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EXHIBIT 10.13
CREDIT AGREEMENT
among
XXXXXXX PETROLEUM CORPORATION,
a Texas corporation,
Borrower
CHRISTIANIA BANK OG KREDITKASSE ASA,
Administrative Agent
and
THE LENDERS NAMED HEREIN,
Lenders
$50,000,000
MAY 15, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I Definitions and Terms............................................................................ 1
1.1 Definitions............................................................................. 1
1.2 Capitalized Terms....................................................................... 13
1.3 Determination of Reserves............................................................... 13
1.4 Gender of Words......................................................................... 13
1.5 Accounting Principles................................................................... 13
ARTICLE II The Commitment.................................................................................. 14
2.1 Maximum Amount of Facility.............................................................. 14
2.2 Purpose of Advances..................................................................... 14
2.3 Advance Procedure....................................................................... 14
2.4 Notes................................................................................... 15
2.5 Interest................................................................................ 15
2.6 Repayment of Principal of and Interest.................................................. 15
2.7 Time and Place of Payments.............................................................. 16
2.8 Optional Prepayment; Cancellation of Commitments........................................ 16
2.9 Mandatory Prepayment.................................................................... 17
2.10 LC Subfacility.......................................................................... 17
2.11 Borrowing Base.......................................................................... 19
2.12 Quotation of Rates...................................................................... 21
2.13 Eurodollar Interest Periods; Rollovers; Conversions..................................... 21
2.14 Basis Inadequate for Determining Eurodollar Rate........................................ 21
2.15 Additional Costs........................................................................ 22
2.16 Illegality.............................................................................. 23
2.17 Replacement Lender...................................................................... 23
2.18 Consequential Loss...................................................................... 23
2.19 Sharing of Payments, Etc................................................................ 23
2.20 Offset.................................................................................. 24
2.21 Calculation of Eurodollar Rate.......................................................... 24
2.22 Booking Loans........................................................................... 24
2.23 Highest Lawful Rate..................................................................... 24
2.24 Foreign Lenders......................................................................... 24
2.25 Fees.................................................................................... 25
ARTICLE III Security....................................................................................... 25
3.1 Collateral.............................................................................. 25
3.2 Release of Collateral................................................................... 26
3.3 Additional Security and Guaranties...................................................... 26
ARTICLE IV Representations and Warranties.................................................................. 26
4.1 Existence. ............................................................................ 26
4.2 Chief Executive Offices................................................................. 27
4.3 Subsidiaries; Ownership of Borrower. .................................................. 27
4.4 Compliance with Laws and Documents; Binding Obligations. .............................. 27
4.5 Solvency. ............................................................................. 27
4.6 Financial Statements; Fiscal Year. .................................................... 27
(i)
3
4.7 Reports and Other Information. ........................................................ 27
4.8 Joint Venture or Partnership. ......................................................... 28
4.9 Fees or Commissions. .................................................................. 28
4.10 Tax Returns. .......................................................................... 28
4.11 Litigation and Other Contingent Liabilities. .......................................... 28
4.12 Ownership of Collateral. .............................................................. 28
4.13 Loans to Affiliates. .................................................................. 28
4.14 Indebtedness. ......................................................................... 28
4.15 Intellectual Property. ................................................................ 28
4.16 Leases. ................................................................................ 28
4.17 Gas Imbalances. ........................................................................ 29
4.18 Environmental Laws. ................................................................... 29
4.19 Compliance With Laws. ................................................................. 29
4.20 No Default Under Other Agreements. .................................................... 30
4.21 No Liability For Any Other Person. .................................................... 30
4.22 Security Interests. ................................................................... 30
4.23 Tax Identification Number. ............................................................ 30
4.24 Public Utility Holding Company Act. ................................................... 30
4.25 Investment Company Act. ............................................................... 30
4.26 Burdensome Contracts. ................................................................. 30
4.27 Operating Agreements. ................................................................. 30
4.28 Sale of Hydrocarbons. ................................................................. 31
4.29 Employee Plans. ........................................................................ 31
4.30 Regulation O. ......................................................................... 31
ARTICLE V Financial Statements and Information; Certain Notices to Lender.................................. 31
5.1 Production Reports...................................................................... 31
5.2 Quarterly Financial Statements.......................................................... 31
5.3 Annual Financial Statements............................................................. 31
5.4 Notices and Related Information......................................................... 32
5.5 Reserve Reports......................................................................... 32
5.6 Revenue and Lease Operating Expense Forecasts........................................... 32
5.7 Amendments to Corporate Documents....................................................... 32
5.8 General................................................................................. 32
ARTICLE VI Affirmative Covenants........................................................................... 32
6.1 Corporate Existence. .................................................................. 32
6.2 Transaction With Affiliates. .......................................................... 32
6.3 Compliance with Tax Laws; Royalty Payments. ........................................... 33
6.4 Books and Records. .................................................................... 33
6.5 Litigation. ........................................................................... 33
6.6 Compliance with Environmental Laws. ................................................... 33
6.7 CERCLA. ............................................................................... 33
6.8 Notice of Release....................................................................... 33
6.9 Maintenance of Property; Insurance...................................................... 33
6.10 Insurance Renewal or Replacement. ..................................................... 34
6.11 Consultants. .......................................................................... 34
6.12 Inspections. .......................................................................... 34
6.13 Access to Companies. .................................................................. 34
6.14 Accounts With Agent. ................................................................... 34
(ii)
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6.15 Expenses. ............................................................................. 34
6.16 Taxes................................................................................... 35
6.17 Hydrocarbon Sales Contracts; Gas Balancing; Hedging. .................................. 35
6.18 Further Assurances. ................................................................... 35
6.19 Indemnification. ...................................................................... 36
6.20 Notice of Non-Consent. ................................................................ 36
ARTICLE VII Negative Covenants............................................................................. 36
7.1 Indebtedness. ......................................................................... 36
7.2 Liabilities of Other Persons. ......................................................... 36
7.3 New Business. ......................................................................... 36
7.4 Assets. ............................................................................... 36
7.5 Cancellation of Debt. ................................................................. 37
7.6 Default. .............................................................................. 37
7.7 Loans to Persons. ..................................................................... 37
7.8 Negative Pledge. ...................................................................... 37
7.9 Investments; Subsidiaries. ............................................................ 37
7.10 Chief Executive Office; Corporate Name. ............................................... 37
7.11 Fiscal Year. .......................................................................... 38
7.12 Dividends. ............................................................................ 38
7.13 Security Documents. ................................................................... 38
7.14 Maintenance of Properties. ............................................................ 38
7.15 Amendments to Other Debt Instruments. ................................................. 38
7.16 Employee Plans.......................................................................... 38
7.17 Minimum Interest Coverage Ratio......................................................... 38
7.18 Minimum Current Ratio................................................................... 38
7.19 Permitted G&A........................................................................... 38
ARTICLE VIII Closing; Conditions Precedent to Closing...................................................... 39
8.1 Closing. .............................................................................. 39
8.2 Initial Borrowing....................................................................... 39
8.3 Each Borrowing.......................................................................... 40
8.4 Supplements to Schedules................................................................ 41
ARTICLE IX Default......................................................................................... 41
ARTICLE X Remedies of Lenders and Agreements Among Lenders................................................. 43
10.1 Remedies Upon Default. ................................................................ 43
10.2 Company Waivers. ...................................................................... 44
10.3 Performance by Agent. ................................................................. 44
10.4 Not in Control. ....................................................................... 44
10.5 Course of Dealing. .................................................................... 44
10.6 Cumulative Rights. .................................................................... 45
10.7 Agreements Among Lenders................................................................ 45
ARTICLE XI Miscellaneous................................................................................... 50
11.1 Successors and Assigns. ............................................................... 50
11.2 Participations. ....................................................................... 50
11.3 Assignments. .......................................................................... 50
11.4 Notices. .............................................................................. 51
(iii)
5
11.5 Exercise of Rights; No Waivers. ....................................................... 52
11.6 Release to Public. .................................................................... 53
11.7 Waiver of Jury Trial. ................................................................. 53
11.8 Governing Law. ........................................................................ 53
11.9 Benefits of Agreement................................................................... 53
11.10 Invalid Provisions. ................................................................... 53
11.11 Headings. ............................................................................. 53
11.12 Advice of Legal Counsel. .............................................................. 53
11.13 Amendments, Consents, Conflicts and Waivers............................................. 54
11.14 Multiple Counterparts. ................................................................ 54
11.15 Usury Savings Clause. ................................................................. 54
11.16 Xxxxxx; Cash Collateral. .............................................................. 55
11.17 Nonbusiness Days; Time. ............................................................... 55
11.18 Entirety. .............................................................................. 55
SCHEDULES AND EXHIBITS
Schedule 1 Parties, Addresses, Committed Amounts and Wiring Information
Schedule 2 Borrowing Base Reduction Schedule
Schedule 4.1 Jurisdictions of Incorporation and Business
Schedule 4.2 Chief Executive Offices
Schedule 4.8 Joint Ventures and Partnerships
Schedule 4.10 Tax Delinquencies
Schedule 4.11 Material Litigation and Other Material Contingent Liabilities
Schedule 4.13 Loans, Advances and Investments to Affiliates
Schedule 4.26 Burdensome Contracts
Schedule 4.29 Employee Plans
Exhibit A Form of Reducing Revolving Credit Note
Exhibit B Form of Production Report
Exhibit C Form of Borrowing Request
Exhibit D Form of LC Request
Exhibit E Form of Compliance Certificate
Exhibit F Form of Assignment Agreement
Exhibit G Form of Opinion of Counsel
(iv)
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "AGREEMENT") made as of May 15, 1998, among
XXXXXXX PETROLEUM CORPORATION, a Texas corporation having its principal
executive office and place of business at 00000 Xxxxxxxxx Xxxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxx 00000 ("BORROWER"), CHRISTIANIA BANK OG KREDITKASSE ASA
("CHRISTIANIA"), as Administrative Agent ("AGENT"), and Lenders (as defined
below) named herein.
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lenders make available a
$50,000,000 reducing revolving credit facility to be used by Borrower to finance
its working capital needs and for general corporate purposes in the ordinary
course of business, subject to Borrower granting Agent, on behalf of Lenders, a
perfected first priority security interest covering (i) at least 90% of the
present value (discounted at 10%) of Borrower's proved oil and gas reserves,
(ii) all of Borrower's accounts receivable, and (iii) any material contracts,
equipment and gathering systems of Borrower, and further subject to the other
terms and conditions set forth herein; and
WHEREAS, Borrower expressly acknowledges and agrees that Lenders will
not make the foregoing credit facility available unless Borrower (i) satisfies
the conditions precedent set forth herein, and (ii) executes such documentation
satisfactory to Agent with respect to Agent's first priority security interest
in the Collateral (as hereinafter defined);
NOW, THEREFORE, the parties hereto in consideration of the terms,
covenants, provisions and conditions set forth herein hereby agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
1.1 DEFINITIONS. As used in the Loan Documents, the following terms
shall have the following meanings and, as the context requires, the singular
shall include the plural:
ABR means the highest of (i) the rate of interest publicly announced by
Agent as its prime rate in effect at its principal office in New York City (the
"PRIME RATE"), (ii) the secondary market rate for three-month certificates of
deposit (adjusted for statutory reserve requirements) plus 1% and (iii) the
Federal Funds Rate plus 0.5%.
ABR ADVANCE means an Advance bearing interest at the ABR.
ABR LOANS means Loans bearing interest at the ABR.
ADVANCE means an advance of funds by Lenders pursuant to ARTICLE II
including the original disbursement or the continuation of an amount
outstanding.
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AFFILIATE means as to any Person (as hereinafter defined), any other
Person who directly or indirectly controls, is under common control with, or is
controlled by such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise), provided
that, in any event (i) any Person who owns directly or indirectly 20% or more of
the securities having ordinary voting power for the election of directors or
other governing body of a corporation or 20% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person, and
(ii) any sub sidiary of Borrower shall be deemed to be an Affiliate of Borrower.
AGENT is defined in the preamble to this Agreement.
AGREEMENT means this Credit Agreement, including Schedules and Exhibits
hereto, as amended, supplemented or restated from time to time.
BB REDUCTION AMOUNT is defined in SECTION 2.11.
BORROWER is defined in the preamble to this Agreement.
BORROWING BASE means at any point in time, the value assigned to the
Properties, in accordance with Agent's normal and customary oil and gas lending
practices after taking into account, in Agent's sole discretion, all such
factors as Agent reasonably may deem relevant, and approved by Required Lenders.
BORROWING BASE DEFICIENCY means when, at any time, amounts outstanding
under the Facility (together with LC Exposure) exceed the Borrowing Base.
BORROWING DATE means the date for which funds are requested by Borrower
for any Advance.
BUSINESS DAY means any day on which the Federal Reserve Bank of New
York is open for business, other than any day on which banks are required or
authorized to close in New York, New York, or, solely for purposes of
establishing the Borrowing Date for any Eurodollar Loan, London England.
CAPITAL LEASE means obligations of any Person under any capital lease
or sublease that has been (or under GAAP should be) capitalized on a balance
sheet of such Person.
CERCLA means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
CHRISTIANIA is defined in the preamble to this Agreement.
CLOSING means the date of execution and delivery by Borrower and/or
other applicable parties to Lenders of this Agreement, the other Security
Documents (as hereinafter defined) and other related documents pursuant to
SECTION 8.2 and the satisfaction of the conditions precedent thereto.
CLOSING DATE is defined in SECTION 8.1.
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CODE means the Internal Revenue Code of 1986, as amended, and related
rules and regulations.
COLLATERAL is defined in ARTICLE III.
COMMITTED AMOUNT means for each Lender the amount (which is subject to
reduction and cancellation as provided in this Agreement) stated beside such
Lender's name on SCHEDULE 1 as most recently amended under this Agreement.
COMMITMENT PERCENTAGE means for each Lender the proportion (stated as a
percentage) that such Lender's Committed Amount bears to the Total Commitment.
COMPANY OR COMPANIES means, at any time, Borrower and each of its
wholly-owned Subsidiaries created or acquired in accordance with SECTION 7.9(b).
COMPLIANCE CERTIFICATE means a certificate substantially in the form of
EXHIBIT E and signed by a Responsible Officer.
CRUDE OIL means all crude oil and/or condensate.
CURRENT FINANCIALS means, at any time, the consolidated Financial
Statements of MHI and its Affiliates most recently delivered to Agent under
ARTICLE V.
DEBTOR RELIEF LAWS means all applicable liquidation, conservatorship,
bankruptcy, insolvency, rearrangement, moratorium, reorganization, or similar
debtor relief laws affecting the rights of creditors generally from time to time
in effect.
DEFAULT is defined in SECTION 9.1.
DEFAULT RATE is defined in SECTION 2.13(b).
DEFENSIBLE TITLE means with respect to each Property, such title that
(i) entitles a Company to receive (free and clear of all royalties, overriding
royalties, net profits interests, or other burdens on or measured by production
of Hydrocarbons and associated gases) not less than the Net Revenue Interest, as
indicated in Exhibit A to a Mortgage, of Company in all Hydrocarbons produced,
saved and marketed from such Property for the productive life of such Property,
free and clear of any Encumbrance other than the Permitted Encumbrances; (ii)
obligates a Company to bear costs and expenses relating to the maintenance,
development and operation of such Property in an amount not greater than the
Working Interest of Borrower for the productive life of such Property, as
indicated on Exhibit A to a Mortgage (unless such greater Working Interest
results in a corresponding proportionate increase in the Net Revenue Interest of
such Company in such Property); and (iii) with respect to any royalty and
overriding royalty interests acquired by a Company not included in the Net
Revenue Interest or Working Interest described in CLAUSES (i) or (II) above, net
profits interests and/or production interests and any rights a Company acquires
to receive revenues from production, good and valid title to such interests,
free and clear of any Encumbrance, other than the Permitted Encumbrances.
DESIGNATED RATE is defined in SECTION 2.5(b).
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EBITDA means net income, plus (a) to the extent deducted in the
calculation of net income, the sum of (i) income taxes arising from the
Companies' income, (ii) interest expense, (iii) amortization, depletion and
depreciation expense, (iv) losses from sales or disposition of assets, and (v)
other non-cash charges, less (b) to the extent included in the calculation of
net income, the sum of (i) gains from sales or disposition of assets and (ii)
extraordinary or non-recurring gains, net of extraordinary or non-recurring
losses, in each case calculated in accordance with GAAP.
EMPLOYEE PLAN means an employee pension benefit plan covered by Title
IV of ERISA and any other employee incentive compensation arrangement
established or maintained by any Company.
ENCUMBRANCE means any lien, mortgage, security interest, pledge,
charge, title retention agreement (other than any rights reserved to or retained
by a lessor in respect of an oil, gas and mineral lease and any rights retained
by a party pursuant to a farmout agreement) or encumbrance of any kind, and any
other Right of or arrangement with any creditor to have his claim satisfied out
of any property or assets, or the proceeds therefrom, prior to the general
creditors of the owner thereof.
ENGINEERS means
Xxxxxxxxxx & Co. Inc.
0000 Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
or such other independent petroleum engineering firms selected by Borrower as
shall be acceptable to Agent.
ENVIRONMENTAL AND SAFETY REGULATIONS means all applicable federal,
state or local laws, ordinances, codes, rules, orders and regulations with
respect to any environmental, pollution, toxic or hazardous waste or health and
safety law, including, without limitation, those promulgated by the United
States Environmental Protection Agency, the Federal Energy Regulatory
Commission, the Department of Energy, the Occupational Safety and Health
Administration, the Department of the Interior, or any other federal or state
regulatory agency, or any of their predecessor or successor agencies.
EQUIPMENT means all surface or subsurface machinery, goods, equipment,
fixtures, inventory, facilities, supplies or other personal or moveable property
of whatsoever kind or nature (excluding property taken to the premises for
temporary uses) now owned or hereafter acquired by a Company now or hereafter
located on or under any of the lands attributable to the Properties which are
used for the production, gathering, treatment, processing, storage or
transportation of Hydrocarbons (together with all accessions, additions and
attachments to any thereof), including, without limitation, all oil xxxxx, gas
xxxxx, water xxxxx, injection xxxxx, casing, tubing, tubular goods, rods,
pumping units and engines, Christmas trees, platforms, derricks, separators,
compressors, gun barrels, flow lines, tanks, gas systems (for gathering,
treating and compression), pipelines (including gathering lines, laterals and
trunklines), chemicals, solutions, water systems (for treating, disposal and
injection), power plants, poles, lines, transformers, starters and controllers,
machine shops, tools, storage yards and equipment stored therein, telegraph,
telephone and other communication systems, loading docks, loading racks,
shipping facilities, platforms, well equipment, wellhead valves, meters, motors,
pumps, tankage, regulators, furniture, fixtures, automotive equipment,
forklifts, storage and handling equipment, together with all additions and
accessions thereto, all replacements and all accessories and parts therefor, all
manuals, blueprints, documentation and processes, warranties and records in
connection therewith including, without limitation, any and all seismic data,
all rights against
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suppliers, warrantors, manufacturers, sellers or others in connection therewith,
and together with all substitutes for any of the foregoing.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and related rules and regulations.
EURODOLLAR LOANS means those certain Loans bearing interest based upon
the Eurodollar Rate.
EURODOLLAR RATE means the rate (adjusted for statutory reserve
requirements of eurocurrency liabilities) at which eurodollar deposits for one,
two, three or six (or, if available and acceptable to Required Lenders, nine or
twelve) months (as selected by Borrower) are offered to Agent in the Interbank
eurodollar market, plus 1.75%.
EURODOLLAR RATE ADVANCE means an Advance bearing interest based upon
the Eurodollar Rate.
FACILITY means the reducing revolving credit facility described in
SECTION 2.1.
FEDERAL FUNDS RATE for any day means the rate set forth in H.15(519) or
any successor publication published by the Board of Governors of the Federal
Reserve System for that day opposite the caption "Federal Funds (Effective)," or
if such rate is not yet published therein, the rate set forth in Composite 3:30
p.m. Quotations for U.S. Government Securities or any successor publication
published by the Federal Reserve Bank of New York for that day under the caption
"Federal Funds/Effective Rate". If such rates are not published in either
publication, the rate shall be the arithmetic mean of the rates for the last
transaction in overnight Federal funds arranged by three leading brokers of
Federal funds transactions in New York City prior to 9:00 a.m., New York City
time, on that day, as determined by Agent.
FEE LETTER means the letter agreement dated March 23, 1998, between
Borrower and Agent.
FINANCIAL HEDGE means a swap, collar, floor, cap, futures or other
contract which is intended to reduce or eliminate currency exchange risk or the
risk of fluctuations in interest rates.
FINANCIAL STATEMENTS of a Person means balance sheets, profit and loss
statements, reconciliations of capital and surplus, and statements of cash flow
prepared according to GAAP, except as permitted by SECTION 1.5, in comparative
form to prior year-end figures or corresponding periods of the preceding fiscal
year, as applicable.
GAAP means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent with
applicable laws, except for changes mandated by the Financial Accounting
Standards Board or any similar accounting authority of comparable standing.
Whenever any accounting term is used herein which is not otherwise defined, it
shall be interpreted in accordance with GAAP.
HAZARDOUS MATERIALS means and includes (i) all elements or compounds
that are contained in the list of hazardous substances adopted by the United
States Environmental Protection Agency and the list of toxic pollutants
designated by Congress or the Environmental Protection Agency or under any
Hazardous Substance Laws (as hereinafter defined), and (ii) any "hazardous
waste", "hazardous substance", "toxic
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substance", "regulated substance", "pollutant" or "contaminant" as defined under
any Hazardous Substance Laws.
HAZARDOUS SUBSTANCE LAWS means CERCLA, the Resource Conservation and
Recovery Act, the Federal Water Pollution Control Act, the Toxic Substances
Control Act, the Hazardous Liquid Pipeline Safety Act of 1979, the Texas Natural
Resources Code, the Federal Insecticide, Fungicide, and Rodenticide Act, the
Federal Clean Air Act, the Texas Water Quality Act, the Texas Clean Air Act,
Subchapter I of the Texas Water Code (Underground and Aboveground Storage
Tanks), the Texas Solid Waste Disposal Act, any so-called federal, state or
local "superfund" or "superlien" statute, and any other federal, state or local
law, rule, regulation or ordinance related to the remediation, clean-up or
reporting of environmental pollution or contamination or imposing liability
(including strict liability) or standards of conduct concerning any Hazardous
Materials, in each case, as amended.
HEDGE means any Financial Hedge or Hydrocarbon Hedge.
HYDROCARBONS means all Crude Oil, Natural Gas, distillate and sulphur,
natural gas liquids and all products recovered in the processing of natural gas
liquids, including, without limitation, natural gasoline, iso-butane, normal
butane, propane and ethane (including such methane allowable in commercial
ethane), produced from or attributable to the Properties.
HYDROCARBON HEDGE means a swap, collar, floor, cap, futures or other
contract which is intended to reduce or eliminate currency exchange risk or the
risk of fluctuations in the price of Hydrocarbons.
INDEBTEDNESS means and includes (i) all obligations for borrowed money
of any kind or nature, including funded and unfunded debt or guarantees thereof
and contingent obligations in respect of any of the foregoing including, without
limitation, reimbursement obligations in respect of letters of credit, and (ii)
all obligations of a Person for the acquisition or use of any fixed asset or
improvements thereto and which are required to be capitalized on the balance
sheet of such Person in accordance with GAAP, including Capital Leases, which
are payable over a period longer than one year or guarantees thereof, regardless
of the term thereof or the Person or Persons (each as hereinafter defined) to
whom the same is payable.
INITIAL RESERVE REPORT means the reserve report dated effective as of
December 31, 1997, and prepared by Engineers with respect to the Properties and
delivered to and accepted by Agent prior to the date hereof.
INTEREST COVERAGE RATIO means, as of the last day of any fiscal quarter
of the Companies, the ratio of (i) EBITDA for the four fiscal quarters ending on
such date, to (ii) interest expense on all Indebtedness, including LC fees
described in SECTION 2.25(c) of the Agreement, for the four fiscal quarters
ending on such date.
INTEREST PERIOD is defined in SECTION 2.13(a).
INTERESTS means with respect to the Properties, all of the Companies':
(a) rights in and to oil, gas and mineral leases and the estates
created thereby, including without limitation, working or undivided interests
therein, overriding royalty interests, production payments, net profits
interests, carried interests, reversionary interests or back-in interests. The
term "OIL, GAS AND MINERAL
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LEASES" includes, in addition to oil, gas and mineral leases, oil and gas
leases, oil, gas and sulphur leases, other mineral leases, co-lessor's
agreements and extensions, amendments, ratification and subleases of all or any
of the foregoing, all as may be appropriate;
(b) mineral interests, royalty interests and fee interests, whether
the same be term, freehold, participating or non-participating, and any other
right or estate which conveys upon the owner thereof the right to grant oil, gas
and mineral leases to third parties to explore for, to discover and to produce
Hydrocarbons;
(c) all rights, titles, interests and estates in and to present and
future drilling, spacing, proration or production units, as created by the terms
of any unitization, communitization and pooling agreements, and all properties,
property rights and estates created thereby which include, belong or appertain
to the estates, rights and interests described in the foregoing paragraphs,
including, without limitation, all such units formed voluntarily or under or
pursuant to any Law relating to any of such estates, rights and interests; and
(d) all rights, titles, interests and estates in and to present and
future salt water disposal facilities or any contract, lease or other agreement
relating thereto.
INVESTMENT in any Person means the amount paid or committed to be paid
or the value of property or wages contributed or committed to be contributed by
the Person making the Investment on its account for or in connection with its
acquisition of any stock, bonds, notes, debentures, partnership or other
ownership interest or any other security of the Person in whom such Investment
is made or any evidence of indebtedness by reason of a loan, advance, extension
of credit, guaranty or other similar obligation of any debt, liability or
indebtedness of such Person in whom the Investment is made.
LAWS means all applicable statutes, laws, treaties, ordinances, rules,
regulations, orders, writs, injunctions, decrees, judgments, opinions and
interpretations of any Tribunal.
LC means each standby letter of credit made available by Agent pursuant
to SECTION 2.10.
LC EXPOSURE means, at any time (without duplication), the sum of (a)
the aggregate undrawn and uncancelled portions of all outstanding LCs plus (b)
the aggregate unpaid reimbursement obligations of Borrower under drawings or
drafts under any LC, excluding Advances to fund such reimbursement obligations
under SECTION 2.10.
LC REQUEST means a request substantially in the form of EXHIBIT D.
LEASE or LEASES means whether one or more, (i) those certain oil and
gas leases set forth in the description of the Property attached as Exhibit A to
the initial Mortgage, and any other interests in the Leases and any extension,
renewals, corrections, modifications, elections or amendments (such as those
relating to unitization) of any such Lease or Leases, or (ii) other oil, gas
and/or mineral leases or other interests pertaining to the Properties which may
now and hereafter be made subject to the lien of any of the Security Documents
and any extension, renewals, corrections, modifications, elections or amendments
(such as those relating to unitization) of any such lease or leases.
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LENDERS means the financial institutions named on SCHEDULE 1 or on the
most recently amended SCHEDULE 1, if any, delivered by Agent under this
Agreement, and, subject to this Agreement, their respective successors and
assigns (but not any Participant who is not otherwise a party to this
Agreement).
LOAN DOCUMENTS means (a) this Agreement, certificates and reports
delivered under this Agreement, and exhibits and schedules to this Agreement,
(b) the Notes, the Security Documents, the Fee Letter, and any other agreements,
documents and instruments ever executed in favor of Agent or Lenders (or Agent
on behalf of Lenders) and delivered in connection with or under this Agreement
or otherwise delivered in connection with all or any part of the Obligation, (c)
all LCs and applications therefor, and (d) all renewals, extensions and
restatements of, and amendments and supplements to, any of the foregoing.
LOANS means loans under the Facility not to exceed the Total Commitment
in the aggregate outstanding at any one time.
MCF means one thousand cubic feet.
MATERIAL ADVERSE EVENT means any circumstance or event that,
individually or collectively with other circumstances or events, reasonably is
expected to result in any (a) material impairment of the ability of any Company
to perform any of its payment or other material obligations under any Loan
Document, (b) material impairment of the ability of Agent or any Lender to
enforce (i) any of the material obligations of any Company under this Agreement
or (ii) any of its Rights under the Loan Documents, unless the cause of such
impairment results from any action or lack of action by Agent or Lenders, (c)
material and adverse effect on the financial condition of Borrower individually,
or the Companies as a whole, as represented to Lenders in the Current
Financials, (d) material and adverse effect on any part of the Collateral having
a fair market value of at least $1,000,000 at such time, or (e) Default or
Potential Default.
MHI is defined in SECTION 4.3.
MORTGAGE means a Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement (or similar instrument) as the same
may be modified, amended or supplemented pursuant to the terms of this Agreement
executed by a Company and granting a first and prior lien to or for Agent on
behalf of Lenders in the Mortgaged Properties subject only to the Permitted
Encumbrances.
MORTGAGED PROPERTY or MORTGAGED PROPERTIES means the property described
on Exhibit A to each Mortgage.
NATURAL GAS means all natural gas, and any natural gas liquids and all
products recovered in the processing of natural gas (other than condensate)
including, without limitation, natural gasoline, iso-butane, normal butane,
propane and ethane (including such methane allowable in commercial ethane)
produced from or attributable to the Properties.
NET REVENUE INTEREST means with respect to any Property, the decimal or
percentage share of production from or allocable to such Property, after
deduction of all overriding royalties and other burdens on production applicable
thereto, that an owner of a corresponding Working Interest in such Property is
entitled to receive.
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NOTES means each promissory note executed by Borrower and delivered to
a Lender pursuant to the terms of SECTION 2.4 substantially in the form of
EXHIBIT A, together with all renewals, extensions and rearrangements thereof.
OBLIGATIONS means and includes all loans and advances (including the
Loans), debts, liabilities, obligations, covenants and duties owing by any
Company to Agent or Lenders or any Affiliate of Agent or Lenders of any kind or
nature, present or future, whether or not evidenced by any note, guaranty or
other instrument, arising directly or indirectly, under any Loan Document or any
Hedge between a Company and Agent (or any Lender). The term includes, but is not
limited to, all interest, reasonable charges, expenses, consultants' and
attorneys' fees and any other sum chargeable to any Company under any Loan
Document or any Hedge between a Company and Agent (or any Lender).
OPERATING AGREEMENTS means all joint operating agreements relating to
the Properties.
OPERATOR shall mean any Company and any other operators, including
contract operators, of the Properties (as such terms are generally understood in
the oil and gas industry).
PARTICIPANT is defined in SECTION 11.2.
PERMITTED DEBT means (a) the Obligations, (b) obligations to pay Taxes,
(c) accounts payable in the ordinary course of business (including, without
limitation, customary bonuses, delay rentals, shut-in payments and royalties
payable in connection with the production of Hydrocarbons), (d) purchase money
obligations of up to $500,000 at any time for all of the Companies so long as
they do not exceed the fair market value of the property purchased therewith,
(e) obligations under Xxxxxx permitted under this Agreement, (f) obligations
under Capital Leases, the aggregate unpaid principal amount of which shall not
exceed $500,000 at any time for all of the Companies, (g) obligations with
respect to the Senior Note Offering (including guaranties of the Senior Notes by
Subsidiaries of Borrower, and the obligations under the Indenture, as amended or
supplemented from time to time, governing the terms of the Senior Notes), (h)
obligations to deliver approximately 4 BCF of natural gas to Mobil Producing
Texas & New Mexico Inc.("MOBIL PRODUCING") as the deferred purchase price for
certain of the Properties pursuant to the terms of that certain South Xxxxxxxxx
Ranch (Lobo) Assets Agreement dated April 20, 1998 between Borrower and Mobil
Exploration & Producing U.S. Inc., as Agent for Mobil Producing, (i)
inter-Company loans and advances, and (j) other Indebtedness not to exceed, in
the aggregate at any time outstanding, an amount equal to $500,000 for all of
the Companies.
PERMITTED ENCUMBRANCES means (a) Encumbrances securing the Obligations,
(b) Encumbrances securing any purchase money obligation included in Permitted
Debt if such Encumbrances encumber only the property for which such purchase
money obligation was incurred and such property is not part of the Collateral,
(c) in respect of the Mortgaged Properties, existing burdens, terms of operating
agreements, assignments, sales contracts and other agreements in effect on the
date hereof relating to the Mortgaged Properties, and minor defects in title
which do not restrict the full use and other benefits of ownership by or the
ability to receive a share of production equal to the Net Revenue Interest of
the Companies therein and which are ordinarily and customarily waived by
reasonable and prudent operators, (d) Encumbrances related to any Capital Lease
included in Permitted Debt if such Encumbrances encumber only the property
demised by such lease, (e) Encumbrances for Taxes not yet due and payable, (f)
inchoate liens in respect of mechanics, materialmen, laborers, warehousemen,
royalty owners, subcontractors, and operators under joint or unit operating
agreements, or statutory or contractual landlord liens and security interests if
discharged in the
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ordinary course of business or while being contested in good faith and by
appropriate and lawful proceedings diligently conducted if reserve or other
appropriate provision (if any) required by GAAP has been made, so long as such
Encumbrances do not materially detract from the value of the property in
question, or materially impair the use thereof, (g) pledges or deposits made to
secure payment of worker's compensation, or to participate in any fund in
connection with worker's compensation, unemployment insurance, pensions or other
social security programs, (h) good-faith pledges or deposits made to secure
performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, not in excess of 10% of the aggregate amount due
thereunder, or to secure statutory obligations, surety or appeal bonds, or
indemnity, performance or other similar bonds in the ordinary course of
business), and (i) any obligations or liens with respect to Employee Plans.
PERMITTED INVESTMENTS means
1. The following (i.e., "GOVERNMENT SECURITIES") if due within one year
after issuance: (a) Readily marketable direct full faith and credit
obligations of the United States of America or obligations guaranteed
by the full faith and credit of the United States of America; and (b)
readily marketable obligations of an agency or instrumentality of, or
corporation owned, controlled or sponsored by, the United States of
America that are generally considered in the securities industry to be
implicit obligations of the United States of America.
2. Readily marketable direct obligations of any state of the United States
of America given on the date of such investment a credit rating of at
least Aaa by Xxxxx'x Investors Service, Inc. ("MOODY'S") or AAA by
Standard & Poor's Ratings Group, a division of XxXxxx-Xxxx, Inc.
("S&P"), in each case due within one year from the making of the
investment.
3. Certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and repurchase agreements
covering Government Securities executed by, any (a) Lender or (b) bank
incorporated under the Laws of the United States of America or any of
its states and given on the date of the investment a short-term
certificate of deposit credit rating of at least P-1 by Moody's or A-1
by S&P, in each case due within one year after the date of the making
of the investment.
4. Certificates of deposit issued by, bank deposits in, eurodollar
deposits through, bankers' acceptances of, and repurchase agreements
covering Government Securities executed by, any branch or office
located in the United States of America of a bank incorporated under
the Laws of any jurisdiction outside the United States of America
having on the date of the investment a short-term certificate of
deposit credit rating of at least P-1 by Moody's or A-1 by S&P, in each
case due within one year after the date of the making of the
investment.
5. Repurchase agreements covering Government Securities executed by a
broker or dealer registered under Section 15(b) of the Securities
Exchange Act of 1934 having on the date of the investment capital of at
least $100,000,000, due within 30 days after the date of the making of
the investment, so long as the maker of the investment receives written
confirmation of the transfer to it of record ownership of the
Government Securities on the books of a "primary dealer" in the
Government Securities as soon as practicable after the making of the
investment.
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6. Readily marketable commercial paper of corporations doing business in
and incorporated under the Laws of the United States of America or any
State thereof or of any corporation that is the holding company for a
bank described in ITEMS 3 and 4 above given on the date of the
investment a credit rating of at least P-1 by Moody's or A-1 by S&P, in
each case due within 90 days after the date of the making of the
investment.
7. "Money market preferred stock" issued by a corporation incorporated
under the Laws of the United States of America or any of its states
given on the date of the investment a credit rating of at least Aaa by
Moody's and AAA by S&P, in each case having an investment period not
exceeding 50 days, so long as (a) the amount of all the investments
issued by the same issuer does not exceed $10,000,000 and (b) the
aggregate amount of all the investments does not exceed $50,000,000.
8. A readily redeemably "money market mutual fund" sponsored by a bank
described in ITEMS 3 and 4 above, or a registered broker or dealer
described in ITEM 5 above, that has and maintains an investment policy
limiting its investments primarily to instruments of the types
described in ITEMS 1 through 7 above and having on the date of those
investment total assets of at least $1,000,000,000.
9. Loans, advances or investments set forth on SCHEDULE 4.13 that never
exceed a total of $250,000 outstanding at any time to Borrower's
directors, officers and employees.
10. Loans to MHI made pursuant to SECTION 7.12 and set forth on SCHEDULE
4.13.
11. Inter-Company loans, advances and investments which are set forth on
SCHEDULE 4.13.
12. Other loans, advances or investments that never exceed a total of
$1,000,000 outstanding at any time for all of the Companies, and which
are set forth on SCHEDULE 4.13.
PERSON means an individual, corporation, partnership, joint venture,
trust or unincorporated organization, joint stock company or other similar
organization, government or any political subdivision thereof, a court, or any
other legal entity, whether acting in an individual, fiduciary or other
capacity.
POTENTIAL DEFAULT means the occurrence of any event or the existence of
any circumstance that would, upon notice or lapse of time or both (unless cured
or waived), become a Default.
PRIME RATE is defined in the definition of "ABR" in this Agreement.
PRINCIPAL DEBT means, at any time, the unpaid principal balance of all
Advances.
PRO RATA and PRO RATA PART means, when determined for any Lender,
either (i) such Lender's Commitment Percentage or (ii) if the Total Commitment
has been terminated or canceled, the proportion (stated as a percentage) that
such Lender's Advances bears to the Principal Debt.
PRODUCTION REPORT means a report substantially in the form of EXHIBIT B
with all information called for therein duly completed.
PROPERTY or PROPERTIES means all of the Companies' net proved oil and
gas reserves.
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RELATED CLOSING COSTS means the fees and expenses of counsel for Agent
and the fees and expenses of engineers and other consultants for Agent in
connection with the due diligence, negotiation and preparation of documents
relating to the Closing.
RELEASE means Hazardous Materials that are pumped, spilled, leaked,
disposed of, emptied, discharged or otherwise released into the environment.
REPRESENTATIVES means representatives, officers, directors, employees,
attorneys and agents.
REQUIRED LENDERS means Lenders holding at least 75% of the Total
Commitment, or if the Total Commitment has been terminated or canceled, Lenders
holding at least 75% of the Principal Debt.
RESERVE REPORT means an annual report in a form reasonably acceptable
to Agent prepared by the Engineers in accordance with procedures customarily
used by independent petroleum engineers in making such appraisals, including
reasonable assumptions, estimates and projections as to expenses, reserves and
rates of productions from the Properties. Assumptions in regard to future prices
for Hydrocarbons shall be agreed to in advance by Borrower and Agent. In any
event, all assumptions, estimates and projections shall be fully disclosed in
the relevant Reserve Report. This report shall be an appraisal of the Proved
Developed Producing Reserves, the Proved Developed Non-Producing Reserves and
the Proved Undeveloped Reserves (as such terms are generally understood and
utilized by independent petroleum engineers in making such appraisals)
reasonably estimated to be recoverable from all Interests of Borrower, based
upon the assumptions, estimates and projections set forth in the relevant
Reserve Report.
RESPONSIBLE OFFICER means the chairman, president, chief executive
officer, chief financial officer, chief operating officer, chief accounting
officer, any vice president, controller or treasurer of Borrower.
RIGHTS means rights, remedies, powers, privileges and benefits.
ROYALTY INTEREST means the volume of production from or allocable to
any particular Property which the owners of royalty rights, including but not
limited to overriding royalty rights, and other rights to receive production,
other than by virtue of ownership of Working Interests, in any particular
Property are entitled to take in kind or for which they are entitled to be paid.
SECURITY DOCUMENTS means the Mortgage, and any other agreement or
writing evidencing any Encumbrance executed in favor of Agent on behalf of
Lenders in or on the Collateral and any other documents relevant thereto.
SENIOR NOTE OFFERING means that certain offering of $135 million of
11.5% Senior Notes of Borrower which are unsecured and due April 1, 2005 by
Bear, Xxxxxxx & Co., Inc., Xxxxxxxx & Company, Inc. and Xxxxxxx Xxxxx &
Associates, Inc., which offering is more particularly described in that certain
Offering Memorandum dated March 30, 1998 and that certain exchange offering for
such 11.5% Senior Notes in exchange for new 11.5% Senior Notes of Borrower
having terms substantially identical thereto (both such old and new 11.5% Senior
Notes, limited in the aggregate to $135,000,000 in outstanding principal amount,
being referred to herein as the "SENIOR NOTES").
SHAREHOLDERS' AGREEMENT means the MHI Shareholders' Agreement dated as
of July 1, 1996, among the Shareholders of MHI.
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SOLVENT means when used with respect to any Person, that as of the date
as to which the Person's solvency is to be measured: (a) the fair saleable value
of its assets is in excess of the total amount of its liabilities (including
income tax liabilities) as they become absolute and matured; and (b) it is able
to meet its debts as they mature.
SUBSIDIARY means for any Person, any corporation, partnership, or other
business entity of which more than fifty percent (50%) of the issued and
outstanding securities (or other ownership interests) having ordinary voting
power for the election of directors (or other persons performing similar
functions) is owned directly or indirectly, by such Person and/or one or more of
its subsidiaries.
TAXES means, for any Person, taxes, assessments or other governmental
charges or levies imposed upon it, its income, or any of its properties,
franchises or assets.
TERMINATION DATE means the fourth anniversary of the Closing Date.
TOTAL COMMITMENT means, at any time, the sum of the Committed Amounts
for all Lenders under this Agreement (as reduced or canceled) then in effect.
TRIBUNAL means any (a) local, state or federal judicial, executive or
legislative instrumentality, (b) private arbitration board or panel, or (c)
central bank.
TYPE means any type of Advance determined with respect to the
applicable interest option.
UCP means the Uniform Customs and Practice for Documentary Credits
(1993 version), International Chamber of Commerce Publication No. 500 (as
amended or modified).
WELL means any existing oil or gas well or salt water disposal well or
any other well located on or related to the Properties, as described on Exhibit
A to the Mortgage, or any well which may hereafter be drilled and/or completed
thereon, or any facility or equipment in addition to or replacement of any
thereof.
WORKING INTEREST means the property interest which entitles the owner
thereof to explore and develop certain land for oil and gas production purposes,
whether under an oil and gas lease or unit, a compulsory pooling order or
otherwise.
1.2 Capitalized Terms. Capitalized terms not otherwise defined in
SECTION 1.1 shall have the meanings so given elsewhere in this Agreement.
1.3 Determination of Reserves. All determinations of amounts and
types of reserves shall be made in accordance with Society of Petroleum
Engineers definitions.
1.4 Gender of Words. Words of any gender include each other gender
where appropriate.
1.5 Accounting Principles. Under the Loan Documents, unless
otherwise stated, (a) GAAP determines all accounting and financial terms, (b)
GAAP in effect on the date of this Agreement determines compliance with
financial covenants, and (c) otherwise, all accounting principles applied in a
current period must be comparable in all material respects to those applied
during the preceding comparable period.
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ARTICLE II
THE COMMITMENT
2.1 Maximum Amount of Facility. Subject to and in reliance upon
the terms, conditions, representations and warranties in the Loan Documents,
Lenders severally and not jointly agree to make to Borrower on one or more
Business Days prior to the Termination Date (subject to the limitation on the
number of Interest Periods that may exist at any time under SECTION 2.13)
secured loans on a reducing revolving basis (the "LOANS") in an amount up to an
aggregate principal amount outstanding at any one time of the lesser of such
Lender's Committed Amount or its Pro Rata Part of the Borrowing Base. Borrower
acknowledges that Lenders do not intend to advance Borrower any amount which
would at any point in time cause the aggregate principal amount of the Loans and
the undrawn amount of all LCs to exceed the Borrowing Base; provided, however,
that if obligations of Borrower under the Loans together with the undrawn amount
of all LCs exceed such amount, all such obligations shall nevertheless
constitute Obligations under this Agreement and shall be entitled to the benefit
of the Collateral. Prior to the Termination Date, any Principal Debt prepaid
may, subject to the conditions of this Agreement, be reborrowed hereunder, and
this Agreement shall not be deemed terminated or canceled solely because the
Obligations may from time to time be paid in full.
2.2 Purpose of Advances. Proceeds of the Loans shall be used to
finance working capital needs of Borrower and for its general corporate purposes
in the ordinary course of business. Multiple Advances shall be permitted under
the Loans, provided that all conditions precedent thereto set forth in ARTICLE
VIII have been satisfied.
2.3 Advance Procedure.
(a) Each Advance shall be in an amount of not less than
$500,000 or a greater integral multiple of $250,000 (unless the amount
available for borrowing is less). With respect to Advances, Borrower
must give Agent prior written notice in substantially the form of
EXHIBIT C of the Advance to be made and specifying the date and amount
thereof and whether such Advance is to be an ABR Advance or a
Eurodollar Rate Advance and, if a Eurodollar Rate Advance, the Interest
Period therefor pursuant to SECTION 2.13(a) (a "BORROWING REQUEST"). A
Borrowing Request for an ABR Advance must be delivered to Agent by
11:00 a.m. New York time on the day of the Advance. A Borrowing Request
for a Eurodollar Rate Advance must be delivered to Agent by 1:00 p.m.
New York time on the third Business Day prior to the day of the
Advance. Each Borrowing Request shall be irrevocable and binding on
Borrower.
(b) On the Borrowing Date, each Lender shall remit its
Commitment Percentage of each requested Advance to Agent's office in
New York City, in funds that are available for immediate use by Agent
by 12:00 noon on the applicable Borrowing Date. Subject to receipt of
such funds, Agent shall (unless to its actual knowledge any of the
applicable conditions precedent have not been satisfied by Borrower or
waived by Required Lenders) make such funds available to Borrower by
deposit into the operating account maintained by Borrower with Agent in
New York City (or such other account as may be designated by Borrower
in the Borrowing Notice and is acceptable to Agent); and absent
contrary written notice from a Lender, Agent may assume that each
Lender has made its Commitment Percentage of the requested Advance
available to Agent on the applicable Borrowing Date, and Agent may, in
reliance upon such assumption (but shall not be required to),
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make available to Borrower a corresponding amount. If a Lender fails to
make its Commitment Percentage of any requested Advance available to
Agent on the applicable Borrowing Date, Agent may recover the
applicable amount on demand (i) from that Lender, together with
interest at the Federal Funds Rate during the period commencing on the
date the amount was made available to Borrower by Agent and ending on
(but excluding) the date Agent recovers the amount from that Lender, or
(ii) if that Lender fails to pay its amount upon demand, then from
Borrower, together with interest at the rate applicable to the
requested Advance during the period commencing on the Borrowing Date
and ending on (but excluding) the date Agent recovers the amount from
Borrower. No Lender is responsible for the failure of any other Lender
to make its Commitment Percentage of any Advance.
2.4 Notes. Borrower's obligation to repay the Loans shall be
evidenced by promissory notes executed by Borrower substantially in the form of
EXHIBIT A in favor of each Lender.
2.5 Interest.
(a) Interest. All interest shall be computed on the actual
number of days elapsed over a year comprised of 360 days (or 365/366
days, in the case of ABR Loans, the interest rate payable on which is
then based on the Prime Rate) for actual days elapsed. In the case of
ABR Loans, interest shall be due and payable in accordance with SECTION
2.7 in immediately available funds quarterly in arrears and in full on
the Termination Date. In the case of Eurodollar Loans, interest shall
be due on the last day of each relevant Interest Period and, in the
case of any Interest Period longer than three months, on each
successive date three months after the first day of such Interest
Period. Each change in the Eurodollar Rate shall take effect for new
Eurodollar Rate Advances on the date of such Eurodollar Rate Advance
and with respect to outstanding Eurodollar Rate Advances, on the first
day of each new Interest Period therefor.
(b) Interest Recapture. If at any time the interest rate
designated by Borrower pursuant to SECTION 2.3 (the "DESIGNATED RATE")
exceeds the Highest Lawful Rate, the rate of interest on such Advance
shall be limited to the Highest Lawful Rate, but any subsequent
reductions in the Designated Rate shall not reduce the rate of interest
thereon below the Highest Lawful Rate until the total amount of
interest accrued thereon equals the amount of interest which would have
accrued thereon if the Designated Rate had at all times been in effect.
In the event that at maturity (stated or by acceleration), or at final
payment of any Note, the total amount of interest paid or accrued is
less than the amount of interest which would have accrued if the
Designated Rate had at all times been in effect, then, at such time and
to the extent permitted by Law, Borrower shall pay an amount equal to
the positive difference, if any, between (a) the lesser of the amount
of interest which would have accrued if the Designated Rate had at all
times been in effect and the amount of interest which would have
accrued if the Highest Lawful Rate had at all times been in effect, and
(b) the amount of interest actually paid or accrued on such Note.
2.6 Repayment of Principal of and Interest.
(a) On the Termination Date, Borrower shall pay to each
Lender all outstanding principal and accrued and unpaid interest under
the Loans.
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(b) If no Default or Potential Default exists, any payment
shall be applied to the Obligations in the order and manner directed by
Borrower. If a Default or Potential Default exists, any payment
(including proceeds from the exercise of any Rights) shall be applied
in the following order: (i) to all fees and expenses for which Agent or
Lenders have not been paid or reimbursed in accordance with the Loan
Documents (and if such payment is less than all unpaid or unreimbursed
fees and expenses, then the payment shall be paid against unpaid and
unreimbursed fees and expenses in the order of incurrence or due date);
(ii) to accrued interest on the Principal Debt; (iii) to the Principal
Debt outstanding; (iv) to any LC reimbursement obligations that are due
and payable and that remain unfunded; (v) to the remaining Obligations
in the order and manner Required Lenders deem appropriate; and (vi) as
a deposit with Agent, for the benefit of Lenders, as security for and
payment of any subsequent LC reimbursement obligations.
2.7 Time and Place of Payments. Each payment or prepayment on the
Obligations must be paid at Agent's principal office in New York, New York, in
funds which are or will be available for immediate use by Agent by 2:00 p.m.
(New York time) on the day due. If any action is required or any payment is to
be made on a day which is not a Business Day, then such action or payment may be
delayed until the next succeeding Business Day; provided that, with respect to a
Eurodollar Rate Advance, if the next succeeding Business Day is in the next
calendar month, such payment shall be taken or made on the next-preceding
Business Day. Any extension of time shall be included in the computation of
payments of interest and fees. Agent shall pay to each Lender any payment or
prepayment to which that Lender is entitled on the same day Agent receives the
funds from Borrower if Agent receives the payment or prepayment before 2:00 p.m.
and otherwise before 2:00 p.m. on the following Business Day. If and to the
extent that Agent does not make payments to Lenders when due, unpaid amounts
shall accrue interest at the Federal Funds Rate from the due date until (but not
including) the payment date.
2.8 Optional Prepayment; Cancellation of Commitments.
(a) Borrower may, without premium or penalty, and upon at
least one Business Day's irrevocable written notice to Agent, prepay
the Principal Debt from time to time and at any time, in whole or in
part, without penalty, but subject to the provisions of SECTION
2.18(b); provided that (i) each prepayment shall be in an amount of not
less than $500,000 or a greater integral multiple of $250,000 in excess
thereof, and (ii) all accrued interest on the amount prepaid shall be
paid to the date of such prepayment. A notice of prepayment from
Borrower shall constitute a binding obligation of Borrower to make a
prepayment on the date stated therein. Amounts prepaid under this
SECTION 2.8(a) may be reborrowed in accordance with this ARTICLE II.
(b) Agent may, without premium or penalty to Borrower,
apply to the Principal Debt insurance proceeds in excess of $500,000
received by Agent pursuant to SECTION 6.9.
(c) Borrower may, without premium or penalty, and upon at
least three Business Days' prior irrevocable written notice to Agent,
terminate all or part of the unused portion of the Total Commitment.
Each partial termination must be in an amount of not less than $500,000
or a greater integral multiple of $250,000, and shall be Pro Rata among
all Lenders. Once terminated or reduced, the Total Commitment may not
be increased or reinstated without the agreement of all parties hereto.
2.9 Mandatory Prepayment. If the Principal Debt (together with LC
Exposure) ever exceeds the Borrowing Base or the Total Commitment (as either may
be reduced or canceled in accordance with this
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Agreement), Borrower shall, within 30 days, either repay such excess in full or
(in the case of a Borrowing Base Deficiency) provide additional collateral
acceptable to Required Lenders to increase the Borrowing Base in an amount
sufficient to eliminate such Borrowing Base Deficiency.
2.10 LC Subfacility.
(a) $6,000,000 LC Subfacility. Subject to the terms and
conditions of this Agreement and applicable Law, a portion of the
Facility not in excess of $6,000,000 shall be available to Borrower for
the issuance of LCs by Agent, in the capacity of Issuing Lender, for
Borrower's account upon Borrower's delivery of an LC Request in the
form of EXHIBIT D, which must be received by Agent no later than 10:00
a.m. on the second Business Day before the requested LC is to be
issued; provided that the LC Exposure under this SECTION 2.10(a) may
not exceed $6,000,000.
(b) Expiration of LCs. No LC issued under this SECTION
2.10(a) shall have an expiration date after the earlier of (i) 18
months after the date of issuance and (ii) five Business Days prior to
the Termination Date; provided, however, that any such LC may provide
for the automatic renewal thereof for additional periods of up to 18
months each (which shall in no event extend beyond the date referred to
in clause (ii) above).
(c) To induce Agent to issue and maintain LCs, and to
induce Lenders to participate in issued LCs, Borrower agrees to pay or
reimburse Agent on or before the actual payment date with respect to
any draft or draw under any LC, (i) the amount paid or to be paid by
Agent and (ii) promptly, upon demand, any fees due under SECTION
2.25(c) with respect to such LC. If Borrower does not timely pay or
reimburse Agent for any drafts or draw requests paid or to be paid,
Agent is irrevocably authorized to fund Borrower's reimbursement
obligations as an ABR Advance and the proceeds of such ABR Advance
shall be advanced directly to Agent to pay Borrower's unpaid
reimbursement obligations. If funds cannot be advanced or if Agent
elects not to exercise the authority granted it for the immediately
preceding sentence to fund the reimbursement obligations as an ABR
Advance, then Borrower's reimbursement obligation shall constitute a
demand obligation bearing interest at the Default Rate from the date
Agent pays the applicable draft or draw request through the date Agent
is paid or reimbursed by Borrower. Borrower's obligations under this
SECTION 2.10(c) are absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense
to payment that Borrower may have at any time against Agent or any
other Person, provided that Borrower shall have no liability or
obligation for any reimbursement obligations arising in respect of
draft or draw requests honored by Agent as a result of Agent's gross
negligence or willful misconduct.
(d) Immediately upon Agent's issuance of any LC, Agent
shall be deemed to have sold and transferred to each Lender, and each
other Lender shall be deemed irrevocably and unconditionally to have
purchased and received from Agent, without recourse or warranty, an
undivided interest and participation (to the extent of such Lender's
Pro Rata Part) in the LC and all applicable rights of Agent in the LC
(other than rights to receive certain fees payable solely to the
Issuing Lender provided for in SECTION 2.25(c)). Agent agrees to
provide a copy of each LC to each other Lender promptly upon request.
However, Agent's failure to promptly send to Lenders a copy of an
issued LC shall not affect the rights and obligations of Agent and
Lenders under this Agreement.
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(e) All LCs shall count against the Borrowing Base and at
no time may the total of (a) the Principal Debt and (b) the LC
Exposure, exceed the Borrowing Base. Draws under any LC shall be
reimbursed by Borrower (whether with its own funds or with the proceeds
of the Loans) on the same Business Day.
(f) Agent shall promptly notify Borrower of the date and
amount of any draft or draw request presented for honor under any LC
(but failure to give notice will not affect Borrower's obligations
under this Agreement). Agent shall pay the requested amount upon
presentment of a draft or draw request, unless presentment on its face
does not comply with the terms of the applicable LC. When making
payment, Agent may disregard (i) any default or potential default that
exists under any agreement (other than the LC) and (ii) obligations
under any agreement (other than the LC) that have or have not been
performed by the beneficiary or any other Person (and Agent is not
liable for any of those obligations). Borrower's reimbursement
obligations to Agent and Lenders, and each Lender's obligations to
Agent, are absolute and unconditional irrespective of, and Agent is not
responsible for, (1) the validity, enforceability, sufficiency,
accuracy or genuineness of documents or endorsements (even if they are
in any respect invalid, unenforceable, insufficient, inaccurate,
fraudulent or forged), (2) any dispute by any Company with, or any
Company's claims, setoffs, defenses, counterclaims or other Rights
against, Agent, any Lender or any other Person, or (iii) the occurrence
of any Default, provided that Borrower shall have no liability or
obligation for any reimbursement obligations arising in respect of
draft or draw requests honored by Agent as a result of Agent's gross
negligence or willful misconduct.
(g) If Borrower fails to reimburse Agent as provided in
this SECTION 2.10 and funds are not advanced to satisfy the
reimbursement obligations, Agent shall promptly notify each Lender of
Borrower's failure, of the date and amount paid, and of each Lender's
Pro Rata Part of the unreimbursed amount. Each Lender shall promptly
and unconditionally make available to Agent in immediately available
funds its Pro Rata Part of the unpaid reimbursement obligation. Such
funds are due and payable to Agent before the close of business on (i)
the Business Day Agent gives notice to each Lender of Borrower's
reimbursement failure if the notice is received by a Lender before
12:00 noon in the time zone where such Lender's office listed on
SCHEDULE 1 is located, or (ii) on the next succeeding Business Day
after the Business Day Agent gives notice to each Lender of Borrower's
reimbursement failure, if notice is received after 12:00 noon in the
time zone where such Lender's office listed on SCHEDULE 1 is located.
All amounts payable by any Lender accrue interest at the Federal Funds
Rate from the day the applicable draft or draw is paid by Agent to (but
not including) the date the amount is paid by Lender to Agent.
(h) Borrower acknowledges that each LC is deemed issued
upon delivery to the beneficiary or Borrower. If Borrower requests any
LC be delivered to Borrower rather than the beneficiary, and Borrower
subsequently cancels that LC, Borrower agrees to return it to Agent
together with Borrower's written certification that it has never been
delivered to the beneficiary. If any LC is delivered to the beneficiary
under Borrower's instructions, Borrower's cancellation is ineffective
without Agent's receipt of the LC and the beneficiary's written consent
to the cancellation.
(i) Agent agrees with each Lender that it will examine all
documents with reasonable care to ascertain that they appear on their
face to be in accordance with the terms and conditions of the LC. Each
Lender and Borrower agree that, in paying any draft or draw under any
LC, Agent has
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no responsibility to obtain any document (other than any documents
expressly required by the respective LC) or to ascertain or inquire as
to any document's validity, enforceability, sufficiency, accuracy or
genuineness or the authority of any Person delivering it. Neither Agent
nor its Representatives will be liable to any Lender or any Company for
any LC's use or for any beneficiary's acts or omissions. Any action,
inaction, error, delay or omission taken or suffered by Agent or any of
its Representatives in connection with any LC, applicable draws, drafts
or documents, or the transmission, dispatch or delivery of any related
message or advice, if in conformity with applicable Laws and in
accordance with the standards of care specified in the UCP, is binding
upon Borrower and Lenders. Agent is not liable to any Company or any
Lender for any action taken or omitted by Agent or its Representative
in connection with any LC in the absence of gross negligence or willful
misconduct.
(j) On the Termination Date, upon the cancellation of the
Total Commitment under SECTION 2.8, during the continuance of a Default
under SECTION 9.1(d) or 9.1(e), or upon any demand by Agent during the
continuance of any other Default, Borrower shall provide to Agent, for
the benefit of Lenders, cash collateral in an amount equal to the
then-existing LC Exposure. Any cash collateral provided by Borrower to
Agent in accordance with this SECTION 2.10(j) shall be deposited by
Agent in an interest bearing cash collateral account maintained with
Agent at the office of Agent and invested in obligations issued or
guaranteed by the United States and, upon the surrender of any LC,
Agent shall deliver the appropriate funds on deposit in such collateral
account to Borrower together with interest accrued on such funds.
(k) THE COMPANIES SHALL PROTECT, INDEMNIFY, PAY, AND SAVE
AGENT, EACH LENDER AND THEIR RESPECTIVE REPRESENTATIVES HARMLESS FROM
AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, DAMAGES, LOSSES,
COSTS, CHARGES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES)
WHICH ANY OF THEM MAY INCUR OR BE SUBJECT TO AS A CONSEQUENCE OF THE
ISSUANCE OF ANY LC, ANY DISPUTE ABOUT IT, ANY CANCELLATION OF ANY LC BY
BORROWER, OR THE FAILURE OF AGENT TO HONOR A DRAFT OR DRAW REQUEST
UNDER ANY LC AS A RESULT OF ANY ACT OR OMISSION (WHETHER RIGHT OR
WRONG) OF ANY PRESENT OR FUTURE TRIBUNAL. HOWEVER, NO PERSON IS
ENTITLED TO INDEMNITY UNDER THE FOREGOING FOR ITS OWN GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT.
(l) Although referenced in any LC, terms of any particular
agreement or other obligation to the beneficiary are not incorporated
into this Agreement in any manner. The fees and other amounts payable
with respect to each LC are as provided in this Agreement and drafts
and draws under each LC are part of the Obligations.
2.11 Borrowing Base.
(a) During the period from and after the Closing Date until
the Borrowing Base is redetermined in accordance with this SECTION
2.11, the amount of the Borrowing Base shall be $30,000,000. The
Borrowing Base shall be reduced on the last day of each calendar
quarter, commencing March 31, 1999, and thereafter through the
Termination Date, by the amount (the "BB REDUCTION AMOUNT") set forth
on SCHEDULE 2 (or any revised SCHEDULE 2 ever delivered by Agent under
this SECTION 2.11(a)) corresponding with the last day of the applicable
calendar quarter. In addition, the Borrowing Base and the BB Reduction
Amounts shall be automatically reduced from
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time to time upon the disposition of any Collateral by the Borrowing
Base value and the BB Reduction Amounts, if any, assigned to such
Collateral by Agent. The Borrowing Base and the BB Reduction Amount
shall be determined in accordance with SECTION 2.11(b) by Agent and
approved by Required Lenders as described below. The Borrowing Base and
the BB Reduction Amounts are subject to redetermination in accordance
with SECTION 2.11(d). Upon any redetermination of the Borrowing Base
and the BB Reduction Amounts, such redetermination shall remain in
effect until the next successive date that the Borrowing Base and BB
Reduction Amounts are again redetermined and become effective under
SECTION 2.11(d) and Agent shall promptly advise Borrower and each
Lender of the redetermined Borrowing Base and circulate a revised
SCHEDULE 2 reflecting such redetermined BB Reduction Amounts. So long
as any part of the Total Commitment is in effect and until all of the
Loans outstanding hereunder are paid in full, this Agreement shall be
governed by the then effective Borrowing Base.
(b) Agent will within thirty days of receipt of the most
recent Reserve Report delivered under SECTION 5.5, and such other data
and supplemental information as may, from time to time, be reasonably
requested by Agent, redetermine the Borrowing Base and BB Reduction
Amounts based on such Reserve Report and propose such redetermined
Borrowing Base and BB Reduction Amounts to Lenders. After receiving
notice of the proposed Borrowing Base and BB Reduction Amounts, Lenders
shall have 15 days to agree or disagree with such proposal. Each
redetermination of the Borrowing Base and BB Reduction Amounts must be
approved by Required Lenders. Failure of a Lender to object to a
proposed redetermination within 15 days after notice thereof is given
to such Lender by Agent shall be deemed an approval of such
redetermination by such Lender. If the Required Lenders cannot agree on
the amount of such redetermined Borrowing Base and/or BB Reduction
Amount within such time, the greater of (i) the lowest redetermination
by any Lender, and (ii) the current Borrowing Base and BB Reduction
Amount shall be in effect until the Required Lenders can reach an
agreement as to the amount of the redetermined Borrowing Base and BB
Reduction Amount.
(c) Agent may exclude any Property (other than Properties
which have a present value (discounted at 10%) in the aggregate of not
more than 10% of the total present value of all Properties), or any
portion of production therefrom from the Borrowing Base, at any time,
because the status of title to such Property is not reasonably
satisfactory or because such Property is not subject to a first
priority lien in favor of Agent as security for the Obligations or
because of receipt of a notice of non-consent delivered pursuant to
SECTION 6.20.
(d) So long as any of the Total Commitment is in effect and
until payment in full of all Loans hereunder, effective on or about the
last day of each April and October, commencing on October 31, 1998
("SCHEDULED REDETERMINATION DATES"), Agent, with the approval of
Required Lenders, shall redetermine the amount of the Borrowing Base
and the BB Reduction Amount in accordance with SECTION 2.11(b). In
addition, at any time (i) Borrower may request up to two
redeterminations of the Borrowing Base and the BB Reduction Amount at
any time during any consecutive twelve-month period (an "UNSCHEDULED
REDETERMINATION"), and (ii) Required Lenders may initiate an
Unscheduled Redetermination at any time; provided, however, that
Required Lenders may initiate only two such Unscheduled
Redeterminations during any consecutive twelve-month period, and (iii)
any dispositions by Borrower of Collateral in any calendar year for
aggregate consideration in excess of the lesser of $4,000,000 or 5% of
Borrower's total proved reserve value
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as determined by Agent shall permit the Required Lenders to initiate an
Unscheduled Redetermination. Any Unscheduled Redetermination shall be
in accordance with SECTION 2.11(b).
2.12 Quotation of Rates. Any representative of Borrower may call
Agent on or before the date on which notice of a Designated Rate is to be
delivered by Borrower in order to receive an indication of the rates then in
effect, but such projection shall not be binding upon Agent or Lenders nor
affect the rate of interest which thereafter is actually in effect when the
election is made.
2.13 Eurodollar Interest Periods; Rollovers; Conversions.
(a) When Borrower gives a Borrowing Request under SECTION
2.3(a) that includes a Eurodollar Rate Advance, Borrower shall specify
the interest period (each an "INTEREST PERIOD") applicable thereto,
which shall, at the option of Borrower, be a period of 1, 2, 3 or 6 (or
if acceptable to Lenders, 9 or 12) month period; provided that (a) the
initial Interest Period for a Eurodollar Rate Advance shall commence on
the date of such Advance and each Interest Period occurring thereafter
in respect of such Advance shall commence on the day on which the next
preceding Interest Period applicable thereto expires, (b) if any
Interest Period for a Eurodollar Rate Advance begins on a day for which
there is no numerically corresponding Business Day in the calendar
month at the end of such Interest Period, such Interest Period shall
end on the last Business Day of such calendar month, (c) no Interest
Period may be chosen for a Eurodollar Rate Advance which would extend
beyond the Termination Date, and (d) no more than five Interest Periods
for Eurodollar Rate Advances shall be in effect at one time. Agent
shall promptly notify each Lender of its receipt of any such notice and
its contents.
(b) Upon the occurrence and during the continuance of a
Default hereunder, the rate of interest applicable to the Loans shall
be two percent (2%) over the interest rate otherwise applicable
hereunder (the "DEFAULT RATE").
(c) On any Business Day, Borrower may convert an ABR
Advance to a Eurodollar Rate Advance if Borrower is in compliance with
ARTICLE VIII. At the end of an Interest Period, Borrower may "rollover"
a Eurodollar Rate Advance into another Eurodollar Rate Advance if
Borrower is in compliance with SECTION 8.3 or convert a Eurodollar Rate
Advance to an ABR Advance, in each case by giving written notice to
Agent. Any such notice shall be irrevocable and binding on Borrower,
shall be substantially in the form of EXHIBIT C, shall specify the Type
of Advance and, in the case of a Eurodollar Rate Advance, the new
Interest Period requested, and shall be delivered no later than 1:00
p.m. New York time on the third Business Day preceding the conversion
or rollover. Agent shall promptly notify each Lender of its receipt of
any such notice and its contents. If, upon the expiration of any
Interest Period applicable to a Eurodollar Rate Advance, Borrower has
failed to give notice of a desired conversion or rollover, Borrower
shall be deemed to have converted such Advance to an ABR Advance.
2.14 Basis Inadequate for Determining Eurodollar Rate. If, on or
before any date on which a Eurodollar Rate is to be determined, Agent or any
Lender determines (and Required Lenders agree with that determination) that (a)
dollar deposits in the appropriate amount for the appropriate period are not
available in the London inter-bank market, or (b) the applicable Eurodollar Rate
does not accurately reflect the cost to Lenders of making or maintaining
Advances for such Interest Period, then Agent shall promptly give notice
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of such determination to Borrower and Lenders and, until such condition no
longer exists, Lenders' commitment hereunder to make Eurodollar Rate Advances
shall be suspended.
2.15 Additional Costs. With respect to any Law, requirement,
request, directive or change affecting banking institutions generally:
(a) With respect to any Eurodollar Rate Advance or ABR
Advance, if (i) any change in present Law or any future Law imposes,
modifies, or deems applicable (or if compliance by any Lender with any
such requirement of any Tribunal results in) any such requirement that
any reserves (including, without limitation, any marginal, emergency,
supplemental or special reserves) be maintained, and (ii) those
reserves reduce any sums receivable by that Lender under this Agreement
or increase the costs incurred by that Lender in advancing or
maintaining any portion of any Eurodollar Rate Advance, or ABR Advance,
then (unless the effect is already reflected in the rate of interest
then applicable under this Agreement) that Lender (through Agent) shall
deliver to Borrower a certificate setting forth in reasonable detail
the calculation of the amount necessary to compensate it for its
reduction or increase (which certificate is conclusive and binding
absent manifest error), and Borrower shall promptly pay that amount to
that Lender upon demand, provided, however, that no Lender may claim
any such compensation for any period of time prior to the date which is
90 days prior to the date such notice is received by Borrower. The
provisions of and undertakings and indemnification set forth in this
paragraph shall survive the satisfaction and payment of the Obligation
and termination of this Agreement.
(b) With respect to any Advance or LC, if any change in
present Law or any future Law regarding capital adequacy or compliance
by Agent (as issuer of LCs) or any Lender with any request, directive
or requirement now existing or hereafter imposed by any Tribunal
regarding capital adequacy, or any change in its written policies or in
the risk category of this transaction, reduces the rate of return on
its capital as a consequence of its obligations under this Agreement to
a level below that which it otherwise would have achieved (taking into
consideration its policies with respect to capital adequacy) by an
amount reasonably deemed by it to be material (and it may, in
determining the amount, use reasonable assumptions and allocations of
costs and expenses and use any reasonable averaging or attribution
method), then (unless the effect is already reflected in the rate of
interest then applicable under this Agreement) Agent or that Lender
(through Agent) shall notify Borrower and deliver to Borrower a
certificate setting forth in reasonable detail the calculation of the
amount necessary to compensate it (which certificate is conclusive and
binding absent manifest error), and Borrower shall promptly pay that
amount to Agent or that Lender upon demand, provided, however, that no
Lender may claim any such compensation for any period of time prior to
the date which is 90 days prior to the date such notice is received by
Borrower. The provisions of and undertakings and indemnification set
forth in this paragraph shall survive the satisfaction and payment of
the Obligations and termination of this Agreement.
(c) Any Taxes payable by Agent or any Lender or ruled (by a
Tribunal) payable by Agent or any Lender in respect of any Loan
Document shall, if permitted by Law, be paid by Borrower, together with
interest and penalties, if any (except for (i)(1) Taxes imposed on or
measured by the overall net income of Agent or that Lender (2)
franchise or similar taxes of the Agent or that Lender and (3) amounts
requested to be withheld for Taxes pursuant to the last sentence of
SECTION 2.24 and (ii) interest and penalties incurred as a result of
the gross negligence or willful misconduct of Agent or any Lender).
Agent or that Lender (through Agent) shall notify Borrower and deliver
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to Borrower a certificate setting forth in reasonable detail the
calculation of the amount of payable Taxes, which certificate is
conclusive and binding (absent manifest error), and Borrower shall
promptly pay that amount to Agent for its account or the account of
that Lender, as the case may be. If Agent or that Lender subsequently
receives a refund of the Taxes paid to it by Borrower, then each
recipient shall promptly pay the refund to Borrower.
2.16 Illegality. If at any time any Law or any interpretation by a
Tribunal of competent jurisdiction of any Law shall make it unlawful for any
Lender to make or maintain Eurodollar Rate Advances, then such Lender (through
Agent) shall promptly notify Borrower, and Lenders shall not be obligated to
make any requested Eurodollar Rate Advance which would be unlawful with respect
to any Lender.
2.17 Replacement Lender. In the event any Lender invokes SECTION
2.15 or SECTION 2.16, then, unless such Lender has removed or cured the
conditions actuating such Section, Borrower may designate a substitute lender
reasonably acceptable to Agent (such lender referred to in this Agreement as a
"REPLACEMENT LENDER") to purchase such Lender's rights and obligations with
respect to its entire Pro Rata Part under this Agreement. Any such purchase
shall be without recourse to or warranty by, or expense to, the Lender in
accordance with SECTION 11.3, and shall have a purchase price equal to the
outstanding principal amounts payable to the Lender with respect to its entire
Pro Rata Part under this Agreement, plus any accrued and unpaid interest, fees
and charges in respect of such Lender's Pro Rata Part, and on other terms
reasonably satisfactory to Agent. Upon such purchase by the Replacement Lender
and payment of all other amounts owing to the Lender being replaced, such
exiting Lender shall no longer be a party to this Agreement or have any rights
or obligations under this Agreement and the Replacement Lender shall succeed to
the Rights and obligations of the exiting Lender with respect to the exiting
Lender's Pro Rata Part and Commitments under this Agreement.
2.18 Consequential Loss.
(a) If, after Borrower requests a Eurodollar Rate Advance,
the conditions precedent for such Advance are not satisfied (unless
waived by Required Lenders), or if Borrower otherwise fails to take
such Advance or any part thereof, Borrower shall pay to Lenders, upon
demand, any actual costs or losses resulting therefrom (including,
without limitation, those incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by Lenders to fund or
maintain such Advance).
(b) If any payment of principal is made upon a Eurodollar
Rate Advance on a date other than the last day of the Interest Period
therefor, Borrower shall pay to Lenders, upon demand, any actual costs
or losses resulting therefrom (including, without limitation, those
incurred by reason of the liquidation or re-employment of deposits or
other funds acquired by Lenders to fund or maintain such Advance).
2.19 Sharing of Payments, Etc. If any Lender obtains any payment
(whether voluntary, involuntary, or otherwise, including, without limitation, as
a result of exercising its Rights under SECTION 2.20) that exceeds its Pro Rata
Part, then that Lender shall purchase from the other Lenders participations that
will cause the purchasing Lender to share the excess payment ratably with each
other Lender. If all or any portion of any excess payment is subsequently
recovered from the purchasing Lender, then the purchase of such participations
shall be rescinded and the purchase price restored to the extent of the
recovery. Borrower agrees that any Lender purchasing a participation from
another Lender under this
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section may, to the fullest extent permitted by Law, exercise all of its Rights
of payment (including the Right of offset) with respect to that participation as
fully as if that Lender were the direct creditor of Borrower in the amount of
that participation.
2.20 Offset. Upon the occurrence of a Default, each Lender and
Participant shall be entitled to exercise (for the benefit of all Lenders and
Participants in accordance with SECTION 2.19) the Rights of offset and/or
banker's Lien against each and every account and other property, or any interest
therein, which Borrower may now or hereafter have with such Lender or
Participant, or which is now or hereafter in the possession of such Lender or
Participant, to the extent of the full amount of the Obligations.
2.21 Calculation of Eurodollar Rate. The provisions of this
Agreement relating to calculation of the Eurodollar Rate are included only for
the purpose of determining the rate of interest or other amounts to be paid
hereunder that are based upon such rate, it being understood that Lenders shall
be entitled to fund and maintain such funding of all or any part of an Advance
as they see fit. All such determinations hereunder, however, shall be made as if
Lenders had actually funded and maintained funding of each Advance through the
purchase in the market for offshore dollars of one or more eurodollar deposits
in an amount equal to the principal amount of such Advance and having a maturity
corresponding to the applicable Interest Period.
2.22 Booking Loans. Notwithstanding any contrary provision in
SECTION 11.17, any Lender may make, carry, or transfer its part of any Advance
at, to, or for the account of any of its branch offices or the office of any of
its Affiliates. However, no Affiliate is entitled to receive any greater payment
under SECTION 2.15 than the transferor Lender would have been entitled to
receive with respect to those Advances.
2.23 Highest Lawful Rate. Regardless of any provision contained in
any Loan Document or any document related thereto, it is the intent of the
parties to this Agreement that neither Agent nor any Lender contract for,
charge, take, reserve, receive or apply, as interest on all or any part of the
Obligation any amount in excess of the Highest Lawful Rate or receive any
unearned interest in violation of any applicable Law, and, if Lenders ever do
so, then any excess shall be treated as a partial repayment or prepayment of
principal and any remaining excess shall be refunded to Borrower. In determining
if the interest paid or payable exceeds the Highest Lawful Rate, Borrower and
Lenders shall, to the maximum extent permitted under applicable Law, (a) treat
all Advances as but a single extension of credit (and Lenders and Borrower agree
that is the case and that provision in this Agreement for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an expense,
fee or premium rather than as interest, (c) exclude voluntary repayments or
prepayments and their effects, and (d) amortize, prorate, allocate and spread
the total amount of interest throughout the entire contemplated term of the
Obligations. However, if the Obligations are paid in full before the end of
their full contemplated term, and if the interest received for its actual period
of existence exceeds the Highest Lawful Rate, Lenders shall refund any excess
(and Lenders may not, to the extent permitted by Law, be subject to any
penalties provided by any Laws for contracting for, charging, taking, reserving
or receiving interest in excess of the Maximum Amount). If the Laws of the State
of Texas are applicable for purposes of determining the "Maximum Rate" or the
"Maximum Amount," then such terms refer to the "revised ceiling or bracket" from
time to time in effect under V.T.C.A., Finance Code ss. 1.001 et seq (West
1997). Borrower agrees that V.T.C.A., Finance Code Chapter 346 (which regulates
certain revolving credit loan accounts and revolving tri-party accounts), does
not apply to the Obligations, other than ss. 346.004.
2.24 Foreign Lenders Each Lender that is organized under the Laws
of any jurisdiction other than the United States of America or any State thereof
(a) represents to Agent and Borrower that (i) no Taxes are
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required to be withheld by Agent or Borrower with respect to any payments to be
made to it in respect of the Obligations and (ii) it has furnished to Agent and
Borrower two duly completed copies of U.S. Internal Revenue Service Form 4224,
Form 1001, Form W-8, or any other tax form acceptable to Agent (wherein it
claims entitlement to complete exemption from U.S. federal withholding tax on
all interest payments under the Loan Documents), and (b) covenants to (i)
provide Agent and Borrower a new tax form upon the expiration or obsolescence of
any previously delivered form according to Law, duly executed and completed by
it, and (ii) comply from time to time with all Laws with regard to the
withholding tax exemption. If any of the foregoing is not true or the applicable
forms are not provided, then Borrower and Agent (without duplication) may deduct
and withhold from interest payments under the Loan Documents United States
federal income tax at the full rate applicable under the Code (and still be in
compliance with the terms hereof).
2.25 Fees.
(a) Treatment of Fees. The fees described in this SECTION
2.25 and in the Fee Letter (a) are not compensation for the use,
detention, or forbearance of money, (b) are in addition to, and not in
lieu of, interest and expenses otherwise described in this Agreement,
(c) are payable in accordance with SECTION 2.7(a), (d) are
non-refundable, (e) to the fullest extent permitted by Law, bear
interest, if not paid when due, at the Default Rate, and (f) are
calculated on the basis of actual number of days (including the first
day but excluding the last day) elapsed, but computed as if each
calendar year consisted of 360 days, unless computation would result in
an interest rate in excess of the Highest Lawful Rate in which event
the computation is made on the basis of a year of 365 or 366 days, as
the case may be. The fees described in this SECTION 2.25 are in all
events subject to the provisions of SECTION 2.23 of this Agreement.
(b) Commitment Fees. Borrower shall pay a commitment fee
calculated at 3/8% per annum on the average daily unused portion of the
lesser of the (i) Borrowing Base and (ii) the Total Commitment, payable
quarterly in arrears on the last day of each calendar quarter and on
the Termination Date.
(c) Letter of Credit Fees. Borrower shall pay to Agent for
the ratable benefit of each Lender, quarterly in arrears, a commission
on all outstanding LCs at a per annum rate equal to 1.375% on the face
amount of each such LC. A fronting fee equal to 1/8 of 1% per annum on
the face amount of each LC shall be payable quarterly in arrears to the
Issuing Lender for its own account. In addition, customary
administrative, issuance, amendment, payment and negotiation charges,
as applicable, shall be payable to the Issuing Lender for its own
account.
(d) Borrower shall pay Agent, solely for its own account,
the fees (other than the fees described in SECTION 2.25(b) and (c))
described in the Fee Letter.
ARTICLE III
SECURITY
3.1 Collateral
(a) As security for the Obligations, the Companies will
grant to Agent, for the benefit of Lenders, a first mortgage lien on
and first priority and perfected security interest in (i) at least 90%
of the present value (discounted at 10%) of the Properties, (ii) all
accounts receivable, and (iii) any
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material contracts, equipment and gathering systems, and all products,
substitutions, betterments, additions and proceeds therefrom, all of
the foregoing of which are subject only to Permitted Encumbrances of
the type described in CLAUSES (c), (e), (f), (g), (h) and (i) of the
definition thereof, and (iv) additional collateral furnished pursuant
to SECTION 7.9(b) (collectively, the "COLLATERAL").
(b) Without limiting the foregoing, each Company, upon
request, will properly execute any and all documents reasonably
necessary to perfect Agent's security interests in, and/or mortgage
liens on, the Collateral. Each Company will, at its own expense, upon
the request of Agent, cause such Uniform Commercial Code or similar
searches with respect to such Company, to be conducted as Agent may
reasonably request from time to time in order to evidence, perfect,
maintain or continue perfection, or confirm the rights and remedies, of
Agent in and to the Collateral granted hereby and to perfect such
security interests in after-acquired property constituting the
Properties and to continue the perfection of the security interests
granted therein and file financing statements against such Company
relating to the security interests securing any Obligations.
(c) Upon the payment and performance in full of the
Obligations (other than obligations arising under any Hedge, providing
that the Companies have complied with SECTION 11.16), Agent shall
deliver to each Company, at such Company's expense, releases and
satisfactions of all financing statements and all other Security
Documents with an acknowledgment that the same have been terminated to
the extent that they secure any portion of the Obligations.
3.2 Release of Collateral. Upon any sale, transfer or disposition
of Collateral which is expressly permitted under this Agreement (or as otherwise
authorized by Required Lenders), and upon five Business Days prior written
notice by Borrower, Agent shall execute, at Borrower's expense, such documents
as may be necessary to evidence the release, without recourse or warranty, of
all of Agent's liens upon such Collateral; provided that (a) Agent shall not be
required to execute any such document on terms which, in Agent's opinion, would
expose it to liability, and (b) such release shall not in any manner discharge,
affect or impair the Obligations or the remaining Collateral.
3.3 Additional Security and Guaranties. Agent or Lenders may,
without notice and without affecting Borrower's obligations under the Loan
Documents, from time to time take any additional security or guaranty for the
Obligations from any Person and subsequently exchange, enforce or release such
security or any part thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to make Loans, Borrower makes the following
representations and warranties to Agent and Lenders as of the Closing Date, each
and all of which shall survive the execution and delivery of this Agreement and
continue until all Obligations have been satisfied and Lenders have no further
commitment to make Advances hereunder:
4.1 Existence. Each Company is duly organized and validly existing
and in good standing under the laws of the jurisdiction in which it is
incorporated or organized as identified on SCHEDULE 4.1. Each Company is
qualified to transact business in every jurisdiction where the nature of its
business or the
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ownership of its property requires it to be so qualified and where failure so to
qualify would result in a Material Adverse Event.
4.2 Chief Executive Offices. Each Company's chief executive
offices are at the addresses set forth in SCHEDULE 4.2.
4.3 Subsidiaries; Ownership of Borrower. As of the Closing Date,
Borrower has no Subsidiaries. All of Borrower's issued and outstanding stock is
owned by Xxxxxxx Holdings, Inc., a Texas corporation ("MHI").
4.4 Compliance with Laws and Documents; Binding Obligations. The
execution, delivery and performance by each Company of each Loan Document to
which it is a party and the creation of all liens, mortgages and security
interests provided for therein (a) are within each Company's corporate or
partnership, as applicable, power and authority, (b) have been duly authorized
by all necessary or proper action by its board of directors or general partner,
as applicable, (c) are not in contravention of (i) any agreement or indenture to
which such Company is a party or by which it is bound, (ii) the articles of
incorporation or certificate of limited partnership, as applicable, bylaws or
partnership agreement, as applicable, of such Company, or (iii) any provision of
Law, (d) do not require the consent or approval of any governmental body,
agency, authority or any other Person which has not been obtained and (e) are
legal, valid and binding obligations of such Company, enforceable against such
Company in accordance with their respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting the enforcement of creditors rights generally and by
general equitable principles.
4.5 Solvency. Each Company is Solvent and will continue to be
Solvent after giving effect to the transactions hereunder.
4.6 Financial Statements; Fiscal Year. The 1997 year end audited
consolidated Financial Statements, a copy of which has been delivered to Agent,
are complete and correct in all material respects and fairly present MHI's
financial condition in all material respects as of the date(s) indicated
therein. MHI does not have any contingent liabilities, liabilities for taxes,
unusual forward or long-term commitments, or unrealized or unanticipated losses
from any commitment which are not disclosed in such Financial Statements or the
exhibits thereto which in the opinion of MHI would be material except as
disclosed (a) in the Senior Note Offering Registration Statement on Form S-4, as
filed with the Securities and Exchange Commission on May 8, 1998 or (b) on
SCHEDULE 4.11. The 1997 Financial Statements described above have been prepared
in accordance with GAAP. The fiscal year of each Company ends on December 31.
4.7 Reports and Other Information. To the best of Borrower's
knowledge, all written data, reports and information which Borrower has supplied
to Agent or caused to be supplied by a third party on its behalf are complete
and accurate in all material respects and contain no material omission or
misstatement. The Initial Reserve Report furnished to Agent prior to the
execution of this Agreement, to the best of Borrower's knowledge, was prepared
in accordance with customary oil and gas engineering practices. The Initial
Reserve Report is based on historical information supplied by Borrower, is
complete and accurate in all material respects, reflects all burdens and
encumbrances on the Properties and contains no material omission or
misstatement; provided, however, that Borrower makes no representation or
warranty regarding the accuracy of the forecasts, projections or quantity of
reserves or predictability thereof reflected by such reserve reports.
Additionally, with respect to seismic data and interpretations, Borrower makes
no representation concerning the accuracy thereof or quantity of reserves or
producibility of reserves indicated thereby.
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4.8 Joint Venture or Partnership. No Company is engaged in any
joint venture or partnership with any other Person, except as described in
SCHEDULE 4.8.
4.9 Fees or Commissions. No broker's or finder's fees or
commissions have been paid or will be payable by any Company to any Person
(other than to Agent and Lenders) in connection with the transactions
contemplated by this Agreement. Borrower will indemnify Agent and Lenders and
their Affiliates and their respective officers, directors, employees and agents
from and against, and hold each of such parties harmless on demand from, all
liabilities, costs, damages and expenses, including, but not limited to
attorneys' fees and disbursements relating to any third parties concerning
finder's, brokerage, financing or similar fees arising in connection with the
transactions contemplated under this Agreement, other than those payable to
Agent or Lenders.
4.10 Tax Returns. Except as disclosed on SCHEDULE 4.10 (a) all Tax
returns of each Company required to be filed have been filed (or extensions have
been granted) before delinquency, and (b) all Taxes imposed upon each Company
that are due and payable have been paid before delinquency except as being
contested as permitted by SECTION 6.16. Except as disclosed on SCHEDULE 4.10, to
the best of Borrower's knowledge, no Federal or other income tax return of any
Company is presently being examined by the Internal Revenue Service or any State
or local tax authority.
4.11 Litigation and Other Contingent Liabilities. Except as set
forth on SCHEDULE 4.11, none of the Companies nor MHI is involved in, or aware
of the threat of, any Litigation or other contingent liability, nor are there
any outstanding or unpaid judgments against them (except for Litigation,
liabilities or judgments that do not, individually or collectively, result in a
Material Adverse Event).
4.12 Ownership of Collateral. The Collateral is owned by Borrower
free and clear of any security interest, lien, encumbrance, mortgages, security
agreement or other charge other than the Permitted Encumbrances and Encumbrances
which are in favor of Agent on behalf of Lenders or are permitted hereunder.
Borrower has Defensible Title to the Properties, including each Lease related
thereto free and clear of any Encumbrance except those arising under this
Agreement or the Security Documents and except for the Permitted Encumbrances.
Subject to the Permitted Encumbrances, Borrower has all beneficial right, title
and interest in and to the Net Revenue Interest in all production from or
allocable to Borrower's interest in the Properties (including each lease) and
has the exclusive right to sell or mortgage the same subject to any right in the
owners of Royalty Interests.
4.13 Loans to Affiliates. Except as disclosed on SCHEDULE 4.13,
Borrower has made no loans, advances or investments to any of its Affiliates
other than those constituting Permitted Investments.
4.14 Indebtedness. No Company is an obligor on any Indebtedness
other than Permitted Debt.
4.15 Intellectual Property. Except where any such conflict or
infringement would not result in a Material Adverse Event, each Company
possesses or will possess all trademarks, trade names, trade styles, copyrights
and patents necessary to conduct its business as it is presently conducted or as
such Company intends to conduct it hereafter without any infringement or
conflict with the rights of any other Person with respect to such trademarks,
trade names, trade styles, copyrights or patents.
4.16 Leases. Except where any failure to do so would not result in
a Material Adverse Event, (a) the Companies enjoy peaceful and undisturbed
possession of all Leases necessary for the operation of their
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Properties and assets, none of which contains any unusual or burdensome
provisions which might materially affect or impair the operation of those
Properties and assets, and (b) all material Leases under which they are a lessee
are in full force and effect, and no default -- or event that, with notice, time
lapse, or both, would become a default -- exists.
4.17 Gas Imbalances. No Company (a) is obligated in any material
respect by virtue of any prepayment made under any contract containing a
"take-or-pay" or "prepayment" provision or under any similar agreement to
deliver Hydrocarbons produced from or allocated to any of the Mortgaged
Properties at some future date without receiving full payment therefor at the
time of delivery, or (b) has produced gas, in any material amount, subject to,
and is not, nor are any of the Mortgaged Properties, subject to balancing rights
of third parties or subject to balancing duties under governmental requirements,
except as to such matters for which such Company has established monetary
reserves adequate in an amount to satisfy such obligations and has segregated
such reserves from other accounts.
4.18 Environmental Laws. Each Company has all permits, licenses
and other authorizations which are required under Environmental and Safety
Regulations with respect to safety, pollution or protection of the environment
relating to any of the Properties, including laws relating to actual or
threatened emissions, discharges or releases of pollutants, raw materials,
products, contaminants or hazardous or toxic materials or wastes into ambient
air, surface water, groundwater or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes, the failure of which to obtain would result in a Material
Adverse Event, and each Company with respect to any of the Properties is in
compliance, in all material respects with all terms and conditions of such
Environmental and Safety Regulations, and such permits, licenses and
authorizations, and is also in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder relating to
the Collateral, the failure to comply with which would result in a Material
Adverse Event. Except as may have been disclosed in writing to Agent, no Company
has received notice of any material violation of or investigation relating to
any Environmental and Safety Regulations relating to any Property.
4.19 Compliance With Laws. Except for matters which would not
result in a Material Adverse Event, each Company has fulfilled all requirements
for obtaining and has obtained and maintained all licenses, permits, operating
authorities and other authorizations necessary for each Company to operate or
maintain each of the Properties and each Company is qualified to own and hold
such Properties and to exercise rights under all leases, contracts or other
documents governing the operation or maintenance of the Properties. The
continuation, validity and effectiveness of each such license, permit and other
authorization are not and will in no way be materially and adversely affected by
the transactions contemplated by this Agreement, or the Security Documents. To
Borrower's knowledge, no Company is in breach of, or in default under the terms
of, and has not engaged in any activity which would cause revocation or
suspension of, any such licenses, permits or authorizations and, to Borrower's
knowledge, no action or proceeding looking to or contemplating the revocation or
suspension of any thereof is pending or threatened against any Company. To
Borrower's knowledge, no Company is in material violation of any law, ordinance,
administrative or governmental rule or regulation or court decree relating to
any of the Properties or otherwise applicable to such Company. No material
suspension of production on the Properties is in effect.
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4.20 No Default Under Other Agreements. No Company is in violation
of, or in default under, any material agreement. All Xxxxx are operated in
material compliance with all applicable rules, regulations, permits, judgments,
orders and decrees of any court or the federal and state regulatory authorities
having jurisdiction thereof.
4.21 No Liability For Any Other Person. No Company has assumed,
guaranteed or endorsed, or otherwise become directly or contingently liable in
connection with, any liability of any other Person, except for the endorsement
of checks and other negotiable instruments for collection in the ordinary course
of business, or as may be required under the Operating Agreements or the
Security Documents or other documents or interests executed in connection with
the Security Documents.
4.22 Security Interests. Except for the Permitted Encumbrances and
certain limitations on Liens (as defined therein) securing Indebtedness (as
defined therein) set forth in the Indenture pursuant to the Senior Notes, there
is no restriction or other limitation on Agent's right on behalf of the Lenders
to obtain its security interests or exercise its rights thereunder in the
Equipment comprising a part of the Collateral, including, without limitation,
the right to foreclose on and sell such Equipment or to exercise all other
rights and remedies of a secured party under the laws of each jurisdiction
applicable to the Collateral other than Debtor Relief Laws, laws related to the
rights of co-owners of property and laws related to the enforcement of security
interests on personal property.
4.23 Tax Identification Number. Borrower's federal taxpayer
identification number is 00-0000000.
4.24 Public Utility Holding Company Act. No Company is a "holding
company" or a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" or a "public utility" within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
4.25 Investment Company Act. No Company is an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
4.26 Burdensome Contracts. Except as disclosed on SCHEDULE 4.26,
neither Borrower nor any other Company is a party to, or bound by, nor are any
of the Properties subject to, any contract which could reasonably result in a
Material Adverse Event and the Companies have not agreed to sell or granted any
Person an option or preferential right of purchase with respect to any of the
Properties which is not described in the title opinions delivered to Agent,
except for those certain preferential rights granted to Enogex Exploration
Corporation ("ENOGEX") in (i) the Participation Agreement between Borrower and
Xxxxxxx Gas Production Corporation, as seller, and Enogex, as buyer, dated
effective as of February 1, 1996, and (ii) the Drilling and Acquisition
Agreement between Borrower, Xxxxxxx Gas Production Corporation and Enogex dated
May 1, 1996, but with an effective date of February 1, 1996.
4.27 Operating Agreements. With respect to Operating Agreements,
(i) there are no outstanding calls for payments under authorities for
expenditures or payments which are due or which Borrower or any predecessor of
Borrower has committed to make which have not been or are not being paid within
the terms required, and (ii) other than those which have been disclosed in
writing to Agent pursuant to SECTION 6.20, there are no operations with respect
to which Borrower has become a non-consenting party nor are there any
non-consenting penalties not reflected in the Net Revenue Interest or Working
Interest as indicated in the most recent Reserve Report furnished to Agent
pursuant to SECTION 5.5.
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4.28 Sale of Hydrocarbons. Except as previously disclosed by
Borrower to Agent in writing, all proceeds from the sale of Hydrocarbons from
Borrower's Working Interest in the Properties and/or Net Revenue Interest are
being received in all respects by Borrower in a timely manner and no material
portion thereof is being held in suspense for any reason.
4.29 Employee Plans. Except where the failure to comply would not
result in a Material Adverse Event, (a) no Employee Plan has incurred an
"accumulated funding deficiency" (as defined in section 302 of ERISA or section
412 of the Code), (b) no Company has incurred liability under ERISA to the PBGC
in connection with any Employee Plan (other than required insurance premiums,
all of which have been paid when due), (c) no Company has withdrawn in whole or
in part from participation in a multiemployer plan, (d) no Company has engaged
in any "prohibited transaction" (as defined in section 406 of ERISA or section
4975 of the Code), and (e) no "reportable event" (as defined in section 4043 of
ERISA) has occurred, excluding events for which the notice requirement is waived
under applicable PBGC regulations. All Employee Plans are described on SCHEDULE
4.29.
4.30 Regulation O. No person who may be deemed to have "control"
of any Company is an "executive officer," "director," or "principal shareholder"
of Agent or any Lender or any correspondent of Agent or any Lender, as such
quoted terms are defined in section 215.2 of Regulation O of the Board of
Governors of the Federal Reserve System, as amended.
ARTICLE V
FINANCIAL STATEMENTS AND INFORMATION;
CERTAIN NOTICES TO LENDERS
So long as there are any Obligations to Agent or Lenders under this
Agreement, Borrower, at its expense, shall deliver to Agent the following items:
5.1 Production Reports. As soon as available, but no later than
45 days after the last day of each calendar quarter commencing June 30, 1998, a
Production Report, substantially in the form of EXHIBIT B, of the Companies with
an "as of" date of the last day of such calendar quarter, certified by a
Responsible Officer of the Companies as accurate and complete and dated as of
the date of the delivery thereof to Agent.
5.2 Quarterly Financial Statements. As soon as available, but no
later than 45 days after the last day of each fiscal quarter (other than those
ending on December 31) commencing with June 30, 1998, consolidated Financial
Statements showing the financial condition and results of operations of MHI as
of, and for the period from the beginning of its current fiscal year to, such
last day, together with any such required schedules (including balance sheets
and income and cash flow statements), prepared in accordance with GAAP, and a
Compliance Certificate (with accompanying calculation worksheet), substantially
in the form of EXHIBIT E with respect to such Financial Statements.
5.3 Annual Financial Statements. As soon as available, but no
later than 90 days after the last day of each fiscal year commencing with fiscal
year 1998, audited consolidated Financial Statements showing the financial
condition and results of operations of MHI as of, and for the year ended on,
such last day, together with any such required schedules (including balance
sheets and income and cash flow statements), prepared in accordance with GAAP,
and (a) the opinion, without material qualification, of a firm of independent or
chartered public accountants reasonably acceptable to Agent, based on an audit
using generally accepted
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auditing standards, that such Financial Statements were prepared in accordance
with GAAP and fairly present the financial condition and results of operations
of MHI and (b) a Compliance Certificate (with accompanying calculation
worksheet) substantially in the form of EXHIBIT E with respect to such Financial
Statements.
5.4 Notices and Related Information. Promptly after becoming aware
of the existence of any Default under this Agreement or a material default under
any Operating Agreement or after becoming aware of any Material Adverse Event,
Borrower shall provide Agent with telephonic notice specifying and describing
the nature thereof, which telephonic notice shall be confirmed by Borrower in
writing within five Business Days, and shall furnish Agent upon request such
additional information with respect thereto as Agent may reasonably request.
5.5 Reserve Reports. On or before each March 31 and September 30,
commencing September 30, 1998, a Reserve Report (with a copy to each Lender)
with respect to the Properties dated as of the preceding December 31 or June 30,
as applicable, certified by a Responsible Officer of Borrower as being prepared,
to the best knowledge of such Responsible Officer, in accordance with customary
oil and gas reservoir engineering practices and that all historical information
furnished by Borrower in such Reserve Report in connection therewith is accurate
and complete in all material respects. Each Reserve Report dated as of December
31 shall be prepared by the Engineers. Each Reserve Report dated as of June 30
shall be prepared by Borrower; provided, however, that Agent reserves the right
to require Borrower to have any such June 30 Reserve Report prepared by the
Engineers at Borrower's expense.
5.6 Revenue and Lease Operating Expense Forecasts. Prior to the
Closing Date, and semiannually thereafter simultaneous with the delivery of
Reserve Reports under SECTION 5.5, a rolling revenue and lease operating expense
forecast by month covering Borrower's interest in the Properties for the
succeeding six month period.
5.7 Amendments to Corporate Documents. Copies of all material
amendments or modifications to any Company's bylaws, partnership agreement,
articles of incorporation or certificate of limited partnership, as applicable.
5.8 General. Such other information respecting the financial
condition of any Company or the Collateral as Agent reasonably may, from time to
time, request.
ARTICLE VI
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as there are any
Obligations to Agent or Lenders hereunder, or Lenders have any commitment to
make further Advances hereunder, it shall comply with the following affirmative
covenants (unless previously waived by Lenders in writing):
6.1 Corporate Existence. Each Company shall preserve and maintain
its separate existence as a corporation and the rights, privileges and
franchises of a corporation in connection therewith.
6.2 Transaction With Affiliates. Each Company shall conduct
transactions with any of its Affili ates on an arm's-length basis.
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6.3 Compliance with Tax Laws; Royalty Payments. Each Company shall
comply with all Federal, State or local laws and regulations regarding the
collection, payment and deposit of employees' income, unemployment and Social
Security taxes and will make all royalty or overriding royalty payments and
payments to all other interest owners in the Properties which it operates (other
than those payments held in suspense in the ordinary course of business in
accordance with oil and gas industry custom and practice).
6.4 Books and Records. Each Company shall keep adequate records
and books of account with respect to its business activities, and with respect
to the Properties which it operates in accordance with the provisions of the
applicable Operating Agreement, in which proper entries are made in accordance
with GAAP reflecting all financial transactions of each Company.
6.5 Litigation. Borrower shall give Agent prompt written notice of
any suit at law or in equity against any Company or any investigation or
proceeding before or by any administrative or governmental agency and known to
any Company which, if adversely determined, would result in a Material Adverse
Event.
6.6 Compliance with Environmental Laws. Each Company shall duly
observe and comply in all material respects with all laws, rules and regulations
made by any governmental authority, and all valid requirements of any regulatory
body which may acquire jurisdiction, which apply or relate to any or all of the
Properties, including, without limitation, Environmental and Safety Regulations
and keep any or all of the Properties free and clear of any Encumbrances (other
than Permitted Encumbrances) imposed pursuant thereto .
6.7 CERCLA. Each Company shall operate any Property (whether or
not such property constitutes a "facility" as defined by CERCLA) so that no
material cleanup or other obligation arises in respect of CERCLA or other
applicable Federal law or under any state, local or municipal law, statute
(including, without limitation, Hazardous Substance Laws), ordinance, rule or
regulation designed to protect the environment or relating to the disposition,
generation or transportation of hazardous waste, which would constitute a lien
or charge on any property of any Company prior to that of Agent or Lenders. If
any such claim be made or any obligation should nevertheless arise hereafter,
the Companies will, at their own expense, (a) promptly cure or cause a third
party to immediately cure the same and (b) indemnify and hold harmless Agent and
Lenders and their officers, directors, agents and employees from any liability,
responsibility or obligation in respect thereof or in respect of any cleanup or
other liability as successor, secured party or otherwise (regardless of whether
or not Lender may be deemed to be an "owner or operator" under CERCLA) for any
reason including, without limitation, the enforcement of Agent's and Lenders'
rights as secured parties under this Agreement, the Security Documents or by
operation of law.
6.8 Notice of Release. In the event that any Company receives any
notice from any Person with regard to the Release of Hazardous Materials on, or
from, any or all of the Properties, Borrower shall give prompt written notice
thereof to Agent (and, in any event, prior to the expiration of any period in
which to respond to such notice under any applicable Environmental and Safety
Regulation).
6.9 Maintenance of Property; Insurance. Each Company shall, at its
sole cost and expense, keep and maintain in respect of its properties and
business such insurance as is generally kept and maintained by reasonable and
prudent operators of oil and gas properties, including, but not limited to,
where applicable, blow-out insurance, xxxxxxx'x compensation insurance, property
insurance, and general liability insurance. All such policies of insurance shall
be in a form, in such amounts, with such deductibles, and with such insurers as
may be customary for oil and gas companies of similar size and operations for
each Company and
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in accordance with industry practice. Policies of insurance and the certificates
evidencing the same shall contain an endorsement, in form and substance
acceptable to Agent, showing Agent as additional loss payee. Such endorsement or
an independent instrument furnished to Agent shall provide that the insurance
companies will give Agent at least 30 days prior notice before any such
insurance shall be altered or canceled. If no Default exists, the proceeds of
any such insurance shall be used to repair or replace the property the damage or
destruction of which gave rise to such insurance proceeds; provided that any
insurance proceeds in excess of $500,000 which are not used for repair or
replacement in accordance herewith, unless paid as reimbursement of expenses
incurred and business losses suffered in connection with the loss or damage, may
be retained by Agent and Lenders as a prepayment of the Obligation and applied
thereto in accordance with SECTION 2.8(b).
6.10 Insurance Renewal or Replacement. Each Company shall obtain
prior to the expiration date of each policy maintained pursuant to SECTION 6.9,
a renewal or replacement thereof and Borrower shall deliver to Agent a
certificate of such renewal or replacement policy.
6.11 Consultants. Each Company shall accord to Agent the right, to
be exercised reasonably to evaluate individual situations, with prior written
notice to Borrower (except upon the occurrence of an Event of Default in which
case no prior written notice is required), from time to time to select and
retain consultants, including, without limitation, the Engineers, to advise
Agent as to technical matters pertaining to the Companies' operations relating
to the Properties. Except as provided to the contrary herein, the reasonable
fees and costs charged by such consultants shall be paid by Borrower. Each
Company shall allow such consultants access during normal business hours to the
Properties and all other Company facilities relating to the Properties operated
by any Company (and will use reasonable efforts to obtain such access from the
operator of any Properties not operated by any Company) or the conduct of any
Company's business and to any Company's financial records relating to operation
of the Properties and all of its records of operations related thereto. Such
access shall not unreasonably disrupt the business of any Company or the
operations of the Properties.
6.12 Inspections. Each Company shall so long as any Obligation
remains unfulfilled or any Collateral remains located at any of the Properties
or other facilities owned or leased by any Company, accord Agent, Lenders or
their agents full and unrestricted access upon the giving of reasonable prior
notice under the circumstances (subject to reasonable safety restrictions,
applicable confidentiality agreements and in accordance with prudent operator
standards) during normal business hours to the Properties and such other
facilities, including pipelines, operated by any Company and shall use
reasonable efforts to cause the operator of any non-operated Properties or other
facilities to provide such access, so as to permit Agent, Lenders or their
agents to, among other things, witness workovers and other field activities,
inspect or take delivery of production. Such access shall not unreasonably
disrupt the business of any Company or the operation of the Properties.
6.13 Access to Companies. Each Company shall allow Agent and
Lenders, or their agents, access to appropriate officers, employees and agents
of each Company to discuss the affairs, finances and accounts of such Company
during regular business hours and upon reasonable notice and as often as they
may reasonably request.
6.14 Accounts With Agent. Borrower shall maintain an operating
account with Agent's New York Branch.
6.15 Expenses. Borrower shall pay the following:
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(a) All reasonable out-of-pocket expenses of Agent
associated with the syndication of the Facility and the preparation,
execution, delivery, filing, recordation and administration of the Loan
Documents and any amendment or waiver with respect thereto (including
the reasonable fees, disbursements and other charges of counsel);
(b) All out-of-pocket expenses of Agent and Lenders
(including the fees, disbursements and other charges of counsel) in
connection with enforcement of the Loan Documents; and
(c) All reasonable out-of-pocket engineering expenses
associated with Agent's periodic review of the Borrowing Base and any
reserves submitted by Borrower to Agent to be included in the Borrowing
Base, not to exceed the amounts set forth in the Fee Letter and related
Term Sheet.
6.16 Taxes. Each Company shall promptly pay when due any and all
Taxes and other obligations, other than Taxes or obligations which are being
contested in good faith by lawful proceedings diligently conducted, against
which reserve or other provision required by GAAP has been made, and in respect
of which levy and execution of any Lien have been and continue to be stayed.
6.17 Hydrocarbon Sales Contracts; Gas Balancing; Hedging. With
respect to the Interests included in the Borrowing Base, from and after the
Closing Date, the Companies will not enter into Hydrocarbon Xxxxxx for amounts
exceeding 85% of the proved developed producing reserves as reflected in
Borrower's then most current Reserve Report without the prior written consent of
Agent. With respect to Interests operated by the Companies, the Companies shall
not become obligated with respect to gas balancing agreements or a take or pay
provision in a gas sales or purchase agreement under which it is required to
deliver volumes of gas without receiving full payment therefor which,
individually or in the aggregate, could result in a liability exceeding
$500,000. With respect to Interests operated by a Person other than the
Companies, the Companies shall promptly notify Agent of any such agreement or
provision of which they have knowledge which could reasonably be expected to
result in a Material Adverse Event.
6.18 Further Assurances. Each Company shall perform such acts and
duly authorize, execute, acknowledge, deliver, file and record such additional
assignments, security agreements, deeds of trust, mortgages, financing
statements and other agreements, documents, instruments and certificates as
Agent may reasonably deem necessary or appropriate in order to perfect and
maintain the Agent's liens on the Collateral and preserve and protect the Rights
of Agent and Lenders under the Loan Documents.
6.19 Indemnification. THE COMPANIES WILL INDEMNIFY, PROTECT AND
HOLD AGENT AND LENDERS AND THEIR RESPECTIVE PARENTS, SUBSIDIARIES,
REPRESENTATIVES, SUCCESSORS AND ASSIGNS (INCLUDING ALL OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS THEREOF)(COLLECTIVELY, THE "INDEMNIFIED PARTIES") HARMLESS
FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS AND PROCEEDINGS AND ALL COSTS,
EXPENSES (INCLUDING, WITHOUT LIMITATION, ALL ATTORNEYS' FEES AND LEGAL EXPENSES
WHETHER OR NOT SUIT IS BROUGHT) AND DISBURSEMENTS OF ANY KIND OR NATURE (THE
"INDEMNIFIED LIABILITIES") THAT MAY AT ANY TIME BE IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST THE INDEMNIFIED PARTIES, IN ANY WAY RELATING TO OR ARISING OUT
OF (A) THE VIOLATION BY ANY COMPANY OF ANY ENVIRONMENTAL AND SAFETY LAW, (B) ANY
COMPANY'S GENERATION, MANUFACTURE, PRODUCTION, STORAGE, RELEASE, THREATENED
RELEASE, DISCHARGE, DISPOSAL OR PRESENCE IN CONNECTION WITH ITS PROPERTIES OF A
HAZARDOUS SUBSTANCE (INCLUDING, WITHOUT LIMITATION, (I) ALL DAMAGES OF ANY USE,
GENERATION, MANUFACTURE, PRODUCTION, STORAGE,
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RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL OR PRESENCE, OR (II) THE COSTS
OF ANY ENVIRONMENTAL INVESTIGATION, MONITORING, REPAIR, CLEANUP OR
DETOXIFICATION AND THE PREPARATION AND IMPLEMENTATION OF ANY CLOSURE, REMEDIAL
OR OTHER PLANS), OR (C) THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN (OTHER THAN THOSE ARISING FROM ANY ACTION OR LACK OF ACTION
BY THE INDEMNIFIED PARTIES). HOWEVER, ALTHOUGH EACH INDEMNIFIED PARTY HAS THE
RIGHT TO BE INDEMNIFIED HEREUNDER UNDER CERTAIN CIRCUMSTANCES FOR ITS OWN
ORDINARY NEGLIGENCE, NO INDEMNIFIED PARTY HAS THE RIGHT TO BE INDEMNIFIED
HEREUNDER FOR ITS OWN FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE
PROVISIONS OF AND UNDERTAKINGS AND INDEMNIFICATION SET FORTH IN THIS PARAGRAPH
SHALL SURVIVE THE SATISFACTION AND PAYMENT OF THE OBLIGATION AND TERMINATION OF
THIS AGREEMENT.
6.20 Notice of Non-Consent. Borrower shall promptly provide Agent
with telephonic notice, which shall be confirmed by written notice within five
Business Days thereof, if any Company has become a non-consenting party with
respect to any Operating Agreement.
ARTICLE VII
NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as there are any
Obligations to Agent or Lenders hereunder, or Lenders have any commitment to
make further Advances hereunder, Borrower shall comply with the following
negative covenants (unless previously waived by Lenders in writing):
7.1 Indebtedness. No Company shall create, incur, assume or suffer
to exist any Indebtedness, except Permitted Debt.
7.2 Liabilities of Other Persons. No Company shall assume,
guaranty or endorse or otherwise become directly or contingently liable in
connection with any liability of any other Person (other than another Company),
including speculative derivative obligations and other similar obligations
(other than ordinary course hedging transactions), except for Permitted Debt,
Permitted Investments and for the indemnification contained herein or in the
Security Documents and other documents and instruments executed in connection
with the Security Documents; provided, however, that the foregoing shall not
prohibit the endorsement of negotiable instruments for deposit or collection or
incurrence of obligations under the Operating Agreements and similar
transactions in the ordinary course of business. For the purposes hereof
"guaranty" shall include any agreement, whether such agreement is on a
contingency basis or otherwise, to purchase, repurchase or otherwise acquire any
obligation or liability of any other Person, or to purchase, sell or lease, as
lessee or lessor, property or services, in any such case primarily for the
purpose of enabling another Person to make payment of any such debt or
liability, or to make any payment (whether as a capital contribution, purchase
of an equity interest or otherwise) to assure a minimum equity, asset base,
working capital or other balance sheet or financial condition, in connection
with debt or liability of another Person, or to supply funds to or in any manner
invest in another Person in connection with such Person's debt or liability.
7.3 New Business. No Company shall enter into any business which
is significantly different from its present business.
7.4 Assets. If a Default exists, no Company shall sell, transfer,
assign or grant any Person an option to acquire any of its assets (as that term
is defined in accordance with GAAP) or take any action in
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furtherance thereof, except for the sale of production or inventory in the
ordinary course of such Company's business. No Company shall sell its accounts
or accounts receivable without the prior written consent of Required Lenders.
Any disposition of Collateral (other than dispositions from one Company to
another Company) shall automatically reduce the Borrowing Base and the BB
Reduction Amounts in accordance with SECTION 2.11(a). In addition, any
dispositions of Collateral in any calendar year for aggregate consideration in
excess of the lesser of $4,000,000 or 5% of Borrower's total proved reserve
value as reasonably determined by Agent shall result in a redetermination of the
Borrowing Base and the BB Reduction Amounts in accordance with SECTION 2.11(d).
7.5 Cancellation of Debt. No Company shall cancel any claim or
debt during the term of the Loans, except for consideration and in the ordinary
course of its business, or prepay any Indebtedness other than the Obligations
and inter-Company loans and advances constituting Permitted Debt.
7.6 Default. No Company shall cause a material default under any
lease, mortgage, deed of trust or lien on real estate owned or leased by such
Company or suffer any such default to exist.
7.7 Loans to Persons. No Company shall make any loan or advance or
extend any credit during the term of the Loans (except for Permitted Investments
and such loans, advances or extensions of credit made or entered into in the
ordinary course of business) to any Person, whether or not an Affiliate of
Borrower.
7.8 Negative Pledge. No Company shall suffer to exist any
Encumbrance or consent to the filing of any financing statement on any
Collateral or such Company's Working Interest or Net Revenue Interest in the
Properties, other than Permitted Encumbrances.
7.9 Investments; Subsidiaries.
(a) No Company shall make, or suffer to exist, any
Investment except Permitted Investments; and
(b) Borrower shall not acquire or create any Subsidiary,
unless (i) such Investment is permitted under SECTION 7.9(a), (ii) at
least 15 days' prior written notice thereof is given to Agent, (iii)
such new Subsidiary is a wholly-owned Subsidiary, directly or
indirectly, of Borrower, (iv) the capital stock, partnership interests
or other equity interests of such Subsidiary and any promissory notes
or other evidence of Indebtedness of such Subsidiary to any Company (in
each case, together with any proceeds thereof) are pledged to Agent,
for the benefit of Lenders, pursuant to a pledge agreement reasonably
satisfactory in form and substance to Agent, (v) such Subsidiary
guarantees the Obligations pursuant to a guaranty reasonably
satisfactory in form and substance to Agent, (vi) such Subsidiary
grants to Agent, for the benefit of Lenders, a first mortgage lien on
and first priority and perfected security interest in the types of
assets described in SECTION 3.1(a), and (vii) Agent shall have received
closing items with respect to such Subsidiary of the types described in
SECTIONS 8.2 (e), (g), (i), (l), (m) and (n).
7.10 Chief Executive Office; Corporate Name. No Company shall
transfer its chief executive offices or change its corporate name or keep
Collateral at any locations other than those described in the Security
Documents, except upon prior written notice to Agent and after the delivery to
Agent of financing statements or other security documents in form and substance
satisfactory to Agent.
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7.11 Fiscal Year. No Company shall change its fiscal year.
7.12 Dividends. Except as set forth in the following sentence,
Borrower shall not, without the prior consent of Agent, declare or pay any cash
dividends or distributions to its shareholders, or declare or make any capital
distribution in cash or other property or return of capital, purchase or redeem
any of its capital stock or other securities, or take any action which would
have an effect equivalent to any of the foregoing or issue additional capital
stock, including stock presently authorized but unissued to any Person. Borrower
may pay dividends or make loans or advances to MHI to permit the repurchase,
redemption, other acquisition or retirement for value of capital stock of MHI
held by a departing or deceased shareholder pursuant to the Shareholders'
Agreement, provided that such dividends, loans and advances may not exceed
$500,000 in any fiscal year of Borrower and no Default or Potential Default
exists immediately after any such repurchase, redemption, acquisition or
retirement.
7.13 Security Documents. No Company shall alter, amend or cause the
alteration or amendment of any of the Security Documents without the prior
written consent of Agent.
7.14 Maintenance of Properties. No Company shall allow (i) the
abandonment of any Well capable of commercial production, or the release or
abandonment of all or any part of its Working Interest and/or Net Revenue
Interest in the Properties capable of commercial production, or release or
abandon all or any portion of the Properties except in accordance with prudent
operator standards; (ii) its Net Revenue Interest in the Properties to be
developed, maintained or operated in a manner less favorable than prudent
operator standards; and (iii) shall not enter into any new contracts relating to
the Properties that would be unduly burdensome in comparison to customary oil
and gas industry standards.
7.15 Amendments to Other Debt Instruments. No Company shall
materially amend any other debt instruments other than those debt instruments
created in contemplation of this Agreement.
7.16 Employee Plans. No Company shall permit any of the events or
circumstances described in SECTION 4.29 to exist or occur.
7.17 Minimum Interest Coverage Ratio. Borrower shall not permit the
Interest Coverage Ratio to be less than 1.5 to 1.0 as of the last day of any
1998 fiscal quarter, 1.75 to 1.0 as of the last day of any 1999 fiscal quarter,
and 2.0 to 1.0 as of the last day of any fiscal quarter thereafter.
7.18 Minimum Current Ratio. Borrower shall not permit the ratio of
the Companies' current assets (which shall be deemed to include effective as of
the date of determination availability under the Facility) to their current
liabilities (excluding current maturities of Indebtedness under the Facility) to
ever be less than 1.0 to 1.0.
7.19 Permitted G&A. Borrower shall not permit the Companies'
consolidated general and administrative expenses to exceed 12.5% of their gross
revenues in any calendar year.
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ARTICLE VIII
CLOSING; CONDITIONS PRECEDENT TO CLOSING
8.1 Closing. Subject to the conditions stated in this Agreement,
the Closing shall occur at a mutually agreeable time on or before May 31, 1998.
The date the Closing actually occurs is referred to herein as the "CLOSING
DATE." The Closing shall be held at the offices of Xxxxxx & Xxxxxx, L.L.P., in
Houston, Texas, at 10:00 a.m. on the Closing Date, or at such other place and
time as Borrower and Agent may agree in writing.
8.2 Initial Borrowing. As conditions precedent to the making of
the Facility hereunder, on or before the Closing Date:
(a) Each credit party to this Agreement shall have
executed and delivered the Loan Documents;
(b) On or before the Closing Date, Agent shall have
received (i) all fees required to be paid on or before the Closing Date
pursuant to SECTION 2.25 and the Fee Letter; and (ii) the expenses to
be paid by Borrower pursuant to SECTION 6.15 for which invoices have
been presented with a reasonable opportunity for Borrower to review, on
or before the Closing Date;
(c) The Facility and the Loan Documents must comply with
all applicable laws, contracts, instruments and government policies;
(d) Borrower must have a current ratio of not less than 1.0
to 1.0 and no trade payables shall be outstanding beyond sixty (60)
days (unless a longer period has been agreed to between Borrower and
the Payee);
(e) Agent shall have received results of recent lien
searches in each jurisdiction where Borrower is authorized to conduct
business, and such searches shall reveal no liens on any of Borrower's
assets other than Permitted Encumbrances or liens to be discharged on
or prior to the Closing Date pursuant to documentation satisfactory to
Agent;
(f) Agent shall have received the Initial Reserve Report;
(g) Agent shall have received title opinions or other
evidence satisfactory to Agent covering at least 90% of the Properties
(current to a date within 30 days of the Closing Date) and showing
Defensible Title to such Properties in Borrower subject only to the
Permitted Encumbrances and otherwise satisfactory in form and substance
to Agent;
(h) Agent shall have received evidence of Borrower's
insurance in amounts and covering risks acceptable to Agent and showing
Agent, for the benefit of Lenders, as loss payee;
(i) Borrower shall have delivered to Lender an opinion of
counsel to Borrower, in the form of EXHIBIT G, and such opinion shall
specifically provide that Agent and Lenders shall be entitled to rely
upon the opinions set forth therein, and Borrower shall have delivered
to Agent each other Loan Document, duly executed by the applicable
parties and in form and substance satisfactory to Agent;
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(j) All representations and warranties in the Loan
Documents are true and correct in all material respects;
(k) Borrower shall have delivered to Agent the Financial
Statements referred to and in accordance with SECTION 4.6;
(l) Borrower shall have delivered to Agent copies of all
environmental reports reasonably requested by Agent.
(m) Borrower shall have delivered to Agent:
(i) A copy of the resolutions, in form and
substance reasonably satisfactory to Lender, of the Board of
Directors of Borrower authorizing (1) the execution, delivery
and performance of the Loan Documents, (2) the borrowings
contemplated hereunder, (3) the granting by it of the liens,
pledges and security interests granted by it pursuant to the
Mortgage and the other Security Documents, certified by the
Secretary of Borrower as of the Closing Date, which
certificate shall state that the authorization thereby
certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
(ii) A certificate of the Secretary or Assistant
Secretary of Borrower dated the Closing Date, as to the
incumbency and signature of the officers of Borrower executing
the Loan Documents and any certificate or other documents to
be delivered pursuant thereto, together with evidence of the
incumbency of such certifying Secretary or Assistant
Secretary; and
(iii) (1) A copy, certified as of the Closing Date
by the Secretary or Assistant Secretary of Borrower, of
Borrower's Articles of Incorporation, (2) a copy, certified as
of the Closing Date by the Secretary or Assistant Secretary of
Borrower, of Borrower's Bylaws, (3) a certificate as of a date
not more than 45 days prior to the Closing Date from the
Secretary of State of the State of Texas as to the existence
of Borrower as a Texas corporation, and (4) a current
certificate of good standing of Borrower issued by the
Comptroller of Public Accounts of the State of Texas;
(n) Borrower shall have delivered to Agent such other
documents and instruments as Agent may reasonably request.
8.3 Each Borrowing. The following additional conditions precedent
apply to the making of each Advance of the Facility:
(a) There is no Default or Potential Default in existence
at the time of, or after giving effect to the making of, such extension
of credit;
(b) Borrower shall deliver to Agent a Borrowing Request,
certifying to the matters to be set forth therein to satisfy the
conditions precedent to such Advance; and
(c) Borrower shall deliver to Agent such other documents as
Agent may reasonably request.
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8.4 Supplements to Schedules. Borrower may, from time to time but
in no event less than five Business Days prior to delivery of any Borrowing
Request or LC Request, amend or supplement the Schedules to this Agreement by
delivering (effective upon receipt) to Agent and each Lender a copy of such
revised Schedule or Schedules, which shall (i) be dated the date of delivery,
(ii) be certified by a Responsible Officer as true, complete and correct as of
such date and as delivered in replacement for the corresponding Schedule or
Schedules previously in effect, and (iii) show in reasonable detail (by
blacklining or other appropriate graphic means) the changes from each such
corresponding predecessor Schedule. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, in the event that
Required Lenders determine based upon such revised Schedules (whether
individually or in the aggregate or cumulatively) that a Material Adverse Event
has occurred, Lenders shall have no further obligation to make Loans or continue
or convert any Loan previously made and Agent shall have no further obligation
to issue LCs or to renew or extend existing LCs.
ARTICLE IX
DEFAULT
9.1 The occurrence and continuance of any of the following at any
time during the term hereof shall be a "DEFAULT" hereunder:
(a) the Companies shall fail to make a principal payment
under any Loan Document on the date due; or
(b) the Companies shall fail to make any payment other than
a principal payment under any Loan Document within three Business Days
after the due date; or
(c) any Company or any other obligor shall fail to comply
with any term, condition, or covenant of or in any Loan Document not
related to any payment Obligation hereunder, where such failure is not
remedied by Borrower or such obligor within 30 days after Borrower has
knowledge thereof or receives written notice from Agent; or
(d) any Company shall (i) execute an assignment for the
benefit of its creditors, (ii) become or be adjudicated a bankrupt or
insolvent, (iii) admit in writing its inability to pay its debts
generally as they become due, (iv) apply for or consent to the
appointment of a conservator, receiver, trustee, or liquidator of such
Company of all or a substantial part of its respective assets, (v) file
a voluntary petition seeking reorganization or an arrangement with
creditors, or to take advantage of or seek any other relief under any
Debtor Relief Laws, (vi) file an answer admitting the material
allegations of or consenting to, or default in, a petition filed
against it in any proceeding under any Debtor Relief Laws, or (vii)
institute or voluntarily be or become a party to any other judicial
proceedings intended to effect a discharge of their debts, in whole or
in part, or a postponement of the maturity or the collection thereof,
or a suspension of any of the rights of Lender or its affiliate granted
in any of the Security Documents; or
(e) (i) an order, judgment, or decree shall be entered by
any court of competent jurisdiction approving a petition seeking
reorganization of any Company, or appointing a conservator, receiver,
trustee, or liquidator of any Company, or of all or any substantial
part of its assets, and such order, judgment, or decree is not
permanently stayed or reversed within 60 days after the entry thereof,
or (ii) a petition is filed against any Company seeking reorganization,
an arrangement with creditors,
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or any other relief under any Debtor Relief Laws, and such petition is
not discharged within 65 days after the filing thereof; or
(f) any statement, representation or warranty by any
Company contained in any Loan Document, any financial statement or
certificate delivered by Borrower to Lenders shall be willfully or
materially false when made; or
(g) judgments for more than $500,000 in the aggregate shall
be entered against any Company individually, or the Companies as a
whole, or if any such judgment would adversely affect its ability to
operate the Properties and shall not be stayed, vacated, bonded, paid,
or discharged within 30 days except a judgment where the claim is
covered by insurance and the insurance company has not denied coverage
therefor or for which adequate reserves under GAAP have been made; or
(h) any Company shall fail to pay any Indebtedness in
excess of $500,000 in the aggregate (other than Indebtedness hereunder)
or any interest or premium thereon, when due (whether at scheduled
maturity or by acceleration, demand or otherwise) and such failure
shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to any such Indebtedness or any
other event shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the
effect of such default or event is to accelerate or to permit the
acceleration of, the maturity of such Indebtedness (in excess of
$500,000 in the aggregate), or if any such Indebtedness (in excess of
$500,000 in the aggregate) shall be declared to be due and payable, or
is required to be prepaid, prior to the stated maturity thereof; or
(i) the occurrence of a "default" or an "Event of Default"
under the Security Documents which continues beyond any applicable
grace period set forth therein; or
(j) this Agreement or any Loan Document shall cease to be
in full force and effect (except in accordance with its terms) or shall
be declared null and void or the validity or enforceability thereof
shall be contested or challenged by any Company or any of its
respective shareholders, or any Company shall deny that such Company
has any further liability or obligation under this Agreement or any
Loan Document, or such Company shall deny that it has liability under
the Mortgage, or the liens and security interests granted to lender
under the Security Documents shall cease to be perfected; or
(k) any Company fails to perform any of its material
obligations under any Hedge with Agent or any Lender and such failure
continues beyond any applicable grace period set forth therein; or
(l) any Company modifies or amends its bylaws or
partnership agreement, as applicable, or its articles of incorporation
or certificate of limited partnership, as applicable, in any material
manner without Agent's prior written approval; or
(m) (i) MHI ceases to own 100% of Borrower; or (ii) the
Persons listed as shareholders of MHI on Schedule A to the
Shareholders' Agreement collectively cease to own or control, directly
or indirectly, at least 70% of the securities having ordinary voting
power for the election of Borrower's Board of Directors.
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ARTICLE X
REMEDIES OF LENDERS AND AGREEMENTS AMONG LENDERS
10.1 Remedies Upon Default.
(a) Upon the occurrence of any Default other than under
SECTIONS 9.1(d) and (e), Lenders may, following two Business Days'
prior written notice, terminate this Agreement or may demand payment of
all Obligations (whether otherwise then payable on demand or not)
without terminating this Agreement and shall, in any event, be under no
further responsibility to extend any credit or afford any financial
accommodation to Borrower, whether under this Agreement or otherwise.
Upon the occurrence of a Default under SECTIONS 9.1(d) or (e), Lenders
may, without prior notice or demand to Borrower, terminate this
Agreement or demand payment of all Obligations (whether otherwise then
payable on demand or not) without terminating this Agreement and shall,
in any event, be under no further responsibility to extend any credit
or afford any financial accommodation to Borrower, whether under this
Agreement or otherwise. Upon a termination of this Agreement by Lenders
following a Default, Agent and Lenders shall have, in addition to all
of their other rights under this Agreement, any Security Document
(including, without limitation, the assignment of production contained
in the Mortgage, by operation of law or otherwise (which rights shall
be cumulative), all of the rights and remedies of a secured party under
the Uniform Commercial Code and shall have the right to enter upon any
premises where the Collateral is kept and peacefully retake possession
thereof.
(b) Agent and Lenders shall not have any obligation to
preserve rights to any Collateral against prior parties or to proceed
first against any Collateral or to marshal any Collateral of any kind
for the benefit of any other creditor of any Company or any other
Person. After the occurrence and during the continuance of a Default,
Agent and Lenders are hereby granted a license or other right to use,
without charge, any Company's labels, patents, copyrights, rights of
use of any name, trade secrets, trade names, trademarks and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and
selling any Collateral and any Company's rights under all licenses and
any franchise, sales or distribution agreements shall inure to Lenders'
benefit.
(c) Upon the occurrence of a Default, Lenders shall have
the right to set-off and apply against the Obligations in such manner
as Lenders may determine, at any time to any Company, any and all
deposits (general or special, time or demand, provisional or final) or
other sums at any time credited by or owing from Lenders or any
depositary to any Company whether or not the Obligations are then due,
except for any amounts owing to third-party Working Interest and
Royalty Interest holders of which Lenders shall have been notified.
Lenders shall provide notice to Borrower not later than five Business
Days following any application of such funds. As further security for
the Obligations, Borrower hereby grants to each Lender a security
interest in all money, instruments, and other property of Borrower now
or hereafter held by such Lender, including, without limitation,
property held in safekeeping. In addition to each Lender's right of
set-off and as further security for the Obligations, Borrower hereby
grants to each Lenders a security interest and lien in all deposits
(general or special, time or demand, provisional or final) and other
accounts of Borrower now or hereafter on deposit with or held by such
Lender or any depositary and all other sums at any time credited by or
owing from such Lender or any depositary to Borrower. The rights and
remedies of Lenders hereunder are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which
Lenders may have.
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(d) Upon the occurrence of a Default, Lenders shall have
the right to exercise any Company's rights under the Operating
Agreements subject to the liens and security interests of the Security
Documents, including any right to remove and replace the Operator.
(e) At any time during which a Default exists and is
continuing, each Company authorizes Agent (a) to execute alone any
financing statement or other documents or instruments that Agent may
require to perfect, protect or establish any lien or security interest
hereunder or under any Security Documents and further authorizes Agent
to sign such Company's name on the same; and (b) to appoint such Person
or Persons as Agent may designate as its agent and attorney-in-fact to
endorse the name of such Company on any checks, notes, drafts or other
forms of payment or security that may come into the possession of Agent
or any Lender or any Affiliate of Agent or Lenders, to sign such
Company's name on invoices or bills of lading, drafts against
customers, notices of assignment, verifications and schedules and,
generally, to do all things necessary to carry out this Agreement and
the Security Documents. The powers granted herein, being coupled with
an interest, are irrevocable. Neither Agent, Lenders nor their agents
and attorneys-in-fact shall be liable for any act or omission, error in
judgment or mistake of law so long as the same is not malicious,
grossly negligent or evidences reckless misconduct. Upon payment and
performance of all Obligations of the Companies to Agent and Lenders,
such power of attorney will become null and void.
10.2 Company Waivers. To the extent permitted by Law, each Company
waives presentment and demand for payment, protest, notice of intention to
accelerate, notice of acceleration and notice of protest and nonpayment, and
agrees that its liability with respect to all or any part of the Obligations is
not affected by any renewal or extension in the time of payment of all or any
part of the Obligations, by any indulgence, or by any release or change in any
security for the payment of all or any part of the Obligations.
10.3 Performance by Agent. If any covenant, duty or agreement of
any Company is not performed in accordance with the terms of the Loan Documents,
Agent may, while a Default exists, at its option (but subject to the approval of
Required Lenders), perform or attempt to perform that covenant, duty or
agreement on behalf of that Company (and any amount expended by Agent in its
performance or attempted performance is payable by the Companies to Agent on
demand, becomes part of the Obligations, and bears interest at the Default Rate
from the date of Agent's demand therefor until paid). However, neither Agent nor
any Lender assumes or shall have, except by its express written consent, any
liability or responsibility for the performance of any covenant, duty or
agreement of any Company.
10.4 Not in Control. None of the covenants or other provisions
contained in any Loan Document shall, or shall be deemed to, give Agent or
Lenders the Right to exercise control over the assets (including, without
limitation, real property), affairs, or management of any Company; the power of
Agent and Lenders is limited to the Right to exercise the remedies provided in
this ARTICLE X.
10.5 Course of Dealing. The acceptance by Agent or Lenders of any
partial payment on the Obligations shall not be deemed to be a waiver of any
Default then existing. No waiver by Agent, Required Lenders or Lenders of any
Default shall be deemed to be a waiver of any other then-existing or subsequent
Default. No delay or omission by Agent, Required Lenders or Lenders in
exercising any Right under the Loan Documents will impair that Right or be
construed as a waiver thereof or any acquiescence therein, nor will any single
or partial exercise of any Right preclude other or further exercise thereof or
the exercise of any other Right under the Loan Documents or otherwise.
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10.6 Cumulative Rights. All Rights available to Agent, Required
Lenders, and Lenders under the Loan Documents are cumulative of and in addition
to all other Rights granted to Agent, Required Lenders, and Lenders at law or in
equity, whether or not the Obligations are due and payable and whether or not
Agent, Required Lenders, or Lenders have instituted any suit for collection,
foreclosure, or other action in connection with the Loan Documents.
10.7 Agreements Among Lenders.
(a) Agent
(i) Each Lender appoints Agent (and Agent accepts
appointment) as its nominee and agent, in its name and on its
behalf: (i) to act as its nominee and on its behalf in and
under all Loan Documents with such powers as are expressly
delegated to Agent under the Loan Documents, together with
such other powers as are reasonably incidental thereto; (ii)
to arrange the means whereby its funds are to be made
available to Borrower under the Loan Documents; (iii) to take
any action that it properly requests under the Loan Documents
(subject to the concurrence of other Lenders as may be
required under the Loan Documents); (iv) to receive all
documents and items to be furnished to it under the Loan
Documents; (v) to be the secured party, mortgagee,
beneficiary, recipient and similar party in respect of any
collateral for the benefit of Lenders; (vi) to promptly
distribute to it all material information, requests, documents
and items received from the Companies under the Loan
Documents; (vii) to promptly distribute to it its ratable part
of each payment or prepayment (whether voluntary, as proceeds
of collateral upon or after foreclosure, as proceeds of
insurance thereon, or otherwise) in accordance with the terms
of the Loan Documents; and (viii) to deliver to the
appropriate Persons requests, demands, approvals and consents
received from it. However, Agent may not be required to take
any action that exposes it to personal liability or that is
contrary to any Loan Document or applicable Law.
(ii) If the initial or any successor Agent
ever ceases to be a party to this Agreement or if the initial
or any successor Agent ever resigns (whether voluntarily or at
the request of Required Lenders), then Required Lenders shall
appoint the successor Agent from among Lenders (other than the
resigning Agent). If Required Lenders fail to appoint a
successor Agent within 30 days after the resigning Agent has
given notice of resignation or Required Lenders have removed
the resigning Agent, then the resigning Agent may, on behalf
of Lenders, appoint a successor Agent, which must be a Lender,
or in the event no Lender agrees to accept such appointment, a
commercial bank having a combined capital and surplus of at
least $1,000,000,000 (as shown on its most recently published
statement of condition). Upon its acceptance of appointment as
successor Agent, the successor Agent succeeds to and becomes
vested with all of the Rights of the prior Agent, and the
prior Agent is discharged from its duties and obligations of
Agent under the Loan Documents (but, when used in connection
with LCs issued and outstanding before the appointment of the
successor Agent, "Agent" shall continue to refer solely to
Christiania, but, any LCs issued or renewed after the
appointment of any successor Agent shall be issued or renewed
by the successor Agent), and the resigning or removed Agent
and each Lender shall execute such documents as any Lender,
the resigning or removed Agent, or the successor Agent
reasonably request to reflect the change. After any Agent's
resignation or removal as Agent under the Loan Documents, the
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provisions of this ARTICLE X inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent
under the Loan Documents.
(iii) Agent, in its capacity as a Lender, has
the same Rights under the Loan Documents as any other Lender
and may exercise those Rights as if it were not acting as
Agent; the term "Lender" shall, unless the context otherwise
indicates, include Agent; and Agent's resignation or removal
shall not impair or otherwise affect any Rights that it has or
may have in its capacity as an individual Lender. Each Lender
and Borrower agrees that Agent is not a fiduciary for Lenders
or for Borrower but simply is acting in the capacity described
in this Agreement to alleviate administrative burdens for
Borrower and Lenders, that Agent has no duties or
responsibilities to Lenders or Borrower except those expressly
set forth in the Loan Documents, and that Agent in its
capacity as a Lender has all Rights of any other Lender.
(iv) Agent may now or hereafter be engaged in
one or more loan, letter of credit, leasing or other financing
transactions with any Company, act as trustee or depositary
for any Company or otherwise be engaged in other transactions
with any Company (collectively, the "OTHER ACTIVITIES") not
the subject of the Loan Documents. Without limiting the Rights
of Lenders specifically set forth in the Loan Documents, Agent
is not responsible to account to Lenders for those other
activities, and no Lender shall have any interest in any other
activities, any present or future guaranties by or for the
account of any Company that are not contemplated or included
in the Loan Documents, any present or future offset exercised
by Agent in respect of those other activities, any present or
future property taken as security for any of those other
activities, or any property now or hereafter in Agent's
possession or control that may be or become security for the
obligations of the Companies arising under the Loan Documents
by reason of the general description of indebtedness secured
or of property contained in any other agreements, documents,
or instruments related to any of those other activities (but,
if any payments in respect of those guaranties or that
property or the proceeds thereof is applied by Agent to reduce
the Obligations, then each Lender is entitled to share ratably
in the application as provided in the Loan Documents).
(b) Expenses. Each Lender shall pay its Pro Rata Part of
any reasonable expenses (including, without limitation, court costs,
reasonable attorneys' fees and other costs of collection) incurred by
Agent (while acting in such capacity) in connection with any of the
Loan Documents if Agent is not reimbursed from other sources within 30
days after demand therefor has been made by Agent upon such other
sources. Each Lender is entitled to receive its Pro Rata Part of any
reimbursement that it makes to Agent if Agent is subsequently
reimbursed from other sources.
(c) Proportionate Absorption of Losses. Except as otherwise
provided in the Loan Documents, nothing in the Loan Documents gives any
Lender any advantage over any other Lender insofar as the Obligations
are concerned or to relieve any Lender from ratably absorbing any
losses sustained with respect to the Obligations (except to the extent
unilateral actions or inactions by any Lender result in Borrower or any
other obligor on the Obligations having any credit, allowance, setoff,
defense, or counterclaim solely with respect to all or any part of that
Lender's Pro Rata Part of the Obligations).
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(d) Delegation of Duties; Reliance. Lenders may perform any
of their duties or exercise any of their Rights under the Loan
Documents by or through Agent, and Lenders and Agent may perform any of
their duties or exercise any of their Rights under the Loan Documents
by or through their respective Representatives. Agent, Lenders and
their respective Representatives (a) are entitled to rely upon (and
shall be protected in relying upon) any written or oral statement
believed by it or them to be genuine and correct and to have been
signed or made by the proper Person and, with respect to legal matters,
upon opinion of counsel selected by Agent or that Lender (but nothing
in this SECTION 10.7(d) permits Agent to rely on (i) oral statements if
a writing is required by this Agreement or (ii) any other writing if a
specific writing is required by this Agreement), (b) are entitled to
deem and treat each Lender as the owner and holder of its Pro Rata Part
of the Principal Debt for all purposes until, subject to SECTION 11.2,
written notice of the assignment or transfer is given to and received
by Agent (and any request, authorization, consent or approval of any
Lender given before receipt of such notice is conclusive and binding on
each subsequent holder, assignee or transferee of or Participant in
that Lender's Pro Rata Part of the Principal Debt), (c) are not deemed
to have notice of the occurrence of a Default unless a responsible
officer of Agent, who handles matters associated with the Loan
Documents and transactions thereunder, has actual knowledge or Agent
has been notified by a Lender or Borrower, and (d) are entitled to
consult with legal counsel (including counsel for Borrower),
independent accountants, and other experts selected by Agent (and/or
any such Lenders, as the case may be) and are not liable for any action
taken or omitted to be taken in good faith by it in accordance with the
advice of counsel, accountants, or experts.
(e) Limitation of Agent's Liability.
(i) Neither Agent nor any of its Representatives
will be liable for any action taken or omitted to be taken by
it or them under the Loan Documents in good faith and believed
by it or them to be within the discretion or power conferred
upon it or them by the Loan Documents or be responsible for
the consequences of any error of judgment (except for fraud,
gross negligence or willful misconduct), and neither Agent nor
any of its Representatives has a fiduciary relationship with
any Lender by virtue of the Loan Documents (but nothing in
this Agreement negates the obligation of Agent to account for
funds received by it for the account of any Lender).
(ii) Unless indemnified to its satisfaction, Agent
may not be compelled to do any act under the Loan Documents or
to take any action toward the execution or enforcement of the
powers thereby created or to prosecute or defend any suit in
respect of the Loan Documents. If Agent requests instructions
from Lenders, or Required Lenders, as the case may be, with
respect to any act or action in connection with any Loan
Document, Agent is entitled to refrain (without incurring any
liability to any Person by so refraining) from that act or
action unless and until it has received instructions. In no
event, however, may Agent or any of its Representatives be
required to take any action that it or they determine could
incur for it or them criminal or onerous civil liability.
Without limiting the generality of the foregoing, no Lender
has any right of action against Agent as a result of Agent's
acting or refraining from acting under this Agreement in
accordance with instructions of Required Lenders, or, if
unanimity is required, in accordance with instructions of all
Lenders.
(iii) Agent is not responsible to any Lender or any
Participant for, and each Lender represents and warrants that
it has not relied upon Agent in respect of, (i) the
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creditworthiness of Borrower and the risks involved to that
Lender, (ii) the effectiveness, enforceability, genuineness,
validity or due execution of any Loan Document (other than by
Agent), (iii) any representation, warranty, document,
certificate, report or statement made therein (other than by
Agent) or furnished thereunder or in connection therewith,
(iv) the adequacy of any collateral now or hereafter securing
the Obligations or the existence, priority or perfection of
any Lien now or hereafter granted or purported to be granted
on the collateral under any Loan Document, or (v) the
observance of or compliance with any of the terms, covenants
or conditions of any Loan Document on the part of Borrower.
EACH LENDER AGREES TO INDEMNIFY AGENT AND ITS REPRESENTATIVES
AND HOLD THEM HARMLESS FROM AND AGAINST (BUT LIMITED TO SUCH
LENDER'S PRO RATA PART OF) ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, COSTS, REASONABLE EXPENSES AND REASONABLE DISBURSEMENTS
OF ANY KIND OR NATURE WHATSOEVER THAT MAY BE IMPOSED ON,
ASSERTED AGAINST, OR INCURRED BY THEM IN ANY WAY RELATING TO
OR ARISING OUT OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR
OMITTED BY THEM UNDER THE LOAN DOCUMENTS IF AGENT AND ITS
REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH AMOUNTS BY
BORROWER. ALTHOUGH AGENT AND ITS REPRESENTATIVES HAVE THE
RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR
OWN ORDINARY NEGLIGENCE, AGENT AND ITS REPRESENTATIVES DO NOT
HAVE THE RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS
OR THEIR OWN FRAUD, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(f) Default; Collateral. If Agent receives notice of a
Default from Borrower or any Lender, Agent shall promptly notify
Lenders of such Default and Lenders agree to promptly confer in order
that Required Lenders or Lenders, as the case may be, may agree upon a
course of action for the enforcement of the Rights of Lenders. Unless
and until Agent receives directions from Required Lenders, Agent shall
refrain from taking any action (without incurring any liability to any
Person for so refraining), provided that, unless and until Agent has
received such directions, Agent may, at its option, take such actions
as it deems appropriate without the direction of Required Lenders in
circumstances where the ability of Lenders to recover the Obligations
may otherwise be materially impaired. In actions with respect to any
property of any Company, Agent is acting for the ratable benefit of
each Lender. Agent shall hold, for the ratable benefit of all Lenders,
any security it receives for the Obligations or any guaranty of the
Obligations it receives upon or in lieu of foreclosure.
(g) Limitation of Liability. No Lender or any Participant
will incur any liability to any other Lender or Participant except for
acts or omissions in bad faith, and neither Agent nor any Lender or
Participant will incur any liability to any other Person for any act or
omission of any other Lender or any Participant.
(h) Relationship of Lenders. The Loan Documents, and the
documents delivered in connection therewith, do not create a
partnership or joint venture among Agent and Lenders or among Lenders.
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(i) Collateral Matters.
(i) Each Lender authorizes and directs Agent to
enter into the Security Documents for the ratable benefit of
Lenders. Each Lender agrees that any action taken by Agent
concerning any Collateral with the consent of, or at the
request of, Required Lenders or all Lenders, as the case may
be, in accordance with the provisions of this Agreement, the
Security Documents or the other Loan Documents, and the
exercise by Agent (with the consent of, or at the request of,
Required Lenders or all Lenders, as the case may be) of powers
concerning the Collateral set forth in any Loan Document,
together with other reasonably incidental powers, shall be
authorized and binding upon all Lenders.
(ii) Agent is authorized on behalf of all Lenders,
without the necessity of any notice to or further consent from
any Lender, from time to time before a Default or Potential
Default, to take any action with respect to any Collateral or
Security Documents that may be necessary to perfect and
maintain perfected liens upon the Collateral granted by the
Security Documents.
(iii) Agent has no obligation whatsoever to any
Lender or to any other Person to assure that the Collateral
exists or is owned by any Company or is cared for, protected
or insured or has been encumbered or that the Liens granted to
Agent for the benefit of Lenders under the Security Documents
have been properly or sufficiently or lawfully created,
perfected, protected or enforced, or are entitled to any
particular priority.
(iv) Agent shall exercise the same care and
prudent judgment with respect to the Collateral and the
Security Documents as it normally and customarily exercises in
respect of similar collateral and security documents.
(v) Lenders irrevocably authorize Agent, at its
option and in its discretion, to release any lien upon any
Collateral (i) upon full payment of the Obligations; (ii)
constituting property being sold or disposed of as permitted
under SECTIONS 6.17 and 7.5, if Agent determines that the
property being sold or disposed is being sold or disposed in
accordance with the requirements and limitations of SECTIONS
6.17 and 7.5 and Agent concurrently receives all mandatory
prepayments with respect thereto, if any; (iii) constituting
property in which such Company did not own any interest at the
time such lien was granted or at any time thereafter; (iv)
constituting property leased to such Company under a lease
that has expired or been terminated in a transaction permitted
under this Agreement or is about to expire and that has not
been, and is not intended by such Company to be, renewed; (v)
consisting of an instrument evidencing Indebtedness pledged to
Agent (for the benefit of Lenders), if the Indebtedness
evidenced thereby has been paid in full; or (vi) if approved,
authorized or ratified in writing by Required Lenders subject
to SECTION 11.13(b)(v). Upon request by Agent at any time,
Lenders will confirm in writing Agent's authority to release
particular types or items of Collateral under this SECTION
10.7(i).
(j) Amendments. The affirmative vote of Required Lenders
shall be required for Amendments, waivers and similar actions, except
100% of the affirmative vote of all Lenders shall be required for any
changes in interest rates, the rates of any fee (excluding Agent's
fee), payment dates, extensions of commitment, or release of material
Collateral.
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(k) Benefits of Agreement. None of the provisions of this
ARTICLE X inure to the benefit of any Company or any other Person other
than Agent and Lenders; consequently, no Company nor any such other
Person is entitled to rely upon, or to raise as a defense, in any
manner whatsoever, the failure of Agent or any Lender to comply with
these provisions.
ARTICLE XI
MISCELLANEOUS
11.1 Successors and Assigns. This Agreement is entered into for the
benefit of the parties hereto and their respective successors and assigns. It
shall be binding upon and shall inure to the benefit of such parties and their
respective successors and assigns. The rights and obligations of the Companies
hereunder, under the Notes, the other Security Documents and any other documents
to which it is a party may not be assigned without Lenders' prior written
consent.
11.2 Participations. Subject to the provisions of this section and
in accordance with applicable Law, any Lender may, in the ordinary course of its
commercial banking business, at any time sell to one or more Persons (each a
"PARTICIPANT") participating interests in its portion of the Obligations. The
selling Lender shall remain a "Lender" under this Agreement (and the Participant
shall not constitute a "Lender" under this Agreement) and its obligations under
this Agreement shall remain unchanged. The selling Lender shall remain solely
responsible for the performance of its obligations under the Loan Documents and
shall remain the holder of its share of the Principal Debt for all purposes
under this Agreement. Borrower and Agent shall continue to deal solely and
directly with the selling Lender in connection with that Lender's Rights and
obligations under the Loan Documents. Participants have no Rights under the Loan
Documents, other than certain voting Rights as provided below. Subject to the
following, each Lender may obtain (on behalf of its Participants) the benefits
of ARTICLE II with respect to all participations in its part of the Obligations
outstanding from time to time so long as Borrower is not obligated to pay any
amount in excess of the amount that would be due to that Lender under ARTICLE II
calculated as though no participations have been made. No Lender may sell any
participating interest under which the Participant has any Rights to approve any
amendment, modification or waiver of any Loan Document, except to the extent the
amendment, modification or waiver extends the due date for payment of any
principal, interest or fees due under the Loan Documents, reduces the interest
rate or the amount of principal or fees applicable to the Obligations (except
reductions contemplated by this Agreement), or releases any collateral, if any,
for the Obligations (other than releases of collateral permitted by SECTION 7.5
and SECTION 10.7(i)). However, if a Participant is entitled to the benefits of
ARTICLE II or a Lender grants Rights to its Participants to approve amendments
to or waivers of the Loan Documents respecting the matters described in the
previous sentence, then that Lender must include a voting mechanism in the
relevant participation agreement whereby a majority of its portion of the
Obligations (whether held by it or participated) shall control the vote for all
of that Lender's portion of the Obligations. Except in the case of the sale of a
participating interest to another Lender, the relevant participation agreement
shall prohibit the Participant from transferring, pledging, assigning, selling
participations in, or otherwise encumbering its portion of the Obligations.
11.3 Assignments. Subject to the provisions of this section, any
Lender may at any time, in the ordinary course of its commercial banking
business, (i) without the consent of Borrower or Agent, assign all or any part
of its Rights and obligations under the Loan Documents to any of its Affiliates
which has sufficient resources with which to honor its obligations under this
Agreement (each a "PURCHASER") and (ii) if no Default exists, upon the prior
written consent of Borrower (which will not be unreasonably withheld) and Agent,
assign
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to any other Person(each of which is also a "PURCHASER") a proportionate part
(not less than $7,500,000 and an integral multiple of $500,000) of all or any
part of its Rights and obligations under the Loan Documents. In each case, the
Purchaser shall assume those Rights and obligations under an assignment
agreement substantially in the form of the attached EXHIBIT F. Each assignment
under this SECTION 11.3 shall include a ratable interest in the assigning
Lender's Rights and obligations under this Agreement. Upon (i) delivery of an
executed copy of the assignment agreement to Borrower and Agent and (ii) payment
of a fee of $3,500 from the transferor to Agent, from and after the assignment's
effective date (which shall be after the date of delivery), the Purchaser shall
for all purposes be a Lender party to this Agreement and shall have all the
Rights and obligations of a Lender under this Agreement to the same extent as if
it were an original party to this Agreement with commitments as set forth in the
assignment agreement, and the transferor Lender shall be released from its
obligations under this Agreement to a corresponding extent, and, except as
provided in the following sentence, no further consent or action by Borrower,
Lenders or Agent shall be required. Upon the consummation of any transfer to a
Purchaser under this SECTION 11.3, the then-existing SCHEDULE 1 shall
automatically be deemed to reflect the name, address, and Committed Amount of
such Purchaser, Agent shall deliver to Borrower and Lenders an amended SCHEDULE
1 reflecting those changes, Borrower shall execute and deliver to each of the
transferor Lender and the Purchaser a promissory note in the form of EXHIBIT A
in the face amount of its respective Committed Amount under this Agreement
following transfer, and, upon receipt of such note, the transferor Lender shall
return to Borrower the promissory note previously delivered to it under this
Agreement. A Purchaser is subject to all the provisions in this section as if it
were a Lender signatory to this Agreement as of the date of this Agreement. Any
Lender may at any time, without the consent of Borrower or Agent, assign all or
any part of its Rights under the Loan Documents to a Federal Reserve Bank
without releasing the transferor Lender from its obligations thereunder.
Notwithstanding any contrary provision in this Agreement, a Lender may not sell
or participate any of its interests for a purchase price that, directly or
indirectly, reflects a discount from face value, without first offering the sale
or participation to the other Lenders on a Pro Rata basis (which must be
accepted or rejected within five Business Days after the offer).
11.4 Notices. Any notice, demand or document which either party is
required or may desire to give hereunder shall be in writing and, except to the
extent provided in the other provisions of this Agreement, given by messenger,
telecopy or other electronic transmission, or United States registered or
certified mail, postage prepaid, return receipt requested, addressed to such
party at its address and telecopy number shown below, or at such other address
as either party shall have furnished to the other by notice given in accordance
with this provision.
If to Agent, to:
Christiania Bank og Kreditkasse ASA
New York Branch
00 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: W. S. (Xxxxx) Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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with a copy to:
Xxxxxx & Xxxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: F. Xxxxxx Xxxxxxxx, Xx.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Borrower, to:
Xxxxxxx Petroleum Corporation
00000 Xxxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Vice President, Finance
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx and Xxxxx, L.L.P.
0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to any other obligor party, to the address set forth in the Security
Document or other agreement to which they are a party.
Any notice delivered or made by messenger, telecopy, or United States mail shall
be deemed to be given on the date of actual delivery as shown by messenger
receipt, the addressor's telecopy machine confirmation or other verifiable
electronic receipt, or the registry or certification receipt. Agent or Lenders
need not delay action on notice transmitted orally by an authorized officer of
Borrower to Agent or Lenders until receipt of written confirmation of such
notice. In the event that a discrepancy exists between the notice received by
Agent or Lenders orally and the written confirmation, or in the absence of a
written confirmation, the oral notice, as understood by Agent or Lenders will be
deemed the controlling and proper notice.
11.5 Exercise of Rights; No Waivers. Neither the failure nor any
delay on the part of any party hereto to exercise any right, remedy, power,
privilege or option under this Agreement shall operate as a waiver of such or
any other right, remedy, power, privilege or option. No single or partial
exercise of any right, remedy, power, privilege or option under this Agreement
shall preclude any other or further exercise thereof or the exercise of any
other right, remedy, power, privilege or option. No waiver of any right, remedy,
power, privilege or option with respect to any occurrence shall be construed as
a waiver of such right, remedy, power, privilege or option with respect to any
subsequent or other occurrence. No waiver whatever shall be valid unless in
writing and signed by an officer of the party to whom such waiver applies and
then only to the extent therein set forth.
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11.6 Release to Public. Except as may be required by law, rule or
regulation (including those promulgated by any federal or state securities law
authority) or in response to or in connection with arbitration proceedings or
legal process or in any legal proceeding to enforce or have interpreted the
Security Documents or any other document or instrument executed in connection
with the Security Documents, and such filings as are necessary or appropriate to
create, maintain and perfect liens and security interests contemplated hereby,
no party shall release this Agreement or any other document, agreement or
instrument relating to or executed in conjunction with this Agreement, or
disclose the substantive terms hereof or thereof, except to its attorneys,
accountants or engineers, participants and potential Lenders on a need-to-know
basis, without the prior express written consent of the other party. Without
limitation of the foregoing, neither party or any of their respective Affiliates
shall issue any press release or make any other public announcement relating to
this Agreement without the written approval of the other party; provided,
however, that Agent shall have the right to publish a "tombstone" announcement
regarding this Agreement, which announcement shall be approved by Borrower (such
approval not to be unreasonably withheld).
11.7 Waiver of Jury Trial. TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, EACH OF THE UNDERSIGNED (AND IN THE CASE OF BORROWER, FOR ITSELF AND EACH
OTHER COMPANY) HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT
WHICH IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THE LOAN
DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY.
11.8 Governing Law. The Loan Documents (other than the Security
Documents to the extent they may be governed by Texas law or the laws of any
other State of the United States where the Collateral is located) are to be
performed in the State of New York. Except to the extent that any of the
Security Documents are expressly stated to be governed by Texas law, the Loan
Documents, and all transactions provided for herein or therein shall be governed
by, interpreted and construed under, and in connection with, the laws of the
State of New York without regard to its conflicts of laws provisions.
11.9 Benefits of Agreement. Subject to SECTION 10.7, the benefits
of this Agreement shall not inure to any third party. Notwithstanding anything
contained in the Security Documents, or any conduct or course of conduct by the
parties hereto, before or after signing the Security Documents, this Agreement
shall not be construed as creating any rights, claims or causes of action
against Lenders, or any of their officers, directors, agents or employees by any
Person other than Borrower.
11.10 Invalid Provisions. Any section, clause, subsection, sentence,
paragraph, provision or portion thereof of this Agreement held by a court of
competent jurisdiction to be invalid, illegal, or ineffective shall not impair,
invalidate or nullify the remainder of this Agreement, but the effect thereof
shall be confined to the section, clause, subsection, sentence, paragraph or
provision, or portion thereof so held to be invalid, illegal or ineffective.
11.11 Headings. The headings, captions and arrangements contained in
this Agreement have been inserted for convenience only and shall not be deemed
in any manner to modify, explain, enlarge or restrict any of the provisions
hereof.
11.12 Advice of Legal Counsel. Borrower, Agent and Lenders
acknowledge that each of them has had the benefit of legal counsel of its own
choice and has been afforded an opportunity to review the Loan
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Documents with their legal counsel and that the Loan Documents shall be
construed as if jointly drafted by Borrower and Lenders.
11.13 Amendments, Consents, Conflicts and Waivers.
(a) Unless otherwise specifically provided, (i) this
Agreement may be amended only by an instrument in writing executed by
Borrower, Agent and Required Lenders and supplemented only by documents
delivered or to be delivered in accordance with the express terms of
this Agreement, and (ii) the other Loan Documents may only be the
subject of an amendment, modification or waiver that has been approved
by Required Lenders and the respective parties thereto.
(b) Any amendment, consent or waiver under this Agreement
or any Loan Document that purports to accomplish any of the following
must be in writing and executed by Borrower and Agent and executed (or
approved, as the case may be) by each Lender: (i) extend the due date
or decrease the amount of any scheduled payment of the Obligation
beyond the date specified in the Loan Document; (ii) decrease any rate
or amount of interest, fees or other sums payable to Agent or Lenders
under this Agreement (except such reductions as are contemplated by
this Agreement); (iii) change the definition of "Committed Amount,"
"Commitment Percentage," "Required Lenders," "Maturity Date," "Total
Commitment" or any of the defined terms used in the financial covenants
contained in ARTICLE VI; (iv) increase or decrease any one or more
Lenders' Committed Amounts except as provided in this Agreement; (v)
consent to the release of any portion of the Collateral under the
Security Documents (except for such releases as are permitted under the
terms of this Agreement) having a value equal to or greater than
$1,000,000 (or if the value of such Collateral when added to the value
of all other Collateral released during the immediately preceding 12
month period is equal to or greater than $4,000,000); (vi) change the
provisions of SECTION 11.7 to the detriment of any Lender; (vii) change
any provision requiring ratable distributions to Lenders; (viii)
subject any Lender to a greater obligation than expressly provided in
this Agreement; or (ix) change this SECTION 11.13(b) or any other
matter specifically requiring the consent of all Lenders under this
Agreement.
(c) Any conflict or ambiguity between the terms and
provisions of this Agreement and terms and provisions in any other Loan
Document is controlled by the terms and provisions of this Agreement.
(d) No course of dealing or any failure or delay by Agent,
any Lender, or any of their respective Representatives with respect to
exercising any Right of Agent or any Lender under this Agreement
operates as a waiver thereof. A waiver must be in writing and signed by
Agent and Lenders (or Required Lenders, if permitted under this
Agreement) to be effective, and a waiver will be effective only in the
specific instance and for the specific purpose for which it is given.
11.14 Multiple Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute but one and the same
instrument.
11.15 Usury Savings Clause. It is the intention of the parties
hereto to comply with applicable usury laws (now or hereafter enacted);
accordingly, notwithstanding any provision to the contrary in this Agreement and
the other Security Documents or any other document related hereto, in no event
shall this Agreement or any such other document require the payment or permit
the collection of interest in excess of the maximum
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amount permitted by such laws. If from any circumstances whatsoever, fulfillment
of any provision of this Agreement or of any other document pertaining hereto or
thereto, shall involve transcending the limit of validity prescribed by law for
the contracting for, collection or charging of interest, then, ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity, and
if from any such circumstances Lender shall ever receive anything of value as
interest or deemed interest by applicable law under the Loan Documents or any
other document pertaining hereto or otherwise an amount that would exceed the
highest lawful rate, such amount that would be excessive interest shall be
applied to the reduction of the principal amount owing under the Notes or on
account of any other indebtedness of Borrower to Lenders, and not to the payment
of interest, or if such excessive interest exceeds the unpaid balance of
principal of such indebtedness, such excess shall be refunded to Borrower. In
determining whether or not the interest paid or payable with respect to any
indebtedness of Borrower to Lenders, under any specified contingency, exceeds
the highest lawful rate, Borrower and Lenders shall, to the maximum extent
permitted by applicable law, (a) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, (c) amortize, prorate, allocate and spread
the total amount of interest throughout the full term of such indebtedness so
that the actual rate of interest on account of such indebtedness does not exceed
the maximum amount permitted by applicable law, and/or (d) allocate interest
between portions of such indebtedness, to the end that no such portion shall
bear interest at a rate greater than that permitted by applicable law.
11.16 Xxxxxx; Cash Collateral. On the Termination Date, upon the
cancellation of the Total Commitment under SECTION 2.8, during the continuance
of a Default under SECTION 9.1(d) or 9.1(e), or upon any demand by Agent during
the continuance of any other Default, the Companies shall provide to Agent, for
the benefit of Agent or any Lender which is a party to a Hedge with any Company,
upon the written request from Agent or such Lender, as applicable, cash
collateral or other collateral acceptable to Agent or such Lender, as
applicable, in an amount equal, at all times, to 110% of Borrower's "Exposure"
(as defined in the ISDA form Master Swap Agreement) pursuant to the terms and
provisions of the standard ISDA form of Credit Support Annex (with such
modifications as may be agreed to by Borrower and Agent or such Lender, as
applicable). Borrower shall pay Agent's or Lender's, as applicable, costs and
expenses associated with such collateralization and with maintaining and
monitoring such Xxxxxx in effect after the Termination Date or upon cancellation
of the Total Commitment under SECTION 2.8.
11.17 Nonbusiness Days; Time. Any payment or action that is due
under any Loan Document on a non-Business Day may be delayed until the
next-succeeding Business Day (but interest shall continue to accrue on any
applicable payment until payment is in fact made) unless the payment concerns a
Eurodollar Rate Advance, in which case if the next-succeeding Business Day is in
the next calendar month, then such payment shall be made on the next-preceding
Business Day. Unless otherwise indicated, all time references (e.g., 10:00 a.m.)
are to New York, New York time.
11.18 Entirety. THE 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.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized.
XXXXXXX PETROLEUM CORPORATION,
a Texas corporation as Borrower
By: /s/ XXXXXXX XXXXXX
--------------------------------
Name: Xxxxxxx Xxxxxx
------------------------------
Title: President
-----------------------------
CHRISTIANIA BANK OG KREDITKASSE ASA,
as Administrative Agent and Lender
By: /s/ XXXXXXX X. XXXXXXXX
--------------------------------
Name: Xxxxxxx X. Xxxxxxxx
------------------------------
Title: Vice President
-----------------------------
By: /s/ HANS CHR. KJELSRUD
--------------------------------
Name: Hans Chr. Kjelsrud
------------------------------
Title: First Vice President
-----------------------------
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