EXHIBIT 10.2
TERM LOAN AGREEMENT
DATED AS OF APRIL 8, 2004
AMONG
MISSION RESOURCES CORPORATION
AS BORROWER,
GUGGENHEIM CORPORATE FUNDING, LLC
AS COLLATERAL AGENT,
AND
THE LENDERS SIGNATORY HERETO
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS........................................... 1
Section 1.01 Terms Defined Above................................................. 1
Section 1.02 Certain Defined Terms............................................... 1
Section 1.03 Accounting Terms and Determinations................................. 14
ARTICLE II COMMITMENTS ................................................................. 14
Section 2.01 Loans............................................................... 14
Section 2.02 Fees................................................................ 15
Section 2.03 Several Obligations................................................. 15
Section 2.04 Notes............................................................... 15
Section 2.05 Prepayments......................................................... 15
Section 2.06 Lending Offices..................................................... 16
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST......................................... 16
Section 3.01 Repayment of Loans.................................................. 16
Section 3.02 Interest............................................................ 16
Section 3.03 Intercreditor Agreement............................................. 17
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.............................. 17
Section 4.01 Payments............................................................ 17
Section 4.02 Pro Rata Treatment.................................................. 17
Section 4.03 Computations........................................................ 17
Section 4.04 Non-receipt of Funds by the Collateral Agent........................ 18
Section 4.05 Set-off, Sharing of Payments, Etc................................... 18
Section 4.06 Taxes............................................................... 19
Section 4.07 Disposition of Proceeds............................................. 21
ARTICLE V [RESERVED] .................................................................. 22
ARTICLE VI CONDITIONS PRECEDENT ........................................................ 22
Section 6.01 Conditions to Funding............................................... 22
Section 6.02 Conditions to the Lenders' Obligations.............................. 25
Section 6.03 Conditions Precedent for the Benefit of Lenders..................... 25
Section 6.04 No Waiver........................................................... 26
ARTICLE VII REPRESENTATIONS AND WARRANTIES .............................................. 26
Section 7.01 Corporate Existence................................................. 26
Section 7.02 Financial Condition................................................. 26
Section 7.03 Litigation.......................................................... 26
Section 7.04 No Breach........................................................... 27
Section 7.05 Authority........................................................... 27
Section 7.06 Approvals........................................................... 27
Section 7.07 Use of Loans........................................................ 27
Section 7.08 ERISA............................................................... 28
Section 7.09 Taxes............................................................... 29
Section 7.10 Titles, etc......................................................... 29
Section 7.11 No Material Misstatements........................................... 29
Section 7.12 Investment Company Act.............................................. 30
Section 7.13 Public Utility Holding Company Act.................................. 30
Section 7.14 Subsidiaries........................................................ 30
Section 7.15 Location of Business and Offices.................................... 30
Section 7.16 Defaults............................................................ 30
Section 7.17 Environmental Matters............................................... 30
Section 7.18 Compliance with the Law............................................. 31
Section 7.19 Insurance........................................................... 32
Section 7.20 [RESERVED].......................................................... 32
Section 7.21 Hedging Agreements.................................................. 32
Section 7.22 Restriction on Liens................................................ 33
Section 7.23 Material Agreements................................................. 33
Section 7.24 Gas Imbalances...................................................... 33
Section 7.25 Partnership Agreement............................................... 34
Section 7.26 [RESERVED].......................................................... 34
Section 7.27 Solvency............................................................ 34
Section 7.28 Name Changes........................................................ 34
Section 7.29 Taxpayer Identification Number...................................... 34
Section 7.30 State of Formation.................................................. 34
ARTICLE VIII AFFIRMATIVE COVENANTS ....................................................... 34
Section 8.01 Reporting Requirements.............................................. 34
Section 8.02 Litigation.......................................................... 36
Section 8.03 Maintenance, Etc.................................................... 37
Section 8.04 Environmental Matters............................................... 38
Section 8.05 Further Assurances.................................................. 39
Section 8.06 Performance of Obligations.......................................... 39
Section 8.07 Engineering Reports................................................. 39
Section 8.08 Title Information and Mortgage Coverage............................. 40
Section 8.09 Additional Collateral............................................... 41
Section 8.10 Cash Collateral Account Agreement................................... 42
Section 8.11 [RESERVED].......................................................... 42
Section 8.12 ERISA Information and Compliance.................................... 42
Section 8.13 Joinder and Guaranty Agreements..................................... 42
ARTICLE IX NEGATIVE COVENANTS .......................................................... 43
Section 9.01 Debt................................................................ 43
Section 9.02 Liens............................................................... 44
Section 9.03 Investments, Loans and Advances..................................... 44
Section 9.04 Dividends, Distributions and Redemptions............................ 45
Section 9.05 Sales and Leasebacks................................................ 45
Section 9.06 Nature of Business.................................................. 46
Section 9.07 Limitation on Leases................................................ 46
Section 9.08 Mergers, Etc........................................................ 46
Section 9.09 Proceeds of Notes................................................... 46
Section 9.10 ERISA Compliance.................................................... 46
Section 9.11 Sale or Discount of Receivables..................................... 48
Section 9.12 [RESERVED].......................................................... 48
Section 9.13 Current Ratio....................................................... 48
Section 9.14 Tangible Net Worth.................................................. 48
Section 9.15 Leverage Ratio...................................................... 48
Section 9.16 Interest Coverage Ratio............................................. 48
Section 9.17 Sale of Mortgaged Properties........................................ 49
Section 9.18 [RESERVED].......................................................... 49
Section 9.19 Environmental Matters............................................... 49
Section 9.20 Transactions with Affiliates........................................ 49
Section 9.21 Subsidiaries........................................................ 49
Section 9.22 Negative Pledge Agreements.......................................... 49
Section 9.23 Gas Imbalances, Take-or-Pay or Other Prepayments.................... 50
Section 9.24 Ownership of Subsidiaries........................................... 50
Section 9.25 Change in Borrower's or Subsidiary's Name or State of Formation..... 50
Section 9.26 Material Agreements................................................. 50
Section 9.27 Partnership Agreement............................................... 51
ARTICLE X EVENTS OF DEFAULT; REMEDIES ................................................. 51
Section 10.01 Events of Default................................................... 51
Section 10.02 Remedies............................................................ 53
ARTICLE XI THE COLLATERAL AGENT ........................................................ 53
Section 11.01 Appointment, Powers and Immunities.................................. 53
Section 11.02 Reliance by Collateral Agent........................................ 54
Section 11.03 Defaults............................................................ 54
Section 11.04 Rights as a Lender.................................................. 54
SECTION 11.05 INDEMNIFICATION..................................................... 55
Section 11.06 Non-Reliance on Collateral Agent and other Lenders.................. 55
Section 11.07 Action by Collateral Agent.......................................... 56
Section 11.08 Resignation or Removal of Collateral Agent.......................... 56
ARTICLE XII MISCELLANEOUS ............................................................... 56
Section 12.01 Waiver.............................................................. 56
Section 12.02 Notices............................................................. 57
Section 12.03 Payment of Expenses, Indemnities, etc............................... 57
Section 12.04 Amendments, Etc..................................................... 59
Section 12.05 Successors and Assigns.............................................. 60
Section 12.06 Assignments......................................................... 60
Section 12.07 Invalidity.......................................................... 60
Section 12.08 Counterparts........................................................ 61
Section 12.09 References; Use of Word "Including"................................. 61
Section 12.10 Survival............................................................ 61
Section 12.11 Captions............................................................ 61
SECTION 12.12 NO ORAL AGREEMENTS.................................................. 61
SECTION 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION........................... 61
Section 12.14 Interest............................................................ 62
Section 12.15 Confidentiality..................................................... 63
Section 12.16 Effectiveness....................................................... 64
Section 12.17 Exculpation Provisions.............................................. 64
Section 12.18 Arbitration......................................................... 64
ANNEXES, EXHIBITS AND SCHEDULES
Annex I - List of Term Loan Amounts
Exhibit A - Form of Note
Exhibit B - Form of Compliance Certificate
Exhibit C - List of Security Instruments
Exhibit D - Form of Assignment Agreement
Exhibit E - Form of Joinder Agreement
Exhibit F - Form of Guaranty
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.21 - Hedging Agreements
Schedule 7.23 - Material Agreements
Schedule 7.24 - Gas Imbalances
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
THIS TERM LOAN AGREEMENT dated as of April 8, 2004 is among
MISSION RESOURCES CORPORATION, a corporation formed under the laws of the State
of Delaware (the "BORROWER"); the subsidiaries of the Borrower, each of which is
or becomes a signatory hereto as provided in Section 8.13; each of the lenders
that is a signatory hereto or which becomes a signatory hereto as provided in
Section 12.06 (individually, together with its successors and assigns, a
"LENDER" and, collectively, the "LENDERS"); and Guggenheim Corporate Funding,
LLC, (in its individual capacity, "GUGGENHEIM"), as collateral agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"COLLATERAL AGENT").
R E C I T A L S
A. The Borrower has requested that the Lenders provide one or
more term loans to the Borrower; and
B. The Lenders have agreed to make such term loans subject to the
terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans and commitments hereinafter
referred to, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement,
the terms "COLLATERAL AGENT," "BORROWER," "LENDER," "LENDERS," and "GUGGENHEIM"
shall have the meanings indicated above.
Section 1.02 Certain Defined Terms. As used herein, the
following terms shall have the following meanings (all terms defined in this
Article I or in other provisions of this Agreement in the singular to have
equivalent meanings when used in the plural and vice versa):
"AFFILIATE" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. For purposes of this definition, any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to "CONTROL" (including, with its correlative meanings, "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") such corporation or other Person; provided
that, the previous clause of this sentence notwithstanding, for purposes of this
Agreement, Guggenheim and its Affiliates (excluding the Borrower and its
Subsidiaries) shall be deemed not to be Affiliates of the Borrower.
"AGREEMENT" shall mean this Term Loan Agreement, as the same may from
time to time be amended or supplemented.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender, the lending
office of such Lender (or an Affiliate of such Lender) designated for such Loan
on the signature pages hereof or such other offices of such Lender (or of an
Affiliate of such Lender) as such Lender may from time to time specify to the
Collateral Agent and the Borrower as the office by which its Loans are to be
made and maintained.
"ASSIGNMENT" shall have the meaning assigned such term in Section
12.06(b).
"BLACK HAWK" shall mean Black Hawk Oil Company, a Delaware corporation
"BUSINESS DAY" shall mean any day other than a day on which commercial
banks are authorized or required to close in New York, New York, and if such day
relates to a payment or prepayment of principal of or interest on, or the
Interest Period for, a Loan or a notice by the Borrower with respect to any such
payment, prepayment, or Interest Period, any day which is also a day on which
dealings in Dollar deposits are carried out in the London interbank market.
"CASH COLLATERAL ACCOUNT AGREEMENT" shall mean that certain Cash
Collateral Account Agreement among the Borrower, each of its Subsidiaries and
the Collateral Agent in form and substance satisfactory to Collateral Agent and
shall include a financing statement and all other documentation required, in
form and substance satisfactory to Collateral Agent to cover and grant a
perfected second priority security interest to the Collateral Agent in the cash
collateral, and subject only to Liens or any other encumbrances satisfactory to
Collateral Agent.
"CLOSING DATE" shall mean April 8, 2004.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"COMMITMENT" shall mean with respect to each Lender, the commitment of
such Lender to make a Loan hereunder on the Effective Date, expressed as an
amount representing the principal amount of the Loan to be made by such Lender
hereunder. The amount of each Lender's Commitment is set forth on ANNEX I. The
aggregate amount of the Lenders' Commitments is $25,000,000.
"CONSOLIDATED NET INCOME" shall mean with respect to the Borrower and
its Consolidated Subsidiaries, for any period, the aggregate of the net income
(or loss) of the Borrower and its Consolidated Subsidiaries after allowances for
taxes for such period, determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (i) the net income of any Person in
which the Borrower or any Consolidated Subsidiary has an interest (which
interest does not cause the net income of such other Person to be consolidated
with the net income of the Borrower and its Consolidated Subsidiaries in
accordance with GAAP), except to the extent of the amount of dividends or
distributions actually paid in such period by such other Person to the Borrower
or to a Consolidated Subsidiary, as the case may be; (ii) the net income (but
not loss) of any Consolidated Subsidiary to the extent that the declaration or
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payment of dividends or similar distributions or transfers or loans by that
Consolidated Subsidiary is not at the time permitted by operation of the terms
of its charter or any agreement, instrument or Governmental Requirement
applicable to such Consolidated Subsidiary, or is otherwise restricted or
prohibited in each case determined in accordance with GAAP; (iii) any
extraordinary gains or losses, including gains or losses attributable to
Property sales not in the ordinary course of business; and (iv) the cumulative
effect of a change in accounting principles and any gains or losses attributable
to write-ups or write-downs of assets.
"CONSOLIDATED SUBSIDIARIES" shall mean each Subsidiary of a Person
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of such Person in accordance with GAAP. Unless otherwise indicated,
each reference to the term "Consolidated Subsidiary" shall mean a Subsidiary
consolidated with the Borrower.
"CREDIT FACILITY" shall mean the revolving loans and secured
commitments under the Senior Credit Agreement.
"CREDIT FACILITY AGENT" shall mean the administrative agent under the
Senior Credit Agreement.
"CURRENT ASSETS" shall have the meaning assigned such term in Section
9.13.
"CURRENT LIABILITIES" shall have the meaning assigned such term in
Section 9.13.
"DEBT" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which such Person is liable (whether contingent or otherwise); (v) all Debt
(as described in the other clauses of this definition) and other obligations of
others secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person; (vi) all Debt (as described in the other clauses of
this definition) and other obligations of others guaranteed by such Person or in
which such Person otherwise assures a creditor against loss with respect to the
Debt or obligations of others; (vii) all obligations or undertakings of such
Person to maintain or cause to be maintained the financial position or covenants
of others or to purchase the Debt or Property (if the obligation to purchase
Property is incurred to assure a creditor against loss) of others; (viii)
obligations to deliver goods or services including Hydrocarbons in consideration
of advance payments, except as permitted by Section 9.23 and disclosed by
Section 8.07(c); (ix) obligations to pay for goods or services whether or not
such goods or services are actually received or utilized by such Person; (x) any
capital stock or other ownership interest of such Person in which such Person
has a mandatory obligation to redeem such stock or other ownership interest
prior to the Final Maturity Date; (xi) any Debt of a Special Entity for which
such Person is liable either by agreement or because of a Governmental
Requirement; (xii) the undischarged balance of any production payment
3
created by such Person or for the creation of which such Person directly or
indirectly received payment; and (xiii) all net obligations of such Person under
Hedging Agreements excluding Hedging Agreements with Credit Facility Agent or
any lender under the Senior Credit Agreement.
"DEFAULT" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EBITDA" shall mean, for any period, the sum of Consolidated Net Income
for such period plus the following charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes (including
franchise taxes calculated with respect to income), depreciation, depletion and
amortization and any other non-cash charges and non-cash revenues and after
eliminating extraordinary items. For the quarter ending June 30, 2004, September
30, 2004 and December 31, 2004, EBITDA shall be calculated by annualizing EBITDA
for the period beginning on April 1, 2004; e.g., for the quarter ending June 30,
2004, the calculation for said quarter of 2004 will be multiplied by four, for
the two quarters ending September 30, 2004, the calculation for said two
quarters will be multiplied by two, and for the three quarters ending December
31, 2004, the calculation for said three quarters of 2004 will be multiplied by
one and one-third. Thereafter, EBITDA shall be calculated on a rolling four
quarter basis. In addition, for any applicable period during which an
acquisition or disposition permitted by this Agreement is consummated, EBITDA
shall be determined on a pro forma basis (with such calculation to be consistent
with the comparable calculation made pursuant to the Senior Credit Agreement and
reasonably acceptable to the Collateral Agent) as if such acquisition or
disposition were consummated on the first day of such applicable period.
"EFFECTIVE DATE" shall have the meaning assigned such term in Section
12.16.
"ENGINEERING REPORTS" shall mean the reports required by Section 8.07
and such other reports, data and supplemental information as may from time to
time be reasonably requested by the Collateral Agent or any Lender.
"ENVIRONMENTAL LAWS" shall mean any and all applicable Governmental
Requirements pertaining to health or the environment in effect in any and all
jurisdictions in which the Borrower or any Subsidiary is conducting or at any
time has conducted business, or where any Property of the Borrower or any
Subsidiary is located, including without limitation, OPA, the Clean Air Act, as
amended, the Comprehensive Environmental, Response, Compensation, and Liability
Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control
Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous Materials Transportation Act, as amended, and other
environmental conservation or protection laws. The term "oil" shall have the
meaning specified in OPA, the terms "hazardous substance" and "release" (or
"threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the
4
meaning of any term defined thereby, such broader meaning shall apply subsequent
to the effective date of such amendment and (ii) to the extent the laws of the
state in which any Property of the Borrower or any Subsidiary is located
establish a meaning for "oil," "hazardous substance," "release," "solid waste"
or "disposal" which is broader than that specified in either OPA, CERCLA or
RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time and any successor statute.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with the Borrower or any Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA EVENT" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of the
Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"EVENT OF DEFAULT" shall have the meaning assigned such term in Section
10.01.
"EXCEPTED LIENS" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due, which remain payable without
penalty, or which are being contested in good faith by appropriate action and
for which adequate reserves have been maintained; (ii) Liens in connection with
workmen's compensation, unemployment insurance or other social security, old age
pension or public liability obligations not yet due or which are being contested
in good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (iii) operators', non-operators', vendors',
carriers', warehousemen's, repairmen's, mechanics', workmen's, materialmen's,
construction or other like Liens arising by operation of law in the ordinary
course of business or incident to the exploration, development, operation and
maintenance of Oil and Gas Properties or statutory landlord's liens, each of
which is in respect of obligations that have not been outstanding more than
ninety (90) days or which are being contested in good faith by appropriate
proceedings and for which adequate reserves have been maintained in accordance
with GAAP; (iv) any Liens reserved in leases, joint operating agreements,
farmout agreements and other similar agreements for rent or royalties and for
compliance with the terms of such agreements or leases in the case of leasehold
estates, to the extent that any such Lien referred to in this clause does not
materially impair the use of the Property covered by such Lien for the purposes
for which such Property is held by the Borrower or any Subsidiary or materially
impair the value of such Property subject thereto; (v) encumbrances (other than
to secure the payment of borrowed money or the deferred purchase price of
Property or services), easements, restrictions, servitudes, permits, conditions,
covenants, exceptions or reservations in any rights of way or other Property of
the Borrower or any Subsidiary for the purpose of roads, pipelines, transmission
lines, transportation lines,
5
distribution lines for the removal of gas, oil, coal or other minerals or
timber, and other like purposes, or for the joint or common use of real estate,
rights of way, facilities and equipment, and defects, irregularities, zoning
restrictions and deficiencies in title of any rights of way or other Property
which in the aggregate do not materially impair the use of such rights of way or
other Property for the purposes of which such rights of way and other Property
are held by the Borrower or any Subsidiary or materially impair the value of
such Property subject thereto; (vi) deposits of cash or securities to secure the
performance of bids, trade contracts, leases, statutory obligations and other
obligations of a like nature incurred in the ordinary course of business; (vii)
Liens permitted by the Security Instruments and (viii) Liens given to secure
obligations under the Senior Credit Agreement.
"EXISTING SENIOR SUBORDINATED UNSECURED NOTES" shall mean the 10 -7/8%
Senior Subordinated Notes due 2007, Series C, issued by the Borrower and
outstanding in the aggregate principal amount of $87,426,000.00.
"FEE LETTER" shall mean that certain letter agreement between
Guggenheim and the Borrower dated March 29, 2004, concerning certain fees in
connection with this Agreement and any agreements or instruments executed in
connection therewith, as the same may be amended or replaced from time to time.
"FINAL MATURITY DATE" shall mean the earlier to occur of (i) the fourth
anniversary of the Closing Date, (ii) the date that the Notes are prepaid in
full pursuant to Section 2.05 and (iii) termination of this Agreement.
"FINANCIAL STATEMENTS" shall mean the financial statement or statements
of the Borrower and its Consolidated Subsidiaries described or referred to in
Section 7.02.
"FUNDING" shall mean the funding of the Loans upon satisfaction of the
conditions set forth in Section 6.01.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, the
Borrower, its Subsidiaries or any of their Property or the Collateral Agent, any
Lender, or any Applicable Lending Office.
"GOVERNMENTAL REQUIREMENT" shall mean any applicable law, statute,
code, ordinance, order, determination, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
directive or requirement (having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.
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"GUARANTOR" shall mean, individually and collectively, (i) each and
every Subsidiary of Borrower and all of their direct and indirect Subsidiaries
existing as of the date hereof, and (ii) each and every Subsidiary and all of
their direct and indirect Subsidiaries hereafter created, acquired or otherwise
owned by Borrower, and shall include, without limitation, Black Hawk Oil
Company, MSSN Holdings, and Mission E&P.
"GUARANTY AGREEMENT" shall mean any agreement executed by any Guarantor
in form and substance satisfactory to the Collateral Agent guarantying,
unconditionally, payment of the Obligations, as the same may be amended,
modified or supplemented from time to time.
"HEDGING AGREEMENTS" shall mean any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction.
"HIGHEST LAWFUL RATE" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on the Notes or on
any other Obligations under laws applicable to such Lender which are presently
in effect or, to the extent allowed by law, under such applicable laws which may
hereafter be in effect and which allow a higher maximum nonusurious interest
rate than applicable laws now allow.
"HYDROCARBON INTERESTS" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"HYDROCARBONS" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"INDEMNIFIED PARTIES" shall have the meaning assigned such term in
Section 12.03(a)(ii).
"INDEMNITY MATTERS" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without limitation,
consequential damages) or reasonable costs and expenses of any kind or nature
whatsoever incurred by such Person whether caused by the sole or concurrent
negligence of such Person seeking indemnification.
"INITIAL RESERVE REPORT" shall mean the report of Netherland Xxxxxx &
Associates, Inc., dated as of January 1, 2004, with respect to the Oil and Gas
Properties of the Borrower, a copy of which has been delivered to the Collateral
Agent.
"INTERCREDITOR AGREEMENT" shall mean the intercreditor agreement of
even date herewith by and among the Borrower, the Guarantors, Xxxxx Fargo Bank,
National Association,
7
in its capacity as agent and for each of the Senior Secured Creditors, the
Collateral Agent and each of the Lenders.
"INTEREST COVERAGE RATIO" shall have the meaning ascribed to such term
in Section 9.16.
"INTEREST PERIOD" shall mean, with respect to each Loan, the period
commencing on and including the Effective Date or the numerically corresponding
day in any month, as applicable, and ending on, but excluding, the numerically
corresponding day in the immediately succeeding month.
Notwithstanding the foregoing: (i) no Interest Period may end after the
Final Maturity Date; (ii) each Interest Period which would otherwise end on a
day which is not a Business Day shall end on the next succeeding Business Day
(or, if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (iii) no Interest Period shall
have a duration of less than one month.
"LENDER TERMINATION DATE" shall have the meaning assigned to such term
in Section 5.05(c).
"LETTERS IN LIEU" shall mean each and every letter in lieu in form and
substance reasonably satisfactory to Collateral Agent executed by the Borrower
or any Subsidiary, as applicable, to each of the purchasers of the Hydrocarbons
of the Borrower or any Subsidiary produced from the Borrower's and any of its
Subsidiaries' Oil and Gas Properties.
"LEVERAGE RATIO" shall mean, for any period, the ratio of Total Debt as
of the last day of such period to EBITDA for such period.
"LIBOR" shall mean, for each Interest Period for any Loan, the rate per
annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to the
average of the offered quotations for 30-day LIBOR appearing on Telerate Page
3750 (or if such Telerate Page shall not be available, any successor or similar
service as may be selected by Collateral Agent and Borrower) as of 11:00 a.m.,
New York, New York time (or, as soon thereafter as practicable) two (2) LIBOR
Business Days prior to the first day of such Interest Period for deposits in
Dollars having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the LIBOR borrowing to which such Interest
Period relates. If none of such Telerate Page 3750 nor any successor or similar
service is available, then "LIBOR" shall mean, with respect to any Interest
Period for any applicable LIBOR borrowing, the rate of interest per annum,
rounded upwards, if necessary, to the nearest 1/16th of 1%, quoted by Collateral
Agent at or before 11:00 a.m., New York, New York time (or, as soon thereafter
as practicable), TWO (2) LIBOR Business Days before the first day of such
Interest Period, to be the arithmetic average of the prevailing rates per annum
at the time of determination and in accordance with the then existing practice
in the applicable market, for the offering to Collateral Agent by one or more
prime banks selected by Collateral Agent in its sole discretion, in the London
interbank market, of deposits in Dollars for delivery on the first day of such
Interest Period and having a maturity equal (or as nearly equal as may be) to
the length of such Interest Period and in an amount equal (or as nearly equal as
may be) to the LIBOR borrowing to which such Interest Period relates. Each
determination by Collateral Agent of LIBOR shall be conclusive and
8
binding, absent manifest error, and may be computed using any reasonable
averaging and attribution method.
"LIBOR RATE" shall mean, with respect to any Loan, a rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) determined by the
Collateral Agent to be equal to (A) LIBOR for such Loan for the next succeeding
Interest Period plus (B) 5.25%.
"LIEN" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments and the like payable
out of Oil and Gas Properties except to the extent the reserves attachable
thereto are deducted from the applicable Reserve Report. The term "LIEN" shall
include reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting Property. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement, or leases
under a financing lease or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person in a transaction
intended to create a financing.
"LIMITED LIABILITY COMPANY AGREEMENT" shall mean the First Amended and
Restated Limited Liability Company Agreement of Mission Holdings LLC, a Delaware
Limited Liability Company, among its Members dated January 8, 2002.
"LOAN COMMITMENT" shall mean, for any Lender, its obligation to make a
Loan as provided in Section 2.01.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the Fee Letter
and the Security Instruments.
"LOANS" shall mean the loans as provided for by Section 2.01.
"LOCKBOX" shall mean the lockbox established pursuant to the Cash
Collateral Account Agreement and subject to the Lockbox Agreement.
"LOCKBOX AGREEMENT" shall mean that certain Lockbox Agreement between
the Borrower, its Subsidiaries, and the Collateral Agent in form and substance
satisfactory to Collateral Agent which shall grant a second priority security
interest in the contents therein and shall include a financing statement in form
and substance satisfactory to Collateral Agent covering the contents therein.
"MAJORITY LENDERS" shall mean, at any time while Loans are outstanding,
one or more Lenders holding at least a majority of the outstanding aggregate
principal amount of the Loans.
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect on
(i) the assets, liabilities, financial condition, business, operations or
affairs of the Borrower and its Subsidiaries
9
taken as a whole different from those reflected in the Financial Statements or
from the facts represented or warranted in any Loan Document, or (ii) the
ability of the Borrower and its Subsidiaries taken as a whole to carry out their
business as at the Closing Date or as proposed as of the Closing Date to be
conducted or meet their obligations under the Loan Documents on a timely basis.
"MATERIAL AGREEMENTS" shall mean all agreements listed on SCHEDULE
7.23.
"MISSION E&P" shall mean E&P Limited Partnership, a Texas limited
partnership.
"MORTGAGES" shall mean, individually and collectively, (i) each Amended
and Restated Consolidated Mortgage, Deed of Trust, Assignment of Production,
Security Agreement and Financing Statement dated as of April 8, 2004, covering
certain Borrower's and its Subsidiaries' Oil and Gas Properties in Texas and
Louisiana, and (ii) each Amended and Restated Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statement dated as of
April 8, 2004, covering certain of Mission E&P's Oil and Gas Properties in New
Mexico together with any and all amendments, modifications, supplements and/or
restatements thereof.
"MORTGAGED PROPERTY" shall mean the Property owned by the Borrower and
its Subsidiaries and which is subject to the Liens existing and to exist under
the terms of the Security Instruments.
"MSSN HOLDINGS" shall mean Mission Holdings LLC, a Delaware limited
liability company.
"MULTIEMPLOYER PLAN" shall mean a Plan defined as such in Section 3(37)
or 4001(a)(3) of ERISA.
"NOTES" shall mean the promissory note or notes (whether one or more)
of the Borrower described in Section 2.04 and being in the form of EXHIBIT A.
"NOTICE OF TERMINATION" shall have the meaning assigned such term in
Section 5.05(a).
"OBLIGATIONS" shall mean all indebtedness, obligations and liabilities
of the Borrower or any Subsidiary to any of the Lenders, any of the Lenders'
Affiliates or the Collateral Agent, individually or collectively, existing on
the date of this Agreement or arising thereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising or incurred under any Hedging
Agreement, under this Agreement or any of the other Loan Documents or in respect
of any of the Loans made or reimbursement obligations incurred or any of the
Notes or other instruments at any time evidencing any thereof, including
interest accruing subsequent to the filing of a petition or other action
concerning bankruptcy or other similar proceedings, overdrafts, or any other
obligations incurred under this Agreement or any of the Security Agreements and
all renewals, extensions, refinancings and replacements for the foregoing.
"OIL AND GAS PROPERTIES" shall mean Hydrocarbon Interests; any interest
of the Person owning such Hydrocarbon Interest in the Properties now or
hereafter pooled or unitized with such Hydrocarbon Interests; all presently
existing or future unitization, pooling agreements and
10
declarations of pooled units and the units created in connection therewith
(including without limitation all units created under orders, regulations and
rules of any Governmental Authority) which may affect all or any portion of the
Hydrocarbon Interests; all operating agreements, contracts and other agreements
which relate to any of the Hydrocarbon Interests or the production, sale,
purchase, exchange or processing of Hydrocarbons from or attributable to such
Hydrocarbon Interests; all Hydrocarbons in and under and which may be produced
and saved or attributable to the Hydrocarbon Interests, including all oil in
tanks, the lands covered thereby and all rents, issues, profits, proceeds,
products, revenues and other incomes from or attributable to the Hydrocarbon
Interests; all tenements, hereditaments, appurtenances and Properties in any
manner appertaining, belonging, affixed or incidental to the Hydrocarbon
Interests; and all Properties, rights, titles, interests and estates described
or referred to above, including any and all Property, real or personal, now
owned or hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such Hydrocarbon
Interests or Property (excluding drilling rigs, automotive equipment or other
personal property which may be on such premises for the purpose of drilling a
well or for other similar temporary uses) and including any and all oil xxxxx,
gas xxxxx, injection xxxxx or other xxxxx, buildings, structures, fuel
separators, liquid extraction plants, plant compressors, pumps, pumping units,
field gathering systems, tanks and tank batteries, fixtures, valves, fittings,
machinery and parts, engines, boilers, meters, apparatus, equipment, appliances,
tools, implements, cables, wires, towers, casing, tubing and rods, surface
leases, rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing.
"OPA" shall mean the Oil Pollution Act of 1990.
"OTHER TAXES" shall have the meaning assigned such term in Section
4.06(b).
"PARTNERS" shall mean Black Hawk Oil Company and MSSN Holdings.
"PARTNERSHIP AGREEMENT" shall mean the Agreement of Limited Partnership
of Mission E&P Limited Partnership among the Partners dated as of December 4,
2001.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions.
"PERMITTED TRANSFER" shall mean (i) the sale of Hydrocarbons in the
ordinary course of business, (ii) the sale or transfer of equipment that is (A)
obsolete, worn out, depleted or uneconomic and disposed of in the ordinary
course of business, (B) no longer necessary for the business of the Borrower or
such Guarantor or (C) contemporaneously replaced by equipment of at least
comparable value and use, and (iii) the Transfer of any Oil and Gas Property
having a zero or negative value in the most recent Reserve Report; and (iv) the
Transfer of Oil and Gas Properties of the Borrower or any Guarantor; where the
aggregate fair market value of such Oil and Gas Properties Transferred since the
date hereof or, if one or more Redetermination Dates shall have occurred, since
the last Redetermination Date is less than or equal to five percent (5%) of the
present value discounted at ten percent (10%) of proved developed producing
reserves as reflected in the most recent Reserve Report.
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"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
"PLAN" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained
or contributed to by the Borrower, any Subsidiary or an ERISA Affiliate or (ii)
was at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Borrower, any Subsidiary or an ERISA Affiliate.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any Loan
or any other amount payable by the Borrower under this Agreement or any other
Loan Document, a rate per annum for the period commencing on the date of
occurrence of an Event of Default and ending on the earlier to occur of the last
day of the Interest Period therefor or the date all Events of Default are cured
or waived, four percent (4%) per annum above the interest rate for such Loan as
provided in Section 3.02(a), but in no event to exceed the Highest Lawful Rate.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"REQUIRED PAYMENT" shall have the meaning assigned such term in Section
4.04.
"RESERVE REPORT" shall mean a report, in form and substance
satisfactory to the Collateral Agent, setting forth, as of each January 1 and
July 1 (or in the event of an unscheduled redetermination, the effective date
thereof); (i) the oil and gas reserves attributable to the Borrower's and its
Subsidiaries' Oil and Gas Properties together with a projection of the rate of
production and future net income, taxes, operating expenses and capital
expenditures with respect thereto as of such date, based upon the pricing
assumptions determined by the Collateral Agent at the time and (ii) such other
information as the Collateral Agent may reasonably request. The term "Reserve
Report" shall also include the information to be provided by the Borrower each
year pursuant to Section 8.07(a).
"RESPONSIBLE OFFICER" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer" shall include the Chief
Financial Officer of such Person. Unless otherwise specified, all references to
a Responsible Officer herein shall mean a Responsible Officer of the Borrower.
"REVOLVING CREDIT COMMITMENT" shall mean, for any lender under the
Senior Credit Agreement, its obligation to make Loans and participate in the
issuance of Letters of Credit to the extent and on the terms set forth in the
Senior Credit Agreement.
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"SECURITY INSTRUMENTS" shall mean the agreements or instruments
described or referred to in EXHIBIT C, and any and all other agreements or
instruments now or hereafter executed and delivered by the Borrower or any other
Person (other than participation or similar agreements
12
between any Lender and any other lender or creditor with respect to any
Obligations pursuant to this Agreement) in connection with, or as security for
the payment or performance of, the Notes, or this Agreement, as such agreements
may be amended, supplemented or restated from time to time.
"SENIOR CREDIT AGREEMENT" shall mean the Credit Agreement of even date
herewith (as amended, restated or supplemented from time to time) among the
Borrower, each of the lenders signatory thereto and Xxxxx Fargo Bank, National
Association, as agent for the lenders thereunder.
"SENIOR SECURED LENDERS" shall mean each of the lenders that is a party
to the Senior Credit Agreement.
"SENIOR UNSECURED NOTES" shall mean the 97/8% Senior Notes due 2011 in
the original principal amount of $130,000,000.00 issued by the Borrower pursuant
to the Senior Unsecured Notes Indenture.
"SENIOR UNSECURED NOTES INDENTURE" shall mean the Indenture to be dated
on the closing date, between the Borrower and The Bank of New York, as Trustee.
"SPECIAL ENTITY" shall mean any joint venture, limited liability
company or partnership, general or limited partnership or any other type of
partnership or company other than a corporation in which a Person or one or more
of its other Subsidiaries is a member, owner, partner or joint venturer and
owns, directly or indirectly, at least a majority of the equity of such entity
or controls such entity, but excluding any tax partnerships that are not
classified as partnerships under state law. For purposes of this definition, any
Person which owns directly or indirectly an equity investment in another Person
which allows the first Person to manage or elect managers who manage the normal
activities of such second Person will be deemed to "control" such second Person
(e.g., a sole general partner controls a limited partnership).
"SUBSIDIARY" shall mean (i) any corporation or other legally formed
entity of which at least a majority of the outstanding shares of stock or other
ownership interest having by the terms thereof ordinary voting power to elect a
majority of the board of directors or other governing body of such entity
(irrespective of whether or not at the time stock or any other ownership
interest of any other class or classes of such entity shall have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by another Person or one or more of
such Person's Subsidiaries or by such Person and one or more of its Subsidiaries
(and, with respect to the Borrower, shall include, without limitation, Black
Hawk, Mission E&P, and MSSN Holdings) and (ii) any Special Entity. Unless
otherwise indicated herein, each reference to the term "Subsidiary" shall mean a
Subsidiary of the Borrower.
"TANGIBLE NET WORTH" shall mean, as at any date, the sum of the
following for the Borrower and its Consolidated Subsidiaries determined (without
duplication) in accordance with GAAP:
(i) the amount of preferred stock and common stock at par plus the
amount of additional paid in capital of the Borrower, plus
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(ii) the retained earnings (or, in the case of retained earnings
deficit, minus the amount of such deficit), minus
(iii) the sum of the following: cost of treasury shares and the book
value of all assets of the Borrower and its Consolidated Subsidiaries which
should be classified as intangibles (without duplication of deductions in
respect of items already deducted in arriving at additional paid in capital and
retained earnings) but in any event including as such intangibles the following:
goodwill, research and development costs, trademarks, trade names, copyrights,
patents and franchises, unamortized debt discount and expense, all reserves and
any write-up in the book value of assets resulting from a revaluation thereof or
resulting from any changes in GAAP subsequent to December 31, 2003.
"TAXES" shall have the meaning assigned such term in Section 4.06(a).
"TOTAL DEBT" shall mean, without duplication, the sum of: (i) all
indebtedness of the Borrower and its Subsidiaries for borrowed money including,
but not limited to, senior bank debt, senior notes, and subordinated debt; (ii)
capital leases; (iii) issued and outstanding letters of credit; and (iv)
contingent obligations for funded indebtedness of the types described in clauses
(i), (ii) and (iii).
"TRANSFER" shall mean any sale, assignment, farmout, conveyance or
other transfer of any Mortgaged Property or any Oil and Gas Property, or any
interest in any Mortgaged Property or any Oil and Gas Property (including,
without limitation, any working interest, overriding royalty interest,
production payment, net profits interest, royalty interest, or mineral fee
interest) of the Borrower or any Guarantor.
"WHOLLY-OWNED SUBSIDIARY" shall mean, as to any Person, any Subsidiary
of which all of the outstanding shares of capital stock or other equity
interests, on a fully-diluted basis, are owned by such Person or one or more of
its Wholly-Owned Subsidiaries or by such Person and one or more of its
Wholly-Owned Subsidiaries. Unless otherwise indicated, each reference to a
"Wholly-Owned Subsidiary" shall mean a Wholly-Owned Subsidiary of the Borrower.
Section 1.03 Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished to the Collateral Agent or the
Lenders hereunder shall be prepared, in accordance with GAAP, applied on a basis
consistent with the audited financial statements of the Borrower referred to in
Section 7.02 (except for changes concurred with by the Borrower's independent
public accountants).
ARTICLE II
COMMITMENTS
Section 2.01 Loans.
(a) Loans. Each Lender severally agrees, on the terms and
conditions of this Agreement, to make a Loan to the Borrower on the
Closing Date in a principal amount
14
equal to the amount of such Lender's Loan Commitment set forth opposite
such Lender's name on Annex I; provided that the aggregate principal
amount of all such Loans by all Lenders hereunder shall equal
$25,000,000.
(b) Notice. The Borrower shall deliver, not later than
11:00 a.m., New York time, on the date hereof written notice to each
Lender and to the Collateral Agent, which shall be irrevocable,
requesting that the Loan by such Lender be funded not later than 1:00
p.m., New York time, on the date hereof.
(c) Funding. Not later than 1:00 p.m., New York time, on
the Closing Date, each Lender shall make available in immediately
available funds the amount of its Loan Commitment to the Collateral
Agent, to an account which the Collateral Agent shall specify, for the
account of the Borrower. The amounts so received by the Collateral
Agent shall, subject to the terms and conditions of this Agreement, be
made available to the Borrower by depositing the same, in immediately
available funds, in an account of the Borrower, designated by the
Borrower.
Section 2.02 Fees. The Borrower shall pay to the Collateral
Agent such fees as agreed in the Fee Letter.
Section 2.03 Several Obligations. The failure of any Lender to
make any Loan to be made by it on the Closing Date shall not relieve any other
Lender of its obligation to make its Loan on such date, but no Lender shall be
responsible for the failure of any other Lender to make a Loan to be made by
such other Lender or to provide funds to be provided by such other Lender.
Section 2.04 Notes. The Loan made by each Lender shall be
evidenced by a single promissory note of the Borrower in substantially the form
of EXHIBIT A, dated (i) the Closing Date or (ii) the effective date of an
Assignment pursuant to Section 12.06(b), payable to the order of such Lender in
a principal amount equal to the amount set forth opposite such Lender's name on
ANNEX I hereto as originally in effect and otherwise duly completed and such
substitute Notes as required by Section 12.06(b). The date, amount, interest
rate and Interest Period of each Loan made by each Lender, and all payments made
on account of the principal thereof, shall be recorded by such Lender on its
books for its Note, and prior to any transfer may be endorsed by such Lender on
the schedule attached to such Note or on any separate record maintained by such
Lender. Failure to make any such notation or to attach a schedule shall not
affect any Lender's or the Borrower's rights or obligations in respect of such
Loans or affect the validity of such transfer by any Lender of its Note.
Section 2.05 Prepayments.
(a) Voluntary Prepayments. To the extent permitted under
the Intercreditor Agreement, the Borrower may prepay the Loans in whole
on any Business Day or in part on the last day of the Interest Period
for the Loans, in each case upon not less than ten (10) Business Day's
prior written notice to the Collateral Agent (which shall promptly
notify the Lenders), which notice shall specify the prepayment date and
the amount of the prepayment (which shall be an integral multiple of
$1,000,000.00 or the remaining aggregate principal balance outstanding
on the Notes) and shall be irrevocable and
15
effective only upon receipt by the Collateral Agent. Prepayments shall
be made at the prices (expressed as percentages of the outstanding
principal amount) set forth below, if prepaid during each successive
12-month period beginning on April 9 of each year indicated below:
PREPAYMENT
YEAR PRICE
------------------- ----------
2004 102%
2005 101%
2006 and thereafter 100%
provided, however, that no prepayment shall be made prior to the date
six months and one day after the Closing Date. Accrued and unpaid
interest on the principal amount prepaid, and the prepayment price set
forth in this Section 2.05, shall be paid on the prepayment date.
Section 2.06 Lending Offices. The Loans made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans.
(a) Loans. On the Final Maturity Date the Borrower shall
repay the outstanding principal amount of the Notes.
(b) Generally. The Borrower will pay to each Lender the
principal payments required by this Section 3.01.
Section 3.02 Interest.
(a) Interest Rates. Except as otherwise provided in
Section 3.02(b), the Borrower will pay to each Lender interest on the
unpaid principal amount of each Loan made by such Lender for the period
commencing on the Closing Date to, but excluding, the date such Loan
shall be paid in full, at the LIBOR Rate, but in no event to exceed the
Highest Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, the
Borrower will pay to each Lender interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender, and
(to the fullest extent permitted by law) on any other amount payable by
the Borrower hereunder, under any Loan Document or under any Note held
by such Lender to or for account of such Lender, for the period
commencing on the date of an Event of Default until the same is paid in
full or all Events of Default are cured or waived.
16
(c) Due Dates. Accrued interest on each Loan shall be
payable on the last day of each Interest Period, except that interest
payable at the Post-Default Rate shall be payable from time to time on
demand. Any accrued and unpaid interest on the Loans shall also be paid
on the date of any prepayment thereof.
(d) Determination of Rates. Promptly after the
determination of any interest rate provided for herein or any change
therein, the Collateral Agent shall notify the Lenders and the Borrower
thereof. Each determination by the Collateral Agent of an interest rate
or fee hereunder shall, except in cases of manifest error, be final,
conclusive and binding on the parties.
Section 3.03 Intercreditor Agreement. All terms of this
Article III are subject to the terms of the Intercreditor Agreement.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by the
Borrower under this Agreement and the Notes shall be made in Dollars, in
immediately available funds, to the Lenders at such account as each of the
Lenders shall have specified by notice to the Borrower and the Collateral Agent
from time to time, not later than 11:00 a.m. New York, New York time on the date
on which such payments shall become due (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding Business
Day). Such payments shall be made without (to the fullest extent permitted by
applicable law and the terms of the Intercreditor Agreement) defense, set-off or
counterclaim. Each payment received by the Collateral Agent under this Agreement
or any Note for account of a Lender shall be paid promptly to such Lender in
immediately available funds. Except as otherwise provided in the definition of
"Interest Period", if the due date of any payment under this Agreement or any
Note would otherwise fall on a day which is not a Business Day such date shall
be extended to the next succeeding Business Day and interest shall be payable
for any principal so extended for the period of such extension.
Section 4.02 Pro Rata Treatment. Except to the extent
otherwise provided herein each Lender agrees that: (i) each payment or
prepayment of principal of Loans by the Borrower shall be made to the Lenders
pro rata in accordance with the respective unpaid principal amount of the Loans
held by the Lenders; and (ii) each payment of interest and premium, if any, on
Loans by the Borrower shall be made to the Lenders pro rata in accordance with
the amounts of interest due and payable to the respective Lenders.
Section 4.03 Computations. Interest on Loans and fees shall be
computed on the basis of a year of three hundred sixty (360) days and actual
days elapsed (including the first day, but excluding the last day) occurring in
the period for which such interest is payable, unless such calculation would
exceed the Highest Lawful Rate, in which case interest shall be calculated on
the per annum basis of a year of three hundred sixty-five (365) or three hundred
sixty-six (366) days, as the case may be.
17
Section 4.04 Non-receipt of Funds by the Collateral Agent.
Unless the Collateral Agent shall have been notified by a Lender prior to the
Closing Date (such payment being herein called the "REQUIRED PAYMENT"), which
notice shall be effective upon receipt, that it does not intend to make the
Required Payment to the Collateral Agent, the Collateral 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
Borrower on such date and, if such Lender has not in fact made the Required
Payment to the Collateral Agent, the Borrower shall, on demand, repay to the
Collateral Agent the amount so made available together with interest thereon in
respect of each day during the period commencing on the date such amount was so
made available by the Collateral Agent until, but excluding, the date the
Collateral Agent recovers such amount at a rate per annum that will be equal to
the LIBOR Rate.
Section 4.05 Set-off, Sharing of Payments, Etc.
(a) The Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall have the right and be
entitled, subject to the terms of the Intercreditor Agreement (after
consultation with the Collateral Agent), at its option, to offset
balances held by it or by any of its Affiliates for account of the
Borrower or any Subsidiary at any of its offices, in Dollars or in any
other currency, against any principal of or interest on such Lender's
Loan, or any other amount payable to such Lender hereunder, which is
not paid when due (regardless of whether such balances are then due to
the Borrower), in which case it shall promptly notify the Borrower and
the Collateral Agent thereof, provided that such Lender's failure to
give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal
of or interest on any Loan made by it to the Borrower under this
Agreement through the exercise of any right of set-off, banker's lien
or counterclaim or similar right or otherwise, and, as a result of such
payment, such Lender shall have received a greater percentage of the
principal or interest of its Loan then due hereunder by the Borrower to
such Lender than the percentage of their respective Loans received by
any other Lenders, it shall promptly (i) notify the Collateral Agent
and each other Lender thereof and (ii) make such adjustments as shall
be equitable, to the end that all the Lenders shall share the benefit
of such excess payment (net of any expenses which may be incurred by
such Lender in obtaining or preserving such excess payment) pro rata in
accordance with the unpaid principal and/or interest on the Loan held
by each of the Lenders. To such end all the Lenders shall make
appropriate adjustments among themselves if such payment is rescinded
or must otherwise be restored. Nothing contained herein shall require
any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such
right with respect to any other indebtedness or obligation of the
Borrower. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a set-off
to which this Section 4.05 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this
Section 4.05 to share the benefits of any recovery on such secured
claim.
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Section 4.06 Taxes.
(a) Payments Free and Clear. Any and all payments by the
Borrower hereunder shall be made, in accordance with Section 4.01, free
and clear of and without deduction for any and all present or future
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of each Lender
and the Collateral Agent, taxes imposed on its income, and franchise or
similar taxes imposed on it, by (i) any jurisdiction (or political
subdivision thereof) of which the Collateral Agent or such Lender, as
the case may be, is a citizen or resident or in which such Lender has
an Applicable Lending Office, (ii) the jurisdiction (or any political
subdivision thereof) in which the Collateral Agent or such Lender is
organized, or (iii) any jurisdiction (or political subdivision thereof)
in which such Lender or the Collateral Agent is presently doing
business which taxes are imposed solely as a result of doing business
in such jurisdiction (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "TAXES"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the
Lenders or the Collateral Agent (i) the sum payable shall be increased
by the amount necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this
Section 4.06) such Lender or the Collateral Agent (as the case may be)
shall receive an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the
relevant taxing authority or other Governmental Authority in accordance
with applicable law.
(b) Other Taxes. In addition, to the fullest extent
permitted by applicable law, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made
hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement, any Assignment or any
Security Instrument (hereinafter referred to as "OTHER TAXES").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE BORROWER WILL INDEMNIFY EACH LENDER AND THE
COLLATERAL AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES
(INCLUDING, BUT NOT LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY
GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.06) PAID
BY SUCH LENDER OR THE COLLATERAL AGENT (ON ITS BEHALF OR ON BEHALF OF
ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING
PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR
LEGALLY ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR
LEGALLY ASSERTED AND SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES
WAS THE RESULT OF ITS GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY
PAYMENT PURSUANT TO SUCH INDEMNIFICATION SHALL BE MADE WITHIN THIRTY
(30) DAYS AFTER THE DATE ANY LENDER OR THE COLLATERAL AGENT, AS THE
CASE MAY BE, MAKES WRITTEN DEMAND THEREFOR. IF ANY LENDER OR THE
COLLATERAL AGENT RECEIVES A REFUND OR
19
CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH LENDER OR
THE COLLATERAL AGENT HAS RECEIVED PAYMENT FROM THE BORROWER IT SHALL
PROMPTLY NOTIFY THE BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO
DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER
RECEIPT OF A REQUEST BY THE BORROWER (OR PROMPTLY UPON RECEIPT, IF THE
BORROWER HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT
HERETO), PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE BORROWER
WITHOUT INTEREST (BUT WITH ANY INTEREST SO REFUNDED OR CREDITED),
PROVIDED THAT THE BORROWER, UPON THE REQUEST OF SUCH LENDER OR THE
COLLATERAL AGENT, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS
PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH LENDER OR THE COLLATERAL
AGENT IN THE EVENT SUCH LENDER OR THE COLLATERAL AGENT IS REQUIRED TO
REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations.
(i) Each Lender represents that it is either (1)
a corporation or limited liability company (an "LLC")
organized under the laws of the United States of America or
any state thereof or (2) it is entitled to complete exemption
from United States withholding tax imposed on or with respect
to any payments to be made to it pursuant to this Agreement
(A) under an applicable provision of a tax convention to which
the United States of America is a party or (B) because it is
acting through a branch, agency or office in the United States
of America and any payment to be received by it hereunder is
effectively connected with a trade or business in the United
States of America. Each Lender that is not a corporation
organized under the laws of the United States of America or
any state thereof agrees to provide to the Borrower and the
Collateral Agent on the Closing Date, or on the date of its
delivery of the Assignment pursuant to which it becomes a
Lender, and at such other times as required by United States
law or as the Borrower or the Collateral Agent shall
reasonably request, two accurate and complete original signed
copies of either (A) Internal Revenue Service Form W-8ECI (or
successor form) certifying that all payments to be made to it
hereunder will be effectively connected to a United States
trade or business (the "FORM W-8ECI CERTIFICATION") or (B)
Internal Revenue Service Form W-8BEN (or successor form)
certifying that it is entitled to the benefit of a provision
of a tax convention to which the United States of America is a
party which completely exempts from United States withholding
tax all payments to be made to it hereunder (the "FORM W-8BEN
CERTIFICATION"). In addition, each Lender agrees that if it
previously filed a Form W-8ECI Certification, it will deliver
to the Borrower and the Collateral Agent a new Form W-8ECI
Certification prior to the first payment date occurring in
each of its subsequent taxable years; and if it previously
filed a Form W-8BEN Certification, it will deliver to the
Borrower and the Collateral Agent a new certification prior to
the first payment date falling in the third year following the
previous filing of such certification. Each Lender also agrees
to deliver to the Borrower and the Collateral Agent such other
or supplemental forms as may at any time be required as a
result of changes in applicable law or regulation in order to
confirm or maintain in effect its
20
entitlement to exemption from United States withholding tax on
any payments hereunder, provided that the circumstances of
such Lender at the relevant time and applicable laws permit it
to do so. If a Lender determines, as a result of any change in
either (i) a Governmental Requirement or (ii) its
circumstances, that it is unable to submit any form or
certificate that it is obligated to submit pursuant to this
Section 4.06, or that it is required to withdraw or cancel any
such form or certificate previously submitted, it shall
promptly notify the Borrower and the Collateral Agent of such
fact. If a Lender is organized under the laws of a
jurisdiction outside the United States of America, unless the
Borrower and the Collateral Agent have received a Form W-8BEN
Certification or Form W-8ECI Certification satisfactory to
them indicating that all payments to be made to such Lender
hereunder are not subject to United States withholding tax,
the Borrower shall withhold taxes from such payments at the
applicable statutory rate. Each Lender agrees to indemnify and
hold harmless the Borrower or Collateral Agent, as applicable,
from any United States taxes, penalties, interest and other
expenses, costs and losses incurred or payable by (i) the
Collateral Agent as a result of such Lender's failure to
submit any form or certificate that it is required to provide
pursuant to this Section 4.06 or (ii) the Borrower or the
Collateral Agent as a result of their reliance on any such
form or certificate which such Lender has provided to them
pursuant to this Section 4.06.
(ii) For any period with respect to which a
Lender has failed to provide the Borrower with the form
required pursuant to this Section 4.06, if any, (other than if
such failure is due to a change in a Governmental Requirement
occurring subsequent to the date on which a form originally
was required to be provided), such Lender shall not be
entitled to indemnification under this Section 4.06 with
respect to taxes imposed by the United States which taxes
would not have been imposed but for such failure to provide
such forms; provided, however, that if a Lender, which is
otherwise exempt from or subject to a reduced rate of
withholding tax, becomes subject to taxes because of its
failure to deliver a form required hereunder, the Borrower
shall take such steps as such Lender shall reasonably request
to assist such Lender to recover such taxes.
(iii) Any Lender claiming any additional amounts
payable pursuant to this Section 4.06 shall use reasonable
efforts (consistent with legal and regulatory restrictions) to
file any certificate or document requested by the Borrower or
the Collateral Agent or to change the jurisdiction of its
Applicable Lending Office or to contest any tax imposed if the
making of such a filing or change or contesting such tax would
avoid the need for or reduce the amount of any such additional
amounts that may thereafter accrue and would not, in the sole
determination of such Lender, be otherwise disadvantageous to
such Lender.
Section 4.07 Disposition of Proceeds. The Mortgages contain an
assignment by the Borrower unto and in favor of the Lenders of all production
and all proceeds attributable thereto which may be produced from or allocated to
the Mortgaged Property, and the Mortgages further provide in general for the
application of such proceeds to the satisfaction of the Obligations and other
indebtedness, liabilities and obligations described therein and secured
21
thereby. Notwithstanding the assignment contained in the Mortgages, until the
occurrence of an Event of Default and subject to the terms of the Intercreditor
Agreement, the Lenders agree that they will neither notify the purchaser or
purchasers of such production nor take any other action to cause such proceeds
to be remitted to the Lenders, but the Lenders will instead permit such proceeds
to be paid to the Borrower.
ARTICLE V
[RESERVED]
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions to Funding.
The obligation of the Lenders to make the Loans on the Closing
Date is subject to the receipt by the Collateral Agent of all fees payable
pursuant to Section 2.02 on or before the Closing Date and the receipt by the
Collateral Agent and the Lenders of the following documents (in sufficient
original counterparts, other than the Notes, for each Lender) and satisfaction
of the other conditions provided in this Section 6.01, each of which shall be
satisfactory to the Collateral Agent and the Lenders in form and substance:
(a) A certificate of the Secretary or an Assistant
Secretary of the Borrower setting forth (i) resolutions of its board of
directors with respect to the authorization of the Borrower to execute
and deliver the Loan Documents to which it is a party and to enter into
the transactions contemplated in those documents, (ii) the officers of
the Borrower (y) who are authorized to sign the Loan Documents to which
Borrower is a party and (z) who will, until replaced by another officer
or officers duly authorized for that purpose, act as its representative
for the purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of the authorized
officers, and (iv) the certificate of incorporation and bylaws of the
Borrower, certified as being true and complete. The Collateral Agent
and the Lenders may conclusively rely on such certificate until the
Collateral Agent receives notice in writing from the Borrower to the
contrary.
(b) A certificate of the Secretary or an Assistant
Secretary of any Subsidiary that is a corporation or an LLC or a
general partner of a Subsidiary that is a partnership or a limited
partnership setting forth (i) resolutions of its board of directors
with respect to the authorization of the Subsidiary to execute and
deliver the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the officers of the
Subsidiary (y) who are authorized to sign the Loan Documents to which
the Subsidiary is a party and (z) who will, until replaced by another
officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices
and other communications in connection with this
22
Agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or
certificate of incorporation and bylaws (and the Regulations if such
Subsidiary is an LLC) of the Subsidiary, certified as being true and
complete. The Collateral Agent and the Lenders may conclusively rely on
such certificate until they receive notice in writing from the
Subsidiary to the contrary.
(c) A certificate of each partner of each partnership
that is a Subsidiary setting forth (i) resolutions of its partners with
respect to the authorization of such Subsidiary to execute and deliver
the Loan Documents to which it is a party and to enter into the
transactions contemplated in those documents, (ii) the Persons of such
Subsidiary (y) who are authorized to sign the Loan Documents to which
such Subsidiary is a party and (z) who will, until replaced by another
Person duly authorized for that purpose, act as its representative for
the purposes of signing documents and giving notices and other
communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of the authorized
Persons, and (iv) the partnership agreement of such Subsidiary,
certified as being true and complete. The Collateral Agent and the
Lenders may conclusively rely on such certificate until they receive
notice in writing from the Borrower to the contrary.
(d) Certificates of the appropriate state agencies with
respect to the existence, qualification and good standing of the
Borrower, Guarantor(s), and Subsidiaries.
(e) A compliance certificate which shall be substantially
in the form of EXHIBIT B, duly and properly executed by a Responsible
Officer and dated as of the date of the Funding.
(f) The Notes, duly completed and executed.
(g) The Security Instruments, including those described
on EXHIBIT C, duly completed and executed in sufficient number of
counterparts for recording, if necessary.
(h) An opinion of each of Xxxxxx & Xxxxxx, L.L.P., and
Schully, Roberts, Slattery, Jaubert & Marino, PC and Xxxxx Xxxxx,
Attorney at Law, counsel to the Borrower, Guarantor and the
Subsidiaries, in form and substance satisfactory to the Collateral
Agent, as to such matters incident to the transactions herein
contemplated as the Collateral Agent may reasonably request, including,
without limitation, the enforceability of the Mortgages and other
Security Instruments and the validity, perfection, and priority of the
liens created thereby.
(i) A certificate of insurance coverage of the Borrower
evidencing that the Borrower is carrying insurance in accordance with
Section 7.19.
(j) Title information as the Collateral Agent may require
from attorneys satisfactory to the Collateral Agent setting forth the
status of title to at least eighty-five percent (85%) of the value of
the Oil and Gas Properties included in the Initial Reserve Report.
23
(k) The Security Instruments and related financing
statements covering the Mortgaged Property shall have been delivered to
special counsel for the Collateral Agent for filing and recording in
the appropriate offices to perfect the Liens and security interests
created thereby in accordance with the requirements for perfection
provided by the attorneys who have furnished the legal opinions called
for in (h) above.
(l) Letters in Lieu executed by the Borrower or any
Subsidiary, as applicable, and a list of the purchasers of the
Hydrocarbons of the Borrower or any Subsidiary produced from the
Borrower's and any of its Subsidiaries' Oil and Gas Properties.
(m) The Collateral Agent shall have been furnished with
appropriate UCC search certificates reflecting the filing of all
financing statements required to perfect the Liens granted by the
Security Instruments and reflecting no prior Liens.
(n) The organizational chart of Borrower and its
Subsidiaries.
(o) All consents in form and substance satisfactory to
all Lenders and of all Persons required by the Lenders.
(p) [RESERVED]
(q) Collateral Agent shall have received from the
Borrower, reviewed, and be satisfied, in Collateral Agent's sole
discretion, of the Borrower's and each Subsidiary's (i) existing
corporate, limited liability company and partnership documents; (ii)
annual financial statements; (iii) most recent interim financial
statements; (iv) valuation information of assets proposed by the
Borrower to secure the Obligations; (v) all lien searches covering any
and all of the Mortgaged Property; (vi) other material documents and
agreements (including, without limitation, (1) all Material Agreements
and (2) all other material documents and other agreements as the
Collateral Agent shall have requested) as the Collateral Agent shall
have requested; (vii) the legal, corporate, partnership, and capital
structure of the Borrower and its Subsidiaries on the Closing Date and
after giving effect to the transactions contemplated hereby; (viii)
evidence satisfactory to Collateral Agent that prior to or concurrently
with the closing, the Borrower shall have executed all necessary
documentation with respect to the Credit Facility on terms and
conditions satisfactory to the Collateral Agent, together with an
intercreditor agreement executed by Collateral Agent, the Lenders,
Borrower, and the Credit Facility Agent, containing terms and
conditions satisfactory to Collateral Agent and the Senior Credit
Agreement shall be in full force and effect; (ix) evidence satisfactory
to the Collateral Agent that prior to or concurrently with the Funding,
the Borrower shall have received gross cash proceeds from a drawing
under the Credit Facility of at least Twenty-One Million Dollars
($21,000,000); (x) evidence satisfactory to Collateral Agent that prior
to or concurrently with the closing, the Borrower shall have received
gross cash proceeds from the Senior Unsecured Notes to the Borrower of
at least One Hundred Thirty Million Dollars ($130,000,000.00) on terms
and conditions satisfactory to the Collateral Agent and satisfactory
review and approval by Collateral Agent of all loan documents and
instruments executed in connection with the Senior Unsecured Notes;
(xi) evidence satisfactory to Collateral Agent that concurrent with the
24
closing of this transaction, all Debt of Borrower and its Subsidiaries
for borrowed money existing prior to closing, shall have been repaid
and/or provided for except for purchase money indebtedness not to
exceed $100,000.00 in the aggregate and insurance premium financing
notes not to exceed $100,000.00 in the aggregate; and (xii) evidence
satisfactory to Collateral Agent that all existing Hedging Agreements
executed by the Borrower and its Subsidiaries are acceptable to the
Collateral Agent with counterparties acceptable to the Collateral
Agent.
(r) Such other conditions and documents, in form and
substance reasonably satisfactory to Collateral Agent, as the
Collateral Agent or any Lender or special counsel to the Collateral
Agent may reasonably request, including, without limitation, (i)
documentation of all environmental and title matters relating to all of
the Borrower's Oil and Gas Properties including, without limitation,
the Mortgaged Properties and (ii) all Material Agreements.
(s) A receipt from The Bank of New York for the funds to
be deposited with the Bank of New York in connection with the
redemption of the Existing Senior Subordinated Unsecured Notes, such
funds to be in the amount specified in the Certificate described in
subsection (t) below.
(t) A copy of the Officer's Certificate to Trustee to be
provided by the Borrower to The Bank of New York in connection with the
redemption of the Existing Senior Subordinated Unsecured Notes, such
Officer's Certificate to contain, inter alia, a statement of the amount
required to be deposited with The Bank of New York in connection with
such redemption.
Section 6.02 Conditions to the Lenders' Obligations. The
obligation of the Lenders to make Loans to the Borrower on and as of the Closing
Date is subject to the further conditions precedent that, as of the date of such
Loans and after giving effect thereto:
(a) no Default shall exist;
(b) no Material Adverse Effect shall have occurred;
(c) the representations and warranties made by the
Borrower in Article VII and in the Security Instruments shall be true
on and as of and following such funding, except to the extent such
representations and warranties are expressly limited to an earlier date
or the Majority Lenders may expressly consent in writing to the
contrary; and
(d) after giving effect to the requested Funding, no
Default will exist under this Agreement or any other Loan Document.
Section 6.03 Conditions Precedent for the Benefit of Lenders.
All conditions precedent to the obligations of the Lenders to make any Loan are
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any Loan in the absence of strict
compliance with such conditions precedent.
25
Section 6.04 No Waiver. The funding of the Loans by the
Lenders notwithstanding the existence of a Default shall not preclude the
Collateral Agent or the Lenders, consistent with the terms of the Intercreditor
Agreement, from thereafter exercising the remedies available to them herein in
the event such Default becomes an Event of Default.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Collateral Agent and the
Lenders that (each representation and warranty herein is given as of the Closing
Date:
Section 7.01 Corporate Existence. Each of the Borrower and
each Subsidiary: (i) is a corporation, limited liability company, or
partnership, duly organized, legally existing and in good standing under the
laws of the jurisdiction of its organization; (ii) has all requisite corporate,
limited liability company, or partnership power, and has all material
governmental licenses, authorizations, consents and approvals necessary to own
its assets and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify would have a Material Adverse Effect.
Section 7.02 Financial Condition. The audited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at December
31, 2003, and the related consolidated statements of income, stockholders'
equity and cash flows of the Borrower and its Consolidated Subsidiaries for the
fiscal year ended on said date, with the opinion thereon of KPMG LLP heretofore
furnished to each of the Lenders are complete and correct and fairly present the
consolidated financial condition of the Borrower and its Consolidated
Subsidiaries as at said dates and the results of their operations for the fiscal
year on said date, all in accordance with GAAP, as applied on a consistent
basis. Neither the Borrower nor any Subsidiary has on the Closing Date any
material Debt except as referred to or reflected or provided for in the
Financial Statements or in SCHEDULE 7.02, or has on the Closing Date any
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the Financial
Statements or in SCHEDULE 7.02 or incurred since the date of the Financial
Statements in the ordinary course of business. Since December 31, 2003, there
has been no change or event having a Material Adverse Effect. Since the date of
the Financial Statements, neither the business nor the Properties of the
Borrower or any Subsidiary have been materially and adversely affected as a
result of any fire, explosion, earthquake, flood, drought, windstorm, accident,
strike or other labor disturbance, embargo, requisition or taking of Property or
cancellation of contracts, permits or concessions by any Governmental Authority,
riot, activities of armed forces or acts of God or of any public enemy.
Section 7.03 Litigation. Except as disclosed to the Lenders in
SCHEDULE 7.03 hereto, which matters could not reasonably be expected to cause a
Material Adverse Effect and except with respect to Environmental Matters which
are addressed in Section 7.17, which could not reasonably be expected to cause a
Material Adverse Effect, at the Closing Date there is no litigation, legal,
administrative or arbitral proceeding, investigation or other action of any
nature
26
pending or, to the knowledge of the Borrower threatened against or affecting the
Borrower or any Subsidiary that involves the possibility of any judgment or
liability against the Borrower or any Subsidiary not fully covered by insurance
(except for normal deductibles). There are no outstanding judgments against
Borrower or any Subsidiary.
Section 7.04 No Breach. Neither the execution and delivery of
the Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent that has not been
obtained as of the Closing Date under, the respective charter, by-laws, or
partnership agreement of the Borrower or any Subsidiary, or any Governmental
Requirement or any agreement or instrument to which the Borrower or any
Subsidiary is a party or by which it is bound or to which it or its Properties
are subject, or constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien upon any of the revenues or
assets of the Borrower or any Subsidiary pursuant to the terms of any such
agreement or instrument other than the Liens created by the Loan Documents.
Section 7.05 Authority. The Borrower and each Subsidiary have
all necessary corporate and partnership power and authority to execute, deliver
and perform its obligations under the Loan Documents to which it is a party; and
the execution, delivery and performance by the Borrower and each Subsidiary of
the Loan Documents to which it is a party, have been duly authorized by all
necessary corporate and partnership action on its part; and the Loan Documents
constitute the legal, valid and binding obligations of the Borrower and each
Subsidiary, enforceable in accordance with their terms except as may be limited
by bankruptcy, insolvency, or other laws relating to or affecting the
enforcement of creditors' rights generally and general principles of equity.
Section 7.06 Approvals. No authorizations, approvals or
consents of, and no filings or registrations with, any Governmental Authority or
any Person are necessary for the execution, delivery or performance by the
Borrower or any Subsidiary of the Loan Documents or for the validity or
enforceability thereof, except for the recording and filing of the Security
Instruments as required by this Agreement.
Section 7.07 Use of Loans. The proceeds of the Loans shall be
used by the Borrower to:
(a) refinance existing indebtedness for borrowed money;
and
(b) pay fees and expenses incurred in connection with the
transactions contemplated hereby;
Neither the Borrower nor any Subsidiary is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan hereunder will
be used to buy or carry any margin stock.
27
Section 7.08 ERISA.
(a) The Borrower, each Subsidiary and each ERISA
Affiliate have complied in all material respects with ERISA and, where
applicable, the Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which
could result in imposition on the Borrower, any Subsidiary or any ERISA
Affiliate (whether directly or indirectly) of (i) either a civil
penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a
tax imposed pursuant to Chapter 43 of Subtitle D of the Code or (ii)
breach of fiduciary duty liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or
any trust created under any such Plan has been terminated since
September 2, 1974. No liability to the PBGC (other than for the payment
of current premiums which are not past due) by the Borrower, any
Subsidiary or any ERISA Affiliate has been or is expected by the
Borrower, any Subsidiary or any ERISA Affiliate to be incurred with
respect to any Plan. No ERISA Event with respect to any Plan has
occurred.
(e) Full payment when due has been made of all amounts
which the Borrower, any Subsidiary or any ERISA Affiliate is required
under the terms of each Plan or applicable law to have paid as
contributions to such Plan, and no accumulated funding deficiency (as
defined in section 302 of ERISA and section 412 of the Code), whether
or not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit
liabilities under each Plan which is subject to Title IV of ERISA does
not, as of the end of the Borrower's most recently ended fiscal year,
exceed the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to
such benefit liabilities. The term "ACTUARIAL PRESENT VALUE OF THE
BENEFIT LIABILITIES" shall have the meaning specified in section 4041
of ERISA.
(g) None of the Borrower, any Subsidiary or any ERISA
Affiliate sponsors, maintains, or contributes to an employee welfare
benefit plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by the Borrower,
a Subsidiary or any ERISA Affiliate in its sole discretion at any time
without any material liability.
(h) None of the Borrower, any Subsidiary or any ERISA
Affiliate sponsors, maintains or contributes to, or has at any time in
the preceding six calendar years, sponsored, maintained or contributed
to, any Multiemployer Plan.
(i) None of the Borrower, any Subsidiary or any ERISA
Affiliate is required to provide security under section 401(a)(29) of
the Code due to a Plan amendment that results in an increase in current
liability for the Plan.
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Section 7.09 Taxes. Except as set out in SCHEDULE 7.09, each
of the Borrower and its Subsidiaries has filed all United States Federal income
tax returns and all other tax returns which are required to be filed by them and
have paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower or any Subsidiary except those taxes, singly or in the
aggregate, the failure of which to pay could not cause a Material Adverse
Effect. The charges, accruals and reserves on the books of the Borrower and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Borrower, adequate. No tax lien has been filed and, to the
knowledge of the Borrower, no claim is being asserted with respect to any such
tax, fee or other charge.
Section 7.10 Titles, etc.
(a) Except as set out in SCHEDULE 7.10, each of the
Borrower and its Subsidiaries has good and defensible title to its
material (individually or in the aggregate) Properties, free and clear
of all Liens, except Liens permitted by Section 9.02. Except as set
forth in SCHEDULE 7.10, after giving full effect to the Excepted Liens,
the Borrower owns the net interests in production attributable to the
Hydrocarbon Interests reflected in the most recently delivered Reserve
Report and the ownership of such Properties shall not in any material
respect obligate the Borrower to bear the costs and expenses relating
to the maintenance, development and operations of each such Property in
an amount in excess of the working interest of each Property set forth
in the most recently delivered Reserve Report. All information
contained in the most recently delivered Reserve Report is true and
correct in all material respects as of the date thereof.
(b) All leases and agreements necessary for the conduct
of the business of the Borrower and its Subsidiaries are valid and
subsisting, in full force and effect (including as to depths) and there
exists no default or event or circumstance which with the giving of
notice or the passage of time or both would give rise to a default
under any such lease or leases, which would adversely affect in any
material respect the conduct of the business of the Borrower and its
Subsidiaries.
(c) The rights, Properties and other assets presently
owned, leased or licensed by the Borrower and its Subsidiaries
including, without limitation, all easements and rights of way, include
all rights, Properties and other assets necessary to permit the
Borrower and its Subsidiaries to conduct their business in all material
respects in the same manner as its business has been conducted prior to
the Closing Date.
(d) All of the assets and Properties of the Borrower and
its Subsidiaries which are reasonably necessary for the operation of
its business are in good working condition and are maintained in
accordance with prudent business standards.
Section 7.11 No Material Misstatements. No written
information, statement, exhibit, certificate, document or report furnished to
the Collateral Agent and the Lenders (or any of them) by the Borrower or any
Subsidiary in connection with the negotiation of this Agreement contained any
material misstatement of fact and all information, taken together, did not omit
to state a material fact or any fact necessary to make the statement contained
therein not materially misleading in the light of the circumstances in which
made and with respect to the Borrower and
29
its Subsidiaries taken as a whole. There is no fact peculiar to the Borrower or
any Subsidiary that has a Material Adverse Effect or in the future could have
(so far as the Borrower can now foresee) a Material Adverse Effect and which has
not been set forth in this Agreement or the other documents, certificates and
statements furnished to the Collateral Agent by or on behalf of the Borrower or
any Subsidiary prior to, or on, the Closing Date in connection with the
transactions contemplated hereby.
Section 7.12 Investment Company Act. Neither the Borrower nor
any Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is a "holding company," or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", or a "public utility" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 7.14 Subsidiaries. Except as set forth on SCHEDULE
7.14, the Borrower has no Subsidiaries.
Section 7.15 Location of Business and Offices. The Borrower's
principal place of business and chief executive offices are located at the
address stated on the signature page of this Agreement. The principal place of
business and chief executive office of each Subsidiary are located at the
addresses stated on SCHEDULE 7.14.
Section 7.16 Defaults. Neither the Borrower nor any Subsidiary
is in default nor has any event or circumstance occurred which, but for the
expiration of any applicable grace period or the giving of notice, or both,
would constitute a default under any Material Agreement or instrument to which
the Borrower or any Subsidiary is a party or by which the Borrower or any
Subsidiary is bound which could have a Material Adverse Effect. No Default
hereunder has occurred and is continuing.
Section 7.17 Environmental Matters. To the best of knowledge
of Borrower, except (i) as provided in SCHEDULE 7.17, which would not reasonably
be expected to have a Material Adverse Effect, or (ii) as would not have a
Material Adverse Effect (or with respect to (c), (d) and (e) below, where the
failure to take such actions would not have a Material Adverse Effect):
(a) Neither any Property of the Borrower or any
Subsidiary nor the operations conducted thereon violate any order or
requirement of any court or Governmental Authority or any Environmental
Laws;
(b) Without limitation of clause (a) above, no Property
of the Borrower or any Subsidiary nor the operations currently
conducted thereon or, to the best knowledge of the Borrower, by any
prior owner or operator of such Property or operation, are in violation
of or subject to any existing, pending or threatened action, suit,
investigation, inquiry or proceeding by or before any court or
Governmental Authority or to any remedial obligations under
Environmental Laws;
30
(c) All notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection
with the operation or use of any and all Property of the Borrower and
each Subsidiary, including without limitation past or present
treatment, storage, disposal or release of a hazardous substance or
solid waste into the environment, have been duly obtained or filed, and
the Borrower and each Subsidiary are in compliance with the terms and
conditions of all such notices, permits, licenses and similar
authorizations;
(d) All hazardous substances, solid waste, and oil and
gas exploration and production wastes, if any, generated at any and all
Property of the Borrower or any Subsidiary have in the past been
transported, treated and disposed of in accordance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and, to the best knowledge
of the Borrower, all such transport carriers and treatment and disposal
facilities have been and are operating in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment, and are not the subject of
any existing, pending or threatened action, investigation or inquiry by
any Governmental Authority in connection with any Environmental Laws;
(e) The Borrower has taken all steps reasonably necessary
to determine and has determined that no hazardous substances, solid
waste, or oil and gas exploration and production wastes, have been
disposed of or otherwise released and there has been no threatened
release of any hazardous substances on or to any Property of the
Borrower or any Subsidiary except in compliance with Environmental Laws
and so as not to pose an imminent and substantial endangerment to
public health or welfare or the environment;
(f) To the extent applicable, all Property of the
Borrower and each Subsidiary currently satisfies all design, operation,
and equipment requirements imposed by the OPA or scheduled as of the
Closing Date to be imposed by OPA during the term of this Agreement,
and the Borrower does not have any reason to believe that such
Property, to the extent subject to OPA, will not be able to maintain
compliance with the OPA requirements during the term of this Agreement;
and
(g) Neither the Borrower nor any Subsidiary has any known
contingent liability in connection with any release or threatened
release of any oil, hazardous substance or solid waste into the
environment.
Section 7.18 Compliance with the Law. Neither the Borrower nor
any Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure could reasonably be expected to have (in the event such
violation or failure were asserted by any Person through appropriate action) a
Material Adverse Effect. To the best knowledge of the Borrower, except for such
acts or failures to act as could not reasonably be expected to have a Material
Adverse Effect, and except with respect to Environmental Matters which are
addressed in Section 7.17, the Oil and Gas Properties (and properties unitized
therewith) operated by the Borrower or its Subsidiaries, and to Borrower's
knowledge, their non-operated Oil and Gas Properties, have been maintained,
31
operated and developed in conformity to standards customary in the industry and
in conformity with all applicable laws and all rules, regulations and orders of
all duly constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other contracts comprising a part of the
Hydrocarbon Interests and other contracts and agreements forming a part of the
Oil and Gas Properties; specifically in this connection, except as could not
reasonably expected to have a Material Adverse Effect (i) after the Closing
Date, no Oil and Gas Property is subject to having allowable production reduced
below the full and regular allowable (including the maximum permissible
tolerance) because of any overproduction (whether or not the same was
permissible at the time) prior to the Closing Date and (ii) none of the xxxxx
comprising a part of the Oil and Gas Properties (or properties unitized
therewith) are deviated from the vertical more than the maximum permitted by
applicable laws, regulations, rules and orders, and such xxxxx are, in fact,
bottomed under and are producing from, and the well bores are wholly within, the
Oil and Gas Properties (or in the case of xxxxx located on properties unitized
therewith, such unitized properties).
Section 7.19 Insurance. SCHEDULE 7.19 attached hereto contains
an accurate and complete description of all material policies of fire,
liability, workmen's compensation and other forms of insurance owned or held by
the Borrower and each Subsidiary. All such policies are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date of the closing have been paid, and no notice of cancellation
or termination has been received with respect to any such policy. Such policies
are sufficient for compliance with all requirements of law and of all agreements
to which the Borrower or any Subsidiary is a party; are valid, outstanding and
enforceable policies; provide adequate insurance coverage in at least such
amounts and against at least such risks (but including in any event public
liability) as are usually insured against in the same general area by companies
engaged in the same or a similar business for the assets and operations of the
Borrower and each Subsidiary; will remain in full force and effect through the
respective dates set forth in SCHEDULE 7.19 without the payment of additional
premiums; and will not in any way be affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. SCHEDULE 7.19
identifies all material risks, if any, which the Borrower and its Subsidiaries
and their respective Board of Directors or officers have designated as being
self insured. Neither the Borrower nor any Subsidiary has been refused any
insurance with respect to its assets or operations, nor has its coverage been
limited below usual and customary policy limits, by an insurance carrier to
which it has applied for any such insurance or with which it has carried
insurance during the last three years. All such policies name Collateral Agent
as additional insured, loss payee, and contain endorsements for no cancellation
thereof without thirty (30) days' prior written notice to the Collateral Agent
and the Lenders on all such policies.
Section 7.20 [RESERVED]
Section 7.21 Hedging Agreements. SCHEDULE 7.21 sets forth, as
of the Closing Date, a true and complete list of all Hedging Agreements
(including commodity price swap agreements, forward agreements or contracts of
sale which provide for prepayment for deferred shipment or delivery of oil, gas
or other commodities) of the Borrower and each Subsidiary, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net xxxx to market value thereof, all credit support
agreements relating
32
thereto (including any margin required or supplied), and the counter party to
each such agreement.
Section 7.22 Restriction on Liens. Neither the Borrower nor
any of its Subsidiaries is a party to any agreement or arrangement (other than
the Second Amended and Restated Credit Agreement dated June 5, 2003, among the
Borrower, the lenders named therein and Xxxxx Fargo Foothill, Inc., as
administrative agent, which agreement is to be terminated on the Closing Date),
or subject to any order, judgment, writ or decree, which either restricts or
purports to restrict its ability to grant Liens to the Collateral Agent for the
benefit of the Lenders as contemplated by the Agreement and the Security
Instruments.
Section 7.23 Material Agreements. Set forth on SCHEDULE 7.23
hereto is a complete and correct list of all material agreements, leases,
indentures, purchase agreements, obligations in respect of letters of credit,
guarantees, and other instruments in effect or to be in effect as of the Closing
Date (other than Hedging Agreements) providing for, evidencing, securing or
otherwise relating to any Debt for borrowed money of the Borrower or any of its
Subsidiaries, (other than the Debt hereunder, Debt evidenced by the Existing
Unsecured Notes and Debt to be paid off contemporaneously with the Closing Date
out of the proceeds of the Initial Funding and the proceeds of the Senior
Unsecured Notes), including the Senior Unsecured Notes Indenture, the Purchase
Agreement pursuant to which the Senior Unsecured Notes are to be issued by the
Borrower to the purchasers named therein and the Senior Credit Agreement and
such list correctly sets forth the names of the debtor or lessee and creditor or
lessor with respect to the Debt (other than the Senior Unsecured Notes) or lease
obligations outstanding or to be outstanding and the Property subject to any
Lien securing such Debt or lease obligation. Also set forth on SCHEDULE 7.23
hereto is a complete and correct list of all material agreements of the Borrower
and its Subsidiaries relating to the sale and supply of Hydrocarbons (other than
any such agreement with a term, or cancelable by the Borrower or a Subsidiary on
notice of less than (12) months, any such agreement in which commodity prices
float with market indices and any agreement that is expected to account for less
than five percent (5%) of the sales of the Borrower and its Subsidiaries during
the Borrower's current fiscal year) in effect on the Closing Date. The Borrower
will provide to the Collateral Agent a complete and correct copy of material
agreements in effect on the Closing Date. All of the Material Agreements of the
Borrower and all of its Subsidiaries together with all amendments and
modifications thereto are set forth on SCHEDULE 7.23.
Section 7.24 Gas Imbalances. Except as set forth on SCHEDULE
7.24 or on the most recent certificate delivered pursuant to Section 8.07(c), on
a net basis there are no gas imbalances, take or pay or other prepayments with
respect to the Borrower's Oil and Gas Properties which (taken together with the
imbalances take or pay, or other prepayments on Schedule 7.24 or such
certificate)would require the Borrower or its Subsidiaries to deliver, in the
aggregate, after netting over-production and under-production three percent (3%)
or more of the total volumes of proved, producing reserves of Hydrocarbons
(calculated on an mcf equivalent basis with each barrel of oil being equivalent
to six mcf of natural gas) reflected in the Initial Reserve Report on the most
recent Reserve Report delivered pursuant to SECTION 8.07, as the case may be,
from the Oil and Gas Properties of Borrower and its Subsidiaries at some future
time without then or thereafter receiving full payment therefor.
33
Section 7.25 Partnership Agreement. The Partnership Agreement
has not been terminated, is in full force and effect as of the date hereof and
no default has occurred and is in continuance thereunder which would have a
Material Adverse Effect.
Section 7.26 [RESERVED]
Section 7.27 Solvency. Borrower and its Subsidiaries (and with
respect to its Subsidiaries, after taking into account each Subsidiary's rights
of contribution), on an individual and a consolidated basis, are not insolvent,
Borrower's and its Subsidiaries' assets (and with respect to its Subsidiaries,
after taking into account each Subsidiary's rights of contribution), on an
individual and a consolidated basis, exceed their liabilities, and neither
Borrower nor any of its Subsidiaries (and with respect to its Subsidiaries,
after taking into account each Subsidiary's rights of contribution) will be
rendered insolvent by the execution and performance of this Agreement and the
Loan Documents.
Section 7.28 Name Changes. Borrower's official name as
recorded on its currently effective organizational documents which are filed
with the Secretary of State of its State of organization is the same as found on
the signature page of this Agreement. Borrower has not, during the preceding
five years, entered into any contract, agreement, security instrument or other
document using a name other than, or been known by or otherwise used any name
other than, the name used by Borrower herein.
Section 7.29 Taxpayer Identification Number. Borrower's
Taxpayer Identification No. is 00-0000000 and each Subsidiary's Borrower's
Taxpayer Identification No. is set forth on SCHEDULE 7.14.
Section 7.30 State of Formation. Borrower is a corporation
organized under the laws of the State of Delaware. The Subsidiaries are
corporations, limited liability corporations, or partnerships organized under
the laws of the states set forth on SCHEDULE 7.14.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of the Revolving
Credit Commitments under the Senior Credit Agreement are in effect and until
payment in full of all Loans hereunder, all interest thereon and all other
amounts payable by the Borrower hereunder:
Section 8.01 Reporting Requirements. The Borrower shall
deliver, or shall cause to be delivered, to the Collateral Agent with sufficient
copies of each for the Lenders:
(a) Annual Financial Statements. As soon as available and
in any event within ninety (90) days after the end of each fiscal year
of the Borrower, the audited consolidated statements of income,
stockholders' equity, changes in financial position and cash flows of
the Borrower and its Consolidated Subsidiaries for such fiscal year,
and the related consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such fiscal year, and
setting forth in each case in comparative form the corresponding
figures for the preceding fiscal year, and accompanied by the related
34
unqualified opinion of independent public accountants of recognized
national standing acceptable to the Collateral Agent, which opinion
shall state that said financial statements fairly present the
consolidated financial condition and results of operations of the
Borrower and its Consolidated Subsidiaries as at the end of, and for,
such fiscal year and that such financial statements have been prepared
in accordance with GAAP, except for such changes in such principles
with which the independent public accountants shall have concurred and
such opinion shall not contain a "going concern" or like qualification
or exception, and a certificate of such accountants stating that, in
making the examination necessary for their opinion, they obtained no
knowledge, except as specifically stated, of any Default, together with
calculations confirming the Borrower's compliance with the financial
covenants set forth in Sections 9.13, 9.14, 9.15 and 9.16, certified by
a senior financial officer of Borrower.
(b) Quarterly Financial Statements. As soon as available
and in any event within forty-five (45) days after the end of each of
the first three fiscal quarterly periods of each fiscal year of the
Borrower, consolidated statements of income, stockholders' equity,
changes in financial position and cash flows of the Borrower and its
Consolidated Subsidiaries for such period and for the period from the
beginning of the respective fiscal year to the end of such period, and
the related consolidated balance sheets as at the end of such period,
and setting forth in each case in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year,
accompanied by the certificate of a Responsible Officer, which
certificate shall state that said financial statements fairly present
the consolidated financial condition and results of operations of the
Borrower and its Consolidated Subsidiaries in accordance with GAAP, as
at the end of, and for, such period (subject to normal year-end audit
adjustments), together with calculations confirming the Borrower's
compliance with all financial covenants, certified by a senior
financial officer of Borrower.
(c) Projected Financial Statements. Upon request by the
Collateral Agent or any Lender, as soon as available and in any event
within forty-five (45) days after the end of the preceding fiscal year
of the Borrower, the projected consolidated statements of income and
cash flows of the Borrower and its Consolidated Subsidiaries for such
projected fiscal year, and the related projected consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as at the end
of such fiscal year, and setting forth in each case in comparative form
the corresponding figures for the preceding fiscal year, accompanied by
the certificate of a Responsible Officer, which certificate shall state
that said financial projections have been prepared based on assumptions
that were reasonable at the date presented.
(d) Notice of Default, Etc. Promptly after the Borrower
knows that any Default or any Material Adverse Effect has occurred, a
notice of such Default or Material Adverse Effect, describing the same
in reasonable detail and the action the Borrower proposes to take with
respect thereto.
(e) Other Accounting Reports. Upon request by the
Collateral Agent or any Lender, promptly upon receipt thereof, a copy
of each other report or letter submitted to the Borrower or any
Subsidiary by independent accountants in connection with any
35
annual, interim or special audit made by them of the books of the
Borrower and its Subsidiaries, and a copy of any response by the
Borrower or any Subsidiary of the Borrower, or the Board of Directors
of the Borrower or any Subsidiary of the Borrower, to such letter or
report.
(f) SEC Filings, Etc. Promptly upon its becoming
available, each financial statement, report, notice or proxy statement
sent by the Borrower to stockholders generally and each regular or
periodic report and any registration statement, prospectus or written
communication (other than transmittal letters) in respect thereof filed
by the Borrower with or received by the Borrower in connection
therewith from any securities exchange or the SEC or any successor
agency.
(g) Notices Under Other Loan Agreements. Promptly after
the furnishing thereof, copies of any statement, report or notice
furnished to any Person pursuant to the terms of any material
indenture, loan or credit or other similar agreement, other than this
Agreement and not otherwise required to be furnished to the Lenders
pursuant to any other provision of this Section 8.01.
(h) Other Matters. From time to time such other
information regarding the business, affairs or financial condition of
the Borrower or any Subsidiary (including, without limitation, any Plan
or Multiemployer Plan and any reports or other information required to
be filed under ERISA) as any Lender or the Collateral Agent may
reasonably request.
(i) Hedging Agreements. Upon request by the Collateral
Agent or any Lender, as soon as available and in any event within ten
(10) Business Days after the last day of each calendar quarter, a
report, in form and substance satisfactory to the Collateral Agent,
setting forth as of the last Business Day of such calendar quarter a
true and complete list of all Hedging Agreements (including commodity
price swap agreements, forward agreements or contracts of sale which
provide for prepayment for deferred shipment or delivery of oil, gas or
other commodities) of the Borrower and each Subsidiary, the material
terms thereof (including the type, term, effective date, termination
date and notional amounts or volumes), the net xxxx to market value
therefor, any new credit support agreements relating thereto not listed
on SCHEDULE 7.21, any margin required or supplied under any credit
support document, and the counter party to each such agreement.
The Borrower will furnish to the Collateral Agent, at the time it furnishes each
set of financial statements pursuant to paragraph (a) or (b) above, a
certificate substantially in the form of EXHIBIT C executed by a Responsible
Officer (i) certifying as to the matters set forth therein and stating that no
Default has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail), and (ii) setting forth in
reasonable detail the computations necessary to determine whether the Borrower
is in compliance with Sections 9.13, 9.14, 9.15, and 9.16 as of the end of the
respective fiscal quarter or fiscal year.
Section 8.02 Litigation. The Borrower shall promptly give to
the Collateral Agent notice of: (i) all legal or arbitral proceedings, and of
all proceedings before any
36
Governmental Authority affecting the Borrower or any Subsidiary, except
proceedings which, if adversely determined, could not have a Material Adverse
Effect, and (ii) of any litigation or proceeding against or adversely affecting
the Borrower or any Subsidiary in which the amount involved is not covered in
full by insurance (subject to normal and customary deductibles and for which the
insurer has not assumed the defense), or in which injunctive or similar relief
is sought. The Borrower will, and will cause each of its Subsidiaries to,
promptly notify the Collateral Agent and each of the Lenders of any claim,
judgment, Lien or other encumbrance affecting any Property of the Borrower or
any Subsidiary if the value of the claim, judgment, Lien, or other encumbrance
affecting such Property shall exceed $250,000.00.
Section 8.03 Maintenance, Etc.
(a) Generally. The Borrower shall and shall cause each
Subsidiary to: preserve and maintain its corporate existence and all of
its material rights, privileges and franchises; keep books of record
and account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and activities;
comply with all Governmental Requirements if failure to comply with
such requirements will have a Material Adverse Effect; pay and
discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its Property
prior to the date on which penalties attach thereto, except for any
such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained; upon reasonable notice, permit
representatives of the Collateral Agent or any Lender, during normal
business hours, to examine, copy and make extracts from its books and
records, to inspect its Properties, and to discuss its business and
affairs with its officers, all to the extent reasonably requested by
such Lender or the Collateral Agent (as the case may be); and keep, or
cause to be kept, insured by financially sound and reputable insurers
all Property of a character usually insured by Persons engaged in the
same or similar business similarly situated against loss or damage of
the kinds and in the amounts customarily insured against by such
Persons and carry such other insurance as is usually carried by such
Persons including, without limitation, environmental risk insurance to
the extent reasonably available. The Borrower shall promptly obtain
endorsements to such insurance policies naming "Guggenheim Corporate
Funding, LLC, as Collateral Agent for the Lenders" as joint loss payee,
additional insured, and containing provisions that such policies will
not be canceled without 30 days prior written notice having been given
by the insurance company to the Collateral Agent.
(b) Proof of Insurance. Contemporaneously with the
delivery of the financial statements required by Section 8.01(a) to be
delivered for each year, the Borrower will furnish or cause to be
furnished to the Collateral Agent and the Lenders a certificate of
insurance coverage from the insurer in form and substance satisfactory
to the Collateral Agent and, if requested, will furnish the Collateral
Agent and the Lenders copies of the applicable policies.
(c) Operation of Properties. The Borrower will and will
cause each Subsidiary to operate its Properties or cause such
Properties to be operated in a careful and efficient manner in
accordance with the practices of the industry and in compliance
37
with all applicable contracts and agreements and in compliance in all
material respects with all Governmental Requirements.
(d) Oil and Gas Properties. The Borrower will and will
cause each Subsidiary to, at its own expense, do or cause to be done
and, in the case of non-operated Oil and Gas Properties, to use its
reasonable commercial efforts to cause them to be done by the operators
all things reasonably necessary to preserve and keep in good repair,
working order and efficiency all of its Oil and Gas Properties and
other material Properties including, without limitation, all equipment,
machinery and facilities, and from time to time will make all the
reasonably necessary repairs, renewals and replacements so that at all
times the state and condition of its Oil and Gas Properties and other
material Properties will be preserved and maintained in accordance with
industry standards, except to the extent a portion of such Properties
is no longer capable of producing Hydrocarbons in economically
reasonable amounts. The Borrower will and will cause each Subsidiary or
use its reasonable commercial efforts to cause the operator to do so,
in the case of non-operated properties, to promptly: (i) pay and
discharge, or make reasonable and customary efforts to cause to be paid
and discharged, all delay rentals, royalties, expenses and indebtedness
accruing under the leases or other agreements affecting or pertaining
to its Oil and Gas Properties, (ii) perform or make reasonable and
customary efforts to cause to be performed, in accordance with industry
standards, the obligations required by each and all of the assignments,
deeds, leases, sub-leases, contracts and agreements affecting its
interests in its Oil and Gas Properties and other material Properties,
(iii) will and will cause each Subsidiary to do all other things
necessary to keep unimpaired, except for Liens described in Section
9.02, its rights with respect to its Oil and Gas Properties and other
material Properties and prevent any forfeiture thereof or a default
thereunder, except to the extent a portion of such Properties is
undeveloped or is no longer capable of producing Hydrocarbons in
economically reasonable amounts and except for dispositions permitted
by Section 9.17. The Borrower will and will cause each Subsidiary to
operate its Oil and Gas Properties and other material Properties or
cause or make reasonable and customary efforts to cause such Oil and
Gas Properties and other material Properties to be operated in a
careful and efficient manner in accordance with the practices of the
industry and in compliance with all applicable contracts and agreements
and in compliance in all material respects with all Governmental
Requirements.
Section 8.04 Environmental Matters.
(a) Establishment of Procedures. The Borrower will and
will cause each Subsidiary to establish and implement such procedures
as may be reasonably necessary to continuously determine and assure
that any failure of the following does not have a Material Adverse
Effect: (i) all Properties of the Borrower and its Subsidiaries and the
operations conducted thereon and other activities of the Borrower and
its Subsidiaries are in compliance with and do not violate the
requirements of any Environmental Laws, (ii) no oil, hazardous
substances or solid wastes are disposed of or otherwise released on or
to any Property owned by any such party except in compliance with
Environmental Laws, (iii) no hazardous substance will be released on or
to any such Property in a quantity equal to or exceeding that quantity
which requires reporting pursuant to
38
Section 103 of CERCLA, and (iv) no oil, oil and gas exploration and
production wastes or hazardous substance is released on or to any such
Property so as to pose an imminent and substantial endangerment to
public health or welfare or the environment.
(b) Notice of Action. The Borrower will promptly notify
the Collateral Agent and the Lenders in writing of any threatened
action, investigation or inquiry by any Governmental Authority of which
the Borrower has knowledge in connection with any Environmental Laws,
excluding routine testing and corrective action.
(c) Future Acquisitions. The Borrower will and will cause
each Subsidiary to provide environmental audits and tests in accordance
with American Society for Testing and Materials standards as reasonably
requested by the Collateral Agent and the Lenders (or as otherwise
required to be obtained by the Collateral Agent or the Lenders by any
Governmental Authority) in connection with any future acquisitions of
Oil and Gas Properties or other material Properties.
Section 8.05 Further Assurances. The Borrower will and will
cause each Subsidiary to cure promptly any defects in the creation and issuance
of the Notes and the execution and delivery of the Security Instruments and this
Agreement. The Borrower at its expense will and will cause each Subsidiary to
promptly execute and deliver to the Collateral Agent upon request all such other
documents, agreements and instruments to comply with or accomplish the covenants
and agreements of the Borrower or any Subsidiary, as the case may be, in the
Security Instruments and this Agreement, or to further evidence and more fully
describe the collateral intended as security for the Notes, or to correct any
omissions in the Security Instruments, or to state more fully the security
obligations set out herein or in any of the Security Instruments, or to perfect,
protect or preserve any Liens created pursuant to any of the Security
Instruments, or to make any recordings, to file any notices or obtain any
consents, all as may be necessary or appropriate in connection therewith.
Section 8.06 Performance of Obligations. The Borrower will pay
the Notes according to the reading, tenor and effect thereof; and the Borrower
will and will cause each Subsidiary to do and perform every act and discharge
all of the obligations to be performed and discharged by them under the Security
Instruments and this Agreement, at the time or times and in the manner
specified.
Section 8.07 Engineering Reports.
(a) Commencing with October 1, 2004, upon request of the
Collateral Agent or any Lender, the Borrower shall furnish to the
Collateral Agent and the Lenders its most recent Reserve Report;
provided that such Reserve Reports shall be available not less than
ninety (90) days after each January 1 and July 1. The Reserve Report as
of January 1 of each year shall be prepared by certified independent
petroleum engineers or other independent petroleum consultant(s)
acceptable to the Collateral Agent and the Reserve Report as of July 1
of each year shall be prepared by or under the supervision of the chief
engineer of the Borrower who shall certify such Reserve Report to be
true and accurate and to have been prepared in accordance with the
procedures used in the immediately proceeding Reserve Report as of
January 1.
39
(b) In the event any additional Reserve Report is
prepared by or under the supervision of the chief engineer of the
Borrower who certifies such Reserve Report to be true and accurate and
to have been prepared in accordance with the procedures used in the
immediately preceding Reserve Report, the Company shall furnish such
Reserve Report to the Collateral Agent and the Lenders.
(c) With the delivery of each Reserve Report, the
Borrower shall provide to the Collateral Agent and the Lenders, a
certificate from a Responsible Officer certifying that, to the best of
his knowledge and in all material respects: (i) the information
contained in the Reserve Report and any other information delivered in
connection therewith is true and correct, (ii) the Borrower owns good
and defensible title to the Oil and Gas Properties evaluated in such
Reserve Report and such Properties are free of all Liens except for
Liens permitted by Section 9.02, (iii) except as set forth on an
exhibit to the certificate, on a net basis there are no gas imbalances,
take or pay or other prepayments with respect to the Borrower's Oil and
Gas Properties which would require Borrower or its Subsidiaries to
deliver, in the aggregate, after netting all over-production and
under-production, three percent (3%) or more of total volumes of
proved, producing reserves of Hydrocarbons (calculated on an mcf
equivalent basis with each barrel of oil being equivalent to six mcf of
natural gas) reflected in the Initial Reserve Report or the most recent
Reserve Report delivered pursuant to this Section 8.07, as the case may
be, from the Oil and Gas Properties of Borrower and its Subsidiaries at
some future time without then receiving full payment therefor which
would require the Borrower to deliver Hydrocarbons produced from such
Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor, (iv) none of its Oil and Gas
Properties have been sold since the date of the previous Reserve Report
except as set forth on an exhibit to the certificate, which certificate
shall list all of its Oil and Gas Properties sold and in reasonable
detail, (v) attached to the certificate is a list of its Oil and Gas
Properties added to and deleted from the immediately prior Reserve
Report and a list showing any change in working interest or net revenue
interest in its Oil and Gas Properties occurring and the reason for
such change, (vi) attached to the certificate is a list of all Persons
disbursing proceeds to the Borrower from its Oil and Gas Properties and
(vii) except as set forth on a schedule attached to the certificate, at
least eighty-five percent (85%), by value, of the Oil and Gas
Properties of the Borrower and its Subsidiaries are Mortgaged Property.
(d) As soon as available and in any event within sixty
(60) days after the end of each month, the Borrower shall furnish to
the Collateral Agent, upon request, reports, which reports shall
include any direct or allocated general and administrative expenses and
production reports for its Oil and Gas Properties, which production
reports shall include quantities or volume of production, revenue,
realized product prices, operating expenses, taxes, capital
expenditures and lease operating costs which have accrued to the
Borrower's accounts in such period, and such other information with
respect thereto as the Collateral Agent may require.
Section 8.08 Title Information and Mortgage Coverage.
40
(a) Mortgage and Title Coverage. The Borrower will
provide the Collateral Agent with (i) title information in form and
substance acceptable to the Agent and (ii) Mortgages on the Oil and Gas
Properties of the Borrower and its Subsidiaries, in form and substance
satisfactory to Collateral Agent, and subject on to Excepted Liens,
which are, at all times, sufficient to cause eighty-five percent (85%)
of the value of the proved Oil and Gas Properties of the Borrower and
its Subsidiaries to be covered both by such title information and by
Mortgages in favor of the Collateral Agent for the benefit of the
Lenders (the "85% Coverage Requirement").
(b) Cure of Title Defects. The Borrower shall promptly
proceed in good faith to cure any title defects or exceptions which are
not Excepted Liens raised by such information, or substitute acceptable
Mortgaged Properties with no material title defects or exceptions
except for Excepted Liens covered Mortgaged Property sufficient to
cause the 85% Coverage Requirement to be maintained as promptly as
reasonable and, in any event, within ninety (90) days after a request
by the Collateral Agent or the Lenders to cure such defects or
exceptions. With respect to this Section 8.08(b), "material title
defects or exceptions" shall mean the defects and exceptions relating
to all the Mortgaged Properties that could reasonably be expected to
affect the revenue stream attributable to such Mortgaged Properties and
the cost to cure such defects or exceptions could reasonably be
expected to exceed $200,000.00 individually or $2,000,000.00 in the
aggregate.
(c) Failure to Cure Title Defects. If the Borrower is
unable to cure any title defect as requested by the Collateral Agent or
the Lenders to be cured within the ninety (90) day period set forth in
subsection (b) above and the Borrower does not substitute acceptable
Mortgage Properties sufficient to cause the 85% Coverage Requirement to
be maintained, such default shall constitute a Default or an Event of
Default.
Section 8.09 Additional Collateral.
(a) Lien in Acquired Oil and Gas Properties. Should the
Borrower or any of its Subsidiaries acquire any additional developed
Oil and Gas Properties or additional interests in its existing
developed Oil and Gas Properties, the Borrower will (i) grant to the
Collateral Agent as security for the Obligations a second-priority Lien
and security interest (subject only to the first priority Lien granted
under the terms of the Senior Credit Agreement and Excepted Liens) on
the Borrower's interest in any such developed Oil and Gas Properties
not already subject to a Lien of the Security Instruments, which Lien
will be created and perfected by and in accordance with the provisions
of mortgages, deeds of trust, security agreements and financing
statements, or other Security Instruments, all in form and substance
satisfactory to the Collateral Agent in its sole discretion and in
sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes, and (ii) will provide the Agent
with title information in form and substance satisfactory to the Agent
on such developed Oil and Gas Properties, to the extent required to
maintain the satisfaction of the 85% Coverage Requirement.
(b) [RESERVED]
41
(c) Legal Opinions. Also, promptly after the filing of
any new Security Instrument in any state, upon the reasonable request
of the Collateral Agent, the Borrower will provide to the Collateral
Agent an opinion addressed to the Collateral Agent for the benefit of
the Lenders in form and substance satisfactory to the Collateral Agent
in its sole discretion from counsel acceptable to Collateral Agent,
stating that the Security Instrument creates a Lien and is valid,
binding and enforceable in accordance with its terms in legally
sufficient form for such jurisdiction, and the means by which to
perfect the Lien created by such Security Instrument.
Section 8.10 Cash Collateral Account Agreement. Upon the
occurrence of a Default, the Borrower and all of its Subsidiaries shall cause
all proceeds arising from its Oil and Gas Properties, including without
limitation from the sale of Hydrocarbons, to be directed to a lockbox (and in
connection therewith, Borrower and all of its Subsidiaries shall execute a
Lockbox Agreement and financing statements in form and substance satisfactory to
the Collateral Agent) pursuant to letters acceptable to the Collateral Agent
stating that such directions may not be changed without the written consent of
the Collateral Agent. The Cash Collateral Account Agreement and the Liens and
security interests established in such Cash Collateral Account Agreement will
continue until all the Obligations under this Agreement are paid in full and
this Agreement is terminated.
Section 8.11 [RESERVED]
Section 8.12 ERISA Information and Compliance. The Borrower
will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to the Collateral Agent and the Lenders, upon request (i)
promptly after the filing thereof with the United States Secretary of Labor, the
Internal Revenue Service or the PBGC, copies of each annual and other report
with respect to each Plan or any trust created thereunder, (ii) immediately upon
becoming aware of the occurrence of any ERISA Event or of any "PROHIBITED
TRANSACTION," as described in section 406 of ERISA or in section 4975 of the
Code, in connection with any Plan or any trust created thereunder, a written
notice signed by a Responsible Officer specifying the nature thereof, what
action the Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes
to take with respect thereto, and, when known, any action taken or proposed by
the Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, and (iii) immediately upon receipt thereof, copies of any notice of the
PBGC's intention to terminate or to have a trustee appointed to administer any
Plan. With respect to each Plan (other than a Multiemployer Plan), the Borrower
will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full
and in a timely manner, without incurring any late payment or underpayment
charge or penalty and without giving rise to any lien, all of the contribution
and funding requirements of section 412 of the Code (determined without regard
to subsections (d), (e), (f) and (k) thereof) and of section 302 of ERISA
(determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay,
or cause to be paid, to the PBGC in a timely manner, without incurring any late
payment or underpayment charge or penalty, all premiums required pursuant to
sections 4006 and 4007 of ERISA.
Section 8.13 Joinder and Guaranty Agreements. The Borrower and
each of its Subsidiaries will cause each of their Subsidiaries, whether newly
formed, after acquired, or otherwise existing, upon the creation or acquisition
thereof, to become a Guarantor hereunder by
42
way of a Joinder Agreement attached hereto as EXHIBIT E and a Guaranty Agreement
attached hereto as EXHIBIT F and the execution of mortgages, deeds of trusts,
security agreements, pledges, and any other instruments in form and substance
satisfactory to Collateral Agent and in Collateral Agent's sole discretion
covering all of such Subsidiaries, assets, security for the Obligations,
together with evidence satisfactory to the Collateral Agent, in Collateral
Agent's sole discretion, that all such collateral will be a perfected second
Lien on such collateral in favor of the Collateral Agent, with only such Liens
or other encumbrances of any kind on such collateral that are acceptable to the
Collateral Agent.
Section 8.14 Ancillary Documents. Not later than the fifth
business day immediately succeeding the Closing Date, (i) the Borrower, the
Collateral Agent and the Lenders, as applicable, shall enter into the agreements
listed on Exhibit G hereto (the "Remaining Agreements"), (ii) the Borrower shall
execute and deliver to the Collateral Agent and the Lenders the other documents
listed on Exhibit G hereto (the "Remaining Documents" and, collectively with the
Other Agreements the "Required Documentation"), and (iii) counsel to the
Borrower shall issue opinions required under the terms of this Agreement and the
Remaining Agreements, in each case dated as of the date hereof and in form and
substance satisfactory to the Collateral Agent.
ARTICLE IX
NEGATIVE COVENANTS
The Borrower covenants and agrees that, until payment in full
of all Loans hereunder, all interest thereon and all other amounts payable by
the Borrower hereunder, without the prior written consent of the Majority
Lenders:
Section 9.01 Debt. Neither the Borrower nor any Subsidiary
will incur, create, assume or permit to exist any Debt, except:
(a) the Notes or other Obligations or any guaranty of or
suretyship arrangement for the Notes or other Obligations;
(b) The Senior Secured Notes, the Senior Unsecured Notes
and Debt of the Borrower existing on the Closing Date which is
reflected in the Financial Statements or is disclosed in SCHEDULE 9.01,
and any renewals, extensions or refinancings (but not increases)
thereof;
(c) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary course
of business which, if greater than 90 days past the invoice or billing
date, are being contested in good faith by appropriate proceedings if
reserves adequate under GAAP shall have been established therefor;
(d) Debt under capital leases (as required to be reported
on the financial statements of the Borrower pursuant to GAAP) not to
exceed $100,000.00 in the aggregate at any time outstanding;
43
(e) Debt associated with bonds or surety obligations
required by contract or by Governmental Requirements in connection with
the operation of the Oil and Gas Properties, in the ordinary course of
business;
(f) Debt of the Borrower and its Subsidiaries under
Hedging Agreements, but only if (i) the provider of the Hedging
Agreements is a Lender or an unsecured counterparty acceptable to the
Collateral Agent; (ii) the total notional volume attributable to such
Hedging Agreement, if it is a Hedging Agreement with respect to
Hydrocarbon Interests, does not exceed more than seventy-five percent
(75%) of scheduled proved producing net production quantities in any
period, (iii) if the Hedging Agreement is an interest rate hedge, the
notional principal amount shall not exceed more than seventy-five
percent (75%) of loans outstanding to the Borrower under the Senior
Credit Agreement, provided, however, at no time shall Borrower fail to
maintain (x) a hedge position on fifty percent (50%) of proved
producing volumes projected to be produced over the next 12 months
after the Closing Date, and thereafter on a rolling 12-month basis
until the Maturity Date; and (y) a Hedging Agreement on twenty-five
(25%) of proved producing production volumes projected to be produced
over the 13th through the 24th months after the Closing Date, on a
rolling 12-month basis; and
(g) any guarantee of Debt otherwise permitted under
Section 9.01.
Section 9.02 Liens. Neither the Borrower nor any Subsidiary
will create, incur, assume or permit to exist any Lien on any of its Properties
(now owned or hereafter acquired), except:
(a) Liens securing the loans and other obligations under
the Senior Credit Agreement;
(b) Liens securing the payment of any Obligations;
(c) Excepted Liens;
(d) Liens securing leases allowed under Section 9.01(d),
but only on the Property under lease;
(e) Liens disclosed on SCHEDULE 9.02;
(f) Liens on cash or securities of the Borrower securing
the Debt described in Section 9.01(e); and
(g) certain permitted Liens allowed by the Credit
Facility Agent, at the Credit Facility Agent's sole discretion.
Section 9.03 Investments, Loans and Advances. Neither the
Borrower nor any Subsidiary will make or permit to remain outstanding any loans
or advances to or investments in any Person (other than the Borrower or any
Guarantor), except that the foregoing restriction shall not apply to:
44
(a) investments, loans or advances reflected in the
Financial Statements or which are disclosed to the Lenders in SCHEDULE
9.03;
(b) accounts receivable arising in the ordinary course of
business;
(c) direct obligations of the United States or any agency
thereof, or obligations guaranteed by the United States or any agency
thereof, in each case maturing within one year from the date of
creation thereof;
(d) commercial paper maturing within one year from the
date of creation thereof rated in the highest grade by Standard &
Poor's Corporation or Xxxxx'x Investors Service, Inc.;
(e) deposits maturing within one year from the date of
creation thereof with, including certificates of deposit issued by, any
Lender or any office located in the United States of any other bank or
trust company which is organized under the laws of the United States or
any state thereof, has capital, surplus and undivided profits
aggregating at least $500,000,000 (as of the date of such Lender's or
bank or trust company's most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set
forth from time to time, by Standard & Poor's Corporation or Xxxxx'x
Investors Service, Inc., respectively;
(f) deposits in money market funds investing at least
ninety-five percent (95%) of funds exclusively in investments described
in Section 9.03(c), 9.03(d) or 9.03(e);
(g) usual and customary travel and other similar expense
advances to employees, officers, directors or agents of the Borrower or
any Subsidiary not to exceed $100,000 in the aggregate at any time
outstanding;
(h) Hedging Agreements permitted to be incurred pursuant
to SECTION 9.01(f); and
(i) investments by the Borrower in direct ownership
interests in additional Oil and Gas Properties and gas gathering
systems related thereto.
Section 9.04 Dividends, Distributions and Redemptions. The
Borrower will not declare or pay any dividend, purchase, redeem or otherwise
acquire for value any of its stock now or hereafter outstanding, return any
capital to its stockholders or make any distribution of its assets to its
stockholders.
Section 9.05 Sales and Leasebacks. Neither the Borrower nor
any Subsidiary will enter into any arrangement, directly or indirectly, with any
Person whereby the Borrower or any Subsidiary shall sell or transfer any of its
Property, whether now owned or hereafter acquired, and whereby the Borrower or
any Subsidiary shall then or thereafter rent or lease as lessee such Property or
any part thereof or other Property which the Borrower or any Subsidiary intends
to use for substantially the same purpose or purposes as the Property sold or
transferred.
45
Section 9.06 Nature of Business. Neither the Borrower nor any
Subsidiary will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company.
Section 9.07 Limitation on Leases. Neither the Borrower nor
any Subsidiary will create, incur, assume or permit to exist any obligation for
the payment of rent or hire of Property of any kind whatsoever (real or personal
excluding capital leases, leases of Hydrocarbon Interests and leases of
automobiles, compression or other oilfield equipment leased in the ordinary
course of business), under leases or lease agreements that would cause the
aggregate amount of all payments made by the Borrower and its Subsidiaries
pursuant to all such leases or lease agreements to exceed $1,500,000.00 in any
period of twelve consecutive calendar months during the life of such leases.
Section 9.08 Mergers, Etc. Neither the Borrower nor any
Subsidiary will merge into or with or consolidate with any other Person, or
sell, lease or otherwise dispose of (whether in one transaction or in a series
of transactions) all or substantially all of its Property or assets to any other
Person; provided, however, nothing shall prohibit Borrower or any Subsidiary
from: (i) acquiring (a) any domestic undeveloped Hydrocarbon Interests or (b)
domestic developed Oil and Gas Properties, so long as Borrower or such
Subsidiary pledges and/or mortgages to the Lenders all such developed Oil and
Gas Properties acquired pursuant thereto (to the extent necessary to maintain
Agent's Lien in at least eighty-five percent (85%) by value of the Oil and Gas
Properties of Borrower and its Subsidiaries) by execution of documents in form
and substance satisfactory to Collateral Agent, granting perfected, second
priority Liens and security interests in such Oil and Gas Properties subject
only to (x) Excepted Liens and other Liens acceptable to the Lenders and (y)
Liens securing loans under the Senior Credit Agreement or (ii) merging (after
having given the Collateral Agent thirty (30) days prior written notice) (a) any
Guarantor into another Guarantor or (b) any Guarantor into Borrower.
Section 9.09 Proceeds of Notes. The Borrower will not permit
the proceeds of the Notes to be used for any purpose other than those permitted
by Section 7.07. Neither the Borrower nor any Person acting on behalf of the
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation T, U or X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
Section 9.10 ERISA Compliance. The Borrower will not at any
time:
(a) Engage in, or permit any Subsidiary or ERISA
Affiliate to engage in, any transaction in connection with which the
Borrower, any Subsidiary or any ERISA Affiliate could be subjected to
either a civil penalty assessed pursuant to section 502(c), (i) or (l)
of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA
Affiliate to terminate, any Plan in a manner, or take any other action
with respect to any Plan, which could result in any liability to the
Borrower, any Subsidiary or any ERISA Affiliate to the PBGC;
46
(c) Fail to make, or permit any Subsidiary or ERISA
Affiliate to fail to make, full payment when due of all amounts which,
under the provisions of any Plan, agreement relating thereto or
applicable law, the Borrower, a Subsidiary or any ERISA Affiliate is
required to pay as contributions thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA
Affiliate to permit to exist, any accumulated funding deficiency within
the meaning of section 302 of ERISA or section 412 of the Code, whether
or not waived, with respect to any Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to
permit, the actuarial present value of the benefit liabilities under
any Plan maintained by the Borrower, any Subsidiary or any ERISA
Affiliate which is regulated under Title IV of ERISA to exceed the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities. The term "ACTUARIAL PRESENT VALUE OF THE BENEFIT
LIABILITIES" shall have the meaning specified in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute
to, or permit any Subsidiary or ERISA Affiliate to contribute to or
assume an obligation to contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate
to acquire, an interest in any Person that causes such Person to become
an ERISA Affiliate with respect to the Borrower, any Subsidiary or any
ERISA Affiliate if such Person sponsors, maintains or contributes to,
or at any time in the six-year period preceding such acquisition has
sponsored, maintained, or contributed to, (1) any Multiemployer Plan,
or (2) any other Plan that is subject to Title IV of ERISA under which
the actuarial present value of the benefit liabilities under such Plan
exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to
such benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to
incur, a liability to or on account of a Plan under sections 515, 4062,
4063, 4064, 4201 or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute
to, or permit any Subsidiary or ERISA Affiliate to contribute to or
assume an obligation to contribute to, any employee welfare benefit
plan, as defined in section 3(1) of ERISA, including, without
limitation, any such plan maintained to provide benefits to former
employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to
amend, a Plan resulting in an increase in current liability such that
the Borrower, any Subsidiary or any ERISA Affiliate is required to
provide security to such Plan under section 401(a)(29) of the Code.
47
Section 9.11 Sale or Discount of Receivables. Neither the
Borrower nor any Subsidiary will discount or sell (with or without recourse) any
of its notes receivable or accounts receivable.
Section 9.12 [RESERVED]
Section 9.13 Current Ratio. The Borrower will not permit its
ratio of (i) consolidated Current Assets (including, without limitation,
Borrowing Base availability for loans for general corporate purposes under the
Credit Facility) to (ii) consolidated Current Liabilities (excluding current
maturities of the Notes) to be less than 1.00 to 1.00 at any time. The current
ratio shall be calculated and tested quarterly as of the last day of each fiscal
quarter of Borrower, beginning with the quarter ending March 31, 2004. As used
in this Section 9.13, "CURRENT ASSETS" shall have the meaning of such term as
defined by GAAP, except any availability under the Borrowing Base (as defined in
the Senior Credit Agreement) under the Credit Facility shall be included in the
definition of Current Assets and "CURRENT LIABILITIES" shall have the meaning of
such term as defined by GAAP, except that current maturities of loans under the
Credit Facility and under this Agreement shall be excluded from Current
Liabilities. Current asset or liability accounts associated with Hedging
Agreements will be excluded from calculations of the Current Ratio.
Section 9.14 Tangible Net Worth. The Borrower will not permit,
at any time, its Tangible Net Worth to be less than eighty-five percent (85%) of
Tangible Net Worth as of March 31, 2004, plus fifty percent (50%) of positive
net income after tax distributions, plus one hundred percent (100%) of equity
offerings after March 31, 2004 excluding any asset impairment charges.
Section 9.15 Leverage Ratio. The Borrower will not permit its
Leverage Ratio on an annualized basis (until the passing of four (4) full fiscal
quarters after the date hereof), on the last day of each fiscal quarter to be
more than the ratio set forth below for the corresponding time.
Period Ending Maximum Leverage Ratio
---------------------------------------- ----------------------
June 30, 2004 through September 30, 2004 3.75x
December 31, 2004 and thereafter 3.50x
Section 9.16 Interest Coverage Ratio. The Borrower will not
permit its Interest Coverage Ratio (on an annualized basis until the passing of
four fiscal quarters after the date hereof) as of the end of any fiscal quarter
of the Borrower (calculated quarterly at the end of each fiscal quarter) to be
less than the ratio set forth below for the corresponding time periods. For the
purposes of this Section 9.16, "INTEREST COVERAGE RATIO" shall mean the ratio of
(i) EBITDA for the four fiscal quarters ending on such date to (ii) cash
interest payments made for such four fiscal quarters of the Borrower and its
Consolidated Subsidiaries.
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Period Ending Minimum Interest Coverage Ratio
--------------------------------------- -------------------------------
June 30, 2004 through December 31, 2004 2.50x
March 30, 2005 through June 30, 2005 2.75x
September 30, 2005 and thereafter 3.00x
Section 9.17 Sale of Mortgaged Properties. The Borrower will
not, and will not permit any Subsidiary to, Transfer any Mortgaged Property, Oil
and Gas Property or any interest in any Mortgaged Property or Oil and Gas
Property, except for Permitted Transfers.
Section 9.18 [RESERVED]
Section 9.19 Environmental Matters. After the Effective Date
of this Agreement, Borrower and Borrower's Subsidiaries will remain in
substantial compliance with all state and federal environmental regulations and
Borrower will not place nor permit to be placed any hazardous substance on any
of the Mortgaged Property in violation of applicable state and federal
environmental laws. In the event Borrower shall discover any hazardous
substances on any of the Mortgaged Property which could result in a breach of
the foregoing covenant, Mortgagor shall notify Mortgagee within three (3) days
after such discovery. Borrower shall dispose of any hazardous substances
generated on a Mortgaged Property after the Effective Date only at facilities
and/or with carriers that maintain valid governmental permits under RCRA.
Neither the Borrower nor any Subsidiary will cause or permit any of its Property
to be in violation of, or do anything or permit anything to be done which will
subject any such Property to any remedial obligations under any Environmental
Laws, assuming disclosure to the applicable Governmental Authority of all
relevant facts, conditions and circumstances, if any, pertaining to such
Property where such violations or remedial obligations would have a Material
Adverse Effect.
Section 9.20 Transactions with Affiliates. Neither the
Borrower nor any Subsidiary will enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate unless such transactions are otherwise
permitted under this Agreement, are in the ordinary course of its business and
are upon fair and reasonable terms no less favorable to it than it would obtain
in a comparable arm's length transaction with a Person not an Affiliate.
Section 9.21 Subsidiaries. The Borrower shall not, and shall
not permit any Subsidiary to, create, acquire or otherwise own any additional
Subsidiaries unless Borrower concurrently pledges to the Collateral Agent for
the benefit of the Lenders all stock or other ownership interests of such
Subsidiary, and such Subsidiary is created, acquired or otherwise owned and in
compliance with Sections 9.03 and 9.08.
Section 9.22 Negative Pledge Agreements. Neither the Borrower
nor any Subsidiary will create, incur, assume or permit to exist any contract,
agreement or understanding (other than this Agreement and the Security
Instruments and the Senior Credit Agreement and the security instruments in
connection therewith) which in any way prohibits or restricts the
49
granting, conveying, creation or imposition of any Lien on any of its Property
in favor of the Collateral Agent or the Lenders or restricts any Subsidiary from
paying dividends to the Borrower, or which requires the consent of or notice to
other Persons in connection therewith provided, however, the foregoing
restrictions will not apply to restrictions existing under or by reason of: (i)
applicable law; (ii) customary non-assignment provisions in leases entered into
in the ordinary course of business and consistent with past practices; (iii)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions on the property so acquired; and (iv)
agreements that restrict to the disposition or distribution of assets or
property in oil and gas leases, joint operating agreements, joint exploration
and/or development agreements, participation agreements and other similar
agreements entered into in the ordinary course of the oil and gas exploration
and development business.
Section 9.23 Gas Imbalances, Take-or-Pay or Other Prepayments.
The Borrower will not allow gas imbalances, take-or-pay or other prepayments
with respect to the Oil and Gas Properties of the Borrower and its Subsidiaries
which would require the Borrower and its Subsidiaries to deliver Hydrocarbons
produced on Oil and Gas Properties at some future time without then or
thereafter receiving full payment therefor in an aggregate amount, after netting
all over-production and all under-production, in excess of three percent (3%) or
more of the total volumes of proved, producing reserves of Hydrocarbons
(calculated on an mcf equivalent basis with each barrel of oil being equivalent
to six mcf of natural gas) reflected in the Initial Reserves Report or the most
recent Reserve Report delivered pursuant to SECTION 8.07, as the case may be.
Section 9.24 Ownership of Subsidiaries. The Borrower shall
fail to pledge, assign, deliver, and transfer to the Collateral Agent for the
benefit of the Lenders, and grant to the Collateral Agent for the benefit of the
Lenders a continuing security interest in one hundred percent (100%) of the
stock or other ownership interests in the Subsidiaries existing as of the date
hereof and any Subsidiaries the Borrower shall create, acquire or otherwise own
hereafter.
Section 9.25 Change in Borrower's or Subsidiary's Name or
State of Formation. Without the prior written approval of the Collateral Agent,
(a) the Borrower will not (nor permit any Subsidiary to) change its name,
identity or place of organization and (b) the Borrower will not (nor permit any
Subsidiary to) engage in any other business or transaction under any name other
than the Borrower's or each Subsidiary's name hereunder. Should Collateral Agent
approve, prior to doing any of the aforesaid, the Borrower shall provide (or
cause each Subsidiary to provide) to Collateral Agent all assignments,
certificates, financing statements, financing statement amendments or other
documents determined necessary in Collateral Agent's sole judgment to protect
and continue Collateral Agent's interest in the collateral pledged by Borrower,
any Guarantor, or any other party to secure the Obligations.
Section 9.26 Material Agreements. Neither the Borrower nor any
Subsidiary or Affiliate of Borrower will amend or permit to be amended any
Material Agreement to which it is a party, without prior written consent of the
Collateral Agent, if such amendment could reasonably be expected to result in a
Material Adverse Effect; provided, however, notwithstanding the foregoing, in
any event that the Borrower, or any Subsidiary or Affiliate of Borrower, amends
or permits any Material Agreement to be amended in any manner whatsoever, the
Borrower, or such Subsidiary, or Affiliate of Borrower shall notify the
Collateral Agent and
50
shall furnish to the Collateral Agent a fully executed copy of said amendment
within five (5) Business Days after request by the Collateral Agent thereof.
Section 9.27 Partnership Agreement. The Borrower will not
amend or permit to be amended the Partnership Agreement in any manner that could
adversely affect any of the Lenders without the prior written consent of the
Majority Lenders.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following
events shall constitute an "EVENT OF DEFAULT":
(a) the Borrower shall default in the payment or
prepayment when due of any principal of or premium or interest on any
Loan, or any fees or other amount payable by it hereunder or under any
Security Instrument; or
(b) the Borrower or any Subsidiary shall default in the
payment when due of any principal of or interest on any of its other
Debt aggregating Five Hundred Thousand and No/100 Dollars ($500,000.00)
or more, or any event specified in any note, agreement, indenture or
other document evidencing or relating to any such Debt shall occur if
the effect of such event is to cause, or (with the giving of any notice
or the lapse of time or both) to permit the holder or holders of such
Debt (or a trustee or agent on behalf of such holder or holders) to
cause, such Debt to become due prior to its stated maturity; or
(c) any representation, warranty or certification made or
deemed made herein or in any Security Instrument by the Borrower or any
Subsidiary, or any certificate furnished to any Lender or the
Collateral Agent pursuant to the provisions hereof or any Security
Instrument, shall prove to have been false or misleading as of the time
made or furnished in any material respect; or
(d) the Borrower shall default in the performance of any
of its obligations under Article IX or any other Article of this
Agreement other than under Article VIII; or the Borrower shall default
in the performance of any of its obligations under Article VIII or any
Security Instrument (other than the payment of amounts due, which shall
be governed by Section 10.01(a)) and such default shall continue
unremedied for a period of thirty (30) days after the earlier to occur
of (i) notice thereof to the Borrower by the Collateral Agent or any
Lender (through the Collateral Agent), or (ii) the Borrower otherwise
becoming aware of such default; or
(e) the Borrower shall admit in writing its inability to,
or be generally unable to, pay its debts as such debts become due; or
(f) the Borrower shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of its
51
creditors, (iii) commence a voluntary case under the Federal Bankruptcy
Code (as now or hereafter in effect), (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, liquidation or composition or readjustment
of debts, (v) fail to controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code, or (vi) take any
corporate action for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of the Borrower, in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower of all or any substantial part of its assets, or
(iii) similar relief in respect of the Borrower under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any
of the foregoing shall be entered and continue unstayed and in effect,
for a period of sixty (60) days; or (iv) an order for relief against
the Borrower shall be entered in an involuntary case under the Federal
Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in
excess of $500,000.00 in the aggregate shall be rendered by a court
against the Borrower or any Subsidiary and the same shall not be
discharged (or provision shall not be made for such discharge), or a
stay of execution thereof shall not be procured, within thirty (30)
days from the date of entry thereof and the Borrower or such Subsidiary
shall not, within said period of thirty (30) days, or such longer
period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal; or
(i) the Security Instruments after delivery thereof shall
for any reason, except to the extent permitted by the terms thereof,
cease to be in full force and effect and valid, binding and enforceable
in accordance with their terms, or cease to create a valid and
perfected Lien of the priority required thereby on any of the
collateral purported to be covered thereby, except to the extent
permitted by the terms of this Agreement, or the Borrower shall so
state in writing; or
(j) an event having a Material Adverse Effect shall
occur; or
(k) the Borrower or any Subsidiary discontinues its usual
business or suffers to exist any material change in its organization or
ownership as of the date hereof, or Xxxxxx Xxxxxx and Xxxxxxx Xxxxxxxx,
or either of them, or any successors acceptable to Lender, fail to (i)
be responsible for running Borrower's or any Subsidiary's day to day
operations or (ii) act as Chief Executive Officer and Chief Financial
Officer, respectively, of Borrower or any Subsidiary.
(l) any Guarantor takes, suffers or permits to exist any
of the events or conditions referred to in paragraphs (e), (f), (g) or
(h) or if any provision of any guaranty
52
agreement related thereto shall for any reason cease to be valid and
binding on Guarantor or if Guarantor shall so state in writing; or
(m) any Subsidiary takes, suffers or permits to exist any
of the events or conditions referred to in paragraphs (e), (f), (g) or
(h).
(n) the Existing Senior Subordinated Unsecured Notes
shall have failed to be redeemed in full on the redemption date
provided in the officer's certificate described in Section 6.01(t), but
in no event later than sixty (60) days from the Closing Date.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one
referred to in clauses (e), (f) or (g) of Section 10.01 or in clause
(l) or (m) to the extent it relates to clauses (e), (f) or (g), subject
to the terms of the Intercreditor Agreement, the Collateral Agent, upon
request of the Majority Lenders, shall, by notice to the Borrower,
declare the principal amount then outstanding of, and the accrued
interest on, the Loans and all other amounts payable by the Borrower
hereunder and under the Notes to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other formalities of any kind, all of which are hereby
expressly waived by the Borrower.
(b) In the case of the occurrence of an Event of Default
referred to in clauses (e), (f) or (g) of Section 10.01 or in clause
(l) or (m) to the extent it relates to clauses (e), (f) or (g), the
principal amount then outstanding of, and the accrued interest on, the
Loans and all other amounts payable by the Borrower hereunder and under
the Notes shall become automatically immediately due and payable
without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which
are hereby expressly waived by the Borrower.
(c) All proceeds received after maturity of the Notes,
whether by acceleration or otherwise shall be applied first to
reimbursement of expenses and indemnities provided for in this
Agreement and the Security Instruments; second to accrued interest on
the Notes; third to fees; fourth pro rata to principal outstanding on
the Notes and any other Obligations; and any excess shall be paid to
the Borrower or as otherwise required by any Governmental Requirement.
ARTICLE XI
THE COLLATERAL AGENT
Section 11.01 Appointment, Powers and Immunities. Each Lender
hereby irrevocably appoints and authorizes the Collateral Agent to act as its
agent hereunder and under the Security Instruments with such powers as are
specifically delegated to the Collateral Agent by the terms of this Agreement
and the Security Instruments, together with such other powers as are reasonably
incidental thereto. The Collateral Agent (which term as used in this sentence
and in Section 11.05 and the first sentence of Section 11.06 shall include
reference to its Affiliates and its and its Affiliates' officers, directors,
employees, attorneys, accountants, experts and
53
agents): (i) shall have no duties or responsibilities except those expressly set
forth in the Loan Documents, and shall not by reason of the Loan Documents be a
trustee or fiduciary for any Lender; (ii) makes no representation or warranty to
any Lender and shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement, or for the value, validity, effectiveness,
genuineness, execution, effectiveness, legality, enforceability or sufficiency
of this Agreement, any Note or any other document referred to or provided for
herein or for any failure by the Borrower or any other Person (other than the
Collateral Agent) to perform any of its obligations hereunder or thereunder or
for the existence, value, perfection or priority of any collateral security or
the financial or other condition of the Borrower, its Subsidiaries or any other
obligor or guarantor; (iii) except pursuant to Section 11.07 shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder; and (iv) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith including its own ordinary
negligence, except for its own gross negligence or willful misconduct. The
Collateral Agent may employ agents, accountants, attorneys and experts and shall
not be responsible for the negligence or misconduct of any such agents,
accountants, attorneys or experts selected by it in good faith or any action
taken or omitted to be taken in good faith by it in accordance with the advice
of such agents, accountants, attorneys or experts. The Collateral Agent may deem
and treat the payee of any Note as the holder thereof for all purposes hereof
unless and until a written notice of the assignment or transfer thereof
permitted hereunder shall have been filed with the Collateral Agent. The
Collateral Agent is authorized to release any collateral that is permitted to be
sold or released pursuant to the terms of the Loan Documents.
Section 11.02 Reliance by Collateral Agent. The Collateral
Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telex, telecopier, telegram
or cable) believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Collateral Agent.
Section 11.03 Defaults. The Collateral Agent shall not be
deemed to have knowledge of the occurrence of a Default (other than the
non-payment of principal of or interest on Loans or of fees) unless the
Collateral Agent has received notice from a Lender or the Borrower specifying
such Default and stating that such notice is a "NOTICE OF DEFAULT." In the event
that the Collateral Agent receives such a notice of the occurrence of a Default,
the Collateral Agent shall give prompt notice thereof to the Lenders. In the
event of a payment Default, the Collateral Agent shall give each Lender prompt
notice of each such payment Default.
Section 11.04 Rights as a Lender. With respect to the Loans,
if any, made by it, Guggenheim (and any successor acting as Collateral Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Collateral Agent, and the term "LENDER" or "LENDERS" shall, unless
the context otherwise indicates, include the Collateral Agent in its individual
capacity. Guggenheim (and any successor acting as Collateral Agent) and its
Affiliates may (without
54
having to account therefor to any Lender) accept deposits from, lend money to
and generally engage in any kind of banking, trust or other business with the
Borrower (and any of its Affiliates) as if it were not acting as the Collateral
Agent, and Guggenheim and its Affiliates may accept fees and other consideration
from the Borrower for services in connection with this Agreement or otherwise
without having to account for the same to the Lenders.
Section 11.05 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY
THE COLLATERAL AGENT FOR THE INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO
THE EXTENT NOT INDEMNIFIED OR REIMBURSED BY THE BORROWER UNDER SECTION 12.03,
BUT WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SAID SECTION 12.03
AND FOR ANY AND ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND
NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE
COLLATERAL AGENT IN ANY WAY RELATING TO OR ARISING OUT OF: (I) THIS AGREEMENT,
THE SECURITY INSTRUMENTS OR ANY OTHER DOCUMENTS CONTEMPLATED BY OR REFERRED TO
HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING, UNLESS A DEFAULT
HAS OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND EXPENSES
INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (II) THE
ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT, ANY SECURITY INSTRUMENT OR OF
ANY SUCH OTHER DOCUMENTS; WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS
SECTION 11.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE COLLATERAL
AGENT, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE
EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
COLLATERAL AGENT.
Section 11.06 Non-Reliance on Collateral Agent and other
Lenders. Each Lender acknowledges and agrees that it has, independently and
without reliance on the Collateral Agent or any other Lender, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of the Borrower and its decision to enter into this Agreement, and that
it will, independently and without reliance upon the Collateral Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Collateral Agent shall not
be required to keep itself informed as to the performance or observance by the
Borrower of this Agreement, the Notes, the Security Instruments or any other
document referred to or provided for herein or to inspect the properties or
books of the Borrower. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Collateral
Agent hereunder, the Collateral Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information concerning the
affairs, financial condition or business of the Borrower (or any of its
Affiliates) which may come into the possession of the Collateral Agent or any of
its Affiliates. In this regard, each Lender acknowledges that Sidley Xxxxxx
Xxxxx & Xxxx LLP is acting in this transaction as special counsel to the
Collateral Agent only, except to the extent otherwise expressly stated in any
legal opinion or any Loan Document. Each Lender will consult with its own legal
counsel to the extent that it deems necessary in connection with the Loan
Documents and the matters contemplated therein.
55
Section 11.07 Action by Collateral Agent. Except for action or
other matters expressly required of the Collateral Agent hereunder, the
Collateral Agent shall in all cases be fully justified in failing or refusing to
act hereunder unless it shall (i) receive written instructions from the Majority
Lenders (or all of the Lenders as expressly required by Section 12.04)
specifying the action to be taken, and (ii) be indemnified to its satisfaction
by the Lenders against any and all liability and expenses which may be incurred
by it by reason of taking or continuing to take any such action. The
instructions of the Majority Lenders (or all of the Lenders as expressly
required by Section 12.04) and any action taken or failure to act pursuant
thereto by the Collateral Agent shall be binding on all of the Lenders. If a
Default has occurred and is continuing, the Collateral Agent shall take such
action with respect to such Default as shall be directed by the Majority Lenders
(or all of the Lenders as required by Section 12.04) in the written instructions
(with indemnities) described in this Section 11.07, provided that, unless and
until the Collateral Agent shall have received such directions, the Collateral
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders. In no event, however, shall the Collateral
Agent be required to take any action which exposes the Collateral Agent to
personal liability or which is contrary to this Agreement and the Security
Instruments or applicable law.
Section 11.08 Resignation or Removal of Collateral Agent.
Subject to the appointment and acceptance of a successor Collateral Agent as
provided below, the Collateral Agent may resign at any time by giving notice
thereof to the Lenders and the Borrower, and the Collateral Agent may be removed
at any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right to appoint a
successor Collateral Agent. If no successor Collateral Agent shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Collateral Agent's giving of notice
of resignation or the Majority Lenders' removal of the retiring Collateral
Agent, then the retiring Collateral Agent may, on behalf of the Lenders, appoint
a successor Collateral Agent. Upon the acceptance of such appointment hereunder
by a successor Collateral Agent, such successor Collateral Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Collateral Agent, and the retiring Collateral Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Collateral Agent's resignation or removal hereunder as Collateral Agent, the
provisions of this Article XI and Section 12.03 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Collateral Agent.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver. No failure on the part of the Collateral
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under any of the Loan Documents
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
56
Section 12.02 Notices. All notices and other communications
provided for herein and in the other Loan Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement
or the other Loan Documents) shall be given or made by telex, telecopy, courier
or U.S. Mail or in writing and telexed, telecopied, mailed or delivered to the
intended recipient at the "ADDRESS FOR NOTICES" specified below its name on the
signature pages hereof or in the Loan Documents, except that all such notices
and communications sent to Collateral Agent shall be sent to Guggenheim
Corporate Funding, LLC, 000 X. 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention:
Managing Director -- Mission Resources Corporation or, as to any party, at such
other address as shall be designated by such party in a notice to each other
party. Except as otherwise provided in this Agreement or in the other Loan
Documents, all such communications shall be deemed to have been duly given when
transmitted, if transmitted before 1:00 p.m. local time on a Business Day
(otherwise on the next succeeding Business Day) by telex or telecopier and
evidence or confirmation of receipt is obtained, or personally delivered or, in
the case of a mailed notice, three (3) Business Days after the date deposited in
the mails, postage prepaid, in each case given or addressed as aforesaid.
Section 12.03 Payment of Expenses, Indemnities, etc.
(a) The Borrower agrees:
(i) whether or not the transactions hereby
contemplated are consummated, to pay all reasonable expenses
of the Collateral Agent in the administration (both before and
after the execution hereof and including advice of counsel as
to the rights and duties of the Collateral Agent and the
Lenders with respect thereto) of, and in connection with the
negotiation, syndication, investigation, preparation,
execution and delivery of, recording or filing of,
preservation of rights under, enforcement of, and refinancing,
renegotiation or restructuring of, the Loan Documents and any
amendment, waiver or consent relating thereto (including,
without limitation, travel, photocopy, mailing, courier,
telephone and other similar expenses of the Collateral Agent,
the cost of environmental audits, surveys and appraisals at
reasonable intervals, the reasonable fees and disbursements of
counsel and other outside consultants for the Collateral Agent
and, in the case of enforcement, the reasonable fees and
disbursements of counsel for the Collateral Agent and any of
the Lenders); and promptly reimburse the Collateral Agent for
all amounts expended, advanced or incurred by the Collateral
Agent or the Lenders to satisfy any obligation of the Borrower
under this Agreement or any Security Instrument, including
without limitation, all costs and expenses of foreclosure;
(ii) TO INDEMNIFY THE COLLATERAL AGENT AND EACH
LENDER AND EACH OF THEIR AFFILIATES AND EACH OF THEIR
OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS,
ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES")
FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON
DEMAND PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY
MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR
INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED
A PARTY THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY
57
WAY RELATED TO (I) ANY ACTUAL OR PROPOSED USE BY THE BORROWER
OF THE PROCEEDS OF ANY OF THE LOANS, (II) THE EXECUTION,
DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE
OPERATIONS OF THE BUSINESS OF THE BORROWER AND ITS
SUBSIDIARIES, (IV) THE FAILURE OF THE BORROWER OR ANY
SUBSIDIARY TO COMPLY WITH THE TERMS OF ANY SECURITY INSTRUMENT
OR THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V)
ANY INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY
WARRANTY OF THE BORROWER OR ANY GUARANTOR SET FORTH IN ANY OF
THE LOAN DOCUMENTS, (VI) ANY ASSERTION THAT THE LENDERS WERE
NOT ENTITLED TO RECEIVE THE PROCEEDS RECEIVED PURSUANT TO THE
SECURITY INSTRUMENTS OR (VII) ANY OTHER ASPECT OF THE LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES
AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES INCURRED
IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO
DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY
INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND
INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE
ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT EXCLUDING
ALL INDEMNITY MATTERS ARISING SOLELY BY REASON OF CLAIMS
BETWEEN THE LENDERS OR ANY LENDER AND THE COLLATERAL AGENT OR
A LENDER'S SHAREHOLDERS AGAINST THE COLLATERAL AGENT OR LENDER
OR BY REASON OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON
THE PART OF THE INDEMNIFIED PARTY; AND
(iii) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO
TIME THE INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL
LOSSES, CLAIMS, COST RECOVERY ACTIONS, ADMINISTRATIVE ORDERS
OR PROCEEDINGS, DAMAGES AND LIABILITIES TO WHICH ANY SUCH
PERSON MAY BECOME SUBJECT (I) UNDER ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY OR ANY OF THEIR
PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR
DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES,
(II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY THE
BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (III) DUE TO
PAST OWNERSHIP BY THE BORROWER OR ANY SUBSIDIARY OF ANY OF
THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES
WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE, RELEASE,
STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON OR
AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE BORROWER OR
ANY SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR
SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS;
PROVIDED, HOWEVER, NO INDEMNITY SHALL BE AFFORDED UNDER THIS
SECTION 12.03(A)(III) IN RESPECT OF ANY PROPERTY FOR ANY
OCCURRENCE ARISING FROM THE ACTS OR OMISSIONS OF THE
COLLATERAL AGENT OR ANY LENDER DURING THE PERIOD AFTER WHICH
SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE OBTAINED
POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED IN
LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
58
(b) No Indemnified Party may settle any claim to be
indemnified without the consent of the indemnitor, such consent not to
be unreasonably withheld; provided, however, that the indemnitor may
not reasonably withhold consent to any settlement that an Indemnified
Party proposes, if the indemnitor does not have the financial ability
to pay all its obligations outstanding and asserted against the
indemnitor at that time, including the maximum potential claims against
the Indemnified Party to be indemnified pursuant to this Section 12.03.
(c) In the case of any indemnification hereunder, the
Collateral Agent or Lender, as appropriate shall give notice to the
Borrower of any such claim or demand being made against the Indemnified
Party and the Borrower shall have the non-exclusive right to join in
the defense against any such claim or demand provided that if the
Borrower provides a defense, the Indemnified Party shall bear its own
cost of defense unless there is a conflict between the Borrower and
such Indemnified Party.
(d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE
INDEMNIFIED PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE
OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT
LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE
RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE INDEMNIFIED PARTIES
OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON ANY ONE OR
MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL
CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS
DEEMED TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
(e) The Borrower's obligations under this Section 12.03
shall survive any termination of this Agreement and the payment of the
Notes and shall continue thereafter in full force and effect.
(f) The Borrower shall pay any amounts due under this
Section 12.03 within thirty (30) days of the receipt by the Borrower of
notice of the amount due.
Section 12.04 Amendments, Etc. Any provision of this Agreement
or any Security Instrument may be amended, modified or waived with the
Borrower's and the Majority Lenders' prior written consent; provided, however,
that (i) no amendment, modification or waiver which extends the final maturity
of the Loans, forgives the principal amount of any Obligations outstanding under
this Agreement, releases any guarantor of any Obligations or releases all or
substantially all of the collateral, reduces the interest rate applicable to the
Loans or the fees payable to the Lenders generally, affects Section 2.03(a),
this Section 12.04 or Section 12.06(a) or modifies the definition of "MAJORITY
LENDERS" shall be effective without consent of all Lenders; and (ii) no
amendment, modification or waiver which modifies the rights, duties or
obligations of the Collateral Agent shall be effective without the consent of
the Collateral Agent.
59
Section 12.05 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
Section 12.06 Assignments.
(a) The Borrower may not assign its rights or obligations
hereunder or under the Notes without the prior consent of all of the
Lenders and the Collateral Agent.
(b) Any Lender may assign to one or more of its
Affiliates without restriction and may, with the written consent of the
Collateral Agent and, if no Event of Default has occurred and is
continuing, the Borrower (which consent shall not be unreasonably
withheld) assign to one or more other assignees all or a portion of its
rights and obligations under this Agreement pursuant to an Assignment
Agreement substantially in the form of EXHIBIT D (an "ASSIGNMENT");
provided, however, that (i) any such assignment other than to an
Affiliates shall be in the amount of at least $5,000,000.00, and (ii)
the assignee shall have executed, and thereby become a party to, the
Intercreditor Agreement, and (iii) the assignee or assignor shall pay
to the Collateral Agent a processing and recordation fee of $3,000.00
for each assignment. Any such assignment will become effective upon the
execution and delivery to the Collateral Agent, the Borrower and the
Guarantors of the Assignment Agreement and a signature page of the
Intercreditor Agreement, duly executed by the assignee. Upon receipt of
such executed documents, the Borrower will, at its own expense, execute
and deliver new Notes to the assignor and/or assignee, as appropriate,
in accordance with their respective interests as they appear. Upon the
effectiveness of any assignment pursuant to this Section 12.06(b), the
assignee will become a "LENDER", if not already a "LENDER," for all
purposes of this Agreement and the Security Instruments. The assignor
shall be relieved of its obligations hereunder to the extent of such
assignment (and if the assigning Lender no longer holds any rights or
obligations under this Agreement, such assigning Lender shall cease to
be a "LENDER" hereunder except that its rights under Sections 4.06 and
12.03 shall not be affected). The Collateral Agent will prepare on the
last Business Day of each month during which an assignment has become
effective pursuant to this Section 12.06(b), a new ANNEX I giving
effect to all such assignments effected during such month, and will
promptly provide the same to the Borrower and each of the Lenders.
(c) The Lenders may furnish any information concerning
the Borrower in the possession of the Lenders from time to time to
assignees (including prospective assignees); provided that, such
Persons agree to be bound by the provisions of Section 12.15.
(d) Notwithstanding any other provisions of this Section
12.06, no transfer or assignment of the interests or obligations of any
Lender shall be permitted if such transfer or assignment would require
the Borrower to file a registration statement with the SEC or to
qualify the Loans under the "Blue Sky" laws of any state.
Section 12.07 Invalidity. In the event that any one or more of
the provisions contained in any of the Loan Documents shall, for any reason, be
held invalid, illegal or
60
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Notes, this Agreement or any other
Loan Document.
Section 12.08 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
Section 12.09 References; Use of Word "Including". The words
"herein," "hereof", "hereunder" and other words of similar import when used in
this Agreement refer to this Agreement as a whole, and not to any particular
article, section or subsection. Any reference herein to a Section or Article
shall be deemed to refer to the applicable Section or Article of this Agreement
unless otherwise stated herein. Any reference herein to an exhibit, schedule, or
other attachment shall be deemed to refer to the applicable exhibit, schedule,
or other attachment attached hereto unless otherwise stated herein. The word
"including", "includes" and words of similar import means "including, without
limitation".
Section 12.10 Survival. The obligations of the parties under
Section 4.06, Article V, and Sections 11.05, 12.03 and 12.15 shall survive the
repayment of the Loans. To the extent that any payments on the Obligations or
proceeds of any collateral are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or other Person under any bankruptcy law, common
law or equitable cause, then to such extent, the Obligations so satisfied shall
be revived and continue as if such payment or proceeds had not been received and
the Collateral Agent's and the Lenders' Liens, security interests, rights,
powers and remedies under this Agreement and each Security Instrument shall
continue in full force and effect. In such event, each Security Instrument shall
be automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Collateral Agent and the Lenders to effect such
reinstatement.
Section 12.11 Captions. Captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY
THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL
OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER
TO CHARGE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE STATE WHERE
SUCH LENDER IS LOCATED.
61
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE
LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER
HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW) IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION
OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO
JURISDICTION IS NON-EXCLUSIVE AND DOES NOT PRECLUDE THE COLLATERAL
AGENT OR ANY LENDER FROM OBTAINING JURISDICTION OVER THE BORROWER IN
ANY COURT OTHERWISE HAVING JURISDICTION.
(c) THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT ITS SAID ADDRESS,
SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT, ANY
LENDER OR ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER OR ITS PROPERTIES IN ANY OTHER JURISDICTION.
(d) THE BORROWER, THE COLLATERAL AGENT AND EACH LENDER
HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES;
(III) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE, AGENT OR
COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVERS, AND (IV) ACKNOWLEDGE THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION 12.13.
Section 12.14 Interest. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of New York or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the
62
Loan Documents or any agreement entered into in connection with or as security
for the Notes, it is agreed as follows: (i) the aggregate of all consideration
which constitutes interest under law applicable to any Lender that is contracted
for, taken, reserved, charged or received by such Lender under any of the Loan
Documents or agreements or otherwise in connection with the Notes shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Lender on the principal amount of the Obligations (or, to the extent
that the principal amount of the Obligations shall have been or would thereby be
paid in full, refunded by such Lender to the Borrower); and (ii) in the event
that the maturity of the Notes is accelerated by reason of an election of the
holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the Obligations (or, to the extent that the principal amount
of the Obligations shall have been or would thereby be paid in full, refunded by
such Lender to the Borrower). All sums paid or agreed to be paid to any Lender
for the use, forbearance or detention of sums due hereunder shall, to the extent
permitted by law applicable to such Lender, be amortized, prorated, allocated
and spread throughout the full term of the Loans evidenced by the Notes until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at any time and from time to time (i) the amount of interest payable to any
Lender on any date shall be computed at the Highest Lawful Rate applicable to
such Lender pursuant to this Section 12.14 and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to such
Lender would be less than the amount of interest payable to such Lender computed
at the Highest Lawful Rate applicable to such Lender, then the amount of
interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this Section 12.14.
Section 12.15 Confidentiality. In the event that the Borrower
provides to the Collateral Agent or the Lenders written confidential information
belonging to the Borrower, if the Borrower shall denominate such information in
writing as "CONFIDENTIAL", the Collateral Agent and the Lenders shall thereafter
maintain such information in confidence in accordance with the standards of care
and diligence that each utilizes in maintaining its own confidential
information. This obligation of confidence shall not apply to such portions of
the information which (i) are in the public domain, (ii) hereafter become part
of the public domain without the Collateral Agent or the Lenders breaching their
obligation of confidence to the Borrower, (iii) are previously known by the
Collateral Agent or the Lenders from some source other than the Borrower, (iv)
are hereafter developed by the Collateral Agent or the Lenders without using the
Borrower's information, (v) are hereafter obtained by or available to the
Collateral Agent or the Lenders from a third party who owes no obligation of
confidence to the Borrower with respect to such information or through any other
means other than through disclosure by the Borrower, (vi) are disclosed with the
Borrower's consent, (vii) must be disclosed either pursuant
63
to any Governmental Requirement or to Persons regulating the activities of the
Collateral Agent or the Lenders, or (viii) as may be required by law or
regulation or order of any Governmental Authority in any judicial, arbitration
or governmental proceeding. Further, the Collateral Agent or a Lender may
disclose any such information to any other Lender, any independent petroleum
engineers or consultants, any independent certified public accountants, any
legal counsel employed by such Person in connection with this Agreement or any
Security Instrument, including without limitation, the enforcement or exercise
of all rights and remedies thereunder, or any assignee or participant (including
prospective assignees and participants) in the Loans; provided, however, that
the Collateral Agent or the Lenders shall receive a confidentiality agreement
from the Person to whom such information is disclosed such that said Person
shall have the same obligation to maintain the confidentiality of such
information as is imposed upon the Collateral Agent or the Lenders hereunder.
Notwithstanding anything to the contrary provided herein, this obligation of
confidence shall cease three (3) years from the date the information was
furnished, unless the Borrower requests in writing at least thirty (30) days
prior to the expiration of such three year period, to maintain the
confidentiality of such information for an additional three-year period. The
Borrower waives any and all other rights it may have to confidentiality as
against the Collateral Agent and the Lenders arising by contract, agreement,
statute or law except as expressly stated in this Section 12.15.
Section 12.16 Effectiveness. This Agreement shall be effective
on the Closing Date (the "EFFECTIVE DATE").
Section 12.17 Exculpation Provisions. Each of the parties
hereto specifically agrees that it has a duty to read this Agreement and the
Security Instruments and agrees that it is charged with notice and knowledge of
the terms of this Agreement and the Security Instruments; that it has in fact
read this Agreement and is fully informed and has full notice and knowledge of
the terms, conditions and effects of this Agreement; that it has been
represented by independent legal counsel of its choice throughout the
negotiations preceding its execution of this Agreement and the Security
Instruments; and has received the advice of its attorney in entering into this
Agreement and the Security Instruments; and that it recognizes that certain of
the terms of this Agreement and the Security Instruments result in one party
assuming the liability inherent in some aspects of the transaction and relieving
the other party of its responsibility for such liability. Each party hereto
agrees and covenants that it will not contest the validity or enforceability of
any exculpatory provision of this Agreement and the Security Instruments on the
basis that the party had no notice or knowledge of such provision or that the
provision is not "CONSPICUOUS."
Section 12.18 Arbitration.
(a) Arbitration. The parties hereto agree, upon demand by
any party, to submit to binding arbitration all claims, disputes and
controversies between or among them (and their respective employees,
officers, directors, attorneys, and other agents), whether in tort,
contract or otherwise arising out of or relating to in any way (i) the
loan and related Loan Documents which are the subject of this Agreement
and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation,
inducement, enforcement, default or termination; or (ii) requests for
additional credit.
64
(b) Governing Rules. Any arbitration proceeding will (i)
proceed in a location in New York selected by the American Arbitration
Association ("AAA"); (ii) be governed by the Federal Arbitration Act
(Title 9 of the United States Code), notwithstanding any conflicting
choice of law provision in any of the documents between the parties;
and (iii) be conducted by the AAA, or such other administrator as the
parties shall mutually agree upon, in accordance with the AAA's
commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be
conducted in accordance with the AAA's optional procedures for large,
complex commercial disputes (the commercial dispute resolution
procedures or the optional procedures for large, complex commercial
disputes to be referred to, as applicable, as the "RULES"). If there is
any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or
refuses to submit to arbitration following a demand by any other party
shall bear all costs and expenses incurred by such other party in
compelling arbitration of any dispute. Nothing contained herein shall
be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 U.S.C.Section.91 or any similar applicable
state law.
(c) No Waiver of Provisional Remedies, Self-Help and
Foreclosure. The arbitration requirement does not limit the right of
any party to (i) foreclose against real or personal property
collateral; (ii) exercise self-help remedies relating to collateral or
proceeds of collateral such as setoff or repossession; or (iii) obtain
provisional or ancillary remedies such as replevin, injunctive relief,
attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not
constitute a waiver of the right or obligation of any party to submit
any dispute to arbitration or reference hereunder, including those
arising from the exercise of the actions detailed in Sections (i), (ii)
and (iii) of this paragraph.
(d) Arbitrator Qualifications and Powers. Any arbitration
proceeding in which the amount in controversy is $5,000,000.00 or less
will be decided by a single arbitrator selected according to the Rules,
and who shall not render an award of greater than $5,000,000.00. Any
dispute in which the amount in controversy exceeds $5,000,000.00 shall
be decided by majority vote of a panel of three arbitrators; provided,
however, that all three arbitrators must actively participate in all
hearings and deliberations. The arbitrator will be a neutral attorney
licensed in the State of New York with a minimum of ten years
experience in the substantive law applicable to the subject matter of
the dispute to be arbitrated. The arbitrator will determine whether or
not an issue is arbitratable and will give effect to the statutes of
limitation in determining any claim. In any arbitration proceeding the
arbitrator will decide (by documents only or with a hearing at the
arbitrator's discretion) any pre-hearing motions which are similar to
motions to dismiss for failure to state a claim or motions for summary
adjudication. The arbitrator shall resolve all disputes in accordance
with the substantive law of New York and may grant any remedy or relief
that a court of such state could order or grant within the scope hereof
and such ancillary relief as is necessary to make effective any award.
The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the
arbitrator deems necessary to the same extent a judge could pursuant to
the Federal Rules of Civil Procedure, the New York
65
Rules of Civil Procedure or other applicable law. Judgment upon the
award rendered by the arbitrator may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff,
to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(e) Discovery. In any arbitration proceeding discovery
will be permitted in accordance with the Rules. All discovery shall be
expressly limited to matters directly relevant to the dispute being
arbitrated and must be completed no later than twenty (20) days before
the hearing date and within one hundred and eighty (180) days of the
filing of the dispute with the AAA. Any requests for an extension of
the discovery periods, or any discovery disputes, will be subject to
final determination by the arbitrator upon a showing that the request
for discovery is essential for the party's presentation and that no
alternative means for obtaining information is available.
(f) Class Proceedings and Consolidations. The resolution
of any dispute arising pursuant to the terms of this Agreement shall be
determined by a separate arbitration proceeding and such dispute shall
not be consolidated with other disputes or included in any class
proceeding.
(g) Payment of Arbitration Costs and Fees. The arbitrator
shall award all costs and expenses of the arbitration proceeding.
(h) Miscellaneous. To the maximum extent practicable, the
AAA, the arbitrators and the parties shall take all action required to
conclude any arbitration proceeding within one hundred and eighty (180)
days of the filing of the dispute with the AAA. No arbitrator or other
party to an arbitration proceeding may disclose the existence, content
or results thereof, except for disclosures of information by a party
required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between
the parties potentially applies to a dispute, the arbitration provision
most directly related to the Loan Documents or the subject matter of
the dispute shall control. This arbitration provision shall survive
termination, amendment or expiration of any of the Loan Documents or
any relationship between the parties.
[SIGNATURES BEGIN ON NEXT PAGE]
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The parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
BORROWER:
MISSION RESOURCES CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President and Chief
Financial Officer
Address for Notices:
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Telecopier No. (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Chief Financial Officer
With copy to:
Xxxxxx & Xxxxxx L.L.P.
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
67
COLLATERAL AGENT:
GUGGENHEIM CORPORATE FUNDING, LLC
By: /s/ Xxxx Xxxxxx
---------------------------------------
Name: Xxxx Xxxxxx
Title: Authorized Signatory
Address for Notices:
GUGGENHEIM CORPORATE FUNDING, LLC
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Managing Director, Mission
Resources
[With copy to:]
Sidley Xxxxxx Xxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxxxx
Xxxxx Xxxxxx
68
UPPER COLUMBIA CAPITAL COMPANY, LLC:
By: /s/ Xxxx Xxxxxx
----------------------------------------
Name: Xxxx Xxxxxx
Title: Manager
LENDING XXXXXX
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Address for Notices:
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: Xxxx Xxxxxx
With copy to:
Sidley Xxxxxx Xxxxx & Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx, Esq.
Xxxxx Xxxxxx, Esq.
69
ANNEX I
LIST OF LENDERS AND LOANS
NAME OF LENDER TERM LOAN
----------------------------------- -----------
Upper Columbia Capital Company, LLC $25,000,000
TOTAL $25,000,000
Annex I-1
EXHIBIT A
FORM OF NOTE
$25,000,000 April 8, 2004
FOR VALUE RECEIVED, MISSION RESOURCES CORPORATION, a Delaware
corporation (the "BORROWER") hereby promises to pay to the order of UPPER
COLUMBIA CAPITAL COMPANY, LLC (the "LENDER"), c/o GUGGENHEIM CORPORATE FUNDING,
LLC (the "COLLATERAL AGENT"), at 000 X. 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
the principal sum of Twenty-Five Million Dollars ($25,000,000) (or such lesser
amount as shall equal the aggregate unpaid principal amount of the Loans made by
the Lender to the Borrower under the Term Loan Agreement, as hereinafter
defined), in lawful money of the United States of America and in immediately
available funds, on the dates and in the principal amounts provided in the Term
Loan Agreement, and to pay interest on the unpaid principal amount of each such
Loan, at such office, in like money and funds, for the period commencing on the
date of such Loan until such Loan shall be paid in full, at the rates per annum
and on the dates provided in the Term Loan Agreement.
The date, amount, interest rate, Interest Period and maturity of each
Loan made by the Lender to the Borrower, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and, prior to
any transfer of this Note, endorsed by the Lender on the schedules attached
hereto.
This Note is one of the Notes referred to in the Term Loan Agreement
dated as of April 8, 2004, among the Borrower, the Lenders which are or become
parties thereto (including the Lender) and the Collateral Agent (as the same may
be amended or supplemented from time to time, the "Term Loan Agreement"), and
evidences Loans made by the Lender thereunder. Capitalized terms used in this
Note have the respective meanings assigned to them in the Term Loan Agreement.
This Note is issued pursuant to the Term Loan Agreement and is entitled
to the benefits provided for in the Term Loan Agreement and the Security
Instruments. The Term Loan Agreement provides for the acceleration of the
maturity of this Note upon the occurrence of certain events, for prepayments of
Loans upon the terms and conditions specified therein and other provisions
relevant to this Note.
Exhibit A-1
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
MISSION RESOURCES CORPORATION
By: _______________________________________________
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President and Chief Financial
Officer
Exhibit A-2
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the ________________ of
MISSION RESOURCES CORPORATION, a Delaware corporation (the "BORROWER") and that
as such he is authorized to execute this certificate on behalf of the Borrower.
With reference to the Term Loan Agreement dated as of April 8, 2004, among the
Borrower, GUGGENHEIM CORPORATE FUNDING, LLC, as Collateral Agent for the lenders
(the "LENDERS") which are or become a party thereto, and such Lenders (together
with all amendments, modifications, supplements and/or restatements thereto
being the "TERM LOAN AGREEMENT"), the undersigned represents and warrants as
follows (each capitalized term used herein having the same meaning given to it
in the Credit Agreement unless otherwise specified):
(a) The representations and warranties of the Borrower
contained in Article VII of the Term Loan Agreement and in the Security
Instruments and otherwise made in writing by or on behalf of the
Borrower pursuant to the Term Loan Agreement and the Security
Instruments were true and correct when made, and are repeated at and as
of the time of delivery hereof and are true and correct at and as of
the time of delivery hereof, except to the extent any such
representations and warranties are expressly limited to an earlier date
or the Majority Lenders have expressly consented in writing to the
contrary.
(b) The Borrower has performed and complied with all
agreements and conditions contained in the Credit Agreement and in the
Security Instruments required to be performed or complied with by it
prior to or at the time of delivery hereof.
(c) Neither the Borrower nor any Subsidiary has incurred
any material liabilities, direct or contingent, since
_________________, except those set forth in SCHEDULE 9.01 to the
Credit Agreement and except those allowed by the terms of the Credit
Agreement or consented to by the Majority Lenders in writing.
(d) Since __________________, no change has occurred,
either in any case or in the aggregate, in the condition, financial or
otherwise, of the Borrower or any Subsidiary which would have a
Material Adverse Effect.
(e) There exists, and, after giving effect to the loan or
loans with respect to which this certificate is being delivered, will
exist, no Default under the Credit Agreement or any event or
circumstance which constitutes, or with notice or lapse of time (or
both) would constitute, an event of default under any loan or credit
agreement, indenture, deed of trust, security agreement or other
agreement or instrument evidencing or pertaining to any Debt of the
Borrower or any Subsidiary, or under any material agreement or
instrument to which the Borrower or any Subsidiary is a party or by
which the Borrower or any Subsidiary is bound.
(f) The financial statements furnished to the Collateral
Agent with this certificate fairly present the consolidated financial
condition and results of operations of
Exhibit B-1
the Borrower and its Consolidated Subsidiaries as at the end of, and
for, the [fiscal quarter] [fiscal year] ending
_________________________ and such financial statements have been
prepared in accordance with the accounting procedures specified in the
Credit Agreement.
(g) Attached hereto are the detailed computations
necessary to determine whether the Borrower and its Consolidated
Subsidiaries are in compliance with Sections 9.13, 9.14, 9.15 and 9.16
of the Term Loan Agreement as of the end of the [fiscal quarter]
[fiscal year] ending _________________________.
EXECUTED AND DELIVERED this ____ day of ______________.
MISSION RESOURCES CORPORATION
By: __________________________________
Name: _______________________________
Title: _______________________________
Exhibit B-2
EXHIBIT C
SECURITY INSTRUMENTS
1. Amended, Restated and Consolidated Mortgages, Deed of Trust, Assignment
of Production, Security Agreement and Financing Statement of Borrower
(Texas) (Louisiana)
2. Mortgages, Deed of Trust, Assignment of Production, Security Agreement
and Financing Statement of Mission E&P (Texas) (Louisiana)
3. Amended and Restated Mortgages, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement of Mission E&P
(New Mexico)
4. Security Agreement of Borrower covering all assets of Borrower
5. UCC-1 Financing Statement (Delaware Secretary of State) relating to all
assets of Borrower
6. Third Party Security Agreement of Mission E&P covering all assets of
Mission E&P
7. UCC-1 Financing Statement (Texas Secretary of State) relating to all
assets of Mission E&P Limited Partnership
8. Pledge Agreement by Borrower
9. Third Party Pledge Agreement by Black Hawk
10. UCC-1 Financing Statement (Delaware Secretary of State) relating to
Third Party Pledge Agreement by Black Hawk
11. Third Party Pledge Agreement by [Mission E&P]
12. UCC-1 Financing Statement (Delaware Secretary of State) relating to
Third Party Pledge Agreement by Mission E&P
13. Guaranty - Mission E&P
14. Guaranty - Black Hawk
15. Guaranty - Mission Holdings
16. Contribution and Indemnification Agreement between Borrower and
_______________, ____________________, ________________________, and
______________________.
17. Intercreditor Agreement by Collateral Agent, Borrower, Guarantors and
Xxxxx Fargo Bank, National Association.
18. Letters in Lieu
Exhibit C-1
19. Section 26.02 Notice
Exhibit C-2
EXHIBIT D
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT ("AGREEMENT") dated as of ________________, 200___ between
_____________________________________________________ (the "ASSIGNOR") and
__________________________ (the "ASSIGNEE").
RECITALS
A. The Assignor is a party to the Term Loan Agreement dated as of
April 8, 2004 (as amended, modified, supplemented and/or restated and in effect
from time to time, the "TERM LOAN AGREEMENT") among MISSION RESOURCES
CORPORATION, a Delaware corporation (the "BORROWER"), each of the lenders that
is or becomes a party thereto as provided in Section 12.06 of the Term Loan
Agreement (individually, together with its successors and assigns, a "LENDER",
and collectively, together with their successors and assigns, the "Lenders"),
and Guggenheim Corporate Funding, LLC, in its individual capacity,
("GUGGENHEIM") and as collateral agent for the Lenders (in such capacity,
together with its successors in such capacity, the "COLLATERAL AGENT"). The
Assignor is also a party to the Intercreditor Agreement dated as of April 8,
2004 (as amended, modified, supplemented and/or restated and in effect from time
to time, the "INTERCREDITOR AGREEMENT") by and between Mission Resources
Corporation, a Delaware corporation, Black Hawk Oil Company, a Delaware
corporation, Mission Holdings LLC, a Delaware limited liability company, Mission
E&P Limited Partnership, a Texas limited partnership, Xxxxx Fargo Bank, National
Association, in its capacity as agent for itself and for each of the lenders to
be a party to the Senior Secured Term Loan Agreement dated as of April 8, 2004
and Guggenheim Corporate Funding LLC, a Delaware limited liability company as
collateral agent, for itself and for each of the lenders that is or becomes a
party to the Term Loan Agreement.
B. The Assignor proposes to sell, assign and transfer to the
Assignee, and the Assignee proposes to purchase and assume from the Assignor, a
portion of the Assignor's outstanding Loans on the terms and conditions of this
Agreement.
C. In consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. All capitalized terms used but not
defined herein have the respective meanings given to such terms in the Term Loan
Agreement.
Section 1.02 Other Definitions. As used herein, the following
terms have the following respective meanings:
"ASSIGNED INTEREST" shall mean all of Assignor's (in its
capacity as a "LENDER") rights and obligations under the Term Loan
Agreement and the other Security
Exhibit D-1
Instruments in respect of the principal amount of the Loans outstanding
thereunder, currently in the amount of $_________________ (the "LOAN
BALANCE"), plus the interest and fees which will accrue from and after
the Assignment Date.
"ASSIGNMENT DATE" shall mean _____________________, 200__.
ARTICLE II
SALE AND ASSIGNMENT
Section 2.01 Sale and Assignment. On the terms and conditions
set forth herein, effective on and as of the Assignment Date, the Assignor
hereby sells, assigns and transfers to the Assignee, and the Assignee hereby
purchases and assumes from the Assignor, all of the right, title and interest of
the Assignor in and to, and all of the obligations of the Assignor in respect
of, the Assigned Interest. Such sale, assignment and transfer is without
recourse and, except as expressly provided in this Agreement, without
representation or warranty.
Section 2.02 Assumption of Obligations. The Assignee agrees
with the Assignor (for the express benefit of the Assignor and the Borrower)
that the Assignee will, from and after the Assignment Date, perform all of the
obligations of the Assignor in respect of the Assigned Interest. From and after
the Assignment Date: (a) the Assignor shall be released from the Assignor's
obligations in respect of the Assigned Interest, and (b) the Assignee shall be
entitled to all of the Assignor's rights, powers and privileges under the Term
Loan Agreement and the other Security Instruments in respect of the Assigned
Interest.
Section 2.03 Consent by Collateral Agent. By executing this
Agreement as provided below, in accordance with Section 12.06(b) of the Term
Loan Agreement, the Collateral Agent hereby acknowledges notice of the
transactions contemplated by this Agreement and consents to such transactions.
ARTICLE III
PAYMENTS
Section 3.01 Payments. As consideration for the sale,
assignment and transfer contemplated by Section 2.01 hereof, the Assignee shall,
on the Assignment Date, assume Assignor's obligations in respect of the Assigned
Interest and pay to the Assignor an amount equal to the Loan Balance, if any. An
amount equal to all accrued and unpaid interest and fees shall be paid to the
Assignor as provided in Section 3.02 (iii) below. Except as otherwise provided
in this Agreement, all payments hereunder shall be made in Dollars and in
immediately available funds, without setoff, deduction or counterclaim.
Section 3.02 Allocation of Payments. The Assignor and the
Assignee agree that (i) the Assignor shall be entitled to any payments of
principal with respect to the Assigned Interest made prior to the Assignment
Date, together with any interest and fees with respect to the Assigned Interest
accrued prior to the Assignment Date, (ii) the Assignee shall be entitled to any
payments of principal with respect to the Assigned Interest made from and after
the Assignment Date, together with any and all interest and fees with respect to
the Assigned Interest accruing from and after the Assignment Date, and (iii) the
Collateral Agent is authorized and instructed to allocate payments received by
it for account of the Assignor and the Assignee as
Exhibit D-2
provided in the foregoing clauses. Each party hereto agrees that it will hold
any interest, fees or other amounts that it may receive to which the other party
hereto shall be entitled pursuant to the preceding sentence for account of such
other party and pay, in like money and funds, any such amounts that it may
receive to such other party promptly upon receipt.
Section 3.03 Delivery of Notes. Promptly following the receipt
by the Assignor of the consideration required to be paid under Section 3.01
hereof, the Assignor shall, in the manner contemplated by Section 12.06(b) of
the Term Loan Agreement, (i) deliver to the Collateral Agent (or its counsel)
the Notes held by the Assignor and (ii) notify the Collateral Agent to request
that the Borrower execute and deliver new Notes to the Assignor, if Assignor
continues to be a Lender, and the Assignee, dated the date of this Agreement in
respective principal amounts equal to the respective Loans of the Assignor (if
appropriate) and the Assignee after giving effect to the sale, assignment and
transfer contemplated hereby.
Section 3.04 Further Assurances. The Assignor and the Assignee
hereby agree to execute and deliver such other instruments, and take such other
actions, as either party may reasonably request in connection with the
transactions contemplated by this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 Conditions Precedent. The effectiveness of the
sale, assignment and transfer contemplated hereby is subject to the satisfaction
of each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the
Assignor and the Assignee;
(b) the execution and delivery of the Intercreditor
Agreement by the Assignee;
(c) the receipt by the Assignor of the payment required
to be made by the Assignee under Section 3.01 hereof; and
(d) the acknowledgment and consent by the Collateral
Agent contemplated by Section 2.03 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01 Representations and Warranties of the Assignor.
The Assignor represents and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has
taken all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignor and the delivery of all instruments required to be
delivered by it hereunder do not and
Exhibit D-3
will not violate any Governmental Requirement applicable to it;
(c) this Agreement has been duly executed and delivered
by it and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with
and all actions by any Governmental Authority necessary for the
validity or enforceability of its obligations under this Agreement have
been obtained;
(e) the Assignor has good title to, and is the sole legal
and beneficial owner of, the Assigned Interest, free and clear of all
Liens, claims, participations or other charges of any nature
whatsoever; and
(f) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignor.
Section 5.02 Disclaimer. Except as expressly provided in
Section 5.01 hereof, the Assignor does not make any representation or warranty,
nor shall it have any responsibility to the Assignee, with respect to the
accuracy of any recitals, statements, representations or warranties contained in
the Term Loan Agreement or in any certificate or other document referred to or
provided for in, or received by any Lender under, the Term Loan Agreement, or
for the value, validity, effectiveness, genuineness, execution, effectiveness,
legality, enforceability or sufficiency of the Term Loan Agreement, the Notes or
any other document referred to or provided for therein or for any failure by the
Borrower or any other Person (other than Assignor) to perform any of its
obligations thereunder prior or for the existence, value, perfection or priority
of any collateral security or the financial or other condition of the Borrower
or the Subsidiaries or any other obligor or guarantor, or any other matter
relating to the Term Loan Agreement or any other Security Instrument or any
extension of credit thereunder.
Section 5.03 Representations and Warranties of the Assignee.
The Assignee represents and warrants to the Assignor as follows:
(a) it has all requisite power and authority, and has
taken all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignee and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any Governmental
Requirement applicable to it;
(c) this Agreement has been duly executed and delivered
by it and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with
and all actions by any Governmental Authority necessary for the
validity or enforceability of its obligations under this Agreement have
been obtained;
Exhibit D-4
(e) the Assignee has fully reviewed the terms of the Term
Loan Agreement and the other Security Instruments and has independently
and without reliance upon the Assignor, and based on such information
as the Assignee has deemed appropriate, made its own credit analysis
and decision to enter into this Agreement;
(f) the Assignee hereby affirms that the representations
contained in Section 4.06(d)(i) and (ii) of the Term Loan Agreement are
true and accurate as to it and, to the extent applicable, the Assignee
has contemporaneously herewith delivered to the Collateral Agent and
the Borrower such certifications as are required thereby to avoid the
withholding taxes referred to in Section 4.06; and
(g) the transactions contemplated by this Agreement are
commercial banking transactions entered into in the ordinary course of
the banking business of the Assignee.
ARTICLE VI
MISCELLANEOUS
Section 6.01 Notices. All notices and other communications
provided for herein (including, without limitation, any modifications of, or
waivers, requests or consents under, this Agreement) shall be given or made in
writing (including, without limitation, by telex or telecopy) to the intended
recipient at its "ADDRESS FOR NOTICES" specified below its name on the signature
pages hereof or, as to either party, at such other address as shall be
designated by such party in a notice to the other party.
Section 6.02 Amendment, Modification or Waiver. No provision
of this Agreement may be amended, modified or waived except by an instrument in
writing signed by the Assignor and the Assignee, and consented to by the
Collateral Agent.
Section 6.03 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The representations and warranties made herein
by the Assignee are also made for the benefit of the Collateral Agent and the
Borrower, and the Assignee agrees that the Collateral Agent and the Borrower are
entitled to rely upon such representations and warranties.
Section 6.04 Assignments. Neither party hereto may assign any
of its rights or obligations hereunder except in accordance with the terms of
the Term Loan Agreement.
Section 6.05 Captions. The captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
Section 6.06 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be identical and all of which,
taken together, shall constitute one and the same instrument, and each of the
parties hereto may execute this Agreement by signing any such counterpart.
Section 6.07 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the law of the State of Texas.
Exhibit D-5
Section 6.08 Expenses. Each party hereto shall bear its own
expenses in connection with the execution, delivery and performance of this
Agreement.
Section 6.09 Waiver of Jury Trial. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this
Assignment Agreement to be executed and delivered as of the date first above
written.
ASSIGNOR:
__________________________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
Address for Notices:
__________________________________________
__________________________________________
__________________________________________
__________________________________________
__________________________________________
__________________________________________
Exhibit D-6
ASSIGNEE:
__________________________________________
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
Address for Notices:
__________________________________________
__________________________________________
__________________________________________
Telecopier No.: __________________________
Telephone No.: ___________________________
Attention: _______________________________
ACKNOWLEDGED AND CONSENTED TO:
__________________________________________,
as Collateral Agent
By: ______________________________________
Name: ____________________________________
Title: ___________________________________
Exhibit D-7
