CREDIT AGREEMENT
dated as of
November 26, 2001
among
CASTLE EXPLORATION COMPANY, INC.,
as Borrower,
CASTLE ENERGY CORPORATION,
as Parent,
and
BANK OF TEXAS, NATIONAL ASSOCIATION,
as Bank
$40,000,000.00
TABLE OF CONTENTS
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ARTICLE I TERMS DEFINED.............................................................................................1
Section 1.1. Definitions..................................................................................1
Section 1.2. Accounting Terms and Determinations.........................................................20
Section 1.3. Miscellaneous...............................................................................20
ARTICLE II THE CREDIT..............................................................................................20
Section 2.1. Commitment..................................................................................20
Section 2.2. Method of Borrowing.........................................................................21
Section 2.3. Letters of Credit...........................................................................22
Section 2.4. Notes.......................................................................................25
Section 2.5. Interest Rates; Payments....................................................................25
Section 2.6. Mandatory Repayments........................................................................27
Section 2.7. Mandatory Prepayment Resulting from Borrowing Base Deficiency...............................27
Section 2.8. Voluntary Prepayments.......................................................................28
Section 2.9. Mandatory Termination of Commitments; Termination
Date and Maturity...........................................................................28
Section 2.10. Voluntary Reduction of Total Commitment.....................................................28
Section 2.11. Application of Payments.....................................................................29
Section 2.12. Commitment Fee..............................................................................29
Section 2.13. Letter of Credit Fee........................................................................29
Section 2.14. Origination Fee.............................................................................29
Section 2.15. Increase Fees...............................................................................29
Section 2.16. Engineering Fees............................................................................29
Section 2.17. Other Fees..................................................................................29
ARTICLE III GENERAL PROVISIONS.....................................................................................30
Section 3.1. Delivery and Endorsement of Notes...........................................................30
Section 3.2. General Provisions as to Payments...........................................................30
Section 3.3. Funding Losses..............................................................................31
Section 3.4. Foreign Lenders, Participants, and Assignees................................................31
Section 3.5. Non-Receipt of Funds by Administrative Agent................................................32
ARTICLE IV BORROWING BASE..........................................................................................32
Section 4.1. Reserve Reports; Proposed Borrowing Base....................................................32
Section 4.2. Periodic Determinations of the Borrowing Base;
Procedures and Standards.................................................................32
Section 4.3. Special Determinations of the Borrowing Base................................................33
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Section 4.4. Initial Determination.......................................................................33
Section 4.5. Borrowing Base Deficiency...................................................................34
Section 4.6. Monthly Commitment Reductions...............................................................34
ARTICLE V COLLATERAL...............................................................................................34
Section 5.1. Security....................................................................................34
Section 5.2. Title Opinions..............................................................................35
Section 5.3. Guaranties..................................................................................35
Section 5.4. Lockbox.....................................................................................35
ARTICLE VI CONDITIONS TO BORROWINGS................................................................................36
Section 6.1. Conditions to Initial Borrowing and Letter of Credit Exposure...............................36
Section 6.2. Conditions to each Borrowing and each Letter of Credit......................................39
Section 6.3. Conditions to Borrowing after the Loan is Secured...........................................40
Section 6.4. Materiality of Conditions...................................................................40
ARTICLE VII REPRESENTATIONS AND WARRANTIES.........................................................................41
Section 7.1. Existence and Power.........................................................................41
Section 7.2. Authorization; Contravention................................................................41
Section 7.3. Binding Effect..............................................................................42
Section 7.4. Financial Information.......................................................................42
Section 7.5. Litigation..................................................................................42
Section 7.6. ERISA.......................................................................................42
Section 7.7. Taxes and Filing of Tax Returns.............................................................42
Section 7.8. Title to Properties; Liens..................................................................43
Section 7.9. Mineral Interests...........................................................................43
Section 7.10. Business; Compliance........................................................................44
Section 7.11. Licenses, Permits, Etc......................................................................44
Section 7.12. Compliance with Law.........................................................................44
Section 7.13. Ownership Interests.........................................................................44
Section 7.14. Full Disclosure.............................................................................44
Section 7.15. Organizational Structure; Nature of Business................................................45
Section 7.16. Environmental Matters.......................................................................45
Section 7.17. Burdensome Obligations......................................................................46
Section 7.18. Government Regulations......................................................................46
Section 7.19. Fiscal Year.................................................................................46
Section 7.20. No Default..................................................................................46
Section 7.21. Insider.....................................................................................46
Section 7.22. Gas Balancing Agreements and Advance Payment Contracts......................................46
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ARTICLE VIII AFFIRMATIVE COVENANTS.................................................................................46
Section 8.1. Business of Credit Parties..................................................................46
Section 8.2. Maintenance of Existence....................................................................47
Section 8.3. Right of Inspection.........................................................................47
Section 8.4. Maintenance of Insurance....................................................................47
Section 8.5. Payment of Taxes and Claims.................................................................47
Section 8.6. Compliance with Laws and Documents..........................................................48
Section 8.7. Operation of Properties and Equipment.......................................................48
Section 8.8. Further Assurances..........................................................................48
Section 8.9. Environmental Law Compliance and Indemnity..................................................49
Section 8.10. Title Data..................................................................................49
Section 8.11. Deposit Accounts............................................................................49
Section 8.12. Hedge Transactions..........................................................................50
ARTICLE IX NEGATIVE COVENANTS......................................................................................50
Section 9.1. Incurrence of Debt..........................................................................50
Section 9.2. Restricted Payments.........................................................................50
Section 9.3. Negative Pledge.............................................................................50
Section 9.4. Consolidations and Mergers..................................................................50
Section 9.5. Asset Dispositions..........................................................................50
Section 9.6. Amendments to Material Documents............................................................51
Section 9.7. Use of Proceeds.............................................................................51
Section 9.8. Investments.................................................................................51
Section 9.9. Transactions with Affiliates................................................................51
Section 9.10. ERISA. ....................................................................................51
Section 9.11. Hedge Transactions..........................................................................52
Section 9.12. Operating Leases............................................................................52
Section 9.13. Speculative Hedge Transactions..............................................................52
Section 9.14. Fiscal Year.................................................................................52
Section 9.15. Change in Business..........................................................................52
Section 9.16. Acquisition.................................................................................52
Section 9.17. Gas Balancing Agreements....................................................................53
ARTICLE X FINANCIAL COVENANTS AND REPORTING REQUIREMENTS...........................................................53
Section 10.1 Financial Covenants.........................................................................53
Section 10.2 Reporting Requirements......................................................................53
Section 10.3. ERISA Reporting Requirements................................................................56
ARTICLE XI DEFAULTS................................................................................................58
Section 11.1. Events of Default...........................................................................58
Section 11.2. Notice and Cure.............................................................................59
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ARTICLE XII AGENTS.................................................................................................60
Section 12.1. Appointment and Authorization............................................................60
Section 12.2. Agents and Affiliates....................................................................60
Section 12.3. Action by Agents.........................................................................60
Section 12.4. Consultation with Experts................................................................61
Section 12.5. Liability of Agents......................................................................61
Section 12.6. Delegation of Duties.....................................................................61
Section 12.7. Indemnification..........................................................................61
Section 12.8. Credit Decision..........................................................................61
Section 12.9. Successor Agents.........................................................................62
ARTICLE XIII PROTECTION OF YIELD; CHANGE IN LAWS...................................................................62
Section 13.1. Basis for Determining Interest Rate Inadequate...........................................62
Section 13.2. Illegality of Eurodollar Tranches........................................................63
Section 13.3. Increased Cost of Eurodollar Tranche.....................................................63
Section 13.4. Base Rate Tranche Substituted for Affected Eurodollar Tranche............................64
Section 13.5. Capital Adequacy.........................................................................64
Section 13.6. Taxes....................................................................................66
Section 13.7. Discretion of Banks as to Manner of Funding..............................................66
ARTICLE XIV MISCELLANEOUS..........................................................................................66
Section 14.1. Notices..................................................................................66
Section 14.2. Waivers and Amendments; Acknowledgments..................................................67
Section 14.3. Expenses; Documentary Taxes; Indemnification.............................................68
Section 14.4. Right and Sharing of Set-Offs............................................................69
Section 14.5. Survival.................................................................................69
Section 14.6. Limitation on Interest...................................................................70
Section 14.7. Invalid Provisions.......................................................................71
Section 14.8. Waiver of Consumer Credit Laws...........................................................71
Section 14.9. Successors and Assigns...................................................................71
Section 14.10. TEXAS LAW................................................................................72
Section 14.11 Consent to Jurisdiction; Waiver of Immunities............................................73
Section 14.12. Counterparts; Effectiveness..............................................................73
Section 14.13. No Third Party Beneficiaries.............................................................73
Section 14.14. COMPLETE AGREEMENT.......................................................................73
Section 14.15. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC..............................................74
Section 14.16. Fees and Expenses........................................................................74
Section 14.17. Notice of Final Agreement................................................................74
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EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Certificate of Ownership Interests
Exhibit C Form of Request for Borrowing
Exhibit D Form of Rollover Notice
Exhibit E Form of Compliance Certificate
Exhibit F Form of Assignment and Assumption Agreement
SCHEDULES
Schedule 1 Financial Institutions
Schedule 2 Litigation
Schedule 3 Organizational Structure
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into effective as
of the 26th day of November, 2001, among CASTLE EXPLORATION COMPANY, INC., a
Pennsylvania corporation ("Borrower"), CASTLE ENERGY CORPORATION, a Delaware
corporation ("Parent"), BANK OF TEXAS, NATIONAL ASSOCIATION, a national banking
association, as Administrative Agent ("Administrative Agent"), and BANK OF
TEXAS, NATIONAL ASSOCIATION and any other financial institutions listed on
Schedule 1 hereto as Banks (individually a "Bank" and collectively "Banks").
R E C I T A L S
A. Parent and Borrower have requested that Bank of Texas provide
Borrower with a revolving credit facility and Bank of Texas is willing to
provide such a credit facility upon the terms and subject to the conditions set
forth herein.
B. Initially, Bank of Texas will be the sole Bank and lender under this
Agreement. However, in the event that any other Banks are hereafter a party to
this Agreement, pursuant to Article XII of this Agreement, Bank of Texas,
National Association has been appointed Administrative Agent for Banks
hereunder.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants, and agreements contained herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Parent, Borrower, Administrative Agent, and Banks hereby agree as
follows:
ARTICLE I
TERMS DEFINED
Section 1.1. Definitions. The following terms, as used herein, have the
meanings assigned below:
"Adjusted Base Rate" means, on any day, the sum of (a) the Base Rate in
effect on such day, less (b) the Applicable Margin. Each change in the Adjusted
Base Rate shall become effective automatically and without notice to Borrower or
any Bank upon the effective date of each change in the Federal Funds Rate or the
Base Rate, as the case may be.
"Adjusted LIBOR Rate" applicable to any Interest Period, means a rate
per annum equal to (a) the quotient obtained (rounded upwards, if necessary, to
the next higher 1/16 of 1%) by dividing (i) the applicable LIBOR Rate by (ii)
1.00 minus the Eurodollar Reserve Percentage, plus (b) the LIBOR Spread.
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"Administrative Agent" means BANK OF TEXAS, NATIONAL ASSOCIATION, in
its capacity as Administrative Agent for Banks hereunder or any successor
thereto.
"Advance Payment Contract" means any contract whereby any Credit Party
either (a) receives or becomes entitled to receive (either directly or
indirectly) any payment (an "Advance Payment") to be applied toward payment of
the purchase price of Hydrocarbons produced or to be produced from Mineral
Interests owned by any Credit Party and which Advance Payment is paid or to be
paid in advance of actual delivery of such production to or for the account of
the purchaser regardless of such production, or (b) grants an option or right of
refusal to the purchaser to take delivery of such production in lieu of payment,
and, in either of the foregoing instances, the Advance Payment is, or is to be,
applied as payment in full for such production when sold and delivered or is, or
is to be, applied as payment for a portion only of the purchase price thereof or
of a percentage or share of such production; provided that inclusion of the
standard "take or pay" provision in any gas sales or purchase contract or any
other similar contract shall not, in and of itself, constitute such contract as
an Advance Payment Contract for the purposes hereof.
"Affiliate" means, as to any Person, any Subsidiary of such Person, or
any other Person which, directly or indirectly, controls, is controlled by, or
is under common control with, such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or partnership interests, or by contract or
otherwise.
"Agent" means Administrative Agent, Sole Lead Arranger, or Book Runner;
and "Agents" means Administrative Agent, Sole Lead Arranger, and Book Runner,
collectively.
"Agreement" means this Credit Agreement, including the Schedules and
Exhibits hereto, as amended or supplemented from time to time.
"Aggregate Note Amounts" means the aggregate face amount of all Notes,
which shall initially be $40,000,000.00.
"Appeal L/C" means a Letter of Credit in an amount not to exceed
$3,100,000.00, to be issued by Bank of Texas for the account of Castle Texas
Production Limited Partnership, and for the benefit of Western Surety Company,
as security for an appeal bond to be posted for the appeal of the case styled:
"The Long Trusts v. Castle Texas Production Limited Partnership, et al," Case
No. 96- 123 in the District Court of Xxxx County, Texas, 4th Judicial District.
"Applicable Margin" means, on any date, with respect to each Base Rate
Tranche, (i) so long as no Triggering Event has occurred, the Applicable Margin
shall be zero percent (0.0%); and (ii) after a Triggering Event, and after
satisfaction of the conditions set forth in Section 6.3 below, the Applicable
Margin shall be an amount determined by reference to the ratio of Outstanding
Credit to the Borrowing Base on such date in accordance with the table below:
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=======================================================================
Ratio of Outstanding Applicable Margin for
Credit to Borrowing Base Base Rate Tranches
-----------------------------------------------------------------------
< .50 to 1 To be determined
-----------------------------------------------------------------------
>= 0.50 to 1 <= 0.75 to 1 To be determined
-----------------------------------------------------------------------
> 0.75 to 1 To be determined
=======================================================================
"Assignee" has the meaning given such term in Section 14.9(c).
"Assignment and Assumption Agreement" has the meaning given such term
in Section 14.9(c).
"Authorized Officer" means, as to any Person, any of its Chairman,
Vice-Chairman, President, Executive Vice President, Senior Vice President, or
Vice President, duly authorized to act on behalf of such Person.
"Availability" means, at any time, (a) the Borrowing Base in effect at
such time, minus (b) the Outstanding Credit at such time.
"Bank" means any financial institution listed on Schedule 1 as having a
Commitment, and its successors and assigns, and "Banks" shall mean all Banks.
"Bank of Texas" means BANK OF TEXAS, NATIONAL ASSOCIATION, a national
banking association, in its capacity as a Bank.
"Base Rate" means, for any day, the floating rate of interest
determined by Administrative Agent as the greater of (i) the rate of interest
per annum then most recently published by The Wall Street Journal as the "prime
rate" on corporate loans for large U.S. commercial banks, as published in the
Money Rates section of The Wall Street Journal, or (ii) the sum of the Federal
Funds Rate, plus one half of one percent (0.5 %), each change in the Base Rate
to become effective without notice to Borrower on the effective date of each
such change.
"Base Rate Borrowing" means any Borrowing which will constitute a Base
Rate Tranche.
"Base Rate Tranche" means the portion of the principal of the Loan
bearing interest with reference to the Adjusted Base Rate.
"Book Runner" means BANK OF TEXAS, NATIONAL ASSOCIATION, in its
capacity as book runner for the credit facility hereunder or any successor
thereto, in the event that the Loan is hereafter syndicated.
"Borrower" means CASTLE EXPLORATION COMPANY, INC., a Delaware
corporation.
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"Borrowing" means any disbursement to Borrower under, or to satisfy the
obligations of any Credit Party under, any of the Loan Documents.
"Borrowing Base" means the Borrowing Base as determined in accordance
with Section 4.2 hereof and refers to the designated loan value (as calculated
by Banks in their sole discretion) assigned to the discounted present value of
future net income accruing to the Mineral Interests based upon Banks' in-house
evaluation. Banks' determination of the Borrowing Base will use such
methodology, assumptions, and discount rates customarily used by Banks with
respect to credits of a similar size and nature in assigning collateral value to
oil and gas properties and will be based upon such other credit factors or
financial information available to Banks at the time of each determination,
including, without limitation, Borrower's assets, liabilities, cash flow,
liquidity, business, properties, prospects, management, and ownership.
"Borrowing Base Deficiency" means, as of any date, the amount, if any,
by which (a) the Outstanding Credit on such date, exceeds (b) the Borrowing Base
in effect on such date; provided, that, for purposes of computing the existence
and amount of any Borrowing Base Deficiency, Letter of Credit Exposure will not
be deemed to be outstanding to the extent funds have been deposited with
Administrative Agent to secure such Letter of Credit Exposure pursuant to
Section 2.3.
"Borrowing Base Properties" means all Mineral Interests evaluated by
Banks for purposes of establishing the Borrowing Base. The Borrowing Base
Properties on the Closing Date consist of the Mineral Interests described in the
Reserve Report.
"Borrowing Date" means the Eurodollar Business Day or the Domestic
Business Day, as the case may be, upon which the proceeds of any Borrowing are
made available to Borrower or to satisfy the obligations of any Credit Party.
"Capital Lease" means, for any Person as of any date, any lease of
property, real or personal, which would be capitalized on a balance sheet of the
lessee prepared as of such date in accordance with GAAP.
"Change of Control" means the occurrence of any of the following
whether voluntarily or involuntary, including by operation of law: (a) Borrower
or any other Credit Party (other than Parent) shall cease to be a wholly-owned
Subsidiary of Parent, or (b) Xxx Xxxxxx shall cease to own at least 15% of the
issued and outstanding voting shares in Parent.
"Closing Date" means November 26, 2001.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations and rulings issued thereunder.
"Commitment" means, with respect to any Bank, the commitment of such
Bank to lend its Commitment Percentage of the Total Commitment to Borrower
pursuant to Section 2.1 hereof, as such Commitment may be terminated and/or
reduced from time to time in accordance with the provisions hereof. On the
Closing Date, the amount of each Bank's Commitment is the amount set
4
forth opposite such Bank's name on Schedule 1; provided, that, after giving
effect to any Assignment and Assumption Agreement, the Commitment of each Bank
shall be the amount set forth in the amended Schedule 1 prepared by
Administrative Agent and circulated to Borrower and Banks pursuant to Section
14.9(c) hereof.
"Commitment Fee Percentage" means four-tenths of one percent (0.4%) per
annum (calculated on the basis of actual days elapsed and as if each calendar
year consisted of 360 days).
"Commitment Percentage" means, with respect to any Bank at any time,
the Commitment Percentage for such Bank set forth on Schedule 1 (as the same may
be amended and reflected in an amended Schedule 1 prepared and circulated by
Administrative Agent to Borrower and Banks pursuant to Section 14.9(c) hereof).
"Consolidated Current Assets" means, at any time, the current assets of
Parent and its Consolidated Subsidiaries at such time determined in accordance
with GAAP.
"Consolidated Current Liabilities" means, at any time, the current
liabilities of Parent and its Consolidated Subsidiaries at such time, determined
in accordance with GAAP.
"Consolidated EBITDA" means, for any period, the Consolidated Net
Income for such period, plus each of the following determined for Parent and its
Consolidated Subsidiaries on a consolidated basis for such period in accordance
with GAAP: (a) any provision for (or less any benefit from) income or franchise
Taxes included in determining Consolidated Net Income; (b) Consolidated Net
Interest Expense deducted in determining Consolidated Net Income; (c)
depreciation, depletion, and amortization expense deducted in determining
Consolidated Net Income; (d) other noncash charges deducted in determining
Consolidated Net Income to the extent not already included in clauses (b) and
(c) of this definition; and (e) costs and expenses associated with seismic,
geological, and geophysical services performed in connection with, and
attributable to, oil and gas exploration, to the extent deducted in determining
Consolidated Net Income.
"Consolidated Net Income" means, as of any period, the net income (or
loss) of Parent and its Consolidated Subsidiaries for such period determined in
accordance with GAAP, but excluding: (a) the income of any other Person (other
than its Consolidated Subsidiaries) in which such Person or any of its
Subsidiaries has an ownership interest, unless received by such Person or its
Consolidated Subsidiaries in a cash distribution; (b) any after-tax gains
attributable to asset dispositions; (c) to the extent not included in clauses
(a) and (b) above, any after-tax (i) extraordinary gains (net of extraordinary
losses), or (ii) non-cash nonrecurring gains; and (d) non-cash or nonrecurring
charges.
"Consolidated Net Interest Expense" means, for any period, the
remainder of the following for Parent and its Consolidated Subsidiaries for such
period, calculated in accordance with GAAP: (a) interest expense, minus (b)
interest income.
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"Consolidated Subsidiaries" means, for any Person, at any time, any
Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in its consolidated financial statements as of such time.
"Consolidated Tangible Net Worth" means the consolidated net worth of
Parent and its Consolidated Subsidiaries, excluding intangible assets,
determined in accordance with GAAP.
"Credit Parties" means, collectively, Parent, Borrower, and any
Subsidiary of Parent, but excluding the Excluded Subsidiaries, and "Credit
Party" means any one of the foregoing.
"Current Financials" means (a) the most recent annual audited
consolidated balance sheet of Parent and its Consolidated Subsidiaries,
including Borrower, and the related consolidated statements of operations and
cash flow delivered to Banks hereunder, and (b) the most recent quarterly
unaudited consolidated balance sheet of Parent and its Consolidated Subsidiaries
and the related consolidated statements of operations and cash flow delivered to
Banks hereunder. Until superseded by the delivery by Borrower to Banks of more
recent financial statements pursuant to Section 10.2, "Current Financials" shall
mean, collectively, (a) the annual audited consolidated balance sheets of Parent
and its Consolidated Subsidiaries as of September 30, 2000, and the related
statements of operations and cash flow for the Fiscal Year then ended, reported
on by KPMG, and (b) the quarterly unaudited consolidated balance sheets of
Parent and its Consolidated Subsidiaries as of June 30, 2001, and the related
consolidated statements of operations and cash flow for the Fiscal Quarter then
ended, copies of which have been provided to Banks.
"Current Ratio" is defined as the ratio of (1) Consolidated Current
Assets plus Availability to (2) Consolidated Current Liabilities (but excluding
current maturities of long-term debt).
"Debt" of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) all other
indebtedness (including obligations under Capital Leases, other than Capital
Leases which are usual and customary oil and gas leases) of such Person on which
interest charges are customarily paid or accrued, (d) all Guaranties by such
Person, (e) the unfunded or unreimbursed portion of all letters of credit issued
for the account of such Person, (f) any amount owed by such Person representing
the deferred purchase price for property or services acquired by such Person,
excluding, however, trade payables incurred in the ordinary course of business
which are not more than ninety (90) days past the invoice date, and joint
interest xxxxxxxx on oil and gas properties incurred in the ordinary course of
business which are not more than ninety (90) days past the due date, (g) all
obligations of such Person secured by a Lien on any property or asset owned or
held by that Person regardless of whether the indebtedness secured thereby shall
have been assumed by that Person or is non-recourse to the credit of that
Person, and (h) all liability of such Person as a general partner of a
partnership for obligations of such partnership of the nature described in (a)
through (g) preceding.
"Debt Service Coverage Ratio" is defined as the ratio of (1) the
Consolidated EBITDA for the most recent four Fiscal Quarters on rolling basis,
divided by (2) the sum of the current maturities of long term debt (excluding
the Loan) as of the most recent Fiscal Quarter, plus the greater of: (i)
6
the total amount outstanding on the Loan divided by the Monthly Commitment
Reductions, if any, for the Fiscal Quarter. At Administrative Agent's
discretion, extraordinary non-recurring events may be excluded from this
calculation.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate" means, in respect of any principal of the Loan or any
other amount payable by Borrower under any Loan Documents which is not paid when
due (whether at stated maturity, by acceleration, or otherwise), a rate per
annum during the period commencing on the due date until such amount is paid in
full equal to the sum of (i) five percent (5%), plus (ii) the Adjusted Base Rate
as in effect from time to time (provided, that if such amount in default is
principal of a Eurodollar Borrowing and the due date is a day other than the
last day of an Interest Period therefor, the "Default Rate" for such principal
shall be, for the period from and including the due date and to but excluding
the last day of the Interest Period therefor, the sum of (a) five percent (5%),
plus (b) the LIBOR Spread, plus (c) the LIBOR Rate for such Borrowing for such
Interest Period as provided in Section 2.5 hereof, and thereafter, the rate
provided for above in this definition).
"Determination" means (i) any Periodic Determination, (ii) any Special
Determination, and (iii) the Initial Determination.
"Determination Date" means (a) with respect to any Periodic
Determination, each May 31 and November 30, commencing May 31, 2002, (b) with
respect to any Special Determination, the first day of the first month which is
not less than twenty (20) Domestic Business Days following the date of a request
for a Special Determination, and (c) with respect to the Initial Determination,
June 1, 2001. The Closing Date shall also constitute a Determination Date for
purposes of this Agreement.
"Distribution" by any Person, means (a) with respect to any stock
issued by such Person or any partnership, joint venture, limited liability
company, membership or other equity ownership interest of such Person, the
retirement, redemption, purchase, or other acquisition for value of any such
stock, partnership, joint venture, limited liability company, membership or
other equity ownership interest, (b) the declaration or payment of any dividend
or other distribution on or with respect to any stock, partnership, joint
venture, limited liability company, membership or other equity ownership
interest of any Person, and (c) any other payment by such Person with respect to
such stock, partnership, joint venture, limited liability company, membership or
other equity ownership interest.
"Domestic Business Day" means any day except a Saturday, Sunday, or
other day on which national banks in Houston, Texas, are authorized by Law to
close.
"Domestic Lending Office" means, as to each Bank, its office identified
on Schedule 1 as its Domestic Lending Office or such other office as such Bank
may hereafter designate as its Domestic Lending Office by notice to Borrower and
Administrative Agent.
7
"Environmental Complaint" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, proceeding,
judgment, letter or other communication from any federal, state or municipal
authority or any other party against any Credit Party involving (a) a Hazardous
Discharge from, onto or about any real property owned, leased, or operated at
any time by any Credit Party, (b) a Hazardous Discharge caused, in whole or in
part, by any Credit Party or by any Person acting on behalf of or at the
instruction of any Credit Party, or (c) any violation of any Environmental Law
by any Credit Party.
"Environmental Law" means any Law, statute, ordinance, rule,
regulation, order or determination of any Governmental Authority or any board of
fire underwriters (or other body exercising similar functions), affecting any
real or personal property owned, operated or leased by any Credit Party or any
other operation of any Credit Party in any way pertaining to health, safety or
the environment, including, without limitation, all applicable zoning ordinances
and building codes, flood disaster Laws and health, safety and environmental
Laws and regulations, and further including, without limitation, (a) the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986 (as
amended from time to time, herein referred to as "CERCLA"), (b) the Resource
Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act
of 1980, the Solid Waste Recovery Act of 1976, as amended by the Solid Waste
Disposal Act of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as
amended from time to time, herein referred to as "RCRA"), (c) the Safe Drinking
Water Act, as amended, (d) the Toxic Substances Control Act, as amended, (e) the
Clean Air Act, as amended, (f) the Occupational Safety and Health Act of 1970,
as amended, (g) the Laws, rules and regulations of any state having jurisdiction
over any real or personal property owned, operated or leased by any Credit Party
or any other operation of any Credit Party which relates to health, safety or
the environment, as each may be amended from time to time, and (h) any federal,
state or municipal Laws, ordinances or regulations which may now or hereafter
require removal of asbestos or other hazardous wastes or impose any liability
related to asbestos or other hazardous wastes. The terms "hazardous substance,"
"petroleum," "release" and "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, in the event either 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
with respect to all provisions of this Agreement; and provided further that, to
the extent the Laws of the state in which any real or personal property owned,
operated or leased by any Credit Party is located establish a meaning for
"hazardous substance," "petroleum," "release," "solid waste" or "disposal" which
is broader than that specified in either CERCLA or RCRA, such broader meaning
shall apply in so far as such broader meaning is applicable to the real or
personal property owned, operated or leased by any such Credit Party and located
in such state.
"Environmental Liability" means any liability, loss, fine, penalty,
charge, Lien, damage, cost, or expense of any kind that results directly or
indirectly, in whole or in part (a) from the violation of any Environmental Law,
(b) from the release or threatened release of any Hazardous Substance, (c) from
removal, remediation, or other actions in response to the release or threatened
release of any Hazardous Substance, (d) from actual or threatened damages to
natural resources, (e) from the imposition of injunctive relief or other orders,
(f) from personal injury, death, or property damage
8
which occurs as a result of any Credit Party's use, storage, handling, or the
release or threatened release of a Hazardous Substance, or (g) from any
environmental investigation performed at, on, or for any real property owned by
any Credit Party.
"Equity" means shares of capital stock or a partnership, profits,
capital, or member interest, or options, warrants, or any other right to
substitute for or otherwise acquire the capital stock or a partnership, profits,
capital, or member interest of any Credit Party.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rulings and regulations issued thereunder as from time to time
in effect.
"ERISA Affiliate" means any corporation or trade or business under
common control with any Credit Party as determined under Section 4001(a)(14) of
ERISA.
"ERISA Event" means, with respect to any Credit Party and any ERISA
Affiliate, (a) a "reportable event" as defined in Section 4043 of ERISA (other
than a reportable event not subject to the provision for thirty (30) days notice
to the PBGC under regulations issued under Section 4043 of ERISA), (b) the
withdrawal of any Credit Party 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, (c) the filing of a notice of intent to terminate a Plan under Section
4041(c) of ERISA, (d) the institution of proceedings to terminate a Plan by the
PBGC, (e) the failure to make required contributions which could result in the
imposition of a Lien under Section 412 of the Code or Section 302 of ERISA, or
(f) any other event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"Eurodollar Borrowing" means any Borrowing which will constitute a
Eurodollar Tranche.
"Eurodollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London, England.
"Eurodollar Lending Office" means, as to each Bank, its office, branch
or affiliate located at its address identified on Schedule 1 as its Eurodollar
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Eurodollar Lending Office by notice to Borrower and
Administrative Agent.
"Eurodollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York, New York, in respect of "Eurocurrency liabilities"
(or in respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Tranches is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents). The Adjusted
LIBOR Rate shall be adjusted automatically on and as of the effective date of
any change in the Eurodollar Reserve Percentage.
9
"Eurodollar Tranche" means, with respect to any Interest Period, any
portion of the principal amount outstanding under the Loan which bears interest
at a rate computed by reference to the Adjusted LIBOR Rate for such Interest
Period.
"Event of Default" has the meaning set forth in Section 11.1 hereof.
"Excluded Subsidiaries" means Indian Refining, L.P., Indian Refining
and Marketing Inc., and Indian Oil Company.
"Facility Guaranty" means a Guaranty in Proper Form, to be executed by
Guarantors in favor of Banks, pursuant to which Guarantors guarantee payment and
performance in full of the Obligations.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted average
of the rates on overnight federal funds transactions with members 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 Domestic Business Day next
succeeding such day; provided that (a) if the day for which such rate is to be
determined is not a Domestic Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Domestic Business
Day as so published on the next succeeding Domestic Business Day, and (b) if
such rate is not so published on such next succeeding Domestic Business Day, the
Federal Funds Rate for any day shall be the average rate charged to
Administrative Agent on such day on such transactions as determined by
Administrative Agent.
"Fiscal Quarter" means the three (3) month periods ending March 31,
June 30, September 30, or December 31 of each Fiscal Year.
"Fiscal Year" means a twelve (12) month period ending September 30.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods after the
Closing Date so as to properly reflect the financial condition, and the results
of operations and changes in financial position, of a Person and its
Consolidated Subsidiaries, except that any accounting principle or practice
required to be changed by said Accounting Principles Board or Financial
Accounting Standards Board (or other appropriate board or committee of said
Boards) in order to continue as a generally accepted accounting principle or
practice may be so changed.
"Gas Balancing Agreement" means any agreement or arrangement whereby
any Credit Party, or any other party having an interest in any Hydrocarbons to
be produced from Mineral Interests in which any Credit Party owns an interest,
has a right to take more than its proportionate share of production therefrom.
10
"Governmental Authority" means any court or governmental department,
commission, board, bureau, agency, or instrumentality of any nation or of any
province, state, commonwealth, nation, territory, possession, county, parish, or
municipality, whether now or hereafter constituted or existing.
"Guarantors" means Parent, CEC, INC., a Delaware corporation, CASTLE
TEXAS OIL AND GAS LIMITED PARTNERSHIP, a Texas limited partnership, CASTLE TEXAS
EXPLORATION LIMITED PARTNERSHIP, a Texas limited partnership, and REDECO
PETROLEUM COMPANY LIMITED, a Guernsey company, or the successor to Redeco
pursuant to planned restructuring of Redeco's Romanian concessions, and each
future Subsidiary of Parent (other than Borrower and Excluded Subsidiaries).
"Guaranty" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions, by "comfort letter" or other similar undertaking
of support or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such Debt of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided that the
term Guaranty shall not include endorsements for collection or deposit in the
ordinary course of business.
"Hazardous Discharge" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, or dumping of any Hazardous Substance from or onto any real property
owned, leased, or operated at any time by any Credit Party or any real property
owned, leased, or operated by any other party.
"Hazardous Substance" means any pollutant, toxic substance, hazardous
waste, compound, element, or chemical that is defined as hazardous, toxic,
noxious, dangerous, or infectious pursuant to any Environmental Law or which is
otherwise regulated by any Environmental Law.
"Hedge Transaction" means any commodity, interest rate, currency, or
other swap, option, collar, futures contract, advance payment contract, or other
contract pursuant to which a Person xxxxxx risks related to commodity prices,
interest rates, currency exchange rates, securities prices, or financial market
conditions. Hedge Transactions expressly include Oil and Gas Hedge Transactions,
but exclude contracts for the sale of natural gas, entered into in the ordinary
course of business and with natural gas price to fluctuate at market terms.
"Hydrocarbons" means crude oil, natural gas, casinghead gas, drip
gasolines, natural gasoline, condensate, distillate, and all other liquid and
gaseous hydrocarbons produced or to be produced in conjunction therewith, and
all products, by-products, and all other substances derived therefrom or the
processing thereof.
11
"Immaterial Title Deficiencies" means, with respect to Borrowing Base
Properties, defects or clouds on title, discrepancies in reported net revenue
and working interest ownership percentages, and other Liens, defects,
discrepancies, and similar matters which do not, individually or in the
aggregate, affect Borrowing Base Properties with a Recognized Value greater than
two percent (2%) of the Recognized Value of all such Borrowing Base Properties.
"Initial Borrowing Base" means a Borrowing Base in the amount of
$10,000,000, which shall be in effect during the period commencing on the
Closing Date and continuing until the first Determination after the Closing
Date.
"Initial Determination" means the initial determination of the
Borrowing Base by Bank of Texas.
"Interest Coverage Ratio" is defined as the ratio of (1) the
Consolidated EBITDA for the most recent four Fiscal Quarters on rolling basis,
divided by (2) Consolidated Net Interest Expense for the same period. At
Administrative Agent's discretion, extraordinary non-recurring events may be
excluded from this calculation.
"Interest Option" has the meaning given such term in Section 2.5(c).
"Interest Period" means, with respect to each Eurodollar Tranche, the
period commencing on the Borrowing Date or Conversion Date applicable to such
Tranche and ending two (2) or three (3) months thereafter, as Borrower may elect
in the applicable Request for Borrowing; provided that: (a) any Interest Period
which would otherwise end on a day which is not a Eurodollar Business Day shall
be extended to the next succeeding Eurodollar Business Day unless such
Eurodollar Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Eurodollar Business Day; (b) any
Interest Period which begins on the last Eurodollar Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall, subject to clause (c)
below, end on the last Eurodollar Business Day of a calendar month; (c) if any
Interest Period includes a date on which any payment of principal of the Loan
subject to such Eurodollar Tranche is required to be made hereunder, but does
not end on such date, then (i) the principal amount of each Eurodollar Tranche
required to be repaid on such date shall have an Interest Period ending on such
date, and (ii) the remainder of each such Eurodollar Tranche shall have an
Interest Period determined as set forth above; and (d) no Interest Period shall
extend past the expiration of the Termination Date.
"Investment" means, with respect to any Person, any loan, advance,
extension of credit, capital contribution to, investment in or purchase of the
stock securities of, or interests in, any other Person; provided, that
"Investment" shall not include current customer and trade accounts which are
payable in accordance with customary trade terms.
"Laws" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth, nation,
territory, possession, county, township, parish, municipality or Governmental
Authority.
12
"Lending Office" means, as to any Bank, its Domestic Lending Office or
its Eurodollar Lending Office, as the context may require.
"Letter of Credit Application" has the meaning given such term in
Section 2.3.
"Letter of Credit Exposure" of any Bank means, collectively, such
Bank's aggregate participation in (a) the unfunded portion of Letters of Credit
outstanding at any time, and (b) the funded but unreimbursed (by Borrower)
portion of Letters of Credit outstanding at such time.
"Letter of Credit Fee" means, with respect to any Letter of Credit
issued hereunder, a fee in the amount of two and one-quarter percent (2.25%) per
annum, calculated on the full face amount of each Letter of Credit, payable
quarterly in advance, pursuant to Section 2.13.
"Letter of Credit Fronting Fee" means, with respect to each Letter of
Credit issued hereunder, a fee equal to $500 per Letter of Credit.
"Letter of Credit Issuer" has the meaning set forth in Section 2.3.
"Letters of Credit" means, collectively, letters of credit issued for
the account of Borrower pursuant to Section 2.3.
"LIBOR Rate" means, for any Eurodollar Tranche for any Interest Period
therefor, the rate per annum determined by Administrative Agent (rounded upward,
if necessary, to the next higher 1/16 of 1%), as reported by Reuters news
service (or such other similar news reporting service as Administrative Agent
may subscribe to at the time such LIBOR Rate is determined), as the London
interbank offered rate for deposits in dollars at approximately 11:00 a.m.
(London time) two (2) Eurodollar Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period.
"LIBOR Spread" means, on any date, with respect to each Eurodollar
Tranche, (i) so long as no Triggering Event has occurred, the LIBOR Spread shall
be two and one-quarter percent (2.25%); and (ii) after any Triggering Event, and
after satisfaction of the conditions set forth in Section 6.3 below, the LIBOR
Spread shall be an amount determined by reference to the ratio of Outstanding
Credit to the Borrowing Base on such date in accordance with the table below:
=======================================================================
Ratio of Outstanding LIBOR Spread for
Credit to Borrowing Base Eurodollar Tranches
-----------------------------------------------------------------------
< .50 to 1 To be determined
-----------------------------------------------------------------------
>= 0.50 to 1 <= 0.75 to 1 To be determined
-----------------------------------------------------------------------
> 0.75 to 1 To be determined
=======================================================================
"Lien" means with respect to any asset, any mortgage, lien, pledge,
charge, security interest, or encumbrance of any kind in respect of such asset.
For purposes of this Agreement, a Credit Party shall be deemed to own subject to
a Lien any asset which is acquired or held subject to the interest
13
of a vendor or lessor under any conditional sale agreement, Capital Lease, or
other title retention agreement relating to such asset.
"Loan" means the revolving credit loans in an amount outstanding at any
time not to exceed the amount of the Total Commitment then in effect, less the
amount of the Letter of Credit Exposure then outstanding, to be made by Banks to
Borrower pursuant to the Commitments of each Bank.
"Loan Documents" means this Agreement, the Notes, each Facility
Guaranty now or hereafter executed, the Mortgages, each Pledge Agreement now or
hereafter executed, and all other certificates, documents, or instruments
delivered in connection with this Agreement, as the foregoing may be amended
from time to time.
"Margin Regulations" mean Regulations T, U, and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"Margin Stock" means "margin stock" as defined in Regulation U.
"Material Adverse Change" means any circumstance or event that has had
or would reasonably be expected to have a Material Adverse Effect.
"Material Adverse Effect" means a material adverse effect on (a) the
assets, liabilities, financial condition, results of operations or prospects of
any Credit Party, individually or taken as a whole, (b) the right or ability of
any Credit Party to fully, completely and timely perform its obligations under
the Loan Documents, (c) the validity or enforceability of any Loan Documents
against any Credit Party (to the extent a party thereto), or (d) the validity,
perfection, or priority of any Lien on a material portion of the assets intended
to be created under or pursuant to any Loan Documents to secure the Obligations.
"Material Agreement" means any material written or enforceable oral
agreement, contract, commitment, or understanding to which a Person is a party,
by which such Person is directly or indirectly bound, or to which any assets of
such Person may be subject, which is not cancelable by such Person upon notice
of thirty (30) days or less without liability for further payment other than
nominal penalty.
"Material Gas Imbalance" means, with respect to all Gas Balancing
Agreements to which any Credit Party is a party or by which any Mineral Interest
owned by any Credit Party is bound, a net gas imbalance to Borrower or any other
Credit Party, individually or taken as a whole, in excess of $250,000.
"Maximum Lawful Rate" means, for each Bank, the maximum rate (or, if
the context so permits or requires, an amount calculated at such rate) of
interest which, at the time in question would not cause the interest charged on
the portion of the Loan owed to such Bank at such time to exceed the maximum
amount which such Bank would be allowed to contract for, charge, take, reserve,
or receive under applicable Law after taking into account, to the extent
required by applicable Law, any and all relevant payments or charges under the
Loan Documents. To the extent
14
the Laws of the State of Texas are applicable for purposes of determining the
"Maximum Lawful Rate," such term shall mean the "interest rate ceiling" from
time to time in effect under the Texas Finance Code, as amended, substituted
for, or restated, or, if permitted by applicable Law and effective upon the
giving of the notices required by the Texas Finance Code (or effective upon any
other date otherwise specified by applicable Law), the "quarterly ceiling" or
"annualized ceiling" from time to time in effect under the Texas Finance Code,
whichever Administrative Agent (with the approval of Required Banks) shall elect
to substitute for the "interest rate ceiling" and vice versa, each such
substitution to have the effect provided in the Texas Finance Code, and
Administrative Agent (with the approval of Required Banks) shall be entitled to
make such election from time to time and one or more times and, without notice
to Borrower, to leave any such substitute rate in effect for subsequent periods
in accordance with the Texas Finance Code.
"Mineral Interests" means rights, estates, titles, and interests in and
to oil and gas leases and any oil and gas interests, royalty and overriding
royalty interests, production payments, net profits interests, oil and gas fee
interests, and other rights therein, including, without limitation, any
reversionary or carried interests relating to the foregoing, together with
rights, titles, and interests created by or arising under the terms of any
unitization, communitization, and pooling agreements or arrangements, and all
properties, rights and interests covered thereby, whether arising by contract,
by order, or by operation of Law, which now or hereafter include all or any part
of the foregoing.
"Monthly Commitment Reduction" means the monthly commitment reduction
as determined in accordance with Section 4.6 hereof and refers to the amount set
by Administrative Agent by which the Borrowing Base shall be automatically
reduced effective as of the last day of each successive calendar month until the
next Determination. Administrative Agent's determination of the Monthly
Commitment Reduction will use such methodology, assumptions, and discount rates
customarily used with respect to credits of a similar size and nature in
determining commitment reductions and will be based upon such other credit
factors or financial information available to Administrative Agent at the time
of each Determination, including, without limitation, the economic half-life of
the Mineral Interests, and Borrower's assets, liabilities, cash flow, liquidity,
business, properties, prospects, management, and ownership. The Monthly
Commitment Reduction will initially be set at zero dollars ($0).
"Monthly Date" means the fifth (5th) day of each calendar month.
"Mortgages" means all mortgages, deeds of trust, security agreements,
pledge agreements, and similar documents, instruments and agreements creating,
evidencing, perfecting or otherwise establishing the Liens required by Article V
hereof as may have been heretofore or may hereafter be granted or assigned to
Administrative Agent to secure payment of the Obligations or any part thereof.
All Mortgages shall be in Proper Form.
"Note" means a promissory note of Borrower, payable to the order of a
Bank, substantially in the form of Exhibit A, evidencing the obligation of
Borrower to repay to such Bank its Commitment Percentage of the Loan, together
with all modifications, extensions, renewals, and rearrangements thereof, and
"Notes" means all of such Notes.
15
"Obligations" means, collectively, all present and future indebtedness,
obligations, and liabilities, and all renewals and extensions thereof, or any
part thereof, of each Credit Party to any Bank or to any Affiliate of any Bank
(a) arising pursuant to the Loan Documents, and all interest accrued thereon and
costs, expenses and reasonable attorneys fees incurred in the enforcement or
collection thereof, and (b) arising under or in connection with any Hedge
Transaction entered into between any Credit Party and any Bank or any Affiliate
of any Bank, regardless of whether such indebtedness, obligations, and
liabilities are direct, indirect, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several.
"Oil and Gas Hedge Transactions" means Hedge Transactions pursuant to
which any Person xxxxxx the price to be received by it for future production of
Hydrocarbons, but excluding contracts for the sale of natural gas, entered into
in the ordinary course of business and with natural gas price to fluctuate at
market terms.
"Operating Lease" means any lease, sublease, license, or similar
arrangement (other than a Capital Lease and other than leases with a primary
term of one year or less or which can be terminated by the lessee upon notice of
one year or less without incurring a penalty), pursuant to which a Person
leases, subleases, or otherwise is granted the right to occupy, take possession
of, or use property whether real, personal, or mixed; provided, that "Operating
Lease" shall not include oil, gas, or mineral leases entered into or assigned to
any Credit Party in the ordinary course of such Credit Party's business.
"Outstanding Credit" means, at any time, the sum of (i) the aggregate
outstanding Letter of Credit Exposure on such date, including the aggregate
Letter of Credit Exposure related to Letters of Credit to be issued on such
date, plus (ii) the aggregate outstanding principal balance of the Loan on such
date, including the amount of any Borrowing to be made on such date.
"Parent" means CASTLE ENERGY CORPORATION, a Delaware corporation.
"Participant" has the meaning given such term in Section 14.9(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Periodic Determination" means any determination of the Borrowing Base
pursuant to Section 4.2.
"Permitted Encumbrances" means with respect to any asset:
(a) Liens securing the Obligations in favor of Banks or their
Affiliates under the Loan Documents;
(b) minor defects in title which do not secure the payment of
money and otherwise have no material adverse effect on the value or operation of
the subject property, and for the purposes of this Agreement, a minor defect in
title shall include, without limitation, easements,
16
rights-of-way, servitudes, permits, surface leases and other similar rights in
respect of surface operations, and easements for pipelines, streets, alleys,
highways, telephone lines, power lines, railways and other easements and
rights-of-way, on, over or in respect of any of the properties of any Credit
Party that are customarily granted in the oil and gas industry;
(c) contractual or statutory Liens securing obligations for
labor, services, materials, and supplies furnished to Mineral Interests arising
under joint operating agreements entered into in the ordinary course of
business, in each case securing obligations which are not delinquent (except to
the extent permitted by Section 8.5);
(d) contractual or statutory mechanic's, materialmen's,
warehouseman's, journeyman's and carrier's Liens and other similar Liens arising
in the ordinary course of business which are not delinquent (except to the
extent permitted by Section 8.5);
(e) Liens for Taxes or assessments not yet due or not yet
delinquent, or, if delinquent, that are not required to be paid subject to the
satisfaction of the conditions set forth in Section 8.5; and
(f) lease burdens payable to third parties which are granted
in the ordinary course of business in the oil and gas industry and which are
deducted in the calculation of discounted present value in the Reserve Reports
including, without limitation, any royalty, overriding royalty, net profits
interest, production payment, carried interest or reversionary working interest
and which have been disclosed to the Administrative Agent in writing; provided,
however, that Borrower shall not be required to disclose such lease burdens
unless the same are lease burdens which are not customarily and usually found in
the oil and gas industry or unless the same are lease burdens which obligate
Borrower and/or its Subsidiaries, as applicable, in a fashion not customarily
and usually found in the oil and gas industry.
"Permitted Investment" means, with respect to any Credit Party, (a)
readily marketable direct obligations of the United States of America, (b) fully
insured time deposits and certificates of deposit with maturities of one (1)
year or less of any commercial bank operating in the United States having
capital and surplus in excess of $500,000,000, (c) commercial paper of a
domestic issuer if at the time of purchase such paper is rated in one of the two
highest ratings categories of Standard and Poor's Corporation or Xxxxx'x
Investors Service, (d) Investments by any Credit Party in a Subsidiary of Parent
that has provided a Facility Guaranty and, after any of the Triggering Events,
the Equity of which has been pledged to Administrative Agent pursuant to a
Pledge Agreement, (e) Parent's existing investment in Networked Energy LC, plus
up to $1,000,000 additional investment in that entity, and (f) Parent's existing
investment in Redeco Petroleum Company Limited, a Guernsey company, or the
successor to Redeco pursuant to planned restructuring of Redeco's Romanian
concessions, plus up to $3,000,000 additional investment in that entity.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
17
"Plan" means at any time an employee pension benefit plan which is now
or was previously covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code.
"Pledge Agreement" means a Pledge Agreement in Proper form to be
executed by Parent and Borrower after any of the Triggering Events, pursuant to
which Parent and Borrower shall pledge to Administrative Agent, for the ratable
benefit of Banks, one hundred percent (100%) of the issued and outstanding
Equity owned by Parent or Borrower of each existing or hereafter created or
acquired Subsidiary of Parent (other than Excluded Subsidiaries) to secure the
Obligations.
"Proper Form" means in form, substance, and detail satisfactory to
Administrative Agent, in its sole and absolute discretion.
"Proved Reserves" means, collectively, Proved Developed Producing
Reserves, Proved Developed Non-Producing Reserves, and Proved Undeveloped
Reserves.
"Proved Developed Non-Producing Reserves" has the meaning assigned to
that term by the Society of Petroleum Engineers, as it may be amended from time
to time, but generally shall mean the subcategory of "Proved Developed Reserves"
(as defined by the Society of Petroleum Engineers) which will become "Proved
Developed Producing Reserves" upon minor capital expenditures being made with
respect to existing xxxxx which will cause formerly non-producing completions or
intervals to become open and producing to market.
"Proved Developed Producing Reserves" has the meaning assigned to that
term by the Society of Petroleum Engineers, as it may be amended from time to
time, but generally shall mean the subcategory of "Proved Developed Reserves"
(as defined by the Society of Petroleum Engineers) which are recoverable from
the completion intervals currently open and producing to market. Additional oil
and gas expected to be obtained through the application of fluid injection or
other improved recovery techniques for supplementing the natural forces and
mechanisms of primary recovery will be included as "Proved Developed Producing
Reserves" only after the operation of an installed program has confirmed through
production response through existing completions producing to market that
increased recovery will be achieved as determined by the Lenders. Proved
Developed Producing Reserves shall not include any Proved Developed Non-
Producing Reserves.
"Proved Undeveloped Reserves" has the meaning assigned to that term by
the Society of Petroleum Engineers, as it may be amended from time to time, but
generally shall mean those reserves that are expected to be recovered from new
xxxxx on undrilled acreage, or from existing xxxxx where a relatively major
expenditure is required for recompletion. Proved Undeveloped Reserves on
undrilled acreage shall be limited to those drilling units offsetting productive
units that are reasonably certain of production when drilled. Proved Undeveloped
Reserves for other undrilled units can be claimed only where it can be
demonstrated with certainty that there is continuity of production from the
existing productive formation. Under no circumstances should estimates for
Proved Undeveloped Reserves be attributable to any acreage for which an
application
18
of fluid injection or other improved recovery technique is contemplated, unless
such techniques have been proved effective by actual tests in the area and in
the same reservoir.
"Recognized Value" means, with respect to Mineral Interests, the
portion of the Borrowing Base which Agent attributes to such Mineral Interests
for purposes of the most recent redetermination of the Borrowing Base pursuant
to Article IV hereof (or for purposes of determining the Initial Borrowing Base
in the event no such redetermination has occurred), based upon the discounted
present value of the estimated net cash flow to be realized from the production
of Hydrocarbons from such Mineral Interests.
"Refunding Borrowing" means a Borrowing made solely for the purpose of
refinancing a Eurodollar Tranche on the expiration of the Interest Period
applicable thereto or for the purpose of converting all or any part of a Base
Rate Tranche to a Eurodollar Tranche, in each case in the manner contemplated by
Section 2.5(c) and which does not result in any increase in the outstanding
principal balance of the Loan. Refunding Borrowings may be Base Rate Borrowings
or Eurodollar Borrowings.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time.
"Request for Borrowing" has the meaning set forth in Section 2.2(a).
"Request for Letter of Credit" has the meaning given such term in
Section 2.3(b).
"Required Banks" means (a) as long as the Commitments are in effect,
Banks having an aggregate Commitment Percentage which is greater than sixty-six
and two-thirds percent (66 2/3%) of the Total Commitment, and (b) following
termination of the Commitments, Banks holding greater than sixty-six and
two-thirds percent (66 2/3%) of the Outstanding Credit.
"Required Reserve Value" means Borrowing Base Properties that have a
Recognized Value of not less than ninety percent (90%) of the Recognized Value
of all Borrowing Base Properties.
"Reserve Report" means an unsuperseded engineering analysis of the
Mineral Interests owned by Borrower in Proper Form, prepared in accordance with
customary and prudent practices in the petroleum engineering industry and
Financial Accounting Standards Board Statement 69. Each annual Reserve Report
required shall be prepared by a reputable firm of independent petroleum
engineers as shall be selected by Borrower and approved by Required Banks, such
approval not to be unreasonably withheld.
"Restricted Payment" means, with respect to any Person, (a) any
Distribution by such Person, except for the Permitted Distributions permitted by
Section 10.1(e), or (b) the retirement, redemption or prepayment prior to the
scheduled maturity by such Person or any of the Affiliates of such Person of any
Debt of such Person other than the Obligations.
"Rollover Notice" has the meaning given such term in Section 2.5(c).
19
"Sole Lead Arranger" means BANK OF TEXAS, NATIONAL ASSOCIATION, in its
capacity as sole lead arranger for the credit facility hereunder or any
successor thereto, in the event that the Loan is hereafter syndicated.
"Special Determination" means any determination of the Borrowing Base
pursuant to Section 4.3.
"Subsidiary" means, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. The term Subsidiary shall include Subsidiaries of Subsidiaries (and so
on).
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, interest equalization
taxes, capital transaction taxes, foreign exchange taxes or other charges, or
other charges of any nature whatsoever, from time to time or at any time imposed
by Law or any federal, state or local governmental agency. "Tax" means any one
of the foregoing.
"Termination Date" means November 30, 2003.
"Title Required Reserve Value" means Proved Reserves that have a
Recognized Value of not less than eighty-five percent (85%) of the Recognized
Value of all Proved Reserves held by Borrower and its Subsidiaries.
"Total Commitment" means the Commitments of all Banks in an initial
aggregate amount of $10,000,000, as such amount may be reduced from time to time
pursuant to Sections 2.10 hereof.
"Tranche" means a Base Rate Tranche or a Eurodollar Tranche and
"Tranches" means Base Rate Tranches or Eurodollar Tranches or any combination
thereof.
"Triggering Events" has the meaning given such term in Section 5.1(a).
Section 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with GAAP,
applied on a basis consistent with the most recent audited consolidated
financial statements of Parent and its Consolidated Subsidiaries delivered to
Banks except for changes in which Parent's independent certified public
accountants concur and which are disclosed to Administrative Agent on the next
date on which financial statements are required to be delivered to Banks
pursuant to Sections 10.2; provided that, unless Borrower and Required Banks
shall otherwise agree in writing, no such change shall modify or affect the
manner in which compliance with the covenants contained in Article X are
computed such that all such computations shall be conducted utilizing financial
information presented consistently with prior periods.
20
Section 1.3. Miscellaneous. For the purpose of this Agreement, (a)
"Exhibit" refers to an exhibit attached to this Agreement and incorporated
herein by reference, unless specifically provided otherwise; (b) "Schedule"
means a "schedule" attached to this Agreement, unless specifically indicated
otherwise; and (c) "Section" refers to a "Section" or "subSection" of this
Agreement unless specifically indicated otherwise.
ARTICLE II
THE CREDIT
Section 2.1. Commitment. (a) Initially, Bank of Texas will be the sole
Bank and lender under this Agreement. So long as Bank of Texas is the sole Bank
hereunder, and subject to the terms and conditions set forth in this Agreement
and the other Loan Documents, Bank of Texas agrees to lend to Borrower from time
to time prior to the Termination Date, amounts not to exceed in the aggregate at
any one time outstanding, the amount of Bank of Texas' Commitment reduced by an
amount equal to Bank of Texas' Letter of Credit Exposure. So long as Bank of
Texas is the sole Bank hereunder, the Loan will be evidenced by a Revolving
Promissory Note in the face amount of $40,000,000.00, in Proper Form.
(b) After any other Banks become a party to this Agreement,
each Bank severally agrees, subject to Section 2.3 and the other terms and
conditions set forth in this Agreement and the Loan Documents, to lend to
Borrower from time to time prior to the Termination Date, amounts not to exceed
in the aggregate at any one time outstanding, the amount of such Bank's
Commitment reduced by an amount equal to such Bank's Letter of Credit Exposure.
Notwithstanding any term to the contrary, Administrative Agent may only
syndicate the Loans, or make other Banks a party to this Agreement, with the
consent of Borrower, which will not be unreasonably withheld (unless an Event of
Default has occurred and is continuing, in which case no consent is needed);
provided, however, that Administrative Agent may assign or transfer portions of,
or sell participations in, the Loans to Bank of Oklahoma, N.A., at any time,
without notice to or consent of Borrower.
(c) Subject to the terms and conditions hereof, Borrower may
borrow, repay, and reborrow on a revolving basis from time to time during the
period commencing on the date hereof and continuing through 11:00 a.m. (Houston,
Texas time) on the Termination Date, such amounts as Borrower may request under
the Loan; provided, however, the Outstanding Credit at any time shall not exceed
the lesser of (i) the aggregate sums permitted under the Borrowing Base (which
is initially set at $10,000,000.00), or (ii) the Aggregate Note Amounts. All
sums advanced under the Loan, together with all accrued but unpaid interest
thereon, shall be due and payable in full on the Termination Date.
(d) Each Borrowing shall (i) be in an aggregate principal
amount of $500,000 or any larger integral multiple of $100,000, and (ii) be made
from each Bank ratably in accordance with its respective Commitment Percentage.
Subject to the foregoing limitations and the other provisions of this Agreement,
Borrower may borrow under this Section, repay amounts borrowed under this
Section, and request new Borrowings under this Section.
21
Section 2.2. Method of Borrowing. (a) In order to request any Borrowing
hereunder, Borrower shall hand deliver, telex, or telecopy to Administrative
Agent a duly completed Request for Borrowing (herein so called) prior to 12:00
noon (Houston, Texas time) (i) at least one (1) Domestic Business Day before the
Borrowing Date specified for a proposed Base Rate Borrowing, and (ii) at least
three (3) Eurodollar Business Days before the Borrowing Date of a proposed
Eurodollar Borrowing. Each such Request for Borrowing shall be substantially in
the form of Exhibit C, and shall specify:
(i) whether such Borrowing is to be a Base Rate
Borrowing or a Eurodollar Borrowing;
(ii) the Borrowing Date of such Borrowing, which
shall be a Domestic Business Day in the case of a Base Rate Borrowing, or a
Eurodollar Business Day in the case of a Eurodollar Borrowing;
(iii) the aggregate amount of such Borrowing; and
(iv) in the case of a Eurodollar Borrowing, the
duration of the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
(b) Upon receipt of a Request for Borrowing, Administrative
Agent shall promptly notify each Bank of the contents thereof and the amount of
the Borrowing to be loaned by such Bank pursuant thereto, and such Request for
Borrowing shall not thereafter be revocable by Borrower.
(c) Not later than 12:00 noon (Houston, Texas time) on the
date of each Borrowing, each Bank shall make available its Commitment Percentage
of such Borrowing, in Federal or other funds immediately available in Houston,
Texas, to Administrative Agent at its address set forth on Schedule 1.
Notwithstanding the foregoing, if Borrower delivers to Administrative Agent a
Request for Borrowing prior to 10:00 a.m. (Houston, Texas time) on a Domestic
Business Day requesting a Base Rate Borrowing on such day, each Bank shall use
its best efforts to make available to Administrative Agent its Commitment
Percentage of such Borrowing by 1:00 p.m. (Houston, Texas time) on the same day.
Unless Administrative Agent determines that any applicable condition specified
in Section 6.2 has not been satisfied, Administrative Agent will make the funds
so received from Banks available to Borrower at Administrative Agent's aforesaid
address.
Section 2.3. Letters of Credit. (a) Administrative Agent, or such Bank
designated by Administrative Agent which (without obligation to do so) consents
to the same ("Letter of Credit Issuer"), will issue Letters of Credit, from time
to time prior to the Termination Date, upon request by Borrower, for the account
of Borrower, so long as (i) the sum of the total Letter of Credit Exposure then
existing, plus the amount of the requested Letter of Credit, does not exceed
$4,000,000, (ii) the sum of the total Letter of Credit Exposure then existing
(excluding the Appeal L/C), plus the amount of the requested Letter of Credit,
does not exceed ten percent (10%) of the
22
current Borrowing Base, and (iii) Borrower would be entitled to a Borrowing
under this Section or Section 2.1 in the amount of the requested Letter of
Credit (except that the Letter of Credit is not required to be in a minimum
amount of $500,000 or in integral multiple of $100,000). Not less than five (5)
Domestic Business Days prior to the requested date of issuance of any such
Letter of Credit, Borrower shall execute and deliver to Letter of Credit Issuer,
Letter of Credit Issuer's customary letter of credit application ("Letter of
Credit Application"). Each Letter of Credit shall be in Proper Form and
acceptable to Letter of Credit Issuer. Excluding the Appeal L/C, no Letter of
Credit shall have an expiration date later than the earlier of (i) five days
before the Termination Date, or (ii) one (1) year from the date of issuance.
(b) In order to request any Letter of Credit hereunder,
Borrower shall hand deliver, telex, or telecopy to Administrative Agent a duly
completed Request for Letter of Credit (herein so called), in Proper Form, prior
to 12:00 noon (Houston, Texas time) at least five (5) Domestic Business Days
before the date specified for issuance of such Letter of Credit. Each Request
for a Letter of Credit shall be in Proper Form, shall be accompanied by the
applicable Letter of Credit Issuer's duly completed and executed Letter of
Credit Application and agreement and shall specify:
(i) the requested date for issuance of such Letter of
Credit;
(ii) the terms of such requested Letter of Credit,
including the name and address of the beneficiary, the stated amount, the
expiration date and the conditions under which drafts under such Letter of
Credit are to be available; and
(iii) the purpose of such Letter of Credit.
(c) Upon the date of issuance of a Letter of Credit, Letter of
Credit Issuer shall be deemed to have sold to each other Bank, and each other
Bank shall be deemed to have unconditionally and irrevocably purchased from
Letter of Credit Issuer, a non-recourse participation in the related Letter of
Credit and Letter of Credit Exposure equal to such Bank's Commitment Percentage
of such Letter of Credit and Letter of Credit Exposure. Upon request of any
Bank, Administrative Agent shall provide notice to each Bank by telephone,
teletransmission, or telex setting forth each Letter of Credit issued and
outstanding pursuant to the terms hereof and specifying the Letter of Credit
Issuer, beneficiary and expiration date of each such Letter of Credit, each
Bank's participation percentage of each such Letter of Credit and the actual
dollar amount of each Bank's participation held by Letter of Credit Issuer(s)
thereof for such Bank's account and risk. In connection with the issuance of
Letters of Credit under this Section, Borrower shall pay to Administrative Agent
in respect of such Letters of Credit (a) the applicable Letter of Credit Fee in
accordance with Section 2.13 hereof, and (b) at the time of issuance of each
Letter of Credit, the Letter of Credit Fronting Fee. Administrative Agent shall
distribute the Letter of Credit Fee to Banks in accordance with their respective
Commitment Percentages, and Administrative Agent shall distribute the Letter of
Credit Fronting Fee to the Letter of Credit Issuer for its own account. Any (y)
material amendment or modification, or (z) renewal or extension of any Letter of
Credit shall be deemed to be the issuance of a new Letter of Credit for purposes
of this Section. Notwithstanding anything to the contrary contained herein,
Borrower shall pay to Letter of Credit
23
Issuer in connection with any amendment or modification of any nature, such
Letter of Credit Issuer's usual and customary fees for amendments or
modifications to, and processing of, Letters of Credit.
(d) Upon receipt of a Request for Letter of Credit,
Administrative Agent shall promptly notify each Bank and the proposed Letter of
Credit Issuer of the contents thereof, including the amount of the requested
Letter of Credit, and such Request for Letter of Credit shall not thereafter be
revocable by Borrower. No later than 12:00 noon (Houston, Texas time) on the
date each Letter of Credit is requested, unless Administrative Agent or the
applicable Letter of Credit Issuer determines that any applicable condition
precedent set forth in Section 6.2 hereof has not been satisfied, the applicable
Letter of Credit Issuer will issue and deliver such Letter of Credit pursuant to
the instructions of Borrower.
(e) No Bank will be obligated to lend to Borrower or incur
Letter of Credit Exposure, and Borrower shall not be entitled to borrow
hereunder or obtain Letters of Credit (i) during the existence of any Borrowing
Base Deficiency, or (ii) in an amount which would cause a Borrowing Base
Deficiency. Nothing in this Section shall be deemed to limit any Bank's
obligation to (A) reimburse any Letter of Credit Issuer with respect to such
Bank's participation in Letters of Credit issued by such Letter of Credit Issuer
as provided in this Section, or (B) fund any Refunding Borrowing.
(f) Upon the occurrence of an Event of Default, Borrower
shall, on the next succeeding Domestic Business Day, deposit with Administrative
Agent such funds as Administrative Agent may request, up to a maximum amount
equal to the aggregate existing Letter of Credit Exposure of all Banks. Any
funds so deposited shall be held by Administrative Agent for the ratable benefit
of all Banks as security for the outstanding Letter of Credit Exposure and the
other Obligations, and Borrower will, in connection therewith, execute and
deliver such security agreements in Proper Form. As drafts or demands for
payment are presented under any Letter of Credit, Administrative Agent shall
apply such funds to satisfy such drafts or demands. When all Letters of Credit
have expired and the Obligations have been repaid in full (and the Commitments
of all Banks have terminated) or such Event of Default has been cured to the
satisfaction of Required Banks, Administrative Agent shall release to Borrower
any remaining funds deposited under this Section. Whenever Borrower is required
to make deposits under this Section and fails to do so on the day such deposit
is due, Administrative Agent or any Bank may, without notice to Borrower, make
such deposit (whether by application of proceeds of any collateral for the
Obligations, by transfers from other accounts maintained with any Bank or
otherwise) using any funds then available to any Bank of Borrower, any
guarantor, or any other Person liable for all or any part of the Obligations.
(g) Notwithstanding anything to the contrary contained herein,
Borrower hereby agrees to reimburse each Letter of Credit Issuer immediately
upon demand by such Letter of Credit Issuer, and in immediately available funds,
for any payment or disbursement made by such Letter of Credit Issuer under any
Letter of Credit issued by it. Payment shall be made by Borrower with interest
on the amount so paid or disbursed by Letter of Credit Issuer from and including
the date payment is made under any Letter of Credit to and including the date of
payment, at the lesser
24
of (i) the Maximum Lawful Rate, or (ii) the Default Rate. At Borrower's election
and subject to all requirements for a Borrowing under this Credit Agreement,
payments or disbursements may be reimbursed to the Letter of Credit Issuers by a
Borrowing under the Loan. The obligations of Borrower under this paragraph will
continue until all Letters of Credit have expired and all reimbursement
obligations with respect thereto have been paid in full by Borrower and until
all other Obligations shall have been paid in full.
(h) The reimbursement obligations of Borrower under this
Section shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of the Loan Documents (including any
Letter of Credit Application executed pursuant to this Section) under and in all
circumstances whatsoever and Borrower hereby waives any defense to the payment
of such reimbursement obligations based on any circumstance whatsoever,
including without limitation, in any case, the following circumstances: (i) any
lack of validity or enforceability of any Letter of Credit; (ii) the existence
of any claim, set-off, counterclaim, defense or other rights which Borrower or
any other Person may have at any time against any beneficiary of any Letter of
Credit, Administrative Agent, any Bank or any other Person, whether in
connection with any Letter of Credit or any unrelated transaction; (iii) any
statement, draft or other documentation presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever; or (iv)
any other circumstance whatsoever, whether or not similar to any of the
foregoing.
(i) As among Borrower on the one hand, and each Agent and each
Bank, on the other hand, Borrower assumes all risks of the acts and omissions
of, or misuse of Letters of Credit by, the beneficiary of such Letters of
Credit. In furtherance and not in limitation of the foregoing, no Agent, Letter
of Credit Issuer nor any Bank shall be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any Person in connection with the application for and issuance of and
presentation of drafts with respect to any Letter of Credit, even if it should
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (ii) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign the 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; (iii) the false representation of
the beneficiary of the Letter of Credit regarding compliance with conditions
required in order to draw upon such Letter of Credit; (iv) errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (v)
errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit or of the proceeds thereof; (vii) the misapplication
by the beneficiary of the Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of any Agent or any Bank.
(j) Borrower shall be obligated to reimburse each Letter of
Credit Issuer upon demand for all amounts paid under Letters of Credit as set
forth in the immediately preceding paragraph hereof; provided, however, if
Borrower for any reason fails to reimburse such Letter of Credit Issuer in full
upon demand, Banks shall reimburse such Letter of Credit Issuer in accordance
with each Banks' Commitment Percentage for amounts due and unpaid from Borrower
as set forth
25
below; provided, further, however, that no such reimbursement made by Banks
shall discharge Borrower's obligations to reimburse Letter of Credit Issuer. All
reimbursement amounts payable by any Bank under this Section shall include
interest thereon at the Federal Funds Rate, from the date of the payment of such
amounts by any Letter of Credit Issuer to the date of reimbursement by such
Bank. No Bank shall be liable for the performance or nonperformance of the
obligations of any other Bank under this paragraph. The reimbursement
obligations of Banks under this paragraph shall continue after the Termination
Date and shall survive termination of this Agreement and the other Loan
Documents.
Section 2.4. Notes. Each Bank's Commitment Percentage of the Loan shall
be evidenced by a single Note payable to the order of such Bank in an amount
equal to such Bank's Commitment Percentage of the Aggregate Note Amounts.
Section 2.5. Interest Rates; Payments. (a) The principal amount of the
Loan outstanding from day to day which is the subject of a Base Rate Tranche
shall bear interest at a rate per annum equal to the Adjusted Base Rate;
provided that in no event shall the rate charged hereunder or under the Notes
exceed the Maximum Lawful Rate. Interest on any portion of the principal of the
Loan subject to a Base Rate Tranche shall be payable as it accrues on the last
day of each Fiscal Quarter.
(b) The principal amount of the Loan outstanding from day to
day which is the subject of a Eurodollar Tranche shall bear interest for the
Interest Period applicable thereto at a rate per annum equal to the Adjusted
LIBOR Rate; provided that in no event shall the rate charged hereunder or under
the Notes exceed the Maximum Lawful Rate. Interest on any portion of the
principal of the Loan subject to a Eurodollar Tranche having an Interest Period
of one (1), two (2) or three (3) months shall be payable on the last day of the
Interest Period applicable thereto. Interest on any portion of the principal of
the Loan subject to a Eurodollar Tranche having an Interest Period of more than
three (3) months shall be payable on the last day of the Interest Period
applicable thereto and on the last day of each three (3) month period during
such Interest Period.
(c) So long as no Default or Event of Default shall be
continuing, subject to the provisions of this Section, Borrower shall have the
option of having all or any portion of the principal outstanding under the Loan
borrowed by it be the subject of a Base Rate Tranche or one (1) or more
Eurodollar Tranches, which shall bear interest at rates based upon the Adjusted
Base Rate and the Adjusted LIBOR Rate, respectively, and subject to the
provisions of Sections 2.5(a) and (b) above (each such option is referred to
herein as an "Interest Option"); provided, that each Tranche shall be in a
minimum amount of $500,000 and shall be in an amount which is an integral
multiple of $100,000. Each change in an Interest Option made pursuant to this
Section shall be deemed both a payment in full of the portion of the principal
of the Loan which was the subject of the Base Rate Tranche or Eurodollar Tranche
from which such change was made and a Borrowing (notwithstanding that the unpaid
principal amount of the Loan is not changed thereby) of the portion of the
principal of the Loan which is the subject of the Base Rate Tranche or
Eurodollar Tranche into which such change was made. Prior to the termination of
each Interest Period with respect to each Eurodollar Tranche, Borrower shall
give written notice (a "Rollover Notice") in the form of Exhibit D to
Administrative Agent of the Interest Option which shall be applicable to such
portion of the principal of the Loan upon the expiration of such Interest
Period. Such Rollover Notice shall
26
be given to Administrative Agent at least one (1) Domestic Business Day, in the
case of a Base Rate Tranche selection and at least three (3) Eurodollar Business
Days, in the case of a Eurodollar Tranche selection, prior to the termination of
the Interest Period then expiring. If Borrower shall specify a Eurodollar
Tranche, such Rollover Notice shall also specify the length of the succeeding
Interest Period (subject to the provisions of the definitions of such term)
selected by Borrower. Each Rollover Notice shall be irrevocable and effective
upon notification thereof to Administrative Agent. If the required Rollover
Notice shall not have been timely received by Administrative Agent, Borrower
shall be deemed to have elected that the principal of the Loan subject to the
Interest Period then expiring be the subject of a Base Rate Tranche upon the
expiration of such Interest Period and Borrower will be deemed to have given
Administrative Agent notice of such election. Subject to the limitations set
forth in this Section on the minimum amount of Eurodollar Tranches, Borrower
shall have the right to convert all or part of the Base Rate Tranche to a
Eurodollar Tranche by giving Administrative Agent a Rollover Notice of such
election at least three (3) Eurodollar Business Days prior to the date on which
Borrower elects to make such conversion (a "Conversion Date"). The Conversion
Date selected by Borrower shall be a Eurodollar Business Day. Notwithstanding
anything in this Section to the contrary, no portion of the principal of the
Loan which is the subject of a Base Rate Tranche may be converted to a
Eurodollar Tranche and no Eurodollar Tranche may be continued as such when any
Default or Event of Default has occurred and is continuing, but each such
Tranche shall be automatically converted to a Base Rate Tranche on the last day
of each applicable Interest Period. In no event shall more than four (4)
Interest Options be in effect with respect to the Loan at any time.
(d) Notwithstanding anything to the contrary set forth in
Section 2.5(a) or (b) above, all overdue principal of and, to the extent
permitted by Law, overdue interest on the Loan and all other Obligations which
are not paid in full when due (whether at stated maturity, by acceleration or
otherwise), for the period from and including the due date thereof to but
excluding the date the same is paid in full, shall bear interest at a rate per
annum equal to the lesser of (a) the Default Rate, and (b) the Maximum Lawful
Rate. Interest payable as provided in this Section shall be payable from time to
time on demand.
(e) Administrative Agent shall determine each interest rate
applicable to the Loan in accordance with the terms hereof. Administrative Agent
shall promptly notify Borrower and Banks by telex, telecopy or cable of each
rate of interest so determined, and its determination thereof shall be
conclusive in the absence of manifest error.
(f) Notwithstanding the foregoing, if at any time the rate of
interest calculated with reference to the Adjusted Base Rate or the Adjusted
LIBOR Rate hereunder (the "contract rate") is limited to the Maximum Lawful
Rate, any subsequent reductions in the contract rate shall not reduce the rate
of interest on the Loan below the Maximum Lawful Rate until the total amount of
interest accrued equals the amount of interest which would have accrued if the
contract rate had at all times been in effect. In the event that at maturity
(stated or by acceleration), or at final payment of any Note, the total amount
of interest paid or accrued on such Note is less than the amount of interest
which would have accrued if the contract rate had at all times been in effect
with respect thereto, then at such time, to the extent permitted by Law,
Borrower shall pay to the holder of such Note an amount equal to the difference
between (i) the lesser of the amount of interest
27
which would have accrued if the contract rate had at all times been in effect
and the amount of interest which would have accrued if the Maximum Lawful Rate
had at all times been in effect, and (ii) the amount of interest actually paid
on such Note.
(g) Interest payable on the principal of any portion of the
Loan subject to a Eurodollar Tranche shall be computed based on the number of
actual days elapsed assuming that each calendar year consisted of 360 days.
Interest payable on the principal of any portion of the Loan subject to a Base
Rate Tranche shall be computed based on the number of actual days elapsed and
based on the actual number of days in the calendar year for which accrued
interest is being computed.
Section 2.6. Mandatory Repayments. If, on any date, the aggregate
Outstanding Credit shall exceed the Total Commitment (after giving effect to any
voluntary reduction of the Total Commitment on such date pursuant to Section
2.10), then Borrower shall immediately repay, without premium or penalty, the
principal of the Loan in an amount equal to such excess, along with accrued
unpaid interest on the amount so repaid to the date of such repayment.
Section 2.7. Mandatory Prepayment Resulting from Borrowing Base
Deficiency. (a) If a Borrowing Base Deficiency exists at any time, excluding a
Borrowing Base Deficiency caused by the sale of Mineral Interests as covered by
subsection (b) below, Borrower shall, at its option, either (i) eliminate such
Borrowing Base Deficiency by making a single mandatory prepayment of principal
on the Loan in an amount equal to the entire amount of such Borrowing Base
Deficiency on the first Monthly Date following the date on which such Borrowing
Base Deficiency is determined to exist, or (ii) eliminate such Borrowing Base
Deficiency by making six (6) consecutive mandatory prepayments of principal on
the Loan each of which shall be in the amount of one sixth (1/6th) of the amount
of such Borrowing Base Deficiency commencing on the first Monthly Date following
the date on which such Borrowing Base Deficiency is determined to exist and
continuing on each Monthly Date thereafter, or (iii) mortgaging additional
collateral, which must be acceptable to Administrative Agent as to type, value,
and title. If a Borrowing Base Deficiency cannot be eliminated pursuant to
clauses (i) or (ii) of this Section by prepayment of the Loan in full (as a
result of outstanding Letter of Credit Exposure), on each Monthly Date, or
pursuant to clause (iii) of this Section by additional acceptable collateral,
Borrower shall deposit cash with Administrative Agent, to be held by
Administrative Agent to secure outstanding Letter of Credit Exposure in the
manner contemplated by Section 2.3, in an amount at least equal to one sixth
(1/6th) of the balance of such Borrowing Base Deficiency (i.e., one-sixth of the
difference between the Borrowing Base Deficiency and the remaining outstanding
principal under the Loan on the date such Borrowing Base Deficiency is first
determined to occur). A failure by Borrower to resolve a Borrowing Base
Deficiency to Administrative Agent's satisfaction within the period set forth
above will constitute a default under this Agreement.
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(b) If Borrower sells, transfers, or otherwise disposes of any
Mineral Interests that have an aggregate Recognized Value in excess of two
percent (2%) of the most recent Borrowing Base, at the election of Banks the
Borrowing Base will be immediately reduced. Any Borrowing Base Deficiency
resulting from the sale of any Mineral Interests shall be immediately eliminated
by Borrower pursuant to a single lump sum payment. All sales or transfers of any
Mineral Interests are also subject to the restriction in Section 9.5 below.
Section 2.8. Voluntary Prepayments. Borrower may, subject to Section
3.3 and the other provisions of this Agreement, upon (A) one (1) Domestic
Business Day advance notice to Administrative Agent with respect to Base Rate
Borrowings, and (B) three (3) Domestic Business Days advance notice to
Administrative Agent with respect to Eurodollar Borrowings, prepay the principal
of the Loan in whole or in part. Any partial prepayment shall be in a minimum
amount of $500,000 and shall be in an integral multiple of $100,000, and, to the
extent made with respect to any Eurodollar Tranche, may be made only on the last
day of the Interest Period applicable thereto.
Section 2.9. Mandatory Termination of Commitments; Termination Date and
Maturity. The Total Commitment (and the Commitment of each Bank) shall terminate
on the Termination Date. The outstanding principal balance of the Loan, all
accrued but unpaid interest thereon, and all other Obligations shall be due and
payable in full on the Termination Date.
Section 2.10. Voluntary Reduction of Total Commitment. Borrower may, by
notice to Administrative Agent ten (10) Domestic Business Days prior to the
effective date of any such reduction, permanently reduce or terminate the Total
Commitment (and thereby permanently reduce the Commitment of each Bank ratably
in accordance with such Bank's Commitment Percentage); provided, that any
reduction shall be in amounts not less than $500,000 or any larger multiple of
$100,000. On the effective date of any such reduction in the Total Commitment,
Borrower shall, to the extent required as a result of such reduction, make a
principal payment on the Loan (together with accrued interest thereon) in an
amount sufficient to cause the Outstanding Credit to be equal to or less than
the Total Commitment as thereby reduced (and Administrative Agent shall
distribute to each Bank in like funds that portion of any such payment as is
required to cause the principal balance of the Loan held by such Bank to be not
greater than its Commitment as thereby reduced). Notwithstanding the foregoing,
Borrower shall not be permitted to voluntarily reduce the Total Commitment (a)
if, as a result of such reduction, Borrower would be required to prepay all or
any portion of the principal amount of any Eurodollar Tranche prior to the last
day of the Interest Period applicable thereto, or (b) to an amount less than the
aggregate Letter of Credit Exposure of all Banks.
Section 2.11. Application of Payments. Each repayment pursuant to
Sections 2.6, 2.7, 2.8 and 2.10 shall be made together with accrued interest to
the date of payment, and shall be applied to payment of the Loan in accordance
with Section 3.2 and the other provisions of this Agreement.
Section 2.12. Commitment Fee. Within thirty (30) days of the date of
any invoice from Administrative Agent, setting forth evidence of the calculation
of the commitment fee for the preceding calendar quarter, and on the Termination
Date and and in the event the Commitments are terminated in their entirety prior
to the Termination Date, on the date of such termination, Borrower
29
shall pay to Administrative Agent, for the ratable benefit of each Bank based on
each Bank's Commitment Percentage, a commitment fee equal to the Commitment Fee
Percentage for the applicable period of the average daily Availability for the
Fiscal Quarter (or portion thereof) ending on such date.
Section 2.13. Letter of Credit Fee. Borrower shall pay to
Administrative Agent (to be distributed by Administrative Agent in accordance
with Section 2.3 hereof) the Letter of Credit Fee. The Letter of Credit Fee will
be calculated on the aggregated stated amount of each Letter of Credit for the
stated duration thereof (computed on the basis of actual days elapsed as of each
year consisted of 360 days) and is due quarterly in advance.
Section 2.14. Origination Fee. Upon execution of this Agreement,
Borrower shall pay to Bank of Texas an origination fee in the amount of
$75,000.00.
Section 2.15. Increase Fees. Upon any increase in the Borrowing Base,
Borrower agrees to pay to Administrative Agent, for the ratable benefit of each
Bank based on each Bank's Commitment Percentage, an increase fee equal to one
half of one percent (0.5%) of the increase in the Borrowing Base.
Section 2.16. Engineering Fees. Borrower shall pay to Administrative
Agent and its Affiliates such fees and other amounts as Administrative Agent
shall require for its engineering services in connection with each Determination
of the Borrowing Base and for providing other services in connection with the
credit facilities provided pursuant hereto. Such fees and other amounts shall be
retained by the Administrative Agent and its Affiliates, and no Bank (other than
Administrative Agent) shall have any interest therein.
Section 2.17. Other Fees. Borrower shall pay to Administrative Agent
and its Affiliates such fees and other amounts as Borrower shall be required to
pay to Administrative Agent and its Affiliates from time to time pursuant to any
separate agreement among Parent and/or Borrower and Administrative Agent, Book
Runner, Sole Lead Arranger, or any of their Affiliates, setting forth the
compensation to be paid to Administrative Agent, Book Runner, Sole Lead Arranger
and their Affiliates in consideration for acting as Administrative Agent, Book
Runner and Sole Lead Arranger hereunder and for providing other services in
connection with the credit facilities provided pursuant hereto. Such fees and
other amounts shall be retained by the Administrative Agent and its Affiliates,
and no Bank (other than Administrative Agent) shall have any interest therein.
Administrative Agent may disburse any fees paid to Administrative Agent and its
Affiliates pursuant to this Section in any manner Administrative Agent desires
in its sole discretion.
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ARTICLE III
GENERAL PROVISIONS
Section 3.1. Delivery and Endorsement of Notes. On or before the
Closing Date, and prior to, and as a condition precedent to, the initial
Borrowing hereunder, Administrative Agent shall deliver to each Bank the Note
payable to such Bank. Each Bank may endorse (and prior to any transfer of its
Note shall endorse) on the schedule attached to its Note appropriate notations
to evidence the date and amount of each advance of funds made by it in respect
of any Borrowing, the Interest Period applicable thereto, and the date and
amount of each payment of principal received by such Bank with respect to the
Loan; provided that the failure by any Bank to so endorse its Note shall not
affect the liability of Borrower for the repayment of all amounts outstanding
under such Notes together with interest thereon. Each Bank is hereby irrevocably
authorized by Borrower to endorse its Note and to attach to and make a part of
any Note a continuation of any such schedule as required.
Section 3.2. General Provisions as to Payments. (a) Borrower shall make
each payment of principal of, and interest on, the Loan and all fees payable by
Borrower hereunder not later than 12:00 noon (Houston, Texas time) on the date
when due, in Federal or other funds immediately available in Houston, Texas to
Administrative Agent at its address set forth on Schedule 1. Administrative
Agent will promptly (and if such payment is received by Administrative Agent by
10:00 a.m. (Houston, Texas time), and otherwise if reasonably possible, on the
same Domestic Business Day) distribute to each Bank its Commitment Percentage of
each such payment received by Administrative Agent for the account of Banks.
Whenever any payment of principal of, or interest on, that portion of the Loan
subject to a Base Rate Tranche or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day (subject to the definition of Interest
Period). Whenever any payment of principal of, or interest on, that portion of
the Loan subject to a Eurodollar Tranche shall be due on a day which is not a
Eurodollar Business Day, the date for payment thereof shall be extended to the
next succeeding Eurodollar Business Day (subject to the definition of Interest
Period). If the date for any payment of principal is extended by operation of
Law or otherwise, interest thereon shall be payable for such extended time.
Borrower hereby authorizes Administrative Agent to charge from time to time
against Borrower's account or accounts with Administrative Agent any amount then
due by Borrower.
(b) Prior to the occurrence of an Event of Default, all
principal payments received by Banks with respect to the Loan shall be applied
first to Eurodollar Tranches outstanding under the Loan with Interest Periods
ending on the date of such payment, then to the Base Rate Tranches outstanding
under the Loan, and then to Eurodollar Tranches outstanding under the Loan next
maturing until such principal payment is fully applied, with such adjustments in
such order of payment as Administrative Agent shall specify in order that each
Bank receives its ratable share of each such payment.
(c) After the occurrence of an Event of Default, all amounts
collected or received by Administrative Agent or any Bank from any Credit Party
or in respect of any of the assets of any
31
Credit Party shall be applied first to the payment of all proper costs incurred
by Administrative Agent in connection with the collection thereof (including
reasonable expenses and disbursements of counsel to Administrative Agent),
second to the payment of all proper costs incurred by Banks in connection with
the collection thereof (including reasonable expenses and disbursements of
counsel to Banks), third to the reimbursement of any advances made by Banks to
effect performance of any unperformed covenants of any Credit Party under any of
the Loan Documents, fourth to the payment of any unpaid fees required pursuant
to this Agreement, and fifth to each Bank in accordance with its Commitment
Percentage for application to the portion of the outstanding balance of the Loan
held by such Bank (with any such payment being applied first to accrued but
unpaid interest and then to principal).
Section 3.3. Funding Losses. If Borrower makes any payment of principal
subject to a Eurodollar Tranche (whether pursuant to Section 2.6, 2.7, 2.8, 2.9,
2.10 or Article XI or XIII and whether as a voluntary or mandatory prepayment or
otherwise) on any day other than the last day of an Interest Period applicable
thereto, or if Borrower fails to borrow any Eurodollar Borrowing, after notice
has been given to any Bank in accordance with Section 2.2, Borrower shall
reimburse each Bank on demand for any resulting loss or expense incurred by it,
including (without limitation) any loss incurred in obtaining, liquidating or
employing deposits from third parties, or any loss arising from the reemployment
of funds at rates lower than the cost to such Bank of such funds and related
costs, which in the case of the payment or prepayment prior to the end of the
Interest Period for any Eurodollar Tranche, shall include the amount, if any, by
which (a) the interest which such Bank would have received absent such payment
or prepayment for the applicable Interest Period exceeds (b) the interest which
such Bank would receive if its Commitment Percentage of the amount of such
Eurodollar Borrowing were deposited, loaned, or placed by such Bank in the
interbank Eurodollar market on the date of such payment or prepayment for the
remainder of the applicable Interest Period. Such Bank shall promptly deliver to
Borrower and Administrative Agent a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest error.
Section 3.4. Foreign Lenders, Participants, and Assignees. Each Bank,
Participant (by accepting a participation interest under this Agreement), and
Assignee (by executing an Assignment and Assumption Agreement) that is not
organized under the Laws of the United States of America or one of its states
(a) represents to Administrative Agent and Borrower that (i) no Taxes are
required to be withheld by Administrative Agent or Borrower with respect to any
payments to be made to it in respect of the Obligations, and (ii) it has
furnished to Administrative Agent and Borrower two (2) duly completed copies of
either U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8, or other
form acceptable to Administrative Agent that entitles it to exemption from U.S.
federal withholding Tax on all interest payments under the Loan Documents, and
(b) covenants to (i) provide Administrative Agent and Borrower a new Form 4224,
Form 1001, Form W-8, or other form acceptable to Administrative Agent upon the
expiration or obsolescence of any previously delivered form according to
applicable Laws and regulations, duly executed and completed by it, and (ii)
comply from time to time with all applicable Laws and regulations with regard to
the withholding Tax exemption. If any of the foregoing is not true or the
applicable forms are not provided, then Borrower and Administrative Agent (but
without duplication) may deduct
32
and withhold from interest payments under the Loan Documents any United States
federal-income Tax at the maximum rate under the Code.
Section 3.5. Non-Receipt of Funds by Administrative Agent. Unless
Administrative Agent shall have been notified by a Bank or Borrower ("Payor")
prior to the date on which such Bank is to make payment to Administrative Agent
hereunder or Borrower is to make a payment to Administrative Agent for the
account of one or more Banks, as the case may be (such payment being herein
called the "Required Payment"), which notice shall be effective upon receipt,
that Payor 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 on such date and, if Payor has not
in fact made the Required Payment to Administrative Agent, (a) the recipient of
such payment shall, on demand, pay to Administrative Agent the amount made
available to it together with interest thereon in respect of the period
commencing on the date such amount was so made available by Administrative Agent
until the date Administrative Agent recovers such amount at a rate per annum
equal to the Adjusted Base Rate then in effect for such period, and (b)
Administrative Agent shall be entitled to offset against any and all sums to be
paid to such recipient, the amount calculated in accordance with the foregoing
clause (a).
ARTICLE IV
BORROWING BASE
Section 4.1. Reserve Reports; Proposed Borrowing Base. Borrower shall
deliver to each Bank a Reserve Report as required by Section 10.2 below.
Simultaneously with the delivery to Administrative Agent and each Bank of each
Reserve Report, Borrower shall notify Administrative Agent of the Borrowing Base
which Borrower requests become effective for the period commencing on the next
Determination Date.
Section 4.2. Periodic Determinations; Procedures and Standards. Based
in part on the Reserve Reports made available to Banks, Banks shall redetermine
the Borrowing Base on or prior to the next Determination Date (or such date
promptly thereafter as reasonably possible based on the engineering and other
information available to Banks). Any Borrowing Base which becomes effective as a
result of any Determination of the Borrowing Base shall be subject to the
following restrictions: (a) such Borrowing Base shall not exceed the Borrowing
Base requested by Borrower pursuant to Section 4.1 or 4.3 (as applicable), (b)
such Borrowing Base shall not exceed the Total Commitment then in effect, (c) to
the extent such Borrowing Base represents an increase from the Borrowing Base in
effect prior to such Determination, such Borrowing Base shall be approved by all
Banks, and (d) any Borrowing Base which represents a decrease in the Borrowing
Base in effect prior to such Determination, or a reaffirmation of such prior
Borrowing Base, shall be proposed by Administrative Agent and require approval
of Required Banks. Each Determination shall be made by Banks in accordance with
their normal and customary procedures for evaluating oil and gas reserves and
other related assets as such exist at that particular time and will otherwise be
in their sole discretion. Administrative Agent shall propose such redetermined
Borrowing Base to Banks within thirty (30) days following receipt by
Administrative Agent and Banks of a Reserve Report.
33
After having received notice of such proposal by Administrative Agent, Required
Banks (or all Banks in the event of a proposed increase) shall have fifteen (15)
days to agree or disagree with such proposal. If at the end of such fifteen (15)
day period, Required Banks (or all Banks in the event of a proposed increase)
have not communicated their approval or disapproval, such silence shall be
deemed an approval and Administrative Agent's proposal shall be the new
Borrowing Base. If, however, Required Banks (or any Bank in the event of a
proposed increase) notify Administrative Agent within such fifteen (15) day
period of their disapproval, Required Banks (or all Banks in the event of a
proposed increase) shall, within a reasonable period of time, agree on a new
Borrowing Base. In taking the above actions, Administrative Agent and Banks
shall act in accordance with their normal and customary procedures for
evaluating oil and gas reserves and other related assets as such exist at that
particular time and will otherwise act in their sole discretion. It is further
acknowledged and agreed that each Bank may consider such other credit factors as
it deems appropriate which are consistent with its normal and customary
procedures for evaluating oil and gas reserves and shall have no obligation in
connection with any Determination to approve any increase from the Borrowing
Base in effect prior to such Determination. Promptly following any Determination
of the Borrowing Base, Administrative Agent shall notify Borrower of the amount
of the Borrowing Base as redetermined, which Borrowing Base shall be effective
as of the date specified in such notice, and shall remain in effect for all
purposes of this Agreement until the next Determination.
Section 4.3. Special Determinations of the Borrowing Base. In addition
to the redeterminations of the Borrowing Base pursuant to Section 4.2 and 4.4,
Borrower and Required Banks may each request a Special Determination of the
Borrowing Base once in each period between Periodic Determinations. In the event
Required Banks request a Special Determination, Administrative Agent shall
promptly deliver notice of such request to Borrower and Borrower shall, within
thirty (30) days following the date of such request, deliver to Banks a Reserve
Report prepared as of the last day of the calendar month preceding the date of
such request. In the event Borrower requests a Special Determination, Borrower
shall deliver written notice of such request to Banks which shall include (i) a
Reserve Report prepared as of a date not more than thirty (30) days prior to the
date of such request, and (ii) the amount of the Borrowing Base requested by
Borrower and to become effective on the Determination Date applicable to such
Special Determination. Upon receipt of such Reserve Report, Administrative Agent
shall, subject to approval of Required Banks, or all Banks in the event of a
proposed increase in the Borrowing Base, redetermine the Borrowing Base in
accordance with the procedure set forth in Section 4.2 which Borrowing Base
shall become effective on the Determination Date applicable to such Special
Determination (or as soon thereafter as Administrative Agent and Required Banks,
or all Banks in the event of a proposed increase in the Borrowing Base, approve
such Borrowing Base and provide notice thereof to Borrower).
Section 4.4. Initial Determination and Initial Borrowing Base. Bank of
Texas has made the Initial Determination of the Borrowing Base as of June 1,
2001, from which Bank of Texas may exclude from the Borrowing Base the value
(determined by Bank of Texas for purposes of establishing the Initial Borrowing
Base) attributable to the Mineral Interests which are subject to Liens, claims,
encumbrances, defects, deficiencies, or other impairments to the title which
Bank of Texas deems material. Notwithstanding anything contained herein to the
contrary, the Borrowing
34
Base in effect during the period from the Closing Date until the date of the
first Determination after the Closing Date shall be the Initial Borrowing Base.
Section 4.5. Borrowing Base Deficiency. If a Borrowing Base Deficiency
exists at any time, Borrower shall be obligated to eliminate such Borrowing Base
Deficiency by making the mandatory prepayments of the Loan required by Section
2.7.
Section 4.6. Monthly Commitment Reductions. At the time of any
Determination, Administrative Agent reserves the right to establish an equal
Monthly Commitment Reduction. If a Borrowing Base Deficiency exists at any time
solely because of a Monthly Commitment Reduction, Borrower shall promptly make a
single lump sum payment in an amount at least equal to the Monthly Commitment
Reduction to eliminate the Borrowing Base Deficiency. If a Borrowing Base
Deficiency exists at any time because a new Determination of the Borrowing Base
becomes effective (or due to a Borrowing Base Determination combined with a
required Monthly Commitment Reduction), Borrower shall have the right to cure
the Borrowing Base Deficiency as set forth in Section 2.7 above; provided,
however, that if the Monthly Commitment Reduction was applicable before the
Borrowing Base Determination, then the Monthly Commitment Reduction amount will
be due in a lump sum and the Monthly Commitment Reduction will continue at the
same amount or such other amount as determined by Administrative Agent.
ARTICLE V
COLLATERAL
Section 5.1. Security. (a) Initially, the Loan will be unsecured. The
Loan shall remain unsecured so long as the sum of the Outstanding Credit (i) is
not in excess of $10,000,000, (ii) is less than the Borrowing Base, and (iii) is
less than thirty percent (30%) of the Recognized Value of Borrower's Proved
Developed Producing Reserves, as determined by Administrative Agent, in its sole
discretion, as of the most-recent Borrowing Base Determination (collectively the
"Triggering Events"). Upon Administrative Agent's determination that Borrower
has failed to meet any of the Triggering Events, payment of the Obligations will
be secured as set forth below.
(b) Upon Administrative Agent's determination that Borrower
has failed to meet any of the Triggering Events, payment of the Obligations
shall be secured by first and prior Liens (subject only to Permitted
Encumbrances) covering and encumbering (i) the Mineral Interests owned by
Borrower or other Subsidiaries, as specified by Administrative Agent or Required
Banks, which shall in all events include not less than the Required Reserve
Value of all Proved Reserves owned by Borrower, and (ii) one hundred percent
(100%) of the issued and outstanding Equity of each existing and future
Subsidiary of Parent (other than Excluded Subsidiaries). Upon Administrative
Agent's determination that Borrower has failed to meet any of the Triggering
Events, Parent and Borrower and any other Subsidiaries shall deliver to
Administrative Agent, for the ratable benefit of each Bank (A) Mortgages in
Proper Form and duly executed, together with such other assignments,
conveyances, amendments, agreements, and other writings, as Administrative Agent
shall deem necessary or appropriate to grant, evidence, and perfect first and
prior Liens in all Borrowing Base Properties and other interests of Borrower
required by this
35
Section, (B) the Pledge Agreement duly executed by Parent and Borrower, (C) such
UCC-1 financing statements as Administrative Agent shall request to fully
evidence and perfect the Liens created by the Mortgages and the Pledge
Agreement, and (D) the certificates (or other evidence satisfactory to
Administrative Agent) evidencing the issued and outstanding Equity owned by
Borrower and Parent, duly endorsed or accompanied by appropriate blank stock
powers.
(c) Upon Administrative Agent's determination that Borrower
has failed to meet any of the Triggering Events and on or before each
Determination Date after that date and at such other times as Administrative
Agent or Required Banks shall thereafter request, Borrower shall deliver to
Administrative Agent, for the ratable benefit of each Bank, Mortgages in Proper
Form and duly executed by Borrower together with such other assignments,
conveyances, amendments, agreements, and other writings, including, without
limitation, UCC-1 financing statements (each duly authorized and executed), as
Administrative Agent shall deem necessary or appropriate to grant, evidence, and
perfect the Liens required by Section 5.1(b) with respect to Mineral Interests
then held by Borrower or any Subsidiaries, which are not the subject of existing
first and prior, perfected Liens securing the Obligations as required by Section
5.1(b).
(d) Upon Administrative Agent's determination that Borrower
has failed to meet any of the Triggering Events and on the date of the creation
or acquisition by Parent of any Subsidiary, or on the date of creation or
acquisition by any Subsidiary of Parent of any Subsidiary, Parent or such
Subsidiary of Parent (as applicable) shall execute and deliver to Administrative
Agent a Pledge Agreement, together with (i) all certificates (or other evidence
acceptable to Administrative Agent) evidencing the issued and outstanding Equity
of any such Subsidiary of every class which shall be duly endorsed or
accompanied by stock powers executed in blank (as applicable), and (ii) such
UCC-1 financing statements as Administrative Agent shall deem necessary or
appropriate to grant, evidence and perfect the Liens required by Section 5.1(b)
in the issued and outstanding Equity of each such Subsidiary.
Section 5.2. Title Opinions. At any time Borrower or any of its
Subsidiaries are required to execute and deliver Mortgages to Administrative
Agent pursuant to Section 5.1(b), Borrower shall also deliver to Administrative
Agent such opinions of counsel (including, if so requested, title opinions, and
in each case addressed to Administrative Agent) or other evidence of title as
Administrative Agent shall deem necessary or appropriate to verify (i)
Borrower's title to the Required Reserve Value of the Proved Reserves which are
subject to such Mortgages, and (ii) the validity, perfection and priority of the
Liens created by such Mortgages.
Section 5.3. Guaranties. Payment and performance of the Obligations
shall be fully guaranteed by Guarantors pursuant to a Facility Guaranty. On the
date of creation or acquisition by Parent of any future Subsidiary, or on the
date of creation or acquisition by any Subsidiary of Parent of any future
Subsidiary, Parent shall cause such Subsidiary to execute and deliver to
Administrative Agent a Facility Guaranty.
36
Section 5.4. Lockbox. After any Triggering Event, Administrative Agent
reserves the right to require Borrower to set up a lockbox account to be managed
by Administrative Agent, for the ratable benefit of Banks, for the purpose of
collection of production proceeds from the Mineral Interests. Borrower agrees
that upon Administrative Agent's election to require the lockbox after an Event
of Default, Administrative Agent will receive the proceeds of all Hydrocarbons
produced from or attributable to the Mineral Interests for application to the
Loan; and Borrower hereby directs all production purchasers or operators
distributing proceeds to pay Borrower's distributions attributable to the
Mineral Interests directly to Administrative Agent, if Administrative Agent so
elects. All production proceeds attributable to the Mineral Interests received
in the lockbox account by Administrative Agent in excess of the principal and
interest then due on the Loan will be transferred to Borrower at the end of each
month for its unlimited use, so long as there is no existing Event of Default or
Borrowing Base Deficiency. If the production proceeds received by Administrative
Agent during any month are not sufficient to pay the principal and interest then
due on the Loan, Borrower will pay Administrative Agent the deficiency within
ten days. Contemporaneously with the execution of the Mortgages after a
Triggering Event, Borrower will sign and deliver letters in lieu of transfer
orders to all purchasers of production directing those parties to pay all
proceeds from the Mineral Interests to the lockbox account, and these letters,
signed in blank, will be held by Administrative Agent until such time as
Administrative Agent elects to require the lockbox. It will be an Event of
Default under this Agreement if production payments for Hydrocarbons produced
from or attributable to the Mineral Interests, in an amount greater than five
percent (5%) of Borrower's total monthly production revenues, are directed to
any party other than the lockbox maintained by Administrative Agent following
the establishment of the lockbox under this section.
ARTICLE VI
CONDITIONS TO BORROWINGS
Section 6.1. Conditions to Initial Borrowing and Participation in
Letter of Credit Exposure. The obligation of Bank of Texas to loan its
Commitment Percentage of the initial Borrowing hereunder, and the obligation of
Bank of Texas to issue any Letter of Credit issued hereunder is subject to the
satisfaction of each of the following conditions:
(a) Closing Deliveries. Bank of Texas shall have received each
of the following documents, instruments, and agreements, each of which shall be
in Proper Form and executed in such counterparts as shall be acceptable to Bank
of Texas and each of which shall, unless otherwise indicated, be dated the
Closing Date:
(i) a Note payable to the order of Bank of Texas in
the amount of the Aggregate Note Amounts, duly executed and delivered by
Borrower;
(ii) the Facility Guaranty duly executed and
delivered by Guarantors;
(iii) a Certificate of Ownership Interests in
substantially the form of
37
Exhibit B, duly executed and delivered by an Authorized Officer of Borrower and
appropriate Subsidiaries;
(iv) an opinion of general counsel to Parent and
Borrower, favorably opining as to such matters as Bank of Texas may request;
(v) a certificate executed by an Authorized Officer
of Borrower stating that (A) the representations and warranties contained in
this Agreement and the other Loan Documents are true and correct in all
respects, (B) no Default or Event of Default has occurred which is continuing,
and (C) all conditions set forth in this Section and Section 6.2 have been
satisfied;
(vi) such UCC-11 search reports as Bank of Texas
shall require, prepared as of a date not more than twenty (20) days prior to the
Closing Date, conducted in such jurisdictions and reflecting such names as Bank
of Texas shall request;
(vii) a copy of the articles or certificate of
incorporation, certificate of limited partnership, or comparable charter
documents, and all amendments thereto, of each Credit Party accompanied by a
certificate that such copy is true, correct, and complete, and dated within ten
(10) days of the Closing Date, issued by the appropriate Governmental Authority
of the jurisdiction of incorporation or organization of each such Credit Party,
and accompanied by a certificate of the Secretary or comparable Authorized
Officer of each such Credit Party, that such copy is true, correct and complete
on the Closing Date;
(viii) a copy of the bylaws, partnership agreement,
regulations, operating agreement, or comparable documents, and all amendments
thereto, of each Credit Party accompanied by a certificate of the Secretary or
comparable Authorized Officer of each such Credit Party that such copy is true,
correct and complete as of the date hereof;
(ix) certain certificates and other documents issued
by the appropriate Governmental Authorities of such jurisdictions as
Administrative Agent has requested relating to the existence of each Credit
Party and to the effect that each Credit Party is in good standing with respect
to the payment of franchise and similar Taxes and is duly qualified to transact
business in such jurisdictions;
(x) a certificate of incumbency of all officers of
each Credit Party (to the extent a party to any Loan Documents) who will be
authorized to execute or attest to any Loan Documents, dated the date hereof,
executed by the Secretary or comparable Authorized Officer of each such Credit
Party (as applicable);
(xi) copies of resolutions or comparable
authorizations approving the Loan Documents and authorizing the transactions
contemplated by this Agreement and the other Loan Documents, duly adopted by the
Board of Directors, partners or comparable authority of each Credit Party a
party to any Loan Documents, accompanied by certificates of the Secretary or
comparable officer or partner of each such Credit Party (as applicable) that
such copies are true and
38
correct copies of resolutions duly adopted at a meeting of or (if permitted by
applicable Law and, if required by such Law, by the bylaws, or other charter
documents of each such Credit Party, as applicable) by the unanimous written
consent of the Board of Directors of each such Credit Party, as applicable, and
that such resolutions constitute all the resolutions adopted with respect to
such transactions, have not been amended, modified, or revoked in any respect,
and are in full force and effect as of the date hereof;
(xii) copies of consents of partners of each Credit
Party which is a partnership (to the extent required) to the transactions
contemplated by this Agreement and the other Loan Documents, duly executed by
each partner of such Credit Party required to consent to such transactions,
accompanied by certificates of the Secretary or comparable Authorized Officers
or partner of each applicable Credit Party that such copies are true and correct
copies of all consents of the partners of the Credit Parties required to be
executed and granted pursuant to such Credit Party's partnership agreement and
all other comparable charter documents of such Credit Party;
(xiii) certificates from Borrower's insurance broker
setting forth the insurance maintained by Borrower, stating that such insurance
is in full force and effect, that all premiums due have been paid and stating
that such insurance is adequate and complies with the requirements of Section
8.4 hereof; and
(xiv) a report or reports in form, scope and detail
acceptable to Bank of Texas setting forth the results of a review of Borrower's
Mineral Interests and other operations, which report(s) shall not reflect the
existence of facts or circumstances which would constitute a material violation
of any Environmental Law or which are likely to result in a material liability
to any Credit Party, and/or otherwise reveal any condition or circumstance which
would reflect that the representations and warranties contained in Section 7.16
hereof are inaccurate in any respect.
(b) Fees and Expenses. All fees and expenses of Bank of Texas
and its Affiliates in connection with the credit facility provided herein shall
have been paid, subject to Section 14.16.
(c) Financial Statements. Bank of Texas shall have received
and reviewed, with results satisfactory to Bank of Texas, the Current
Financials.
(d) No Material Adverse Change. In the sole discretion of Bank
of Texas, no Material Adverse Change shall have occurred in the assets,
liabilities, financial condition or prospects of any Credit Party.
(e) No Legal Prohibition. The transactions contemplated by
this Agreement and the other Loan Documents shall be permitted by applicable Law
and regulation and shall not subject any Agent, any Bank, or any Credit Party to
any material adverse change in their assets, liabilities, financial condition or
prospects.
(f) No Litigation. No litigation, arbitration, or similar
proceeding shall be pending which calls into question the validity or
enforceability of this Agreement and/or the other
39
Loan Documents; and there shall be no order or injunction or other pending or
threatened litigation in which there is a reasonable possibility, in Bank of
Texas' judgment, of a decision which could materially adversely affect the
ability of Borrower to perform under the Loan Documents.
(g) Litigation Schedule. Bank of Texas shall have received and
reviewed, with results satisfactory to Bank of Texas and its counsel, Schedule
2, showing information regarding any existing litigation affecting Borrower,
Parent, or any of the Mineral Interests.
(h) Closing Fees. Borrower shall have paid to Bank of Texas
any fees payable to Bank of Texas or any Affiliate.
(i) Reserve Report. Bank of Texas shall have received and
reviewed, with results satisfactory to Bank of Texas, the Reserve Reports for
the Borrowing Base Properties.
(j) Miscellaneous Information. Bank of Texas shall have
received and reviewed, with results satisfactory to Bank of Texas and its
counsel, information regarding litigation, tax, accounting, insurance, pension
liabilities (actual or contingent), real estate leases, material contracts, debt
agreements, property ownership, and contingent liabilities of Borrower, Parent,
and any Subsidiaries.
(k) Debts. Bank of Texas' receipt of satisfactory evidence
that Borrower has no outstanding indebtedness other than the Loan and trade
accounts payable and taxes incurred in the ordinary course of business.
(l) Existing Xxxxxx. Borrower shall not have entered into any
Oil and Gas Hedge Transaction, and no Oil and Gas Hedge Transaction shall exist,
except for Oil and Gas Hedge Transactions that would result in a price per
barrel or mcf higher than the base case price used by Bank of Texas in the
most-recent engineering evaluation of the Borrowing Base Properties, adjusted
for variances between the hedging price and Borrower's actual product price as
determined by Bank of Texas.
(m) Investment Account. Borrower's establishment of its
primary investment accounts with Bank of Texas.
(n) Other Matters. All matters related to this Agreement, the
other Loan Documents, or any Credit Party shall be acceptable to Administrative
Agent and each Bank in their sole discretion, and Borrower shall have delivered
to Administrative Agent and each Bank such evidence as they shall request to
substantiate any matters related to this Agreement, the other Loan Documents, or
any Credit Party as Administrative Agent or any Bank shall request.
Section 6.2. Conditions to each Borrowing and each Letter of Credit.
The obligation of each Bank to loan its Commitment Percentage of each Borrowing
and the obligation of any Letter of Credit Issuer to issue Letters of Credit on
the date any Letter of Credit is to be issued are subject to the further
satisfaction of the following conditions:
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(a) timely receipt by Administrative Agent of a Request for
Borrowing or Request for Letter of Credit (as applicable);
(b) immediately before and after giving effect to such
Borrowing or issuance of Letter of Credit, no Default or Event of Default shall
have occurred and be continuing and neither such Borrowing nor the issuance of
such Letter of Credit (as applicable) shall cause a Default or Event of Default;
(c) the representations and warranties of each Credit Party
contained in this Agreement and the other Loan Documents shall be true and
correct in all material respects on and as of the date of such Borrowing or the
issuance of such Letter of Credit (as applicable), except to the extent such
representations and warranties are expressly stated as of a certain date, in
which case such representations and warranties shall be true and correct in all
material respects as of such date;
(d) the funding of such Borrowing or the issuance of such
Letter of Credit (as applicable) and all other Borrowings to be made and/or
Letters of Credit to be issued (as applicable) on the same day under this
Agreement, shall not cause a Borrowing Base Deficiency; and
(e) following the issuance of any Letters of Credit, the
aggregate Letter of Credit Exposure of all Banks shall not exceed $4,000,000;
(f) there has been no Material Adverse Change; and
(g) there is no existing Default.
Each Borrowing and the issuance of each Letter of Credit hereunder shall
constitute a representation and warranty by Borrower that on the date of such
Borrowing or issuance of such Letter of Credit (as applicable) the statements
contained in subclauses (b), (c), (d), (e), (f), and (g) above are true.
Section 6.3. Conditions to Borrowing after the Loan is Secured. The
obligation of each Bank to loan its Commitment Percentage of any Borrowing
hereunder after Administrative Agent's determination that Borrower has failed to
meet any of the Triggering Events, and the obligation of Administrative Agent to
issue (or cause another Bank to issue), any Letter of Credit thereafter, is
subject to the satisfaction of each of the following conditions:
(a) Deliveries. Administrative Agent shall have received each
of the following documents, instruments, and agreements, each of which shall be
in Proper Form and executed in such counterparts as shall be acceptable to
Administrative Agent:
(i) the Pledge Agreement duly executed and delivered
by Parent together with (A) certificates (or other evidence acceptable to
Administrative Agent) evidencing one hundred percent (100%) of the issued and
outstanding Equity of Borrower of every class, which certificates shall be duly
endorsed or accompanied by stock powers executed in blank (as applicable), and
(B) such financing statements executed by Parent as Administrative Agent shall
request to evidence and perfect the Liens granted pursuant to such Pledge
Agreement;
41
(ii) the Mortgages, duly executed and delivered by
Borrower and all other appropriate Subsidiaries, together with such other
assignments, conveyances, amendments, agreements and other writings, including,
without limitation, UCC-1 financing statements; and
(iii) appropriate resolutions of the Credit Parties
signing the Pledge Agreement and the Mortgages.
(b) Title Review. Administrative Agent or its title counsel
shall have completed a review of title (including limited opinions of title)
with respect to the Title Required Reserve Value of all Borrowing Base
Properties, and such review shall not have revealed any condition or
circumstance which would reflect that the representations and warranties
contained in Section 7.9 hereof are inaccurate in any respect.
(c) Lien Priority. Administrative Agent is provided
satisfactory evidence that Administrative Agent holds, for the ratable benefit
of Banks, first-priority perfected Liens in all collateral covered by the Pledge
Agreement and the Mortgages, subject to no other Liens other than Permitted
Encumbrances.
Section 6.4. Materiality of Conditions. Each condition precedent herein
is material to the transactions contemplated herein, and time is of the essence
in respect of each thereof.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Parent and Borrower jointly and severally represent and warrant that
each of the following statements is true and correct on the date hereof and will
be true and correct on the occasion of each Borrowing and the issuance of each
Letter of Credit, except to the extent such representations and warranties are
expressly stated as of a certain date, in which case such representations and
warranties shall be true and correct as of such date:
Section 7.1. Existence and Power. Each of the Credit Parties (a) is a
corporation, limited liability company or partnership duly incorporated or
organized (as applicable), and is validly existing and in good standing under
the Laws of its jurisdiction of incorporation or organization (as applicable),
(b) has all corporate, limited liability company or partnership power (as
applicable) and all material governmental licenses, authorizations, consents and
approvals required to carry on its businesses as now conducted and as proposed
to be conducted, and (c) is duly qualified to transact business as a foreign
corporation, foreign limited liability company or foreign partnership (as
applicable) in each jurisdiction where a failure to be so qualified could have a
Material Adverse Effect.
Section 7.2. Authorization; Contravention. The execution, delivery and
performance of this Agreement and the other Loan Documents by each Credit Party
(as applicable) (a) are within such Credit Party's corporate, partnership, or
limited liability company powers (as applicable), (b) have been duly authorized
by all necessary corporate, partnership, or limited liability company
42
action (as applicable), (c) require no action by or in respect of, or filing
with, any Governmental Authority or official, and (d) do not contravene, or
constitute a default under, any provision of applicable Law or regulations
(including, without limitation, the Margin Regulations) or of the articles of
association, partnership agreement, certificate of limited partnership, articles
of incorporation, certificate of incorporation, bylaws, regulations or other
organizational documents (as applicable) of any such Credit Party or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
any such Credit Party or result in the creation or imposition of any Lien on any
asset of any such Credit Party except Liens securing the Obligations.
Section 7.3. Binding Effect. This Agreement constitutes a valid and
binding agreement of Parent and Borrower; the other Loan Documents when executed
and delivered in accordance with this Agreement, will then constitute valid and
binding obligations of each Credit Party (to the extent a party thereto); and
each of the Loan Documents is enforceable against each such Credit Party (to the
extent a party thereto) in accordance with its terms except as (a) the
enforceability thereof may be limited by bankruptcy, insolvency or similar Laws
affecting creditors rights generally, and (b) the availability of equitable
remedies may be limited by equitable principles of general applicability.
Section 7.4. Financial Information. (a) The Current Financials fairly
present, in conformity with GAAP, the consolidated financial position of Parent
and Borrower and their consolidated results of operations and cash flows as of
the date and for the periods covered thereby.
(b) There has been no Material Adverse Change in the business,
financial position, results of operations or prospects of any Credit Party since
the date of the most recent balance sheet included in the Current Financials.
Section 7.5. Litigation. Except for matters disclosed on Schedule 2,
there is no action, suit or proceeding pending against, or to the knowledge of
any Credit Party, threatened against or affecting any Credit Party before any
court, arbitrator, Governmental Authority or official in which there is a
reasonable possibility of an adverse decision which could have a Material
Adverse Effect or which could in any manner draw into question the validity of
the Loan Documents.
Section 7.6. ERISA. No Credit Party nor any ERISA Affiliate maintains
or has ever maintained or been obligated to contribute to any Plan covered by
Title IV of ERISA or subject to the funding requirements of Section 412 of the
Code or Section 302 of ERISA. Each Plan maintained by any Credit Party or any
ERISA Affiliate is in compliance in all material respects with all applicable
Laws. Except in such instances where an omission or failure would not have a
Material Adverse Effect, (a) all returns, reports and notices required to be
filed with any regulatory agency with respect to any Plan have been filed
timely, and (b) no Credit Party nor any ERISA Affiliate has failed to make any
contribution or pay any amount due or owing as required by the terms of any
Plan. There are no pending or, to Parent's or Borrower's knowledge, threatened
claims, lawsuits, investigations or actions (other than routine claims for
benefits in the ordinary course) asserted or instituted against, and no Credit
Party nor any ERISA Affiliate has knowledge of any threatened litigation or
claims against, the assets of any Plan or its related trust or against any
fiduciary of a Plan with respect to the operation of such Plan that are likely
to result in liability of any Credit Party having a Material Adverse Effect.
Except in such instances where an omission or
43
failure would not have a Material Adverse Effect, each Plan that is intended to
be "qualified" within the meaning of Section 401(a) of the Code is, and has been
during the period from its adoption to date, so qualified, both as to form and
operation and all necessary governmental approvals, including a favorable
determination as to the qualification under the Code of such Plan and each
amendment thereto, have been or will be timely obtained. No Credit Party nor any
ERISA Affiliate has engaged in any prohibited transactions, within the meaning
of Section 406 of ERISA or Section 4975 of the Code, in connection with any Plan
which would result in liability of any Credit Party having a Material Adverse
Effect. No Credit Party nor any ERISA Affiliate maintains or contributes to any
Plan that provides a post-employment health benefit, other than a benefit
required under Section 601 of ERISA, or maintains or contributes to a Plan that
provides health benefits that is not fully funded except where the failure to
fully fund such Plan would not have a Material Adverse Effect. No Credit Party
nor any ERISA Affiliate maintains, has established or has ever participated in a
multiple employer welfare benefit arrangement within the meaning of Section
3(40)(A) of ERISA.
Section 7.7. Taxes and Filing of Tax Returns. Each Credit Party has
filed all material tax returns required to have been filed and has paid all
Taxes shown to be due and payable on such returns, including interest and
penalties, and all other Taxes which are payable by such party, to the extent
the same have become due and payable, other than Taxes with respect to which a
failure to pay would not have a Material Adverse Effect. Neither Parent nor
Borrower knows of any proposed material Tax assessment against any Credit Party,
and all Tax liabilities of each Credit Party and their predecessors are
adequately provided for. Except as disclosed in writing to Banks, no income tax
liability of any Credit Party, or any of their predecessors has been asserted by
the Internal Revenue Service for Taxes in excess of those already paid.
Section 7.8. Title to Properties; Liens. Each Credit Party has good and
valid title to all material assets purported to be owned by them, including,
without limitation, all material assets reflected in the Current Financials and
any subsequent financial statements delivered to Banks pursuant to Sections
10.2, and none of such assets are subject to any Lien other than Permitted
Encumbrances.
Section 7.9. Mineral Interests. (a) Borrower has good and defensible
title to all Borrowing Base Properties (except for Borrowing Base Properties
disposed of in compliance with, and to the extent permitted by, Section 9.5 to
the extent this representation and warranty is made or deemed made after the
Closing Date), free and clear of all Liens, except Permitted Encumbrances and
Immaterial Title Deficiencies, and will have full authority to create Liens
thereon in favor of Administrative Agent for the ratable benefit of Banks, (b)
with the exception of Immaterial Title Deficiencies, all Borrowing Base
Properties are valid, subsisting, and in full force and effect, and all rentals,
royalties and other amounts due and payable in respect thereof have been duly
paid, (c) without regard to any consent or non-consent provisions of any joint
operating agreement covering any of such Mineral Interests and with the
exception of Immaterial Title Deficiencies, Borrower's share of (i) the costs
for each Borrowing Base Property is not greater than the decimal fraction set
forth in the Reserve Report, before and after payout, as the case may be, and
described by the respective designations "working interests," "WI," "gross
working interest," "GWI," or similar terms, and (ii) production from, allocated
to, or attributed to each such Borrowing Base Property is
44
not less than the decimal fraction set forth in such Reserve Report, before and
after payout, as the case may be, and described therein by the designations "net
revenue interest," "NRI" or similar terms, and (d) each well drilled in respect
of each Proved Producing Mineral Interest described in the Reserve Report (A) is
capable of, and is presently, producing Hydrocarbons in commercially profitable
quantities, and Borrower is receiving payments for its share of production, and
no funds in respect of any thereof will be held in suspense, and (B) to Parent's
and Borrower's knowledge, has been drilled, bottomed, completed and operated in
compliance with all Laws and no such well which is currently producing
Hydrocarbons is subject to any penalty in production by reason of such well
having produced in excess of its allowable production.
Section 7.10. Business; Compliance. Each Credit Party has performed and
abided by all obligations required to be performed under each license, permit,
order, authorization, grant, contract, agreement, or regulation to which such
Credit Party is a party or by which such Credit Party or any of the assets of
such Credit Party are bound to the extent a failure to perform and abide by such
obligations could have a Material Adverse Effect; provided that, to the extent
Mineral Interests owned by any such Credit Party are operated by operators other
than such Credit Party or an Affiliate of such Credit Party, neither Parent nor
Borrower has any knowledge that any such obligation remains unperformed in any
material respect, and the appropriate Person has enforced the contractual
obligations of such operators in accordance with reasonable commercial practices
in the industry.
Section 7.11. Licenses, Permits, Etc. Each Credit Party possesses such
valid franchises, certificates of convenience and necessity, operating rights,
licenses, permits, consents, authorizations, exemptions and orders of tribunals,
as are necessary to carry on their businesses as now being conducted except to
the extent a failure to obtain any such item would not have a Material Adverse
Effect; provided that, to the extent Mineral Interests owned by any Credit Party
are operated by operators other than such Credit Party or an Affiliate of such
Credit Party, neither Parent nor Borrower has any knowledge that possession of
such items has not been obtained, and the appropriate Person has enforced the
contractual obligations of such operators in accordance with reasonable
commercial practices in the industry.
Section 7.12. Compliance with Law. The business and operations of each
Credit Party have been and are being conducted in accordance with all applicable
Laws, rules and regulations of all tribunals and Governmental Authorities, other
than Laws, rules and regulations the violation of which could not (either
individually or collectively) have a Material Adverse Effect; provided that, to
the extent Mineral Interests owned by any Credit Party are operated by operators
other than such Credit Party or an Affiliate of such Credit Party, neither
Parent nor Borrower has any knowledge of non-compliance and the appropriate
Person has enforced the contractual obligations of such operators in accordance
with reasonable commercial practices in the industry.
Section 7.13. Ownership Interests. The Reserve Reports most recently
provided to Banks accurately reflect, and all Reserve Reports hereafter
delivered pursuant to this Agreement will accurately reflect, in all material
respects, the ownership interests in the Mineral Interests referred to therein
(including all before and after payout calculations).
45
Section 7.14. Full Disclosure. All information heretofore furnished by
any Credit Party (or any other party on any Credit Party's behalf) to any Agent
or any Bank for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter furnished
by any Credit Party or on behalf of any Credit Party to any Agent or any Bank
will be, true, complete and accurate in every material respect or based on
reasonable estimates on the date as of which such information is stated or
certified. Parent and Borrower have disclosed to Banks in writing any and all
facts (other than facts of general public knowledge) which might reasonably be
expected to have a Material Adverse Effect, or might affect the business,
operations, prospects or condition, financial or otherwise, of each Credit Party
or the ability of each Credit Party to perform its obligations under this
Agreement and the other Loan Documents.
Section 7.15. Organizational Structure; Nature of Business. Each Credit
Party is engaged only in the business of acquiring, exploring, developing and
operating Mineral Interests and the production, marketing, processing and
transporting of Hydrocarbons therefrom. Schedule 3 accurately reflects, as of
the date hereof (i) the jurisdiction of incorporation or organization of each
Credit Party, (ii) each jurisdiction in which each Credit Party is qualified to
transact business as a foreign corporation, foreign partnership or foreign
limited liability company, (iii) the authorized, issued and outstanding stock,
partnership or limited liability interests of each Credit Party, including the
names of (and number of shares or other equity interests held by) the record and
beneficial owners of such interests, and (iv) all outstanding warrants, options,
subscription rights, convertible securities or other rights to purchase capital
stock, partnership or limited liability company interests of each Credit Party.
Except as set forth in this Section and in Schedule 3, no Person holds record or
beneficial ownership of any capital stock or other equity interest in Borrower
or any other Subsidiary of Parent or any other right or option to acquire any
capital stock or other equity interest in Borrower or any other Subsidiary of
Parent and, without limiting the foregoing, there are not outstanding any
warrants, options, subscription rights or other rights to purchase stock or
other equity interests in Borrower or any other Subsidiary of Parent. No Credit
Party has made or presently holds any Investments other than Permitted
Investments. Except as set forth in Schedule 3, Borrower does not have any
Subsidiaries, and no Credit Party is a partner or joint venturer in any
partnership or joint venture or a member of any unincorporated association.
Section 7.16. Environmental Matters. No real or personal property owned
or leased by any Credit Party (including without limitation, Borrower's Mineral
Interests) and no operations conducted thereon, and to Parent's or Borrower's
knowledge, no operations of any prior owner, lessee or operator of any such
properties, is or has been in violation of any Environmental Law other than
violations which neither individually nor in the aggregate will have a Material
Adverse Effect, nor is any such property or operation the subject of any
existing, pending or, to Parent's or Borrower's knowledge, threatened
Environmental Complaint which could, individually or in the aggregate, have a
Material Adverse Effect. All notices, permits, licenses, and similar
authorizations, if any, required to be obtained or filed in connection with the
ownership or operation of any and all real and personal property owned, leased
or operated by any Credit Party, including, without limitation, notices,
licenses, permits and authorizations required in connection with any past or
present treatment, storage, disposal, or release of Hazardous Substances into
the environment, have been duly obtained or filed except to the extent the
failure to obtain or file such notices, licenses, permits and authorizations
would not have a Material Adverse Effect. All Hazardous Substances, if
46
any, generated at any and all real and personal property owned, leased or
operated by any Credit Party have been transported, treated, and disposed of
only by carriers maintaining valid permits under RCRA and all other
Environmental Laws. There have been no Hazardous Discharges which were not in
compliance with Environmental Laws other than Hazardous Discharges which would
not, individually or in the aggregate, have a Material Adverse Effect. No Credit
Party has any contingent liability in connection with any Hazardous Discharges
which could have a Material Adverse Effect.
Section 7.17. Burdensome Obligations. No Credit Party nor any of the
properties of any Credit Party is subject to any Law or regulation or subject to
any restriction under the articles or certificate of incorporation, certificate
of limited partnership, partnership agreement, bylaws, regulations or other
organizational documents of any Credit Party or under any agreement or
instrument to which any Credit Party is a party or by which any of their
properties may be subject or bound, which is so unusual or burdensome as to be
likely in the foreseeable future to have a Material Adverse Effect. Without
limiting the foregoing, no Credit Party is a party to or bound by an agreement
or subject to any order of any Governmental Authority which prohibits or
restricts in any way the right of such party to make Distributions other than
restrictions binding on the Credit Parties set forth in this Agreement.
Section 7.18. Government Regulations. No Credit Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 (as
any of the preceding acts have been amended) or any other Law or regulation
which regulates the incurring by it of Debt, including, but not limited to, Laws
relating to common carriers or the sale of electricity, gas, steam, water or
other public utility services.
Section 7.19. Fiscal Year. Each of Parent's and Borrower's Fiscal Year
is October 1 through September 30.
Section 7.20. No Default. Neither a Default nor an Event of Default has
occurred or will exist after giving effect to the transactions contemplated by
this Agreement or the other Loan Documents.
Section 7.21. Insider. No Credit Party is, and no Person having
"control" (as that term is defined in 12 U.S.C. Section 375(b) or regulations
promulgated thereunder) of any Credit Party is an "executive officer,"
"director" or "shareholder" of any Bank or any bank holding company of which any
Bank is a Subsidiary or of any Subsidiary of such bank holding company.
Section 7.22. Gas Balancing Agreements and Advance Payment Contracts.
On the date of this Agreement, (a) there is no Material Gas Imbalance, and (b)
the aggregate amount of all Advance Payments received by any Credit Party under
Advance Payment Contracts which have not been satisfied by delivery of
production does not exceed $250,000.
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ARTICLE VIII
AFFIRMATIVE COVENANTS
Parent and Borrower jointly and severally covenant and agree that, so
long as any Bank has any commitment to lend or participate in Letter of Credit
Exposure hereunder or any amount payable under any Note remains unpaid or any
Letter of Credit remains outstanding:
Section 8.1. Business of Credit Parties. The primary business of the
Credit Parties will continue to be the acquisition, exploration, development,
and operation of Mineral Interests, and the production and marketing of
Hydrocarbons and accompanying elements therefrom.
Section 8.2. Maintenance of Existence. Each of Parent and Borrower
shall, and shall cause each of the other Credit Parties (excluding Castle
Offshore LLC, which is being liquidated) to, at all times (a) maintain its
corporate, partnership or limited liability company existence (as applicable) in
its state of organization, and (b) maintain its good standing and qualification
to transact business in all jurisdictions where the failure to maintain good
standing or qualification to transact business could have a Material Adverse
Effect.
Section 8.3. Right of Inspection. Parent and Borrower will permit, and
will cause each other Credit Party to permit, any officer, employee or agent of
any Agent or any Bank to visit and inspect any of the assets of any Credit
Party, examine each Credit Party's books of record and accounts, take copies and
extracts therefrom, and discuss the affairs, finances and accounts of each
Credit Party with any of such Credit Party's officers, accountants and auditors,
all upon reasonable advance notice and at such reasonable times and as often as
any Agent or any Bank may desire, all at the expense of Borrower.
Section 8.4. Maintenance of Insurance. Parent and Borrower will, and
will cause each other Credit Party to, at all times maintain or cause to be
maintained insurance covering such risks as are customarily carried by
businesses similarly situated including, without limitation, the following: (a)
workers' compensation insurance; (b) employer's liability insurance; (c) general
public liability and property damage insurance in respect of all activities in
which any Credit Party might incur personal liability for the death or injury of
an employee or third person, or damage to or destruction of another's property;
(d) insurance against loss or damage by fire, lightning, hail, tornado,
explosion or other similar risk to buildings, building contents and field
inventory, excluding wellhead equipment and production facilities; and (e)
comprehensive automobile liability insurance. After a Triggering Event, all loss
payable clauses or provisions in all policies of insurance maintained by the
Credit Parties pursuant to this Section shall be endorsed in favor of and made
payable to Administrative Agent for the ratable benefit of Banks, as their
interests may appear. Administrative Agent for the ratable benefit of Banks
shall have the right to collect, and Parent and Borrower hereby assign to
Administrative Agent for the ratable benefit of Banks, any and all monies that
may become payable under any such policies of insurance by reason of damage,
loss or destruction of any property which stands as security for the Obligations
or any part thereof, and Administrative Agent may, at its election, either apply
for the ratable benefit of Banks all or any part of the sums so collected toward
payment of the Obligations (or the portion thereof with respect to
48
which such property stands as security), whether or not such Obligations are
then due and payable, in such manner as Administrative Agent may elect or
release same to Borrower.
Section 8.5. Payment of Taxes and Claims. Parent and Borrower will, and
will cause each other Credit Party to, pay (a) all Taxes imposed upon it or any
of its assets or with respect to any of its franchises, business, income or
profits before any material penalty or interest accrues thereon, and (b) all
material claims (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which by
Law have or might become a Lien (other than a Permitted Encumbrance) on any of
its assets; provided, however, no payment of Taxes or claims shall be required
if (i) the amount, applicability or validity thereof is currently being
contested in good faith by appropriate action promptly initiated and diligently
conducted in accordance with good business practices and no material part of the
property or assets of any Credit Party is subject to levy or execution, (ii) the
Credit Parties, as and to the extent required in accordance with GAAP, shall
have set aside on their books, reserves (segregated to the extent required by
generally accepted accounting practices) deemed by it to be adequate with
respect thereto, and (iii) the Credit Parties have notified Administrative Agent
of such circumstances, in detail satisfactory to Administrative Agent.
Section 8.6. Compliance with Laws and Documents. Parent and Borrower
will, and will cause each other Credit Party to, comply with all Laws, their
respective articles or certificate of incorporation, certificate of limited
partnership, partnership agreement, bylaws, regulations and similar
organizational documents and all Material Agreements to which any Credit Party
is a party, if a violation, alone or when combined with all other such
violations, could have a Material Adverse Effect.
Section 8.7. Operation of Properties and Equipment. (a) Parent and
Borrower will, and will cause each other Credit Party to, maintain, develop and
operate its Mineral Interests in a good and workmanlike manner, and observe and
comply with all of the terms and provisions, express or implied, of all oil and
gas leases relating to such properties so long as such oil and gas leases are
capable of producing Hydrocarbons and accompanying elements in paying
quantities, to the extent that the failure to so observe and comply could have a
Material Adverse Effect.
(b) Parent and Borrower will, and will cause each other Credit
Party to, comply in all respects with all contracts and agreements applicable to
or relating to its Mineral Interests or the production and sale of Hydrocarbons
and accompanying elements therefrom, except to the extent a failure to so comply
could not have a Material Adverse Effect.
(c) Parent and Borrower will, and will cause each other Credit
Party to, at all times maintain, preserve and keep all operating equipment used
with respect to its Mineral Interests in proper repair, working order and
condition, and make all necessary or appropriate repairs, renewals,
replacements, additions and improvements thereto so that the efficiency of such
operating equipment shall at all times be properly preserved and maintained;
provided that no item of operating equipment need be so repaired, renewed,
replaced, added to or improved, if Borrower shall in good faith determine that
such action is not necessary or desirable for the continued efficient and
profitable operation of the business of such Credit Party.
49
(d) With respect to Mineral Interests of any Credit Party
which are operated by operators other than such Credit Party, no Credit Party
shall be obligated itself to perform any undertakings contemplated by the
covenants and agreements contained in this Section which are performable only by
such operators and are beyond the control of such Credit Party, but shall be
obligated to seek to enforce such operators' contractual obligations to
maintain, develop and operate the Mineral Interests subject to such operating
agreements.
Section 8.8. Further Assurances. Parent and Borrower will, and will
cause each other Credit Party to, execute and deliver or cause to be executed
and delivered such other and further instruments or documents and take such
further action as in the judgment of Administrative Agent may be required to
carry out the provisions and purposes of the Loan Documents including, without
limitation, to create, preserve, protect and perfect the Liens of Administrative
Agent for the ratable benefit of the Banks as required by Article V.
Section 8.9. Environmental Law Compliance and Indemnity. Parent and
Borrower will, and will cause each other Credit Party to, comply in all material
respects with all Environmental Laws, including, without limitation, (a) all
licensing, permitting, notification and similar requirements of Environmental
Laws, and (b) all provisions of Environmental Law regarding storage, discharge,
release, transportation, treatment and disposal of Hazardous Substances. Parent
and Borrower will, and will cause each other Credit Party to, promptly pay and
discharge when due all debts, claims, liabilities and obligations with respect
to any clean-up or remediation measures necessary to comply with Environmental
Laws. Parent and Borrower hereby jointly and severally indemnify and agree to
defend and hold Banks and their successors and assigns harmless from and against
any and all claims, demands, causes of action, loss, damage, liabilities, costs
and expenses (including reasonable attorneys fees and court costs) of any and
every kind or character, known or unknown, fixed or contingent, asserted against
or incurred by any Bank at any time and from time to time including, without
limitation, those asserted or arising subsequent to the payment or other
satisfaction of the Loan, by reason of or arising out of the ownership,
construction, occupancy, operation, use and maintenance of any of the collateral
for the Loan, including matters arising out of the negligence of Banks;
provided, however, this indemnity shall not apply with respect to matters caused
by or arising out of (i) the gross negligence or willful misconduct of Banks (IT
BEING THE EXPRESS INTENTION HEREBY THAT BANKS SHALL BE INDEMNIFIED FROM THE
CONSEQUENCES OF THEIR ORDINARY NEGLIGENCE); and (ii) the construction,
occupancy, operation, use and maintenance of the collateral for the Loan by any
owner, lessee or party in possession of the collateral for the Loan subsequent
to the ownership of the collateral for the Loan by any Credit Party, provided
further, however, that this subclause (ii) shall not exclude from the foregoing
indemnity and agreement, liability, claims, demands, causes of action, loss,
damage, costs and expenses imposed by reason of the ownership of the collateral
for the Loan by Banks after purchase by Banks at any foreclosure sale or
transfer in lieu thereof from any Credit Party in partial or entire satisfaction
of the Loan (unless the same shall be solely attributable to the subsequent use
of the collateral by Banks during their ownership thereof). The foregoing
indemnity and agreement applies to the violation of any Environmental Law prior
to the payment or other satisfaction of the Loan and any act, omission, event or
circumstance existing or occurring on or about the collateral for the Loan
(including, without limitation, the presence on the collateral for the Loan or
release from the collateral for the Loan of asbestos or other Hazardous
Substances disposed of or otherwise
50
present in or released prior to the payment or other satisfaction of the Loan).
It shall not be a defense to the covenant of Parent and Borrower to indemnify
that the act, omission, event or circumstance did not constitute a violation of
any Environmental Law at the time of its existence or occurrence. The provisions
of this Section shall survive the repayment of the Loan and shall continue
thereafter in full force and effect. In the event of the transfer of the Loan or
any portion thereof, Banks or any prior holder of the Loan and any participants
shall continue to be benefitted by this indemnity and agreement with respect to
the period of such holding of the Loan.
Section 8.10. Title Data. Parent and Borrower shall, upon the request
of Administrative Agent, cause to be delivered to Administrative Agent such
limited title opinions and other information regarding title to Mineral
Interests owned by Borrower or any other Credit Party as are appropriate.
Section 8.11. Deposit Accounts. After a Triggering Event, Parent and
Borrower will maintain their operating account and primary deposit accounts at
Bank of Texas.
Section 8.12. Hedge Transactions. After a Triggering Event, Parent and
Borrower will maintain a program satisfactory to Administrative Agent for
hedging, forward sale, or swap of part of anticipated production from the Proved
Developed Producing Reserves.
ARTICLE IX
NEGATIVE COVENANTS
Parent and Borrower agree that, so long as any Bank has any commitment
to lend or participate in Letter of Credit Exposure hereunder or any amount
payable under any Note remains unpaid or any Letter of Credit remains
outstanding:
Section 9.1. Incurrence of Debt. Parent and Borrower will not, nor will
Parent and/or Borrower permit any other Credit Party to, incur, become or remain
liable for any Debt other than (a) the Obligations, and (b) other Debt in the
aggregate amount outstanding at any time not to exceed $250,000.
Section 9.2. Restricted Payments. Parent and Borrower will not, nor
will Parent and/or Borrower permit any other Credit Party to, declare, pay or
make, or incur any liability to declare, pay or make, any Restricted Payment.
Section 9.3. Negative Pledge. Parent and Borrower will not, nor will
Parent and/or Borrower permit any other Credit Party to, create, assume, or
suffer to exist any Lien on any asset owned by it (other than Permitted
Encumbrances). Parent and Borrower will not, nor will Parent and/or Borrower
permit any other Credit Party to, enter into or become subject to any agreement
(other than this Agreement) that prohibits or otherwise restricts the right of
any Credit Party to create, assume, or suffer to exist any Lien in favor of
Administrative Agent or any Bank on any Credit Party's assets.
51
Section 9.4. Consolidations and Mergers. Parent and Borrower will not,
nor will Parent and/or Borrower permit any other Credit Party to, consolidate or
merge with or into any other Person; provided, that, so long as no Default or
Event of Default exists or will result, Parent, Borrower or any wholly owned
Subsidiary of Parent may merge or consolidate with any other Person so long as
Parent, Borrower or any wholly owned Subsidiary of Parent is the surviving
corporation or entity.
Section 9.5. Asset Dispositions. Parent and Borrower will not, nor will
Parent and/or Borrower permit any other Credit Party to, sell, lease, transfer,
abandon, or otherwise dispose of any asset, other than (a) the sale in the
ordinary course of business of Hydrocarbons produced from Borrower's Mineral
Interests; and (b) the sale of Mineral Interests having an aggregate sales price
not in excess of $1,000,000.00 per year; provided, that (i) Borrower shall
provide Administrative Agent with not less than ten (10) Domestic Business Days
notice of such sale, pursuant to this clause (b), and (ii) Administrative Agent
shall not unreasonably withhold its consent from sales of Mineral Interests in
excess of the value limit above, so long as (x) any resulting Borrowing Base
Deficiency is immediately eliminated by a single lump sum payment; and (y) there
is no existing Event of Default. In no event will Borrower issue, sell, transfer
or dispose of, or permit any other Credit Party to issue, sell, transfer or
dispose of, any capital stock or other equity interest in any Subsidiary of such
Credit Party, nor will Parent or Borrower permit any other Credit Party to issue
or sell any capital stock or other equity interest or any option, warrant, or
other right to acquire such capital stock or equity interest or security
convertible into such capital stock or equity interest to any Person other than
the Person which is the direct parent of such issuer on the Closing Date.
Section 9.6. Amendments to Material Documents. Parent and Borrower will
not, nor will Parent and/or Borrower permit any other Credit Party to, enter
into or permit any modification or amendment of, grant any material consent
under, or waive any material right or obligation of any Credit Party under (a)
its certificate or articles of incorporation, bylaws, regulations, certificate
of limited partnership, limited partnership agreement, or other organizational
documents; or (b) any Closing Document.
Section 9.7. Use of Proceeds. The proceeds of Borrowings under the
Commitment will not be used for any purpose other than (a) to finance the
acquisition, exploration, and development of Mineral Interests, (b) the issuance
of Letters of Credit, (c) for working capital, (d) for capital expenditures, and
(e) for general corporate purposes. None of the proceeds of the Loan nor any
Letter of Credit issued hereunder will be used, directly or indirectly, (i) for
the purpose, whether immediate, incidental or ultimate, of purchasing or
carrying any Margin Stock, or (ii) in violation of applicable Law or regulation
(including, without limitation, the Margin Regulations). Letters of Credit will
be issued hereunder only for the purpose of securing bids, tenders, bonds,
contracts and other obligations entered into in the ordinary course of business
of Borrower or its Subsidiaries; provided, that, the aggregate Letter of Credit
Exposure of all Banks under all Letters of Credit shall not exceed $5,000,000 at
any time. Without limiting the foregoing, no Letters of Credit will be issued
hereunder for the purpose of or providing credit enhancement with respect to any
Debt or equity security of any Credit Party or to secure any Credit Party's
obligations with respect to Hedge Transactions other than Hedge Transactions
with a Bank or an Affiliate of a Bank.
52
Section 9.8. Investments. Parent and Borrower will not, nor will Parent
and/or Borrower permit any other Credit Party to, directly or indirectly, make
any Investment other than Permitted Investments.
Section 9.9. Transactions with Affiliates. Parent and Borrower will
not, nor will Parent and/or Borrower permit any other Credit Party to, engage in
any material transaction with any of their Affiliates (other than any Credit
Party) unless such transaction is generally as favorable to such Credit Party as
could be obtained in an arm's length transaction with an unaffiliated Person in
accordance with prevailing industry customs and practices.
Section 9.10. ERISA. Parent and Borrower will not, nor will Parent
and/or Borrower permit any other Credit Party to (a) take any action or fail to
take any action which would result in a violation of ERISA, the Code or other
Laws applicable to the Plans maintained or contributed to by it or any ERISA
Affiliate, or (b) modify the term of, or the funding obligations or contribution
requirements under any existing Plan, establish a new Plan, or become obligated
or incur any liability under a Plan that is not maintained or contributed to by
any Credit Party or any ERISA Affiliate as of the Closing Date.
Section 9.11. Hedge Transactions. Parent and Borrower will not, nor
will Parent and/or Borrower permit any other Credit Party to, enter into any Oil
and Gas Hedge Transactions: (a) which would cause the volume of Hydrocarbons
with respect to which a settlement payment is calculated to exceed seventy-five
percent (75%) in the case of Oil and Gas Hedge Transactions resulting in a cap
on the price to be received, or ninety percent (90%) in the case of Oil and Gas
Hedge Transactions resulting only in a floor price, of the anticipated
production from Proved Developed Producing Reserves as determined by
Administrative Agent, during the period from the immediately preceding
settlement date (or the commencement of such Hedge Transactions if there is no
prior settlement date) to such settlement date; or (b) which is for a period in
excess of two years; or (c) which would result in a price per barrel or mcf
lower than the base case price used by Banks in the most-recent engineering
evaluation of the Borrowing Base Properties, adjusted for variances between the
hedging price and Borrower's actual product price as determined by Banks.
Section 9.12. Operating Leases. Parent and Borrower will not, nor will
Parent and/or Borrower permit any other Credit Party to, incur, become, or
remain liable under any Operating Lease which would cause the aggregate amount
of all rentals payable by any Credit Party under an Operating Lease in any
Fiscal Year to be greater than $450,000.
Section 9.13. Speculative Hedge Transactions. Parent and Borrower will
not, nor will Parent and/or Borrower permit any other Credit Party to, enter
into any commodity, interest rate, currency or other swap, option, collar or
other derivative transaction pursuant to which any Credit Party speculates on
the movement of commodity prices, securities prices, interest rates, financial
markets, currency markets or other items; provided, that nothing contained in
this Section shall prohibit any Credit Party from (a) entering into interest
rate swaps or other interest rate hedge transactions pursuant to which Borrower
xxxxxx interest rate risk with respect to the interest reasonably anticipated to
be incurred pursuant to this Agreement, (b) entering into Oil and Gas Hedge
Transactions permitted by Section 9.11 hereof, or (c) making Permitted
Investments.
53
Section 9.14. Fiscal Year. Neither Parent nor Borrower will change its
Fiscal Year.
Section 9.15. Change in Business. Parent and Borrower will not, nor
will Parent and/or Borrower permit any other Credit Party to, make a material
change in the character of the business or businesses engaged in by such parties
on the date hereof, taken as a whole.
Section 9.16. Acquisition. Parent and Borrower will not, nor will
Parent and/or Borrower permit any other Credit Party to, acquire, in a single
transaction or a series of related transactions, all or substantially all of the
assets or capital stock (or other outstanding equity interests) of any Person,
or all or substantially all of the assets comprising a division of any Person;
provided, that, nothing contained in this Section shall prohibit Borrower from
making any acquisition of assets consisting of oil and gas properties, or
companies owning primarily oil and gas properties, or any other acquisition
which is permitted by the terms of this Agreement, including any Permitted
Investment.
Section 9.17. Gas Balancing Agreements. Parent and Borrower will not,
nor will Parent and/or Borrower permit any other Credit Party to, incur, become
or remain liable for any Material Gas Imbalance.
ARTICLE X
FINANCIAL COVENANTS AND REPORTING REQUIREMENTS
Parent and Borrower agree that, so long as any Bank has any commitment
to lend or participate in Letter of Credit Exposure hereunder or any amount
payable under any Note remains unpaid or any Letter of Credit remains
outstanding:
Section 10.1. Financial Covenants. Until the Loan and all other
obligations and liabilities of Borrower under this Agreement are fully paid and
satisfied, and Banks have no further Commitment to lend hereunder, Borrower and
Parent agree and covenant that they will, unless Bank otherwise consents in
writing, maintain the following financial covenants calculated on a consolidated
basis:
(a) Parent will maintain a Consolidated Tangible Net Worth of
not less than the sum of the following to be tested at the end of each Fiscal
Quarter, commencing with the Fiscal Quarter ending March 31, 2001: (i)
$47,714,000, plus (ii) fifty percent (50%) of Consolidated Net Income accruing
after December 31, 2000 (this calculation shall include deferred taxes and
exclude non-cash write-downs of reserve values).
(b) Parent will maintain at the end of each Fiscal Quarter a
minimum Debt Service Coverage Ratio greater than or equal to 1.25 to 1.0.
(c) Parent will maintain at the end of each Fiscal Quarter a
minimum Interest Coverage Ratio greater than or equal to 3.0 to 1.0.
(d) Parent will not permit a Current Ratio as of the end of
any Fiscal Quarter to be less than 1.0 to 1.0.
54
(e) So long as no Event of Default or Borrowing Base
Deficiency has occurred or is continuing, and the distribution will not cause an
Event of Default, Borrower shall be permitted quarterly distributions
(collectively the "Permitted Distributions") in an amount not to exceed the
lesser of (A) $750,000.00, or (B) fifty percent (50%) of Net Income as defined
below. "Net Income" is defined as Borrower's after-tax net income, for the
trailing four Fiscal Quarters, divided by four, as determined under GAAP; and
non-cash write-downs of reserve values will be excluded from this calculation.
Permitted Distributions shall be distributed quarterly in arrears.
Section 10.2. Reporting Requirements. Parent and Borrower will deliver,
or cause to be delivered, to each Bank:
(a) as soon as available and in any event within ninety (90)
days after the end of each Fiscal Year of Parent and Borrower, consolidated
balance sheets of Parent and Borrower as of the end of such Fiscal Year and the
related consolidated income statement, a statement of cash flows, a statement of
operations, a statement of changes in shareholders' equity, and a statement of
contingent liabilities for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous Fiscal Year, all reported by
Parent and Borrower (as applicable) in accordance with GAAP, audited by a firm
of independent public accountants of nationally recognized standing acceptable
to Administrative Agent, certified by the chief financial officer or the chief
accounting officer of Parent and Borrower (i) as being true and correct in all
material aspects to the best of his knowledge, (ii) as fairly reporting the
financial condition of Parent and its Consolidated Subsidiaries as of the close
of the Fiscal Year and the results of their operations for the Fiscal Year, and
(iii) as having been prepared in accordance with GAAP, consistently applied;
(b) as soon as available and in any event within sixty (60)
days after the end of each of the first three (3) Fiscal Quarters of each Fiscal
Year of Parent and Borrower, consolidated balance sheets of Parent and Borrower
as of the end of such Fiscal Quarter and the related consolidated statements of
income and cash flow for such Fiscal Quarter and for the portion of Parent's and
Borrower's Fiscal Year ending at the end of such Fiscal Quarter, setting forth
in each case in comparative form the figures for the corresponding Fiscal
Quarter and the corresponding portion of Parent's and Borrower's previous Fiscal
Year, and certified by the chief financial officer or the chief accounting
officer of Parent and Borrower (i) as being true and correct in all material
aspects to the best of his knowledge, (ii) as fairly reporting the financial
condition of Parent and its Consolidated Subsidiaries as of the close of the
Fiscal Quarter and the results of their operations for the Fiscal Quarter, and
(iii) as having been prepared in accordance with GAAP, consistently applied;
(c) simultaneously with the delivery of each set of financial
statements referred to in Sections 10.2(a) and (b), a certificate of the chief
financial officer or the chief accounting officer of Parent and Borrower in the
form of Exhibit E, (i) setting forth, in the case of Parent, in reasonable
detail the calculations required to establish whether Parent was in compliance
with the requirements of Article X on the date of such financial statements,
(ii) stating whether there exists on the date of such certificate any Default
and, if any Default then exists, setting forth the details thereof and the
action which Parent and/or Borrower is taking or proposes to take with respect
thereto, (iii) stating whether or not any Material Adverse Change has occurred
during the period covered by such financial statements, and if any Material
Adverse Change has occurred, setting
55
forth the details thereof, (iv) stating whether or not such financial statements
fairly present in all material respects the results of operations and financial
condition of Parent and Borrower (as applicable) as of the date of the delivery
of such financial statements and for the period covered thereby, (v) setting
forth (A) whether as of such date there is a Material Gas Imbalance and, if so,
setting forth the amount of net gas imbalances under Gas Balancing Agreements to
which any Credit Party is a party or by which any Mineral Interests owned by any
Credit Party are bound, and (B) the aggregate amount of all Advance Payments
received under Advance Payment Contracts to which any Credit Party is a party or
by which any Mineral Interests owned by any Credit Party are bound which have
not been satisfied by delivery of production, if any, and (vi) a summary of the
Hedge Transactions to which any Credit Party is a party on such date;
(d) After any Triggering Event, Borrower will provide to
Banks, within forty-five (45) days after the end of each calendar quarter, a
hedge transaction report and a gas balancing report, all in Proper Form and duly
certified by an Authorized Officer (i) as being true and correct in all material
aspects to the best of his or her knowledge and (ii) as having been prepared in
accordance with GAAP, consistently applied;
(e) After any Triggering Event, Borrower will provide to
Banks, within sixty (60) days of the end of each month, a monthly report on a
lease-by-lease or unit basis, showing the gross proceeds from the sale of oil,
gas, and associated hydrocarbons produced from the Mineral Interests, the
quantity of oil, gas, and associated hydrocarbons sold, the severance, gross
production, occupation, or gathering taxes deducted from or paid out of the
proceeds, the lease operating expenses, tangible drilling costs, and capital
expenditures, the number of xxxxx operated, drilled, or abandoned, the name,
address, telephone number, and contact with the first purchaser of production
for all of the Mineral Interests, and such other information as Administrative
Agent may reasonably request;
(f) At any time upon request by Administrative Agent and
within thirty (30) days of any change thereafter, a list showing the name and
address of each purchaser of any Hydrocarbons produced from or attributable to
the Mineral Interests;
(g) immediately upon any Authorized Officer of any Credit
Party becoming aware of the occurrence of any Default, including, without
limitation, a Default under Article X, a certificate of an Authorized Officer of
Borrower setting forth the details thereof and the action which Parent and/or
Borrower is taking or proposes to take with respect thereto;
(h) prompt notice (i) of any Material Adverse Change in the
financial condition of any Credit Party, or (ii) of the occurrence of any
acceleration of the maturity of any Debt owing by any Credit Party or any
default under any indenture, mortgage, agreement, contract or other instrument
to which it is a party or by which it or any of its properties is bound, if such
default or acceleration might have a Material Adverse Effect;
(i) promptly upon the mailing thereof to the stockholders of
Parent and/or Borrower generally, copies of all financial statements, material
reports and proxy statements so mailed;
56
(j) promptly upon filing thereof, copies of all final
registration statements, post effective amendments thereto and annual, quarterly
or special reports which Parent or Borrower shall have filed with the Securities
and Exchange Commission; provided, that Parent and Borrower must deliver, or
cause to be delivered, any annual reports which Parent or Borrower shall have
filed with the Securities and Exchange Commission within ninety (90) days after
the end of each Fiscal Year of Parent or Borrower (as applicable) and any
quarterly reports which Parent or Borrower shall have filed with the Securities
and Exchange Commission within forty-five (45) days after the end of each of the
first three (3) Fiscal Quarters of each Fiscal Year of Parent or Borrower (as
applicable);
(k) promptly upon receipt of same, any notice or other
information received by any Credit Party indicating any potential, actual or
alleged (i) non-compliance with or violation of the requirements of any
Environmental Law which could result in liability to any Credit Party for fines,
clean up or any other remediation obligations or any other liability in excess
of $100,000 in the aggregate; (ii) release or threatened release of any
Hazardous Discharge which release would impose on any Credit Party a duty to
report to a Governmental Authority or to pay cleanup costs or to take remedial
action under any Environmental Law which could result in liability to any such
Credit Party for fines, clean up and other remediation obligations or any other
liability in excess of $100,000 in the aggregate; or (iii) the existence of any
Lien arising under any Environmental Law securing any obligation to pay fines,
clean up or other remediation costs or any other liability in excess of $100,000
in the aggregate; without limiting the foregoing, Borrower shall provide to
Banks promptly upon receipt of same copies of all environmental consultants or
engineers reports received by any Credit Party which would render the
representations and warranties contained in Section 7.16 untrue or inaccurate in
any material respect;
(l) in the event any notification is provided by any Credit
Party to any Bank or any Agent pursuant to Section 10.2(k) hereof or any Agent
or any Bank otherwise learns of any event or condition under which any such
notice would be required, then, upon request of Required Banks, Borrower shall,
within ninety (90) days of such request, cause to be furnished to each Bank a
report by an environmental consulting firm acceptable to Administrative Agent
and Required Banks, stating that a review of such event, condition or
circumstance has been undertaken (the scope of which shall be acceptable to
Administrative Agent and Required Banks) and detailing the findings,
conclusions, and recommendations of such consultant; Borrower shall bear all
expenses and costs associated with such review and updates thereof, as well as
all remediation or curative action recommended by any such environmental
consultant;
(m) On or before October 31 of each year, a Reserve Report
dated as of the prior September 30, prepared by an independent petroleum
engineer or engineering firm acceptable to Bank, and on or before April 30 of
each year, a Reserve Report dated as of the prior March 31, prepared by
Borrower, both reports to be prepared on a consistent basis in accordance with
the customary standards and procedures of the petroleum industry, estimating the
quantity of oil, gas, and associated hydrocarbons recoverable from the
Borrower's oil and gas properties and the projected income and expense
attributable to the oil and gas properties, including, without limitation, a
description of reserves, net revenue interests and working interests
attributable to the reserves, rates of production, gross revenues, operating
expenses, ad valorem taxes, capital expenditures necessary to cause the oil and
gas properties to achieve the rate of production set forth
57
in the report, net revenues and present value of future net revenues
attributable to the reserves and production therefrom, a statement of the
assumptions upon which the determinations were made and any other matters
related to the operations of the oil and gas properties and the estimated income
therefrom; and
(n) from time to time such additional information regarding
the financial condition or business of each Credit Party as Administrative
Agent, at the request of any Bank, may reasonably request.
Section 10.3. ERISA Reporting Requirements. Parent and Borrower shall
furnish, or cause to be furnished, to Administrative Agent:
(a) promptly and in any event (i) within thirty (30) days
after any Credit Party or any ERISA Affiliate knows or has reason to know that
any ERISA Event described in clause (a) of the definition of ERISA Event or any
event described in Section 4063(a) of ERISA with respect to any Plan of any
Credit Party or any ERISA Affiliate has occurred, and (ii) within ten (10) days
after any Credit Party or any ERISA Affiliate knows or has reason to know that
any other ERISA Event with respect to any Plan of any Credit Party or any ERISA
Affiliate has occurred or a request for minimum funding waiver under Section 412
of the Code with respect to any Plan of any Credit Party or any ERISA Affiliate
has been made, a written notice describing such event and describing what action
is being taken or is proposed to be taken with respect thereto, together with a
copy of any notice of event that is given to the PBGC;
(b) promptly and in any event within two (2) Domestic Business
Days after receipt thereof by any Credit Party or any ERISA Affiliate from the
PBGC, copies of each notice received by any Credit Party or any ERISA Affiliate
of the PBGC's intention to terminate any Plan or to have a trustee appointed to
administer any Plan;
(c) promptly and in any event within thirty (30) days after
the receipt by any Credit Party of a request therefor by a Bank, copies of any
annual and other report (including Schedule B thereto) with respect to a Plan
filed by any Credit Party or any ERISA Affiliate with the United States
Department of Labor, the Internal Revenue Service or the PBGC;
(d) promptly, and in any event within ten (10) Domestic
Business Days after receipt thereof, a copy of any correspondence any Credit
Party or any ERISA Affiliate receives from the Plan Sponsor (as defined by
Section 4001(a)(10) of ERISA) of any Plan asserting withdrawal liability
pursuant to Section 4219 or 4202 of ERISA upon any Credit Party or any ERISA
Affiliate, and a statement from the chief financial officer of such Credit Party
or such ERISA Affiliate setting forth details as to the events giving rise to
such withdrawal liability and the action which such Credit Party or such ERISA
Affiliate is taking or proposes to take with respect thereto;
(e) notification within thirty (30) days of the effective date
thereof of any material increases in the benefits of any existing Plan which is
not a multiemployer plan (as defined in Section 4001(a)(3) of ERISA), or the
establishment of any new Plans, or the commencement of
58
contributions to any Plan to which any Credit Party or any ERISA Affiliate was
not previously contributing;
(f) notification within three (3) Domestic Business Days after
any Credit Party or any ERISA Affiliate knows or has reason to know that any
such Credit Party or any such ERISA Affiliate has or intends to file a notice of
intent to terminate any Plan under a distress termination within the meaning of
Section 4041(c) of ERISA and a copy of such notice; and
(g) promptly after receipt of written notice of commencement
thereof, notice of all (i) claims made by participants or beneficiaries with
respect to any Plan and (ii) actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting any Credit Party or any ERISA Affiliate with
respect to any Plan, except those which, in the aggregate, if adversely
determined would not have a Material Adverse Effect.
ARTICLE XI
DEFAULTS
Section 11.1. Events of Default. If one or more of the following events
(collectively "Events of Default" and individually an "Event of Default") shall
have occurred and be continuing:
(a) Borrower shall fail to pay when due any principal of any
Note or any reimbursement obligation with respect to any Letters of Credit when
due;
(b) Borrower shall fail to pay any accrued interest due and
owing on any Note or any fees or any other amount payable hereunder when due;
(c) any Credit Party shall fail to observe or perform any
covenant or agreement applicable thereto contained in this Agreement or the
other Loan Documents (other than those covered by Sections 11.1(a) and (b));
(d) any Credit Party shall fail to cause the financial
statements described in Section 10.2(a) to be accompanied by the opinion without
qualification (except for qualifications required by changes in accounting
methods with which such Credit Party's auditors concur) of the accountants
preparing such opinion, that such financial statements were prepared in
accordance with GAAP and fairly present the consolidated financial position and
results of operations of such Credit Party;
(e) any representation, warranty, certification or statement
made or deemed to have been made by any Credit Party in this Agreement or by any
Credit Party or any other Person on behalf of any Credit Party in any other Loan
Documents or any other certificate, financial statement or other document
delivered pursuant to this Agreement shall prove to have been incorrect in any
material respect when made;
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(f) any Credit Party shall fail to make any payment when due
on any Debt in a principal amount equal to or greater than $500,000, or any
event or condition (i) shall occur which results in the acceleration of the
maturity of any Debt of any such Credit Party in a principal amount equal to or
greater than $100,000, or (ii) shall occur which entitles (or, with the giving
of notice or lapse of time or both, would unless cured or waived, entitle) the
holder of such Debt to accelerate the maturity thereof;
(g) any Credit Party shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar Law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate or partnership action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced
against any Credit Party seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar Law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days; or an
order for relief shall be entered against any Credit Party under the federal
bankruptcy Laws as now or hereafter in effect;
(i) one (1) or more judgments or orders for the payment of
money aggregating in excess of $500,000 shall be rendered against any Credit
Party and such judgment or order (i) shall continue unsatisfied and unstayed
(unless bonded with a supersedeas bond at least equal to such judgment or order)
for a period of sixty (60) days, or (ii) is not fully paid and satisfied at
least ten (10) days prior to the date on which any of its assets may be lawfully
sold to satisfy such judgment or order;
(j) any Credit Party shall incur Environmental Liabilities
which, individually or when considered in the aggregate, exceed $250,000;
(k) this Agreement or any other Loan Documents shall cease to
be in full force and effect or shall be declared null and void or the validity
or enforceability thereof shall be contested or challenged by any Credit Party,
or any Credit Party shall deny that it has any further liability or obligation
under any of the Loan Documents, or any Lien created by the Loan Documents shall
for any reason (other than the express release thereof by a written instrument
executed by Administrative Agent in accordance with the Loan Documents) cease to
be a valid, first priority, perfected Lien upon any of the property purported to
be covered thereby; or
(l) a Change of Control shall occur;
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and after the expiration of the notice and cure period required by Section 11.2
below, then, and in every such event, Administrative Agent shall without
presentment, notice or demand (unless expressly provided for herein) of any kind
(including, without limitation, notice of intention to accelerate and
acceleration), all of which are hereby waived, (a) if requested by Required
Banks, terminate the Commitment and it shall thereupon terminate, and (b) if
requested by Required Banks, take such other actions as may be permitted by the
Loan Documents, including, without limitation, declaring the Notes, or any of
them (together with accrued interest thereon) to be, and the Notes, or any of
them, shall thereupon become, immediately due and payable; provided that in the
case of any of the Events of Default specified in Section 11.1(g) or (h),
without any notice to Borrower or any other Credit Party or any other act by
Administrative Agent or Banks, the Commitment shall thereupon terminate and the
Notes (together with accrued interest thereon) shall become immediately due and
payable.
Section 11.2. Notice and Cure. Upon any Event of Default because of the
failure to pay any sums owed to Banks, Administrative Agent shall provide
Borrower with written notice of the Event of Default and Borrower shall have
three (3) Domestic Business Days after notice in order to cure the default prior
to acceleration of the Notes and exercise of any remedies. Upon any other Event
of Default, Administrative Agent shall provide Borrower with written notice of
the default and Borrower shall have thirty (30) days after notice in order to
cure the default prior to acceleration of the Notes and exercise of any
remedies; except (i) no written notice is required for Events of Default that
Borrower discovers and reports to Administrative Agent, but Borrower shall have
the benefit of any applicable cure period required herein, (ii) Borrower shall
have no notice or cure period in the case of any of the Events of Default
specified in Section 11.1(g) or (h), and (iii) the Credit Parties shall not be
entitled to more than two (2) notices and periods of cure during any calendar
year.
ARTICLE XII
AGENTS
Section 12.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes each Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement, the Notes, the Mortgages and
the other Loan Documents as are delegated to such Agent by the terms hereof or
thereof, together with all such powers as are reasonably incidental thereto;
provided that, as between and among Banks and Agents, no Agent will prosecute,
settle or compromise any claim against Borrower or any other Credit Party, or
release or institute enforcement proceedings, except with the consent of
Required Banks. Each Bank, Parent and Borrower agree that none of the Agents is
a fiduciary for Banks or for Parent or Borrower but simply is acting in the
capacity described herein to alleviate administrative burdens for Parent or
Borrower and Banks and that no Agent has any duties or responsibilities to
Banks, Parent or Borrower except those expressly set forth herein.
Section 12.2. Agents and Affiliates. Each Agent in its individual
capacity and not as Agent hereunder shall have the same rights and powers under
this Agreement as any other Bank and may exercise or refrain from exercising the
same as though it were not an Agent hereunder and each
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Agent in its individual capacity and not as Agent hereunder may accept deposits
from, lend money to, and generally engage in any kind of business with any
Credit Party and any of their Affiliates as if it were not an Agent hereunder.
Section 12.3. Action by Agents. The obligations of Agents hereunder are
only those expressly set forth herein. Without limiting the generality of the
foregoing, no Agent shall be required to take any action with respect to any
Default or Event of Default, except as expressly provided in Article XI.
Notwithstanding the administrative authority delegated to Agents, no Agent
shall, without the prior written approval of all Banks, cause or permit any
modification of the Loan Documents which would (a) increase the Commitment of
any Bank or subject any Bank to any additional obligations, (b) forgive any of
the principal or reduce the rate of interest on the Loan or any fees hereunder,
(c) postpone the Termination Date or any other date fixed for payment of
principal of or interest on the Loan or any fees hereunder, (d) change the
percentage of the Total Commitment, or the number of Banks which shall be
required for Banks or any of them to take any action under Section 14.2 or any
other provision of this Agreement, (e) permit any Credit Party to assign any of
its rights hereunder, (f) amend or waive any of the provisions of Article IV or
of the definitions contained in Section 1.1 applicable thereto, or (g) provide
for the release or substitution of collateral for the Loan other than releases
required pursuant to sales of collateral which are expressly permitted under
Section 9.5. Subject to the foregoing, each Agent shall make such requests or
take such actions in respect of any Credit Party as Required Banks shall direct.
Further, subject to the foregoing, each Agent shall grant such waivers, consents
or approvals in favor of any Credit Party as Required Banks shall direct.
Section 12.4. Consultation with Experts. Each Agent may consult with
legal counsel (who may be counsel for any Credit Party), independent public
accountants, third party engineers and other experts selected by it and shall
not be liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants, engineers or experts.
Section 12.5. Liability of Agents. None of the Agents nor any of their
directors, officers, agents, or employees shall be liable for any action taken
or not taken by such Agent in connection herewith (a) with the consent or at the
request of Required Banks, or (b) in the absence of its own gross negligence or
willful misconduct, IT BEING THE INTENTION OF BANKS THAT SUCH PARTIES SHALL NOT
BE LIABLE FOR THE CONSEQUENCES OF THEIR ORDINARY NEGLIGENCE. None of the Agents
nor any of their respective officers, directors, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any borrowing hereunder, (ii) the performance or observance of any of the
covenants or agreements of any Credit Party, (iii) the satisfaction of any
condition specified in Article VI, except receipt of items required to be
delivered to Administrative Agent, or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or writing
furnished in connection herewith. No Agent shall incur any liability by acting
in reliance upon any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex or similar writing) believed by it to be
genuine or to be signed by the proper party or parties or upon any oral notice
which such Agent believes will be confirmed in writing by the proper party or
parties. If any Agent fails to take any action required to be taken by it under
the Loan Documents after the occurrence of an Event of Default and within a
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reasonable time after being requested to do so by any Bank (after such
requesting Bank has obtained the approval of such other Banks as required), such
Agent shall not suffer or incur any liability as a result thereof, but such
requesting Bank may request such Agent to resign, whereupon such Agent shall so
resign pursuant to Section 12.9.
Section 12.6. Delegation of Duties. Each Agent may execute any of its
duties hereunder by or through officers, directors, employees, attorneys, or
agents.
Section 12.7. Indemnification. Each Bank shall, ratably in accordance
with its Commitment Percentage, indemnify each Agent (to the extent not
reimbursed by Borrower) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as result
from such Agent's gross negligence or willful misconduct) that such Agent may
suffer or incur in connection with this Agreement or any action taken or omitted
by such Agent hereunder, including without limitation, matters arising out of
such Agent's own negligence, IT BEING THE INTENTION OF EACH BANK THAT EACH AGENT
SHALL BE INDEMNIFIED FOR THE CONSEQUENCES OF ITS ORDINARY NEGLIGENCE.
Section 12.8. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon any Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon any Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
Section 12.9. Successor Agents. Any Agent may resign at any time by
giving written notice thereof to Banks and Borrower. In addition, Borrower may,
prior to a Default, request the designation by Banks of a successor Agent. Upon
any such request by Borrower or resignation by such Agent, Required Banks shall
have the right to appoint a successor Agent, which shall be one of the Banks. If
no successor Agent shall have been so appointed by Required Banks and accepted
such appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation or Borrower's request for a successor Agent, then the
retiring Agent may, on behalf of Banks, appoint a successor Agent, which shall
(a) be a commercial bank organized under the Laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $500,000,000 and (b) unless the successor Agent is a Bank, be reasonably
acceptable to Borrower. Upon the acceptance of its appointment as a successor
Agent hereunder, such successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Agent, and the retiring
Agent's resignation hereunder, the provisions of this Section shall continue to
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent hereunder. Borrower shall be entitled to recommend a successor
Agent at the time of designation of any successor Agent pursuant to this
Section. Banks shall give due consideration to the successor nominated by
Borrower, but shall have no obligation to approve such nominee.
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ARTICLE XIII
PROTECTION OF YIELD; CHANGE IN LAWS
Section 13.1. Basis for Determining Interest Rate Applicable to
Eurodollar Tranches Inadequate. If on or prior to the first day of any Interest
Period with respect to a Borrowing:
(a) Administrative Agent is advised by any Bank that deposits
in dollars (in the applicable amounts) are not being offered to such Bank(s) in
the relevant market for such Interest Period, or
(b) Banks having fifty percent (50%) or more of the aggregate
amount of the Total Commitment advise Administrative Agent that the Adjusted
LIBOR Rate as determined by Administrative Agent will not adequately and fairly
reflect the cost to such Banks of funding their respective shares of the
requested Borrowing which will be subject to a Eurodollar Tranche for such
Interest Period,
then, in such event, Administrative Agent shall give notice thereof to Borrower
and Banks, whereupon the obligations of Banks to allow interest to be computed
by reference to the Adjusted LIBOR Rate shall be suspended until Administrative
Agent notifies Borrower that the circumstances giving rise to such suspension no
longer exist. Unless Borrower notifies Administrative Agent at least two (2)
Domestic Business Days before the date of any Borrowing for which a Request for
Borrowing has previously been given that it elects not to borrow on such date,
such Borrowing shall instead be made as a Base Rate Borrowing.
Section 13.2. Illegality of Eurodollar Tranches. (a) If, after the date
of this Agreement, the adoption of any applicable Law, rule or regulation, or
any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its Eurodollar Lending Office) with any request or directive (whether or not
having the force of Law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank (or its Eurodollar
Lending Office) to make, maintain or fund any portion of the Loan subject to a
Eurodollar Tranche and such Bank shall so notify Administrative Agent,
Administrative Agent shall forthwith give notice thereof to the other Banks and
Borrower. Until such Bank notifies Borrower and Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Bank to maintain or fund any portion of the Loan subject to a Eurodollar
Tranche shall be suspended. Before giving any notice to Administrative Agent
pursuant to this Section, such Bank shall designate a different Eurodollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. If such Bank shall determine that it may not lawfully continue to maintain
and fund any portion of the Loan outstanding subject to a Eurodollar Tranche to
maturity and shall so specify in such notice, Borrower shall immediately convert
the principal amount of the Loan which is subject to a Eurodollar Tranche to a
Base Rate Tranche of an equal principal amount from such Bank (on which interest
and principal shall be payable contemporaneously with the unaffected Eurodollar
Tranches of the other Banks).
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(b) No Bank shall be required to make the Loan (or any portion
thereof) hereunder if the making of the Loan (or any portion thereof) would be
in violation of any Law applicable to such Bank.
Section 13.3. Increased Cost of Eurodollar Tranche. If after the date
hereof, the adoption of any applicable Law, rule or regulation, or any change
therein, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Lending Office) with any request or directive (whether or not having the force
of Law) of any such authority, central bank or comparable agency:
(a) shall subject any Bank (or its Lending Office) to any tax,
duty or other charge with respect to maintaining or funding any portion of the
Loan subject to a Eurodollar Tranche, its Note or its obligation to allow
interest to be computed by reference to the Adjusted LIBOR Rate shall change the
basis of taxation of payments to any Bank (or its Lending Office) of the
principal of or interest on any portion of the Loan which is subject to any
Eurodollar Tranche or any other amounts due under this Agreement in respect of
any portion of the Loan which is subject to any Eurodollar Tranche or its
obligation to allow interest to be computed by reference to the Adjusted LIBOR
Rate (except for changes in the rate of Tax on the overall net income of such
Bank or its Lending Office imposed by the jurisdiction in which such Bank's
principal executive office or Lending Office is located); or
(b) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding with respect to any Eurodollar Tranche any such requirement included
in an applicable Eurodollar Reserve Percentage) against assets of, deposits with
or for the account of or credit extended by, any Bank's Lending Office or shall
impose on any Bank (or its Lending Office) or the applicable interbank
Eurodollar market or any other condition affecting Eurodollar Tranches, its Note
or its obligation to allow interest to be computed by reference to the Adjusted
LIBOR Rate;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of funding or maintaining any portion of the Loan subject to
a Eurodollar Tranche, or to reduce the amount of any sum received or receivable
by such Bank (or its Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Bank to be material, then, within
five (5) days after demand by such Bank (with a copy to the Administrative
Agent), Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such increased cost or reduction. Each Bank will
promptly notify Borrower and Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section and will designate a different Lending
Office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate of any Bank claiming compensation
under this Section and setting forth the additional amount or amounts to be paid
to it hereunder shall be conclusive in the absence of
65
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
Section 13.4. Base Rate Tranche Substituted for Affected Eurodollar
Tranche. If (a) the obligation of any Bank to fund or maintain any portion of
the Loan subject to a Eurodollar Tranche has been suspended pursuant to Section
13.2, or (b) any Bank has demanded compensation under Section 13.3 and Borrower
shall, by at least five (5) Eurodollar Business Days prior notice to such Bank
through the Administrative Agent, have elected that the provisions of this
Section shall apply to such Bank, then, unless and until such Bank notifies
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer apply:
(a) any Tranche which would otherwise be characterized by such
Bank as a Eurodollar Tranche shall instead be deemed a Base Rate Tranche (on
which interest and principal shall be payable contemporaneously with the
unaffected Eurodollar Tranches of the other Banks); and
(b) after all of its Eurodollar Tranches have been repaid, all
payments of principal which would otherwise be applied to repay Eurodollar
Tranches shall be applied to repay its Base Rate Tranches instead.
Section 13.5. Capital Adequacy. If after the date hereof, the adoption
of any applicable Law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof, by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of Law), shall:
(a) impose, modify or deem applicable any reserve, special
deposit, compensatory loan, deposit insurance, capital adequacy, minimum
capital, capital ratio or similar requirement against all or any assets held by,
deposits or accounts with, credit extended by or to, or commitments to extend
credit or any other acquisition of funds by any Bank (or its Lending Office), or
impose on any Bank (or its Lending Office) any other condition, with respect to
the maintenance by such Bank of all or any part of its Commitment; or
(b) subject any Bank (or its Lending Office) to, or cause the
termination or reduction of a previously granted exemption with respect to, any
Tax with respect to the maintenance by such Bank of all or any part of its
Commitment (other than Taxes assessed against such Bank's overall net income);
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of maintaining its Commitment or to reduce the amount of any
sums received or receivable by it (or its Lending Office) under this Agreement
or any other Loan Documents, or to reduce the rate of return on such Bank's
equity in connection with this Agreement, as the case may be, by an amount which
such Bank deems material;
then, in any such case, within five (5) days of demand by such Bank (or its
Lending Office) (with a copy to Administrative Agent), Borrower shall pay to
such Bank (or its Lending Office) such additional amount or amounts as will
compensate such Bank for any additional cost, reduced
66
benefit, reduced amount received or reduced rate of return. Each Bank will
promptly notify Borrower and Administrative Agent of any event of which it has
knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
Without limiting the foregoing, in the event any event or condition
described in this Section shall occur or arise which relates to the maintenance
by any Bank of that part of its Commitment which is in excess of its Commitment
Percentage of the Borrowing Base then in effect (such excess portion of such
Commitment of any Bank is hereinafter referred to as its "Surplus Commitment"),
such Bank shall notify Administrative Agent and Borrower of the occurrence of
such event or the existence of such condition and of the amount of a fee (to be
computed on a per annum basis with respect to such Bank's Surplus Commitment)
which such Bank determines in good faith will compensate such Bank for such
additional cost, reduced benefit, reduced amount received or reduced rate of
return. Within five (5) Domestic Business Days following receipt of such notice,
Borrower shall notify such Bank whether it accepts or rejects such fee (if
Borrower fails to timely respond to such notice it will be deemed to have
accepted such fee). If Borrower rejects such fee, the applicable Commitment of
each Bank will be automatically and permanently reduced to the Borrowing Base
applicable to such Commitment and then in effect. If Borrower accepts such fee,
such fee shall accrue from and after the date of such Bank's notice and shall be
payable in arrears (based on the daily average balance of such Bank's Surplus
Commitment) on the last day of each Fiscal Quarter and on the Termination Date.
Such fee shall be in lieu of any amounts to which such Bank would otherwise be
entitled in respect of its Surplus Commitment pursuant to the other provisions
of this Section for the period on and after the date of such notice unless such
Bank determines that such fee is not adequate to fully compensate such Bank for
any additional cost, reduced benefit, reduced amount received or reduced rate of
return such Bank may thereafter incur in respect of such Bank's Surplus
Commitment. In that event such Bank shall be entitled to such additional
compensation to which such Bank is otherwise entitled pursuant to this Section.
Section 13.6. Taxes. All amounts payable by Borrower under the Loan
Documents (whether principal, interest, fees, expenses, or otherwise) to or for
the account of each Bank shall be paid in full, free of any deductions or
withholdings for or on account of any Taxes. If Borrower is prohibited by Law
from paying any such amount free of any such deductions and withholdings, then
(at the same time and in the same manner that such original amount is otherwise
due under the Loan Documents) Borrower shall pay to or for the account of such
Bank such additional amount as may be necessary in order that the actual amount
received by such Bank after deduction and/or withholding (and after payment of
any additional Taxes due as a consequence of the payment of such additional
amount, and so on) will equal the amount such Bank would have received if such
deduction or withholding were not made.
Section 13.7. Discretion of Banks as to Manner of Funding.
Notwithstanding any provisions of this Agreement to the contrary, each Bank
shall be entitled to fund and maintain its funding of all or any part of its
Commitment in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if such
Bank
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had actually funded and maintained the Loan (or any portion thereof) subject to
a Eurodollar Tranche during the Interest Period for the Loan (or any portion
thereof) through the purchase of deposits having a maturity corresponding to the
last day of such Interest Period and bearing an interest rate equal to the
Adjusted LIBOR Rate for such Interest Period.
ARTICLE XIV
MISCELLANEOUS
Section 14.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telecopy or
similar writing) and shall be given (a) if to any Agent or any Bank, to such
party at its address or telecopy number set forth on Schedule 1, or (b) if to
Parent or Borrower, to such party at its address or telecopy number set forth on
the signature pages hereto or such other address or telecopy number as such
party may hereafter specify for the purpose by notice to Administrative Agent
and Borrower, as the case may be. Each such notice, request or other
communication shall be effective (a) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified in this Section and the appropriate
answerback is received or receipt is otherwise confirmed, (b) if given by mail,
three (3) Domestic Business Days after deposit in the mails with first class
postage prepaid, addressed as aforesaid, or (c) if given by overnight delivery,
messenger or any other means, when delivered at the address specified in this
Section; provided that notices to Administrative Agent under Article II or XIII
shall not be effective until received.
Section 14.2. Waivers and Amendments; Acknowledgments. (a) No failure
or delay (whether by course of conduct or otherwise) by any Bank or any Agent in
exercising any right, power or remedy which it may have under any of the Loan
Documents shall operate as a waiver thereof or of any other right, power or
remedy, nor shall any single or partial exercise by any Bank or any Agent of any
such right, power or remedy preclude any other or further exercise thereof or of
any other right, power or remedy. No waiver of any provision of any Loan
Documents and no consent to any departure therefrom shall ever be effective
unless it is in writing and signed by Required Banks and/or Administrative Agent
in accordance with Section 14.2(c) hereof, and then such waiver or consent shall
be effective only in the specific instances and for the purposes for which given
and to the extent specified in such writing. No notice to or demand on Borrower
shall in any case of itself entitle Borrower to any other or further notice or
demand in similar or other circumstances. This Agreement and the other Loan
Documents set forth the entire understanding and agreement of the parties hereto
and thereto with respect to the transactions contemplated herein and therein and
supersede all prior discussions and understandings with respect to the subject
matter hereof and thereof, and no modification or amendment of or supplement to
this Agreement or the other Loan Documents shall be valid or effective unless
the same is in compliance with subclause (c) to this Section.
(b) Each of Parent and Borrower represents, warrants,
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution and delivery of the Loan Documents to which it is a
party, (ii) it has made an independent decision to enter into this Agreement and
the other Loan Documents to which it is a party, without reliance on any
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representation, warranty, covenant or undertaking by Banks or Agents whether
written, oral or implicit, other than as expressly set out in this Agreement or
in any other Loan Documents delivered on or after the date hereof, (iii) there
are no representations, warranties, covenants, undertakings or agreements by any
Bank or any Agent as to the Loan Documents except as expressly set out in this
Agreement or in any other Loan Documents delivered on or after the date hereof,
(iv) neither any Bank nor any Agent owes any fiduciary duty to Parent, Borrower
or any other Credit Party with respect to any Loan Documents or the transactions
contemplated thereby, (v) the relationship pursuant to the Loan Documents
between Parent and Borrower, on one hand, and Banks and Agents, on the other
hand, is and shall be solely that of debtor and creditor, respectively, (vi) no
partnership or joint venture exists with respect to the Loan Documents among
Parent, Borrower and any Bank or any Agent, (vii) should an Event of Default or
Default occur or exist each Bank and each Agent will determine in its sole and
absolute discretion and for its own reasons what remedies and actions it will or
will not exercise or take at that time, (viii) without limiting any of the
foregoing, neither Parent nor Borrower is relying upon any representation or
covenant by any Bank or any Agent or any representative thereof, and no such
representation or covenant has been made, that any Bank or any Agent will, at
the time of an Event of Default, or at any other time, waive, negotiate,
discuss, or take or refrain from taking any action permitted under the Loan
Documents with respect to any such Event of Default or Default or any other
provision of the Loan Documents, and (ix) each Bank has relied upon the
truthfulness of the acknowledgments in this Section in deciding to execute and
deliver this Agreement and to make the Loan.
(c) Any provision of this Agreement, the Notes or the other
Loan Documents may be amended or waived if, but only if such amendment or waiver
is in writing and is signed by Parent, Borrower and Required Banks (and, if the
rights or duties of any Agent are affected thereby, by any such Agent); provided
that no such amendment or waiver shall, unless signed by all Banks, (i) increase
the Commitment of any Bank or subject any Bank to any additional obligation,
(ii) forgive any of the principal of or reduce the rate of interest on the Loan
or any fees hereunder, (iii) postpone the Termination Date or any date fixed for
any payment of principal of or interest on the Loan or any fees hereunder, (iv)
change the percentages of the Total Commitment, or the number of Banks which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement, (v) permit Parent or Borrower
to assign any of its rights hereunder, (vi) amend or waive any of the provisions
of Article IV or the definitions contained in Section 1.1 applicable thereto,
(vii) amend or waive any of the conditions precedent contained in Section 6.1(a)
hereof, or (viii) provide for release or substitution of collateral for the
Obligations or any part thereof other than releases required pursuant to sales
of collateral which are expressly permitted by Section 9.5 hereof. Parent,
Borrower, each Agent and each Bank further acknowledge that any decision by any
Agent or any Bank to enter into any amendment, waiver or consent pursuant hereto
shall be made by such Bank or such Agent in its sole discretion, and in making
any such decision each such Agent and each such Bank shall be permitted to give
due consideration to any credit or other relationship any such Agent or any such
Bank may have with Parent, Borrower, any other Credit Party or any Affiliate of
any Credit Party.
Section 14.3. Expenses; Documentary Taxes; Indemnification. (a) Parent
and Borrower jointly and severally agree to pay (i) all out-of-pocket expenses
of Administrative Agent, including reasonable fees and disbursements of special
counsel for Administrative Agent, in connection with
69
the preparation of this Agreement and the other Loan Documents and, if
appropriate, the recordation of the Loan Documents, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder,
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
each Agent and each Bank, including reasonable fees and disbursements of counsel
in connection with such Event of Default and collection and other enforcement
proceedings resulting therefrom, fees of auditors and consultants incurred in
connection therewith and investigation expenses incurred by each Agent and each
Bank in connection therewith. Parent and Borrower jointly and severally agree to
indemnify each Bank against any Taxes imposed by reason of the execution and
delivery of this Agreement or the Notes (other than Taxes in respect of the net
income of such Bank).
(b) Parent and Borrower jointly and severally agree to
indemnify each Indemnified Entity (as defined below), upon demand, from and
against any and all liabilities, obligations, claims, losses, damages,
penalties, fines, actions, judgments, suits, settlements, costs, expenses or
disbursements (including reasonable fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever (in this Section collectively called
"liabilities and costs") which to any extent (in whole or in part) may be
imposed on, incurred by, or asserted against such Indemnified Entity growing out
of, resulting from or in any other way associated with any of the collateral for
the Loan, the Loan Documents, or the transactions and events (including the
enforcement or defense thereof) at any time associated therewith or contemplated
therein (including any violation or noncompliance with any Environmental Laws by
any Credit Party or any liabilities or duties of any Credit Party or of any
Indemnified Entity with respect to Hazardous Substances found in or released
into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR ARE TO ANY EXTENT CAUSED, IN WHOLE OR IN PART,
BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY INDEMNIFIED ENTITY;
provided only that no Indemnified Entity shall be entitled under this Section to
receive indemnification for that portion, if any, of any liabilities and costs
which is proximately caused by its own individual gross negligence or willful
misconduct, as determined in a final judgment, or by its own individual actions
with respect to the collateral for the Loan in its possession. As used in this
Section, the term "Indemnified Entity" refers to each Bank, each Agent, and each
director, officer, agent, trustee, manager, attorney, employee, representative
and Affiliate of any such Person.
Section 14.4. Right and Sharing of Set-Offs. (a) Upon the occurrence
and during the continuance of any Event of Default, each Bank is hereby
authorized at any time and from time to time, to the fullest extent permitted by
Law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final), but excluding royalty accounts solely for the
benefit of others, at any time held and other indebtedness at any time owing by
such Bank to or for the credit or the account of any Credit Party against any
and all of the Obligations, irrespective of whether or not such Bank shall have
made any demand under this Agreement or any Note and although such obligations
may be unmatured, provided, however, that Banks may exercise this right
70
of setoff against accounts expressly set up as royalty payment accounts or
escrow accounts only to the extent of the Credit Parties' interest in those
royalty payment accounts or escrow accounts. Each Bank agrees promptly to notify
such Credit Party after any such setoff and application made by such Bank,
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of each Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Bank may have.
(b) Each Bank agrees that if it shall, by exercising any right
of setoff or counterclaim or otherwise, receive payment after the occurrence and
during the continuance of an Event of Default of a proportion of the aggregate
amount of principal and interest due with respect to the Loan and Letter of
Credit Exposure which is greater than its Commitment Percentage, the Bank
receiving such proportionately greater payment shall purchase such
participations in the interests in the Loan and Letter of Credit Exposure held
by the other Banks, and such other adjustments shall be made, as may be required
so that all such payments of principal and interest and Letter of Credit
Exposure shall be shared by Banks ratably in accordance with their respective
Commitment Percentages; provided that nothing in this Section shall impair the
right of any Bank to exercise any right of setoff or counterclaim it may have
and to apply the amount subject to such exercise to the payment of indebtedness
of any Credit Party other than the Obligations. Parent and Borrower agree, to
the fullest extent they may effectively do so under applicable Law, that
Participants may exercise rights of setoff or counterclaim and other rights with
respect to such participation as fully as if such holder of a participation were
a direct creditor of Parent and/or Borrower in the amount of such participation.
Section 14.5. Survival. All of the various representations, warranties,
covenants, indemnitees and agreements in the Loan Documents shall survive the
execution and delivery of this Agreement and the other Loan Documents and the
performance hereof and thereof, including the making or granting of the Loan and
the delivery of the Notes and the other Loan Documents, and shall further
survive until all of the Obligations are paid in full to Banks and Agents and
all of Banks' obligations to Borrower are terminated (provided, that, to the
extent expressly provided in any indemnification clause contained herein or in
any other Loan Documents, such indemnification obligation shall survive payment
in full of the Obligations and termination of the obligations of Banks to
Borrower hereunder). All statements and agreements contained in any certificate
or other instrument delivered by Parent and/or Borrower to any Bank or any Agent
under any Loan Documents shall be deemed representations and warranties by
Parent and/or Borrower or agreements and covenants of Parent and/or Borrower
under this Agreement. The representations, warranties and covenants made by any
Credit Party (as applicable) in the Loan Documents, and the rights, powers and
privileges granted to Banks and Agents in the Loan Documents, are cumulative,
and, except for expressly specified waivers and consents, no Any Loan Documents
shall be construed in the context of another to diminish, nullify, or otherwise
reduce the benefit to Banks and Agents of any such representation, warranty,
covenant, right, power or privilege. In particular and without limitation, no
exception set out in this Agreement to any representation, warranty or covenant
herein contained shall apply to any similar representation, warranty or covenant
contained in any other Loan Documents, and each such similar representation,
warranty or covenant shall be subject only to those exceptions which are
expressly made applicable to it by the terms of the various Loan Documents.
71
Section 14.6. Limitation on Interest. Each Bank, each Agent, Parent,
Borrower, each other Credit Party and any other parties to the Loan Documents
intend to contract in strict compliance with applicable usury Law from time to
time in effect. In furtherance thereof such Persons stipulate and agree that
none of the terms and provisions contained in the Loan Documents shall ever be
construed to create a contract to pay, for the use, forbearance or detention of
money, interest in excess of the Maximum Lawful Rate. None of Parent, Borrower,
any other Credit Party nor any present or future guarantors, endorsers, or other
Persons hereafter becoming liable for payment of any Obligation shall ever be
liable for unearned interest thereon or shall ever be required to pay interest
thereon in excess of the Maximum Lawful Rate and the provisions of this Section
shall control over all other provisions of the Loan Documents which may be in
conflict or apparent conflict herewith. Each Bank and each Agent expressly
disavow any intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of any Obligation is accelerated. If
(a) the maturity of any Obligation is accelerated for any reason, (b) any
Obligation is prepaid and as a result any amounts held to constitute interest
are determined to be in excess of the Maximum Lawful Rate, or (c) any Bank or
any other holder of any or all of the Obligations shall otherwise collect moneys
which are determined to constitute interest which would otherwise increase the
interest on any or all of the Obligations to an amount in excess of the Maximum
Lawful Rate, then all such sums determined to constitute interest in excess of
the Maximum Lawful Rate shall, without penalty, be promptly applied to reduce
the then outstanding principal of the related Obligations or, at any Bank's or
such holder's option, promptly returned to Borrower or the other payor thereof
upon such determination. In determining whether or not the interest paid or
payable, under any specific circumstance, exceeds the Maximum Lawful Rate,
Agents, Banks, Parent, Borrower, and any other Credit Party (and any other
payors or payees thereof) shall to the greatest extent permitted under
applicable Law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the instrument
evidencing the Obligations in accordance with the amounts outstanding from time
to time thereunder and the Maximum Lawful Rate in order to lawfully charge the
Maximum Lawful Rate.
Section 14.7. Invalid Provisions. If any provision of the Loan
Documents is held to be illegal, invalid, or unenforceable under present or
future Laws effective during the term thereof, such provision shall be fully
severable, the Loan Documents shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part thereof,
and the remaining provisions thereof shall remain in full force and effect and
shall not be affected by the illegal, invalid, or unenforceable provision or by
its severance therefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as a part of the Loan
Documents a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid and enforceable.
Section 14.8. Waiver of Consumer Credit Laws. Pursuant to Chapter 346
of the Texas Finance Code, as amended, Parent and Borrower agree that such
Chapter shall not govern or in any manner apply to the Loan.
72
Section 14.9. Successors and Assigns. (a) Each of the Any Loan
Documents binds and inures to the parties to it, any intended beneficiary of it,
and each of their respective successors and permitted assigns. Neither Parent,
Borrower nor any other Credit Party may assign or transfer any rights or
obligations under any Loan Documents without first obtaining all Banks' consent,
and any purported assignment or transfer without all Banks' consent is void. No
Bank may transfer, pledge, assign, sell any participation in, or otherwise
encumber its portion of the Obligations except as permitted by clause (b) or (c)
below.
(b) Any Bank may (subject to the provisions of this Section,
in accordance with applicable Law, in the ordinary course of its business, and
at any time) sell to one or more Persons (each a "Participant") participating
interests in its portion of the Obligations. The selling Bank remains a "Bank"
under the Loan Documents, the Participant does not become a "Bank" under the
Loan Documents, and the selling Bank's obligations under the Loan Documents
remain unchanged. The selling Bank remains solely responsible for the
performance of its obligations and remains the holder of its share of the
outstanding Loan for all purposes under the Loan Documents. Parent, Borrower and
each Agent shall continue to deal solely and directly with the selling Bank in
connection with that Bank's rights and obligations under the Loan Documents, and
each Bank must retain the sole right and responsibility to enforce due
obligations of Parent, Borrower and/or any other Credit Party. Participants have
no rights under the Loan Documents except certain voting rights as provided
below. Subject to the following, each Bank may obtain (on behalf of its
Participants) the benefits of Article XIII with respect to all participations in
its part of the Obligations outstanding from time to time so long as Borrower is
not obligated to pay any amount in excess of the amount that would be due to
that Bank under Article XIII calculated as though no participations have been
made. No Bank may sell any participating interest under which the Participant
has any rights to approve any amendment, modification, or waiver of any Loan
Documents except to the extent such amendment, modification or waiver would (i)
extend the Termination Date, (ii) reduce the interest rate or fees applicable to
the Commitments or any portion of the Loan in which such Participant is
participating, or postpone the payment of any thereof, or (iii) release all or
substantially all of the collateral or guaranties securing any portion of the
Total Commitment or the Loan in which such Participant is participating.
(c) Each Bank may make assignments to the Federal Reserve
Bank. Each Bank may also assign to one or more assignees (each an "Assignee")
all or any part of its rights and obligations under the Loan Documents so long
as (i) the assignor Bank and Assignee execute and deliver to Administrative
Agent and Borrower for their consent and acceptance (which may not be
unreasonably withheld and which, in the case of Borrower, will not be required
during the existence of an Event of Default) an assignment and assumption
agreement in substantially the form of Exhibit F (an "Assignment and Assumption
Agreement") and Assignee pays to Administrative Agent a processing fee of
$3,500, (ii) Assignee acquires an identical percentage interest in the
Commitment of the assignor Bank and an identical percentage of the interests in
the outstanding Loan held by such assignor Bank, (iii) the conditions
(including, without limitation, minimum amounts of the Total Commitment that may
be assigned or that must be retained) for that assignment set forth in the
applicable Assignment and Assumption Agreement are satisfied, and (iv) except in
the case of an assignment to another Bank or an assignment of all of a Bank's
rights and obligations under this Agreement, the portion of the Commitment
assigned is at least
73
$5,000,000. The "Effective Date" in each Assignment and Assumption Agreement
must (unless a shorter period is agreeable to Borrower and Administrative Agent)
be at least five (5) Domestic Business Days after it is executed and delivered
by the assignor Bank and Assignee to Administrative Agent and Borrower (if
Borrower's acceptance is required) for acceptance. Once that Assignment and
Assumption Agreement is accepted by Administrative Agent and Borrower (if
Borrower's acceptance is required), then, from and after the Effective Date
stated in such Assignment and Assumption Agreement (i) Assignee automatically
becomes a party to this Agreement and, to the extent provided in that Assignment
and Assumption Agreement, has the rights and obligations of a Bank under the
Loan Documents, (ii) the assignor Bank, to the extent provided in that
Assignment and Assumption Agreement, is released from its obligations to fund
Borrowings under this Agreement and its reimbursement obligations under this
Agreement and, in the case of an Assignment and Assumption Agreement covering
all of the remaining portion of the assignor Bank's rights and obligations under
the Loan Documents, that Bank ceases to be a party to the Loan Documents, (iii)
Borrower shall execute and deliver to the assignor Bank and Assignee the
appropriate Notes in accordance with this Agreement following the transfer, (iv)
upon delivery of the Notes under clause (iii) preceding, the assignor Bank shall
return to Borrower all Notes previously delivered to that Bank under this
Agreement, and (v) Schedule 1 is automatically deemed to be amended to reflect
the name, address, telecopy number, and Commitment of Assignee and the remaining
Commitment (if any) of the assignor Bank, and Administrative Agent shall prepare
and circulate to Borrower and Banks an amended Schedule 1 reflecting those
changes.
Section 14.10. TEXAS LAW. THIS AGREEMENT, EACH NOTE AND THE OTHER LOAN
DOCUMENTS (INCLUDING BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF
AND THEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THAT
THE LAWS OF ANY STATE IN WHICH ANY PROPERTY INTENDED AS SECURITY FOR THE
OBLIGATIONS IS LOCATED NECESSARILY GOVERN (A) THE PERFECTION AND PRIORITY OF THE
LIENS IN FAVOR OF ADMINISTRATIVE AGENT AND BANKS WITH RESPECT TO SUCH PROPERTY,
AND (B) THE EXERCISE OF ANY REMEDIES (INCLUDING FORECLOSURE) WITH RESPECT TO
SUCH PROPERTY.
Section 14.11 Consent to Jurisdiction; Waiver of Immunities. (a) Parent
and Borrower hereby irrevocably submit to the jurisdiction of any Texas State or
Federal court sitting in the Southern District of Texas over any action or
proceeding arising out of or relating to this Agreement or any other Loan
Documents, and Parent and Borrower hereby irrevocably agree that all claims in
respect of such action or proceeding may be heard and determined in such Texas
State or Federal court. As an alternative, Parent and Borrower irrevocably
consent to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to such Person at its address specified
in Section 14.1. Parent and Borrower agree that a final judgment on any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
74
(b) Nothing in this Section shall affect any right of Banks to
serve legal process in any other manner permitted by law or affect the right of
any Bank to bring any action or proceeding against any Credit Party or their
properties in the courts of any other jurisdictions.
(c) To the extent that Parent and/or Borrower has or hereafter
may acquire any immunity from jurisdiction of any court or from any legal
process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, such Person hereby irrevocably waives such immunity in respect
of its obligations under this Agreement and the other Loan Documents.
Section 14.12. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when Administrative Agent
shall have received counterparts hereof signed by all of the parties hereto or,
in the case of any Bank as to which an executed counterpart shall not have been
received, Administrative Agent shall have received telegraphic or other written
confirmation from such Bank of execution of a counterpart hereof by such Bank.
Section 14.13. No Third Party Beneficiaries. It is expressly intended
that there shall be no third party beneficiaries of the covenants, agreements,
representations or warranties herein contained other than Book Runner and Sole
Lead Arranger and Participants and Assignees permitted pursuant to Section 14.9
and Affiliates of any Bank which hold any part of the Obligations.
Section 14.14. COMPLETE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG BANKS, AGENTS,
PARENT AND BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF BANKS, AGENTS, PARENT AND
BORROWER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR AMONG BANKS, AGENTS,
PARENT AND BORROWER.
Section 14.15. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF
PARENT, BORROWER, EACH AGENT, AND EACH BANK HEREBY (a) KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR
ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (B) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER
IN ANY SUCH LITIGATION ANY "SPECIAL DAMAGES," AS DEFINED BELOW; (C) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF
75
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS; AND (D) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION,
"SPECIAL DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE
DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENT OR FUNDS
WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER
PARTY HERETO.
Section 14.16 Fees and Expenses. Without limiting the effect of any
provision of any Loan Document which provides for the payment of expenses and
attorneys fees upon the occurrence of certain events, Borrower shall pay all
costs and expenses (including, without limitation, the reasonable attorneys fees
of Administrative Agent's inside or independent legal counsel) in connection
with (i) the preparation of this Agreement and the other Loan Documents, and any
and all extensions, renewals, amendments, supplements, extensions, or
modifications thereof, (ii) any action reasonably required in the course of
administration of the Loan, (iii) resolution of any disputes with Borrower or
Guarantors related to the Loan or this Agreement, and (iv) any action in the
enforcement of Bank's rights upon the occurrence of an Event of Default.
Notwithstanding the above, upon closing of the Loan, Bank of Texas agrees to pay
the first $15,000 of its legal fees related to the documentation and closing of
this Agreement and the Loan Documents.
Section 14.17 Notice of Final Agreement. (a) In connection with the
Loan, Borrower, Guarantors, and Banks have executed and delivered this Agreement
and the Loan Documents (collectively the "Written Loan Agreement").
(b) It is the intention of Borrower, Guarantors, and Banks
that this paragraph be incorporated by reference into each of the Loan
Documents. Borrower, Guarantors, and Banks each warrant and represent that their
entire agreement with respect to the Loans is contained within the Written Loan
Agreement, and that no agreements or promises have been made by, or exist by or
among, Borrower, Guarantors, and Banks that are not reflected in the Written
Loan Agreement.
(c) THE WRITTEN LOAN AGREEMENT REPRESENTS 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 AGREEMENTS BETWEEN THE PARTIES.
76
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective Authorized Officers effective as of the day and
year first above written.
BORROWER:
CASTLE EXPLORATION COMPANY, INC., Address for Notice:
a Delaware corporation Xxx Xxxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxxx
By: __________________________ Fax Number (000) 000-0000
Name: Xxxxxxx X. Xxxxxxx, III
Title: Vice President and General Counsel
PARENT:
CASTLE ENERGY CORPORATION, Address for Notice:
a Delaware corporation Xxx Xxxxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
Attention: Xx. Xxxxxxx X. Xxxxxxxxx
By: __________________________ Fax Number (000) 000-0000
Name: Xxxxxxx X. Xxxxxxx, III
Title: Vice President and General Counsel
ADMINISTRATIVE AGENT:
BANK OF TEXAS, NATIONAL ASSOCIATION
By: __________________________
Xxxxxx X. Xxxxxx,
Senior Vice President
BANKS:
BANK OF TEXAS, NATIONAL ASSOCIATION
By: __________________________
Xxxxxx X. Xxxxxx,
Senior Vice President
77
SCHEDULE 1
FINANCIAL INSTITUTIONS
==============================================================================
Banks Commitment Amount Commitment Percentage
------------------------------------------------------------------------------
Bank of Texas, N.A. $10,000,000 100%
------------------------------------------------------------------------------
Totals: $10,000,000 100%
==============================================================================
==========================================================================================================================
Banks Domestic Lending Office Eurodollar Lending Office Address for Notice
--------------------------------------------------------------------------------------------------------------------------
Bank of Texas, N.A. Bank of Texas, N.A. Bank of Texas, N.A. Bank of Texas, N.A.
Attention: Xxxxxx X. Xxxxxx Attention: Xxxxxx X. Xxxxxx Attention: Xxxxxx X. Xxxxxx
000 Xxxxxx, Xxxxx X-000 000 Xxxxxx, Xxxxx X-000 000 Xxxxxx, Xxxxx X-000
Xxxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxx 00000
Fax Number (000) 000-0000 Fax Number (000) 000-0000 Fax Number (000) 000-0000
==========================================================================================================================
Administrative Agent - Address:
BANK OF TEXAS, N.A.
Attention: Xxxxxx X. Xxxxxx, Senior Vice President
000 Xxxxxx, Xxxxx X-000
Xxxxxxx, Xxxxx 00000
Fax Number (000) 000-0000
