Exhibit 10.2
EXECUTION COPY
LOAN AGREEMENT
BETWEEN
LEUCADIA NATIONAL CORPORATION,
A NEW YORK CORPORATION
AS LENDER,
GOOBER DRILLING, LLC,
A DELAWARE LIMITED LIABILITY COMPANY,
AS BORROWER,
AND
THE SUBSIDIARIES OF BORROWER
FROM TIME TO TIME SIGNATORY HERETO,
AS GUARANTORS
TABLE OF CONTENTS
PAGE
1. INTERPRETATION AND ACCOUNTING TERMS......................................................................1
1.1 Defined Terms...................................................................................1
1.2 Accounting Terms and Principles.................................................................1
1.3 Interpretation: Certain Terms...................................................................1
1.4 Interpretation: Certain References..............................................................2
2. LOAN.....................................................................................................2
2.1 Loan............................................................................................2
2.2 Procedure for Borrowing.........................................................................3
2.3 Term and Prepayments............................................................................3
2.3.1 Maturity Date..........................................................................3
2.3.2 Asset Sales and Casualty Events........................................................3
2.3.3 Equity and Debt Issuances..............................................................3
2.3.4 Excess Cash Flow.......................................................................4
2.3.5 Voluntary Prepayment...................................................................4
2.4 Single Loan.....................................................................................4
2.5 Interest........................................................................................4
2.5.1 Rate...................................................................................4
2.5.2 Computation............................................................................4
2.5.3 Payments...............................................................................4
2.5.4 Default Rate...........................................................................4
2.5.5 Non-Business Days......................................................................5
2.5.6 Maximum Lawful Rate....................................................................5
2.6 Receipt of Payments.............................................................................5
2.7 Application and Allocation of Payments..........................................................5
2.8 Accounting......................................................................................5
3. COLLATERAL SECURITY......................................................................................5
3.1 Security Agreement..............................................................................5
3.2 Joint and Several Unconditional, Continuing Guaranty Agreement.................................6
3.3 Deposit Account Control Agreement...............................................................6
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TABLE OF CONTENTS
(CONTINUED)
PAGE
3.4 Assignment of Key Man Life Insurance Policy.....................................................6
4. REPRESENTATIONS AND WARRANTIES...........................................................................6
4.1 Litigation......................................................................................6
4.2 No Default......................................................................................6
4.3 Ownership.......................................................................................6
4.4 Financial Statements............................................................................6
4.5 Compliance with Applicable Laws.................................................................6
4.6 Contractual Defaults............................................................................6
4.7 Full Disclosure.................................................................................7
4.8 Outstanding Security Interests..................................................................7
4.9 Use of Proceeds.................................................................................7
4.10 Corporate Existence.............................................................................7
4.11 Legal Authority to Conduct Business.............................................................7
4.12 Locations; Corporate or Other Names, Etc........................................................7
4.13 Execution and Enforceability....................................................................8
4.14 Projections.....................................................................................8
4.15 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness......................8
4.16 Material Adverse Change.........................................................................8
4.17 Solvency........................................................................................8
4.18 Taxes...........................................................................................8
4.19 Labor Matters...................................................................................9
4.20 ERISA...........................................................................................9
4.21 Environmental Matters...........................................................................9
4.22 Intellectual Property..........................................................................10
4.23 Insurance......................................................................................10
4.24 Deposit Accounts...............................................................................10
4.25 Brokers........................................................................................10
4.26 Anti-Terrorism and Anti-Money Laundering.......................................................10
4.27 Affiliated Transactions........................................................................11
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TABLE OF CONTENTS
(CONTINUED)
PAGE
4.28 Survival of Representations and Warranties.....................................................11
5. CONDITIONS PRECEDENT....................................................................................11
5.1 Conditions to Initial Advance..................................................................11
5.1.1 Closing Documents.....................................................................11
5.1.2 Notice of Borrowing...................................................................11
5.1.3 Insurance.............................................................................11
5.1.4 Recording of Security Documents.......................................................11
5.1.5 Execution Copies of Operator Contracts................................................11
5.1.6 Execution Copies of Employment Agreements.............................................12
5.1.7 Key Man Life Insurance Policy.........................................................12
5.1.8 Opinion of Borrower's Counsel.........................................................12
5.1.9 Officer's Certificate.................................................................12
5.1.10 Leases................................................................................12
5.1.11 Projections...........................................................................12
5.1.12 Release of Existing Debt..............................................................12
5.1.13 Release of F&M Bank Debt..............................................................12
5.2 Conditions to Subsequent Advances..............................................................12
5.2.1 Notice of Borrowing...................................................................13
5.2.2 Additional Matters....................................................................13
5.2.3 Representations and Warranties; No Defaults...........................................13
6. CONDITIONS AND RESTRICTIONS.............................................................................13
6.1 Performance of Obligations.....................................................................13
6.2 Affirmative Covenants:.........................................................................13
6.2.1 Books and Records.....................................................................13
6.2.2 Monthly Financial Statements; Monthly Compliance Schedules...........................13
6.2.3 Quarterly Financial Statements........................................................14
6.2.4 Annual Financial Statements...........................................................14
6.2.5 Section 404 of Xxxxxxxx-Xxxxx Act of 2002 Compliance.................................14
6.2.6 Additional Reporting Requirements.....................................................14
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.2.7 Consent of Borrower's Accountants.....................................................14
6.2.8 Projections; Budgets; Operating Plan..................................................15
6.2.9 Notice of Litigation; Default.........................................................15
6.2.10 Lender Reporting Requirement..........................................................15
6.2.11 Maintenance of Properties.............................................................15
6.2.12 Tax Returns...........................................................................15
6.2.13 Operating Accounts....................................................................16
6.2.14 Maintenance of Existence..............................................................16
6.2.15 Maintenance of Insurance..............................................................16
6.2.16 Access to Books and Records...........................................................16
6.2.17 Environmental.........................................................................17
6.2.18 Intellectual Property.................................................................17
6.2.19 Further Assurances....................................................................17
6.2.20 Closing of Lockbox Account............................................................17
6.3 Negative and Financial Covenants:..............................................................18
6.3.1 Asset Dispositions....................................................................18
6.3.2 Liens.................................................................................18
6.3.3 Indebtedness..........................................................................18
6.3.4 Ownership; Fundamental Changes........................................................18
6.3.5 Capital Expenditures..................................................................18
6.3.6 Maintenance Capital Expenditures......................................................18
6.3.7 Minimum EBITDA........................................................................18
6.3.8 Restricted Payments...................................................................19
6.3.9 Subsidiaries; Investments.............................................................19
6.3.10 Change in Nature of Business..........................................................20
6.3.11 Affiliated Transactions...............................................................20
6.3.12 Third Party Restrictions on Indebtedness, Liens, Investments or Restricted
Payments..............................................................................20
6.3.13 Modification of Certain Documents.....................................................20
6.3.14 Accounting Changes; Fiscal Year.......................................................20
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.3.15 Changes to Name, Locations, Etc.......................................................20
6.3.16 Margin Regulations....................................................................21
6.3.17 Compliance with ERISA.................................................................21
6.3.18 Hazardous Materials...................................................................21
6.4 Required Deposits..............................................................................21
6.5 Payment of Taxes...............................................................................21
7. ADMINISTRATION OF LOAN..................................................................................22
8. DEFAULT.................................................................................................22
8.1 Non-Payment of Loan............................................................................22
8.2 Other Non-Payment..............................................................................22
8.3 Breach of Covenants............................................................................22
8.4 Bankruptcy.....................................................................................22
8.5 Representations................................................................................22
8.6 Cross-Default..................................................................................22
8.7 Litigation.....................................................................................23
8.8 Judgments......................................................................................23
8.9 Material Adverse Effect........................................................................23
8.10 Invalidity, Etc................................................................................23
8.11 Transfer of Stock..............................................................................23
8.12 Other Events of Default........................................................................23
9. REMEDIES................................................................................................23
9.1 Acceleration of Loan...........................................................................23
9.2 Selective Enforcement..........................................................................24
9.3 Application of Proceeds........................................................................24
10. MISCELLANEOUS...........................................................................................24
10.1 Expenses.......................................................................................24
10.2 Notices........................................................................................24
10.3 Amendment and Waiver...........................................................................25
10.4 Non-Waiver; Cumulative Remedies................................................................25
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TABLE OF CONTENTS
(CONTINUED)
PAGE
10.5 Assignment.....................................................................................25
10.6 Applicable Law; Venue..........................................................................26
10.7 Descriptive Headings...........................................................................26
10.8 Integrated Agreement...........................................................................26
10.9 Time of Essence................................................................................26
10.10 Binding Effect.................................................................................26
10.11 Third Party Beneficiary........................................................................26
10.12 Right to Defend................................................................................27
10.13 Partial Invalidity.............................................................................27
10.14 WAIVER OF JURY TRIAL...........................................................................27
10.15 Indemnity......................................................................................27
10.16 No Fiduciary Relationship......................................................................27
10.17 No Marshaling; Reinstatement...................................................................28
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ANNEX:
------
A Defined Terms
EXHIBITS:
---------
A $80,000,000 Promissory Note
B Security Agreement and Financing Statements
C Guaranty Agreement
D Deposit Account Control Agreement
E Assignment of Key Man Life Insurance Policy
F Form of Legal Opinion
G Form of Officer's Certificate
H Form of Compliance Certificate
I Form of Monthly Compliance Schedule
J Form of Financial Statements and Supporting Schedules
SCHEDULES:
----------
4.12 Locations; Corporate or Other Names
4.15 Stock; Affiliates
4.19 Labor Matters
4.20 ERISA
4.21 Environmental Matters
4.22 Intellectual Property
4.23 Insurance
4.24 Deposit and Other Accounts
4.27 Affiliated Transactions
6.3.3 Outstanding Indebtedness
6.3.5 New Rigs Under Contract with Operators
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LOAN AGREEMENT
THIS LOAN AGREEMENT (as the same may be amended, restated, supplemented
or otherwise modified from time to time, this "AGREEMENT") is made and entered
into this 6th day of April, 2006, by and among GOOBER DRILLING, LLC, a Delaware
limited liability company (hereinafter referred to as "BORROWER"), the
Subsidiaries, if any, of Borrower from time to time signatory hereto (each a
"GUARANTOR" and, collectively, "GUARANTORS"), and LEUCADIA NATIONAL CORPORATION,
a New York corporation (hereinafter referred to as "LENDER").
W I T N E S S E T H :
WHEREAS, Borrower desires to (i) fund new Rig (as defined below)
equipment purchases and construction costs and (ii) repay the Bridge Loan (as
defined below) and other Existing Debt (as defined below);
WHEREAS, Borrower has requested that Lender make available a secured
credit facility consisting of up to $80,000,000 of multiple advance term loans,
the proceeds of which will be used to finance the items described in (i) and
(ii) above and for other purposes permitted under, and otherwise in accordance
with and subject to the terms of, this Agreement; and
WHEREAS, Lender is willing to make such facility available to Borrower
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and obligations herein set forth and for other good and valuable consideration,
the sufficiency and receipt of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. INTERPRETATION AND ACCOUNTING TERMS.
1.1 DEFINED TERMS. Capitalized terms used herein shall have the
meanings assigned to such terms in Annex A attached hereto and incorporated
herein by reference.
1.2 ACCOUNTING TERMS AND PRINCIPLES. All accounting
determinations required to be made pursuant hereto shall, unless expressly
otherwise provided herein, be made in accordance with GAAP. No change in the
accounting principles used in the preparation of any financial statement
hereafter adopted by Borrower shall be given effect if such change would affect
a calculation that measures compliance with any provision of Section 6 unless
Borrower and Lender agree to modify such provisions to reflect such changes in
GAAP and, unless such provisions are modified, all financial statements,
Compliance Certificates and similar documents provided hereunder shall be
provided together with a reconciliation between the calculations and amounts set
forth therein before and after giving effect to such change in GAAP.
1.3 INTERPRETATION: CERTAIN TERMS. Except as set forth in any
Loan Document, all accounting terms not specifically defined herein shall be
construed in accordance with GAAP (except for the term "property", which shall
be interpreted as broadly as possible, including, in any case, cash, Securities,
other assets, rights under Contractual Obligations and Permits and any right or
interest in any property). The terms "herein", "hereof" and similar terms refer
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to this Agreement as a whole. In the computation of periods of time from a
specified date to a later specified date in any Loan Document, the term "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding" and the word "through" means "to and including." In any other case,
the term "including" when used in any Loan Document means "including without
limitation." The term "documents" means all writings, however evidenced and
whether in physical or electronic form, including all documents, instruments,
agreements, notices, demands, certificates, forms, financial statements,
opinions and reports. The term "incur" means incur, create, make, issue, assume
or otherwise become directly or indirectly liable in respect of or responsible
for, in each case whether directly or indirectly, and the terms "incurrence" and
"incurred" and similar derivatives shall have correlative meanings.
1.4 INTERPRETATION: CERTAIN REFERENCES. Unless otherwise
expressly indicated, references (i) in this Agreement to an Exhibit, Schedule,
Annex, Section, clause or paragraph refer to the appropriate Exhibit, Schedule
or Annex to, or Section, clause or paragraph in, this Agreement and (ii) in any
Loan Document, to (A) any agreement or instrument shall include, without
limitation, all exhibits, schedules, appendixes and annexes to such agreement
and, unless the prior consent of Lender required therefor is not obtained, any
amendment, amendment and restatement, supplement or other modification to any
term of such agreement from time to time, (B) any statute shall be to such
statute as modified from time to time and to any successor legislation thereto,
in each case as in effect at the time any such reference is operative and (C)
any time of day shall be a reference to New York time. Titles of sections,
clauses, paragraphs, exhibits, schedules and annexes contained in any Loan
Document are without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto. Unless otherwise
expressly indicated, the meaning of any term defined (including by reference) in
any Loan Document shall be equally applicable to both the singular and plural
forms of such term.
2. LOAN.
2.1 LOAN. Subject to the terms and conditions of this Agreement,
Lender agrees to make one or more term loans (each, a "TERM LOAN") to Borrower
on the Closing Date and on any Business Day thereafter prior to March 31, 2007
in an aggregate principal amount not to exceed $80,000,000 (the Term Loans being
collectively referred to herein as the "LOAN"). The Loan shall be evidenced by a
Promissory Note in the principal amount of up to Eighty Million and No/100
Dollars ($80,000,000), substantially in the form of Exhibit "A" attached hereto
and incorporated herein by reference (hereinafter referred to as the "PROMISSORY
NOTE" or the "NOTE"). The Loan shall be repayable on the Maturity Date and at
the dates and in the amounts set forth below:
DATE AMOUNT
March 31, 2007 $4,000,000
June 30, 2007 $4,000,000
September 30, 2007 $4,000,000
December 31, 2007 $4,000,000
March 31, 2008 $4,000,000
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June 30, 2008 $4,000,000
September 30, 2008 $4,000,000
December 31, 2008 $4,000,000
April 6, 2009 The remaining outstanding
principal balance of the Loan
Amounts repaid, or prepaid in accordance with this Section 2.1 and
Section 2.3 hereof, on account of the Loan may not be reborrowed.
2.2 PROCEDURE FOR BORROWING. Borrower shall give Lender
irrevocable notice (including telephonic notice confirmed in writing) (which
notice must be received by Lender not later than 11:00 a.m. three (3) Business
Days before the date of the anticipated borrowing) requesting that Lender make a
Term Loan on such borrowing date and specifying the amount to be borrowed (each
such notice being referred to herein as a "NOTICE OF BORROWING").
Notwithstanding anything to the contrary in this Agreement, all borrowings
hereunder shall be in minimum amounts of $5,000,000 and incremental amounts of
$1,000,000 in excess thereof.
2.3 TERM AND PREPAYMENTS.
2.3.1 MATURITY DATE. Upon the Maturity Date, Borrower
shall pay to Lender in full, in cash: (i) all principal and
accrued but unpaid interest on the Loan and (ii) all other
non-contingent Obligations due to or incurred by Lender.
2.3.2 ASSET SALES AND CASUALTY EVENTS. Upon receipt on
or after the Closing Date by any Credit Party or any of its
Subsidiaries of (i) net cash proceeds arising from any Sale by
any Credit Party of any of its property other than (x) net cash
proceeds from Sales of Rig spare parts in the ordinary course of
business and (y) net cash proceeds from Sales of assets with a
fair market value not in excess of $250,000 per transaction (or
series of related transactions) and $2,000,000 in the aggregate
during the term of this Agreement which are reinvested within
one hundred eighty (180) days of receipt thereof in assets
useful to the business of Borrower and the other Credit Parties
or (ii) net cash proceeds from any casualty or condemnation
event with respect to any property of any Credit Party other
than net cash proceeds not in excess of $1,000,000 in the
aggregate during the term of this Agreement which are reinvested
within one hundred eighty (180) days of receipt thereof in
assets useful to the business of Borrower and the other Credit
Parties, Borrower shall immediately pay or cause to be paid to
Lender an amount equal to 100% of such net cash proceeds and
Lender shall apply the same to the Obligations in such manner as
Lender may elect in its sole discretion.
2.3.3 EQUITY AND DEBT ISSUANCES. Upon receipt on or
after the Closing Date by any Credit Party or any of its
Subsidiaries of net cash proceeds arising from (i) the issuance
or Sale of its own Stock (other than any Stock of Borrower which
has been issued pursuant to an employee stock option plan that
has been approved in writing by Lender, a "STOCK OPTION PLAN"),
Borrower shall immediately pay or cause to be paid to Lender an
amount equal to 100% of such net cash proceeds or (ii) the
incurrence by any Credit Party or any of its Subsidiaries of
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Indebtedness (other than any such Indebtedness permitted under
Section 6.3.3 hereof), Borrower shall immediately pay or cause
to be paid to Lender an amount equal to 100% of such net cash
proceeds.
2.3.4 EXCESS CASH FLOW. Beginning with the fourth (4th)
fiscal quarter of 2006 and continuing for each fiscal quarter
thereafter, Borrower shall pay or cause to be paid to Lender,
within thirty (30) days after the end of each such fiscal
quarter, an amount equal to 100% of the Excess Cash Flow for
such fiscal quarter; provided, however, that (i) the Excess Cash
Flow payment for the fourth (4th) fiscal quarter of 2006 shall
be an amount equal to the total Excess Cash Flow for the fiscal
year ending December 31, 2006 less the Rig Construction Reserve
Amount and (ii) the Excess Cash Flow payment for the fourth
(4th) fiscal quarter of 2007 shall be reduced on a dollar for
dollar basis by the amount, if any, of the 2007 Distribution.
2.3.5 VOLUNTARY PREPAYMENT. Borrower shall have the
right, at any time upon one (1) day's prior written notice to
Lender, to prepay all or a portion of the Loan; provided that
any prepayment of less than all of the outstanding principal
balance of the Loan shall be applied to the remaining
installments of the Loan in the inverse order of their maturity.
2.4 SINGLE LOAN. The Loan and all of the other Obligations of
Borrower to Lender shall constitute one general obligation of Borrower secured
by all of the Collateral.
2.5 INTEREST.
2.5.1 RATE. Borrower shall pay interest to Lender on the
outstanding principal balance of the Loan at a floating rate per
annum equal to LIBOR plus two percent (2.0%).
2.5.2 COMPUTATION. All computations of interest shall be
made by Lender on the basis of a three hundred and sixty (360)
day year, in each case for the actual number of days occurring
in the period for which such interest is payable. Each
determination by Lender of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error.
2.5.3 PAYMENTS. Interest shall be payable (i) in arrears
for the preceding calendar month on the first day of each
calendar month, (ii) upon any prepayment of the Loan pursuant to
Section 2.3, (iii) on the Maturity Date and (iv) if any interest
accrues or remains payable after the Maturity Date, upon demand
by Lender.
2.5.4 DEFAULT RATE. Effective upon the occurrence of any
Default or Event of Default and for so long as any Default or
Event of Default shall be continuing, all outstanding
Obligations, including unpaid interest, shall continue to accrue
interest from the date of such Default or Event of Default at
the rate equal to five percent (5.0%) per annum above the rate
of interest published in the "Money Rates" section of The Wall
Street Journal as the prime rate of interest from time to time
(the "DEFAULT RATE"), and any such interest shall be payable to
Lender by Borrower upon demand therefor by Lender.
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2.5.5 NON-BUSINESS DAYS. If any interest or any other
payment to Lender under this Agreement becomes due and payable
on a day other than a Business Day, such payment date shall be
extended to the next succeeding Business Day and interest
thereon shall be payable at the then applicable rate during such
extension.
2.5.6 MAXIMUM LAWFUL RATE. It is the intention of the
parties hereto to comply with any applicable usury laws;
accordingly, it is agreed that, notwithstanding any provisions
to the contrary in this Agreement or any other Loan Document, in
no event shall this Agreement or any other Loan Document require
the payment or permit the collection of interest or any amount
in the nature of interest or fees in excess of the maximum
amount permitted by applicable law. If any such excess interest
is contracted for, charged or received under this Agreement or
any other Loan Document, or in the event that all of the
principal balance shall be prepaid, so that under any of such
circumstances the amount of interest contracted for, charged or
received under this Agreement or any other Loan Document shall
exceed the maximum amount of interest permitted by applicable
law, then in such event any such excess which may have been
collected shall be either applied as a credit against the then
unpaid principal balance of the Loan or refunded to Borrower, at
the option of Lender and the effective rate of interest shall be
automatically reduced to the maximum lawful contract rate
allowed under applicable law as now or hereafter construed by
the courts having jurisdiction thereof.
2.6 RECEIPT OF PAYMENTS. Borrower shall make each payment under
this Agreement (not otherwise made pursuant to Section 2.7) without set-off,
counterclaim or deduction and free and clear of all Taxes not later than 1:00
p.m. on the day when due in lawful money of the United States of America in
immediately available funds to the Collection Account.
2.7 APPLICATION AND ALLOCATION OF PAYMENTS. Borrower irrevocably
agrees that Lender shall have the continuing and exclusive right to apply any
and all payments against the then due and payable Obligations in such order as
Lender may deem advisable.
2.8 ACCOUNTING. Lender is authorized to record on its books and
records the date and amount of the Loan and each payment of principal thereof
and such recordation shall constitute prima facie evidence of the accuracy of
the information so recorded.
3. COLLATERAL SECURITY. The performance of all covenants, conditions and
agreements contained in this Agreement and in the other documents executed or
delivered as a part of this transaction and the payment of the Obligations shall
be secured or supported by, among other things, the following:
3.1 SECURITY AGREEMENT. A Security Agreement executed by each
Credit Party in favor of Lender in the form set forth as Exhibit "B" attached
hereto and incorporated herein by reference (the "SECURITY AGREEMENT"), and any
UCC-1 financing statements filed in connection therewith.
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3.2 JOINT AND SEVERAL UNCONDITIONAL, CONTINUING GUARANTY
AGREEMENT. To the extent there exists any Subsidiary of the Borrower, a Joint
and Several Unconditional Continuing Guaranty Agreement of the Guarantors in
favor of Lender in the form set forth as Exhibit "C" attached hereto and
incorporated herein by reference (any such agreement, a "GUARANTY AGREEMENT").
3.3 DEPOSIT ACCOUNT CONTROL AGREEMENT. A Deposit Account Control
Agreement by and among Borrower, Bank and Lender.
3.4 ASSIGNMENT OF KEY MAN LIFE INSURANCE POLICY. Borrower shall
cause to be assigned to Lender a key man life insurance policy in the amount of
Five Million and No/100 Dollars ($5,000,000) issued on the life of Xxxx Xxxxx
(the "KEY MAN LIFE INSURANCE POLICY") pursuant to an assignment in the form set
forth as Exhibit "E" attached hereto and incorporated herein by reference (the
"ASSIGNMENT OF KEY MAN LIFE INSURANCE POLICY").
4. REPRESENTATIONS AND WARRANTIES. Borrower and each other Credit Party
represent and warrant to Lender each of the following on and as of the Closing
Date and each other date of the relevant Term Loan or incurrence and the
acceptance of the proceeds thereof that:
4.1 LITIGATION. There is no Litigation pending, or threatened,
against Borrower or any other Credit Party which, if adversely determined, would
materially and adversely affect Borrower or any other Credit Party, or impair
the ability of Borrower or any other Credit Party to carry on its business
substantially as now conducted or contemplated.
4.2 NO DEFAULT. The making and performance by Borrower and each
other Credit Party of this Agreement or any other Loan Document to which it is a
party will not violate any provision of or constitute a default under (i) any
Contractual Obligation or Requirement of Law to or by which Borrower or any
other Credit Party is bound or by which they or any of their properties may be
affected or (ii) its charter, bylaws and/or other governing documents.
4.3 OWNERSHIP. The relevant Credit Party has good and marketable
title to the property described in the agreements set forth in Sections 3.1, 3.3
and 3.4 above.
4.4 FINANCIAL STATEMENTS. Financial statements shall be
delivered to Lender relating to Borrower and each other Credit Party which shall
be complete, true and correct in all material respects, shall be the most
current statements available, shall have been prepared in accordance with GAAP
consistently applied, and shall fully and accurately represent the financial
condition reflected therein without material change since the dates thereof.
4.5 COMPLIANCE WITH APPLICABLE LAWS. Borrower and each other
Credit Party, to the best of their knowledge, have not violated and are not now
in violation of any Requirement of Law, in any respect adversely affecting their
business, property, assets, operations or condition, financial or otherwise.
4.6 CONTRACTUAL DEFAULTS. To Borrower's and each other Credit
Party's knowledge, Borrower and each other Credit Party are not in default of or
in breach in any material respect under any Contractual Obligation to which
6
Borrower or each other Credit Party are a party or by which they or any of their
properties may be bound.
4.7 FULL DISCLOSURE. Neither this Agreement, nor any statements
or documents referred to herein or delivered by Borrower or any other Credit
Party pursuant to this Agreement, contain any untrue statement which is material
or omit to state a material fact necessary to make the statements therein not
misleading.
4.8 OUTSTANDING SECURITY INTERESTS. There are no outstanding
and/or filed mortgages, security interests or Liens granted by Borrower or any
other Credit Party or any other Person or entity upon the Collateral (other than
the Liens permitted under Section 6.3.2). Neither Borrower nor any other Credit
Party will grant any security interests in the collateral securing the Loan and
the other Obligations of Borrower or any other Credit Party hereunder and under
the other Loan Documents (collectively, the "COLLATERAL") during the term of the
Loan and any extension thereof, except to the extent permitted under Section
6.3.2.
4.9 USE OF PROCEEDS. The proceeds of the Loan will be used (i)
to fund new Rig equipment purchases and construction costs, (ii) to repay the
Bridge Loan and Existing Debt, (iii) to repay the F&M Bank Debt and (iv) for
working capital and general corporate purposes. Borrower is not subject to or
regulated under any federal or state Requirement of Law that restricts or limits
its ability to incur Indebtedness, pledge its assets, or to perform its
obligations under the Loan Documents. Borrower is not engaged in the business of
extending credit for the purpose of "purchasing" or "carrying" any Margin Stock.
4.10 CORPORATE EXISTENCE. Each Credit Party is (a) duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and (b) duly qualified to do
business as a foreign entity and in good standing in each other material
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification.
4.11 LEGAL AUTHORITY TO CONDUCT BUSINESS. Each Credit Party has
(a) the requisite organizational power and authority and the legal right to
execute, deliver and perform its obligations under the Loan Documents, and to
own, pledge, mortgage or otherwise encumber and operate its properties, to lease
the property it operates under lease and to conduct its business as now,
heretofore or proposed to be conducted and (b) all Permits, consents or
approvals from or by all Persons or Governmental Authorities having jurisdiction
over such Credit Party that are necessary or appropriate for the conduct of its
business.
4.12 LOCATIONS; CORPORATE OR OTHER NAMES, ETC. Set forth on
Schedule 4.12 is (a) each Credit Party's name as it appears in official filings
in the state of its incorporation or organization, (b) the type of entity of
each Credit Party, (c) the organizational identification number issued by each
such Credit Party's state of incorporation or organization or a statement that
no such number has been issued, (d) each Credit Party's state of organization or
incorporation and (e) the location of each Credit Party's chief executive
office, corporate offices, warehouses, other locations of Collateral and
locations where records with respect to Collateral are kept (including in each
case the county of such locations) and, except as set forth in such Schedule,
such locations have not changed during the preceding twelve months. As of the
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Closing Date, during the prior five years, except as set forth on Schedule 4.12,
no Credit Party has been known as or conducted business in any other name
(including trade names).
4.13 EXECUTION AND ENFORCEABILITY. From and after its delivery
to Lender, each Loan Document shall have been duly executed and delivered by or
on behalf of each Credit Party which is a party thereto, and each such Loan
Document upon such execution and delivery shall be a legal, valid and binding
obligation of such Credit Party, enforceable against it in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency and
other similar laws affecting creditors' rights generally.
4.14 PROJECTIONS. The projections most recently delivered by
Borrower to Lender hereunder have been prepared in good faith, with care and
diligence and use assumptions that are reasonable under the circumstances at the
time such projections were prepared and as of the date delivered to Lender and
all such assumptions are disclosed in the projections.
4.15 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK
AND INDEBTEDNESS. Except as set forth on Schedule 4.15, as of the Closing Date,
no Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person. All
of the issued and outstanding Stock of each Credit Party (including all rights
to purchase, options, warrants or similar rights or Contractual Obligations
pursuant to which any Credit Party may be required to issue, Sell, repurchase or
redeem any of its Stock) as of the Closing Date is owned by each of the Persons
(and in the amounts) set forth on Schedule 4.15. All outstanding Indebtedness of
each Credit Party as of the Closing Date (after giving effect to the use of the
proceeds of the Term Loan made on the Closing Date) is described on Schedule
6.3.3.
4.16 MATERIAL ADVERSE CHANGE. Since December 31, 2004, no events
have occurred that, alone or in the aggregate, have had or could reasonably be
expected to have a Material Adverse Effect.
4.17 SOLVENCY. Both before and after giving effect to (a) the
Term Loans made on or prior to the date this representation and warranty is
made, (b) the disbursement of the proceeds of such Term Loans, and (c) the
payment and accrual of all transaction costs in connection with the foregoing,
both the Credit Parties taken as a whole and Borrower individually are Solvent.
4.18 TAXES. All federal, state, local and foreign income and
franchise and other material tax returns, reports and statements (collectively,
the "TAX RETURNS") required to be filed by any Tax Affiliate have been filed
with the appropriate Governmental Authorities in all jurisdictions in which such
Tax Returns are required to be filed, all such Tax Returns are true and correct
in all material respects, and all taxes, charges and other impositions reflected
therein or otherwise due and payable have been paid prior to the date on which
any Liability may be added thereto for non-payment thereof except for those
contested in good faith by appropriate proceedings diligently conducted and for
which adequate reserves are maintained on the books of the appropriate Tax
Affiliate in accordance with GAAP. No Tax Return is under audit or examination
by any Governmental Authority and no notice of such an audit or examination or
any assertion of any claim for Taxes has been given or made by any Governmental
Authority. Proper and accurate amounts have been withheld by each Tax Affiliate
8
from their respective employees for all periods in full and complete compliance
with the tax, social security and unemployment withholding provisions of
applicable Requirements of Law and such withholdings have been timely paid to
the respective Governmental Authorities. No Tax Affiliate has participated in a
"reportable transaction" within the meaning of Treasury Regulation Section
1.6011-4(b) or has been a member of an affiliated, combined or unitary group
other than the group of which a Tax Affiliate is the common parent.
4.19 LABOR MATTERS. There are no strikes, work stoppages,
slowdowns or lockouts existing, pending (or, to the knowledge of any Credit
Party, threatened) against or involving any Credit Party. Except as set forth on
Schedule 4.19, as of the Closing Date, (a) there is no collective bargaining or
similar agreement with any union, labor organization, works council or similar
representative covering any employee of any Credit Party, (b) no petition for
certification or election of any such representative is existing or pending with
respect to any employee of any Credit Party and (c) no such representative has
sought certification or recognition with respect to any employee of any Credit
Party.
4.20 ERISA. Schedule 4.20 sets forth, as of the Closing Date, a
complete and correct list of, and that separately identifies, (a) all Title IV
Plans, (b) all Multiemployer Plans and (c) all material Benefit Plans. Each
Benefit Plan, and each trust thereunder, intended to qualify for tax exempt
status under Section 401 or 501 of the Code or other Requirements of Law so
qualifies. Except for those that would not, in the aggregate, result in any
Liability in excess of $500,000, (x) each Benefit Plan is in compliance with
applicable provisions of ERISA, the Code and other Requirements of Law, (y)
there are no existing or pending (or to the knowledge of any Credit Party,
threatened) claims (other than routine claims for benefits in the normal
course), sanctions, actions, lawsuits or other proceedings or investigation
involving any Benefit Plan to which any Credit Party incurs or otherwise has or
could have an obligation or any Liability and (z) no ERISA Event is reasonably
expected to occur. On the Closing Date, no ERISA Event has occurred in
connection with which obligations and liabilities (contingent or otherwise)
remain outstanding. No ERISA Affiliate would have any Withdrawal Liability as a
result of a complete withdrawal from any Multiemployer Plan on the date this
representation is made.
4.21 ENVIRONMENTAL MATTERS. Except as set forth on Schedule
4.21, (a) the operations of each Credit Party are and have been in compliance
with all applicable Environmental Laws, including obtaining, maintaining and
complying with all Permits required by any applicable Environmental Law, other
than non-compliances that, in the aggregate, would not have a reasonable
likelihood of resulting in Liabilities in excess of $500,000, (b) no Credit
Party is party to, and no Credit Party and no real property currently (or to the
knowledge of any Credit Party previously) owned, leased, subleased, operated or
otherwise occupied by or for any Credit Party is subject to or the subject of,
any Contractual Obligation or any pending (or, to the knowledge of any Credit
Party, threatened) order, action, investigation, suit, proceeding, audit, claim,
demand, dispute or notice of violation or of potential liability or similar
notice relating in any manner to any Environmental Law other than those that, in
the aggregate, are not reasonably likely to result in Liabilities in excess of
$500,000, (c) no Lien in favor of any Governmental Authority securing, in whole
or in part, Environmental Liabilities has attached to any property of any Credit
Party and, to the knowledge of any Credit Party, no facts, circumstances or
9
conditions exist that could reasonably be expected to result in any such Lien
attaching to any such property, (d) no Credit Party has caused or suffered to
occur a Release of Hazardous Materials at, to or from any real property of any
Credit Party and each such real property is free of contamination by any
Hazardous Materials except for such Release or contamination that could not
reasonably be expected to result, in the aggregate, in Liabilities in excess of
$500,000, (e) no Credit Party (i) is or has been engaged in, or has permitted
any current or former tenant to engage in, operations or (ii) knows of any
facts, circumstances or conditions, including receipt of any information request
or notice of potential responsibility under the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. xx.xx. 9601 et seq.) or
similar Environmental Laws, that, in the aggregate, would have a reasonable
likelihood of resulting in Liabilities in excess of $500,000 and (f) each Credit
Party has made available to Lender copies of all existing environmental reports,
reviews and audits and all documents pertaining to actual or potential
Environmental Liabilities, in each case to the extent such reports, reviews,
audits and documents are in their possession, custody or control.
4.22 INTELLECTUAL PROPERTY. As of the Closing Date, all material
Intellectual Property owned or used by any Credit Party is listed, together with
application or registration numbers, where applicable, on Schedule 4.22. Each
Credit Party owns, or is licensed to use, all Intellectual Property material and
necessary to conduct its business as currently conducted. To the knowledge of
each Credit Party, (a) the conduct and operations of the businesses of each
Credit Party does not infringe, misappropriate, dilute, violate or otherwise
impair any Intellectual Property owned by any other Person in any material
respect and (b) no other Person has contested any right, title or interest of
any Credit Party in, or relating to, any material Intellectual Property, other
than, in each case, as cannot reasonably be expected to affect the Loan
Documents and the transactions contemplated therein.
4.23 INSURANCE. As of the Closing Date, Schedule 4.23 lists all
insurance of any nature maintained for current occurrences by Borrower and each
other Credit Party, as well as a summary of the terms of such insurance.
4.24 DEPOSIT ACCOUNTS. Schedule 4.24 lists all banks and other
financial institutions at which Borrower or any other Credit Party, maintains
deposit and/or other accounts, including accounts subject to Deposit Account
Control Agreements in favor of Lender, and such Schedule correctly identifies
the name, address and telephone number of each such depository, the name in
which the account is held, a description of the purpose of the account, and the
complete account number.
4.25 BROKERS. No broker or finder acting on behalf of Borrower
or any other Credit Party brought about the obtaining, making or closing of the
Agreement and the credit provided hereunder and neither Borrower nor any Credit
Party has any obligation to any Person in respect of any finder's or brokerage
fees in connection therewith.
4.26 ANTI-TERRORISM AND ANTI-MONEY LAUNDERING. Borrower
currently (a) ensures that neither Borrower nor any Person who owns a
controlling interest in or otherwise controls Borrower shall be (i) listed on
the Specially Designated Nationals and Blocked Person List maintained by the
Office of Foreign Assets Control ("OFAC"), Department of the Treasury, and/or
any other similar lists maintained by OFAC pursuant to any authorizing statute,
10
Executive Order or regulation or (ii) a Person designated under Section 1(b),
(c) or (d) of Executive Order No. 13224 (September 23, 2001), any related
enabling legislation or any other similar Executive Orders and (b) complies with
all applicable Bank Secrecy Act ("BSA") laws, regulations and government
guidance on BSA compliance and on the prevention and detection of money
laundering violations.
4.27 AFFILIATED TRANSACTIONS. Schedule 4.27 sets forth, as of
the Closing Date, a complete and correct list of, and separately identifies, all
of the transactions between any Credit Party and its Affiliates (collectively,
the "AFFILIATED TRANSACTIONS").
4.28 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All covenants,
representations and warranties made herein shall survive the making of the Loan
hereunder and the delivery of the Note, the Security Documents and other Loan
Documents described herein until complete repayment of the Obligations.
5. CONDITIONS PRECEDENT.
5.1 CONDITIONS TO INITIAL ADVANCE. At or prior to the initial
advance of the Loan hereunder (the "INITIAL ADVANCE"), Borrower and each Credit
Party, as applicable, shall deliver, or cause to be delivered to Lender, the
following items, all of which are to be in form and substance reasonably
satisfactory to Lender, and, where deemed necessary by Lender or required for
recording, duly executed and acknowledged:
5.1.1 CLOSING DOCUMENTS. This Agreement, the Note, UCC-1
financing statements, the Security Agreement, a Deposit Account
Control Agreement in respect of accounts maintained at the Bank
and the Assignment of Key Man Life Insurance Policy shall be
duly authorized, executed and delivered to Lender.
5.1.2 NOTICE OF BORROWING. The Lender shall have
received a written, timely and duly executed and completed
Notice of Borrowing in respect of the Initial Advance.
5.1.3 INSURANCE. Borrower and each Credit Party, as
applicable, will deposit and maintain with Lender throughout the
term of the Loan copies of certificates of insurance, premiums
prepaid, with insurance companies satisfactory to Lender, in
such amounts and against such risks as shall be reasonably
required by Lender. All insurance policies shall name Borrower,
each Credit Party and Lender as loss payees, as their respective
interests may appear, or as additional insureds as required by
Lender and shall otherwise be satisfactory in all respects to
Lender.
5.1.4 RECORDING OF SECURITY DOCUMENTS. The UCC-1
financing statements shall be filed in the appropriate recording
offices.
5.1.5 EXECUTION COPIES OF OPERATOR CONTRACTS. Duly
executed copies of the Operator Contracts for each of the Rigs,
excluding Rigs 5, 29 and 30, listed on Schedule 6.3.5 hereto.
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5.1.6 EXECUTION COPIES OF EMPLOYMENT AGREEMENTS. Duly
executed copies of the Employment Agreements, in each case, in
form and substance acceptable to Lender.
5.1.7 KEY MAN LIFE INSURANCE POLICY. A copy of the Key
Man Life Insurance Policy, in form and substance acceptable to
Lender.
5.1.8 OPINION OF BORROWER'S COUNSEL. An opinion from
Borrower's and the other Credit Parties' counsel in
substantially the form of Exhibit "F" hereto and otherwise in
form and substance satisfactory to Lender and Lender's counsel.
5.1.9 OFFICER'S CERTIFICATE. Borrower shall deliver to
Lender a duly authorized and executed certificate substantially
in the form of Exhibit "G" hereto, including true and complete
copies of all attachments referred to therein.
5.1.10 LEASES. Borrower shall enter into written
agreements for all leases of real property which shall be in
form and substance reasonably satisfactory to Lender and deliver
duly executed copies thereof to Lender.
5.1.11 PROJECTIONS. Borrower shall deliver to Lender its
forecasted consolidated balance sheet, statements of income and
cash flow (including forecasted capital expenditures) for each
fiscal month during fiscal years 2006 through 2009.
5.1.12 RELEASE OF EXISTING DEBT. Borrower shall deliver
to Lender payoff letters (including, without limitation,
releases of all Collateral securing such Existing Debt and
releases of the Credit Parties and the other persons liable
therefor) in respect of the Existing Debt in form and substance
satisfactory to Lender, together with any and all instruments
authorized by the holders of the Existing Debt necessary to give
effect to such releases.
5.1.13 RELEASE OF F&M BANK DEBT. Borrower shall deliver
to Lender a payoff letter (including, without limitation,
releases of all Collateral securing such F&M Bank Debt and
releases of the Credit Parties and the other persons liable
therefor) in respect of the F&M Bank Debt in form and substance
satisfactory to Lender, together with any and all instruments
authorized by the holders of the F&M Bank Debt necessary to give
effect to such releases.
In addition to the delivery of the foregoing items, (i) no Default or
Event of Default shall have occurred and be continuing either before or after
giving effect to the funding of the Initial Advance and (ii) each of the
representations and warranties made by Borrower or any other Credit Party in the
Loan Documents shall be true and correct in all material respects both before
and after giving effect to the funding of the Initial Advance.
5.2 CONDITIONS TO SUBSEQUENT ADVANCES. At or prior to any
subsequent advance of the Loan hereunder (each, a "SUBSEQUENT ADVANCE"),
Borrower or any other Credit Party, as applicable, shall deliver, or cause to be
delivered to Lender, the following items, all of which are to be in form and
substance reasonably satisfactory to Lender, and, where deemed necessary by
Lender or required for recording, duly executed and acknowledged:
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5.2.1 NOTICE OF BORROWING. The Lender shall have
received a written, timely and duly executed and completed
Notice of Borrowing in respect of any such Subsequent Advance.
5.2.2 ADDITIONAL MATTERS. Lender shall have received
such additional documents and information as Lender may
reasonably request and, to the extent that any such Subsequent
Advance is to be used to (i) fund Capital Expenditures in
respect of Rig 29 and/or Rig 30, Borrower shall deliver to
Lender a duly executed copy of the Operator Contract for each
such Rig or (ii) payoff the Xxxx Deere Debt, Borrower shall
deliver to Lender a payoff letter (including, without
limitation, releases of all Collateral securing such Xxxx Deere
Debt and releases of the Credit Parties and the other persons
liable therefor) in respect of the Xxxx Deere Debt in form and
substance satisfactory to Lender, together with any and all
instruments authorized by the holders of the Xxxx Deere Debt
necessary to give effect to such releases.
5.2.3 REPRESENTATIONS AND WARRANTIES; NO DEFAULTS. In
addition to the delivery of the foregoing, the following
statements shall be true on such date, both before and after
giving effect to any Subsequent Advance: (i) the representations
and warranties set forth in any Loan Document shall be true and
correct in all material respects on and as of such date or, to
the extent such representations and warranties expressly relate
to an earlier date, on and as of such earlier date and (ii) no
Default or Event of Default shall have occurred and be
continuing.
The representations and warranties set forth in any Notice of Borrowing
(or any certificate delivered in connection therewith) shall be deemed to be
made again on and as of the date of the relevant Subsequent Advance and the
acceptance of the proceeds thereof.
6. CONDITIONS AND RESTRICTIONS. Until the payment in full and
performance of all Obligations owing to Lender under this Agreement or any of
the other Loan Documents, unless Lender shall otherwise consent in writing,
Borrower and each other Credit Party covenant and agree as follows:
6.1 PERFORMANCE OF OBLIGATIONS. Borrower and each other Credit
Party will promptly and punctually perform all of the Obligations hereunder and
under any of the other Loan Documents.
6.2 AFFIRMATIVE COVENANTS:
6.2.1 BOOKS AND RECORDS. Borrower and each other Credit
Party shall maintain adequate Books and Records in accordance
with GAAP consistently applied.
6.2.2 MONTHLY FINANCIAL STATEMENTS; MONTHLY COMPLIANCE
SCHEDULES. Beginning with the first full fiscal month following
the Closing Date and continuing for each fiscal month
thereafter, Borrower shall, within ten (10) days of the end of
each such fiscal month, provide Lender with (a) a monthly
reporting package in form and substance acceptable to Lender
(the "MONTHLY REPORT") and (b) Monthly Compliance Schedules;
provided, however, Borrower shall only be required to provide
13
Monthly Compliance Schedules to Lender for each such fiscal
month through the fiscal month ending March 31, 2007.
6.2.3 QUARTERLY FINANCIAL STATEMENTS. Beginning with the
fiscal quarter ended June 30, 2006 and continuing for each
fiscal quarter thereafter, Borrower shall provide Lender with
unaudited consolidated quarterly financial statements and
supporting schedules prepared in accordance with GAAP within
fifteen (15) days after the end of each of the first three
fiscal quarters of each fiscal year, in each case, together with
a duly executed Compliance Certificate; provided, that to the
extent the Securities and Exchange Commission (the "SEC")
reduces the timeframe within which Lender is required to make
any filings, each timeframe set forth above shall be
correspondingly reduced. The forms of financial statements and
supporting schedules currently required by Lender are attached
hereto as Exhibit J; however such forms and the information
requested to be delivered to Lender hereunder may be changed
from time to time at the discretion of Lender upon written
notice to Borrower (such forms and information, the "REQUIRED
Forms").
6.2.4 ANNUAL FINANCIAL STATEMENTS. Borrower shall
deliver to Lender (a) year-end consolidated financial statements
(commencing with the fiscal year ending December 31, 2006)
prepared in accordance with GAAP and in the Required Forms
within twenty four (24) days after Borrower's fiscal year end
and (b) year-end audited consolidated financial statements
(commencing with the fiscal year ending December 31, 2006)
prepared in accordance with GAAP and audited in accordance with
United States generally accepted auditing standards and meeting
all applicable requirements of the SEC within fifty (50) days
after Borrower's fiscal year end and accompanied by (i) a report
and opinion of Borrower's auditors (the identity of which shall
be reasonably satisfactory to Lender), which report and opinion
shall not be subject to any "going concern" or like
qualification or exception or any qualification or exception as
to the scope of such audit and (ii) a duly executed Compliance
Certificate; provided, further, that to the extent the SEC
reduces the timeframes within which Lender is required to make
any filings, the timeframes set forth above shall be
correspondingly reduced.
6.2.5 SECTION 404 OF XXXXXXXX-XXXXX ACT OF 2002
COMPLIANCE. Borrower shall undertake best efforts to become
compliant with Section 404 of the Xxxxxxxx-Xxxxx Act of 2002
("404 Compliant") by December 31, 2007 and provide updates on
such progress at Lender's request.
6.2.6 ADDITIONAL REPORTING REQUIREMENTS. The financial
reporting requirements included in Sections 6.2.2 through 6..2.5
are subject to change should Lender determine that Borrower must
be treated as a consolidated Subsidiary for GAAP and SEC
reporting purposes.
6.2.7 CONSENT OF BORROWER'S ACCOUNTANTS. If required by
Lender's independent public accounting firm, Borrower will take
whatever steps are necessary so that Lender's independent public
accounting firm may review the audit work papers of the
Borrower's independent public accounting firm immediately after
receipt of the audited consolidated financial statements
14
referred to in Section 6.2.4(b). If required under the rules of
the SEC, the Borrower will obtain from their independent public
accounting firm such firm's consent for Lender to file their
opinion and the financial statements with the SEC, within eighty
(80) days after the end of Lender's fiscal year.
6.2.8 PROJECTIONS; BUDGETS; OPERATING PLAN. No later
than October 15th of each fiscal year following the Closing Date
(including fiscal year 2006), Borrower shall deliver to Lender
(a) a projected balance sheet and statements of income and cash
flow of Borrower and its Subsidiaries for each fiscal month of
the fourth (4th) fiscal quarter of such fiscal year, (b) a
projected balance sheet and statements of income and cash flow
of Borrower and its Subsidiaries for each fiscal month of the
next fiscal year and an operating plan for Borrower, including
senior management's discussion and analysis of strategic
initiatives for the upcoming fiscal year and (c) a projected
balance sheet and statements of income and cash flow of Borrower
and its Subsidiaries on an annual basis for each of the
following two (2) fiscal years, in each case (i) prepared by
Borrower in a manner consistent with GAAP and in good faith,
with care and diligence, and using assumptions that are
reasonable under the circumstances at the time the such items
are delivered to Lender and disclosed therein when delivered and
(ii) setting forth in comparative form the figures for the
corresponding period in the prior fiscal year; provided, that
the projections provided in clause (b) shall be consistent in
all respects with the projections for such fiscal year provided
pursuant to clause (c).
6.2.9 NOTICE OF LITIGATION; DEFAULT. Borrower and each
other Credit Party shall inform Lender in writing (a) promptly
of any and all litigation, against Borrower or any other Credit
Party brought by any Person, partnership or entity or in which
Borrower or any other Credit Party are involved, in each case,
in which the damages asserted in the petition or complaint
exceed $50,000, and which is not adequately covered by insurance
and (b) immediately upon the occurrence of any Default.
6.2.10 LENDER REPORTING REQUIREMENT. Borrower and each
other Credit Party will promptly furnish to Lender all requested
information concerning the Collateral and any requested
information that may be required by Lender to enable it to
comply with the accounting and disclosure requirements of the
SEC as in effect from time to time, which information shall be
provided to Lender in a timely manner to meet the SEC
requirements.
6.2.11 MAINTENANCE OF PROPERTIES. Borrower shall
maintain the physical condition of all property described in the
Security Agreement in a good and satisfactory condition during
the term of the Loan and shall maintain all material rights,
permits, licenses, approvals and privileges (including all
Permits) necessary, used or useful, whether because of its
ownership, lease, sublease or other operation or occupation of
property or other conduct of its business, and shall make all
necessary or appropriate filings with, and give all required
notices to, Government Authorities.
6.2.12 TAX RETURNS. Within one hundred twenty (120) days
after the end of each fiscal year, Borrower and each other
Credit Party shall provide to Lender such information as is
necessary to complete Lender's United States income tax or
15
information returns, including a copy of Borrower's United
States federal, state and local income tax or information
returns.
6.2.13 OPERATING ACCOUNTS. Borrower and each other
Credit Party shall maintain all deposit and other operating
accounts with Bank during the term of the Loan or until Lender
approves in writing another depository institution, which such
accounts shall be subject to a Deposit Account Control Agreement
in favor of Lender, except Borrower may maintain (a) its payroll
account at Stillwater National Bank and Trust and (b) an
operating account at Stillwater National Bank and Trust;
provided that the balance maintained from time to time in any
such operating account at Stillwater National Bank and Trust
shall not exceed $100,000.
6.2.14 MAINTENANCE OF EXISTENCE. Borrower and each other
Credit Party shall preserve and maintain (a) its legal existence
and good standing under the laws of the jurisdiction of its
incorporation or organization and (b) it rights (charter and
statutory), privileges franchises and Permits material to and
necessary or desirable in the conduct of its business.
6.2.15 MAINTENANCE OF INSURANCE. Borrower and each other
Credit Party shall (a) maintain or cause to be maintained in
full force and effect all policies of insurance of any kind with
respect to the property and businesses of the Credit Parties
with financially sound and reputable insurance companies or
associations (in each case that are not Affiliates of Borrower)
of a nature and providing such coverage as is sufficient and as
is customarily carried by businesses of the size and character
of the business of the Credit Parties and (b) cause all such
insurance relating to any property or business of any Credit
Party to name Lender as additional insured or loss payee, as
appropriate. All policies of insurance on real and personal
property will give Lender at least thirty (30) days' prior
written notice before any such policy or policies of insurance
shall be altered or canceled and that no act or default of
Borrower or any other Person shall affect the right of Lender to
recover under such policy or policies of insurance in case of
loss or damage. Lender reserves the right at any time, upon
review of each Credit Party's risk profile, to require in its
reasonable discretion additional forms and limits of insurance.
6.2.16 ACCESS TO BOOKS AND RECORDS. Borrower and each
other Credit Party shall, with respect to each owned, leased, or
controlled property, during normal business hours and upon
reasonable advance notice (unless a Default shall have occurred
and be continuing, in which event no notice shall be required
and Lender shall have access at any and all times): (a) provide
access to such property to Lender and any of its Related
Persons, as frequently as Lender determines to be appropriate,
(b) permit Lender and any of its Related Persons to inspect,
audit and make extracts and copies (or take originals if
reasonably necessary) from all of such Credit Party's Books and
Records and (c) permit Lender to inspect, review, evaluate and
make physical verifications and appraisals of the inventory and
other Collateral in any manner and through any medium that
Lender considers advisable, and such Credit Party agrees to
render to Lender, at such Credit Party's cost and expense, such
16
clerical and other assistance as may be reasonably requested
with regard thereto.
6.2.17 ENVIRONMENTAL. Borrower and each other Credit
Party shall comply in all material respects with, and maintain
its real property, whether owned, leased, subleased or otherwise
operated or occupied, in compliance with, all applicable
Environmental Laws (including by implementing any Remedial
Action necessary to achieve such compliance or that is required
by orders and directives of any Governmental Authority). Without
limiting the foregoing, if an Event of Default is continuing or
if Lender at any time has a reasonable basis to believe that
there exist violations of Environmental Laws by any Credit Party
or that there exist any material Environmental Liabilities, then
each Credit Party shall, promptly upon receipt of request from
Lender, cause the performance of, and allow Lender and its
Related Persons access to such real property for the purpose of
conducting, such environmental audits and assessments, including
subsurface sampling of soil and groundwater, and cause the
preparation of such reports, in each case as Lender may from
time to time reasonably request. Such audits, assessments and
reports, to the extent not conducted by Lender or any of its
Related Persons, shall be conducted and prepared by reputable
environmental consulting firms reasonably acceptable to Lender
and shall be in form and substance reasonably acceptable to
Lender.
6.2.18 INTELLECTUAL PROPERTY. Borrower and each other
Credit Party shall maintain the patenting and registration of
all Intellectual Property with the United States Patent and
Trademark Office, the United States Copyright Office, or other
appropriate Governmental Authority.
6.2.19 FURTHER ASSURANCES. Borrower and each other
Credit Party, at any time and from time to time, upon the
written request of Lender and at the sole expense of such Credit
Party, shall promptly and duly execute and deliver any and all
such further instruments and documents and take such further
action as Lender may reasonably deem necessary or advisable (a)
to obtain the full benefits of this Agreement and the other Loan
Documents, (b) to protect, preserve, maintain and enforce
Lender's rights in (and the priority of Lender's Lien on) any
Collateral or (c) to enable Lender to exercise all or any of the
rights, remedies and powers granted herein or in any other Loan
Document.
6.2.20 CLOSING OF LOCKBOX ACCOUNT. Within thirty (30)
days after the Closing Date, Borrower shall close that certain
lockbox account (account number: 348572) maintained by Borrower
at Stillwater National Bank and Trust.
17
6.3 NEGATIVE AND FINANCIAL COVENANTS:
6.3.1 ASSET DISPOSITIONS. Borrower and each other Credit
Party shall not Sell any of the Collateral with a fair market
value in excess of $250,000 per transaction (or series of
related transactions) and $2,000,000 in the aggregate during the
term of this Agreement without the prior written consent of
Lender.
6.3.2 LIENS. Borrower and each other Credit Party shall
not encumber (except for Liens securing Indebtedness described
in Section 6.3.3 and other Permitted Liens) any of the
Collateral by Lien, mortgage, or otherwise, without the prior
written consent of Lender.
6.3.3 INDEBTEDNESS. Borrower and each other Credit Party
shall not incur additional Indebtedness (except (i) revolving
debt incurred under a revolving credit facility (in form and
substance reasonably acceptable to Lender) in an aggregate
principal amount not to exceed $8,000,000 or additional amounts
upon the Lender's prior written approval, (ii) Indebtedness
described on Schedule 6.3.3 hereto, (iii) capital lease
obligations in an aggregate principal amount not to exceed
$1,000,000 and (iv) purchase money Indebtedness in an aggregate
principal amount not to exceed $1,000,000) without the prior
written consent of Lender.
6.3.4 OWNERSHIP; FUNDAMENTAL CHANGES. Borrower shall not
issue additional Stock (other than pursuant to a Stock Option
Plan), allow Xxxxx XxXxxxxxx or Xxxx Xxxxx to disassociate
themselves with or otherwise not participate in the management
of Borrower, elect officers (other than the present officers and
directors), merge, consolidate, or Sell all or substantially all
of its assets without the prior written consent of Lender.
6.3.5 CAPITAL EXPENDITURES. Borrower's Capital
Expenditures in respect of the construction and/or acquisition
of the Rigs listed on Schedule 6.3.5, which amounts shall be
expended on or prior to March 31, 2007, shall not exceed
$100,000,000 in the aggregate without the prior written consent
of Lender.
6.3.6 MAINTENANCE CAPITAL EXPENDITURES. Borrower shall
not incur Capital Expenditures in excess of $2,500,000 in the
aggregate per fiscal year for maintenance of Rigs without the
prior written consent of Lender.
6.3.7 MINIMUM EBITDA. Borrower and its Subsidiaries on a
consolidated basis shall have, for each fiscal quarter ending on
the date set forth below, EBITDA for the twelve (12) month
period then ended of not less than the following (provided, that
the minimum EBITDA amount for each of the fiscal quarters ending
June 30, 2006, September 30, 2006 and December 31, 2006 shall be
a cumulative amount for the period beginning with the fiscal
month ending January 31, 2006 and concluding with the fiscal
month ending on the stated date):
18
------------------------------------------------------------ ---------------------------------------------------------
DATE MINIMUM EBITDA
------------------------------------------------------------ ---------------------------------------------------------
June 30, 2006 $17,500,000
------------------------------------------------------------ ---------------------------------------------------------
September 30, 2006 $31,500,000
------------------------------------------------------------ ---------------------------------------------------------
December 31, 2006 $50,000,000
------------------------------------------------------------ ---------------------------------------------------------
March 31, 2007 $63,000,000
------------------------------------------------------------ ---------------------------------------------------------
June 30, 2007 $72,500,000
------------------------------------------------------------ ---------------------------------------------------------
September 30, 2007 $78,500,000
------------------------------------------------------------ ---------------------------------------------------------
December 31, 2007 $80,000,000
------------------------------------------------------------ ---------------------------------------------------------
March 31, 2008 $77,500,000
------------------------------------------------------------ ---------------------------------------------------------
June 30, 2008 $73,000,000
------------------------------------------------------------ ---------------------------------------------------------
September 30, 2008 $67,500,000
------------------------------------------------------------ ---------------------------------------------------------
December 31, 2008 $60,000,000
------------------------------------------------------------ ---------------------------------------------------------
March 31, 2009 $53,500,000
------------------------------------------------------------ ---------------------------------------------------------
June 30, 2009 $49,000,000
------------------------------------------------------------ ---------------------------------------------------------
September 30, 2009 $44,000,000
------------------------------------------------------------ ---------------------------------------------------------
December 31, 2009 $40,000,000
------------------------------------------------------------ ---------------------------------------------------------
March 31, 2010 and the last day of each fiscal quarter $40,000,000
occurring thereafter
------------------------------------------------------------ ---------------------------------------------------------
6.3.8 RESTRICTED PAYMENTS. Borrower and each other
Credit Party will not make any Restricted Payments to equity
holders or otherwise without the prior written consent of
Lender; provided, however, Borrower shall be allowed to make (i)
Permitted Tax Distributions and (ii) if Borrower's total
outstanding Indebtedness as of September 30, 2007 is equal to or
less than $40,000,000, a one-time dividend of up to the lesser
of (x) $15,000,000 and (y) the amount of the Excess Cash Flow
generated in the fourth fiscal quarter of 2007 (the "2007
DISTRIBUTION") on or prior to January 31, 2008.
6.3.9 SUBSIDIARIES; INVESTMENTS. Borrower and each other
Credit Party shall not form any Subsidiary or make any
investment in or, except as provided in Section 6.3.11 below,
loan or advance to, any Person.
19
6.3.10 CHANGE IN NATURE OF BUSINESS. Borrower and each
other Credit Party shall not make any changes in any of their
business objectives, purposes, or operations that could
reasonably be expected to adversely affect repayment of the
Obligations, or engage in any business other than that engaged
in on the Closing Date.
6.3.11 AFFILIATED TRANSACTIONS. Except for the
Affiliated Transactions, Borrower and each other Credit Party
shall not enter into or be a party to any transaction with any
of its officers, directors, Affiliates (including, without
limitation, Special Exploration Co., Inc. and Special Energy
Co., Inc.) or any other Credit Party (including upstreaming and
downstreaming of cash and intercompany advances and payments by
a Credit Party on behalf of another Credit Party) except those
meeting each of the following criteria: (i) such transaction is
entered into in the ordinary course of business, (ii) such
transaction is upon fair and reasonable terms that are no less
favorable to such Credit Party than would be obtained in a
comparable arm's length transaction with a Person not an
Affiliate of such Credit Party and (iii) with Lender's prior
written consent.
6.3.12 THIRD PARTY RESTRICTIONS ON INDEBTEDNESS, LIENS,
INVESTMENTS OR RESTRICTED PAYMENTS. Borrower and each other
Credit Party shall not incur or otherwise suffer to exist or
become effective or remain liable on or responsible for any
Contractual Obligation limiting the ability of (a) any
Subsidiary of Borrower to make Restricted Payments to, or
investments in, or repay Indebtedness or otherwise sell property
to, any Credit Party or (b) any Credit Party to incur or suffer
to exist any Lien upon any property of any Credit Party, whether
now owned or hereafter acquired, securing any of its Obligations
(including any "equal and ratable" clause and any similar
Contractual Obligation requiring, when a Lien is granted on any
property, another Lien to be granted on such property or any
other property), except, for each of clauses (a) and (b) above,
pursuant to the Loan Documents or any capital leases or purchase
money Indebtedness permitted under Section 6.3.3 hereof.
6.3.13 MODIFICATION OF CERTAIN DOCUMENTS. Borrower and
each other Credit Party shall not amend, waive, or otherwise
modify its charter or by-laws or other organizational documents.
6.3.14 ACCOUNTING CHANGES; FISCAL YEAR. Borrower and
each other Credit Party shall not change their (a) accounting
treatment or reporting practices, except as required by GAAP or
any Requirement of Law or (b) their fiscal year or their method
for determining fiscal quarters or fiscal months.
6.3.15 CHANGES TO NAME, LOCATIONS, ETC. Borrower and
each other Credit Party shall not (a) change (i) its respective
name, chief executive office, corporate offices from those set
forth on Schedule 4.12, (ii) its Collateral locations, or
location of its records concerning the Collateral from those
locations set forth on Schedule 4.12, (iii) the type of legal
entity that it is, (iv) its organization identification number,
if any, issued by its state of incorporation or organization or
(v) its state of incorporation or organization from that set
forth on Schedule 4.12 or (b) acquire or lease any real estate
after the Closing Date without such Person, in each instance,
giving thirty (30) days' prior written notice thereof to Lender
20
and, if requested by Lender, taking all actions deemed
reasonably necessary or appropriate by Lender to continuously
protect and perfect Lender's Liens upon the Collateral
(including, without limitation, granting a mortgage on any
fee-owned real estate acquired by any Credit Party (other than
to the extent acquired with the proceeds of purchase money
Indebtedness permitted pursuant to Section 6.3.3 hereof)).
6.3.16 MARGIN REGULATIONS. Borrower and each other
Credit Party shall not use all or any portion of the proceeds of
any credit extended hereunder to purchase or carry Margin Stock
in contravention of Regulation U of the Federal Reserve Board.
6.3.17 COMPLIANCE WITH ERISA. No ERISA Affiliate shall
cause or suffer to exist (a) any event that could result in the
imposition of a Lien with respect to any Title IV Plan or
Multiemployer Plan or (b) any other ERISA Event, that would, in
the aggregate, reasonably be expected to result in Liabilities
in excess of $500,000. No Credit Party shall cause or suffer to
exist any event that could result in the imposition of a Lien
with respect to any Benefit Plan.
6.3.18 HAZARDOUS MATERIALS. No Credit Party shall cause
or suffer to exist any Release of any Hazardous Material at, to
or from any real property owned, leased, subleased or otherwise
operated or occupied by any Credit Party that would violate any
Environmental Law, form the basis for any Environmental
Liabilities or otherwise adversely affect the value or
marketability of any real property (whether or not owned by any
Credit Party), other than such violations, Environmental
Liabilities and effects that would not, in the aggregate, result
in Liabilities in excess of $500,000.
6.4 REQUIRED DEPOSITS. Borrower and each other Credit Party
will, upon request of Lender, deposit with Lender an amount sufficient to pay
the insurance premiums, which amount shall be held in an escrow account. Lender
shall not require the foregoing escrow so long as such insurance premiums are
paid when due, evidence of such payment is provided to Lender and there is no
Default by Borrower hereunder.
6.5 PAYMENT OF TAXES. All Taxes and other Charges imposed on
Borrower or any other Credit Party or on Borrower's or any other Credit Party's
assets, income or profits, will be paid prior to the date on which penalties
attach thereto. Notwithstanding the foregoing, Borrower or Guarantor shall not
be required to pay any Tax or other Charge which is being contested, in good
faith, by proper proceedings and for which adequate reserves in accordance with
GAAP have been made on the Books and Records of such Person; provided, however,
at any time after a Lien in respect of any Tax or Charge is filed or notice
thereof is received, upon request of Lender, Borrower and/or any other Credit
Party, as the case may be, shall deposit with Lender the amount so contested and
unpaid, together with all interest that may or might be assessed or be a charge
on any of the property securing the Loan or any part thereof, which amount shall
be held in an escrow account or, if permitted by law, post appropriate bond with
the governmental agency filing such Lien or notice and furnishing evidence to
Lender of the posting of such bond.
21
7. ADMINISTRATION OF LOAN. Upon Lender being satisfied that each
representation or warranty by Borrower and each other Credit Party to Lender is
true and correct in all material respects, and upon Lender being satisfied that
no Event of Default has occurred and is continuing, and that all material
conditions set forth herein are satisfied, Lender agrees to disburse proceeds of
the Loan, which shall be paid in accordance with the wiring instructions set
forth below:
Union Bank of Xxxxxxxx
Account #10228
Bankers Bank OKC
ABA #000000000
Memo: For credit to Goober Drilling account #136690
8. DEFAULT. The following shall constitute events of default hereunder
and under each of the other Loan Documents (each an "EVENT OF DEFAULT" and,
collectively, the "EVENTS OF DEFAULT"):
8.1 NON-PAYMENT OF LOAN. Default in payment when due of (i) any
principal of the Loan and/or (ii) any interest on the Loan or any other
obligations of Borrower to Lender, and any and all extensions, renewals,
replacements, substitutions and modifications thereof and such default under
this clause (ii) continues for five (5) days from the date such payment is due.
8.2 OTHER NON-PAYMENT. Default in payment when due of any amount
(other than principal and interest) payable to Lender or default in any other
monetary Obligation of Borrower to Lender and Borrower fails to cure such
default within fifteen (15) days from the date Borrower receives written notice
that such payment is past due.
8.3 BREACH OF COVENANTS. Default by Borrower in the performance
or observance of (i) any covenant contained in Sections 6.2.2, 6.2.3, 6.2.4,
6.2.9(b), 6.2.12 and 6.2.13 or Section 6.3 or (ii) any other covenant contained
in this Agreement, the Security Documents or any other Loan Document or under
the terms of any other instrument delivered to Lender in connection with this
Agreement (other than any such default which is separately described in this
Section 8), and the failure to cure such default under this clause (ii) within
thirty (30) days after written notice of such default or breach from Lender.
8.4 BANKRUPTCY. The institution of bankruptcy, reorganization,
liquidation or receivership proceedings by or against any Borrower or any other
Credit Party and, solely in the case of any such proceedings involuntarily
instituted against Borrower or such other Credit Party, the pendency of such
proceedings for sixty (60) days.
8.5 REPRESENTATIONS. Any representation, warranty, statement,
certificate, schedule or report made or furnished to Lender by Borrower or any
other Credit Party proves to be false or erroneous in any material respect at
the time of the making thereof.
8.6 CROSS-DEFAULT. An event of default shall occur under any
Contractual Obligation of Borrower or any other Credit Party (other than this
Agreement and the other Loan Documents), and such event of default (i) involves
the failure to make any payment (whether or not such payment is blocked pursuant
to the terms of an intercreditor agreement or otherwise), whether of principal,
22
interest or otherwise, and whether due by scheduled maturity, required
prepayment, acceleration, demand or otherwise, in respect of any Indebtedness
(other than the Obligations) of such Person in an aggregate amount exceeding
$500,000 or (ii) causes (or permits any holder of such Indebtedness or a trustee
to cause) such Indebtedness, or a portion thereof, in an aggregate amount
exceeding $500,000 to become due prior to its stated maturity or prior to its
regularly scheduled date of payment.
8.7 LITIGATION. There shall be commenced against Borrower or any
other Credit Party any Litigation seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets that results in the entry of an order for any such relief that
remains unstayed or undismissed for thirty (30) consecutive days.
8.8 JUDGMENTS. A final judgment or judgments for the payment of
money in excess of $500,000 in the aggregate shall be rendered against Borrower
or any other Credit Party, unless the same shall be (i) fully covered by
insurance and the issuer(s) of the applicable policies shall have acknowledged
full coverage in writing within thirty (30) days of judgment or (ii) vacated,
stayed, bonded, paid or discharged within a period of thirty (30) days from the
date of such judgment.
8.9 MATERIAL ADVERSE EFFECT. Any other event shall have occurred
that has had or could reasonably be expected to have a Material Adverse Effect.
8.10 INVALIDITY, ETC. Any provision of any Loan Document shall
for any reason cease to be valid, binding and enforceable in accordance with its
terms, or any Lien granted, or intended by the Loan Documents to be granted, to
Lender shall cease to be a valid and perfected Lien having the first priority
(or a lesser priority if expressly permitted in the Loan Documents) in any of
the Collateral (or any Credit Party shall so assert any of the foregoing).
8.11 TRANSFER OF STOCK. Any Stock of the Borrower is sold,
assigned, transferred, pledged, hypothecated, mortgaged, encumbered or disposed
(any such action hereinafter referred to as a "TRANSFER") by any owner thereof
(other than Lender, its Affiliates and their respective assignees) without the
prior written consent of Lender; provided, however, the Transfer of such Stock
by any owner thereof that is an individual (an "INDIVIDUAL MEMBER") without the
prior written consent of the Lender to any such Individual Member's spouse or
children, or any trust, limited liability company or partnership established
primarily for the benefit of the foregoing relatives of such Individual Member,
shall not constitute an Event of Default hereunder.
8.12 OTHER EVENTS OF DEFAULT. The occurrence of any other "Event
of Default" under any other Loan Document.
9. REMEDIES. Upon the occurrence of any Event of Default, Lender may, at
its option:
9.1 ACCELERATION OF LOAN. Declare the Loan to be immediately due
and payable whereupon the Loan and all other Obligations shall become forthwith
due and payable (provided that upon the occurrence of any Event of Default under
Section 8.4, the Loan and all other Obligations shall become automatically due
and payable) without presentment, demand, protest or notice of any kind, and
23
Lender shall be entitled to proceed simultaneously or selectively and
successively to enforce its rights under the Note, this Agreement, the Security
Documents, any of the other Loan Documents, or any one or all of them. Nothing
contained herein shall limit Lender's rights and remedies available under
applicable laws.
9.2 SELECTIVE ENFORCEMENT. In the event Lender shall elect to
selectively and successively enforce its rights under any of the aforementioned
Loan Documents or against any one of Borrower or any other Credit Party, such
action shall not be deemed a waiver or discharge of any other Lien, encumbrance
or security interest securing payment of the Obligations until such time as
Lender shall have been paid in full all sums advanced under the Note and all
other Obligations. The foreclosure of any Lien provided pursuant to this
Agreement or any other Loan Document without the simultaneous foreclosure of all
such other Liens provided hereunder or thereunder shall not merge such
non-foreclosed Liens with any interest which Lender might obtain as a result of
such selective and successive foreclosure.
9.3 APPLICATION OF PROCEEDS. In addition to any other rights and
remedies Lender has under the Loan Documents, the Uniform Commercial Code, at
law or in equity, all proceeds collected or received from collecting, holding,
managing, renting, selling or otherwise disposing of all or any part of the
Collateral or any proceeds thereof upon exercise of remedies hereunder upon the
occurrence of an Event of Default, shall be applied, in such order of priority
as Lender shall elect. If, after the payment in full of all of the Obligations
there remains any surplus, then such surplus shall be paid to Borrower or
Guarantor, as applicable, unless otherwise provided by law or directed by a
court of competent jurisdiction; provided that Borrower and Guarantor shall be
liable for any deficiency if such proceeds are insufficient to satisfy all of
the Obligations.
10. MISCELLANEOUS. It is further agreed as follows:
10.1 EXPENSES. Borrower agrees to pay all fees, expenses and
charges in respect to the Loan contemplated by this Agreement, including,
without limiting the generality thereof, the following:
10.1.1 the reasonable fees and expenses of counsel
employed by Lender in connection with documenting and closing
the Loan and all reasonable fees and expenses of counsel
employed by Lender in regard to any Litigation arising out of or
relating to this transaction;
10.1.2 recording and filing fees;
10.1.3 all other reasonable fees and expenses involved
in the closing of the Loan and the reasonable fees and expenses
payable by Lender which are incidental to the enforcement or
defense of this Agreement, the Security Documents or any other
Loan Document.
10.2 NOTICES. Any notices or other communications required or
permitted hereunder shall be deemed sufficiently given if delivered personally
or sent by registered or certified mail, postage prepaid, return receipt
requested and addressed as listed below or to such other address as the party
24
concerned may substitute by written notice to the other. All notices shall be
deemed received within three Business Days after being mailed:
TO BORROWER:
Goober Drilling, LLC
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxx Xxxx, Chief Financial Officer
TO OTHER CREDIT PARTIES:
c/o Goober Drilling, LLC
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Xxx Xxxx, Chief Financial Officer
TO LENDER:
Leucadia National Corporation
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxx, Chief Financial Officer
WITH A COPY TO:
Xxxxxx X. Xxxxxxxxx
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
10.3 AMENDMENT AND WAIVER. This Agreement may not be amended or
modified in any form, except by an instrument in writing executed by all parties
hereto; provided, however, Lender may, in writing: (i) extend the time for
performance of any of the obligations of Borrower and each other Credit Party;
(ii) waive any default or Event of Default by Borrower or any other Credit
Party, and (iii) waive satisfaction of any condition precedent to the
performance of Lender's obligations under this Agreement. In the event of a
waiver of any default or Event of Default by Lender, such specific default or
Event of Default shall be deemed to have been cured and not continuing, but no
such waiver shall extend to any subsequent or other default or impair any
consequence of such subsequent default or Event of Default.
10.4 NON-WAIVER; CUMULATIVE REMEDIES. No failure on the part of
Lender to exercise and no delay in exercising any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise by Lender of any
right hereunder preclude any other or further right of exercise thereof. The
remedies herein provided are cumulative and not alternative.
10.5 ASSIGNMENT. This Agreement shall not be assignable in whole
or in part by Borrower or any other Credit Party without the prior written
consent of Lender.
25
10.6 APPLICABLE LAW; VENUE. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ITS CHOICE OF LAW
PROVISIONS THAT WOULD RESULT IN THE APPLICATION OF THE LAWS OF A DIFFERENT
JURISDICTION. ANY JUDICIAL PROCEEDING AGAINST BORROWER AND/OR ANY OTHER CREDIT
PARTY WITH RESPECT TO THE OBLIGATIONS, ANY LOAN DOCUMENT OR ANY RELATED
AGREEMENT MAY BE BROUGHT IN ANY FEDERAL COURT OR STATE COURT OF COMPETENT
JURISDICTION LOCATED IN THE STATE OF NEW YORK. BY EXECUTION AND DELIVERY OF EACH
LOAN DOCUMENT TO WHICH IT IS A PARTY, BORROWER AND EACH OTHER CREDIT PARTY (I)
ACCEPTS THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY, (II) WAIVES PERSONAL
SERVICE OF PROCESS, (III) AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED AND (IV) WAIVES ANY
OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION, VENUE,
CONVENIENCE OR FORUM NON CONVENIENS. NOTHING SHALL AFFECT THE RIGHT OF LENDER TO
SERVE PROCESS IN ANY MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF LENDER
TO BRING PROCEEDINGS AGAINST BORROWER AND/OR ANY OTHER CREDIT PARTY IN THE
COURTS OF ANY OTHER JURISDICTION HAVING JURISDICTION. ANY JUDICIAL PROCEEDINGS
AGAINST LENDER INVOLVING, DIRECTLY OR INDIRECTLY, THE OBLIGATIONS, ANY LOAN
DOCUMENT OR ANY RELATED AGREEMENT SHALL BE BROUGHT ONLY IN A FEDERAL COURT
LOCATED IN SOUTHERN DISTRICT OF NEW YORK OR STATE COURT LOCATED IN THE BOROUGH
OF MANHATTAN.
10.7 DESCRIPTIVE HEADINGS. The descriptive headings of the
paragraphs of this Agreement are for convenience only and shall not be used in
the construction of the terms hereof.
10.8 INTEGRATED AGREEMENT. This Agreement and the Annex,
Exhibits and Schedules attached hereto constitute the entire agreement between
the parties hereto, and there are no other agreements, understandings,
warranties or representations regarding the Loan between the parties.
10.9 TIME OF ESSENCE. Time is of the essence of this Agreement.
10.10 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
legal representatives and assigns.
10.11 THIRD PARTY BENEFICIARY. Nothing in this Agreement,
express or implied, is intended to confer upon any Person, other than the
parties hereto and their respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
26
10.12 RIGHT TO DEFEND. Lender shall have the right, but not the
obligation, at Borrower's expense, to commence, to appear in or to defend any
action or proceeding (initiated by a third party against Borrower) purporting to
affect the rights or duties of the parties hereunder and in connection therewith
pay out of the funds of the Loan all necessary expenses, including fees of
counsel, if Borrower fails to so commence, appear in or defend any such action
or proceeding with counsel satisfactory to Lender.
10.13 PARTIAL INVALIDITY. If any provision of this Agreement or
the application hereof to any party or circumstance shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement on the application of such provision to such
Person or circumstance, other than those as to which it is determined invalid or
unenforceable, shall not be affected thereby and each provision of this
Agreement shall be valid and shall be enforced to the fullest extent permitted
by law.
10.14 WAIVER OF JURY TRIAL. THE PARTIES HERETO, TO THE EXTENT
PERMITTED BY LAW, WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING ARISING OUT OF, IN CONNECTION WITH OR RELATING TO, THIS AGREEMENT,
THE LOAN, THE OTHER LOAN DOCUMENTS AND ANY OTHER TRANSACTION CONTEMPLATED HEREBY
OR THEREBY. THIS WAIVER APPLIES TO ANY ACTION, SUIT OR PROCEEDING WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE.
10.15 INDEMNITY. Borrower and each other Credit Party hereby
agree to indemnify, defend and hold harmless each of Lender and its Related
Persons (each, an "INDEMNIFIED PERSON") from and against any and all Liabilities
(including without limitation, Environmental Liabilities) of whatsoever kind and
nature (including those arising from an Indemnified Person's ordinary
negligence) arising out of, in connection with, or relating to the Collateral,
this Agreement, the Loan, the other Loan Documents, the use or the proposed use
of the proceeds thereof, any other transaction contemplated by the Loan
Documents and any other transaction related thereto (collectively, "CLAIMS"),
regardless of whether such Indemnified Person is a party thereto; provided that
no Indemnified Person shall be entitled to indemnity hereunder in respect of any
Claim to the extent that the same is found by a final, non-appealable judgment
of a court of competent jurisdiction to have resulted directly from the gross
negligence or willful misconduct of such Indemnified Person. Under no
circumstances shall Lender or any of its Affiliates be liable for any punitive,
exemplary, consequential or indirect damages that may be alleged to result in
connection with, arising out of, or relating to, any Claims, this Agreement, the
Loan, the other Loan Documents, the use or the proposed use of the proceeds of
the Loan, any other transaction contemplated by the Loan Documents and any other
transaction related thereto.
10.16 NO FIDUCIARY RELATIONSHIP. The relationship between
Lender, on the one hand, and Borrower and each other Credit Party, on the other
hand, is solely that of lender and creditor. Lender has no fiduciary
relationship or duty to Borrower and/or any other Credit Party arising out of or
in connection with, and there is no agency, tenancy or joint venture
relationship between Lender and Borrower and/or any other Credit Party by virtue
of, any Loan Document or any transaction contemplated therein.
27
10.17 NO MARSHALING; REINSTATEMENT. Lender shall be under no
obligation to marshal any property in favor of Borrower or any other Credit
Party or any other party or against or in payment of any Obligation. To the
extent that Lender receives a payment from Borrower, from any other Credit
Party, from the proceeds of the Collateral, from the exercise of its rights of
setoff, any enforcement action or otherwise, and such payment is subsequently,
in whole or in part, invalidated, declared to be fraudulent or preferential, set
aside or required to be repaid to a trustee, receiver or any other party, then
to the extent of such recovery, the obligation or part thereof originally
intended to be satisfied, and all Liens, rights and remedies therefore, shall be
revived and continued in full force and effect as if such payment had not
occurred.
[SIGNATURE PAGE FOLLOWS]
28
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed as of the day and year first above written.
BORROWER:
GOOBER DRILLING, LLC, a Delaware limited
liability company
By:
----------------------------------------
Xxxxx XxXxxxxxx
Its Co-Chief Executive Officer
LENDER:
LEUCADIA NATIONAL CORPORATION, a New York
corporation
By:
----------------------------------------
Xxxxxx X. Xxxx,
Executive Vice President and Treasurer
ANNEX A
Defined Terms
"2007 DISTRIBUTION" has the meaning assigned to it in Section 6.3.8.
"AFFILIATE" means, with respect to any Person, each officer, director,
general partner or joint-venturer of such Person and any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, such Person; provided, however, that Lender shall not be an Affiliate of
Borrower. For purpose of this definition, "control" means the possession of
either (a) the power to vote, or the beneficial ownership of, 10% or more of the
Voting Stock of such Person or (b) the power to direct or cause the direction of
the management and policies of such Person, whether by contract or otherwise.
"AFFILIATED TRANSACTIONS" has the meaning assigned to it in Section
4.27.
"AGREEMENT" has the meaning assigned to it in the preamble to this
Agreement.
"ASSIGNMENT OF KEY MAN LIFE INSURANCE POLICY" has the meaning assigned
to it in Section 3.4.
"BANK" means Union Bank of Xxxxxxxx, an Oklahoma banking corporation.
"BANK LOAN AGREEMENT" means that certain Loan Agreement dated as of
June 23, 2005, between Goober Drilling Corporation, Xxxxx XxXxxxxxx, Xxxx X.
Special, Special Exploration Co., Inc. and Bank.
"BENEFIT PLAN" means any employee benefit plan as defined in Section
3(3) of ERISA (whether governed by the laws of the United States or otherwise)
to which any Credit Party incurs or otherwise has any obligation or liability,
contingent or otherwise.
"BOOKS AND RECORDS" means all books, records, board minutes, contracts,
licenses, insurance policies, environmental audits, business plans, files,
computer files, computer discs and other data and software storage and media
devices, accounting books and records, financial statements (actual and pro
forma), filings with Governmental Authorities and any and all records and
instruments relating to the Collateral or Borrower's business
"BORROWER" has the meaning assigned to it in the preamble to this
Agreement.
"BRIDGE LOAN" means the term loan made pursuant to that certain Loan
Agreement dated as of February 22, 2006 between Leucadia National Corporation,
as lender, Goober Drilling Corporation, as borrower, and Xxxxx XxXxxxxxx and
Xxxx X. Special, as guarantors.
"BSA" has the meaning assigned to it in Section 4.26.
"BUSINESS DAY" means any day of the year that is not a Saturday, Sunday
or a day on which banks are required or authorized to close in New York City.
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"CAPITAL EXPENDITURES" means, for any Person for any period, the
aggregate of all expenditures, whether or not made through the incurrence of
Indebtedness, by such Person and its Subsidiaries during such period for the
acquisition, leasing (pursuant to a capital lease), construction, replacement,
repair, substitution or improvement of fixed or capital assets or additions to
equipment, in each case required to be capitalized under GAAP on a consolidated
balance sheet of such Person, excluding interest capitalized during
construction.
"CHARGES" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including taxes owed to PBGC at the time
due and payable), levies, customs or other duties, assessments, charges, liens,
and all additional charges, interest, penalties, expenses, claims or
encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of any Credit Party, (d) the
ownership or use of any assets by any Credit Party or (e) any other aspect of
any Credit Party's business.
"CLAIMS" has the meaning assigned to it in Section 10.15
"CLOSING DATE" means the Business Day on which the conditions precedent
set forth in Section 5.1 have been satisfied or specifically waived in writing
by Lender, and the Initial Advance of the Loan has been made.
"CODE" means the U.S. Internal Revenue Code of 1986.
"COLLATERAL" has the meaning assigned to it in Section 4.8.
"COLLECTION ACCOUNT" means such account as may be identified in writing
by Lender to Borrower from time to time.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of Exhibit "H".
"CONTRACTUAL OBLIGATIONS" means as to any Person, any provision of any
Security issued by such Person or of any agreement, instrument, or other
undertaking (other than a Loan Document) to which such Person is a party or by
which it or any of its property is bound or to which any of its property is
subject.
"CREDIT PARTY" means Borrower, each Guarantor and each other Person
(other than Lender) that is or may become a party to this Agreement or any other
Loan Document.
"DEFAULT" means any Event of Default or event that, with the passage of
time or notice or both, would become an Event of Default.
"DEFAULT RATE" has the meaning assigned to it in Section 2.5.4.
"DEPOSIT ACCOUNT CONTROL AGREEMENT" means a deposit account control
agreement and/or lock box agreement among any financial institution at which
deposit accounts, lock boxes and/or lock box accounts of the Borrower or any
other Credit Party are maintained, Lender and the applicable Credit Party,
substantially in the form set forth as Exhibit "D" attached hereto and
incorporated herein by reference.
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"EBITDA" means, for any period, the Net Income (Loss) of Borrower and
its Subsidiaries on a consolidated basis for such period, plus (a) without
duplication, to the extent deducted in calculating Net Income (Loss), (i) cash
interest expense, (ii) provisions for income taxes paid in cash or payable
during such period, including distributions to equity holders for tax purposes,
(iii) amortization, depreciation and depletion expense, (iv) the out-of-pocket
fees and expenses incurred by Borrower on or prior to the Closing Date in
connection with negotiating, reviewing and executing this Agreement and the
other Loan Documents and (v) extraordinary losses and minus (b) without
duplication, to the extent included in the determination of such Net Income
(Loss), (i) extraordinary gains and (ii) interest income, in each case, of
Borrower and its Subsidiaries on a consolidated basis for such period determined
in accordance with GAAP.
"EMPLOYMENT AGREEMENTS" means those certain Employment Agreements dated
as of April 6, 2006, between the Borrower and each of Xxxxx XxXxxxxxx, Xxxx
Special, Xxxx Xxxxx and Xxx Xxxx.
"ENVIRONMENTAL LAWS" means all present and future Requirements of Law
and Permits imposing liability or standards of conduct for or relating to the
regulation and protection of human health, safety, the environment and natural
resources, and including public notification requirements and environmental
transfer of ownership, notification or approval statutes.
"ENVIRONMENTAL LIABILITIES" means all Liabilities (including costs of
Remedial Actions, natural resource damages and costs and expenses of
investigation and feasibility studies) that may be imposed on, incurred by or
asserted against any Credit Party as a result of, or related to, any claim,
suit, action, investigation, proceeding or demand by any Person, whether based
in contract, tort, implied or express warranty, strict liability, criminal or
civil statute or common law or otherwise, arising under any Environmental Law or
in connection with any environmental, health or safety condition or with any
Release and resulting from the ownership, lease, sublease or other operation or
occupation of property by any Credit Party, whether on, prior or after the date
hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" means , collectively, any Credit Party, and any
Person under common control, or treated as a single employer, with any Credit
Party, within the meaning of Section 414(b), (c), (m) or (o) of the Code.
"ERISA EVENT" means any of the following: (a) a reportable event
described in Section 4043(b) of ERISA (or, unless the 30-day notice requirement
has been duly waived under the applicable regulations, Section 4043(c) of ERISA)
with respect to a Title IV Plan, (b) the withdrawal of any ERISA Affiliate from
a Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the
complete or partial withdrawal of any ERISA Affiliate from any Multiemployer
Plan, (d) with respect to any Multiemployer Plan, the filing of a notice of
reorganization, insolvency or termination (or treatment of a plan amendment as
termination) under Section 4041A of ERISA, (e) the filing of a notice of intent
to terminate a Title IV Plan (or treatment of a plan amendment as termination)
under Section 4041 of ERISA, (f) the institution of proceedings to terminate a
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Title IV Plan or Multiemployer Plan by the PBGC, (g) the failure to make any
required contribution to any Title IV Plan or Multiemployer Plan when due, (h)
the imposition of a lien under Section 412 of the Code or Section 302 or 4068 of
ERISA on any property (or rights to property, whether real or personal) of any
ERISA Affiliate, (i) the failure of a Benefit Plan or any trust thereunder
intended to qualify for tax exempt status under Section 401 or 501 of the Code
or other Requirements of Law to qualify thereunder and (j) any other event or
condition that might reasonably be expected to constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of any
liability upon any ERISA Affiliate under Title IV of ERISA other than for PBGC
premiums due but not delinquent.
"EVENT OF DEFAULT" has the meaning assigned to it in Section 8.
"EXCESS CASH FLOW" means an amount (if positive) equal to: EBITDA plus
(a) (i) the Working Capital Adjustment and (ii) interest income and minus (b)
the sum of (i) all scheduled amortization payments and any prepayments in
respect of the Loan and other Indebtedness for borrowed money (but only, in the
case of payment in respect of revolving loans, to the extent that the related
revolving credit commitments are permanently reduced by the amount of such
payment), (ii) Capital Expenditures (net of proceeds from financings or assets
sales to finance such expenditures), (iii) cash interest expense, (iv)
provisions for income taxes paid in cash or payable during such period,
including distributions to equity holders for tax purposes, and (v) cash
expenses and charges added to Net Income (Loss) to determine EBITDA that are
extraordinary, unusual or non-recurring in nature.
"EXISTING DEBT" means the Indebtedness outstanding under (i) the Bank
Loan Agreement, (ii) that certain Home National Bank Business Loan Agreement
dated February 10, 2006, between Goober Drilling Corporation and Home National
Bank and (iii) that certain outstanding note payable made by Special Exploration
Co., Inc. in favor of Ophir Energy in the aggregate principal amount of
approximately $8,210,411.
"F&M BANK DEBT" means the Indebtedness outstanding under that certain
Loan Agreement between F&M Bank & Trust Company and Special Exploration Co.,
Inc. in the aggregate principal amount of approximately $565,771.
"GAAP" means generally accepted accounting principles in the United
States of America, as in effect from time to time, set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants, in the statements and pronouncements of the
Financial Accounting Standards Board and in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession that are applicable to the circumstances as of the date of
determination.
"GOVERNMENTAL AUTHORITY" means any nation, sovereign or government, any
state or other political subdivision thereof, any agency, authority or
instrumentality thereof and any entity or authority exercising executive,
legislative, taxing, judicial, regulatory or administrative functions of or
pertaining to government, including any central bank, stock exchange, regulatory
body, arbitrator, public sector entity, supra-national entity (including the
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European Union and the European Central Bank) and any self-regulatory
organization (including the National Association of Insurance Commissioners).
"GUARANTOR" has the meaning assigned to it in the preamble to this
Agreement.
"GUARANTY AGREEMENT" has the meaning assigned to it in Section 3.2.
"HAZARDOUS MATERIALS" means any substance, material or waste that is
classified, regulated or otherwise characterized under any Environmental Law as
hazardous, toxic, a contaminant or a pollutant or by other words of similar
meaning or regulatory effect, including petroleum or any fraction thereof,
asbestos, polychlorinated biphenyls and radioactive substances.
"INDEBTEDNESS" of any Person means, without duplication, any of the
following, whether or not matured: (a) all indebtedness for borrowed money, (b)
all obligations evidenced by notes, bonds, debentures or similar instruments,
(c) all reimbursement and all obligations with respect to (i) letters of credit,
bank guarantees or bankers' acceptances or (ii) surety, customs, reclamation or
performance bonds (in each case not related to judgments or litigation) other
than those entered into in the ordinary course of business, (d) all obligations
to pay the deferred purchase price of property or services, other than trade
payables incurred in the ordinary course of business, (e) all obligations
created or arising under any conditional sale or other title retention
agreement, regardless of whether the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property, (f) all capitalized lease obligations, (g) all payments that
would be required to be made in respect of any hedging agreement in the event of
a termination (including an early termination) on the date of determination and
(h) all guaranty obligations for obligations of any other Person constituting
Indebtedness of such other Person; provided, however, that the items in each of
clauses (a) through (h) above shall constitute "Indebtedness" of such Person
solely to the extent, directly or indirectly, (x) such Person is liable for any
part of any such item, (y) any such item is secured by a Lien on such Person's
property or (z) any other Person has a right, contingent or otherwise, to cause
such Person to become liable for any part of any such item or to grant such a
Lien.
"INDEMNIFIED PERSON" has the meaning assigned to it in Section 10.15.
"INDIVIDUAL MEMBER" has the meaning assigned to it in Section 8.11.
"INITIAL ADVANCE" has the meaning assigned to it in Section 5.1.
"INTELLECTUAL PROPERTY" means all rights, title and interests in or
relating to intellectual property and industrial property arising under any
Requirement of Law and all ancillary rights relating thereto, including all
copyrights, patents, trademarks, internet domain names, trade secrets and
licenses relating to any of the foregoing.
"XXXX DEERE DEBT" means the Indebtedness outstanding under that certain
agreement between Xxxx Deere and Special Exploration Co., Inc. in the aggregate
principal amount of approximately $46,297.
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"KEY MAN LIFE INSURANCE POLICY" has the meaning assigned to it in
Section 3.4.
"LENDER" has the meaning assigned to it in the preamble to this
Agreement and, if at any time Lender shall decide to assign or syndicate all or
any of the Obligations, such term shall include such assignee or such other
members of the syndicate.
"LIABILITIES" means all claims, actions, suits, judgments, damages,
losses, liability, obligations, responsibilities, fines, penalties, sanctions,
costs, fees, taxes, commissions, charges, disbursements and expenses, in each
case of any kind or nature (including interest accrued thereon or as a result
thereto and reasonable fees, charges and disbursements of financial, legal and
other advisors and consultants), whether joint or several, whether or not
indirect, contingent, consequential, actual, punitive, treble or otherwise.
"LIBOR" means the rate per annum for 6-month interest periods as
published in the "Money Rates" section of The Wall Street Journal (or another
national publication selected by Lender) (a) initially, (i) with respect to the
Initial Advance, on the Business Day prior to the date of the Initial Advance
hereunder and (ii) with respect to each Subsequent Advance, on the second
Business Day prior to the date of any such Subsequent Advance hereunder and (b)
thereafter, each date which is two Business Days prior to the 6-month
anniversary of the date referred to in clause (a) above (or, if later, the last
date previously determined under this clause (b)).
"LIEN" means any mortgage, deed of trust, pledge, hypothecation,
assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory
or other), security interest or other security arrangement and any other
preference, priority or preferential arrangement of any kind or nature
whatsoever, including any conditional sale contract or other title retention
agreement, the interest of a lessor under a capital lease and any synthetic or
other financing lease having substantially the same economic effect as any of
the foregoing.
"LIMITED LIABILITY COMPANY AGREEMENT" means that certain Limited
Liability Company Agreement of Borrower dated as of April 6, 2006.
"LITIGATION" means any claim, lawsuit, litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority.
"LOAN" has the meaning assigned to it in Section 2.1.
"LOAN DOCUMENT" means this Agreement, the Note, UCC-1 financing
statements, each Guaranty Agreement, the Security Agreement, any Deposit Account
Control Agreement, the Assignment of Key Man Life Insurance Policy and any other
documents, instruments, agreements, certificates and notices at any time
delivered by any Person (other than Lender) in connection with or under any of
the foregoing.
"MARGIN STOCK" means any "margin security" as such term is defined in
Regulation U of the Federal Reserve Board as now and hereafter in effect.
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"MATERIAL ADVERSE EFFECT" means any fact, event or circumstance that,
alone or when taken with other events or conditions occurring or existing
concurrently with such event or condition (a) has or is reasonably expected to
have a material adverse effect on the business, assets, operations, condition
(financial or otherwise), or prospects of Borrower or any Credit Party, (b)
materially impairs or is reasonably expected to materially impair the ability of
Borrower or any Credit Party to pay and perform their obligations under the Loan
Documents to which they are a party, (c) materially impairs or is reasonably
expected to materially impair the ability of Lender to enforce its rights and
remedies under any Loan Document or (d) has or is reasonably expected to have
any material adverse effect on the Collateral, the Liens of Lender in such
Collateral or the priority of such Liens.
"MATURITY DATE" means April 6, 2009.
"MONTHLY COMPLIANCE SCHEDULES" means a schedule in substantially the
form of Exhibit I setting forth the relevant amount of Capital Expenditures on a
monthly and year-to-date basis in respect of new Rig construction.
"MONTHLY REPORT" has the meaning assigned to it in Section 6.2.2.
"MULTIEMPLOYER PLAN" means any multiemployer plan, as defined in
Section 400l(a)(3) of ERISA, to which any ERISA Affiliate incurs or otherwise
has any obligation or liability, contingent or otherwise.
"NET INCOME (LOSS)" means with respect to any Person and for any
period, the aggregate net income (or loss) after taxes of such Person for such
period, determined in accordance with GAAP.
"NOTE" has the meaning assigned to it in Section 2.1.
"NOTICE OF BORROWING" has the meaning assigned to it in Section 2.2.
"OBLIGATIONS" means, with respect to any Credit Party, all amounts,
obligations, liabilities, covenants and duties of every type and description
owing by such Credit Party to Lender, any other Indemnified Person and any
Affiliate of any of them arising out of, under, or in connection with, any Loan
Document or any other agreement between any Credit Party and Lender, whether
direct or indirect (regardless of whether acquired by assignment), absolute or
contingent, due or to become due, whether liquidated or not, now existing or
hereafter arising and however acquired, and whether or not evidenced by any
instrument or for the payment of money, including, without duplication, (a) if
such Credit Party is Borrower, the Loan, (b) all interest, whether or not
accruing after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or similar proceeding, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding and (c) all
other fees, expenses (including fees, charges and disbursements of counsel),
interest, commissions, charges, costs, disbursements, indemnities and
reimbursement of amounts paid and other sums chargeable to such Credit Party
under any Loan Document. "Obligations" shall not include any obligations of
Borrower to Lender, its successors, assigns or Affiliates, pursuant to the
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Limited Liability Company Agreement or that certain Contribution Agreement dated
as of even date herewith, by and among Lender, Borrower, Xxxx Special, Xxxxx
XxXxxxxxx and Xxxx Xxxxx.
"OFAC" has the meaning assigned to it in Section 4.26.
"OPERATOR CONTRACT" means any agreement between Borrower and one or
more third parties pertaining to the installation, use, maintenance and/or
transportation of a Rig.
"PBGC" means the United States Pension Benefit Guaranty Corporation and
any successor thereto.
"PERMIT" means , with respect to any Person, any permit, approval,
authorization, license, registration, certificate, concession, grant, franchise,
variance or permission from, and any other Contractual Obligations with, any
Governmental Authority, in each case whether or not having the force of law and
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"PERMITTED LIENS" means (a) Liens for taxes or assessments or other
governmental charges or levies, either not yet due and payable or to the extent
that nonpayment thereof is permitted hereunder, (b) pledges or deposits securing
obligations under worker's compensation, unemployment insurance, social security
or public liability laws or similar legislation, (c) pledges or deposits
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business, (d) deposits securing public or statutory
obligations of any Credit Party, (e) inchoate and unperfected workers',
mechanics', or similar liens arising in the ordinary course of business so long
as such Liens attach only to equipment, fixtures or real estate, (f) carriers',
warehousemans', suppliers' or other similar possessory liens arising in the
ordinary course of business and securing obligations not yet due and payable,
(g) deposits of money securing, or in lieu of, surety, appeal or customs bonds
in proceedings to which any Credit Party is a party, (h) zoning restrictions,
easements, licenses, or other restrictions on the use of real property or other
minor irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of such real
estate, (i) Liens in favor of Lender securing the Obligations and (j) a Lien
securing Borrower's obligation to repurchase Class A Units (as defined in the
Limited Liability Company Agreement) as set forth in, and under the terms and
conditions of, Section 13.1 of the Limited Liability Company Agreement.
"PERMITTED TAX DISTRIBUTIONS" means any tax distributions made by
Borrower to its members pursuant to Section 10.2 of the Limited Liability
Company Agreement.
"PERSON" means any individual, partnership, corporation (including a
business trust and a public benefit corporation), joint stock company, estate,
association, firm, enterprise, trust, limited liability company, unincorporated
association, joint venture and any other entity or Governmental Authority.
"PROMISSORY NOTE" has the meaning assigned to it in Section 2.1.
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"RELATED PERSONS" means , with respect to any Person, each Affiliate of
such Person and each principal, director, officer, employee, agent, trustee,
representative, attorney, accountant and each insurance, environmental, legal,
financial and other advisor (including those retained in connection with the
satisfaction or attempted satisfaction of any condition set forth in Section 5)
and other consultants and agents of or to such Person or any of its Affiliates.
"RELEASE" means any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material into or through the environment in violation of Environmental Laws.
"REMEDIAL ACTION" means all actions required to (a) clean up, remove,
treat or in any other way address any Hazardous Material in the indoor or
outdoor environment, (b) prevent or minimize any Release so that a Hazardous
Material does not migrate or endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment or (c) perform pre remedial studies
and investigations and post-remedial monitoring and care with respect to any
Hazardous Material.
"REQUIRED FORMS" has the meaning assigned to it in Section 6.2.3.
"REQUIREMENT OF LAW" means, with respect to any Person, collectively,
the common law and all federal, state, local, foreign, multinational or
international laws, statutes, codes, treaties, standards, rules and regulations,
guidelines, ordinances, orders, judgments, writs, injunctions, decrees
(including administrative or judicial precedents or authorities) and the
interpretation or administration thereof by, and other determinations,
directives, requirements or requests of, any Governmental Authority, in each
case whether or not having the force of law and that are applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
"RESTRICTED PAYMENT" means: (a) the declaration or payment of any
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets on or in respect of Borrower's
or any other Credit Party's Stock, (b) any payment or distribution made in
respect of any subordinated Indebtedness of Borrower or any other Credit Party
in violation of any subordination or other agreement made in favor of Lender,
(c) any payment on account of the purchase, redemption, defeasance or other
retirement of Borrower's or any other Credit Party's Stock or Indebtedness or
any other payment or distribution made in respect of any thereof, either
directly or indirectly; other than (i) that arising under this Agreement or (ii)
interest and principal, when due without acceleration or modification of the
amortization as in effect on the Closing Date, under Indebtedness (not including
subordinated Indebtedness, payments of which shall be permitted only in
accordance with the terms of the relevant subordination agreement made in favor
of Lender) permitted under Section 6.3.3 or (d) any payment, loan, contribution,
or other transfer of funds or other property to any holder of Stock of such
Person which is not expressly and specifically permitted in this Agreement;
provided that no payment to Lender shall constitute a Restricted Payment.
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"RIG" means a completely assembled, fully operational and functioning
drilling rig to be used in the exploration and production of subsurface oil, gas
and mineral rights.
"RIG CONSTRUCTION RESERVE AMOUNT" means an amount equal to $100,000,000
less the cumulative amount of Capital Expenditures listed on the Monthly
Compliance Schedule for the period April 1, 2006 through December 31, 2006.
"SEC" has the meaning assigned to it in Section 6.2.3.
"SECURITY" means all Stock, Stock Equivalents, voting trust
certificates, bonds, debentures, instruments and other evidence of Indebtedness,
whether or not secured, convertible or subordinated, all certificates of
interest, share or participation in, all certificates for the acquisition of,
and all warrants, options and other rights to acquire, any Security.
"SECURITY AGREEMENT" has the meaning assigned to it in Section 3.1.
"SECURITY DOCUMENTS" means the Security Agreement, any Guaranty
Agreement, any Deposit Account Control Agreement, the Assignment of Key Man Life
Insurance Policy and any other agreement, instrument or document executed and
delivered by any Credit Party in connection with the creation, attachment and
perfection of a Lien upon the property of any such Credit Party to secure or
otherwise provide credit support for the Obligations.
"SELL" means , with respect to any property, to sell, convey, transfer,
assign, license, lease or otherwise dispose of, any interest therein or to
permit any Person to acquire any such interest, including, in each case, through
a sale and leaseback transaction or through a sale, factoring at maturity,
collection of or other disposal, with or without recourse, of any notes or
accounts receivable. Conjugated forms thereof and the noun "Sale" have
correlative meanings.
"SOLVENT" means , with respect to any Person as of any date of
determination, that, as of such date, (a) the value of the assets of such Person
(both at fair value and present fair saleable value) is greater than the total
amount of liabilities (including contingent and unliquidated liabilities) of
such Person, (b) such Person is able to pay all liabilities of such Person as
such liabilities mature and (c) such Person does not have unreasonably small
capital. In computing the amount of contingent or unliquidated liabilities at
any time, such liabilities shall be computed at the amount that, in light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"STOCK" means all shares of capital stock (whether denominated as
common stock or preferred stock), equity interests, beneficial, partnership or
membership interests, joint venture interests, participations or other ownership
or profit interests in or equivalents (regardless of how designated) of or in a
Person (other than an individual), whether voting or non-voting.
"STOCK EQUIVALENTS" means all Securities convertible into or
exchangeable for Stock or any other Stock Equivalent and all warrants, options
or other rights to purchase, subscribe for or otherwise acquire any Stock or any
other Stock Equivalent, whether or not presently convertible, exchangeable or
exercisable.
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"STOCK OPTION PLAN" has the meaning assigned to it in Section 2.3.3.
"SUBSEQUENT ADVANCE" has the meaning assigned to it in Section 5.2.
"SUBSIDIARY" means , with respect to any Person, any corporation,
partnership, joint venture, limited liability company, association or other
entity, the management of which is, directly or indirectly, controlled by, or of
which an aggregate of more than 50% of the outstanding Voting Stock is, at the
time, owned or controlled directly or indirectly by, such Person or one or more
Subsidiaries of such Person.
"TAXES" means taxes, levies, imposts, deductions, or withholdings, and
all liabilities with respect thereto, excluding taxes imposed on or measured by
the net income of Lender.
"TAX AFFILIATE" means (a) Borrower and its Subsidiaries and (b) any
Affiliate of Borrower with which Borrower files or is eligible to file
consolidated, combined or unitary tax returns.
"TAX RETURNS" has the meaning assigned to it in Section 4.18.
"TERM LOAN" has the meaning assigned to it in Section 2.1.
"TITLE IV PLANS" means a pension plan subject to Title IV of ERISA,
other than a Multiemployer Plan, to which any ERISA Affiliate incurs or
otherwise has any obligation or liability, contingent or otherwise.
"TRANSFER" has the meaning assigned to it in Section 8.11.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial Code of any
applicable jurisdiction and, if the applicable jurisdiction shall not have any
Uniform Commercial Code, the Uniform Commercial Code as in effect in the State
of New York.
"WITHDRAWAL LIABILITY" means , at any time, any liability incurred
(whether or not assessed) by any ERISA Affiliate and not yet satisfied or paid
in full at such time with respect to any Multiemployer Plan pursuant to Section
4201 of ERISA.
"WORKING CAPITAL" means as to any Person, for any date of
determination, the current assets of such Person and its consolidated
Subsidiaries minus the current liabilities of such Person and its consolidated
Subsidiaries.
"WORKING CAPITAL ADJUSTMENT" means, for any period, the amount (which
may be a negative number) by which Working Capital as of the beginning of the
period exceeds (or is less than) Working Capital as of the end of such period.
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