EXHIBIT 1
to SCHEDULE 13D
SUBORDINATED CREDIT AGREEMENT
THIS SUBORDINATED CREDIT AGREEMENT (this "AGREEMENT") is entered into
as of June 10, 2002, by and between VAALCO ENERGY, INC., a Delaware corporation
("BORROWER"), and 1818 FUND II, L.P., a Delaware limited partnership, and such
other parties from time to time a Lender hereto (herein collectively "LENDER").
RECITALS
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WHEREAS, Vaalco Gabon (Etame), Inc. ("VGEI") and International Finance
Corporation ("IFC") entered into that certain Loan Agreement dated April 19,
2002 (the "IFC LOAN AGREEMENT"), for the purpose of financing the Project (all
capitalized terms not defined in the body of this Agreement are defined under
Appendix A hereto).
WHEREAS, as a condition precedent to funding under the IFC Loan
Agreement, IFC has required an escrow account (the "SPONSOR ESCROW ACCOUNT") be
established pursuant to that certain Escrow Account Agreement between Borrower,
IFC and JPMorgan/Chase Bank, London Branch ("ESCROW ACCOUNT BANK") dated May 31,
2002 (the "SPONSOR ESCROW AGREEMENT") in which Borrower shall maintain certain
required balances up to $10,000,000 as security for the obligations of Borrower
to IFC under the Guarantee Agreement dated on or about the date of the IFC Loan
Agreement between Borrower and IFC.
WHEREAS, Borrower has requested Lender extend it credit for the purpose
of funding the Sponsor Escrow Account and Lender has agreed to provide such
credit to Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Lender and Borrower hereby agree as follows:
ARTICLE I.
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CREDIT TERMS
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SECTION 1.01 LINE OF CREDIT LOAN.
(a) LINE OF CREDIT LOAN. Subject to the terms and
conditions of this Agreement until January 31, 2003, Lender hereby
agrees to make one or more loans (each such advance a "LOAN" and
collectively the "LOANS") to Borrower in an aggregate principal amount
not to exceed Ten Million Dollars ($10,000,000) (the "COMMITMENT"), the
proceeds of which shall be funded directly into and held in the Sponsor
Escrow Account pursuant to the Sponsor Escrow Agreement. Borrower's
obligation to repay the Loans shall be evidenced by a promissory note
substantially in the form of EXHIBIT A attached hereto (as same may be
amended, renewed, assigned in whole or in part, collectively, the
"NOTE"), all terms of which are incorporated herein by this reference.
After the earlier of (i) Phase One Completion Date and (ii) January 31,
2003, Lender shall have no obligation to make any additional Loans to
Borrower.
(b) REPAYMENT. Principal and interest on the Loans shall
be repaid in accordance with the provisions of the Note, the terms of
which are incorporated herein by reference.
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(c) MANDATORY PREPAYMENT. Principal outstanding under the
Loans is subject to mandatory prepayment in accordance with provisions
of the Note, the terms of which are incorporated herein by reference.
SECTION 1.02 INTEREST/FEES.
(a) INTEREST. The outstanding principal balance of the
Loans shall bear interest at the rate of interest and on the dates set
forth in the Note and this Agreement.
(b) WARRANTS. Borrower shall sell and issue to Lender
warrants to purchase 15,000,000 shares of Borrower's Common Stock at
$0.50 per share, subject to adjustment pursuant to the terms thereof
(the "WARRANTS") in the forms attached hereto as EXHIBITS B-1 and B-2.
(c) ADDITIONAL WARRANT. If all principal, interest and
other amounts under the Loans and the Note have not been paid in full
and Lender's obligation to make Loans has not been terminated on or
prior to the second anniversary following the first funding hereunder,
Borrower shall issue to Lender a warrant ("ADDITIONAL WARRANT") to
purchase a number of shares of Borrower's Common Stock equal to
7,500,000 multiplied by a fraction, the numerator of which shall be the
principal amount of the Loans outstanding on such second anniversary
and the denominator of which shall be $10.0 million. The number of
shares subject to such Additional Warrant shall be subject to
appropriate adjustment if any of the events described in Sections 5.1,
5.2, 5.3, 5.5 and 5.9 of the Warrant attached as EXHIBIT B-1 occurs
prior to such second anniversary. The exercise price of such Additional
Warrant shall be $0.10 per share. The Additional Warrant shall expire
seven years following the date of issuance. The Additional Warrant
shall be substantially identical to the Warrant attached as EXHIBIT B-1
(except that the antidilution adjustments will be appropriately
modified so as to adjust the number of shares only and the number of
shares subject to the Additional Warrant shall be reduced as set forth
in Sections 5.1, 5.2, 5.3, 5.5 and 5.9 of the Warrant).
SECTION 1.03 PAYMENTS.
(a) Borrower shall make all payments of principal,
interest, fees, and any other amount due to Lender under the Loan
Documents in Dollars, in same day funds, to Xxxxx Brothers Xxxxxxxx &
Co., for credit to Lender's account number 9201033231 at JPMorgan Chase
& Co. (ABA #0210-00021), for further credit to The 1818 Fund II, L.P.
to account number 0000000 (Reference: VAALCO), or at such other bank or
account in New York as Lender from time to time designates. Payments
must be received in Lender's designated account no later than 1:00 p.m.
New York time.
(b) The tender or payment of any amount payable under the
Loan Documents (whether or not by recovery under a judgment) in any
currency other than Dollars shall not novate, discharge or satisfy the
obligation of Borrower to pay in Dollars all amounts payable under the
Loan Documents except to the extent that (and as of the date when)
Lender actually receives funds in Dollars in the account specified in,
or pursuant to, SUBSECTION 1.03(A).
(c) Borrower shall indemnify Lender against any losses
resulting from a payment being received or an order or judgment being
given under the Loan Documents in any currency other than Dollars or
any place other than the account specified in, or pursuant to,
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SUBSECTION 1.03(A). Borrower shall, as a separate obligation, pay such
additional amount as is necessary to enable Lender to receive, after
conversion to Dollars at a market rate and transfer to that account,
the full amount due to Lender under the Loan Documents in Dollars and
in the account specified in, or pursuant to, SUBSECTION 1.03(A).
(d) Notwithstanding the provisions of SUBSECTION 1.03(A)
and SUBSECTION 1.03(B), Lender may require Borrower to pay (or
reimburse Lender) for any Taxes and other amounts payable under
SUBSECTION 1.07(A) in the currency in which they are payable, if other
than Dollars.
SECTION 1.04 COLLATERAL.
(a) As security for the payment or performance, as
applicable, of all of Borrower's Obligations, Borrower has granted
security interests to Lender, and its successors and assigns pursuant
to the security agreements and other documents described on SCHEDULE I
hereto and any financing statements filed in connection therewith or as
Lender shall require, all in form and substance satisfactory to Lender
(collectively the "SECURITY DOCUMENTS").
(b) Borrower hereby authorizes Lender to file one or more
financing statements, continuation statements, or other documents for
the purpose of perfecting, confirming, continuing, enforcing or
protecting the security interest granted pursuant to the Security
Documents by Borrower naming Borrower as debtor and Lender as secured
party. Borrower shall reimburse Lender immediately upon demand for all
reasonable costs and expenses incurred by Lender in connection with the
Loan Documents or any of the foregoing, including without limitation,
filing and recording fees and costs of appraisals, audits, title
insurance, and attorneys' fees.
SECTION 1.05 SUBORDINATION OF DEBT. In connection with the Note,
VGEI is borrowing money from and incurring obligations to IFC (the "IFC
INDEBTEDNESS"). The obligation of Borrower to repay the Note and other
indebtedness under the Loan Documents and the priority of liens created under
the Security Documents are subject to the terms of that certain Subordination
Agreement, dated as of even date herewith, by and between Borrower, IFC and
Lender attached as EXHIBIT C hereto (hereafter, the "SUBORDINATION AGREEMENT").
SECTION 1.06. SUSPENSION OR CANCELLATION BY LENDER.
(a) Lender may, by notice to Borrower, suspend the right
of Borrower to borrow and/or cancel the undisbursed portion of the
Commitment in whole or in part:
(i) if the first Loan has not been made by
September 30, 2002 or such earlier date agreed to by
VGEI and IFC under the IFC Loan Agreement;
(ii) if any Event of Default has occurred and is
continuing;
(iii) if any event or condition has occurred and
is continuing which has or can reasonably be
expected to have a material adverse effect;
(iv) on or after December 31, 2003; or
(v) the Phase One Completion Date.
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(b) Upon the giving of any such notice, the right of
Borrower to any further Loans shall be suspended or canceled, as the
case may be. The exercise by Lender of its right of suspension shall
not preclude Lender from exercising its right of cancellation, either
for the same or any other reason specified in SECTION 1.06. Upon any
cancellation, Borrower shall, subject to SUBSECTION 1.06(D), pay to
Lender all fees and other amounts accrued (whether or not then due and
payable) under this Agreement up to the date of that cancellation. A
suspension shall not limit any other provision of this Agreement.
(c) Any portion of the Commitment that is canceled under
this SECTION 1.06 may not be reborrowed.
(d) In the case of a partial cancellation of the
Commitment pursuant to SUBSECTION 1.06(A), interest on the amount then
outstanding of the Loans remains payable as provided in SUBSECTION
1.02(A).
SECTION 1.07 TAXES.
(a) Borrower shall pay or cause to be paid all Taxes
other than taxes, if any, payable on the overall income of Lender on or
in connection with the payment of any and all amounts due under this
Agreement that are now or in the future levied or imposed by any
Authority of Gabon, the United States of America, or the United Kingdom
or by any organization of which Gabon, the United States of America or
the United Kingdom is a member or any jurisdiction through or out of
which a payment is made.
(b) All payments of principal, interest, fees and other
amounts due under this Agreement shall be made without deduction for or
on account of any Taxes.
(c) If Borrower is prevented by operation of law or
otherwise from making or causing to be made those payments without
deduction, the principal or (as the case may be) interest, fees or
other amounts due under this Agreement shall be increased to such
amount as may be necessary so that Lender receives the full amount it
would have received (taking into account any Taxes payable on amounts
payable by Borrower under this subsection) had those payments been made
without that deduction.
(d) If SECTION 1.07 applies and Lender so requests,
Borrower shall deliver to Lender official tax receipts evidencing
payment (or certified copies of them) within thirty (30) days of the
date of that request.
ARTICLE II.
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REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Lender,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to
Lender subject to this Agreement.
SECTION 2.01 LEGAL STATUS. Borrower and VGEI are each
corporations, duly organized and existing and in good standing under the laws of
the State of Delaware and are qualified or licensed to do business (and are in
good standing as a foreign corporation, if applicable) in all jurisdictions in
which
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such qualification or licensing is required or in which the failure to so
qualify or to be so licensed could have a material adverse effect on Borrower or
VGEI.
SECTION 2.02 CAPITALIZATION.
(a) The authorized capital stock of Borrower consists
solely of 100,000,000 shares of common stock, par value $.10 per share
("COMMON STOCK") and 500,000 shares of preferred stock, par value
$25.00 per share ("PREFERRED STOCK"). As of the date hereof: (i)
20,744,569 shares of Common Stock were issued and outstanding, (ii)
10,000 shares of Series A Preferred Stock ("SERIES A PREFERRED STOCK")
were issued and outstanding, (iii) 3,495,325 shares of Common Stock
were reserved for issuance upon exercise of outstanding options,
warrants (excluding the Warrants) and other rights to acquire Common
Stock, (iv) 15,000,000 shares of Common Stock were reserved for
issuance upon exercise of the Warrants, (v) 5,395 shares of Common
Stock were held by the Company in its treasury, and (vi) 27,500,000
shares of Common Stock were reserved for issuance upon conversion of
the Series A Preferred Stock. The Warrants and the Additional Warrants
are duly authorized, and when issued to Lender after payment therefor,
will be validly issued and will be free and clear of all liens. The
shares of Common Stock issuable upon exercise of the Warrants and the
Additional Warrants, when issued in compliance with the terms thereof,
will be validly issued, fully paid and nonassessable and not subject to
any preemptive rights. Except as set forth above, as of the date
hereof, no shares of capital stock or other equity securities of
Borrower were issued, reserved for issuance or outstanding, and there
are no other options, warrants or other rights presently outstanding to
purchase or otherwise acquire (i) any authorized but unissued,
unauthorized or treasury shares of the Borrower's capital stock, or
(ii) any security which by its terms is convertible or exercisable for
shares of Borrower's capital stock, and there are no commitments to
issue any of the foregoing. All outstanding shares of Common Stock and
Preferred Stock of Borrower are duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights.
(b) The authorized capital stock of VGEI consists solely
of 1,000 shares of common stock, par value $10.00 per share ("VGEI
COMMON STOCK"). As of the date hereof 1,000 shares of VGEI Common Stock
were issued and outstanding. As of the date hereof all of the capital
stock of VGEI was owned by Borrower and no shares of capital stock or
other equity securities of VGEI were issued, reserved for issuance or
outstanding, and there are no other options, warrants or other rights
presently outstanding to purchase or otherwise acquire (i) any
authorized but unissued, unauthorized or treasury shares of VGEI's
capital stock, or (ii) any security which by its terms is convertible
or exercisable for shares of VGEI's capital stock, and there are no
commitments to issue any of the foregoing. All outstanding shares of
VGEI Common Stock are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights.
SECTION 2.03 AUTHORIZATION AND VALIDITY.
(a) This Agreement, the Note, the Security Documents, the
Warrants, the Additional Warrants and each contract, instrument and
other document required hereby or at any time hereafter delivered to
Lender in connection herewith (collectively, the "LOAN DOCUMENTS") have
been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and
binding agreements and obligations of Borrower, enforceable in
accordance with their respective terms.
(b) The IFC Loan Agreement, and the other Transaction
Documents contemplated by the IFC Loan Agreement, have been duly
authorized, and upon their execution and delivery in accordance with
the provisions of the IFC Loan Agreement will constitute legal, valid
and
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binding agreements and obligations of VGEI or Borrower, as the case may
be, enforceable in accordance with their respective terms.
SECTION 2.04 NO VIOLATION.
(a) The execution, delivery and performance by Borrower
of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of
Incorporation or By-Laws of Borrower, or result in any breach of or
default under any contract, obligation, indenture or other instrument
to which Borrower is a party or by which Borrower may be bound.
(b) The execution, delivery and performance by VGEI or
Borrower, as the case may be, of the IFC Loan Agreement and each of the
Transaction Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of
Incorporation or By-Laws of VGEI, or result in any breach of or default
under any contract, obligation, indenture or other instrument to which
VGEI is a party or by which VGEI may be bound.
SECTION 2.05 LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower or VGEI other than those disclosed
by Borrower to Lender in writing prior to the date hereof.
SECTION 2.06 CORRECTNESS OF FINANCIAL STATEMENT. The quarterly
consolidated and consolidating balance sheet dated December 31, 2001, prepared
by Borrower's chief financial officer (a) are complete and correct and present
fairly the consolidated financial condition of Borrower, (b) disclose all
liabilities of Borrower and its Subsidiaries that are required to be reflected
or reserved against under U.S. generally accepted accounting principles, whether
liquidated or unliquidated, fixed or contingent, and (c) were prepared in
accordance with U.S. generally accepted accounting principles consistently
applied. Since the date of such quarterly financial statement there has been no
material adverse change in the consolidated financial condition of Borrower, nor
has Borrower or any of its Subsidiaries mortgaged, pledged, granted a security
interest in or otherwise encumbered any of its assets or properties except in
favor of Lender or IFC or as otherwise permitted by Lender in writing.
SECTION 2.07 INCOME TAX RETURNS. All tax returns and reports of
Borrower and its Subsidiaries required by law to be filed have been duly filed
and all taxes, obligations, fees and other governmental charges upon Borrower
and its Subsidiaries, or their properties, or their income or assets, which are
due and payable or to be withheld, have been paid or withheld, other than those
currently payable without penalty or interest.
SECTION 2.08 NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower or any of its Subsidiaries is a party
or by which Borrower or any of its Subsidiaries may be bound that requires the
subordination in right of payment of any of Borrower's obligations subject to
this Agreement to any other obligation of Borrower except as provided in the
Subordination Agreement.
SECTION 2.09 PERMITS, FRANCHISES. Each of Borrower and its
Subsidiaries possess, and will hereafter possess, all permits, consents,
approvals, franchises and licenses required and rights to all trademarks, trade
names, patents, and fictitious names, if any, necessary to enable it to conduct
the business in which it is now engaged in compliance with applicable law.
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SECTION 2.10 ERISA. Each of Borrower and its Subsidiaries is in
compliance in all material respects with all applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended or recodified from
time to time ("ERISA"); Neither Borrower nor any of its Subsidiaries has
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower or its Subsidiaries (each, a
"PLAN"); no Reportable Event as defined in ERISA has occurred and is continuing
with respect to any Plan initiated by Borrower or its Subsidiaries; each of
Borrower and its Subsidiaries has met its minimum funding requirements under
ERISA with respect to each Plan; and each Plan will be able to fulfill its
benefit obligations as they come due in accordance with the Plan documents and
under U.S. generally accepted accounting principles.
SECTION 2.11 OTHER OBLIGATIONS. Neither Borrower nor any of its
Subsidiaries is in default on any obligation for borrowed money, any purchase
money obligation or any other material lease, commitment, contract, instrument
or obligation.
SECTION 2.12 ENVIRONMENTAL MATTERS. Except as disclosed by
Borrower to Lender in writing prior to the date hereof, Borrower and each of its
Subsidiaries is in compliance with all applicable federal or state
environmental, hazardous waste, health and safety statutes, and any rules or
regulations adopted pursuant thereto, which govern or affect any of Borrower's
or its Subsidiaries' operations and/or properties, including without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal
Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances
Control Act, as any of the same may be amended, modified or supplemented from
time to time. None of the operations of Borrower or its Subsidiaries is the
subject of any federal or state investigation evaluating whether any remedial
action involving a material expenditure is needed to respond to a release of any
toxic or hazardous waste or substance into the environment. Neither Borrower nor
any of its Subsidiaries has a material contingent liability in connection with
any release of any toxic or hazardous waste or substance into the environment.
SECTION 2.13 NO CONSENT.
(a) Borrower's execution, delivery and performance of
each of the Loan Documents, including this Agreement, to which Borrower
is a party do not require the consent or approval of any other person
or entity which has not been obtained, including, without limitation,
any regulatory authority or governmental body of the United States of
America or any state thereof or any political subdivision of the United
States of America or any state thereof.
(b) VGEI's or Borrower's, as the case may be, execution,
delivery and performance of the IFC Loan Agreement and each of the
Transaction Documents, to which VGEI or Borrower, as the case may be,
is a party do not require the consent or approval of any other person
or entity which has not been obtained, including, without limitation,
any regulatory authority or governmental body of the United States of
America or any state thereof or any political subdivision of the United
States of America or any state thereof.
SECTION 2.14 NO LIENS. Neither Borrower nor any of its
Subsidiaries has any outstanding lien on any of its assets other than liens
under the IFC Loan Agreement in favor of IFC and otherwise as arising by
operation of law, and no contract or arrangements, conditional or unconditional,
exist for the creation by Borrower or any of its Subsidiaries of any lien,
except for liens in favor of IFC pursuant to the IFC Loan Agreement and Lender
pursuant to the Loan Documents.
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SECTION 2.15 LAWS. To the best of Borrower's knowledge and belief
after due inquiry, neither Borrower nor any of its Subsidiaries is in violation
of any statute or regulation of any governmental authority.
SECTION 2.16 JUDGMENTS. No judgment or order has been issued which
has or may reasonably be expected to have a material adverse effect on the
financial conditions or operations of Borrower or any of its Subsidiaries.
SECTION 2.17 INFORMATION. All information regarding Borrower and
its Subsidiaries furnished to Lender prior to or contemporaneously herewith, by
or on behalf of Borrower, was and continues to be true and accurate and does not
contain any information that is misleading in any material respect nor does it
omit any information the omission of which makes the information contained in it
misleading in any material respect, and none of the representations and
warranties in this ARTICLE II omits any matter the omission of which makes any
of such representations and warranties misleading.
SECTION 2.18 VGEI. The representations and warranties made by VGEI
in Section 4.01 of the IFC Loan Agreement are true and correct in all material
respects (except for any such representations and warranties which are qualified
by their terms by a reference to materiality or material adverse affect, which
representation as so qualified shall be true and correct in all respects).
ARTICLE III.
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CONDITIONS
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SECTION 3.01 CONDITIONS TO INITIAL LOAN. The obligation of Lender
to make the initial Loan under SECTION 1.01(A) is subject to the fulfillment to
Lender's satisfaction of all of the following conditions:
(a) APPROVAL OF LENDER COUNSEL. All legal matters
incidental to the extension of credit by Lender shall be satisfactory
to Lender's counsel.
(b) DOCUMENTATION. Lender shall have received, in form
and substance satisfactory to Lender, such documents as Lender may
require including, without limitation, this Agreement, the Note, the
Warrants and each of the documents described on SCHEDULE I attached
hereto.
(c) LENDER APPROVAL AND CLOSING OF SENIOR LOAN. The IFC
Loan Agreement, the Transaction Documents and other related documents
(the "IFC LOAN DOCUMENTS") shall be satisfactory to Lender in its sole
discretion, all conditions precedent under the IFC Loan Documents will
following the occurrence of funding hereunder, be satisfied (and not
waived except with Lender's consent), and all such agreements shall
close and fund within three (3) Business Days following Closing and
funding hereunder. Borrower will deliver to Lender all documents
delivered to IFC upon closing of the IFC Loan Agreement that Lender
specifically requests Borrower to deliver to Lender.
(d) FINANCIAL CONDITION. There shall have been no
material adverse change, as determined by Lender, in the financial
condition or business of Borrower and its Subsidiaries, nor any
material decline, as determined by Lender, in the market value of any
collateral required hereunder or a substantial or material portion of
the assets of Borrower and its Subsidiaries.
(e) INSURANCE. Borrower shall have delivered to Lender
evidence of insurance coverage on all Borrower's and its Subsidiaries'
property, in form, substance, amounts, covering
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risks and issued by companies satisfactory to Lender, including without
limitation, policies of fire and extended coverage insurance covering
all real property collateral required hereby, and such policies of
insurance against specific hazards affecting any such real property as
may be required by governmental regulation.
(f) OPINION OF INVESTMENT BANK. An opinion of an
investment bank or financial advisor acceptable to Lender that the
terms of this Agreement and the other Loan Documents are fair to
Borrower from a financial point of view.
(g) OPINION OF COUNSEL. An opinion of Borrower's counsel,
addressed to Lender in form and substance satisfactory to Lender's
counsel and opinion of Borrower's U.K. counsel, addressed to Lender, in
form and substance satisfactory to Lender's counsel, regarding the
validity and enforceability of the Charge Over Deposit Agreement.
SECTION 3.02 CONDITIONS OF ALL LOANS. The obligation of Lender to
make any Loan, including the initial Loan, on any date is also subject to the
conditions that:
(a) no Event of Default has occurred and is continuing;
(b) no event of default pursuant to Section 7.02 of the
IFC Loan Agreement ("IFC EVENTS OF DEFAULT") and no event or
circumstance which would, with notice, lapse of time, the making of a
determination or any combination thereof, become an event of default
pursuant to Section 7.02 of the IFC Loan Agreement ("IFC POTENTIAL
EVENTS OF DEFAULT") has occurred and is continuing;
(c) the proceeds of such requested Loan shall, at such
date, be used by Borrower for the sole purpose of funding the Sponsor
Escrow Account as a condition precedent to a funding in the same amount
by IFC to VGEI under the IFC Loan Agreement within three (3) Business
Days thereof;
(d) since the date of this Agreement, no event has
occurred which (i) has and is continuing to have or (ii) can reasonably
be expected to have a material adverse effect on Borrower and its
Subsidiaries taken as a whole;
(e) since December 31, 2001, Borrower and its
Subsidiaries have not incurred any material loss or liability (except
such liabilities as may be incurred in accordance with ARTICLE V );
(f) the representations and warranties made in ARTICLE II
are true and correct in all material respects (except for any such
representations and warranties which are qualified by their terms by a
reference to materiality or material adverse affect, which
representation as so qualified shall be true and correct in all
respects) on and as of such date with the same effect as if those
representations and warranties had been made on and as of such date;
(g) after giving effect to such Loan, neither Borrower
nor its Subsidiaries would be in violation of:
(i) its articles of incorporation and bylaws
and/or such other constitutive documents,
however so called;
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(ii) any provision contained in any document to
which Borrower or any of its Subsidiaries is
a party (including this Agreement) or by
which Borrower or any of its Subsidiaries is
bound; or
(iii) any law, rule, regulation, authorization or
agreement or other document binding on
Borrower or any of its Subsidiaries directly
or indirectly limiting or otherwise
restricting Borrower's or any of its
Subsidiary's borrowing power or authority or
its ability to borrow;
(h) on and as of such date, Borrower's Long-term Debt to
Equity Ratio does not exceed 70:30; and
(i) the undisbursed portion of funds available to VGEI
under the IFC Loan Agreement are sufficient to finance VGEI's share of
costs projected to be incurred up through the Phase One Completion
Date.
SECTION 3.03 BORROWER'S CERTIFICATION. Lender shall not be
obligated to make any Loan until Borrower shall have delivered to Lender with
respect to each request for a Loan:
(a) certifications, in the form included in SCHEDULE III
signed by an executive officer of Borrower, certifying the conditions
specified in SECTION 3.02 expressed to be effective as of such date;
and
(b) such evidence as Lender may reasonably request of the
proposed utilization of the proceeds of the Loan or the utilization of
the proceeds of the corresponding loan to VGEI under the IFC Loan
Agreement.
SECTION 3.04 CONDITIONS FOR LENDER'S BENEFIT. The conditions in
SECTION 3.01 through SECTION 3.03 are for the benefit of Lender and may be
waived only by Lender in its sole discretion.
ARTICLE IV.
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AFFIRMATIVE COVENANTS
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Borrower covenants that so long as any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Lender under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower shall (and shall cause its Subsidiaries, if
applicable), unless Lender otherwise consents in writing.
SECTION 4.01 PUNCTUAL PAYMENTS. Punctually pay all principal,
interest, fees or other liabilities due under any of the Loan Documents at the
times and place and in the manner specified therein.
SECTION 4.02 ACCOUNTING RECORDS. Maintain adequate books and
records in accordance with U.S. generally accepted accounting principles
consistently applied, and permit any representative of Lender, at any reasonable
time, to inspect, audit and examine such books and records, to make copies of
the same, and to inspect the properties of Borrower and its Subsidiaries.
10
SECTION 4.03 FINANCIAL STATEMENTS. Borrower will promptly furnish
to Lender from time to time upon request such information regarding the business
and affairs and financial condition of Borrower and its Subsidiaries as Lender
may reasonably request, and will furnish to Lender:
(a) ANNUAL REPORTS - promptly after becoming available
and in any event within 90 days after the close of each fiscal year of
Borrower, the audited consolidated and unaudited consolidating balance
sheets of Borrower and its Subsidiaries as at the end of such year, the
audited consolidated and unaudited consolidating statements of profit
and loss of Borrower and its Subsidiaries for such year and the audited
consolidated and unaudited consolidating statements of reconciliation
of capital accounts of Borrower and its Subsidiaries for such year,
setting forth in each case for fiscal years ending after September 30,
2001, in comparative form the corresponding figures for the preceding
fiscal year, accompanied by the related report of independent public
accountants acceptable to Lender which report shall be to the effect
that such statements have been prepared in accordance with U.S.
generally accepted accounting principles consistently followed
throughout the period indicated except for such changes in such
principles with which the independent public accountants shall have
concurred, showing the calculations confirming Borrower's compliance
with all financial covenants; and
(b) QUARTERLY REPORTS - promptly after becoming available
and in any event within 45 days after the end of each of the first
three quarterly periods in each fiscal year of Borrower, the
consolidated and consolidating balance sheets of Borrower and its
Subsidiaries as at the end of such period, the consolidated and
consolidating statements of profit and loss of Borrower and its
Subsidiaries for such quarter and for the period from the beginning of
the fiscal year to the close of such quarter, and the consolidated and
consolidating statement of reconciliation of capital accounts of
Borrower and its Subsidiaries for such quarter and for the period from
the beginning of the fiscal year to the close of such quarter, setting
forth in each case for fiscal years ending after September 30, 2001, in
comparative form the corresponding figures for the corresponding period
of the preceding fiscal year, certified by the principal financial
officer of Borrower to have been prepared in accordance with U.S.
generally accepted accounting principles consistently followed
throughout the period indicated except to the extent stated therein,
subject to normal changes resulting from year-end adjustment;
(c) AUDIT REPORTS - promptly upon receipt thereof, one
copy of each other report submitted to Borrower or any Subsidiary by
independent accountants in connection with any annual, interim or
special audit made by them of the books of Borrower or any Subsidiary;
(d) SEC AND OTHER REPORTS - promptly upon their becoming
available, one copy of each financial statement, report, notice or
proxy statement sent by Borrower to stockholders generally, and of each
regular or periodic report and any registration statement, prospectus
or written communication (other than transmittal letters) in respect
thereof filed by Borrower with or received by Borrower in connection
therewith from any securities exchange or the Securities and Exchange
Commission or any successor agency;
(e) VGEI REPORTS - to the extent requested by Lender, all
reports, documents or other materials required to be delivered or
otherwise delivered to IFC pursuant to Section 6.03 of the IFC Loan
Agreement.
(f) OTHER INFORMATION - from time to time such other
information as Lender may reasonably request.
11
SECTION 4.04 COMPLIANCE. Preserve and maintain all licenses,
permits, governmental approvals, rights, privileges and franchises necessary for
the conduct of its business and the business of its Subsidiaries; and comply
with the provisions of all documents pursuant to which Borrower and its
Subsidiaries organized and/or which govern Borrower's and its Subsidiaries'
continued existence and with the requirements of all laws, rules, regulations
and orders of any governmental authority applicable to Borrower, its
Subsidiaries and/or their business.
SECTION 4.05 INSURANCE. Maintain and keep in force insurance of
the types and in amounts customarily carried in lines of business similar to
that of Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Lender, and
deliver to Lender from time to time, at Lender's request, schedules setting
forth all insurance then in effect.
SECTION 4.06 FACILITIES. Keep all properties useful or necessary
to Borrower's and its Subsidiaries' business in good repair and condition, and
from time to time make necessary repairs, renewals and replacements thereto so
that such properties shall be fully and efficiently preserved and maintained.
SECTION 4.07 TAXES AND OTHER LIABILITIES. Pay and discharge when
due any and all indebtedness, obligations, assessments and taxes, both real or
personal, including without limitation federal and state income taxes and state
and local property taxes and assessments, except such (a) as Borrower or any
Subsidiary may in good faith contest or as to which a bona fide dispute may
arise, and (b) for which Borrower or any Subsidiary has made provision, to
Lender's satisfaction, for eventual payment thereof in the event Borrower or any
Subsidiary is obligated to make such payment.
SECTION 4.08 LITIGATION. Promptly give notice in writing to Lender
of all litigation pending or threatened against Borrower or any Subsidiary with
claims in excess of $10,000.00 in the aggregate.
SECTION 4.09 NOTICE TO LENDER. Promptly give written notice to
Lender in reasonable detail of: (a) the occurrence of any Event of Default of
which Borrower is aware along with written notices or correspondence regarding
same, or any condition, event or act which with the giving of notice or the
passage of time or both would constitute an Event of Default; (b) any IFC Events
of Default or IFC Potential Events of Default along with written notices or
correspondence regarding same; (c) any change in the name or the organizational
structure of Borrower; and (d) the occurrence and nature of any Reportable Event
or Prohibited Transaction, each as defined in ERISA, or any funding deficiency
with respect to any Plan.
SECTION 4.10 MAINTENANCE OF EXISTENCE. Each of Borrower and its
Subsidiaries shall preserve and maintain in full force and effect their legal
existence, and maintain their good standing under the laws of their state or
jurisdiction of formation.
ARTICLE V.
----------
NEGATIVE COVENANTS
------------------
Borrower further covenants that so long as Lender remains committed to
extend credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Lender under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not (and shall cause its Subsidiaries
not to, if applicable) without Lender's prior written consent:
12
SECTION 5.01 USE OF FUNDS. Use the proceeds of Loans for purposes
other than to fund the Sponsor Escrow Account pursuant to the IFC Loan
Agreement.
SECTION 5.02 OTHER INDEBTEDNESS. Create, incur, assume or permit
to exist any Debt with respect to Borrower and its Subsidiaries except (a) the
liabilities of Borrower to Lender, (b) any other liabilities of Borrower and its
Subsidiaries existing as of, and described in the Subordination Agreement, and
(c) other Long Term Debt, provided that Borrower's Long Term Debt to Equity
Ratio shall not exceed 70:30.
SECTION 5.03 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into
or consolidate with any other entity; make any substantial change in the nature
of Borrower's or any Subsidiary's business as conducted as of the date hereof;
acquire all or substantially all of the assets of any other entity; nor sell,
lease, transfer or otherwise dispose of all or a substantial or material portion
of Borrower's or any Subsidiary's assets except in the ordinary course of its
business.
SECTION 5.04 LOANS, ADVANCES, INVESTMENTS. Make any loans or
advances to or investments in any person or entity, except any of the foregoing
to VGEI and to the extent existing as of, and disclosed to Lender prior to, the
date hereof.
SECTION 5.05 DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend
or distribution either in cash, stock or any other property on Borrower's or any
Subsidiary's (other than wholly-owned Subsidiaries) stock now or hereafter
outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of
any class of Borrower's or any Subsidiary's (other than wholly-owned
Subsidiaries) stock now or hereafter outstanding except as provided in the
Warrants.
SECTION 5.06 PLEDGE OF ASSETS. Mortgage, pledge, grant or permit
to exist a security interest in, or lien upon, all or any portion of Borrower's
or any Subsidiary's assets now owned or hereafter acquired, except any of the
foregoing in favor of Lender or which is existing as of the date of, and
described under, the Subordination Agreement.
SECTION 5.07 SALES AND LEASEBACKS. Enter into any arrangement,
directly or indirectly, with any person whereby Borrower or any Subsidiary shall
sell or transfer any of its property, whether now owned or hereafter acquired,
and whereby Borrower or any Subsidiary shall then or thereafter rent or lease as
lessee such property or any part thereof or other property which Borrower or any
Subsidiary intends to use for substantially the same purpose or purposes as the
property is sold or transferred.
SECTION 5.08 NATURE OF BUSINESS. Allow any material change to be
made in the character of Borrower's or any Subsidiary's business as conducted on
the date of this Agreement.
SECTION 5.09 TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including without limitation, any purchase, sale, lease or exchange
of property or the rendering of any service, with any affiliate of Borrower or
any of its Subsidiaries unless such transactions are in the ordinary course of
its business and are upon fair and reasonable terms no less favorable to
Borrower or its Subsidiary than Borrower or its Subsidiary would obtain in a
comparable arm's-length transaction with a person not an affiliate.
SECTION 5.10 FISCAL YEAR. Change the fiscal accounting year of
Borrower or its Subsidiaries from a calendar year commencing each year on
January 1 and ending on the following December 31.
13
SECTION 5.11 PROJECT. Permit VGEI to change in any material way
the nature or scope of the Project or change the nature of its present or
contemplated business or operations.
SECTION 5.12 VGEI PSC INTEREST. Permit VGEI to reduce its working
interest under the PSC below 30.35% during the exploration phase and below
28.07% during the production phase.
ARTICLE VI.
-----------
EVENTS OF DEFAULT
-----------------
SECTION 6.01 EVENTS OF DEFAULT. The occurrence of any of the
following shall constitute an "EVENT OF DEFAULT" under this Agreement:
(a) Borrower shall fail to pay when due any principal,
interest, fees or other amounts payable under any of the Loan
Documents.
(b) Any default in the performance of or compliance with
any obligation, agreement or other provision contained herein or in any
other Loan Document (other than those referred to in SUBSECTIONS
6.01(A)), and with respect to any such default which by its nature can
be cured, such default shall continue for a period of thirty (30) days
from its occurrence.
(c) Borrower or any of its Subsidiaries fails to pay any
of its Debt (other than as provided under 6.01 (a)) or to perform any
of its obligations under any agreement pursuant to which there is
outstanding any Debt, and any such failure continues for more than any
applicable period of grace or any such Debt becomes prematurely due and
payable or is placed on demand, provided such non-payment or
non-performance will not be an Event of Default if (i) such non-payment
or non-performance relates to a Debt not exceeding one hundred fifty
thousand Dollars ($150,000) and (ii) is being contested by Borrower or
such Subsidiary in good faith in a court of competent jurisdiction for
reasons other than its inability to make due and punctual payment and
for which Borrower or such Subsidiary has set aside adequate reserves.
(d) Any of the representations and warranties of Borrower
made herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it
at any time under or in connection with this Agreement or any such
other Loan Document shall prove to have been inaccurate, false or
misleading in any material respect on or as of the date made.
(e) The filing of a notice of judgment lien against
Borrower or any of its Subsidiaries; or the recording of any abstract
of judgment against Borrower or any of its Subsidiaries in any county
in which Borrower has an interest in real property; or the service of a
notice of levy and/or of a writ of attachment or execution, or other
like process, against the assets of Borrower or any of its
Subsidiaries; or the entry of a judgment against Borrower or any of its
Subsidiaries. Notwithstanding the foregoing, there shall not be an
Event of Default upon the filing of notices of judgment lien, the
recording of abstracts of judgment, or the entries of judgment against
Borrower or any of its Subsidiaries if the aggregate amount of all such
judgments not covered by insurance is less than $1,000,000 and such
judgments are released within sixty (60) days of the filing, recording
or entry of such judgment.
(f) Borrower or any of its Subsidiaries shall become
insolvent, or shall suffer or consent to or apply for the appointment
of a receiver, trustee, custodian or liquidator of itself or
14
any of its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of
creditors; Borrower or any of its Subsidiaries shall file a voluntary
petition in bankruptcy, or seeking reorganization, in order to effect a
plan or other arrangement with creditors or any other relief under the
Bankruptcy Reform Act, Title 11 of the United States Code, as amended
or recodified from time to time ("BANKRUPTCY CODE"), or under any state
or federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the
Bankruptcy Code or any other applicable state or federal law relating
to bankruptcy, reorganization or other relief for debtors is filed or
commenced against Borrower or any of its Subsidiaries, or Borrower or
any of its Subsidiaries shall file an answer admitting the jurisdiction
of the court and the material allegations of any involuntary petition;
or Borrower or any of its Subsidiaries shall be adjudicated a bankrupt,
or an order for relief shall be entered against Borrower or any of its
Subsidiaries by any court of competent jurisdiction under the
Bankruptcy Code or any other applicable state or federal law relating
to bankruptcy, reorganization or other relief for debtors.
(g) The dissolution or liquidation of Borrower or any
Subsidiary, or any of its directors or stockholders respectively, shall
take action seeking to effect the dissolution or liquidation of
Borrower or any Subsidiary.
(h) Any IFC Event of Default.
SECTION 6.02 REMEDIES. Upon (a) the occurrence of any Event of
Default under SUBSECTION 6.01(F) above, all indebtedness including principal and
accrued and unpaid interest outstanding under each of the Loan Documents shall
become automatically due and payable and (b) upon the occurrence of any other
Event of Default, all indebtedness including all principal and accrued and
unpaid interest outstanding under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Lender's option and without notice
become immediately due and payable; in each case without presentment, demand, or
any notices of any kind, including without limitation notice of nonperformance,
notice of protest, protest, notice of dishonor, notice of intention to
accelerate or notice of acceleration, all of which are hereby expressly waived
by Borrower. Upon acceleration of the indebtedness, Lender shall have all
rights, powers and remedies available under each of the Loan Documents, and
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Lender may be exercised at any time by Lender and from time to
time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.
ARTICLE VII.
------------
MISCELLANEOUS
-------------
SECTION 7.01 NO WAIVER. No delay, failure or discontinuance of
Lender in exercising any right, power or remedy under any of the Loan Documents
shall affect or operate as a waiver of such right, power or remedy; nor shall
any single or partial exercise of any such right, power or remedy preclude,
waive or otherwise affect any other or further exercise thereof or the exercise
of any other right, power or remedy. Any waiver, permit, consent or approval of
any kind by Lender of any breach of or default under any of the Loan Documents
must be in writing and shall be effective only to the extent set forth in such
writing.
15
SECTION 7.02 NOTICES. All notices, requests and demands which any
party is required or may desire to give to any other party under any provision
of this Agreement must be in writing delivered to each party at the following
address:
BORROWER: VAALCO ENERGY, INC.
0000 Xxxx Xxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Attn: Xxxxxxx Xxxxxxxxx
LENDER: 1818 FUND II, L.P.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxx Xxxxx
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.03 COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall
pay to Lender immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys' fees (to include
outside counsel fees), expended or incurred by Lender in connection with (a) the
negotiation and preparation of this Agreement and the other Loan Documents,
Lender's continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Lender's
rights and/or the collection of any amounts which become due to Lender under any
of the Loan Documents, and (c) the prosecution or defense of any action in any
way related to any of the Loan Documents, including without limitation, any
action for declaratory relief, whether incurred at the trial or appellate level,
in an arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by
Lender or any other person) relating to Borrower or any other person or entity.
SECTION 7.04 ASSIGNMENTS.
(a) Borrower may not assign its rights or obligations
hereunder or under the Note without the prior consent of Lender.
(b) Lender may assign to one or more assignees all or a
portion of its rights and obligations under this Agreement pursuant to
an Assignment Agreement substantially in the form of EXHIBIT D (an
"ASSIGNMENT"); PROVIDED, however, that any such assignment shall be in
the amount of at least $1,000,000 and PROVIDED FURTHER, at no time
shall there be more than four (4) Lenders. Any such assignment will
become effective upon the execution and delivery to Borrower and all
Lenders then party to this Agreement ("EXISTING LENDERS") of the
Assignment and the consent of Existing Lenders. Upon receipt of such
executed Assignment, Borrower, will, at its own expense, execute and
deliver new Notes to the assignor and/or assignee, as appropriate, in
accordance with their respective interests as they appear. Borrower and
Lenders further agree to enter into such modifications, assignments and
amendments to the Loan Documents as necessary to provide for multiple
Lenders, including, for example, designation of a collateral agent and
administrative agent for the Lenders. Upon the effectiveness of any
assignment
16
pursuant to this SECTION 7.04(B), the assignee will become a "Lender"
for all purposes of this Agreement and obligated, subject to the terms
of this Agreement and the Assignment, to fund up to the full amount of
its assigned percentage of the Commitment (the "PERCENTAGE SHARE OF THE
COMMITMENT"). The assignor shall be relieved of its obligations
hereunder to the extent of such assignment (and if the assigning Lender
no longer holds any rights or obligations under this Agreement, such
assigning Lender shall cease to be a "Lender" hereunder). Existing
Lenders will prepare a new SCHEDULE II giving effect to all such
assignments effected restating each Lenders' Percentage Share of the
Commitment, its pro-rata share of the Commitment and assigned share of
Loans then outstanding, and will promptly provide the same to Borrower
and each Lender.
(c) Existing Lenders may furnish any information
concerning Borrower in their possession from time to time to assignees
(including prospective assignees); PROVIDED that, such persons agree to
maintain such information confidential.
(d) Notwithstanding anything in this SECTION 7.04 to the
contrary, any Lender may assign and pledge its Note to any Federal
Reserve Bank or any Affiliate of such Lender for so long as such entity
remains an Affiliate of Lender. No such assignment and/or pledge shall
release the assigning and/or pledging Lender from its obligations
hereunder.
(e) Notwithstanding any other provisions of this SECTION
7.04, no transfer or assignment of the interests or obligations of any
Lender or any grant of participations therein shall be permitted if
such transfer, assignment or grant would require Borrower to file a
registration statement with the SEC or to qualify the Loans under the
"BLUE SKY" laws of any state.
SECTION 7.05 AMENDMENT. This Agreement may be amended or modified
only in writing signed by each party hereto.
SECTION 7.06 NO THIRD PARTY BENEFICIARIES. This Agreement is made
and entered into for the sole protection and benefit of the parties hereto and
their respective permitted successors and assigns, and no other person or entity
shall be a third party beneficiary of, or have any direct or indirect cause of
action or claim in connection with, this Agreement or any other of the Loan
Documents to which it is not a party.
SECTION 7.07 TIME. Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.
SECTION 7.08 SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered shall be
deemed to be an original, and all of which when taken together shall constitute
one and the same Agreement. Any signed counterpart shall be deemed delivered by
the party signing it if sent to the other parties hereto by electronic facsimile
transmission.
SECTION 7.10 FURTHER ASSURANCES. Borrower agrees, at its own
expense, to execute, acknowledge, deliver and cause to be duly filed all such
further instruments and documents and take all such actions as the Lender may
from time to time reasonably request to preserve, protect and perfect the
17
security interests granted pursuant to the Security Documents and the rights and
remedies created hereby, including the payment of any fees and taxes required in
connection with the execution and delivery of this Agreement, the granting of
the security interests granted pursuant to the Security Documents and the filing
of any financing statements (including fixture filings) or other documents in
connection herewith or therewith.
SECTION 7.11 GOVERNING LAW.
(a) This Agreement is governed by and shall be construed
in accordance with the laws of the State of New York and applicable
U.S. federal law.
(b) For the exclusive benefit of Lender, Borrower
irrevocably agrees that any legal action, suit or proceeding arising
out of or relating to this Agreement or any other Loan Document to
which Borrower is a party may be brought by Lender, in its discretion,
in the courts of the State of New York, the United States for the
Southern District of New York, or England. By the execution of this
Agreement, Borrower irrevocably submits to the non-exclusive
jurisdiction of such courts in any such action, suit or proceeding.
Final judgment against Borrower in any such action, suit or proceeding
shall be conclusive and may be enforced in any other jurisdiction,
including Gabon, London, New York and Delaware, by suit on the
judgment, a certified or exemplified copy of which shall be conclusive
evidence of the judgment, or in any other manner provided by law.
(c) Nothing in this Agreement shall affect the right of
Lender to commence legal proceedings or otherwise xxx Borrower in
Gabon, London, New York, Delaware or any other appropriate
jurisdiction, or concurrently in more than one jurisdiction, or to
serve process, pleadings and other papers upon Borrower in any manner
authorized by the laws of any such jurisdiction.
(d) Borrower hereby irrevocably designates, appoints and
empowers the Chief Executive and the Head of the Litigation Group of
Bird & Bird located at 00 Xxxxxx Xxxxx, Xxxxxx XX0X 0XX (reference
VAAEN.0001), as its authorized agent solely to receive for and on its
behalf service of the writ of summons or other legal process in any
action, suit or proceeding Lender may bring in the courts of England
and CT Corp., as its authorized agent solely to receive for and on its
behalf service of the writ of summons or other legal process in any
action, suit or proceeding Lender may bring in the courts of the
Southern District of New York.
(e) As long as this Agreement or any other Loan Document
to which Borrower is a party remains in force, Borrower shall maintain
a duly appointed and authorized agent to receive for and on its behalf
service of the writ of summons or other legal process in any action,
suit or proceeding brought by Lender in the courts of England or in the
Southern District of New York with respect to this Agreement or such
other Loan Documents. Borrower shall keep Lender advised of the
identity and location of such agent.
(f) Borrower irrevocably waives: (i) any objection which
it may have now or in the future to the laying of the venue of any
action, suit or proceeding in any court referred to in this SECTION
7.11; and (ii) any claim that any such action, suit or proceeding has
been brought in an inconvenient forum.
(g) To the extent that Borrower may be entitled in any
jurisdiction to claim for itself or its assets immunity with respect to
its obligations under this Agreement or any other Loan
18
Document to which it is a party from any suit, execution, attachment
(whether provisional or final, in aid of execution, before judgment or
otherwise) or other legal process or to the extent that in any
jurisdiction that immunity (whether or not claimed), may be attributed
to it or its assets, Borrower irrevocably agrees not to claim and
irrevocably waives such immunity to the fullest extent now or in the
future permitted by the laws of such jurisdiction.
(h) Borrower also consents generally with respect to any
proceedings arising out of or in connection with this Agreement or any
other Loan Document to which it is a party to the giving of any relief
or the issue of any process in connection with such proceedings
including, without limitation, the making, enforcement or execution
against any property whatsoever (irrespective of its use or intended
use) of any order or judgment which may be made or given in such
proceedings.
(i) To the extent that Borrower may, in any suit, action
or proceeding brought in any of the courts referred to in SUBSECTION
7.11(B) or a court of Gabon, London, New York, Delaware or elsewhere
arising out of or in connection with this Agreement or any other Loan
Document to which Borrower is a party, be entitled to the benefit of
any provision of law requiring Lender in such suit, action or
proceeding to post security for the costs of Borrower, or to post a
bond or to take similar action, Borrower hereby irrevocably waives such
benefit, in each case to the fullest extent now or in the future
permitted under the laws of Gabon, London, New York, Delaware or, as
the case may be, the jurisdiction in which such court is located.
(j) Borrower also irrevocably consents, if for any reason
Borrower's authorized agent for service of process of summons,
complaint and other legal process in any action, suit or proceeding is
not present in New York or England, to service of such papers being
made out of those courts by mailing copies of the papers by registered
air mail, postage prepaid, to Borrower at its address specified
pursuant to SECTION 7.02. In such a case, Lender shall also send by
facsimile, or have sent by facsimile, a copy of the papers to Borrower.
SECTION 7.12 SAVINGS CLAUSE. It is the intention of the parties to
comply strictly with applicable usury laws. Accordingly, notwithstanding any
provision to the contrary in the Loan Documents, in no event shall any Loan
Documents require the payment or permit the payment, taking, reserving,
receiving, collection or charging of any sums constituting interest under
applicable laws that exceed the maximum amount permitted by such laws, as the
same may be amended or modified from time to time (the "MAXIMUM RATE"). If any
such excess interest is called for, contracted for, charged, taken, reserved or
received in connection with any Loan Documents, or in any communication by or
any other person to Borrower or any other person, or in the event that all or
part of the principal or interest hereof or thereof shall be prepaid or
accelerated, so that under any of such circumstances or under any other
circumstance whatsoever the amount of interest contracted for, charged, taken,
reserved or received on the amount of principal actually outstanding from time
to time under the Loan Documents shall exceed the Maximum Rate, then in such
event it is agreed that: (i) the provisions of this paragraph shall govern and
control; (ii) neither Borrower nor any other person or entity now or hereafter
liable for the payment of any Loan Documents shall be obligated to pay the
amount of such interest to the extent it is in excess of the Maximum Rate; (iii)
any such excess interest which is or has been received by Lender,
notwithstanding this paragraph, shall be credited against the then unpaid
principal balance hereof or thereof, or if any of the Loan Documents has been or
would be paid in full by such credit, refunded to Borrower; and (iv) the
provisions of each of the Loan Documents, and any other communication to
Borrower, shall immediately be deemed reformed and such excess interest reduced,
without the necessity of executing any other document, to the Maximum Rate. The
right to accelerate the maturity of the Loan Documents does not include the
right to accelerate, collect or charge unearned interest, but only such
19
interest that has otherwise accrued as of the date of acceleration. Without
limiting the foregoing, all calculations of the rate of interest contracted for,
charged, taken, reserved or received in connection with any of the Loan
Documents which are made for the purpose of determining whether such rate
exceeds the Maximum Rate shall be made to the extent permitted by applicable
laws by amortizing, prorating, allocating and spreading during the period of the
full term of such Loan Documents, including all prior and subsequent renewals
and extensions hereof or thereof, all interest at any time contracted for,
charged, taken, reserved or received by Lender. The terms of this paragraph
shall be deemed to be incorporated into each of the other Loan Documents.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Lender hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Lender's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
SECTION 7.13 RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the
occurrence of an Event of Default, (a) Borrower hereby authorizes Lender, acting
on Lender's behalf, at any time and from time to time, without notice, which is
hereby expressly waived by Borrower, and whether or not Lender shall have
declared any credit subject hereto to be due and payable in accordance with the
terms hereof, to set off against, and to appropriate and apply to the payment
of, Borrower's obligations and liabilities under the Loan Documents (whether
matured or unmatured, fixed or contingent, liquidated or unliquidated), any and
all amounts owing by Lender to Borrower (whether payable in U.S. dollars or any
other currency, whether matured or unmatured, and in the case of deposits,
whether general or special (except trust and escrow accounts), time or demand
and however evidenced), and (b) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities. Borrower hereby grants to Lender a security interest in all
deposits and accounts maintained with Lender and with any financial institution
to secure the payment of all obligations and liabilities of Borrower to Lender
under the Loan Documents.
SECTION 7.14 BUSINESS PURPOSE. Borrower represents and warrants
that each credit subject hereto is for a business, commercial, investment,
agricultural or other similar purpose and not primarily for a personal, family
or household use.
SECTION 7.15 INDEMNIFICATION. Borrower agrees to indemnify Lender,
each assignee or participant hereunder, each of their affiliates and each of
their officers, directors, partners, employees, representatives, agents,
attorneys, accountants and experts ("INDEMNIFIED PARTIES") from, hold each of
them harmless against and promptly upon demand pay or reimburse each of them
for, the Indemnity Matters which may be incurred by or asserted against or
involve any of them (whether or not any of them is designated a party thereto)
as a result of, arising out of or in any way related to (i) any actual or
proposed use by Borrower of the proceeds of any of the Loans, (ii) the
execution, delivery and performance of the Loan Documents and amendments to such
documents, (iii) the operations of the business of Borrower, (iv) the failure of
Borrower to comply with the terms of any Loan Documents or this Agreement and
amendments to such documents, or with any applicable law, (v) any inaccuracy of
any representation or any breach of any warranty of Borrower set forth in any of
the Loan Documents and amendments to such documents, (vi) any assertion that any
Indemnified Party was not entitled to receive the proceeds received pursuant to
the Loan Documents and amendments to such documents, (vii) the administration of
this Agreement, (viii) the custody or preservation of, or the sale of,
collection from or other realization upon any of the collateral, (ix) the
exercise, enforcement or protection of any of the rights of the Lender
hereunder, or (x) any other aspect of the Loan Documents and amendments to such
documents , including, without limitation, the reasonable fees and disbursements
of counsel and all other expenses incurred in connection with investigating,
defending or preparing to defend any such action,
20
suit, proceeding (including any investigations, litigation or inquiries) or
claim and including all Indemnity Matters arising by reason of the ordinary
negligence of any Indemnified Party, but excluding all Indemnity Matters arising
solely by reason of claims between Lender or any assignee or participant, or any
such party's shareholders against Lender or any assignee or participant or by
reason of the gross negligence or willful misconduct on the part of the
Indemnified Party.
SECTION 7.16 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO
A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF
LENDER IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT THEREOF.
NOTICE: THIS DOCUMENT AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS
CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES RELATING TO THE INDEBTEDNESS.
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
VAALCO ENERGY, INC.
By: /s/ W. Xxxxxxx Xxxxxxxxx
---------------------------------------
Name: W.XXXXXXX XXXXXXXXX
Title: PRESIDENT
SIGNATURE PAGE S-1 TO SUBORDINATED CREDIT AGREEMENT
S-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
1818 FUND II, L.P.
By: Xxxxx Brothers Xxxxxxxx & Co.,
its general partner
By: /s/ Xxxxxx Xxxxx
-----------------------------------
Name: Xxxxxx Xxxxx
Title: Managing Director
SIGNATURE PAGE S-2 TO SUBORDINATED CREDIT AGREEMENT
S-2
APPENDIX A
DEFINED TERMS
-------------
GENERAL DEFINITIONS. Wherever used in this Agreement, the following
terms have the meanings specified or referred to below:
"ADDITIONAL WARRANT" has the meaning specified in SUBSECTION 1.02(C).
"AFFILIATE" means, in respect of any Person, any other Person directly
or indirectly Controlling, Controlled by or under common Control with,
such Person;
"AGREEMENT" has the meaning set forth in the introductory paragraph
hereto.
"ASSIGNMENT" has the meaning specified in SUBSECTION 7.04(B).
"AUTHORITY" means any national, supranational, regional or local
government or governmental, administrative, fiscal, judicial, or
government-owned body, department, commission, authority, tribunal,
agency or entity, or central bank (or any entity, whether or not
government owned and howsoever constituted or called, that exercises
the functions of a central bank).
"BANKRUPTCY CODE" has the meaning specified in SUBSECTION 6.01(F).
"BUSINESS DAY" means a day when banks are open for business in New
York, New York.
"BORROWER" has the meaning set forth in the introductory paragraph
hereto.
"COMMON STOCK" has the meaning specified in SUBSECTION 2.02(A).
"CONTROL" means the power to direct the management or policies of a
Person, directly or indirectly, whether through the ownership of shares
or other securities, by contract or otherwise, provided that the direct
or indirect ownership of fifty-one per cent (51%) or more of the voting
share capital of a Person is deemed to constitute control of that
Person, and "Controlling" and "Controlled" have corresponding meanings;
"CURRENT LIABILITIES" means, with respect to Borrower and/or its
Subsidiaries, as applicable, the aggregate of all liabilities of
Borrower falling due on demand or within one year (including the
portion of Long-term Debt falling due within one year);
"DEBT" means, with respect to Borrower and/or its Subsidiaries, as
applicable, the aggregate of all obligations (whether actual or
contingent) of such Person, to pay or repay money including, without
limitation: (i) all Indebtedness for Borrowed Money; (ii) the aggregate
amount then outstanding of all liabilities of any party to the extent
such Person guarantees them or otherwise directly or indirectly
obligates itself to pay them; (iii) all liabilities of such Person
(actual or contingent) under any conditional sale or a transfer with
recourse or obligation to repurchase, including, without limitation, by
way of discount or factoring of book debts or receivables; and (iv) all
liabilities of such Person (actual or contingent) under its Articles of
Incorporation or Bylaws, any resolution of its shareholders, or any
agreement or other document binding on such Person to redeem any of its
shares.
APPENDIX A-1
"DERIVATIVE TRANSACTION" means any swap agreement, cap agreement,
collar agreement, futures contract, forward contract or similar
arrangement with respect to interest rates, currencies or commodity
prices.
"DISBURSEMENT" has the meaning ascribed to such term in the IFC Loan
Agreement.
"DOLLARS" and "$" means the lawful currency of the United States of
America.
"ERISA" has the meaning specified in SECTION 2.10.
"ESCROW ACCOUNT BANK" has the meaning set forth in the recitals hereto.
"ETAME FIELD" means the area 45 kilometers offshore of the southern
coast of Gabon identified as the "Delimited Area" (ZONE DELIMITEE) in
the PSC, which contains hydrocarbon accumulations, in relation to which
the EEA has been granted by GOG.
"EVENT OF DEFAULT" has the meaning specified in SECTION 6.01.
"EEA" means the Exclusive Exploitation Authorization granted to
Borrower with respect to the Etame Field through an edict by the
Minister in charge of Hydrocarbons of Gabon on July 17, 2001, for a
term of at least ten (10) years.
"EXISTING LENDERS" has the meaning specified in SUBSECTION 7.04(B).
"GABON" means the Republic of Gabon.
"GOG" means the government of the Republic of Gabon.
"IFC" has the meaning set forth in the recitals hereto.
"IFC INDEBTEDNESS" has the meaning specified in SECTION 1.05.
"IFC LOAN AGREEMENT" has the meaning set forth in the recitals hereto.
"IFC EVENTS OF DEFAULT" has the meaning specified in SUBSECTION
3.02(B).
"IFC POTENTIAL EVENTS OF DEFAULT" has the meaning specified in
SUBSECTION 3.02(B).
"IFC LOAN DOCUMENTS" has the meaning specified in SUBSECTION 3.01(C).
"INDEBTEDNESS FOR BORROWED MONEY" means, with respect to Borrower
and/or its Subsidiaries, as applicable, all obligations of such Person
to repay money including, without limitation, with respect to: (i)
borrowed money; (ii) the outstanding principal amount of any bonds,
debentures, notes, loan stock, commercial paper, acceptance credits,
bills or promissory notes drawn, accepted, endorsed or issued by such
Person; (iii) any credit to such Person from a supplier of goods or
services under any installment purchase or other similar arrangement
with respect to goods or services (except trade accounts that are
payable in the ordinary course of business and included in Current
Liabilities); (iv) non-contingent obligations of such Person to
reimburse any other person or entity with respect to amounts paid by
such Person to that person or entity under a letter of credit or
similar instrument (excluding any letter of credit or similar
instrument issued for the benefit of such Person with respect to trade
accounts that are payable in the ordinary course of business and
included in Current Liabilities); (v) amounts raised under any other
transaction
APPENDIX A-2
having the financial effect of a borrowing and which would be
classified as a borrowing (and not as an off-balance sheet financing)
under U.S. generally accepted accounting principles applied on a
consistent basis including, without limitation, under leases or similar
arrangements entered into primarily as a means of financing the
acquisition of the asset leased; (vi) the amount of such Person's
obligations, as the case may be, pursuant to Derivative Transactions
which consist of swap, collar and cap agreements entered into in
connection with other Debt of such Person or VGEI, respectively,
provided that for the avoidance of double counting and for so long as
any such swap, collar or cap agreement is in effect, that Debt will be
included in Indebtedness for Borrowed Money pursuant to the terms of
the relevant Derivative Transaction and not the terms of the agreement
providing for that Debt when it was incurred; and (vii) any premium
payable on a mandatory redemption or replacement of any of the
foregoing obligations.
"INDEMNIFIED PARTIES" has the meaning specified in SECTION 7.15.
"INDEMNITY MATTERS" means any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims,
demands and causes of action made or threatened against a person and,
in connection therewith, all losses, liabilities, damages (including,
without limitation, consequential damages) or reasonable costs and
expenses of any kind or nature whatsoever incurred by such person
(including, without limitation, expenses and fees of counsel and of any
experts and agents) whether caused by the sole or concurrent negligence
of such person seeking indemnification.
"LENDER" has the meaning set forth in the introductory paragraph
hereto.
"LOAN" has the meaning specified in SUBSECTION 1.01(A).
"LOAN DOCUMENTS" has the meaning specified in SUBSECTION 2.03(A).
"LONG TERM DEBT" means, with respect to Borrower, that part of the Debt
of Borrower the final maturity of which, by its terms or the terms of
any agreement relating to it, falls due more than one year after the
date of its incurrence.
"LONG-TERM DEBT TO EQUITY RATIO" means, at any calculation date, with
respect to Borrower, the result obtained by dividing Borrower's
Long-term Debt by Borrower's Shareholder Equity.
"MAXIMUM RATE" has the meaning specified in SECTION 7.12.
"NOTE" has the meaning specified in SUBSECTION 1.01(A).
"OBLIGATIONS" means, collectively, (a) the due and punctual payment by
the Borrower of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding) on the Loans, when and
as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, and (ii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Borrower to
the Lender or any other Person under the Loan Documents and (b) the due
and punctual payment and performance of all covenants, agreements,
obligations and liabilities of the Borrower, monetary or otherwise,
under or pursuant to the Loan Documents.
APPENDIX A-3
"PERCENTAGE SHARE OF THE COMMITMENT" has the meaning specified in
SUBSECTION 7.04(B).
"PERSON" means any natural person, corporation, partnership, company,
or other entity, whether acting in an individual, fiduciary or other
capacity.
"PHASE ONE COMPLETION DATE" has the meaning ascribed to such term in
the IFC Loan Agreement as in effect on the date hereof.
"PLAN" has the meaning specified in SECTION 2.10.
"PREFERRED STOCK" has the meaning specified in SUBSECTION 2.02(A).
"PSC" means the Exploration and Production Sharing Contract dated as of
July 7, 1995, between the Republic of Gabon, represented by the
Minister of Mines, Energy and Petroleum, and Borrower and PanAfrican
Gabon (under its former name VAALCO Energy (Gabon), Inc.), collectively
as the Contractor, as amended October __, 2001.
"PROJECT" means that certain project consisting of the development of
the Etame Field in the Etame Marin block, 45 km offshore of the
southern coast of Gabon and involving the re-entering and completing of
three existing xxxxx, the drilling and completing of up to three
additional xxxxx and installing of flowlines to connect the xxxxx to a
registered floating production storage and offloading tanker facility
and its mooring system capable of processing up to 30,000 barrels per
day and storing up to 1.1 million barrels of oil.
"SECURITY DOCUMENTS" has the meaning specified in SECTION 1.04.
"SERIES A PREFERRED STOCK" has the meaning specified in SUBSECTION
2.02(A).
"SHAREHOLDERS' EQUITY" means, with respect to Borrower, the aggregate
of: (i) the amount paid up on the share capital of Borrower; and (ii)
the amount standing to the credit of the reserves of Borrower
(including, without limitation, any share premium account, capital
redemption reserve funds and any credit balance on the accumulated
profit and loss account); after deducting from that aggregate (A) any
debit balance on the profit and loss account or impairment of the
issued share capital of Borrower (except to the extent that deduction
with respect to that debit balance or impairment has already been
made), (B) amounts set aside for dividends or taxation (including
deferred taxation), and (C) amounts attributable to capitalized items
such as goodwill, trademarks, deferred charges, licenses, patents and
other intangible assets.
"SPONSOR ESCROW ACCOUNT" has the meaning set forth in the recitals
hereto.
"SPONSOR ESCROW AGREEMENT" has the meaning set forth in the recitals
hereto.
"SUBORDINATION AGREEMENT" has the meaning specified in SECTION 1.05.
"SUBSIDIARY" means (a) any corporation in which Borrower, directly or
indirectly, owns more than fifty percent (50%) of the issued and
outstanding securities having voting power to elect a majority of the
directors of such corporation; and (b) any partnership, association,
joint venture, or other entity in which Borrower, directly or
indirectly, has more than a fifty percent (50%) equity interest at the
time.
APPENDIX A-4
"TAXES" means any present or future taxes, withholding obligations,
duties and other charges of whatever nature levied by any Authority.
"TRANSACTION DOCUMENTS" has the meaning ascribed to such term in the
IFC Loan Agreement.
"VGEI COMMON STOCK" has the meaning specified in SUBSECTION 2.02(B).
"VGEI" has the meaning set forth in the recitals hereto.
"WARRANTS" has the meaning specified in SUBSECTION 1.02(B).
APPENDIX A-5
SCHEDULE I
----------
Unless otherwise stated, all documents are of even date herewith.
1. "Subordination Agreement" by and between Borrower, IFC and Lender.
2. "Subordinated Pledge of Shares Agreement" by and between Borrower and
Lender.
3. "Charge Over Deposit Agreement" by and between Borrower and Lender and
any notices required thereby or delivered thereto.
Schedule I
SCHEDULE II
-----------
1. Lender's Commitments
Lender: Percentage Share Commitment Amount
of the Commitment
1818 Fund II, L.P. 100% $10,000,000
SCHEDULE III
Page 1 of 2
SCHEDULE III
------------
FORM OF BORROWER'S CERTIFICATE
------------------------------
[Borrower's Letterhead]
[Date]
1818 Fund II, L.P.
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxx
Gentlemen:
1. Please refer to the Subordinated Credit Agreement (the "Loan
Agreement") dated ___________, ___, between VAALCO Energy, Inc. (the "Borrower")
and 1818 Fund II, L.P. ("Lender"). Terms defined in the Loan Agreement have
their defined meanings whenever used in this certificate.
2. The Borrower irrevocably requests the disbursement on ____________,
____ (or as soon as practicable thereafter) of the amount of ____________
(____________) in accordance with the provisions of Section 3.03 of the Loan
Agreement. You are requested to pay such amount to the Escrow Account Bank,
Account No. ____________ at [Name and Address of Bank] in London, England.
3. Borrower certifies as follows:
(a) no Event of Default has occurred and is continuing;
(b) no event of default pursuant to Section 7.02 of the IFC Loan
Agreement and no event or circumstance which would, with notice, lapse of time,
the making of a determination or any combination thereof, become an event of
default pursuant to Section 7.02 of the IFC Loan Agreement has occurred and is
continuing;
(c) the proceeds of the Loan are at the date of this certificate
needed by the Borrower to fund the Sponsor Escrow Account as a condition
precedent to a funding in the same amount to VGEI under the IFC Loan Agreement
to be made within three (3) Business Days after this Loan for the purpose of
financing costs associated with the Project;
(d) since the date of the Loan Agreement nothing has occurred
which (i) has and is continuing to have, or (ii) can reasonably be expected to
have a material adverse effect on Borrower and its Subsidiaries taken as a
whole;
(e) since December 31, 2001, the Borrower and its Subsidiaries
have not incurred any material loss or liability (except such liabilities as may
be incurred by the Borrower or any of its Subsidiaries in accordance with
Article V);
SCHEDULE III
Page 2 of 2
(f) the representations and warranties made in Article II are true
and correct in all material respects (except for any such representations and
warranties which are qualified by their terms by a reference to materiality or
material adverse affect, which representation as so qualified shall be true and
correct in all respects) on and as of such date with the same effect as if those
representations and warranties had been made on and as of such date;
(g) after giving effect to the Loan, neither the Borrower nor any
of its Subsidiaries will be in violation of:
(i) its articles of incorporation and bylaws and/or such
other constitutive documents, howsoever called;
(ii) any provision contained in any document to which
Borrower or any of its Subsidiaries is a party
(including the Loan Agreement) or by which Borrower
or any of its Subsidiaries is bound; or
(iii) any law, rule, regulation, authorization or agreement
or other document binding on the Borrower or any of
its Subsidiaries directly or indirectly, limiting or
otherwise restricting the Borrower's or any of its
Subsidiaries' borrowing power or authority or its
ability to borrow;
(h) on and as of the date of this certificate, Borrower's
Long-term Debt to Equity Ratio does not exceed 70:30; and
(i) the undisbursed portion of funds available to VGEI under the
IFC Loan Agreement are sufficient to finance VGEI's share of costs projected to
be incurred up through the Phase One Completion Date.
The above certifications are effective as of the date hereof and shall
continue to be effective as of the date of the Loan. If any of these
certifications is no longer valid as of or prior to the date of the Loan, the
Borrower undertakes to immediately notify Lender.
Yours truly,
VAALCO ENERGY, INC.
By ________________________
Authorized Representative
EXHIBIT A
NOTE
----
$10,000,000.00 June 10, 2002
FOR VALUE RECEIVED, the undersigned VAALCO ENERGY, INC., a Delaware
corporation ("BORROWER"), promises to pay to the order of 1818 FUND II, L.P.,
Delaware limited partnership or its permitted assigns ("LENDER") at its office
at 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, or at such other place as the
holder hereof may designate, in lawful money of the United States of America and
in immediately available funds, the principal sum of Ten Million Dollars
($10,000,000.00), or such lesser amount advanced by Lender to Borrower under the
terms of the Credit Agreement (as defined below), and to pay interest thereon as
set forth herein. This Note is issued in connection with that certain
Subordinated Credit Agreement between Lender and Borrower of even date herewith
(the "CREDIT Agreement"), and is secured as provided therein by the Security
Documents. All capitalized terms not otherwise defined herein are defined in the
Credit Agreement.
PROCEDURE FOR BORROWINGS:
(a) Each advance of principal hereunder shall be made upon
Borrower's irrevocable written notice delivered to Lender (each a "BORROWING
NOTICE"); which notice must be received by Lender prior to 9:00 a.m. (Central
time) ten (10) days prior to the date of the requested advance except for the
initial advance in the amount of $___________ which shall be made on the date
hereof.
(b) Each Borrowing Notice shall specify (i) the amount of
principal to be advanced, which shall be in an aggregate minimum amount of
$2,000,000 or any multiple integrals of $100,000 in excess thereof; and (ii) the
requested date principal is to be advanced which shall be a Business Day. Any
amounts repaid under this Note may not be reborrowed.
(c) Each advance or repayment shall be recorded by Lender and
endorsed on the grid attached hereto, which is part of this Note.
INTEREST:
Borrower agrees to pay interest at Lender's address listed above on the
unpaid principal outstanding under this Note and, to the extent permitted by
law, the accrued interest in respect hereof from time to time from the date
hereof until payment in full of the principal amount hereof and accrued interest
hereon, at a rate equal to (i) ten percent (10%) per annum, compounded annually,
from the period beginning on the date hereof and ending on the earlier of nine
(9) months from the First Sale of Production (as defined in the Senior Loan
Documents as in effect on the date hereof) and eighteen (18) months following
the date hereof and (ii) fourteen percent (14%) per annum, compounded annually
for the period beginning on the date next succeeding the period referred to in
clause (i) and ending when the full principal amount hereof and accrued interest
hereon have been paid in full. Interest shall be computed on the basis of a
360-day year, actual days elapsed, unless such calculation would result in a
usurious rate, in which case interest shall be computed on the basis of a
365/366-day year, as the case may be, actual days elapsed. Interest shall be
payable in a single payment on the "MATURITY DATE" as hereinbelow defined.
Exhibit A-1
Notwithstanding the foregoing provisions of this Section, but subject
to applicable law, any overdue principal of and overdue interest on this Note
shall bear interest, payable on demand in immediately available funds, for each
day from the date payment of principal or interest was due to the date of actual
payment, at the then current rate of interest plus 2.0% per annum, and, upon and
during the continuance of an Event of Default, this Note shall bear interest,
from the date of the occurrence of such Event of Default until such Event of
Default is cured or waived, payable on demand in immediately available funds, at
the then current rate of interest plus 2.0% per annum.
REPAYMENT AND PREPAYMENT:
(a) REPAYMENT. To the extent not sooner paid, the unpaid principal
balance of this Note, together with all accrued but unpaid interest and
outstanding expenses hereunder and under the Loan Documents shall be due and
payable on the earliest of (i) the Phase One Completion Date, (ii) March 31,
2005; and (iii) the date that all principal and accrued and unpaid interest
shall become due and payable pursuant to Article VI of the Credit Agreement (the
"MATURITY DATE").
(b) APPLICATION OF PAYMENTS. Each payment made on this Note shall
be credited first, to any interest then due and second, to the outstanding
principal balance hereof.
(c) PREPAYMENT. Borrower may prepay this Note plus accrued and
unpaid interest hereon provided that all terms in the Credit Agreement and
herein are complied with, at any time upon one day prior notice and in the
minimum amount of One Hundred Thousand Dollars ($100,000); PROVIDED, HOWEVER,
that if the outstanding principal balance of such portion of this Note plus
accrued and unpaid interest hereon is less than said amount, the minimum
prepayment amount shall be the entire outstanding principal hereof.
(d) MANDATORY PREPAYMENT. In the event that IFC has not made a
Disbursement pursuant to the IFC Loan Agreement in an amount equal to or greater
than the Loan made hereunder within three (3) Business Days of the funding of
such Loan pursuant to Section 1.01(a) of the Credit Agreement, Borrower shall
immediately notify Lender and shall repay such loan plus interest accruing
thereon to Lender upon three Business Days written demand from Lender. Further,
Borrower shall prepay this Note in amounts equal to (i) any amounts released by
IFC under the Sponsor Escrow Account other than the amounts described under the
first sentence of this SUBSECTION (D), (ii) the net proceeds of any debt or
issuance of securities received by Borrower in excess of Ten Million Dollars
($10,000,000), and (iii) to the extent not prohibited under the IFC Loan
Agreement (as in effect on the date hereof), ninety percent (90%) of the Free
Cash Flow from the Project. For purposes of this SUBSECTION (D), "FREE CASH
FLOW" shall mean cash flow from the Project net of amounts required to maintain
the PSC in full force and effect. All amounts prepaid shall first be applied to
accrued and unpaid interest and then to outstanding principal.
EVENTS OF DEFAULT:
(a) EVENTS OF DEFAULT. The occurrence of an Event of Default under
the Credit Agreement shall constitute an "EVENT OF DEFAULT" under this Note.
(b) REMEDIES. Upon the occurrence of any Event of Default, Lender
shall be entitled to such remedies as set forth in the Credit Agreement.
Exhibit A-2
MISCELLANEOUS:
(a) GOVERNING LAW.
(i) This Note is governed by and shall be construed in
accordance with the laws of the State of New York and applicable
Federal Law.
(ii) For the exclusive benefit of Lender, Borrower
irrevocably agrees that any legal action, suit or proceeding arising
out of or relating to this Note or any other Loan Document to which
Borrower is a party may be brought by Lender, in its sole discretion,
in the courts of the State of New York, the United States for the
Southern District of New York, or England. By the execution of this
Note, Borrower irrevocably submits to the non-exclusive jurisdiction of
such courts in any such action, suit or proceeding. Final judgment
against Borrower in any such action, suit or proceeding shall be
conclusive and may be enforced in any other jurisdiction, including
Gabon, London, New York and Delaware, by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of
the judgment, or in any other manner provided by law.
(iii) Nothing in this Note shall affect the right of Lender
to commence legal proceedings or otherwise xxx Borrower in Gabon,
London, New York, Delaware or any other appropriate jurisdiction, or
concurrently in more than one jurisdiction, or to serve process,
pleadings and other papers upon Borrower in any manner authorized by
the laws of any such jurisdiction.
(iv) Borrower hereby irrevocably designates, appoints and
empowers the Chief Executive and the Head of the Litigation Group of
Bird & Bird located at 00 Xxxxxx Xxxxx, Xxxxxx XX0X 0XX (reference
VAAEN.0001), as its authorized agent solely to receive for and on its
behalf service of the writ of summons or other legal process in any
action, suit or proceeding Lender may bring in the courts of England
and CT Corp., as its authorized agent solely to receive for and on its
behalf service of the writ of summons or other legal process in any
action, suit or proceeding Lender may bring in the courts of the
Southern District of New York.
(v) As long as this Note or any other Loan Document to
which Borrower is a party remains in force, Borrower shall maintain a
duly appointed and authorized agent to receive for and on its behalf
service of the writ of summons or other legal process in any action,
suit or proceeding brought by Lender in the courts of England or in the
Southern District of New York with respect to this Note or such other
Loan Documents. Borrower shall keep Lender advised of the identity and
location of such agent.
(vi) Borrower irrevocably waives: (x) any objection which
it may have now or in the future to the laying of the venue of any
action, suit or proceeding in any court referred to in this Section;
and (y) any claim that any such action, suit or proceeding has been
brought in an inconvenient forum.
(vii) To the extent that Borrower may be entitled in any
jurisdiction to claim for itself or its assets immunity with respect to
its obligations under this Note or any other Loan Document to which it
is a party from any suit, execution, attachment (whether provisional or
final, in aid of execution, before judgment or otherwise) or other
legal process or to the extent that in any jurisdiction that immunity
(whether or not claimed), may be attributed to it or its assets,
Borrower
Exhibit A-3
irrevocably agrees not to claim and irrevocably waives such immunity to
the fullest extent now or in the future permitted by the laws of such
jurisdiction.
(viii) Borrower also consents generally with respect to any
proceedings arising out of or in connection with this Note or any other
Loan Document to which it is a party to the giving of any relief or the
issue of any process in connection with such proceedings including,
without limitation, the making, enforcement or execution against any
property whatsoever (irrespective of its use or intended use) of any
order or judgment which may be made or given in such proceedings.
(ix) To the extent that Borrower may, in any suit, action
or proceeding brought in any of the courts referred to in Subsection
(ii) or a court of Gabon, London, New York, Delaware or elsewhere
arising out of or in connection with this Note or any other Loan
Document to which Borrower is a party, be entitled to the benefit of
any provision of law requiring Lender in such suit, action or
proceeding to post security for the costs of Borrower, or to post a
bond or to take similar action, Borrower hereby irrevocably waives such
benefit, in each case to the fullest extent now or in the future
permitted under the laws of Gabon, London, New York, Delaware or, as
the case may be, the jurisdiction in which such court is located.
(x) Borrower also irrevocably consents, if for any reason
Borrower's authorized agent for service of process of summons,
complaint and other legal process in any action, suit or proceeding is
not present in New York or England, to service of such papers being
made out of those courts by mailing copies of the papers by registered
air mail, postage prepaid, to Borrower at its address specified
pursuant to Section 7.02 of the Credit Agreement. In such a case,
Lender shall also send by facsimile, or have sent by facsimile, a copy
of the papers to Borrower.
(b) SAVINGS CLAUSE. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Note, the Credit Agreement, or in any other Loan
Document, in no event shall this Note or any Loan Document require the payment
or permit the payment, taking, reserving, receiving, collection or charging of
any sums constituting interest under applicable laws that exceed the maximum
amount permitted by such laws, as the same may be amended or modified from time
to time (the "MAXIMUM RATE"). If any such excess interest is called for,
contracted for, charged, taken, reserved or received in connection with this
Note or any Loan Document, or in any communication by Lender or any other person
to Borrower or any other person, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under this Note shall
exceed the Maximum Rate, then in such event it is agreed that: (i) the
provisions of this paragraph shall govern and control; (ii) neither Borrower nor
any other person or entity now or hereafter liable for the payment of this Note
or any Loan Document shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (iii) any such excess interest
which is or has been received by Lender, notwithstanding this paragraph, shall
be credited against the then unpaid principal balance hereof or thereof, or if
this Note or any Loan Document has been or would be paid in full by such credit,
refunded to Borrower; and (iv) the provisions of this Note and each Loan
Document, and any other communication to Borrower, shall immediately be deemed
reformed and such excess interest reduced, without the necessity of executing
any other document, to the Maximum Rate. The right to accelerate the maturity of
this Note or any Loan Document does not include the right to accelerate, collect
or charge unearned interest, but only such interest that has otherwise accrued
as of the date of acceleration. Without limiting the foregoing, all calculations
of the rate of interest contracted for, charged, taken, reserved or received in
connection with this Note and any Loan Document which are
Exhibit A-4
made for the purpose of determining whether such rate exceeds the Maximum Rate
shall be made to the extent permitted by applicable laws by amortizing,
prorating, allocating and spreading during the period of the full term of this
Note or such Loan Document, including all prior and subsequent renewals and
extensions hereof or thereof, all interest at any time contracted for, charged,
taken, reserved or received by Lender. The terms of this paragraph shall be
deemed to be incorporated into each Loan Document.
To the extent that either Chapter 303 or 306, or both, of the Texas
Finance Code apply in determining the Maximum Rate, Lender hereby elects to
determine the applicable rate ceiling by using the weekly ceiling from time to
time in effect, subject to Lender's right subsequently to change such method in
accordance with applicable law, as the same may be amended or modified from time
to time.
(c) RIGHT OF SETOFF; DEPOSIT ACCOUNTS. Upon and after the
occurrence of an Event of Default, (i) Borrower hereby authorizes Lender, at any
time and from time to time, without notice, which is hereby expressly waived by
Borrower, and whether or not Lender shall have declared this Note to be due and
payable in accordance with the terms hereof, to set off against, and to
appropriate and apply to the payment of, Borrower's obligations and liabilities
under this Note (whether matured or unmatured, fixed or contingent, liquidated
or unliquidated), any and all amounts owing by Lender to Borrower (whether
payable in U.S. dollars or any other currency, whether matured or unmatured, and
in the case of deposits, whether general or special (except trust and escrow
accounts), time or demand and however evidenced), and (ii) pending any such
action, to the extent necessary, to hold such amounts as collateral to secure
such obligations and liabilities. Borrower hereby grants to Lender a security
interest in all deposits and accounts maintained with Lender and with any
financial institution to secure the payment of all obligations and liabilities
of Borrower to Lender under this Note.
(d) SUBORDINATION. Payment of this Note is subject to the terms of
the Subordination Agreement of even date herewith between Borrower, Lender and
IFC.
(e) ASSIGNMENT. Lender may assign this Note pursuant to the terms
of the Credit Agreement. Borrower may not assign its rights or obligations under
this Note without the prior consent of Lender.
(f) AMENDMENT. This Note may be amended or modified only in
writing signed by Borrower and Lender.
NOTICE: THIS NOTE AND ALL OTHER DOCUMENTS RELATING TO THE INDEBTEDNESS EVIDENCED
HEREBY CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THIS NOTE AND THE
INDEBTEDNESS EVIDENCED HEREBY.
[THE REMAINDER OF THIS PAGE INTENTIONALLY BLANK. SIGNATURE PAGE TO FOLLOW.]
Exhibit A-5
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
date first written above.
VAALCO ENERGY, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Exhibit A-6
LOANS AND PRINCIPAL PAYMENTS
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AMOUNT OF AMOUNT OF UNPAID
LOAN PRINCIPAL PRINCIPAL NOTATION
DATE MADE REPAID BALANCE TOTAL MADE BY
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Exhibit A-7
EXHIBIT D
FORM OF ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT ("AGREEMENT") dated as of ____________, 200__
between: _______________________ (the "ASSIGNOR") and _________________________
(the "ASSIGNEE").
RECITALS
--------
A. The Assignor is a party to the Credit Agreement dated as of
___________, 2002 (as amended and supplemented and in effect from time to time,
the "CREDIT AGREEMENT") among VAALCO Energy, Inc., a Delaware corporation (the
"BORROWER"), 1818 Fund II, L.P., a Delaware limited partnership, and each of
Lenders that is or becomes a party thereto as provided in SECTION 7.04 of the
Credit Agreement (individually, together with its successors and assigns, a
"LENDER", and collectively, together with their successors and assigns, the
"LENDERS").
B. The Assignor proposes to sell, assign and transfer to the
Assignee, and the Assignee proposes to purchase and assume from the Assignor,
[all] [a portion] of the Assignor's Percentage Share of the Commitment and
outstanding Loans, all on the terms and conditions of this Agreement.
C. In consideration of the foregoing and the mutual agreements
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01 DEFINITIONS. All capitalized terms used but not defined
herein have the respective meanings given to such terms in the Credit Agreement.
Section 1.02 OTHER DEFINITIONS. As used herein, the following terms
have the following respective meanings:
"ASSIGNED INTEREST" shall mean [all] [stated percentage] of Assignor's (in its
capacity as a "LENDER") Percentage Share of the Commitment including
its pro rata rights and obligations under the Credit Agreement and the
other Security Documents and the obligation to make Loans and any right
to receive payments for the Loans outstanding under the Credit
Agreement equal to the Percentage Share of the Commitment specified on
Schedule I hereto for Assignee, plus the interest and fees which will
accrue from and after the Assignment Date.
"ASSIGNMENT DATE" shall mean ________________________, 200__.
ARTICLE II
SALE AND ASSIGNMENT
Section 2.01 SALE AND ASSIGNMENT. On the terms and conditions set
forth herein, effective on and as of the Assignment Date, the Assignor hereby
sells, assigns and transfers to the Assignee, and the Assignee hereby purchases
and assumes from the Assignor, all of the right, title and interest of the
Assignor
Exhibit D-1
in and to, and all of the obligations of the Assignor in respect of,
the Assigned Interest. Such sale, assignment and transfer is without recourse
and, except as expressly provided in this Agreement, without representation or
warranty.
Section 2.02 ASSUMPTION OF OBLIGATIONS. The Assignee agrees with the
Assignor (for the express benefit of the Assignor and Borrower) that the
Assignee will, from and after the Assignment Date, perform all of the
obligations of the Assignor in respect of the Assigned Interest. From and after
the Assignment Date: (a) the Assignor shall be released from the Assignor's
obligations in respect of the Assigned Interest, and (b) the Assignee shall be
entitled to all of the Assignor's rights, powers and privileges under the Credit
Agreement and the other Security Documents in respect of the Assigned Interest.
Section 2.03 CONSENT BY EXISTING LENDERS. By executing this Agreement
as provided below, in accordance with SECTION 7.04(B) of the Credit Agreement,
the Existing Lenders hereby acknowledge notice of the transactions contemplated
by this Agreement and consent to such transactions.
ARTICLE III
PAYMENTS
Section 3.01 PAYMENTS. As consideration for the sale, assignment and
transfer contemplated by SECTION 2.01 hereof, the Assignee shall, on the
Assignment Date, assume Assignor's obligations in respect of the Assigned
Interest and pay to the Assignor an amount equal to the Assignee's Share of
Loans outstanding, as set forth on Schedule I hereto, if any. An amount equal to
all accrued and unpaid interest and fees attributable to the Assigned Interest
shall be paid to the Assignor as provided in SECTION 3.02(I) and (III) below.
Except as otherwise provided in this Agreement, all payments hereunder shall be
made in United States Dollars and in immediately available funds, without
setoff, deduction or counterclaim.
Section 3.02 ALLOCATION OF PAYMENTS. The Assignor and the Assignee
agree that (i) the Assignor shall be entitled to any payments of principal with
respect to the Assigned Interest made prior to the Assignment Date, together
with any interest and fees with respect to the Assigned Interest accrued prior
to the Assignment Date, (ii) the Assignee shall be entitled to any payments of
principal with respect to the Assigned Interest made from and after the
Assignment Date, together with any and all interest and fees with respect to the
Assigned Interest accruing from and after the Assignment Date, and (iii)
Borrower is instructed to allocate payments due under the Credit Agreement pro
rata between Assignor and the Assignee as provided in the foregoing clauses.
Each party hereto agrees that it will hold any interest, fees or other amounts
that it may receive to which the other party hereto shall be entitled pursuant
to the preceding sentence for account of such other party and pay, in like money
and funds, any such amounts that it may receive to such other party promptly
upon receipt.
Section 3.03 DELIVERY OF NOTES. Promptly following the receipt by the
Assignor of the consideration required to be paid under SECTION 3.01 hereof, the
Assignor shall, in the manner contemplated by SECTION 7.04(B) of the Credit
Agreement, (i) deliver to the Existing Lenders (or their counsel) the Note(s)
held by the Assignor and (ii) notify Borrower to execute and deliver new Notes
to the Assignor, if Assignor continues to be a Lender, and the Assignee, dated
the date of this Agreement in respective principal amounts equal to the
respective Maximum Loan Amounts of the Assignor (if any) and the Assignee as set
forth on Schedule I hereto after giving effect to the sale, assignment and
transfer contemplated hereby.
Section 3.04 FURTHER ASSURANCES. The Assignor and the Assignee hereby
agree to execute and deliver such other instruments, and take such other
actions, as either party may reasonably request in connection with the
transactions contemplated by this Agreement.
Exhibit D-2
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01 CONDITIONS PRECEDENT. The effectiveness of the sale,
assignment and transfer contemplated hereby is subject to the satisfaction of
each of the following conditions precedent:
(a) the execution and delivery of this Agreement by the
Assignor and the Assignee;
(b) the receipt by the Assignor of the payment required to
be made by the Assignee under SECTION 3.01 hereof; and
(c) the acknowledgment and consent by the Existing Lenders
contemplated by SECTION 2.03 hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES.
Section 5.01 REPRESENTATIONS AND WARRANTIES OF THE ASSIGNOR. The
Assignor represents and warrants to the Assignee as follows:
(a) it has all requisite power and authority, and has taken
all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignor and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any provision of
any law or regulation of any Authority applicable to it;
(c) this Agreement has been duly executed and delivered by
it and constitutes the legal, valid and binding obligation of the
Assignor, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with
and all actions by any Authority necessary for the validity or
enforceability of its obligations under this Agreement have been
obtained; and
(e) the Assignor has good title to, and is the sole legal
and beneficial owner of, the Assigned Interest, free and clear of all
liens, claims, participations or other charges of any nature
whatsoever.
Section 5.02 DISCLAIMER. Except as expressly provided in SECTION 5.01
hereof, the Assignor does not make any representation or warranty, nor shall it
have any responsibility to the Assignee, with respect to the accuracy of any
recitals, statements, representations or warranties contained in the Credit
Agreement or in any certificate or other document referred to or provided for
in, or received by any Lender under, the Credit Agreement, or for the value,
validity, effectiveness, genuineness, execution, effectiveness, legality,
enforceability or sufficiency of the Credit Agreement, the Note(s) or any other
document referred to or provided for therein or for any failure by Borrower or
any other person (other than Assignor) to perform any of its obligations
thereunder prior hereto or for the existence, value, perfection or priority of
any collateral security or the financial or other condition of Borrower or the
Subsidiaries or any other obligor or guarantor,
Exhibit D-3
or any other matter relating to the Credit Agreement or any other Security
Documents or any extension of credit thereunder.
Section 5.03 REPRESENTATIONS AND WARRANTIES OF THE ASSIGNEE. The
Assignee represents and warrants to the Assignor as follows:
(a) it has all requisite power and authority, and has taken
all action necessary to execute and deliver this Agreement and to
fulfill its obligations under, and consummate the transactions
contemplated by, this Agreement;
(b) the execution, delivery and compliance with the terms
hereof by Assignee and the delivery of all instruments required to be
delivered by it hereunder do not and will not violate any provision of
any law or regulation of any Authority applicable to it;
(c) this Agreement has been duly executed and delivered by it
and constitutes the legal, valid and binding obligation of the
Assignee, enforceable against it in accordance with its terms;
(d) all approvals and authorizations of, all filings with
and all actions by any Authority necessary for the validity or
enforceability of its obligations under this Agreement have been
obtained; and
(e) the Assignee has fully reviewed the terms of the Credit
Agreement and the other Security Documents and has independently and
without reliance upon the Assignor, and based on such information as
the Assignee has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement.
ARTICLE VI
MISCELLANEOUS.
Section 6.01 NOTICES. All notices and other communications provided for
herein (including, without limitation, any modifications of, or waivers,
requests or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telex or telecopy) to the intended recipient
at its "Address for Notices" specified below its name on the signature pages
hereof or, as to either party, at such other address as shall be designated by
such party in a notice to the other party.
Section 6.02 AMENDMENT, MODIFICATION OR WAIVER. No provision of this
Agreement may be amended, modified or waived except by an instrument in writing
signed by the Assignor and the Assignee, and consented to by the Existing
Lenders .
Section 6.03 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The representations and warranties made herein
by the Assignee are also made for the benefit of the Existing Lenders and
Borrower, and the Assignee agrees that the Existing Lenders and Borrower are
entitled to rely upon such representations and warranties.
Section 6.04 ASSIGNMENTS. Neither party hereto may assign any of its
rights or obligations hereunder except in accordance with the terms of the
Credit Agreement.
Exhibit D-4
Section 6.05 CAPTIONS. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
Section 6.06 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be identical and all of which, taken
together, shall constitute one and the same instrument, and each of the parties
hereto may execute this Agreement by signing any such counterpart.
Section 6.07 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York.
Section 6.08 EXPENSES. To the extent not paid by Borrower pursuant to
the terms of the Credit Agreement, each party hereto shall bear its own expenses
in connection with the execution, delivery and performance of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed and delivered as of the date first above written.
ASSIGNOR:
--------
_________________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
Address for Notices:
_________________________________________
_________________________________________
_________________________________________
Telecopier No.:__________________________
Telephone No.:___________________________
Attention: ___________________________
ASSIGNEE:
--------
_________________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
Exhibit D-5
Address for Notices:
_________________________________________
_________________________________________
_________________________________________
Telecopier No.:__________________________
Telephone No.:___________________________
Attention: ___________________________
ACKNOWLEDGED AND CONSENTED TO:
[Existing Lenders, if applicable]
_________________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
Exhibit D-6
SCHEDULE I
TO ASSIGNMENT AGREEMENT
Assignor Assignee
(Retained Interest) (Assigned
Interest)
a. Percentage Share of the Commitment ________% _______%
b. Maximum Loan Amount $__________ $________
c. Share of Loans Outstanding $__________ $________
Exhibit D-7
TABLE OF CONTENTS
PAGE
ARTICLE I. CREDIT TERMS.......................................................1
SECTION 1.01 LINE OF CREDIT LOAN..........................................1
(A) LINE OF CREDIT LOAN...............................................1
(B) REPAYMENT.........................................................1
(C) Mandatory Prepayment.............................................1
SECTION 1.02 INTEREST/FEES................................................2
(A) INTEREST..........................................................2
(B) WARRANTS..........................................................2
(C) ADDITIONAL WARRANT................................................2
SECTION 1.03 PAYMENTS.....................................................2
SECTION 1.04 COLLATERAL...................................................3
SECTION 1.05 SUBORDINATION OF DEBT........................................3
ARTICLE II. REPRESENTATIONS AND WARRANTIES....................................4
SECTION 2.01 LEGAL STATUS.................................................4
SECTION 2.02 CAPITALIZATION...............................................5
SECTION 2.03 AUTHORIZATION AND VALIDITY...................................5
SECTION 2.04 NO VIOLATION.................................................6
SECTION 2.05 LITIGATION...................................................6
SECTION 2.06 CORRECTNESS OF FINANCIAL STATEMENT...........................6
SECTION 2.07 INCOME TAX RETURNS...........................................6
SECTION 2.08 NO SUBORDINATION.............................................6
SECTION 2.09 PERMITS, FRANCHISES..........................................6
SECTION 2.10 ERISA........................................................7
SECTION 2.11 OTHER OBLIGATIONS............................................7
SECTION 2.12 ENVIRONMENTAL MATTERS........................................7
SECTION 2.13 NO CONSENT...................................................7
SECTION 2.14 NO LIENS.....................................................7
SECTION 2.15 LAWS.........................................................8
SECTION 2.16 JUDGMENTS....................................................8
SECTION 2.17 INFORMATION..................................................8
SECTION 2.18 VGEI.........................................................8
ARTICLE III. CONDITIONS.......................................................8
SECTION 3.01 CONDITIONS TO INITIAL LOAN...................................8
(A) APPROVAL OF LENDER COUNSEL........................................8
(B) DOCUMENTATION.....................................................8
(C) LENDER APPROVAL AND CLOSING OF SENIOR LOAN........................8
(D) FINANCIAL CONDITION...............................................8
(E) INSURANCE.........................................................8
(F) OPINION OF INVESTMENT BANK........................................9
-i-
(G) OPINION OF COUNSEL................................................9
SECTION 3.02 CONDITIONS OF ALL LOANS......................................9
SECTION 3.03 BORROWER'S CERTIFICATION....................................10
SECTION 3.04 CONDITIONS FOR LENDER'S BENEFIT.............................10
ARTICLE IV. AFFIRMATIVE COVENANTS............................................10
SECTION 4.01 PUNCTUAL PAYMENTS...........................................10
SECTION 4.02 ACCOUNTING RECORDS..........................................10
SECTION 4.03 FINANCIAL STATEMENTS........................................11
(A) ANNUAL REPORTS...................................................11
(B) QUARTERLY REPORTS................................................11
(C) AUDIT REPORTS....................................................11
(D) SEC AND OTHER REPORTS............................................11
(E) VGEI REPORTS.....................................................11
(F) OTHER INFORMATION................................................11
SECTION 4.04 COMPLIANCE..................................................12
SECTION 4.05 INSURANCE...................................................12
SECTION 4.06 FACILITIES..................................................12
SECTION 4.07 TAXES AND OTHER LIABILITIES.................................12
SECTION 4.08 LITIGATION..................................................12
SECTION 4.09 NOTICE TO LENDER............................................12
SECTION 4.10 MAINTENANCE OF EXISTENCE....................................12
ARTICLE V. NEGATIVE COVENANTS................................................12
SECTION 5.01 USE OF FUNDS................................................13
SECTION 5.02 OTHER INDEBTEDNESS..........................................13
SECTION 5.03 MERGER, CONSOLIDATION, TRANSFER OF ASSETS...................13
SECTION 5.04 LOANS, ADVANCES, INVESTMENTS................................13
SECTION 5.05 DIVIDENDS, DISTRIBUTIONS....................................13
SECTION 5.06 PLEDGE OF ASSETS............................................13
SECTION 5.07 SALES AND LEASEBACKS........................................13
SECTION 5.08 NATURE OF BUSINESS..........................................13
SECTION 5.09 TRANSACTIONS WITH AFFILIATES................................13
SECTION 5.10 FISCAL YEAR.................................................13
SECTION 5.11 PROJECT.....................................................14
SECTION 5.12 VGEI PSC INTEREST...........................................14
ARTICLE VI. EVENTS OF DEFAULT................................................14
SECTION 6.01 EVENTS OF DEFAULT...........................................14
SECTION 6.02 REMEDIES....................................................15
ARTICLE VII. MISCELLANEOUS...................................................15
SECTION 7.01 NO WAIVER...................................................15
SECTION 7.02 NOTICES.....................................................16
SECTION 7.03 COSTS, EXPENSES AND ATTORNEYS' FEES.........................16
SECTION 7.04 ASSIGNMENTS.................................................16
SECTION 7.05 AMENDMENT...................................................17
-ii-
SECTION 7.06 NO THIRD PARTY BENEFICIARIES................................17
SECTION 7.07 TIME........................................................17
SECTION 7.08 SEVERABILITY OF PROVISIONS..................................17
SECTION 7.09 COUNTERPARTS................................................17
SECTION 7.10 FURTHER ASSURANCES..........................................17
SECTION 7.11 GOVERNING LAW...............................................18
SECTION 7.12 SAVINGS CLAUSE..............................................19
SECTION 7.13 RIGHT OF SETOFF; DEPOSIT ACCOUNTS...........................20
SECTION 7.14 BUSINESS PURPOSE............................................20
SECTION 7.15 INDEMNIFICATION.............................................20
SECTION 7.16 WAIVER OF JURY TRIAL........................................21
APPENDIX A
Defined Terms
EXHIBITS
A. Note
B. Warrants
C. Subordination Agreement
D. Assignment Agreement
SCHEDULES
I Security Documents
II Lender's Commitments
III Form of Borrower's Certificate
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SUBORDINATED CREDIT AGREEMENT
Dated as of June 10, 2002
Between
VAALCO ENERGY, INC., as Borrower
And
1818 FUND II, L.P., as Lender
