrower will not and
will not permit any Subsidiary to create, incur, assume or suffer to exist any
contract, agreement or understanding (other than the Loan Documents and the
Senior Loan Documents) which in any way prohibits or restricts (i) the granting,
conveying, creation or imposition of any Lien on any
50
of its Property or (ii) any Subsidiary from paying dividends or making any other
distribution to the Borrower or which requires the consent of or notice to other
Persons in connection with any of the foregoing.
Section 9.18 GAS IMBALANCES, TAKE-OR-PAY OR OTHER PREPAYMENTS. The
Borrower will not allow gas imbalances, take-or-pay or other prepayments with
respect to the Hydrocarbon Interests of the Borrower and its Subsidiaries which
would require the Borrower or its Subsidiaries to deliver five percent (5%) or
more of the Borrower's and its Subsidiaries' Hydrocarbons produced on a monthly
basis from the Hydrocarbon Interests at some future time without then or
thereafter receiving full payment therefor.
Section 9.19 BORROWER AS OPERATOR. The Borrower will not and will not
permit any of the Subsidiaries to voluntarily resign as operator of more than
twenty-five percent (25%) of their currently operated Oil and Gas Properties
unless the new operator is acceptable to the Senior Agent.
Section 9.20 RESTRICTIONS WHILE OUTSTANDING INDEBTEDNESS EXCEEDS THE
BORROWING BASE. The Borrower covenants and agrees that until the Covenant
Release Date without prior written consent of the Majority Lenders:
(a) The Borrower will not permit Net Seismic and Land
Expenditures to exceed three million dollars (the NSLE Limit).
Beginning December 31, 2000, the NSLE Limit will increase at the
beginning of each succeeding quarter of a year by an amount equal to
15% of the total projected capital expenditures for such quarter. This
limitation in this subsection (a)shall only be in place at any time
that Indebtedness at the end of the quarter plus actual Net Seismic
and Land Expenditures for such quarter divided by such quarter's
EBITDA minus capitalized general and administrative expenses is
greater than 16:1 (or 4:1 on an annualized basis).
(b) For so long as SCI remains a "SCI Lender", as such term is
defined in the Senior Credit Agreement, Borrower will not permit its
capital expenditures to deviate materially from the then current CAPEX
Plan under the Senior Credit Agreement, with the materiality of any
such deviation to be determined by the SCI Lenders in their sole but
reasonable discretion and at any point when SCI does not remain an SCI
Lender, the Borrower will not permit its capital expenditures to
deviate materially from the then current CAPEX Plan submitted
hereunder, with the materiality of any such deviation to be determined
by the Majority Lenders, in their sole but reasonable discretion.
(c) The Borrower will not allow growth in general and
administrative expenses to exceed the amount which is reasonable and
necessary to retain key employees and to execute the Borrower's
business plan to maximize growth in resources, net assets, cash flow
and equity value.
(d) Borrower will not permit any new xxxxx to be spudded for
which the weekly cash budget indicates that there will be insufficient
working capital to
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complete, after taking into account availability under this Agreement
and the Senior Credit Agreement.
Section 9.21 DEBT TO RAPRV. Upon receipt of the reports required
by Section 8.07 and such other reports, data and supplemental information as may
from time to time be reasonably requested by the Agent (the "ENGINEERING
REPORTS"), the Agent will determine or redetermine, as appropriate, the RAPRV
10% and the RAPRV 7%. The Agent shall propose to the Lenders the RAPRV 10% and
the RAPRV 7% within ten (10) Business Days following receipt by the Agent and
the Lenders of the Engineering Reports in a timely and complete manner.
(a) The Borrower will not permit RAPRV 7% to fall below a value
of (i) from January 1, 2001 to July 30, 2001, $62,500,000; (ii) from
July 31, 2001 to January 30, 2002, $67,500,000; and (iii) on and after
January 31, 2002, the amount of the Senior Indebtedness actually
outstanding under the Senior Credit Agreement, excluding any
obligations of any kind under any Hedging Agreement.
(b) If the "Aggregate Commitments" under the Senior Credit
Agreement, determined without regard to any Debt arising under or in
relation to Hedging Agreements, exceed $75,000,000, the Borrower will
not permit RAPRV 10% to fall below the amount of the Senior
Indebtedness actually outstanding under the Senior Credit Agreement,
excluding any obligations of any kind under any Hedging Agreement.
ARTICLE 10
EVENTS OF DEFAULT; REMEDIES
Section 10.01 EVENTS OF DEFAULT. One or more of the following events
shall constitute an "EVENT OF DEFAULT":
(a) the Borrower shall default in the payment or prepayment when
due of any principal of or interest on any Loan or any fees or other
amount payable by it hereunder or under any other Loan Document and
such default, other than a default of a payment or prepayment of
principal (which shall have no cure period), shall continue unremedied
for a period of three (3) Business Days; or
(b) the Borrower or any Guarantor shall default in the payment
when due of any principal of or interest on any of its other Debt
aggregating $1,000,000 or more, or any event specified in any note,
agreement, indenture or other document evidencing or relating to any
such Debt shall occur if the effect of such event is to cause, or
(with the giving of any notice or the lapse of time or both) to permit
the holder or holders of such Debt (or a trustee or agent on behalf of
such holder or holders) to cause, such Debt to become due prior to its
stated maturity; or
(c) any representation, warranty, or certification made or deemed
made herein or in any other Loan Document by the Borrower or any
Guarantor, or any certificate furnished by the Borrower or any
Guarantor to any Lender or the Agent
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pursuant to the provisions hereof or any Loan Document, shall prove to
have been false or misleading as of the time made or furnished in any
material and adverse respect; or
(d) the Borrower shall default in the performance of any of its
obligations under Article IX or Section 8.01(c) of this Agreement; or
the Borrower shall default in the performance of any of its
obligations under any other Article of the Agreement or under or any
other Loan Document to which it is a party (other than the payment of
amounts due which shall be governed by Section 10.01(a)) and such
default shall continue unremedied for a period of thirty (30) days
after notice thereof to the Borrower by the Agent or any of the
Lenders (through the Agent); or
(e) any Guarantor shall default in the performance of its
obligation to pay the Liabilities (as defined therein) at maturity or,
with respect to Xxxxxxx Exploration, performance of any covenant under
Section 5.1(i) or Section 5.2 of its Guaranty Agreement; or any
Guarantor shall default in the performance of any of its other
obligations under its Guaranty Agreement and such default shall
continue unremedied for a period of thirty (30) days after notice
thereof to the Guarantor by the Agent or the any of the Lenders
(through the Agent); or
(f) the Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(g) the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Federal
Bankruptcy Code (as now or hereafter in effect), (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, liquidation or composition or
readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code,
or (vi) take any corporate action for the purpose of effecting any of
the foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower of all or any substantial part of its assets, or
(iii) similar relief in respect of the Borrower under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of 60 days; or an order for relief against the
53
Borrower shall be entered in an involuntary case under the Federal
Bankruptcy Code; or
(i) a judgment or judgments for the payment of money in excess of
$1,000,000 in the aggregate shall be rendered by a court against the
Borrower and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not
be procured, within thirty (30) days from the date of entry thereof
and the Borrower shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(j) the Loan Documents after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to
be in full force and effect and valid, binding and enforceable in all
material respects in accordance with their terms, or cease in any
material respect to create a valid and perfected Lien of the priority
required thereby on any of the collateral purported to be covered
thereby, except to the extent permitted by the terms of this
Agreement, or the Borrower or any Guarantor shall so state in writing;
or
(k) any Guarantor discontinues its usual business or suffers to
exist any material change in its ownership, control or management; or
(l) any Guarantor takes, suffers or permits to exist any of the
events or conditions referred to in paragraphs (f), (g), (h) or (i)
hereof or if any guaranty agreement related thereto shall for any
reason cease to be valid and binding on such Guarantor in all material
respects or if such Guarantor shall so state in writing; or
(m) Xxxxxxx Exploration ceases to own (directly or indirectly)
100% of the Borrower; or
(n) the Borrower ceases to be the primary operating entity for
Xxxxxxx Exploration and its Subsidiaries and the Borrower and its
Subsidiaries cease to be the only Xxxxxxx Exploration entities owning
Oil and Gas Properties.
Section 10.02 REMEDIES. Subject to any contrary or other
provisions of the Subordination Agreement:
(a) At any time during the continuance of an Event of Default
other than one referred to in clauses (f), (g) or (h) of Section 10.01
or in clause (l) to the extent it relates to clauses (f), (g) or (h),
the Agent, upon request of the Majority Lenders, shall, by notice to
the Borrower, cancel the Commitments and/or declare the principal
amount then outstanding of, and the accrued interest on, the Loans and
all other amounts payable by the Borrower hereunder and under the
Notes to be forthwith due and payable, whereupon such amounts shall be
immediately due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or other
formalities of any kind, all of which are hereby
54
expressly waived by the Borrower. Once an acceleration has been
declared pursuant to the foregoing, no subsequent cure of the Event of
Default shall negate such acceleration or the rights and remedies of
the Agent and the Lenders with respect thereto without the express
written consent of all of the Lenders.
(b) In the case of the occurrence of an Event of Default referred
to in clauses (f), (g) or (h) of Section 10.01 or in clause (l) to the
extent it relates to clauses (f), (g) or (h), the Commitments shall be
automatically canceled and the principal amount then outstanding of,
and the accrued interest on, the Loans and all other amounts payable
by the Borrower hereunder and under the Notes shall become
automatically immediately due and payable without presentment, demand,
protest, notice of intent to accelerate, notice of acceleration or
other formalities of any kind, all of which are hereby expressly
waived by the Borrower.
(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in the Loan Documents; second to
accrued interest on the Notes; third to fees of the Lenders; fourth
pro rata to principal outstanding on the Notes and other Indebtedness
of the Lenders; and any excess shall be paid to the Borrower or as
otherwise required by any Governmental Requirement.
Section 10.03 PRODUCTION AND PROCEEDS. Notwithstanding that, by the
terms of the various Mortgages and other Loan Documents, the Borrower and any
other mortgagors are and will be assigning to Agent all of the Hydrocarbons
covered thereby and all of the products thereof and proceeds and revenues
attributable thereto and all payments in lieu of such Hydrocarbons (in this
section collectively called the "Production and Proceeds"), so long as no
Default has occurred and is continuing (a) the Borrower and such mortgagors may
continue to receive all such Production and Proceeds, subject, however, to the
Liens created under the Mortgages and other Loan Documents, and (b) upon the
Borrower's request the Agent will confirm to any purchasers of Hydrocarbons,
title examiners, or other Persons that the Borrower and such mortgagors continue
to have the right so to receive such Production and Proceeds until notification
by the Agent of the occurrence of a Default. During the continuance of a
Default, however, the Agent may exercise its rights and remedies granted under
the Mortgages and the other Loan Documents, including the rights and remedies
granted under the Mortgages and the other Loan Documents, including the right to
obtain possession of all Production and Proceeds then held by the Borrower and
such mortgagors and to receive directly from the purchasers of Hydrocarbons all
other Production Proceeds, subject in each instance to the terms of the
Subordination Agreement. In no case shall any failure by the Agent to collect
directly any such Production and Proceeds constitute in any way a release of any
of its rights under the Loan Documents.
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ARTICLE 11
THE AGENT
Section 11.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
the Agent by the terms of this Agreement and the other Loan Documents, together
with such other powers as are reasonably incidental thereto. The Agent (which
term as used in this sentence and in Section 11.05 and the first sentence of
Section 11.06 shall include reference to its Affiliates and its and its
Affiliates' officers, directors, employees, attorneys, accountants, experts and
agents): (i) shall have no duties or responsibilities except those expressly set
forth in the Loan Documents, and shall not by reason of the Loan Documents be a
trustee or fiduciary for any Lender; (ii) makes no representation or warranty to
any Lender and shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement, or for the value, validity, effectiveness,
genuineness, execution, effectiveness, legality, enforceability or sufficiency
of this Agreement, any Note or any other document referred to or provided for
herein or for any failure by the Borrower or any other Person (other than the
Agent) to perform any of its obligations hereunder or thereunder or for the
existence, value, perfection or priority of any collateral security or the
financial or other condition of the Borrower, the Subsidiaries or any other
obligor or guarantor; (iii) except pursuant to Section 11.07 shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder; and (IV) SHALL NOT BE RESPONSIBLE FOR ANY ACTION TAKEN OR OMITTED TO
BE TAKEN BY IT HEREUNDER OR UNDER ANY OTHER DOCUMENT OR INSTRUMENT REFERRED TO
OR PROVIDED FOR HEREIN OR IN CONNECTION HEREWITH INCLUDING ITS OWN ORDINARY
NEGLIGENCE, EXCEPT FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. The Agent
may employ agents, accountants, attorneys and experts and shall not be
responsible for the negligence or misconduct of any such agents, accountants,
attorneys or experts selected by it in good faith or any action taken or omitted
to be taken in good faith by it in accordance with the advice of such agents,
accountants, attorneys or experts. The Agent may deem and treat the payee of any
Note as the holder thereof for all purposes hereof unless and until a written
notice of the assignment or transfer thereof permitted hereunder shall have been
filed with the Agent. The Agent is authorized to release any collateral that is
permitted to be sold or released pursuant to the terms of the Loan Documents.
Section 11.02 RELIANCE BY AGENT. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopier, telegram or cable) believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Agent.
Section 11.03 DEFAULTS. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees) unless the Agent has received
notice from a Lender or the Borrower specifying such Default and stating that
such notice is a "Notice of Default." In the event that the Agent receives such
a notice of the occurrence of a Default, the Agent shall give prompt notice
thereof to the
56
Lenders. In the event of a payment Default, the Agent shall give each Lender
prompt notice of each such payment Default.
Section 11.04 RIGHTS AS A LENDER. With respect to its Commitments and
the Loans made by it, Agent shall have the same rights and powers hereunder as
any other Lender and may exercise the same as though it were not acting as the
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include the Agent in its individual capacity. Agent and its
Affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to and generally engage in any kind of banking, trust
or other business with the Borrower (and any of its Affiliates) as if it were
not acting as the Agent, and Agent and its Affiliates may accept fees and other
consideration from the Borrower for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY THE
AGENT RATABLY IN ACCORDANCE WITH THEIR PERCENTAGE SHARES FOR THE INDEMNITY
MATTERS AS DESCRIBED IN SECTION 12.03 TO THE EXTENT NOT INDEMNIFIED OR
REIMBURSED BY THE BORROWER UNDER SECTION 12.03, BUT WITHOUT LIMITING THE
OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03 AND FOR ANY AND ALL OTHER
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR
ARISING OUT OF: (I) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OTHER
DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED
HEREBY, BUT EXCLUDING, UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL
ADMINISTRATIVE COSTS AND EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY
DUTIES HEREUNDER OR (II) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT,
ANY OTHER LOAN DOCUMENT OR OF ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF
THE FOREGOING SPECIFIED IN THIS SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT
NEGLIGENCE OF THE AGENT, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE
FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE AGENT.
Section 11.06 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
acknowledges and agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrower and its
decision to enter into this Agreement, and that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Borrower of the Loan Documents or any other document referred
to or provided for herein or to inspect the properties or books of the Borrower.
Except for notices, reports and other documents and information expressly
required to be furnished to the Lenders by the Agent hereunder, the Agent
57
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the affairs, financial condition or business of
the Borrower (or any of its Affiliates) which may come into the possession of
the Agent or any of its Affiliates. In this regard, each Lender acknowledges
that Xxxxxx & Xxxxxx is acting in this transaction as special counsel to the
Agent only, except to the extent otherwise expressly stated in any legal opinion
or any Loan Document. Each Lender will consult with its own legal counsel to the
extent that it deems necessary in connection with the Loan Documents and the
matters contemplated therein.
Section 11.07 ACTION BY AGENT. Except for action or other matters
expressly required of the Agent hereunder, the Agent shall in all cases be fully
justified in failing or refusing to act hereunder unless it shall (i) receive
written instructions from the Majority Lenders (or all of the Lenders as
expressly required by Section 12.04) specifying the action to be taken, and (ii)
be indemnified to its satisfaction by the Lenders against any and all liability
and expenses which may be incurred by it by reason of taking or continuing to
take any such action. The instructions of the Majority Lenders (or all of the
Lenders as expressly required by Section 12.04) and any action taken or failure
to act pursuant thereto by the Agent shall be binding on all of the Lenders. If
a Default has occurred and is continuing, the Agent shall take such action with
respect to such Default as shall be directed by the Majority Lenders (or all of
the Lenders as required by Section 12.04) in the written instructions (with
indemnities) described in this Section 11.07, provided that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Lenders.
In no event, however, shall the Agent be required to take any action which
exposes the Agent to personal liability or which is contrary to this Agreement
and the other Loan Documents or applicable law.
Section 11.08 RESIGNATION OR REMOVAL OF AGENT. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Lenders and the Borrower, and
the Agent may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or removal, the Majority Lenders shall have
the right to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent from
among the Lenders. Upon the acceptance of such appointment hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article XI and Section 12.03 shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while
it was acting as the Agent.
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ARTICLE 12
MISCELLANEOUS
Section 12.01 WAIVER. No failure on the part of the Agent or any
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Section 12.02 NOTICES. All notices and other communications provided
for herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other Loan
Documents) shall be given or made by telex, telecopy, courier or U.S. Mail or in
writing and telexed, telecopied, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or in the Loan Documents or, as to any party, at such other address as
shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. Houston time on a Business Day (otherwise on the
next succeeding Business Day) by telex or telecopier and evidence or
confirmation of receipt is obtained, or personally delivered or, in the case of
a mailed notice, three (3) Business Days after the date deposited in the mails,
postage prepaid, in each case given or addressed as aforesaid.
Section 12.03 PAYMENT OF EXPENSES, INDEMNITIES, ETC. The Borrower
agrees:
(a) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of the Agent in the
administration (both before and after the execution hereof and
including advice of counsel as to the rights and duties of the Agent
and the Lenders with respect thereto) of, and in connection with the
negotiation, syndication, investigation, preparation, execution and
delivery of, recording or filing of, preservation of rights under,
enforcement of, and refinancing, renegotiation or restructuring of,
the Loan Documents and any amendment, waiver or consent relating
thereto (including, without limitation, the reasonable fees and
disbursements of counsel and other outside consultants for the Agent
and, in the case of enforcement, the reasonable fees and disbursements
of counsel for the Agent and any of the Lenders); and promptly
reimburse the Agent for all amounts expended, advanced or incurred by
the Agent or the Lenders to satisfy any obligation of the Borrower
under this Agreement or any other Loan Document, including without
limitation, all costs and expenses of foreclosure;
(b) TO INDEMNIFY THE AGENT AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS
("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS AGAINST AND
PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY
MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF
THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A
59
PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO
(I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER OF THE PROCEEDS OF ANY
OF THE LOANS, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN
DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF THE BORROWER AND
THE SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER OR ANY GUARANTOR TO
COMPLY WITH THE TERMS OF ANY OTHER LOAN DOCUMENT OR THIS AGREEMENT, OR
WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY
REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE BORROWER OR ANY
GUARANTOR SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) ANY ASSERTION
THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED
PURSUANT TO THE LOAN DOCUMENTS OR (VII) ANY OTHER ASPECT OF THE LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL AND ALL OTHER REASONABLE EXPENSES INCURRED IN
CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO DEFEND ANY
SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS,
LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS
ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY,
BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS
BETWEEN THE LENDERS OR ANY LENDER AND THE AGENT OR A LENDER'S
SHAREHOLDERS AGAINST THE AGENT OR LENDER OR BY REASON OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF ANY INDEMNIFIED PARTY;
AND
(c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST
RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY OF ITS PROPERTIES,
INCLUDING WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL OF HAZARDOUS
SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A RESULT OF THE BREACH
OR NONCOMPLIANCE BY THE BORROWER WITH ANY ENVIRONMENTAL LAW APPLICABLE
TO THE BORROWER, (III) DUE TO PAST OWNERSHIP BY THE BORROWER OF ANY OF
ITS PROPERTIES OR PAST ACTIVITY ON ANY OF ITS PROPERTIES WHICH, THOUGH
LAWFUL AND FULLY PERMISSIBLE AT THE TIME, RESULTS IN PRESENT
LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR
DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED
OR OPERATED BY THE BORROWER OR
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(V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY CONDITION IN CONNECTION
WITH THE LOAN DOCUMENTS, PROVIDED, HOWEVER, NO INDEMNITY SHALL BE
AFFORDED UNDER THIS SECTION 12.03(C) IN RESPECT OF ANY PROPERTY FOR
ANY OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE AGENT OR ANY
LENDER DURING THE PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR
ASSIGNS, OR THEIR AGENTS OR REPRESENTATIVES, SHALL HAVE OBTAINED
POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN LIEU OF
FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(d) No Indemnified Party may settle any claim to be indemnified
without the consent of the indemnitor, such consent not to be
unreasonably withheld; PROVIDED, that the indemnitor may not
reasonably withhold consent to any settlement that an Indemnified
Party proposes, if the indemnitor does not have the financial ability
to pay all its obligations outstanding and asserted against the
indemnitor at that time, including, without limitation, the maximum
potential claims against the Indemnified Party to be indemnified
pursuant to this Section 12.03.
(e) In the case of any indemnification hereunder, the Agent or
Lender, as appropriate shall give notice to the Borrower of any such
claim or demand being made against the Indemnified Party and the
Borrower shall have the non-exclusive right to join in the defense
against any such claim or demand provided that if the Borrower
provides a defense, the Indemnified Party shall bear its own cost of
defense unless there is a conflict between the Borrower and such
Indemnified Party.
(f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY
KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN
AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF
TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF STRICT
LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED
PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE
COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS
CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT SHALL
ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE
OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY.
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(g) The Borrower's obligations under this Section 12.03 shall
survive any termination of this Agreement and the payment of the Notes
and shall continue thereafter in full force and effect.
(h) The Borrower shall pay any amounts due under this Section
12.03 within thirty (30) days of the receipt by the Borrower of notice
of the amount due.
Section 12.04 AMENDMENTS, ETC. Any provision of this Agreement or any
other Loan Document may be amended, modified or waived with the Borrower's and
the Majority Lenders' written consent; provided that (i) no amendment,
modification or waiver which extends the final maturity of the Loans, increases
the Aggregate Maximum Credit Amounts, forgives the principal amount of any
Indebtedness outstanding under this Agreement, releases any guarantor of the
Indebtedness or releases all or substantially all of the collateral, reduces the
interest rate applicable to the Loans or the fees payable to the Lenders
generally, affects Section 2.03(a), this Section 12.04 or Section 12.06(a) or
modifies the definition of "Majority Lenders" shall be effective without consent
of all Lenders; (ii) no amendment, modification or waiver which increases the
Maximum Credit Amount of any Lender shall be effective without the consent of
such Lender; and (iii) no amendment, modification or waiver which modifies the
rights, duties or obligations of the Agent shall be effective without the
consent of the Agent.
Section 12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 ASSIGNMENTS AND PARTICIPATIONS
(a) The Borrower may not assign its rights or obligations
hereunder or under the Notes without the prior consent of all of the
Lenders and the Agent.
(b) Any Lender may sell, assign, transfer or negotiate to one or
more other lenders, commercial banks, insurance companies, other
financial institutions or any other Person all or any portion of its
rights and obligations hereunder pursuant to an Assignment Agreement
substantially in the form of Exhibit E hereto ("ASSIGNMENT"), and
acceptance of such Assignment by any assignee shall constitute the
agreement of such assignee to be bound by the terms of this Agreement
applicable to the assigning Lender.
(c) Promptly after receiving evidence of an assignment under
Section 12.06(b), the Agent shall send a notice of such assignment to
the Borrower. Upon receipt of such notice and of the Notes that are
the subject thereof, the Borrower will, at its own expense, execute
and deliver new Notes to the assignor and/or assignee, as appropriate,
in accordance with their respective interests. Upon receipt of such
executed Assignment and of the Notes which are the subject thereof,
the Borrower will, at its own expense, execute and deliver new Notes
to the assignor and/or assignee, as appropriate, in accordance with
their respective interests as they appear. Upon the effectiveness of
any assignment pursuant to Section 12.06(b) the assignee will become a
"Lender," if
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not already a "Lender," for all purposes of this Agreement and the
other Loan Documents. The assignor shall be relieved of its
obligations hereunder to the extent of such assignment (and if the
assigning Lender no longer holds any rights or obligations under this
Agreement, such assigning Lender shall cease to be a "Lender"
hereunder except that its rights under Sections 4.06, 5.01, 5.05 and
12.03 shall not be affected). The Agent will prepare on the last
Business Day of each month during which an assignment has become
effective pursuant to Section 12.06(b) a new Annex I giving effect to
all such assignments effected during such month, and will promptly
provide the same to the Borrower and each of the Lenders.
(d) Each Lender may transfer, grant or assign participations in
all or any part of such Lender's interests hereunder pursuant to this
Section 12.06(d) to any Person, PROVIDED that: (i) such Lender shall
remain a "Lender" for all purposes of this Agreement and the
transferee of such participation shall not constitute a "Lender"
hereunder; and (ii) no participant under any such participation shall
have rights to approve any amendment to or waiver of any of the Loan
Documents except to the extent such amendment or waiver would (x)
forgive any principal owing on any Indebtedness or extend the final
maturity of the Loans, (y) reduce the interest rate (other than as a
result of waiving the applicability of any post-default increases in
interest rates) or fees applicable to any of the Commitments or Loans
in which such participant is participating, or postpone the payment of
any thereof, or (z) release any guarantor of the Indebtedness or
release all or substantially all of the collateral (except as provided
in the Loan Documents) supporting any of the Commitments or Loans in
which such participant is participating. In the case of any such
participation, the participant shall not have any rights under this
Agreement or any of the other Loan Documents (the participant's rights
against the granting Lender in respect of such participation to be
those set forth in the agreement with such Lender creating such
participation), and all amounts payable by the Borrower hereunder
shall be determined as if such Lender had not sold such participation,
PROVIDED that such participant shall be entitled to receive additional
amounts under Article V on the same basis as if it were a Lender and
be indemnified under Section 12.03 as if it were a Lender. In
addition, each agreement creating any participation must include an
agreement by the participant to be bound by the provisions of Section
12.15.
(e) The Lenders may furnish any information concerning the
Borrower in the possession of the Lenders from time to time to
assignees and participants (including prospective assignees and
participants; provided that, such Persons agree to be bound by the
provisions of Section 12.15 hereof.
(f) Notwithstanding anything in this Section 12.06 to the
contrary, any Lender may assign and pledge its Note to any Federal
Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors of the Federal
Reserve System and any operating circular issued by such Federal
Reserve System and/or such Federal Reserve Bank. No such
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assignment and/or pledge shall release the assigning and/or pledging
Lender from its obligations hereunder.
(g) Notwithstanding any other provisions of this Section 12.06,
no transfer or assignment of the interests or obligations of any
Lender or any grant of participations therein shall be permitted if
such transfer, assignment or grant would require the Borrower to file
a registration statement with the SEC or to qualify the Loans under
the "Blue Sky" laws of any state.
Section 12.07 INVALIDITY. In the event that any one or more of the
provisions contained in any of the Loan Documents shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of the Notes, this
Agreement or any other Loan Document.
Section 12.08 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 12.09 REFERENCES. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 SURVIVAL. The obligations of the parties under Section
4.06, Article V, and Sections 11.05 and 12.03 shall survive the repayment of the
Loans and the termination of the Commitments. To the extent that any payments on
the Indebtedness or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Indebtedness so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and the Agent's and the Lenders' Liens, security interests,
rights, powers and remedies under this Agreement and each other Loan Document
shall continue in full force and effect. In such event, each Loan Document shall
be automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Agent and the Lenders to effect such reinstatement.
Section 12.11 CAPTIONS. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
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PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT, THE LOANS AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS
EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER
TO CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE
SUCH LENDER IS LOCATED. CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH
REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRI-PARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT, THE LOANS, OR THE NOTES.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE
AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS
NON-EXCLUSIVE AND DOES NOT PRECLUDE THE AGENT OR ANY LENDER FROM
OBTAINING JURISDICTION OVER THE BORROWER IN ANY COURT OTHERWISE HAVING
JURISDICTION.
(c) EACH OF THE BORROWER AND EACH LENDER HEREBY (I) IRREVOCABLY
AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW,
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN;
(II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW,
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO
PARTY HERETO NOR
65
ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.13.
Section 12.14 INTEREST. It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to any Lender under
laws applicable to it (including the laws of the United States of America and
the State of Texas or any other jurisdiction whose laws may be mandatorily
applicable to such Lender notwithstanding the other provisions of this
Agreement), then, in that event, notwithstanding anything to the contrary in any
of the Loan Documents or any agreement entered into in connection with or as
security for the Loans, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Loans
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be cancelled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower), and (ii) in the event that the maturity of the Notes is accelerated
resulting from any Event of Default under this Agreement or otherwise, or in the
event of any required or permitted prepayment, then such consideration that
constitutes interest under law applicable to any Lender may never include more
than the maximum amount allowed by such applicable law, and excess interest, if
any, provided for in this Agreement or otherwise shall be cancelled
automatically by such Lender as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Lender on the principal
amount of the Indebtedness (or, to the extent that the principal amount of the
Indebtedness shall have been or would thereby be paid in full, refunded by such
Lender to the Borrower). All sums paid or agreed to be paid to any Lender for
the use, forbearance or detention of sums due hereunder or under any other Loan
Document shall, to the extent permitted by law applicable to such Lender, be
amortized, prorated, allocated and spread throughout the full term of the Loans
evidenced by the Notes until payment in full so that the rate or amount of
interest on account of any Loans hereunder does not exceed the maximum amount
allowed by such applicable law. If at any time and from time to time (i) the
amount of interest payable to any Lender on any date shall be computed at the
Highest Lawful Rate applicable to such Lender pursuant to this Section 12.14 and
(ii) in respect of any subsequent interest computation period the amount of
interest otherwise payable to such Lender would be less than the amount of
interest payable to such Lender computed at the Highest Lawful Rate applicable
to such Lender, then the amount of interest payable to such Lender in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate applicable to such Lender until the total amount of interest
payable to such Lender shall equal the total amount of interest which would have
been payable to such Lender if the total amount of interest had been computed
without giving effect to this
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Section 12.14. To the extent that Chapter 303 of the Texas Finance Code is
relevant for the purpose of determining the Highest Lawful Rate, such Lender
elects to determine the applicable rate ceiling under such Article by the weekly
ceiling from time to time in effect.
Section 12.15 CONFIDENTIALITY. In the event that the Borrower or any
Guarantor (hereinafter called the "SUBJECT ENTITIES") provides to the Agent or
the Lenders written confidential information or, if communicated as
confidential, oral confidential information belonging to any Subject Entity, the
Agent and the Lenders shall thereafter maintain such information in confidence
in accordance with the standards of care and diligence that each utilizes in
maintaining its own confidential information. This obligation of confidence
shall not apply to such portions of the information which (i) are in the public
domain, (ii) hereafter become part of the public domain without the Agent or the
Lenders breaching their obligation of confidence to any Subject Entity, (iii)
are previously known by the Agent or the Lenders from some source other than any
Subject Entity, (iv) are hereafter developed by the Agent or the Lenders without
using a Subject Entity's information, (v) are hereafter obtained by or available
to the Agent or the Lenders from a third party who owes no obligation of
confidence to any Subject Entity with respect to such information, (vi) are
disclosed with a Subject Entity's consent, (vii) must be disclosed either
pursuant to any Governmental Requirement or to Persons regulating the activities
of the Agent or the Lenders, or (viii) as may be required by law or regulation
or order of any Governmental Authority in any judicial, arbitration or
governmental proceeding. Further, the Agent or a Lender may disclose any such
information to any other Lender, any independent petroleum engineers or
consultants, any independent certified public accountants, any legal counsel
employed by such Person in connection with this Agreement or any other Loan
Document, including without limitation, the enforcement or exercise of all
rights and remedies thereunder, or, subject to Section 12.06, any assignee or
participant (including prospective assignees to which the Borrower has consented
and participants) in the Loans; provided, however, that the Agent or the Lenders
shall receive a confidentiality agreement from the Person to whom such
information is disclosed such that said Person shall have the same obligation to
maintain the confidentiality of such information as is imposed upon the Agent or
the Lenders hereunder. Notwithstanding anything to the contrary provided herein,
this obligation of confidence shall cease three (3) years from the date the
information was furnished, unless the Borrower requests in writing at least
thirty (30) days prior to the expiration of such three year period, to maintain
the confidentiality of such information for an additional three year period.
Section 12.16 EFFECTIVENESS. This Agreement shall be effective on the
Closing Date (the "EFFECTIVE DATE") upon its execution and delivery by Borrower
and SCI. Although Xxxxxxx Exploration, Xxxxxxx, Inc., Xxxxxxx Holdings I, LLC
and Xxxxxxx Holdings II, LLC, are not parties to this Agreement they are
executing this Agreement as Releasing Parties under Section 12.18 below and
Section 12.18 will become effective as to each Releasing Party as described in
Section 12.18(c).
Section 12.17 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND
67
KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS
BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE
NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF
THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY
ASSUMING THE LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING
THE OTHER PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO
AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF
ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE
BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE
PROVISION IS NOT "CONSPICUOUS."
Section 12.18 RELEASE.
(a) Each of the Releasing Parties desires and intends fully to
compromise, release and settle any and all of the Released Claims; and
each of the Releasing Parties hereby covenants, warrants and
represents unto each of the Released Parties that such Releasing Party
does hereby FOREVER RELEASE, ACQUIT, WAIVE AND DISCHARGE each of the
Released Parties of and from the Released Claims and each of the
Releasing Parties hereby declares the same FOREVER RELEASED,
ACQUITTED, WAIVED, SETTLED AND DISCHARGED. This release is effective
without regard to whether (i) such Released Claims are known or
unknown, (ii) damages arising out of such Released Claims have yet
accrued, (iii) such Released Claims arose collaterally, directly,
derivatively, or otherwise between the parties hereto or (iv) an
ordinary person in the same or similar circumstances would or would
not, through the exercise of due care, have discovered such claims by
the date of this Agreement. In connection with the foregoing release:
(b) Borrower and each of the Guarantors represents and warrants
that it has the full power and authority to perform the release
granted in this Section 12.18 and that it has not in any manner made
any assignment of any Released Claim to any third party.
(c) The release granted in this Section 12.18 by each Releasing
Party will be effective upon execution of this Agreement by such
Releasing Party hereto.
(d) Each party executing this Agreement understands and agrees
that the release granted in this Section 12.18 is a full, final and
complete release of the Released Claims and that such release may be
pleaded as an absolute and final bar to any or all suits which may
hereafter be filed or prosecuted by any one or more of the Releasing
Parties or anyone claiming by, through or under any one or more of the
Releasing Parties in respect of any of the matters released hereby,
and that no recovery on account of the Released Claims may hereafter
be had from any of
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the Released Parties; and that the consideration given for such
release is not an admission of liability or fault on the part of any
of the Released Parties (it being the express intent of the parties
hereto to obtain peace of mind and avoid the expense and uncertainty
of potential litigation), and that none of the Releasing Parties or
those claiming by, through or under any of them will ever claim that
it is.
(e) The parties hereto acknowledge that the release granted by
this Section 12.18 does not have any effect with respect to
relationships between the Borrower and each of the Guarantors and the
Lenders and the Agent other than in connection with the Lending
Relationship.
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The parties hereto have caused this Agreement to be duly executed as
of the day and year first above written.
BORROWER: XXXXXXX OIL & GAS, L.P.
By: Xxxxxxx, Inc., its General Partner
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
Address for Notices:
0000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
GUARANTOR: XXXXXXX EXPLORATION COMPANY
(for purposes of Section 12.18)
By: /s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
GUARANTOR: XXXXXXX, INC.
(for purposes of Section 12.18)
By:/S/ XXXXXX X. XXXXXXX
Name: Xxxxxx X. Xxxxxxx
Title: Chief Financial Officer
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GUARANTOR: XXXXXXX HOLDINGS I, LLC
(for purposes of Section 12.18)
By: /s/ Xxx X. Xxxxxxx
Name: Xxx X. Xxxxxxx
Title: President
GUARANTOR: XXXXXXX HOLDINGS II, LLC
(for purposes of Section 12.18)
By: /s/ Xxx X. Xxxxxxx
Name: Xxx X. Xxxxxxx
Title: President
AGENT AND LENDER: SHELL CAPITAL INC.
By:/s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Vice President
Address for Notices:
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
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