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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
AMONG
EDGE PETROLEUM CORPORATION,
EDGE PETROLEUM EXPLORATION COMPANY,
AND
EDGE PETROLEUM OPERATING COMPANY,
AS BORROWERS,
THE LENDERS SIGNATORY HERETO,
AND
UNION BANK OF CALIFORNIA, N.A., AS AGENT
Dated as of October 6, 2000
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REVOLVING LINE OF CREDIT OF UP TO $25,000,000
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 TERMS DEFINED ABOVE.........................................................................2
1.2 ADDITIONAL DEFINED TERMS....................................................................2
1.3 UNDEFINED FINANCIAL ACCOUNTING TERMS.......................................................18
1.4 REFERENCES.................................................................................18
1.5 ARTICLES AND SECTIONS......................................................................18
1.6 NUMBER AND GENDER..........................................................................18
1.7 COMPUTATION OF TIME PERIODS................................................................19
1.8 INCORPORATION OF SCHEDULES AND EXHIBITS....................................................19
ARTICLE II
TERMS OF FACILITY
2.1 REVOLVING LINE OF CREDIT...................................................................19
2.2 METHOD OF BORROWING........................................................................19
2.3 LETTER OF CREDIT FACILITY..................................................................21
2.4 USE OF LOAN PROCEEDS AND LETTERS OF CREDIT. ..............................................25
2.5 INTEREST; COMPUTATIONS.....................................................................25
2.6 REPAYMENT OF LOANS AND INTEREST............................................................26
2.7 OUTSTANDING AMOUNTS........................................................................26
2.8 TIME, PLACE, AND METHOD OF PAYMENTS........................................................27
2.9 PRO RATA TREATMENT; ADJUSTMENTS............................................................27
2.10 BORROWING BASE DETERMINATIONS..............................................................28
2.11 PREPAYMENTS................................................................................31
2.12 REDUCTION OF THE COMMITMENTS...............................................................32
2.13 COMMITMENT FEE.............................................................................32
2.14 FACILITY FEES..............................................................................32
2.15 BORROWING BASE INCREASE FEES. ............................................................32
2.16 LETTER OF CREDIT FEE.......................................................................33
2.17 ENGINEERING FEE............................................................................33
2.18 LOANS TO SATISFY OBLIGATIONS OF BORROWER...................................................33
2.19 SECURITY INTEREST IN ACCOUNTS; RIGHT OF OFFSET.............................................33
2.20 GENERAL PROVISIONS RELATING TO INTEREST....................................................34
2.21 YIELD PROTECTION...........................................................................35
2.22 LIMITATION ON LOANS........................................................................35
2.23 ILLEGALITY.................................................................................36
2.24 INCREASED COSTS............................................................................36
2.25 LETTERS IN LIEU OF TRANSFER ORDERS.........................................................38
2.26 POWER OF ATTORNEY..........................................................................38
2.27 TAXES......................................................................................38
ARTICLE III
CONDITIONS
3.1 CONDITIONS PRECEDENT TO EFFECTIVENESS......................................................39
3.2 CONDITIONS PRECEDENT TO ALL BORROWINGS.....................................................43
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 DUE AUTHORIZATION..........................................................................44
4.2 CORPORATE EXISTENCE........................................................................44
4.3 VALID AND BINDING OBLIGATIONS..............................................................44
4.4 USE OF PROCEEDS............................................................................44
4.5 SECURITY INSTRUMENTS.......................................................................45
4.6 TITLE TO ASSETS; CONDITION OF ITS PROPERTIES...............................................45
4.7 SCOPE AND ACCURACY OF FINANCIAL STATEMENTS.................................................45
4.8 NO MATERIAL MISSTATEMENTS..................................................................45
4.9 LIABILITIES, LITIGATION, AND RESTRICTIONS..................................................45
4.10 COMPLIANCE WITH LAWS.......................................................................45
4.11 ERISA......................................................................................46
4.12 ENVIRONMENTAL LAWS.........................................................................46
4.13 INVESTMENT COMPANY ACT COMPLIANCE..........................................................47
4.14 PUBLIC UTILITY HOLDING COMPANY ACT COMPLIANCE..............................................47
4.15 PROPER FILING OF TAX RETURNS; PAYMENT OF TAXES DUE.........................................47
4.16 REFUNDS....................................................................................47
4.17 GAS CONTRACTS..............................................................................47
4.18 INTELLECTUAL PROPERTY......................................................................47
4.19 CASUALTIES OR TAKING OF PROPERTY...........................................................48
4.20 LOCATIONS OF BORROWER......................................................................48
4.21 SUBSIDIARIES...............................................................................48
4.22 NO BURDENSOME RESTRICTIONS; NO DEFAULTS....................................................48
ARTICLE V
AFFIRMATIVE COVENANTS
5.1 MAINTENANCE AND ACCESS TO RECORDS..........................................................49
5.2 QUARTERLY FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES....................................49
5.3 ANNUAL FINANCIAL STATEMENTS................................................................49
5.4 OIL AND GAS PRODUCTION REPORTS.............................................................49
5.5 TITLE OPINIONS; TITLE DEFECTS..............................................................49
5.6 NOTICES OF CERTAIN EVENTS..................................................................50
5.7 LETTERS IN LIEU OF TRANSFER ORDERS; DIVISION ORDERS........................................51
5.8 ADDITIONAL INFORMATION.....................................................................51
5.9 COMPLIANCE WITH LAWS.......................................................................51
5.10 PAYMENT OF ASSESSMENTS AND CHARGES.........................................................52
5.11 MAINTENANCE OF CORPORATE EXISTENCE AND GOOD STANDING.......................................52
5.12 PAYMENT OF NOTES; PERFORMANCE OF OBLIGATIONS...............................................52
5.13 FURTHER ASSURANCES.........................................................................52
5.14 INITIAL FEES AND EXPENSES..................................................................52
5.15 SUBSEQUENT FEES AND EXPENSES OF AGENT AND LENDERS..........................................52
5.16 OPERATION OF OIL AND GAS PROPERTIES........................................................53
5.17 MAINTENANCE AND INSPECTION OF PROPERTIES...................................................53
5.18 MAINTENANCE OF INSURANCE...................................................................53
5.19 INDEMNIFICATION............................................................................54
5.20 SUBSIDIARY AND AFFILIATE SECURITY INSTRUMENTS..............................................55
5.21 PAYMENT OF HEDGING OBLIGATIONS.............................................................56
5.22 MULTIPLE BORROWERS.........................................................................56
ARTICLE VI
NEGATIVE COVENANTS
6.1 INDEBTEDNESS...............................................................................58
6.2 TRADE PAYABLES.............................................................................58
6.3 CONTINGENT OBLIGATIONS.....................................................................58
6.4 LIENS......................................................................................58
6.5 SALES OF ASSETS............................................................................58
6.6 LEASEBACKS.................................................................................59
6.7 LOANS OR ADVANCES..........................................................................59
6.8 INVESTMENTS................................................................................59
6.9 DIVIDENDS AND DISTRIBUTIONS................................................................59
6.10 ISSUANCE OF STOCK; CHANGES IN CORPORATE STRUCTURE..........................................59
6.11 TRANSACTIONS WITH AFFILIATES...............................................................59
6.12 LINES OF BUSINESS..........................................................................60
6.13 PLAN OBLIGATIONS...........................................................................60
6.14 NEW SUBSIDIARIES...........................................................................60
6.15 EBITDA TO INTEREST EXPENSE RATIO...........................................................60
6.16 WORKING CAPITAL............................................................................60
6.17 ALLOWABLE EXPENSES.........................................................................60
ARTICLE VII
EVENTS OF DEFAULT
7.1 ENUMERATION OF EVENTS OF DEFAULT...........................................................60
7.2 REMEDIES...................................................................................62
7.3 APPLICATION OF PROCEEDS UPON DEFAULT.......................................................63
ARTICLE VIII
THE AGENT
8.1 APPOINTMENT................................................................................64
8.2 DELEGATION OF DUTIES.......................................................................64
8.3 EXCULPATORY PROVISIONS.....................................................................64
8.4 RELIANCE BY AGENT..........................................................................65
8.5 NOTICE OF DEFAULT..........................................................................65
8.6 NON-RELIANCE ON AGENT AND OTHER LENDERS....................................................66
8.7 INDEMNIFICATION............................................................................66
8.8 RESTITUTION................................................................................67
8.9 AGENT IN ITS INDIVIDUAL CAPACITY...........................................................68
8.10 SUCCESSOR AGENT............................................................................68
8.11 APPLICABLE PARTIES.........................................................................68
ARTICLE IX
MISCELLANEOUS
9.1 ASSIGNMENTS; PARTICIPATIONS................................................................68
9.2 WAIVERS, AMENDMENTS........................................................................70
9.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS.....................................71
9.4 NOTICES AND OTHER COMMUNICATIONS...........................................................71
9.5 PARTIES IN INTEREST........................................................................71
9.6 RIGHTS OF THIRD PARTIES....................................................................72
9.7 RENEWALS; EXTENSIONS.......................................................................72
9.8 NO WAIVER; RIGHTS CUMULATIVE...............................................................72
9.9 SURVIVAL UPON UNENFORCEABILITY.............................................................72
9.10 AMENDMENTS; WAIVERS........................................................................72
9.11 CONTROLLING AGREEMENT......................................................................72
9.12 DISPOSITION OF COLLATERAL..................................................................73
9.13 GOVERNING LAW..............................................................................73
9.14 JURISDICTION AND VENUE.....................................................................73
9.15 WAIVER OF RIGHTS TO JURY TRIAL.............................................................73
9.16 ENTIRE AGREEMENT. .........................................................................74
9.17 COUNTERPARTS...............................................................................74
LIST OF SCHEDULES
Schedule 1 - Permitted Indebtedness
Schedule 3.1(a) - Title Opinions for Closing
Schedule 4.9 - Liabilities and Litigation
Schedule 4.12 - Environmental Matters
Schedule 4.16 - Refunds
Schedule 4.17 - Gas Contracts
Schedule 4.19 - Casualties
Schedule 4.21 - Subsidiaries
Schedule 5.5 - Title Opinions to be Provided Post-Closing
Schedule 6.13 - Plan Obligations
Schedule 9.4 - Notice Information for Lenders and Applicable Lending
Offices
LIST OF EXHIBITS
Exhibit A - Form of Borrowing Request
Exhibit B - Form of Compliance Certificate
Exhibit C - Form of Lender Assignment Agreement
Exhibit D - Form of Mortgage
Exhibit E - Form of Notes
Exhibit F - Form of Notice of Conversion or Continuation
Exhibit G - Form of Security Agreement
Exhibit H - Form of Security Agreements (Stock Pledge)
Exhibit I - Form of Transfer Letters
Exhibit J - Form of Opinion of Counsel
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is made and entered
into this 6th day of October, 2000, by and among EDGE PETROLEUM CORPORATION, a
Delaware corporation ("Parent"), EDGE PETROLEUM EXPLORATION COMPANY, a Delaware
corporation ("Edge Exploration"), EDGE PETROLEUM OPERATING COMPANY, INC., a
Texas corporation ("Edge Operating," and together with the Parent and Edge
Exploration, referred to collectively as the "BORROWERS"), the lenders named
herein ("Lenders"), and UNION BANK OF CALIFORNIA, N.A., a national banking
association, as agent for the Lenders ("Agent").
W I T N E S S E T H:
A. The Parent and Edge Exploration are parties to an Amended and
Restated Credit Agreement dated as of April 1, 1998 among the Parent, Edge
Exploration, the lenders party thereto ("Existing Lenders"), and Bank One, N.A.
(as successor in interest to The First National Bank of Chicago), as agent for
the Existing Lenders ("Existing Agent"), as amended by the First Amendment to
Amended and Restated Credit Agreement dated as of September 29, 1998, and as
amended by the First (SIC) Amendment to Amended and Restated Credit Agreement
dated as of March 1, 1999 (as so amended the "EXISTING CREDIT AGREEMENT").
B. In order to secure the full and punctual payment and performance
of the loans under the Existing Credit Agreement, the Parent and Edge
Exploration have executed and delivered mortgages, collateral assignments,
security agreements and financing statements in favor of the Existing Agent (or
in favor of any predecessors in such capacity) (collectively, the "Existing
Security Documents") granting a mortgage lien and continuing security interest
in and to the collateral described in such Existing Security Documents.
C. Under the terms of the Assignment (as defined below), (1) the
Existing Credit Agreement, the Existing Note (as defined below), and the credit
facilities and loans evidenced by such documents shall be purchased by the
Lenders and assigned to such Lenders, and (2) the liens and security interests
under the Existing Security Documents will be purchased from the Existing
Lenders and assigned by the Existing Agent, on behalf of itself and the Existing
Lenders, to the Agent for the benefit of the Agent and the Lenders.
D. The Parent, Edge Exploration, the Agent and the Lenders have
agreed to amend and restate, and Edge Operating has agreed to join in as a
borrower under, the Existing Credit Agreement, the loans under the Existing
Credit Agreement, the Existing Security Documents and the Existing Note
effective upon the execution of the Assignment.
Now, therefore, the Borrowers, the Agent and the Lenders do hereby
agree that the Existing Credit Agreement is amended and restated as follows and
the Existing Note is amended and restated to provide as stated in the Notes (as
defined below):
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 TERMS DEFINED ABOVE. As used in this Second Amended and
Restated Credit Agreement, each of the terms defined above shall have the
meanings assigned to such terms.
1.2 ADDITIONAL DEFINED TERMS. As used in this Agreement, each of
the following terms shall have the meaning assigned thereto in this Section,
unless the context otherwise requires:
"ACCEPTABLE SECURITY INTEREST" in any Property means a Lien (a) which
exists in favor of the of the Agent for the benefit of itself and the Lenders,
(b) which is superior to all other Liens, (c) which secures the Obligations, and
(d) which is perfected and enforceable against all Persons in preference to any
rights of any Person therein.
"ADJUSTED LIBO RATE" shall mean, for any LIBO Rate Loan, an interest
rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
determined by the Agent to be equal to the sum of the LIBO Rate for such Loan
plus the Applicable Margin, but in no event exceeding the Highest Lawful Rate.
"AFFILIATE" shall mean any Person directly or indirectly controlling,
or under common control with, any Borrower and includes any Subsidiary of any
Borrower and any "affiliate" of any Borrower within the meaning of Reg. Section
240.12b-2 of the Securities Exchange Act of 1934, as amended, with "control," as
used in this definition, meaning possession, directly or indirectly, of the
power to direct or cause the direction of management, policies or action through
ownership of voting securities, contract, voting trust, or membership in
management or in the group appointing or electing management or otherwise
through formal or informal arrangements or business relationships.
"AGREEMENT" shall mean this Second Amended and Restated Credit
Agreement, as it may be amended, supplemented, restated or otherwise modified
from time to time.
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and type of
Loan, the lending office of such Lender (or an affiliate of such Lender)
designated for such type of Loan on Schedule 9.4 hereof or such other office of
such Lender (or an affiliate of such Lender) as such Lender may from time to
time specify to the Agent and the Borrowers as the office by which Loans of such
type are to be made and maintained.
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"APPLICABLE MARGIN" shall mean (a) as to each LIBO Rate Loan, 2.75% and
(b) as to each Floating Rate Loan, 0.50%.
"ASSIGNMENT" shall mean that certain Assignment of Note, Liens,
Security Interests and Other Rights dated as of October 6, 2000 made by the
Existing Lenders and the Existing Agent, assigning the Existing Note and rights
under the Existing Credit Agreement to the Lenders and the Existing Liens to the
Agent for the benefit of the Lenders.
"BORROWING" means, subject to Section 2.22(c), a borrowing consisting
of simultaneous Loans of the same type made by each Lender pursuant to Section
2.2(a), Continued by each Lender pursuant to Section 2.2(b), or Converted by
each Lender to Loans of a different type pursuant to Section 2.2(b).
"BORROWING BASE" shall mean, at any time, the amount determined by the
Lenders in accordance with Section 2.10 and then in effect.
"BORROWING REQUEST" shall mean each written request, in substantially
the form attached hereto as Exhibit A, by a Borrower to the Agent for a
Borrowing pursuant to Section 2.2(a).
"BUSINESS DAY" shall mean (a) for all purposes other than as covered by
clause (b) of this definition, a day other than a Saturday, Sunday, legal
holiday for commercial banks under the laws of the State of Texas, or any other
day when banking is suspended in the State of Texas, and (b) with respect to all
requests, notices, and determinations in connection with, and payments of
principal and interest on, LIBO Rate Loans, a day which is a Business Day
described in clause (a) of this definition and which is a day for trading by and
between banks for Dollar deposits in the London interbank market.
"CASH COLLATERAL ACCOUNT" means a special cash collateral account
pledged to the Agent containing cash deposited pursuant to Sections 7.2(a)(iv),
7.2(b)(iv) or 2.11(b)(iii), to be maintained with the Agent in accordance with
Section 2.3(g) through Section 2.3(i).
"CHANGE IN CONTROL" shall mean the acquisition by any Person, or two or
more Persons acting in concert (other than members of the senior management of
the Parent), of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934) of
50% or more of the outstanding shares of voting stock of the Parent.
"CLOSING DATE" shall mean the date of this Agreement.
"CODE" shall mean the United States Internal Revenue Code of 1986, as
amended from time to time.
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"COLLATERAL" shall mean the Mortgaged Properties, Cash Collateral
Accounts, and any other Property now or at any time used or intended as security
for the payment or performance of all or any portion of the Obligations (subject
to the provisions of Section 7.3) of the Borrowers or any Subsidiary or other
Affiliate of a Borrower owing to the Agent or any Lender or any branch,
Subsidiary or other Affiliate of the Agent or any Lender which is subject to a
Security Instrument.
"COMMITMENT" shall mean, for each Lender, the amount set opposite such
Lender's name on the signature pages of this Agreement as its Commitment or, if
such Lender has entered into any Lender Assignment Agreement after the date of
this Agreement, the amount set forth for such Lender as its Commitment in the
Register maintained by the Agent pursuant to Section 9.1(c), as such amount may
be reduced pursuant to Section 2.12.
"COMMITMENT FEE" shall mean each fee payable to the Agent for the
benefit of the Lenders by the Borrowers pursuant to Section 2.13.
"COMMITMENT PERIOD" shall mean the period from and including the
Closing Date to but not including the Commitment Termination Date.
"COMMITMENT TERMINATION DATE" shall mean the earlier to occur of (a)
the Final Maturity Date and (b) the earlier termination in whole of the
Commitments pursuant to Section 2.12 or Section 7.2.
"COMMONLY CONTROLLED ENTITY" shall mean any Person which is under
common control with any Borrower within the meaning of Section 4001 of ERISA.
"COMPLIANCE CERTIFICATE" shall mean each certificate, substantially in
the form attached hereto as Exhibit B, executed by a Responsible Officer of the
Parent and furnished to the Agent and the Lenders from time to time in
accordance with Section 5.2.
"CONTINGENT OBLIGATION" shall mean, as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness, leases,
dividends, or other obligations of any other Person (for purposes of this
definition, a "PRIMARY OBLIGATION") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
regardless of whether such obligation is contingent, (a) to purchase any primary
obligation or any Property constituting direct or indirect security therefor,
(b) to advance or supply funds (i) for the purchase or payment of any primary
obligation, or (ii) to maintain working or equity capital of any other Person in
respect of any primary obligation, or otherwise to maintain the net worth or
solvency of any other Person, (c) to purchase Property, securities or services
primarily for the purpose of assuring the owner of any primary obligation of the
ability of the Person primarily liable for such primary obligation to make
payment thereof, or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss in respect thereof, with the amount of any
Contingent
4
Obligation being deemed to be equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made or, if
not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith.
"CONTINUE", "CONTINUATION", and "CONTINUED" each refers to a
continuation of Loans for an additional Interest Period upon the expiration of
the Interest Period then in effect for such Loans.
"CONVERT", "CONVERSION", and "CONVERTED" each refers to a conversion of
a LIBO Rate Loan into a Floating Rate Loan or the conversion of a Floating Rate
Loan into a LIBO Rate Loan pursuant to Section 2.2(b).
"DEFAULT" shall mean any event or occurrence which with the lapse of
time or the giving of notice or both would become an Event of Default.
"DEFAULT RATE" shall mean a per annum interest rate equal to the
Reference Rate plus five percent (5%), but in no event exceeding the Highest
Lawful Rate.
"DOLLARS" and "$" shall mean dollars in lawful currency of the United
States of America.
"EBITDA" shall mean, for any period, (a) Net Income for such period
PLUS (b) to the extent deducted in determining Net Income, Interest Expense,
taxes accrued or provided for, depreciation, depletion and amortization (and
other similar non-cash items) for such period.
"ENGINEERING REPORT" means either an Independent Engineering Report or
an Internal Engineering Report.
"ENVIRONMENTAL COMPLAINT" shall mean any written or oral complaint,
order, directive, claim, citation, notice of environmental report or
investigation, or other notice by any Governmental Authority with respect to (a)
air emissions, (b) spills, releases, or discharges to soils, any improvements
located thereon, surface water, groundwater, or the sewer, septic, waste
treatment, storage, or disposal systems servicing any Property of any Borrower,
(c) solid or liquid waste disposal, (d) the use, generation, storage,
transportation, or disposal of any Hazardous Substance, or (e) other
environmental, health, or safety matters affecting any Property of any Borrower
or the business conducted thereon.
"ENVIRONMENTAL LAWS" shall mean (a) the following federal laws as they
may be cited, referenced, and amended from time to time: the Clean Air Act, the
Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
5
Reauthorization Act, and the Toxic Substances Control Act; (b) any and all
equivalent environmental statutes of any state in which Property of any Borrower
is situated, as they may be cited, referenced and amended from time to time; (c)
any rules or regulations promulgated under or adopted pursuant to the above
federal and state laws; and (d) any other equivalent foreign, federal, state, or
local statute or any requirement, rule, regulation, code, ordinance, or order
adopted pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal, handling,
or release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations thereunder and interpretations
thereof.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Federal Reserve Board (or any successor), as in effect from
time to time.
"EVENT OF DEFAULT" shall mean any of the events specified in Section
7.1.
"EXISTING INDEBTEDNESS" shall mean the "Obligations" as defined under
the Existing Credit Agreement outstanding as of the Closing Date.
"EXISTING LIENS" shall mean the Liens securing the Existing
Indebtedness in effect as of the Closing Date, which are to be assigned to the
Agent for the benefit of the Lenders pursuant to the Assignment.
"EXISTING NOTE" shall mean that certain promissory note dated March 1,
1999, in the face amount of up to $100,000,000 made by the Parent and Edge
Exploration payable to the order of The First National Bank of Chicago, which
note was issued in renewal and replacement of (a) that certain promissory note
dated April 1, 1998, in the face amount of up to $75,000,000 made by the Parent
and Edge Exploration and payable to the order of Compass Bank and (b) that
certain promissory note dated April 1, 1998, in the face amount of up to
$25,000,000 made by the Parent and Edge Exploration and payable to the order of
The First National Bank of Chicago. The promissory notes referenced in clause
(a) and (b) were issued in renewal and replacement of that certain promissory
note dated July 11, 1995 in the face amount of up to $20,000,000 made by Edge
Joint Venture II, predecessor to Edge Exploration, payable to the order of
Compass Bank.
"FACILITY FEE" shall mean the facility fees payable to the Agent for
the benefit of the Lenders by the Borrowers pursuant to Section 2.14.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day)
6
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for any such
day on such transactions received by the Agent from three Federal funds brokers
of recognized standing selected by it.
"FEDERAL RESERVE BOARD" shall mean the Board of Governors of the
Federal Reserve System or any of its successors.
"FINAL MATURITY DATE" shall mean October 6, 2002.
"FINANCIAL STATEMENTS" shall mean statements of the financial condition
of the Parent and its consolidated Subsidiaries on a consolidated and
consolidating basis as at the point in time and for the period indicated and
consisting of at least a balance sheet and related statements of operations,
common stock and other stockholders' equity, and cash flows, and when such
statements prepared on a consolidated basis are required by applicable
provisions of this Agreement to be audited, accompanied by the unqualified
certification of a nationally-recognized firm of independent certified public
accountants or other independent certified public accountants acceptable to the
Agent and footnotes to any of the foregoing, all of which shall be prepared in
accordance with GAAP consistently applied and in comparative form with respect
to the corresponding period of the preceding fiscal period.
"FLOATING RATE" shall mean an interest rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined by the Agent to be equal to
the sum of the Reference Rate for such Loan plus the Applicable Margin, but in
no event exceeding the Highest Lawful Rate.
"FLOATING RATE LOAN" shall mean any Loan and any portion of the Loan
Balance which a Borrower has requested, in the initial Borrowing Request for
such Loan or a subsequent Borrowing Request for such portion of the Loan
Balance, which bears interest at the Floating Rate, or which pursuant to the
terms hereof is otherwise required to bear interest at the Floating Rate.
"GAAP" shall mean generally accepted accounting principles established
by the Financial Accounting Standards Board or the American Institute of
Certified Public Accountants and in effect in the United States from time to
time.
"GOVERNMENTAL AUTHORITY" shall mean any nation, country, commonwealth,
territory, government, state, county, parish, municipality, or other political
subdivision and any entity exercising executive, legislative, judicial,
regulatory, or administrative functions of or pertaining to government.
"HAZARDOUS SUBSTANCES" shall mean flammables, explosives, radioactive
materials, hazardous wastes, asbestos, or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum, petroleum products, associated oil or natural gas
7
exploration, production, and development wastes, or any substances defined as
"hazardous substances," "hazardous materials," "hazardous wastes," or "toxic
substances" under the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, the Superfund Amendments and Reauthorization Act, as
amended, the Hazardous Materials Transportation Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic Substances Control Act, as
amended, or any other law or regulation now or hereafter enacted or promulgated
by any Governmental Authority.
"HEDGE AGREEMENT" shall mean any agreement, device or arrangement
entered into by one Person with another Person providing for payments which are
related to fluctuations in the prices or rates, including currencies, interest
rates, securities prices and commodity prices, including prices of petroleum (or
any fraction thereof), natural gas, or natural gas liquids (including, but not
limited to, swaps, caps, collars, options, puts, calls, futures and forward
contracts).
"HEDGING OBLIGATIONS" of a Person means all obligations of such Person
under forward sales arrangements, calls, options, swaps, or other similar
transactions or any combination thereof, including any right or obligation to
purchase, sell or deliver any currency, commodity or security at a future date
for a specified price entered into to protect such Person from fluctuations in
prices or rates, including currencies, interest rates, commodity prices, and
securities prices.
"HIGHEST LAWFUL RATE" shall mean the maximum non-usurious interest
rate, if any (or, if the context so requires, an amount calculated at such
rate), that at any time or from time to time may be contracted for, taken,
reserved, charged, or received under applicable laws of the State of Texas or
the United States of America, whichever authorizes the greater rate, as such
laws are presently in effect or, to the extent allowed by applicable law, as
such laws may hereafter be in effect and which allow a higher maximum
non-usurious interest rate than such laws now allow.
"HYDROCARBONS" means oil, gas, coal seam gas, casinghead gas, drip
gasoline, natural gasoline, condensate, distillate, and all other liquid and
gaseous hydrocarbons produced or to be produced in conjunction therewith from a
well bore and all products, by-products, and other substances derived therefrom
or the processing thereof, and all other minerals and substances produced in
conjunction with such substances, including, but not limited to, sulfur,
geothermal steam, water, carbon dioxide, helium, and any and all minerals, ores,
or substances of value and the products and proceeds therefrom.
"INDEBTEDNESS" shall mean, as to any Person, without duplication, (a)
all liabilities (excluding reserves for deferred income taxes, deferred
compensation liabilities, and other deferred liabilities and credits) which in
accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet, (b) all obligations of such Person
evidenced by bonds, debentures, promissory notes, or similar evidences of
indebtedness, (c) all other indebtedness of such Person for borrowed money, (d)
all obligations issued, undertaken or assumed as the deferred
8
purchase price of property or services (other than trade payables, which include
amounts owed to drilling contractors, entered into in the ordinary course of
business on ordinary terms); (e) all indebtedness created or arising under any
conditional sale or other title retention agreement, or incurred as financing,
in either case with respect to property acquired by the Person (even though the
rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property) including, without
limitation, production payments, net profit interests and other hydrocarbon
interests subject to repayment out of future oil and gas production; (f) all
obligations with respect to capital leases; (g) all Hedging Obligations; and (h)
all obligations, including Contingent Obligations of others, to the extent any
such obligation is secured by a Lien on the assets of such Person (whether or
not such Person has assumed or become liable for the obligation secured by such
Lien).
"INDEPENDENT ENGINEERING REPORT" means a report, in form and substance
satisfactory to the Agent and each of the Lenders, prepared by a nationally or
regionally recognized independent consulting petroleum engineers that the Parent
has engaged with the Agent's consent, such consent not to be unreasonably
withheld, addressed to the Agent and the Lenders with respect to the Oil and Gas
Properties owned by the Borrowers (or to be acquired by the Borrowers) which are
or are to be included in the Borrowing Base, which report shall (a) specify the
location, quantity, and type of the estimated Proven Reserves attributable to
such Oil and Gas Properties, (b) contain a projection of the rate of production
of such Oil and Gas Properties, (c) contain an estimate of the net operating
revenues to be derived from the production and sale of Hydrocarbons from such
Proven Reserves based on product price and cost escalation assumptions
reasonably estimated by the Agent and the Lenders, and (d) contain such other
information as is customarily obtained from and provided in such reports or is
otherwise reasonably requested by the Agent or any Lender.
"INSOLVENCY PROCEEDING" shall mean application (whether voluntary or
instituted by another Person) for or the consent to the appointment of a
receiver, trustee, conservator, custodian, or liquidator of any Person or of all
or a substantial part of the Property of such Person, or the filing of a
petition (whether voluntary or instituted by another Person) commencing a case
under Title 11 of the United States Code, seeking liquidation, reorganization,
or rearrangement or taking advantage of any bankruptcy, insolvency, debtor's
relief, or other similar law of the United States, the State of Texas, or any
other jurisdiction.
"INTELLECTUAL PROPERTY" shall mean patents, patent applications,
trademarks, tradenames, copyrights, technology, know-how, and processes.
"INTEREST EXPENSE" shall mean, for any relevant accounting period, the
sum of (a) gross interest expense (including all cash and accrued interest
expense) of the Parent and its consolidated Subsidiaries on a consolidated basis
for that period, including (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the issuance of debt, to the
extent included in interest expense, and (iii) the portion of any payments or
accruals with respect to capital leases
9
allocable to interest expense and (b) capitalized interest of the Parent and its
consolidated Subsidiaries on a consolidated basis.
"INTEREST PERIOD"means, for each LIBO Rate Loan comprising part of the
same Borrowing, the period commencing on the date of such LIBO Rate Loan or the
date of the Conversion of any Floating Rate Loan into a LIBO Rate Loan and
ending on the last day of the period selected by a Borrower pursuant to the
provisions below and Section 2.2 and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of the period selected by a Borrower pursuant to the
provisions below and Section 2.2. The duration of each such Interest Period
shall be one, two, three, or, subject to availability, six months, in each case
as a Borrower may, upon notice received by the Agent not later than 10:00 a.m.
(Dallas, Texas time) on the third Business Day prior to the first day of such
Interest Period select; PROVIDED, HOWEVER, that:
(a) Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing shall be of the same duration;
(b) no Borrower may select any Interest Period which ends after
the Final Maturity Date;
(c) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day,
PROVIDED that if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding Business
Day; and
(d) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month in
which it would have ended if there were a numerically corresponding day
in such calendar month.
"INTERNAL ENGINEERING REPORT" means a report, in form and substance
satisfactory to the Agent and each Lender, prepared by the Borrowers and
certified by a Responsible Officer of a Borrower, addressed to the Agent and the
Lenders with respect to the Oil and Gas Properties owned by any of the Borrowers
(or to be acquired by any Borrower) which are or are to be included in the
Borrowing Base, which report shall (a) specify the location, quantity, and type
of the estimated Proven Reserves attributable to such Oil and Gas Properties,
(b) contain a projection of the rate of production of such Oil and Gas
Properties, (c) contain an estimate of the net operating revenues to be derived
from the production and sale of Hydrocarbons from such Proven Reserves based on
product price and cost
10
escalation assumptions reasonably estimated by the Agent and the Lenders, and
(d) contain such other information as is customarily obtained from and provided
in such reports or is otherwise reasonably requested by the Agent or any Lender.
"L/C EXPOSURE" shall mean, at any time, the sum of (a) the aggregate
undrawn maximum face amount of each Letter of Credit at such time and (b) the
aggregate unpaid amount of all Reimbursement Obligations owing with respect to
such Letters of Credit at such time MINUS the amount of any cash collateral held
by the Agent in the Cash Collateral Account at such time.
"LENDER ASSIGNMENT AGREEMENT" shall mean the assignment agreement
entered into by a Lender and an Assignee Lender, and accepted by the Agent, in
substantially the form of the attached Exhibit C.
"LETTER OF CREDIT" shall mean any standby letter of credit issued by
the Agent for the account of a Borrower pursuant to Section 2.3.
"LETTER OF CREDIT APPLICATION" shall mean the standard letter of credit
application employed by the Agent as the issuer of the Letters of Credit, from
time to time, in connection with Letters of Credit.
"LETTER OF CREDIT FEE" shall mean each fee payable by the Borrowers to
the Agent for the account of the Lenders pursuant to Section 2.16 upon or in
connection with the issuance or renewal of each Letter of Credit.
"LIBO RATE" shall mean, with respect to any Interest Period for any
LIBO Rate Loan, the lesser of (a) the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) set forth on the applicable Telerate Page
as the London Interbank Offered Rate for deposits in Dollars at 11:00 a.m.,
(London, England time) two Business Days prior to the first day of such Interest
Period, in the case of any LIBO Rate Loan and for a period equal to such
Interest Period, and (b) the Highest Lawful Rate. If no such quotation appears
on the applicable Telerate Page, the term "LIBO Rate" shall mean, with respect
to any Interest Period for any LIBO Rate Loan, the lesser of (i) the rate per
annum (rounded upwards if necessary, to the nearest 1/100 of 1%) quoted by the
Agent at approximately 11:00 a.m., London time (or as soon thereafter as
practicable) two Business Days prior to the first day of the Interest Period for
such LIBO Rate Loan for the offering by the Agent to leading banks in the London
interbank market of Dollar deposits in an amount substantially equal to the
principal amount of such LIBO Rate Loan and having a period equal to the
Interest Period for such LIBO Rate Loan, and (ii) the Highest Lawful Rate.
"LIBO RATE LOAN" shall mean any Loan and any portion of the Loan
Balance which a Borrower has requested, in the initial Borrowing Request for
such Loan or a subsequent Borrowing
11
Request for such portion of the Loan Balance, bearing interest at the Adjusted
LIBO Rate and which is permitted by the terms hereof to bear interest at the
Adjusted LIBO Rate.
"LIBO RATE RESERVE PERCENTAGE" of any Lender for the Interest Period
for any LIBO Rate Loan means the reserve percentage applicable during such
Interest Period (or if more than one such percentage shall be so applicable, the
daily average of such percentages for those days in such Interest Period during
which any such percentage shall be so applicable) under regulations issued from
time to time by the Federal Reserve Board for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental, or
other marginal reserve requirement) for such Lender with respect to liabilities
or assets consisting of or including Eurocurrency Liabilities having a term
equal to such Interest Period.
"LIEN" shall mean any interest in Property securing an obligation owed
to, or a claim by, a Person other than the owner of such Property, whether such
interest is based on common law, statute, or contract, and including, but not
limited to, the lien or security interest arising from a mortgage, ship
mortgage, encumbrance, pledge, security agreement, conditional sale or trust
receipt, or a lease, consignment, or bailment for security purposes (other than
true leases or true consignments), liens of mechanics, materialmen, and
artisans, maritime liens and reservations, exceptions, encroachments, easements,
rights of way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Property. For the purpose of this
Agreement, a Borrower shall be deemed to be the owner of any Property which it
has acquired or holds subject to a conditional sale agreement, financing lease,
or other arrangement pursuant to which title to the Property has been retained
by or vested in some other Person for security purposes), and the filing or
recording of any financing statement or other security instrument in any public
office.
"LIMITATION PERIOD" shall mean any period while any amount remains
owing on the Notes and interest on such amount, calculated at the applicable
interest rate, plus any fees or other sums payable under any Loan Document and
deemed to be interest under applicable law, would exceed the amount of interest
which would accrue at the Highest Lawful Rate.
"LIQUID INVESTMENT" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States;
(b) (i) negotiable or nonnegotiable certificates of deposit, time
deposits, or other similar banking arrangements maturing within 180
days from the date of acquisition thereof ("bank debt securities"),
issued by (A) any Lender (or any Affiliate of any Lender) or (B) any
other bank or trust company which has a combined capital surplus and
undivided profit of not less than $500,000,000, if at the time of
deposit or purchase, such bank debt securities are rated not less than
"A" (or the then
12
equivalent) by the rating service of Standard & Poor's Ratings Group or
of Xxxxx'x Investors Service, and (ii) commercial paper issued by (A)
any Lender (or any Affiliate of any Lender) or (B) any other Person if
at the time of purchase such commercial paper is rated not less than
"A-2" (or the then equivalent) by the rating service of Standard &
Poor's Ratings Group or not less than "P-2" (or the then equivalent) by
the rating service of Xxxxx'x Investors Service, or upon the
discontinuance of both of such services, such other nationally
recognized rating service or services, as the case may be, as shall be
selected by a Borrower with the consent of the Required Lenders;
(c) repurchase agreements relating to investments described in
clauses (a) and (b) above with a market value at least equal to the
consideration paid in connection therewith, with any Person who
regularly engages in the business of entering into repurchase
agreements and has a combined capital surplus and undivided profit of
not less than $500,000,000, if at the time of entering into such
agreement the debt securities of such Person are rated not less than
"A" (or the then equivalent) by the rating service of Standard & Poor's
Ratings Group or of Xxxxx'x Investors Service; and
(d) such other instruments (within the meaning of Article 9 of the
Uniform Commercial Code as adopted in the State of Texas) as a Borrower
may request and the Required Lenders may approve in writing, which
approval will not be unreasonably withheld.
"LOAN" shall mean any loan made by any Lender to or for the benefit of
a Borrower pursuant to this Agreement.
"LOAN BALANCE" shall mean, at any time, the aggregate outstanding
principal balance of the Notes at such time.
"LOAN DOCUMENTS" shall mean the Assignment, this Agreement, the Notes,
any Letter of Credit Applications, any Letters of Credit, the Security
Instruments, and all other documents and instruments now or hereafter delivered
pursuant to the terms of or in connection with the Assignment, this Agreement,
the Notes, any Letter of Credit Applications, any Letters of Credit, or the
Security Instruments, and all renewals and extensions of, amendments and
supplements to, and restatements of, any or all of the foregoing from time to
time in effect.
"MATERIAL ADVERSE EFFECT" shall mean (a) a material adverse change in
the business, assets, financial condition, or results of operations of a
Borrower or any of its Subsidiaries since the date of the Financial Statements,
or (b) the occurrence and continuance of any event or circumstance
13
which could reasonably be expected to have a material adverse effect on a
Borrower's ability to perform its obligations under this Agreement, any Note or
any other Loan Document.
"MORTGAGE" means each of the Mortgages, Deeds of Trust, Security
Agreements and Financing Statements executed by the Borrowers in favor of the
Agent in substantially the form of the attached Exhibit D, and "MORTGAGES" shall
mean all such mortgages collectively.
"MORTGAGED PROPERTIES" shall mean all Oil and Gas Properties of a
Borrower subject to a perfected first-priority Lien in favor of the Agent for
the benefit of the Lenders, subject only to Permitted Liens, as security for the
Obligations owing to the Agent or any Lender (subject to the provisions of
Section 7.3).
"NET INCOME" shall mean, for any relevant accounting period, the net
income of the Parent and its consolidated Subsidiaries on a consolidated basis
for such period, determined in accordance with GAAP.
"NOTES" shall mean, collectively, each of the promissory notes of the
Borrowers, each of which shall be in part a renewal, extension and modification,
but not a discharge or novation, of the Existing Note and shall be in the form
attached hereto as Exhibit E, together with all renewals, extensions for any
period, increases, and rearrangements thereof.
"NOTICE OF CONVERSION OR CONTINUATION" means a notice of conversion or
continuation in the form of the attached Exhibit F, executed by a Responsible
Officer of the applicable Borrower.
"OBLIGATIONS" shall mean, without duplication, (a) all Indebtedness
evidenced by the Notes, (b) the undrawn, unexpired amount of all outstanding
Letters of Credit, (c) the obligation of the Borrowers for the payment of
Commitment Fees, Facility Fees and Letter of Credit Fees, (d) all Reimbursement
Obligations, (e) any Hedging Obligations of the Borrowers to the Agent and/or
the Lenders, and (f) all other obligations and liabilities of the Borrowers to
the Agent and/or the Lenders, now existing or hereafter incurred, under, arising
out of or in connection with any Loan Document, and to the extent that any of
the foregoing includes or refers to the payment of amounts deemed or
constituting interest, only so much thereof as shall have accrued, been earned
and which remains unpaid at each relevant time of determination.
"OIL AND GAS PROPERTIES" shall mean fee, leasehold, or other interests
in or under mineral estates or oil, gas, and other liquid or gaseous hydrocarbon
leases with respect to Properties situated in the United States or offshore from
any State of the United States, including, without limitation, overriding
royalty and royalty interests, leasehold estate interests, net profits
interests, production payment interests, and mineral fee interests, together
with contracts executed in connection therewith and all tenements,
hereditaments, appurtenances and Properties appertaining, belonging, affixed, or
14
incidental thereto, and also including all unsevered and unextracted
Hydrocarbons in, under, or attributable to such oil and gas Properties and
interests.
"PERCENTAGE SHARE" shall mean, as to each Lender, the percentage such
Lender's Commitment constitutes of the aggregate Commitments.
"PERMITTED INDEBTEDNESS" shall mean (a) Indebtedness arising from
endorsing negotiable instruments for deposit or collection in the ordinary
course of business, (b) current liabilities incurred in the ordinary course of
business, (c) purchase money Indebtedness which does not exceed an aggregate
principal amount of $250,000 during the term of this Agreement, and (d)
Indebtedness existing on the Closing Date as disclosed on Schedule 1 hereof,
such Indebtedness existing by virtue of the requirements of GAAP or obligations
existing on the Closing Date which may at any time hereafter become Indebtedness
by virtue of any changes in the requirements of GAAP.
"PERMITTED LIENS" shall mean (a) Liens for taxes, assessments, or other
governmental charges or levies not yet due or which (if foreclosure, distraint,
sale, or other similar proceedings shall not have been initiated) are being
contested in good faith by appropriate proceedings, and such reserve as may be
required by GAAP shall have been made therefor, (b) Liens in connection with
workers' compensation, unemployment insurance or other social security (other
than Liens created by Section 4068 of ERISA), old-age pension, or public
liability obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, if such reserve as may be required by GAAP
shall have been made therefor, (c) Liens in favor of vendors, carriers,
warehousemen, repairmen, mechanics, workmen, materialmen, construction, or
similar Liens arising by operation of law in the ordinary course of business in
respect of obligations which are not yet due or which are being contested in
good faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (d) Liens in favor of operators and
non-operators under joint operating agreements or similar contractual
arrangements arising in the ordinary course of the business of any Borrower to
secure amounts owing, which amounts are not yet due or are being contested in
good faith by appropriate proceedings, if such reserve as may be required by
GAAP shall have been made therefor, (e) Liens under production sales agreements,
division orders, operating agreements, and other agreements customary in the oil
and gas business for processing, producing, and selling Hydrocarbons securing
obligations not constituting Indebtedness and provided that such Liens do not
secure obligations to deliver Hydrocarbons at some future date without receiving
full payment therefor within 90 days of delivery, (f) easements, rights of way,
restrictions, and other similar encumbrances, and minor defects in the chain of
title which are customarily accepted in the oil and gas financing industry, none
of which materially interfere with the ordinary conduct of the business of any
Borrower or materially detract from the value or use of the Property to which
they apply, (g) liens granted to secure purchase money indebtedness which does
not exceed the amount described in the definition of Permitted Indebtedness, and
(h) Liens in favor of the Agent for the benefit of the Lenders and other Liens
expressly permitted under the Security Instruments.
15
"PERSON" shall mean an individual, corporation, limited liability
company, partnership, trust, unincorporated organization, government, any agency
or political subdivision of any government, or any other form of entity.
"PLAN" shall mean, at any time, any employee benefit plan which is
covered by ERISA and in respect of which any Borrower or any Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, tangible or intangible.
"PROVEN RESERVES" means, at any particular time, the estimated
quantities of Hydrocarbons which geological and engineering data demonstrate
with reasonable certainty to be recoverable in future years from known
reservoirs attributable to Oil and Gas Properties included or to be included in
the Borrowing Base under then existing economic and operating conditions (i.e.,
prices and costs as of the date the estimate is made).
"REFERENCE RATE" means a fluctuating interest rate per annum as shall
be in effect from time-to-time equal to the rate of interest publicly announced
by Union Bank of California, N.A., as its reference rate, whether or not any
Borrower has notice thereof.
"REGISTER" has the meaning set forth in Section 9.1(d).
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, as the same may be amended or supplemented from time to
time.
"REIMBURSEMENT OBLIGATIONS" means all of the obligations of the
Borrowers set forth in Section 2.3(d).
"RELEASE OF HAZARDOUS SUBSTANCES" shall mean any emission, spill,
release, disposal, or discharge (except in accordance with the Requirement of
Law or pursuant to a valid permit, license, certificate, or approval of the
relevant Governmental Authority) of any Hazardous Substance into or upon (a) the
air, (b) soils or any improvements located thereon, (c) surface water or
groundwater, or (d) the sewer or septic system, or the waste treatment, storage,
or disposal system servicing any Property of any Borrower.
"REQUIRED LENDERS" shall mean, at any time, Lenders holding at least
66-2/3% of the then Loan Balance and the L/C Exposure of the Lenders at such
time, or, if there is no Loan Balance and no L/C Exposure is outstanding at such
time, Lenders having at least 66-2/3% of the aggregate amount of the Commitments
at such time.
16
"REQUIREMENT OF LAW" shall mean, as to any Person, the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any applicable law, treaty, ordinance, order,
judgment, rule, decree, regulation, or determination of an arbitrator, court, or
other Governmental Authority, including, without limitation, rules, regulations,
orders, and requirements for permits, licenses, registrations, approvals, or
authorizations, in each case as such now exist or may be hereafter amended and
are applicable to or binding upon such Person or any of its Property or to which
such Person or any of its Property is subject.
"RESPONSIBLE OFFICER" shall mean, as to any Person, its President,
Chief Executive Officer, Chief Financial Officer or any Vice President.
"RESTRICTED PAYMENT" shall mean, with respect to any Person, (a) any
dividends or other distributions (in cash, property, or otherwise) on, or any
payment for the purchase, redemption, or other acquisition of, any shares of any
capital stock or other equity interests (including partnership interests and
membership interests) of such Person, other than dividends payable in such
Person's stock or other equity interests or (b) principal or interest payments
(in cash, property or otherwise) on or redemptions of subordinated debt of such
Person.
"SECURITY AGREEMENT" shall mean the Amended and Restated Security
Agreement executed by the Borrowers in favor of the Agent in substantially the
form of the attached Exhibit G.
"SECURITY AGREEMENTS (STOCK PLEDGE)" shall mean collectively, the
Amended and Restated Security Agreement Security Agreement (Stock Pledge)
executed by the Parent and the Security Agreement (Stock Pledge) executed by
Edge Exploration in favor of the Agent in substantially the form of the attached
Exhibit H.
"SECURITY INSTRUMENTS" shall mean the security instruments executed and
delivered in satisfaction of the condition set forth in Section 3.1(a)(viii),
and all other documents and instruments at any time executed as security for all
or any portion of the Obligations (subject to the provisions of Section 7.3) of
each of the Borrowers or any Subsidiary or other Affiliate of any Borrower owing
to the Agent or any Lender or any branch, Subsidiary or other Affiliate of the
Agent or any Lender, as such instruments may be amended, restated, or
supplemented from time to time.
"SUBSIDIARY" of a Person shall mean any corporation, association,
partnership or other business entity of which more than 50% of the outstanding
shares of capital stock (or other equivalent interests) having by the terms
thereof ordinary voting power under ordinary circumstances to elect a majority
of the board of directors or Persons performing similar functions (or, if there
are no such directors or Persons, having general voting power) of such entity
(irrespective of whether at the time capital stock (or other equivalent
interests) of any other class or classes of such entity shall or might have
voting power upon the occurrence of any contingency) is
17
at the time directly or indirectly owned or controlled by such Person, by such
Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person.
"UCC" shall mean the Uniform Commercial Code as from time to time in
effect in the State of Texas.
1.3 UNDEFINED FINANCIAL ACCOUNTING TERMS. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Lenders hereunder shall
(unless otherwise disclosed to the Lenders in writing at the time of delivery
thereof) be prepared, in accordance with GAAP applied on a basis consistent with
those used in the preparation of the latest financial statements furnished to
the Lenders hereunder. All calculations made for the purposes of determining
compliance with this Agreement shall (except as otherwise expressly provided
herein) be made by application of GAAP applied on a basis consistent with those
used in the preparation of the annual or quarterly financial statements
furnished to the Lenders pursuant to Sections 5.2 and 5.3 hereof most recently
delivered prior to or concurrently with such calculations (or, prior to the
delivery of the first financial statements under Sections 5.2 and 5.3 hereof,
used in the preparation of the Financial Statements). In addition, all
calculations and defined accounting terms used herein shall, unless expressly
provided otherwise, when referring to any Person, refer to such Person on a
consolidated basis and mean such Person and its consolidated subsidiaries.
1.4 REFERENCES. References in this Agreement to Schedule,
Exhibit, Article, or Section numbers shall be to Schedules, Exhibits, Articles,
or Sections of this Agreement, unless expressly stated to the contrary.
References in this Agreement to "hereby," "herein," "hereinafter,"
"hereinabove," "hereinbelow," "hereof," "hereunder" and words of similar import
shall be to this Agreement in its entirety and not only to the particular
Schedule, Exhibit, Article, or Section in which such reference appears.
1.5 ARTICLES AND SECTIONS. This Agreement, for convenience
only, has been divided into Articles and Sections; and it is understood that the
rights and other legal relations of the parties hereto shall be determined from
this instrument as an entirety and without regard to the aforesaid division into
Articles and Sections and without regard to headings prefixed to such Articles
or Sections.
1.6 NUMBER AND GENDER. Whenever the context requires,
reference herein made to the single number shall be understood to include the
plural; and likewise, the plural shall be understood to include the singular.
Definitions of terms defined in the singular or plural shall be equally
applicable to the plural or singular, as the case may be, unless otherwise
indicated. Words denoting sex shall be construed to include the masculine,
feminine and neuter, when such construction is appropriate; and specific
enumeration shall not exclude the general but shall be construed as cumulative.
18
1.7 COMPUTATION OF TIME PERIODS. In the Loan Documents in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
1.8 INCORPORATION OF SCHEDULES AND EXHIBITS. The Exhibits
attached to this Agreement are incorporated herein and shall be considered a
part of this Agreement for all purposes.
ARTICLE II
TERMS OF FACILITY
2.1 REVOLVING LINE OF CREDIT. (a) Upon the terms and
conditions and relying on the representations and warranties contained in this
Agreement, the Lenders severally agree, during the Commitment Period, to make
Loans to the Borrowers, in immediately available funds, to or for the benefit of
the Borrower requesting such Loans, from time to time on any Business Day
designated by such Borrower following receipt by the Agent of a Borrowing
Request from such Borrower in accordance with Section 2.2(a); provided, however,
that no Loan shall be made if after giving effect to such Loan, the sum of the
Loan Balance and the L/C Exposure then outstanding, would exceed the lesser of
(i) the aggregate Commitments and (ii) the Borrowing Base.
(b) Subject to the terms of this Agreement, during the
Commitment Period, the Borrowers may borrow, repay, and reborrow Loans and may
Convert Loans of one type into Loans of another type or Continue Loans with one
Interest Period with a different Interest Period. Except for prepayments made
pursuant to Section 2.11, each Borrowing or repayment shall be in an aggregate
amount at least equal to (i) in the case of Floating Loans, $250,000 and in
integral multiples of $50,000 in excess thereof, and (ii) in the case of LIBO
Rate Loans, $500,000 and in integral multiples of $100,000 in excess thereof.
2.2 METHOD OF BORROWING.
(a) NOTICE. Each Loan shall be made pursuant to a Borrowing
Request (or by telephone notice promptly confirmed in writing by a Borrowing
Request), given by such Borrower to the Agent not later than 10:00 a.m., Dallas,
Texas time (i) at least three Business Day before the date of the proposed Loan,
in the case of a LIBO Rate Loan, and (ii) at least one Business Day before the
date of the proposed Loan, in the case of a Floating Rate Loan, by the
applicable Borrower to the Agent. Each Borrowing Request shall be in writing or
by telecopier, telex, or telephone, confirmed immediately in writing specifying
(v) name of the Borrower requesting the Loan, (w) the requested date of such
Loan (which shall be a Business Day), (x) whether the requested Loan is a LIBO
Rate Loan or a Floating Rate Loan (y) the requested aggregate amount of such
Loan, and (z) if such Loan is to be a LIBO Rate Loan, the requested Interest
Period for such Loan.
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(b) CONVERSIONS AND CONTINUATIONS. In order to elect to
Convert or Continue a Loan under this Section, the Borrower requesting such
Conversion or Continuation shall deliver an irrevocable Notice of Conversion or
Continuation to the Agent (or give telephone notice promptly confirmed in
writing by a Notice of Conversion or Continuation) not later than 10:00 a.m.,
Dallas, Texas time (i) at least one Business Day before the proposed conversion
date in the case of a Conversion to a Floating Rate Loan, and (ii) at least
three Business Days in advance of such requested Conversion or Continuation date
in the case of a Conversion to, or a Continuation of, a LIBO Rate Loan. Each
such Notice of Conversion or Continuation shall be in writing or by telex,
telecopier, or telephone, confirmed immediately in writing specifying (v) name
of the Borrower requesting the Conversion or Continuation, (w) the requested
date of such Conversion or Continuation (which shall be a Business Day), (x) the
amount of the Loan to be Converted or Continued and whether such Loan is a LIBO
Rate Loan or a Floating Rate Loan, (y) whether a Conversion or Continuation is
requested, and if a Conversion, into what type of Loan, and (z) in the case of a
Conversion to, or a Continuation of, a LIBO Rate Loan, the requested Interest
Period. Notwithstanding the foregoing, the Borrowers may not Convert LIBO Rate
Loans to Floating Rate Loans prior to the end of the applicable Interest Period
for such LIBO Rate Loans.
(c) NOTICES IRREVOCABLE. Each Borrowing Request and Notice of
Conversion or Continuation delivered by a Borrower shall be irrevocable and
binding on such Borrower. In the case of any Loan for which the related
Borrowing Request or Notice of Conversion or Continuation specifies is to be a
LIBO Rate Loan, the Borrowers shall indemnify the Agent and the Lenders against
any loss, out-of-pocket cost or expense incurred by the Agent or the Lenders, as
applicable, as a result of any failure to fulfill on or before the date
specified in such Borrowing Request or such Notice of Conversion or Continuation
for such Loan the applicable conditions set forth in Article III, including,
without limitation, any loss (including any loss of anticipated profits), cost
or expense incurred by reason of the liquidation or re-employment of deposits or
other funds acquired by the Agent or Lenders to fund the Loan to be made by the
Lenders when such Loan, as a result of such failure, is not made on such date.
(d) NOTE. The indebtedness of the Borrowers to the Lenders
resulting from Loans owing to the Lenders shall be evidenced by the Notes from
the Borrowers payable to the order of the Lenders.
(e) FUNDING BY LENDERS. Not later than 12:00 p.m., Dallas,
Texas time, as the case may be, on the date specified for each Loan, each Lender
shall make available an amount equal to its Percentage Share of the Loans to be
made on such date to the Agent, at an account designated by the Agent, in
immediately available funds, for the account of the applicable Borrower. After
the Agent's receipt of such funds and upon fulfillment of the applicable
conditions set forth in Article III, the Agent will make such funds available to
such Borrower at its account with the Agent. The failure of any Lender to make
any Loan required to be made by it hereunder shall not relieve any other
20
Lender of its obligation to make any Loan required to be made by it, and no
Lender shall be responsible for the failure of any other Lender to make any
Loan.
2.3 LETTER OF CREDIT FACILITY.
(a) ISSUANCE. Upon the terms and conditions and relying on the
representations and warranties contained in this Agreement, the Agent, as
issuing bank for the Lenders, agrees from the date of this Agreement until the
date which is thirty days prior to the Final Maturity Date, to issue on behalf
of the Lenders in their respective Percentage Shares, Letters of Credit for the
account of any Borrower and to renew, increase and extend such Letters of
Credit. Letters of Credit shall be issued, renewed, increased or extended from
time to time on any Business Day designated by the Borrower requesting such
Letter of Credit following the receipt in accordance with the terms hereof by
the Agent of the written (or oral, confirmed promptly in writing) request by a
Responsible Officer of such Borrower therefor and a Letter of Credit
Application. Letters of Credit shall be issued in such amounts as the Borrowers
may request; provided, however, that the Agent shall not be obligated to issue,
increase, extend, or renew any Letter of Credit if (i) the Letter of Credit
shall have an expiration date which is subsequent to the Final Maturity Date,
(ii) the Letter of Credit shall have an expiration date more than one year after
the issuance thereof; provided that, any such Letter of Credit with a one-year
tenor may expressly provide that it is renewable at the option of the Agent for
additional one-year periods, (iii) the Letter of Credit is in form and substance
not acceptable to the Agent in its sole discretion, (iv) the Borrower requesting
such Letter of Credit has not delivered to the Agent a completed and executed
Letter of Credit Application, (v) the Letter of Credit is not governed by the
Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500 or any successor to such
publication, (vi) the L/C Exposure would exceed $500,000, or (vii) after giving
effect to the issuance, increase, renewal, or extension of such Letter of
Credit, the sum of the L/C Exposure and the Loan Balance then outstanding, would
exceed the lesser of (A) the aggregate Commitments and (B) the Borrowing Base
(b) LENDER PARTICIPATION. Upon the date of the issuance,
extension, renewal or increase of a Letter of Credit, the Agent shall be deemed
to have sold to each Lender and each Lender shall have been deemed to have
purchased from the Agent a participation in the Agent's obligation with respect
to the relevant Letter of Credit, equal to such Lender's Percentage Share at
such date. Such sale and purchase shall otherwise be in accordance with the
terms of this Agreement. The Agent shall promptly notify each such participant
Lender by telex, telephone, or telecopy (confirmed promptly in writing) of each
Letter of Credit issued, increased, renewed or extended and the actual dollar
amount of such Lender's participation in such Letter of Credit.
(C) INDEMNIFICATION. EACH LENDER AGREES TO SEVERALLY INDEMNIFY
THE AGENT, AS THE ISSUER OF EACH LETTER OF CREDIT, AND THE OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND
21
AFFILIATES OF THE AGENT (TO THE EXTENT NOT REIMBURSED BY THE BORROWERS AND
WITHOUT LIMITING THE OBLIGATION OF THE BORROWERS TO DO SO), RATABLY ACCORDING TO
THE PERCENTAGE SHARE OF SUCH LENDER AT THE TIME OF ISSUANCE OF SUCH LETTER OF
CREDIT, FROM AND AGAINST ANY AND ALL LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
OF ANY KIND WHATSOEVER WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY
TIME FOLLOWING THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST
THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN ANY WAY
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR SUCH LETTER OF CREDIT OR ANY
ACTION TAKEN OR OMITTED BY THE AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING, WITHOUT
LIMITATION, ANY LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED
OR ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE
AGENT AS THE ISSUER OF SUCH LETTER OF CREDIT OR ANY OF ITS OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES; PROVIDED THAT NO LENDER
(OTHER THAN THE AGENT AS THE ISSUER OF A LETTER OF CREDIT) SHALL BE LIABLE FOR
THE PAYMENT OF ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING
FROM THE GROSS NEGLIGENCE WHETHER SOLE OR CONCURRENT OR WILLFUL MISCONDUCT OF
THE AGENT AS THE ISSUER OF A LETTER OF CREDIT. THE AGREEMENTS IN THIS SECTION
2.3(C) SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE
TERMINATION OF THIS AGREEMENT.
(d) REIMBURSEMENT. Each of the Borrowers hereby agrees to pay
on demand to the Agent for the benefit of the Lenders in respect of each Letter
of Credit an amount equal to any amount paid by the Agent under or in respect of
such Letter of Credit. In the event the Agent makes a payment pursuant to a
request for draw presented under a Letter of Credit and such payment is not
promptly reimbursed by the Borrowers upon demand, the Agent shall give notice of
such payment to the Lenders, and each Lender shall promptly reimburse the Agent
for such Lender's Percentage Share of such payment, and such reimbursement shall
be deemed for all purposes of this Agreement to constitute a Floating Rate Loan
to such Borrower who requested such Letter of Credit from such Lender. If such
reimbursement is not made by any Lender to the Agent on the same day on which
22
the Agent shall have made payment on any such draw, such Lender shall pay
interest thereon to the Agent at a rate per annum equal to the Federal Funds
Rate. Each of the Borrowers hereby unconditionally and irrevocably authorizes,
empowers, and directs the Agent and the Lenders to record and otherwise treat
such payment under a Letter of Credit not immediately reimbursed by the
Borrowers as a Floating Rate Loan to the Borrowers.
(e) OBLIGATIONS UNCONDITIONAL. The obligations of the
Borrowers under this Agreement in respect of each Letter of Credit shall be
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, notwithstanding the following
circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit Application or any documents in connection with such
application;
(ii) any amendment or waiver of or any consent to departure
from any Letter of Credit Application or any documents in connection
with such application;
(iii) the existence of any claim, set-off, defense or other
right which a Borrower may have at any time against any beneficiary or
transferee of such Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Agent, any
Lenders or any other person or entity, whether in connection with this
Agreement, the transactions contemplated in this Agreement or in the
Letter of Credit Letter Application or any documents in connection with
such application or any unrelated transaction;
(iv) any statement or any other document presented under such
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect to the extent the Agent would not be liable
therefor pursuant to the following Section 2.3(f);
(v) payment by the Agent under such Letter of Credit against
presentation of a draft or certificate which does not comply with the
terms of such Letter of Credit; or
(vi) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing;
PROVIDED, HOWEVER, that nothing contained in this Section 2.3(e) shall be deemed
to constitute a waiver of any remedies of the Borrowers in connection with the
Letters of Credit.
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(f) LIABILITY OF AGENT. Each of the Borrowers assumes all
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Agent nor
any of its officers or directors shall be liable or responsible for:
(i) the use which may be made of any Letter of Credit or any
acts or omissions of any beneficiary or transferee in connection
therewith;
(ii) the validity, sufficiency or genuineness of documents,
or of any endorsement thereon, even if such documents should prove to
be in any or all respects invalid, insufficient, fraudulent or forged;
(iii) payment by the Agent against presentation of documents
which do not comply with the terms of a Letter of Credit, including
failure of any documents to bear any reference or adequate reference to
the relevant Letter of Credit; or
(iv) any other circumstances whatsoever in making or failing
to make payment under any Letter of Credit (INCLUDING THE AGENT'S OWN
NEGLIGENCE),
EXCEPT that the Borrowers shall have a claim against the Agent, and the Agent
shall be liable to, and shall promptly pay to, the Borrowers, to the extent of
any direct, as opposed to consequential, damages suffered by the Borrowers which
the Borrowers prove were caused by (A) the Agent's willful misconduct or gross
negligence in determining whether documents presented under a Letter of Credit
comply with the terms of such Letter of Credit or (B) the Agent's willful
failure to make lawful payment under any Letter of Credit after the presentation
to it of a draft and certificate strictly complying with the terms and
conditions of such Letter of Credit.
In furtherance and not in limitation of the foregoing, the Agent may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
(g) CASH COLLATERAL ACCOUNT. If a Borrower is required to
deposit funds in the Cash Collateral Account pursuant to this Agreement, then
the Borrowers and the Agent shall establish the Cash Collateral Account and the
Borrowers shall execute any documents and agreements, including the Agent's
standard form assignment of deposit accounts, that the Agent requests in
connection therewith to establish the Cash Collateral Account and grant to the
Agent, a security interest in such account and the funds therein. Each of the
Borrowers hereby pledges to the Agent and grants to the Agent a security
interest in the Cash Collateral Account, whenever established, all funds held in
the Cash Collateral Account from time to time, and all proceeds thereof as
security for the payment of the Obligations.
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(h) FUNDS OF CASH COLLATERAL ACCOUNT. Funds held in the Cash
Collateral Account shall be held as cash collateral for obligations with respect
to Letters of Credit and promptly applied by the Agent to any reimbursement or
other obligations under Letters of Credit that exist or occur. To the extent
that any surplus funds are held in the Cash Collateral Account above the L/C
Exposure during the existence of a Default or Event of Default, the Agent may
(i) hold such surplus funds in the Cash Collateral Account as cash collateral
for the Obligations or (ii) apply such surplus funds to any Obligations in its
sole discretion. If no Default exists, the Agent shall release to the Borrowers
at the Borrowers' written request any funds held in the Cash Collateral Account
above the amounts required by this Agreement.
(i) INVESTMENTS OF FUNDS. Funds held in the Cash Collateral
Account shall be invested in Liquid Investments maintained with, and under the
sole dominion and control of, the Agent or in another investment if mutually
agreed upon by the Borrowers and the Agent, but the Agent shall have no other
obligation to make any other investment of the funds therein. The Agent shall
exercise reasonable care in the custody and preservation of any funds held in
the Cash Collateral Account and shall be deemed to have exercised such care if
such funds are accorded treatment substantially equivalent to that which the
Agent accords its own property, it being understood that the Agent shall not
have any responsibility for taking any necessary steps to preserve rights
against any parties with respect to any such funds.
2.4 USE OF LOAN PROCEEDS AND LETTERS OF CREDIT. (a) On the
Closing Date, each of the Lenders shall pay to Existing Lenders an amount equal
to the outstanding principal balance under the Existing Credit Agreement times
such Lender's Percentage Share. Such Existing Indebtedness under the Existing
Credit Agreement shall be assigned, renewed, extended, and rearranged pursuant
to the terms of this Agreement and the Notes and shall, for all purposes, be
deemed a Borrowing hereunder;
(b) proceeds of all subsequent Loans shall be used for general
corporate purposes of a Borrower, including, without limitation, costs of
acquiring, exploring on and developing Oil and Gas Properties and general
working capital needs; and
(c) Letters of Credit shall be used solely for general
corporate purposes of a Borrower; provided, however, no Letter of Credit may be
used in lieu or in support of stay or appeal bonds.
2.5 INTEREST; COMPUTATIONS. Subject to the terms of this
Agreement (including, without limitation, Section 2.20), interest on the Loans
shall accrue and be payable at a rate per annum equal to the Floating Rate for
each Floating Rate Loan and the Adjusted LIBO Rate for each LIBO Rate Loan.
Interest on all Floating Rate Loans shall be computed on the basis of a year of
365 or 366 days, as the case may be, and actual days elapsed (including the
first day but excluding the last day) during the period for which payable.
Interest on all LIBO Rate Loans shall be computed
25
on the basis of a year of 360 days, and actual days elapsed (including the first
day but excluding the last day) during the period for which payable.
Notwithstanding the foregoing, interest on past-due principal and, to the extent
permitted by applicable law, past-due interest, shall accrue at the Default
Rate, computed on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed (including the first day but excluding the last day)
during the period for which payable, and shall be payable upon demand by the
Lenders at any time as to all or any portion of such interest. In the event that
a Borrower fails to select the duration of any Interest Period for any LIBO Rate
Loan within the time period and otherwise as provided herein, such Loan (if
outstanding as a LIBO Rate Loan) will be automatically converted into a Floating
Rate Loan on the last day of the then current Interest Period for such Loan or
(if outstanding as a Floating Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Floating Rate Loan. Interest provided for herein
shall be calculated on unpaid sums actually advanced and outstanding pursuant to
the terms of this Agreement and only for the period from the date or dates of
such advances until repayment. All computations of interest based on the Federal
Funds Rate, and of fees shall be made by the Agent, on the basis of a year of
365 or 366 days, in each case for the actual number of days (including the first
day, but excluding the last day) occurring in the period for which such interest
or fees are payable. Each determination by the Agent of an interest rate or of
fees shall be conclusive and binding for all purposes, absent manifest error.
2.6 REPAYMENT OF LOANS AND INTEREST. Accrued and unpaid
interest on each outstanding Floating Rate Loan shall be due and payable monthly
commencing on the last day of October, 2000, and continuing on the last day of
each calendar month thereafter while any Floating Rate Loan remains outstanding,
the payment in each instance to be the amount of interest which has accrued and
remains unpaid in respect of the relevant Loan. Accrued and unpaid interest on
each outstanding LIBO Rate Loan shall be due and payable on the last day of the
Interest Period for such LIBO Rate Loan and, in the case of any Interest Period
in excess of three months, on the day of the third monthly anniversary following
the commencement of such Interest Period, the payment in each instance to be the
amount of interest which has accrued and remains unpaid in respect of the
relevant Loan. The Loan Balance, together with all accrued and unpaid interest
thereon, shall be due and payable at Commitment Termination Date. At the time of
making each payment hereunder or under the Notes, the Borrowers shall specify to
the Agent the Loans or other amounts payable by the Borrowers hereunder to which
such payment is to be applied. In the event a Borrower fails to so specify, or
if an Event of Default has occurred and is continuing, the Agent shall apply
such payment in accordance with Section 7.3.
2.7 OUTSTANDING AMOUNTS. The Loan Balance reflected by the
notations by the Lenders on their records shall be deemed rebuttably presumptive
evidence of the Loan Balance. The liability for payment of principal and
interest evidenced by the Notes shall be limited to principal amounts actually
advanced and outstanding pursuant to this Agreement and interest on such amounts
calculated in accordance with this Agreement.
26
2.8 TIME, PLACE, AND METHOD OF PAYMENTS. All payments required
pursuant to this Agreement or the Notes shall be made in lawful money of the
United States of America and in immediately available funds, shall be deemed
received by the Lenders on the next Business Day following receipt if such
receipt is after 2:00 p.m., Dallas, Texas time, as the case may be, on any
Business Day, and shall be made to the Agent at the address of its Applicable
Lending Office for Floating Rate Loans. Except as provided to the contrary
herein, if the due date of any payment hereunder or under the Notes 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; PROVIDED, however, that
if such extension would cause payment of interest on or principal of a LIBO Rate
Loan to be made in the next following calendar month, such payment shall be made
on the next preceding Business Day.
2.9 PRO RATA TREATMENT; ADJUSTMENTS. (a) Except to the extent
otherwise expressly provided herein, (i) each Loan and each issuance, renewal,
extension or increase of a Letter of Credit made pursuant to this Agreement
shall be from the Lenders pro rata in accordance with their Percentage Shares,
(ii) each payment by a Borrower of Commitment Fees shall be made for the account
of the Lenders pro rata in accordance with their respective Percentage Shares,
(iii) Facility Fees and Letter of Credit Fees shall be made for the account of
the Lenders in accordance with each Lender's Percentage Share of any increase in
the Commitments, the Borrowing Base or Letter of Credit issued (iv) each payment
of principal of Loans shall be made for the account of the Lenders pro rata in
accordance with their respective Percentage Shares of the Loan Balance, and (v)
each payment of interest on Loans shall be made for the account of the Lenders
pro rata in accordance with their Percentage Shares of the aggregate amount of
interest due and payable to the Lenders.
(b) The Agent shall distribute all payments with respect to
the Obligations to the Lenders promptly upon receipt in like funds as received.
In the event that any payments made hereunder by a Borrower prior to the
occurrence of an Event of Default are insufficient to satisfy in full the
Obligations due and payable at such time, such payments shall be applied (i)
first, to fees and expenses due the Agent pursuant to the terms of this
Agreement or any other Loan Document, (ii) second, to fees and expenses due the
Lenders pursuant to the terms of this Agreement or any other Loan Document,
(iii) third, to accrued interest, (iv) fourth, to the Loan Balance, (v) fifth,
to any other Obligations other than Hedging Obligations of the Borrower to the
Agent and/or Lenders, and (vi) last, to Hedging Obligations of the Borrower to
the Agent and/or Lenders.
(c) If any Lender (for purposes of this Section, a "BENEFITTED
LENDER") shall at any time receive any payment of all or part of its portion of
the Obligations, or receive any Collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Sections 7.1(f) or 7.1(g), or otherwise) in an amount
greater than such Lender was entitled to receive pursuant to the terms hereof,
such benefitted Lender shall purchase for cash from the other Lenders such
portion of the Obligations of such other Lenders or shall provide such other
Lenders with the benefits of any such Collateral or the proceeds thereof as
shall
27
be necessary to cause such benefitted Lender to share the excess payment or
benefits of such Collateral or proceeds with each of the Lenders according to
the terms hereof. If all or any portion of such excess payment or benefits is
thereafter recovered from such benefitted Lender, such purchase shall be
rescinded and the purchase price and benefits returned by such Lender, to the
extent of such recovery, but without interest. Each of the Borrowers agrees that
each such Lender so purchasing a portion of the Obligations of another Lender
may exercise all rights of payment (including, without limitation, rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion. If any Lender ever receives, by voluntary payment,
exercise of rights of set-off or banker's lien, counterclaim, cross-action or
otherwise, any funds of a Borrower to be applied to the Obligations, or receives
any proceeds by realization on or with respect to any Collateral, all such funds
and proceeds shall be immediately forwarded to the Agent for distribution in
accordance with the terms of this Agreement.
2.10 BORROWING BASE DETERMINATIONS.
(a) GENERALLY. The Borrowing Base in effect from time-to-time
shall represent the maximum amount of the Loans that may be outstanding at any
time. The Borrowing Base shall be determined in accordance with the standards
set forth in Section 2.10(d) and is subject to periodic redetermination pursuant
to Sections 2.10(b) and 2.10(c) and periodic reduction pursuant to Section
2.10(b)(v).
(b) CALCULATION OF BORROWING BASES.
(i) The Borrowers shall deliver to the Agent and each of the
Lenders on or before each March 15, beginning March 15, 2001, an
Independent Engineering Report evaluating the Mortgaged Properties of
the Borrowers as of January 1 of such calendar year, and such other
information as may be reasonably requested by any Lender with respect
to the Mortgaged Properties included or to be included in the Borrowing
Base. Within 30 days after the Agent and the Lenders' receipt of such
Independent Engineering Report and other information, the Agent shall
deliver to each Lender the Agent's recommendation for the redetermined
Borrowing Base. Within 15 days after the Lenders' receipt of the
Agent's recommendation, the Agent and the Lenders shall redetermine the
Borrowing Base in accordance with Section 2.10(d) and the Agent shall
promptly notify the Borrowers in writing of the amount of the Borrowing
Base as so redetermined.
(ii) The Borrowers shall deliver to the Agent and each Lender
on or before each September 15, beginning September 15, 2001, an
Internal Engineering Report evaluating the Mortgaged Properties of the
Borrowers as of July 1 of such calendar year, and such other
information as may be reasonably requested by the Agent or any Lender
with respect to the Mortgaged Properties included or to be
28
included in the Borrowing Base. Within 30 days after the Agent and the
Lenders' receipt of such Internal Engineering Report and other
information, the Agent shall deliver to each Lender the Agent's
recommendation for the redetermined Borrowing Base. Within 15 days
after the Lenders' receipt of the Agent's recommendation, the Agent and
the Lenders shall redetermine the Borrowing Base in accordance with
Section 2.10(d) and the Agent shall promptly notify the Borrowers in
writing of the amount of the Borrowing Base as so redetermined.
(iii) In the event that a Borrower does not furnish to the
Agent and the Lenders the Independent Engineering Report, Internal
Engineering Report or other information specified in clauses (i) and
(ii) above by the date specified therein, the Agent and the Lenders may
nonetheless redetermine the Borrowing Base and redesignate the
Borrowing Base from time-to-time thereafter in their sole discretion
until the Agent and the Lenders receive the relevant Independent
Engineering Report, Internal Engineering Report, or other information,
as applicable, whereupon the Agent and the Lenders shall redetermine
the Borrowing Base as otherwise specified in this Section 2.10.
(iv) Each delivery of an Engineering Report by the Borrowers
to the Agent and the Lenders shall constitute a representation and
warranty by the Borrowers to the Agent and the Lenders that (A) the
Borrowers, as applicable, own the Oil and Gas Properties specified
therein free and clear of any Liens (except Permitted Liens), and (B)
on and as of the date of such Engineering Report each Oil and Gas
Property described as "proved developed" therein was developed for oil
and gas, and the xxxxx pertaining to such Oil and Gas Properties that
are described therein as producing xxxxx ("XXXXX"), were each producing
oil and gas in paying quantities, except for Xxxxx that were unitized
as water or gas injection xxxxx or as water disposal xxxxx.
(v) The Borrowing Base, as established by the procedures set
forth in this Section 2.10(b) and as such Borrowing Base may be
redetermined periodically, shall automatically and permanently reduce
in equal amounts on a monthly basis on the last day of each calendar
month commencing with, unless the parties otherwise agree, the calendar
month immediately following each redetermination (except that the first
such reduction occurring after the date of this Agreement shall occur
on October 31, 2000). Concurrent with each redetermination, the Agent
and the Lenders shall establish the amount of the monthly Borrowing
Base reduction that shall apply until the next redetermination. The
initial monthly Borrowing Base reduction amount shall be equal to
$300,000 and shall commence on October 31, 2000.
29
(vi) For the period from and including the date of this
Agreement to and including the first redetermination, the amount of the
Borrowing Base shall be $5,000,000.
(c) INTERIM REDETERMINATION. In addition to the Borrowing Base
redeterminations provided for in Section 2.10(b), the Agent and the Lenders may,
either in their sole discretion or at the request of a Borrower and based on
such information as the Agent and the Lenders deem relevant (but in accordance
with Section 2.10(d)), make one additional redetermination of the Borrowing Base
during any six-month period. The party requesting the redetermination shall give
the other party at least 10 days' prior written notice that a redetermination of
the Borrowing Base pursuant to this paragraph (c) is to be performed. In
connection with any redetermination of the Borrowing Base under this Section
2.10(c), each of the Borrowers shall provide the Agent and the Lenders with such
information regarding such Borrower's business (including, without limitation,
its Oil and Gas Properties, the Proven Reserves, and production relating
thereto) as the Agent or any Lender may request, including, in the case of
requests for an increase to the Borrowing Base of $1,000,000 or more, an updated
Independent Engineering Report. The Agent shall promptly notify the Borrowers in
writing of each redetermination of the Borrowing Base pursuant to this Section
2.10(c) and the amount of the Borrowing Base as so redetermined.
(d) STANDARDS FOR REDETERMINATION. Each redetermination of the
Borrowing Base by the Agent and the Lenders pursuant to this Section 2.10 shall
be made (i) in the sole discretion of the Agent and the Lenders (but in
accordance with the other provisions of this Section 2.10(d)), (ii) in
accordance with the Agent and the Lenders' customary internal standards and
practices for valuing and redetermining the value of Oil and Gas Properties in
connection with reserve based oil and gas loan transactions, (iii) in
conjunction with the most recent Independent Engineering Report or Internal
Engineering Report, as applicable, or other information received by the Agent
and the Lenders relating to the Proven Reserves of any Borrower, and (iv) based
upon the estimated value of the Proven Reserves owned by the Borrowers and
pledged as collateral security for the Obligations as determined by the Agent
and the Lenders. In valuing and redetermining the Borrowing Base, the Agent and
the Lenders may also consider the business, financial condition, and
Indebtedness obligations of the Borrowers and such other factors as the Agent
and the Lenders customarily deem appropriate. In that regard, each of the
Borrowers acknowledges that the determination of the Borrowing Base contains an
equity cushion (market value in excess of loan value), which is essential for
the adequate protection of the Agent and the Lenders. No Proven Reserves shall
be included or considered for inclusion in the Borrowing Base unless the Agent
and the Lenders shall have received, at the Borrowers' expense, evidence of
title satisfactory in form and substance to the Agent that the Agent has an
Acceptable Security Interest in the Oil and Gas Properties relating thereto
pursuant to the Security Instruments. At all times after the Agent has given the
Borrowers notification of a redetermination of the Borrowing Base under this
Section 2.10, the Borrowing Base shall be equal to the redetermined amount or
such lesser amount designated by
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each of the Borrowers and disclosed in writing to the Agent and the Lenders
until the Borrowing Base is subsequently redetermined in accordance with this
Section 2.10.
2.11 PREPAYMENTS. The Borrowers shall have no right to prepay
any principal amount of any Advance except as provided in Section 2.11.
(a) OPTIONAL. Each of the Borrowers may elect to prepay any
of the Loans, after giving prior written notice to the Agent of such election by
(i) 10:00 a.m. (Dallas, Texas time) three Business days before such prepayment
date in the case of LIBO Rate Loans and (ii) 10:00 a.m. (Dallas, Texas time) one
Business Day before such prepayment date in the case of Floating Rate Loans, in
each case stating the proposed date and aggregate principal amount of such
prepayment. If any such notice is given, such Borrower shall prepay such Loans
in whole or ratably in part in an aggregate principal amount equal to the amount
specified in such notice, together with accrued interest to the date of such
prepayment on the principal amount prepaid and amounts, if any, required to be
paid pursuant to Sections 2.24 and 2.21 as a result of such prepayment being
made on such date; PROVIDED, however, that each partial prepayment of principal
shall be in an aggregate principal amount as set forth in Section 2.1(b).
(b) MANDATORY.
(i) If at any time the sum of the Loan Balance and the L/C
Exposure exceeds the lesser of (A) the aggregate Commitments and (B)
the Borrowing Base then in effect (other than due to a monthly
reduction of the Borrowing Base as provided for in Section 2.10(b) or
an optional reduction in the Commitments pursuant to Section 2.12), the
Borrowers shall, within 10 days of notice from the Agent of such
occurrence, (x) repay the Lenders an amount equal to the amount of such
excess, including any unpaid accrued interest on the amount prepaid,
(y) indicate its election to pay the Lenders an amount equal to the
amount of such excess, including any unpaid accrued interest on the
amount to be prepaid, in six equal consecutive monthly installments
with the first such installment being due and payable at the end of the
calendar month in which such election is made, which payments shall be
in addition to other principal payments due under this Agreement, or
(z) provide additional Collateral, of character and value satisfactory
to the Lenders in their sole discretion, to secure the amount of such
excess by the execution and delivery to the Lenders of Security
Instruments in form and substance satisfactory to the Lenders.
(ii) If at any time the sum of the Loan Balance and the L/C
Exposure exceeds the lesser of (A) aggregate Commitments and (B) the
Borrowing Base, due to a monthly reduction of the Borrowing Base as
provided for in Section 2.10(b) or due to an optional reduction in the
Commitments pursuant to Section 2.12, the
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Borrowers shall immediately repay the Lenders an amount equal to the
amount of such excess.
(iii) In the event that a mandatory prepayment is required
under this Section and the Loan Balance is less than the amount
required to be prepaid, the Borrowers shall repay the entire Loan
Balance and deposit into the Cash Collateral Account, as additional
collateral securing the Obligations, an amount of cash, in immediately
available funds, equal to the L/C Exposure minus the lesser of (A) the
aggregate Commitments and (B) the Borrowing Base.
(c) RATABLE PAYMENTS; EFFECT OF NOTICE. Each payment of any
Loan pursuant to this Section 2.11 or any other provision of this Agreement
shall be made in a manner such that all Loans comprising part of the same
Borrowing are paid in whole or ratably in part. All notices given pursuant to
this Section 2.11 shall be irrevocable and binding upon the Borrowers.
2.12 REDUCTION OF THE COMMITMENTS. The Borrowers shall have
the right, upon at least three Business Days' irrevocable notice to the Agent,
to terminate in whole or reduce ratably in part the unused portion of the
Commitments; PROVIDED that each partial reduction shall be in the aggregate
amount of $1,000,000 or in integral multiples of $1,000,000 in excess thereof.
Any reduction or termination of the Commitments pursuant to this Section 2.12
shall be permanent, with no obligation of the Lenders to reinstate such
Commitments and the commitment fees provided for in Section 2.13 shall
thereafter be computed on the basis of the Commitments, as so reduced.
2.13 COMMITMENT FEE. In addition to interest on the Notes as
provided herein and other fees payable hereunder and to compensate the Lenders
for maintaining funds available, the Borrowers shall pay to the Agent, for the
account of the Lenders, in immediately available funds, a commitment fee on the
average daily amount by which the lesser of (a) the Borrowing Base and (b) the
aggregate Commitments, exceeds the sum of (i) the Loan Balance and (ii) the L/C
Exposure, from the date of this Agreement until the Commitment Termination Date
at the rate of .375% per annum. The fee payable pursuant to the preceding
sentence is due quarterly in arrears on the last day of each March, June,
September and December commencing December 31, 2000, and on the Commitment
Termination Date.
2.14 FACILITY FEES. The Borrowers agree to pay to the Agent
the Facility Fees described in the letter dated October 6, 2000 from the
Borrowers to the Agent.
2.15 BORROWING BASE INCREASE FEES. The Borrowers agree to pay
to the Agent for the account of the Lenders in connection with any incremental
increase of the Borrowing Base to an amount that exceeds the level of the
Borrowing Base then in effect, a Borrowing Base increase fee on the amount of
such incremental increase. The Borrowing Base increase fee shall be in an amount
equal to .50% multiplied by the amount of the incremental increase to the
extent, but only
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to the extent that such incremental increase amount exceeds the level of
Borrowing Base then in effect at such time, such Borrowing Base increase fee to
be due and payable on the date that the increase to the Borrowing Base becomes
effective.
2.16 LETTER OF CREDIT FEE. In addition to interest on the
Notes as provided herein and Commitment Fees and Facility Fees payable
hereunder, the Borrowers agree to pay to the Agent, for the account of the
Lenders, on the date of issuance or renewal of each Letter of Credit, a non-
refundable Letter of Credit fee equal to the greater of (a) $500 or (b) 2.00%
per annum, on the face amount of such Letter of Credit and for the period for
which such Letter of Credit is issued or renewed. The Borrowers also agree to
pay on demand to the Agent, for its own account as the issuer of the Letters of
Credit, its customary letter of credit transactional fees, including, without
limitation, amendment fees, payable with respect to each Letter of Credit.
2.17 ENGINEERING FEE. In addition to interest on the Notes as
provided herein and all other fees payable under and to compensate the Agent for
the costs of evaluating the Mortgaged Properties and reviewing the Reserve
Reports, the Borrowers shall pay to the Agent, in immediately available funds,
on the date of each redetermination of the Borrowing Base, an engineering fee in
the amount of $5,000.
2.18 LOANS TO SATISFY OBLIGATIONS OF BORROWER. The Lenders
may, by unanimous consent, but shall not be obligated to, make Loans for the
benefit of a Borrower and apply proceeds thereof to the satisfaction of any
condition, warranty, representation, or covenant of such Borrower contained in
this Agreement or any other Loan Document. Any such Loan shall be evidenced by
the Notes and shall be made as a Floating Rate Loan.
2.19 SECURITY INTEREST IN ACCOUNTS; RIGHT OF OFFSET. As
security for the payment and performance of the Obligations, each of the
Borrowers hereby transfers, assigns, and pledges to the Agent, for the benefit
of the Lenders, and grants to the Agent, for the benefit of the Lenders, a
security interest in all funds of each of the Borrowers now or hereafter or from
time to time on deposit with the Agent or any Lender, with such interest of the
Lenders to be retransferred, reassigned, and/or released by the Agent and each
Lender, as the case may be, at the expense of the Borrowers upon payment in full
and complete performance by the Borrowers of all Obligations. All remedies as
secured party or assignee of such funds shall be exercisable by the Agent and
each Lender upon the occurrence of any Event of Default, regardless of whether
the exercise of any such remedy would result in any penalty or loss of interest
or profit with respect to any withdrawal of funds deposited in a time deposit
account prior to the maturity thereof. Furthermore, each of the Borrowers hereby
grants to the Agent and each Lender the right, exercisable at such time as any
Obligation shall mature, whether by acceleration of maturity or otherwise, of
offset or banker's lien against all funds of each of the Borrowers now or
hereafter or from time to time on deposit with the Agent and each Lender,
regardless of whether the exercise of any such remedy would result in any
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penalty or loss of interest or profit with respect to any withdrawal of funds
deposited in a time deposit account prior to the maturity thereof.
2.20 GENERAL PROVISIONS RELATING TO INTEREST. (a) It is the
intention of the parties hereto to comply strictly with the usury laws of the
State of Texas to the extent applicable to each Lender and the United States of
America. In this connection, there shall never be collected, charged, or
received on the sums advanced hereunder interest in excess of that which would
accrue at the Highest Lawful Rate. For purposes of Tex. Fin. Code Xxx. Section
303.301 (Xxxxxx 1998), each of the Borrowers agrees that the Highest Lawful Rate
shall be the "indicated (weekly) rate ceiling" as defined in such Article,
provided that the Agent and the Lenders may also rely, to the extent permitted
by applicable laws of the State of Texas or the United States of America, on
alternative maximum rates of interest under other laws of the State of Texas or
other states or the United States of America applicable to the Agent and/or such
Lender, if greater.
(b) Notwithstanding anything herein or in the Notes to the
contrary, during any Limitation Period, the interest rate to be charged on
amounts evidenced by the Notes shall be the Highest Lawful Rate, and the
obligation, if any, of the Borrowers for the payment of fees or other charges
deemed to be interest under applicable law shall be suspended. During any period
or periods of time following a Limitation Period, to the extent permitted by
applicable laws of the State of Texas or other states or the United States of
America, the interest rate to be charged hereunder shall remain at the Highest
Lawful Rate until such time as there has been paid to the Agent for the account
of each Lender (i) the amount of interest in excess of that accruing at the
Highest Lawful Rate that the Agent and the Lenders would have received during
the Limitation Period had the interest rate remained at the otherwise applicable
rate, and (ii) all interest and fees otherwise payable to the Agent and the
Lenders but for the effect of such Limitation Period.
(c) If, under any circumstances, the aggregate amounts paid on
the Notes or under this Agreement or any other Loan Document include amounts
which by law are deemed interest and which would exceed the amount permitted if
the Highest Lawful Rate were in effect, each of the Borrowers stipulates that
such payment and collection will have been and will be deemed to have been, to
the greatest extent permitted by applicable laws of the State of Texas any other
applicable states' laws or the United States of America, the result of
mathematical error on the part of a Borrower and the Agent and the Lenders; and
the Agent and the Lenders shall promptly refund the amount of such excess (to
the extent only of such interest payments in excess of that which would have
accrued and been payable on the basis of the Highest Lawful Rate) upon discovery
of such error by the Agent and the Lenders or notice thereof from a Borrower. In
the event that the maturity of any Obligation is accelerated, by reason of an
election by the Agent and the Lenders or otherwise, or in the event of any
required or permitted prepayment, then the consideration constituting interest
under applicable laws may never exceed the Highest Lawful Rate; and excess
amounts paid which by law are deemed interest, if any, shall be credited by the
Lenders on the principal amount of the
34
Obligations, or if the principal amount of the Obligations shall have been paid
in full, refunded to the Borrowers.
(d) All sums paid, or agreed to be paid, to the Agent and the
Lenders for the use, forbearance and detention of the proceeds of any advance
hereunder shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full term hereof until paid in
full so that the actual rate of interest is uniform but does not exceed the
Highest Lawful Rate throughout the full term hereof.
2.21 YIELD PROTECTION. If (a) any payment of principal of any
LIBO Rate Loan is made other than on the last day of the Interest Period for
such Loan as a result of any payment pursuant to Section 2.11, the acceleration
of the maturity of the Note pursuant to Article VII, or for any other reason or
(b) a Borrower fails to make a principal or interest payment with respect to any
LIBO Rate Loan on the date such payment is due and payable, the Borrowers shall,
within 10 days of any written demand sent by the Agent to the Borrowers, pay to
the Agent for the account of the Lenders any amounts required to compensate a
Lender for any additional losses, out-of-pocket costs or expenses which it may
reasonably incur as a result of such payment or nonpayment, including, without
limitation, any loss (including loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by the Lender to fund or maintain such Loan.
2.22 LIMITATION ON LOANS. Anything herein to the contrary
notwithstanding:
(a) at no time shall there be more than four Interest Periods
applicable to outstanding LIBO Rate Loans;
(b) if any Lender shall, at least one Business Day before the
date of any requested Loan, reasonably conclude that the introduction of or any
change in or in the interpretation of any law or regulation makes it unlawful,
or that any central bank or other Governmental Authority asserts that it is
unlawful, for the Lenders or its Applicable Lending Office to perform its
obligations under this Agreement to make LIBO Rate Loans or to fund or maintain
LIBO Rate Loans, the right of the Borrowers to select LIBO Rate Loans shall be
suspended until the Agent shall notify the Borrowers that the circumstances
causing such suspension no longer exist, and such requested Loan shall be a
Floating Rate Loan;
(c) if the Agent is unable to determine in good faith the
LIBO Rate for LIBO Rate Loans and the Agent gives telephonic or telecopy notice
thereof to the Borrowers as soon as practicable, the right of the Borrowers to
select LIBO Rate Loans shall be suspended until the Agent shall notify the
Borrowers that the circumstances causing such suspension no longer exist, and
each requested Loan shall be a Floating Rate Loan;
35
(d) if any Lender shall, by 11:00 a.m., Dallas, Texas time, at
least one Business Day before the date of any requested Loan, reasonably
conclude that the LIBO Rate for LIBO Rate Loans will not adequately reflect the
cost to the Lender of making or funding LIBO Rate Loans, as the case may be, the
right of the Borrowers to select LIBO Rate Loans shall be suspended until the
Lenders shall notify the Borrowers that the circumstances causing such
suspension no longer exist, and each subsequent Loan shall be a Floating Rate
Loan;
(e) if a Borrower shall fail to select the duration or
continuation of any Interest Period for any LIBO Rate Loan in accordance with
the provisions contained in the definition of "Interest Period" in Section 1.1,
the Agent will forthwith so notify such Borrower and such Loan will be made
available to such Borrower with a one-month Interest Period or, in the case of
an existing LIBO Rate Loan, Continue with a one-month Interest Period; and
(f) if a Borrower shall fail to deliver a Borrowing Request
and Notice of Conversion or Continuation prior to the end of an Interest Period
for any existing Loan which is to be refinanced, then the Agent will forthwith
so notify such Borrower and such Borrower shall (unless such Loan is repaid at
the end of an Interest Period) be deemed to have given notice of an election to
refinance such Loan with a Floating Rate Loan.
2.23 ILLEGALITY. If any Lender shall notify the Agent and the
Borrowers that the introduction of or any change in or in the interpretation of
any law or regulation makes it unlawful, or that any central bank or other
Governmental Authority asserts that it is unlawful for such Lender or its
Applicable Lending Office to perform its obligations under this Agreement to
maintain any LIBO Rate Loan of such Lender then outstanding hereunder, (a) the
Borrowers shall, no later than 10:00 a.m. (Dallas, Texas time) (i) if not
prohibited by law, on the last day of the Interest Period for each outstanding
LIBO Rate Loan made by such Lender or (ii) if required by such notice, on the
second Business Day following its receipt of such notice, prepay all of the LIBO
Rate Loans made by such Lender then outstanding, together with accrued interest
on the principal amount prepaid to the date of such prepayment and amounts, if
any, required to be paid pursuant to Section 2.24 as a result of such prepayment
being made on such date, (b) such Lender shall simultaneously make a Floating
Rate Loan to the Borrowers on such date in an amount equal to the aggregate
principal amount of the LIBO Rate Loan prepaid to such Lender, and (c) the right
of the Borrowers to select LIBO Rate Loans from such Lender for any subsequent
Borrowing shall be suspended until such Lender shall notify the Agent that the
circumstances causing such suspension no longer exist.
2.24 INCREASED COSTS.
(a) LIBO RATE LOANS. If, due to either (i) the introduction
of or any change (other than any change by way of imposition or increase of
reserve requirements included in the LIBO Rate Reserve Percentage) in or in the
interpretation of any law or regulation or (ii) the compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not
36
having the force of law), there shall be any increase in the cost to any Lender
of agreeing to make or making, funding, or maintaining LIBO Rate Loans, then the
Borrowers shall from time to time, upon demand by such Lender (with a copy of
such demand to the Agent), immediately pay to the Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost. A certificate as to the amount of such increased cost and
detailing the calculation of such cost submitted to the Borrowers and the Agent
by such Lender shall be conclusive and binding for all purposes, absent manifest
error.
(b) CAPITAL ADEQUACY. If any Lender or the Agent as the bank
issuing the Letters of Credit determines in good faith that compliance with any
law or regulation or any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or the Agent or any corporation controlling such Lender or the Agent and
that the amount of such capital is increased by or based upon the existence of
such Lender's commitment to lend or the Agent's commitment to issue the Letters
of Credit and other commitments of this type, then, upon 30 days' prior written
notice by such Lender or the Agent (with a copy of any such demand to the Agent,
as applicable), the Borrowers shall immediately pay to the Agent for the account
of such Lender or the Agent itself, as the case may be, from time to time as
specified by such Lender or the Agent additional amounts sufficient to
compensate such Lender or the Agent, in light of such circumstances, (i) with
respect to such Lender, to the extent that such Lender reasonably determines
such increase in capital to be allocable to the existence of such Lender's
commitment to lend under this Agreement and (ii) with respect to the Agent, to
the extent that the Agent reasonably determines such increase in capital to be
allocable to the issuance or maintenance of the Letters of Credit. A certificate
as to such amounts and detailing the calculation of such amounts submitted to a
Borrower by such Lender or the Agent shall be conclusive and binding for all
purposes, absent manifest error.
(c) LETTERS OF CREDIT. If any change in any law or regulation
or in the interpretation thereof by any court or administrative or Governmental
Authority charged with the administration thereof shall either (i) impose,
modify, or deem applicable any reserve, special deposit, or similar requirement
against letters of credit issued by, or assets held by, or deposits in or for
the account of, the Agent or (ii) impose on the Agent any other condition
regarding the provisions of this Agreement relating to the Letters of Credit or
any Obligations with respect to Letters of Credit, and the result of any event
referred to in the preceding clause (i) or (ii) shall be to increase the cost to
the Agent of issuing or maintaining any Letter of Credit (which increase in cost
shall be determined by the Agent's reasonable allocation of the aggregate of
such cost increases resulting from such event), then, upon demand by the Agent,
the Borrowers shall pay to the Agent, from time to time as specified by the
Agent, additional amounts which shall be sufficient to compensate the Agent for
such increased cost. A certificate as to such increased cost incurred by the
Agent, as a result of any event mentioned in clause (i) or (ii) above, and
detailing the calculation of such increased costs submitted by the Agent to a
Borrower, shall be conclusive and binding for all purposes, absent manifest
error.
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2.25 LETTERS IN LIEU OF TRANSFER ORDERS. The Agent agrees that
none of the letters in lieu of transfer or division orders provided by the
Borrowers pursuant to Section 3.1(a)(viii)(D) or Section 5.7 will be sent to the
addressees thereof prior to the occurrence of an Event of Default, at which time
the Agent may, at its option and in addition to the exercise of any of its other
rights and remedies, send any or all of such letters.
2.26 POWER OF ATTORNEY. Each of the Borrowers hereby
designates the Agent as its agent and attorney-in-fact, to act in its name,
place, and stead for the purpose of completing and, upon the occurrence of an
Event of Default, delivering any and all of the letters in lieu of transfer
orders delivered by a Borrower to the Agent pursuant to Section 3.1(a)(viii)(D)
or Section 5.7, including, without limitation, completing any blanks contained
in such letters and attaching exhibits thereto describing the relevant
Collateral. Each of the Borrowers hereby ratifies and confirms all that the
Agent shall lawfully do or cause to be done by virtue of this power of attorney
and the rights granted with respect to such power of attorney. This power of
attorney is coupled with the interests of the Agent in the Collateral, shall
commence and be in full force and effect as of the Closing Date and shall remain
in full force and effect and shall be irrevocable so long as any Obligation
remains outstanding or unpaid or any Commitment exists. The powers conferred on
the Agent by this appointment are solely to protect the interests of the Agent
and the Lenders under the Loan Documents and shall not impose any duty upon the
Agent to exercise any such powers. The Agent shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers and
shall not be responsible to the Borrowers or any other Person for any act or
failure to act with respect to such powers, except for gross negligence or
willful misconduct.
2.27 TAXES. (a) NO DEDUCTION FOR CERTAIN TAXES. Any and all
payments by the Borrower shall be made, in accordance with Section 2.8, 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, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which each
Lender is organized or any political subdivision of the 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 to
each Lender, (i) the sum payable shall be increased as may be necessary so that,
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.27), each Lender receives an amount
equal to the sum it would have received had no such deductions been made; (ii)
the Borrower shall make such deductions; and (iii) the Borrower shall pay the
full amount deducted to the relevant taxation authority or other authority in
accordance with applicable law. In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the Notes, or the other Loan Documents (hereinafter referred to as
"Other Taxes").
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(b) INDEMNIFICATION. THE BORROWER HEREBY INDEMNIFIES EACH
LENDER FOR THE FULL AMOUNT OF TAXES OR OTHER TAXES (INCLUDING, WITHOUT
LIMITATION, ANY TAXES OR OTHER TAXES IMPOSED BY ANY JURISDICTION ON AMOUNTS
PAYABLE UNDER THIS SECTION 2.27) PAID BY THE LENDERS AND ANY LIABILITY ARISING
THEREFROM OR WITH RESPECT THERETO. EACH PAYMENT REQUIRED TO BE MADE BY THE
BORROWER IN RESPECT OF THIS INDEMNIFICATION SHALL BE MADE TO THE AGENT WITHIN 30
DAYS FROM THE DATE THE BORROWER RECEIVES WRITTEN DEMAND THEREFOR FROM A LENDER.
ARTICLE III
CONDITIONS
3.1 CONDITIONS PRECEDENT TO EFFECTIVENESS. The effectiveness
of this Agreement is subject to the condition precedent that:
(a) DOCUMENTATION. The Lenders shall have no obligation under
this Agreement unless and until all matters incident to the consummation of the
transactions contemplated herein, including, without limitation, the review by
the Agent or its counsel of the title of the Borrowers shall be satisfactory to
the Agent, and the Agent shall have received, reviewed, and approved the
following documents and other items, appropriately executed when necessary and,
where applicable, acknowledged by one or more authorized officers of a Borrower
all in form and substance satisfactory to the Agent and dated, where applicable,
of even date herewith or a date prior thereto and acceptable to the Agent:
(i) multiple counterparts of this Agreement as requested by
the Lenders;
(ii) the Notes;
(iii) multiple counterparts of the Assignment;
(iv) the Existing Note as endorsed by Bank One (as successor
to The First National Bank of Chicago) to Lenders;
(v) copies of the Certificate of Incorporation and all
amendments thereto and the bylaws and all amendments thereto of each of
the Borrowers accompanied by a certificate issued by the secretary or
an assistant secretary of each of the Borrowers as the case may be, to
the effect that each such copy is correct and complete;
39
(vi) a certificate of incumbency and signatures of all
officers of each of the Borrowers who are authorized to execute Loan
Documents on behalf of such Borrower, each such certificate being
executed by the secretary or an assistant secretary of such Borrower;
(vii) copies of corporate resolutions approving the Loan
Documents and authorizing the transactions contemplated herein and
therein, duly adopted by the boards of directors of each of the
Borrowers accompanied by a certificate of the secretary or an assistant
secretary of such Borrower to the effect that such copies are true and
correct copies of resolutions duly adopted at a meeting or by unanimous
consent of the board of directors of such Borrower and that such
resolutions constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified, or revoked in any
respect, and are in full force and effect as of the date of such
certificate;
(viii) multiple counterparts, as requested by the Lenders, of
the following Security Instruments creating, evidencing, perfecting,
and otherwise establishing Liens in favor of the Agent for the benefit
of the Lenders in and to the Collateral as security for the Obligations
(subject to the provisions of Section 7.3) of the Borrowers or any
Subsidiary or other Affiliate of any Borrower owing to the Agent or any
Lender or any branch, Subsidiary or other Affiliate of the Agent or any
Lender:
(A) Supplements to the existing mortgages from the Borrowers
to or for the benefit of the Agent covering the Oil and Gas
Properties of any Borrower subject to the Existing Liens and
all improvements, personal property, and fixtures related
thereto;
(B) Mortgages from the Borrowers to or for the benefit of the
Agent covering certain Oil and Gas Properties of any Borrower
designated by the Agent and all improvements, personal
property, and fixtures related thereto;
(C) Financing Statements from each of the Borrowers, as
debtor, in favor of the Agent, as secured party, constituent
to the instruments described in clause (i) or clause (ii)
above;
(D) undated letters, in form of Exhibit I, from the Borrowers
to each purchaser of production and disburser of the proceeds
of production from or attributable to the Mortgaged
Properties, together with additional letters with the
addressees left blank, authorizing and directing the
addressees to make future payments attributable to production
from the Mortgaged Properties directly to the Agent;
40
(E) the Security Agreements (Stock Pledge) from the Parent and
from Edge Exploration in favor of the Agent for its benefit
and the benefit of the Lenders and covering all of the issued
and outstanding capital stock of its Subsidiaries;
(F) Irrevocable Stock Powers executed in blank, the stock
certificates and Financing Statements for the stocks pledge
under the Security Agreements (Stock Pledge) by the Parent and
by Edge Exploration referenced in clause (E) above;
(G) Security Agreement by the Borrowers and all presently
existing Subsidiaries and other Affiliates of any Borrower in
favor of the Agent covering all rights, but not obligations,
of the Borrowers and all presently existing Subsidiaries and
other Affiliates of any Borrower under any Hedge Agreement,
whether now existing or hereafter arising; and
(H) Financing Statement from each of the Borrowers and all
presently existing Subsidiaries and other Affiliates of such
Borrower, as debtors, in favor of the Agent, as secured party,
constituent to the instrument described in clause (G) above.
(ix) audited Financial Statements of the Parent as of
December 31, 1999 and unaudited Financial Statements of the Parent as
of June 30, 2000;
(x) certificates dated as of a recent date from the
Secretary of State or other appropriate Governmental Authority
evidencing the existence or qualification and good standing of each of
the Borrowers in its jurisdiction of incorporation and in any other
jurisdiction in which it conducts business, other than in Alabama for
Edge Exploration, for which such certificate will be provided to the
Agent within 60 days after the Closing Date;
(xi) results of searches of the UCC Records of the Secretary
of State of the States of Alabama, Louisiana, Mississippi, and Texas
from a source acceptable to the Agent and reflecting no Liens, other
than Permitted Liens, against any of the Collateral as to which
perfection of a Lien is accomplished by the filing of a financing
statement;
(xii) confirmation, acceptable to the Agent, of the title of
each of the Borrowers to the Mortgaged Properties, free and clear of
Liens other than Permitted Liens;
41
(xiii) title opinions covering the Oil and Gas Properties
listed on Schedule 3.1(a), in form and substance satisfactory to the
Agent in its sole discretion as to the status of the Parent's and its
Subsidiaries' title to the Mortgaged Properties;
(xiv) copies of all operating, lease, sublease, royalty,
sales, exchange, processing, farmout, bidding, pooling, unitization,
communitization, and other agreements relating to the Mortgaged
Properties requested by the Agent;
(xv) Engineering Reports covering the Mortgaged Properties;
(xvi) the opinion of Xxxxxx X. Xxxxxx, counsel to the
Borrowers, substantially in the form attached hereto as Exhibit J, with
such changes thereto as may be approved by the Agent and Lenders;
(xvii) certificates evidencing the insurance coverage required
pursuant to Section 5.18; and
(xviii) such other agreements, documents, instruments,
opinions, certificates, waivers, consents, and evidence as the Agent or
any Lender may reasonably request.
(b) PAYMENT OF FEES. On the date of this Agreement, the
Borrowers shall have paid the fees required by Article II and all costs and
expenses which have been invoiced and are payable pursuant to Section 5.14.
(c) NO DEFAULT. No Default shall have occurred and be
continuing or would result from the consummation of the transactions
contemplated by this Agreement, including the advance of a Loan or from the
application of the proceeds therefrom or an issuance of a Letter of Credit;
(d) REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in Article IV hereof and in each other Loan Document shall
be true and correct in all material respects.
(e) MATERIAL ADVERSE EFFECT. No event or circumstance that
could cause a Material Adverse Effect shall have occurred.
(f) NO PROCEEDING OR LITIGATION; NO INJUNCTIVE RELIEF. No
action, suit, investigation or other proceeding (including, without limitation,
the enactment or promulgation of a statute or rule) by or before any arbitrator
or any Governmental Authority shall be threatened or pending and no preliminary
or permanent injunction or order by a state or federal court shall have been
entered (i) in connection with this Agreement or any transaction contemplated
hereby except as set forth in Schedule 4.9 or (ii) which, in any case, in the
reasonable judgment of the Agent, could
42
reasonably be expected to result in a Material Adverse Effect.
(g) CONSENTS, LICENSES, APPROVALS, ETC. The Agent shall have
received true copies (certified to be such by each of the Borrowers or other
appropriate party) of all consents, licenses and approvals required in
accordance with applicable law in connection with the execution, delivery,
performance, validity and enforceability of this Agreement and the other Loan
Documents. In addition, each of the Borrowers and its Subsidiaries shall have
all such material consents, licenses and approvals required in connection with
the continued operation of such Borrower and its Subsidiaries, and such
approvals shall be in full force and effect, and all applicable waiting periods
shall have expired without any action being taken or threatened by any competent
authority which would restrain, prevent or otherwise impose adverse conditions
on this Agreement and the actions contemplated hereby.
(h) BORROWING REQUEST. The Agent shall have received a
Borrowing Request from a Borrower in the form of Exhibit A, with appropriate
insertions and executed by a duly authorized Responsible Officer of such
Borrower.
3.2 CONDITIONS PRECEDENT TO ALL BORROWINGS. The obligation of
each Lender to make a Loan on the occasion of each Borrowing and of the Agent to
issue, increase, or extend any Letter of Credit shall be subject to the further
conditions precedent that on the date of such Borrowing or the issuance,
increase, or extension of such Letter of Credit:
(a) the following statements shall be true (and each of the
giving of the applicable Borrowing Request, Notice of Conversion or
Continuation, or Letter of Credit Application and the acceptance by a Borrower
of the proceeds of such Borrowing or the issuance, increase, or extension of
such Letter of Credit shall constitute a representation and warranty by the
Borrowers that on the date of such Borrowing, the issuance, increase, or
extension of such Letter of Credit, such statements are true):
(i) the representations and warranties contained in Article IV
of this Agreement, the Security Instruments, and each of the other Loan
Documents are true and correct in all material respects on and as of
the date of such Borrowing or the date of the issuance, increase, or
extension of such Letter of Credit, before and after giving effect to
such Borrowing or to the issuance, increase, or extension of such
Letter of Credit and to the application of the proceeds from such
Borrowing, as though made on and as of such date; and
(ii) no Default has occurred and is continuing or would result
from such Borrowing or from the application of the proceeds therefrom,
from the issuance, increase, or extension of such Letter of Credit; and
43
(b) the Agent shall have received such other approvals, opinions, or
documents reasonably deemed necessary or desirable by any Lender as a result of
circumstances occurring after the date of this Agreement, as any Lender through
the Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each of the Borrowers jointly and severally represents and warrants as
follows:
4.1 DUE AUTHORIZATION. The execution, delivery, and
performance by each of the Borrowers of this Agreement, and the borrowings
hereunder, the execution, delivery and performance by each of the Borrowers of
the Notes, the repayment of the Notes and interest and fees provided for in the
Notes and this Agreement, the execution, delivery, and performance of the
Security Instruments by each of the Borrowers and the performance of all
obligations of each of the Borrowers under the Loan Documents are within the
power of such Borrower, have been duly authorized by all necessary corporate
action by each of the Borrowers, and do not and will not to (a) require the
consent of any Governmental Authority, (b) contravene or conflict with any
Requirement of Law, (c) contravene or conflict with any indenture, instrument,
or other agreement to which any Borrower is a party or by which any Property of
any Borrower may be presently bound or encumbered, (d) contravene any Borrower's
certificate of incorporation, bylaws or other similar governance documents, or
(e) result in or require the creation or imposition of any Lien in prohibited by
this Agreement.
4.2 CORPORATE EXISTENCE. Each of the Borrowers is a
corporation duly organized, legally existing, and in good standing under the
laws of its state of incorporation and is duly qualified as a foreign
corporation and is in good standing in all jurisdictions wherein the ownership
of Property or the operation of its business necessitates same, other than those
jurisdictions wherein the failure to so qualify will not have a Material Adverse
Effect.
4.3 VALID AND BINDING OBLIGATIONS. All Loan Documents have
been duly executed and delivered by each of the Borrowers. Each Loan Document is
the legal, valid, and binding obligation of each of the Borrowers, enforceable
against each of the Borrowers in accordance with its terms.
4.4 USE OF PROCEEDS. The proceeds of the Loans will be used by
the Borrowers for the purposes described in Section 2.4. None of the Borrowers
has engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation U). No proceeds of any
Loan will be used to purchase or carry any margin stock in violation of
Regulation T, U or X.
44
4.5 SECURITY INSTRUMENTS. The provisions of each Security
Instrument are effective to create in favor of the Agent for the benefit of the
Lenders, a legal, valid, and enforceable Lien in all right, title, and interest
of any Borrower in the Collateral described therein, which Liens, assuming the
accomplishment of recording and filing in accordance with applicable laws prior
to the intervention of rights of other Persons, shall constitute fully perfected
first-priority Liens on all right, title, and interest of any Borrower in the
Collateral described therein. The Existing Liens, as assigned by Bank One to the
Agent for its benefit and the benefit of the Lenders, continue to constitute
good and valid first-priority Liens as of the original date of recordation
thereof.
4.6 TITLE TO ASSETS; CONDITION OF ITS PROPERTIES. Each of the
Borrowers and each of its Subsidiaries has good and indefeasible title to all of
its Properties as is customary in the oil and gas industry in all material
respects, free and clear of all Liens except for Permitted Liens.
4.7 SCOPE AND ACCURACY OF FINANCIAL STATEMENTS. The Parent has
delivered to the Agent and the Lenders copies of the Financial Statements as
required under Section 3.1(a)(ix), and such Financial Statements are accurate
and complete in all material respects and present fairly the financial position
and results of operations and cash flows of the Parent and its consolidated
Subsidiaries in accordance with GAAP as at the relevant point in time or for the
period indicated, as applicable. No event or circumstance has occurred since
June 30, 2000 that could reasonably be expected to have a Material Adverse
Effect.
4.8 NO MATERIAL MISSTATEMENTS. To the knowledge of the
Borrowers, no information, exhibit, statement or report furnished to the Lenders
by or at the direction of the Borrowers contains any material misstatement of
fact or omits to state a material fact or any fact necessary to make the
statements contained therein not misleading.
4.9 LIABILITIES, LITIGATION, AND RESTRICTIONS. Other than as
reflected in the Financial Statements referred to in Section 4.7 or as listed on
Schedule 4.9 attached hereto, none of the Borrowers has any liabilities, direct,
or contingent, which may materially and adversely affect its business or
operations or its ownership of the Collateral, and no litigation or other action
of any nature affecting any Borrower is pending before any Governmental
Authority or arbitrator or, to the best knowledge of such Borrower, threatened
against or affecting such Borrower which might reasonably be expected to result
in any impairment of its ownership of any Collateral, have a Material Adverse
Effect, or which purports to affect the legality, validity, binding effect or
enforceability of this Agreement, any Note, or any other Loan Document. No
unusual or unduly burdensome restriction, restraint or hazard exists by
contract, Requirement of Law, or otherwise relative to the business or
operations of any Borrower or the ownership and operation of the Collateral
other than such as relate generally to Persons engaged in business activities
similar to those conducted by the Borrowers.
4.10 COMPLIANCE WITH LAWS. Each of the Borrowers and their
respective
45
Properties, including, without limitation, the Mortgaged Properties, are in
compliance with all applicable Requirements of Law, including, without
limitation, Environmental Laws, the Natural Gas Policy Act of 1978, as amended,
and ERISA, except to the extent non-compliance with any such Requirements of Law
could not reasonably be expected to have a Material Adverse Effect.
4.11 ERISA. The Borrowers do not maintain nor have they ever
maintained a Plan. The Borrowers do not currently contribute to nor have they
any obligation to contribute to or otherwise have any liability with respect to
any Plan.
4.12 ENVIRONMENTAL LAWS.
(a) Except as set forth on Schedule 4.12, each of the
Borrowers (i) has obtained all permits, licenses, orders, approvals or other
authorizations required under Environmental Laws necessary for the ownership and
operation of its Properties and the conduct of its business; (ii) has been and
is in material compliance with all terms and conditions of such environmental
permits, licenses, orders, approvals and other authorizations and with all other
material requirements of applicable Environmental Laws; (iii) has not received
notice of any material violation or alleged violation of any Environmental Laws;
and (iv) is not subject to any actual or contingent Environmental Complaint,
which could reasonably be expected to cause a Material Adverse Effect.
(b) Except as set forth on Schedule 4.12, to each of the
Borrowers' best knowledge, none of the present or previously owned or operated
Property of any Borrower or of any of their former Subsidiaries, wherever
located, (i) has been placed on or proposed to be placed on the National
Priorities List, the Comprehensive Environmental Response Compensation Liability
Information System list, or their state or local analogs, or have been otherwise
investigated, designated, listed, or identified as a potential site for removal,
remediation, cleanup, closure, restoration, reclamation, or other response
activity under any Environmental Laws; (ii) is subject to a Lien, arising under
or in connection with any Environmental Laws, that attaches to any revenues or
to any Property owned or operated by any Borrower, wherever located, which could
reasonably be expected to cause a Material Adverse Effect; or (iii) has been the
site of any Release of Hazardous Substances from present or past operations
which has caused at the site or at any third-party site any condition that has
resulted in or could reasonably be expected to result in the need for Response
(as defined under Environmental Laws) that would cause a Material Adverse
Effect.
(c) Except as set forth on Schedule 4.12, without limiting the
foregoing, (i) all necessary notices have been properly filed, and no further
action is required under current Environmental Law as to each Response or other
restoration or remedial project undertaken by the Borrowers or any of their
former Subsidiaries on any of their presently or formerly owned or operated
Property and (ii) the present and, to each of the Borrowers' best knowledge,
future liability, if any, of any Borrower which could reasonably be expected to
arise in connection with requirements under Environmental Laws will not result
in a Material Adverse Effect.
46
4.13 INVESTMENT COMPANY ACT COMPLIANCE. None of the Borrowers
is, nor is it directly or indirectly controlled by or acting on behalf of any
Person which is, an "investment company" or an "affiliated person" of an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
4.14 PUBLIC UTILITY HOLDING COMPANY ACT COMPLIANCE. None of
the Borrowers nor any of their Subsidiaries 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," within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
4.15 PROPER FILING OF TAX RETURNS; PAYMENT OF TAXES DUE. Each
of the Borrowers has duly and properly filed a United States income tax return
and all other tax returns which are required to be filed and has paid all taxes
due except such as are being contested in good faith and as to which adequate
provisions and disclosures have been made. The respective charges and reserves
on the books of the Borrowers with respect to taxes and other governmental
charges are adequate.
4.16 REFUNDS. Except as described on Schedule 4.16 attached
hereto, no orders of, proceedings pending before, or other requirements of the
Minerals Management Service, Bureau of Land Management, the Federal Energy
Regulatory Commission, the Texas Railroad Commission, or any Governmental
Authority exist which could result in a Borrower being required to refund any
material portion of the proceeds received or to be received from the sale of
Hydrocarbons constituting part of the Mortgaged Property.
4.17 GAS CONTRACTS. Except as described on Schedule 4.17
attached hereto, none of the Borrowers (a) is obligated in any material respect
by virtue of any prepayment made under any contract containing a "take-or-pay"
or "prepayment" provision or under any similar agreement to deliver Hydrocarbons
produced from or allocated to any of the Mortgaged Property at some future date
without receiving full payment therefor within 90 days of delivery, and (b) has
produced gas, in any material amount, subject to, and none of the Borrowers nor
any of their Mortgaged Properties is subject to, balancing rights of third
parties or subject to balancing duties under governmental requirements or joint
operating agreements, except as to such matters for which such Borrower has
disclosed to the Agent and has established monetary reserves adequate in amount
to satisfy such obligations and have segregated such reserves from other
accounts.
4.18 INTELLECTUAL PROPERTY. Each of the Borrowers owns or is
licensed to use all Intellectual Property necessary to conduct all business
material to its condition (financial or otherwise), business, or operations as
such business is currently conducted. No claim has been asserted or is pending
by any Person with respect to the use of any such Intellectual Property or
challenging or questioning the validity or effectiveness of any such
Intellectual Property; and the Borrowers know of no valid basis for any such
claim. The use of such Intellectual Property by each
47
of the Borrowers does not infringe on the rights of any Person, except for such
claims and infringements as do not, in the aggregate, give rise to any material
liability on the part of any Borrower.
4.19 CASUALTIES OR TAKING OF PROPERTY. The material Properties
used or to be used in the continuing operations of the Borrowers are in good
repair, working order and condition. Except as disclosed on Schedule 4.19
attached hereto, neither the business nor any Property of any Borrower has 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 any public enemy.
4.20 LOCATIONS OF BORROWER. The principal place of business
and chief executive office of each of the Borrowers is located at the address of
such Borrower set forth in Section 9.4 or at such other location as such
Borrower may have, by proper written notice hereunder, advised the Agent and the
Lenders, provided that such other location is within a state in which
appropriate financing statements from such Borrower in favor of the Agent have
been filed.
4.21 SUBSIDIARIES. The Borrowers have no Subsidiaries other
than as listed on Schedule 4.21 attached hereto.
4.22 NO BURDENSOME RESTRICTIONS; NO DEFAULTS.
(a) None of the Borrowers nor any of their Subsidiaries is a
party to any indenture, loan, or credit agreement or any lease or other
agreement or instrument or subject to any charter or corporate restriction or
provision of applicable law or governmental regulation which would reasonably be
expected to cause a Material Adverse Effect. None of the Borrowers nor any of
their Subsidiaries is in default under or with respect to any contract,
agreement, lease, or other instrument to which such Borrower or any of its
Subsidiaries is a party and which could reasonably be expected to cause a
Material Adverse Effect. None of the Borrowers nor any of their Subsidiaries has
received any notice of default under any material contract, agreement, lease, or
other instrument to which such Borrower or such Subsidiary is a party.
(b) No Default has occurred and is continuing. No default or
event of default under any contract, financing agreement or instrument to which
a Borrower or any of its Subsidiaries is a party has occurred and is continuing.
48
ARTICLE V
AFFIRMATIVE COVENANTS
So long as any Note or any amount under any Loan Document
shall remain unpaid, any Letter of Credit shall remain outstanding, or any
Lender shall have any Commitment hereunder, and unless the Required Lenders
shall otherwise consent in writing, each of the Borrowers shall:
5.1 MAINTENANCE AND ACCESS TO RECORDS. Keep adequate records,
in accordance with GAAP, of all its transactions so that at any time, and from
time to time, its true and complete financial condition may be readily
determined, and within two Business Days following the reasonable request of the
Agent or any Lender, make such records available for inspection by the Agent or
any Lender and, at the expense of the Borrowers, allow the Agent or any Lender
to make and take away copies thereof.
5.2 QUARTERLY FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATES.
Cause the Parent to deliver to the Agent and each Lender, (a) on or before the
45th day after the close of each of the first three quarterly periods of each
fiscal year of the Parent, a copy of the unaudited consolidated and
consolidating Financial Statements of the Parent and its consolidated
Subsidiaries as at the close of such quarterly period and from the beginning of
such fiscal year to the end of such period, such Financial Statements to be
certified by a Responsible Officer of the Parent as having been prepared in
accordance with GAAP consistently applied and as a fair presentation of the
condition of the Parent, subject to changes resulting from normal year-end audit
adjustments, and (b) on or before the 45th day after the close of each fiscal
quarter of the Parent and on or before the 90th day after the close of each
fiscal year of the Parent, a Compliance Certificate in the form of Exhibit B
hereto signed by a Responsible Officer of the Parent.
5.3 ANNUAL FINANCIAL STATEMENTS. Cause the Parent to deliver
to the Agent and each Lender, on or before the 90th day after the close of each
fiscal year of the Parent, a copy of the annual audited consolidated and
unaudited consolidating Financial Statements of the Parent.
5.4 OIL AND GAS PRODUCTION REPORTS. Cause the Parent to
deliver as soon as available and in any event within 45 days after the end of
each fiscal quarter of the Parent, a report certified by a Responsible Officer
of the Parent in form and substance satisfactory to the Agent prepared by the
Parent covering certain material Oil and Gas Properties of the Borrowers and
their respective Subsidiaries as selected by the Agent and detailing on a
monthly basis (a) the production, revenue, and price information and associated
operating expenses for such month, (b) any changes to any producing reservoir,
production equipment, or producing well during such month, which changes could
cause a Material Adverse Change and (c) any sales of any Borrower's or any of
their respective Subsidiaries' Oil and Gas Properties during such month
5.5 TITLE OPINIONS; TITLE DEFECTS. (a) On or before the
Closing Date, furnish to
49
the Agent title opinions, in form and substance and by counsel satisfactory to
the Agent, or other confirmation of title acceptable to the Lenders, covering
the Oil and Gas Properties listed on Schedule 3.1(a), (b) within 60 days from
the Closing Date, furnish title opinions or other confirmation of title
acceptable to the lenders, covering the Oil & Gas Properties listed on Schedule
5.5, in form and substance satisfactory to the Agent in its sole discretion as
to the status of the Parent's and its Subsidiaries' title to the Mortgaged
Properties, and (c) promptly, but in any event within 60 days after notice by
the Agent of any defect, material in the opinion of the Agent and the Lenders in
value, in the title of the Borrowers to any of their respective Oil and Gas
Properties, clear such title defects, and, in the event any such title defects
are not cured in a timely manner, pay all related costs and fees incurred by the
Agent to do so; provided, however, to the extent it is determined by the Lenders
that such title defects cannot be cured or a Borrower so notifies the Lenders,
the Lenders may reduce the Borrowing Base by the amount equal to the value of
the Oil and Gas Property affected by such title defect.
5.6 NOTICES OF CERTAIN EVENTS. Deliver to the Agent and each
Lender, immediately upon having knowledge of the occurrence of any of the
following events or circumstances, a written statement with respect thereto,
signed by a Responsible Officer of the Parent and setting forth the relevant
event or circumstance and the steps being taken by the Borrowers with respect to
such event or circumstance:
(a) any Default or Event of Default;
(b) any default or event of default under any contractual
obligation of a Borrower, or any litigation, investigation, or proceeding
between a Borrower and any Governmental Authority which, in either case, if not
cured or if adversely determined, as the case may be, could reasonably be
expected to have a Material Adverse Effect;
(c) any litigation or proceeding involving a Borrower as a
defendant or in which any Property of a Borrower is subject to a claim and in
which the amount involved is $100,000 or more and which is not covered by
insurance or in which injunctive or similar relief is sought;
(d) the receipt by a Borrower of any Environmental Complaint;
(e) any actual, proposed, or threatened testing or other
investigation by any Governmental Authority or other Person concerning the
environmental condition of, or relating to, any Property of a Borrower or
adjacent to any Property of a Borrower following any allegation of a violation
of any Requirement of Law;
(f) any Release of Hazardous Substances by a Borrower or from,
affecting, or related to any Property of a Borrower or adjacent to any Property
of a Borrower except in accordance with applicable Requirements of Law or the
terms of a valid permit, license, certificate, or approval
50
of the relevant Governmental Authority, or the violation of any Environmental
Law, or the revocation, suspension, or forfeiture of or failure to renew, any
permit, license, registration, approval, or authorization which could reasonably
be expected to have a Material Adverse Effect;
(g) upon the request of any Lender, the change in identity or
address of any Person remitting to a Borrower proceeds from the sale of
hydrocarbon production from or attributable to any Mortgaged Property;
(h) any change in the senior management of a Borrower; and
(i) any other event or condition which could reasonably be
expected to have a Material Adverse Effect.
5.7 LETTERS IN LIEU OF TRANSFER ORDERS; DIVISION ORDERS.
Promptly upon request by the Agent at any time and from time to time, execute
such letters in lieu of transfer orders, in addition to the letters signed by
the Borrowers and delivered to the Agent in satisfaction of the condition set
forth in Section 3.1(a)(viii)(D) and/or division and/or transfer orders as are
necessary or appropriate to transfer and deliver to the Agent proceeds from or
attributable to any Mortgaged Property.
5.8 ADDITIONAL INFORMATION. Furnish to the Agent and each
Lender, promptly upon the request of the Agent or any Lender, such additional
financial or other information concerning the assets, liabilities, operations,
and transactions of the Borrowers as the Agent or any Lender may from time to
time request; and notify the Agent and each Lender not less than ten Business
Days prior to the occurrence of any condition or event that may change the
proper location for the filing of any financing statement or other public notice
or recording for the purpose of perfecting a Lien in any Collateral, including,
without limitation, any change in its name or the location of its principal
place of business or chief executive office; and upon the request of the Agent
or any Lender, execute such additional Security Instruments as may be necessary
or appropriate in connection therewith.
5.9 COMPLIANCE WITH LAWS. Comply with all material applicable
Requirements of Law, including, without limitation, (a) the Natural Gas Policy
Act of 1978, as amended, (b) ERISA, (c) Environmental Laws, and (d) permits,
licenses, registrations, approvals, and authorizations issued to it or of which
it has knowledge (i) related to any natural or environmental resource or media
located on, above, within, in the vicinity of, related to or affected by any
Property of a Borrower, (ii) required for the performance of the operations of a
Borrower, or (iii) applicable to the use, generation, handling, storage,
treatment, transport, or disposal of any Hazardous Substances; and instruct all
employees, crew members, agents, contractors, subcontractors, and future lessees
(pursuant to appropriate lease provisions) of a Borrower, while such Persons are
acting within the scope of their relationship with a Borrower, to comply with
all such Requirements of Law
51
as may be necessary or appropriate to enable a Borrower to so comply.
5.10 PAYMENT OF ASSESSMENTS AND CHARGES. Pay all taxes,
assessments, governmental charges, rent, and other Indebtedness which, if
unpaid, might become a Lien against the Property of a Borrower, except any of
the foregoing being contested in good faith and as to which adequate reserves in
accordance with GAAP have been established or unless failure to pay would not
have a Material Adverse Effect.
5.11 MAINTENANCE OF CORPORATE EXISTENCE AND GOOD STANDING.
Maintain its corporate existence or qualification and good standing in its
jurisdiction of incorporation and in all jurisdictions wherein the Property now
owned or hereafter acquired or business now or hereafter conducted necessitates
same, unless the failure to do so would not have a Material Adverse Effect.
5.12 PAYMENT OF NOTES; PERFORMANCE OF OBLIGATIONS. Pay the
Notes according to the reading, tenor, and effect thereof, as modified hereby,
and do and perform every act and discharge all of its other Obligations.
5.13 FURTHER ASSURANCES. Upon the Agent's written request,
promptly cure any defects in the execution and delivery of any of the Loan
Documents and all agreements contemplated thereby, and execute, acknowledge, and
deliver such other assurances and instruments as shall, in the opinion of the
Agent, be necessary to fulfill the terms of the Loan Documents.
5.14 INITIAL FEES AND EXPENSES. Each of the Borrowers agrees
to pay on demand (a) all reasonable out-of-pocket costs and expenses of the
Agent in connection with the preparation, execution, delivery, administration,
modification, and amendment of this Agreement, the Notes, and the other Loan
Documents including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Agent with respect to advising the Agent as to its
rights and responsibilities under this Agreement, and (b) all reasonable
out-of-pocket costs and expenses, if any, of the Agent, as the issuing bank for
the Letters of Credit, and each Lender (including, without limitation,
reasonable counsel fees and expenses of the Agent, and each Lender) in
connection with the enforcement (whether through negotiations, legal
proceedings, or otherwise) of this Agreement, the Notes, and the other Loan
Documents.
5.15 SUBSEQUENT FEES AND EXPENSES OF AGENT AND LENDERS. Upon
request by the Agent, promptly reimburse the Agent (to the fullest extent
permitted by law) for all amounts reasonably expended, advanced, or incurred by
or on behalf of the Agent to ratify, amend, restate, or prepare additional Loan
Documents, as the case may be and for the filing and recordation of Security
Instruments. Promptly reimburse the Agent and each Lender for all amounts
reasonably expended, advanced, or incurred (a) to satisfy any obligation of a
Borrower under any of the Loan Documents; (b) to collect the Obligations; (c) to
enforce the rights of the Agent and each Lender under any of the Loan Documents;
and (d) to protect the Properties or business of a Borrower,
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including, without limitation, the Collateral, which amounts shall be deemed
compensatory in nature and liquidated as to amount upon notice to a Borrower by
the Agent and each Lender and which amounts shall include, but not be limited to
(i) all court costs, (ii) reasonable attorneys' fees, (iii) reasonable fees and
expenses of auditors and accountants incurred to protect the interests of the
Agent and each Lender, (iv) fees and expenses incurred in connection with the
participation by the Agent and each Lender as a member of the creditors'
committee in a case commenced under any Insolvency Proceeding, (v) fees and
expenses incurred in connection with lifting the automatic stay prescribed in
Section 362 Title 11 of the United States Code, and (vi) fees and expenses
incurred in connection with any action pursuant to Section 1129 Title 11 of the
United States Code all reasonably incurred by the Agent and each Lender in
connection with the collection of any sums due under the Loan Documents,
together with interest at the per annum interest rate equal to the Floating
Rate, calculated on a basis of a calendar year of 365 or 366 days, as the case
may be, counting the actual number of days elapsed, on each such amount from the
date of notification that the same was expended, advanced, or incurred by the
Agent and each Lender until the date it is repaid to the Agent and each Lender,
with the obligations under this Section surviving the non-assumption of this
Agreement in a case commenced under any Insolvency Proceeding and being binding
upon a Borrower and/or a trustee, receiver, custodian, or liquidator of a
Borrower appointed in any such case.
5.16 OPERATION OF OIL AND GAS PROPERTIES. Develop, maintain,
and operate its Oil and Gas Properties in a prudent and workmanlike manner in
accordance with industry standards.
5.17 MAINTENANCE AND INSPECTION OF PROPERTIES. Maintain all of
its tangible Properties in good repair and condition, ordinary wear and tear
excepted; make all necessary replacements thereof and operate such Properties in
a good and workmanlike manner; and permit on two Business Days prior written
notice any authorized representative of the Agent or any Lender to visit and
inspect any tangible Property of a Borrower.
5.18 MAINTENANCE OF INSURANCE. Maintain insurance with respect
to its Properties and businesses against such liabilities, casualties, risks,
and contingencies as is customary in the relevant industry and sufficient to
prevent a Material Adverse Effect, and maintain insurance as required under any
Security Instrument, all such insurance to be in amounts and from insurers
acceptable to the Lenders and, with respect to property damage insurance
covering Collateral and business interruption insurance, if any, maintained by a
Borrower, naming the Agent as loss payee in form reasonably satisfactory to the
Agent or shall name the Agent as an additional insured, as applicable. Upon any
renewal of any such insurance furnish to the Agent or any Lender evidence,
satisfactory to the Agent and each Lender of the maintenance of such insurance.
All certified copies of policies or certificates thereof, and endorsements and
renewals thereof shall be delivered to and retained by the Agent. All policies
or certificates of insurance shall set forth the coverage, the limits of
liability, the name of the carrier, the policy number, and the period of
coverage. In addition, all policies of insurance required under the terms hereof
shall contain an endorsement or agreement by
53
the insurer that any loss shall be payable in accordance with the terms of such
policy notwithstanding any act of negligence of such Borrower, or any party
holding under such Borrower which might otherwise result in a forfeiture of the
insurance and the further agreement of the insurer waiving all rights of setoff,
counterclaim or deductions against such Borrower. All such policies shall
contain a provision that notwithstanding any contrary agreements between such
Borrower and the applicable insurance company, such policies will not be
canceled, allowed to lapse without renewal, surrendered or amended (which
provision shall include any reduction in the scope or limits of coverage)
without at least 30 days' prior written notice to the Agent. In the event that,
not withstanding the "lender's loss payable endorsement" requirement of this
Section, the proceeds of any insurance policy described above are paid to a
Borrower, such Borrower shall deliver such proceeds to the Agent immediately
upon receipt. Furthermore, the Agent shall have the right to collect, and each
of the Borrowers hereby assigns to the Agent for the benefit of the Lenders, any
and all monies that may become payable under any policies of insurance relating
to business interruption or by reason of damage, loss, or destruction of any of
the Collateral. In the event of any damage, loss, or destruction for which
insurance proceeds relating to business interruption or Collateral exceed
$100,000, the Agent for the benefit of the Lenders may, at its option, apply all
such sums or any part thereof received by it toward the payment of the
Obligations, whether matured or unmatured, application to be made first to
interest and then to principal, and shall deliver to such Borrower the balance,
if any, after such application has been made. In the event of any such damage,
loss, or destruction for which insurance proceeds are $100,000 or less, provided
that no Default or Event of Default has occurred and is continuing, the Agent
shall deliver any such proceeds received by it to such Borrower. In the event
the Agent receives insurance proceeds not attributable to Collateral or business
interruption, the Agent shall deliver any such proceeds to such Borrower.
5.19 INDEMNIFICATION. INDEMNIFY AND HOLD THE AGENT AND EACH
LENDER AND THEIR SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE AGENT
AND EACH LENDER UNDER ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST ANY AND
ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES,
ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS,
REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES
INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES
AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF A
BORROWER, (B) ANY ACTIVITY CARRIED ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF A
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, AND WHETHER BY A BORROWER
OR ANY PREDECESSOR IN TITLE, EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF A
BORROWER OR ANY OTHER PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY,
IN CONNECTION WITH THE HANDLING, TREATMENT,
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REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION, OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR UNDER SUCH PROPERTY,
(C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF A BORROWER, (D) ANY
CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING IN CONNECTION WITH
THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR DISPOSAL OF ANY
HAZARDOUS SUBSTANCES BY A BORROWER OR ANY EMPLOYEE, AGENT, CONTRACTOR, OR
SUBCONTRACTOR OF A BORROWER WHILE SUCH PERSONS ARE ACTING WITHIN THE SCOPE OF
THEIR RELATIONSHIP WITH A BORROWER, IRRESPECTIVE OF WHETHER ANY OF SUCH
ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH APPLICABLE REQUIREMENTS
OF LAW, OR (E) THE PERFORMANCE OF ANY LOAN DOCUMENT, ANY ALLEGATION BY ANY
BENEFICIARY OF A LETTER OF CREDIT OF A WRONGFUL DISHONOR BY THE AGENT OR ANY
LENDER OF A CLAIM OR DRAFT PRESENTED THEREUNDER, OR ANY OTHER ACT OR OMISSION IN
CONNECTION WITH OR RELATED TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IN THIS SECTION
ARISING FROM NEGLIGENCE, OTHER THAN GROSS NEGLIGENCE, WHETHER SOLE OR
CONCURRENT, ON THE PART OF THE AGENT OR ANY LENDER OR ANY OF THEIR SHAREHOLDERS,
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY
TRUSTEE FOR THE BENEFIT OF THE AGENT OR ANY LENDER UNDER ANY SECURITY
INSTRUMENT; WITH THE FOREGOING INDEMNITY SURVIVING SATISFACTION OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT, UNLESS ALL SUCH OBLIGATIONS
HAVE BEEN SATISFIED WHOLLY IN CASH FROM A BORROWER AND NOT BY WAY OF REALIZATION
AGAINST ANY COLLATERAL OR THE CONVEYANCE OF ANY PROPERTY IN LIEU THEREOF,
PROVIDED THAT SUCH INDEMNITY SHALL NOT EXTEND TO ANY ACT OR OMISSION BY THE
AGENT OR ANY LENDER WITH RESPECT TO ANY PROPERTY SUBSEQUENT TO THE AGENT OR ANY
LENDER BECOMING THE OWNER OF SUCH PROPERTY AND WITH RESPECT TO WHICH PROPERTY
SUCH CLAIM, LOSS, DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING, ORDER,
JUDGMENT, ACTION, OR REQUIREMENT ARISES SUBSEQUENT TO THE ACQUISITION OF TITLE
THERETO BY THE AGENT OR ANY LENDER.
5.20 SUBSIDIARY AND AFFILIATE SECURITY INSTRUMENTS. Cause each
Subsidiary or other Affiliate of a Borrower not already a party to a necessary
Security Instrument which enters into, subsequent to the Closing Date, a Hedge
Agreement not prohibited by Section 6.1 to execute and deliver to the Agent such
Security Instruments as may be reasonably required by the Agent to establish and
perfect in favor of the Agent, for the benefit of the Lenders and any branch,
Subsidiary or other Affiliate of the Agent or any Lender, a Lien against the
rights of such Subsidiary or other Affiliate of a Borrower under each Hedge
Agreement into which it enters, whether then existing or thereafter arising.
55
5.21 PAYMENT OF HEDGING OBLIGATIONS. Pay, and cause each
Subsidiary or other Affiliate of a Borrower which is a party to a Hedge
Agreement, to pay, all Hedging Obligations as they become due and in any event
within sixty (60) days from the date the relevant Hedging Obligation becomes
due.
5.22 MULTIPLE BORROWERS.
(a) OBLIGATIONS JOINT AND SEVERAL AND UNCONDITIONAL The
obligations of each of the Borrowers under this Agreement and the Notes are
joint and several and absolute and unconditional irrespective of the value,
genuineness, validity, regularity or enforceability of the obligations of the
other Borrowers under this Agreement, the Notes or any other agreement or
instrument referred to herein or therein (collectively, the "OTHER BORROWER
OBLIGATIONS"), or any substitution, release or exchange of any other guarantee
of or security for any of the Other Borrower Obligations, and, to the fullest
extent permitted by applicable law, irrespective of any other circumstance
whatsoever which might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor, it being the intent of this Section 5.22 that
the obligations of each of the Borrowers hereunder shall be absolute and
unconditional under any and all circumstances. Without limiting the generality
of the foregoing, it is agreed that the occurrence of any one or more of the
following shall not affect the liability of any Borrower under this Agreement,
the Notes or any other agreement referred to herein or therein:
(i) at any time or from time to time, without notice to any
Borrower, the time for any performance of or compliance with any of the
Other Borrower Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of
this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be done or omitted;
(iii) the maturity of any of the Other Borrower Obligations
shall be accelerated, or any of the Other Borrower Obligations shall be
modified, supplemented or amended in any respect, or any right under
this Agreement or the Notes or any other agreement or instrument
referred to herein or therein shall be waived or any other guarantee of
any of the Other Borrower Obligations or any security therefor shall be
released or exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor
of, the Agent or any Lender or Lenders as security for any of the
Other Borrower Obligations shall fail to be perfected.
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Each of the Borrowers hereby expressly waives, with respect to the
Other Borrower Obligations diligence, presentment, demand of payment, protest
and all notices whatsoever, and any requirement that the Agent or any Lender
exhaust any right, power or remedy or proceed against the other Borrowers under
this Agreement or the Notes or any other agreement or instrument referred to
herein or therein, or against any other Person under any other guarantee of, or
security for, any of the Other Borrower Obligations.
(b) REINSTATEMENT. The obligations of a Borrower under this
Section 5.22 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the other Borrowers in respect of the
Other Borrower Obligations is rescinded or must be otherwise restored by any
holder of any of the Other Borrower Obligations, whether as a result of any
proceedings in a bankruptcy or reorganization or otherwise, and each of the
Borrowers agrees that it will indemnify the Agent and each Lender on demand for
all reasonable costs and expenses (including, without limitation, fees of
counsel) incurred by the Agent or such Lender in connection with such rescission
or restoration.
(c) SUBROGATION. Each of the Borrowers hereby agrees that
until the payment and satisfaction in full of all Other Borrower Obligations and
the expiration and termination of the Commitments of the Lenders under this
Agreement it shall not exercise any right or remedy arising by reason of any
performance by it of any of its obligations hereunder, whether by subrogation or
otherwise, against the Other Borrower Obligations or any security for any of the
Other Borrower Obligations.
(d) REMEDIES. Each of the Borrowers agrees that, as between
such Borrower and the Lenders, the obligations of the other Borrowers under this
Agreement and the Notes may be declared to be forthwith due and payable as
provided in Article VII hereof (and shall be deemed to have become automatically
due and payable in the circumstances provided in Article VII) notwithstanding
any stay, injunction or other prohibition preventing such declaration (or such
obligations from being deemed to have become automatically due and payable),
such obligations (whether or not due and payable by such other Borrowers) shall
forthwith become due and payable by such Borrower.
(e) LIMITATION ON OBLIGATIONS. Notwithstanding any provision
to the contrary contained herein, in any of the Notes or any other agreement or
instrument referred to herein or therein, to the extent the joint obligations of
the Borrowers would be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of applicable state or federal law
relating to fraudulent conveyances or transfers) then the aggregate obligations
of each of the Borrowers hereunder and under the Notes and all other agreements
and instruments referred to herein or therein shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state and
including, with limitation, the federal Bankruptcy Code).
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ARTICLE VI
NEGATIVE COVENANTS
So long as any Note or any amount under any Loan Document
shall remain unpaid, any Letter of Credit shall remain outstanding, or any
Lender shall have any Commitment, none of the Borrowers shall, unless the
Required Lenders shall otherwise consent in writing:
6.1 INDEBTEDNESS. Create, incur, assume, or suffer to exist
any Indebtedness, whether by way of loan or otherwise other than (a) the
Obligations, (b) Permitted Indebtedness, and (c) Hedging Obligations that are
not created for speculative purposes; PROVIDED that, with respect to any such
Hedging Obligations arising under Hedging Agreements entered into in respect of
any commodity, the following additional restrictions shall apply: (i) no Hedging
Agreements shall be entered into if, after giving effect to such Hedging
Agreement and all other Hedging Agreements then outstanding, the Borrower shall
have hedged more than 75% of the monthly production of Proven Reserves as
forecast in the Lenders' most recent engineering evaluation of the Mortgaged
Properties, (ii) each of the Borrowers shall have notified the Lenders, within
five days of the establishment of each such Hedging Agreement of the strike
price, the volume of production committed, if applicable, and the term under the
relevant agreement, and (iii) no such Hedging Agreement shall have a term in
excess of eighteen months.
6.2 TRADE PAYABLES. Permit (a) any of its trade payables to be
outstanding for more than 90 days (except in cases where any such trade payable
is being disputed in good faith and adequate reserves under GAAP have been
established) and (b) the weighted average maturity of all such trade payables to
exceed 75 days.
6.3 CONTINGENT OBLIGATIONS. Create, incur, assume, or suffer
to exist any Contingent Obligation not otherwise prohibited by Section 6.1;
provided, however, the foregoing restriction shall not apply to (a) performance
guarantees and performance surety or other bonds provided in the ordinary course
of business, or (b) trade credit incurred or operating leases entered into in
the ordinary course of business.
6.4 LIENS. Create, incur, assume, or suffer to exist any Lien
on any of its Oil and Gas Properties or any other Property, whether now owned or
hereafter acquired; provided, however, the foregoing restrictions shall not
apply to Permitted Liens.
6.5 SALES OF ASSETS. Sell, transfer, or otherwise dispose of
any assets other than (a) sales of inventory in the ordinary course of business,
(b) occasional sales, leases or other dispositions of immaterial assets for
consideration not less than fair market value, (c) sales, leases or other
dispositions of assets that are obsolete or have negligible fair market value,
(d) sales of equipment no longer used or useful in such Borrower's business or
equipment salvaged in connection with any plugging or abandonment of any well,
and (e) sales of interests in exploration
58
prospects in the ordinary course of business.
6.6 LEASEBACKS. Either directly or indirectly, enter into,
assume, guarantee or otherwise become liable under any agreement to sell or
transfer any Property and thereafter rent or lease as lessee such Property or
other Property intended for the same use or purpose as the Property sold or
transferred.
6.7 LOANS OR ADVANCES. Make or agree to make or allow to
remain outstanding any loans or advances to any Person, other than (a) advances
or extensions of credit in the form of accounts receivable incurred in the
ordinary course of business and upon terms common in the industry for such
accounts receivable, (b) advances to employees of such Borrower for the payment
of expenses in the ordinary course of business, (c) intercompany loans or
advances between Borrowers, and (d) other loans or advances not otherwise
permitted by this Section 6.7 in an aggregate amount not to exceed $100,000 at
any time.
6.8 INVESTMENTS. Make or permit to exist any loans, advances
or capital contribu tions to, or make any acquisition or investment in, or
purchase or commit to purchase any stock or other securities or evidences of
indebtedness of or interests in any Person, or pay management fees to any other
Person, except for (a) loans, advances, capital contributions or investments in
any other Borrower, (b) Liquid Investments, (c) other loans or investments
arising after the date of this Agreement and not otherwise permitted by this
Section 6.8 which in the aggregate does not exceed $250,000, (d) advances made
pursuant to operating agreements, unitization and pooling agreements and orders,
farmout agreements and gas balancing agreements, in each case under this clause
(d) made in the ordinary course of business to the extent customary in the oil,
gas and mineral production business, and (e) plugging and abandonment deposits,
escrow deposits, purchase and sale agreement escrow amounts and other similar
deposits or escrows customary for the oil, gas and mineral business and in each
case made in the ordinary course of business.
6.9 DIVIDENDS AND DISTRIBUTIONS. Make any Restricted Payments
except that the Subsidiaries of the Parent may make Restricted Payments to the
Parent.
6.10 ISSUANCE OF STOCK; CHANGES IN CORPORATE STRUCTURE. Issue
or agree to issue additional shares of capital stock, except to officers,
directors or employees of a Borrower as part of their compensation; or enter
into any transaction of consolidation, merger, or amalgamation; or liquidate,
wind up, or dissolve (or suffer any liquidation or dissolution).
6.11 TRANSACTIONS WITH AFFILIATES. Directly or indirectly,
enter into any transaction (including the sale, lease, or exchange of Property
or the rendering of service) with any of its Affiliates, other than upon fair
and reasonable terms no less favorable than could be obtained in an arm's length
transaction with a Person which was not an Affiliate.
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6.12 LINES OF BUSINESS. Expand, on its own or through any
Subsidiary, into any line of business other than those in which such Borrower is
engaged as of the date hereof.
6.13 PLAN OBLIGATIONS. Assume or otherwise become subject to
an obligation to contribute to or maintain any Plan not set forth in Schedule
6.13 or acquire any Person which has at any time had an obligation to contribute
to or maintain any Plan.
6.14 NEW SUBSIDIARIES. Form any new Subsidiaries without the
prior written consent of the Lenders.
6.15 EBITDA TO INTEREST EXPENSE RATIO. Permit the ratio of, as
of the last day of any fiscal quarter of the Parent, (a) consolidated EBITDA of
the Parent for the four fiscal quarters then ended to (b) the consolidated
Interest Expense of the Parent for the four fiscal quarters then ended, to be
less than 3.5 to 1.0.
6.16 WORKING CAPITAL. Permit, as of the last day of any fiscal
quarter of the Parent, the amount of the Parent's consolidated current assets
less its consolidated current liabilities to be less than $1,000,000. For
purposes of calculating the foregoing amount (a) "current assets" shall include
an amount equal to the amount of Loans available to be borrowed under Section
2.1 as of the date of calculation and (b) "current liabilities" shall exclude
the current portion of all long-term Indebtedness existing as of the date of
calculation.
6.17 ALLOWABLE EXPENSES. Permit the ratio of, as of the last
day of any fiscal quarter of the Parent, (a) the aggregate amount of the
Parent's year to date consolidated general and administrative expenses for the
period from January 1 of such year through the fiscal quarter then ended to (b)
the Parent's year to date consolidated net oil and gas revenues for the period
from January 1 of such year through the fiscal quarter then ended, to be more
than .40 to 1.0.
ARTICLE VII
EVENTS OF DEFAULT
7.1 ENUMERATION OF EVENTS OF DEFAULT. Any of the following
events shall constitute an Event of Default:
(a) default shall be made in the payment when due of any
installment of principal or interest under this Agreement or the Notes or in the
payment when due of any fee or other sum payable under any Loan Document;
(b) default shall be made by a Borrower in the due observance
or performance of (i) its covenants contained in Article VI and Section 5.12, or
(ii) any other obligations or covenants set forth in any Loan Document which is
not covered by clause (i) of this Section 7.1(b)
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or any other provision of this Section 7.1 if such default shall remained
unremedied for 30 days after the occurrence of such default;
(c) any representation or warranty made by a Borrower in any
of the Loan Documents proves to have been untrue in any material respect or any
representation, statement (including Financial Statements), certificate, or data
furnished or made to the Agent and/or the Lenders in connection herewith proves
to have been untrue in any material respect as of the date the facts therein set
forth were stated or certified;
(d) (i) failure to pay any principal of or premium or interest
on its Indebtedness which is outstanding in a principal amount of at least
$500,000 individually or when aggregated with all such Indebtedness of the
Borrowers or their Subsidiaries so in default (but excluding Indebtedness
evidenced by the Notes) when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness; (ii) any other
event shall occur or condition shall exist under any agreement or instrument
relating to Indebtedness which is outstanding in a principal amount of at least
$500,000 individually or when aggregated with all such Indebtedness of the
Borrowers and their Subsidiaries so in default, and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or (iii) any such
Indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof;
(e) a Borrower shall be unable to satisfy any condition or
cure any circumstance specified in Article III, the satisfaction or curing of
which is a condition precedent to the right of such Borrower to obtain a Loan or
for the issuance, extension, or increase of a Letter of Credit, and such
inability shall continue for a period in excess of 30 days;
(f) a Borrower or any of its Subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against a Borrower or
any of its Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee or other
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against a Borrower or any of its
Subsidiaries, either such proceeding shall remain undismissed for a period of 60
days or any of the actions sought in such proceeding shall occur; or a Borrower
or any of its Subsidiaries shall take any corporate or limited liability company
action to
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authorize any of the actions set forth above in this Section 7.1(f);
(g) any judgment, decree or order for the payment of money
shall be rendered against a Borrower or any of its Subsidiaries in an amount in
excess of $500,000 if rendered solely against a Borrower or any of its
Subsidiaries, or for which a Borrower's or any such Subsidiary's allocated
portion of which exceeds $500,000 and either (i) such judgment, decree or order
remains unsatisfied and in effect for a period of 30 consecutive days or more
without being vacated, discharged, satisfied or stayed or bonded pending appeal
or (ii) enforcement proceedings shall have been commenced by any creditor upon
such judgment, decree or order;
(h) any charges are filed or any other action or proceeding is
instituted by any Governmental Authority against a Borrower under the
Racketeering Influence and Corrupt Organizations Statute (18 U.S.C. Section 1961
ET SEQ.), the result of which could be the forfeiture or transfer of any
material Property of a Borrower subject to a Lien in favor of the Agent for the
benefit of the Lenders without (i) satisfaction or provision for satisfaction of
such Lien, or (ii) such forfeiture or transfer of such Property being expressly
made subject to such Lien, but only where such action or proceeding is not being
contested by such Borrower in good faith;
(i) a Borrower shall have (i) concealed, removed, or diverted,
or permitted to be concealed, removed, or diverted, any part of their Property,
with intent to hinder, delay, or defraud its creditors or any of them, (ii) made
or suffered a transfer of any of its Property which may be fraudulent under any
bankruptcy, fraudulent conveyance, or similar law, or (iii) shall have suffered
or permitted, while insolvent, any creditor to obtain a Lien upon any of its
Property through legal proceedings or distraint which is not vacated within 30
days from the date thereof;
(j) any Security Instrument shall for any reason not, or cease
to, create an Acceptable Security Interest in the Collateral purportedly covered
thereby;
(k) a Borrower shall suffer a Change in Control; or
(l) the occurrence of a Material Adverse Effect and the same
shall remain unremedied for in excess of 30 days after notice given by the
Agent.
7.2 REMEDIES.
(a) AUTOMATIC ACCELERATION OF MATURITY. Upon the occurrence of
an Event of Default specified in Section 7.1(f), immediately and without notice,
(i) all Obligations shall automatically become immediately due and payable,
without presentment, demand, protest, notice of protest, default, or dishonor,
notice of intent to accelerate maturity, notice of acceleration of maturity, or
other notice of any kind, except as may be provided to the contrary elsewhere
herein, all of which are hereby expressly waived by each of the Borrowers; (ii)
the Commitments shall
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immediately cease and terminate unless and until reinstated by the Agent and the
Lenders in writing; (iii) to the extent permitted by and in compliance with
applicable law, the Agent and the Lenders may set-off and apply any and all
deposits (general or special, time or demand, provisional or final) held by the
Agent and the Lenders and any and all other indebtedness at any time owing by
the Agent and the Lenders to or for the credit or account of the Borrowers
against any and all of the Obligations although such Obligations may be
unmatured; and (iv) the Borrowers shall deposit into the Cash Collateral Account
an amount of cash equal to the outstanding L/C Exposure as security for the
Obligations to the extent the any obligations of the Borrowers with respect to
the Letters of Credit are not otherwise paid to the Agent at such time.
(b) OPTIONAL ACCELERATION OF MATURITY. Upon the occurrence of
any Event of Default other than those specified in Section 7.1(f), (i) the Agent
and the Lenders may, by notice to the Borrowers, declare all Obligations
immediately due and payable, without presentment, demand, protest, notice of
protest, default, or dishonor, notice of intent to accelerate maturity, notice
of acceleration of maturity, or other notice of any kind, except as may be
provided to the contrary elsewhere herein, all of which are hereby expressly
waived by each of the Borrowers; (ii) the Commitments shall immediately cease
and terminate unless and until reinstated by the Agent and the Lenders in
writing; (iii) to the extent permitted by and in compliance with applicable law,
the Agent and the Lenders may set-off and apply any and all deposits (general or
special, time or demand, provisional or final) held by the Agent and the Lenders
and any and all other indebtedness at any time owing by the Agent and the
Lenders to or for the credit or account of the Borrowers against any and all of
the Obligations although such Obligations may be unmatured; and (iv) the
Borrowers shall deposit into the Cash Collateral Account an amount of cash equal
to the outstanding L/C Exposure as security for the Obligations to the extent
the any obligations of the Borrowers with respect to the Letters of Credit are
not otherwise paid to the Agent at such time.
(c) NON-EXCLUSIVITY OF REMEDIES. Upon the occurrence of any
Event of Default, the Agent and the Lenders may, in addition to the foregoing in
this Section, exercise any or all of their rights and remedies provided by law
or pursuant to the Loan Documents.
7.3 APPLICATION OF PROCEEDS UPON DEFAULT. From and during the
continuance of any Event of Default, any monies or property actually received by
the Agent pursuant to the Credit Agreement, the exercise of any rights or
remedies under any security agreement, mortgage or any other agreement with any
Borrower or any of its respective subsidiaries or affiliates which secures any
of the Obligations, shall be applied in the following order:
FIRST, to the payment of all amounts due to the Agent under
any of the expense reimbursement or indemnity provisions of the Credit
Agreement, any security agreement, mortgage or other collateral
documents, and any applicable law;
SECOND, ratably, according to the then unpaid amounts thereof,
without
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preference or priority of any kind among them, to the payment of the
Obligations then due and payable, including Obligations with respect to
Letters of Credit, but not including any Hedging Obligations, and
THIRD, ratably, according to the then unpaid amounts thereof,
without preference or priority of any kind among them, to the payment
of all Hedging Obligations of the Borrowers to the Agent and/or the
Lenders, if any, then due and payable;
FOURTH, the remainder, if any, to whichever of the Borrowers,
or its respective successors or assigns, as may be lawfully entitled to
receive the same or as a court of competent jurisdiction may direct.
ARTICLE VIII
THE AGENT
8.1 APPOINTMENT. Each Lender hereby designates and appoints the
Agent as the agent of such Lender under this Agreement and the other Loan
Documents. Each Lender authorizes the Agent, as the agent for such Lender, to
take such action on behalf of such Lender under the provisions of this Agreement
and the other Loan Documents and to exercise such powers and perform such duties
as are expressly delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Agreement or in any other Loan Document, the Agent shall not have any
duties to, responsibilities to, or any fiduciary relationship with, any Lender
except those expressly set forth herein or in any other Loan Document; and no
implied covenants, functions, responsibilities, duties, obligations, or
liabilities on the part of the Agent shall be read into this Agreement or any
other Loan Document or otherwise exist against the Agent.
8.2 DELEGATION OF DUTIES. The Agent may execute any of its
duties under this Agreement and the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
8.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(a) required to initiate or conduct any litigation or collection proceedings
hereunder, except with the concurrence of the Lenders and contribution by each
Lender of its Percentage Share of costs reasonably expected by the Agent to be
incurred in connection therewith, (b) liable for any action lawfully taken or
omitted to be taken
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by it or such Person under or in connection with this Agreement or any other
Loan Document (except for gross negligence or willful misconduct of the Agent or
such Person), or (c) responsible in any manner to any Lender for (i) any
recitals, statements, representations or warranties made by a Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agent under or in connection with, this Agreement or any
other Loan Document, (ii) for the sufficiency, accuracy, or completeness of any
materials provided by the Agent, or the failure of the Agent to provide any
materials or disclose any matter to any Lender except as may be expressly
required herein, or (iii) for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of a Borrower to perform its obligations hereunder or
thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of a Borrower.
8.4 RELIANCE BY AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrowers), independent accountants and other
experts selected by the Agent. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes unless and until an executed Lender
Assignment Agreement shall have been received by the Agent. The Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless it shall first receive such advice or
concurrence of the Lenders as it deems appropriate and contribution by each
Lender of its Percentage Share of costs reasonably expected by the Agent to be
incurred in connection therewith. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Lenders. Such request
and any action taken or failure to act pursuant thereto shall be binding upon
the Lenders and all future holders of the Notes. In no event shall the Agent be
required to take any action that exposes the Agent to personal liability or that
is contrary to any Loan Document or applicable Requirement of Law.
8.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received notice from a Lender or the Borrowers referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall promptly give written notice thereof to the Lenders. The
Agent shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Lenders; provided that unless and until the
Agent shall have received such directions, subject to the provisions of Section
7.2, the Agent may (but shall not be obligated to) take such action, or refrain
65
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders. In the event that the
officer of the Agent primarily responsible for the lending relationship with the
Borrowers or the officer of any Lender primarily responsible for the lending
relationship with the Borrowers becomes aware that a Default or Event of Default
has occurred and is continuing, the Agent or such Lender, as the case may be,
shall use its good faith efforts to inform the other Lenders and/or the Agent,
as the case may be, promptly of such occurrence. Notwithstanding the preceding
sentence, failure to comply with the preceding sentence shall not result in any
liability to the Agent or any Lender.
8.6 NON-RELIANCE ON AGENT AND OTHER LENDERS. Each Lender
expressly acknowledges that neither the Agent nor any other Lender nor any of
their respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representation or warranty to such Lender and that no
act by the Agent or any other Lender hereafter taken, including any review of
the affairs of the Borrowers, shall be deemed to constitute any representation
or warranty by the Agent or any Lender to any other Lender. Each Lender
represents to the Agent that it has, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, condition (financial and otherwise) and
creditworthiness of the Borrowers and the value of the Collateral and other
Properties of the Borrowers and has made its own decision to enter into this
Agreement. Each Lender also represents that it will, independently and without
reliance upon the 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
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
condition (financial and otherwise) and creditworthiness of the Borrowers and
the value of the Collateral and other Properties of the Borrowers. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial and
otherwise), or creditworthiness of the Borrowers or the value of the Collateral
or other Properties of the Borrowers which may come into the possession of the
Agent or any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
8.7 INDEMNIFICATION. EACH LENDER AGREES TO SEVERALLY INDEMNIFY
THE AGENT AND ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT AND
AFFILIATES (TO THE EXTENT NOT REIMBURSED BY THE BORROWERS AND WITHOUT LIMITING
THE OBLIGATION OF THE BORROWERS TO DO SO), RATABLY AND ACCORDING TO THE
PERCENTAGE SHARE OF SUCH LENDER, FROM AND AGAINST ANY AND ALL LIABILITIES,
CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER
66
WHICH MAY AT ANY TIME (INCLUDING, WITHOUT LIMITATION, ANY TIME FOLLOWING THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS AND THE TERMINATION OF THIS
AGREEMENT) BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST THE AGENT OR ANY OF
ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES IN
ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT,
OR ANY OTHER DOCUMENT CONTEMPLATED OR REFERRED TO HEREIN OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR ANY ACTION TAKEN OR OMITTED BY THE AGENT OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES UNDER OR
IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING, WITHOUT LIMITATION, ANY
LIABILITIES, CLAIMS, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS IMPOSED, INCURRED OR
ASSERTED AS A RESULT OF THE NEGLIGENCE, WHETHER SOLE OR CONCURRENT, OF THE AGENT
OR ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR
AFFILIATES; PROVIDED THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT OF ANY
PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING FROM THE GROSS
NEGLIGENCE, SOLE OR CONCURRENT OR WILLFUL MISCONDUCT OF THE AGENT OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT OR AFFILIATES. THE
AGREEMENTS IN THIS SECTION SHALL SURVIVE THE PAYMENT AND PERFORMANCE OF ALL
OBLIGATIONS AND THE TERMINATION OF THIS AGREEMENT.
8.8 RESTITUTION. Should the right of the Agent or any Lender to
realize funds with respect to the Obligations be challenged and any application
of such funds to the Obligations be reversed, whether by Governmental Authority
or otherwise, or should the Borrowers otherwise be entitled to a refund or
return of funds distributed to the Lenders in connection with the Obligations,
the Agent or such Lender, as the case may be, shall promptly notify the Lenders
of such fact. Not later than Noon, Dallas, Texas time, as the case may be, of
the Business Day following such notice, each Lender shall pay to the Agent an
amount equal to the ratable share of such Lender of the funds required to be
returned to the Borrowers. The ratable share of each Lender shall be determined
on the basis of the percentage of the payment all or a portion of which is
required to be refunded originally distributed to such Lender, if such
percentage can be determined, or, if such percentage cannot be determined, on
the basis of the Percentage Share of such Lender. The Agent shall forward such
funds to the Borrowers or to the Lender required to return such funds. If any
such amount due to the Agent is made available by any Lender after Noon, Dallas,
Texas time, as the case may be, of the Business Day following such notice, such
Lender shall pay to the Agent (or the Lender required to return funds to the
Borrowers, as the case may be) for its own account interest on such
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amount at a rate equal to the Federal Funds Rate for the period from and
including the date on which restitution to the Borrowers is made by the Agent
(or the Lender required to return funds to the Borrowers, as the case may be) to
but not including the date on which such Lender failing to timely forward its
share of funds required to be returned to the Borrowers shall have made its
ratable share of such funds available.
8.9 AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrowers as though the Agent were not the agent
hereunder. With respect to any Note issued to the Lender serving as the Agent,
the Agent shall have the same rights and powers under this Agreement as a Lender
and may exercise such rights and powers as though it were not the Agent. The
terms "Lender" and "Lenders" shall include the Agent in its individual capacity.
8.10 SUCCESSOR AGENT. The Agent may resign as Agent upon thirty
days' notice to the Lenders and the Borrowers. If the Agent shall resign as
Agent under this Agreement and the other Loan Documents, or if the Agent shall
assign all of its obligations, then the Lenders shall appoint from among the
Lenders a successor agent for the Lenders, whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent. The term "Agent" shall
mean such successor agent effective upon its appointment. The rights, powers,
and duties of the former Agent as Agent shall be terminated, without any other
or further act or deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Notes. After the removal or resignation of
any Agent hereunder as Agent, the provisions of this Article VIII and Sections
2.3(c) and 5.19, shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement and the other Loan
Documents.
8.11 APPLICABLE PARTIES. The provisions of this Article are
solely for the benefit of the Agent and the Lenders, and the Borrowers shall not
have any rights as a third party beneficiary or otherwise under any of the
provisions of this Article. In performing functions and duties hereunder and
under the other Loan Documents, the Agent shall act solely as the agent of the
Lenders and does not assume, nor shall it be deemed to have assumed, any
obligation or relationship of trust or agency with or for the Borrowers or any
legal representative, successor, and assign of the Borrowers.
ARTICLE IX
MISCELLANEOUS
9.1 ASSIGNMENTS; PARTICIPATIONS. Each Lender may assign or
sell participations in its Loans and Commitments to one or more other Persons in
accordance with this Section 9.1.
(a) ASSIGNMENTS. Any Lender (i) with the written consent of
each of the
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Borrowers and the Agent (which consent shall not be unreasonably delayed or
withheld), may at any time, assign and delegate to one or more commercial banks
or other financial institutions, and (ii) with notice to the Borrowers and the
Agent, but without the consent of the Borrowers or the Agent, may assign and
delegate to any of its affiliates or to any other Lender (each Person described
in (i) or (ii) above as being the Person to whom such assignment and delegation
is to be made, being hereinafter referred to as an "ASSIGNEE LENDER"), all or
any fraction of such Lender's total Loans and Commitments (which assignment and
delegation shall be of a constant, and not a varying percentage, of all the
assigning Lender's Loans and Commitments), in a minimum aggregate amount of
$1,000,000 or if less, the entire amount of such Lender's total Loans and
Commitments; provided that (w) such Assignee Lender will comply with all the
provisions of this Agreement, (x) the Borrowers and the Agent shall be entitled
to continue to deal solely and directly with such assigning Lender in connection
with the interests so assigned and delegated to an Assignee Lender until written
notice of such assignment and delegation together with payment instructions,
addresses and related information with respect to such Assignee Lender, shall
have been given to the Borrowers and the Agent by such Lender and such Assignee
Lender, (y) such Assignee Lender shall have executed and delivered to the
Borrowers and the Agent a Lender Assignment Agreement, accepted by the Borrowers
and the Agent, and substantially in the form attached hereto as Exhibit C, and
(z) the processing fees described below shall have been paid.
(b) RIGHTS AND OBLIGATIONS. From and after the effective date
of the Lender Assignment Agreement, (i) the Assignee Lender thereunder shall be
deemed automatically to have become a party hereto and to the extent that rights
and obligations hereunder have been assigned and delegated to such Assignee
Lender in connection with such Lender Assignment Agreement, shall have the
rights and obligations of a Lender hereunder and under the other Loan Documents,
and (ii) the Assignor Lender, to the extent that rights and obligations
hereunder have been assigned and delegated by it in connection with such Lender
Assignment Agreement, shall be released from its obligations hereunder and under
the other Loan Documents. Within five Business Days after its receipt of notice
that the Agent has received an executed Lender Assignment Agreement, the
Borrowers shall execute and deliver to the Agent (for delivery to the relevant
Assignee Lender) new Notes evidencing such Assignee Lender's assigned Loans and
Commitments and, if the assignor Lender has retained Loans and Commitments
hereunder, replacement Notes in the principal amount of the Loans and
Commitments retained by the assignor Lender hereunder (such Notes to be in
exchange for, but not in payment of, those Notes then held by such assignor
Lender). Each such Note shall be dated the date of the predecessor Notes. The
assignor Lender shall xxxx the predecessor Notes "exchanged" and deliver them to
the Borrowers. Accrued interest on that part of the predecessor Notes evidenced
by the new Notes, and accrued fees, shall be paid as provided in the Lender
Assignment Agreement. Accrued interest on that part of the predecessor Notes
evidenced by the replacement Notes shall be paid to the assignor Lender. Accrued
interest and accrued fees shall be paid at the same time or times provided in
the predecessor Notes and in this Agreement. Such Assignor Lender or such
Assignee Lender must also pay a processing fee in the amount of $3,000 to the
Agent upon delivery of any Lender Assignment Agreement. Any attempted
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assignment and delegation not made in accordance with this Section 9.1 shall be
null and void.
(c) PARTICIPATIONS. Any Lender may, at any time and without
necessity for the consent of the Agent or the Borrowers, sell to one or more
commercial banks (each of such commercial banks being herein called a
"PARTICIPANT") participating interests in any of the Loans, Commitments, or
other interests of such Lender hereunder; provided, however, that (i) no
participation contemplated in this Section 9.1 shall relieve such Lender from
its Commitments or its other obligations hereunder or under any other Loan
Document, (ii) such Lender shall remain solely responsible for the performance
of its Commitments and such other obligations, (iii) the Borrowers and the Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and each of the other
Loan Documents, and (iv) such Lender shall not require the Participant's consent
to any matter under this Agreement, except for (A) change in the principal
amount of the Notes, (B) reductions in fees or interest, (C) releasing all or
substantially all of any collateral, (D) permitting the Borrowers or any
Subsidiary to enter into any merger or consolidation with or into any other, (E)
postponement of any date fixed for any payment of principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, or (F) extensions of
the Final Maturity Date or the Commitment Termination Date.
(d) THE REGISTER. The Agent shall maintain at its address
referred to in Section 9.4 a copy of each Assignment and Acceptance delivered to
and accepted by it and a register for the recordation of the names and addresses
of the Lenders and the Commitments of, and principal amount of the Loans owing
to, each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Borrowers, the Agent and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrowers or
any Lender at any reasonable time and from time to time upon reasonable prior
notice.
9.2 WAIVERS, AMENDMENTS. The provisions of this Agreement and
of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification, or waiver is in writing and consented
to by the Borrowers and the Required Lenders; provided, however, that no such
amendment, modification or waiver would: (a) modify any requirement hereunder
that any particular action be taken by all of the Lenders or by the Required
Lenders unless consented to by each Lender; (b) modify this Section 9.2, change
the definition of "Required Lenders", or change the Commitment or Percentage
Share of any Lender, reduce the fees described in Article II, extend the
Commitment Termination Date, release any Security Instrument or Lien, or
initiate any foreclosure, enforcement or collection procedure without the
consent of each Lender; (c) extend the due date for, (or reduce the amount of
any scheduled repayment or prepayment of principal of or interest on any Loan)
without the consent of the holder of that Note evidencing such Loan; (d) affect,
adversely the interests, rights, or obligations of the Agent without the consent
of the Agent; or (e) to modify the Borrowing Base or modify the monthly
reduction
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amount.
9.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS.
All representations and warranties of the Borrowers and all covenants and
agreements herein made shall survive the execution and delivery of the Notes and
the Security Instruments and shall remain in force and effect so long as any
Obligation is outstanding or any Commitment exists.
9.4 NOTICES AND OTHER COMMUNICATIONS. Except as to oral
notices expressly authorized herein, which oral notices shall be confirmed in
writing, all notices, requests, and communications hereunder shall be in writing
(including by telecopy). Unless otherwise expressly provided herein, any such
notice, request, demand, or other communication shall be deemed to have been
duly given or made when delivered by hand, or, in the case of delivery by mail,
when deposited in the mail if concurrent telecopy notice is also given, or, if
no concurrent telecopy notice is given, three Business Days after deposited in
the mail, certified mail, return receipt requested, postage prepaid, or, in the
case of telecopy notice, when receipt thereof is acknowledged orally or by
written confirmation report, addressed as follows:
(a) if to the Agent:
Union Bank of California, N.A.
Lincoln Plaza
000 X. Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Telecopy: (000) 000-0000
(b) if to a Borrower:
Edge Petroleum Corporation
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxx
Telecopy: (000) 000-0000
(c) if to a Lender, then to the address set forth
opposite such Lender's name on Schedule 9.4.
Any party may, by proper written notice hereunder to the
others, change the individuals or addresses to which such notices to it shall
thereafter be sent.
9.5 PARTIES IN INTEREST. Subject to the restrictions on
changes in corporate structure
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set forth in Section 6.10 and other applicable restrictions contained herein,
all covenants and agreements herein contained by or on behalf of the Borrowers
or the Agent and each Lender shall be binding upon and inure to the benefit of
the Borrowers or the Agent and each Lender, as the case may be, and their
respective legal representatives, successors, and assigns.
9.6 RIGHTS OF THIRD PARTIES. All provisions herein are imposed
solely and exclusively for the benefit of the Agent and each Lender and the
Borrowers. No other Person shall have any right, benefit, priority, or interest
hereunder or as a result hereof or have standing to require satisfaction of
provisions hereof in accordance with their terms, and any or all of such
provisions may be freely waived in whole or in part by the Agent or the Lenders
at any time if in their sole discretion they deem it advisable to do so.
9.7 RENEWALS; EXTENSIONS. All provisions of this Agreement
relating to the Notes shall apply with equal force and effect to each promissory
note hereafter executed which in whole or in part represents a renewal or
extension of any part of the Indebtedness of the Borrowers under this Agreement,
the Notes, or any other Loan Document.
9.8 NO WAIVER; RIGHTS CUMULATIVE. No course of dealing on the
part of the Agent or the Lenders, their officers or employees, nor any failure
or delay by the Agent or the Lenders with respect to exercising any of their
rights under any Loan Document shall operate as a waiver thereof. The rights of
the Agent and each Lender under the Loan Documents shall be cumulative and the
exercise or partial exercise of any such right shall not preclude the exercise
of any other right. The making of any Loan or the issuance, renewal, extension
or increase of any Letter of Credit shall not constitute a waiver of any of the
covenants, warranties, or conditions of the Borrowers contained herein. In the
event a Borrower is unable to satisfy any such covenant, warranty, or condition,
the making of any Loan or the issuance, extension, increase or renewal of a
Letter of Credit shall not have the effect of precluding the Agent and each
Lender from thereafter declaring such inability to be an Event of Default as
hereinabove provided.
9.9 SURVIVAL UPON UNENFORCEABILITY. In the event any one or
more of the provisions contained in any of the Loan Documents or in any other
instrument referred to herein or executed in connection with the Obligations
shall, for any reason, be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provision of any Loan Document or of any other instrument referred to
herein or executed in connection with such Obligations.
9.10 AMENDMENTS; WAIVERS. Neither this Agreement nor any
provision hereof may be amended, waived, discharged, or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the amendment, waiver, discharge, or termination is sought.
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9.11 CONTROLLING AGREEMENT. In the event of a conflict between
the provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
9.12 DISPOSITION OF COLLATERAL. Notwithstanding any term or
provision, express or implied, in any of the Security Instruments, the
realization, liquidation, foreclosure, or any other disposition on or of any or
all of the Collateral shall be in the order and manner and determined in the
sole discretion of the Agent and the Lenders; provided, however, that in no
event shall the Agent or any Lender violate applicable law or exercise rights
and remedies other than those provided in such Security Instruments or otherwise
existing at law or in equity.
9.13 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE
DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT VERNON'S CHAPTER
346 OF THE TEXAS FINANCE CODE (FORMERLY TEX. REV. CIV. STAT. XXX. ART. 0000, XX.
15) (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING
TRIPARTY ACCOUNTS) SHALL NOT APPLY.
9.14 JURISDICTION AND VENUE. ALL ACTIONS OR PROCEEDINGS WITH
RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED
TO, OR FROM THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE
SOLE DISCRETION AND ELECTION OF THE LENDERS, IN COURTS HAVING SITUS IN DALLAS,
DALLAS COUNTY, TEXAS. THE BORROWERS HEREBY SUBMIT TO THE JURISDICTION OF ANY
LOCAL, STATE, OR FEDERAL COURT LOCATED IN DALLAS, DALLAS COUNTY, TEXAS. AND
HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR
VENUE OF ANY LITIGATION BROUGHT AGAINST THEM BY THE LENDERS IN ACCORDANCE WITH
THIS SECTION.
9.15 WAIVER OF RIGHTS TO JURY TRIAL. THE BORROWERS, THE AGENT
AND THE LENDERS HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF
ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR OMISSIONS OF THE
AGENT OR ANY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT THERETO. THE
PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE AGENT AND THE
LENDERS ENTERING INTO
73
THIS AGREEMENT.
9.16 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER WRITTEN
LOAN DOCUMENTS CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH
RESPECT TO THE SUBJECT HEREOF AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN
THE PARTIES HERETO, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF.
FURTHERMORE, IN THIS REGARD, THIS AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS
REPRESENT, COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH
PARTIES.
9.17 COUNTERPARTS. For the convenience of the parties, this
Agreement may be executed in multiple counterparts, each of which for all
purposes shall be deemed to be an original, and all such counterparts shall
together constitute but one and the same Agreement.
Signature pages follow.
74
IN WITNESS WHEREOF, this Agreement is deemed executed
effective as of the date first above written.
BORROWERS:
EDGE PETROLEUM CORPORATION
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------------
Xxxxxxx X. Xxxx
Chief Financial Officer
EDGE PETROLEUM EXPLORATION
COMPANY
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------------
Xxxxxxx X. Xxxx
Chief Financial Officer
EDGE PETROLEUM OPERATING
COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------------
Xxxxxxx X. Xxxx
Chief Financial Officer
Signature Page for Second Amended and Restated Credit Agreement
AGENT:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxxxx
Senior Vice President
By: /s/ Xxx Xxxxx
-------------------------------------------
Xxx Xxxxx
Assistant Vice President
LENDERS:
Commitment: UNION BANK OF CALIFORNIA, N.A.
$25,000,000
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxxxx
Senior Vice President
By: /s/ Xxx Xxxxx
-------------------------------------------
Xxx Xxxxx
Assistant Vice President
Signature Page for Second Amended and Restated Credit Agreement
