EXHIBIT 10.6
CREDIT AGREEMENT
DATED AS OF MARCH 2, 2007
AMONG
ISRAMCO ENERGY, L.L.C.
AS BORROWER,
XXXXX FARGO BANK, N. A.,
AS ADMINISTRATIVE AGENT,
AND
THE LENDERS SIGNATORY HERETO
TABLE OF CONTENTS
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Page
ARTICLE I Definitions and Accounting Matters............................. 1
Section 1.01 Terms Defined Above................................... 1
Section 1.02 Certain Defined Terms................................. 1
Section 1.03 Accounting Terms and Determinations................... 14
Section 1.04 References; Use of Word "Including"................... 14
ARTICLE II Commitments................................................... 14
Section 2.01 Loans and Letters of Credit........................... 14
Section 2.02 Borrowings, Continuations and Conversions, Letters
of Credit.......................................... 15
Section 2.03 Changes of Commitments................................ 16
Section 2.04 Fees.................................................. 17
Section 2.05 Several Obligations................................... 18
Section 2.06 Notes................................................. 18
Section 2.07 Prepayments........................................... 18
Section 2.08 Borrowing Base........................................ 20
Section 2.09 Assumption of Risks................................... 22
Section 2.10 Obligation to Reimburse and to Prepay................. 22
Section 2.11 Lending Offices....................................... 24
ARTICLE III Payments of Principal and Interest........................... 24
Section 3.01 Repayment of Loans.................................... 24
Section 3.02 Interest.............................................. 24
ARTICLE IV Payments; Pro Rata Treatment; Computations; Etc............... 25
Section 4.01 Payments.............................................. 25
Section 4.02 Pro Rata Treatment.................................... 25
Section 4.03 Computations.......................................... 25
Section 4.04 Non-receipt of Funds by Administrative Agent.......... 25
Section 4.05 Set-off, Sharing of Payments, Etc..................... 26
Section 4.06 Taxes................................................. 27
Section 4.07 Disposition of Proceeds............................... 29
ARTICLE V Capital Adequacy and Additional Costs.......................... 29
Section 5.01 Additional Costs...................................... 29
Section 5.02 Limitation on LIBOR Loans............................. 30
Section 5.03 Illegality............................................ 31
Section 5.04 Base Rate Loans Pursuant to Sections 5.01,
5.02 and 5.03...................................... 31
Section 5.05 Compensation.......................................... 31
ARTICLE VI Conditions Precedent.......................................... 32
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Section 6.01 Initial Funding....................................... 32
Section 6.02 Initial and Subsequent Loans and Letters of Credit.... 34
Section 6.03 Conditions Precedent for the Benefit of Lenders....... 34
Section 6.04 No Waiver............................................. 34
ARTICLE VII Representations and Warranties............................... 34
Section 7.01 Corporate Existence................................... 35
Section 7.02 Financial Condition................................... 35
Section 7.03 Litigation............................................ 35
Section 7.04 No Breach............................................. 35
Section 7.05 Authority............................................. 35
Section 7.06 Approvals............................................. 36
Section 7.07 Use of Loans.......................................... 36
Section 7.08 ERISA................................................. 36
Section 7.09 Taxes................................................. 37
Section 7.10 Titles, Etc........................................... 37
Section 7.11 No Material Misstatements............................. 37
Section 7.12 Investment Company Act................................ 38
Section 7.13 Subsidiaries.......................................... 38
Section 7.14 Location of Business and Offices...................... 38
Section 7.15 Defaults.............................................. 38
Section 7.16 Environmental Matters................................. 38
Section 7.17 Compliance with the Law............................... 39
Section 7.18 Insurance............................................. 39
Section 7.19 Hedging Agreements.................................... 40
Section 7.20 Restriction on Liens.................................. 40
Section 7.21 Material Agreements................................... 40
Section 7.22 Solvency.............................................. 40
Section 7.23 Gas Imbalances........................................ 41
Section 7.24 Permits, Licenses, Franchises, Patents and
Trademarks............................................ 41
ARTICLE VIII Affirmative Covenants....................................... 41
Section 8.01 Reporting Requirements................................ 41
Section 8.02 Litigation............................................ 44
Section 8.03 Maintenance, Etc...................................... 44
Section 8.04 Environmental Matters................................. 45
Section 8.05 Further Assurances.................................... 45
Section 8.06 Performance of Obligations............................ 46
Section 8.07 Engineering Reports................................... 46
Section 8.08 Title Information..................................... 46
Section 8.09 Collateral............................................ 47
Section 8.10 ERISA Information and Compliance...................... 48
Section 8.11 Hedging Agreements.................................... 48
ARTICLE IX Negative Covenants............................................ 48
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Section 9.01 Debt.................................................. 48
Section 9.02 Liens................................................. 49
Section 9.03 Investments, Loans and Advances....................... 49
Section 9.04 Dividends, Distributions and Redemptions.............. 50
Section 9.05 Sales and Leasebacks.................................. 50
Section 9.06 Nature of Business.................................... 50
Section 9.07 Mergers, Etc.......................................... 50
Section 9.08 Proceeds of Notes; Letters of Credit.................. 51
Section 9.09 ERISA Compliance...................................... 51
Section 9.10 Sale or Discount of Receivables....................... 52
Section 9.11 Financial Covenants................................... 52
Section 9.12 Sale of Properties.................................... 53
Section 9.13 Environmental Matters................................. 53
Section 9.14 Transactions with Affiliates.......................... 53
Section 9.15 Subsidiaries.......................................... 53
Section 9.16 Negative Pledge Agreements............................ 53
Section 9.17 Gas Imbalances, Take-or-Pay or Other Prepayments...... 53
Section 9.18 Material Operational Agreements....................... 53
ARTICLE X Events of Default; Remedies.................................... 54
Section 10.01 Events of Default..................................... 54
Section 10.02 Remedies.............................................. 55
ARTICLE XI Administrative Agent.......................................... 56
Section 11.01 Appointment, Powers and Immunities.................... 56
Section 11.02 Reliance by Administrative Agent...................... 57
Section 11.03 Defaults.............................................. 57
Section 11.04 Rights as a Lender.................................... 57
Section 11.05 Indemnification....................................... 57
Section 11.06 Non-Reliance on Administrative Agent and other
Lenders............................................... 57
Section 11.07 Action by Administrative Agent........................ 58
Section 11.08 Resignation of Administrative Agent................... 58
ARTICLE XII Miscellaneous................................................ 58
Section 12.01 Waiver................................................ 58
Section 12.02 Notices............................................... 59
Section 12.03 Payment of Expenses, Indemnities, Etc................. 59
Section 12.04 Amendments, Etc....................................... 61
Section 12.05 Successors and Assigns................................ 61
Section 12.06 Assignments and Participations........................ 61
Section 12.07 Invalidity............................................ 63
Section 12.08 Counterparts; Electronic Delivery of Signature Page... 63
Section 12.09 Survival.............................................. 63
Section 12.10 Captions.............................................. 63
SECTION 12.11 NO ORAL AGREEMENTS.................................... 63
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SECTION 12.12 GOVERNING LAW; SUBMISSION TO JURISDICTION............. 63
Section 12.13 Interest.............................................. 64
Section 12.14 Confidentiality....................................... 65
Section 12.15 USA Patriot Act....................................... 66
Section 12.16 Exculpation Provisions................................ 66
ANNEXES, EXHIBITS AND SCHEDULES
Annex I - List of Percentage Shares and Maximum Revolving Credit Amounts
Exhibit A - Form of Note
Exhibit B - Form of Borrowing, Continuation and Conversion Request
Exhibit C - Form of Compliance Certificate
Exhibit D - List of Security Instruments
Exhibit E - Form of Assignment Agreement
Exhibit F - Form of Reserve Report Certificate
Exhibit G - Form of Letter-in-Lieu
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.13 - Subsidiaries, Etc.
Schedule 7.14 - Location of Business and Offices, Etc.
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.22 - Material Agreements
Schedule 7.23 - Gas Imbalances
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
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THIS CREDIT AGREEMENT dated as of March 2, 2007 is among ISRAMCO
ENERGY, L.L.C., limited liability company formed under the laws of the State of
Texas (the "Borrower"); each of the lenders that is a signatory hereto or which
becomes a signatory hereto as provided in Section 12.06 (individually, together
with its successors and assigns, a "Lender" and, collectively, the "Lenders");
and XXXXX FARGO BANK, N. A., a national banking association (in its individual
capacity, "WFB"), as agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
RECITALS
--------
A. Borrower has requested that the Lenders provide certain loans to
and extensions of credit on behalf of Borrower; and
B. The Lenders have agreed to make such loans and extensions of
credit subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans, extensions of credit and commitments hereinafter
referred to, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS, ETC.
Section 1.01 Terms Defined Above. As used in this Agreement, the
terms defined in the opening paragraph and the Recitals above shall have the
meanings indicated therein.
Section 1.02 Certain Defined Terms. As used herein, the following
terms shall have the following meanings (all terms defined in this Article I or
in other provisions of this Agreement in the singular to have equivalent
meanings when used in the plural and vice versa):
"Additional Costs" shall have the meaning assigned such term in Section
5.01(a).
"Affected Loans" shall have the meaning assigned such term in Section
5.04.
"Affiliate" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. For purposes of this definition, any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to "control" (including, with its correlative meanings, "controlled by"
and "under common control with") such corporation or other Person.
"Agreement" shall mean this Credit Agreement, as the same may from time
to time be amended or supplemented.
"Aggregate Commitments" at any time shall equal the amount calculated in
accordance with Section 2.03.
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"Aggregate Maximum Revolving Credit Amounts" at any time shall equal the
sum of the Maximum Revolving Credit Amounts of the Lenders, as the same may be
reduced pursuant to Section 2.03(b). As of the Closing Date, the Aggregate
Maximum Revolving Credit Amounts equal $150,000,000.
"Applicable Lending Office" shall mean, for each Lender and for each
Type of Loan, the lending office of such Lender (or an Affiliate of such Lender)
designated for such Type of Loan on the signature pages hereof or such other
offices of such Lender (or of an Affiliate of such Lender) as such Lender may
from time to time specify to the Administrative Agent and Borrower as the office
by which its Loans of such Type are to be made and maintained.
"Applicable Margin" shall mean the applicable per annum percentage set
forth at the appropriate intersection in the table shown below, based on the
Borrowing Base Utilization as in effect from time to time:
APPLICABLE MARGIN
-----------------
LIBOR BASE RATE
BORROWING BASE UTILIZATION LOANS LOANS
----------------------------- ----- ---------
Less than 50% 1.25% 0.00%
Greater than or equal to 50%,
but less than 75% 1.50% 0.00%
Greater than or equal to 75%,
but less than 90% 1.75% 0.25%
Greater than or equal to 90% 2.00% 0.50%
;provided, however, at any time that a Borrowing Base Deficiency exists,
"Applicable Margin" shall mean 4.00% for LIBOR Loans and 1.00% for Base Rate
Loans.
Each change in the Applicable Margin resulting from a change in the Borrowing
Base Utilization shall take effect on the day such change in the Borrowing Base
Utilization occurs.
"Aspen" means Aspen Operating Company, L.L.C., a Texas limited liability
company.
"Aspen Operations Agreement" shall mean that certain Agreement for
Operations between Borrower and Aspen, dated effective as of the date of the
closing of the Five States Acquisition.
"Assignment" shall have the meaning assigned such term in Section
12.06(b).
"Bank Products" means any financial accommodation extended to Borrower
or its Subsidiaries by any Lender or any Lender Affiliate, including, without
limitation: (i) credit cards, (ii) credit card processing services, (iii) debit
cards, (iv) purchase cards, and (v) any overdraft or unpaid amount relating to
cash management, including controlled disbursement, accounts or services.
"Base Rate" shall mean, with respect to any Base Rate Loan, for any day,
the higher of (i) the Federal Funds Rate for any such day plus 1/2 of 1% or (ii)
the Prime Rate for such day. Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
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"Beneficiaries" shall mean the Administrative Agent, the Lenders, each
Issuing Bank and each Affiliate of a Lender that is a party to a Hedging
Agreement with Borrower.
"Borrowing Base" shall mean at any time an amount equal to the amount
determined in accordance with Section 2.08.
"Borrowing Base Deficiency" shall mean, and occur when, the amount by
which the sum of (i) the aggregate outstanding principal amount of the Loans,
plus (ii) the LC Exposure, exceeds the Borrowing Base, whether as the result of
a redetermination, a scheduled reduction, or otherwise.
"Borrowing Base Utilization" shall mean at any time, an amount equal to
the quotient of (i) the aggregate principal amount of Loans outstanding plus LC
Exposure, divided by (ii) the Borrowing Base.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Texas and, if such day relates to a
borrowing or continuation of, a payment or prepayment of principal of or
interest on, or a conversion of or into, or the Interest Period for, a LIBOR
Loan or a notice by Borrower with respect to any such borrowing or continuation,
payment, prepayment, conversion or Interest Period, any day which is also a day
on which dealings in Dollar deposits are carried out in the London interbank
market.
"Capital Securities" means, with respect to any Person, any and all
shares, units representing interests, participations, rights in or other
equivalents (however designated) of such Persons capital stock, including (x)
with respect to partnerships, partnership interests (whether general or limited)
and any other interest or participation that confers upon a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
such partnership, (y) with respect to limited liability companies, member
interests, and (z) with respect to any Person, any rights (other than debt
securities convertible into capital stock), warrants or options exchangeable for
or convertible into such capital stock.
"Change of Control" means the occurrence of any of the following events:
(a) Parent shall cease to own, directly or indirectly, 100% of the outstanding
shares of voting Capital Securities of Borrower on a fully-diluted basis, (b)
the engagement by Borrower of Xxxxxx Xxxxx, as an engineering consultant
terminates for any reason or he otherwise ceases to have an active role in the
operations of Borrower, unless, within 90 days after any such termination or
cessation, Borrower replaces him with an individual acceptable to the Lenders in
their sole discretion.
"Closing Date" shall mean March 2, 2007.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"Collateral" shall mean the Property owned by Borrower or any Guarantor
and which is subject to the Liens existing and to exist under the terms of the
Security Instruments.
"Commitment" shall mean, for any Lender, its obligation to make Loans
and to participate in the Letters of Credit as provided in Section 2.01(b) up to
the lesser of (i) such Lender's Maximum Credit Amount and (ii) the Lender's
Percentage Share of the amount equal to the then effective Borrowing Base.
"Compliance Certificate" shall mean a certificate from Borrower
substantially in the form of Exhibit C.
"Consolidated Net Income" shall mean with respect to Borrower and its
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of Borrower and its Consolidated
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Subsidiaries after allowances for taxes for such period, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded from such net income (to the extent otherwise included therein) the
following: (i) the net income of any Person in which Borrower or any
Consolidated Subsidiary has an interest (which interest does not cause the net
income of such other Person to be consolidated with the net income of Borrower
and its Consolidated Subsidiaries in accordance with GAAP), except to the extent
of the amount of dividends or distributions actually paid in such period by such
other Person to Borrower or to a Consolidated Subsidiary, as the case may be;
(ii) the net income (but not loss) of any Consolidated Subsidiary to the extent
that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted
by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary, or is
otherwise restricted or prohibited in each case determined in accordance with
GAAP; (iii) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (iv) any extraordinary gains or losses, including gains or losses
attributable to Property sales not in the ordinary course of business; and (v)
the cumulative effect of a change in accounting principles and any gains or
losses attributable to writeups or write downs of assets.
"Consolidated Subsidiaries" shall mean each Subsidiary of a Person
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of such Person in accordance with GAAP. Unless otherwise indicated,
each reference to the term "Consolidated Subsidiary" shall mean a Subsidiary
consolidated with Borrower.
"Debt" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which such Person is liable (whether contingent or otherwise); (v) all
obligations of such Person under "synthetic lease" transactions or other off
balance sheet financings; (vi) all Debt (as described in the other clauses of
this definition) and other obligations of others secured by a Lien on any asset
of such Person, whether or not such Debt is assumed by such Person; (vii) all
Debt (as described in the other clauses of this definition) and other
obligations of others guaranteed by such Person or in which such Person
otherwise assures a creditor against loss of the debtor or obligations of
others; (viii) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or to
purchase the Debt or Property of others; (ix) obligations to deliver goods or
services including Hydrocarbons in consideration of advance payments, except as
permitted by Section 9.17 and disclosed in a Reserve Report Certificate; (x)
obligations to pay for goods or services whether or not such goods or services
are actually received or utilized by such Person; (xi) any capital stock of such
Person in which such Person has a mandatory obligation to redeem such stock;
(xii) any Debt of a Subsidiary for which such Person is liable either by
agreement or because of a Governmental Requirement; (xiii) the undischarged
balance of any production payment created by such Person or for the creation of
which such Person directly or indirectly received payment; and (xiv) all
obligations of such Person under Hedging Agreements.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
America.
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"EBITDAX" shall mean, for any period, without duplication, the sum of
Consolidated Net Income, plus the following expenses or charges to the extent
deducted from Consolidated Net Income in such period: (i) interest expense,
income taxes, depreciation, depletion, and amortization, plus (ii) exploration
expenses, plus (iii) other non-cash items reducing Consolidated Net Income.
"Effective Date" shall have the meaning assigned such term in Section
12.16.
"Engineering Reports" shall have the meaning assigned such term in
Section 2.08.
"Environmental Laws" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all jurisdictions
in which Borrower or any Subsidiary is conducting or at any time has conducted
business, or where any Property of Borrower or any Subsidiary is located,
including without limitation, the Oil Pollution Act of 1990 ("OPA"), the Clean
Air Act, as amended, the Comprehensive Environmental, Response, Compensation,
and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution
Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall have the
meaning specified in OPA, the terms "hazardous substance" and "release" (or
"threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of Borrower or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor statute.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with Borrower or any Subsidiary would be deemed to
be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of
Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"Event of Default" shall have the meaning assigned such term in Section
10.01.
"Excepted Liens" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been
maintained; (ii) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations not yet due or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary
5
course of business or incident to the exploration, development, operation and
maintenance of Oil and Gas Properties or statutory landlord's liens, each of
which is in respect of obligations that have not been outstanding more than 90
days or which are being contested in good faith by appropriate proceedings and
for which adequate reserves have been maintained in accordance with GAAP; (iv)
any Liens reserved in leases or farmout agreements for rent or royalties and for
compliance with the terms of the farmout agreements or leases in the case of
leasehold estates, to the extent that any such Lien referred to in this clause
does not materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by Borrower or any Subsidiary or
materially impair the value of such Property subject thereto; (v) encumbrances
(other than to secure the payment of borrowed money or the deferred purchase
price of Property or services), easements, restrictions, servitudes, permits,
conditions, covenants, exceptions or reservations in any rights of way or other
Property of Borrower or any Subsidiary for the purpose of roads, pipelines,
transmission lines, transportation lines, distribution lines for the removal of
gas, oil, coal or other minerals or timber, and other like purposes, or for the
joint or common use of real estate, rights of way, facilities and equipment, and
defects, irregularities, zoning restrictions and deficiencies in title of any
rights of way or other Property which in the aggregate do not materially impair
the use of such rights of way or other Property for the purposes of which such
rights of way and other Property are held by Borrower or any Subsidiary or
materially impair the value of such Property subject thereto; (vi) deposits of
cash or securities to secure the performance of bids, trade contracts, leases,
statutory obligations and other obligations of a like nature incurred in the
ordinary course of business; and (vii) Liens permitted by the Security
Instruments.
"Federal Funds Rate" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with a
member of the Federal Reserve System arranged by federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the date for which such rate is
to be determined is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to the Administrative Agent on such day on such transactions as
determined by Administrative Agent.
"Fee Letter" shall mean that certain letter agreement from
Administrative Agent to Borrower, dated as of February 28, 2007, concerning
certain fees in connection with this Agreement and any agreements or instruments
executed in connection therewith, as the same may be amended or replaced from
time to time.
"Five States Acquisition" shall mean the acquisition of various Oil and
Gas Properties by Borrower pursuant to that certain Purchase and Sale Agreement
dated as of February 16, 2007 among Five States Energy Company, L.L.C., et al
and Parent or its designee, Borrower.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"Governmental Authority" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, Borrower,
its Subsidiaries or any of their Property or Administrative Agent, any Lender or
any Applicable Lending Office.
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"Governmental Requirement" shall mean any law, statute, code, ordinance,
order, determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
(whether or not having the force of law), including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
"Guarantor" shall mean Parent and all existing or hereafter acquired or
created Subsidiaries of Borrower.
"Guaranty Agreement" shall mean an agreement executed by each Guarantor
in form and substance satisfactory to Administrative Agent guarantying,
unconditionally, payment of the Obligations, as the same may be amended,
modified or supplemented from time to time.
"Hedging Agreements" shall mean any commodity, interest rate or currency
swap, cap, floor, collar, forward agreement or other exchange or protection
agreements or any option with respect to any such transaction.
"Highest Lawful Rate" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on the Notes or on
any other Obligations under laws applicable to such Lender which are presently
in effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"Hydrocarbon Interests" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"Hydrocarbons" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"Indemnified Parties" shall have the meaning assigned such term in
Section 12.03(a)(ii).
"Indemnity Matters" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent
negligence of such Person seeking indemnification.
"Initial Funding" shall mean the funding of the initial Loans or
issuance of the initial Letters of Credit upon satisfaction of the conditions
set forth in Sections 6.01 and 6.02.
"Initial Reserve Report" shall mean the report of Xxxxxxx X. Xxxx and
Associates, Inc., dated January 8, 2007 with respect to the Oil and Gas
Properties of Borrower as of October 1, 2006, a copy of which has been delivered
to Administrative Agent.
"Interest Period" shall mean, with respect to any LIBOR Loan, the period
commencing on the date such LIBOR Loan is made and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as Borrower may select as provided in Section 2.02 (or such longer
period as may be requested by Borrower and agreed to by the Majority Lenders),
except that each Interest Period which commences on the last Business Day of a
calendar month (or on any day for which
7
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent calendar
month.
Notwithstanding the foregoing: (i) no Interest Period may end after the
Revolving Credit Termination Date; (ii) no Interest Period for any LIBOR Loan
may end after the due date of any installment, if any, provided for in Section
3.01 to the extent that such LIBOR Loan would need to be prepaid prior to the
end of such Interest Period in order for such installment to be paid when due;
(iii) each Interest Period which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day (or, if such next
succeeding Business Day falls in the next succeeding calendar month, on the next
preceding Business Day); and (iv) no Interest Period shall have a duration of
less than one month and, if the Interest Period for any LIBOR Loans would
otherwise be for a shorter period, such Loans shall not be available hereunder.
"Issuing Bank" shall mean WFB or any other Lender agreed to by Borrower
and Administrative Agent to issue Letters of Credit.
"Xxx Management" shall mean Xxx Management, L.L.C., a Texas limited
liability company, and Affiliate of Borrower.
"Xxx Management Agreement" shall mean that certain Management Agreement,
dated as of February 28, 2007, by and between Xxx Management and Borrower.
"Xxx Management JOA" shall mean that certain Joint Operating Agreement,
dated February 28, 2007 entered into by Borrower with Xxx Management, as
operator.
"LC Commitment" at any time shall mean $5,000,000.
"LC Exposure" at any time shall mean the aggregate face amount of all
undrawn and uncancelled Letters of Credit plus the aggregate of all amounts
drawn under all Letters of Credit and not yet reimbursed.
"Lender Affiliate" means, (a) with respect to any Lender, (i) an
Affiliate of such Lender or (ii) any Person that is engaged in making,
purchasing, holding or otherwise investing in bank loans and similar extensions
of credit in the ordinary course of its business and is administered or managed
by a Lender or an Affiliate of such Lender and (b) with respect to any Lender
that is a fund which invests in bank loans and similar extensions of credit, any
other fund that invests in bank loans and similar extensions of credit and is
managed by the same investment advisor as such Lender or by an Affiliate of such
investment advisor.
"Letter of Credit Agreements" shall mean the written agreements with the
Issuing Bank, as issuing lender for any Letter of Credit, executed in connection
with the issuance by the Issuing Bank of the Letters of Credit, such agreements
to be on the Issuing Bank's customary form for letters of credit of comparable
amount and purpose as from time to time in effect or as otherwise agreed to by
Borrower and the Issuing Bank.
"Letters of Credit" shall mean the letters of credit issued pursuant to
Section 2.01(b) and all reimbursement obligations pertaining to any such letters
of credit, and "Letter of Credit" shall mean any one of the Letters of Credit
and the reimbursement obligations pertaining thereto.
"Letter-in-Lieu" shall mean a letter addressed to a Purchaser or in
blank, substantially in the form of Exhibit G.
8
"LIBOR" shall mean, for any LIBOR Loan for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Dow Xxxxx Market Service Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "LIBOR" shall mean, for any LIBOR Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London
interbank offered rate for deposits in Dollars at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of such Interest Period
for a term comparable to such Interest Period; provided, however, if more than
one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be
the arithmetic mean of all such rates. In the event that such rate does not
appear on either Dow Xxxxx Market Service Page 3750 or Reuters Screen LIBO Page,
"LIBOR" shall be determined by Administrative Agent to be the rate per annum at
which deposits in Dollars are offered by leading reference banks in the London
interbank market to WFB at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of the applicable Interest Period for a period equal
to such Interest Period and in an amount substantially equal to the amount of
the applicable Loan.
"LIBOR Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "LIBOR
Adjusted Rate".
"LIBOR Adjusted Rate" shall mean, with respect to any LIBOR Loan, a rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined
by Administrative Agent to be equal to the quotient of (i) LIBOR for such Loan
for the Interest Period for such Loan divided by (ii) 1 minus the Reserve
Requirement for such Loan for such Interest Period.
"Lien" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments and the like payable
out of Oil and Gas Properties. The term "Lien" shall include reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purposes of this Agreement, Borrower or any Subsidiary shall
be deemed to be the owner of any Property which it has acquired or holds subject
to a conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.
"Loan Documents" shall mean this Agreement, the Notes, the Fee Letter,
all Letters of Credit and the Security Instruments.
"Loans" shall mean the loans as provided for by Sections 2.01(a).
"Majority Lenders" shall mean, at any time while no Loans are
outstanding, Administrative Agent and Lenders having at least sixty-six and
two-thirds percent (66-2/3%) of the Aggregate Commitments and, at any time while
Loans are outstanding, Administrative Agent and Lenders holding at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding aggregate
principal amount of the Loans (without regard to any sale by a Lender of a
participation in any Loan under Section 12.06(c)).
"Material Adverse Effect" shall mean any set of circumstances or events
that (i) has or could reasonably be expected to have any material and adverse
effect whatsoever upon, or result in or reasonably be expected to result in a
material adverse change in, (A) the assets, liabilities, financial
9
condition, business, operations or affairs of Borrower and its Subsidiaries
taken as a whole different from the facts represented or warranted in any Loan
Document, or (B) the ability of Borrower and its Subsidiaries taken as a whole
to carry out their business as at the Closing Date or as proposed as of the
Closing Date to be conducted or meet their obligations under the Loan Documents
on a timely basis, (ii) impairs materially or could be reasonably expected to
impair materially the ability of Borrower and its Subsidiaries to duly and
punctually pay and perform their obligations under the Loan Documents or (iii)
impairs materially or could reasonably be expected to impair materially the
ability of Administrative Agent or any of the Lenders, to the extent permitted,
to enforce its legal remedies pursuant to the Loan Documents, except, in all
cases, for depletions and routine changes which occur in the normal course of
the day to day ownership or operation of the xxxxx or the Properties.
"Maximum Revolving Credit Amount" shall mean, as to each Lender, the
amount set forth opposite such Lender's name on Annex I under the caption
"Maximum Revolving Credit Amounts" (as the same may be reduced pursuant to
Section 2.03(b) pro rata to each Lender based on its Percentage Share), as
modified from time to time to reflect any assignments permitted by Section
12.06(b).
"Monthly Reduction Amount" shall mean the amount by which the Borrowing
Base shall automatically reduce on the last day of each month, as determined by
Administrative Agent and the Majority Lenders in accordance with Section 2.08.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37)
or 4001(a)(3) of ERISA.
"Notes" shall mean the Notes provided for by Section 2.06, together with
any and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
"Obligations" shall mean all indebtedness, obligations and liabilities
of Borrower or any Subsidiary to any of the Lenders, any of the Lenders'
Affiliates, Administrative Agent, or the Issuing Bank, individually or
collectively, existing on the date of this Agreement or arising thereafter,
direct or indirect, joint or several, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising or incurred
under any Hedging Agreement, under this Agreement or any of the other Loan
Documents, or in respect of any of the Loans made, reimbursement obligations
incurred or any automated clearing house transactions, or any of the Notes,
Letters of Credit or other instruments at any time evidencing any of the
foregoing, or under or attributable to Bank Products, including interest
accruing subsequent to the filing of a petition or other action concerning
bankruptcy or other similar proceedings, and all renewals, extensions,
refinancings and replacements for the foregoing.
"Oil and Gas Properties" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization, pooling agreements and declarations of
pooled units and the units created thereby (including without limitation all
units created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
10
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil xxxxx, gas xxxxx, injection xxxxx or other xxxxx,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing. Unless otherwise indicated
herein, each reference to the term "Oil and Gas Properties" shall mean the Oil
and Gas Properties of Borrower and/or its Subsidiaries.
"Other Taxes" shall have the meaning assigned such term in Section
4.06(b).
"Parent" shall mean Isramco, Inc., a Delaware corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.
"Percentage Share" shall mean the percentage of the Aggregate
Commitments to be provided by a Lender under this Agreement as indicated on
Annex I hereto, as modified from time to time to reflect any assignments
permitted by Section 12.06(b).
"Permitted Tax Distributions" shall mean distributions by Borrower to
its members for the payment of income tax liabilities resulting from being a
member of Borrower, but not to exceed 40% of the net income of Borrower in the
relevant calendar year.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
"Plan" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained
or contributed to by Borrower, any Subsidiary or an ERISA Affiliate or (ii) was
at any time during the preceding six calendar years sponsored, maintained or
contributed to, by Borrower, any Subsidiary or an ERISA Affiliate.
"Post Default Rate" shall mean, in respect of any principal of any Loan
(including LIBOR Loans after the last day of the Interest Period therefore) or
any other amount payable by Borrower under this Agreement or any other Loan
Document, a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to 5% per annum above the Base Rate
as in effect from time to time plus the Applicable Margin (if any), but in no
event to exceed the Highest Lawful Rate; provided, however, for a LIBOR Loan,
the "Post Default Rate" for such principal shall be, for the period commencing
on the date of occurrence of an Event of Default and ending on the earlier to
occur of the last day of the Interest Period therefor or the date all Events of
Default are cured or waived, 5% per annum above the interest rate for such Loan
as provided in Section 3.02(a)(ii), but in no event to exceed the Highest Lawful
Rate.
"Prime Rate" shall mean the variable per annum rate of interest then
most recently announced within WFB at its principal office in San Francisco,
California, as its "prime rate", with the understanding that WFB's "prime rate"
is one of its base rates and serves as the basis upon which effective rates of
interest are calculated for those loans making reference thereto, and is
evidenced by the recording thereof after its announcement in such internal
publication or publications as WFB may designate. Each change in any interest
rate provided for herein based upon the Prime Rate resulting from a change in
the Prime Rate shall take effect on the day the change is announced within WFB
without notice to Borrower at the time of such change in the Prime Rate.
11
"Principal Office" shall mean the principal office of Administrative
Agent, presently located at 0000 Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxx 00000.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Purchasers" shall mean each of the Persons that at any time purchase
the Hydrocarbons of Borrower and/or its Subsidiaries from their Oil and Gas
Properties.
"Quarterly Dates" shall mean the last day of each March, June,
September, and December, in each year, the first of which shall be March 31,
2007; provided, however, that if any such day is not a Business Day, such
Quarterly Date shall be the next succeeding Business Day.
"Redetermination Date" shall mean the date that the redetermined
Borrowing Base and/or Monthly Reduction Amount becomes effective subject to the
notice requirements specified in Section 2.08(g) both for scheduled
redeterminations and unscheduled redeterminations.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
after the Closing Date in any Governmental Requirement (including Regulation D)
or the adoption or making after such date of any interpretations, directives or
requests applying to a class of lenders (including such Lender or its Applicable
Lending Office) of or under any Governmental Requirement (whether or not having
the force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"Required Payment" shall have the meaning assigned such term in Section
4.04.
"Reserve Report" shall mean a report, in form and substance satisfactory
to Administrative Agent, setting forth, as of each December 31 and June 30 (or
such other date in the event of an unscheduled redetermination); (i) the oil and
gas reserves attributable to Borrower's Oil and Gas Properties together with a
projection of the rate of production and future net income (including, where
applicable, taking into account existing Hedging Agreements), taxes, operating
expenses and capital expenditures with respect thereto as of such date, based
upon the pricing assumptions consistent with SEC reporting requirements at the
time or otherwise as satisfactory to Administrative Agent and (ii) such other
information as Administrative Agent may reasonably request.
"Reserve Report Certificate" shall mean a certificate from Borrower
substantially in the form of Exhibit F.
"Reserve Requirement" shall mean, for any Interest Period for any LIBOR
Loan, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D by member banks of the Federal Reserve System
in New York City with deposits exceeding one billion Dollars against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change against (i) any category of liabilities which includes
deposits by reference to which LIBOR is to be determined as provided in the
definition of "LIBOR" or (ii) any category of extensions of credit or other
assets which include a LIBOR Loan.
"Responsible Officer" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer"
12
shall include the Chief Financial Officer of such Person. Unless otherwise
specified, all references to a Responsible Officer herein shall mean a
Responsible Officer of Borrower.
"Revolving Credit Termination Date" shall mean the earlier to occur of
(i) the fourth anniversary of the Closing Date or (ii) the date that the
Commitments are sooner terminated pursuant to Sections 2.03(b) or 10.02.
"Scheduled Redetermination Date" shall have the meaning assigned to such
term in Section 2.08(d).
"SEC" shall mean the Securities and Exchange Commission or any successor
Governmental Authority.
"Security Instruments" shall mean the Letter of Credit Agreements, the
agreements or instruments described or referred to in Exhibit D, and any and all
other agreements or instruments now or hereafter executed and delivered by
Borrower, any Guarantor or any other Person (other than participation or similar
agreements between any Lender and any other lender or creditor with respect to
any Obligations pursuant to this Agreement) in connection with, or as security
for or guarantee of the payment or performance of, the Obligations, the Notes,
this Agreement, or reimbursement obligations under the Letters of Credit, as
such agreements or instruments may be amended, supplemented, modified or
restated from time to time.
"Sigma" shall mean Sigma Energy Corporation, a Texas corporation wholly
owned by Xx. Xxxxxx Xxxxx.
"Sigma Consulting Agreement" shall mean that certain Agreement dated as
of February 28 among Borrower, Parent and Sigma.
"Subsidiary" shall mean (i) any corporation of which at least a majority
of the outstanding shares of stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by another Person or one or more of such Person's Subsidiaries or by
such Person and one or more of its Subsidiaries and (ii) any joint venture,
limited liability company or partnership, trust company, general or limited
partnership or any other type of partnership or entity other than a corporation
in which a Person or one or more of its other Subsidiaries is a member, owner,
partner or joint venturer and owns, directly or indirectly, at least a majority
of the equity of such entity or controls such entity, but excluding any tax
partnerships that are not classified as partnerships under state law. For
purposes of this definition, any Person which owns directly or indirectly an
equity investment in another Person which allows the first Person to manage or
elect managers who manage the normal activities of such second Person will be
deemed to "control" such second Person (e.g. a sole general partner controls a
limited partnership). Unless otherwise indicated herein, each reference to the
term "Subsidiary" shall mean a Subsidiary of Borrower.
"Taxes" shall have the meaning assigned such term in Section 4.06(a).
"Transfer" shall mean any sale, assignment, farm-out, conveyance or
other transfer of any Property, or any interest in any Property (including,
without limitation, any working interest, overriding royalty interest,
production payments, net profits interest, royalty interest, or mineral fee
interest in any Oil and Gas Property) of Borrower or any Subsidiary, except for
(i) the sale of Hydrocarbons in the ordinary course of business, (ii) the sale
or transfer of equipment that is (A) obsolete, worn out, depleted or uneconomic
and disposed of in the ordinary course of business, (B) no longer necessary for
the
13
business of Borrower or such Guarantor or (C) contemporaneously replaced by
equipment of at least comparable value and use, (iii) between Scheduled
Redetermination Dates, the sale of Oil and Gas Properties of Borrower or any
Subsidiary for which value was given in the most recent Borrowing Base
redetermination which in the aggregate have a fair market value of $500,000 or
less, and (iv) subject to Section 2.08(e), the transfer of interest in Oil and
Gas Properties of Borrower to Sigma pursuant to the terms of the Sigma
Consulting Agreement.
"Type" shall mean, with respect to any Loan, a Base Rate Loan or a LIBOR
Loan.
Section 1.03 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to Administrative Agent or the Lenders hereunder shall
be prepared, in accordance with GAAP, applied on a basis consistent with the
audited financial statements of Borrower referred to in Section 7.02 (except for
changes concurred with by Borrower's independent public accountants).
Section 1.04 References; Use of Word "Including". The words "herein,"
"hereof," "hereunder" and other words of similar import when used in this
Agreement refer to this Agreement as a whole, and not to any particular article,
section or subsection. Any reference herein to a Section or Article shall be
deemed to refer to the applicable Section or Article of this Agreement unless
otherwise stated herein. Any reference herein to an exhibit, schedule, or other
attachment shall be deemed to refer to the applicable exhibit, schedule, or
other attachment attached hereto unless otherwise stated herein. The word
"including", "includes" and words of similar import means "including, without
limitation".
ARTICLE II
COMMITMENTS
Section 2.01 Loans and Letters of Credit.
(a) Loans. Each Lender severally agrees, on the terms and
conditions of this Agreement, to make loans to Borrower during the
period from and including (i) the Closing Date or (ii) such later date
that such Lender becomes a party to this Agreement as provided in
Section 12.06(b), to and up to, but excluding, the Revolving Credit
Termination Date in an aggregate principal amount at any one time
outstanding up to, but not exceeding, the amount of such Lender's
Commitment as then in effect; provided, however, that the aggregate
principal amount of all such Loans by all Lenders hereunder at any one
time outstanding together with the LC Exposure shall not exceed the
Aggregate Commitments. Subject to the terms of this Agreement, during
the period from the Closing Date to and up to, but excluding, the
Revolving Credit Termination Date, Borrower may borrow, repay and
reborrow the amount described in this Section 2.01(a).
(b) Letters of Credit. During the period from and including
the Closing Date to, but excluding, the Revolving Credit Termination
Date, the Issuing Bank, as issuing bank for the Lenders, agrees to
extend credit for the account of Borrower or any Subsidiary at any time
and from time to time by issuing, renewing, extending or reissuing
Letters of Credit; provided, however, the LC Exposure at any one time
outstanding shall not exceed the lesser of (i) the LC Commitment and
(ii) the Aggregate Commitments, as then in effect, minus the aggregate
principal amount of all Loans then outstanding. The Lenders shall
participate in such Letters of Credit according to their respective
Percentage Shares. Each of the Letters of Credit shall (i) be issued by
the Issuing Bank, (ii) contain such terms and provisions as are
reasonably required by
14
the Issuing Bank, (iii) be for the account of Borrower or a Subsidiary
and (iv) expire not later than the Revolving Credit Termination Date.
(c) Limitation on Types of Loans. Subject to the other terms
and provisions of this Agreement, at the option of Borrower, the Loans
may be Base Rate Loans or LIBOR Loans; provided that, without the prior
written consent of the Majority Lenders, no more than three (3) LIBOR
Loans may be outstanding at any time.
Section 2.02 Borrowings, Continuations and Conversions, Letters of
Credit.
(a) Borrowings. Borrower shall give Administrative Agent
(which shall promptly notify the Lenders) advance notice as hereinafter
provided of each borrowing hereunder, which shall specify (i) the
aggregate amount of such borrowing, (ii) the Type and (iii) the date
(which shall be a Business Day) of the Loans to be borrowed, and (iv)
(in the case of LIBOR Loans) the duration of the Interest Period
therefor.
(b) Minimum Amounts. All Base Rate Loan borrowings shall be
in amounts of at least $500,000 or the remaining balance of the
Aggregate Commitments, if less, or any whole multiple of $100,000 in
excess thereof, and all LIBOR Loans shall be in amounts of at least
$1,000,000 or any whole multiple of $500,000 in excess thereof.
(c) Notices. All borrowings, continuations and conversions
shall require advance written notice to Administrative Agent (which
shall promptly notify the Lenders) in the form of Exhibit B (or
telephonic notice promptly confirmed by such a written notice), which in
each case shall be irrevocable and accompanied by a Compliance
Certificate (excluding the information required by clauses (f) and (g)
thereof) from Borrower, to be received by Administrative Agent not later
than 11:00 a.m. Houston, Texas time at least one Business Day prior to
the date of each Base Rate Loan borrowing and three Business Days prior
to the date of each LIBOR Loan borrowing, continuation or conversion.
Without in any way limiting Borrower's obligation to confirm in writing
any telephonic notice, Administrative Agent may act without liability
upon the basis of telephonic notice believed by Administrative Agent in
good faith to be from Borrower prior to receipt of written confirmation.
In each such case, Borrower hereby waives the right to dispute
Administrative Agent's record of the terms of such telephonic notice
except in the case of gross negligence or willful misconduct by
Administrative Agent.
(d) Continuation Options. Subject to the provisions made in
this Section 2.02(d), Borrower may elect to continue all or any part of
any LIBOR Loan beyond the expiration of the then current Interest Period
relating thereto by giving advance notice as provided in Section 2.02(c)
to Administrative Agent (which shall promptly notify the Lenders) of
such election, specifying the amount of such Loan to be continued and
the Interest Period therefor. In the absence of such a timely and proper
election, Borrower shall be deemed to have elected to convert such LIBOR
Loan to a Base Rate Loan pursuant to Section 2.02(e). All or any part of
any LIBOR Loan may be continued as provided herein, provided that (i)
any continuation of any such Loan shall be (as to each Loan as continued
for an applicable Interest Period) in amounts of at least $1,000,000 or
any whole multiple of $500,000 in excess thereof and (ii) no Default
shall have occurred and be continuing. If a Default shall have occurred
and be continuing, each LIBOR Loan shall be converted to a Base Rate
Loan on the last day of the Interest Period applicable thereto.
(e) Conversion Options. Borrower may elect to convert all or
any part of any LIBOR Loan on the last day of the then current Interest
Period relating thereto to a Base Rate Loan by giving advance notice to
Administrative Agent (which shall promptly notify the
15
Lenders) of such election. Subject to the provisions made in this
Section 2.02(e), Borrower may elect to convert all or any part of any
Base Rate Loan at any time and from time to time to a LIBOR Loan by
giving advance notice as provided in Section 2.02(c) to Administrative
Agent (which shall promptly notify the Lenders) of such election. All or
any part of any outstanding Loan may be converted as provided herein,
provided that (i) any conversion of any Base Rate Loan into a LIBOR Loan
shall be (as to each such Loan into which there is a conversion for an
applicable Interest Period) in amounts of at least $1,000,000 or any
whole multiple of $500,000 in excess thereof and (ii) no Default shall
have occurred and be continuing. If a Default shall have occurred and be
continuing, no Base Rate Loan may be converted into a LIBOR Loan.
(f) Advances. Not later than 11:00 a.m. Houston, Texas time
on the date specified for each borrowing hereunder, each Lender shall
make available the amount of the Loan to be made by it on such date to
Administrative Agent, to an account which Administrative Agent shall
specify, in immediately available funds, for the account of Borrower.
The amounts so received by Administrative Agent shall, subject to the
terms and conditions of this Agreement, be made available to Borrower by
depositing the same, in immediately available funds, in an account of
Borrower, designated by Borrower and maintained at the Principal Office.
(g) Letters of Credit. Borrower shall give the Issuing Bank
(which shall promptly notify the Lenders of such request and their
Percentage Share of such Letter of Credit) advance notice to be received
by the Issuing Bank not later than 11:00 a.m. Houston, Texas time not
less than three (3) Business Days prior thereto of each request for the
issuance, and at least thirty (30) Business Days prior to the date of
the renewal or extension, of a Letter of Credit hereunder which request
shall specify (i) the amount of such Letter of Credit, (ii) the date
(which shall be a Business Day) such Letter of Credit is to be issued,
renewed or extended, (iii) the duration thereof, (iv) the name and
address of the beneficiary thereof, (v) the type of the Letter of Credit
and (vi) such other information as the Issuing Bank may reasonably
request, all of which shall be reasonably satisfactory to the Issuing
Bank. Subject to the terms and conditions of this Agreement, on the date
specified for the issuance, renewal or extension of a Letter of Credit,
the Issuing Bank shall issue, renew or extend such Letter of Credit to
the beneficiary thereof.
In conjunction with the issuance of each Letter of Credit,
Borrower and the Subsidiary, if the account party, shall execute a
Letter of Credit Agreement. In the event of any conflict between any
provision of a Letter of Credit Agreement and this Agreement, Borrower,
the Issuing Bank, Administrative Agent and the Lenders hereby agree that
the provisions of this Agreement shall govern.
The Issuing Bank will send to Borrower and each Lender, promptly
upon issuance of any Letter of Credit, or an amendment thereto, a true
and complete copy of such Letter of Credit, or such amendment thereto.
Section 2.03 Changes of Commitments.
(a) The Aggregate Commitments shall at all times be equal to
the lesser of (i) the Aggregate Maximum Revolving Credit Amounts after
adjustments resulting from reductions pursuant to Section 2.03(b) or
(ii) the Borrowing Base as determined from time to time.
(b) Borrower shall have the right to terminate or to reduce
the amount of the Aggregate Maximum Revolving Credit Amounts at any
time, or from time to time, upon not less than three (3) Business Days'
prior notice to Administrative Agent (which shall promptly notify the
Lenders) of each such termination or reduction, which notice shall
specify the effective date thereof and the amount of any such reduction
(which shall not be less than $1,000,000 or any
16
whole multiple of $500,000 in excess thereof) and shall be irrevocable
and effective only upon receipt by Administrative Agent.
(c) The Aggregate Maximum Revolving Credit Amounts once
terminated or reduced may not be reinstated.
Section 2.04 Fees.
(a) Commitment Fee. Borrower shall pay to Administrative
Agent for the account of each Lender a commitment fee on the daily
average unused amount of the Aggregate Commitments for the period from
and including the Closing Date up to, but excluding, the earlier of the
date the Aggregate Commitments are terminated or the Revolving Credit
Termination Date at a rate per annum equal to the applicable percentage
set forth at the appropriate intersection in the table shown below,
based on the Borrowing Base Utilization as in effect from time to time:
BORROWING BASE UTILIZATION APPLICABLE PERCENTAGE
---------------------------- ---------------------
Less than 75% 0.375%
Greater than or equal to 75% 0.500%
Each change in the applicable percentage resulting from a change
in the Borrowing Base Utilization shall take effect on the day such
change in the Borrowing Base Utilization occurs. Accrued commitment fees
shall be payable quarterly in arrears on each Quarterly Date and on the
earlier of the date the Aggregate Commitments are terminated or the
Revolving Credit Termination Date.
(b) Letter of Credit Fees.
(i) Borrower agrees to pay Administrative Agent, for
the account of each Lender, commissions for issuing the Letters of
Credit on the daily average outstanding of the maximum liability of the
Issuing Bank existing from time to time under each Letter of Credit
(calculated separately for each Letter of Credit) at the rate per annum
equal to the Applicable Margin in effect from time to time for LIBOR
Loans. Each Letter of Credit shall be deemed to be outstanding up to the
full face amount of the Letter of Credit until the Issuing Bank has
received the canceled Letter of Credit or a written cancellation of the
Letter of Credit from the beneficiary of such Letter of Credit in form
and substance acceptable to the Issuing Bank, or for any reductions in
the amount of the Letter of Credit (other than from a drawing), written
notification from the beneficiary of such Letter of Credit. Such
commissions are payable quarterly in arrears on each Quarterly Date and
upon cancellation or expiration of each such Letter of Credit.
(ii) Upon each issuance, renewal or extension of any
Letter of Credit, Borrower shall pay to Administrative Agent for the
account of the Issuing Bank an upfront fee equal to the greater of (a)
0.125% of the face amount of the Letter of Credit and (b) $500.
(iii) Borrower shall pay to the Issuing Bank such
other usual and customary fees of the Issuing Bank associated with any
transfers, amendments, drawings, negotiations or reissuances of any
Letters of Credit.
(c) Fee Letter. Borrower shall pay such other fees as are
set forth in the Fee Letter pursuant to the provisions thereof.
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Section 2.05 Several Obligations. The failure of any Lender to make
any Loan to be made by it or to provide funds for disbursements or
reimbursements under Letters of Credit on the date specified therefor shall not
relieve any other Lender of its obligation to make its Loan or provide funds on
such date, but no Lender shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender or to provide funds to be
provided by such other Lender.
Section 2.06 Notes. The Loans made by each Lender shall be evidenced
by a single promissory note of Borrower in substantially the form of Exhibit A,
dated (i) the Closing Date or (ii) the effective date of an Assignment pursuant
to Section 12.06(b), payable to the order of such Lender in a principal amount
equal to its Maximum Revolving Credit Amount as originally in effect and
otherwise duly completed and such substitute Notes as required by Section
12.06(b). The date, amount, Type, interest rate and Interest Period of each Loan
made by each Lender, and all payments made on account of the principal thereof,
shall be recorded by such Lender on its books for its Note, and, prior to any
transfer may be endorsed by such Lender on a schedule attached to such Note or
any continuation thereof or on any separate record maintained by such Lender.
Failure to make any such notation or to attach a schedule shall not affect any
Lender's or Borrower's rights or obligations in respect of such Loans or affect
the validity of such transfer by any Lender of its Note.
Section 2.07 Prepayments.
(a) Voluntary Prepayments. Borrower may prepay the Base Rate
Loans upon not less than one (1) Business Day's prior notice to
Administrative Agent (which shall promptly notify the Lenders), which
notice shall specify the prepayment date (which shall be a Business Day)
and the amount of the prepayment (which shall be at least $1,000,000 or
any whole multiple of $500,000 in excess thereof, or the remaining
aggregate principal balance outstanding on the Notes if less than
$1,000,000) and shall be irrevocable and effective only upon receipt by
Administrative Agent, provided that interest on the principal prepaid,
accrued to the prepayment date, shall be paid on the prepayment date.
Borrower may prepay LIBOR Loans on the same conditions as for Base Rate
Loans (except that prior notice to Administrative Agent shall be not
less than three (3) Business Days for LIBOR Loans) and in addition such
prepayments of LIBOR Loans shall be subject to the terms of Section
5.05.
(b) Mandatory Prepayments.
(i) Termination or Reduction of Aggregate Maximum
Revolving Credit Amounts. If, after giving effect to any termination or
reduction of the Aggregate Maximum Revolving Credit Amounts pursuant to
Section 2.03(b), the outstanding aggregate principal amount of the
Revolving Credit Loans plus the LC Exposure exceeds the Aggregate
Maximum Revolving Credit Amounts, Borrower shall (i) prepay the Loans on
the date of such termination or reduction in an aggregate principal
amount equal to the excess, together with interest on the principal
amount paid accrued to the date of such prepayment and (ii) if any
excess remains after prepaying all of the Loans because of LC Exposure,
pay to Administrative Agent on behalf of the Lenders an amount equal to
the excess to be held as cash collateral as provided in Section 2.10(b)
hereof.
(ii) Redetermination of Borrowing Base. Upon any
redetermination of the amount of the Borrowing Base in accordance with
Section 2.08, if the redetermined Borrowing Base results in a Borrowing
Base Deficiency, then Borrower shall within fifteen (15) days of receipt
of written notice thereof deliver to Agent a written response indicating
which of the following actions it intends to take to remedy the
Borrowing Base Deficiency (and the failure of Borrower to deliver such
election notice or to perform the action chosen to remedy such Borrowing
Base Deficiency shall constitute an Event of Default):
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(w) within thirty (30) days of receipt of
written notice of the Borrowing Base Deficiency, prepay the
Loans in an aggregate principal amount sufficient to eliminate
such Borrowing Base Deficiency, together with interest on the
principal amount paid accrued to the date of such prepayment;
(x) prepay the Loans in six (6) monthly
installments equal to one-sixth of such Borrowing Base
Deficiency (after taking into account any Properties mortgaged
to Agent pursuant to clause (c) below), with the first such
installment due 30 days after the date such Borrowing Base
Deficiency notice is received by Borrower and each of the other
five installments due 30 days after the preceding installment,
and make each of such payments within such time periods;
(y) within thirty (30) days of receipt of
written notice of the Borrowing Base Deficiency, grant to Agent
a first priority Lien in additional Properties of Borrower,
which in the Lenders' sole determination, have sufficient loan
value to eliminate such Borrowing Base Deficiency; or
(z) eliminate the Borrowing Base Deficiency
through a combination of the actions described in clauses (w) or
(x) and (y).
If, because of LC Exposure, a Borrowing Base Deficiency remains
after prepaying all of the Loans and granting first priority Liens in
additional Properties to Administrative Agent, Borrower shall pay to
Administrative Agent on behalf of the Lenders an amount equal to such
remaining Borrowing Base Deficiency to be held as cash collateral as
provided in Section 2.10(b).
(iii) Monthly Reduction Amount. If any reduction of the amount
of the Borrowing Base by operation of the Monthly Reduction Amount in
accordance with Section 2.08 results in a Borrowing Base Deficiency,
then Borrower shall immediately prepay the Loans in an aggregate
principal amount equal to such Borrowing Base Deficiency, together with
interest on the principal amount paid accrued to the date of such
prepayment. If, because of LC Exposure, a Borrowing Base Deficiency
remains after prepaying all of the Loans, Borrower shall pay to
Administrative Agent on behalf of the Lenders an amount equal to such
remaining Borrowing Base Deficiency to be held as cash collateral as
provided in Section 2.10(b).
(iv) Transfer. If, after a Transfer of any Property to the
extent allowed by Section 9.12 and the reduction in the Borrowing Base
pursuant to Section 2.08(f), a Borrowing Base Deficiency exists, then
Borrower shall, concurrently with the receipt thereof, prepay the Loans
with the net proceeds received from such Transfer in an amount necessary
to eliminate such Borrowing Base Deficiency. If, because of LC Exposure,
a Borrowing Base Deficiency remains after prepaying all of the Loans,
Borrower shall pay to Administrative Agent on behalf of the Lenders an
amount equal to such remaining Borrowing Base Deficiency to be held as
cash collateral as provided in Section 2.10(b). Notwithstanding anything
in this Agreement to the contrary, if at the time of any permitted
Transfer a Borrowing Base Deficiency exists, then Borrower shall,
concurrently with the receipt thereof, prepay the Loans with the net
proceeds received from such Transfer to the extent necessary to
eliminate the portion of the Borrowing Base Deficiency resulting from
such Transfer and such preexisting Borrowing Base Deficiency; and
Borrower shall remain obligated, pursuant to the terms of this
Agreement, to eliminate any Borrowing Base Deficiency remaining after
prepaying the Loans with the net proceeds from such Transfer. If
Borrower Transfers any Property at such time as a Default exits,
Borrower shall, concurrently with the receipt of proceeds therefrom,
prepay the Loans in an amount equal to the
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lesser of (x) the aggregate principal amount outstanding on the Loans
and (y) 100% of the net proceeds received from such Transfer. The
preceding sentence shall not be interpreted as permitting the sale of
any Property at such time as a Default exists without the prior written
consent of the Lenders.
(v) Proceeds from Hedging Agreements. At any time that a
Default exists, any proceeds received by Borrower under any Hedging
Agreements, including as a result of the early termination thereof,
shall be used immediately upon receipt thereof to prepay the Loans in an
amount equal to the lesser of (x) the aggregate principal amount
outstanding on the Loans and (y) 100% of the net proceeds received.
(c) Generally. Prepayments permitted or required under this
Section 2.07 shall be without premium or penalty, except as required
under Section 5.05 for prepayment of LIBOR Loans. Any prepayments on the
Loans may be reborrowed subject to the then effective Aggregate
Commitments. Any prepayments made while a Borrowing Base Deficiency
exists shall be applied first to the Borrowing Base Deficiency and then
otherwise as provided by the Loan Documents.
Section 2.08 Borrowing Base.
(a) Borrowing Base and Monthly Reduction Amount. The
Borrowing Base and the Monthly Reduction Amount shall be determined in
accordance with Section 2.08(b) by Administrative Agent with the
concurrence of the Lenders and are subject to redetermination in
accordance with Sections 2.08(d), (e) and (f). Upon any redetermination
of the Borrowing Base or the Monthly Reduction Amount, such
redetermination shall remain in effect until the next successive
Redetermination Date; provided, however, the then effective Borrowing
Base shall reduce on the last day of each month by the then effective
Monthly Reduction Amount. So long as any of the Commitments are in
effect or any LC Exposure or Loans are outstanding hereunder, this
facility shall be governed by the then effective Borrowing Base and
Monthly Reduction Amount. During the period from and after the Closing
Date until the next redetermination pursuant to Sections 2.08(d), (e) or
(f) or adjusted pursuant to Section 8.08(c), the amount of the Borrowing
Base shall be $35,300,000, as reduced on a cumulative basis on the last
day of each month following such effective date by the applicable
Monthly Reduction Amount. The Monthly Reduction Amount shall be $0.00,
(or the outstanding principal balance of the Loans, if such balance is
less than such Monthly Reduction Amount) each month until the next
redetermination thereof pursuant to Sections 2.08(d), (e) or (f). No
delay for any reason whatsoever in a redetermination of the Monthly
Reduction Amount shall affect Borrower's obligations under Section
2.07(b)(iii).
(b) Determination Procedure. Upon receipt of the reports
required by Section 8.07 and such other reports, data and supplemental
information as may from time to time be reasonably requested by
Administrative Agent (the "Engineering Reports"), Administrative Agent
will redetermine the Borrowing Base and the Monthly Reduction Amount.
Such redetermination will be in accordance with its normal and customary
practices and procedures for evaluating oil and gas reserves and other
related assets as such exist at that particular time, and may also take
into consideration the financial condition, Debt, and business of
Borrower and its Subsidiaries and such other factors as Administrative
Agent customarily deems appropriate. Administrative Agent, in its sole
discretion, may make adjustments to the rates, volumes and prices and
other assumptions set forth therein in accordance with its normal and
customary procedures for evaluating oil and gas reserves and other
related assets as such exist at that particular time. Administrative
Agent shall propose to the Lenders a new Borrowing Base and Monthly
Reduction Amount within 15 days following receipt by Administrative
Agent and the
20
Lenders of the Engineering Reports in a timely and complete manner.
After having received notice of such proposal by Administrative Agent,
the Lenders shall have 15 days to agree or disagree with such proposal.
If at the end of the 15 days, the Lenders have not communicated their
approval or disapproval, such silence shall be deemed to be an approval
and Administrative Agent's proposal shall be the new Borrowing Base and
Monthly Reduction Amount. If however, the Lenders notify Administrative
Agent within 15 days of their disapproval, the Lenders shall, within a
reasonable period of time, agree on a new Borrowing Base and Monthly
Reduction Amount. Administrative Agent and all of the Lenders must
approve any increase in the Borrowing Base and any decrease in the
Monthly Reduction Amount, and Administrative Agent and Majority Lenders
must approve any reaffirmation of or decrease in the Borrowing Base and
any reaffirmation of or increase in the Monthly Reduction Amount.
(c) Excluded Property. Administrative Agent may exclude any
Oil and Gas Property or portion of production therefrom or any income
from any other Property from the Borrowing Base, at any time, because
title information is not reasonably satisfactory, such Property is not
Collateral or such Property is not assignable.
(d) Redeterminations. So long as any of the Commitments are
in effect and until payment in full of all Loans hereunder, on or around
the first Business Day of each June and December, commencing June, 2007
(each being a "Scheduled Redetermination Date"), the Lenders shall
redetermine the amount of the Borrowing Base and the Monthly Reduction
Amount in accordance with Section 2.08(b).
(e) Unscheduled Redeterminations. In addition to the
redeterminations of the Borrowing Base and the Monthly Reduction Amount
described in Section 2.08(d), (i) Borrower may initiate a
redetermination of the Borrowing Base and/or the Monthly Reduction
Amount at any other time as it so elects by specifying in writing to
Administrative Agent (who will promptly notify the Lenders) the date by
which Borrower will furnish to Administrative Agent and the Lenders a
Reserve Report in accordance with Section 8.07(b) and the date by which
such redetermination is requested to occur; provided, however, that
Borrower may initiate only one such unscheduled redetermination between
Scheduled Redetermination Dates, (ii) the Majority Lenders or
Administrative Agent may initiate a redetermination of the Borrowing
Base and/or the Monthly Reduction Amount at any other time as they so
elect by specifying in writing to Borrower the date by which Borrower is
to furnish a Reserve Report in accordance with Section 8.07(b) and the
date on which such redetermination is to occur; provided, however, that
the Majority Lenders or Administrative Agent may initiate only one such
unscheduled redetermination between Scheduled Redetermination Dates, and
(iii) Administrative Agent may initiate a redetermination of the
Borrowing Base and/or the Monthly Reduction Amount upon the occurrence
of (A) an early termination or a material amendment or modification of
the Aspen Operations Agreement or (B) the transfer of any interest in
any Oil and Gas Properties of Borrower to Sigma pursuant to the terms of
the Sigma Consulting Agreement.
(f) Redetermination Concurrent with Transfer. To the extent
allowed by Section 9.12, if Borrower Transfers any Property between
Scheduled Redetermination Dates with an aggregate fair market value in
excess of $500,000, the Borrowing Base shall automatically be reduced
upon execution of such Transfer by an amount equal to the Borrowing Base
values (as determined by the Majority Lenders in their reasonable
discretion) attributed in the immediately preceding determination of the
Borrowing Base to the Property which is the subject of such Transfer.
(g) Effective Upon Notice. Administrative Agent shall
promptly notify in writing Borrower and the Lenders of the new Borrowing
Base and/or Monthly Reduction Amount. Any
21
redetermination of the Borrowing Base and/or Monthly Reduction Amount
shall not be in effect until written notice is received by Borrower.
Section 2.09 Assumption of Risks. Borrower assumes all risks of the
acts or omissions of any beneficiary of any Letter of Credit or any transferee
thereof with respect to its use of such Letter of Credit. Neither the Issuing
Bank (except in the case of gross negligence or willful misconduct on the part
of the Issuing Bank or any of its employees), its correspondents nor any Lender
shall be responsible for the validity, sufficiency or genuineness of
certificates or other documents or any endorsements thereon, even if such
certificates or other documents should in fact prove to be invalid,
insufficient, fraudulent or forged; for errors, omissions, interruptions or
delays in transmissions or delivery of any messages by mail, telex, or
otherwise, whether or not they be in code; for errors in translation or for
errors in interpretation of technical terms; the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason;
the failure of any beneficiary or any transferee of any Letter of Credit to
comply fully with conditions required in order to draw upon any Letter of
Credit; or for any other consequences arising from causes beyond the Issuing
Bank's control or the control of the Issuing Bank's correspondents. In addition,
neither the Issuing Bank, Administrative Agent nor any Lender shall be
responsible for any error, neglect, or default of any of the Issuing Bank's
correspondents; and none of the above shall affect, impair or prevent the
vesting of any of the Issuing Bank's, Administrative Agent's or any Lender's
rights or powers hereunder or under the Letter of Credit Agreements, all of
which rights shall be cumulative. The Issuing Bank and its correspondents may
accept certificates or other documents that appear on their face to be in order,
without responsibility for further investigation of any matter contained therein
regardless of any notice or information to the contrary. In furtherance and not
in limitation of the foregoing provisions, Borrower agrees that any action,
inaction or omission taken or not taken by the Issuing Bank or by any
correspondent for the Issuing Bank in good faith in connection with any Letter
of Credit, or any related drafts, certificates, documents or instruments, shall
be binding on Borrower and shall not put the Issuing Bank or its correspondents
under any resulting liability to Borrower.
Section 2.10 Obligation to Reimburse and to Prepay.
(a) Reimbursement Obligations. If a disbursement by the
Issuing Bank is made under any Letter of Credit, Borrower shall pay to
Administrative Agent within two (2) Business Days after notice of any
such disbursement is received by Borrower, the amount of each such
disbursement made by the Issuing Bank under the Letter of Credit (if
such payment is not sooner effected as may be required under this
Section 2.10 or under other provisions of the Letter of Credit),
together with interest on the amount disbursed from and including the
date of disbursement until payment in full of such disbursed amount at a
varying rate per annum equal to (i) the then applicable interest rate
for Base Rate Loans through the second Business Day after notice of such
disbursement is received by Borrower and (ii) thereafter, the Post
Default Rate for Base Rate Loans (but in no event to exceed the Highest
Lawful Rate) for the period from and including the third Business Day
following the date of such disbursement to and including the date of
repayment in full of such disbursed amount. The obligations of Borrower
under this Agreement with respect to each Letter of Credit shall be
absolute, unconditional and irrevocable and shall be paid or performed
strictly in accordance with the terms of this Agreement under all
circumstances whatsoever, including, without limitation, but only to the
fullest extent permitted by applicable law, the following circumstances:
(i) any lack of validity or enforceability of this Agreement, any Letter
of Credit or any of the Security Instruments; (ii) any amendment or
waiver of (including any default), or any consent to departure from this
Agreement (except to the extent permitted by any amendment or waiver),
any Letter of Credit or any of the Security Instruments; (iii) the
existence of any claim, set-off, defense or other rights which Borrower
may have at any time against the beneficiary of any Letter of Credit or
any transferee of any Letter of Credit (or
22
any Persons for whom any such beneficiary or any such transferee may be
acting), the Issuing Bank, Administrative Agent, any Lender or any other
Person, whether in connection with this Agreement, any Letter of Credit,
the Security Instruments, the transactions contemplated hereby or any
unrelated transaction; (iv) any statement, certificate, draft, notice or
any other document presented under any Letter of Credit proves to have
been forged, fraudulent, insufficient or invalid in any respect or any
statement therein proves to have been untrue or inaccurate in any
respect whatsoever; (v) payment by the Issuing Bank under any Letter of
Credit against presentation of a draft or certificate which appears on
its face to comply, but does not comply, with the terms of such Letter
of Credit; and (vi) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing.
Notwithstanding anything in this Agreement to the contrary,
Borrower will not be liable for payment or performance that results from
the gross negligence or willful misconduct of the Issuing Bank, except
where Borrower or any Subsidiary actually recovers the proceeds for
itself or the Issuing Bank of any payment made by the Issuing Bank in
connection with such gross negligence or willful misconduct.
(b) Cash Collateral for LC Exposure. In the event of the
occurrence of any Event of Default, a payment or prepayment pursuant to
Section 2.07(b) or the maturity of the Notes, whether by acceleration or
otherwise, an amount equal to the LC Exposure (or the excess in the case
of Section 2.07(b)) shall be deemed to be forthwith due and owing by
Borrower to the Issuing Bank, Administrative Agent and the Lenders as of
the date of any such occurrence; and Borrower's obligation to pay such
amount shall be absolute and unconditional, without regard to whether
any beneficiary of any such Letter of Credit has attempted to draw down
all or a portion of such amount under the terms of a Letter of Credit,
and, to the fullest extent permitted by applicable law, shall not be
subject to any defense or be affected by a right of set-off,
counterclaim or recoupment which Borrower may now or hereafter have
against any such beneficiary, the Issuing Bank, Administrative Agent,
the Lenders or any other Person for any reason whatsoever. Such payments
shall be held by the Issuing Bank on behalf of the Lenders as cash
collateral securing the LC Exposure in an account or accounts at the
Principal Office; and Borrower hereby grants to and by its deposit with
Administrative Agent grants to Administrative Agent a security interest
in such cash collateral. In the event of any such payment by Borrower of
amounts contingently owing under outstanding Letters of Credit and in
the event that thereafter drafts or other demands for payment complying
with the terms of such Letters of Credit are not made prior to the
respective expiration dates thereof, Administrative Agent agrees, if no
Event of Default has occurred and is continuing or if no other amounts
are outstanding under this Agreement, the Notes or any other Loan
Documents, to remit to Borrower amounts for which the contingent
obligations evidenced by the Letters of Credit have ceased.
(c) Lender Reimbursement. Each Lender severally and
unconditionally agrees that it shall promptly reimburse the Issuing Bank
an amount equal to such Lender's Percentage Share of any disbursement
made by the Issuing Bank under any Letter of Credit that is not
reimbursed according to this Section 2.10.
(d) Automatic Funding as Loan. Notwithstanding anything to
the contrary contained herein, if no Default exists or would result
therefrom, to the extent Borrower has not reimbursed the Issuing Bank
for any drawn upon Letter of Credit within two (2) Business Days after
notice of such disbursement has been received by Borrower, the amount of
such Letter of Credit reimbursement obligation shall automatically be
funded by the Lenders as a Loan hereunder and used by the Lender to pay
such Letter of Credit reimbursement obligation. If an Event of Default
exists, such Letter of Credit reimbursement obligation shall not be
funded as a Loan, but instead shall accrue interest as provided in
Section 2.10(a).
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Section 2.11 Lending Offices. The Loans of each Type made by each
Lender shall be made and maintained at such Lender's Applicable Lending Office
for Loans of such Type.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans.
(a) Loans. On the Revolving Credit Termination Date Borrower
shall repay the outstanding aggregate principal amount of the Notes.
(b) Generally. Borrower will pay to Administrative Agent,
for the account of each Lender, the principal payments required by this
Section 3.01.
Section 3.02 Interest.
(a) Interest Rates. Borrower will pay to Administrative
Agent, for the account of each Lender, interest on the unpaid principal
amount of each Loan made by such Lender for the period commencing on the
date such Loan is made to, but excluding, the date such Loan shall be
paid in full, at the following rates per annum:
(i) if such a Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin, but in
no event to exceed the Highest Lawful Rate; and
(ii) if such a Loan is a LIBOR Loan, for each
Interest Period relating thereto, the LIBOR Adjusted Rate for such Loan
plus the Applicable Margin (as in effect from time to time), but in no
event to exceed the Highest Lawful Rate.
(b) Post Default Rate. Notwithstanding the foregoing,
Borrower will pay to Administrative Agent, for the account of each
Lender interest at the applicable Post Default Rate on any principal of
any Loan made by such Lender, and (to the fullest extent permitted by
law) on any other amount payable by Borrower hereunder, under any Loan
Document or under any Note held by such Lender to or for account of such
Lender, for the period commencing on the date of an Event of Default
until the same is paid in full or all Events of Default are cured or
waived.
(c) Due Dates. Accrued interest on Base Rate Loans shall be
payable monthly on the [last Business Day of each month commencing on
March 30, 2007], and accrued interest on each LIBOR Loan shall be
payable on the last day of the Interest Period therefor and, if such
Interest Period is longer than three months at three-month intervals
following the first day of such Interest Period, except that interest
payable at the Post Default Rate shall be payable from time to time on
demand and interest on any LIBOR Loan that is converted into a Base Rate
Loan (pursuant to Section 5.04) shall be payable on the date of
conversion (but only to the extent so converted). Any accrued and unpaid
interest on the Loans on the Revolving Credit Termination Date shall be
paid on such date.
(d) Determination of Rates. Promptly after the determination
of any interest rate provided for herein or any change therein,
Administrative Agent shall notify the Lenders to which such interest is
payable and Borrower thereof. Each determination by Administrative Agent
of an interest rate or fee hereunder shall, except in cases of manifest
error, be final, conclusive and binding on the parties.
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ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by
Borrower under this Agreement, the Notes, the Letter of Credit Agreements or any
other Loan Document shall be made in Dollars, in immediately available funds, to
Administrative Agent at such account as Administrative Agent shall specify by
notice to Borrower from time to time, not later than 11:00 a.m. Houston, Texas
time on the date on which such payments shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day). Such payments shall be made without (to the fullest
extent permitted by applicable law) defense, set-off or counterclaim and in
connection therewith, Borrower and each Guarantor hereby waives (to the fullest
extent permitted by applicable law) all defenses, rights of set-off and
counterclaims it may have with respect to such payments. Each payment received
by Administrative Agent under this Agreement or any Note for account of a Lender
shall be paid promptly to such Lender in immediately available funds. Except as
otherwise provided in the definition of "Interest Period", if the due date of
any payment under this Agreement or any Note would otherwise fall on a day which
is not a Business Day such date shall be extended to the next succeeding
Business Day and interest shall be payable for any principal so extended for the
period of such extension. At the time of each payment to Administrative Agent of
any principal of or interest on any borrowing, Borrower shall notify
Administrative Agent of the Loans to which such payment shall apply. In the
absence of such notice Administrative Agent may specify the Loans to which such
payment shall apply, but to the extent possible such payment or prepayment will
be applied first to the Loans comprised of Base Rate Loans.
Section 4.02 Pro Rata Treatment. Except to the extent otherwise
provided herein each Lender agrees that: (i) each borrowing from the Lenders
under Section 2.01 and each continuation and conversion under Section 2.02 shall
be made from the Lenders pro rata in accordance with their Percentage Share,
each payment of fees under Section 2.04(a) and Section 2.04(b)(i) shall be made
for account of the Lenders pro rata in accordance with their Percentage Share,
and each termination or reduction of the amount of the Aggregate Maximum
Revolving Credit Amounts under Section 2.03(b) shall be applied to the
Commitment of each Lender, pro rata according to the amounts of its respective
Commitment; (ii) each payment of principal of Loans by Borrower shall be made
for account of the Lenders pro rata in accordance with the respective unpaid
principal amount of the Loans held by the Lenders; (iii) each payment of
interest on Loans by Borrower shall be made for account of the Lenders pro rata
in accordance with the amounts of interest due and payable to the respective
Lenders; and (iv) each reimbursement by Borrower of disbursements under Letters
of Credit shall be made for account of the Issuing Bank or, if funded by the
Lenders, pro rata for the account of the Lenders, in accordance with the amounts
of reimbursement obligations due and payable to each respective Lender.
Section 4.03 Computations. Interest on LIBOR Loans and fees shall be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which such
interest is payable, unless such calculation would exceed the Highest Lawful
Rate, in which case interest shall be calculated on the per annum basis of a
year of 365 or 366 days, as the case may be. Interest on Base Rate Loans shall
be computed on the basis of a year of 365 or 366 days, as the case may be, and
actual days elapsed (including the first day but excluding the last day)
occurring in the period for which such interest is payable.
Section 4.04 Non-receipt of Funds by Administrative Agent. Unless
Administrative Agent shall have been notified by a Lender or Borrower prior to
the date on which such notifying party is scheduled to make payment to
Administrative Agent (in the case of a Lender) of the proceeds of a Loan or a
payment under a Letter of Credit to be made by it hereunder or (in the case of
Borrower) a payment to Administrative Agent for account of one or more of the
Lenders hereunder (such payment being herein
25
called the "Required Payment"), which notice shall be effective upon receipt,
that it does not intend to make the Required Payment to Administrative Agent,
Administrative Agent may assume that the Required Payment has been made and may,
in reliance upon such assumption (but shall not be required to), make the amount
thereof available to the intended recipient(s) on such date and, if such Lender
or Borrower (as the case may be) has not in fact made the Required Payment to
Administrative Agent, the recipient(s) of such payment shall, on demand, repay
to Administrative Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by Administrative Agent until, but excluding, the
date Administrative Agent recovers such amount at a rate per annum which, for
any Lender as recipient, will be equal to the Federal Funds Rate, and for
Borrower as recipient, will be equal to the Base Rate plus the Applicable
Margin.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall have the right and be
entitled (after consultation with Administrative Agent), at its option,
to offset balances held by it or by any of its Affiliates for account of
Borrower or any Subsidiary at any of its offices, in Dollars or in any
other currency, against any principal of or interest on any of such
Lender's Loans, or any other amount payable to such Lender hereunder,
which is not paid when due (regardless of whether such balances are then
due to Borrower), in which case it shall promptly notify Borrower and
Administrative Agent thereof, provided that such Lender's failure to
give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of
or interest on any Loan made by it to Borrower under this Agreement (or
reimbursement as to any Letter of Credit) through the exercise of any
right of set-off, banker's lien or counterclaim or similar right or
otherwise, and, as a result of such payment, such Lender shall have
received a greater percentage of the principal or interest (or
reimbursement) then due hereunder by Borrower to such Lender than the
percentage received by any other Lenders, it shall promptly (i) notify
Administrative Agent and each other Lender thereof and (ii) purchase
from such other Lenders participation in (or, if and to the extent
specified by such Lender, direct interests in) the Loans (or
participations in Letters of Credit) made by such other Lenders (or in
interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end
that all the Lenders shall share the benefit of such excess payment (net
of any expenses which may be incurred by such Lender in obtaining or
preserving such excess payment) pro rata in accordance with the unpaid
principal and/or interest on the Loans held by each of the Lenders (or
reimbursements of Letters of Credit). To such end all the Lenders shall
make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must
otherwise be restored. Borrower agrees that any Lender so purchasing a
participation (or direct interest) in the Loans made by other Lenders
(or in interest due thereon, as the case may be) may exercise all rights
of set-off, banker's lien, counterclaim or similar rights with respect
to such participation as fully as if such Lender were a direct holder of
Loans (or Letters of Credit) in the amount of such participation.
Nothing contained herein shall require any Lender to exercise any such
right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of Borrower. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a
secured claim in lieu of a set-off to which this Section 4.05 applies,
such Lender shall, to the extent practicable, exercise its rights in
respect of such secured claim in a manner consistent with the rights of
the Lenders entitled under this Section 4.05 to share the benefits of
any recovery on such secured claim.
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Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by
Borrower hereunder shall be made, in accordance with Section 4.01, free
and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender,
the Issuing Bank and Administrative Agent, taxes imposed on its income,
and franchise or similar taxes imposed on it, by (i) any jurisdiction
(or political subdivision thereof) of which Administrative Agent, the
Issuing Bank or such Lender, as the case may be, is a citizen or
resident or in which such Lender has an Applicable Lending Office, (ii)
the jurisdiction (or any political subdivision thereof) in which
Administrative Agent, the Issuing Bank or such Lender is organized, or
(iii) any jurisdiction (or political subdivision thereof) in which such
Lender, the Issuing Bank or Administrative Agent is presently doing
business which taxes are imposed solely as a result of doing business in
such jurisdiction (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If Borrower shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder to the
Lenders, the Issuing Bank or Administrative Agent (i) the sum payable
shall be increased by the amount necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this Section 4.06) such Lender, the Issuing Bank or
Administrative Agent (as the case may be) shall receive an amount equal
to the sum it would have received had no such deductions been made, (ii)
Borrower shall make such deductions and (iii) Borrower shall pay the
full amount deducted to the relevant taxing authority or other
Governmental Authority in accordance with applicable law.
(b) Other Taxes. In addition, to the fullest extent
permitted by applicable law, Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes,
charges or similar levies that arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with
respect to, this Agreement, any Assignment or any other Loan Document
(hereinafter referred to as "Other Taxes").
(C) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER WILL INDEMNIFY EACH LENDER AND THE ISSUING BANK
AND THE ADMINISTRATIVE AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER
TAXES (INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED
BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION
4.06) PAID BY SUCH LENDER, THE ISSUING BANK OR ADMINISTRATIVE AGENT (ON
THEIR BEHALF OR ON BEHALF OF ANY LENDER), AS THE CASE MAY BE, AND ANY
LIABILITY (INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM
OR WITH RESPECT THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE
CORRECTLY OR LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT
CORRECTLY OR LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR
OTHER TAXES WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE
WITHIN THIRTY (30) DAYS AFTER THE DATE ANY LENDER, THE ISSUING BANK OR
ADMINISTRATIVE AGENT, AS THE CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR.
IF ANY LENDER, THE ISSUING BANK OR ADMINISTRATIVE AGENT RECEIVES A
REFUND OR CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH
LENDER, ISSUING BANK OR ADMINISTRATIVE AGENT HAS RECEIVED PAYMENT FROM
BORROWER IT SHALL PROMPTLY NOTIFY BORROWER OF SUCH REFUND OR CREDIT AND
SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30)
DAYS AFTER RECEIPT OF A REQUEST BY BORROWER (OR PROMPTLY UPON RECEIPT,
IF BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT
HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO BORROWER
WITHOUT INTEREST (BUT WITH ANY INTEREST SO
27
REFUNDED OR CREDITED), PROVIDED THAT BORROWER, UPON THE REQUEST OF SUCH
LENDER, THE ISSUING BANK OR ADMINISTRATIVE AGENT, AGREES TO RETURN SUCH
REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH
LENDER OR ADMINISTRATIVE AGENT IN THE EVENT SUCH LENDER OR
ADMINISTRATIVE AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (1) a
banking association or corporation organized under the laws of the
United States of America or any state thereof or (2) it is entitled to
complete exemption from United States withholding tax imposed on or with
respect to any payments, including fees, to be made to it pursuant to
this Agreement (A) under an applicable provision of a tax convention to
which the United States of America is a party or (B) because it is
acting through a branch, agency or office in the United States of
America and any payment to be received by it hereunder is effectively
connected with a trade or business in the United States of America. Each
Lender that is not a banking association or corporation organized under
the laws of the United States of America or any state thereof agrees to
provide to Borrower and Administrative Agent on the Closing Date, or on
the date of its delivery of the Assignment pursuant to which it becomes
a Lender, and at such other times as required by United States law or as
Borrower or Administrative Agent shall reasonably request, two accurate
and complete original signed copies of either (A) Internal Revenue
Service Form W-8ECI (or successor form) certifying that all payments to
be made to it hereunder will be effectively connected to a United States
trade or business (the "Form W-8ECI Certification") or (B) Internal
Revenue Service Form W-8BEN (or successor form) certifying that it is
entitled to the benefit of a provision of a tax convention to which the
United States of America is a party which completely exempts from United
States withholding tax all payments to be made to it hereunder (the
"Form W-8BEN Certification"). In addition, each Lender agrees that if it
previously filed a Form W-8ECI Certification, it will deliver to
Borrower and Administrative Agent a new Form W-8ECI Certification prior
to the first payment date occurring in each of its subsequent taxable
years; and if it previously filed a Form W-8BEN Certification, it will
deliver to Borrower and Administrative Agent a new certification prior
to the first payment date falling in the third year following the
previous filing of such certification. Each Lender also agrees to
deliver to Borrower and Administrative Agent such other or supplemental
forms as may at any time be required as a result of changes in
applicable law or regulation in order to confirm or maintain in effect
its entitlement to exemption from United States withholding tax on any
payments hereunder, provided that the circumstances of such Lender at
the relevant time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to submit any
form or certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any such form
or certificate previously submitted, it shall promptly notify Borrower
and Administrative Agent of such fact. If a Lender is organized under
the laws of a jurisdiction outside the United States of America, unless
Borrower and Administrative Agent have received a Form W-8BEN
Certification or Form W-8ECI Certification satisfactory to them
indicating that all payments to be made to such Lender hereunder are not
subject to United States withholding tax, Borrower shall withhold taxes
from such payments at the applicable statutory rate. Each Lender agrees
to indemnify and hold harmless Borrower or Administrative Agent, as
applicable, from any United States taxes, penalties, interest and other
expenses, costs and losses incurred or payable by (i) Administrative
Agent as a result of such Lender's failure to submit any form or
certificate that it is required to provide pursuant to this Section 4.06
or (ii) Borrower or Administrative Agent as a result of their reliance
on any such form or certificate which such Lender has provided to them
pursuant to this Section 4.06.
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(ii) For any period with respect to which a Lender
has failed to provide Borrower with the form required pursuant to this
Section 4.06, if any, (other than if such failure is due to a change in
a Governmental Requirement occurring subsequent to the date on which a
form originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 4.06 with respect to taxes
imposed by the United States which taxes would not have been imposed but
for such failure to provide such forms; provided, however, that if a
Lender, which is otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to taxes because of its failure to
deliver a form required hereunder, Borrower shall take such steps as
such Lender shall reasonably request to assist such Lender to recover
such taxes.
(iii) Any Lender claiming any additional amounts
payable pursuant to this Section 4.06 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any
certificate or document requested by Borrower or Administrative Agent or
to change the jurisdiction of its Applicable Lending Office or to
contest any tax imposed if the making of such a filing or change or
contesting such tax would avoid the need for or reduce the amount of any
such additional amounts that may thereafter accrue and would not, in the
sole determination of such Lender, be otherwise disadvantageous to such
Lender.
Section 4.07 Disposition of Proceeds. Some of the Security
Instruments contain an assignment by Borrower unto and in favor of
Administrative Agent for the benefit of the Lenders of all production and all
proceeds attributable thereto which may be produced from or allocated to Oil and
Gas Properties, and such Security Instruments further provide in general for the
application of such proceeds to the satisfaction of the Obligations and other
indebtedness, liabilities and obligations described therein and secured thereby.
Notwithstanding the assignment contained in such Security Instruments, until the
occurrence of an Event of Default, the Lenders agree that they will neither
notify the Purchasers of such production nor take any other action to cause such
proceeds to be remitted to the Lenders, but the Lenders will instead permit such
proceeds to be paid to Borrower.
ARTICLE V
CAPITAL ADEQUACY AND ADDITIONAL COSTS
Section 5.01 Additional Costs.
(a) LIBOR Regulations, etc. Borrower shall pay directly to
each Lender from time to time such amounts as such Lender may determine
to be necessary to compensate such Lender for any costs which it
determines are attributable to its making or maintaining of any LIBOR
Loans or issuing or participating in Letters of Credit hereunder or its
obligation to make any LIBOR Loans or issue or participate in any
Letters of Credit hereunder, or any reduction in any amount receivable
by such Lender hereunder in respect of any of such LIBOR Loans, Letters
of Credit or such obligation (such increases in costs and reductions in
amounts receivable being herein called "Additional Costs"), resulting
from any Regulatory Change which: (i) changes the basis of taxation of
any amounts payable to such Lender under this Agreement or any Note in
respect of any of such LIBOR Loans or Letters of Credit (other than
taxes imposed on the overall net income of such Lender or of its
Applicable Lending Office for any of such LIBOR Loans by the
jurisdiction in which such Lender has its principal office or Applicable
Lending Office); or (ii) imposes or modifies any reserve, special
deposit, minimum capital, capital ratio or similar requirements relating
to any extensions of credit or other assets of, or any deposits with or
other liabilities of such Lender, or the Commitment or Loans of such
Lender or the London interbank market; or (iii) imposes any other
condition affecting this Agreement or any Note (or any of such
extensions of credit or liabilities) or such Lender's Commitment or
Loans. Each Lender will notify Administrative Agent and Borrower of any
event occurring after the Closing Date which
29
will entitle such Lender to compensation pursuant to this Section
5.01(a) as promptly as practicable after it obtains knowledge thereof
and determines to request such compensation, and will designate a
different Applicable Lending Office for the Loans of such Lender
affected by such event if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the sole
opinion of such Lender, be disadvantageous to such Lender, provided that
such Lender shall have no obligation to so designate an Applicable
Lending Office located in the United States. If any Lender requests
compensation from Borrower under this Section 5.01(a), Borrower may, by
notice to such Lender, suspend the obligation of such Lender to make
additional Loans of the Type with respect to which such compensation is
requested until the Regulatory Change giving rise to such request ceases
to be in effect (in which case the provisions of Section 5.04 shall be
applicable).
(b) Regulatory Change. Without limiting the effect of the
provisions of Section 5.01(a), in the event that at any time (by reason
of any Regulatory Change or any other circumstances arising after the
Closing Date affecting (A) any Lender, (B) the London interbank market
or (C) such Lender's position in such market), the LIBOR Adjusted Rate,
as determined in good faith by such Lender, will not adequately and
fairly reflect the cost to such Lender of funding its LIBOR Loans, then,
if such Lender so elects, by notice to Borrower and Administrative
Agent, the obligation of such Lender to make additional LIBOR Loans
shall be suspended until such Regulatory Change or other circumstances
ceases to be in effect (in which case the provisions of Section 5.04
shall be applicable).
(c) Capital Adequacy. Without limiting the effect of the
foregoing provisions of this Section 5.01 (but without duplication),
Borrower shall pay directly to any Lender from time to time on request
such amounts as such Lender may reasonably determine to be necessary to
compensate such Lender or its parent or holding company for any costs
which it determines are attributable to the maintenance by such Lender
or its parent or holding company (or any Applicable Lending Office),
pursuant to any Governmental Requirement following any Regulatory
Change, of capital in respect of its Commitment, its Note, its Loans or
any interest held by it in any Letter of Credit, such compensation to
include, without limitation, an amount equal to any reduction of the
rate of return on assets or equity of such Lender or its parent or
holding company (or any Applicable Lending Office) to a level below that
which such Lender or its parent or holding company (or any Applicable
Lending Office) could have achieved but for such Governmental
Requirement. Such Lender will notify Borrower that it is entitled to
compensation pursuant to this Section 5.01(c) as promptly as practicable
after it determines to request such compensation.
(d) Compensation Procedure. Any Lender notifying Borrower of
the incurrence of Additional Costs under this Section 5.01 shall in such
notice to Borrower and Administrative Agent set forth in reasonable
detail the basis and amount of its request for compensation.
Determinations and allocations by each Lender for purposes of this
Section 5.01 of the effect of any Regulatory Change pursuant to Section
5.01(a) or (b), or of the effect of capital maintained pursuant to
Section 5.01(c), on its costs or rate of return of maintaining Loans or
its obligation to make Loans or issue Letters of Credit, or on amounts
receivable by it in respect of Loans or Letters of Credit, and of the
amounts required to compensate such Lender under this Section 5.01,
shall be conclusive and binding for all purposes, provided that such
determinations and allocations are made on a reasonable basis. Any
request for additional compensation under this Section 5.01 shall be
paid by Borrower within thirty (30) days of the receipt by Borrower of
the notice described in this Section 5.01(d).
Section 5.02 Limitation on LIBOR Loans. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any LIBOR
Adjusted Rate for any Interest Period:
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(i) Administrative Agent determines (which
determination shall be conclusive, absent manifest error) that
quotations of interest rates for the relevant deposits referred to in
the definition of "LIBOR Adjusted Rate" in Section 1.02 are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for LIBOR Loans as provided
herein; or
(ii) Administrative Agent determines (which
determination shall be conclusive, absent manifest error) that the
relevant rates of interest referred to in the definition of "LIBOR
Adjusted Rate" in Section 1.02 upon the basis of which the rate of
interest for LIBOR Loans for such Interest Period is to be determined
are not sufficient to adequately cover the cost to the Lenders of making
or maintaining LIBOR Loans;
then Administrative Agent shall give Borrower prompt notice thereof, and so long
as such condition remains in effect, the Lenders shall be under no obligation to
make additional LIBOR Loans.
Section 5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain LIBOR
Loans hereunder, then such Lender shall promptly notify Borrower thereof and
such Lender's obligation to make LIBOR Loans shall be suspended until such time
as such Lender may again make and maintain LIBOR Loans (in which case the
provisions of Section 5.04 shall be applicable).
Section 5.04 Base Rate Loans Pursuant to Sections 5.01, 5.02 and
5.03. If the obligation of any Lender to make LIBOR Loans shall be suspended
pursuant to Sections 5.01, 5.02 or 5.03 ("Affected Loans"), all Affected Loans
which would otherwise be made by such Lender shall be made instead as Base Rate
Loans (and, if an event referred to in Section 5.01(b) or Section 5.03 has
occurred and such Lender so requests by notice to Borrower, all Affected Loans
of such Lender then outstanding shall be automatically converted into Base Rate
Loans on the date specified by such Lender in such notice) and, to the extent
that Affected Loans are so made as (or converted into) Base Rate Loans, all
payments of principal which would otherwise be applied to such Lender's Affected
Loans shall be applied instead to its Base Rate Loans.
Section 5.05 Compensation. Borrower shall pay to each Lender within
thirty (30) days of receipt of written request of such Lender (which request
shall set forth, in reasonable detail, the basis for requesting such amounts and
which shall be conclusive and binding for all purposes provided that such
determinations are made on a reasonable basis), such amount or amounts as shall
compensate it for any loss, cost, expense or liability which such Lender
determines are attributable to:
(i) any payment, prepayment or conversion of a LIBOR
Loan properly made by such Lender or Borrower for any reason (including,
without limitation, the acceleration of the Loans pursuant to Section
10.01) on a date other than the last day of the Interest Period for such
Loan; or
(ii) any failure by Borrower for any reason
(including but not limited to, the failure of any of the conditions
precedent specified in Article VI to be satisfied) to borrow, continue
or convert a LIBOR Loan from such Lender on the date for such borrowing,
continuation or conversion specified in the relevant notice given
pursuant to Section 2.02(c).
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid, prepaid or converted
or not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to the last day of the Interest Period for such
Loan (or, in the case of a failure to borrow, the Interest Period for such Loan
which would have commenced on the date specified
31
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the interest component of the amount such Lender would have
bid in the London interbank market for Dollar deposits of leading banks in
amounts comparable to such principal amount and with maturities comparable to
such period (as reasonably determined by such Lender).
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Initial Funding. The obligation of the Lenders to make
the Initial Funding is subject to the receipt by Administrative Agent and the
Lenders of all fees payable pursuant to Section 2.04 on or before the Closing
Date and the receipt by Administrative Agent of the following documents (in
sufficient original counterparts, other than the Notes, for each Lender) and
satisfaction of the other conditions provided in this Section 6.01, each of
which shall be satisfactory to Administrative Agent in form and substance:
(a) A certificate of officer of Borrower setting forth (i)
resolutions of its Managers with respect to the authorization of
Borrower to execute and deliver the Loan Documents to which it is a
party and to enter into the transactions contemplated in those
documents, (ii) the officers of Borrower (y) who are authorized to sign
the Loan Documents to which Borrower is a party and (z) who will, until
replaced by another officer or officers duly authorized for that
purpose, act as its representative for the purposes of signing documents
and giving notices and other communications in connection with this
Agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the Operating Agreement
of Borrower, certified as being true and complete. Administrative Agent
and the Lenders may conclusively rely on such certificate until
Administrative Agent receives notice in writing from Borrower to the
contrary.
(b) A certificate of the Secretary or an Assistant Secretary
of Parent setting forth (i) resolutions of its board of directors with
respect to the authorization of Parent to execute and deliver the Loan
Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of Parent (y) who are
authorized to sign the Loan Documents to which Parent is a party and (z)
who will, until replaced by another officer or officers duly authorized
for that purpose, act as its representative for the purposes of signing
documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or
certificate of incorporation and bylaws of Parent, certified as being
true and complete. Administrative Agent and the Lenders may conclusively
rely on such certificate until they receive notice in writing from
Parent to the contrary.
(c) Certificates of the appropriate state agencies with
respect to the existence, qualification and good standing of Borrower
and Parent.
(d) A Compliance Certificate duly and properly executed by a
Responsible Officer and dated as of the date of the Initial Funding.
(e) The Notes, duly completed and executed.
(f) The Security Instruments, including those described on
Exhibit D, duly completed and executed in sufficient number of
counterparts for recording, if necessary.
32
(g) A favorable opinion of (i) Xxxxxxxxx Xxxxxxxxxx P.C.,
counsel to Borrower and Parent and (ii) Aboudi & Xxxxxxxxxx, special
counsel to Parent, each in form and substance satisfactory to
Administrative Agent, as to such matters incident to the transactions
herein contemplated as Administrative Agent may reasonably request.
(h) Environmental assessment reports relating to the Oil and
Gas Properties of Borrower as may be requested by Administrative Agent,
including environmental audits, phase I reports or other environmental
reports of any nature whatsoever (whether prepared internally or by
third party consultants); and Administrative Agent must be satisfied
with the results of the review of such reports and environmental
condition of such Oil and Gas Properties.
(i) Administrative Agent shall have received, reviewed and
be satisfied with the results of the review of the Initial Reserve
Report and any other related engineering data with respect to the Oil
and Gas Properties included therein for which value was given to the
Borrowing Base.
(j) A certificate of insurance coverage of Borrower
evidencing that Borrower is carrying insurance in accordance with
Section 7.18.
(k) Title information as Administrative Agent may require
setting forth a status of title acceptable to Administrative Agent and
the Lenders to at least 80% of the value of the Oil and Gas Properties
included in the Initial Reserve Report.
(l) Administrative Agent shall have received and reviewed,
with respect to Parent and its Subsidiaries, (i) most recent annual and
quarterly financial statements, (ii) organizational and governing
documents of Parent and Borrower, and (iii) information regarding
litigation, insurance, contingent liabilities, pension liabilities
(actual and contingent) and the material contracts described in Section
7.21; and Administrative Agent, the Lenders and counsel to
Administrative Agent shall be satisfied with the results of such
reviews.
(m) Letters in Lieu executed by Borrower to Purchasers as of
the Closing Date, Letters in Lieu executed by Borrower in blank, and a
list of Purchasers with address, telephone and facsimile numbers, e-mail
address (if available) and contact individual for each Purchaser.
(n) Appropriate UCC search certificates reflecting no prior
Liens in any Property of Borrower and releases of Liens and UCC
Termination Statements relating to Liens in favor of Bank of Texas, N.A.
covering various of the Properties being acquired as part of the Five
States Acquisition.
(o) Administrative Agent shall have received and reviewed
all necessary information regarding Hedging Agreements entered into by
Borrower to be in effect on the Closing Date and be satisfied with the
results of such review.
(p) Administrative Agent shall have received and reviewed
documentation pursuant to which Parent is to contribute to Borrower net
cash proceeds as equity in an amount of at least $50,000,000 and be
satisfied with the results of such review, and received evidence
reasonably satisfactory to Administrative Agent that prior to or
concurrently with the Initial Funding, Borrower shall have received such
equity contribution in the amount of at least $50,000,000.
(q) Administrative Agent shall have received a certificate
of a Responsible Officer, in form and substance satisfactory to
Administrative Agent, certifying to various matters in
33
connection with the Five States Acquisition, including that concurrently
with the Initial Funding, Borrower is consummating the Five States
Acquisition.
(r) Administrative Agent shall have received and reviewed a
pro-forma balance sheet of Borrower reflecting Borrower's financial
position immediately upon closing of the Five States Acquisition and be
satisfied with the results of such review.
(s) Administrative Agent shall have received and reviewed
the Xxx Management Agreement and the Xxx Management JOA and be satisfied
with the results of such review.
(t) Such other documents as Administrative Agent or any
Lender or special counsel to Administrative Agent may reasonably
request.
Section 6.02 Initial and Subsequent Loans and Letters of Credit. The
obligation of the Lenders to make Loans to Borrower upon the occasion of each
borrowing hereunder and to issue, renew, extend or reissue Letters of Credit for
the account of Borrower (including the Initial Funding) is subject to the
further conditions precedent that, as of the date of such Loans and after giving
effect thereto:
(a) no Default shall exist;
(b) no Material Adverse Effect shall have occurred; and
(c) the representations and warranties made by Borrower in
Article VII and by Borrower and Guarantors in the other Loan Documents
to which they are a party shall be true on and as of the date of the
making of such Loans or issuance, renewal, extension or reissuance of a
Letter of Credit with the same force and effect as if made on and as of
such date and following such new borrowing, except to the extent such
representations and warranties are expressly limited to an earlier date
or the Majority Lenders may expressly consent in writing to the
contrary.
Each request for a borrowing or issuance, renewal, extension or
reissuance of a Letter of Credit by Borrower hereunder shall constitute a
certification by Borrower that the statements set forth in Section 6.02(a), (b)
and (c) are true (both as of the date of such notice and, unless Borrower
otherwise notifies Administrative Agent prior to the date of and immediately
following such borrowing or issuance, renewal, extension or reissuance of a
Letter of Credit, as of the date thereof).
Section 6.03 Conditions Precedent for the Benefit of Lenders. All
conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any Loan in the absence of strict
compliance with such conditions precedent.
Section 6.04 No Waiver. No waiver of any condition precedent shall
preclude Administrative Agent or the Lenders from requiring such condition to be
met prior to making any subsequent Loan or preclude the Lenders from thereafter
declaring that the failure of Borrower to satisfy such condition precedent
constitutes a Default.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and the Lenders
that (each representation and warranty herein is given as of the Closing Date
and shall be deemed repeated and
34
reaffirmed on the dates of each borrowing and issuance, renewal, extension or
reissuance of a Letter of Credit as provided in Section 6.02):
Section 7.01 Corporate Existence. Each of Borrower and each
Subsidiary: (i) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation; (ii) has all requisite entity
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (iii) is qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify would have a Material
Adverse Effect.
Section 7.02 Financial Condition. The audited consolidated balance
sheet of Parent and its Consolidated Subsidiaries as at December 31, 2005 and
the related consolidated statement of income, stockholders' equity and cash flow
of Parent and its Consolidated Subsidiaries for the fiscal year ended on said
date, with the opinion thereon of Xxxxxx & Xxxxxx, P.C. heretofore furnished to
each of the Lenders and the unaudited consolidated balance sheet of Parent and
its Consolidated Subsidiaries as at September 30, 2006 and their related
consolidated statements of income, stockholders' equity and cash flow of Parent
and its Consolidated Subsidiaries for the nine month period ended on such date
heretofore furnished to Administrative Agent, are complete and correct and
fairly present in all material respects the consolidated financial condition of
Borrower and its Consolidated Subsidiaries as at said dates and the results of
its operations for the fiscal year and the nine month period on said dates, all
in accordance with GAAP, as applied on a consistent basis (subject, in the case
of the interim financial statements, to normal year-end adjustments). Neither
Borrower nor any Subsidiary has on the Closing Date any material Debt,
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in Schedule
7.02. Since the date of formation of Borrower, there has been no change or event
having a Material Adverse Effect. Since the date of formation of Borrower,
neither the business nor the Properties of Borrower or any Subsidiary have been
materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of Property or cancellation of
contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God or of any public enemy.
Section 7.03 Litigation. Except as disclosed to the Lenders in
Schedule 7.03 hereto, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature pending or, to the knowledge of Borrower threatened against or affecting
Borrower or any Subsidiary which involves the possibility of any judgment or
liability against Borrower or any Subsidiary not fully covered by insurance
(except for normal deductibles).
Section 7.04 No Breach. Neither the execution and delivery of the
Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has not
been obtained as of the Closing Date under, the respective charter or by-laws of
Borrower or any Subsidiary, or any Governmental Requirement or any agreement or
instrument to which Borrower or any Subsidiary is a party or by which it is
bound or to which it or its Properties are subject, or constitute a default
under any such agreement or instrument, or result in the creation or imposition
of any Lien upon any of the revenues or assets of Borrower or any Subsidiary
pursuant to the terms of any such agreement or instrument other than the Liens
created by the Loan Documents.
Section 7.05 Authority. Borrower and each Subsidiary have all
necessary corporate power and authority to execute, deliver and perform its
obligations under the Loan Documents to which it is a party; and the execution,
delivery and performance by Borrower and each Subsidiary of the Loan Documents
to which it is a party, have been duly authorized by all necessary corporate
action on its part;
35
and the Loan Documents constitute the legal, valid and binding obligations of
Borrower and each Subsidiary, enforceable in accordance with their terms.
Section 7.06 Approvals. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by Borrower or any Subsidiary of the
Loan Documents or for the validity or enforceability thereof, except for the
recording and filing of the Security Instruments as required by this Agreement.
Section 7.07 Use of Loans. The proceeds of the Loans shall be used
(i) to acquire Oil and Gas Properties from Five States Energy Company, L.L.C.
and (ii) for working capital and general business purposes of Borrower and its
Subsidiaries. Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose, whether
immediate, incidental or ultimate, of buying or carrying margin stock (within
the meaning of Regulation T, U or X of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan hereunder will be used
to buy or carry any margin stock.
Section 7.08 ERISA.
(a) Borrower, each Subsidiary and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could
result in imposition on Borrower, any Subsidiary or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed
pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed
pursuant to Chapter 43 of Subtitle D of the Code or (ii) breach of
fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any
trust created under any such Plan has been terminated since September 2,
1974. No liability to the PBGC (other than for the payment of current
premiums which are not past due) by Borrower, any Subsidiary or any
ERISA Affiliate has been or is expected by Borrower, any Subsidiary or
any ERISA Affiliate to be incurred with respect to any Plan. No ERISA
Event with respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which
Borrower, any Subsidiary or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as contributions to
such Plan, and no accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists
with respect to any Plan.
(f) The actuarial present value of the benefit liabilities
under each Plan which is subject to Title IV of ERISA does not, as of
the end of Borrower's most recently ended fiscal year, exceed the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of ERISA.
(g) None of Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan,
as defined in section 3(1) of ERISA, including, without limitation, any
such plan maintained to provide benefits to former employees
36
of such entities, that may not be terminated by Borrower, a Subsidiary
or any ERISA Affiliate in its sole discretion at any time without any
material liability.
(h) None of Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the
preceding six calendar years, sponsored, maintained or contributed to,
any Multiemployer Plan.
(i) None of Borrower, any Subsidiary or any ERISA Affiliate
is required to provide security under section 401(a)(29) of the Code due
to a Plan amendment that results in an increase in current liability for
the Plan.
Section 7.09 Taxes. Except as set out in Schedule 7.09, each of
Borrower and its Subsidiaries has filed all United States Federal income tax
returns and all other tax returns which are required to be filed by them and
have paid all material taxes due pursuant to such returns or pursuant to any
assessment received by Borrower or any Subsidiary. The charges, accruals and
reserves on the books of Borrower and its Subsidiaries in respect of taxes and
other governmental charges are, in the opinion of Borrower, adequate. No tax
lien has been filed and, to the knowledge of Borrower, no claim is being
asserted with respect to any such tax, fee or other charge.
Section 7.10 Titles, Etc.
(a) Except as set out in Schedule 7.10, each of Borrower and
its Subsidiaries has good and indefeasible title to its material
(individually or in the aggregate) Properties comprised of real Property
and has good and marketable title to and is possessed of its material
(individually or in the aggregate) Properties comprised of personal
Property, free and clear of all Liens, except Liens permitted by Section
9.02. Except as set forth in Schedule 7.10, after giving full effect to
the Excepted Liens, Borrower owns the net interests in production
attributable to the Hydrocarbon Interests reflected in the most recently
delivered Reserve Report and the ownership of such Properties shall not
in any material respect obligate Borrower to bear the costs and expenses
relating to the maintenance, development and operations of each such
Property in an amount in excess of the working interest of each Property
set forth in the most recently delivered Reserve Report. All information
contained in the most recently delivered Reserve Report is true and
correct in all material respects as of the date thereof.
(b) All leases and agreements necessary for the conduct of
the business of Borrower and its Subsidiaries are valid and subsisting,
in full force and effect and there exists no default or event or
circumstance which with the giving of notice or the passage of time or
both would give rise to a default under any such lease or leases, which
would affect in any material respect the conduct of the business of
Borrower and its Subsidiaries.
(c) All of the assets and Properties of Borrower and its
Subsidiaries which are reasonably necessary for the operation of its
business are in good working condition and are maintained in accordance
with prudent business standards.
Section 7.11 No Material Misstatements. No written information,
statement, exhibit, certificate, document or report furnished to Administrative
Agent and the Lenders (or any of them) by or on behalf of Borrower or any
Subsidiary in connection with the negotiation of this Agreement contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statement contained therein not materially misleading in
the light of the circumstances in which made and with respect to Borrower and
its Subsidiaries taken as a whole. There is no fact peculiar to Borrower or any
Subsidiary which has a Material Adverse Effect or in the future is reasonably
likely to have (so far as Borrower can now foresee) a Material Adverse Effect
and which has not been set forth in this Agreement
37
or the other documents, certificates and statements furnished to Administrative
Agent by or on behalf of Borrower or any Subsidiary prior to, or on, the Closing
Date in connection with the transactions contemplated hereby. To the best
knowledge of Borrower, there are no statements or conclusions in any Reserve
Reports which are based upon or include misleading information or fail to take
into account material information regarding the matters reported therein.
Section 7.12 Investment Company Act. Neither Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 Subsidiaries. Except as set forth on Schedule 7.13,
Borrower has no Subsidiaries.
Section 7.14 Location of Business and Offices, Etc. Borrower's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement. The principal place of
business and chief executive office of each Subsidiary are located at the
addresses stated on Schedule 7.14. The tax identification number, organizational
identification number and state of formation for Borrower and each Subsidiary
are set forth on Schedule 7.14.
Section 7.15 Defaults. Neither Borrower nor any Subsidiary is in
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any material agreement or instrument to which
Borrower or any Subsidiary is a party or by which Borrower or any Subsidiary is
bound which default would have a Material Adverse Effect. No Default hereunder
has occurred and is continuing.
Section 7.16 Environmental Matters. Except (i) as provided in
Schedule 7.16 or (ii) as would not have a Material Adverse Effect (or with
respect to (c), (d) and (e) below, where the failure to take such actions would
not have a Material Adverse Effect):
(a) Neither any Property of Borrower or any Subsidiary nor
the operations conducted thereon violate any order or requirement of any
court or Governmental Authority or any Environmental Laws;
(b) Without limitation of clause (a) above, no Property of
Borrower or any Subsidiary nor the operations currently conducted
thereon or, to the best knowledge of Borrower, by any prior owner or
operator of such Property or operation, are in violation of or subject
to any existing, pending or threatened action, suit, investigation,
inquiry or proceeding by or before any court or Governmental Authority
or to any remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection
with the operation or use of any and all Property of Borrower and each
Subsidiary, including without limitation past or present treatment,
storage, disposal or release of a hazardous substance or solid waste
into the environment, have been duly obtained or filed, and Borrower and
each Subsidiary are in compliance with the terms and conditions of all
such notices, permits, licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all
Property of Borrower or any Subsidiary have in the past been
transported, treated and disposed of in accordance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and, to the best knowledge
of Borrower, all such transport carriers and treatment and disposal
facilities have been and are operating in compliance with Environmental
Laws and so as not to
38
pose an imminent and substantial endangerment to public health or
welfare or the environment, and are not the subject of any existing,
pending or threatened action, investigation or inquiry by any
Governmental Authority in connection with any Environmental Laws;
(e) Borrower has taken all steps reasonably necessary to
determine and has determined that no hazardous substances, solid waste,
or oil and gas exploration and production wastes, have been disposed of
or otherwise released and there has been no threatened release of any
hazardous substances on or to any Property of Borrower or any Subsidiary
except in compliance with Environmental Laws and so as not to pose an
imminent and substantial endangerment to public health or welfare or the
environment;
(f) To the extent applicable, all Property of Borrower and
each Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA or scheduled as of the Closing Date to
be imposed by OPA during the term of this Agreement, and Borrower does
not have any reason to believe that such Property, to the extent subject
to OPA, will not be able to maintain compliance with the OPA
requirements during the term of this Agreement; and
(g) Neither Borrower nor any Subsidiary has any known
contingent liability in connection with any release or threatened
release of any oil, hazardous substance or solid waste into the
environment.
Section 7.17 Compliance with the Law. Neither Borrower nor any
Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
Except for such acts or failures to act as would not have a Material Adverse
Effect, the Oil and Gas Properties (and properties unitized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all applicable laws and all rules, regulations and orders of all
duly constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties. Specifically in this connection, (i) after the Closing
Date, no Oil and Gas Property is subject to having allowable production reduced
below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) prior to the Closing Date and (ii) none of the xxxxx
comprising a part of the Oil and Gas Properties (or properties unitized
therewith) are deviated from the vertical more than the maximum permitted by
applicable laws, regulations, rules and orders, and such xxxxx are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Oil and Gas Properties (or in the case of xxxxx located on properties unitized
therewith, such unitized properties).
Section 7.18 Insurance. Schedule 7.18 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by Borrower
and each Subsidiary. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the date
of the closing have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which Borrower
or any Subsidiary is a party; are valid, outstanding and enforceable policies;
provide adequate insurance coverage in at least such amounts and against at
least such risks (but including in any event public liability) as are usually
insured against in the same general area by companies engaged in the same or a
similar business for the assets and operations of Borrower and each Subsidiary;
will remain in full force and effect through the respective dates set forth in
Schedule 7.18 without the payment of additional premiums; and will not in any
way be affected by, or terminate or lapse by reason of, the transactions
39
contemplated by this Agreement. Schedule 7.18 identifies all material risks, if
any, which Borrower and its Subsidiaries and their respective Board of Directors
or officers have designated as being self insured. Neither Borrower nor any
Subsidiary has been refused any insurance with respect to its assets or
operations, nor has its coverage been limited below usual and customary policy
limits, by an insurance carrier to which it has applied for any such insurance
or with which it has carried insurance during the last three years.
Section 7.19 Hedging Agreements. Schedule 7.19 sets forth, as of the
Closing Date, a true and complete list of all Hedging Agreements (including
commodity price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or other
commodities) of Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net xxxx to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied), and the counter
party to each such agreement.
Section 7.20 Restriction on Liens. Neither Borrower nor any of its
Subsidiaries is a party to any agreement or arrangement (other than the Loan
Documents), or subject to any order, judgment, writ or decree, which either
restricts or purports to restrict its ability to grant Liens to other Persons on
or in respect of their respective assets or Properties.
Section 7.21 Material Agreements. Set forth on Schedule 7.21 hereto
is a complete and correct list of all material agreements, leases, purchase
agreements, joint venture agreements and other agreements and contracts in
effect or to be in effect on the Closing Date relating to the operation of
Borrower's and each Subsidiaries business, and all indentures, letters of
credit, guarantees, and other instruments and agreements in effect or to be in
effect as of the Closing Date (other than Hedging Agreements) providing for,
evidencing, securing or otherwise relating to any Debt of Borrower or any of its
Subsidiaries, and all obligations of Borrower or any of its Subsidiaries to
issuers of surety or appeal bonds issued for account of Borrower or any such
Subsidiary, and such list correctly sets forth the names of the debtor or lessee
and creditor or lessor with respect to the Debt or lease obligations outstanding
or to be outstanding and the Property subject to any Lien securing such Debt or
lease obligation. Also set forth on Schedule 7.21 hereto is a complete and
correct list of all material agreements and other instruments of Borrower and
its Subsidiaries relating to the purchase, transportation by pipeline, gas
processing, marketing, sale and supply of natural gas and other Hydrocarbons,
but in any event, any such agreement or other instrument that will account for
more than ten percent (10%) of the sales of Borrower and its Subsidiaries during
Borrower's current fiscal year. Borrower has heretofore delivered to
Administrative Agent and the Lenders a complete and correct copy of the Aspen
Operations Agreement, the Sigma Consulting Agreement, the Xxx Management
Agreement, the Xxx Management JOA, and all such material agreements, purchase
agreements, joint venture agreements, leases, indentures, letters of credit,
guarantees, or other contracts and instruments, including any modifications or
supplements thereto, as in effect on the date of the Initial Funding.
Section 7.22 Solvency. Immediately after the Initial Funding and
after giving effect to the application of the proceeds of the Initial Funding,
(a) the fair value of the Property of Borrower, at a fair valuation, will exceed
its debts and liabilities, subordinated, contingent or otherwise; (b) the
present fair saleable value of the Property of Borrower will be greater than the
amount that will be required to pay the probable liability of its debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) Borrower will be able to pay
its debts and liabilities, subordinated, contingent or otherwise, as such debts
and liabilities become absolute and matured; and (d) Borrower will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be conducted
following the Initial Funding.
40
Section 7.23 Gas Imbalances. Except as set forth on Schedule 7.23 or
on the most recent certificate delivered pursuant to Section 8.07(c), on a net
basis there are no gas imbalances, take or pay or other prepayments with respect
to Borrower's Oil and Gas Properties which would require Borrower to deliver, in
the aggregate, two percent (2.0%) or more of the monthly production from
Hydrocarbons produced from Borrower's Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor.
Section 7.24 Permits, Licenses, Franchises, Patents and Trademarks.
Borrower and each Subsidiary has all permits and owns or is licensed or
otherwise has the right to use all of the patents, trademarks, trade names,
copyrights, franchises, licenses and rights, as the case may be, necessary for
the conduct of its business, which ownership, patents, trademarks, trade names,
copyrights, licenses, franchises, permits and rights of Borrower and each
Subsidiary, as the case may be, are free and clear of Liens, except for Liens
permitted by the Loan Documents. There does not exist, nor to the knowledge of
Borrower, has there been threatened against Borrower or any Subsidiary, any
material liability of Borrower or any Subsidiary in respect of any claim or
infringement of any of the foregoing.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments are
in effect and until payment in full of all Loans hereunder, all interest thereon
and all other amounts payable by Borrower hereunder:
Section 8.01 Reporting Requirements. Borrower shall deliver, or shall
cause to be delivered, to Administrative Agent with sufficient copies of each
for the Lenders:
(a) Annual Financial Statements.
(i) As soon as available and in any event within 120 days
after the end of each fiscal year of Parent, the audited consolidated
statements of income, stockholders' equity, changes in financial
position and cash flows of Parent and its Consolidated Subsidiaries for
such fiscal year, and the related consolidated and consolidating balance
sheets of Parent and its Consolidated Subsidiaries as at the end of such
fiscal year, and setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, and accompanied by
the related opinion of independent public accountants of recognized
national standing acceptable to Administrative Agent which opinion shall
state that said financial statements fairly present in all material
respects the consolidated financial condition and results of operations
of Parent and its Consolidated Subsidiaries as at the end of, and for,
such fiscal year and that such financial statements have been prepared
in accordance with GAAP, except for such changes in such principles with
which the independent public accountants shall have concurred and such
opinion shall not contain a "going concern" or like qualification or
exception, and a certificate of such accountants stating that, in making
the examination necessary for their opinion, they obtained no knowledge,
except as specifically stated, of any Default.
(ii) As soon as available and in any event within 120 days
after the end of each fiscal year of Borrower, the audited consolidated
statements of income, members' equity, changes in financial position and
cash flows of Borrower and its Consolidated Subsidiaries for such fiscal
year, and the related consolidated and consolidating balance sheets of
Borrower and its Consolidated Subsidiaries as at the end of such fiscal
year, and setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, and accompanied by
the related opinion of independent public accountants of recognized
national standing acceptable to
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Administrative Agent which opinion shall state that said financial
statements fairly present in all material respects the consolidated and
consolidating financial condition and results of operations of Borrower
and its Consolidated Subsidiaries as at the end of, and for, such fiscal
year and that such financial statements have been prepared in accordance
with GAAP, except for such changes in such principles with which the
independent public accountants shall have concurred and such opinion
shall not contain a "going concern" or like qualification or exception,
and a certificate of such accountants stating that, in making the
examination necessary for their opinion, they obtained no knowledge,
except as specifically stated, of any Default.
(b) Quarterly Financial Statements.
(i) As soon as available and in any event within 60 days
after the end of each of the first three fiscal quarterly periods of
each fiscal year of Parent, consolidated statements of income,
stockholders' equity, changes in financial position and cash flows of
Parent and its Consolidated Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated balance sheets as at the end
of such period, and setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding
fiscal year, accompanied by the certificate of a Responsible Officer,
which certificate shall state that said financial statements fairly
present in all material respects the consolidated and consolidating
financial condition and results of operations of Parent and its
Consolidated Subsidiaries in accordance with GAAP, as at the end of, and
for, such period (subject to normal year-end audit adjustments).
(ii) As soon as available and in any event within 60 days
after the end of each of the first three fiscal quarterly periods of
each fiscal year of Borrower, consolidated statements of income,
members' equity, changes in financial position and cash flows of
Borrower and its Consolidated Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of
such period, and the related consolidated balance sheets as at the end
of such period, and setting forth in each case in comparative form the
corresponding figures for the corresponding period in the preceding
fiscal year, accompanied by the certificate of a Responsible Officer,
which certificate shall state that said financial statements fairly
present in all material respects the consolidated and consolidating
financial condition and results of operations of Borrower and its
Consolidated Subsidiaries in accordance with GAAP, as at the end of, and
for, such period (subject to normal year-end audit adjustments).
(c) Compliance Certificate. At the time each set of
financial statements pursuant to Sections 8.01(a) or (b) above and each
report pursuant to Section 8.01(f) below is furnished, a Compliance
Certificate executed by a Responsible Officer, which among other things,
(i) certifies as to the matters set forth therein and states that no
Default exists (or, if any Default exists, describing the same in
reasonable detail), and (ii) sets forth in reasonable detail the
computations necessary to determine whether Borrower is in compliance
with Section 9.11 as of the end of the respective fiscal quarter or
fiscal year.
(d) Notice of Default, Etc. Promptly after Borrower knows
that any Default or any Material Adverse Effect has occurred, a notice
of such Default or Material Adverse Effect, describing the same in
reasonable detail and the action Borrower proposes to take with respect
thereto.
(e) Other Accounting Reports. Promptly upon receipt thereof,
a copy of each other report or letter submitted to Borrower or any
Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of Borrower and
42
its Subsidiaries, and a copy of any response by Borrower or any
Subsidiary of Borrower, or the Board of Directors of Borrower or any
Subsidiary of Borrower, to such letter or report.
(f) Hedging Agreements and Property Reports. As soon as
available and in any event within 15 days after the last day of each
calendar quarter, a report certified as true and complete in all
material respects by a Responsible Officer, in form and substance
satisfactory to Administrative Agent, (i) setting forth as of the last
Business Day of such calendar quarter a true and complete list of all
Hedging Agreements (including commodity price swap agreements, forward
agreements or contracts of sale which provide for prepayment for
deferred shipment or delivery of oil, gas or other commodities) of
Borrower and each Subsidiary, the material terms thereof (including the
type, term, effective date, termination date and notional amounts or
volumes), the net xxxx to market value therefor, and the counter party
to each such agreement, and (ii) setting forth a list of any Oil and Gas
Properties acquired and any oil or gas xxxxx drilled or brought on line
not reflected in a previous report.
(g) Production Reports, Etc. As soon as available and in any
event within 15 days after the end of each month, reports certified as
true and complete in all material respects by a Responsible Officer,
regarding production and general and administrative cost summaries by
lease for its Oil and Gas Properties, in form and substance satisfactory
to Administrative Agent, which reports shall include (i) quantities or
volume of production, revenue, realized product prices, operating
expenses, taxes, capital expenditures and lease operating costs which
have accrued to Borrower's accounts in such period, (ii) the name,
address, telephone and facsimile numbers, e-mail address (if available)
and contact individual for each Purchaser, and (iii) such other
information with respect thereto as Administrative Agent or the Lenders
may require.
(h) Reserve Report Certificate. Concurrent with delivery of
each Reserve Report furnished pursuant to Section 8.07, a completed
Reserve Report Certificate, duly executed by a Responsible Officer.
(i) Tax Returns. As soon as available and in any event
within 15 days after the filing of any tax return, or any other filing
with a taxing authority, of the Guarantor, Borrower or any Subsidiary, a
copy of such filed tax return or other filing, together with all
exhibits and attachments thereto.
(j) SEC Filings, Etc. Promptly upon its becoming available,
each financial statement, report, notice or proxy statement sent by
Parent and/or Borrower to stockholders or equity holders generally and
each regular or periodic report and any registration statement,
prospectus or written communication (other than transmittal letters) in
respect thereof filed by Parent and/or Borrower with or received by
Parent and/or Borrower in connection therewith from any securities
exchange or the SEC or any successor agency.
(k) Notices Under Other Loan Agreements. Promptly after the
furnishing thereof, copies of any statement, report or notice furnished
to any Person pursuant to the terms of any indenture, loan or credit or
other similar agreement, other than this Agreement and not otherwise
required to be furnished to the Lenders pursuant to any other provision
of this Section 8.01.
(l) Other Matters. From time to time such other information
regarding the business, affairs or financial condition of Borrower or
any Subsidiary (including, without limitation, any Plan or Multiemployer
Plan and any reports or other information required to be filed under
ERISA) as any Lender or Administrative Agent may reasonably request.
43
Section 8.02 Litigation. Borrower shall promptly give to
Administrative Agent notice of: (i) all legal or arbitral proceedings, and of
all proceedings before any Governmental Authority affecting Borrower or any
Subsidiary, except proceedings which, if adversely determined, would not have a
Material Adverse Effect, and (ii) of any litigation or proceeding against or
adversely affecting Borrower or any Subsidiary in which the amount involved is
not covered in full by insurance (subject to normal and customary deductibles
and for which the insurer has not assumed the defense), or in which injunctive
or similar relief is sought. Borrower will, and will cause each of its
Subsidiaries to, promptly notify Administrative Agent and each of the Lenders of
any claim, judgment, Lien or other encumbrance affecting any Property of
Borrower or any Subsidiary.
Section 8.03 Maintenance, Etc.
(a) Generally. Borrower shall and shall cause each
Subsidiary to: preserve and maintain its corporate existence and all of
its material rights, privileges, licenses, franchises and other rights
necessary to conduct its business; keep books of record and account in
which full, true and correct entries will be made of all dealings or
transactions in relation to its business and activities; comply with all
Governmental Requirements if failure to comply with such requirements
will have a Material Adverse Effect; pay and discharge all taxes,
assessments and governmental charges or levies imposed on it or on its
income or profits or on any of its Property prior to the date on which
penalties attach thereto, except for any such tax, assessment, charge or
levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained;
upon reasonable notice, permit representatives of Administrative Agent
or any Lender, during normal business hours, to examine, copy and make
extracts from its books and records, to inspect its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or Administrative Agent (as the case
may be).
(b) Insurance. Borrower shall and shall cause each
Subsidiary to keep, or cause to be kept, insured by financially sound
and reputable insurers all Property of a character usually insured by
Persons engaged in the same or similar business similarly situated
against loss or damage of the kinds and in the amounts customarily
insured against by such Persons and carry such other insurance as is
usually carried by such Persons including, without limitation,
environmental risk insurance to the extent reasonably available.
Borrower shall promptly obtain endorsements to such insurance policies
naming "Xxxxx Fargo Bank, N.A., as Administrative Agent for the Lenders"
as joint loss payee and containing provisions that such policies will
not be canceled without 30 days prior written notice having been given
by the insurance company to Administrative Agent.
(c) Proof of Insurance. Contemporaneously with the delivery
of the financial statements required by Section 8.01(a) to be delivered
for each year, Borrower will furnish or cause to be furnished to
Administrative Agent and the Lenders a certificate of insurance coverage
from the insurer in form and substance satisfactory to Administrative
Agent and, if requested, will furnish Administrative Agent and the
Lenders copies of the applicable policies.
(d) Oil and Gas Properties. Borrower will and will cause
each Subsidiary to, at its own expense, do or cause to be done all
things reasonably necessary to preserve and keep in good repair, working
order and efficiency all of its Oil and Gas Properties and other
material Properties including, without limitation, all equipment,
machinery and facilities, and from time to time will make all the
reasonably necessary repairs, renewals and replacements so that at all
times the state and condition of its Oil and Gas Properties and other
material Properties will be fully preserved and maintained, except to
the extent a portion of such Properties is no longer capable of
producing Hydrocarbons in economically reasonable amounts. Borrower will
and will cause each
44
Subsidiary to promptly: (i) pay and discharge, or make reasonable and
customary efforts to cause to be paid and discharged, all delay rentals,
royalties, expenses and indebtedness accruing under the leases or other
agreements affecting or pertaining to its Oil and Gas Properties, (ii)
perform or make reasonable and customary efforts to cause to be
performed, in accordance with industry standards, the obligations
required by each and all of the assignments, deeds, leases, subleases,
contracts and agreements affecting its interests in its Oil and Gas
Properties and other material Properties, and (iii) do all other things
necessary to keep unimpaired, except for Liens described in Section
9.02, its rights with respect to its Oil and Gas Properties and other
material Properties and prevent any forfeiture thereof or a default
thereunder, except to the extent a portion of such Properties is no
longer capable of producing Hydrocarbons in economically reasonable
amounts and except for dispositions permitted by Section 9.12. Borrower
will and will cause each Subsidiary to operate its Oil and Gas
Properties and other material Properties or cause or make reasonable and
customary efforts to cause such Oil and Gas Properties and other
material Properties to be operated in the manner of a prudent operator
in accordance with the practices of the industry and in compliance with
all applicable contracts and agreements and in compliance in all
material respects with all Governmental Requirements.
Section 8.04 Environmental Matters.
(a) Establishment of Procedures. Borrower will and will
cause each Subsidiary to establish and implement such procedures as may
be reasonably necessary to continuously determine and assure that any
failure of the following does not have a Material Adverse Effect: (i)
all Property of Borrower and its Subsidiaries and the operations
conducted thereon and other activities of Borrower and its Subsidiaries
are in compliance with and do not violate the requirements of any
Environmental Laws, (ii) no oil, hazardous substances or solid wastes
are disposed of or otherwise released on or to any Property owned by any
such party except in compliance with Environmental Laws, (iii) no
hazardous substance will be released on or to any such Property in a
quantity equal to or exceeding that quantity which requires reporting
pursuant to Section 103 of CERCLA, and (iv) no oil, oil and gas
exploration and production wastes or hazardous substance is released on
or to any such Property so as to pose an imminent and substantial
endangerment to public health or welfare or the environment.
(b) Notice of Action. Borrower will promptly notify
Administrative Agent and the Lenders in writing of any threatened
action, investigation or inquiry by any Governmental Authority of which
Borrower has knowledge in connection with any Environmental Laws,
excluding routine testing and corrective action.
(c) Future Acquisitions. Borrower will and will cause each
Subsidiary to provide environmental audits and tests as reasonably
requested by Administrative Agent and the Lenders (or as otherwise
required to be obtained by Administrative Agent or the Lenders by any
Governmental Authority) in connection with any future acquisitions of
Oil and Gas Properties or other material Properties.
Section 8.05 Further Assurances. Borrower will and will cause each
Subsidiary to cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of this Agreement and any other Loan
Document. Borrower, at its expense, will and will cause each Subsidiary to
promptly execute and deliver to Administrative Agent upon request all such other
documents, agreements and instruments to comply with or accomplish the covenants
and agreements of Borrower or any Subsidiary, as the case may be, in this
Agreement and any other Loan Document, or to further evidence and more fully
describe the collateral intended as security for the Obligations or to correct
any omissions in the Loan Documents, or to state more fully the security
obligations set out herein or in any of the Loan Documents, or to perfect,
protect or preserve any Liens created pursuant to any of the
45
Security Instruments, or to make any recordings, to file any notices or obtain
any consents, all as may be necessary or appropriate in connection therewith.
Section 8.06 Performance of Obligations. Borrower will pay the Notes
according to the reading, tenor and effect thereof; and Borrower will and will
cause each Subsidiary to do and perform every act and discharge all of the
obligations to be performed and discharged by them under the Loan Documents, at
the time or times and in the manner specified.
Section 8.07 Engineering Reports.
(a) Scheduled Redetermination. On or before May 1 of each
year Borrower shall furnish, or cause to be furnished, to Administrative
Agent and the Lenders the as of December 31 Reserve Report, and on or
before November 1 of each year Borrower shall furnish, or cause to be
furnished, to Administrative Agent and the Lenders the as of June 30
Reserve Report. The as of December 31 Reserve Report of each year shall
be prepared by certified independent petroleum engineers or other
independent petroleum consultant(s) acceptable to Administrative Agent
and the as of June 30 Reserve Report of each year shall be prepared by
or under the supervision of the chief engineer of Borrower who shall
certify such Reserve Report to be true and accurate and to have been
prepared in accordance with the procedures used in the immediately
proceeding as of December 31 Reserve Report.
(b) Unscheduled Redetermination. In the event of an
unscheduled redetermination, Borrower shall furnish to Administrative
Agent and the Lenders a Reserve Report prepared by or under the
supervision of the chief engineer of Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in
accordance with the procedures used in the immediately preceding Reserve
Report. For any unscheduled redetermination requested by the Majority
Lenders or Administrative Agent pursuant to Section 2.08(e), Borrower
shall provide as soon as possible, but in any event no later than 30
days following the receipt of the request by Administrative Agent, such
Reserve Report with an "as of" date not more than 60 days prior to the
anticipated date of redetermination or as otherwise required by the
Majority Lenders or Administrative Agent.
Section 8.08 Title Information.
(a) Delivery. On or before the delivery to Administrative
Agent and the Lenders of each Reserve Report required by Section
8.07(a), Borrower will deliver title information in form and substance
acceptable to Administrative Agent covering enough of the Oil and Gas
Properties evaluated by such Reserve Report that were not included in
the immediately preceding Reserve Report, so that Administrative Agent
shall have received together with title information previously delivered
to Administrative Agent, satisfactory title information on at least
eighty percent (80%) of the value of the Oil and Gas Properties
evaluated by such Reserve Report.
(b) Cure of Title Defects. Borrower shall cure any title
defects or exceptions which are not Excepted Liens raised by the
information described in Section 8.08(a), or substitute as Collateral
acceptable Oil and Gas Properties with no title defects or exceptions
except for Excepted Liens covering Oil and Gas Properties of an
equivalent value (but for such title defects or exceptions), within 60
days after a request by Administrative Agent or the Lenders to cure such
defects or exceptions.
(c) Failure to Cure Title Defects. If Borrower is unable to
cure any title defect requested by Administrative Agent or the Lenders
to be cured within the 60 day period or Borrower does not comply with
the requirements to provide acceptable title information covering
46
eighty percent (80%) of the value of the Oil and Gas Properties
evaluated in the most recent Reserve Report, such default shall not be a
Default or an Event of Default, but instead Administrative Agent and the
Lenders shall have the right to exercise, in their sole discretion from
time to time, the remedy described in the next sentence, and any failure
to so exercise this remedy at any time shall not be a waiver as to
future exercise of such remedy by Administrative Agent or the Lenders.
To the extent that Administrative Agent or the Lenders are not satisfied
with title to any Oil and Gas Properties comprising Collateral after the
time period in Section 8.08(b) has elapsed, such unacceptable Oil and
Gas Property Collateral shall not count towards the eighty percent (80%)
requirement, and Administrative Agent may send a notice to Borrower and
the Lenders that the then outstanding Borrowing Base shall be reduced by
an amount as determined by all of the Lenders to cause Borrower to be in
compliance with the requirement to provide acceptable title information
on eighty percent (80%) of the value of the Oil and Gas Properties
comprising Collateral. This new Borrowing Base shall become effective
immediately after receipt of such notice.
Section 8.09 Collateral.
(a) Collateral. The Obligations shall be secured by a
perfected first priority Lien (subject only to Excepted Liens) granted
to Administrative Agent for the benefit of the Beneficiaries in (i) all
of Borrower's and its Subsidiaries' rights, titles and interests, now
owned or hereafter acquired, in any Oil and Gas Properties, and
contracts and any other rights related thereto, (ii) all personal
Property of Borrower and its Subsidiaries and (iii) all of the issued
and outstanding capital stock, partnership interests, member interest or
other equity interest of all existing and/or hereafter created and/or
acquired Subsidiaries of Borrower.
(b) Lien in Acquired Oil and Gas Properties. Should Borrower
or any of its Subsidiaries acquire any additional Oil and Gas Properties
or additional interests in its existing Oil and Gas Properties, Borrower
and/or such Subsidiary, as applicable, will grant to Administrative
Agent as security for the Obligations a first priority Lien interest
(subject only to Excepted Liens) on Borrower's or such Subsidiary's
interest in any Oil and Gas Properties not already subject to a Lien of
the Security Instruments, which Lien will be created and perfected by
and in accordance with the provisions of mortgages, deeds of trust,
security agreements and financing statements, or other Security
Instruments, all in form and substance satisfactory to Administrative
Agent in its sole discretion and in sufficient executed (and
acknowledged where necessary or appropriate) counterparts for recording
purposes.
(c) Title Information. Concurrently with the granting of the
Lien or other action referred to in Subsection (b) of this Section,
Borrower will provide, or cause to be provided, to Administrative Agent
title information in form and substance satisfactory to Administrative
Agent in its sole discretion with respect to Borrower's and each
Subsidiary's interests in its Oil and Gas Properties.
(d) Legal Opinions. Also, concurrently with the filing of
any new Security Instrument in any state wherein Security Instruments
have not previously been filed or there is reason to believe the law
applicable to Security Instruments may have changed, upon the reasonable
request of Administrative Agent, Borrower will provide to Administrative
Agent an opinion addressed to Administrative Agent for the benefit of
the Lenders in form and substance satisfactory to Administrative Agent
in its sole discretion from counsel acceptable to Administrative Agent,
stating that the Security Instrument is valid, binding and enforceable
in accordance with its terms in legally sufficient form for such
jurisdiction, and the means by which such Security Instrument will
perfect the Lien created thereby.
47
Section 8.10 ERISA Information and Compliance. Borrower will promptly
furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly
furnish to Administrative Agent with sufficient copies to the Lenders (i)
promptly after the filing thereof with the United States Secretary of Labor, the
Internal Revenue Service or the PBGC, copies of each annual and other report
with respect to each Plan or any trust created thereunder, (ii) immediately upon
becoming aware of the occurrence of any ERISA Event or of any "prohibited
transaction," as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by a Responsible Officer specifying the nature thereof, what
action Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to
take with respect thereto, and, when known, any action taken or proposed by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, and (iii) immediately upon receipt thereof, copies of any notice of the
PBGC's intention to terminate or to have a trustee appointed to administer any
Plan. With respect to each Plan (other than a Multiemployer Plan), Borrower
will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full
and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.11 Hedging Agreements. Borrower may maintain Hedging
Agreements; provided that such Hedging Agreements (i) are in form and substance
satisfactory to Administrative Agent and the Majority Lenders (ii) shall be with
a Lender or, as approved by Administrative Agent and the Majority Lenders, other
unsecured counterparty, (iii) are entered into as a part of Borrower's normal
business operations as a risk management strategy and/or hedge against changes
resulting from market conditions related to Borrower's operations, and (iv)
shall not at any time, in the aggregate, cover more than eighty percent (80%) of
estimated production of Hydrocarbons of Borrower from its Oil and Gas Properties
for each individual period covered by Hedging Agreements. At any time that
Borrower has Loans outstanding in an amount exceeding seventy-five percent (75%)
of the Borrowing Base, the Lenders may require Borrower to maintain Hedging
Agreements or other contractual agreements upon terms, including projected
production volumes, and pursuant to documentation, in form and substance
satisfactory to Administrative Agent and the Majority Lenders. For purposes of
this Section 8.11, the notional volumes and corresponding swap volumes so
determined shall be calculated and recorded separately for natural gas and crude
oil, and natural gas volumes shall include associated natural gas liquids
volumes. In no event shall any Hedging Agreement contain any current
requirement, agreement or covenant for the Borrower or any Subsidiary to pledge
collateral or post margin, to secure their obligations under such Hedging
Agreements or to cover market exposures.
ARTICLE IX
NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any of the Commitments
are in effect and until payment in full of Loans hereunder, all interest thereon
and all other amounts payable by Borrower hereunder, without the prior written
consent of the Majority Lenders:
Section 9.01 Debt. Neither Borrower nor any Subsidiary will incur,
create, assume or permit to exist any Debt, except:
(a) the Notes or other Obligations or any guaranty of or
suretyship arrangement for the Notes or other Obligations.
48
(b) Debt of Borrower existing on the Closing Date which is
disclosed in Schedule 9.01, and any renewals or extensions (but not
increases) thereof.
(c) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary course
of business which, if greater than 90 days past the invoice or billing
date, are being contested in good faith by appropriate proceedings if
reserves adequate under GAAP shall have been established therefore.
(d) Debt under capital leases (as required to be reported on
the financial statements of Borrower pursuant to GAAP) and purchase
money Debt, in each case for the acquisition of equipment, which in each
purchase money Debt case shall not exceed 100% of the lesser of the
total purchase price and the fair market value of the Property acquired
as determined at the time of acquisition; provided that all Debt
incurred as described in this clause (d) shall not exceed $500,000 in
the aggregate outstanding at any time].
(e) Debt associated with bonds or surety obligations
required by Governmental Requirements in connection with the operation
of the Oil and Gas Properties.
(f) Subject to the provisions of Section 8.11, Debt of
Borrower and its Subsidiaries under Hedging Agreements with a Lender or
as approved by the Majority Lenders entered into as a part of its normal
business operations as a risk management strategy and/or hedge against
changes resulting from market conditions related to Borrower's
operations.
Section 9.02 Liens. Neither Borrower nor any Subsidiary will create,
incur, assume or permit to exist any Lien on any of its Properties (now owned or
hereafter acquired), except:
(a) Liens securing the payment of any Obligations.
(b) Excepted Liens.
(c) Liens securing capital leases or purchase money Debt
allowed under Section 9.01(d), but only on the Property under lease or
acquired with such Debt or the proceeds thereof.
(d) Liens disclosed on Schedule 9.02.
(e) Liens on cash or securities of Borrower securing the
Debt described in Section 9.01(e).
Section 9.03 Investments, Loans and Advances. Neither Borrower nor
any Subsidiary will make or permit to remain outstanding any loans or advances
to or investments in any Person, except that the foregoing restriction shall not
apply to:
(a) investments, loans or advances which are disclosed to
the Lenders in Schedule 9.03;
(b) accounts receivable arising in the ordinary course of
business.
(c) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof, in each case maturing within one year from the date of creation
thereof.
(d) commercial paper maturing within one year from the date
of creation thereof rated in the highest grade by Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc.
49
(e) deposits maturing within one year from the date of\
creation thereof with, including certificates of deposit issued by, any
Lender or any office located in the United States of any other bank or
trust company which is organized under the laws of the United States or
any state thereof, has capital, surplus and undivided profits
aggregating at least $500,000,000 (as of the date of such Lender's or
bank or trust company's most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set
forth from time to time, by Standard & Poor's Corporation or Xxxxx'x
Investors Service, Inc., respectively.
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e).
(g) investments by Borrower in direct ownership interests in
additional Oil and Gas Properties and gas gathering systems related
thereto.
Section 9.04 Dividends, Distributions and Redemptions. Borrower will
not declare or pay any dividend or distribution, return any capital to its
members or make any distribution of its assets to its members; provided,
however, Borrower may make (i) Permitted Tax Distributions and (ii) not more
than one distribution to its members per fiscal quarter, commencing with the
fiscal quarter ending September 30, 2007, which when aggregated with any prior
distributions made during the immediately preceding three fiscal quarters, shall
not exceed one hundred percent (100%) of Borrower's Consolidated Net Income
(less any Permitted Tax Distributions) during the 4 fiscal quarters immediately
preceding the fiscal quarter in which such distribution is made if, and to the
extent that, (A) Administrative Agent has received the Compliance Certificate
required by Section 8.01 for the fiscal quarter immediately preceding the
quarter in which such distribution is made, (B) no Default exists or would
result therefrom, including on a proforma basis under Section 9.11, (C) after
giving effect to such distribution, there exist availability under the then
effective Borrower Base of at least 20% of such Borrowing Base and a borrowing
of at least 20% of the available Borrowing Base would not cause a Default, and
(D) such distribution would not impair the ability of Borrower to meet its
obligations under this Agreement. Prior to Borrower making any distribution as
permitted under clause (ii) in the preceding sentence, Borrower shall provide to
Administrative Agent a certificate of a Responsible Officer, in form and
substance satisfactory to Administrative Agent, certifying that such
distribution complies with the terms of this Section and that all conditions
permitting such distribution are satisfied. Notwithstanding anything in this
Section to the contrary, prior to such time as four quarters have elapsed after
the Closing Date, determination of Borrower's Consolidated Net Income shall not
be annualized, but rather shall only include Borrower's Consolidated Net Income
for actual quarters elapsed during such period.
Section 9.05 Sales and Leasebacks. Neither Borrower nor any
Subsidiary will enter into any arrangement, directly or indirectly, with any
Person whereby Borrower or any Subsidiary shall sell or transfer any of its
Property, whether now owned or hereafter acquired, and whereby Borrower or any
Subsidiary shall then or thereafter rent or lease as lessee such Property or any
part thereof or other Property which Borrower or any Subsidiary intends to use
for substantially the same purpose or purposes as the Property sold or
transferred.
Section 9.06 Nature of Business. Neither Borrower nor any Subsidiary
will allow any material change to be made in the character of its business as an
independent oil and gas acquisition, exploration and production company.
Section 9.07 Mergers, Etc. Neither Borrower nor any Subsidiary will
merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property or assets to any other Person.
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Section 9.08 Proceeds of Notes; Letters of Credit. Borrower will not
permit the proceeds of the Notes or Letters of Credit to be used for any purpose
other than those permitted by Section 7.07. Neither Borrower nor any Person
acting on behalf of Borrower has taken or will take any action which might cause
any of the Loan Documents to violate Regulation T, U or X or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect.
Section 9.09 ERISA Compliance. Borrower will not at any time:
(a) Engage in, or permit any Subsidiary or ERISA Affiliate
to engage in, any transaction in connection with which Borrower, any
Subsidiary or any ERISA Affiliate could be subjected to either a civil
penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a
tax imposed by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA Affiliate
to terminate, any Plan in a manner, or take any other action with
respect to any Plan, which could result in any liability to Borrower,
any Subsidiary or any ERISA Affiliate to the PBGC;
(c) Fail to make, or permit any Subsidiary or ERISA
Affiliate to fail to make, full payment when due of all amounts which,
under the provisions of any Plan, agreement relating thereto or
applicable law, Borrower, a Subsidiary or any ERISA Affiliate is
required to pay as contributions thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA
Affiliate to permit to exist, any accumulated funding deficiency within
the meaning of Section 302 of ERISA or section 412 of the Code, whether
or not waived, with respect to any Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to
permit, the actuarial present value of the benefit liabilities under any
Plan maintained by Borrower, any Subsidiary or any ERISA Affiliate which
is regulated under Title IV of ERISA to exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV
of ERISA) of such Plan allocable to such benefit liabilities. The term
"actuarial present value of the benefit liabilities" shall have the
meaning specified in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to,
or permit any Subsidiary or ERISA Affiliate to contribute to or assume
an obligation to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate to
acquire, an interest in any Person that causes such Person to become an
ERISA Affiliate with respect to Borrower, any Subsidiary or any ERISA
Affiliate if such Person sponsors, maintains or contributes to, or at
any time in the six-year period preceding such acquisition has
sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or
(2) any other Plan that is subject to Title IV of ERISA under which the
actuarial present value of the benefit liabilities under such Plan
exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to
such benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to
incur, a liability to or on account of a Plan under sections 515, 4062,
4063, 4064, 4201 or 4204 of ERISA;
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(i) Contribute to or assume an obligation to contribute to,
or permit any Subsidiary or ERISA Affiliate to contribute to or assume
an obligation to contribute to, any employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any
such plan maintained to provide benefits to former employees of such
entities, that may not be terminated by such entities in their sole
discretion at any time without any material liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to
amend, a Plan resulting in an increase in current liability such that
Borrower, any Subsidiary or any ERISA Affiliate is required to provide
security to such Plan under section 401(a)(29) of the Code.
Section 9.10 Sale or Discount of Receivables. Neither Borrower nor
any Subsidiary will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable.
Section 9.11 Financial Covenants.
(a) Current Ratio Borrower will not permit the ratio of (i)
consolidated current assets (including any amounts available under the
facility of this Agreement) to (ii) consolidated current liabilities
(excluding current maturities of the Notes) to be less than 1.0 to 1.0
at any time. As used in this Section, "consolidated current assets"
shall mean shall mean shall mean assets which would, in accordance with
GAAP, be included as current assets on a consolidated balance sheet of
Borrower and its Consolidated Subsidiaries, but excluding non-cash
assets under FAS 133, and "consolidated current liabilities" shall mean
liabilities which would, in accordance with GAAP, be included as current
liabilities on a consolidated balance sheet of Borrower and its
Consolidated Subsidiaries, but excluding non-cash obligations under FAS
133.
(b) Leverage Ratio. Borrower will not permit its Leverage
Ratio as of the end of any fiscal quarter of Borrower (calculated
quarterly at the end of each fiscal quarter) to be greater than 3.50 to
1.00. For purposes of this Section 9.11(b), "Leverage Ratio" shall mean
the ratio of (i) Debt as of the end of such four fiscal quarters of
Borrower and its Consolidated Subsidiaries to (ii) EBITDAX for the four
fiscal quarters ending on such date. For purposes of the calculations in
this Section to be made prior to the fourth full fiscal quarter to
elapse after the Closing Date, EBITDAX shall be determined by
multiplying the sum of EBITDAX for each of the fiscal quarters actually
elapsed from and including the first fiscal quarter of 2007 through and
including the fourth fiscal quarter of 2007 by a fraction, the numerator
of which is 4 and the denominator of which is the number of such
actually elapsed fiscal quarters.
(c) Interest Coverage Ratio. Borrower will not permit its
Interest Coverage Ratio as of the end of any fiscal quarter of Borrower
(calculated quarterly at the end of each fiscal quarter) to be less than
2.50 to 1.00. For the purposes of this Section 9.11(c), "Interest
Coverage Ratio" shall mean the ratio of (i) EBITDAX for the four fiscal
quarters ending on such date to (ii) cash interest payments made for
such four fiscal quarters of Borrower and its Consolidated Subsidiaries.
For purposes of the calculations in this Section to be made prior to the
fourth full fiscal quarter to elapse after the Closing Date, EBITDAX and
the amount of cash interest payments shall be determined by multiplying
the sum of each such component for each of the fiscal quarters actually
elapsed from and including the first fiscal quarter of 2007 through and
including the fourth fiscal quarter of 2007 by a fraction, the numerator
of which is 4 and the denominator of which is the number of such
actually elapsed fiscal quarters.
(d) Capital Expenditures. Borrower will not, and will not
permit any Subsidiary to, make any expenditures for fixed or capital
assets if, after giving effect thereto, the aggregate of all such
expenditures by Borrower and its Subsidiaries would exceed $2,500,000
during any fiscal year of Borrower.
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(e) XXXXX Charges. Borrower will not, and will not permit
any Subsidiary to, incur XXXXX charges under any agreement with any
operator of Oil and Gas Properties, including Aspen, in an amount
exceeding $250 per well per month.
Section 9.12 Sale of Properties. Borrower will not, and will not
permit any Subsidiary to Transfer any Properties or any interest in any
Properties, for which value was given in the most recent Borrowing Base
redetermination which in the aggregate have a fair market value in excess of
$500,000.
Section 9.13 Environmental Matters. Neither Borrower nor any
Subsidiary will cause or permit any of its Property to be in violation of, or do
anything or permit anything to be done which will subject any such Property to
any remedial obligations under any Environmental Laws, assuming disclosure to
the applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect.
Section 9.14 Transactions with Affiliates. Neither Borrower nor any
Subsidiary will enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of Property or the rendering of any service,
with any Affiliate, except (i) capital contributions from Parent in the form of
common equity and (ii) pursuant to the Xxx Management Agreement and the Xxx
Management JOA, provided that such transactions are in the ordinary course of
its business and are upon fair and reasonable terms no less favorable to it than
it would obtain in a comparable arm's length transaction with a Person not an
Affiliate.
Section 9.15 Subsidiaries. Borrower shall not, and shall not permit
any Subsidiary to, create any additional Subsidiaries. Borrower shall not and
shall not permit any Subsidiary to sell or to issue any stock or ownership
interest of a Subsidiary, except to Borrower or any Subsidiary that is a
Guarantor and except in compliance with Section 9.03. If the necessary consent
to create or acquire a Subsidiary is obtained, such Subsidiary shall immediately
upon its being created or acquired enter into a Guaranty Agreement.
Section 9.16 Negative Pledge Agreements. Neither Borrower nor any
Subsidiary will create, incur, assume or permit to exist any contract, agreement
or understanding (other than the Loan Documents) which in any way prohibits or
restricts the granting, conveying, creation or imposition of any Lien on any of
its Property or restricts any Subsidiary from paying dividends to Borrower, or
which requires the consent of or notice to other Persons in connection
therewith.
Section 9.17 Gas Imbalances, Take-or-Pay or Other Prepayments.
Borrower will not allow gas imbalances, take-or-pay or other prepayments with
respect to the Oil and Gas Properties of Borrower or any Subsidiary which would
require Borrower or any Subsidiary to deliver in the aggregate two percent
(2.0%) or more of their Hydrocarbons produced on a monthly basis from such Oil
and Gas Properties at some future time without then or thereafter receiving full
payment therefor.
Section 9.18 Material Operational Agreements. Borrower shall not
enter into any amendment, supplement, restatement or other modification of the
Operational Agreement, the Sigma Consulting Agreement, the Xxx Management
Agreement or the Xxx Management JOA without the prior written consent of the
Lenders.
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ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events
shall constitute an "Event of Default":
(a) Borrower shall default in the payment or prepayment when
due of any principal of or interest on any Loan, or any reimbursement
obligation for a disbursement made under any Letter of Credit, or any
fees or other amount payable by it hereunder or under any Loan Document;
or
(b) Borrower or any Subsidiary shall default in the payment
when due of any principal of or interest on any of its other Debt, or
any event specified in any note, agreement, indenture or other document
evidencing or relating to any such Debt shall occur if the effect of
such event is to cause, or (with the giving of any notice or the lapse
of time or both) to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause, such
Debt to become due prior to its stated maturity; or
(c) any representation, warranty or certification made or
deemed made herein or in any other Loan Document by Borrower or any
Subsidiary, or any certificate furnished to any Lender or Administrative
Agent pursuant to the provisions hereof or any other Loan Document,
shall prove to have been false or misleading as of the time made or
furnished in any material respect; or
(d) Borrower shall default in the performance of any of its
obligations under Article IX, Sections 8.01(a) or (d) or any other
Article of this Agreement other than under Article VIII (excluding
Sections 8.01(a) and (d)); or Borrower shall default in the performance
of any of its obligations under Article VIII (excluding Sections 8.01(a)
and (d)) or any other Loan Document (other than the payment of amounts
due which shall be governed by Section 10.01(a)) and such default shall
continue unremedied for a period of thirty (30) days after the earlier
to occur of (i) notice thereof to Borrower by Administrative Agent or
any Lender (through Administrative Agent), or (ii) Borrower otherwise
becoming aware of such default; or
(e) any Guarantor shall default in the performance of any of
its obligations under its Guaranty Agreement (other than the payment of
amounts due, which shall have no grace period) and such default shall
continue unremedied for a period of thirty (30) days after the earlier
to occur of (i) notice thereof to Borrower and such Guarantor by
Administrative Agent or any Lender (through Administrative Agent), or
(ii) Borrower or any Guarantor otherwise becoming aware of such default;
or
(f) Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(g) Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Federal Bankruptcy
Code (as now or hereafter in effect), (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, liquidation or composition or readjustment
of debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed
54
against it in an involuntary case under the Federal Bankruptcy Code, or
(vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(h) a proceeding or case shall be commenced, without the
application or consent of Borrower, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of
Borrower of all or any substantial part of its assets, or (iii) similar
relief in respect of Borrower under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an
order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect, for a period of 60
days; or (iv) an order for relief against Borrower shall be entered in
an involuntary case under the Federal Bankruptcy Code; or
(i) a judgment or judgments for the payment of money in
excess of $100,000 in the aggregate shall be rendered by a court against
Borrower or any Subsidiary and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured by posting a bond or otherwise, within
thirty (30) days from the date of entry thereof and Borrower or such
Subsidiary shall not, within said period of 30 days, or such longer
period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such
appeal; or
(j) the Loan Documents after delivery thereof shall for any
reason, except to the extent permitted by the terms thereof, cease to be
in full force and effect and valid, binding and enforceable in
accordance with their terms, or cease to create a valid and perfected
Lien of the priority required thereby on any of the collateral purported
to be covered thereby, except to the extent permitted by the terms of
this Agreement, or Borrower or any Guarantor shall so state in writing;
or
(k) an event having a Material Adverse Effect shall occur;
or
(l) Borrower discontinues its usual business or a Change of
Control occurs; or
(m) any Guarantor takes, suffers or permits to exist any of
the events or conditions referred to in paragraphs (f), (g), (h) or (i)
or if any provision of any Guaranty Agreement related thereto shall for
any reason cease to be valid and binding on such Guarantor or if such
Guarantor shall so state in writing; or
(n) Borrower defaults under the Aspen Operations Agreement,
the Sigma Consulting Agreement, the Xxx Management Agreement or the Xxx
Management JOA.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one
referred to in clauses (f), (g) or (h) of Section 10.01 or in clause (m)
to the extent it relates to clauses (f), (g) or (h), Administrative
Agent, upon request of the Majority Lenders, shall, by notice to
Borrower, cancel the Commitments (in whole or part) and/or declare the
principal amount then outstanding of, and the accrued interest on, the
Loans and all other amounts payable by Borrower hereunder and under the
Notes (including without limitation the payment of cash collateral to
secure the LC Exposure as provided in Section 2.10(b)) to be forthwith
due and payable, whereupon such amounts shall be immediately due and
payable without presentment, demand, protest, notice of
55
intent to accelerate, notice of acceleration or other formalities of any
kind, all of which are hereby expressly waived by Borrower.
(b) In the case of the occurrence of an Event of Default
referred to in clauses (f), (g) or (h) of Section 10.01 or in clause (m)
to the extent it relates to clauses (f), (g) or (h), the Commitments
shall be automatically canceled and the principal amount then
outstanding of, and the accrued interest on, the Loans and all other
amounts payable by Borrower hereunder and under the Notes (including
without limitation the payment of cash collateral to secure the LC
Exposure as provided in Section 2.10(b)) shall become automatically
immediately due and payable without presentment, demand, protest, notice
of intent to accelerate, notice of acceleration or other formalities of
any kind, all of which are hereby expressly waived by Borrower.
(c) All proceeds received after maturity of the Notes,
whether by acceleration or otherwise shall be applied first to
reimbursement of expenses and indemnities provided for in this Agreement
and the other Loan Documents; second to fees; third pro rata to accrued
interest on the Notes; fourth pro rata to principal outstanding on the
Notes and any other Obligations; fifth to serve as cash collateral to be
held by Administrative Agent to secure the LC Exposure; and any excess
shall be paid to Borrower or as otherwise required by any Governmental
Requirement.
ARTICLE XI
ADMINISTRATIVE AGENT
Section 11.01 Appointment, Powers and Immunities. Each Lender hereby
irrevocably appoints and authorizes Administrative Agent to act as its agent
hereunder and under the other Loan Documents with such powers as are
specifically delegated to Administrative Agent by the terms of this Agreement
and the other Loan Documents, together with such other powers as are reasonably
incidental thereto. Administrative Agent (which term as used in this sentence
and in Section 11.05 and the first sentence of Section 11.06 shall include
reference to its Affiliates and its and its Affiliates' officers, directors,
employees, attorneys, accountants, experts and agents): (i) shall have no duties
or responsibilities except those expressly set forth in the Loan Documents, and
shall not by reason of the Loan Documents be a trustee or fiduciary for any
Lender; (ii) makes no representation or warranty to any Lender and shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement, or for the value, validity, effectiveness, genuineness, execution,
effectiveness, legality, enforceability or sufficiency of this Agreement, any
Note or any other document referred to or provided for herein or for any failure
by Borrower or any other Person (other than Administrative Agent) to perform any
of its obligations hereunder or thereunder or for the existence, value,
perfection or priority of any collateral security or the financial or other
condition of Borrower, its Subsidiaries or any other obligor or guarantor; (iii)
except pursuant to Section 11.07 shall not be required to initiate or conduct
any litigation or collection proceedings hereunder; and (iv) shall not be
responsible for any action taken or omitted to be taken by it hereunder or under
any other document or instrument referred to or provided for herein or in
connection herewith including its own ordinary negligence, except for its own
gross negligence or willful misconduct. Administrative Agent may employ agents,
accountants, attorneys and experts and shall not be responsible for the
negligence or misconduct of any such agents, accountants, attorneys or experts
selected by it in good faith or any action taken or omitted to be taken in good
faith by it in accordance with the advice of such agents, accountants, attorneys
or experts. Administrative Agent may deem and treat the payee of any Note as the
holder thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof permitted hereunder shall have been filed with
Administrative Agent. Administrative Agent is authorized to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan Documents.
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Section 11.02 Reliance by Administrative Agent. Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telecopier, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by
Administrative Agent.
Section 11.03 Defaults. Administrative Agent shall not be deemed to
have knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees or failure to reimburse for Letter
of Credit drawings) unless Administrative Agent has received notice from a
Lender or Borrower specifying such Default and stating that such notice is a
"Notice of Default." In the event that Administrative Agent receives such a
notice of the occurrence of a Default, Administrative Agent shall give prompt
notice thereof to the Lenders. In the event of a payment Default, Administrative
Agent shall give each Lender prompt notice of each such payment Default.
Section 11.04 Rights as a Lender. With respect to its Commitments and
the Loans made by it and its participation in the issuance of Letters of Credit,
WFB (and any successor acting as Administrative Agent) in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as Administrative
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include Administrative Agent in its individual capacity. WFB (and any
successor acting as Administrative Agent) and its Affiliates may (without having
to account therefor to any Lender) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with Borrower
(and any of its Affiliates) as if it were not acting as Administrative Agent,
and WFB and its Affiliates may accept fees and other consideration from Borrower
for services in connection with this Agreement or otherwise without having to
account for the same to the Lenders.
Section 11.05 Indemnification. The Lenders agree to indemnify
Administrative Agent and the Issuing Bank ratably in accordance with their
Percentage Shares for the Indemnity Matters as described in section 12.03 to the
extent not indemnified or reimbursed by Borrower under section 12.03, but
without limiting the obligations of Borrower under said section 12.03 and for
any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against
Administrative Agent or the Issuing Bank in any way relating to or arising out
of: (i) this Agreement, the other Loan Documents or any other documents
contemplated by or referred to herein or the transactions contemplated hereby,
but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder or (ii) the enforcement of any of the terms of this Agreement,
any Loan Document or of any such other documents; whether or not any of the
foregoing specified in this section 11.05 arises from the sole or concurrent
negligence of Administrative Agent or the Issuing Bank, provided that no Lender
shall be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of Administrative Agent.
Section 11.06 Non-Reliance on Administrative Agent and other Lenders.
Each Lender acknowledges and agrees that it has, independently and without
reliance on Administrative Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of Borrower and its decision to enter into this Agreement, and that it
will, independently and without reliance upon Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement. Administrative Agent shall not be required
to keep itself informed as to the performance or observance by Borrower of this
Agreement, the Notes, any other Loan Document or any other document referred to
or provided for herein or to inspect the properties or books of Borrower. Except
for notices, reports and other documents and information expressly required
57
to be furnished to the Lenders by Administrative Agent hereunder, Administrative
Agent shall not have any duty or responsibility to provide any Lender with any
credit or other information concerning the affairs, financial condition or
business of Borrower (or any of its Affiliates) which may come into the
possession of Administrative Agent or any of its Affiliates. In this regard,
each Lender acknowledges that Xxxxxxxx Xxxxx L.L.P. is acting in this
transaction as special counsel to Administrative Agent only, except to the
extent otherwise expressly stated in any legal opinion or any Loan Document.
Each Lender will consult with its own legal counsel to the extent that it deems
necessary in connection with the Loan Documents and the matters contemplated
therein.
Section 11.07 Action by Administrative Agent. Except for action or
other matters expressly required of Administrative Agent hereunder,
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall (i) receive written instructions from
the Majority Lenders (or all of the Lenders as expressly required by Section
12.04) specifying the action to be taken, and (ii) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions of the Majority Lenders (or all of the Lenders as expressly
required by Section 12.04) and any action taken or failure to act pursuant
thereto by Administrative Agent shall be binding on all of the Lenders. If a
Default has occurred and is continuing, Administrative Agent shall take such
action with respect to such Default as shall be directed by the Majority Lenders
(or all of the Lenders as required by Section 12.04) in the written instructions
(with indemnities) described in this Section 11.07, provided that, unless and
until Administrative Agent shall have received such directions, Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders. In no event, however, shall Administrative
Agent be required to take any action which exposes Administrative Agent to
personal liability or which is contrary to this Agreement and the other Loan
Documents or applicable law. In connection with taking any action pursuant to
this Section or otherwise under this Agreement, Administrative Agent may engage
legal counsel and/or other qualified consultants to act at the instructions of
and on behalf of Administrative Agent, and such legal counsel and/or consultants
shall be afforded all of the indemnities and other protections afforded to
Administrative Agent pursuant to Article XI.
Section 11.08 Resignation of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, Administrative Agent may resign at any time by giving notice thereof to
the Lenders and Borrower. Upon any such resignation, the Majority Lenders shall
have the right to appoint a successor Administrative Agent. If no successor
Administrative Agent shall have been so appointed by the Majority Lenders and
shall have accepted such appointment within thirty (30) days after the resigning
Administrative Agent's giving of notice of resignation, then the resigning
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent. Upon the acceptance of such appointment hereunder by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the resigning Administrative Agent, and the resigning
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any resigning Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Article XI and Section 12.03 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of Administrative Agent
or any Lender to exercise and no delay in exercising, and no course of dealing
with respect to, any right, power or privilege under any of the Loan Documents
shall operate as a waiver thereof, nor shall any single or partial exercise
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of any right, power or privilege under any of the Loan Documents preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The remedies provided herein are cumulative and not exclusive of any
remedies provided by law.
Section 12.02 Notices. All notices and other communications provided
for herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other Loan
Documents) shall be given or made in writing by telecopy, e-mail, courier or
U.S. Mail and telecopied, e-mailed, mailed or delivered to the intended
recipient at the "Address for Notices" specified below its name on the signature
pages hereof or in the Loan Documents or, as to any party, at such other address
as shall be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given (i) when transmitted
before 3:00 p.m. Houston, Texas time on a Business Day (otherwise on the next
succeeding Business Day) by telecopier or e-mail and evidence or confirmation of
receipt is obtained, (ii) when delivered if personally delivered or (iii) in the
case of a mailed notice, three (3) Business Days after the date deposited in the
mails, postage prepaid, and in each case given or addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, Etc.
(a) Borrower agrees:
(i) whether or not the transactions hereby
contemplated are consummated, to pay all reasonable expenses of
Administrative Agent in the administration (both before and after the
execution hereof and including advice of counsel as to the rights and
duties of Administrative Agent and the Lenders with respect thereto) of,
and in connection with the negotiation, syndication, investigation,
preparation, execution and delivery of, recording or filing of,
preservation of rights under, enforcement of, and refinancing,
renegotiation or restructuring of, the Loan Documents and any amendment,
waiver or consent relating thereto (including, without limitation,
travel, photocopy, mailing, courier, telephone and other similar
expenses of Administrative Agent, the cost of environmental audits,
surveys and appraisals at reasonable intervals, the reasonable fees and
disbursements of counsel and other outside consultants for
Administrative Agent and, in the case of enforcement, the reasonable
fees and disbursements of counsel for Administrative Agent and any of
the Lenders); and promptly reimburse Administrative Agent for all
amounts reasonably expended, advanced or incurred by Administrative
Agent or the Lenders to satisfy any obligation of Borrower under this
Agreement or any other Loan Document, including without limitation, all
costs and expenses of foreclosure;
(II) TO INDEMNIFY ADMINISTRATIVE AGENT AND EACH
LENDER AND EACH OF THEIR AFFILIATES AND EACH OF THEIR OFFICERS,
DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS, ACCOUNTANTS
AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM HARMLESS
AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE
INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR
INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY
THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY
ACTUAL OR PROPOSED USE BY BORROWER OF THE PROCEEDS OF ANY OF THE LOANS
OR LETTERS OF CREDIT, (II) THE EXECUTION, DELIVERY AND PERFORMANCE OF
THE LOAN DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF BORROWER AND
ITS SUBSIDIARIES, (IV) THE FAILURE OF BORROWER OR ANY SUBSIDIARY TO
COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, OR WITH ANY GOVERNMENTAL
REQUIREMENT, (V) ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF
ANY WARRANTY OF BORROWER [OR ANY GUARANTOR] SET FORTH IN ANY OF THE LOAN
DOCUMENTS, (VI) THE ISSUANCE, EXECUTION AND DELIVERY OR TRANSFER OF OR
PAYMENT OR FAILURE TO PAY UNDER ANY
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LETTER OF CREDIT, OR (VII) THE PAYMENT OF A DRAWING UNDER ANY LETTER OF
CREDIT NOTWITHSTANDING THE NON-COMPLIANCE, NON-DELIVERY OR OTHER
IMPROPER PRESENTATION OF THE MANUALLY EXECUTED DRAFT(S) AND
CERTIFICATION(S), (VIII) ANY ASSERTION THAT THE LENDERS WERE NOT
ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY
INSTRUMENTS OR (IX) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, INCLUDING,
WITHOUT LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND
ALL OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING
OR PREPARING TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY
INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL
INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY
INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY
REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND ADMINISTRATIVE
AGENT OR A LENDER'S SHAREHOLDERS AGAINST ADMINISTRATIVE AGENT OR LENDER
OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART
OF THE INDEMNIFIED PARTY; AND
(III) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME
THE INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS,
COST RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO BORROWER OR ANY SUBSIDIARY OR ANY OF
THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR
DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A
RESULT OF THE BREACH OR NON-COMPLIANCE BY BORROWER OR ANY SUBSIDIARY
WITH ANY ENVIRONMENTAL LAW APPLICABLE TO BORROWER OR ANY SUBSIDIARY,
(III) DUE TO PAST OWNERSHIP BY BORROWER OR ANY SUBSIDIARY OF ANY OF
THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH,
THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT
LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR
DISPOSAL OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR
OPERATED BY BORROWER OR ANY SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL,
HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS;
PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION
12.03(A)(III) IN RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM
THE ACTS OR OMISSIONS OF ADMINISTRATIVE AGENT OR ANY LENDER DURING THE
PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE
OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN
LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
(b) No Indemnified Party may settle any claim to be
indemnified without the consent of the indemnitor, such consent not to
be unreasonably withheld; provided, that the indemnitor may not
reasonably withhold consent to any settlement that an Indemnified Party
proposes, if the indemnitor does not have the financial ability to pay
all its obligations outstanding and asserted against the indemnitor at
that time, including the maximum potential claims against the
Indemnified Party to be indemnified pursuant to this Section 12.03.
(c) In the case of any indemnification hereunder,
Administrative Agent or Lender, as appropriate shall give notice to
Borrower of any such claim or demand being made against the Indemnified
Party and Borrower shall have the non-exclusive right to join in the
defense against any such claim or demand provided that if Borrower
provides a defense, the Indemnified Party shall bear its own cost of
defense unless there is a conflict between Borrower and such Indemnified
Party.
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(d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE
INDEMNIFIED PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF
EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER
AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF
TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES OR BY REASON OF STRICT
LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED
PARTIES. TO THE EXTENT THAT AN INDEMNIFIED PARTY IS FOUND TO HAVE
COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THIS
CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT SHALL ONLY
EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF THE INDEMNIFIED PARTY.
(e) Borrower's obligations under this Section 12.03 shall
survive any termination of this Agreement and the payment of the Notes
and shall continue thereafter in full force and effect.
(f) Borrower shall pay any amounts due under this Section
12.03 within thirty (30) days of the receipt by Borrower of notice of
the amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement or any
other Loan Document may be amended, modified or waived with Borrower's and the
Majority Lenders' prior written consent; provided that (i) no amendment,
modification or waiver which extends the final maturity of the Loans, increases
the Aggregate Maximum Revolving Credit Amounts, increases the Borrowing Base or
reduces the Monthly Reduction Amount, forgives the principal amount of any
Obligations outstanding under this Agreement, releases any guarantor of any
Obligations or releases all or substantially all of the collateral, reduces the
interest rate applicable to the Loans or the fees payable to the Lenders
generally, affects Section 2.03(a), this Section 12.04 or Section 12.06(a) or
modifies the definition of "Majority Lenders" shall be effective without consent
of all Lenders; (ii) no amendment, modification or waiver which increases the
Maximum Revolving Credit Amount of any Lender shall be effective without the
consent of such Lender; and (iii) no amendment, modification or waiver which
modifies the rights, duties or obligations of Administrative Agent shall be
effective without the consent of Administrative Agent.
Section 12.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 Assignments and Participations.
(a) Borrower may not assign its rights or obligations
hereunder or under the Notes or any Letters of Credit without the prior
consent of all of the Lenders and Administrative Agent.
(b) Any Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement pursuant to
an Assignment Agreement substantially in the form of Exhibit E (an
"Assignment"); provided, however, that (i) except in the case of an
assignment to a Lender or a Lender Affiliate, such assignment shall
require the written consent of Administrative Agent and, if no Event of
Default has occurred and is continuing, Borrower (which consent will not
be unreasonably withheld), (ii) except in the case of an assignment to a
Lender or a Lender Affiliate, any such assignment shall be in the amount
of at least $5,000,000 or such lesser amount to which Borrower and
Administrative Agent have consented and if the assigning Lender has
assigned less than all of its Percentage Share of the Loans, such
assigning Lender shall retain a Percentage Share of the Loans equating
to at least $5,000,000 or such lesser amount to which Borrower and
Administrative Agent have consented and (iii) the assignee or assignor
shall pay to Administrative Agent a processing and recordation fee of
$5,000 for each
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assignment. Any such assignment will become effective upon the execution
and delivery to Administrative Agent of the Assignment, payment of the
recordation fee and, if required, the consent of Administrative Agent
and Borrower. Promptly after receipt of an executed Assignment,
Administrative Agent shall send to Borrower a copy of such executed
Assignment. Upon receipt of such executed Assignment, Borrower, will, at
its own expense, execute and deliver new Notes to the assignor and/or
assignee, as appropriate, in accordance with their respective interests
as they appear. Upon the effectiveness of any assignment pursuant to
this Section 12.06(b), the assignee will become a "Lender," if not
already a "Lender," for all purposes of this Agreement and the other
Loan Documents. The assignor shall be relieved of its obligations
hereunder to the extent of such assignment (and if the assigning Lender
no longer holds any rights or obligations under this Agreement, such
assigning Lender shall cease to be a "Lender" hereunder except that its
rights under Sections 4.06, 5.01, 5.05 and 12.03 shall not be affected).
Administrative Agent will prepare on the last Business Day of each month
during which an assignment has become effective pursuant to this Section
12.06(b), a new Annex I giving effect to all such assignments effected
during such month, and will promptly provide the same to Borrower and
each of the Lenders. Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section
12.06(b) shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in
accordance with Section 12.06(c).
(c) Each Lender may, without the consent of Borrower,
Administrative Agent or the Issuing Bank, transfer, grant or assign
participations in all or any part of such Lender's interests hereunder
pursuant to this Section 12.06(c) to any Person, provided that: (i) such
Lender shall remain a "Lender" for all purposes of this Agreement and
the transferee of such participation shall not constitute a "Lender"
hereunder, (ii) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to
the other parties hereto for the performance of such obligations and
(iv) Borrower, Administrative Agent, the Issuing Bank and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells
such a participation shall provide that such Lender shall retain the
sole right to enforce the Loan Documents and to approve any amendment,
modification or waiver of any provision of the Loan Documents; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the participant, agree to any amendment,
modification or waiver that would (x) forgive any principal owing on any
Obligations or extend the final maturity of the Loans, (y) reduce the
interest rate (other than as a result of waiving the applicability of
any Post Default increases in interest rates) or fees applicable to any
of the Commitments, Loans or Letters of Credit in which such participant
is participating, or postpone the payment of any thereof, or (z) release
any guarantor of the Obligations or release all or substantially all of
the collateral (except as provided in the Loan Documents) supporting any
of the Commitments, Loans or Letters of Credit in which such participant
is participating. In the case of any such participation, the participant
shall not have any rights under this Agreement or any of the other Loan
Documents (the participant's rights against the granting Lender in
respect of such participation to be those set forth in the agreement
with such Lender creating such participation), and all amounts payable
by Borrower hereunder shall be determined as if such Lender had not sold
such participation, provided that such participant shall be entitled to
receive additional amounts under Article V on the same basis as if it
were a Lender and be indemnified under Section 12.03 as if it were a
Lender. In addition, each agreement creating any participation must
include an agreement by the participant to be bound by the provisions of
Section 12.14.
(d) The Lenders may furnish any information concerning
Borrower in the possession of the Lenders from time to time to assignees
and participants (including prospective assignees
62
and participants); provided that, such Persons agree to be bound by the
provisions of Section 12.14.
(e) Notwithstanding anything in this Section 12.06 to the
contrary, any Lender may assign and pledge its Note to any Federal
Reserve Bank No such assignment and/or pledge shall release the
assigning and/or pledging Lender from its obligations hereunder.
(f) Notwithstanding any other provisions of this Section
12.06, no transfer or assignment of the interests or obligations of any
Lender or any grant of participations therein shall be permitted if such
transfer, assignment or grant would require Borrower to file a
registration statement with the SEC or to qualify the Loans under the
"Blue Sky" laws of any state.
Section 12.07 Invalidity. In the event that any one or more of the
provisions contained in any of the Loan Documents, the Letters of Credit or the
Letter of Credit Agreements shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any other
Loan Document.
Section 12.08 Counterparts; Electronic Delivery of Signature Page.
This Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such counterpart. Delivery of a
manually executed signature page of this Agreement by facsimile, e-mail or other
electronic means shall be effective as delivery of an original executed
signature page of this Agreement and shall be binding on the parties hereto.
Section 12.09 Survival. The obligations of the parties under Section
4.06, Article V, and Sections 11.05 and 12.03 shall survive the repayment of the
Loans and the termination of the Commitments. To the extent that any payments on
the Obligations or proceeds of any collateral are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver or other Person under any bankruptcy
law, common law or equitable cause, then to such extent, the Obligations so
satisfied shall be revived and continue as if such payment or proceeds had not
been received and Administrative Agent's and the Lenders' Liens, security
interests, rights, powers and remedies under this Agreement and each of the
other Loan Documents shall continue in full force and effect. In such event,
each Loan Document shall be automatically reinstated and Borrower shall take
such action as may be reasonably requested by Administrative Agent and the
Lenders to effect such reinstatement.
Section 12.10 Captions. Captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
SECTION 12.11 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL OTHER
AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.12 GOVERNING LAW; SUBMISSION TO JURISDICTION.
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(A) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT TO
THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CHARGE
INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE SUCH LENDER
IS LOCATED. CH. 346 OF THE TEXAS FINANCE CODE (WHICH REGULATES CERTAIN
REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) SHALL
NOT APPLY TO THIS AGREEMENT OR THE NOTES.
(B) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER HEREBY ACCEPTS FOR
ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES
NOT PRECLUDE ADMINISTRATIVE AGENT OR ANY LENDER FROM OBTAINING
JURISDICTION OVER BORROWER IN ANY COURT OTHERWISE HAVING JURISDICTION.
(C) BORROWER HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF ADMINISTRATIVE AGENT, ANY LENDER OR ANY HOLDER
OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST BORROWER OR ITS
PROPERTIES IN ANY OTHER JURISDICTION.
(D) BORROWER, ADMINISTRATIVE AGENT AND EACH LENDER HEREBY
(I) IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY LOAN DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN; (II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION
ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO
PARTY HERETO NOR ANY REPRESENTATIVE, AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO
ENTER INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.12.
Section 12.13 Interest. It is the intention of the parties hereto that
each Lender shall conform strictly to usury laws applicable to it. Accordingly,
if the transactions contemplated hereby would be usurious as to any Lender under
laws applicable to it (including the laws of the United States of America and
the State of Texas or any other jurisdiction whose laws may be mandatorily
applicable to such Lender notwithstanding the other provisions of this
Agreement), then, in that event, notwithstanding anything to the contrary in any
of the Loan Documents or any agreement entered into in connection with or as
security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes
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interest under law applicable to any Lender that is contracted for, taken,
reserved, charged or received by such Lender under any of the Loan Documents or
agreements or otherwise in connection with the Notes shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Lender on the principal amount of the Obligations (or, to the extent
that the principal amount of the Obligations shall have been or would thereby be
paid in full, refunded by such Lender to Borrower); and (ii) in the event that
the maturity of the Notes is accelerated by reason of an election of the holder
thereof resulting from any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to any Lender may never include
more than the maximum amount allowed by such applicable law, and excess
interest, if any, provided for in this Agreement or otherwise shall be canceled
automatically by such Lender as of the date of such acceleration or prepayment
and, if theretofore paid, shall be credited by such Lender on the principal
amount of the Obligations (or, to the extent that the principal amount of the
Obligations shall have been or would thereby be paid in full, refunded by such
Lender to Borrower). All sums paid or agreed to be paid to any Lender for the
use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the full term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.13 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.13. To the extent that Chapter 303 of the Texas
Finance Code is relevant for the purpose of determining the Highest Lawful Rate,
such Lender elects to determine the applicable rate ceiling under such Chapter
by the indicated weekly rate ceiling from time to time in effect.
Section 12.14 Confidentiality. In the event that Borrower provides to
Administrative Agent or the Lenders written confidential information belonging
to Borrower, if Borrower shall denominate such information in writing as
"confidential", Administrative Agent and the Lenders shall thereafter maintain
such information in confidence in accordance with the standards of care and
diligence that each utilizes in maintaining its own confidential information.
This obligation of confidence shall not apply to such portions of the
information which (i) are in the public domain, (ii) hereafter become part of
the public domain without Administrative Agent or the Lenders breaching their
obligation of confidence to Borrower, (iii) are previously known by
Administrative Agent or the Lenders from some source other than Borrower, (iv)
are hereafter developed by Administrative Agent or the Lenders without using
Borrower's information, (v) are hereafter obtained by or available to
Administrative Agent or the Lenders from a third party who owes no obligation of
confidence to Borrower with respect to such information or through any other
means other than through disclosure by Borrower, (vi) are disclosed with
Borrower's consent, (vii) must be disclosed either pursuant to any Governmental
Requirement or to Persons regulating the activities of Administrative Agent or
the Lenders, or (viii) as may be required by law or regulation or order of any
Governmental Authority in any judicial, arbitration or governmental proceeding.
Further, Administrative Agent or a Lender may disclose any such information to
any other Lender, any independent petroleum engineers or consultants, any
independent certified public accountants, any legal counsel employed by such
Person in connection with this Agreement or any other Loan Document, including
without limitation, the enforcement or exercise of all rights and remedies
thereunder, or any assignee or participant (including prospective assignees and
participants) in the Loans; provided, however, that Administrative Agent or the
Lenders shall receive a confidentiality agreement
65
from the Person to whom such information is disclosed such that said Person
shall have the same obligation to maintain the confidentiality of such
information as is imposed upon Administrative Agent or the Lenders hereunder.
Notwithstanding anything to the contrary provided herein, this obligation of
confidence shall cease three (3) years from the date the information was
furnished, unless Borrower requests in writing at least thirty (30) days prior
to the expiration of such three year period, to maintain the confidentiality of
such information for an additional three year period. Borrower waives any and
all other rights it may have to confidentiality as against Administrative Agent
and the Lenders arising by contract, agreement, statute or law except as
expressly stated in this Section 12.14.
Section 12.15 USA Patriot Act. Each Lender hereby notifies Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the "Act"), it is required to
obtain, verify and record information that identifies Borrower, which
information includes the name and address of Borrower and other information that
will allow such Lender to identify Borrower in accordance with the Act.
Section 12.16 Exculpation Provisions. Each of the parties hereto
specifically agrees that it has a duty to read this Agreement and the other Loan
Documents and agrees that it is charged with notice and knowledge of the terms
of this Agreement and the other Loan Documents; that it has in fact read this
Agreement and is fully informed and has full notice and knowledge of the terms,
conditions and effects of this Agreement; that it has been represented by
independent legal counsel of its choice throughout the negotiations preceding
its execution of this Agreement and the other Loan Documents; and has received
the advice of its attorney in entering into this Agreement and the other Loan
Documents; and that it recognizes that certain of the terms of this Agreement
and the other Loan Documents result in one party assuming the liability inherent
in some aspects of the transaction and relieving the other party of its
responsibility for such liability. Each party hereto agrees and covenants that
it will not contest the validity or enforceability of any exculpatory provision
of this Agreement and the other Loan Documents on the basis that the party had
no notice or knowledge of such provision or that the provision is not
"conspicuous."
Section 12.17 Arbitration.
(a) Arbitration. The parties hereto agree, upon demand by
any party, to submit to binding arbitration all claims, disputes and
controversies between or among them (and their respective employees,
officers, directors, attorneys, and other agents), whether in tort,
contract or otherwise arising out of or relating to in any way (i) the
loan and related Loan Documents which are the subject of this Agreement
and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii) requests for additional
credit.
(b) Governing Rules. Any arbitration proceeding will (i)
proceed in a location in Texas selected by the American Arbitration
Association ("AAA"); (ii) be governed by the Federal Arbitration Act
(Title 9 of the United States Code), notwithstanding any conflicting
choice of law provision in any of the documents between the parties; and
(iii) be conducted by the AAA, or such other administrator as the
parties shall mutually agree upon, in accordance with the AAA's
commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be
conducted in accordance with the AAA's optional procedures for large,
complex commercial disputes (the commercial dispute resolution
procedures or the optional procedures for large, complex commercial
disputes to be referred to, as applicable, as the "Rules"). If there is
any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or
refuses to submit to arbitration following a demand by any other party
shall bear all costs and expenses incurred by such other
66
party in compelling arbitration of any dispute. Nothing contained herein
shall be deemed to be a waiver by any party that is a bank of the
protections afforded to it under 12 U.S.C. Section 91 or any similar
applicable state law.
(c) No Waiver of Provisional Remedies, Self-Help and
Foreclosure. The arbitration requirement does not limit the right of any
party to (i) foreclose against real or personal property collateral;
(ii) exercise self-help remedies relating to collateral or proceeds of
collateral such as setoff or repossession; or (iii) obtain provisional
or ancillary remedies such as replevin, injunctive relief, attachment or
the appointment of a receiver, before during or after the pendency of
any arbitration proceeding. This exclusion does not constitute a waiver
of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the
exercise of the actions detailed in Sections (i), (ii) and (iii) of this
paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration
proceeding in which the amount in controversy is $5,000,000.00 or less
will be decided by a single arbitrator selected according to the Rules,
and who shall not render an award of greater than $5,000,000.00. Any
dispute in which the amount in controversy exceeds $5,000,000.00 shall
be decided by majority vote of a panel of three arbitrators; provided,
however, that all three arbitrators must actively participate in all
hearings and deliberations. The arbitrator will be a neutral attorney
licensed in the State of Texas with a minimum of ten years experience in
the substantive law applicable to the subject matter of the dispute to
be arbitrated. The arbitrator will determine whether or not an issue is
arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will
decide (by documents only or with a hearing at the arbitrator's
discretion) any pre-hearing motions which are similar to motions to
dismiss for failure to state a claim or motions for summary
adjudication. The arbitrator shall resolve all disputes in accordance
with the substantive law of Texas and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award.
The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the
arbitrator deems necessary to the same extent a judge could pursuant to
the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure
or other applicable law. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit
of a provisional or ancillary remedy shall not constitute a waiver of
the right of any party, including the plaintiff, to submit the
controversy or claim to arbitration if any other party contests such
action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery will
be permitted in accordance with the Rules. All discovery shall be
expressly limited to matters directly relevant to the dispute being
arbitrated and must be completed no later than twenty (20) days before
the hearing date and within one hundred and eighty (180) days of the
filing of the dispute with the AAA. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for
discovery is essential for the party's presentation and that no
alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution of
any dispute arising pursuant to the terms of this Agreement shall be
determined by a separate arbitration proceeding and such dispute shall
not be consolidated with other disputes or included in any class
proceeding.
(g) Payment of Arbitration Costs and Fees. The arbitrator
shall award all costs and expenses of the arbitration proceeding.
67
(h) Miscellaneous. To the maximum extent practicable, the
AAA, the arbitrators and the parties shall take all action required to
conclude any arbitration proceeding within one hundred and eighty (180)
days of the filing of the dispute with the AAA. No arbitrator or other
party to an arbitration proceeding may disclose the existence, content
or results thereof, except for disclosures of information by a party
required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the
parties potentially applies to a dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the
dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Loan Documents or any
relationship between the parties.
[SIGNATURES BEGIN ON NEXT PAGE]
68
The parties hereto have caused this Agreement to be duly executed as
of the day and year first above written.
BORROWER: ISRAMCO ENERGY, L.L.C.
By: /s/ Xxxxx Xxxx
Name: Xxxxx Xxxx
Title: President
Address for Notices:
00000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.:(000) 000-0000
e-mail: xxxxxx@xxxxxx.xxx
Attention: Xxxxx Xxxx
With copy to:
Xxxxxxxxx Xxxxxxxxxx P.C.
0000 Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Telephone No.: (000) 000-0000
Telecopier No.:(000) 000-0000
e-mail: xxxxxxxxxxx@xxxxxxx.xxx
Attention: Xxxxx X. Xxxxxxxxxx, III
Signature Page 1 to Credit Agreement
LENDER AND AGENT: XXXXX FARGO BANK, N.A., individually
and as Administrative Agent
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Vice President
Lending Office for Loans:
0000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000
Address for Notices:
0000 Xxxxxxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
e-mail: xxxxx.xxxxxx@xxxxxxxxxx.xxx
Attention: Xxxxx Xxxxxx
With copy to:
Xxxxxxxx Xxxxx L.L.P.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.:(000) 000-0000
e-mail: xxxxxxxxx@xxxxxxxxxxxxx.xxx
Attention: Xxxxxxx X. Xxxxxxxx
Signature Page 2 to Credit Agreement
ANNEX I
LIST OF PERCENTAGE SHARES AND MAXIMUM REVOLVING CREDIT AMOUNTS
--------------------------------------------------------------
MAXIMUM REVOLVING
NAME OF LENDER PERCENTAGE SHARE CREDIT AMOUNT
---------------------- ---------------- -----------------
Xxxxx Fargo Bank, N.A. 100% $150,000,000
TOTAL 100% $150,000,000
Schedule 9.03 - 1
