DEBT RESTRUCTURE AGREEMENT
BETWEEN
BENZ ENERGY, INC.,
TEXSTAR PETROLEUM, INC.
XXXXXXX XXXX, IN HIS CAPACITY AS
COLLATERAL AGENT, XXXXXXX XXXX,
IN HIS CAPACITY AS DEPOSIT AGENT,
PARTICIPATING CREDITORS AND,
SOLELY FOR THE PURPOSES INDICATED IN
SECTION 25.09, AQUILA ENERGY CAPITAL CORPORATION
DEBT RESTRUCTURE AGREEMENT
This Debt Restructure Agreement ("Agreement") is made by and among
Benz Energy, Inc., Texstar Petroleum, Inc., Xxxxxxx Xxxx, in his capacity as
Collateral Agent, Xxxxxxx Xxxx, in his capacity as Deposit Agent,
Participating Creditors and, solely for the purposes indicated in Section
25.09, Aquila Energy Capital Corporation.
ARTICLE I
DEFINITIONS
The following terms, as used in this Agreement, shall have the
meanings indicated below, unless the context otherwise requires:
1.01 "ALLOWED AMOUNT" shall mean the amount of a creditor's claim
which is either (i) acknowledged and agreed to by the Companies, or (ii) is
established as due and owing by the Companies pursuant to the arbitration
procedures set forth in Section 6.03. In no event shall the Allowed Amount
include interest for the period prior to the Closing Date or attorneys' fees.
1.02 "AQUILA" shall mean Aquila Energy Capital Corporation, a
Delaware corporation, its successors and assigns.
1.03 "AVERAGE ADJUSTED SHARE PRICE" shall mean the average of the
closing price of shares of Benz common stock for the thirty (30) trading days
prior to payment in full of the Participating Creditor Claims as provided in
this Agreement (excluding the Upside Payment) adjusted for share
consolidations and dilutions from issuance of stock at less than market price
(other than that resulting from the exercising, existing or proposed warrants
or options disclosed in the Benz Energy Inc. Offer to Exchange and Offer to
Sell dated June 15, 1999 or options and warrants issued in the future at
exercise price less than the then market price).
1.04 "BENZ" shall mean Benz Energy, Inc.
1.05 "BUSINESS DAY" shall mean a day other than a Saturday, a
Sunday, or any federal holiday.
1.06 "CAPITAL EXPENDITURES" shall mean, from and after the first day
of the month following the Closing Date, all costs required to be capitalized
initially according to generally accepted accounting procedures under the
full cost accounting method, and shall include oil and gas lease acquisition
costs, seismic data acquisition expenses, seismic data processing expenses,
delay rental payments, plugging and abandonment expenses, and (to the extent
not treated as lease operating expenses) costs to comply with governmental
regulations.
1.07 "CASH" means legal tender of the United States or equivalents
thereof.
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1.08 "CLOSING DATE" shall mean the first Business Day following
satisfaction of all conditions to this Agreement set forth in Article II,
which shall be August 6, 1999 unless extended by the Companies in their sole
discretion; provided that in no event shall the Closing Date be extended
beyond September 30, 1999.
1.09 "COLLATERAL AGENT" shall mean Xxxxxxx Xxxx or his successor
appointed pursuant to the terms of this Agreement and the Collateral Agent
Agreement.
1.10 "COLLATERAL AGENT AGREEMENT" shall mean the Collateral Agent
Agreement in the form of Exhibit 8.
1.11 "COLLATERAL DOCUMENTS" shall mean the Deeds of Trust,
Assignment of Production, Security Agreement and Financing Statement and Act
of Mortgage, Pledge and Security Agreement substantially in the form of
Exhibits 3, 4 and 5 and the Security Agreement substantially in the form of
Exhibit 6 to this Agreement.
1.12 "COMPANIES" shall mean Benz and Texstar.
1.13 "CONVENIENCE CLAIM" shall mean any claim against either or both
of the Companies that is (i) $10,000 or less, or (ii) more than $10,000 if
the holder has elected on a timely basis, to reduce its claim to $10,000.
1.14 "CREDITOR RATIFICATION" shall mean the Ratification and Limited
Power of Attorney in the form attached as Exhibit 1.
1.15 "DEBT SERVICE" shall mean payments of principal and interest
that are required to be made on the Senior Indebtedness, the Enabling Loan
and Future Loans from and after the first day of the month following the
Closing Date.
1.16 "DEDICATED PORTION OF NET LOAN PROCEEDS" shall mean fifty
percent (50%) of the Net Loan Proceeds.
1.17 "DEDICATED PORTION OF NET PROPERTY SALE PROCEEDS" shall mean on
a property-by-property basis fifty percent (50%) of the Net Property Sales
Proceeds.
1.18 "DEDICATED RECEIVABLES" shall mean the dollar amount owed to
Texstar by (i) Century Offshore Management Co. for operations on the Oakvale
Dome property and Wausau property through June 30, 1999, and (ii) Akasha
Partners LLC for operations on the Wausau property and the East Morgantown
property through June 30, 1999.
1.19 "DEPOSIT AGENT" shall mean Xxxxxxx Xxxx.
1.20 "DISPUTED CLAIM" shall mean that portion of an Eligible Claim
held by a Participating Creditor in excess of the Allowed Amount.
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1.21 "DISPUTED CLAIM RESERVE" shall mean the dollar amount which at
any point in time would have been paid to a Participating Creditor for and on
account of its Disputed Claim if such Disputed Claim was an Allowed Amount.
1.22 "ELIGIBLE CLAIMS" shall mean the claims held by the creditors
of the Companies for services, materials or supplies provided on or before
June 14, 1999 listed on Exhibit 2 to this Agreement and in the amounts which
are listed in Exhibit 2, plus (i) any additional amounts which are later
determined to have been owed in accordance with Article VI, and (ii) any
additional creditor and claim which the Companies elect at any point
(including after the Closing Date) to include as Eligible Claims. The dollar
amount of Eligible Claims shall be adjusted to reflect any settlements or
arbitration awards.
1.23 "ENABLING LOAN" shall mean all loans by Aquila (and other
amounts due Aquila) pursuant to the loan agreement entered into on or about
the Closing Date between Texstar and Aquila, which loans shall not be in an
aggregate amount less than $25,000,000 nor greater than $35,000,000 unless
the Requisite Majority otherwise consents in writing.
1.24 "EVENT OF DEFAULT" shall mean the occurrence of any conditions,
events or acts described in Article XXII.
1.25 "EXEMPTED MERGER" shall mean a merger by Benz approved by a
majority of Senior Management with a U.S. corporation that is effected for
the primary purpose of enabling Benz to list its common shares on the NASDAQ
or similar system or American Stock Exchange. A merger with any company
listed on the NASDAQ, American Stock Exchange or similar system will be
deemed to be effectively for the primary purpose of enabling Benz to list its
common shares on such exchange or system if the other company has an
Enterprise Value equal to or less than half of the Enterprise Value of Benz.
For the purpose of this section, "Enterprise Value" is the aggregate of total
debt, principal amount of preferred stock not traded on a public market and
the market value of all publicly traded stock.
1.26 "FUTURE LOAN" shall mean any lending transactions (other than
vendor financing), including any loans by Aquila other than the Enabling
Loan, which are entered into subsequent to the Closing Date.
1.27 "G&A EXPENSES" shall mean, from and after the first day of the
month following the Closing Date, all customary and routine expenses
generated or incurred by the Companies for legal, accounting, data
processing, geological, engineering or secretarial services, group services
and costs, depreciation (other than depreciation relating to real property),
travel, office rent, telephone, reasonable employee compensation and benefits
comparable to that paid by similar publicly traded oil and gas exploration
companies (compensation in accordance with existing agreements or past levels
is deemed reasonable), maintenance of the publicly traded status of the Benz
Stock, and other items of a general and administrative nature, whether like
or unlike the foregoing, and any other incidental expenses reasonably
necessary to conduct the Companies' business.
1.28 "INITIAL PAYMENTS" shall mean the payments to Participating
Creditors provided for
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in Section 8.01.
1.29 "LOAN EXPENSES" shall mean, from and after the first day of the
month following the Closing Date, the direct costs, fees and expenses
incurred by the Companies in connection with obtaining financing or
refinancing on the Oil and Gas Properties, including but not limited to,
commissions, finders fees, title policy premiums, endorsement charges,
escrow fees, reasonable and actual legal fees and charges of the lender
(i.e., engineering, repairs and repair allowances, legal, appraisal and loan
fees), survey expenses, and title company charges and legal fees incurred by
the Companies.
1.30 "NET LOAN PROCEEDS" means the gross proceeds from a Future Loan
minus the sum of (i) Loan Expenses, (ii) the dollar amount of such loan
proceeds used to repay any loan (including the Senior Indebtedness, the
Enabling Loan and any Future Loan) secured by liens with priority greater
than that of the liens securing the obligations to the Collateral Agent, and
(iii) the portion of the loan proceeds required by the lender to be dedicated
for purposes other than repayment of existing debt.
1.31 "NET PROPERTY SALE PROCEEDS" shall mean the gross proceeds from
the sale of one or more of the Oil and Gas Properties less the sum of the
Selling Expenses, Senior Indebtedness, Enabling Loan and Future Loan.
1.32 "NET REVENUE FROM OPERATIONS" shall mean the amount by which
cumulative Revenue from Operations exceeds cumulative Operation Expenses.
1.33 "NON-PARTICIPATING CLAIMS" shall mean the amount of Eligible
Claims of creditors that fail to become Participating Creditors.
1.34 "NON PARTICIPATING CREDITOR RESERVE" shall mean the dollar
amount which at any point in time would have been paid to holders of Non
Participating Claims pursuant to this Agreement if they had elected to be
Participating Creditors.
1.35 "OIL AND GAS PROPERTIES" shall mean the Companies' interest in
oil and gas leases pledged as collateral pursuant to the Collateral Documents
(excluding third party royalties, overriding royalties, net profit interests
or interests held in trust for the benefit of third parties), together with
the interest in any oil and gas leases acquired by the Companies (excluding
third party royalties, overriding royalties, net profit interests or
interests held in trust for the benefit of third parties) subsequent to the
Closing Date that are required to be pledged as collateral pursuant to
Article XIX. The security interest in the Old Ocean property pledged as
collateral shall be fifty percent (50%) of the Companies' working interest as
of July 1, 1999. Accordingly, any interest in the Old Ocean property in
excess of a fifty percent (50%) of the Companies' working interest as of July
1, 1999 is not included within the definition of an Oil and Gas Property for
purposes of this Agreement. The security interest in the Xxxxxxx property
pledged as collateral shall be a sixty percent (60%) working interest.
Accordingly, any interest in the Xxxxxxx property in excess of a sixty
percent (60%) working interest is not included within the definition of an
Oil and Gas Property for purposes of this Agreement. The Plum Grove property
shall not be included as an Oil and Gas
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Property.
1.35 "OPERATING AGREEMENT" means the operating agreements in effect
as of the date hereof, and from time to time hereafter, for the Oil and Gas
Properties between either of the Companies and other working interest owners.
1.36 "OPERATION EXPENSES" shall mean and shall include the following
costs and expenses actually incurred by the Companies from and after the
first day of the month following the Closing Date:
(i) all costs of gathering, transporting and marketing
production from the Oil and Gas Properties;
(ii) all costs of operating, producing and maintaining the Oil
and Gas Properties (including any third party non-operating interest
owner's share of expenses advanced by the Companies pursuant to the terms
of an Operating Agreement);
(iii) Capital Expenditures;
(iv) all costs of processing production from the Oil and Gas
Properties;
(v) G&A Expenses;
(vi) Debt Service;
(vii) Taxes;
(viii) the Non Participating Creditor Reserves and payments to Non
Participating Creditors up to the amount of the Non Participating
Creditor Reserve; and
(ix) payments for and on account of Participating Creditors'
Claims.
1.37 "PARTICIPATING CREDITOR'S CLAIM" shall mean the Allowed Amount
of an Eligible Claim of a Participating Creditor and shall not include the
Upside Payment Amount.
1.38 "PARTICIPATING CREDITORS" shall mean the holders of Eligible
Claims that satisfy the requirements to become Participating Creditors.
1.39 "PRO RATA" means the proportion that the balance of the Allowed
Amount of a Participating Creditor Claim bears to the aggregate balance of
all Eligible Claims held by Participating Creditors unless otherwise provided.
1.40 "REQUISITE MAJORITY" shall mean Participating Creditors holding
at least sixty percent (60%) by number of all Participating Creditor Claims
that timely return ballots in response to a Solicited Action, provided that
such claims must have originally totaled at least $3,500,000
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(based on Allowed Amounts prior to crediting payments pursuant to this
Agreement).
1.41 "REVENUE FROM OPERATIONS" shall mean the following amounts
actually earned and received by the Companies from and after the first day of
the month following the Closing Date:
(i) gross proceeds from the sale of hydrocarbons produced from
the Oil and Gas Properties;
(ii) funds received from third party non-operating interest
owners to reimburse the Companies for advances pursuant to an Operating
Agreement;
(iii) all material proceeds received by the Companies from the
sale, from and after the Closing Date, of any materials, supplies,
equipment and other personal property or fixtures, or any part thereof or
interest therein, located on or used in connection with the Oil and Gas
Properties;
(iv) all insurance proceeds received by the Companies as a
consequence of the loss or damage from and after the Closing Date to the
Oil and Gas Properties, or any part thereof or interest therein, or any
materials, supplies, equipment or other personal property or fixtures
located on or used in connection with any of the Oil and Gas Properties,
unless such proceeds are used by the Companies within 180 days of receipt
to replace any such lost or damaged materials, supplies, equipment and
other personal property; and
(v) the proceeds of all judgments and claims received by the
Companies (excluding the Dedicated Receivables) for damages from and
after the Closing Date directly related to the Oil and Gas Properties, or
any part thereof or interest therein, or any materials, supplies,
equipment or other personal property or fixtures, or any part thereof or
interest therein, located on or used in connection with any of the Oil
and Gas Properties and which is specifically allocated to the Oil and Gas
Properties or the materials, supplies, equipment or other personal
property or fixtures or any part thereof located on or used in connection
with any of the Oil and Gas Properties.
Proceeds from the sale of Oil and Gas Properties and loan proceeds are not
included within Revenue from Operations.
1.42 "SELLING EXPENSES" shall mean the direct costs, fees and
expenses incurred by the seller in connection with the sale of an Oil and Gas
Property, including but not limited to, all transfer gains and sales taxes,
sales commissions, employee supplemental compensation of ten percent (10%) of
Net Property Sales Proceeds from undeveloped properties net of all other
Selling Expenses, finders fees, title policy premiums, endorsement charges,
escrow fees, survey expenses and title company charges, repair costs and
repair allowances, actual legal costs and fees.
1.43 "SENIOR INDEBTEDNESS" shall mean the indebtedness described in
Exhibit 7.
1.44 "SENIOR MANAGEMENT" shall mean Xxxxxxx Xxxxxxxxx, Xxx Xxxxxx
and Xxxx Xxxxxxx.
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1.45 "SOLICITED ACTION" shall mean any proposed action or agreement
that Participating Creditors are requested to approve in accordance with the
procedures set forth in Section 24.02.
1.46 "SUBSTANTIAL MANAGEMENT CHANGE" shall mean the termination or
resignation of two (2) or more of the existing Senior Management.
1.47 "TAXES" means all taxes of any type including income,
franchise, transfer, ad valorem, property, occupation, gathering, pipeline
regulating, windfall profit, severance, gross production, energy, excise and
other taxes and governmental charges and assessments imposed on the Oil and
Gas Properties, regardless of whether incurred before or after the Closing
Date.
1.48 "TEXSTAR" shall mean Texstar Petroleum, Inc.
1.49 "UPSIDE PAYMENT" shall mean the payment provided for in Article X.
1.50 "UPSIDE PAYMENT AMOUNT" shall mean one percent (1%) of the
balance of Participating Creditor Claims, after crediting the Initial
Payment, for every $.05 (Canadian) that the Average Adjusted Share Price
exceeds $.70 (Canadian) up to a maximum of five percent (5%). For purposes
of this calculation, the Average Adjusted Share Price will be rounded to the
nearest number evenly divisible by five. For example, if the Average
Adjusted Share Price was $.82 (Canadian) a Participating Creditor's Upside
Payment Amount would be two percent (2%) of the balance of that claim after
crediting the Initial Payment. In the event that the shares of Benz common
stock become denominated in U.S. dollars, the above amounts that are in
Canadian dollars will be converted to U.S. dollars at the exchange rate
between Canada and U.S. currency published by Bloomberg on the Business Day
preceding such change in denomination.
ARTICLE II
CONDITIONS
2.01 CONDITIONS TO BE SATISFIED BY TEXSTAR. The obligations of
Benz, Participating Creditors and the Collateral Agent under this Agreement
are conditioned upon the completion of the following conditions on or before
the Closing Date, each of which constitute a condition precedent to their
covenants and agreements under this Agreement.
(a) AGREEMENT. Texstar shall execute and deliver this
Agreement to the Deposit Agent.
(b) COLLATERAL DOCUMENTS. Texstar shall execute and deliver
the Collateral Documents to the Deposit Agent.
(c) COLLATERAL AGENT AGREEMENT. Texstar shall execute and
deliver the Collateral Agent Agreement to the Deposit Agent.
(d) INITIAL PAYMENT. Texstar shall execute and deliver to the
Deposit Agent
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company checks payable to Participating Creditors for Participating
Creditor Claims in the amount of the required Initial Payments as
provided in Section 8.01.
(e) REPRESENTATION. The representations of Texstar set forth in
this Agreement shall be true in all material respects as of the Closing
Date.
2.02 CONDITIONS TO BE SATISFIED BY BENZ. The obligations of
Texstar, Participating Creditors and the Collateral Agent under this
Agreement are conditioned upon completion of the following conditions on or
before the Closing Date.
(a) AGREEMENT. Benz shall execute and deliver this Agreement
to the Deposit Agent.
(b) REPRESENTATION. The representations of Benz set forth in
this Agreement shall be true in all material respects as of the Closing
Date.
2.03 CONDITION TO BE SATISFIED BY PARTICIPATING CREDITORS. The
obligations of the Companies and the Collateral Agent under this Agreement
are conditioned upon holders of Eligible Claims holding at least eighty-five
percent (85%) by dollar amount of all Eligible Claims timely satisfying the
requirements to become Participating Creditors as provided in Article V
hereof. Unless extended by the Companies, in their sole discretion, the
deadline for satisfaction of this condition is August 13, 1999. The timely
satisfaction of this condition constitutes a condition precedent to the
covenants and agreements of the Companies and the Collateral Agent under this
Agreement.
2.04 OTHER CONDITIONS TO BE SATISFIED. The obligations of the
Companies, the Collateral Agent and the Participating Creditors are
conditioned upon (i) closing and funding of the Enabling Loan, (ii) the Benz
Offer to Exchange Shares of Class A Series II Convertible Preferred Stock for
Convertible Debentures and Sell Class A Series II Convertible Preferred Stock
dated June 15, 1999, (iii) purchase of Class A Redeemable Preferred Stock
Series A by EnCap Energy Capital Fund III, L.P., and (iv) delivery by counsel
for the Companies to the Deposit Agent of an Opinion of Counsel substantially
in the form of Exhibit 9, on or before the Closing Date, each of which
constitutes a condition precedent to the covenants and agreements under this
Agreement.
ARTICLE III
DEPOSIT AGENT
3.01 DEPOSITS IN ESCROW. Pending satisfaction of the conditions set
forth in Article II, the instruments delivered to the Deposit Agent shall be
held in escrow.
3.02 DELIVERY TO COLLATERAL AGENT IN EVENT CONDITIONS ARE SATISFIED.
In the event the conditions set forth in Article II are timely satisfied, the
Deposit Agent shall deliver to the Collateral Agent (i) this Agreement fully
executed by the Companies, Participating Creditors and the Collateral Agent,
and (ii) copies of Creditor Ratifications executed by Participating
Creditors, and (iii) the
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Collateral Documents fully executed by Texstar.
3.03 DELIVERY TO PARTICIPATING CREDITORS IN THE EVENT CONDITIONS ARE
SATISFIED. In the event that the conditions set forth in Article II are
timely satisfied, then, within two (2) Business Days of satisfaction of all
conditions, the Deposit Agent shall mail the checks representing the Initial
Payment to each Participating Creditor.
3.04 DELIVERY TO THE COMPANIES IN THE EVENT CONDITIONS ARE
SATISFIED. In the event that the conditions set forth in Article II are
timely satisfied, the Deposit Agent shall simultaneous with receipt of the
checks for the Initial Payment deliver the originals of each Creditor
Ratification to Texstar.
3.05 INSTRUCTIONS IN EVENT CONDITIONS ARE NOT TIMELY SATISFIED. In
the event that the conditions set forth in Article II are not satisfied
within the times (including any extensions granted in accordance therewith)
set forth therein, then this Agreement shall be void and the instruments
delivered to the Deposit Agent shall be of no force and effect and shall be
destroyed by the Deposit Agent. The Collateral Agent shall have no
obligation or duties in the event the conditions set forth in Article II are
not timely satisfied.
3.06 LIMITATION ON DUTY AND LIABILITY OF DEPOSIT AGENT. The duties
and responsibilities of the Deposit Agent shall be limited to those expressly
set forth in this Agreement. No implied duties of the Deposit Agent shall be
read into this Agreement, and the Deposit Agent shall not be subject to, or
obliged to recognize, any other agreement between, or direction or
instruction of, any or all of the parties hereto even though reference
thereto may be made herein. The Deposit Agent is authorized, in its sole
discretion, to disregard any and all notices or instructions given by any
other party hereto or by any other person, firm or corporation, except only
such notices or instructions as are herein provided for or orders of any
court entered or issued with or without jurisdiction. If any property
subject hereto is at any time attached, garnished, or levied upon under any
court order or in case the payment, assignment, transfer, conveyance or
delivery of any such property shall be stayed or enjoined by any court order,
or in case any order, judgment or decree shall be made and entered by any
court affecting such property or any part hereof, then and in any such event
the Deposit Agent is authorized, in its sole discretion, to rely upon and
comply with any such order, writ, judgment or decree with which it is advised
by legal counsel of its own choosing is binding upon it; and if it complies
with any such order, writ, judgment or decree, it shall not be liable to any
other party hereto or to any other person, firm or corporation by reason of
such compliance even though such order, writ, judgment or decree may be
subsequently reversed, modified, annulled, set aside or vacated. The Deposit
Agent may rely, and shall be protected in acting or refraining from acting,
upon any instruments furnished to it hereunder and believed by it to be
genuine and believed by it to have been signed or presented by the
appropriate party or parties. The Deposit Agent shall not be responsible for
the sufficiency or accuracy, or the form, execution, validity or genuineness,
of documents hereafter deposited or received hereunder, or of any endorsement
thereon, or for lack of endorsement thereon, or for any description therein;
nor shall it be responsible or liable in any respect on account of the
identity, authority or rights of any person executing, depositing or
delivering or purporting to execute, deposit or deliver any such document,
security or endorsement or this Agreement, or on account of or by reason of
forgeries, false representations, or the exercise
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of its discretion in any particular manner; nor shall the Deposit Agent be
liable for any mistake of fact or any error of judgment, or for any act or
omission, except as a result of its gross negligence or willful malfeasance.
3.07 INDEMNITY. The Companies hereby agree to protect, defend,
indemnify and hold harmless the Deposit Agent against and from any and all
costs, losses, liabilities, expenses (including counsel fees and expenses)
and claims imposed upon or asserted against the Deposit Agent on account of
any action taken or omitted to be taken by it in good faith in connection
with its acceptance of or performance of its duties and obligations as
Deposit Agent under this Agreement as well as the costs and expenses of
defending itself against any claim or liability arising out of or relating to
this Agreement in such capacity only. The Participating Creditors hereby
release the Deposit Agent from any and all claims, demands and liabilities in
any manner arising from or related to the performance of his obligations
under this Agreement, whether for his acts or failure to act insofar as the
same shall have been in good faith.
3.08 RESIGNATION. It is understood that the Deposit Agent reserves
the right to resign as Deposit Agent at any time by giving ten (10) Business
Days written notice of its resignation, specifying the effective date
thereof, to each other party hereto. Within ten (10) Business Days after
receiving the aforesaid notice, the other party or parties hereto shall
appoint a successor Deposit Agent to which the Deposit Agent may distribute
the property then held hereunder, less its fees, costs and expenses
(including counsel fees and expenses).
ARTICLE IV
EFFECT OF FAILURE TO SATISFY CONDITIONS AND
EFFECT OF SATISFACTION OF CONDITIONS
4.01 EFFECT OF NOT SATISFYING CONDITIONS. This Agreement, all
stipulations and acknowledgments contained in this Agreement and all
agreements and instruments delivered or to be delivered pursuant to this
Agreement (including the Collateral Documents) shall be of no force or effect
unless the conditions set forth in Article II are satisfied.
4.02 EFFECT OF SATISFYING CONDITIONS. This Agreement and all
agreements and instruments delivered or to be delivered pursuant to this
Agreement (including the Collateral Documents) shall become effective
immediately upon the timely satisfaction of all the conditions set forth in
Article II.
ARTICLE V
PARTICIPATING CREDITORS AND RATIFICATION
5.01 CREDITOR RATIFICATION. In order for the holder of an Eligible
Claim to become a party to and entitled to the benefits of this Agreement, it
must execute and deliver to the Deposit Agent a Creditor Ratification within
the period set forth in Section 2.03 (as same may be extended in accordance
with Section 2.03), except as otherwise provided in Section 5.02.
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5.02 DISCRETIONARY EXTENSION OF TIME. A holder of an Eligible Claim
that fails to timely satisfy the requirements of Section 5.01 may become a
Participating Creditor only if (i) it executes and delivers the Creditor
Ratification to the Companies and the Collateral Agent, and (ii) the
Companies in their sole discretion agree to waive the deadline set forth in
Section 5.01.
5.03 RATIFICATION OF AGREEMENT. Subject to the provisions of
Article II, each Participating Creditor ratifies and is bound by the terms of
this Agreement and the Collateral Agent Agreement. Each Participating
Creditor shall evidence its agreement to be bound by the terms of this
Agreement by execution and delivery of the Creditor Ratification to the
Collateral Agent.
5.04 INITIAL COLLATERAL AGENT. Each Participating Creditor agrees
to the selection of Xxxxxxx Xxxx as the initial Collateral Agent.
ARTICLE VI
BENZ/TEXSTAR INDEBTEDNESS
6.01 JOINT AND SEVERAL. Provided that the conditions to this
Agreement are timely satisfied, the Companies agree to be jointly and
severally liable for the Allowed Amount of Participating Creditors' Claims.
6.02 DEBT. The full amount acknowledged by Texstar to be due and
owing to Participating Creditors as of June 14, 1999, is set forth in Exhibit
2 to this Agreement.
6.03 ARBITRATION OF CLAIM AMOUNT DISPUTES. Any claim by a
Participating Creditor that the Allowed Amount of its claim should be greater
than the amount listed on Exhibit 2 shall be resolved in accordance with this
Section.
(a) The Companies and the Participating Creditor in question
will attempt in good faith to resolve any controversy or
dispute concerning the amount owed promptly by negotiations
between themselves. No arbitration may be commenced by any
party unless and until a negotiation complying with the
foregoing subparagraph has been completed.
(b) If a controversy or dispute with respect to the Allowed
Amount of a claim is not resolved after completion of the
negotiation process described above, then, upon notice by
any party to the other parties (an "Arbitration Notice")
and to the American Arbitration Association, the
controversy or dispute shall be submitted for binding
arbitration in Houston, Texas, in accordance with the
American Arbitration Association's Commercial Arbitration
Rules (the "Rules"). The parties agree that they will
abide by and perform any award rendered by the arbitrator.
The arbitration shall be governed by the Federal
Arbitration Act, 9 U.S.C. Section 1-16 (or by the same
principles enunciated by such Act in the event it may not
be technically applicable). The determination of the
Allowed Amount of a claim by the arbitrator shall be
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final and binding on all parties and judgment upon the
award or judgment of the arbitrator may be entered and
enforced by any court having jurisdiction. The fees and
expenses of the arbitrator will be shared by all parties
engaged in the dispute or controversy on a basis determined
to be fair and equitable by the arbitrator, taking into
account the relative fault of each party, the relative
credibility and merit of all claims and defenses made by
each party and the cooperation, speed and efficiency of
each party in conducting the arbitration proceedings and
complying with the Rules and with orders and requests of
the arbitrator.
(c) Promptly after the Arbitration Notice is given, the
American Arbitration Association will select three possible
arbitrators that have experience in the oil and gas
business, to whom the American Arbitration Association will
give the identities of the parties and the general nature
of the controversy. If any of those arbitrators
disqualifies himself or declines to serve, the American
Arbitration Association shall continue to designate
potential arbitrators until the parties have three to
select from. After the panel of three potential
arbitrators has been completed, a two-page summary of the
background of each of the potential arbitrators will be
given to each of the parties, and the parties will have a
period of ten (10) days after receiving the summaries in
which to attempt to agree upon the arbitrator to conduct
the arbitration. If the parties are unable to agree upon
an arbitrator, then one of the parties shall notify the
American Arbitration Association, and the American
Arbitration Association shall select the arbitrator from
one of the three, or less, if one or more has been found to
be disqualified or removes himself from consideration (if
all three are disqualified or remove themselves, then the
American Arbitration Association shall start the
arbitration selection process over again). The decision of
the American Arbitration Association with respect to the
selection of the arbitrator will be final and binding in
such case.
(d) Within ten (10) days after the selection of the arbitrator,
the parties and their counsel will appear before the
arbitrator at a place and time in Houston, Texas, as may be
designated by the arbitrator for the purpose of each party
making a one hour or less presentation and summary of the
case. Thereafter, the arbitrator will set dates and times
for additional hearings until the proceeding is concluded.
The desire and goal of the parties is, and the arbitrator
will be advised that his goal should be, to conduct and
conclude the arbitration proceedings as expeditiously as
possible. If any party or his counsel fails to appear at
any hearing, the arbitrator shall be entitled to reach a
decision based on the evidence which has been presented to
him by the parties who did appear. Any arbitral award may
be confirmed by a Texas state court.
(e) The amount of Participating Creditor claims shall be
adjusted pursuant to any arbitration award made pursuant to
this Agreement
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ARTICLE VII
PAYMENT OF CONVENIENCE CLAIMS
7.01 PAYMENT. Within 45 days of the Closing Date, the Allowed
Amount of each Convenience Claim shall be paid in full.
7.02 ELECTION TO BE TREATED AS A CONVENIENCE CLAIM. By executing a
form titled "Election to be Treated as a Convenience Claim", the holder of an
Eligible Claim in an Allowed Amount greater than $10,000 may elect to reduce
the amount of such holder's claim to $10,000 and to receive treatment as a
Convenience Claim. Such election shall constitute a waiver of the right to
collect, and a release of, the amount of the Eligible Claim in excess of
$10,000, and the holder of such claim shall be deemed to have released the
Companies and their property from any and all liability for such excess
amount.
ARTICLE VIII
INITIAL PAYMENTS TO PARTICIPATING CREDITORS
8.01 INITIAL PAYMENT. Each Participating Creditor shall receive an
Initial Payment equal to ten percent (10%) of the Allowed Amount of its
claim. The Initial Payment shall be credited against the (i) Allowed Amount
of the claim, and (ii) any liens filed by the Participating Creditor in its
own right.
8.02 OBLIGATION AMOUNT. The unpaid balance of the Allowed Amount of
Participating Creditors' claims shall (i) be paid in accordance with Article
IX, and (ii) accrue interest at the rate of ten percent (10%) per annum from
the Closing Date.
ARTICLE IX
SUBSEQUENT PAYMENTS TO PARTICIPATING CREDITORS
9.01 PRO RATA ALLOCATION OF REQUIRED PAYMENTS. Subject to the
provisions of Article XI, each holder of a Participating Creditor Claim shall
receive its Pro Rata share of the payments to be made by the Companies
pursuant to this Article.
9.02 QUARTERLY PAYMENTS. Within sixty (60) days following the end
of each calendar quarter, the Companies shall pay to the holders of
Participating Creditor Claims fifty percent (50%) of Net Revenue from
Operations less (i) the Non Participating Creditor Reserve, and (ii) the
Disputed Claims Reserve. The first quarterly payment shall be due on
November 29, 1999 for the quarter ending September 30, 1999.
9.03 DEDICATED PORTION OF NET PROPERTY SALE PROCEEDS. Within ten
(10) Business Days of actual receipt by the Companies of the proceeds from
the sale of one or more of the Oil and Gas Properties, the Dedicated Portion
of Net Property Sales Proceeds, less (i) the Non Participating
13
Creditor Reserve, and (ii) the Disputed Claims Reserve, shall be paid to the
holders of Participating Creditor Claims.
9.04 DEDICATED PORTION OF NET LOAN PROCEEDS. Within ten (10)
Business Days of actual receipt by the Companies of the proceeds from a
Future Loan, the Dedicated Portion of the Net Loan Proceeds, less (i) the Non
Participating Creditor Reserve, and (ii) the Disputed Claims Reserve, shall
be paid to the holders of Participating Creditor Claims.
9.05 DEDICATED RECEIVABLES. Any Cash payments received by the
Companies on the Dedicated Receivables, less the Non Participating Creditor
Reserve, and less the Disputed Claims Reserve, and after deduction for legal
fees and expenses, shall be held in trust until paid to the Participating
Creditors. Texstar shall not accept payment on the Dedicated Receivables in
any form other than cash without the consent of the Requisite Majority of
Participating Creditors. The Companies will prosecute the collection of the
Dedicated Receivables with reasonable diligence and pay the reasonable legal
fees and expenses incurred in connection therewith.
9.06 MATURITY DATE. The unpaid balance of Participating Creditor's
Claims plus interest as provided by this Agreement shall be due and payable
on the earlier of (i) the third year anniversary of the Closing Date, (ii)
twenty (20) Business Days following the effective date of a consolidation or
merger other than an Exempted Merger of Benz with or into any other entity,
(iii) upon a sale or transfer in a single transaction or series of related
transactions of all or substantially all of the assets of Benz and Texstar,
(iv) twenty (20) Business Days following the date on which a Substantial
Management Change occurs, or (v) ten (10) Business Days after the occurrence
of an Event of Default.
ARTICLE X
UPSIDE PAYMENT
10.01 CONDITION UNDER WHICH DUE. In the event that Participating
Creditor Claims are not paid in full on or before the second anniversary of
the Closing Date, the Participating Creditors shall be entitled to receive
the Upside Payment Amount.
10.02 PAYMENT DATE. The Upside Payment Amount, if any, shall be paid
to each Participating Creditor within ninety (90) Business Days following the
third anniversary of the Closing Date.
10.03 DISCLAIMER. No representation, express or implied, is made by
the Companies as to what the amount, if any, the Upside Payment Amount may
ultimately be determined to be.
10.04 UNSECURED. The obligations of Texstar and Benz pursuant to
this Article shall be unsecured and, accordingly, will not be collateralized
by the property pledged pursuant to the Collateral Documents.
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ARTICLE XI
RESERVES FOR NON-PARTICIPATING CREDITOR CLAIMS
As provided in Article IX, the amount of the Net Revenue from
Operations, Dedicated Portion of Net Property Sale Proceeds, Dedicated
Portion of Net Loan Proceeds and Dedicated Receivables collections which
would otherwise be paid to the holders of Participating Creditor Claims shall
be reduced by the percentage of total Eligible Claims that are held by Non
Participating Creditors. For example, if holders of ninety-five percent
(95%) of Eligible Claims are Participating Creditors, then the dollar amount
of each of the installment payments to holders of Participating Creditor
Claims pursuant to Article IX would be reduced by five percent (5%).
ARTICLE XII
ACKNOWLEDGMENT AND SUBORDINATION
12.01 ACKNOWLEDGMENT CONCERNING THE SENIOR INDEBTEDNESS. Effective
as of the Closing Date, the Collateral Agent and each Participating Creditor
acknowledges that (i) any lien or claim filed by it as to Eligible Claims
(including, but not limited to, any lien pursuant to Chapter 56 of the Texas
Property Code or Mississippi Code Xxx. Section 85-7-131, et seq. and all
other applicable statutory lien laws) is subordinate in right to payment and
lien priority to the liens securing the Senior Indebtedness, (ii) any lien
that it may file in the future with respect to its Eligible Claim shall be
subordinate in right to payment and lien priority to the liens securing the
Senior Indebtedness, and (iii) the liens securing payment of the Senior
Indebtedness are valid and properly perfected as to and against the Oil and
Gas Properties.
12.02 SUBORDINATION TO ENABLING LOAN. In order to fund the Initial
Payments, it will be necessary for the Companies to consummate the Enabling
Loan transactions. Effective as of the Closing Date, the Collateral Agent and
each Participating Creditor agrees that (i) any lien or claim filed by it as
to Eligible Claims (including, but not limited to, any lien pursuant to
Chapter 56 of the Texas Property Code or Mississippi Code Xxx. Section
85-7-131, et seq. and all other applicable statutory lien laws) is
subordinate in right to payment and lien priority to the liens granted by the
Companies to secure payment of the full amount of the Enabling Loan
(including principal and interest), together with all renewals, modification
and extensions thereof, (ii) any right to file a lien and any lien that it
may file in the future against the Oil and Gas Properties to secure payment
of its Eligible Claim (including, but not limited to, any lien pursuant to
Chapter 56 of the Texas Property Code or Mississippi Code Xxx. Section
85-7-131, et seq. and all other applicable statutory lien laws) is
subordinate in right to payment and lien priority to the liens securing the
Enabling Loan, and (iii) it will not contest the validity and perfection of
the liens granted by the Companies to secure payment of the Enabling Loan.
12.03 PRIORITY OF SENIOR INDEBTEDNESS AND ENABLING LOAN TO LIENS
CREATED BY COLLATERAL DOCUMENTS. The obligations to Participating Creditors
under this Agreement and the liens created by the Collateral Documents are
subordinate in right to payment to the Senior Indebtedness and Enabling Loan
and are subordinate in lien priority to the liens securing the Senior
15
Indebtedness and Enabling Loan.
12.04 SUBORDINATION OF MECHANIC'S AND MATERIALMAN'S LIEN TO LIENS
CREATED BY THE COLLATERAL DOCUMENTS. Each Participating Creditor hereby
agrees that any lien or claim filed as well as any lien or claim that it may
in the future file against the Oil and Gas Properties, including, but not
limited to any lien pursuant to Chapter 56 of the Texas Property Code or
Mississippi Code Xxx. Section 85-7-131, et seq. and all other applicable
statutory lien laws) to secure payment of an Eligible Claim is subordinate in
right to payment and lien priority to the liens created pursuant to the
Collateral Documents.
ARTICLE XIII
FUTURE LOANS
13.01 CONSENT TO FUTURE LOANS. The Companies shall be entitled to
attempt to arrange for Future Loans which would be secured by the property
pledged as collateral to the Collateral Agent pursuant to this Agreement and
the Collateral Documents. The Collateral Agent and Participating Creditors
consent to any Future Loan provided the requirements of Section 13.02 are
satisfied.
13.02 SUBORDINATION. The Collateral Agent and Participating
Creditors hereby agree to subordinate to any Future Loan (i) the right of
Participating Creditor's to payment of Eligible Claims, (ii) the priority of
any Participating Creditor's lien or lien claim on the Oil and Gas
Properties, which lien secures payment of an Eligible Claim (including, but
not limited to, any lien pursuant to Chapter 56 of the Texas Property Code or
Mississippi Code Xxx. Section 85-7-131, et seq. and all other applicable
statutory lien laws), and (iii) the priority of the liens granted to the
Collateral Agent pursuant to this Agreement and the Collateral Documents,
subject only to and in accordance with the following provisions:
(1) Written notice of the Companies' intent to subordinate must
be given to the Collateral Agent;
(2) The instruments or documents evidencing the subordination
to be executed by the Collateral Agent shall be prepared by
the Companies;
(3) Such other documentation and information relating to the
Future Loan giving rise to the requested subordination, as
that documentation may be reasonably requested by the
Collateral Agent in connection with the subordination,
shall be provided to the Collateral Agent by the
Companies;
(4) The Participating Creditors are to receive out of the Net
Loan Proceeds from such Future Loan the sum, if any,
required to be paid in accordance with Section 9.04; and
(5) The Net Loan Proceeds from such Future Loan retained by the
Companies
16
shall not be used (i) to purchase any shares of the
Companies' stock, (ii) pay dividends, (iii) to pay any
loan from Starbucks Trust, Xxxxxxx Xxxxxxxxx or Xxxxxxx
Xxxxxxxxx or any entity which they collectively, directly
or indirectly own (beneficially or otherwise) or control at
least ten percent (10%) of the ownership interests of, (iv)
any future loans by an insider of the Companies, or (v) for
termination compensation to Xxxxxxx Xxxxxxxxx greater than
that specified in the December 15, 1998 Agreement by and
between Benz Energy Ltd., Texstar Petroleum, Inc. and
affiliates of EnCap Investments.
The obligation to subordinate under the terms of this Section is absolute and
irrevocable prior to the occurrence of an Event of Default by the Companies.
After the occurrence of an Event of Default by the Companies, the Collateral
Agent is authorized and obligated to subordinate the liens under the terms of
this Section, provided that such action is approved by the Requisite
Majority. The Collateral Agent shall execute and deliver to the Companies
such documents as are reasonably requested by the Companies to evidence the
subordination provided for in this Section.
ARTICLE XIV
SALE OF OIL AND GAS PROPERTIES
14.01 CONSENT TO SALE OF OIL AND GAS PROPERTIES. The Companies shall
be entitled to attempt to arrange for the sale of all or a portion of the
property pledged as collateral to the Collateral Agent pursuant to this
Agreement and the Collateral Documents. The Collateral Agent and
Participating Creditors consent to any future sale of all or a portion of the
Oil and Gas Properties provided that the requirements of Section 14.02 are
satisfied.
14.02 RELEASE OF LIENS. The Collateral Agent and Participating
Creditors hereby agree to release (i) any lien or lien right of a
Participating Creditor securing payment of an Eligible Claim, and (ii) any
lien created pursuant to this Agreement or the Collateral Documents, solely
to the extent such liens encumber the property to be sold by the Companies,
subject only to and in accordance with the following provisions:
(1) Written notice of the Companies' intent to sell property
and obtain a release must be given to the Collateral Agent;
(2) The instruments or documents evidencing the release to be
executed by the Collateral Agent shall be prepared by the
Companies;
(3) Such other documentation and information relating to the
terms of the sale, as that documentation may be reasonably
requested by the Collateral Agent in connection with the
release, shall be provided to the Collateral Agent by the
Companies;
(4) The purchaser is not an insider or affiliate of the
Companies as those terms
17
are defined in 11 U.S.C. Section 101; and
(5) The Participating Creditors are to receive out of the Net
Property Sale Proceeds from such sale the sum, if any,
required to be paid in accordance with Section 9.03.
The obligation to release the liens under the terms of this Section is
absolute and irrevocable prior to the occurrence of an Event of Default by
the Companies. After the occurrence of an Event of Default by the Companies,
the Collateral Agent is authorized and obligated to release the liens under
the terms of this Section, provided that such action is approved by the
Requisite Majority. The Collateral Agent shall execute and deliver to the
Companies such documents as are reasonably requested by the Companies to
evidence the release of liens provided for in this Section.
ARTICLE XV
RECORDS AND REPORTS
15.01 BOOKS AND RECORDS. The Companies shall at all times maintain
true and correct books and records sufficient to determine the amounts
payable to Participating Creditors hereunder, including, but not limited to,
books and records related to Revenue from Operations and Operation Expenses.
15.02 INSPECTIONS. The books and records referred to in Section
15.01 shall be open for inspection by the Collateral Agent or his duly
authorized representative at the Companies' offices during normal business
hours. The Companies will furnish to the Collateral Agent, if and whenever
requested, such detailed information as the Collateral Agent may reasonably
request concerning the Oil and Gas Properties, the operation thereof and the
determination of the Net Revenue from Operations.
15.03 QUARTERLY STATEMENTS. On or before the 25th day of the month
following the end of each calendar quarter, the Companies shall deliver to
the Collateral Agent a statement setting forth the computation of Net Revenue
from Operations for such quarter.
ARTICLE XVI
FUTURE SERVICES, EQUIPMENT AND MATERIALS
Until the earlier of the (i) occurrence of an Event of Default by
Texstar or Benz, or (ii) payment in full of Participating Creditor Claims in
accordance with this Agreement, Texstar, to the extent reasonably practical
and authorized under applicable agreements with non-operating working
interest owners, will favor Participating Creditors in contracting for
equipment, goods, materials and services for oilfield drilling operations
subsequent to the Closing Date, provided that the price, quality,
availability, deliverability and terms proposed by Participating Creditors
are at least equal to that proposed to be provided by third parties. The
foregoing commitment does not apply to any Participating Creditor that (i) in
the future fails to provide contracted for services in a good and
18
workmanlike manner, or (ii) in the future provides defective materials or
equipment to Texstar. The obligation imposed by this Section is satisfied if
the service, equipment or material in question is provided by any
Participating Creditor.
ARTICLE XVII
MORATORIUM AND LIMITATIONS
17.01 MORATORIUM. Each Participating Creditor with respect to any
claim against the Companies for services, materials or equipment furnished
prior to June 14, 1999 will forebear from (i) prosecuting any litigation
against the Companies and the non-operating interest owners of the Oil and
Gas Properties, (ii) attempting to attach, garnish, levy or execute upon any
of the Companies' assets or the non-operating interest owners of the Oil and
Gas Properties, (iii) attempting to sequester or impound the proceeds of sale
of oil, gas, or production runs for the sale of oil or gas, attributable to
the interest of the Companies or mineral interest owners who obtained title
through the Companies, (iv) pursuing any act of foreclosure or instituting
and pursuing legal proceedings upon or against the Companies or their assets,
(v) filing or joining in any petition in bankruptcy with respect to the
Companies, (vi) making, joining, or participating in an application for
appointment of a receiver for the Companies, or for liquidation or
dissolution of the Companies under any state or federal law, and (vii) filing
a mechanic's and materialman's lien against the non-operating interest owners
of the Oil and Gas Properties to secure payment of an Eligible Claim. The
moratorium does not apply to the filing of mechanic's and materialman's liens
against the interests of the Companies.
17.02 STATUTES OF LIMITATION. Any period of limitation on
prosecution or enforcement of rights by a Participating Creditor against the
Companies shall be tolled as of the Closing Date, until the occurrence of an
Event of Default pursuant to Article XXII which is not waived. The Companies
will not raise any contractual or statutory period of limitation on
prosecution as a defense in any legal proceeding which may subsequently be
brought by a Participating Creditor who forbears from the taking of legal
action under the terms of this Agreement prior to the occurrence of an Event
of Default which is not waived.
ARTICLE XVIII
SATISFACTION OF CLAIMS
18.01 SATISFACTION AS TO THE COMPANIES. A Participating Creditor's
Claim will be deemed paid in full upon payment of the Allowed Amount plus
interest of such claim as provided for in this Agreement. The Upside Payment
is not part of the Participating Creditors' Claims.
18.02 RELEASE OF NON-OPERATING INTEREST OWNERS. To facilitate
collection by Texstar of accounts receivable, effective as of the Closing
Date, the Collateral Agent and each Participating Creditor agree that as to
(i) any lien or claim filed by a Participating Creditor as to a Eligible
Claim against an interest owner other than the Companies (including, but not
limited to, any lien pursuant to Chapter 56 of the Texas Property Code or
Mississippi Code Xxx Section 85-7-131, et seq. and all other
19
applicable statutory lien laws) is released, (ii) any right to file a lien
and any lien against the Oil and Gas Properties against an interest owner
other than the Companies to secure payment of its Eligible Claim (including ,
but not limited to, any lien pursuant to Chapter 56 of the Texas Property
Code or Mississippi Code Xxx Section 85-7-131, et seq. and all other
applicable statutory lien laws) is released, and (iii) any claim against a
non-operating interest owner relating to or arising out of an Eligible Claim
(other than the rights under this Agreement) is released.
ARTICLE XIX
FUTURE ACQUIRED OIL AND GAS LEASES
Until such time as Participating Creditor Claims are satisfied in
full, the Companies shall, forthwith following the acquisition of an
additional oil and gas lease, execute such documents as are reasonably
necessary to include the Companies' interest in such oil and gas lease within
the collateral pledged pursuant to the Collateral Documents. This provision
does not apply to any oil and gas leases acquired in the Plum Grove property.
ARTICLE XX
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES
The provisions of this Article constitute representations and
warranties of the Companies.
20.01 REVIEW AND APPROVAL. The Companies warrant and represent that
their representative has reviewed this Agreement together with all exhibits,
including the Collateral Documents, and that the Companies (i) understand
fully the terms of this Agreement and the consequences of the issuance
thereof, (ii) have been afforded an opportunity to have this Agreement
reviewed by legal counsel, and (iii) have entered into this Agreement of
their own free will and accord and without threat or duress.
20.02 AUTHORITY. The Companies warrant and represent that the
undersigned representatives are fully authorized to execute this Agreement or
any other instrument required hereunder on their behalf.
20.03 ACCURACY OF INFORMATION. The information contained in (i) the
Independent Accountant Report prepared by Xxxxxxxxx, Frutchter Xxxxx & Corso,
P.C. dated June 4, 1999, (ii) the Benz Energy, Inc. Offer to Exchange and
Offer to Sell dated June 15, 1999, and (iii) the Form SB-2 Registration
Statement dated July 1999, to the best of the Companies knowledge is accurate
in all material respects as of the dates reflected therein.
20.04 ORGANIZATION. The Companies have been and are validly existing
as corporations, with full power and authority to enter into this Agreement,
to consummate the transactions contemplated hereby and to carry out the terms
of this Agreement.
20
20.05 LEGAL, VALID AND BINDING INSTRUMENT. This Agreement has been
duly authorized, executed and delivered by the Companies, and constitutes a
valid and legally binding instrument, enforceable in accordance with its
terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization,
and other laws of general applicability relating to or affecting creditors'
rights and to general equity principles. The execution, delivery and
performance of this Agreement by the Companies will not result in a breach or
violation of any of the terms or provisions or constitute a default under any
mortgage, deed of trust or material agreement to which the Companies are a
party and which will remain in force and effect after the Closing Date.
20.06 DEDICATED RECEIVABLES. The security interest in the Dedicated
Receivables created in favor of the Collateral Agent pursuant to the Security
Agreement shall (i) be first in priority, (ii) have not been assigned, and
(iii) the Companies are the lawful owners of same.
20.07 SENIOR INDEBTEDNESS. The Senior Indebtedness is a valid and
enforceable obligation of the Companies.
20.08 OWNERSHIP. Benz does not hold record title to an interest in
the Oil and Gas Properties.
ARTICLE XXI
REPRESENTATIONS AND WARRANTIES
OF PARTICIPATING CREDITORS
The provisions of this Article constitute representations and
warranties of the Participating Creditors.
21.01 REVIEW. Each Participating Creditor represents and warrants
that he/she/it or his/her/its representative has reviewed this Agreement
together with all exhibits and that they (i) understand fully the terms of
this Agreement and the consequences of the issuance thereof, (ii) have been
afforded an opportunity to have this Agreement reviewed by legal counsel, and
(iii) have entered into this Agreement to which each is a party of their own
free will and accord and without threat or duress. Each Participating
Creditor represents that the representative executing the Creditor
Ratification is fully authorized to ratify this Agreement or any other
instrument required hereunder on his/her/its behalf.
21.02 AUTHORITY. Each Participating Creditor warrants and represents
that he/she/it has all requisite power, authority and capacity to execute and
deliver this Agreement by means of the Creditor Ratification and to perform
the obligations to be performed by him/her/it hereunder. The execution,
delivery and performance of this Agreement by means of the Creditor
Ratification has been duly authorized by all necessary actions on the part of
each Participating Creditor. Upon delivery of the Creditor Ratification,
this Agreement will constitute a valid and binding obligation of such
Participating Creditor, enforceable against him/her/it in accordance with the
terms of this Agreement, subject to applicable bankruptcy, solvency,
reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally. No consent, approval or authorization of
21
any governmental authority, trustee, lessor, lender or other third party is
required in connection with the execution and delivery of the Creditor
Ratification and performance of this Agreement by each Participating
Creditor.
21.03 NON RELIANCE. Xxxx, Snow, Fogel, Xxxxxxx & Xxxxxx, P.C., has
not acted as counsel nor, except as set forth in the opinion of counsel
attached as Exhibit 9, provided legal advise to any Participating Creditor in
connection with the negotiation, evaluation or documentation of the
transactions contemplated by this Agreement or Collateral Agent Agreement.
Each Participating Creditor's decision to ratify this Agreement and the
Collateral Agent Agreement and execute the Ratification was based solely on
his/her/its own independent evaluation of the Participating Creditor's rights
and the facts which each Participating Creditor has independently
ascertained. Other than as expressly set forth herein, no representation has
been made by the Participating Creditors to induce any other party to execute
this Agreement and, where applicable, its exhibits.
ARTICLE XXII
EVENTS OF DEFAULT
22.01 EVENTS OF DEFAULT AS TO THE COMPANIES. The occurrence of any
one or more of the following events shall constitute an Event of Default as
to the Companies.
(a) Failure or refusal by either Benz or Texstar to punctually
and properly perform, observe and comply with any (i)
material covenant, (ii) representation or (iii) warranty
contained in this Agreement, the Collateral Documents or
any exhibits hereto, which failure or refusal shall
continue for a period of ten (10) days following receipt by
the Companies and Aquila of written notice thereof;
(b) The failure of Benz and/or Texstar to pay when due any
obligation required in this Agreement or the Collateral
Documents and such failure shall continue for a period of
ten (10) days after receipt of written notice of such
default by the Companies and Aquila from the Collateral
Agent;
(c) The filing or commencement by Benz or Texstar of a
voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect, or seeking the appointment
of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its
property; or Benz or Texstar shall consent to any such
relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to
pay its debt as they become due, or shall take any
corporate action to authorize any of the foregoing;
22
(d) The filing or commencement of an involuntary case or other
proceeding against either Benz or Texstar seeking
liquidation, reorganization or other relief with respect to
it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of
ninety (90) days; or an order for relief shall be entered
against either Benz or Texstar under the federal bankruptcy
laws as now or hereafter in effect;
(e) The liquidation or dissolution of either Benz or Texstar
prior to sale of all of its assets in accordance with the
terms of this Agreement;
(f) Posting property pledged as collateral to the Collateral
Agent for foreclosure by the holder of the Senior
Indebtedness, Enabling Loan, Future Loan or any other lien
superior in priority to the liens granted to the Collateral
Agent pursuant to the Collateral Documents;
(g) Benz or Texstar shall claim that the Collateral Agent does
not have a valid lien on the Companies' interest in the
property described in the Collateral Documents;
(h) Any court shall sign a judgment or order that provides that
the Collateral Agent does not have a valid fully perfected
lien on the Companies' interest in the property described
in the Collateral Documents;
(i) Benz or Texstar shall have concealed, removed, or permitted
to be concealed or removed, any material part of its
property, with intent to hinder, delay or defraud any of
its creditors, or make or suffered a transfer of any of its
property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law, or shall have made
any transfer of a material part of its property to or for
the benefit of a creditor at a time when other creditors
similarly situated have not been paid;
(j) A representation in Section XX is established to have been
materially inaccurate as of the date made;
(k) A default under the Collateral Documents shall constitute
an Event of Default hereunder; or
(l) An event of default as to Benz shall constitute an event of
default as to Texstar. An event of default as to Texstar
shall constitute an event of default as to Benz.
22.02 EVENT OF DEFAULT AS TO PARTICIPATING CREDITORS AND COLLATERAL
AGENT. The failure
23
or refusal to perform, observe and comply with any covenant, representation,
warranty, agreement or condition contained in this Agreement or the
Collateral Agent Agreement.
ARTICLE XXIII
REMEDIES
23.01 DEFAULT BY BENZ OR TEXSTAR. In addition to any other provision
of this Agreement or the Collateral Documents, upon the occurrence of an
Event of Default, the Collateral Agent may, upon ten (10) days written notice
to Aquila, exercise any or all of the following rights, remedies and recourse:
a. Enter upon the collateral or any part thereof and take
exclusive possession thereof and of all books, records and accounts
relating thereto. If Benz or Texstar remains in possession of all or any
part of the collateral after an Event of Default occurs and is continuing
and without the Collateral Agent's prior written consent thereto, the
Collateral Agent may invoke any and all legal remedies to dispossess the
Companies, including specifically one or more actions for forcible entry
and detainer, trespass to try title and writ of restriction. Nothing
contained in the foregoing sentence shall, however, be construed to
impose any greater obligation or any prerequisites to acquiring
possession of the collateral or any part thereof after an Event of
Default occurs than would have existed in the absence of such sentence.
b. Hold, lease, manage, operate or otherwise use or permit the
use of the collateral, or any part thereof, either by itself or by other
persons, in such manner, for such time and upon such other terms as the
Collateral Agent may deem to be prudent and reasonable under the
circumstances (making such repairs, alterations, additions and
improvements thereto and taking any and all other action with reference
thereto, from time to time, as the Collateral Agent shall deem necessary
or desirable), and apply all proceeds from the collateral in accordance
with the provisions hereof.
c. Sell or offer for sale the collateral, or any part thereof,
in such portions, order and parcels as the Collateral Agent may
determine, with or without having first taken possession of same, in
accordance with the provisions of the applicable Collateral Documents and
applicable legal requirements.
d. Make application to a court of competent jurisdiction, as a
matter of strict right and, except as otherwise provided by applicable
law, without notice to the Companies or without regard to the adequacy of
the collateral for payment of the obligations to the Collateral Agent
hereunder for the appointment of a receiver of the collateral, or any
part thereof, and, to the extent permitted by applicable law, the
Companies do hereby irrevocably consent to such appointment. Any such
receiver shall have all the usual powers and duties of receivers in
similar cases, including the full power to rent, maintain, sell, dispose
and otherwise operate the collateral, any part thereof, upon such terms
that may be approved by the court, and shall apply all proceeds from such
operation of the collateral in accordance
24
with the provisions hereof.
e. Exercise any and all other rights, remedies and recourses
granted hereunder or under the Collateral Documents or otherwise now or
hereafter existing in equity, at law, by virtue of statute or otherwise.
23.02 The collateral may be sold in one or more parcels and in such
manner and order as the Collateral Agent, in its sole discretion, may elect,
it being expressly understood and agreed that the right of sale arising out
of any Event of Default shall not be exhausted by any one or more sales.
23.03 The Collateral Agent shall have all rights, remedies and
recourses granted in the Collateral Documents, and available at law or equity
(including specifically those granted by the UCC in effect and applicable to
the collateral, or any portion thereof) and same (a) shall be cumulative and
concurrent, (b) may be pursued separately, successively or concurrently
against Benz or Texstar or against the collateral or against any one or more
of them, at the sole discretion of the Collateral Agent, (c) may be exercised
as often as the occasion therefor shall arise, it being agreed by the
Companies that the exercise or failure to exercise any of same shall in no
event be construed as a waiver or release thereof or of any other right,
remedy or recourse, and (d) are intended to be, and shall be, non-exclusive.
23.04 The Companies shall not, except as otherwise provided by
applicable law, be relieved of their obligations by reason of (a) the failure
of a trustee to comply with any request of the Companies, to foreclose the
liens on the collateral or to enforce any provisions of the Collateral
Documents, (b) the release, regardless of consideration, of any person or
entity obligated with respect to the obligations, or of the collateral or any
part thereof, or the addition of any other property to the collateral, (c)
any agreement or stipulation between any subsequent owner of the collateral
and the Collateral Agent extending, renewing, rearranging or in any other way
modifying the terms of the Collateral Documents without first having obtained
the consent of, given notice to or paid any consideration to Benz or Texstar,
or such other person, and in such event, Benz or Texstar, and all such other
persons shall continue to be liable to make payments in accordance with the
terms of any such extension or modification agreement unless expressly
released and discharged in writing by the Collateral Agent, and (d) any other
act or occurrence, save and except the satisfaction of the Companies'
obligations hereunder. The Companies waive any right to require the
Collateral Agent to proceed against any other person, exhaust any of the
collateral, or pursue any other remedy in the Collateral Agent's power.
23.05 The release or substitution of all or any part of the
collateral, regardless of consideration, shall not in any way impair, affect,
subordinate, or release the Collateral Agent's liens or its priority status
in and to any remaining collateral. For payment and performance of the
Companies' obligations hereunder, the Collateral Agent may resort to any
other security therefor held by a trustee in such order and manner as the
Collateral Agent may elect.
23.06 In case the Collateral Agent shall have proceeded to invoke any
right, remedy or recourse permitted under the Collateral Documents and shall
thereafter elect to discontinue or abandon same for any reason, the
Collateral Agent shall have the unqualified right to do so and, in
25
such event, the Companies and the Collateral Agent shall be restored to their
former positions with respect to the Companies' obligations hereunder, the
Collateral Documents, the collateral and otherwise, and the rights, remedies,
recourses and powers of the Collateral Agent shall continue as if same had
never been invoked.
23.07 NO ELECTION OF REMEDIES. The Participating Creditors shall
have all rights, remedies and recourses granted in the Collateral Documents,
and available at law or equity and same (a) shall be cumulative and
concurrent, (b) may be pursued separately, successively or concurrently
against the Companies or against the subject collateral or against any one or
more of them, at the sole discretion of the Collateral Agent, (c) may be
exercised as often as the occasion therefor shall arise, it being agreed by
the Companies that the exercise or failure to exercise any of same shall in
no event be construed as a waiver or release thereof or of any other right,
remedy or recourse, and (d) are intended to be, and shall be, non-exclusive.
23.08 DEFAULT BY A PARTICIPATING CREDITOR. The representations,
warranties and covenants of the Participating Creditors are several and not
joint. Should an Event of Default as to a Participating Creditor occur, (i)
the defaulting Participating Creditor shall remain obligated to perform its
obligations under this Agreement including those set forth in Article XVII,
(ii) the rights of all parties other than the defaulting Participating
Creditor shall be unaffected, (iii) the Companies may suspend making any
further payments to the defaulting Participating Creditor until such time as
the damages incurred by the default are recovered, and (iv) the Participating
Creditors shall be liable for any actual damages sustained as a result of its
default.
23.09 DEFAULT BY COLLATERAL AGENT. Should an Event of Default as to
the Collateral Agent occur (i) the Collateral Agent, to the extent permitted
by the Collateral Agent Agreement, shall be liable for the actual damages
sustained as a result of his willful misconduct and/or fraud, and (ii) the
total amount of Participating Creditor Claims shall be reduced Pro Rata by
the damages sustained by the Companies.
ARTICLE XXIV
FURTHER ACTION
24.01 AMENDMENT OR WAIVER. Any (i) action, (ii) amendment to this
Agreement or the Collateral Documents, or (iii) waiver of a provision of this
Agreement or the Collateral Documents, that is approved (1) in writing by the
Companies, and (2) by the Requisite Majority in accordance with the
procedures set forth in Section 24.02 shall be binding upon all Participating
Creditors, the Collateral Agent and the Companies; provided, that no
amendment to this Section 24.01, to Article XII, or to Section 25.09 shall be
effective unless it is approved in writing by Aquila.
24.02 PROCEDURE FOR APPROVAL OF SOLICITED ACTION. The procedure for
obtaining approval of a Solicited Action is as follows:
(a) Notice of the Solicited Action together with a ballot shall
be sent to Participating Creditors in the manner and at the
address provided for in
26
Section 25.17.
(b) In order to be counted, the ballot must be filled out,
executed by the authorized representative of the
Participating Creditor and delivered to the Companies
within fifteen (15) Business Days of delivery of receipt of
notice of the Solicited Action to the Participating
Creditors as provided in Section 25.17. Any ballots that
fail to satisfy the requirements of this Section shall not
be counted.
24.03 EFFECT. Any Solicited Action which is approved by the
Requisite Majority in accordance with Section 24.02 shall be binding upon all
Participating Creditors and the Collateral Agent.
ARTICLE XXV
MISCELLANEOUS
25.01 DISCLAIMER. No representation, express or implied, is made by
the Companies or their legal counsel as to the tax effects of any of the
transactions contemplated in this Agreement.
25.02 SURVIVAL. All representations, warranties, covenants and
agreements of the parties made in this Agreement and any of its exhibits
shall survive the execution and delivery of this Agreement and any of its
exhibits until such time as all of the obligations of the signatories to such
document shall have lapsed in accordance with their respective terms or shall
have been discharged in full.
25.03 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. No assignment of this Agreement or the rights
hereunder or against non-operating working interest owners of the Oil and Gas
Properties relating to an Eligible Claim may be made by a Participating
Creditor except in accordance with the terms of this Agreement No assignment
shall be effective until the Companies are notified in writing and the
Assignees have executed and delivered to the Companies a Creditor
Ratification. No assignment may be made by a Participating Creditor to a
person or entity engaged in the business of oil and gas exploration and
development other than another Participating Creditor. It is agreed that
Pioneer Natural Resources USA, Inc. may assign its Eligible Claim to Jordan
Oil & Gas L.P. The Companies are released from liability on an Eligible
Claim that is assigned by a Participating Creditor without complying with
this Section.
25.04 MODIFICATIONS AND WAIVERS. No delay on the part of the
Participating Creditors or the Companies in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver
of any right, power or privilege hereunder operate as a waiver of any other
right, power or privilege hereunder, nor shall any single or partial exercise
of any right, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder. All rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies which the parties hereto may
otherwise have at law or in
27
equity. Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by written instrument
signed by the party against which enforcement of such amendment is sought.
25.05 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. This Agreement, the
exhibits hereto and agreements referred to herein collectively contain the
entire agreement between the parties relating to the transactions
contemplated hereby. THIS AGREEMENT, THE EXHIBITS HERETO AND AGREEMENTS
REFERRED TO HEREIN REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES. The Companies agree to pay the reasonable fees and expenses of
the Deposit Agent and the reasonable fees and expenses of Lugenbuhl, Burke,
Wheaton, Peck, Xxxxxx & Xxxxxxx incurred in connection with negotiation,
drafting and closing on this Agreement.
25.06 FURTHER ASSURANCES. Benz or Texstar, as applicable, shall
promptly cure any defects in the execution and delivery of this Agreement,
any exhibit to this Agreement and all other documents contemplated by this
Agreement and shall promptly execute and deliver to the Companies upon
request all such other and further assurances, documents, agreements and
instruments in compliance with or accomplishment of the covenants and
agreements in this Agreement, or obtain any consents, all as may be necessary
or appropriate in connection therewith.
25.07 CAPTIONS. All section titles or captions contained in this
Agreement, in any exhibit annexed hereto or in any schedule referred to
herein are for convenience only, shall not be deemed a part of this Agreement
and shall not affect the meaning or interpretation of this Agreement.
25.08 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which, taken together, shall constitute one and the same
instrument.
25.09 AQUILA; THIRD PARTY BENEFICIARIES. AQUILA, ANY LENDER OF A
FUTURE LOAN AND ANY PURCHASER OF ANY OF THE OIL AND GAS PROPERTIES IS EACH AN
INTENDED BENEFICIARY OF THIS AGREEMENT. ALL PARTIES TO THIS AGREEMENT,
INCLUDING THE PARTICIPATING CREDITORS, ACKNOWLEDGE AND AGREE THAT AQUILA, ANY
LENDER OF A FUTURE LOAN AND ANY PURCHASER OF ANY OF THE OIL AND GAS
PROPERTIES IS ENTITLED TO RELY UPON AND ENFORCE THE PROVISIONS OF THIS
AGREEMENT AND THE COLLATERAL AGENT AGREEMENT. AQUILA, ANY LENDER OF A FUTURE
LOAN AND ANY PURCHASER OF ANY OF THE OIL AND GAS PROPERTIES IS HEREBY
EXPRESSLY GIVEN THE RIGHT TO BRING SUIT DIRECTLY AGAINST ANY PARTY TO THIS
AGREEMENT, INCLUDING PARTICIPATING CREDITORS, TO ENFORCE THE PROVISIONS OF
THIS AGREEMENT AND THE COLLATERAL AGENT AGREEMENT. THE RIGHTS OF AQUILA AND
ANY LENDER OF A FUTURE LOAN INCLUDE, BUT ARE NOT LIMITED TO, THE RIGHT TO
BRING SUIT TO ENFORCE THE EXPRESS SUBORDINATION BY PARTICIPATING CREDITORS
AND THE COLLATERAL AGENT OF ALL OF THEIR RESPECTIVE LIENS TO THE LIENS AND
SECURITY INTERESTS GRANTED TO (i) AQUILA PURSUANT TO THE ENABLING LOAN,
28
AND (ii) A FUTURE LENDER PURSUANT TO A FUTURE LOAN. EXCEPT FOR AQUILA, ANY
LENDER OF A FUTURE LOAN AND ANY PURCHASER OF THE OIL AND GAS PROPERTIES, THIS
AGREEMENT SHALL BE FOR THE BENEFIT OF THE PARTIES HERETO AND IS NOT FOR THE
BENEFIT OF ANY OTHER PERSON. NO OTHER PERSON SHALL HAVE STANDING TO REQUIRE
SATISFACTION OF ANY PROVISION OF THIS AGREEMENT IN ACCORDANCE WITH ITS TERMS.
Aquila has joined in the execution of this Agreement solely for purposes of
establishing a direct contractual right to enforce the benefits provided
Aquila under this Agreement as an inducement to it to provide the Enabling
Loan. Each of the Companies, the Collateral Agent and the Deposit Agent
hereby acknowledges and agrees, and by its execution of a Creditor
Ratification, each Participating Creditor acknowledges and agrees that Aquila
has and shall have no obligations under this Agreement, whether to make the
Enabling Loan or otherwise, and that any obligation of Aquila to make the
Enabling Loan shall arise only under the terms of a written loan agreement
between Aquila and Texstar.
25.10 REFERENCES. The words "herein", "hereof", "hereunder" and
other words of similar import when used in this Agreement refer to this
Agreement as a whole and not to any particular article, section or
subsection. References in this Agreement to sections and exhibits shall
refer to the sections contained in this Agreement and the exhibits attached
to this Agreement, unless otherwise specified.
25.11 EXHIBITS. The exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein.
25.12 SINGULAR AND PLURAL. Words used herein in the singular, where
the context so permits, shall be deemed to include the plural and vice versa.
The definitions of words in the singular herein shall apply to such words
when used in the plural where the context so permits and vice versa.
25.13 GOVERNING LAW. THIS AGREEMENT AND ANY EXHIBITS ATTACHED HERETO
SHALL BE CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF
TEXAS AND, TO THE EXTENT CONTROLLING, THE FEDERAL LAWS OF THE UNITED STATES
OF AMERICA.
25.14 JOINTLY DRAFTED AGREEMENT; CONSTRUCTION. This Agreement and
all exhibits have been drafted jointly by the attorneys of all parties, and
it is expressly agreed that neither this Agreement, any of the exhibits nor
any other document executed in connection herewith shall ever be construed
against any party hereto on the basis of who drafted the documents.
25.15 USURY. All agreements between the Companies and Participating
Creditors are expressly limited so that in no contingency or event shall the
amount paid or agreed to be paid to Participating Creditors for the use,
forbearance, or detention of the money to be lent hereunder exceed the
maximum amount permissible under the applicable federal and state usury laws.
It is therefore the intention of the Companies and Participating Creditors to
conform strictly to said state and federal usury laws applicable to this
transaction. Therefore, in this Agreement and the Collateral Documents, the
aggregate of all interest and any other charges constituting interest under
the
29
applicable law contracted for chargeable or receivable under this Agreement
and the Collateral Documents or otherwise in connection with this transaction
shall under no circumstances exceed the maximum amount of interest permitted
by law. If any excess of interest or in such respect is provided for or
shall be adjudicated to be so provided for in this Agreement and the
Collateral Documents or in any of the documents securing payment hereof or
otherwise relating hereto, then in such event,
(a) The provisions of this paragraph shall govern and control;
(b) The Companies shall not be obligated to pay the amount of
such interest to the extent that it is in excess of the maximum permitted
by law;
(c) Any excess of said interest shall be deemed a mistake and
is hereby canceled automatically and if theretofore paid, shall at the
option of Participating Creditors be refunded to the Companies or
credited to the principal amount; and
(d) The effective rate of interest shall be automatically
subject to reduction to the maximum lawful contract rate allowed under
said laws or as is or as they may hereafter be construed by courts of
appropriate jurisdiction. To the extent permitted by law, the
determination of the rate of interest shall be made by amortizing,
prorating, allocating, and spreading in equal parts during the period of
the full stated term of the loan, all interest at any time contracted
for, charged, or received from the Companies in connection with said
loan.
25.16 SURVIVAL. The release and indemnification provided for herein
shall become effective as and when the conditions set forth in Article II are
satisfied and shall survive the termination of this Agreement.
25.17 NOTICE. Any notice required or permitted to be given under
this Agreement shall be given to each of the following and shall be dated and
in writing and shall be deemed to have been duly given when actually
delivered or three days after being deposited in either (i) United States
first class mail, or (ii) United States certified mail, return receipt
requested, postage pre-paid, and addressed as follows:
If to Benz:
Benz Energy, Inc.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx and Xxxxxxx Xxxxxxxxx
If to Texstar:
Texstar Petroleum, Inc.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx and Xxxxxxx Xxxxxxxxx
30
If to the Collateral Agent:
Xxxxxxx Xxxx
Lugenbuhl, Burke, Wheaton, Peck, et al.
000 Xxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
If to the Deposit Agent:
Xxxxxxx Xxxx
Lugenbuhl, Burke, Wheaton, Peck, et al.
000 Xxxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
BENZ ENERGY, INC.
BY:
-------------------------------------
NAME:
-------------------------------------
TITLE:
-------------------------------------
TEXSTAR PETROLEUM, INC.
BY:
-------------------------------------
NAME:
-------------------------------------
TITLE:
-------------------------------------
COLLATERAL AGENT
BY:
-------------------------------------
XXXXXXX XXXX
DEPOSIT AGENT
BY:
-------------------------------------
XXXXXXX XXXX
31
AQUILA ENERGY CAPITAL CORPORATION
BY:
-------------------------------------
NAME:
-------------------------------------
TITLE:
-------------------------------------
32
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.01 "ALLOWED AMOUNT". . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.02 "AQUILA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.03 "AVERAGE ADJUSTED SHARE PRICE". . . . . . . . . . . . . . . . . . . .1
1.04 "BENZ". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.05 "BUSINESS DAY". . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.06 "CAPITAL EXPENDITURES". . . . . . . . . . . . . . . . . . . . . . . .1
1.07 "CASH". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.08 "CLOSING DATE" . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.09 "COLLATERAL AGENT". . . . . . . . . . . . . . . . . . . . . . . . . .2
1.10 "COLLATERAL AGENT AGREEMENT" . . . . . . . . . . . . . . . . . . . .2
1.11 "COLLATERAL DOCUMENTS". . . . . . . . . . . . . . . . . . . . . . . .2
1.12 "COMPANIES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.13 "CONVENIENCE CLAIM" . . . . . . . . . . . . . . . . . . . . . . . . .2
1.14 "CREDITOR RATIFICATION" . . . . . . . . . . . . . . . . . . . . . . .2
1.15 "DEBT SERVICE". . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.16 "DEDICATED PORTION OF NET LOAN PROCEEDS". . . . . . . . . . . . . . .2
1.17 "DEDICATED PORTION OF NET PROPERTY SALE PROCEEDS" . . . . . . . . . .2
1.18 "DEDICATED RECEIVABLES" . . . . . . . . . . . . . . . . . . . . . . .2
1.19 "DEPOSIT AGENT" . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.20 "DISPUTED CLAIM". . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.21 "DISPUTED CLAIM RESERVE". . . . . . . . . . . . . . . . . . . . . . .3
1.22 "ELIGIBLE CLAIMS" . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.23 "ENABLING LOAN" . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.24 "EVENT OF DEFAULT". . . . . . . . . . . . . . . . . . . . . . . . . .3
1.25 "EXEMPTED MERGER" . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.26 "FUTURE LOAN" . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.27 "G&A EXPENSES". . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.28 "INITIAL PAYMENTS". . . . . . . . . . . . . . . . . . . . . . . . . .4
1.29 "LOAN EXPENSES" . . . . . . . . . . . . . . . . . . . . . . . . . . .4
1.30 "NET LOAN PROCEEDS" . . . . . . . . . . . . . . . . . . . . . . . . .4
1.31 "NET PROPERTY SALE PROCEEDS". . . . . . . . . . . . . . . . . . . . .4
1.32 "NET REVENUE FROM OPERATIONS" . . . . . . . . . . . . . . . . . . . .4
1.33 "NON-PARTICIPATING CLAIMS". . . . . . . . . . . . . . . . . . . . . .4
1.34 "NON PARTICIPATING CREDITOR RESERVE". . . . . . . . . . . . . . . . .4
1.35 "OIL AND GAS PROPERTIES". . . . . . . . . . . . . . . . . . . . . . .4
1.35 "OPERATING AGREEMENT" . . . . . . . . . . . . . . . . . . . . . . . .5
1.36 "OPERATION EXPENSES". . . . . . . . . . . . . . . . . . . . . . . . .5
1.37 "PARTICIPATING CREDITOR'S CLAIM". . . . . . . . . . . . . . . . . . .5
1.38 "PARTICIPATING CREDITORS" . . . . . . . . . . . . . . . . . . . . . .6
1.39 "PRO RATA". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
i
1.40 "REQUISITE MAJORITY". . . . . . . . . . . . . . . . . . . . . . . . .6
1.41 "REVENUE FROM OPERATIONS" . . . . . . . . . . . . . . . . . . . . . .6
1.42 "SELLING EXPENSES". . . . . . . . . . . . . . . . . . . . . . . . . .7
1.43 "SENIOR INDEBTEDNESS" . . . . . . . . . . . . . . . . . . . . . . . .7
1.44 "SENIOR MANAGEMENT" . . . . . . . . . . . . . . . . . . . . . . . . .7
1.45 "SOLICITED ACTION". . . . . . . . . . . . . . . . . . . . . . . . . .7
1.46 "SUBSTANTIAL MANAGEMENT CHANGE" . . . . . . . . . . . . . . . . . . .7
1.47 "TAXES" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.48 "TEXSTAR" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.49 "UPSIDE PAYMENT". . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.50 "UPSIDE PAYMENT AMOUNT" . . . . . . . . . . . . . . . . . . . . . . .7
ARTICLE II
CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.01 CONDITIONS TO BE SATISFIED BY TEXSTAR.. . . . . . . . . . . . . . . .8
2.02 CONDITIONS TO BE SATISFIED BY BENZ. . . . . . . . . . . . . . . . . .8
2.03 CONDITION TO BE SATISFIED BY PARTICIPATING CREDITORS. . . . . . . . .8
2.04 OTHER CONDITIONS TO BE SATISFIED. . . . . . . . . . . . . . . . . . .9
ARTICLE III
DEPOSIT AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.01 DEPOSITS IN ESCROW. . . . . . . . . . . . . . . . . . . . . . . . . .9
3.02 DELIVERY TO COLLATERAL AGENT IN EVENT CONDITIONS ARE SATISFIED. . . .9
3.03 DELIVERY TO PARTICIPATING CREDITORS IN THE EVENT CONDITIONS ARE
SATISFIED.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.04 DELIVERY TO THE COMPANIES IN THE EVENT CONDITIONS ARE SATISFIED.. . .9
3.05 INSTRUCTIONS IN EVENT CONDITIONS ARE NOT TIMELY SATISFIED.. . . . . .9
3.06 LIMITATION ON DUTY AND LIABILITY OF DEPOSIT AGENT.. . . . . . . . . .9
3.07 INDEMNITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.08 RESIGNATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV
EFFECT OF FAILURE TO SATISFY CONDITIONS ANDEFFECT OF SATISFACTION OF
CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.01 EFFECT OF NOT SATISFYING CONDITIONS. . . . . . . . . . . . . . . . 11
4.02 EFFECT OF SATISFYING CONDITIONS.. . . . . . . . . . . . . . . . . . 11
ARTICLE V
PARTICIPATING CREDITORS AND RATIFICATION. . . . . . . . . . . . . . . . . . . 11
5.01 CREDITOR RATIFICATION.. . . . . . . . . . . . . . . . . . . . . . . 11
5.02 DISCRETIONARY EXTENSION OF TIME. . . . . . . . . . . . . . . . . . 11
ii
5.03 RATIFICATION OF AGREEMENT.. . . . . . . . . . . . . . . . . . . . . 11
5.04 INITIAL COLLATERAL AGENT. . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI
BENZ/TEXSTAR INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.01 JOINT AND SEVERAL.. . . . . . . . . . . . . . . . . . . . . . . . . 12
6.02 DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.03 ARBITRATION OF CLAIM AMOUNT DISPUTES. . . . . . . . . . . . . . . . 12
ARTICLE VII
PAYMENT OF CONVENIENCE CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . 13
7.01 PAYMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.02 ELECTION TO BE TREATED AS A CONVENIENCE CLAIM.. . . . . . . . . . . 14
ARTICLE VIII
INITIAL PAYMENTS TO PARTICIPATING CREDITORS . . . . . . . . . . . . . . . . . 14
8.01 INITIAL PAYMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.02 OBLIGATION AMOUNT.. . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IX
SUBSEQUENT PAYMENTS TO PARTICIPATING CREDITORS. . . . . . . . . . . . . . . . 14
9.01 PRO RATA ALLOCATION OF REQUIRED PAYMENTS. . . . . . . . . . . . . . 14
9.02 QUARTERLY PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 14
9.03 DEDICATED PORTION OF NET PROPERTY SALE PROCEEDS.. . . . . . . . . . 14
9.04 DEDICATED PORTION OF NET LOAN PROCEEDS. . . . . . . . . . . . . . . 14
9.05 DEDICATED RECEIVABLES.. . . . . . . . . . . . . . . . . . . . . . . 15
9.06 MATURITY DATE.. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE X
UPSIDE PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.01 CONDITION UNDER WHICH DUE.. . . . . . . . . . . . . . . . . . . . . 15
10.02 PAYMENT DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.03 DISCLAIMER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.04 UNSECURED.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE XI
RESERVES FOR NON-PARTICIPATING CREDITOR CLAIMS. . . . . . . . . . . . . . . . 16
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ARTICLE XII
ACKNOWLEDGMENT AND SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . 16
12.01 ACKNOWLEDGMENT CONCERNING THE SENIOR INDEBTEDNESS.. . . . . . . . . 16
12.02 SUBORDINATION TO ENABLING LOAN. . . . . . . . . . . . . . . . . . . 16
12.03 PRIORITY OF SENIOR INDEBTEDNESS AND ENABLING LOAN TO LIENS
CREATED BY COLLATERAL DOCUMENTS.. . . . . . . . . . . . . . . . . . 16
12.04 SUBORDINATION OF MECHANIC'S AND MATERIALMAN'S LIEN TO LIENS
CREATED BY THE COLLATERAL DOCUMENTS.. . . . . . . . . . . . . . . . 17
ARTICLE XIII
FUTURE LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13.01 CONSENT TO FUTURE LOANS.. . . . . . . . . . . . . . . . . . . . . . 17
13.02 SUBORDINATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE XIV
SALE OF OIL AND GAS PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . 18
14.01 CONSENT TO SALE OF OIL AND GAS PROPERTIES.. . . . . . . . . . . . . 18
14.02 RELEASE OF LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE XV
RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
15.01 BOOKS AND RECORDS.. . . . . . . . . . . . . . . . . . . . . . . . . 19
15.02 INSPECTIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
15.03 QUARTERLY STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XVI
FUTURE SERVICES, EQUIPMENT AND MATERIALS. . . . . . . . . . . . . . . . . . . 20
ARTICLE XVII
MORATORIUM AND LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 20
17.01 MORATORIUM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
17.02 STATUTES OF LIMITATION. . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE XVIII
SATISFACTION OF CLAIMS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
18.01 SATISFACTION AS TO THE COMPANIES. . . . . . . . . . . . . . . . . . 21
18.02 RELEASE OF NON-OPERATING INTEREST OWNERS. . . . . . . . . . . . . . 21
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ARTICLE XIX
FUTURE ACQUIRED OIL AND GAS LEASES. . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE XX
REPRESENTATIONS AND WARRANTIES OF THE COMPANIES . . . . . . . . . . . . . . . 21
20.01 REVIEW AND APPROVAL.. . . . . . . . . . . . . . . . . . . . . . . . 21
20.02 AUTHORITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
20.03 ACCURACY OF INFORMATION.. . . . . . . . . . . . . . . . . . . . . . 22
20.04 ORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
20.05 LEGAL, VALID AND BINDING INSTRUMENT.. . . . . . . . . . . . . . . . 22
20.06 DEDICATED RECEIVABLES.. . . . . . . . . . . . . . . . . . . . . . . 22
20.07 SENIOR INDEBTEDNESS.. . . . . . . . . . . . . . . . . . . . . . . . 22
20.08 OWNERSHIP.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XXI
REPRESENTATIONS AND WARRANTIESOF PARTICIPATING CREDITORS. . . . . . . . . . . 22
21.01 REVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
21.02 AUTHORITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
21.03 NON RELIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE XXII
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
22.01 EVENTS OF DEFAULT AS TO THE COMPANIES.. . . . . . . . . . . . . . . 23
22.02 EVENT OF DEFAULT AS TO PARTICIPATING CREDITORS AND COLLATERAL
AGENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XXIII
REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XXIV
FURTHER ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
24.01 AMENDMENT OR WAIVER.. . . . . . . . . . . . . . . . . . . . . . . . 28
24.02 PROCEDURE FOR APPROVAL OF SOLICITED ACTION. . . . . . . . . . . . . 28
24.03 EFFECT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XXV
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
25.01 DISCLAIMER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
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25.02 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
25.03 SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . . 29
25.04 MODIFICATIONS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . 29
25.05 ENTIRE AGREEMENT; NO ORAL AGREEMENTS. . . . . . . . . . . . . . . . 29
25.06 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . . 30
25.07 CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
25.08 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
25.09 AQUILA; THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . . . 30
25.10 REFERENCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
25.11 EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
25.12 SINGULAR AND PLURAL . . . . . . . . . . . . . . . . . . . . . . . . 31
25.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
25.14 JOINTLY DRAFTED AGREEMENT; CONSTRUCTION . . . . . . . . . . . . . . 31
25.15 USURY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
25.16 SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
25.17 NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
EXHIBITS
EXHIBIT 1 Creditor Ratification
EXHIBIT 2 Eligible Creditors and Claim Amounts
EXHIBIT 3 Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement (Texas)
EXHIBIT 4 Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement (Mississippi)
EXHIBIT 5 Act of Mortgage, Pledge and Security Agreement (Louisiana)
EXHIBIT 6 Security Agreement
EXHIBIT 7 Senior Indebtedness
EXHIBIT 8 Collateral Agent Agreement
EXHIBIT 9 Opinion of Counsel
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