EXHIBIT 4.1
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EXECUTION VERSION
CREDIT AGREEMENT
dated as of
March 29, 2006
among
GASCO ENERGY, INC.,
as Borrower
CERTAIN SUBSIDIARIES OF BORROWER,
as Guarantors
The Lenders Party Hereto
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
X.X. XXXXXX SECURITIES INC., as Sole
Bookrunner and Lead Arranger
$250,000,000 Senior Secured Revolving Credit Facility
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TABLE OF CONTENTS
Article I Definitions.........................................................1
Section 1.01. Defined Terms........................................1
Section 1.02. Types of Loans and Borrowings.......................22
Section 1.03. Terms Generally.....................................22
Section 1.04. Accounting Terms; GAAP..............................22
Section 1.05. Oil and Gas Definitions.............................22
Article II The Credits.......................................................23
Section 2.01. Commitments.........................................23
Section 2.02. Termination and Reduction of the Aggregate
Commitment........................................23
Section 2.03. Loans and Borrowings................................24
Section 2.04. Requests for Borrowings.............................24
Section 2.05. Letters of Credit...................................25
Section 2.06. Funding of Borrowings...............................29
Section 2.07. Interest Elections..................................30
Section 2.08. Repayment of Loans; Evidence of Debt................31
Section 2.09. Optional Prepayment of Loans........................32
Section 2.10. Mandatory Prepayment of Loans.......................32
Section 2.11. Fees................................................33
Section 2.12. Interest............................................34
Section 2.13. Alternate Rate of Interest..........................35
Section 2.14. Increased Costs.....................................35
Section 2.15. Break Funding Payments..............................37
Section 2.16. Taxes...............................................37
Section 2.17. Payments Generally; Pro Rata Treatment; Sharing of
Set-offs..........................................38
Section 2.18. Mitigation Obligations; Replacement of Lenders......40
Article III Borrowing Base...................................................41
Section 3.01. Reserve Report; Proposed Borrowing Base.............41
Section 3.02. Scheduled Redeterminations of the Borrowing Base;
Procedures and Standards..........................42
Section 3.03. Special Redeterminations............................43
Section 3.04. Notice of Redetermination...........................43
Article IV Representations and Warranties....................................43
Section 4.01. Organization; Powers................................43
Section 4.02. Authorization; Enforceability.......................44
Section 4.03. Governmental Approvals; No Conflicts................44
Section 4.04. Financial Condition; No Material Adverse Change.....44
Section 4.05. Properties..........................................44
Section 4.06. Litigation and Environmental Matters................45
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Section 4.07. Compliance with Laws and Agreements.................45
Section 4.08. Investment Company Status...........................45
Section 4.09. Taxes...............................................46
Section 4.10. ERISA...............................................46
Section 4.11. Disclosure..........................................46
Section 4.12. Capitalization; Corporate Information...............46
Section 4.13. Margin Stock........................................46
Section 4.14. Oil and Gas Interests...............................46
Section 4.15. Insurance...........................................47
Section 4.16. Solvency............................................47
Article V Conditions.........................................................48
Section 5.01. Effective Date......................................48
Section 5.02. Each Credit Event...................................50
Article VI Affirmative Covenants.............................................51
Section 6.01. Financial Statements; Other Information.............51
Section 6.02. Notices of Material Events..........................53
Section 6.03. Existence; Conduct of Business......................54
Section 6.04. Payment of Obligations..............................54
Section 6.05. Maintenance of Properties; Insurance................54
Section 6.06. Books and Records; Inspection Rights................54
Section 6.07. Compliance with Laws................................54
Section 6.08. Use of Proceeds and Letters of Credit...............55
Section 6.09. Mortgages...........................................55
Section 6.10. Title Data..........................................55
Section 6.11. Operation of Oil and Gas Interests..................55
Section 6.12. Restricted Subsidiaries.............................56
Section 6.13. Pledged Equity Interests............................56
Article VII Negative Covenants...............................................57
Section 7.01. Indebtedness........................................57
Section 7.02. Liens...............................................58
Section 7.03. Fundamental Changes.................................59
Section 7.04. Investments, Loans, Advances, Guarantees and
Acquisitions......................................60
Section 7.05. Swap Agreements.....................................61
Section 7.06. Restricted Payments.................................62
Section 7.07. Transactions with Affiliates........................62
Section 7.08. Restrictive Agreements..............................62
Section 7.09. Disqualified Stock..................................63
Section 7.10. Amendments to Organizational Documents and JVEA
Documents.........................................63
Section 7.11. Financial Covenants.................................63
Section 7.12. Sale and Leaseback Transactions and other Off-Balance
Sheet Liabilities.................................63
Section 7.13. Convertible Notes Restrictions......................63
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Article VIII Guarantee of Obligations........................................64
Section 8.01. Guarantee of Payment................................64
Section 8.02. Guarantee Absolute..................................64
Section 8.03. Guarantee Irrevocable...............................65
Section 8.04. Reinstatement.......................................65
Section 8.05. Subrogation.........................................65
Section 8.06. Subordination.......................................65
Section 8.07. Payments Generally..................................66
Section 8.08. Setoff..............................................66
Section 8.09. Formalities.........................................66
Section 8.10. Limitations on Guarantee............................66
Article IX Events of Default.................................................67
Article X The Administrative Agent...........................................69
Article XI Miscellaneous.....................................................71
Section 11.01. Notices.............................................71
Section 11.02. Waivers; Amendments.................................72
Section 11.03. Expenses; Indemnity; Damage Waiver..................73
Section 11.04. Successors and Assigns..............................75
Section 11.05. Survival............................................78
Section 11.06. Counterparts; Integration; Effectiveness............78
Section 11.07. Severability........................................79
Section 11.08. Right of Setoff.....................................79
Section 11.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS............................................79
Section 11.10. WAIVER OF JURY TRIAL................................80
Section 11.11. Headings............................................80
Section 11.12. Confidentiality.....................................80
Section 11.13. Interest Rate Limitation............................81
Section 11.14. USA PATRIOT Act.....................................81
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EXHIBITS:
Exhibit A -- Form of Assignment and Assumption
Exhibit B -- Form of Opinion of Borrower's Counsel
Exhibit C - Form of Counterpart Agreement
Exhibit D - Form of Solvency Certificate
SCHEDULES:
Schedule 2.01 - Applicable Percentages and Initial Commitments Schedule 4.06 --
Disclosed Matters Schedule 4.12 - Capitalization and Corporate Information
Schedule 6.10 - Title Curative Matters Schedule 7.01 -- Existing Indebtedness
Schedule 7.02 -- Existing Liens Schedule 7.07 - Transactions with Affiliates
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CREDIT AGREEMENT dated as of March 29, 2006, among GASCO ENERGY, INC., as
Borrower, CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors, the LENDERS party
hereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
The parties hereto agree as follows:
Article I
Definitions
Section 1.01. Defined Terms. As used in this Agreement, the following terms
have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Alternate Base Rate.
"Acquisition" means, the acquisition by the Borrower or any
Restricted Subsidiary, whether by purchase, merger (and, in the case of a merger
with any such Person, with such Person being the surviving corporation) or
otherwise, of all or substantially all of the Equity Interest of, or the
business, property or fixed assets of or business line or unit or a division of,
any other Person primarily engaged in the business of producing oil or natural
gas or the acquisition by such Person of property or assets consisting of Oil
and Gas Interests.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means JPMorgan Chase Bank, N.A., in its
capacity as contractual representative of the Lenders hereunder pursuant to
Article X and not in its individual capacity as a Lender, and any successor
agent appointed pursuant to Article X.
"Administrative Questionnaire" means an Administrative
Questionnaire in a form supplied by the Administrative Agent.
"Advance Payment Contract" means any contract whereby any
Credit Party either (a) receives or becomes entitled to receive (either directly
or indirectly) any payment (an "Advance Payment") to be applied toward payment
of the purchase price of Hydrocarbons produced or to be produced from Oil and
Gas Interests owned by any Credit Party and which Advance Payment is, or is to
be, paid in advance of actual delivery of such production to or for the account
of the purchaser regardless of such production, or (b) grants an option or right
of refusal to the purchaser to take delivery of such production in lieu of
payment, and, in either of the foregoing instances, the Advance Payment is, or
is to be, applied as payment in full for such production when sold and delivered
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or is, or is to be, applied as payment for a portion only of the purchase price
thereof or of a percentage or share of such production; provided that inclusion
of the standard "take or pay" provision in any gas sales or purchase contract or
any other similar contract shall not, in and of itself, constitute such contract
as an Advance Payment Contract for the purposes hereof.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Aggregate Commitment" means the amount equal to the lesser of
(i) the Maximum Facility Amount and (ii) the Borrowing Base, as such Aggregate
Commitment may be (a) reduced from time to time pursuant to Section 2.02, and
(b) reduced or increased from time to time as a result of a Redetermination of
the Borrowing Base pursuant to Article III.
"Aggregate Credit Exposure" means, as of any date of
determination, the sum of the outstanding principal amount of the Loans of all
Lenders as of such date, plus the aggregate LC Exposure of all Lenders as of
such date.
"Agreement" means this Credit Agreement, dated as of March 29,
2006 as it may be amended, supplemented or otherwise modified from time to time.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day and (b) the
Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Lender, the
percentage of the Aggregate Commitment represented by such Lender's Commitment.
The initial amount of each Lender's Applicable Percentage is as set forth on
Schedule 2.01. If the Aggregate Commitment has terminated or expired, the
Applicable Percentages shall be determined based upon the Aggregate Commitment
most recently in effect, giving effect to any assignments.
"Applicable Rate" means, for any day, with respect to any
Eurodollar Loan or ABR Loan, or with respect to the Unused Commitment Fees
payable hereunder, as the case may be, the applicable rate per annum set forth
below under the caption "Eurodollar Spread", "ABR Spread" or "Unused Commitment
Fee Rate", as the case may be, based upon the Borrowing Base Usage applicable on
such date:
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--------------------- ------------ ------------- --------------
Borrowing Base Usage Eurodollar ABR Unused
------------ Commitment
Spread Spread Fee Rate
-------------------- 200 b.p. 75 b.p. 50 b.p.
> 90%
> 75% and < 90% 175 b.p. 50 b.p. 37.5 b.p.
-
> 50% and < 75% 150 b.p. 25 b.p. 37.5 b.p.
-
< 50% 125 b.p. 0 b.p. 30 b.p.
--------------------- ------------ ------------- --------------
Each change in the Applicable Rate shall apply during the period commencing on
the effective date of such change and ending on the date immediately preceding
the effective date of the next change.
"Approved Counterparty" means, at any time and from time to
time, (i) any Person engaged in the business of writing Swap Agreements for
commodity, interest rate or currency risk that is acceptable to the
Administrative Agent and has (or the credit support provider of such Person
has), at the time Borrower or any Restricted Subsidiary enters into a Swap
Agreement with such Person, a long term senior unsecured debt credit rating of
BBB or better from S&P or Baal or better by Xxxxx'x and (ii) any Lender
Counterparty.
"Approved Fund" has the meaning assigned to such term in
Section 11.04.
"Approved Petroleum Engineer" means MHA Petroleum Consultants
Inc., Netherland, Xxxxxx and Associates, Inc. or any other reputable firm of
independent petroleum engineers selected by the Borrower and acceptable to the
Administrative Agent and the Required Lenders.
"Assignment and Assumption" means an assignment and assumption
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 11.04), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent.
"Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Aggregate Commitment.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" means Gasco Energy, Inc., a Nevada corporation, and
its successors and permitted assigns.
"Borrowing" means Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.
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"Borrowing Base" means, at any time an amount equal to the
amount determined in accordance with Section 3.01, as the same may be
redetermined, adjusted or reduced from time to time pursuant to Section 3.02 and
Section 3.03.
"Borrowing Base Deficiency" means, as of any date, the amount,
if any, by which the Aggregate Credit Exposure on such date exceeds the
Borrowing Base in effect on such date; provided, that, for purposes of
determining the existence and amount of any Borrowing Base Deficiency,
obligations under any Letter of Credit will not be deemed to be outstanding to
the extent such obligations are secured by cash in the manner contemplated by
Section 2.05(j).
"Borrowing Base Properties" means all Oil and Gas Interests of
the Borrower and the Restricted Subsidiaries evaluated by the Lenders for
purposes of establishing the Borrowing Base.
"Borrowing Base Usage" means, as of any date and for all
purposes, the quotient, expressed as a percentage, of (i) the Aggregate Credit
Exposure as of such date, divided by (ii) the Borrowing Base in effect on such
date.
"Borrowing Request" means a request by the Borrower for a
Borrowing in accordance with Section 2.04.
"Bundle" has the meaning assigned to such term in the Joint
Value Enhancement Agreement as in effect on the date hereof or as subsequently
amended, modified or restated as permitted under this Agreement.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in Chicago, Illinois are authorized or
required by law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by any Lender or
the Issuing Bank (or, for purposes of Section 2.14(b), by any lending office of
such Lender or by such Lender's or the Issuing Bank's holding company, if any)
with any request, guideline or directive (whether or not having the force of
law) of any Governmental Authority made or issued after the date of this
Agreement.
"Change of Control" means at any time, (a) the acquisition of
ownership, directly or indirectly, beneficially or of record, by any Person or
4
group (within the meaning of the Securities Exchange Act of 1934 and the rules
of the Securities and Exchange Commission thereunder as in effect on the date
hereof) of Equity Interests representing more than 35% of the aggregate ordinary
voting power represented by the issued and outstanding Equity Interests of the
Borrower; (b) occupation of a majority of the seats (other than vacant seats) on
the board of directors of the Borrower by Persons who were neither (i) nominated
by the board of directors of the Borrower nor (ii) appointed by directors so
nominated; or (c) the acquisition of direct or indirect Control of the Borrower
by any Person or group.
"Charges" has the meaning assigned to such term in Section
11.13.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commitment" means, with respect to each Lender, the
commitment of such Lender to make Loans and to acquire participations in Letters
of Credit hereunder, expressed as an amount representing the maximum aggregate
amount of such Lender's Credit Exposure hereunder, as such commitment may be (a)
reduced from time to time pursuant to Section 2.02, (b) reduced or increased
from time to time as a result of changes in the Borrowing Base pursuant to
Article III and (c) reduced or increased from time to time pursuant to
assignments by or to such Lender pursuant to Section 11.04. The initial amount
of each Lender's Commitment (which amount is such Lender's Applicable Percentage
of the initial Aggregate Commitment) is set forth in Schedule 2.01, or in the
Assignment and Assumption pursuant to which such Lender shall have assumed its
Commitment, as applicable.
"Consolidated Current Assets" means, as of any date of
determination, the total of (i) the consolidated current assets of the Borrower
and the Restricted Subsidiaries determined in accordance with GAAP as of such
date and calculated on a combined basis, plus, all Unused Commitments as of such
date, (ii) less any non-cash assets required to be included in consolidated
current assets of the Borrower and the Restricted Subsidiaries as a result of
the application of FASB Statement 133 as of such date.
"Consolidated Current Liabilities" means, as of any date of
determination, the total of (i) consolidated current liabilities of the Borrower
and the Restricted Subsidiaries, as determined in accordance with GAAP as of
such date, (ii) less current maturities of the Loans, (iii) less any non-cash
obligations required to be included in consolidated current liabilities of the
Borrower and the Restricted Subsidiaries as a result of the application of FASB
Statement 133 as of such date.
"Consolidated Current Ratio" means, as of any date of
determination, the ratio of Consolidated Current Assets to Consolidated Current
Liabilities as of such date.
"Consolidated EBITDAX" means, with respect to the Borrower and
its Consolidated Subsidiaries for any period, Consolidated Net Income for such
period; plus, without duplication and to the extent deducted in the calculation
of Consolidated Net Income for such period, the sum of (a) income or franchise
Taxes paid or accrued; (b) Consolidated Interest Expense; (c) amortization,
depletion and depreciation expense; (d) any non-cash losses or charges on any
Swap Agreement resulting from the requirements of FASB Statement 133 for that
period; (e) oil and gas exploration and development expenses (including all
5
drilling, completion, gathering, geological and geophysical costs) for such
period; (f) losses from sales or other dispositions of assets (other than
Hydrocarbons produced in the ordinary course of business) and other
extraordinary or non-recurring losses, (g) workover expenses for such period and
(h) other non-cash charges (excluding accruals for cash expenses made in the
ordinary course of business); minus, to the extent included in the calculation
of Consolidated Net Income for such period, (i) the sum of (1) any non-cash
gains on any Swap Agreements resulting from the requirements of FASB Statement
133 for that period; (2) extraordinary or non-recurring gains; and (3) gains
from sales or other dispositions of assets (other than Hydrocarbons produced in
the ordinary course of business); provided that, with respect to the
determination of Borrower's compliance with the leverage ratio set forth in
Section 7.11(b) for any period, Consolidated EBITDAX shall be calculated (which
calculations shall, in all respects, be acceptable to, and approved by the
Administrative Agent) to give effect, on a pro forma basis, to any Acquisitions
and dispositions of Oil and Gas Interests by the Borrower and its Consolidated
Subsidiaries made during such period as if such Acquisitions or dispositions
were made at the beginning of such period.
"Consolidated Funded Indebtedness" means, as of any date,
without duplication, Indebtedness of the Borrower and the Consolidated
Subsidiaries of the type described in clauses (a), (b), (c), (d), (e), (f), (g)
or (h) of the definition of Indebtedness.
"Consolidated Net Income" means for any period, the
consolidated net income (or loss) of the Borrower and its Consolidated
Subsidiaries, as applicable, determined on a consolidated basis in accordance
with GAAP; provided that there shall be excluded (a) the income (or deficit) of
any Person accrued prior to the date it becomes a Consolidated Subsidiary of the
Borrower, or is merged into or consolidated with the Borrower or any of its
Consolidated Subsidiaries, as applicable, and (b) the undistributed earnings of
any Consolidated Subsidiary of the Borrower, to the extent that the declaration
or payment of dividends or similar distributions by such Consolidated Subsidiary
is not at the time permitted by the terms of any contractual obligation (other
than under any Loan Document) or by any law applicable to such Consolidated
Subsidiary.
"Consolidated Interest Expense" means for any period, without
duplication, the aggregate of all interest paid or accrued by the Borrower and
its Consolidated Subsidiaries, on a consolidated basis, in respect of
Indebtedness of any such Person, on a consolidated basis, including all
interest, fees and costs payable with respect to the obligations related to such
Indebtedness (other than fees and costs which may be capitalized as transaction
costs in accordance with GAAP) and the interest component of Capitalized Lease
Obligations, all as determined in accordance with GAAP.
"Consolidated Subsidiaries" means, for any Person, any
Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in its consolidated financial statements in accordance with
GAAP.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
6
"Convertible Notes" means the 5 1/2 % Senior Convertible Notes
due 2011 of the Borrower issued pursuant to the Convertible Notes Indenture, as
amended, modified, supplemented or restated from time to time as permitted under
this Agreement.
"Convertible Notes Indenture" means that certain Indenture
dated as of October 20, 2004, between the Borrower and the Trustee, as amended,
modified, supplemented or restated from time to time as permitted under this
Agreement.
"Counterpart Agreement" means a Counterpart Agreement
substantially in the form of Exhibit C delivered by a Guarantor pursuant to
Section 6.12.
"Credit Exposure" means, with respect to any Lender at any
time, the sum of the outstanding principal amount of such Lender's Loans and its
LC Exposure at such time.
"Credit Parties" means collectively, Borrower, and each
Guarantor and each individually, a "Credit Party".
"Crude Oil" means all crude oil and condensate.
"Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 4.06.
"Disqualified Stock" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part, on
or prior to the Maturity Date.
"Dollars" or "$" refers to lawful money of the United States
of America.
"Domestic Subsidiary" means, with respect to any Person, a
subsidiary of such Person that is incorporated or formed under the laws of the
United States of America, any state thereof or the District of Columbia.
"Effective Date" means the date on which the conditions
specified in Section 5.01 are satisfied (or waived in accordance with Section
11.02).
"Engineered Value" means, the value attributed to the
Borrowing Base Properties for purposes of the most recent Redetermination of the
Borrowing Base pursuant to Article III (or for purposes of determining the
Initial Borrowing Base in the event no such Redetermination has occurred), based
upon the discounted present value of the estimated net cash flow to be realized
from the production of Hydrocarbons from the Oil and Gas Interests as set forth
in the Reserve Report.
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"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of any Credit Party directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"Equity Interests" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any such equity interest.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with any Credit Party, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by any Credit Party or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by any Credit Party or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by any Credit Party or any of its ERISA Affiliates
of any liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by any Credit Party or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from any
Credit Party or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.
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"Eurodollar", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in
Article IX.
"Excluded Taxes" means, with respect to the Administrative
Agent, any Lender, the Issuing Bank or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United States
of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or, in the case of any
Lender, in which its applicable lending office is located, (b) any branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other jurisdiction in which the Borrower is located and (c) in the case
of a Foreign Lender (other than an assignee pursuant to a request by the
Borrower under Section 2.18(b)), any withholding tax that is imposed on amounts
payable to such Foreign Lender at the time such Foreign Lender becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Lender's failure to comply with Section 2.16(e), except to the
extent that such Foreign Lender (or its assignor, if any) was entitled, at the
time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 2.16(a).
"FASB" means Financial Accounting Standards Board.
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of any Credit Party.
"Foreign Lender" means any Lender that is organized under the
laws of a jurisdiction other than that in which any Credit Party is located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"GAAP" means generally accepted accounting principles in the
United States of America.
"Gas Balancing Agreement" means any agreement or arrangement
whereby the Borrower or any Restricted Subsidiary, or any other party having an
interest in any Hydrocarbons to be produced from Oil and Gas Interests in which
the Borrower or any Restricted Subsidiary owns an interest, has a right to take
more than its proportionate share of production therefrom.
9
"Gasco Production" means Gasco Production Company, a Delaware
corporation formerly known as Pannonian Energy, Inc., and its successors and
permitted assigns.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity properly exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government.
"Guarantee" of or by any Person (in this definition, the
"guarantor") means any obligation, contingent or otherwise, of the guarantor
guaranteeing or having the economic effect of guaranteeing any Indebtedness or
other obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, and including any obligation of the guarantor,
direct or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation or to purchase (or
to advance or supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness or other obligation of the
payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other obligation or (d)
as an account party in respect of any letter of credit or letter of guaranty
issued to support such Indebtedness or obligation; provided, that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.
"Guaranteed Liabilities" has the meaning assigned to such term
in Section 8.01.
"Guarantors" means, collectively, Gasco Production, Riverbend,
Myton and each other Restricted Subsidiary that hereafter executes and delivers
to the Administrative Agent and the Lenders, a Counterpart Agreement.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.
"Hydrocarbons" means all Crude Oil and Natural Gas produced
from or attributable to the Oil and Gas Interests of the Credit Parties.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
10
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitee" has the meaning assigned to such term in Section
11.03.
"Information" has the meaning assigned to such term in Section
11.12.
"Initial Borrowing Base" has the meaning assigned to such term
in Section 3.01.
"Intercreditor Agreement" means the SLB Agreement and any
other Intercreditor Agreement among the Administrative Agent, Gasco Production,
and any other Service Party pursuant to Section 7.02(g), as amended, modified,
supplemented or restated from time to time.
"Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 2.07.
"Interest Payment Date" means (a) with respect to any ABR
Loan, the last day of each calendar month, and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"Interest Period" means with respect to any Eurodollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the calendar month that is one, two, three or
six months thereafter, as the Borrower may elect; provided, that (i) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurodollar Borrowing only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (ii) any Interest Period pertaining to a
Eurodollar Borrowing that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
11
"Issuing Bank" means JPMorgan Chase Bank, N.A., in its
capacity as the issuer of Letters of Credit hereunder, and its successors in
such capacity as provided in Section 2.05(i). The Issuing Bank may, in its
discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of the Issuing Bank, in which case the term "Issuing Bank" shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.
"Joint Value Enhancement Agreement" means the Joint Value
Enhancement Agreement dated January 16, 2004, among Gasco Production and the
Service Parties (other than MBG, LLC and MBGV Partition, LLC), as amended by
First Amendment dated July 31, 2004, and as further amended, supplemented,
restated or otherwise modified from time to time as permitted under this
Agreement.
"JVEA Documents" means, collectively, (i) the Joint Value
Enhancement Agreement, (ii) the Net Profits Purchase Agreement dated as of
August 6, 2004 among Gasco Production, Red Oak Capital Management, LLC, MBG, LLC
and MBGV Partition, LLC, as amended by Purchase Supplement dated August 20,
2004, and as further amended, supplemented, restated or otherwise modified from
time to time as permitted under this Agreement, (iii) the Security Agreement and
Financing Statement entered into as of August 20, 2004, among Gasco Production,
Red Oak Capital Management, LLC, MBG, LLC and MBGV Partition, LLC as amended,
supplemented, restated or otherwise modified from time to time as permitted
under this Agreement and (iv) any other agreement or instrument evidencing or
governing the terms of any Indebtedness or other obligations under the JVEA, or
any other agreement referred to in this clause (iii) including any assignment or
conveyance of a net profits interest to any Service Party, as amended,
supplemented, restated or otherwise modified from time to time as permitted
under this Agreement.
"LC Disbursement" means a payment made by the Issuing Bank
pursuant to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Lender at any
time shall be its Applicable Percentage of the total LC Exposure at such time.
"Lender Counterparty" means any Lender or any Affiliate of a
Lender counterparty to a Swap Agreement with any Credit Party.
"Lenders" means the Persons listed on Schedule 2.01 and any
other Person that shall have become a party hereto pursuant to an Assignment and
Assumption, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Assumption.
"Letter of Credit" means any letter of credit issued pursuant
to this Agreement and that certain irrevocable standby letter of credit, dated
December 27, 2005, issued for the account of the Borrower for the benefit of
Xxxxxx Drilling USA, LP and any renewals or extensions of any such letter of
credit.
12
"LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Dow Xxxxx Market
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the "LIBO Rate"
with respect to such Eurodollar Borrowing for such Interest Period shall be the
rate at which dollar deposits of $5,000,000 and for a maturity comparable to
such Interest Period are offered by the principal London office of the
Administrative Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, any promissory notes
executed in connection herewith, Security Instruments, the Letters of Credit
(and any applications therefore and reimbursement agreements related thereto),
the Fee Letter, any Intercreditor Agreement and any other agreements executed in
connection with this Agreement.
"Loans" means the loans made by the Lenders to the Borrower
pursuant to this Agreement.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Restricted Subsidiaries taken as a whole, (b)
the ability of any Credit Party to perform any of its obligations under this
Agreement and the other Loan Documents to which it is a party, or (c) the rights
of or benefits available to the Lenders under this Agreement and the other Loan
Documents.
"Material Domestic Subsidiary" means any Domestic Subsidiary
that owns or holds assets, properties or interests (including Oil and Gas
Interests) with an aggregate fair market value, on a consolidated basis, greater
than ten percent (10%) of the aggregate fair market value of all of the assets,
properties and interests (including Oil and Gas Interests) of the Borrower and
the Subsidiaries, on a consolidated basis.
"Material Gas Imbalance" means, with respect to all Gas
Balancing Agreements to which Borrower or any Restricted Subsidiary is a party
or by which any Oil and Gas Interests owned by Borrower or a Restricted
Subsidiary is bound, a net overproduced gas imbalance to Borrower and the
Restricted Subsidiaries, taken as a whole, in excess of $1,000,000.
13
"Material Indebtedness" means Indebtedness permitted under
Section 7.01(h) and any other Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of the
Borrower or any one or more of the Restricted Subsidiaries in an aggregate
principal amount exceeding $1,000,000. For purposes of determining Material
Indebtedness, the "principal amount" of the obligations of the Borrower or any
Guarantor in respect of any Swap Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Guarantor would be required to pay if such Swap Agreement were terminated
at such time.
"Material Sales Contract" means, as of any date of
determination, any agreement for the sale of Hydrocarbons from the Borrowing
Base Properties to which the Borrower or any Restricted Subsidiary is a party if
the aggregate volume of Hydrocarbons sold pursuant to such agreement during the
twelve months immediately preceding such date equals or exceeds 10% of the
aggregate volume of Hydrocarbons sold by the Borrower and the Restricted
Subsidiaries, on a consolidated basis, from the Borrowing Base Properties during
the twelve months immediately preceding such date.
"Maturity Date" means March 29, 2010.
"Maximum Facility Amount" means $250,000,000.
"Maximum Liability" has the meaning assigned to such term in
Section 8.10.
"Maximum Rate" has the meaning assigned to such term in
Section 11.13.
"Moody's" means Xxxxx'x Investors Service, Inc.
"Mortgaged Properties" means the Oil and Gas Interests
described in one or more duly executed, delivered and filed Mortgages evidencing
a first and prior Lien in favor of the Administrative Agent for the benefit of
the Secured Parties and subject only to the Liens permitted pursuant to Section
7.02.
"Mortgages" means all mortgages, deeds of trust, amendments to
mortgages, security agreements, assignments of production, pledge agreements,
collateral mortgages, collateral chattel mortgages, collateral assignments,
financing statements and other documents, instruments and agreements evidencing,
creating, perfecting or otherwise establishing the Liens required by Section
6.09. All Mortgages shall be in form and substance satisfactory to
Administrative Agent in its sole discretion
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Myton" means Myton Oilfield Rentals, LLC, a Nevada limited
liability company and its successors and permitted assigns.
"Natural Gas" means all natural gas, distillate or sulphur,
natural gas liquids and all products recovered in the processing of natural gas
(other than condensate) including, without limitation, natural gasoline, coalbed
methane gas, casinghead gas, iso-butane, normal butane, propane and ethane
(including such methane allowable in commercial ethane).
14
"Net Cash Proceeds" means, with respect to the sale of
Borrowing Base Properties by the Borrower or any Restricted Subsidiary, the
excess, if any, of (a) the sum of cash and cash equivalents received in
connection with such sale, but only as and when so received, over (b) the sum of
(i) the principal amount of any Indebtedness that is secured by such asset and
that is required to be repaid in connection with the sale thereof (other than
the Loans), and (ii) the out-of-pocket expenses incurred by the Borrower or such
Restricted Subsidiary in connection with such sale.
"Non-Consenting Lender" has the meaning assigned to such term
in Section 2.18(c).
"Obligations" means all obligations of every nature of the
Borrower from time to time owed to the Administrative Agent, the Issuing Bank,
the Lenders or any of them and the Lender Counterparties under any Loan Document
or Swap Agreement (including, with respect to any transaction under any Swap
Agreement, obligations owed under any Swap Agreement to any Person that was a
Lender Counterparty at the time such transaction was entered into), whether for
principal, interest, reimbursement of amounts drawn under any Letter of Credit,
payments for early termination of Swap Agreements, funding indemnification
amounts, fees, expenses, indemnification or otherwise.
"Off-Balance Sheet Liability" of a Person means (i) any
repurchase obligation or liability of such Person with respect to accounts or
notes receivable sold by such Person, (ii) any liability under any Sale and
Leaseback Transaction which is not a Capital Lease Obligation, (iii) any
liability under any so-called "synthetic lease" transaction entered into by such
Person, (iv) any Material Gas Imbalance, (v) any Advance Payment Contract, or
(vi) any obligation arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the balance sheets of such Person, but excluding from
the foregoing clauses (iii) through (vi) operating leases and usual and
customary oil, gas and mineral leases.
"Oil and Gas Interest(s)" means: (a) direct and indirect
interests in and rights with respect to oil, gas, mineral and related properties
and assets of any kind and nature, direct or indirect, including, without
limitation, working, royalty and overriding royalty interests, mineral
interests, leasehold interests, production payments, operating rights, net
profits interests, other non-working interests, contractual interests,
non-operating interests and rights in any pooled, unitized or communitized
acreage by virtue of such interest being a part thereof; (b) interests in and
rights with respect to Crude Oil, Natural Gas and other minerals or revenues
therefrom and contracts and agreements in connection therewith and claims and
rights thereto (including oil and gas leases, operating agreements, unitization,
communitization and pooling agreements and orders, division orders, transfer
orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing
contracts and agreements and, in each case, interests thereunder), and surface
interests, fee interests, reversionary interests, reservations and concessions
related to any of the foregoing; (c) easements, rights-of-way, licenses,
permits, leases, and other interests associated with, appurtenant to, or
necessary for the operation of any of the foregoing; (d) interests in oil, gas,
15
water, disposal and injection xxxxx, equipment and machinery (including well
equipment and machinery), oil and gas production, gathering, transmission,
compression, treating, processing and storage facilities (including tanks, tank
batteries, pipelines and gathering systems), pumps, water plants, electric
plants, gasoline and gas processing plants, refineries and other tangible or
intangible, movable or immovable, real or personal property and fixtures located
on, associated with, appurtenant to, or necessary for the operation of any of
the foregoing; and (e) all seismic, geological, geophysical and engineering
records, data, information, maps, licenses and interpretations.
"Organizational Documents" means (a) with respect to any
corporation, its certificate or articles of incorporation or organization, as
amended, and its by-laws, as amended, (b) with respect to any limited
partnership, its certificate of limited partnership, as amended, and its
partnership agreement, as amended, (c) with respect to any general partnership,
its partnership agreement, as amended, and (d) with respect to any limited
liability company, its certificate of formation or articles of organization, as
amended, and its limited liability company agreement or operating agreement, as
amended.
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement.
"Participant" has the meaning assigned to such term in Section
11.04.
"Payment Currency" has the meaning assigned to such term in
Section 8.07.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"Percentage" has the meaning assigned to such term in the
Joint Value Enhancement Agreement as in effect on the date hereof or as
subsequently amended, modified or restated as permitted under this Agreement.
"Permitted Encumbrances" means:
(a) Liens imposed by law for Taxes that are not yet due or are
being contested in compliance with Section 6.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, and contractual Liens granted
to operators and non-operators under oil and gas operating agreements, in each
case, arising in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Interests and securing
obligations that are not overdue by more than 30 days or are being contested in
compliance with Section 6.04;
(c) pledges and deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;
16
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the ordinary
course of business;
(e) judgment liens in respect of judgments that do not
constitute an Event of Default under clause (k) of Article
IX;
(f) easements, zoning restrictions, rights-of-way, servitudes,
permits, surface leases, and similar encumbrances on real property imposed by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of any
Credit Party;
(g) royalties, overriding royalties, reversionary interests
and similar burdens granted by the Borrower or any Restricted Subsidiary with
respect to the Oil and Gas Interests owned by the Borrower or such Restricted
Subsidiary, as the case may be, if the net cumulative effect of such burdens
does not operate to deprive the Borrower or any Restricted Subsidiary of any
material right in respect of its assets or properties (except for rights
customarily granted with respect to such interests);
(h) Liens arising from Uniform Commercial Code financing
statement filings regarding operating leases entered into by the Borrower or any
Restricted Subsidiary in the ordinary course of business covering the property
under the lease; and
(i) preferential rights to purchase, and provisions requiring
a third party's consent prior to assignment and similar restraints on
alienation, in each case, granted pursuant to an oil and gas operating agreement
and arising in the ordinary course of business or incident to the exploration,
development, operation and maintenance of Oil and Gas Interests; provided such
right, requirement or restraint does not materially affect the value of such Oil
and Gas Interests;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness (other than contractual Liens described in the foregoing
clause (b) granted to operators and non-operators under oil and gas operating
agreements to the extent the obligations secured by such Liens constitute
Indebtedness).
"Permitted Investments" means:
(a) U.S. Government Securities;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and variable rate preferred securities
maturing within 28 days from the date of acquisition thereof, each having, at
such date of acquisition, the highest credit rating obtainable from S&P or from
Xxxxx'x;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any commercial
17
bank organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of not
less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in clause
(c) above; and
(e) money market funds that (i) comply with the criteria set
forth in Securities and Exchange Commission Rule 2a-7 under the Investment
Company Act of 1940, (ii) are rated AAA by S&P or Aaa by Xxxxx'x and (iii) have
portfolio assets of at least $5,000,000,000.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which any Credit
Party or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pledge Agreement" means a Pledge and Security Agreement in
favor of the Administrative Agent for the benefit of the Secured Parties
covering, among other things, the rights and interests of Borrower or any
Restricted Subsidiary in the Equity Interest of each Restricted Subsidiary and
otherwise in form and substance satisfactory to the Administrative Agent and the
Required Lenders.
"Pledged Securities" means the U.S. Government Securities
pledged to the Trustee as security for the exclusive benefit of the holders of
the Convertible Notes as of the date hereof and any reinvestment thereof.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by JPMorgan Chase Bank, N.A. as its prime rate in
effect at its principal office in Chicago, Illinois, each change in the Prime
Rate shall be effective from and including the date such change is publicly
announced as being effective.
"Projections" means the Borrower's forecasted (a) balance
sheets, (b) profit and loss statements, and (c) cash flow statements, all
prepared on a basis consistent with the historical financial statements
described in Section 4.04 and after giving effect to the Transactions, together
with appropriate supporting details and a statement of underlying assumptions,
in each case in form and substance satisfactory to the Lenders.
"Redetermination" means any Scheduled Redetermination or
Special Redetermination.
"Redetermination Date" means (a) with respect to any Scheduled
Redetermination, each May 1 and November 1 of each year, commencing May 1, 2006,
and (b) with respect to any Special Redetermination, the first day of the first
month which is not less than twenty (20) Business Days following the date of a
request for a Special Redetermination.
18
"Register" has the meaning assigned to such term in Section
11.04.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Required Lenders" means, at any time, Lenders having Credit
Exposures and Unused Commitments representing at least 66-2/3% (or if there are
less than four Lenders, at least 75%) of the sum of the Aggregate Credit
Exposure and all Unused Commitments of all Lenders at such time or, if the
Aggregate Commitment has been terminated, Lenders having Credit Exposures
representing at least 66-2/3% (or if there are less than four Lenders, at least
75%) of the sum of the Aggregate Credit Exposure of all Lenders at such time.
"Reserve Report" means an unsuperseded engineering analysis of
the Borrowing Base Properties, in form and substance reasonably acceptable to
the Administrative Agent, prepared in accordance with customary and prudent
practices in the petroleum engineering industry.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in any Credit Party, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in any Credit Party or any option, warrant or other
right to acquire any such Equity Interests in any Credit Party.
"Restricted Subsidiary" means any Subsidiary that is not an
Unrestricted Subsidiary.
"Riverbend" means Riverbend Gas Gathering, LLC, a Nevada
limited liability company and its successors and permitted assigns.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw Hill Corporation.
"Sale and Leaseback Transaction" means any sale or other
transfer of any property by any Person with the intent to lease such property as
lessee.
"Scheduled Redetermination" means any redetermination of the
Borrowing Base pursuant to Section 3.02.
"Schlumberger" means Schlumberger Technology Corporation, a
Texas corporation, and its successors and assigns.
"SLB Agreement" means the Agreement by and among the
Administrative Agent, Schlumberger and Gasco Production, dated the date hereof
and in form and substance satisfactory to the Lenders, as amended, modified,
supplemented or restated from time to time.
19
"Secured Party" means the Administrative Agent, any Lender and
any Lender Counterparty and shall include Lenders and Lender Counterparties to
the extent that any Obligations owing to such Persons were incurred while such
Persons were Lenders or Lender Counterparties. Each Secured Party shall be and
it hereby is designated a "Bank Creditor" for purposes of each Intercreditor
Agreement.
"Security Instruments" means collectively, all Guarantees of
the Obligations evidenced by the Loan Documents and all mortgages, security
agreements, pledge agreements, collateral assignments and other collateral
documents covering the Oil and Gas Interests of the Borrower and the Restricted
Subsidiaries and the Equity Interests of the Restricted Subsidiaries and other
personal property, equipment, oil and gas inventory and proceeds of the
foregoing, all such documents to be in form and substance reasonably
satisfactory to the Administrative Agent.
"Senior Debt" means all Consolidated Funded Indebtedness of
the Borrower and its Restricted Subsidiaries other than the Convertible Notes.
"Service Parties" means, collectively, Schlumberger, Xxxxxx
Drilling USA, LP, Pool Well Services Co., M-I, LLC and Red Oak Capital
Management, LLC, MBG, LLC and MBGV Partition, LLC and their respective
successors and assigns.
"SLB Agreement" means the Agreement by and among the
Administrative Agent, Schlumberger and Gasco Production, dated the date hereof
and in form and substance satisfactory to the Lenders, as amended, modified,
supplemented or restated from time to time.
"Special Redetermination" means any redetermination of the
Borrowing Base made pursuant to Section 3.03.
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Administrative Agent is
subject, with respect to the Adjusted LIBO Rate, for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
"Subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
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power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent any
subsidiary of the Borrower. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the Borrower.
"Swap Agreement" means any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or
any similar transaction or any combination of these transactions; provided that
no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Credit Parties shall be a Swap Agreement.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Transactions" means the execution, delivery and performance
by the Credit Parties of this Agreement and the Loan Documents, the borrowing of
Loans, the use of the proceeds thereof, and the issuance of Letters of Credit
hereunder.
"Trustee" means Xxxxx Fargo Bank, National Association, in its
capacity as trustee under the Convertible Notes Indenture, and its permitted
successors and assigns.
"Type", when used in reference to any Loan or Borrowing,
refers to whether the rate of interest on such Loan, or on the Loans comprising
such Borrowing, is determined by reference to the Adjusted LIBO Rate or the
Alternate Base Rate.
"Unrestricted Subsidiary" means (a) any Subsidiary that at the
time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors of the Borrower in the manner provided below and (b) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Borrower
may designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries is a Material Domestic Subsidiary or a Subsidiary owning Oil
and Gas Interests included in the Borrowing Base Properties.
"Unused Commitment" means, with respect to each Lender at any
time, such Lender's Commitment at such time minus such Lender's Credit Exposure
at such time.
"Unused Commitment Fee" has the meaning assigned to such term
in Section 2.11(a).
"U.S. Government Securities" means direct obligations of, or
obligations the principal of and interest on which are unconditionally
guaranteed by, the United States of America (or by any agency thereof to the
extent such obligations are backed by the full faith and credit of the United
States of America), in each case maturing within one year from the date of
acquisition thereof.
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"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.02. Types of Loans and Borrowings. For purposes of this Agreement,
Loans may be classified and referred to by Type (e.g., a "Eurodollar Loan" or an
"ABR Loan") and Borrowings also may be classified and referred to by Type (e.g.,
a "Eurodollar Borrowing" or an "ABR Borrowing").
Section 1.03. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall."
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
Section 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower notifies the Administrative Agent that the Borrower request an
amendment to any provision hereof to eliminate the effect of any change
occurring after the date hereof in GAAP or in the application thereof on the
operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
Section 1.05. Oil and Gas Definitions. For purposes of this Agreement, the terms
"proved reserves," "proved developed reserves," "proved undeveloped reserves,"
"proved developed nonproducing reserves" and "proved developed producing
reserves," have the meaning given such terms from time to time and at the time
in question by the Society of Petroleum Engineers of the American Institute of
Mining Engineers.
22
Article II
The Credits
Section 2.01. Commitments. Subject to the terms and conditions set forth herein,
each Lender agrees to make Loans to the Borrower from time to time during the
Availability Period in an aggregate principal amount that will not result in (a)
such Lender's Credit Exposure exceeding such Lender's Commitment or (b) the
Aggregate Credit Exposure exceeding the Aggregate Commitment. Within the
foregoing limits and subject to the terms and conditions set forth herein, the
Borrower may borrow, prepay and reborrow Loans.
Section 2.02. Termination and Reduction of the Aggregate Commitment.
------------------------------------------------------
(a) Unless previously terminated, the Aggregate Commitment shall terminate on
the Maturity Date.
(b) The Borrower may at any time terminate, or from time to time reduce, the
Aggregate Commitment; provided that (i) each reduction of the Aggregate
Commitment shall be in an amount that is an integral multiple of $1,000,000
and not less than $1,000,000, (ii) no such reduction shall reduce the
Aggregate Commitment to an amount that is less than the Borrowing Base and
(iii) the Borrower shall not terminate or reduce the Aggregate Commitment
if, after giving effect to any concurrent prepayment of the Loans in
accordance with Section 2.09 and Section 2.10, the Aggregate Credit
Exposure would exceed the Aggregate Commitment.
(c) The Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Aggregate Commitment under paragraph (b) of this
Section at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by
the Borrower pursuant to this Section shall be irrevocable; provided that a
notice of termination of the Aggregate Commitment delivered by the Borrower
may state that such notice is conditioned upon the effectiveness of other
credit facilities, in which case such notice may be revoked by the Borrower
(by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied. Any termination of the
Aggregate Commitment shall be permanent. Each reduction of the Aggregate
Commitment shall be made ratably among the Lenders in accordance with their
respective Commitment.
(d) With respect to any sale, transfer or disposition of Borrowing Base
Properties, the Borrowing Base shall be automatically reduced by an amount
equal to the value assigned to such Borrowing Base Properties by the
Administrative Agent in connection with the most recent Redetermination of
the Borrowing Base preceding the date of such sale (or in connection with
the determination of the Initial Borrowing Base with respect to any sale
occurring prior to the first Redetermination of the Borrowing Base).
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Section 2.03. Loans and Borrowings.
--------------------
(a) Each Loan shall be made as part of a Borrowing consisting of Loans made
by the Lenders ratably in accordance with their respective Commitments.
The failure of any Lender to make any Loan required to be made by it
shall not relieve any other Lender of its obligations hereunder;
provided that the Commitments of the Lenders are several and no Lender
shall be responsible for any other Lender's failure to make Loans as
required.
(b) Subject to Section 2.13, each Borrowing shall be comprised entirely of
ABR Loans or Eurodollar Loans as the Borrower may request in accordance
herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to
make such Loan; provided that any exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance
with the terms of this Agreement.
(c) At the commencement of each Interest Period for any Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $1,000,000. At the
time that each ABR Borrowing is made, such Borrowing shall be in an
aggregate amount that is an integral multiple of $100,000 and not less
than $100,000; provided that an ABR Borrowing may be in an aggregate
amount that is equal to the entire unused balance of the Aggregate
Commitment or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.05(e). Borrowings of more
than one Type may be outstanding at the same time; provided that there
shall not at any time be more than a total of four (4) Eurodollar
Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date.
Section 2.04. Requests for Borrowings. To request a Borrowing, the Borrower
shall notify the Administrative Agent of such request by telephone (a) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m., Chicago, Illinois
time, three Business Days before the date of the proposed Borrowing or (b) in
the case of an ABR Borrowing, not later than 11:00 a.m., Chicago, Illinois time,
one Business Day before the date of the proposed Borrowing; provided that any
such notice of an ABR Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.05(e) may be given not later than
10:00 a.m., Chicago, Illinois time, on the date of the proposed Borrowing. Each
such telephonic Borrowing Request shall be irrevocable and shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Borrowing Request in a form approved by the Administrative Agent and signed by
the Borrower. Each such telephonic and written Borrowing Request shall specify
the following information in compliance with Section 2.03:
(i) the aggregate amount of the requested Borrowing;
(ii) the date of such Borrowing, which shall be a Business Day;
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(iii) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period
contemplated by the definition of the term "Interest Period";
and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the
requirements of Section 2.06.
If no election as to the Type of Borrowing is specified, then
the requested Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Borrowing, then the Borrower
shall be deemed to have selected an Interest Period of one month's duration.
Promptly following receipt of a Borrowing Request in accordance with this
Section, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made as part of the
requested Borrowing.
Section 2.05. Letters of Credit.
(a) General. Subject to the terms and conditions set forth herein, the
Borrower may request the issuance of Letters of Credit for its own or the
account of any Restricted Subsidiary in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Availability Period. In the event of any inconsistency between the
terms and conditions of this Agreement and the terms and conditions of any form
of letter of credit application or other agreement submitted by the Borrower to,
or entered into by the Borrower with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
To request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the Borrower shall hand deliver
or telecopy (or transmit by electronic communication, if arrangements for doing
so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
and specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day), the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by the Issuing Bank, the Borrower also shall submit a
letter of credit application on the Issuing Bank's standard form in connection
with any request for a Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the LC Exposure shall not exceed $10,000,000 and (ii) the
Aggregate Credit Exposure shall not exceed the Aggregate Commitment.
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(c) Expiration Date. Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
five Business Days prior to the Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit increasing the amount thereof) and without any further
action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby
grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Lender's Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender's Applicable Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the
date due as provided in paragraph (e) of this Section, or of any reimbursement
payment required to be refunded to the Borrower for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the Aggregate
Commitment, and that each such payment shall be made without any offset,
abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in
respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement
by paying to the Administrative Agent an amount equal to such LC Disbursement
not later than 12:00 noon, Chicago, Illinois time, on the date that such LC
Disbursement is made, if the Borrower shall have received notice of such LC
Disbursement prior to 10:00 a.m., Chicago, Illinois time, on such date, or, if
such notice has not been received by the Borrower prior to such time on such
date, then not later than 12:00 noon, Chicago, Illinois time, on (i) the
Business Day that the Borrower receives such notice, if such notice is received
prior to 10:00 a.m., Chicago, Illinois time, on the day of receipt, or (ii) the
Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that the Borrower may, subject to the -------- conditions to borrowing
set forth herein, request in accordance with Section 2.04 that such payment be
financed with an ABR Borrowing in an equivalent amount and, to the extent so
financed, the Borrower's obligation to make such payment shall be discharged and
replaced by the resulting ABR Borrowing. If the Borrower fails to make such
payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from the Borrower in respect
thereof and such Lender's Applicable Percentage thereof. Promptly following
receipt of such notice, each Lender shall pay to the Administrative Agent its
Applicable Percentage of the payment then due from the Borrower, in the same
manner as provided in Section 2.06 with respect to Loans made by such Lender
(and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of
26
the Lenders), and the Administrative Agent shall promptly pay to the Issuing
Bank the amounts so received by it from the Lenders. Promptly following receipt
by the Administrative Agent of any payment from the Borrower pursuant to this
paragraph, the Administrative Agent shall distribute such payment to the Issuing
Bank or, to the extent that Lenders have made payments pursuant to this
paragraph to reimburse the Issuing Bank, then to such Lenders and the Issuing
Bank as their interests may appear. Any payment made by a Lender pursuant to
this paragraph to reimburse the Issuing Bank for any LC Disbursement (other than
the funding of ABR Loans as contemplated above) shall not constitute a Loan and
shall not relieve the Borrower of its obligation to reimburse such LC
Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower's obligations hereunder. Neither
the Administrative Agent, the Lenders nor the Issuing Bank, nor any of their
Related Parties, shall have any liability or responsibility by reason of or in
connection with the issuance or transfer of any Letter of Credit or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to the Borrower to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law) suffered by
the Borrower that are caused by the Issuing Bank's failure to exercise care when
determining whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof. The parties hereto expressly agree that,
in the absence of gross negligence or willful misconduct on the part of the
Issuing Bank (as finally determined by a court of competent jurisdiction), the
Issuing Bank shall be deemed to have exercised care in each such determination.
In furtherance of the foregoing and without limiting the generality thereof, the
parties agree that, with respect to documents presented which appear on their
face to be in substantial compliance with the terms of a Letter of Credit, the
Issuing Bank may, in its sole discretion, either accept and make payment upon
such documents without responsibility for further investigation, regardless of
any notice or information to the contrary, or refuse to accept and make payment
upon such documents if such documents are not in strict compliance with the
terms of such Letter of Credit.
27
(g) Disbursement Procedures. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall promptly notify the
Administrative Agent and the Borrower by telephone (confirmed by telecopy) of
such demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement thereunder; provided that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to reimburse the
Issuing Bank and the Lenders with respect to any such LC Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement,
then, unless the Borrower shall reimburse such LC Disbursement in full on the
date such LC Disbursement is made, the unpaid amount thereof shall bear
interest, for each day from and including the date such LC Disbursement is made
to but excluding the date that the Borrower reimburses such LC Disbursement, at
the rate per annum then applicable to ABR Loans; provided that, if the Borrower
fails to reimburse such LC Disbursement when due pursuant to paragraph (e) of
this Section, then Section 2.12(c) shall apply. Interest accrued pursuant to
this paragraph shall be for the account of the Issuing Bank, except that
interest accrued on and after the date of payment by any Lender pursuant to
paragraph (e) of this Section to reimburse the Issuing Bank shall be for the
account of such Lender to the extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at
any time by written agreement among the Borrower, the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent
shall notify the Lenders of any such replacement of the Issuing Bank. At the
time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.11(b). From and after the effective date of any such replacement, (i)
the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 66-2/3%
of the total LC Exposure) demanding the deposit of cash collateral pursuant to
this paragraph, the Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders, an amount in cash equal to the LC Exposure as of such date plus any
accrued and unpaid interest thereon; provided that the obligation to deposit
such cash collateral shall become effective immediately, and such deposit shall
become immediately due and payable, without demand or other notice of any kind,
upon the occurrence of any Event of Default with respect to the Borrower
described in clause (h) or (i) of Article IX. Such deposit shall be held by the
Administrative Agent as collateral for the payment and performance of the
28
obligations of the Borrower under this Agreement. The Administrative Agent shall
have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Other than any interest earned on the investment
of such deposits, which investments shall be made at the option and sole
discretion of the Administrative Agent and at the Borrower's risk and expense,
such deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in such account. Moneys in such account shall be
applied by the Administrative Agent to reimburse the Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the Borrower for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but subject to the consent of Lenders with LC Exposure
representing 66-2/3% or more of the total LC Exposure), be applied to satisfy
other obligations of the Borrower under this Agreement. If the Borrower is
required to provide an amount of cash collateral hereunder as a result of the
occurrence of an Event of Default, such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower within three Business Days after
all Events of Default have been cured or waived.
Section 2.06. Funding of Borrowings.
---------------------
(a) Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds by 12:00
noon, Chicago, Illinois time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an account of the Borrower
designated by the Borrower in the applicable Borrowing Request; provided that
ABR Loans made to finance the reimbursement of an LC Disbursement as provided in
Section 2.05(e) shall be remitted by the Administrative Agent to the Issuing
Bank.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the greater of the Federal Funds Effective Rate
and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation or (ii) in the case of the Borrower,
the interest rate applicable to ABR Loans. If such Lender pays such amount to
29
the Administrative Agent, then such amount shall constitute such Lender's Loan
included in such Borrowing.
Section 2.07. Interest Elections.
(a) Each Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request; provided
that all Borrowings on the Effective Date shall be ABR Borrowings. Thereafter,
the Borrower may elect to convert such Borrowing to a different Type or to
continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect
Interest Periods therefor, all as provided in this Section. The Borrower may
elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall notify
the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.04 if the Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.03:
(i) the Borrowing to which such Interest Election Request applies and,
if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Borrowing
(in which case the information to be specified pursuant to clauses (iii)
and (iv) below shall be specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) with respect to any Borrowing, whether the resulting Borrowing
is to be an ABR Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period"; except that the Interest Period for any Eurodollar
Borrowing requested during the 30 day period following the Effective Date
shall be of one month's duration unless otherwise agreed upon by the
Borrower and the Administrative Agent.
30
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof
and of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request
with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing
shall be converted to an ABR Borrowing. Notwithstanding any contrary
provision hereof, if an Event of Default has occurred and is continuing
and the Administrative Agent, at the request of the Required Lenders,
so notifies the Borrower, then, so long as an Event of Default is
continuing (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to an ABR Borrowing at the end
of the Interest Period applicable thereto.
Section 2.08. Repayment of Loans; Evidence of Debt.
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Loan on the Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b)
or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent; provided that any promissory note
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issued to evidence any Lender's Loans shall be in a stated amount equal to such
Lender's Applicable Percentage of the Maximum Facility Amount. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 11.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
Section 2.09. Optional Prepayment of Loans.
(a) The Borrower shall have the right at any time and from time to time to
prepay any Borrowing in whole and or in part, subject to prior notice in
accordance with paragraph (b) of this Section.
(b) The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., Chicago,
Illinois time, three Business Days before the date of prepayment, or (ii) in the
case of prepayment of an ABR Borrowing, not later than 11:00 a.m., Chicago,
Illinois time, one Business Day before the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid; provided that, if a
notice of prepayment is given in connection with a conditional notice of
termination or reduction of the Aggregate Commitment as contemplated by Section
2.02, then such notice of prepayment may be revoked if such notice of
termination or reduction is revoked in accordance with Section 2.02. Promptly
following receipt of any such notice relating to a Borrowing, the Administrative
Agent shall advise the Lenders of the contents thereof. Each partial prepayment
of any Borrowing shall be in an amount that would be permitted in the case of an
advance of a Borrowing of the same Type as provided in Section 2.03. Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the
extent required by Section 2.12.
Section 2.10. Mandatory Prepayment of Loans.
(a) Except as otherwise provided in Section 2.10(b), in the event a
Borrowing Base Deficiency exists, the Borrower shall, within thirty (30) days
after written notice from the Administrative Agent to the Borrower of such
Borrowing Base Deficiency, notify the Administrative Agent which of the
following actions it will take to eliminate such Borrowing Base Deficiency and
within sixty (60) days after such notice from the Administrative Agent (a) by
instruments satisfactory in form and substance to the Required Lenders, provide
the Lenders with additional security consisting of Oil and Gas Interests with
value and quality satisfactory to the Lenders in their sole discretion to
eliminate such Borrowing Base Deficiency, (b) prepay, without premium or
penalty, the principal amount of the Loans in an amount sufficient to eliminate
such Borrowing Base Deficiency or (c) by a combination of such additional
security and such prepayment eliminate such Borrowing Base Deficiency.
32
(b) If the Borrower or any Restricted Subsidiary sells, transfers or
otherwise disposes of any Borrowing Base Properties at any time a Borrowing Base
Deficiency exists or would exist after giving effect to such sale, transfer or
disposition, the Borrower shall prepay the Borrowings in an amount equal to such
Borrowing Base Deficiency using the Net Cash Proceeds received from such sale,
transfer or other disposition on the date it or any Restricted Subsidiary
receives such Net Cash Proceeds; provided, however if the amount of such
Borrowing Base Deficiency is greater than such Net Cash Proceeds, such
prepayment shall be in an amount equal to 100% of such Net Cash Proceeds;
provided further, however, that amounts applied to the payment of Borrowings
pursuant to this Section may be reborrowed subject to and in accordance with the
terms of this Agreement. Amounts applied to the prepayment of Borrowings
pursuant to this Section shall be first applied ratably to ABR Borrowings then
outstanding and, upon payment in full of all outstanding ABR Borrowings, second,
to Eurodollar Borrowings then outstanding, and if more than one Eurodollar
Borrowing is then outstanding, to each such Eurodollar Borrowing beginning with
the Eurodollar Borrowing with the least number of days remaining in the Interest
Period applicable thereto and ending with the Eurodollar Borrowing with the most
number of days remaining in the Interest Period applicable thereto, subject to
the payment of any funding indemnification amounts required by Section 2.15 but
without penalty or premium.
Section 2.11. Fees.
-----
(a) The Borrower agrees to pay to the Administrative Agent, for the account
of each Lender, an unused commitment fee (the "Unused Commitment Fee")
equivalent to the Applicable Rate times the daily average of the Unused
Commitment. Such Unused Commitment Fee shall be calculated on the basis of a
year consisting of 360 days. The Unused Commitment Fee shall be payable in
arrears on the last day of March, June, September and December of each year,
commencing with the first such date to occur after the Effective Date, and on
the Maturity Date for any period then ending for which the Unused Commitment Fee
shall not have been theretofore paid. In the event the Aggregate Commitment
terminates on any date other than the last day of March, June, September or
December of any year, the Borrower agrees to pay to the Administrative Agent,
for the account of each Lender, on the date of such termination, the total
Unused Commitment Fee due for the period from the last day of the immediately
preceding March, June, September or December, as the case may be, to the date
such termination occurs.
(b) The Borrower agrees to pay (i) to the Administrative Agent for the
account of each Lender a participation fee with respect to its participations in
Letters of Credit, which shall accrue at the same Applicable Rate used to
determine the interest rate applicable to Eurodollar Loans on the average daily
amount of such Lender's LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender's
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the
rate of 0.125% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but excluding the
later of the date of termination of the Aggregate Commitment and the date on
which there ceases to be any LC Exposure, as well as the Issuing Bank's standard
fees with respect to the issuance, amendment, renewal or extension of any Letter
of Credit or processing of drawings thereunder; provided, however, that no such
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fronting fee shall be payable during any period in which the Issuing Bank is the
only Lender. Participation fees and fronting fees accrued through and including
the last day of March, June, September and December of each year shall be
payable on the third Business Day following such last day, commencing on the
first such date to occur after the Effective Date; provided that all such fees
shall be payable on the date on which the Aggregate Commitment terminates and
any such fees accruing after the date on which the Aggregate Commitment
terminates shall be payable on demand. Any other fees payable to the Issuing
Bank pursuant to this paragraph shall be payable within 10 days after demand.
All participation fees and fronting fees shall be computed on the basis of a
year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).
(c) The Borrower agrees to pay to the Administrative Agent, for its own
account, fees payable in the amounts and at the times separately agreed upon
between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent (or to the Issuing
Bank, in the case of fees payable to it) for distribution, in the case of Unused
Commitment Fees and participation fees, to the Lenders. Fees paid shall not be
refundable under any circumstances.
Section 2.12. Interest.
(a) The Loans comprising each ABR Borrowing shall bear interest at the
Alternate Base Rate plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest at
the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus
the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on any
Loan or any fee or other amount payable by the Borrower hereunder is not paid
when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided in the preceding paragraphs
of this Section or (ii) in the case of any other amount, 2% plus the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan, upon termination of the Aggregate
Commitment and on the Maturity Date; provided that (i) interest accrued pursuant
to paragraph (c) of this Section shall be payable on demand, (ii) in the event
of any repayment or prepayment of any Loan (other than a prepayment of an ABR
Loan prior to the end of the Availability Period at a time when no Borrowing
34
Base Deficiency exists), accrued interest on the principal amount repaid or
prepaid shall be payable on the date of such repayment or prepayment and (iii)
in the event of any conversion of any Eurodollar Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable
on the effective date of such conversion.
(e) All interest hereunder shall be computed on the basis of a year of 360
days, except that interest computed by reference to the Alternate Base Rate at
times when the Alternate Base Rate is based on the Prime Rate shall be computed
on the basis of a year of 365 days (or 366 days in a leap year), and in each
case shall be payable for the actual number of days elapsed (including the first
day but excluding the last day). The applicable Alternate Base Rate, Adjusted
LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
Section 2.13. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
Section 2.14. Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender (except any such reserve requirement
reflected in the Adjusted LIBO Rate) or the Issuing Bank; or
35
(ii) impose on any Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurodollar Loans
made by such Lender or any Letter of Credit or participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, such
additional amount or amounts as will compensate such Lender or the Issuing Bank,
as the case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender's or the Issuing Bank's capital or on the capital of
such Lender's or the Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company could have achieved but for such Change in Law (taking
into consideration such Lender's or the Issuing Bank's policies and the policies
of such Lender's or the Issuing Bank's holding company with respect to capital
adequacy), then from time to time the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the amount
or amounts necessary to compensate such Lender or the Issuing Bank or its
holding company, as the case may be, as specified in paragraph (a) or (b) of
this Section, shall be delivered to the Borrower. Such certificate shall be
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Bank, as the case may be, the amount shown as due on any such
certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation pursuant to this Section shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
that the Borrower shall not be required to compensate a Lender or the Issuing
Bank pursuant to this Section for any increased costs or reductions incurred
more than 270 days prior to the date that such Lender or the Issuing Bank, as
the case may be, notifies the Borrower of the Change in Law giving rise to such
increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 270-day period referred to above shall be extended to include the period of
retroactive effect thereof.
36
Section 2.15. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.09(b) and is revoked in accordance therewith), (d) the assignment of any
Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.18, then,
in any such event, the Borrower shall compensate each Lender for the loss, cost
and expense attributable to such event. In the case of a Eurodollar Loan, such
loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the eurodollar market. A
certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
Section 2.16. Taxes.
------
(a) Any and all payments by or on account of any obligation of the Borrower
hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent, Lender or Issuing Bank (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent, each Lender and
the Issuing Bank, within 10 days after written demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent,
such Lender or the Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrower hereunder (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to the Borrower by a Lender or the Issuing Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or the
Issuing Bank, shall be conclusive absent manifest error.
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(d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to
the Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction
of withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate.
(f) If the Administrative Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by the Borrower or with respect to which the
Borrower has paid additional amounts pursuant to this Section 2.16, it shall pay
over such refund to the Borrower (but only to the extent of indemnity payments
made, or additional amounts paid, by the Borrower under this Section 2.16 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the Borrower, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to
the Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to the Administrative Agent or such Lender in
the event the Administrative Agent or such Lender is required to repay such
refund to such Governmental Authority. This Section shall not be construed to
require the Administrative Agent or any Lender to make available its tax returns
(or any other information relating to its taxes which it deems confidential) to
the Borrower or any other Person.
Section 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.14, Section 2.15 or Section
2.16, or otherwise) prior to 12:00 noon, Chicago, Illinois time, on the date
when due, in immediately available funds, without set-off or counterclaim. Any
38
amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices at Mail Code IL1-0634,
00 Xxxxx Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx, except payments to be made directly to
the Issuing Bank as expressly provided herein and except that payments pursuant
to Section 2.14, Section 2.15, Section 2.16 and Section 11.03 shall be made
directly to the Persons entitled thereto. The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof. If any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in Dollars.
(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties; provided that in the event such funds
are received by and are available to the Administrative Agent as a result of the
exercise of any rights and remedies with respect to any collateral under the
Security Instruments, the parties entitled to a ratable share of such funds
pursuant to the foregoing clause (ii) and the determination of each parties'
ratable share shall include, on a pari passu basis, the Lender Counterparties
and the actual aggregate amounts then due and owing to each Lender Counterparty
by the Borrower or any Guarantor as a result of the early termination of any
transactions under any Swap Agreements included in the Obligations (after giving
effect to any netting agreements).
(c) If any Lender shall, by exercising any right of set-off or counterclaim
or otherwise, obtain payment in respect of any principal of or interest on any
of its Loans or participations in LC Disbursements resulting in such Lender
receiving payment of a greater proportion of the aggregate amount of its Loans
and participations in LC Disbursements and accrued interest thereon than the
proportion received by any other Lender, then the Lender receiving such greater
proportion shall purchase (for cash at face value) participations in the Loans
and participations in LC Disbursements of other Lenders to the extent necessary
so that the benefit of all such payments shall be shared by the Lenders ratably
in accordance with the aggregate amount of principal of and accrued interest on
their respective Loans and participations in LC Disbursements; provided that (i)
if any such participations are purchased and all or any portion of the payment
giving rise thereto is recovered, such participations shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans or
participations in LC Disbursements to any assignee or participant, other than to
39
the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
of this paragraph shall apply). The Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under applicable law, that any
Lender acquiring a participation pursuant to the foregoing arrangements may
exercise against the Borrower rights of set-off and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of the
Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrower will not make such payment, the Administrative Agent may assume that
the Borrower has made such payment on such date in accordance herewith and may,
in reliance upon such assumption, distribute to the Lenders or the Issuing Bank,
as the case may be, the amount due. In such event, if the Borrower has not in
fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.
(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.05(d) or Section 2.05(e), Section 2.06(b), Section 2.17(d)
or Section 11.03(c), then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender's obligations under such Sections until all such unsatisfied
obligations are fully paid.
Section 2.18. Mitigation Obligations; Replacement of Lenders.
(a) If any Lender requests compensation under Section 2.14, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.14 or Section 2.16, as the case
may be, in the future and (ii) would not subject such Lender to any unreimbursed
cost or expense and would not otherwise be disadvantageous to such Lender. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Lender in connection with any such designation or assignment.
(b) If any Lender requests compensation under Section 2.14, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
or if any Lender defaults in its obligation to fund Loans hereunder, then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
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recourse (in accordance with and subject to the restrictions contained in
Section 11.04), all its interests, rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Administrative Agent (and
if a Commitment is being assigned, the Issuing Bank), which consent shall not
unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans and participations in LC
Disbursements, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or the Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.14 or payments required to be made
pursuant to Section 2.16, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
(c) If in connection with any proposed amendment, modification,
termination, waiver or consent with respect to any of the provisions of this
Agreement or any other Loan Document as contemplated by Section 11.02, the
consent of Required Lenders shall have been obtained but the consent of one or
more of such other Lenders (each a "Non-Consenting Lender") whose consent is
required has not been obtained; then, the Borrower may elect to replace such
Non-Consenting Lender as a Lender party to this Agreement in accordance with and
subject to the restrictions contained in, and consents required by Section
11.04; provided that (i) the Borrower shall have received the prior written
consent of the Administrative Agent (and if a Commitment is being assigned, the
Issuing Bank), which consent shall not unreasonably be withheld, (ii) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Borrower (in the case of all other amounts) and (iii) in the case
of any such assignment resulting from a claim for compensation under Section
2.14 or payments required to be made pursuant to Section 2.16, such assignment
will result in a reduction in such compensation or payments. A Lender shall not
be required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling the
Borrower to require such assignment and delegation cease to apply.
Article III
Borrowing Base
Section 3.01. Reserve Report; Proposed Borrowing Base. During the period from
the Effective Date until the first Redetermination after the Effective Date, the
Borrowing Base shall be $17,000,000 (the "Initial Borrowing Base"). As soon as
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available and in any event by April 1 and September 1 of each year, beginning
April 1, 2006, the Borrower shall deliver to the Administrative Agent and each
Lender a Reserve Report, prepared as of the immediately preceding December 31
and June 30, respectively, in form and substance reasonably satisfactory to the
Administrative Agent and prepared by an Approved Petroleum Engineer (or, in the
case of the Reserve Report due on September 1 of each year, by petroleum
engineers employed by the Borrower or the Restricted Subsidiaries), said Reserve
Report to utilize economic and pricing parameters established from time to time
by the Administrative Agent, together with such other information, reports and
data concerning the value of the Borrowing Base Properties as the Administrative
Agent shall deem reasonably necessary to determine the value of such Borrowing
Base Properties. Simultaneously with the delivery to the Administrative Agent
and the Lenders of each Reserve Report, the Borrower shall submit to the
Administrative Agent and each Lender the Borrower's requested amount of the
Borrowing Base as of the next Redetermination Date. Promptly after the receipt
by the Administrative Agent of such Reserve Report and Borrower's requested
amount for the Borrowing Base, the Administrative Agent shall submit to the
Lenders a recommended amount of the Borrowing Base.
Section 3.02. Scheduled Redeterminations of the Borrowing Base; Procedures and
Standards. Based in part on the Reserve Reports made available to the
Administrative Agent and the Lenders pursuant to Section 3.01, the Lenders shall
redetermine the Borrowing Base on or prior to the next Redetermination Date (or
such date promptly thereafter as reasonably possible based on the engineering
and other information available to the Lenders). Any Borrowing Base which
becomes effective as a result of any Redetermination shall be subject to the
following restrictions: (a) such Borrowing Base shall not exceed the Maximum
Facility Amount, (b) to the extent such Borrowing Base represents an increase in
the Borrowing Base in effect prior to such Redetermination, such Borrowing Base
must be approved by all Lenders, and (c) to the extent such Borrowing Base
represents a decrease in the Borrowing Base in effect prior to such
Redetermination or a reaffirmation of such prior Borrowing Base, such Borrowing
Base must be approved by the Administrative Agent and Required Lenders. If a
redetermined Borrowing Base is not approved by the Administrative Agent and
Required Lenders within twenty (20) days after the submission to the Lenders by
the Administrative Agent of its recommended Borrowing Base pursuant to Section
3.01, or by all Lenders within such twenty (20) day period in the case of any
increase in the Borrowing Base, the Administrative Agent shall notify each
Lender that the recommended Borrowing Base has not been approved and request
that each Lender submit to the Administrative Agent within ten (10) days
thereafter its proposed Borrowing Base. Promptly following the 10th day after
the Administrative Agent's request for each Lender's proposed Borrowing Base,
the Administrative Agent shall determine the Borrowing Base for such
Redetermination by calculating the highest Borrowing Base then acceptable to the
Administrative Agent and a number of Lenders sufficient to constitute Required
Lenders (or all Lenders in the case of an increase in the Borrowing Base). Each
Redetermination shall be made by the Lenders in their sole discretion, but based
on the Administrative Agent's and such Lender's usual and customary procedures
for evaluating Oil and Gas Interests as such exist at the time of such
Redetermination, and including adjustments to reflect the effect of any Swap
Agreements of the Borrower and the Restricted Subsidiaries as such exist at the
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time of such Redetermination. The Borrower acknowledges and agrees that each
Redetermination shall be based upon the loan collateral value which each Agent
and each Lender in its sole discretion (using such methodology, assumptions and
discount rates as the Administrative Agent and such Lender customarily uses in
assigning collateral value to Oil and Gas Interests) to the Borrowing Base
Properties at the time in question and based upon such other credit factors
consistently applied (including, without limitation, the assets, liabilities,
cash flow, business, properties, prospects, management and ownership of the
Credit Parties) as the Administrative Agent and such Lender customarily
considers in evaluating similar oil and gas credits. It is expressly understood
that the Administrative Agent and Lenders have no obligation to designate the
Borrowing Base at any particular amounts, except in the exercise of their
discretion, whether in relation to the Aggregate Commitment or otherwise. If the
Borrower does not furnish all information, reports and data required to be
delivered by any date specified in this Article III, unless such failure is not
the fault of the Borrower, the Administrative Agent and Lenders may nonetheless
designate the Borrowing Base at any amounts which the Administrative Agent and
Lenders in their reasonable discretion determine and may redesignate the
Borrowing Base from time to time thereafter until the Administrative Agent and
Lenders receive all such information, reports and data, whereupon the
Administrative Agent and Lenders shall designate a new Borrowing Base, as
described above.
Section 3.03. Special Redeterminations. In addition to Scheduled
Redeterminations, the Borrower shall be permitted to request a Special
Redetermination of the Borrowing Base once between each Scheduled
Redetermination and the Required Lenders shall be permitted to request a Special
Redetermination once between each Scheduled Redetermination. Any request by
Borrower pursuant to this Section 3.03 shall be submitted to the Administrative
Agent and each Lender and at the time of such request Borrower shall notify the
Administrative Agent and each Lender of the Borrowing Base requested by Borrower
in connection with such Special Redetermination and within twenty (20) days
thereafter deliver to the Administrative Agent and each Lender a Reserve Report
prepared as of a date prior to the date of such request that is reasonably
acceptable to the Administrative Agent and such other information which the
Administrative Agent shall reasonably request. Any request by Required Lenders
pursuant to this Section 3.03 shall be submitted to the Administrative Agent and
the Borrower. Any Special Redetermination shall be made by the Administrative
Agent and Lenders in accordance with the procedures and standards set forth in
Section 3.02; provided that no Reserve Report is required to be delivered to the
Administrative Agent or the Lenders in connection with any Special
Redetermination requested by the Required Lenders pursuant to this Section 3.03.
Section 3.04. Notice of Redetermination. Promptly following any Redetermination
of the Borrowing Base, the Administrative Agent shall notify the Borrower of the
amount of the redetermined Borrowing Base, which Borrowing Base shall be
effective as of the date specified in such notice, and such Borrowing Base shall
remain in effect for all purposes of this Agreement until the next
Redetermination.
Article IV
Representations and Warranties
Each Credit Party represents and warrants to the Lenders that:
Section 4.01. Organization; Powers. Each Credit Party is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, has all requisite power and authority to carry on its business as
now conducted and, except where the failure to do so, individually or in the
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aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
Section 4.02. Authorization; Enforceability. The Transactions are within each
Credit Party's corporate, limited liability company or partnership powers and
have been duly authorized by all necessary corporate, limited liability company
or partnership and, if required, stockholder action. This Agreement and each of
the other Loan Documents have been duly executed and delivered by each Credit
Party a party thereto and each such Loan Document constitutes a legal, valid and
binding obligation of each Credit Party a party thereto, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
Section 4.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except such as have been obtained or made
and are in full force and effect, the filing of the Mortgages in the appropriate
filing offices and, after the Effective Date, the filing of the Credit Agreement
and related Loan Documents by the Borrower with the Securities and Exchange
Commission pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, (b) will not violate any applicable law or regulation or the
charter, by-laws or other Organizational Documents of the Borrower or any
Restricted Subsidiary or any order of any Governmental Authority, (c) will not
violate or result in a default under any indenture, agreement or other
instrument evidencing Material Indebtedness, any Material Sales Contract binding
upon the Borrower or any Restricted Subsidiary or any of their respective
assets, or any JVEA Documents (other than violations or defaults that have been
waived to the satisfaction of the Administrative Agent and the Lenders) or give
rise to a right thereunder to require any payment to be made by the Borrower or
any Restricted Subsidiary, and (d) will not result in the creation or imposition
of any Lien on any asset of the Borrower or any Restricted Subsidiary other than
Liens permitted under Section 7.02.
Section 4.04. Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Lenders its consolidated
balance sheet and related statements of income, stockholders equity and
cash flows as of and for the fiscal year ended December 31, 2005,
reported on by Xxxx & Associates LLP, independent public accountants.
Such financial statements present fairly, in all material respects, the
financial position and results of operations and cash flows of the
Borrower and its Consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP.
(b) Since December 31, 2005, there has been no material adverse change in
the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Subsidiaries, taken as a whole.
Section 4.05. Properties.
-----------
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(a) Except as otherwise provided in Section 4.14 with respect to Oil and
Gas Interests, the Borrower and each Restricted Subsidiary has good
title to, or valid leasehold interests in, all such real and personal
property material to its business, except for minor defects in title
that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended
purposes.
(b) The Borrower and each Restricted Subsidiary owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other
intellectual property material to its business, and the use thereof by
the Borrower and such Restricted Subsidiaries, as the case may be, does
not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
Section 4.06. Litigation and Environmental Matters.
(a) There are no actions, suits or proceedings by or before any arbitrator
or Governmental Authority pending against or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or any
Restricted Subsidiary, (i) as to which there is a reasonable
possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect (other than the
Disclosed Matters) or (ii) that involve this Agreement or the
Transactions.
(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, neither the Borrower
nor any Restricted Subsidiary (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii)
has become subject to any Environmental Liability, (iii) has received
notice of any claim with respect to any Environmental Liability or (iv)
knows of any basis for any Environmental Liability.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material
Adverse Effect.
Section 4.07. Compliance with Laws and Agreements. The Borrower and each
Restricted Subsidiary is in compliance with all laws, regulations and orders of
any Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
Section 4.08. Investment Company Status. Neither the Borrower nor any Restricted
Subsidiary is an "investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940.
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Section 4.09. Taxes. The Borrower and each Restricted Subsidiary has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Restricted Subsidiary, as
applicable, has set aside on its books adequate reserves or (b) to the extent
that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect.
Section 4.10. ERISA. No ERISA Event has occurred or is reasonably expected to
occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of FASB Statement 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $1,000,000 the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of FASB Statement 87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed by more
than $1,000,000 the fair market value of the assets of all such underfunded
Plans.
Section 4.11. Disclosure. The Borrower has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
Restricted Subsidiary is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the other reports, financial statements,
certificates or other information furnished by or on behalf of the Borrower or
any Restricted Subsidiary to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that, with respect to the Projections, the
Borrower represents only that such information was prepared in good faith based
on assumptions believed to be reasonable at the time.
Section 4.12. Capitalization; Corporate Information. Schedule 4.12 lists, for
each Credit Party, its full legal name, its jurisdiction of organization and its
federal tax identification number and, with respect to each Restricted
Subsidiary, the number of shares of capital stock or other Equity Interests
outstanding and the owner(s) of such shares or Equity Interests.
Section 4.13. Margin Stock. Neither the Borrower nor any Restricted Subsidiary
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U or X of the Board), and no part of the
proceeds of any Loan will be used to purchase or carry any margin stock in
violation of said Regulation U or X or to extend credit to others for the
purpose of purchasing or carrying margin stock in violation of said Regulation U
or X.
Section 4.14. Oil and Gas Interests. Each Credit Party has good and defensible
title to all proved reserves included in the Oil and Gas Interests (for purposes
of this Section 4.14, "proved Oil and Gas Interests") described in the most
recent Reserve Report provided to the Administrative Agent, free and clear of
all Liens except Liens permitted pursuant to Section 7.02. All such proved Oil
46
and Gas Interests are valid, subsisting, and in full force and effect, and all
rentals, royalties, and other amounts due and payable in respect thereof have
been duly paid. Without regard to any consent or non-consent provisions of any
joint operating agreement covering any Credit Party's proved Oil and Gas
Interests but after giving effect to any net profits interest or similar
interest of any Secured Party, including Schlumberger, under the JVEA Documents,
such Credit Party's share of (a) the costs for each proved Oil and Gas Interest
described in the Reserve Report is not materially greater than the decimal
fraction set forth in the Reserve Report, before and after payout, as the case
may be, and described therein by the respective designations "working
interests," "WI," "gross working interest," "GWI," or similar terms (except in
such cases where there is a corresponding increase in the net revenue interest),
and (b) production from, allocated to, or attributed to each such proved Oil and
Gas Interest is not materially less than the decimal fraction set forth in the
Reserve Report, before and after payout, as the case may be, and described
therein by the designations "net revenue interest," "NRI," or similar terms.
Each well drilled in respect of proved producing Oil and Gas Interests described
in the Reserve Report (1) is capable of, and is presently, either producing
Hydrocarbons in commercially profitable quantities or in the process of being
worked over or enhanced, and the Credit Party that owns such proved producing
Oil and Gas Interests is currently receiving payments for its share of
production, with no funds in respect of any thereof being presently held in
suspense, other than any such funds being held in suspense pending delivery of
appropriate division orders, and (2) has been drilled, bottomed, completed, and
operated in compliance with all applicable laws, in the case of clauses (1) and
(2), except where any failure to satisfy clause (1) or to comply with clause (2)
would not have a Material Adverse Effect, and no such well which is currently
producing Hydrocarbons is subject to any penalty in production by reason of such
well having produced in excess of its allowable production.
Section 4.15. Insurance. The certificate signed by the Financial Officer that
attests to the existence and adequacy of, and summarizes, the property and
casualty insurance program maintained by the Credit Parties that has been
furnished by the Borrower to the Administrative Agent and the Lenders as of the
Effective Date, is complete and accurate in all material respects as of the
Effective Date and demonstrates the Borrower's and the Restricted Subsidiaries'
compliance with Section 6.05.
Section 4.16. Solvency.
(a) Immediately after the consummation of the Transactions and immediately
following the making of the initial Borrowing made on the Effective Date and
after giving effect to the application of the proceeds thereof, (1) the fair
value of the assets of the Credit Parties on a consolidated basis, at a fair
valuation, will exceed the debts and liabilities, subordinated, contingent or
otherwise, of the Credit Parties on a consolidated basis; (2) the present fair
saleable value of the real and personal property of the Credit Parties on a
consolidated basis will be greater than the amount that will be required to pay
the probable liability of the Credit Parties on a consolidated basis on their
debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (3) the Credit Parties
on a consolidated basis will be able to pay their debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
47
absolute and matured; and (4) the Credit Parties on a consolidated basis will
not have unreasonably small capital with which to conduct the businesses in
which they are engaged as such businesses are now conducted and are proposed to
be conducted after the date hereof.
(b) The Credit Parties do not intend to, and do not believe that they will,
incur debts beyond their ability to pay such debts as they mature, taking into
account the timing of and amounts of cash to be received by it and the timing of
the amounts of cash to be payable on or in respect of its Indebtedness.
Article V
Conditions
Section 5.01. Effective Date. The obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 11.02):
(a) The Administrative Agent (or its counsel) shall have received from each
party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a
signed signature page of this Agreement) that such party has signed a
counterpart of this Agreement.
(b) The Administrative Agent shall have received a favorable written
opinions (addressed to the Administrative Agent and the Lenders and
dated the Effective Date) of Xxxx, Dill, Carr, Xxxxxxxxxx & Xxxxxxxxx,
P.C., Xxxxxx & Xxxxxx L.L.P., and Xxxxxx Xxxxxx, counsel for the Credit
Parties, substantially in the form of Exhibits X-0, X-0 and B-3,
respectively, and covering such other matters relating to the Credit
Parties, this Agreement or the Transactions as the Required Lenders
shall reasonably request.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing of
each Credit Party, the authorization of the Transactions and any other
legal matters relating to the Credit Parties, this Agreement or the
Transactions, all in form and substance satisfactory to the
Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming that the Credit Parties
have (i) complied with the conditions set forth in paragraphs (a) and
(b) of Section 5.02, and (ii) complied with the covenants set forth in
Section 6.05 (and demonstrating such compliance by the attachment of an
insurance summary and insurance certificates evidencing the coverage
described in such summary).
(e) The Administrative Agent, the Lenders and the Lead Arranger shall have
received all fees and other amounts due and payable on or prior to the
Effective Date, and, to the extent invoiced, reimbursement or payment
of all out-of-pocket expenses required to be reimbursed or paid by the
48
Borrower hereunder, including all fees, expenses and disbursements of
counsel for the Administrative Agent to the extent invoiced on or prior
to the Effective Date, together with such additional amounts as shall
constitute such counsel's reasonable written estimate of expenses and
disbursements to be incurred by such counsel in connection with the
recording and filing of Mortgages and financing statements; provided,
that, such estimate shall not thereafter preclude further settling of
accounts between the Borrower and the Administrative Agent.
(f) The Administrative Agent shall have received the Mortgages to be
executed on the Effective Date pursuant to Section 6.09 of this
Agreement, duly executed and delivered by the appropriate Credit Party,
together with such other assignments, conveyances, amendments,
agreements and other writings, including, without limitation, UCC-1
financing statements, tax affidavits and applicable department of
revenue documentation, creating first and prior Liens, subject to
Permitted Encumbrances, in Oil and Gas Interests having an Engineered
Value equal to or greater than the Engineered Value required under
Section 6.09.
(g) The Administrative Agent shall have received the title information and
opinions with respect to the Mortgaged Properties required by Section
6.10 on the Effective Date.
(h) The Administrative Agent shall have received the Pledge Agreement to be
executed on the Effective Date pursuant to Section 6.13 of this
Agreement, duly executed and delivered by the appropriate Credit Party,
together with such other assignments, conveyances, amendments,
agreements and other writings, including, without limitation, UCC-1
financing statements and control agreements, creating first and prior
Liens, subject to the Liens permitted under Section 7.02, in all Equity
Interests of each Restricted Subsidiary now or hereafter owned by
Borrower or any Restricted Subsidiary.
(i) The Administrative Agent shall have received such financing statements
(including, without limitation, the financing statements referenced in
subclause (f) and (h) above) as Administrative Agent shall specify to
fully evidence and perfect all Liens (to the extent the filing of a
financing statement can be effective to perfect such Liens)
contemplated by the Loan Documents, all of which shall be filed of
record in such jurisdictions as the Administrative Agent shall require
in its sole discretion.
(j) The Administrative Agent shall have received reports and other
information, in form, scope and substance satisfactory to the
Administrative Agent, regarding environmental matters relating to the
Borrowing Base Properties.
(k) The Administrative Agent shall have received a Solvency Certificate in
the form attached hereto as Exhibit D, dated the Effective Date, and
signed by the Chief Financial Officer of the Borrower.
(l) The Lenders shall have received from the Borrower (i) the financial
statements described in Section 4.04, (ii) a pro forma consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at
the Effective Date, and reflecting the consummation of the
Transactions, the related financings and other transactions
49
contemplated by the Loan Documents to occur on or prior to the
Effective Date, which pro forma balance sheet shall be prepared
consistent in all respects with the information previously provided by
the Borrower to the Administrative Agent and the Lenders and otherwise
in form and substance satisfactory to the Administrative Agent and
(iii) the Projections.
(m) The Administrative Agent, Schlumberger and Gasco Production shall have
executed and delivered the SLB Agreement.
(n) The Administrative Agent shall have received from the Service Parties a
written consent (addressed to Gasco Production and in form, scope and
substance satisfactory to the Administrative Agent) to the execution,
delivery and performance by Gasco Production of the Mortgages to be
filed in Carbon, Duchesne and Uintah Counties, Utah, and the Liens to
secure the Obligations contemplated thereby, including the filing of
such Mortgages and related UCC-1 financing statements in the
appropriate filing offices.
(o) The Administrative Agent shall have received satisfactory evidence that
Schlumberger has complied, or promptly after the Effective Date will
comply, with the legend requirement set forth in the SLB Agreement with
respect to the security instruments evidencing the Liens securing the
obligations of Gasco Production to Schlumberger under the JVEA
Documents.
(p) There shall not exist any action, suit, investigation, litigation or
proceeding or other legal or regulatory developments, pending or
threatened in any court or before any arbitrator or Governmental
Authority that, in the reasonable opinion of Administrative Agent,
singly or in the aggregate, materially impairs the Transactions or any
of the other transactions contemplated by the Loan Documents or that
could have a Material Adverse Effect.
(q) All partnership, corporate and other proceedings taken or to be taken
in connection with the Transactions and all documents incidental
thereto shall be satisfactory in form and substance to Administrative
Agent and its counsel, and Administrative Agent and such counsel shall
have received all such counterpart originals or certified copies of
such documents as Administrative Agent may reasonably request.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 11.02)
at or prior to 3:00 p.m., Chicago, Illinois time, on March 29, 2006 (and, in the
event such conditions are not so satisfied or waived, the Aggregate Commitment
shall terminate at such time).
Section 5.02. Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or
extend any Letter of Credit, is subject to the satisfaction of the following
conditions:
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(a) The representations and warranties of each Credit Party set forth in
this Agreement shall be true and correct on and as of the date of such
Borrowing or the date of issuance, amendment, renewal or extension of
such Letter of Credit, as applicable except to the extent that such
representations and warranties specifically refer to an earlier date,
in which case they shall be true and correct as of such earlier date.
(b) At the time of and immediately after giving effect to such Borrowing or
the issuance, amendment, renewal or extension of such Letter of Credit,
as applicable, no Default shall have occurred and be continuing.
(c) At the time of and immediately after giving effect to such Borrowing or
the issuance, amendment, renewal or extension of such Letter of Credit,
as applicable, no Borrowing Base Deficiency exists or would be caused
thereby.
Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a), (b)
and (c) of this Section.
Article VI
Affirmative Covenants
Until the Aggregate Commitment has expired or been terminated
and the principal of and interest on each Loan and all fees payable hereunder
shall have been paid in full and all Letters of Credit shall have expired or
terminated and all LC Disbursements shall have been reimbursed, each Credit
Party covenants and agrees with the Lenders that:
Section 6.01. Financial Statements; Other Information. The Borrower will furnish
to the Administrative Agent and each Lender known to the Borrower:
(a) within 90 days after the end of each fiscal year of the Borrower, the
audited consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows of the Borrower and its Consolidated
Subsidiaries as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on by a
firm of independent public accountants reasonably acceptable to Administrative
Agent (without a "going concern" or like qualification or exception and without
any qualification or exception as to the scope of such audit) to the effect that
such consolidated and consolidating financial statements present fairly in all
material respects the financial condition and results of operations of the
Borrower and its Consolidated Subsidiaries on a consolidated and consolidating
basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each fiscal quarter of the Borrower,
the consolidated balance sheet and related statements of operations, and cash
flows of the Borrower and its Consolidated Subsidiaries as of the end of and for
such fiscal quarter and the then elapsed portion of the fiscal year, setting
forth in each case in comparative form the figures for the corresponding period
or periods of (or, in the case of the balance sheet, as of the end of) the
previous fiscal year, all certified by one of its Financial Officers as
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presenting fairly in all material respects the financial condition and results
of operations of the Borrower and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;
(c) following any delivery of financial statements under clause (a) or (b)
above, but within the time periods specified in clause (a) or (b) for the
delivery of such financial statements, as applicable, a certificate in a form
reasonably acceptable to Administrative Agent signed by the chief financial
officer of the Borrower (i) certifying as to whether a Default has occurred and,
if a Default has occurred, specifying the details thereof and any action taken
or proposed to be taken with respect thereto, and (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 7.11;
(d) following any delivery of financial statements under clause (a) above,
but within 90 days after the end of the preceding fiscal year, a certificate of
the accounting firm that reported on such financial statements stating whether
they obtained knowledge during the course of their examination of such financial
statements of any Default (which certificate may be limited to the extent
required by accounting rules or guidelines);
(e) as soon as available, and in any event no later than April 1 and
September 1 of each year, the Reserve Reports required on such dates pursuant to
Section 3.01;
(f) together with the Reserve Reports required under clause (e) above, (i)
a report, in reasonable detail, setting forth the Swap Agreements then in
effect, the notional volumes of and prices for, on a monthly basis and in the
aggregate, the Crude Oil and Natural Gas for each such Swap Agreement and the
term of each such Swap Agreement; (ii) a true and correct schedule of the
Mortgaged Properties, (iii) the percentage of the Engineered Value of the
Borrowing Base that the Mortgaged Properties represent and (iv) a description of
the additional Oil and Gas Interests, if any, to be mortgaged by the Credit
Parties to comply with Section 6.09 and the Engineered Value thereof;
(g) together with the Reserve Reports required under clause (e) above,
Projections for the forthcoming three fiscal years, year by year , and for the
forthcoming fiscal year, quarter by quarter; and
(h) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of any Credit
Party, or compliance with the terms of this Agreement, as the Administrative
Agent or any Lender may reasonably request.
Any financial statements and other information meeting the criteria of
Section 6.01(a) or 6.01(b) that are filed by the Borrower with the Securities
and Exchange Commission, or any Governmental Authority succeeding to any or all
the functions of said Commission, shall be deemed to be delivered to the
Administrative Agent and each Lender at the time of each such filing in
satisfaction of the requirements of Section 6.01(a) or 6.01 (b), as applicable;
provided each Lender then known to the Borrower is notified by the Borrower that
such information has been filed with the Securities and Exchange Commission, or
such successor Governmental Authority. In addition, the Borrower shall notify
52
each Lender promptly after the same becomes publicly available, of the filing by
the Borrower or any Subsidiary of any other reports, proxy statements and other
materials with the Securities and Exchange Commission, or such successor
Governmental Authority.
Section 6.02. Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting
any Credit Party or any Affiliate thereof that, if adversely
determined, could reasonably be expected to result in a Material
Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and the Restricted Subsidiaries in
an aggregate amount exceeding $1,000,000;
(d) any written notice or written claim to the effect that any Credit Party
is or may be liable to any Person as a result of the release by any
Credit Party, or any other Person of any Hazardous Materials into the
environment, which could reasonably be expected to have a Material
Adverse Effect;
(e) any notice alleging any violation of any Environmental Law by any
Credit Party, which could reasonably be expected to have a Material
Adverse Effect;
(f) the occurrence of any material breach or default under, or repudiation
or termination of, any Material Sales Contract that results in, or
could reasonably be expected to result in, a Material Adverse Effect;
(g) the occurrence of any material breach or default under, or repudiation
or termination of, any JVEA Document prior to its stated termination or
maturity date.
(h) the receipt by the Borrower or any Restricted Subsidiary of any
management letter or comparable analysis prepared by the auditors for
the Borrower or any such Restricted Subsidiary; and
(i) any other development that results in, or could reasonably be expected
to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
53
Section 6.03. Existence; Conduct of Business. The Borrower will, and will cause
each Restricted Subsidiary to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 7.03.
Section 6.04. Payment of Obligations. The Borrower will, and will cause each
Restricted Subsidiary to, pay its obligations, including Tax liabilities, that,
if not paid, could result in a Material Adverse Effect before the same shall
become delinquent or in default, except where (a) the validity or amount thereof
is being contested in good faith by appropriate proceedings, (b) the Borrower or
such Restricted Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
Section 6.05. Maintenance of Properties; Insurance. The Borrower will, and will
cause each Restricted Subsidiary and use commercially reasonable efforts to
cause each operator of Borrowing Base Properties to, (a) keep and maintain all
property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations, to the extent
that such insurance is commercially available. On or prior to the Effective Date
and thereafter, upon request of the Administrative Agent, the Borrower will
furnish or cause to be furnished to the Administrative Agent from time to time a
summary of the respective insurance coverage of the Borrower and its Restricted
Subsidiaries in form and substance reasonably satisfactory to the Administrative
Agent, and, if requested, will furnish the Administrative Agent copies of the
applicable policies. Upon demand by Administrative Agent, the Borrower will
cause any insurance policies covering any such property to be endorsed (a) to
provide that such policies may not be cancelled, reduced or affected in any
manner for any reason without fifteen (15) days prior notice to Administrative
Agent, and (b) to provide for such other matters as the Lenders may reasonably
require.
Section 6.06. Books and Records; Inspection Rights. The Borrower will, and will
cause each Restricted Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Borrower will, and will cause
each Restricted Subsidiary to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and its
independent accountants, all at such reasonable times and as often as reasonably
requested.
Section 6.07. Compliance with Laws. The Borrower will, and will cause each
Restricted Subsidiary to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
54
Section 6.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans
will be used only to (a) pay the fees, expenses and transaction costs of the
Transactions and (b) finance the working capital needs of the Borrower,
including capital expenditures, and for general corporate purposes of the
Borrower and the Guarantors, in the ordinary course of business, including the
exploration, acquisition and development of Oil and Gas Interests. No part of
the proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the regulations of the Board,
including Regulations U and X. Letters of Credit will be issued only to support
general corporate purposes of the Borrower and the Restricted Subsidiaries.
Section 6.09. Mortgages. The Borrower will, and will cause each Guarantor that
is an owner of Borrowing Base Properties to, execute and deliver to the
Administrative Agent, for the benefit of the Secured Parties, Mortgages in form
and substance acceptable to the Administrative Agent together with such other
assignments, conveyances, amendments, agreements and other writings, including,
without limitation, UCC-1 financing statements (each duly authorized and
executed, as applicable) as the Administrative Agent shall deem necessary or
appropriate to grant, evidence and perfect Liens in not less than eighty percent
(80%) of the Engineered Value of the Borrowing Base Properties of the Borrower
and such Guarantors taken as a whole subject only to Liens in the Borrowing Base
Properties permitted under Section 7.02.
Section 6.10. Title Data. The Borrower will, and will cause each Guarantor that
is an owner of Mortgaged Properties to, deliver to the Administrative Agent such
opinions of counsel and other evidence of title as the Administrative Agent
shall deem reasonably necessary or appropriate to verify (i) the Borrower's and
such Guarantor's title to not less (80%) of the Engineered Value of the
Mortgaged Properties taken as a whole and after giving effect to the Borrower's
and the Restricted Subsidiaries' compliance with the last sentence of this
Section 6.10, and (ii) the validity, perfection and priority of the Liens
created by such Mortgages and such other matters regarding such Mortgages as
Administrative Agent shall reasonably request. Within sixty (60) days after the
Effective Date, the Borrower will and will cause each Restricted Subsidiary to
cure the title defects described on Schedule 6.10 by taking the curative actions
described on Schedule 6.10.
Section 6.11. Operation of Oil and Gas Interests.
(a) The Borrower will, and will cause each Restricted Subsidiary to,
maintain, develop and operate (to the extent it is the operator) its
Oil and Gas Interests in a good and workmanlike manner, and observe and
comply with all of the terms and provisions, express or implied, of all
oil and gas leases relating to such Oil and Gas Interests so long as
such Oil and Gas Interests are capable of producing Hydrocarbons and
accompanying elements in paying quantities, except where such failure
to comply could not reasonably be expected to have a Material Adverse
Effect.
(b) The Borrower will, and will cause each Restricted Subsidiary to, comply
in all respects with all contracts and agreements applicable to or
relating to its Oil and Gas Interests or the production and sale of
Hydrocarbons and accompanying elements therefrom, except to the extent
a failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
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Section 6.12. Restricted Subsidiaries. In the event any Person is or becomes a
Restricted Subsidiary, Borrower will (a) promptly take all action necessary to
comply with Section 6.13, (b) promptly take all such action and execute and
deliver, or cause to be executed and delivered, to the Administrative Agent all
such documents, opinions, instruments, agreements, and certificates similar to
those described in Section 5.01(b) and Section 5.01(c) that the Administrative
Agent may request, and (c) promptly cause such Restricted Subsidiary to (i)
become a party to this Agreement and Guarantee the Obligations by executing and
delivering to the Administrative Agent a Counterpart Agreement in the form of
Exhibit C, and (ii) to the extent required to comply with Section 6.09, grant to
the Administrative Agent, for the benefit of the Lenders, a security interest in
all of such Restricted Subsidiary's Oil and Gas Interests to secure the
Obligations. Upon delivery of any such Counterpart Agreement to the
Administrative Agent, notice of which is hereby waived by each Credit Party,
such Restricted Subsidiary shall be a Guarantor and shall be as fully a party
hereto as if such Restricted Subsidiary were an original signatory hereto. Each
Credit Party expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Credit Party
hereunder. This Agreement shall be fully effective as to any Credit Party that
is or becomes a party hereto regardless of whether any other Person becomes or
fails to become or ceases to be a Credit Party hereunder. With respect to each
such Restricted Subsidiary, the Borrower shall promptly send to the
Administrative Agent written notice setting forth with respect to such Person
the date on which such Person became a Restricted Subsidiary of the Borrower,
and supplement the data required to be set forth in the Schedules to this
Agreement as a result of the acquisition or creation of such Restricted
Subsidiary; provided that such supplemental data must be reasonably acceptable
to the Administrative Agent and Required Lenders.
Section 6.13. Pledged Equity Interests. On the date hereof and at the time
hereafter that any Restricted Subsidiary of the Borrower is created or acquired
or any Unrestricted Subsidiary becomes a Restricted Subsidiary, the Borrower and
the Subsidiaries (as applicable) shall execute and deliver to the Administrative
Agent for the benefit of the Secured Parties, a Pledge Agreement, in form and
substance acceptable to the Administrative Agent, from the Borrower and/or the
Subsidiaries (as applicable) covering all Equity Interests owned by the Borrower
or such Restricted Subsidiaries in such Restricted Subsidiaries, together with
all certificates (or other evidence acceptable to Administrative Agent)
evidencing the issued and outstanding Equity Interests of each such Restricted
Subsidiary of every class owned by such Credit Party (as applicable) which, if
certificated, shall be duly endorsed or accompanied by stock powers executed in
blank (as applicable), as Administrative Agent shall deem necessary or
appropriate to grant, evidence and perfect a first priority security interest in
the issued and outstanding Equity Interests owned by Borrower or any Restricted
Subsidiary in each Restricted Subsidiary.
Section 6.14. JVEA Documents. Promptly after the execution and delivery by any
Credit Party of any amendments, modifications, supplements or restatements of
any JVEA Document or any additional agreements, instruments, conveyances or
assignments, as collateral or otherwise, pursuant to or in connection with any
JVEA Document, the Borrower shall, and shall cause Gasco Production to, deliver
to the Administrative Agent and its counsel true and correct copies of any such
amendment, modification, supplement, restatement, agreement, instrument,
conveyance or assignment.
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Article VII
Negative Covenants
Until the Aggregate Commitment has expired or terminated and
the principal of and interest on each Loan and all fees payable hereunder have
been paid in full and all Letters of Credit have expired or terminated and all
LC Disbursements shall have been reimbursed, each Credit Party covenants and
agrees with the Lenders that:
Section 7.01. Indebtedness. The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) The Obligations;
(b) Indebtedness existing on the date hereof and set forth in Schedule 7.01
and extensions, renewals and replacements of any such Indebtedness that
do not increase the outstanding principal amount thereof;
(c) Indebtedness of the Borrower to any Guarantor and of any Guarantor to
the Borrower or any other Guarantor; provided, that (i) all such
Indebtedness shall be unsecured and subordinated in right of payment to
the payment in full of all of the Obligations in a manner and on terms
and conditions reasonably satisfactory to the Administrative Agent and
(ii) all such Indebtedness is evidenced by promissory notes in form and
substance reasonably satisfactory to the Administrative Agent, and such
promissory notes are subject to a first priority security interest in
favor of the Administrative Agent for the benefit of the Secured
Parties on terms and conditions reasonably satisfactory to the
Administrative Agent.
(d) Guarantees of the Obligations.
(e) Indebtedness of the Borrower and the Restricted Subsidiaries incurred
to finance the acquisition, construction or improvement of any fixed or
capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such
assets or secured by a Lien on any such assets prior to the acquisition
thereof, and extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount
thereof; provided that (i) such Indebtedness is incurred prior to or
within 90 days after such acquisition or the completion of such
construction or improvement and (ii) the aggregate principal amount of
Indebtedness permitted by this clause (e) shall not exceed $1,000,000
at any time outstanding;
(f) Indebtedness incurred or deposits made by the Borrower and the
Restricted Subsidiaries (i) under worker's compensation laws,
unemployment insurance laws or similar legislation, or (ii) in
connection with bids, tenders, contracts (other than for the payment of
Indebtedness) or leases to which such Credit Party is a party, (iii) to
secure public or statutory obligations of such Credit Party, and (iv)
of cash or U.S. Government Securities made to secure the performance of
57
statutory obligations, surety, stay, customs and appeal bonds to which
such Credit Party is a party in connection with the operation of the
Oil and Gas Interests, in each case in the ordinary course of business;
(g) Indebtedness under Swap Agreements to the extent permitted under
Section 7.05;
(h) Indebtedness of the Borrower under the Convertible Notes in an
aggregate principal amount not exceeding $65,000,000 at any
time outstanding;
(i) Indebtedness of Gasco Production to Schlumberger under the JVEA
Documents; and
(j) Other unsecured Indebtedness of the Credit Parties in an aggregate
principal amount not exceeding $1,000,000 at any time outstanding.
Section 7.02. Liens. The Borrower will not, nor will it permit any of its
Restricted Subsidiaries to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:
(a) Any Lien created pursuant to this Agreement or the Security
Instruments;
(b) Permitted Encumbrances;
(c) Any Lien on any property or asset of the Borrower or any Restricted
Subsidiary existing on the date hereof and set forth in Schedule 7.02; provided
that (i) such Lien shall not apply to any other property or asset of the
Borrower or any other Restricted Subsidiary and (ii) such Lien shall secure only
those obligations which it secures on the date hereof and extensions, renewals
and replacements thereof that do not increase the outstanding principal amount
thereof;
(d) Any Lien existing on any property or asset prior to the acquisition
thereof by the Borrower or any Restricted Subsidiary or existing on any property
or asset of any Person that becomes a Restricted Subsidiary after the date
hereof prior to the time such Person becomes a Restricted Subsidiary; provided
that (i) such Lien secures Indebtedness permitted under Section 7.01, (ii) such
Lien is not created in contemplation of or in connection with such acquisition
or such Person becoming a Restricted Subsidiary, as the case may be, (iii) such
Lien shall not apply to any other property or assets of the Borrower or any
other Restricted Subsidiary and (iv) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date such
Person becomes a Restricted Subsidiary, as the case may be and extensions,
renewals and replacements thereof that do not increase the outstanding principal
amount thereof;
(e) Liens on fixed or capital assets acquired, constructed or improved by
the Borrower or any Restricted Subsidiary; provided that (i) such Liens, secure
Indebtedness permitted by Section 7.01(e), (ii) such security interests and the
Indebtedness secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, (iii) the
Indebtedness secured thereby does not exceed the cost of acquiring, constructing
58
or improving such fixed or capital assets and (iv) such security interests shall
not apply to any other property or assets of the Borrower or any other
Restricted Subsidiaries;
(f) Liens on the Pledged Securities to secure Indebtedness of the Borrower
under the Convertible Notes; provided that (i) such Liens shall not apply to any
other property or assets of the Borrower or any Restricted Subsidiary and (ii)
no additional property or assets (other than reinvestments of proceeds of
Pledged Securities) shall be pledged to secure such Indebtedness;
(g) Subject to the SLB Agreement, Liens securing Indebtedness permitted
under Section 7.01(i) and Liens securing other Indebtedness, obligations and
liabilities, including net profits interests, of the Service Parties under the
JVEA Documents; provided that, (i) to the extent any such other Indebtedness,
obligations, liabilities or net profits interests of any Service Party are
secured by, or purported to be secured by, Liens on any Bundle in excess of such
Service Party's Percentage of such Bundle, such Lien is subject to an
Intercreditor Agreement in form and substance satisfactory to the Administrative
Agent and the Lenders or otherwise expressly limited to such Service Party's
Percentage on terms and conditions satisfactory to the Administrative Agent and
the Lenders and (ii) any assets of any Credit Party securing such Indebtedness
are also subject to a Lien securing the Obligations; and
(h) Liens on properties or assets of the Borrower or any Restricted
Subsidiary (other than Borrowing Base Properties) that are not subject to, or
required by any Loan Document to be subject to, Liens created pursuant to this
Agreement or the Security Instruments.
Section 7.03. Fundamental Changes.
(a) The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to, merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of transactions) all or
any substantial part of its assets, or any of its Borrowing Base Properties or
any of the Equity Interests of any Restricted Subsidiary (in each case, whether
now owned or hereafter acquired), or liquidate or dissolve, except that, the
Borrower or any Restricted Subsidiary may sell Hydrocarbons produced from its
Oil and Gas Interests in the ordinary course of business and, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing, (i) any Person may merge into the Borrower in a
transaction in which the Borrower is the surviving entity, (ii) any Person
(other than the Borrower) may merge into any Restricted Subsidiary in a
transaction in which the surviving entity is a Restricted Subsidiary, (iii) any
Restricted Subsidiary may sell, transfer, lease or otherwise dispose of its
assets to the Borrower or to another Restricted Subsidiary, (iv) any Restricted
Subsidiary may liquidate or dissolve if the Borrower determines in good faith
that such liquidation or dissolution is in the best interests of the Borrower
and is not materially disadvantageous to the Lenders, (v) the Borrower or any
Restricted Subsidiary may sell, transfer, lease or otherwise dispose of
equipment and related items in the ordinary course of business, that are
59
obsolete or no longer necessary in the business of the Borrower or any of its
Restricted Subsidiaries or that is being replaced by equipment of comparable
value and utility, (vi) subject to Section 2.10(b), the Borrower or any
Restricted Subsidiary may sell, transfer, lease, exchange, abandon or otherwise
dispose of Borrowing Base Properties with a value not exceeding, in the
aggregate for the Borrower and its Restricted Subsidiaries taken as a whole, 5%
of the Borrowing Base between Scheduled Redeterminations, and (vii) with the
prior written consent of Required Lenders and subject to Section 2.10(b), the
Borrower or any Restricted Subsidiary may sell, transfer, lease, exchange,
abandon or otherwise dispose of Borrowing Base Properties not otherwise
permitted pursuant to the foregoing clause (vi). For purposes of the foregoing
clause (vi), the value of any Oil and Gas Interests included in the Borrowing
Base Properties shall be the Engineered Value of such Oil and Gas Interests and
the value of all other Oil and Gas Interests shall be the value which would be
assigned to such Oil and Gas Interests using the same methodology, assumptions
and discount rates used to determine the Engineered Value of the Borrowing Base
Properties as of the most recent Redetermination. In addition, for purposes of
determining compliance with clause (vi) of this Section with respect to any
exchange of Oil and Gas Interests, the value of such exchange shall be the net
reduction, if any, in Engineered Value realized or resulting from such exchange.
(b) The Borrower will not, nor will it permit any of its Restricted
Subsidiaries to, engage to any material extent in any business other than
businesses of the type conducted by the Borrower and its Restricted Subsidiaries
on the date of execution of this Agreement and after giving effect to the
Transactions and businesses reasonably related thereto.
Section 7.04. Investments, Loans, Advances, Guarantees and Acquisitions. The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a wholly owned Restricted Subsidiary prior to such merger) any capital
stock, evidences of Indebtedness or other securities (including any option,
warrant or other right to acquire any of the foregoing) of, make or permit to
exist any loans or advances to, Guarantee any Indebtedness of, or make or permit
to exist any investment or any other interest in, any other Person, or purchase
or otherwise acquire (in one transaction or a series of transactions) any assets
of any other Person constituting a business unit, except:
(a) Permitted Investments;
(b) investments by the Borrower in the Equity Interests of any Restricted
Subsidiary;
(c) investments by the Borrower or a Guarantor consisting of intercompany
Indebtedness permitted under Section 7.01(c)
(d) Guarantees constituting Indebtedness permitted by Section 7.01;
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(e) investments by the Borrower and its Restricted Subsidiaries that are
(1) customary in the oil and gas business, (2) made in the ordinary course of
the Borrower's or such Restricted Subsidiary's business, and (3) made in the
form of, or pursuant to, oil, gas and mineral leases, operating agreements,
farm-in agreements, farm-out agreements, development agreements, unitization
agreements, joint bidding agreements, services contracts and other similar
agreements that a reasonable and prudent oil and gas industry owner or operator
would find acceptable;
(f) investments consisting of Swap Agreements to the extent permitted under
Section 7.05; and
(g) other investments by the Borrower and the Restricted Subsidiaries in an
aggregate principal amount not exceeding $1,000,000 at any time.
Section 7.05. Swap Agreements. The Borrower will not, nor will it permit any of
its Restricted Subsidiaries to, enter into or maintain any Swap Agreement,
except Swap Agreements entered into in the ordinary course of business and not
for speculative purposes to (a) hedge or mitigate Crude Oil and Natural Gas
price risks to which the Borrower or any Restricted Subsidiary has actual
exposure, and (b) effectively cap, collar or exchange interest rates (from fixed
to floating rates, from one floating rate to another floating rate or otherwise)
with respect to any interest-bearing liability or investment of any Credit
Party; provided that such Swap Agreements (at the time each transaction under
such Swap Agreement is entered into) would not cause the aggregate notional
amount of Crude Oil and Natural Gas under all Swap Agreements then in effect to
exceed eighty percent (80%) of the "forecasted production from proved producing
reserves" (as defined below) of the Borrower and the Restricted Subsidiaries for
the forthcoming five year period. As used in this clause, "forecasted production
from proved producing reserves" means the forecasted production of Crude Oil and
Natural Gas as reflected in the most recent Reserve Report delivered to the
Administrative Agent pursuant to Section 6.01, after giving effect to any pro
forma adjustments for the consummation of any Acquisitions or dispositions since
the effective date of such Reserve Report. Once the Borrower or any Restricted
Subsidiaries enters into a Swap Agreement or any hedge transaction pursuant to
any Swap Agreement, the terms and conditions of such Swap Agreement and such
hedge transaction may not be amended or modified, nor may such Swap Agreement or
hedge transaction be cancelled, assigned, sold or transferred without the prior
written consent of Required Lenders. Upon the request of the Required Lenders,
Borrower will, and will cause each Restricted Subsidiary to, take all actions
necessary to cause all of its right, title and interest in each Swap Agreement
to which it is a party and the hedge transactions related thereto to be
collaterally assigned to the Administrative Agent, for the benefit of the
Secured Parties, and shall, if requested by the Administrative Agent or the
Required Lenders, use its commercially reasonable efforts to cause each such
agreement or contract to (a) expressly permit such assignment and (b) upon the
occurrence of any default or event of default under such agreement or contract,
(i) to permit the Lenders to cure such default or event of default and assume
the obligations of such Credit Party under such agreement or contract and (ii)
to prohibit the termination of such agreement or contract by the counterparty
thereto if the Lenders assume the obligations of such Credit Party under such
agreement or contract and the Lenders take the actions required under the
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foregoing clause (i). Upon the request of the Administrative Agent, the Borrower
shall, within thirty (30) days of such request, provide to the Administrative
Agent and each Lender copies of all agreements, documents and instruments
evidencing the Swap Agreements not previously delivered to the Administrative
Agent and Lenders, certified as true and correct by a Financial Officer of the
Borrower, and such other information regarding such Swap Agreements as the
Administrative Agent and Lenders may reasonably request
Section 7.06. Restricted Payments. The Borrower will not, nor will it permit any
of its Restricted Subsidiaries to, declare or make, or agree to pay or make,
directly or indirectly, any Restricted Payment, except that (a) the Borrower may
declare and pay dividends with respect to its Equity Interests payable solely in
additional shares of its common stock, (b) the Borrower may make Restricted
Payments pursuant to and in accordance with stock option plans or other benefit
plans for management or employees of the Borrower and its Restricted
Subsidiaries in an aggregate amount not to exceed $1,000,000 in any fiscal year,
(c) any Restricted Subsidiary may make Restricted Payments to the Borrower or
any Guarantor, and (d) so long as no Default shall have occurred and be
continuing or would result from the making of such Restricted Payment,
Restricted Payments by the Borrower to fund the repurchase, redemption or other
acquisition or retirement for value of Equity Interests of the Borrower upon the
termination of employment, death, permanent disability or retirement of any
officer or employee of the Borrower or any of its Subsidiaries; provided that,
the aggregate amount of such Restricted Payments pursuant to this clause (d)
shall not exceed $1,000,000 in the aggregate.
Section 7.07. Transactions with Affiliates. The Borrower will not, nor will it
permit any of its Restricted Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Restricted Subsidiary
than could be obtained on an arm's-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its Restricted Subsidiaries
not involving any other Affiliate, (c) transactions described on Schedule 7.07,
and (d) any Restricted Payment permitted by Section 7.06.
Section 7.08. Restrictive Agreements. The Borrower will not, nor will it permit
any of its Restricted Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon (a) the ability of the Borrower or any Restricted
Subsidiary to create, incur or permit to exist any Lien upon any of property or
assets that are, or are required by any Loan Document to be, subject to Liens
created by this Agreement or the Security Instruments hereunder, or (b) the
ability of any Restricted Subsidiary to pay dividends or other distributions
with respect to any of its Equity Interests or to make or repay loans or
advances to the Borrower or any Restricted Subsidiary or to Guarantee
Indebtedness of the Borrower or any Restricted Subsidiary; provided that (i) the
foregoing shall not apply to restrictions and conditions imposed by law or by
this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof pursuant to the JVEA Documents (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of, any such restriction or condition), (iii) clause (a) of the
foregoing shall not apply to restrictions or conditions imposed by any agreement
relating to secured Indebtedness permitted by this Agreement if such
restrictions or conditions apply only to the property or assets securing such
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Indebtedness and (iv) clause (a) of the foregoing shall not apply to customary
provisions in leases (other than oil and gas leases) and other contracts
restricting the assignment thereof.
Section 7.09. Disqualified Stock. The Borrower will not, nor will it permit any
of its Restricted Subsidiaries to, issue any Disqualified Stock.
Section 7.10. Amendments to Organizational Documents and JVEA Documents. The
Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
enter into or permit any material modification or amendment of, or waive any
material right or obligation of any Person under its Organizational Documents
that would adversely affect the Lenders in any material respect. The Borrower
will not, nor will it permit any of its Restricted Subsidiaries to, enter into
or permit any modification or amendment of, or waive any material right or
obligation of any Person under any JVEA Document that would (i) cause the
representations and warranties set forth in Section 4.14 with respect to the
"working interest", "gross working interest" or "net revenue interest" in
respect of the proved producing Oil and Gas Interests described in the Reserve
Report to be incorrect in any material respect, or (ii) otherwise adversely
affect the Secured Parties, including the Lenders, or the Liens securing the
Obligations in any material respect. The Borrower will not, nor will it permit
any Restricted Subsidiary other than Gasco Production to, be a party to any JVEA
Document.
Section 7.11. Financial Covenants.
(a) Consolidated Current Ratio. The Borrower will not permit the
Consolidated Current Ratio as of the end of any fiscal quarter ending
on or after March 31, 2006 to be less than 1.00 to 1.00.
(b) Leverage Ratio. The Borrower will not permit the ratio, determined as
of the end of any fiscal quarter ending on or after March 31, 2006, of
(i) Senior Debt as of the end of such fiscal quarter, to (ii)
Consolidated EBITDAX for such fiscal quarter multiplied by four (4) to
be greater than 3.50 to 1.0.
Section 7.12. Sale and Leaseback Transactions and other Off-Balance Sheet
Liabilities. The Borrower will not, nor will it permit any Restricted Subsidiary
to, enter into or suffer to exist any (i) Sale and Leaseback Transaction or (ii)
any other transaction pursuant to which it incurs or has incurred Off-Balance
Sheet Liabilities, except for Swap Agreements permitted under the terms of
Section 7.05 and Advance Payment Contracts; provided, that the aggregate amount
of all Advance Payments received by any Credit Party that have not been
satisfied by delivery of production at any time does not exceed, in the
aggregate $1,000,000.
Section 7.13. Convertible Notes Restrictions. Prior to the termination of all
Commitments and the payment and performance in full of the Obligations, the
Borrower will not, nor will it permit any Restricted Subsidiary to, (a) except
for the regularly scheduled payments of interest required under the Convertible
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Notes and payments made solely with the proceeds of Pledged Securities or shares
of Borrower's common stock, directly or indirectly, retire, redeem, defease,
repurchase or prepay prior to the scheduled due date thereof any part of the
principal of, or interest on, the Convertible Notes, or (b) enter into or permit
any modification or amendment of, or waive any material right or obligation of
any Person under any Convertible Notes if the effect of any such modification or
amendment is to (i) increase the maximum principal amount of the Indebtedness
evidenced by the Convertible Notes or the rate of interest on any such
Indebtedness (other than as a result of the imposition of a default rate of
interest in accordance with the terms of the Convertible Notes), (ii) change or
add any event of default or any covenant with respect to the Indebtedness
evidenced by the Convertible Notes if the effect of such change or addition is
to cause any one or more of the Convertible Notes to be more restrictive on any
Credit Party than such Convertible Notes were prior to such change or addition,
(iii) change the dates upon which payments of principal or interest on the
Indebtedness evidenced by the Convertible Notes are due, (iv) change any
redemption or prepayment provisions of the Indebtedness evidenced by the
Convertible Notes, (v) grant any Liens in any assets or properties of any Credit
Party to secure the Convertible Notes other than the Pledged Securities, or (vi)
cause any Restricted Subsidiary to become an obligor on the Convertible Notes by
Guarantee or otherwise.
Article VIII
Guarantee of Obligations
Section 8.01. Guarantee of Payment. Each Guarantor unconditionally and
irrevocably guarantees to the Administrative Agent for the benefit of the
Lenders and the Lender Counterparties, the punctual payment of all Obligations
now or which may in the future be owing by the Borrower under the Loan Documents
and all Obligations which may now or which may in the future be owing by the
Borrower or any other Guarantor to any Lender Counterparty under any Swap
Agreement (the "Guaranteed Liabilities"). This Guarantee is a guaranty of
payment and not of collection only. The Administrative Agent shall not be
required to exhaust any right or remedy or take any action against the Borrower
or any other Person or any collateral. The Guaranteed Liabilities include
interest accruing after the commencement of a proceeding under bankruptcy,
insolvency or similar laws of any jurisdiction at the rate or rates provided in
the Loan Documents, or the Swap Agreements between any Credit Party and any
Lender Counterparty, as the case may be, regardless of whether such interest is
an allowed claim. Each Guarantor agrees that, as between the Guarantor and the
Administrative Agent, the Guaranteed Liabilities may be declared to be due and
payable for the purposes of this Guarantee notwithstanding any stay, injunction
or other prohibition which may prevent, delay or vitiate any declaration as
regards the Borrower or any other Guarantor and that in the event of a
declaration or attempted declaration, the Guaranteed Liabilities shall
immediately become due and payable by each Guarantor for the purposes of this
Guarantee.
Section 8.02. Guarantee Absolute. Each Guarantor guarantees that the Guaranteed
Liabilities shall be paid strictly in accordance with the terms of this
Agreement and the Swap Agreements to which any Lender Counterparty is a party.
The liability of each Guarantor hereunder is absolute and unconditional
irrespective of: (a) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Loan Documents or the Guaranteed
Liabilities, or any other amendment or waiver of or any consent to departure
from any of the terms of any Loan Document or Guaranteed Liability, including
any increase or decrease in the rate of interest thereon; (b) any release or
amendment or waiver of, or consent to departure from, any other guaranty or
support document, or any exchange, release or non-perfection of any collateral,
for all or any of the Loan Documents or Guaranteed Liabilities; (c) any present
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or future law, regulation or order of any jurisdiction (whether of right or in
fact) or of any agency thereof purporting to reduce, amend, restructure or
otherwise affect any term of any Loan Document or Guaranteed Liability; (d)
without being limited by the foregoing, any lack of validity or enforceability
of any Loan Document or Guaranteed Liability; and (e) any other setoff, defense
or counterclaim whatsoever (in any case, whether based on contract, tort or any
other theory) with respect to the Loan Documents or the transactions
contemplated thereby which might constitute a legal or equitable defense
available to, or discharge of, the Borrower or a Guarantor.
Section 8.03. Guarantee Irrevocable. This Guarantee is a continuing guaranty of
the payment of all Guaranteed Liabilities now or hereafter existing under this
Agreement and such Swap Agreements to which any Lender Counterparty is a party
and shall remain in full force and effect until payment in full of all
Guaranteed Liabilities and other amounts payable hereunder and until this
Agreement and the Swap Agreements are no longer in effect or, if earlier, when
the Guarantor has given the Administrative Agent written notice that this
Guarantee has been revoked; provided that any notice under this Section shall
not release the revoking Guarantor from any Guaranteed Liability, absolute or
contingent, existing prior to the Administrative Agent's actual receipt of the
notice at its branches or departments responsible for this Agreement and such
Swap Agreements and reasonable opportunity to act upon such notice.
Section 8.04. Reinstatement. This Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Guaranteed Liabilities is rescinded or must otherwise be returned by the
Administrative Agent, any Lender or any Lender Counterparty on the insolvency,
bankruptcy or reorganization of the Borrower, or any other Credit Party, or
otherwise, all as though the payment had not been made.
Section 8.05. Subrogation. No Guarantor shall exercise any rights which it may
acquire by way of subrogation, by any payment made under this Guarantee or
otherwise, until all the Guaranteed Liabilities have been paid in full and this
Agreement and the Swap Agreements to which any Lender Counterparty is a party
are no longer in effect. If any amount is paid to the Guarantor on account of
subrogation rights under this Guarantee at any time when all the Guaranteed
Liabilities have not been paid in full, the amount shall be held in trust for
the benefit of the Lenders and the Lender Counterparties and shall be promptly
paid to the Administrative Agent to be credited and applied to the Guaranteed
Liabilities, whether matured or unmatured or absolute or contingent, in
accordance with the terms of this Agreement and such Swap Agreements. If any
Guarantor makes payment to the Administrative Agent, Lenders, or any Lender
Counterparties of all or any part of the Guaranteed Liabilities and all the
Guaranteed Liabilities are paid in full and this Agreement and such Swap
Agreements are no longer in effect, the Administrative Agent, Lenders and Lender
Counterparties shall, at such Guarantor's request, execute and deliver to such
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to such Guarantor of
an interest in the Guaranteed Liabilities resulting from the payment.
Section 8.06. Subordination. Without limiting the rights of the Administrative
Agent, the Lenders and the Lender Counterparties under any other agreement, any
liabilities owed by the Borrower to any Guarantor in connection with any
extension of credit or financial accommodation by any Guarantor to or for the
account of the Borrower, including but not limited to interest accruing at the
agreed contract rate after the commencement of a bankruptcy or similar
proceeding, are hereby subordinated to the Guaranteed Liabilities, and such
liabilities of the Borrower to such Guarantor, if the Administrative Agent so
65
requests, shall be collected, enforced and received by any Guarantor as trustee
for the Administrative Agent and shall be paid over to the Administrative Agent
on account of the Guaranteed Liabilities but without reducing or affecting in
any manner the liability of the Guarantor under the other provisions of this
Guarantee.
Section 8.07. Payments Generally. All payments by the Guarantors shall be made
in the manner, at the place and in the currency (the "Payment Currency")
required by the Loan Documents and the Swap Agreement to which any Lender
Counterparty is a party, as the case may be; provided, however, that (if the
Payment Currency is other than Dollars) any Guarantor may, at its option (or, if
for any reason whatsoever any Guarantor is unable to effect payments in the
foregoing manner, such Guarantor shall be obligated to) pay to the
Administrative Agent at its principal office the equivalent amount in Dollars
computed at the selling rate of the Administrative Agent or a selling rate
chosen by the Administrative Agent, most recently in effect on or prior to the
date the Guaranteed Liability becomes due, for cable transfers of the Payment
Currency to the place where the Guaranteed Liability is payable. In any case in
which any Guarantor makes or is obligated to make payment in Dollars, the
Guarantor shall hold the Administrative Agent, the Lenders and the Lender
Counterparties harmless from any loss incurred by the Administrative Agent, any
Lender or any Lender Counterparty arising from any change in the value of
Dollars in relation to the Payment Currency between the date the Guaranteed
Liability becomes due and the date the Administrative Agent, such Lender or such
Lender Counterparty is actually able, following the conversion of the Dollars
paid by such Guarantor into the Payment Currency and remittance of such Payment
Currency to the place where such Guaranteed Liability is payable, to apply such
Payment Currency to such Guaranteed Liability.
Section 8.08. Setoff. Each Guarantor agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim the
Administrative Agent, any Lender or any Lender Counterparty may otherwise have,
the Administrative Agent, such Lender or such Lender Counterparty shall be
entitled, at its option, to offset balances (general or special, time or demand,
provisional or final) held by it for the account of any Guarantor at any office
of the Administrative Agent, such Lender or such Lender Counterparty, in Dollars
or in any other currency, against any amount payable by such Guarantor under
this Guarantee which is not paid when due (regardless of whether such balances
are then due to such Guarantor), in which case it shall promptly notify such
Guarantor thereof; provided that the failure of the Administrative Agent, such
Lender, or such Lender Counterparty to give such notice shall not affect the
validity thereof.
Section 8.09. Formalities. Each Guarantor waives presentment, notice of
dishonor, protest, notice of acceptance of this Guarantee or incurrence of any
Guaranteed Liability and any other formality with respect to any of the
Guaranteed Liabilities or this Guarantee.
Section 8.10. Limitations on Guarantee. The provisions of the Guarantee under
this Article VIII are severable, and in any action or proceeding involving any
state corporate law, or any state, federal or foreign bankruptcy, insolvency,
reorganization or other law affecting the rights of creditors generally, if the
obligations of any Guarantor under this Guarantee would otherwise be held or
determined to be avoidable, invalid or unenforceable on account of the amount of
such Guarantor's liability under this Guarantee, then, notwithstanding any other
provision of this Guarantee to the contrary, the amount of such liability shall,
without any further action by the Guarantors, the Administrative Agent, any
Lender or any Lender Counterparty, be automatically limited and reduced to the
highest amount that is valid and enforceable as determined in such action or
proceeding (such highest amount determined hereunder being the relevant
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Guarantor's "Maximum Liability"). This Section 8.10 with respect to the Maximum
Liability of the Guarantors is intended solely to preserve the rights of the
Administrative Agent, Lenders and Lender Counterparties hereunder to the maximum
extent not subject to avoidance under applicable law, and no Guarantor nor any
other Person shall have any right or claim under this Section 8.10 with respect
to the Maximum Liability, except to the extent necessary so that none of the
obligations of any Guarantor hereunder shall not be rendered voidable under
applicable law.
Article IX
Events of Default
If any of the following events ("Events of Default") shall
occur:
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of
three days;
(c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Restricted Subsidiary in or in connection with this
Agreement or any amendment or modification hereof or waiver hereunder, or
in any report, certificate, financial statement or other document furnished
pursuant to or in connection with this Agreement or any amendment or
modification hereof or waiver hereunder or in any Loan Document furnished
pursuant to or in connection with this Agreement or any amendment or
modification thereof or waiver hereunder, shall prove to have been
incorrect in any material respect when made or deemed made;
(d) the Borrower or any Restricted Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in Section 6.02,
Section 6.03 (with respect to the Borrower or any Restricted Subsidiary's
existence), Section 6.05 (with respect to insurance), Section 6.08, or in
Article VII;
(e) the Borrower or any Restricted Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement
(other than those specified in clause (a), (b) or (d) of this Article) or
any Loan Document, and such failure shall continue unremedied for a period
of 30 days after notice thereof from the Administrative Agent to the
Borrower (which notice will be given at the request of any Lender);
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(f) the Borrower or any Restricted Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in
respect of any Material Indebtedness, when and as the same shall become due
and payable, and such failure shall continue after the grace period, if
any, applicable to such Material Indebtedness;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance
thereof, prior to its scheduled maturity; provided that this clause (g)
shall not apply to secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such
Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of the Borrower or any Restricted Subsidiary or its
debts, or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or
hereafter in effect or (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower
or any Restricted Subsidiary or for a substantial part of its assets, and,
in any such case, such proceeding or petition shall continue undismissed
for 60 days or an order or decree approving or ordering any of the
foregoing shall be entered;
(i) the Borrower or any Restricted Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) consent to the institution of, or fail to contest in a timely
and appropriate manner, any proceeding or petition described in clause (h)
of this Article, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official
for the Borrower or any Restricted Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any Restricted Subsidiary shall become unable,
admit in writing its inability or fail generally to pay its debts as they
become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $1,000,000 shall be rendered against the Borrower or
any Restricted Subsidiary or any combination thereof and the same shall
remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to attach or levy upon any assets of the
Borrower or any Restricted Subsidiary to enforce any such judgment;
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(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse
Effect;
(m) the delivery by any Guarantor to the Administrative Agent of
written notice that its Guarantee under Article VIII has been revoked or
any Guarantee of the Obligations is declared invalid or unenforceable;
(n) a Change of Control shall occur;
(o) a "Change of Control" under and as defined in the Convertible
Notes Indenture shall occur;
(p) Gasco Production shall fail to make one or more payments in an
aggregate amount in excess of $1,000,000 in respect of any JVEA Document,
when and as the same shall become due and payable, and such failure shall
continue after any applicable grace period, or any event or condition
occurs that results in any Service Party notifying Gasco Production or any
other Credit Party, in writing, that Gasco Production or any other Credit
Party is in default or breach of any terms or conditions of any JVEA
Document unless such payment or such default or breach, as the case may be,
is being contested by Gasco Production in good faith and the Borrower or
Gasco Production has set aside on its books adequate reserves with respect
to such payment, default or breach.
then, and in every such event (other than an event with respect to the Borrower
or any Restricted Subsidiary described in clause (h) or (i) of this Article),
and at any time thereafter during the continuance of such event, the
Administrative Agent may, and at the request of the Required Lenders shall, by
notice to the Borrower, take either or both of the following actions, at the
same or different times: (i) terminate the Aggregate Commitment, and thereupon
the Aggregate Commitment shall terminate immediately, and (ii) declare the Loans
then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in case of any event with
respect to the Borrower described in clause (h) or (i) of this Article, the
Aggregate Commitment shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrower accrued hereunder, shall automatically become
due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
Article X
The Administrative Agent
Each of the Lenders and the Issuing Bank hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the Administrative
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Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms hereof, together with such
actions and powers as are reasonably incidental thereto.
The bank serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other Lender
and may exercise the same as though it were not the Administrative Agent, and
such bank and its Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with any Credit Party or other
Affiliate thereof as if it were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein. Without limiting the
generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing as directed by the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 11.02), and (c) except
as expressly set forth herein, the Administrative Agent shall not have any duty
to disclose, and shall not be liable for the failure to disclose, any
information relating to any Credit Party that is communicated to or obtained by
the bank serving as Administrative Agent or any of its Affiliates in any
capacity. The Administrative Agent shall not be liable for any action taken or
not taken by it with the consent or at the request of the Required Lenders (or
such other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 11.02) or in the absence of its own gross
negligence or willful misconduct. The Administrative Agent shall be deemed not
to have knowledge of any Default unless and until written notice thereof is
given to the Administrative Agent by the Borrower or a Lender, and the
Administrative Agent shall not be responsible for or have any duty to ascertain
or inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement, (ii) the contents of any certificate, report or
other document delivered hereunder or in connection herewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other agreement, instrument or document, or
(v) the satisfaction of any condition set forth in Article V or elsewhere
herein, other than to confirm receipt of items expressly required to be
delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing believed
by it to be genuine and to have been signed or sent by the proper Person. The
Administrative Agent also may rely upon any statement made to it orally or by
telephone and believed by it to be made by the proper Person, and shall not
incur any liability for relying thereon. The Administrative Agent may consult
with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts.
The Administrative Agent may perform any and all its duties
and exercise its rights and powers by or through any one or more sub-agents
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appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through their respective Related Parties. The exculpatory provisions of the
preceding paragraphs shall apply to any such sub-agent and to the Related
Parties of the Administrative Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this paragraph, the Administrative Agent may
resign at any time by notifying the Lenders, the Issuing Bank and the Borrower.
Upon any such resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders and the Issuing Bank, appoint a successor Administrative Agent which
shall be a bank with an office in Chicago, Illinois or New York, New York, or an
Affiliate of any such bank. Upon the acceptance of its appointment as
Administrative Agent hereunder by a successor, such successor shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 11.03 shall continue in effect for the
benefit of such retiring Administrative Agent, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while it was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any related agreement or any document furnished hereunder or thereunder.
Article XI
Miscellaneous
Section 11.01. Notices.
(a) Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to paragraph (b) below),
all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed
by certified or registered mail or sent by telecopy, as follows:
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(i) if to the Borrower, to Gasco Energy, Inc., 0 Xxxxxxxxx Xxxxx
Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, Attention: X. Xxxx Xxxxx,
Chief Financial Officer, Telecopy No.: (000) 000-0000, with a copy to
Xxxxxx & Xxxxxx L.L.P., 2300 First City Tower, 0000 Xxxxxx Xxxxxx,
Xxxxxxx, Xxxxx 00000-0000, Attention: Xxxxxx X. Xxxxxx, Esq., Telecopy
No.: (000) 000-0000.
(ii) if to the Administrative Agent or Issuing Bank, to JPMorgan
Chase Bank, N.A., Mail Code IL1-0010, 00 Xxxxx Xxxxxxxx Xxxxxx, 0xx
Xxxxx, Xxxxxxx, Xxxxxxxx 00000, Telecopy No.: (000) 000-0000,
Attention: Xxxxxx Xxxxx, with a copy to JPMorgan Chase Bank, N.A.,
0000 Xxxx Xxxxxx, XX0-0000, Xxxxxx, Xxxxx 00000, Telecopy No. (214)
290-2332, Attention: J. Xxxxx Xxxxxx, Vice President;
(iii) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
(b) Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to Article II unless otherwise agreed by the
Administrative Agent and the applicable Lender. The Administrative Agent or the
Borrower may, in their discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.
(c) Any party hereto may change its address or telecopy number for notices
and other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
Section 11.02. Waivers; Amendments.
(a) No failure or delay by the Administrative Agent, the Issuing Bank or
any Lender in exercising any right or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the Issuing
Bank and the Lenders hereunder are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of
this Agreement or consent to any departure by the Borrower therefrom shall in
any event be effective unless the same shall be permitted by paragraph (b) of
this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent, any Lender or the Issuing Bank may have had notice or
knowledge of such Default at the time.
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(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Credit Parties and the Required Lenders or by the Credit Parties and
the Administrative Agent with the consent of the Required Lenders; provided that
no such agreement shall (1) increase the Borrowing Base without the consent of
each Lender, (2) increase the Applicable Percentage of any Lender or the
Aggregate Commitment above the Maximum Facility Amount without the written
consent of such Lender, (3) reduce the principal amount of any Loan or LC
Disbursement or reduce the rate of interest thereon, or reduce any fees payable
hereunder, without the written consent of each Lender affected thereby, (4)
postpone the scheduled date of payment of the principal amount of any Loan or LC
Disbursement, or any interest thereon, or any fees payable hereunder, or reduce
the amount of, waive or excuse any such payment, or postpone the scheduled date
of expiration of any of the Aggregate Commitment, without the written consent of
each Lender affected thereby, (5) change Section 2.17(b) or Section 2.17(c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (6) release any Credit Party from
its obligations under the Loan Documents or, except in connection with any
sales, transfers, leases or other dispositions permitted in Section 7.03,
release any of the Collateral without the consent of each Lender, or (7) change
any of the provisions of this Section or the definition of "Required Lenders" or
any other provision hereof specifying the number or percentage of Lenders
required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder, without the written consent of
each Lender; provided further that no such agreement shall amend, modify or
-------- ------- otherwise affect the rights or duties of the Administrative
Agent or the Issuing Bank hereunder without the prior written consent of the
Administrative Agent or the Issuing Bank, as the case may be.
Section 11.03. Expenses; Indemnity; Damage Waiver.
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Agreement and the other Loan
Documents or any amendments, modifications or waivers of the provisions hereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated), (ii) all reasonable out-of-pocket expenses incurred by the Issuing
Bank in connection with the issuance, amendment, renewal or extension of any
Letter of Credit or any demand for payment thereunder and (iii) all
out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or
any Lender, including the fees, charges and disbursements of any counsel for the
Administrative Agent, the Issuing Bank or any Lender, in connection with the
enforcement or protection of its rights in connection with this Agreement and
the other Loan Documents, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder, including
all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.
(b) THE CREDIT PARTIES SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE
ISSUING BANK AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE") AGAINST, AND HOLD EACH
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INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND
RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT
OF, IN CONNECTION WITH, OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY, THE PERFORMANCE BY
THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THE CONSUMMATION
OF THE TRANSACTIONS OR ANY OTHER TRANSACTIONS CONTEMPLATED HEREBY, (II) ANY LOAN
OR LETTER OF CREDIT OR THE USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL
BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF
THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY
WITH THE TERMS OF SUCH LETTER OF CREDIT), (III) ANY ACTUAL OR ALLEGED PRESENCE
OR RELEASE OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY
THE BORROWER OR ANY SUBSIDIARY, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY
WAY TO THE BORROWER OR ANY SUBSIDIARY, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO; PROVIDED THAT SUCH INDEMNITY SHALL NOT, AS TO
ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES,
LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.
(c) To the extent that any Credit Party fails to pay any amount required to
be paid by it to the Administrative Agent or the Issuing Bank under paragraph
(a) or (b) of this Section, each Lender severally agrees to pay to the
Administrative Agent or the Issuing Bank, as the case may be, such Lender's
Applicable Percentage (in each case, determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent or the Issuing Bank in its capacity as
such.
(d) To the extent permitted by applicable law, the Credit Parties shall not
assert, and hereby waive, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
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of, this Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section shall be payable not later than 10
days after written demand therefor.
Section 11.04. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), except that (i) no Credit Party may assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by such Credit
Party without such consent shall be null and void) and (ii) no Lender may assign
or otherwise transfer its rights or obligations hereunder except in accordance
with this Section. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), Participants (to the extent
provided in paragraph (c) of this Section) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent,
the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim
under or by reason of this Agreement.
(b)
(i) Subject to the conditions set forth in paragraph (b)(ii) below,
any Lender may assign to one or more assignees all or a portion of its
rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it) with the prior
written consent (such consent not to be unreasonably withheld) of:
(A) the Borrower, provided that no consent of the Borrower shall
be required for an assignment to a Lender, an Affiliate of a Lender, a
Federal Reserve Bank, an Approved Fund or, if an Event of Default has
occurred and is continuing, any other assignee; and
(B) the Administrative Agent, provided that no consent of the
Administrative Agent shall be required for an assignment of any
Commitment to an assignee that is a Lender with a Commitment
immediately prior to giving effect to such assignment;
(C) the Issuing Bank.
(ii) Assignments shall be subject to the following additional
conditions:
(A) except in the case of an assignment to a Lender, an Affiliate
of a Lender, an Approved Fund or an assignment of the entire remaining
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amount of the assigning Lender's Commitment or Loans, the amount of
the Commitment or Loans of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Assumption
with respect to such assignment is delivered to the Administrative
Agent) shall not be less than $5,000,000 unless each of the Borrower
and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has
occurred and is continuing;
(B) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and
obligations in respect of such Lender's Commitment and such Lender's
Loans under this Agreement;
(C) the parties to each assignment shall execute and deliver to
the Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500; and
(D) the assignee, if it shall not be a Lender, shall deliver to
the Administrative Agent an Administrative Questionnaire.
For the purposes of this Section 11.04(b), the term "Approved Fund" has
the following meaning:
"Approved Fund" means any Person (other than a natural person)
that is engaged in making, purchasing, holding or investing in bank loans and
similar extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.
(iii) Subject to acceptance and recording thereof pursuant to
paragraph (b)(iv) of this Section, from and after the effective date
specified in each Assignment and Assumption the assignee thereunder
shall be a party hereto and, to the extent of the interest assigned by
such Assignment and Assumption, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder
shall, to the extent of the interest assigned by such Assignment and
Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the
assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Section 2.14, Section 2.15, Section 2.16
and Section 11.03). Any assignment or transfer by a Lender of rights
or obligations under this Agreement that does not comply with this
Section 11.04 shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations
in accordance with paragraph (c) of this Section except that any
attempted assignment or transfer by any Lender that does not comply
with clause (C) of Section 11.04(b)(ii) shall be null and void.
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(iv) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices a copy of
each Assignment and Assumption delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the
Commitment and Applicable Percentage of, and principal amount of the
Loans and LC Disbursements owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register
shall be conclusive, and the Credit Parties, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary. The Register shall be available for inspection by the
Credit Parties, the Issuing Bank and any Lender, at any reasonable
time and from time to time upon reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and
Assumption executed by an assigning Lender and an assignee, the
assignee's completed Administrative Questionnaire (unless the assignee
shall already be a Lender hereunder), the processing and recordation
fee referred to in paragraph (b) of this Section any written consent
to such assignment required by paragraph (b) of this Section, the
Administrative Agent shall accept such Assignment and Assumption and
record the information contained therein in the Register; provided
that if either the assigning Lender or the assignee shall have failed
to make any payment required to be made by it pursuant to Section
2.05(d) or Section 2.05(e), Section 2.06, Section 2.17(d) or Section
11.03(c), the Administrative Agent shall have no obligation to accept
such Assignment and Assumption and record the information therein in
the Register unless and until such payment shall have been made in
full, together with all accrued interest thereon. No assignment shall
be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(c)
(i) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Issuing Bank, sell participations to one
or more banks or other entities (a "Participant") in all or a portion
of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to
it); provided that (A) such Lender's obligations under this Agreement
shall remain unchanged, (B) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations and (C) the Borrower, the Administrative Agent, the
Issuing Bank and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant
to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to
any amendment, modification or waiver described in the first proviso
to Section 11.02(b) that affects such Participant. Subject to
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paragraph (c)(ii) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Section 2.14, Section
2.15 and Section 2.16 to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also
shall be entitled to the benefits of Section 11.08 as though it were a
Lender, provided such Participant agrees to be subject to Section
2.17(c) as though it were a Lender.
(ii) A Participant shall not be entitled to receive any greater
payment under Section 2.14 or Section 2.16 than the applicable Lender
would have been entitled to receive with respect to the participation
sold to such Participant, unless the sale of the participation to such
Participant is made with the prior written consent of the Borrower. A
Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 2.16 unless the Borrower is
notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the Borrower, to comply with
Section 2.16(e) as though it were a Lender.
(d) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations
of such Lender, including without limitation any pledge or assignment to
secure obligations to a Federal Reserve Bank, and this Section shall not
apply to any such pledge or assignment of a security interest; provided
that no such pledge or assignment of a security interest shall release a
Lender from any of its obligations hereunder or substitute any such pledgee
or assignee for such Lender as a party hereto.
Section 11.05. Survival. All covenants, agreements, representations and
warranties made by the Credit Parties herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Aggregate Commitment has not
expired or terminated. The provisions of Section 2.14, Section 2.15, Section
2.16 and Section 11.03 and Article X shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, the expiration or termination of the Letters of
Credit and the Aggregate Commitment or the termination of this Agreement or any
provision hereof.
Section 11.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
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taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. THIS WRITTEN CREDIT AND
GUARANTY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. Except as provided in Section
5.01, this Agreement shall become effective when it shall have been executed by
the Administrative Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.
Section 11.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
Section 11.08. Right of Setoff. If an Event of Default shall have occurred and
be continuing, each Lender and each of its Affiliates is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations at any time owing
by such Lender or Affiliate to or for the credit or the account of the Borrower
against any of and all the obligations of any Credit Party now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
and Section 8.08 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.
Section 11.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAW OF THE STATE OF TEXAS.
(b) EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS,
FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED
STATES FEDERAL OR TEXAS STATE COURT SITTING IN DALLAS, TEXAS IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF
ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH TEXAS
STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF
THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN
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THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, THE
ISSUING BANK OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY CREDIT PARTY OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) EACH CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.
(d) EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN Section 11.01. NOTHING IN
THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
Section 11.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
Section 11.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
Section 11.12. Confidentiality. Each of the Administrative Agent, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
80
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d)
to any other party to this Agreement, (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder, (f) subject to an agreement containing
provisions substantially the same as those of this Section, to (i) any assignee
of or Participant in, or any prospective assignee of or Participant in, any of
its rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Credit Parties and their obligations, (g) with the consent of the Borrower
or (h) to the extent such Information (i) becomes publicly available other than
as a result of a breach of this Section or (ii) becomes available to the
Administrative Agent, the Issuing Bank or any Lender on a nonconfidential basis
from a source other than a Credit Party. For the purposes of this Section,
"Information" means all information received from any Credit Party relating to
any Credit Party or its business, other than any such information that is
available to the Administrative Agent, the Issuing Bank or any Lender on a
nonconfidential basis prior to disclosure by any Credit Party; provided that, in
the case of information received from any Credit Party after the date hereof,
such information is clearly identified at the time of delivery as confidential.
Any Person required to maintain the confidentiality of Information as provided
in this Section shall be considered to have complied with its obligation to do
so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
Section 11.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum Rate") which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender. Chapter 346 of the Texas
Finance Code (which regulates certain revolving credit accounts (formerly Tex.
Rev. Civ. Stat. Xxx. Art. 0000, Xx. 15)) shall not apply to this Agreement or to
any Loan, nor shall this Agreement or any Loan be governed by or be subject to
the provisions of such Chapter 346 in any manner whatsoever.
Xxxxxxx 00.00. XXX XXXXXXX Xxx. Each Lender that is subject to the requirements
of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the "Act") hereby notifies each Credit Party that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies each Credit Party, which information includes the name and
address of each Credit Party and other information that will allow such Lender
to identify each Credit Party in accordance with the Act.
81
(Signature Pages Follow)
82
GASCO REVOLVING CREDIT AGREEMENT- SIGNATURE PAGE
DALLAS 1585582
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
BORROWER:
GASCO ENERGY, INC.
By: /s/ X. Xxxx Xxxxx
-------------------------------------------------
Name: X. Xxxx Grant
Title: Executive Vice President and Chief
Financial Officer
GUARANTORS:
GASCO PRODUCTION COMPANY
By: /s/ X. Xxxx Xxxxx
------------------------------------------------
Name: X. Xxxx Grant
Title: Executive Vice President and Chief
Financial Officer
RIVERBEND GAS GATHERING, LLC
By: Gasco Energy, Inc.
Its Managing Member
By: /s/ X. Xxxx Xxxxx
-------------------------------------------------
Name: X. Xxxx Grant
Title: Executive Vice President and Chief
Financial Officer
83
MYTON OILFIELD RENTALS, LLC
By: Gasco Energy, Inc.
Its Managing Member
By: /s/ X. Xxxx Xxxxx
----------------------------------------------
Name: X. Xxxx Grant
Title: Executive Vice President and Chief
Financial Officer
84
JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent,
By:/s/ J. Xxxxx Xxxxxx
-----------------------------------------------
Name: J. Xxxxx Xxxxxx
Title: Vice President
85
EXHIBIT A
ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the "Assignment and
Assumption") is dated as of the Effective Date set forth below and is entered
into by and between [Insert name of Assignor] (the "Assignor") and [Insert name
of Assignee] (the "Assignee"). Capitalized terms used but not defined herein
shall have the meanings given to them in the Credit Agreement identified below
(as amended, the "Credit Agreement"), receipt of a copy of which is hereby
acknowledged by the Assignee. The Standard Terms and Conditions set forth in
Annex 1 attached hereto are hereby agreed to and incorporated herein by
reference and made a part of this Assignment and Assumption as if set forth
herein in full.
For an agreed consideration, the Assignor hereby irrevocably
sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases
and assumes from the Assignor, subject to and in accordance with the Standard
Terms and Conditions and the Credit Agreement, as of the Effective Date inserted
by the Administrative Agent as contemplated below (i) all of the Assignor's
rights and obligations in its capacity as a Lender under the Credit Agreement
and any other documents or instruments delivered pursuant thereto to the extent
related to the amount and percentage interest identified below of all of such
outstanding rights and obligations of the Assignor under the respective
facilities identified below (including any letters of credit and guarantees
included in such facilities) and (ii) to the extent permitted to be assigned
under applicable law, all claims, suits, causes of action and any other right of
the Assignor (in its capacity as a Lender) against any Person, whether known or
unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims and
all other claims at law or in equity related to the rights and obligations sold
and assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the "Assigned Interest"). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.
1. Assignor: ______________________________
2. Assignee: ______________________________
[and is an Affiliate/Approved Fund of
[identify Lender]]
3. Borrower(s): ______________________________
4. Administrative Agent: JPMorgan Chase Bank,
N.A., as the administrative agent under the
Credit Agreement
86
5. Credit Agreement: Credit Agreement dated as
of March 29, 2006, among Gasco Energy, Inc.,
as Borrower, certain Subsidiaries of the
Borrower, as Guarantors, the Lenders parties
thereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent
6. Assigned Interest:
------------------------------ ----------------------------- ----------------------------- ---------------------------
Facility Assigned Aggregate Amount of Amount of Commitment/Loans Applicable Percentage of
Commitment/Loans for all Assigned Commitment/Loans Assigned
Lenders
------------------------------ ----------------------------- ----------------------------- ---------------------------
------------------------------ ----------------------------- ----------------------------- ---------------------------
Revolving Commitment $ $ %
------------------------------ ----------------------------- ----------------------------- ---------------------------
------------------------------ ----------------------------- ----------------------------- ---------------------------
$ $ %
------------------------------ ----------------------------- ----------------------------- ---------------------------
------------------------------ ----------------------------- ----------------------------- ---------------------------
$ $ %
------------------------------ ----------------------------- ----------------------------- ---------------------------
Effective Date: _____________ ___, 20___
The terms set forth in this Assignment and Assumption are hereby agreed
to:
ASSIGNOR
[NAME OF ASSIGNOR]
By:
---------------------
Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:
---------------------
Title:
87
[Consented to and] Accepted:
JPMORGAN CHASE BANK, N.A.
as Administrative Agent
By:
--------------------------------------------------
Title:
[Consented to:]
GASCO ENERGY, INC.
By:
--------------------------------------------------
Title:
88
ANNEX 1
Credit Agreement dated as of March 29, 2006, among Gasco Energy, Inc., as
Borrower, Certain Subsidiaries of Borrower, as Guarantors, the Lenders party
thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor. The Assignor (a) represents and warrants that
(i) it is the legal and beneficial owner of the Assigned Interest, (ii) the
Assigned Interest is free and clear of any lien, encumbrance or other adverse
claim and (iii) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby; and (b) assumes no
responsibility with respect to (i) any statements, warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document,
(ii) the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Borrower, any Subsidiary or Affiliates or any other Person
obligated in respect of any Loan Document or (iv) the performance or observance
by the Borrower, any Subsidiary or Affiliates or any other Person of any of
their respective obligations under any Loan Document.
1.2. Assignee. The Assignee (a) represents and warrants that
(i) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby and to become a Lender under the Credit
Agreement, (ii) it satisfies the requirements, if any, specified in the Credit
Agreement that are required to be satisfied by it in order to acquire the
Assigned Interest and become a Lender, (iii) from and after the Effective Date,
it shall be bound by the provisions of the Credit Agreement as a Lender
thereunder and, to the extent of the Assigned Interest, shall have the
obligations of a Lender thereunder, (iv) it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 6.01 thereof, as applicable, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest on the basis of which it has made such analysis
and decision independently and without reliance on the Administrative Agent or
any other Lender, and (v) if it is a Foreign Lender, attached to the Assignment
and Assumption is any documentation required to be delivered by it pursuant to
the terms of the Credit Agreement, duly completed and executed by the Assignee;
and (b) agrees that (i) it will, independently and without reliance on the
Administrative Agent, the Assignor or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Loan
Documents, and (ii) it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.
89
2. Payments. From and after the Effective Date, the
Administrative Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to but excluding the Effective Date and
to the Assignee for amounts which have accrued from and after the Effective
Date.
3. General Provisions. This Assignment and Assumption shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. This Assignment and Assumption may be
executed in any number of counterparts, which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption. This Assignment
and Assumption shall be governed by, and construed in accordance with, the law
of the State of Texas.
90
EXHIBIT B-1
FORM OF OPINION OF COUNSEL OF XXXX, DILL, CARR,
XXXXXXXXXX & XXXXXXXXX, P.C.
The closing opinion of Dill, Dill, Xxxx Xxxxxxxxxx & Xxxxxxxxx, P.C.,
counsel for the Borrower and the Guarantors, which is called for by Section
5.01(b) of the Agreement, shall be dated the Effective Date and addressed to the
Administrative Agent and the Lenders, shall be reasonably satisfactory in scope
and form to Lenders and shall be to the effect that
1. The Borrower (a) is a corporation duly organized, validly existing
and in good standing under the laws of Nevada, (b) has all requisite power and
authority to carry on its business as now conducted and (c) except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every jurisdiction where such qualification is
required.
2. Each Guarantor (a) is a corporation/limited liability
company/limited partnership duly organized, validly existing and in good
standing under the laws of the state of its organization, (b) has all requisite
power and authority to carry on its business as now conducted and (c) except
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, is qualified to
do business in, and is in good standing in, every jurisdiction where such
qualification is required
3. The Transactions are within each Credit Parties' corporate/limited
liability company/partnership powers and have been duly authorized by all
necessary corporate and, if required, stockholder action. The Credit Agreement
has been duly executed and delivered by the Credit Parties.
4. The Transactions (a) will not violate any applicable law or
regulation or the charter, by-laws or other Organizational Documents of any
Credit Party or, to such counsel's knowledge, any order of any Governmental
Authority, or (b) to such counsel's knowledge will not violate or result in a
default (other than violations and defaults that have been waived) under any
indenture, agreement or other instrument binding upon any Credit Party or any
Credit Party's assets, or give rise to a right thereunder to require any payment
to be made by any Credit Party or result in the creation or imposition of any
Lien on any asset of any Credit Party other than the Liens securing the
Obligations.
5. Such counsel is not aware of any actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending against or threatened
against or affecting the Credit Parties (a) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect (other than the Disclosed Matters) or (b) that involve the Credit
Agreement or the Transactions.
91
6. Except such as have been obtained or made and are in full force and
effect, the filing of the Mortgages in appropriate filing offices and, after the
Effective Date, the filing of the Credit Agreement and related Loan Documents by
the Borrower with the Securities and Exchange Commission pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, no
authorization, consent, approval, exemption, franchise, permit or license of, or
filing with any Governmental Authority or, to such counsel's knowledge, any
other Person is required to authorize or is otherwise required in connection
with the valid execution and delivery by the Borrower of the Loan Documents or
any instrument contemplated thereby, or the payment or performance by the
Borrower of the Indebtedness.
Such counsel's opinion shall be limited to the laws of the States of
Nevada, Colorado and Delaware.
92
EXHIBIT B-2
FORM OF OPINION OF COUNSEL OF XXXXXX & XXXXXX L.L.P.
The closing opinion of Xxxxxx & Xxxxxx L.L.P., counsel for the Borrower and the
Guarantors, which is called for by Section 5.01(b) of the Agreement, shall be
dated the Effective Date and addressed to the Administrative Agent and the
Lenders, shall be reasonably satisfactory in scope and form to Lenders and shall
be to the effect that
1. Assuming due authorization, execution and delivery of the Credit
Agreement by the Credit Parties, the Credit Agreement constitutes a legal, valid
and binding obligation of the Credit Parties, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
2. The Transactions (a) will not violate any applicable law or
regulation or, to such counsel's knowledge, any order of any Governmental
Authority, or (b) to such counsel's knowledge, will not violate or result in a
default (other than violations or defaults that have been waived) under any
indenture, agreement or other instrument binding upon any Credit Party or any
Credit Party's assets, or give rise to a right thereunder to require any payment
to be made by any Credit Party or result in the creation or imposition of any
Lien on any asset of any Credit Party other than the Liens securing the
Obligations.
3. Such counsel is not aware of any actions, suits or proceedings by or
before any arbitrator or Governmental Authority pending against or threatened
against or affecting the Credit Parties (a) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect (other than the Disclosed Matters) or (b) that involve the Credit
Agreement or the Transactions.
4. None of the Credit Parties is an "investment company" as defined in,
or subject to regulation under, the Investment Company Act of 1940.
5. The Pledge Agreement creates valid security interests in favor of
the Administrative Agent in the Collateral (as defined in the Pledge Agreement),
to the extent the Uniform Commercial Code of the State of Texas (the "Code") is
applicable thereto as security for payment of the Obligations.
6. Except such as have been obtained or made and are in full force and
effect, the filing of the Mortgages in appropriate filing offices and, after the
Effective Date, the filing of the Credit Agreement and related Loan Documents by
the Borrower with the Securities and Exchange Commission pursuant to the
requirements of the Securities Exchange Act of 1934, as amended, no
authorization, consent, approval, exemption, franchise, permit or license of, or
filing with, any Governmental Authority or, to such counsel's knowledge, any
93
other Person is required to authorize or is otherwise required in connection
with the valid execution and delivery by the Borrower of the Loan Documents or
any instrument contemplated thereby, or the payment or performance by the
Borrower of the Indebtedness.
Such counsel's opinion shall be limited to federal laws and the laws of the
States of Texas and Delaware.
94
EXHIBIT B-3
FORM OF FORM OF OPINION OF COUNSEL OF XXXXXX XXXXXX
The closing opinion of Xxxxxx Xxxxxx, counsel for the Borrower and the
Guarantors, which is called for by Section 5.01(b) of the Agreement, shall be
dated the Effective Date and addressed to the Administrative Agent and the
Lenders, shall be reasonably satisfactory in scope and form to Lenders and shall
be to the effect that
1. The Mortgage is a valid and binding obligation of Gasco Production
enforceable against it in accordance with the terms thereof.
2. The Mortgage complies with all applicable laws of the State of Utah,
including without limitation all applicable recording, filing and registration
laws and regulations. The Mortgage creates, to secure the present and future
obligations under the Credit Agreement, the Notes, the Letters of Credit and
other Loan Documents described in such Mortgage, (a) a lien on the Mortgaged
Properties that are real properties located in the State of Utah and (b) a
security interest in the Collateral (as defined in the Mortgage) in favor of
Agent and the Lenders, to the extent that the Collateral is personal property
with respect to which a security interest can be granted under the Uniform
Commercial Code as presently in effect in the State of Utah (the "UCC").
3. A fully executed counterpart of the Mortgage is required to be filed
and recorded in the appropriate real estate records of the offices of the County
Recorders of Uintah and Duchesne Counties, Utah, the counties in which the real
properties described in the Mortgage are located. Once the Mortgage is so filed
and recorded, no further or subsequent filing or refiling will be necessary in
order to continue the existence or perfection of the lien referred to in
Paragraph 2 above except that in the event any indebtedness secured by the
Mortgage has not been paid before the expiration of 6 years from the earlier of
the maturity date provided for therein or in the Notes, as appropriate, for
payment of such indebtedness, an extension agreement with respect to the
Mortgage, providing for the renewal or extension of such indebtedness, should be
entered into and filed and recorded in the records of the office of the County
Recorder in Uintah and Duchesne Counties, Utah prior to the expiration of such
6-year period.
4. The financing statement covering the Collateral reviewed by us is in
proper form for filing with the office of the Secretary of State of Delaware.
Such financing statement, when duly filed in the offices of the Secretary of
State of Delaware, and the Mortgage, when duly recorded in Uintah and Duchesne
Counties, Utah, will have been duly filed in all places where filing is
necessary to perfect Agent's and the Lenders' security interest in that portion
of the Collateral which constitutes personal property, fixtures, or
"as-extracted collateral" (as defined in the UCC) and that is capable of being
perfected by filing a financing statement under the UCC. No further or
subsequent filing, refiling, recording, rerecording, registration or
re-registration, other than continuation statements as required by the UCC (and
amendments in the event that Gasco Production's name or structure changes), will
be necessary in the State of Utah or under any applicable federal law or
regulation in order to continue the perfection of such security interest.
95
5. The acceptance of the Mortgage by Agent and the Lenders, its
possession and retention of its rights thereunder, and its presentation of such
instruments for filing and recording as described herein will not, in and of
themselves, require Agent or any Lender to pay or otherwise subject Agent or any
Lender to any tax, fee or other charge except the customary fee charged by each
filing or recording officer on a per-page, per-property description or
per-instrument basis. Neither Agent nor any Lender is required to qualify to do
business in the State of Utah or to otherwise register or make any filing (other
than those described herein) with any state of local official in the State of
Utah solely as a result of its acceptance of such instruments, its possession
and retention of its liens thereunder, or the filing or recording thereof.
Such counsel's opinion shall be limited to laws of the State of Utah.
96
EXHIBIT C
COUNTERPART AGREEMENT
This COUNTERPART AGREEMENT, dated [ ] (this "Counterpart Agreement") is
delivered pursuant to that certain Credit Agreement, dated as of March 29, 2006
(as it may be amended, supplemented or otherwise modified, the "Credit
Agreement"; the terms defined therein and not otherwise defined herein being
used herein as therein defined), by and among GASCO ENERGY, INC., as Borrower,
CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors, the LENDERS party thereto, and
JPMORGAN CHASE BANK, N.A., as Administrative Agent (the "Administrative Agent").
Section 1. Pursuant to Section 6.12 of the Credit Agreement, the
undersigned hereby:
(a) agrees that this Counterpart Agreement may be attached to
the Credit Agreement and that by the execution and delivery hereof, the
undersigned becomes a Guarantor under the Credit Agreement and agrees to be
bound by all of the terms thereof;
(b) represents and warrants that each of the representations
and warranties set forth in the Credit Agreement and each other Loan Document
and applicable to the undersigned is true and correct both before and after
giving effect to this Counterpart Agreement, except to the extent that any such
representation and warranty relates solely to any earlier date, in which case
such representation and warranty is true and correct as of such earlier date;
(c) no event has occurred or is continuing as of the date
hereof, or will result from the transactions contemplated hereby on the date
hereof, that would constitute an Event of Default or a Default;
(d) agrees to irrevocably and unconditionally guaranty the due
and punctual payment in full of all Obligations when the same shall become due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. ss. 362(a)) and in accordance with Section 8 of the Credit Agreement; and
(e) the undersigned hereby (i) agrees that this counterpart
may also be attached to the Pledge Agreement, (ii) agrees that the undersigned
will comply with all the terms and conditions of the Pledge Agreement as if it
were an original signatory thereto, (iii) grants to Secured Party (as such term
is defined in the Pledge Agreement) a security interest in all of the
undersigned's right, title and interest in and to all "Collateral" (as such term
is defined in the Pledge Agreement) of the undersigned, in each case whether now
or hereafter existing or in which the undersigned now has or hereafter acquires
an interest and wherever the same may be located and (iv) delivers to Agent
supplements to all schedules attached to the Pledge Agreement. All such
Collateral shall be deemed to be part of the "Collateral" and hereafter subject
to each of the terms and conditions of the Pledge Agreement.
97
Section 2. The undersigned agrees from time to time, upon
request of Administrative Agent, to take such additional actions and to execute
and deliver such additional documents and instruments as Administrative Agent
may request to effect the transactions contemplated by, and to carry out the
intent of, this Agreement. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated, except by an instrument in writing
signed by the party (including, if applicable, any party required to evidence
its consent to or acceptance of this Agreement) against whom enforcement of such
change, waiver, discharge or termination is sought. Any notice or other
communication herein required or permitted to be given shall be given in
pursuant to Section 11.01 of the Credit Agreement, and all for purposes thereof,
the notice address of the undersigned shall be the address as set forth on the
signature page hereof. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
98
IN WITNESS WHEREOF, the undersigned has caused this Counterpart
Agreement to be duly executed and delivered by its duly authorized officer as of
the date above first written.
[NAME OF SUBSIDIARY]
By:______________________
Name:
Title:
Address for Notices:
--------------
--------------
Attention:
Telecopier
with a copy to:
--------------
--------------
Attention:
Telecopier
ACKNOWLEDGED AND ACCEPTED, as of the date above first written:
JPMORGAN CHASE BANK, N.A.,
as Administrative Agent
By:_____________________
Name:
Title:
99
EXHIBIT D
CERTIFICATE REGARDING SOLVENCY
The undersigned, as Chief Financial Officer of Gasco Energy, Inc., a
Nevada corporation (the "Borrower"), hereby gives this Certificate Regarding
Solvency to induce JPMorgan Chase Bank, N.A., as Administrative Agent for the
Lenders (defined below) (the "Administrative Agent") to consummate certain
financial accommodations pursuant to the terms and conditions of that certain
Credit Agreement dated the date hereof (the "Credit Agreement") among the
Borrower, certain Subsidiaries of the Borrower, as Guarantors, the lenders
signatory thereto ("Lenders"), and Agent. Capitalized terms used in this
certificate are defined in the Credit Agreement, unless otherwise stated.
The undersigned hereby certifies to the Administrative Agent that:
1. The undersigned is familiar with the business and financial affairs of the
Borrower, including, without limitation, the Transactions and the matters
hereinafter described.
2. The undersigned has reviewed the pro-forma balance sheet of the Borrower, as
of the date thereof (the "Pro-Forma Balance Sheet"), and the Projections, both
of which are attached hereto as Exhibit "A" and Exhibit "B", respectively, and
incorporated herein by reference for all purposes. The undersigned is familiar
with the process through which the Pro-Forma Balance Sheet and the Projections
were generated.
3. The Pro-Forma Balance Sheet fairly presents in all material respects the
financial position of the Borrower as of the date thereof after giving effect to
the Transactions. There have been no material adverse changes in the assets or
liabilities of the Borrower and its Subsidiaries since December 31, 2005. The
Projections are reasonable projections of the balance sheet, income statement
and source and application of funds for the periods covered thereby, based upon
the assumptions set forth therein. The Borrower believes that such assumptions
set forth therein are reasonable in light of current business conditions
existing at the time of preparation thereof. The Projections represent the
Borrower's good faith estimate as of the date thereof of the Borrower's future
financial performance, it being recognized by the Administrative Agent that such
financial information as it relates to future events is not to be viewed as fact
and that actual results during the period or periods covered thereby may differ
from the projected results set forth therein.
4. Immediately following the consummation of, and after giving effect to, the
transactions contemplated by the Loan Documents and the application of the
proceeds from the fundings being made on the Effective Date, the Borrower is
solvent.
5. The Borrower does not intend to incur, or believe it will incur, debts beyond
its ability to pay as they mature.
100
DATED: March 29, 2006
GASCO ENERGY, INC.,
a Nevada corporation
By: /s/ X. Xxxx Xxxxx
--------------------------------------
X. Xxxx Grant
Chief Financial Officer
101
EXHIBIT "A"
Pro-Forma Balance Sheet
(see attached)
102
EXHIBIT "B"
Projections
(see attached)
103
SCHEDULE 2.01
Applicable Percentages and Initial Commitments
-------------------------------------------- ---------------------------- -------------------- --------------------
Applicable Initial Commitment
Lender Title Percentage
-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------
JPMorgan Chase Bank , N.A. Administrative Agent 100% $17,000,000
Mail Code IL1-0010
00 Xxxxx Xxxxxxxx Xxxxxx
0xx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
xxxxxx.xxxxx@xxxxxxxx.xxx
With a copy to:
JPMorgan Chase Bank, N.A.
Mail Code TX1-2448
0000 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: J. Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
xxxxx.xxxxxx@xxxxx.xxx
-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------
-------------------------------------------- ---------------------------- -------------------- --------------------
TOTAL 100.00000% $17,000,000
-------------------------------------------- ---------------------------- -------------------- --------------------
104
SCHEDULE 4.06
DISCLOSED MATTERS
None.
105
SCHEDULE 4.12
CAPITALIZATION AND CORPORATE INFORMATION
---------------------------------------- -------------------------------------- --------------------------------------
Entity Jurisdiction of Organization Federal Tax ID Number
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
Gasco Energy, Inc. Nevada 00-0000000
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
Gasco Production Company Delaware 00-0000000
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
Riverbend Gas Gathering, LLC Nevada 00-0000000
---------------------------------------- -------------------------------------- --------------------------------------
---------------------------------------- -------------------------------------- --------------------------------------
Myton Oilfield Rentals, LLC Nevada 00-0000000
---------------------------------------- -------------------------------------- --------------------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Restricted Subsidiary Type of Entity Outstanding Shares or Owner(s) of Shares or
Other Equity Interests Equity Interests
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Gasco Production Company (fka Corporation 7,925,000 Gasco Energy Inc.
Pannonian Energy Inc.)
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Riverbend Gas Gathering, LLC Limited Liability Company N/A Gasco Energy Inc.-100%
------------------------------- ---------------------------- ---------------------------- ----------------------------
------------------------------- ---------------------------- ---------------------------- ----------------------------
Myton Oilfield Rentals, LLC Limited Liability Company N/A Gasco Energy Inc.-100%
------------------------------- ---------------------------- ---------------------------- ----------------------------
106
SCHEDULE 6.10
TITLE CURATIVE MATTERS
1. Xxxxxx Xxxxx Xxxxxxx 00-00-00-00, XXXX Section 00, Xxxxxxxx 00
Xxxxx, Xxxxx 00 Xxxx, xxxxxxx xx Xxxxxx Xxxxxx xx Xxxxxxx BLM
Lease #U-75082, dated February 26, 1996. Operating Rights
currently owned as follows: Gasco Production Company 50%, QEP
Uinta Basin, Inc. 21.875% and III Exploration Company 28.125%;
Gasco represents ownership of 100% of the Operating Rights.
a. Provide Administrative Agent's counsel with copies of
Transfers of 50% Operating Rights to Gasco Production Company
from QEP Uinta Basin, Inc. and III Exploration Company
approved by BLM and recorded in Duchesne County, Utah.
107
SCHEDULE 7.01
EXISTING INDEBTEDNESS
None.
108
SCHEDULE 7.02
EXISTING LIENS
None.
109
SCHEDULE 7.07
TRANSACTIONS WITH AFFILIATES
None.
110
