Exhibit 10.2
EXECUTION COPY
AMENDED AND RESTATED
SECOND LIEN TERM LOAN AGREEMENT
DATED AS OF
JULY 28, 2005
AMONG
PETROHAWK ENERGY CORPORATION,
AS BORROWER,
BNP PARIBAS,
AS ADMINISTRATIVE AGENT,
AND
THE LENDERS PARTY HERETO
LEAD ARRANGER AND SOLE BOOKRUNNER
BNP PARIBAS
TABLE OF CONTENTS
PAGE
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ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
SECTION 1.01 TERMS DEFINED ABOVE................................................. 1
SECTION 1.02 CERTAIN DEFINED TERMS............................................... 1
SECTION 1.03 TERMS GENERALLY; RULES OF CONSTRUCTION.............................. 20
SECTION 1.04 ACCOUNTING TERMS AND DETERMINATIONS; GAAP........................... 21
ARTICLE II
THE TERM LOANS
SECTION 2.01 TERM LOANS.......................................................... 21
SECTION 2.02 LOANS............................................................... 21
SECTION 2.03 REQUESTS FOR THE LOANS.............................................. 22
SECTION 2.04 LOANS INCREASE...................................................... 23
SECTION 2.05 INTEREST ELECTIONS.................................................. 24
SECTION 2.06 FUNDING THE LOANS................................................... 25
SECTION 2.07 TERMINATION......................................................... 26
SECTION 2.08 TOTAL RESERVE VALUE................................................. 27
SECTION 2.09 SUBORDINATION OF LOANS.............................................. 27
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
SECTION 3.01 REPAYMENT OF THE LOANS.............................................. 27
SECTION 3.02 INTEREST............................................................ 27
SECTION 3.03 ALTERNATE RATE OF INTEREST.......................................... 28
SECTION 3.04 PREPAYMENTS......................................................... 29
SECTION 3.05 FEES................................................................ 29
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
SECTION 4.01 PAYMENTS GENERALLY; PRO RATA TREATMENT; SHARING OF SET-OFFS......... 30
SECTION 4.02 PRESUMPTION OF PAYMENT BY THE BORROWER.............................. 31
SECTION 4.03 CERTAIN DEDUCTIONS BY THE ADMINISTRATIVE AGENT...................... 31
SECTION 4.04 DISPOSITION OF PROCEEDS............................................. 31
ARTICLE V
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
SECTION 5.01 INCREASED COSTS..................................................... 32
SECTION 5.02 BREAK FUNDING PAYMENTS.............................................. 33
SECTION 5.03 TAXES............................................................... 33
SECTION 5.04 MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS...................... 34
SECTION 5.05 ILLEGALITY.......................................................... 35
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ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01 EFFECTIVE DATE...................................................... 35
SECTION 6.02 EACH CREDIT EVENT................................................... 38
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
SECTION 7.01 ORGANIZATION; POWERS................................................ 39
SECTION 7.02 AUTHORITY; ENFORCEABILITY........................................... 39
SECTION 7.03 APPROVALS; NO CONFLICTS............................................. 39
SECTION 7.04 FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE..................... 40
SECTION 7.05 LITIGATION.......................................................... 40
SECTION 7.06 ENVIRONMENTAL MATTERS............................................... 41
SECTION 7.07 COMPLIANCE WITH THE LAWS AND AGREEMENTS; NO DEFAULTS................ 42
SECTION 7.08 INVESTMENT COMPANY ACT.............................................. 42
SECTION 7.09 PUBLIC UTILITY HOLDING COMPANY ACT.................................. 42
SECTION 7.10 TAXES............................................................... 42
SECTION 7.11 ERISA............................................................... 43
SECTION 7.12 DISCLOSURE; NO MATERIAL MISSTATEMENTS............................... 44
SECTION 7.13 INSURANCE........................................................... 44
SECTION 7.14 RESTRICTION ON LIENS................................................ 44
SECTION 7.15 SUBSIDIARIES........................................................ 44
SECTION 7.16 LOCATION OF BUSINESS AND OFFICES.................................... 45
SECTION 7.17 PROPERTIES; TITLES, ETC............................................. 45
SECTION 7.18 MAINTENANCE OF PROPERTIES........................................... 46
SECTION 7.19 GAS IMBALANCES, PREPAYMENTS......................................... 46
SECTION 7.20 MARKETING OF PRODUCTION............................................. 46
SECTION 7.21 SWAP AGREEMENTS..................................................... 47
SECTION 7.22 USE OF PROCEEDS..................................................... 47
SECTION 7.23 SOLVENCY............................................................ 47
SECTION 7.24 MERGERS............................................................. 47
ARTICLE VIII
AFFIRMATIVE COVENANTS
SECTION 8.01 FINANCIAL STATEMENTS; RATINGS CHANGE; OTHER INFORMATION............. 48
SECTION 8.02 NOTICES OF MATERIAL EVENTS.......................................... 51
SECTION 8.03 EXISTENCE; CONDUCT OF BUSINESS...................................... 51
SECTION 8.04 PAYMENT OF OBLIGATIONS.............................................. 51
SECTION 8.05 PERFORMANCE OF OBLIGATIONS UNDER LOAN DOCUMENTS..................... 52
SECTION 8.06 OPERATION AND MAINTENANCE OF PROPERTIES............................. 52
SECTION 8.07 INSURANCE........................................................... 53
SECTION 8.08 BOOKS AND RECORDS; INSPECTION RIGHTS................................ 53
SECTION 8.09 COMPLIANCE WITH LAWS................................................ 53
SECTION 8.10 ENVIRONMENTAL MATTERS............................................... 53
SECTION 8.11 FURTHER ASSURANCES.................................................. 54
SECTION 8.12 RESERVE REPORTS..................................................... 55
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SECTION 8.13 TITLE INFORMATION................................................... 56
SECTION 8.14 ADDITIONAL COLLATERAL; ADDITIONAL GUARANTORS........................ 56
SECTION 8.15 ERISA COMPLIANCE.................................................... 57
SECTION 8.16 SWAP AGREEMENTS..................................................... 58
SECTION 8.17 UNRESTRICTED SUBSIDIARIES........................................... 58
SECTION 8.18 MARKETING ACTIVITIES................................................ 58
ARTICLE IX
NEGATIVE COVENANTS
SECTION 9.01 FINANCIAL COVENANTS................................................. 59
SECTION 9.02 DEBT................................................................ 59
SECTION 9.03 LIENS............................................................... 60
SECTION 9.04 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS, REPAYMENT OF SENIOR
UNSECURED NOTES.................................................. 61
SECTION 9.05 INVESTMENTS, LOANS AND ADVANCES..................................... 61
SECTION 9.06 DESIGNATION AND CONVERSION OF RESTRICTED AND UNRESTRICTED
SUBSIDIARIES; DEBT OF UNRESTRICTED SUBSIDIARIES.................. 63
SECTION 9.07 NATURE OF BUSINESS; INTERNATIONAL OPERATIONS........................ 64
SECTION 9.08 LIMITATION ON LEASES................................................ 64
SECTION 9.09 PROCEEDS OF NOTES................................................... 64
SECTION 9.10 ERISA COMPLIANCE.................................................... 64
SECTION 9.11 SALE OR DISCOUNT OF RECEIVABLES..................................... 65
SECTION 9.12 MERGERS, ETC........................................................ 65
SECTION 9.13 SALE OF PROPERTIES.................................................. 66
SECTION 9.14 ENVIRONMENTAL MATTERS............................................... 67
SECTION 9.15 TRANSACTIONS WITH AFFILIATES........................................ 67
SECTION 9.16 SUBSIDIARIES........................................................ 67
SECTION 9.17 NEGATIVE PLEDGE AGREEMENTS; DIVIDEND RESTRICTIONS................... 67
SECTION 9.18 GAS IMBALANCES, TAKE-OR-PAY OR OTHER PREPAYMENTS.................... 68
SECTION 9.19 SWAP AGREEMENTS..................................................... 68
SECTION 9.20 MERGER DOCUMENTS.................................................... 68
SECTION 9.21 ANTI-LAYERING....................................................... 68
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
SECTION 10.01 EVENTS OF DEFAULT................................................... 69
SECTION 10.02 REMEDIES............................................................ 70
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.01 APPOINTMENT; POWERS................................................. 71
SECTION 11.02 DUTIES AND OBLIGATIONS OF ADMINISTRATIVE AGENT...................... 72
SECTION 11.03 ACTION BY ADMINISTRATIVE AGENT...................................... 72
SECTION 11.04 RELIANCE BY ADMINISTRATIVE AGENT.................................... 73
SECTION 11.05 SUBAGENTS........................................................... 73
SECTION 11.06 RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT...................... 73
SECTION 11.07 ADMINISTRATIVE AGENT AS A LENDER.................................... 74
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SECTION 11.08 NO RELIANCE......................................................... 74
SECTION 11.09 AUTHORITY OF ADMINISTRATIVE AGENT TO RELEASE COLLATERAL AND LIENS... 74
SECTION 11.10 THE ARRANGER........................................................ 75
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 NOTICES............................................................. 75
SECTION 12.02 WAIVERS; AMENDMENTS................................................. 75
SECTION 12.03 EXPENSES, INDEMNITY; DAMAGE WAIVER.................................. 76
SECTION 12.04 SUCCESSORS AND ASSIGNS.............................................. 79
SECTION 12.05 SURVIVAL; REVIVAL; REINSTATEMENT.................................... 81
SECTION 12.06 COUNTERPARTS; INTEGRATION; EFFECTIVENESS............................ 82
SECTION 12.07 SEVERABILITY........................................................ 82
SECTION 12.08 RIGHT OF SETOFF..................................................... 83
SECTION 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCE............ 83
SECTION 12.10 HEADINGS............................................................ 84
SECTION 12.11 CONFIDENTIALITY..................................................... 84
SECTION 12.12 INTEREST RATE LIMITATION............................................ 85
SECTION 12.13 EXCULPATION PROVISIONS.............................................. 86
SECTION 12.14 NO THIRD PARTY BENEFICIARIES........................................ 86
SECTION 12.15 USA PATRIOT ACT NOTICE.............................................. 86
SECTION 12.16 AMENDMENT AND RESTATEMENT OF EXISTING CREDIT AGREEMENT.............. 86
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ANNEXES, EXHIBITS AND SCHEDULES
Annex I Commitments
Annex II Terms of Subordination
Exhibit A Form of Note
Exhibit B-1 Form of Borrowing Request
Exhibit B-2 Notice of Commitment Increase
Exhibit C Form of Interest Election Request
Exhibit D Form of Compliance Certificate
Exhibit E-1 Form of Legal Opinion of Xxxxxx Xxxxxxx Law Firm L.L.C.,
special counsel to the Borrower
Exhibit E-2 Form of Legal Opinion of Local Counsel
Exhibit F-1 Security Instruments
Exhibit F-2 Form of Guaranty and Collateral Agreement
Exhibit G Form of Assignment and Assumption
Schedule 7.05 Litigation
Schedule 7.15 Subsidiaries and Partnerships; Unrestricted Subsidiaries
Schedule 7.19 Gas Imbalances
Schedule 7.20 Marketing Contracts
Schedule 7.21 Swap Agreements
Schedule 9.05 Investments
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THIS AMENDED AND RESTATED SECOND LIEN TERM LOAN AGREEMENT dated as of July
28, 2005, is among: Petrohawk Energy Corporation, a corporation duly formed and
existing under the laws of the State of Delaware (the "Borrower"); each of the
Lenders from time to time party hereto; and BNP Paribas (in its individual
capacity, "BNP Paribas"), as administrative agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Administrative
Agent").
RECITALS
A. On November 23, 2004, the Borrower, the Administrative Agent and certain
financial institutions (the "Existing Term Lenders") entered into that certain
Second Lien Term Loan Agreement (the "Existing Credit Agreement") pursuant to
which each Existing Term Lender severally made a term loan to the Borrower in an
aggregate principal amount of $50,000,000.
B. The Borrower has requested that the Administrative Agent and the Lenders
amend the Existing Credit Agreement to permit the Borrower to incur up to
$100,000,000 in additional term loans and the Administrative Agent and the
Lenders have agreed to do so on the terms and conditions hereinafter set forth.
C. Therefore, for and in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Administrative Agent and the Lenders, hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement, each term
defined above has the meaning indicated above.
Section 1.02 Certain Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"ABR", when used in reference to any Tranche, refers to whether such
Tranche is bearing interest at a rate determined by reference to the Alternate
Base Rate.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Tranche for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Questionnaire" means an Administrative Questionnaire in a
form supplied by the Administrative Agent.
"Affected Tranche" has the meaning assigned such term in Section 5.05.
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agreement" means this Amended and Restated Second Lien Term Loan
Agreement, as the same may from time to time be amended, modified, supplemented
or restated.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin" means (a) with respect to each Eurodollar Tranche, a
rate per annum equal to 4.5% and (b) with respect to each ABR Tranche, a rate
per annum equal to 3.5%.
"Approved Counterparty" means (a) any revolving lender party to the Senior
Revolving Credit Agreement or any Affiliate of such lender or (b) any other
Person whose long term senior unsecured debt rating is A/A2 by S&P or Xxxxx'x
(or their equivalent) or higher.
"Approved Fund" means any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.
"Approved Petroleum Engineers" means Netherland, Xxxxxx & Associates, Inc.,
and any other independent petroleum engineers reasonably acceptable to the
Administrative Agent.
"Arranger" means BNP Paribas, in its capacity as the lead arranger and sole
bookrunner hereunder.
"Assignment and Assumption" means an assignment and assumption entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 12.04(b)), and accepted by the Administrative Agent, in the
form of Exhibit G or any other form approved by the Administrative Agent.
"Board" means the Board of Governors of the Federal Reserve System of the
United States of America or any successor Governmental Authority.
"Borrowing Request" means a request by the Borrower for the Loans in
accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Houston, Texas are authorized or
required by law to remain closed; and if such day relates to a Tranche or
continuation of, a payment or prepayment of principal of or interest on, or a
conversion of or into, or the Interest Period for, a Eurodollar Tranche or a
notice by the Borrower with respect to any such Tranche or continuation,
payment,
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prepayment, conversion or Interest Period, any day which is also a day on which
dealings in dollar deposits are carried out in the London interbank market.
"Capital Leases" means, in respect of any Person, all leases which shall
have been, or should have been, in accordance with GAAP, recorded as capital
leases on the balance sheet of the Person liable (whether contingent or
otherwise) for the payment of rent thereunder.
"Cash Equivalent" means cash held in US dollars and all Investments of the
type identified in Section 9.05(c).
"Casualty Event" means any loss, casualty or other insured damage to, or
any nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of, any Property of the Borrower or any of its Restricted
Subsidiaries having a fair market value in excess of $500,000.
"Change in Control" means (a) the acquisition of ownership, directly or
indirectly, beneficially or of record, by any Person or group (within the
meaning of the Securities Exchange Act of 1934 and the rules of the SEC
thereunder as in effect on the date hereof) other than the Permitted Holders, of
Equity Interests representing more than 35% of the aggregate ordinary voting
power represented by the issued and outstanding Equity Interests of the
Borrower, (b) occupation of a majority of the seats (other than vacant seats) on
the board of directors of the Borrower by Persons who were neither (i) nominated
by the board of directors of the Borrower nor (ii) appointed by directors so
nominated or (c) the acquisition of direct or indirect Control of the Borrower
by any Person or group other than the Permitted Holders.
"Change in Law" means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender (or, for purposes of
Section 5.01(b)), by any lending office of such Lender or by such Lender's
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after
the date of this Agreement.
"CI Lender" has the meaning set forth in Section 2.04(a).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"Commitment" means, with respect to each Lender, the commitment of such
Lender to make during the Commitment Period its term Loans hereunder, as such
commitment may be (a) terminated or reduced from time to time pursuant to
Section 2.07 and (b) modified from time to time pursuant to assignments by or to
such Lender pursuant to Section 12.04(b), and "Commitments" means the aggregate
amount of the Commitments of all Lenders. The initial amount of each Lender's
Commitment is set forth on Annex I.
"Commitment Increase" has the meaning set forth in Section 2.04(a).
"Commitment Increase Effective Date" has the meaning set forth in Section
2.04(b).
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"Commitment Period" means the period from and including the Effective Date
to but excluding the date that is the earlier of (i) the Business Day on which
the notice of an additional borrowing is given under Section 2.02 or (ii) forty
five days after the Effective Date (unless, in either case, the Commitments are
otherwise sooner terminated under Section 2.06 or Section 10.02).
"Consolidated Net Income" means with respect to the Borrower and the
Consolidated Restricted Subsidiaries, for any period, the aggregate of the net
income (or loss) of the Borrower and the Consolidated Restricted Subsidiaries
after allowances for taxes for such period determined on a consolidated basis in
accordance with GAAP; provided that there shall be excluded from such net income
(to the extent otherwise included therein) the following: (a) the net income of
any Person in which the Borrower or any Consolidated Restricted Subsidiary has
an interest (which interest does not cause the net income of such other Person
to be consolidated with the net income of the Borrower and the Consolidated
Restricted Subsidiaries in accordance with GAAP), except to the extent of the
amount of dividends or distributions actually paid in cash during such period by
such other Person to the Borrower or to a Consolidated Restricted Subsidiary, as
the case may be; (b) the net income (but not loss) during such period of any
Consolidated Restricted Subsidiary to the extent that the declaration or payment
of dividends or similar distributions or transfers or loans by that Consolidated
Restricted Subsidiary is not at the time permitted by operation of the terms of
its charter or any agreement, instrument or Governmental Requirement applicable
to such Consolidated Restricted Subsidiary or is otherwise restricted or
prohibited, in each case determined in accordance with GAAP; (c) any
extraordinary non-cash gains or losses during such period and (d) any gains or
losses attributable to writeups or writedowns of assets, including ceiling test
writedowns; and provided further that if the Borrower or any Consolidated
Restricted Subsidiary shall acquire or dispose of any Property during such
period or a Subsidiary shall be redesignated as either an Unrestricted
Subsidiary or a Restricted Subsidiary, then Consolidated Net Income shall be
calculated after giving pro forma effect to such acquisition, merger,
disposition or redesignation, as if such acquisition, merger, disposition or
redesignation had occurred on the first day of such period.
"Consolidated Restricted Subsidiaries" means any Restricted Subsidiaries
that are Consolidated Subsidiaries.
"Consolidated Subsidiaries" means each Subsidiary of the Borrower (whether
now existing or hereafter created or acquired) the financial statements of which
shall be (or should have been) consolidated with the financial statements of the
Borrower in accordance with GAAP.
"Consolidated Unrestricted Subsidiaries" means any Unrestricted
Subsidiaries that are Consolidated Subsidiaries.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise. For the
purposes of this definition, and without limiting the generality of the
foregoing, any Person that owns directly or indirectly 10% or more of the Equity
Interests having ordinary voting power for the election of the directors or
other governing
4
body of a Person (other than as a limited partner of such other Person) will be
deemed to "control" such other Person. "Controlling" and "Controlled" have
meanings correlative thereto.
"Debt" means, for any Person, the sum of the following (without
duplication): (a) all obligations of such Person for borrowed money or evidenced
by bonds, bankers' acceptances, debentures, notes or other similar instruments;
(b) all obligations of such Person (whether contingent or otherwise) in respect
of letters of credit, surety or other bonds and similar instruments; (c) all
accounts payable and all accrued expenses, liabilities or other obligations of
such Person to pay the deferred purchase price of Property or services; (d) all
obligations under Capital Leases; (e) all obligations under Synthetic Leases;
(f) all Debt (as defined in the other clauses of this definition) of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) a Lien on any Property of such
Person, whether or not such Debt is assumed by such Person; (g) all Debt (as
defined in the other clauses of this definition) of others guaranteed by such
Person or in which such Person otherwise assures a creditor against loss of the
Debt (howsoever such assurance shall be made) to the extent of the lesser of the
amount of such Debt and the maximum stated amount of such guarantee or assurance
against loss; (h) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or to
purchase the Debt or Property of others; (i) obligations to deliver commodities,
goods or services, including, without limitation, Hydrocarbons, in consideration
of one or more advance payments, other than gas balancing arrangements in the
ordinary course of business; (j) obligations to pay for goods or services
whether or not such goods or services are actually received or utilized by such
Person; (k) any Debt of a partnership for which such Person is liable either by
agreement, by operation of law or by a Governmental Requirement but only to the
extent of such liability; (l) Disqualified Capital Stock; and (m) the
undischarged balance of any production payment created by such Person or for the
creation of which such Person directly or indirectly received payment. The Debt
of any Person shall include all obligations of such Person of the character
described above to the extent such Person remains legally liable in respect
thereof notwithstanding that any such obligation is not included as a liability
of such Person under GAAP.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Designated Preferred Stock" means the Borrower's Series A 8% Cumulative
Convertible Preferred Stock issued under certificate of designation dated June
29, 2001.
"Disqualified Capital Stock" means any Equity Interest that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock), pursuant to a sinking fund
obligation or otherwise, or is convertible or exchangeable for Debt or
redeemable for any consideration other than other Equity Interests (which would
not constitute Disqualified Capital Stock) at the option of the holder thereof,
in whole or in part, on or prior to the date that is one year after the earlier
of (a) the Maturity Date and (b) the date on which there are no Loans or other
obligations hereunder outstanding.
"dollars" or "$" refers to lawful money of the United States of America.
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"Domestic Subsidiary" means any Restricted Subsidiary that is organized
under the laws of the United States of America or any state thereof or the
District of Columbia.
"EBITDA" means, for any period, the sum of Consolidated Net Income for such
period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: interest, income taxes, depreciation,
depletion, amortization and other similar noncash charges, minus all noncash
income added to Consolidated Net Income.
"Effective Date" means the date on which the conditions specified in
Section 6.01 are satisfied (or waived in accordance with Section 12.02).
"Environmental Laws" means any and all Governmental Requirements pertaining
in any way to health, safety the environment or the preservation or reclamation
of natural resources, in effect in any and all jurisdictions in which the
Borrower or any Restricted Subsidiary is conducting or at any time has conducted
business, or where any Property of the Borrower or any Restricted Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"), as
amended, the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and Recovery Act of
1976 ("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection Governmental Requirements.
The term "oil" shall have the meaning specified in OPA, the terms "hazardous
substance" and "release" (or "threatened release") have the meanings specified
in CERCLA, the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA and the term "oil and gas waste" shall have the
meaning specified in Section 91.1011 of the Texas Natural Resources Code
("Section 91.1011"); provided, however, that (a) in the event either OPA,
CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and (b) to the extent the laws of the state or
other jurisdiction in which any Property of the Borrower or any Restricted
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste," "disposal" or "oil and gas waste" which is broader
than that specified in either OPA, CERCLA, RCRA or Section 91.1011, such broader
meaning shall apply.
"Equity Interests" means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
Equity Interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with the Borrower or a Subsidiary would be deemed
to be a "single employer" within
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the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o)
of section 414 of the Code.
"ERISA Event" means (a) a "Reportable Event" described in section 4043 of
ERISA and the regulations issued thereunder, (b) the withdrawal of the Borrower,
a Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it
was a "substantial employer" as defined in section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Plan or the treatment of a Plan
amendment as a termination under section 4041 of ERISA, (d) the institution of
proceedings to terminate a Plan by the PBGC, (e) receipt of a notice of
withdrawal liability pursuant to Section 4202 of ERISA or (f) any other event or
condition which might constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan.
"Eurodollar" when used in reference to any Tranche, refers to whether such
Tranche is bearing interest at a rate determined by reference to the Adjusted
LIBO Rate.
"Event of Default" has the meaning assigned such term in Section 10.01.
"Excepted Liens" means: (a) Liens for Taxes, assessments or other
governmental charges or levies which are not delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP; (b) Liens in connection with
workers' compensation, unemployment insurance or other social security, old age
pension or public liability obligations which are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (c) statutory landlord's
liens, operators', vendors', carriers', warehousemen's, repairmen's, mechanics',
suppliers', workers', materialmen's, construction or other like Liens arising by
operation of law in the ordinary course of business or incident to the
exploration, development, operation and maintenance of Oil and Gas Properties
each of which is in respect of obligations that are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP; (d) contractual Liens
which arise in the ordinary course of business under operating agreements, joint
venture agreements, oil and gas partnership agreements, oil and gas leases,
farm-out agreements, division orders, contracts for the sale, transportation or
exchange of oil and natural gas, unitization and pooling declarations and
agreements, area of mutual interest agreements, overriding royalty agreements,
marketing agreements, processing agreements, net profits agreements, development
agreements, gas balancing or deferred production agreements, injection,
repressuring and recycling agreements, salt water or other disposal agreements,
seismic or other geophysical permits or agreements, and other agreements which
are usual and customary in the oil and gas business and are for claims which are
not delinquent or which are being contested in good faith by appropriate action
and for which adequate reserves have been maintained in accordance with GAAP,
provided that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Borrower or any Restricted Subsidiary or materially
impair the value of such Property subject thereto; (e) Liens arising solely by
virtue of any statutory or common law provision relating to banker's liens,
rights of set-off or similar rights and remedies and burdening only deposit
accounts or other funds maintained with a creditor depository institution,
provided that no such deposit account is a dedicated cash
7
collateral account or is subject to restrictions against access by the depositor
in excess of those set forth by regulations promulgated by the Board and no such
deposit account is intended by Borrower or any of its Restricted Subsidiaries to
provide collateral to the depository institution; (f) easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations in any
Property of the Borrower or any Restricted Subsidiary for the purpose of roads,
pipelines, transmission lines, transportation lines, distribution lines for the
removal of gas, oil, coal or other minerals or timber, and other like purposes,
or for the joint or common use of real estate, rights of way, facilities and
equipment, that do not secure any monetary obligations and which in the
aggregate do not materially impair the use of such Property for the purposes of
which such Property is held by the Borrower or any Restricted Subsidiary or
materially impair the value of such Property subject thereto; (g) Liens on cash
or securities pledged to secure performance of tenders, surety and appeal bonds,
government contracts, performance and return of money bonds, bids, trade
contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business and (h)
judgment and attachment Liens not giving rise to an Event of Default, provided
that any appropriate legal proceedings which may have been duly initiated for
the review of such judgment shall not have been finally terminated or the period
within which such proceeding may be initiated shall not have expired and no
action to enforce such Lien has been commenced; provided, further that Liens
described in clauses (a) through (e) shall remain "Excepted Liens" only for so
long as no action to enforce such Lien has been commenced and no intention to
subordinate the first priority Lien granted in favor of the Administrative Agent
and the Lenders is to be hereby implied or expressed by the permitted existence
of such Excepted Liens.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, or any other recipient of any payment to be made by or on account of any
obligation of the Borrower or any Guarantor hereunder or under any other Loan
Document, (a) income or franchise taxes imposed on (or measured by) its net
income by the United States of America or such other jurisdiction under the laws
of which such recipient is organized or in which its principal office is located
or, in the case of any Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed by the United States of America or
any similar tax imposed by any other jurisdiction in which the Borrower or any
Guarantor is located and (c) in the case of a Foreign Lender (other than an
assignee pursuant to a request by the Borrower under Section 5.04(b)), any
withholding tax that is imposed on amounts payable to such Foreign Lender at the
time such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender's failure to comply
with Section 5.03(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts with respect to such
withholding tax pursuant to Section 5.03 or Section 5.03(c).
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
8
"Financial Officer" means, for any Person, the chief financial officer,
principal accounting officer, treasurer or controller of such Person. Unless
otherwise specified, all references herein to a Financial Officer means a
Financial Officer of the Borrower.
"Financial Statements" means the financial statement or statements of the
Borrower and its Consolidated Subsidiaries referred to in Section 7.04(a).
"Foreign Lender" means any Lender that is organized under the laws of a
jurisdiction other than that in which the Borrower is located. For purposes of
this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means any Restricted Subsidiary that is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time subject to the terms and conditions
set forth in Section 1.04.
"Gas Balancing Obligations" means those obligations set forth on Schedule
7.19.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government over the Borrower, any Restricted Subsidiary, any of their
Properties, the Administrative Agent or any Lender.
"Governmental Requirement" means any law, statute, code, ordinance, order,
determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement,
whether now or hereinafter in effect, including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
"Guarantors" means, collectively:
(a) as of the Effective Date, each of the following:
- Petrohawk Operating Company, a Texas corporation;
- Beta Operating Company, L.L.C., an Oklahoma limited
liability company;
- P-H Energy, LLC, a Texas limited liability company;
- Prohawk Oil & Gas Corporation, a Texas corporation;
- Red River Field Services, L.L.C., an Oklahoma limited
liability company;
- TCM, L.L.C., an Oklahoma limited liability company;
9
- Petrohawk Properties, LP, a Texas limited partnership;
- Prohawk Operating, LLC, a Texas limited liability company;
- Petrohawk Holdings, LLC, a Delaware limited liability
company;
- Black Hawk Oil Company, a Delaware corporation;
- Mission Holdings LLC, a Delaware limited liability company;
- Mission E&P Limited Partnership, a Texas limited
partnership; and
(b) each other Material Domestic Subsidiary or other Domestic
Subsidiary that guarantees the Indebtedness pursuant to Section 8.14(b).
"Guaranty Agreement" means an agreement executed by the Guarantors in
substantially the form of Exhibit F-2 unconditionally guarantying on a joint and
several basis, payment of the Indebtedness, as the same may be amended, modified
or supplemented from time to time.
"Highest Lawful Rate" means, with respect to each Lender, the maximum
nonusurious interest rate, if any, that at any time or from time to time may be
contracted for, taken, reserved, charged or received on its Loans, or on other
Indebtedness under laws applicable to such Lender which are presently in effect
or, to the extent allowed by law, under such applicable laws which may hereafter
be in effect and which allow a higher maximum nonusurious interest rate than
applicable laws allow as of the date hereof.
"Hydrocarbon Interests" means all rights, titles, interests and estates now
or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases,
or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
"Incremental Commitment" means, as to any Existing Term Lender, the
obligation of such Lender to make additional Loans to the Borrower on the
Effective Date and during the balance of the Commitment Period in excess of the
amount of its Loan under the Existing Credit Agreement.
"Incremental Loan" means an incremental term loan made pursuant to Section
2.01.
"Indebtedness" means any and all amounts owing or to be owing by the
Borrower, any Restricted Subsidiary or any Guarantor to the Administrative Agent
or any Lender under any Loan Document and all renewals, extensions and/or
rearrangements of any of the above.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
10
"Information Memorandum" means the Confidential Information Memorandum
dated June 2005 relating to the Borrower and the Transactions.
"Initial Reserve Report" means the respective reports internally generated
by the Borrower with respect to certain Oil and Gas Properties of the Borrower
and the Restricted Subsidiaries as of July 1, 2005, and Mission with respect to
certain Oil and Gas Properties of Mission and its Subsidiaries as of July 1,
2005.
"Intercreditor Agreement" means the terms of subordination as attached
hereto as Annex II.
"Interest Election Request" means a request by the Borrower to convert or
continue a Tranche in accordance with Section 2.05.
"Interest Payment Date" means (a) with respect to any ABR Tranche, the last
day of each March, June, September and December and (b) with respect to any
Eurodollar Tranche, the last day of the Interest Period applicable to the
Tranche and, in the case of a Eurodollar Tranche with an Interest Period of more
than three months' duration, each day prior to the last day of such Interest
Period that occurs at intervals of three months' duration after the first day of
such Interest Period.
"Interest Period" means with respect to any Eurodollar Tranche, the period
commencing on the date of such Tranche and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
(or, with the consent of each Lender, nine or twelve months) thereafter, as the
Borrower may elect; provided, that (a) if any Interest Period would end on a day
other than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (b) any Interest Period pertaining to a
Eurodollar Tranche that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period. For purposes hereof, the date
of a Tranche initially shall be the date on which such Loan that such Tranche is
a part of is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Tranche.
"Investment" means, for any Person: (a) the acquisition (whether for cash,
Property, services or securities or otherwise) of Equity Interests of any other
Person or any agreement to make any such acquisition (including, without
limitation, any "short sale" or any sale of any securities at a time when such
securities are not owned by the Person entering into such short sale); (b) the
making of any deposit with, or advance, loan or other extension of credit to,
any other Person (including the purchase of Property from another Person subject
to an understanding or agreement, contingent or otherwise, to resell such
Property to such Person, but excluding any such advance, loan or extension of
credit having a term not exceeding ninety (90) days representing the purchase
price of inventory or supplies sold by such Person in the ordinary course of
business) or (c) the entering into of any guarantee of, or other contingent
obligation (including the deposit of any Equity Interests to be sold) with
respect to, Debt or other liability of
11
any other Person and (without duplication) any amount committed to be advanced,
lent or extended to such Person.
"Knowledge" means, with respect to an individual, his or her actual
knowledge and with respect to any corporation, limited liability company,
partnership or other business entity, the actual knowledge of any officer,
general partner or individual being a member of the executive management of such
entity.
"Lenders" means the Persons listed on Annex I and any Person that shall
have become a party hereto pursuant to an Assignment and Assumption, other than
any such Person that ceases to be a party hereto pursuant to an Assignment and
Assumption.
"LIBO Rate" means, with respect to any Eurodollar Tranche for any Interest
Period, the rate appearing on Page 3750 of the Dow Xxxxx Market Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
Eurodollar Tranche for such Interest Period shall be the rate (rounded upwards,
if necessary, to the next 1/16 of 1%) at which dollar deposits of $5,000,000 and
for a maturity comparable to such Interest Period are offered by the principal
London office of the Administrative Agent in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
"Lien" means any interest in Property securing an obligation owed to, or a
claim by, a Person other than the owner of the Property, whether such interest
is based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to (a) the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes or (b) production payments and the like payable out of Oil
and Gas Properties. The term "Lien" shall include easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations. For the
purposes of this Agreement, the Borrower and its Restricted Subsidiaries shall
be deemed to be the owner of any Property which it has acquired or holds subject
to a conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.
"Loan Documents" means this Agreement, the Notes, if requested, the
Security Instruments and the Intercreditor Agreement.
"Loan" means the term loan made by each Lender to the Borrower pursuant to
this Agreement.
12
"Majority Lenders" means (a) at any time prior to the expiration of the
Commitment Period, Lenders having Loans and unused Commitments representing
greater than 67% of the sum of the total Loans and unused Commitments at such
time and (b) at any time after the expiration of the Commitment Period, Lenders
having Loans representing greater than 67% of the outstanding principal amount
of the Loans (without regard to any sale by a Lender of a participation in any
Loan under Section 12.04(c)).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, Property, condition (financial or otherwise) or prospects
of the Borrower and the Restricted Subsidiaries taken as a whole, (b) the
ability of the Borrower, any Restricted Subsidiary or any Guarantor to perform
any of its obligations under any Loan Document, (c) the validity or
enforceability of any Loan Document or (d) the rights and remedies of or
benefits available to the Administrative Agent or any Lender under any Loan
Document.
"Material Domestic Subsidiary" means, as of any date, any Domestic
Subsidiary that (a) is a Wholly-Owned Subsidiary and (b) together with its
Restricted Subsidiaries, owns Property having a fair market value of $500,000 or
more.
"Material Indebtedness" means Debt (other than the Loans), or obligations
in respect of one or more Swap Agreements, of any one or more of the Borrower
and its Restricted Subsidiaries in an aggregate principal amount exceeding
$1,000,000. For purposes of determining Material Indebtedness, the "principal
amount" of the obligations of the Borrower or any Restricted Subsidiary in
respect of any Swap Agreement at any time shall be the maximum aggregate amount
(giving effect to any netting agreements) that the Borrower or such Subsidiary
would be required to pay if such Swap Agreement were terminated at such time.
"Maturity Date" means July 28, 2010.
"Mergers" means the merger of Petrohawk Acquisition Corporation into
Mission, and the subsequent merger of Mission into the Borrower.
"Merger Documents" means the Agreement and Plan of Merger by and among the
Borrower, Petrohawk Acquisition Corporation, a Delaware corporation, and
Mission, dated as of April 3, 2005, and all other agreements, instruments and
documents executed in connection with the Mergers.
"Mission" means Mission Resources Corporation, a Delaware corporation.
"Mission Credit Agreement" means (i) that certain Credit Agreement dated as
of April 8, 2004 among Mission, each of the lenders party thereto and Xxxxx
Fargo Bank, National Association, as administrative agent for the lenders and
(ii) that certain Term Loan Agreement dated as of April 8, 2004 between Mission,
each of the lenders party thereto and Guggenheim, Corporate Funding, LLC, as
collateral agent for the lenders.
"Moody's" means Xxxxx'x Investors Service, Inc. and any successor thereto
that is a nationally recognized rating agency.
13
"Mortgaged Property" means any Property owned by the Borrower or any
Guarantor, which is subject to the Liens existing and to exist under the terms
of the Security Instruments.
"Multiemployer Plan" means a Plan which is a multiemployer plan as defined
in section 3(37) or 4001 (a)(3) of ERISA.
"Net Cash Proceeds" means (a) in connection with any asset sale, the
proceeds thereof in the form of cash and Cash Equivalents (including any such
proceeds received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, but
only as and when received) of such asset sale, net of attorneys' fees,
accountants' fees, investment banking fees, broker's or finder's fees, amounts
required to be applied to the repayment of Indebtedness secured by a Lien
expressly permitted hereunder on any asset that is the subject of such asset
sale (other than any Lien pursuant to a Security Instrument) and other customary
fees and expenses actually incurred in connection therewith and net of taxes
paid or reasonably estimated to be payable as a result thereof (after taking
into account any available tax credits or deductions related to such asset sale
and any tax sharing arrangements) and (b) in connection with any issuance or
sale of equity securities or debt securities or instruments or the incurrence of
loans, the cash proceeds received from such issuance or incurrence, net of
attorneys' fees, investment banking fees, accountants' fees, underwriting
discounts and commissions and other customary fees and expenses actually
incurred in connection therewith.
"New Funds Amount" has the meaning set forth in Section 2.04(d).
"New Lender" means any Lender which is not an Existing Term Lender.
"Non-Recourse Debt" means any Debt of any Unrestricted Subsidiary, in each
case in respect of which: (a) the holder or holders thereof (i) shall have
recourse only to, and shall have the right to require the obligations of such
Unrestricted Subsidiary to be performed, satisfied, and paid only out of, the
Property of such Unrestricted Subsidiary and/or one or more of its Subsidiaries
(but only to the extent that such Subsidiaries are Unrestricted Subsidiaries)
and/or any other Person (other than Borrower and/or any Restricted Subsidiary)
and (ii) shall have no direct or indirect recourse (including by way of
guaranty, support or indemnity) to the Borrower or any Restricted Subsidiary or
to any of the Property of Borrower or any Restricted Subsidiary, whether for
principal, interest, fees, expenses or otherwise; and (b) the terms and
conditions relating to the non-recourse nature of such Debt are in form and
substance reasonably acceptable to the Administrative Agent.
"Notes" means the promissory notes of the Borrower as requested by a Lender
and described in Section 2.02(d) and being substantially in the form of Exhibit
A, together with all amendments, modifications, replacements, extensions and
rearrangements thereof.
"Notice of Commitment Increase" has the meaning set forth in Section
2.04(b).
"Oil and Gas Properties" means (a) Hydrocarbon Interests; (b) the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; (c)
all presently existing or future unitization, pooling agreements and
declarations of pooled units and the units created thereby (including without
limitation all units created under orders, regulations and rules of any
14
Governmental Authority) which may affect all or any portion of the Hydrocarbon
Interests; (d) all operating agreements, contracts and other agreements,
including production sharing contracts and agreements, which relate to any of
the Hydrocarbon Interests or the production, sale, purchase, exchange or
processing of Hydrocarbons from or attributable to such Hydrocarbon Interests;
(e) all Hydrocarbons in and under and which may be produced and saved or
attributable to the Hydrocarbon Interests, including all oil in tanks, and all
rents, issues, profits, proceeds, products, revenues and other incomes from or
attributable to the Hydrocarbon Interests; (f) all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests and (g) all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment, rental equipment or other personal Property which
may be on such premises for the purpose of drilling a well or for other similar
temporary uses) and including any and all oil xxxxx, gas xxxxx, injection xxxxx
or other xxxxx, buildings, structures, fuel separators, liquid extraction
plants, plant compressors, pumps, pumping units, field gathering systems, tanks
and tank batteries, fixtures, valves, fittings, machinery and parts, engines,
boilers, meters, apparatus, equipment, appliances, tools, implements, cables,
wires, towers, casing, tubing and rods, surface leases, rights-of-way, easements
and servitudes together with all additions, substitutions, replacements,
accessions and attachments to any and all of the foregoing.
"Other Taxes" means any and all present or future stamp or documentary
taxes or any other excise or Property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement and any other Loan Document.
"Participant" has the meaning assigned to such term in Section 12.04(c)(i).
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Percentage Share" means with respect to any Lender, the percentage of the
aggregate Commitments represented by such Lender's Commitment as such percentage
is set forth on Annex I as such amount may be adjusted pursuant to a Commitment
Increase under Section 2.04 or any Assignment and Assumption under Section
12.04.
"Permitted Holders" means PHAWK LLC, a Delaware limited liability company,
EnCap Investments, L.P., Liberty Energy Holdings, Xxxxx X. Xxxxxx, and each of
their respective Affiliates.
"Permitted Refinancing Debt" means Debt (for purposes of this definition,
"new Debt") incurred in exchange for, or proceeds of which are used to
refinance, all of any other Debt (the "Refinanced Debt"); provided that (a) such
new Debt is in an aggregate principal amount not in excess of the sum of (i) the
aggregate principal amount then outstanding of the Refinanced Debt (or, if the
Refinanced Debt is exchanged or acquired for an amount less than the principal
amount thereof to be due and payable upon a declaration of acceleration thereof,
such lesser amount) and (ii) an amount necessary to pay any fees and expenses,
including premiums, related
15
to such exchange or refinancing; (b) such new Debt has a stated maturity no
earlier than the stated maturity of the Refinanced Debt and an average life no
shorter than the average life of the Refinanced Debt; (c) such new Debt does not
have a stated interest rate in excess of the stated interest rate of the
Refinanced Debt, except that with respect to any Debt refinancing of the Senior
Unsecured Notes pursuant to a Change of Control tender or as a direct
consequence of the Mergers within 2 months of the Effective Date, such new Debt
does not have a stated interest rate in excess of 12-3/8 % per annum; (d) such
new Debt does not contain any covenants which are more onerous to the Borrower
and its Restricted Subsidiaries than those imposed by the Refinanced Debt and
(e) such new Debt (and any guarantees thereof) is subordinated in right of
payment to the Indebtedness (or, if applicable, the Guaranty Agreement) to at
least the same extent as the Refinanced Debt.
"Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any employee pension benefit plan, as defined in section 3(2)
of ERISA, which (a) is currently or hereafter sponsored, maintained or
contributed to by the Borrower, a Subsidiary or an ERISA Affiliate or (b) was at
any time during the six calendar years preceding the date hereof, sponsored,
maintained or contributed to by the Borrower or a Subsidiary or an ERISA
Affiliate.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by the Administrative Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective. Such rate is set by the Administrative Agent as a general reference
rate of interest, taking into account such factors as the Administrative Agent
may deem appropriate; it being understood that many of the Administrative
Agent's commercial or other loans are priced in relation to such rate, that it
is not necessarily the lowest or best rate actually charged to any customer and
that the Administrative Agent may make various commercial or other loans at
rates of interest having no relationship to such rate.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, including, without
limitation, cash, securities, accounts and contract rights.
"Proved Reserves" means "Proved Reserves" as defined in the Definitions for
Oil and Gas Reserves (in this paragraph, the "Definitions") promulgated by the
Society of Petroleum Engineers (or any generally recognized successor) as in
effect at the time in question. "Proved Developed Producing Reserves" means
Proved Reserves which are categorized as both "Developed" and "Producing" in the
Definitions, "Proved Developed Nonproducing Reserves" means Proved Reserves
which are categorized as both "Developed" and "Nonproducing" in the Definitions,
and "Proved Undeveloped Reserves" means Proved Reserves which are categorized as
"Undeveloped" in the Definitions.
"PV" means the net present value, discounted at 10% per annum, of the
future net revenues expected to accrue to the Borrower's and its Restricted
Subsidiaries' collective interests in Proved Reserves expected to be produced
from Oil and Gas Properties during the remaining
16
expected economic lives of such reserves. Each calculation of such expected
future net revenues shall be made in accordance with the then existing standards
of the Society of Petroleum Engineers, provided that in any event (a)
appropriate deductions shall be made for severance and ad valorem taxes, and for
operating, gathering, transportation and marketing costs required for the
production and sale of such reserves, (b) appropriate adjustments shall be made
for hedging operations, provided that Swap Agreements with non-investment grade
counterparties shall not be taken into account to the extent that such Swap
Agreements improve the position of or otherwise benefit the Borrower or any of
its Restricted Subsidiaries, (c) the pricing assumptions used in determining PV
for any particular reserves shall be based upon the following price decks: (i)
for natural gas, the quotation for deliveries of natural gas for each such year
from the New York Mercantile Exchange for Xxxxx Hub, provided that with respect
to quotations for calendar years after the fifth calendar year, the quotation
for the fifth calendar year shall be applied and (ii) for crude oil, the
quotation for deliveries of crude oil for each such calendar year from the New
York Mercantile Exchange for Cushing, Oklahoma, provided that with respect to
quotations for calendar years after the fifth calendar year, the quotation for
the fifth calendar year shall be applied and (d) the cash-flows derived from the
pricing assumptions set forth in clause (b) above shall be further adjusted to
account for the historical basis differentials for each month during the
preceding 12-month period calculated by comparing realized crude oil and natural
gas prices to Cushing, Oklahoma and Xxxxx Hub NYMEX prices for each month during
such period.
"Redemption" means with respect to any Debt, the repurchase, redemption,
prepayment, repayment, defeasance or any other acquisition or retirement for
value (or the segregation of funds with respect to any of the foregoing) of such
Debt. "Redeem" has the correlative meaning thereto.
"Register" has the meaning assigned such term in Section 12.04(b)(iv).
"Regulation D" means Regulation D of the Board, as the same may be amended,
supplemented or replaced from time to time.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors (including attorneys, accountants and experts) of such Person and
such Person's Affiliates.
"Remedial Work" has the meaning assigned such term in Section 8.10(a).
"Reserve Report" means the Initial Reserve Report and each other report
setting forth, as of each January 1st or July 1st (or such other specified "as
of" date contemplated by Section 2.07), the oil and gas reserves attributable to
the Oil and Gas Properties of the Borrower and the Restricted Subsidiaries,
together with a projection of the rate of production and future net income,
taxes, operating expenses and capital expenditures with respect thereto as of
such date, consistent with SEC reporting requirements at the time and reflecting
(and conforming to the definition of) PV, provided that each such report
hereafter delivered must (a) separately report on Proved Developed Producing
Reserves, Proved Developed Nonproducing Reserves and Proved Undeveloped Reserves
and separately calculate the PV of each such category of Proved Reserves for the
Borrower's and the Restricted Subsidiaries' interests, (b) take into account the
Borrower's actual experiences with leasehold operating expenses and other costs
in determining projected
17
leasehold operating expenses and other costs, (c) identify and take into account
any "over-produced" or "under-produced" status under gas balancing arrangements,
and (d) contain information and analysis comparable in scope to that contained
in the Initial Reserve Report.
"Responsible Officer" means, as to any Person, the Chief Executive Officer,
the President, any Financial Officer or any Vice President of such Person.
Unless otherwise specified, all references to a Responsible Officer herein shall
mean a Responsible Officer of the Borrower.
"Restricted Payment" means any dividend or other distribution (whether in
cash, securities or other Property) with respect to any Equity Interests in the
Borrower, or any payment (whether in cash, securities or other Property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in the Borrower or any option, warrant or other right to
acquire any such Equity Interests in the Borrower.
"Restricted Subsidiary" means any Subsidiary of the Borrower that is not an
Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission or any successor
Governmental Authority.
"Security Instruments" means the Guaranty Agreement, mortgages, deeds of
trust and other agreements, instruments or certificates described or referred to
in Exhibit F-1, and any and all other agreements, instruments or certificates
now or hereafter executed and delivered by the Borrower or any other Person
(other than Swap Agreements with the Lenders or any Affiliate of a Lender or
participation or similar agreements between any Lender and any other lender or
creditor with respect to any Indebtedness pursuant to this Agreement) in
connection with, or as security for the payment or performance of the
Indebtedness, any Notes or this Agreement, as such agreements may be amended,
modified, supplemented or restated from time to time.
"Senior Indenture" means that certain Indenture dated as of April 8, 2004
among the Borrower (as successor by merger to Mission), the Subsidiary
Guarantors (as defined therein) and The Bank of New York, as trustee, as the
same has been amended or supplemented on or prior to the Effective Date and as
the same may hereafter be amended or supplemented pursuant to Section 9.04(b).
"Senior Revolving Credit Agreement" means that certain Amended and Restated
Senior Revolving Credit Agreement as amended and restated on the Effective Date
among the Borrower, BNP Paribas, as administrative agent for the revolving
lenders party thereto and the other agents and revolving lenders from time to
time parties thereto and any "Loan Documents" (as defined therein) executed in
connection therewith, in each case, as hereafter amended or supplemented from
time to time, subject to Section 9.03(e) and Section 9.02(i).
"Senior Unsecured Notes" means those certain $130,000,000 9-7/8% Senior
Notes due 2011, issued by the Borrower (as successor to Mission), as issuer
pursuant to the Senior Indenture.
18
"S&P" means Standard & Poor's Ratings Group, a division of The XxXxxx-Xxxx
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Tranches shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"Subsidiary" means: (a) any Person of which at least a majority of the
outstanding Equity Interests having by the terms thereof ordinary voting power
to elect a majority of the board of directors, manager or other governing body
of such Person (irrespective of whether or not at the time Equity Interests of
any other class or classes of such Person shall have or might have voting power
by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by the Borrower or one or more of its
Subsidiaries or by the Borrower and one or more of its Subsidiaries and (b) any
partnership of which the Borrower or any of its Subsidiaries is a general
partner. Unless otherwise indicated herein, each reference to the term
"Subsidiary" shall mean a Subsidiary of the Borrower.
"Swap Agreement" means any agreement with respect to any swap, forward,
future or derivative transaction, collar or option or similar agreement, whether
exchange traded, "over-the-counter" or otherwise, involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the
Subsidiaries shall be a Swap Agreement.
"Synthetic Leases" means, in respect of any Person, all leases which shall
have been, or should have been, in accordance with GAAP, treated as operating
leases on the financial statements of the Person liable (whether contingently or
otherwise) for the payment of rent thereunder and which were properly treated as
indebtedness for borrowed money for purposes of U.S. federal income taxes, if
the lessee in respect thereof is obligated to either purchase for an amount in
excess of, or pay upon early termination an amount in excess of, 80% of the
residual value of the Property subject to such operating lease upon expiration
or early termination of such lease.
"Taxes" means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
19
"Total Debt" means, at any date, all Debt of the Borrower and the
Consolidated Restricted Subsidiaries on a consolidated basis less (i) Cash
Equivalents, (ii) letters of credit issued for the account of the Borrower
and/or any of its Restricted Subsidiaries but only to the extent the aggregate
face amount of all such letters of credit is less than $5,000,000 and (iii)
surety bonds permitted under Section 9.02(e) to the extent the aggregate face
amount of all such bonds does not exceed $55,000,000.
"Total Reserve Value" means at any time the PV attributable to Proved
Reserves as most recently determined and certified to the Lenders in accordance
with Section 2.07(a), as the same may be adjusted from time to time pursuant to
Section 8.13(b) or Section 9.13(e) and further adjusted, if necessary, to
exclude a portion of reserves other than Proved Developed Producing Reserves
such that not less than 70% of Total Reserve Value is attributable to the PV of
Proved Developed Producing Reserves.
"Tranche" means that portion of the Loans of the same Type, made, converted
or continued on the same date and, in the case of Eurodollar Tranches, as to
which a single Interest Period is in effect.
"Transactions" means, with respect to (a) the Borrower, the execution,
delivery and performance by the Borrower of this Agreement, each other Loan
Document and each Merger Document to which it is a party, the Mergers, the
borrowing of Loans, the use of the proceeds thereof, and the grant of Liens by
the Borrower on Mortgaged Properties and other Properties pursuant to the
Security Instruments and (b) each Guarantor, the execution, delivery and
performance by such Guarantor of each Loan Document and Merger Document to which
it is a party, the Mergers, the guaranteeing of the Indebtedness and the other
obligations under the Guaranty Agreement by such Guarantor and such Guarantor's
grant of the security interests and provision of collateral thereunder, and the
grant of Liens by such Guarantor on Mortgaged Properties and other Properties
pursuant to the Security Instruments.
"Type", when used in reference to any Loan, refers to whether the rate of
interest on such Loan, is determined by reference to the Alternate Base Rate or
the Adjusted LIBO Rate.
"Unrestricted Subsidiary" means any Subsidiary of the Borrower designated
as such on Schedule 7.15 or which the Borrower has designated in writing to the
Administrative Agent to be an Unrestricted Subsidiary pursuant to Section 9.06.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary of which all of
the outstanding Equity Interests (other than any directors' qualifying shares
mandated by applicable law), on a fully-diluted basis, are owned by the Borrower
or one or more of the Wholly-Owned Subsidiaries or by the Borrower and one or
more of the Wholly-Owned Subsidiaries.
Section 1.03 Terms Generally; Rules of Construction. The definitions of
terms herein shall apply equally to the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". The word "will" shall be construed to have the same meaning and
effect as the word "shall". Unless the context requires otherwise (a) any
definition of or reference to any
20
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any law shall be construed as referring to such law as amended,
modified, codified or reenacted, in whole or in part, and in effect from time to
time, (c) any reference herein to any Person shall be construed to include such
Person's successors and assigns (subject to the restrictions contained herein),
(d) the words "herein", "hereof" and "hereunder", and words of similar import,
shall be construed to refer to this Agreement in its entirety and not to any
particular provision hereof, (e) with respect to the determination of any time
period, the word "from" means "from and including" and the word "to" means "to
and including" and (f) any reference herein to Articles, Sections, Annexes,
Exhibits and Schedules shall be construed to refer to Articles and Sections of,
and Annexes, Exhibits and Schedules to, this Agreement. No provision of this
Agreement or any other Loan Document shall be interpreted or construed against
any Person solely because such Person or its legal representative drafted such
provision.
Section 1.04 Accounting Terms and Determinations; GAAP. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the Financial Statements except for changes in which Borrower's independent
certified public accountants concur and which are disclosed to Administrative
Agent on the next date on which financial statements are required to be
delivered to the Lenders pursuant to Section 8.01(a); provided that, unless the
Borrower and the Majority Lenders shall otherwise agree in writing, no such
change shall modify or affect the manner in which compliance with the covenants
contained herein is computed such that all such computations shall be conducted
utilizing financial information presented consistently with prior periods.
ARTICLE II
THE TERM LOANS
Section 2.01 Term Loans. Subject to the terms and conditions set forth
herein, each Lender severally agrees to make on the Effective Date a Loan to the
Borrower in a principal amount equal to such Lender's Percentage Share of
$75,000,000. In addition, subject to the terms and conditions set forth herein,
each Lender severally agrees to make, on a Business Day requested under Section
2.03, a Loan to the Borrower in a principal amount equal to such Lender's
Percentage Share of the requested borrowing, provided that the aggregate amount
of such borrowing shall not exceed $75,000,000. The Commitments are not
revolving in nature, and amounts repaid or prepaid may not be reborrowed under
any circumstance.
Section 2.02 Loans.
(a) Several Obligations. Each Loan shall be made on the Effective Date
by the Lenders ratably in accordance with their respective Commitments. The
failure of any Lender to fund its Loan shall not relieve any other Lender of its
obligations hereunder; provided that the
21
Commitments are several and no Lender shall be responsible for any other
Lender's failure to fund its Loan as required.
(b) Types of Tranches. Subject to Section 3.03, each Loan shall be
comprised entirely of ABR Tranches or Eurodollar Tranches as the Borrower may
request in accordance herewith. Each Lender at its option (but subject to
Section 5.04) may fund any Eurodollar Tranche by causing any domestic or foreign
branch or Affiliate of such Lender to fund such Tranche; provided that any
exercise of such option shall not affect the obligation of the Borrower to repay
such Lender's Loan in accordance with the terms of this Agreement.
(c) Minimum Amounts. At the commencement of each Interest Period for
any Eurodollar Tranche, such Tranche shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $10,000,000. At the time that
each ABR Tranche is made, such Tranche shall be in an aggregate amount that is
an integral multiple of $1,000,000 and not less than $5,000,000. Tranches of
more than one Type may be outstanding at the same time, provided that there
shall not at any time be more than a total of five Eurodollar Tranches
outstanding.
(d) Notes. Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender, including the amounts
of principal and interest payable and paid to such Lender from time to time
hereunder. The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender's share thereof. The
entries made in the accounts maintained pursuant to this Section 2.02(d) shall
be prima facie evidence of the existence and amounts of the obligations recorded
therein; provided that the failure of any Lender or the Administrative Agent to
maintain such accounts or any error therein shall not in any manner affect the
obligation of the Borrower to repay the Loans in accordance with the terms of
this Agreement. Any Lender may request that Loans made by it be evidenced by a
Note. In such event, the Borrower shall prepare, execute and deliver to such
Lender a Note payable to the order of such Lender and substantially in the form
of Exhibit A. Thereafter, the Loans evidenced by such Note and interest thereon
shall at all times (including after assignment pursuant to Section 12.04) be
represented by one or more Notes in such form payable to the order of the payee
named therein (or, if such Note is a registered note, to such payee and its
registered assigns).
Section 2.03 Requests for the Loans Not later than 12:00 noon, New York
City time, three Business Days before the Effective Date, and thereafter, if the
Borrower elects to borrow additional funds hereunder during the Commitment
Period, three Business Days prior to the date of such proposed borrowing, the
Borrower shall request the Loans by notifying the Administrative Agent by
telephone, fax (or electronic communication, if arrangements for doing so have
been approved by the Administrative Agent), and shall confirm such request by
delivering to the Administrative Agent and the Lenders a written Borrowing
Request in substantially the form of Exhibit B-1 and signed by the Borrower.
Such telephonic, electronic or written request shall specify the following
information in compliance with Section 2.02:
22
(i) the aggregate amount of each requested Loan;
(ii) the proposed date of the borrowing, which shall either be
the Effective Date or a Business Day during the Commitment Period;
(iii) whether any portion of such Loans is to be an ABR Tranche
or a Eurodollar Tranche;
(iv) in the case of a Eurodollar Tranche, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by the
definition of the term "Interest Period"; and
(v) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of Section
2.06.
If no election as to the Type is specified, then the entire portion of the Loans
shall be an ABR Tranche. If no Interest Period is specified with respect to any
requested Eurodollar Tranche, then the Borrower shall be deemed to have selected
an Interest Period of one month's duration.
Promptly following receipt of a Borrowing Request in accordance with this
Section 2.03, the Administrative Agent shall advise each Lender of the details
thereof and of the amount of such Lender's Loan to be made.
Section 2.04 Loans Increase.
(a) Subject to the terms and conditions set forth herein, the Borrower
shall have the right, without the consent of the Lenders but with the prior
approval of the Administrative Agent (not to be unreasonably withheld or
delayed), to cause from time to time an increase in the Commitments of the
Lenders (a "Commitment Increase") by adding to this Agreement one or more
additional financial institutions that is not already a Lender hereunder and
that is reasonably satisfactory to the Administrative Agent (each a "CI Lender")
or by allowing one or more existing Lenders to increase their respective
Commitments; provided, however that (i) no Event of Default shall have occurred
which is continuing, no such Commitment Increase shall cause the Commitments and
the then outstanding Loans under this Agreement to exceed $200,000,000 and (iii)
no Lender's Commitment shall be increased without such Lender's prior written
consent (which consent may be given or withheld in such Lender's sole and
absolute discretion).
(b) Any Commitment Increase shall be requested by written notice from
the Borrower to the Administrative Agent (a "Notice of Commitment Increase") in
the form of Exhibit B-2 attached hereto and shall be approved by the
Administrative Agent. Each such Notice of Commitment Increase shall specify (i)
the proposed effective date of such Commitment Increase, which date shall be no
earlier than five (5) Business Days after receipt by the Administrative Agent of
such Notice of Commitment Increase, (ii) the amount of the requested Commitment
Increase (provided that after giving effect to such requested Commitment
Increase, the aggregate amount of the Commitments does not exceed the amount set
forth in subsection (a)(ii) above), (iii) the identity of each CI Lender or
Lender that has agreed in writing to increase its Commitment hereunder, and (iv)
the amount of the respective Commitments of the
23
then existing Lenders and the CI Lenders from and after the Commitment Increase
Effective Date (as defined below). The Administrative Agent shall review each
Notice of Commitment Increase and shall notify the Borrower whether or not the
Administrative Agent consents to the proposed Commitment Increase. If the
Administrative Agent consents to such Commitment Increase (such consent not to
be unreasonably withheld), the Administrative Agent shall execute a counterpart
of the Notice of Commitment Increase and such Commitment Increase shall be
effective on the proposed effective date set forth in the Notice of Commitment
Increase (if the Administrative Agent consented to such Commitment Increase
prior to such proposed date) or on another date agreed to by the Administrative
Agent and the Borrower (such date referred to as the "Commitment Increase
Effective Date").
(c) On each Commitment Increase Effective Date, each CI Lender shall,
by wire transfer of immediately available funds, deliver to the Administrative
Agent such CI Lender's portion of the Commitment Increase, which amount, for
each such CI Lender, shall constitute Loans made by such CI Lender to the
Borrower pursuant to this Agreement on such Commitment Increase Effective Date.
(d) Each Commitment Increase shall become effective on its Commitment
Increase Effective Date and upon such effectiveness (i) the Administrative Agent
shall record in the Register each then CI Lender's information as provided in
the Notice of Commitment Increase and pursuant to an Administrative
Questionnaire satisfactory to the Administrative Agent that shall be executed
and delivered by each CI Lender to the Administrative Agent on or before the
Commitment Increase Effective Date, (ii) Annex I hereof shall be amended and
restated to set forth all Lenders (including any CI Lenders) that will be
Lenders hereunder after giving effect to such Commitment Increase (which shall
be set forth in Annex I to the applicable Notice of Commitment Increase) and the
Administrative Agent shall distribute to each Lender (including each CI Lender)
a copy of such amended and restated Annex I, and (iii) each CI Lender identified
on the Notice of Commitment Increase for such Commitment Increase shall be a
"Lender" for all purposes under this Agreement.
Section 2.05 Interest Elections.
(a) Conversion and Continuance. Each Tranche initially shall be of the
Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Tranche, shall have an initial Interest Period as specified in the
applicable Borrowing Request. Thereafter, the Borrower may elect to convert such
Tranche to a different Type or to continue such Tranche and, in the case of a
Eurodollar Tranche, may elect Interest Periods therefor, all as provided in this
Section 2.05. The Borrower may elect different options with respect to different
portions of the affected Tranche, in which case each such portion shall be
allocated ratably among the Lenders holding the Loans comprising such Tranche,
and the Loans comprising each such portion shall be considered a separate
Tranche.
(b) Interest Election Requests. To make an election pursuant to this
Section 2.05, the Borrower shall notify the Administrative Agent of such
election by telephone, fax (or transmit by electronic communication, if
arrangements for doing so have been approved by the Administrative Agent) (i) in
the case of a Eurodollar Tranche, not later than 12:00 noon, New York City time,
three Business Days before the first day of the Interest Period related to such
24
Tranche and (ii) in the case of an ABR Tranche, not later than 12:00 noon, New
York City time, on the same Business Day of the proposed conversion or
continuation. Each such telephonic (or electronic communication) Interest
Election Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Interest Election
Request in substantially the form of Exhibit C and signed by the Borrower.
(c) Information in Interest Election Requests. Each telephonic,
electronic communication and written Interest Election Request shall specify the
following information in compliance with Section 2.02:
(i) the Tranche to which such Interest Election Request applies
and, if different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting Tranche (in
which case the information to be specified pursuant to Section 2.05(c)(iii) and
(iv) shall be specified for each resulting Tranche);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Tranche is to be an ABR Tranche or a
Eurodollar Tranche; and
(iv) if the resulting Tranche is a Eurodollar Tranche, the
Interest Period to be applicable thereto after giving effect to such election,
which shall be a period contemplated by the definition of the term "Interest
Period".
If any such Interest Election Request requests a Eurodollar Tranche but does not
specify an Interest Period, then the Borrower shall be deemed to have selected
an Interest Period of one month's duration.
(d) Notice to Lenders by the Administrative Agent. Promptly following
receipt of an Interest Election Request, the Administrative Agent shall advise
each Lender of the details thereof and of such Lender's portion of each
resulting Tranche.
(e) Effect of Failure to Deliver Timely Interest Election Request and
Events of Default on Interest Election. If the Borrower fails to deliver a
timely Interest Election Request with respect to a Eurodollar Tranche prior to
the end of the Interest Period applicable thereto, then, unless such Tranche is
repaid as provided herein, at the end of such Interest Period such Tranche shall
be converted to an ABR Tranche. Notwithstanding any contrary provision hereof,
if an Event of Default has occurred and is continuing: (i) no outstanding
Tranche may be converted to or continued as a Eurodollar Tranche (and any
Interest Election Request that requests the conversion of any Tranche to, or
continuation of any Tranche as, a Eurodollar Tranche shall be ineffective) and
(ii) unless repaid, each Eurodollar Tranche shall be converted to an ABR Tranche
at the end of the Interest Period applicable thereto.
Section 2.06 Funding the Loans.
(a) Funding by Lenders on Effective Date. Each New Lender shall make
its Loan on the Effective Date by wire transfer of immediately available funds
by 1:00 p.m., New
25
York, New York time, to the account of the Administrative Agent most recently
designated by it for such purpose by notice to the Lenders. Subject to the
payment of "breakage costs" under the Existing Credit Agreement, the Loans made
by each Existing Term Lender under the Existing Credit Agreement shall be deemed
to have been funded hereunder with Eurodollar Tranches or ABR Tranches as
specified in the Borrowing Request delivered on the Effective Date. Each
Existing Term Lender with an Incremental Commitment shall, if necessary, make
its Incremental Loan so that the principal amount of its Loan equals the
Existing Term Lender's Percentage Share of $75,000,000 on the Effective Date.
(b) Funding by Lenders after Effective Date. If a borrowing is
requested after the Effective Date, each Lender shall make its Loan on the date
so requested by wire transfer of immediately available funds by 1:00 p.m., New
York, New York time, to the account of the Administrative Agent most recently
designated by it for such purpose by notice to the Lenders.
(c) Funding to the Borrower. With respect to any Loans made hereunder
(other than Loans deemed made by Existing Term Lenders as the result of the
amendment and restatement of the Existing Credit Agreement), the Administrative
Agent will make such Loans available to the Borrower by promptly crediting the
amounts so received, in like funds, to an account of the Borrower maintained
with the Administrative Agent in New York, New York and designated by the
Borrower in the applicable Borrowing Request.
(d) Presumption of Funding by the Lenders. Unless the Administrative
Agent shall have received notice from a Lender prior to the Effective Date that
such Lender will not make available to the Administrative Agent such Lender's
Loan, the Administrative Agent may assume that such Lender has made its Loan
available on such date in accordance with Section 2.06(a) and may, in reliance
upon such assumption, make available to the Borrower a corresponding amount. In
such event, if a Lender has not in fact made its Loan available to the
Administrative Agent, then the applicable Lender and the Borrower severally
agree to pay to the Administrative Agent forthwith on demand such corresponding
amount with interest thereon, for each day from and including the date such
amount is made available to the Borrower to but excluding the date of payment to
the Administrative Agent, at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules on interbank compensation or (ii) in
the case of the Borrower, the interest rate applicable to ABR Tranches. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan.
Section 2.07 Termination. The Commitments shall terminate at 3.00 p.m., New
York, New York time on the last day of the Commitment Period. At the close of
business on the Effective Date, the Commitments shall automatically be reduced
to $75,000,000; and any portion of the Commitments not utilized by the Borrower
on or before the last day of the Commitment Period shall be permanently
canceled. In addition, the Borrower may at any time during the Commitment
Period, terminate, or from time to time reduce, the Commitments; provided that
each reduction of the Commitments shall be in an amount that is an integral
multiple of $1,000,000 and not less than $5,000,000. To terminate or reduce the
Commitments, the Borrower shall notify the Administrative Agent of any such
election at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any notice, the Administrative Agent
shall
26
advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section 2.06 shall be irrevocable and permanent. Each
reduction of the Commitments shall be made ratably among the Lenders in
accordance with each Lender's Percentage Share.
Section 2.08 Total Reserve Value. Subject to interim adjustment under
Section 8.14 and Section 9.13, the initial Total Reserve Value shall be
$1,156,438,200. The Borrower shall deliver to the Administrative Agent a
certificate, in form reasonably satisfactory to the Administrative Agent, no
later than April 1st and October 1st of each year reflecting the Total Reserve
Value as of the immediately preceding January 1 and July 1, commencing April 1,
2006. In addition, the Borrower may, by notifying the Administrative Agent
thereof, and the Administrative Agent may, at the direction of the Majority
Lenders, by notifying the Borrower thereof, each elect to require the Total
Reserve Value be determined one additional time on a specified "as of" date
between such regular determinations (which shall be the first day of a calendar
month following the date of such notice), in which event the Borrower shall
deliver to the Administrative Agent a certificate, in form reasonably
satisfactory to the Administrative Agent, no later than three months after such
specified date, reflecting the Total Reserve value as of such specified date.
The Borrower shall calculate the Total Reserve Value based upon the applicable
definitions of this Agreement, and provide with each such certificate the
Reserve Report and other information used by the Borrower in calculating the
Total Reserve Value.
Upon receipt of such certificate, the Administrative Agent shall promptly review
such certificate and, within five (5) Business Days, confirm to the Borrower and
the Lenders that (i) the calculations used to determine the Total Reserve Value
were based upon the pricing and other requirements set forth in the definition
of Total Reserve Value and (ii) no mathematical or other errors or omissions
have been made in such calculation. If facts under (i) or (ii) are ascertained
to exist, the Administrative Agent and the Borrower shall cooperate to promptly
calculate the proper amount of the Total Reserve Value. Otherwise, upon
confirmation by the Administrative Agent of such amount as the Total Reserve
Value, such amount will be the Total Reserve Value until next adjusted or
redetermined in accordance with the terms of this Agreement.
Section 2.09 Subordination of Loans. The Loans, the Notes, if any, this
Agreement and the other Loan Documents; the rights and remedies of the Lenders
and the Administrative Agent hereunder and thereunder and the Liens created
thereby are subject to the Terms of Subordination attached hereto as Annex II.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST; PREPAYMENTS; FEES
Section 3.01 Repayment of the Loans. On the 28th day of each July prior to
the Maturity Date, commencing July 28, 2006, the Borrower shall repay the
aggregate principal amount of the Loans in the principal amount equal to one
percent (1%) of the aggregate outstanding principal balance of the Loans as of
the last day of the Commitment Period; and on the Maturity Date, the Borrower
shall repay the outstanding principal balance of the Loans in full.
Section 3.02 Interest.
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(a) ABR Tranches. The portion of the Loans comprising each ABR Tranche
shall bear interest at the Alternate Base Rate plus the Applicable Margin, but
in no event to exceed the Highest Lawful Rate.
(b) Eurodollar Tranches. The portion of the Loans comprising each
Eurodollar Tranche shall bear interest at the Adjusted LIBO Rate for the
Interest Period in effect for such Tranche plus the Applicable Margin, but in no
event to exceed the Highest Lawful Rate.
(c) Post-Default Rate. Notwithstanding the foregoing, if any principal
of or interest on any Loan or any fee or other amount payable by the Borrower or
any Guarantor hereunder or under any other Loan Document is not paid when due,
whether at stated maturity, upon acceleration or otherwise, such overdue amount
shall bear interest, after as well as before judgment, at a rate per annum equal
to two percent (2%) plus the rate applicable to ABR Tranches as provided in
Section 3.02(a), but in no event to exceed the Highest Lawful Rate.
(d) Interest Payment Dates. Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Tranche; provided that
(i) interest accrued pursuant to Section 3.02(c) shall be payable on demand,
(ii) in the event of any prepayment of any Loan, accrued interest on the
principal amount prepaid shall be payable on the date of such prepayment, and
(iii) in the event of any conversion of any Eurodollar Tranche prior to the end
of the current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion.
(e) Interest Rate Computations. All interest hereunder shall be
computed on the basis of a year of 360 days, unless such computation would
exceed the Highest Lawful Rate, in which case interest shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), except that interest
computed by reference to the Alternate Base Rate at times when the Alternate
Base Rate is based on the Prime Rate shall be computed on the basis of a year of
365 days (or 366 days in a leap year), and in each case shall be payable for the
actual number of days elapsed (including the first day but excluding the last
day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall
be determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error, and be binding upon the parties hereto.
Section 3.03 Alternate Rate of Interest. If prior to the commencement of
any Interest Period for a Eurodollar Tranche:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate for such Interest
Period; or
(b) the Administrative Agent is advised by the Majority Lenders that
the Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans included in such Tranche for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer
28
exist, (i) any Interest Election Request that requests the conversion of any
Tranche to, or continuation of any Tranche as, a Eurodollar Tranche shall be
ineffective, and (ii) if the applicable Borrowing Request requests a Eurodollar
Tranche, such Tranche shall be made as an ABR Tranche.
Section 3.04 Prepayments.
(a) Optional Prepayments. Subject to any breakage funding costs
payable pursuant to Section 5.02 and prior notice in accordance with Section
3.04(b), the Borrower shall have the right to prepay the Loans, in whole or in
part, as follows:
(i) at any time during the period commencing on the Effective
Date to and including the first anniversary of the Effective Date, with a
premium equal to 1% of such amount prepaid, provided that during such period, if
the Borrower has borrowed at least $50,000,000 after the Effective Date, the
Borrower may, without premium or penalty, prepay the Loans in an aggregate
amount of up to $50,000,000 with the Net Cash Proceeds of any sale of Equity
Interests or any sale or other disposition of Property (to the extent permitted
under Section 9.13) occurring after the Effective Date; and
(ii) at any time after the second anniversary of the Effective
Date, without premium or penalty;
provided that, in any event, each prepayment is in an amount that is an integral
multiple of $1,000,000 and not less than $1,000,000, or if such amount is less
than $1,000,000, the outstanding principal amount of the Loans.
(b) Notice and Terms of Optional Prepayment. The Borrower shall notify
the Administrative Agent by telephone, electronic communication and/or fax
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Tranche, not later than 12:00 noon, New York City
time, three Business Days before the date of prepayment, or (ii) in the case of
prepayment of an ABR Tranche, not later than 12:00 noon, New York City time, one
Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
the Loans or portion thereof to be prepaid. Promptly following receipt of any
such notice, the Administrative Agent shall advise the Lenders of the contents
thereof. Each prepayment of a Tranche shall be applied ratably to the Loans of
all Lenders in accordance with their Percentage Shares. Prepayments shall be
accompanied by accrued and unpaid interest to the extent required by Section
3.02.
(c) Mandatory Prepayment. The Net Cash Proceeds of any asset sale
under Section 9.13(e), to the extent not applied in the manner specified
therein, shall be used to repay the Loans. Such payment shall be due on the 91st
day after the asset sale giving rise to such Net Cash Proceeds.
Section 3.05 Fees.
(a) Commitment Fee. The Borrower agrees to pay on the last day of the
Commitment Period to the Administrative Agent for the account of each Lender a
commitment
29
fee which shall accrue at 0.50% per annum on the average daily amount of the
unused amount of the Commitment of such Lender during the period from and
including the Effective Date to but excluding the last day of the Commitment
Period.
(b) Administrative Agent Fees. The Borrower agrees to pay to the
Administrative Agent, for its own account, fees payable in the amounts and at
the times separately agreed upon between the Borrower and the Administrative
Agent.
(c) Payment of Fees. All fees payable hereunder shall be paid on the
dates due, in immediately available funds, to the Administrative Agent. Fees
paid shall not be refundable under any circumstances.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS
Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) Payments by the Borrower. The Borrower shall make each payment
required to be made by it hereunder (whether of principal, interest or fees, or
of amounts payable under Section 5.01, Section 5.02, Section 5.03 or otherwise)
prior to 12:00 noon, New York City time, on the date when due, in immediately
available funds, without defense, deduction, recoupment, set-off or
counterclaim. Fees, once paid, shall not be refundable under any circumstances.
Any amounts received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. All such payments
shall be made to the Administrative Agent at its offices specified in Section
12.01, as expressly provided herein and except that payments pursuant to Section
5.01, Section 5.02, Section 5.03 and Section 12.03 shall be made directly to the
Persons entitled thereto. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such extension.
All payments hereunder shall be made in dollars.
(b) Application of Insufficient Payments. If at any time insufficient
funds are received by and available to the Administrative Agent to pay fully all
amounts of principal, interest and fees then due hereunder, such funds shall be
applied (i) first, towards payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, towards payment of
principal then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal then due to such parties.
(c) Sharing of Payments by Lenders. If any Lender shall, by exercising
any right of set-off or counterclaim or otherwise, obtain payment in respect of
any principal of or interest on its Loan resulting in such Lender receiving
payment of a greater proportion of the aggregate amount of its Loan and accrued
interest thereon than the proportion received by any other Lender, then the
Lender receiving such greater proportion shall purchase (for cash at face
30
value) participations in the Loans of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with their Percentage Shares of the aggregate amount of principal of
and accrued interest on their respective Loans; provided that (i) if any such
participations are purchased and all or any portion of the payment giving rise
thereto is recovered, such participations shall be rescinded and the purchase
price restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 4.01(c) shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in its Loan to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this Section 4.01(c) shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
Section 4.02 Presumption of Payment by the Borrower. Unless the
Administrative Agent shall have received notice from the Borrower prior to the
date on which any payment is due to the Administrative Agent for the account of
the Lenders that the Borrower will not make such payment, the Administrative
Agent may assume that the Borrower has made such payment on such date in
accordance herewith and may, in reliance upon such assumption, distribute to the
Lenders the amount due. In such event, if the Borrower has not in fact made such
payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such
Lender with interest thereon, for each day from and including the date such
amount is distributed to it to but excluding the date of payment to the
Administrative Agent, at the greater of the Federal Funds Effective Rate and a
rate determined by the Administrative Agent in accordance with banking industry
rules on interbank compensation.
Section 4.03 Certain Deductions by the Administrative Agent. If any Lender
shall fail to make any payment required to be made by it pursuant to Section
2.06(d) or Section 4.02 then the Administrative Agent may, in its discretion
(notwithstanding any contrary provision hereof), apply any amounts thereafter
received by the Administrative Agent for the account of such Lender to satisfy
such Lender's obligations under such Sections until all such unsatisfied
obligations are fully paid.
Section 4.04 Disposition of Proceeds. The Security Instruments contain an
assignment by the Borrower and/or the Guarantors unto and in favor of the
Administrative Agent for the benefit of the Lenders of all of the Borrower's or
each Guarantor's interest in and to production and all proceeds attributable
thereto which may be produced from or allocated to the Mortgaged Property. The
Security Instruments further provide in general for the application of such
proceeds to the satisfaction of the Indebtedness and other obligations described
therein and secured thereby. Notwithstanding the assignment contained in such
Security Instruments, until the occurrence of an Event of Default, (a) the
Administrative Agent and the Lenders agree that they will neither notify the
purchaser or purchasers of such production nor take any other action to cause
such proceeds to be remitted to the Administrative Agent or the Lenders, but the
Lenders will instead permit such proceeds to be paid to the Borrower and its
Restricted
31
Subsidiaries and (b) the Lenders hereby authorize the Administrative Agent to
take such actions as may be necessary to cause such proceeds to be paid to the
Borrower and/or such Restricted Subsidiaries.
ARTICLE V
INCREASED COSTS; BREAK FUNDING PAYMENTS; TAXES; ILLEGALITY
Section 5.01 Increased Costs.
(a) Eurodollar Changes in Law. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender (except any such reserve
requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender or the London interbank market any
other condition affecting this Agreement or Eurodollar Tranches of such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Tranche (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or otherwise), then
the Borrower will pay to such Lender such additional amount or amounts as will
compensate such Lender for such additional costs incurred or reduction suffered.
(b) Capital Requirements. If any Lender determines that any Change in
Law regarding capital requirements has or would have the effect of reducing the
rate of return on such Lender's capital or on the capital of such Lender's
holding company, if any, as a consequence of this Agreement or the Loan made by
such Lender, to a level below that which such Lender or the or such Lender's
holding company could have achieved but for such Change in Law (taking into
consideration such Lender's policies and the policies of such Lender's holding
company with respect to capital adequacy), then from time to time the Borrower
will pay to such Lender such additional amount or amounts as will compensate
such Lender or such Lender's holding company for any such reduction suffered.
(c) Certificates. A certificate of a Lender setting forth the amount
or amounts necessary to compensate such Lender or its holding company, as the
case may be, as specified in Section 5.01(a) or (b) shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
(d) Effect of Failure or Delay in Requesting Compensation. Failure or
delay on the part of any Lender to demand compensation pursuant to this Section
5.01 shall not constitute a waiver of such Lender's right to demand such
compensation; provided that the Borrower shall not be required to compensate a
Lender pursuant to this Section 5.01 for any increased costs or reductions
incurred more than 180 days prior to the date that such Lender notifies the
Borrower of the Change in Law giving rise to such increased costs or reductions
and of such Lender's intention to claim compensation therefor; provided further
that, if the Change in
32
Law giving rise to such increased costs or reductions is retroactive, then the
180-day period referred to above shall be extended to include the period of
retroactive effect thereof.
Section 5.02 Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Tranche other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Tranche into an ABR Tranche other than on the
last day of the Interest Period applicable thereto, (c) the failure to borrow,
convert, continue or prepay any Eurodollar Tranche on the date specified in any
notice delivered pursuant hereto, or (d) the assignment of any Eurodollar
Tranche other than on the last day of the Interest Period applicable thereto as
a result of a request by the Borrower pursuant to Section 5.04(b), then, in any
such event, the Borrower shall compensate each Lender for the loss, cost and
expense attributable to such event. In the case of a Eurodollar Tranche, such
loss, cost or expense to any Lender shall be deemed to include an amount
determined by such Lender to be the excess, if any, of (i) the amount of
interest which would have accrued on the principal amount of such Loan had such
event not occurred, at the Adjusted LIBO Rate that would have been applicable to
such Loan, for the period from the date of such event to the last day of the
then current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which such Lender would
bid were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the eurodollar market.
A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 5.02 shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
Section 5.03 Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of
any obligation of the Borrower or any Guarantor under any Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes; provided that if the Borrower or any Guarantor shall be required to
deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 5.03), the Administrative Agent or any Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower or such Guarantor shall make such
deductions and (iii) the Borrower or such Guarantor shall pay the full amount
deducted to the relevant Governmental Authority in accordance with applicable
law.
(b) Payment of Other Taxes by the Borrower. The Borrower shall pay any
Other Taxes to the relevant Governmental Authority in accordance with applicable
law.
(c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent and each Lender, within 10 days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Administrative Agent or such
33
Lender on or with respect to any payment by or on account of any obligation of
the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section 5.03) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority. A
certificate of the Administrative Agent or a Lender as to the amount of such
payment or liability under this Section 5.03 shall be delivered to the Borrower
and shall be conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower or a Guarantor to a
Governmental Authority, the Borrower shall deliver to the Administrative Agent
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the Administrative
Agent.
(e) Foreign Lenders. Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the jurisdiction
in which the Borrower is located, or any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement or any other Loan Document
shall deliver to the Borrower (with a copy to the Administrative Agent), at the
time or times prescribed by applicable law, such properly completed and executed
documentation prescribed by applicable law or reasonably requested by the
Borrower as will permit such payments to be made without withholding or at a
reduced rate.
Section 5.04 Mitigation Obligations; Replacement of Lenders.
(a) Designation of Different Lending Office. If any Lender requests
compensation under Section 5.01, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender pursuant to Section 5.03, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loan
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 5.01 or Section 5.03, as the case may be, in the future and (ii)
would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.
(b) Replacement of Lenders. If any Lender requests compensation under
Section 5.01, or if the Borrower is required to pay any additional amount to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 5.03, or if any Lender defaults in its obligation to fund its Loan
hereunder, then the Borrower may, at its sole expense and effort, upon notice to
such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions
contained in Section 12.04(b)), all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee
may be another Lender, if a Lender accepts such assignment); provided that (i)
the Borrower shall have received the prior written
34
consent of the Administrative Agent, which consent shall not unreasonably be
withheld, (ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loan, accrued interest thereon, accrued fees and
all other amounts payable to it hereunder, from the assignee (to the extent of
such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts) and (iii) in the case of any such assignment
resulting from a claim for compensation under Section 5.01 or payments required
to be made pursuant to Section 5.03, such assignment will result in a reduction
in such compensation or payments. A Lender shall not be required to make any
such assignment and delegation if, prior thereto, as a result of a waiver by
such Lender or otherwise, the circumstances entitling the Borrower to require
such assignment and delegation cease to apply.
Section 5.05 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
applicable lending office to honor its obligation to make or maintain Eurodollar
Tranches either generally or having a particular Interest Period hereunder, then
(a) such Lender shall promptly notify the Borrower and the Administrative Agent
thereof and such Lender's obligation to make such Eurodollar Tranches shall be
suspended (the "Affected Tranches") until such time as such Lender may again
make and maintain such Eurodollar Tranches and (b) all Affected Tranches which
would otherwise be made by such Lender shall be made instead as ABR Tranches
(and, if such Lender so requests by notice to the Borrower and the
Administrative Agent, all Affected Tranches of such Lender then outstanding
shall be automatically converted into ABR Tranches on the date specified by such
Lender in such notice) and, to the extent that Affected Tranches are so made as
(or converted into) ABR Tranches, all payments of principal which would
otherwise be applied to such Lender's Affected Tranches shall be applied instead
to its ABR Tranches.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Effective Date. The obligations of each Lender to make its
Loans hereunder (and to amend and restate the Existing Credit Agreement) shall
not become effective until the date on which each of the following conditions is
satisfied (or waived in accordance with Section 12.02):
(a) The Administrative Agent, the Arranger and the Lenders shall have
received all fees and other amounts due and payable on or prior to the Effective
Date, including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.
(b) The Administrative Agent shall have received a certificate of the
Secretary or an Assistant Secretary of the Borrower and each Guarantor setting
forth (i) resolutions of its board of directors with respect to the
authorization of the Borrower or such Guarantor to execute and deliver the Loan
Documents to which it is a party and to enter into the transactions contemplated
in those documents, (ii) the officers of the Borrower or such Guarantor (y) who
are authorized to sign the Loan Documents to which the Borrower or such
Guarantor is a party and (z) who will, until replaced by another officer or
officers duly authorized for that purpose, act as its representative for the
purposes of signing documents and giving notices and other communications in
connection with this Agreement and the transactions contemplated hereby,
35
(iii) specimen signatures of such authorized officers, and (iv) the articles or
certificate of incorporation and bylaws (or other organizational documents) of
the Borrower and such Guarantor, certified as being true and complete. The
Administrative Agent and the Lenders may conclusively rely on such certificate
until the Administrative Agent receives notice in writing from the Borrower to
the contrary.
(c) The Administrative Agent shall have received certificates of the
appropriate State agencies with respect to the existence, qualification and good
standing of the Borrower and each Guarantor.
(d) The Administrative Agent shall have received a compliance
certificate which shall be substantially in the form of Exhibit D, duly and
properly executed by a Responsible Officer and dated as of the date of Effective
Date.
(e) The Administrative Agent shall have received from each party
hereto counterparts (in such number as may be requested by the Administrative
Agent) of this Agreement signed on behalf of such party.
(f) The Administrative Agent shall have received duly executed Notes,
if requested, payable to the order of each Lender in a principal amount equal to
its Commitment dated as of the date hereof.
(g) The Administrative Agent shall have received from each party
thereto duly executed counterparts (in such number as may be requested by the
Administrative Agent) of the Security Instruments, including the Guaranty
Agreement and the other Security Instruments described on Exhibit F-1. In
connection with the execution and delivery of the Security Instruments, the
Administrative Agent shall:
(i) be reasonably satisfied that the Security Instruments create
first priority, perfected Liens (subject only to Excepted Liens identified in
clauses (a) to (d) and (f) of the definition thereof, but subject to the
provisos at the end of such definition) on at least 80% of the total value of
the Oil and Gas Properties evaluated in the Initial Reserve Report;
(ii) have received certificates, together with undated, blank
stock powers for each such certificate, representing all of the issued and
outstanding Equity Interests of each of the Guarantors and not less than 65% of
all of the issued and outstanding capital stock of each Foreign Subsidiary with
total assets in excess of $500,000 that is not a Guarantor, which is directly
owned by either the Borrower or a Domestic Subsidiary; and
(iii) be reasonably satisfied that it has a Lien on all Property
constituting security for the Senior Revolving Credit Agreement.
(h) The Administrative Agent shall have received a certificate of a
Responsible Officer of the Borrower certifying that (i) the Borrower shall be
contemporaneously closing the Amended and Restated Senior Revolving Credit
Agreement pursuant to which the Borrower shall have not less than $280,000,000
of available credit and (ii) attached to such certificate is a true and complete
copy of the Senior Indenture, as amended on or prior to the Effective Date. The
structure, terms, conditions and documentation, including execution and
36
delivery of appropriate inter-creditor and/or subordination documentation for
each of the foregoing shall be reasonably satisfactory to the Administrative
Agent.
(i) The Administrative Agent shall have received an opinion of (i)
Xxxxxx Xxxxxxx Law Firm L.L.C., special counsel to the Borrower, substantially
in the form of Exhibit E-1 hereto, and local counsel in each of the following
states: Texas, Oklahoma, New Mexico and Louisiana, and any other jurisdictions
requested by the Administrative Agent, substantially in the form of Exhibit E-2.
(j) The Administrative Agent shall have received a certificate of
insurance coverage of the Borrower evidencing that the Borrower is carrying
insurance in accordance with Section 7.13.
(k) The Administrative Agent shall be reasonably satisfied with the
status of title to the Oil and Gas Properties evaluated in the Initial Reserve
Report.
(l) The Administrative Agent shall be reasonably satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries.
(m) The Administrative Agent shall have received a certificate of a
Responsible Officer of the Borrower certifying that the Borrower has received
all consents and approvals required by Section 7.03.
(n) The Administrative Agent shall have received evidence satisfactory
to it that the Borrower is repaying in full and terminating the Mission Credit
Agreement, and all credit facilities and funded Debt of Mission are being repaid
and terminated, except for the Senior Unsecured Notes, contemporaneously with
the funding of the initial Loans under this Agreement, and the Administrative
Agent shall have received a certificate dated as of the Effective Date, signed
by a Responsible Officer, to that effect. The Administrative Agent shall have
received evidence satisfactory to it that all Liens associated with the Mission
Credit Agreement and all credit facilities and funded Debt of the Mission have
been released or terminated contemporaneously with the making of such payments
and that arrangements satisfactory to the Administrative Agent has been made for
recording and filing of such releases.
(o) The Administrative Agent shall have received the financial
statements referred to in Section 7.04(a) and the Initial Reserve Report
accompanied by a certificate covering the matters described in Section 8.12(b).
(p) The Administrative Agent shall have received appropriate UCC
search certificates reflecting no prior Liens encumbering the Properties of the
Borrower, the Restricted Subsidiaries, Mission and its Subsidiaries for each of
the following jurisdictions: Texas, Oklahoma, Louisiana and New Mexico and any
other jurisdiction requested by the Administrative Agent; other than those being
assigned or released on or prior to the Effective Date or Liens permitted by
Section 9.03.
(q) The Administrative Agent shall have received evidence that the
Borrower or one of its Restricted Subsidiaries has purchased one or more
commodity price floors, collars
37
or price swaps with one or more Approved Counterparties, which have (i) a fixed
price payor or floor prices acceptable to the Administrative Agent, and (ii)
aggregate notional volumes of not less than 80% during the calendar year 2005
and 2006 and 25% during calendar year 2007 and 2008 of the reasonably estimated
projected crude oil production and of the reasonably estimated projected natural
gas production, in each case, from its proved developed, producing Oil and Gas
Properties as determined by reference to the Initial Reserve Reports for each
year during the period commencing with the Effective Date and ending on December
31, 2006.
(r) The Administrative Agent shall have received a certificate of a
Responsible Officer of the Borrower certifying that: (i) Mission and the
Borrower are concurrently consummating the Mergers in accordance with the terms
of the Merger Documents (with all of the material conditions thereto having been
satisfied in all material respects by the parties thereto), and (ii) attached
thereto is a true and complete copy of each Certificate of Merger to be filed
with the Delaware Secretary of State.
(s) The Administrative Agent shall have received a copy, certified by
a Responsible Officer as true and complete, of the Merger Documents (together
with all amendments, if any), the terms and conditions of which shall be
reasonably acceptable to the Administrative Agent.
(t) The Administrative Agent shall have received such other documents
as the Administrative Agent or special counsel to the Administrative Agent may
reasonably request.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make its Loans hereunder shall
not become effective unless each of the foregoing conditions is satisfied (or
waived pursuant to Section 12.02) at or prior to 2:00 p.m., New York City time,
on August 31, 2005 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
Section 6.02 Each Credit Event. The obligation of each Lender to fund its
Loan is subject to the satisfaction of the following conditions:
(a) At the time of and immediately after giving effect to the Loans,
no Default shall have occurred and be continuing.
(b) At the time of and immediately after giving effect to the Loans,
no event, development or circumstance has occurred or shall then exist that has
resulted in, or could reasonably be expected to have, a Material Adverse Effect.
(c) The representations and warranties of the Borrower and the
Guarantors set forth in this Agreement and in the other Loan Documents shall be
true and correct on and as of the Effective Date, except to the extent any such
representations and warranties are expressly limited to an earlier date, in
which case, on and as of the Effective Date, such representations and warranties
shall continue to be true and correct as of such specified earlier date.
(d) The making of such Loan, would not conflict with, or cause any
Lender to violate or exceed, any applicable Governmental Requirement, and no
Change in Law shall have
38
occurred, and no litigation shall be pending or threatened, which does or, with
respect to any threatened litigation, seeks to, enjoin, prohibit or restrain,
the making or repayment of any Loan, or any participations therein or the
consummation of the transactions contemplated by this Agreement or any other
Loan Document.
(e) The receipt by the Administrative Agent of the applicable
Borrowing Request in accordance with Section 2.03.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
Section 7.01 Organization; Powers. Each of the Borrower and the Restricted
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, and has all material governmental licenses, authorizations, consents
and approvals necessary, to own its assets and to carry on its business as now
conducted, and is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required, except where failure to have
such power, authority, licenses, authorizations, consents, approvals and
qualifications could not reasonably be expected to have a Material Adverse
Effect.
Section 7.02 Authority; Enforceability. The Transactions are within the
Borrower's and each Guarantor's corporate powers and have been duly authorized
by all necessary corporate and, if required, stockholder action (including,
without limitation, any action required to be taken by any class of directors of
the Borrower, whether interested or disinterested, in order to ensure the due
authorization of the Transactions). Each Loan Document and Merger Document to
which the Borrower and each Guarantor is a party has been duly executed and
delivered by the Borrower and such Guarantor and constitutes a legal, valid and
binding obligation of the Borrower and such Guarantor, as applicable,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally and subject to general principles of equity, regardless of whether
considered in a proceeding in equity or at law.
Section 7.03 Approvals; No Conflicts. The Transactions (a) do not require
any consent or approval of, registration or filing with, or any other action by,
any Governmental Authority or any other third Person, nor is any such consent,
approval, registration, filing or other action necessary for the validity or
enforceability of any Loan Document or the consummation of the Transactions,
except such as have been obtained or made and are in full force and effect other
than (i) the recording and filing of the Security Instruments as required by
this Agreement and (ii) those third party approvals or consents which, if not
made or obtained, would not cause a Default hereunder, could not reasonably be
expected to have a Material Adverse Effect or do not have an adverse effect on
the enforceability of the Loan Documents, (b) will not violate any applicable
law or regulation or the charter, by-laws or other organizational documents of
the Borrower or any Restricted Subsidiary or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Borrower or any Restricted
Subsidiary or its Properties, or give rise to a right thereunder to
39
require any payment to be made by the Borrower or such Restricted Subsidiary and
(d) will not result in the creation or imposition of any Lien on any Property of
the Borrower or any Restricted Subsidiary (other than the Liens created by the
Loan Documents).
Section 7.04 Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore furnished to the Lenders (i) its
consolidated balance sheet and statements of income, stockholders equity and
cash flows (x) as of and for the fiscal year ended December 31, 2004, reported
on by Deloitte & Touche LLP independent public accountants, and (y) as of and
for the fiscal quarter and the portion of the fiscal year ended March 31, 2005,
reviewed by Deloitte & Touche LLP and (ii) the statements of income,
stockholders equity and cash flows of Mission as of and for the fiscal quarter
and the portion of the fiscal year ended December 31, 2004 and March 31, 2005,
certified by its chief financial officer. Such financial statements present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its Consolidated Subsidiaries as
of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the unaudited
quarterly financial statements. The Borrower has heretofore furnished to the
Lenders the unaudited, pro forma consolidated balance sheet and statements of
income, stockholders equity and cash flows as of and for the six-month period
ended June 30, 2005 adjusted to give effect to the Mergers, this Agreement, and
the other transactions contemplated by Section 6.01(h), certified by its chief
financial officer as presenting fairly, in all material respects, the
consolidated pro forma financial position and results of operations and cash
flows of the Borrower and its Consolidated Subsidiaries as of such date and for
such period in accordance with GAAP, subject to year-end audit adjustments and
the absence of footnotes in the case of the unaudited quarterly financial
statements.
(b) Since December 31, 2004, (i) there has been no event, development
or circumstance that has had or could reasonably be expected to have a Material
Adverse Effect and (ii) the business of the Borrower and its Restricted
Subsidiaries has been conducted only in the ordinary course consistent with past
business practices.
(c) Neither the Borrower nor any Restricted Subsidiary has on the date
hereof any material Debt (including Disqualified Capital Stock) or any
contingent liabilities, off-balance sheet liabilities or partnerships,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments (other than the Gas
Balancing Obligations and the Swap Agreements listed on Schedule 7.21) which are
not referred to or reflected or provided for in the Financial Statements.
Section 7.05 Litigation.
(a) Except as set forth on Schedule 7.05, there are no actions, suits,
investigations or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the Knowledge of the Borrower, threatened
against or affecting the Borrower, any Restricted Subsidiary, Mission or any of
its Subsidiaries or involving the Mergers (i) not fully covered by insurance
(except for normal deductibles) as to which there is a reasonable possibility of
an adverse determination that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect, (ii) that involve any Loan
40
Document, any Merger Document or the Transactions or (iii) that could impair the
consummation of the Mergers on the time and in the manner contemplated by the
Merger Documents.
(b) Since the date of this Agreement, there has been no change in the
status of the matters disclosed in Schedule 7.05 that, individually or in the
aggregate, has resulted in, or materially increased the likelihood of, a
Material Adverse Effect.
Section 7.06 Environmental Matters. Except as could not be reasonably
expected to have a Material Adverse Effect (or with respect to (c), (d) and (e)
below, where the failure to take such actions could not be reasonably expected
to have a Material Adverse Effect):
(a) neither any Property of the Borrower or any Restricted Subsidiary
nor the operations conducted thereon violate any order or requirement of any
court or Governmental Authority or any Environmental Laws.
(b) no Property of the Borrower or any Restricted Subsidiary nor the
operations currently conducted thereon or, to the Knowledge of the Borrower, by
any prior owner or operator of such Property or operation, are in violation of
or subject to any existing, pending or threatened action, suit, investigation,
inquiry or proceeding by or before any court or Governmental Authority or to any
remedial obligations under Environmental Laws.
(c) all notices, permits, licenses, exemptions, approvals or similar
authorizations, if any, required to be obtained or filed in connection with the
operation or use of any and all Property of the Borrower and each Restricted
Subsidiary, including, without limitation, past or present treatment, storage,
disposal or release of a hazardous substance, oil and gas waste or solid waste
into the environment, have been duly obtained or filed, and the Borrower and
each Restricted Subsidiary are in compliance with the terms and conditions of
all such notices, permits, licenses and similar authorizations.
(d) all hazardous substances, solid waste and oil and gas waste, if
any, generated at any and all Property of the Borrower or any Restricted
Subsidiary have in the past been transported, treated and disposed of in
accordance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment, and, to
the Knowledge of the Borrower, all such transport carriers and treatment and
disposal facilities have been and are operating in compliance with Environmental
Laws and so as not to pose an imminent and substantial endangerment to public
health or welfare or the environment, and are not the subject of any existing,
pending or threatened action, investigation or inquiry by any Governmental
Authority in connection with any Environmental Laws.
(e) the Borrower has taken all steps reasonably necessary to determine
and has determined that no oil, hazardous substances, solid waste or oil and gas
waste, have been disposed of or otherwise released and there has been no
threatened release of any oil, hazardous substances, solid waste or oil and gas
waste on or to any Property of the Borrower or any Restricted Subsidiary except
in compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment.
41
(f) to the extent applicable, all Property of the Borrower and each
Restricted Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA, and the Borrower does not have any reason to
believe that such Property, to the extent subject to the OPA, will not be able
to maintain compliance with the OPA requirements during the term of this
Agreement.
(g) neither the Borrower nor any Restricted Subsidiary has any known
contingent liability or Remedial Work in connection with any release or
threatened release of any oil, hazardous substance, solid waste or oil and gas
waste into the environment.
Section 7.07 Compliance with the Laws and Agreements; No Defaults.
(a) Each of the Borrower and each Restricted Subsidiary is in
compliance with all Governmental Requirements applicable to it or its Property
and all agreements and other instruments binding upon it or its Property, and
possesses all licenses, permits, franchises, exemptions, approvals and other
governmental authorizations necessary for the ownership of its Property and the
conduct of its business, except where the failure to do so, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
(b) Neither the Borrower nor any Restricted Subsidiary is in default
nor has any event or circumstance occurred which, but for the expiration of any
applicable grace period or the giving of notice, or both, would constitute a
default or would require the Borrower or a Restricted Subsidiary to Redeem or
make any offer to Redeem under any indenture, note, credit agreement or
instrument pursuant to which any Material Indebtedness is outstanding or by
which the Borrower or any Restricted Subsidiary or any of their Properties is
bound.
(c) No Default has occurred and is continuing.
Section 7.08 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of, or subject to regulation under, the
Investment Company Act of 1940, as amended.
Section 7.09 Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," or a "public utility" within the meaning of, or subject
to regulation under, the Public Utility Holding Company Act of 1935, as amended.
Section 7.10 Taxes. Each of the Borrower and its Subsidiaries has timely
filed or caused to be filed all Tax returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside on its books adequate reserves in accordance with GAAP or (b) to the
extent that the failure to do so could not reasonably be expected to result in a
Material Adverse Effect. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of Taxes and other governmental charges
are, in the reasonable opinion of the Borrower, adequate. No Tax Lien has been
filed and, to the Knowledge of the Borrower, no claim is being asserted with
respect to any such Tax or other such governmental charge.
42
Section 7.11 ERISA.
(a) The Borrower, the Subsidiaries and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the Code
regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial compliance
with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could result in
imposition on the Borrower, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed pursuant to
Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty liability
damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any trust
created under any such Plan has been terminated since September 2, 1974. No
liability to the PBGC (other than for the payment of current premiums which are
not past due) by the Borrower, any Subsidiary or any ERISA Affiliate has been or
is expected by the Borrower, any Subsidiary or any ERISA Affiliate to be
incurred with respect to any Plan. No ERISA Event with respect to any Plan has
occurred.
(e) Full payment when due has been made of all amounts which the
Borrower, the Subsidiaries or any ERISA Affiliate is required under the terms of
each Plan or applicable law to have paid as contributions to such Plan as of the
date hereof, and no accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with respect
to any Plan.
(f) The actuarial present value of the benefit liabilities under each
Plan which is subject to Title IV of ERISA does not, as of the end of the
Borrower's most recently ended fiscal year, exceed the current value of the
assets (computed on a plan termination basis in accordance with Title IV of
ERISA) of such Plan allocable to such benefit liabilities. The term "actuarial
present value of the benefit liabilities" shall have the meaning specified in
section 4041 of ERISA.
(g) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan, as
defined in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by the Borrower, a Subsidiary or any ERISA Affiliate in its
sole discretion at any time without any material liability.
(h) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the six-year period
preceding the date hereof sponsored, maintained or contributed to, any
Multiemployer Plan.
(i) Neither the Borrower, the Subsidiaries nor any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a Plan
amendment that results in an increase in current liability for the Plan.
43
Section 7.12 Disclosure; No Material Misstatements. The Borrower has
disclosed to the Administrative Agent and the Lenders all agreements,
instruments and corporate or other restrictions to which it or any of its
Restricted Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. Neither the Information Memorandum nor any of the other
reports, financial statements, certificates or other information furnished by or
on behalf of the Borrower or any Restricted Subsidiary to the Administrative
Agent or any Lender or any of their Affiliates in connection with the
negotiation of this Agreement or any other Loan Document or delivered hereunder
or under any other Loan Document (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time. There is no fact peculiar to the Borrower or any
Restricted Subsidiary which could reasonably be expected to have a Material
Adverse Effect or in the future is reasonably likely to have a Material Adverse
Effect and which has not been set forth in this Agreement or the Loan Documents
or the other documents, certificates and statements furnished to the
Administrative Agent or the Lenders by or on behalf of the Borrower or any
Restricted Subsidiary prior to, or on, the date hereof in connection with the
transactions contemplated hereby. No statements or conclusions exist in any
Reserve Report which are based upon or include misleading information or which
fail to take into account material information regarding the matters reported
therein to the extent such misstatement, misleading information or failure could
reasonably be expected to have a Material Adverse Effect.
Section 7.13 Insurance. The Borrower has, and has caused all its Restricted
Subsidiaries to have, (a) all insurance policies sufficient for the compliance
by each of them with all material Governmental Requirements and all material
agreements and (b) insurance coverage in at least amounts and against such risk
(including, without limitation, public liability) that are usually insured
against by companies similarly situated and engaged in the same or a similar
business for the assets and operations of the Borrower and its Restricted
Subsidiaries. The Administrative Agent and the Lenders have been named as
additional insureds in respect of such liability insurance policies and the
Administrative Agent has been named as loss payee with respect to Property loss
insurance.
Section 7.14 Restriction on Liens. Neither the Borrower nor any of the
Restricted Subsidiaries is a party to any material agreement or arrangement
(other than Capital Leases creating Liens permitted by Section 9.03(c), but then
only on the Property subject of such Capital Lease), or subject to any order,
judgment, writ or decree, which either restricts or purports to restrict its
ability to grant Liens to the Administrative Agent and the Lenders on or in
respect of their Properties to secure the Indebtedness and the Loan Documents.
Section 7.15 Subsidiaries. Except as set forth on Schedule 7.15 or as
disclosed in writing to the Administrative Agent (which shall promptly furnish a
copy to the Lenders), which shall be a supplement to Schedule 7.15, the Borrower
has no Subsidiaries and the Borrower has no Foreign Subsidiaries. Schedule 7.15
identifies each Subsidiary as either Restricted or Unrestricted, and each
Restricted Subsidiary on such schedule is a Wholly-Owned Subsidiary.
44
Section 7.16 Location of Business and Offices. The Borrower's jurisdiction
of organization is Delaware; the name of the Borrower as listed in the public
records of its jurisdiction of organization is Petrohawk Energy Corporation; and
the organizational identification number of the Borrower in its jurisdiction of
organization is 3828463 (or, in each case, as set forth in a notice delivered to
the Administrative Agent pursuant to Section 8.01(n) in accordance with Section
12.01). The Borrower's principal place of business and chief executive offices
are located at the address specified in Section 12.01 (or as set forth in a
notice delivered pursuant to Section 8.01(n) and Section 12.01(c)). Each
Restricted Subsidiary's jurisdiction of organization, name as listed in the
public records of its jurisdiction of organization, organizational
identification number in its jurisdiction of organization, and the location of
its principal place of business and chief executive office is stated on Schedule
7.15 (or as set forth in a notice delivered pursuant to Section 8.01(n)).
Section 7.17 Properties; Titles, Etc.
(a) Each of the Borrower and the Restricted Subsidiaries has good and
defensible title to the Oil and Gas Properties evaluated in the most recently
delivered Reserve Report and good title to all its personal Properties, in each
case, free and clear of all Liens except Liens permitted by Section 9.03. After
giving full effect to the Excepted Liens, the Borrower or the Restricted
Subsidiary specified as the owner owns the net interests in production
attributable to the Hydrocarbon Interests as reflected in the most recently
delivered Reserve Report, and the ownership of such Properties shall not in any
material respect obligate the Borrower or such Restricted Subsidiary to bear the
costs and expenses relating to the maintenance, development and operations of
each such Property in an amount in excess of the working interest of each
Property set forth in the most recently delivered Reserve Report that is not
offset by a corresponding proportionate increase in the Borrower's or such
Restricted Subsidiary's net revenue interest in such Property.
(b) All material leases and agreements necessary for the conduct of
the business of the Borrower and the Restricted Subsidiaries are valid and
subsisting, in full force and effect, and there exists no default or event or
circumstance which with the giving of notice or the passage of time or both
would give rise to a default under any such lease or leases, which could
reasonably be expected to have a Material Adverse Effect.
(c) The rights and Properties presently owned, leased or licensed by
the Borrower and the Restricted Subsidiaries including, without limitation, all
easements and rights of way, include all rights and Properties necessary to
permit the Borrower and the Restricted Subsidiaries to conduct their business in
all material respects in the same manner as its business has been conducted
prior to the date hereof.
(d) All of the Properties of the Borrower and the Restricted
Subsidiaries which are reasonably necessary for the operation of their
businesses are in good working condition and are maintained in accordance with
prudent business standards.
(e) The Borrower and each Restricted Subsidiary owns, or is licensed
to use, all trademarks, tradenames, copyrights, patents and other intellectual
Property material to its business, and the use thereof by the Borrower and such
Restricted Subsidiary does not infringe
45
upon the rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. The Borrower and its Restricted Subsidiaries either
own or have valid licenses or other rights to use all databases, geological
data, geophysical data, engineering data, seismic data, maps, interpretations
and other technical information used in their businesses as presently conducted,
subject to the limitations contained in the agreements governing the use of the
same, which limitations are customary for companies engaged in the business of
the exploration and production of Hydrocarbons, with such exceptions as could
not reasonably be expected to have a Material Adverse Effect.
Section 7.18 Maintenance of Properties. Except for such acts or failures to
act as could not be reasonably expected to have a Material Adverse Effect, the
Oil and Gas Properties (and Properties unitized therewith) of the Borrower and
its Restricted Subsidiaries have been maintained, operated and developed in a
good and workmanlike manner and in conformity with all Government Requirements
and in conformity with the provisions of all leases, subleases or other
contracts comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties of the Borrower and its
Restricted Subsidiaries. Specifically in connection with the foregoing, except
for those as could not be reasonably expected to have a Material Adverse Effect,
(i) no Oil and Gas Property of the Borrower or any Restricted Subsidiary is
subject to having allowable production reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) and (ii)
none of the xxxxx comprising a part of the Oil and Gas Properties (or Properties
unitized therewith) of the Borrower or any Restricted Subsidiary is deviated
from the vertical more than the maximum permitted by Government Requirements,
and such xxxxx are, in fact, bottomed under and are producing from, and the well
bores are wholly within, the Oil and Gas Properties (or in the case of xxxxx
located on Properties unitized therewith, such unitized Properties) of the
Borrower or such Restricted Subsidiary. All pipelines, xxxxx, gas processing
plants, platforms and other material improvements, fixtures and equipment owned
in whole or in part by the Borrower or any of its Restricted Subsidiaries that
are necessary to conduct normal operations are being maintained in a state
adequate to conduct normal operations, and with respect to such of the foregoing
which are operated by the Borrower or any of its Restricted Subsidiaries, in a
manner consistent with the Borrower's or its Restricted Subsidiaries' past
practices (other than those the failure of which to maintain in accordance with
this Section 7.18 could not reasonably be expected to have a Material Adverse
Effect).
Section 7.19 Gas Imbalances, Prepayments. Except as set forth on Schedule
7.19 or on the most recent certificate delivered pursuant to Section 8.12(b), on
a net basis there are no gas imbalances, take or pay or other prepayments which
would require the Borrower or any of its Restricted Subsidiaries to deliver
Hydrocarbons produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding 1.5 bcf of
gas (on an mcf equivalent basis) in the aggregate.
Section 7.20 Marketing of Production. Except for contracts listed and in
effect on the date hereof on Schedule 7.20, and thereafter either disclosed in
writing to the Administrative Agent or included in the most recently delivered
Reserve Report (with respect to all of which contracts the Borrower represents
that it or its Restricted Subsidiaries are receiving a price for all
46
production sold thereunder which is computed substantially in accordance with
the terms of the relevant contract and are not having deliveries curtailed
substantially below the subject Property's delivery capacity), no material
agreements exist which are not cancelable on 60 days notice or less without
penalty or detriment for the sale of production from the Borrower's or its
Restricted Subsidiaries' Hydrocarbons (including, without limitation, calls on
or other rights to purchase, production, whether or not the same are currently
being exercised) that (a) pertain to the sale of production at a fixed price and
(b) have a maturity or expiry date of longer than six (6) months from the date
hereof.
Section 7.21 Swap Agreements. Schedule 7.21, as of the date hereof, and
after the date hereof, each report required to be delivered by the Borrower
pursuant to Section 8.01(e), sets forth, a true and complete list of all Swap
Agreements of the Borrower and each Restricted Subsidiary, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net xxxx to market value thereof, all credit support
agreements relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.
Section 7.22 Use of Proceeds. The proceeds of the Loans shall be used to
provide working capital for exploration and production operations, to provide
funding in connection with the Mergers and for general corporate purposes. The
Borrower and its Subsidiaries are not engaged principally, or as one of its or
their important activities, in the business of extending credit for the purpose,
whether immediate, incidental or ultimate, of buying or carrying margin stock
(within the meaning of Regulation T, U or X of the Board). No part of the
proceeds of any Loan will be used for any purpose which violates the provisions
of Regulations T, U or X of the Board.
Section 7.23 Solvency. After giving effect to the transactions contemplated
hereby, (a) the aggregate assets (after giving effect to amounts that could
reasonably be received by reason of indemnity, offset, insurance or any similar
arrangement), at a fair valuation, of the Borrower and the Guarantors, taken as
a whole, will exceed the aggregate Debt of the Borrower and the Guarantors on a
consolidated basis, as the Debt becomes absolute and matures, (b) each of the
Borrower and the Guarantors will not have incurred or intended to incur, and
will not believe that it will incur, Debt beyond its ability to pay such Debt
(after taking into account the timing and amounts of cash to be received by each
of the Borrower and the Guarantors and the amounts to be payable on or in
respect of its liabilities, and giving effect to amounts that could reasonably
be received by reason of indemnity, offset, insurance or any similar
arrangement) as such Debt becomes absolute and matures and (c) each of the
Borrower and the Guarantors will not have (and will have no reason to believe
that it will have thereafter) unreasonably small capital for the conduct of its
business.
Section 7.24 Mergers. The copies of the Merger Documents previously
delivered by the Borrower to the Administrative Agent are true, accurate and
complete and have not been amended or modified in any manner, other than
pursuant to amendments or modifications previously delivered to the
Administrative Agent. Neither the Borrower nor any Person constituting a
Subsidiary prior to the effectiveness of the Mergers is in default in respect of
any material term or obligation set forth in the Merger Documents. To the
Knowledge of the Borrower, none of Mission's or any of Mission's respective
shareholders, members, partners or
47
other holders of Equity Interests is in default in respect of any material term
or obligation set forth in the Merger Documents.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Until the principal of and interest on each Loan and all fees payable
hereunder and all other amounts payable under the Loan Documents shall have been
paid in full, the Borrower covenants and agrees with the Lenders that:
Section 8.01 Financial Statements; Ratings Change; Other Information. The
Borrower will furnish to the Administrative Agent and each Lender:
(a) Annual Financial Statements. As soon as available, but in any
event in accordance with then applicable law and not later than 90 days after
the end of each fiscal year of the Borrower, its audited consolidated balance
sheet and related statements of operations, stockholders' equity and cash flows
as of the end of and for such year, setting forth in each case in comparative
form the figures for the previous fiscal year, all reported on by independent
public accountants of recognized national standing (without a "going concern" or
like qualification or exception and without any qualification or exception as to
the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Borrower and its Consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied.
(b) Quarterly Financial Statements. As soon as available, but in any
event in accordance with then applicable law and not later than 45 days after
the end of each of the first three fiscal quarters of each fiscal year of the
Borrower, its consolidated balance sheet and related statements of operations,
stockholders' equity and cash flows as of the end of and for such fiscal quarter
and the then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or, in
the case of the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the Borrower and
its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes.
(c) Certificate of Financial Officer -- Compliance. Concurrently with
any delivery of financial statements under Section 8.01(a) or Section 8.01(b), a
certificate of a Financial Officer in substantially the form of Exhibit D hereto
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Section 8.13(b) and Section 9.01 and (iii) stating
whether any change in GAAP or in the application thereof has occurred since the
date of the audited financial statements referred to in Section 7.04 and, if any
such change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate.
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(d) Certificate of Financial Officer -- Consolidating Information. If,
at any time, all of the Consolidated Subsidiaries of the Borrower are not
Consolidated Restricted Subsidiaries, then concurrently with any delivery of
financial statements under Section 8.01(a) or Section 8.01(b), a certificate of
a Financial Officer setting forth consolidating spreadsheets that show all
Consolidated Unrestricted Subsidiaries and the eliminating entries, in such form
as would be presentable to the auditors of the Borrower.
(e) Certificate of Financial Officer - Swap Agreements. Concurrently
with any delivery of financial statements under Section 8.01(a) and Section
8.01(b), a certificate of a Financial Officer, in form and substance
satisfactory to the Administrative Agent, setting forth as of the last Business
Day of such fiscal quarter or fiscal year, a true and complete list of all Swap
Agreements of the Borrower and each Restricted Subsidiary, the material terms
thereof (including the type, term, effective date, termination date and notional
amounts or volumes), the net xxxx-to-market value therefor, any new credit
support agreements relating thereto not listed on Schedule 7.21, any margin
required or supplied under any credit support document, and the counterparty to
each such agreement.
(f) Certificate of Insurer -- Insurance Coverage. Concurrently with
any delivery of financial statements under Section 8.01(a), a certificate of
insurance coverage from each insurer with respect to the insurance required by
Section 8.07, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or any Lender, all copies of the
applicable policies.
(g) Other Accounting Reports. Promptly upon receipt thereof, a copy of
each other report or letter submitted to the Borrower or any of its Subsidiaries
by independent accountants in connection with any annual, interim or special
audit made by them of the books of the Borrower or any such Subsidiary, and a
copy of any response by the Borrower or any such Subsidiary, or the Board of
Directors of the Borrower or any such Subsidiary, to such letter or report.
(h) SEC and Other Filings; Reports to Shareholders. Promptly after the
same become publicly available, and upon the request of the Lenders, copies of
all periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the SEC, or with any national securities
exchange and distributed by the Borrower to its shareholders.
(i) Notices Under Material Instruments. Promptly after the furnishing
thereof, copies of any financial statement, report or notice furnished to or by
any Person pursuant to the terms of any preferred stock designation, indenture,
loan or credit or other similar agreement, other than this Agreement and not
otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 8.01.
(j) Lists of Purchasers. Concurrently with the delivery of any Reserve
Report to the Administrative Agent pursuant to Section 8.12, a list of Persons
who purchase (or did purchase in the last six months) at least 70% of the
Hydrocarbons from the Borrower or any Restricted Subsidiary.
49
(k) Notice of Sales of Oil and Gas Properties. In the event the
Borrower or any Restricted Subsidiary intends to sell, transfer, assign or
otherwise dispose of at least $500,000 worth of any Oil or Gas Properties or any
Equity Interests in any Subsidiary in accordance with Section 9.13, prior
written notice of such disposition, the price thereof and the anticipated date
of closing.
(l) Notice of Casualty Events. Prompt written notice, and in any event
within three Business Days, of the occurrence of any Casualty Event or the
commencement of any action or proceeding that could reasonably be expected to
result in a Casualty Event.
(m) Certificate of Responsible Officer--Total Debt. At the times
specified in Section 2.07 and promptly following any change to Total Reserve
Value pursuant to Section 8.12(a) or Section 9.13, the Borrower will promptly,
but in any event within fifteen (15) days after any such event, deliver a
certificate of a Responsible Officer of the Borrower setting forth the Total
Reserve Value both prior to and after giving effect to such event.
(n) Information Regarding Borrower and Guarantors. Prompt written
notice (and in any event within thirty (30) days prior thereto) of any change
(i) in the Borrower or any Guarantor's corporate name or in any trade name used
to identify such Person in the conduct of its business or in the ownership of
its Properties, (ii) in the location of the Borrower or any Guarantor's chief
executive office or principal place of business, (iii) in the Borrower or any
Guarantor's identity or corporate structure or in the jurisdiction in which such
Person is incorporated or formed, (iv) in the Borrower or any Guarantor's
jurisdiction of organization or such Person's organizational identification
number in such jurisdiction of organization, and (v) in the Borrower or any
Guarantor's federal taxpayer identification number.
(o) Production Report and Lease Operating Statements. With the
delivery of quarterly financial statements under Section 8.01(b) and in any
event, no later than 60 days after the end of each fiscal quarter, a report
setting forth, for each calendar month during the then current fiscal year to
date on a production date basis, the volume of production and sales attributable
to production (and the prices at which such sales were made and the revenues
derived from such sales) for each such calendar month from the Oil and Gas
Properties, and setting forth the related ad valorem, severance and production
taxes and lease operating expenses attributable thereto and incurred for each
such calendar month.
(p) Notices of Certain Changes. Promptly, but in any event within five
(5) Business Days after the execution thereof, copies of any amendment,
modification or supplement to the certificate or articles of incorporation,
by-laws, any preferred stock designation or any other organic document of the
Borrower or any Restricted Subsidiary.
(q) Ratings Change. Promptly after Xxxxx'x or S&P shall have announced
a change in the rating, established or deemed to have been established for the
Borrower or any Material Indebtedness, written notice of such rating change.
(r) Other Requested Information. Promptly following any request
therefor, such other information regarding the operations, business affairs and
financial condition of the Borrower or any Subsidiary (including, without
limitation, any Plan or Multiemployer Plan and
50
any reports or other information required to be filed under ERISA), or
compliance with the terms of this Agreement or any other Loan Document, as the
Administrative Agent or any Lender may reasonably request.
(s) Delivery of Information Electronically. Notices to the
Administrative Agent and the Lenders under this Section 8.01 may be delivered or
furnished by electronic communications pursuant to procedures approved by the
Administrative Agent, including broadcast email to the Lenders that the
available information has been made available to the Lenders on either the
Borrower's "Intralinks" page or the Borrower's website at xxx.xxxxxxxxx.xxx.
Section 8.02 Notices of Material Events. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:
(a) the occurrence of any Default;
(b) the filing or commencement of, or the threat in writing of, any
action, suit, proceeding, investigation or arbitration by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any
Affiliate thereof not previously disclosed in writing to the Lenders or any
material adverse development in any action, suit, proceeding, investigation or
arbitration previously disclosed to the Lenders that, if adversely determined,
could reasonably be expected to result in liability in excess of $2,000,000 not
fully covered by insurance, subject to normal deductibles;
(c) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of the Borrower and its Subsidiaries in an aggregate amount exceeding
$1,000,000; and
(d) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 8.02 shall be accompanied by a
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
Section 8.03 Existence; Conduct of Business. The Borrower will, and will
cause each Restricted Subsidiary to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business and maintain, if necessary, its qualification to do business in
each other jurisdiction in which its Oil and Gas Properties is located or the
ownership of its Properties requires such qualification, except where the
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 9.12.
Section 8.04 Payment of Obligations. The Borrower will, and will cause each
Restricted Subsidiary to, pay its obligations, including Tax liabilities of the
Borrower and all of its Subsidiaries before the same shall become delinquent or
in default, except where (a) the
51
validity or amount thereof is being contested in good faith by appropriate
proceedings, (b) the Borrower or such Restricted Subsidiary has set aside on its
books adequate reserves with respect thereto in accordance with GAAP and (c) the
failure to make payment pending such contest could not reasonably be expected to
result in a Material Adverse Effect or result in the seizure or levy of any
Property of the Borrower or any Subsidiary.
Section 8.05 Performance of Obligations under Loan Documents. The Borrower
will pay the Loans according to the reading, tenor and effect thereof, and the
Borrower will, and will cause each Restricted Subsidiary to, do and perform
every act and discharge all of the obligations to be performed and discharged by
them under the Loan Documents, including, without limitation, this Agreement, at
the time or times and in the manner specified.
Section 8.06 Operation and Maintenance of Properties. The Borrower, at its
own expense, will, and will cause each Restricted Subsidiary to:
(a) operate its Oil and Gas Properties and other material Properties
or cause such Oil and Gas Properties and other material Properties to be
operated in a careful and efficient manner in accordance with the practices of
the industry and in compliance with all applicable contracts and agreements and
in compliance with all Governmental Requirements, including, without limitation,
applicable pro ration requirements and Environmental Laws, and all applicable
laws, rules and regulations of every other Governmental Authority from time to
time constituted to regulate the development and operation of its Oil and Gas
Properties and the production and sale of Hydrocarbons and other minerals
therefrom, except, in each case, where the failure to comply could not
reasonably be expected to have a Material Adverse Effect.
(b) keep and maintain all Property material to the conduct of its
business in good working order and condition, ordinary wear and tear excepted
preserve, maintain and keep in good repair, working order and efficiency
(ordinary wear and tear excepted) all of its Oil and Gas Properties and other
Properties, including, without limitation, all equipment, machinery and
facilities except, in each case, where the failure to do so could not reasonably
be expected to have a Material Adverse Effect.
(c) promptly pay and discharge, or make reasonable and customary
efforts to cause to be paid and discharged, all delay rentals, royalties,
expenses and indebtedness accruing under the leases or other agreements
affecting or pertaining to its Oil and Gas Properties and will do all other
things necessary to keep unimpaired their rights with respect thereto and
prevent any forfeiture thereof or default thereunder.
(d) promptly perform or make reasonable and customary efforts to cause
to be performed, in accordance with industry standards, the obligations required
by each and all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and other
material Properties.
(e) operate its Oil and Gas Properties and other material Properties
or cause or make reasonable and customary efforts to cause such Oil and Gas
Properties and other material Properties to be operated in accordance with the
practices of the industry and in material
52
compliance with all applicable contracts and agreements and in compliance in all
material respects with all Governmental Requirements.
(f) to the extent the Borrower is not the operator of any Property,
the Borrower shall use reasonable efforts to cause the operator to comply with
this Section 8.06.
Section 8.07 Insurance. The Borrower will, and will cause each Restricted
Subsidiary to, maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies engaged in the same or similar businesses operating in
the same or similar locations. The loss payable clauses or provisions in said
insurance policy or policies insuring any of the collateral for the Loans shall
be endorsed in favor of and made payable to the Administrative Agent as its
interests may appear and such policies shall name the Administrative Agent and
the Lenders as "additional insureds" and provide that the insurer will endeavor
to give at least 30 days prior notice of any cancellation to the Administrative
Agent.
Section 8.08 Books and Records; Inspection Rights. The Borrower will, and
will cause each Restricted Subsidiary to, keep proper books of record and
account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. The Borrower will, and
will cause each Restricted Subsidiary to, permit any representatives designated
by the Administrative Agent or any Lender, upon reasonable prior notice, to
visit and inspect its Properties, to examine and make extracts from its books
and records, and to discuss its affairs, finances and condition with its
officers and independent accountants, all at such reasonable times and as often
as reasonably requested.
Section 8.09 Compliance with Laws. The Borrower will, and will cause each
Restricted Subsidiary to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its Property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.
Section 8.10 Environmental Matters.
(a) The Borrower shall at its sole expense: (i) comply, and shall
cause its Properties and operations and each Subsidiary and each Subsidiary's
Properties and operations to comply, with all applicable Environmental Laws, the
breach of which could be reasonably expected to have a Material Adverse Effect;
(ii) not dispose of or otherwise release, and shall cause each Subsidiary not to
dispose of or otherwise release, any oil, oil and gas waste, hazardous
substance, or solid waste on, under, about or from any of the Borrower's or its
Subsidiaries' Properties or any other Property to the extent caused by the
Borrower's or any of its Subsidiaries' operations except in compliance with
applicable Environmental Laws, the disposal or release of which could reasonably
be expected to have a Material Adverse Effect; (iii) timely obtain or file, and
shall cause each Subsidiary to timely obtain or file, all notices, permits,
licenses, exemptions, approvals, registrations or other authorizations, if any,
required under applicable Environmental Laws to be obtained or filed in
connection with the operation or use of the Borrower's or its Subsidiaries'
Properties, which failure to obtain or file could reasonably be expected to have
a Material Adverse Effect; (iv) promptly commence and
53
diligently prosecute to completion, and shall cause each Subsidiary to promptly
commence and diligently prosecute to completion, any assessment, evaluation,
investigation, monitoring, containment, cleanup, removal, repair, restoration,
remediation or other remedial obligations (collectively, the "Remedial Work") in
the event any Remedial Work is required or reasonably necessary under applicable
Environmental Laws because of or in connection with the actual or suspected
past, present or future disposal or other release of any oil, oil and gas waste,
hazardous substance or solid waste on, under, about or from any of the
Borrower's or its Subsidiaries' Properties, which failure to commence and
diligently prosecute to completion could reasonably be expected to have a
Material Adverse Effect; and (v) establish and implement, and shall cause each
Subsidiary to establish and implement, such procedures as may be necessary to
continuously determine and assure that the Borrower's and its Subsidiaries'
obligations under this Section 8.10(a) are timely and fully satisfied, which
failure to establish and implement could reasonably be expected to have a
Material Adverse Effect.
(b) The Borrower will promptly, but in no event later than five days
of the occurrence of a triggering event, notify the Administrative Agent and the
Lenders in writing of any threatened action, investigation or inquiry by any
Governmental Authority or any threatened demand or lawsuit by any landowner or
other third party against the Borrower or its Subsidiaries or their Properties
of which the Borrower has Knowledge in connection with any Environmental Laws
(excluding routine testing and corrective action) if the Borrower reasonably
anticipates that such action will result in liability (whether individually or
in the aggregate) in excess of $2,000,000, not fully covered by insurance,
subject to normal deductibles.
(c) The Borrower will, and will cause each Subsidiary to, provide
environmental audits and tests in accordance with American Society of Testing
Materials standards upon request by the Administrative Agent and the Lenders and
no more than once per year in the absence of any Event of Default (or as
otherwise required to be obtained by the Administrative Agent or the Lenders by
any Governmental Authority), in connection with any future acquisitions of Oil
and Gas Properties or other Properties.
Section 8.11 Further Assurances.
(a) The Borrower at its expense will, and will cause each Restricted
Subsidiary to, promptly execute and deliver to the Administrative Agent all such
other documents, agreements and instruments reasonably requested by the
Administrative Agent to comply with, cure any defects or accomplish the
conditions precedent, covenants and agreements of the Borrower or any Restricted
Subsidiary, as the case may be, in the Loan Documents, including the Notes, if
requested, or to further evidence and more fully describe the collateral
intended as security for the Indebtedness, or to correct any omissions in this
Agreement or the Security Instruments, or to state more fully the obligations
secured therein, or to perfect, protect or preserve any Liens created pursuant
to this Agreement or any of the Security Instruments or the priority thereof, or
to make any recordings, file any notices or obtain any consents, all as may be
reasonably necessary or appropriate, in the sole discretion of the
Administrative Agent, in connection therewith.
(b) The Borrower hereby authorizes the Administrative Agent to file
one or more financing or continuation statements, and amendments thereto,
relative to all or any part of
54
the Mortgaged Property without the signature of the Borrower or any other
Guarantor where permitted by law. A carbon, photographic or other reproduction
of the Security Instruments or any financing statement covering the Mortgaged
Property or any part thereof shall be sufficient as a financing statement where
permitted by law.
Section 8.12 Reserve Reports.
On or before March 1st and September 1st of each year, commencing
March 1, 2006, the Borrower shall furnish to the Administrative Agent and the
Lenders a Reserve Report. The Reserve Report as of January 1 of each year shall
be prepared by one or more Approved Petroleum Engineers, and the July 1 Reserve
Report of each year shall be prepared by or under the supervision of the chief
engineer of the Borrower who shall certify such Reserve Report to be true and
accurate and to have been prepared in accordance with the procedures used in the
immediately preceding January 1 Reserve Report.
(a) In the event of a determination of the Total Reserve Value as of a
specified date other than January 1 and July 1, the Borrower shall furnish to
the Administrative Agent and the Lenders a Reserve Report prepared by or under
the supervision of the chief engineer of the Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in accordance
with the procedures used in the immediately preceding January 1 Reserve Report.
(b) With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Lenders a certificate from a
Responsible Officer certifying that in all material respects: (i) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, and no statements or conclusions
exist in such Reserve Report which are based upon or include misleading
information or which fail to take into account material information regarding
the matters reported therein to the extent such misstatement, misleading
information or failure could reasonably be expected to have a Material Adverse
Effect, (ii) the Borrower or its Restricted Subsidiaries owns good and
defensible title to the Oil and Gas Properties evaluated in such Reserve Report
and such Properties are free of all Liens except for Liens permitted by Section
9.03, (iii) except as set forth on an exhibit to the certificate, on a net basis
there are no gas imbalances, take or pay or other prepayments in excess of the
volume specified in Section 7.19 with respect to its Oil and Gas Properties
evaluated in such Reserve Report which would require the Borrower or any
Restricted Subsidiary to deliver Hydrocarbons either generally or produced from
such Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor, (iv) none of their Oil and Gas Properties have
been sold since the date of the last Total Reserve Value determination except as
set forth on an exhibit to the certificate, which certificate shall list all of
its Oil and Gas Properties sold and in such detail as reasonably required by the
Administrative Agent, (v) attached to the certificate is a list of all marketing
agreements entered into subsequent to the later of the date hereof or the most
recently delivered Reserve Report which the Borrower could reasonably be
expected to have been obligated to list on Schedule 7.20 had such agreement been
in effect on the date hereof and attached thereto is a schedule of the Oil and
Gas Properties evaluated by such Reserve Report that are Mortgaged Properties
and certifying that each Oil and Gas Property that constitutes collateral for
the Senior Revolving Credit Agreement also constitutes collateral for the
Indebtedness outstanding under
55
this Agreement and demonstrating that the percentage of value of such Mortgaged
Properties complies with Section 8.14(a).
Section 8.13 Title Information.
(a) On or before the delivery to the Administrative Agent and the
Lenders of each Reserve Report required by Section 8.12(a), the Borrower will
deliver title information in form and substance acceptable to the Administrative
Agent covering enough of the Oil and Gas Properties evaluated by such Reserve
Report that were not included in the immediately preceding Reserve Report, so
that the Administrative Agent shall be reasonably satisfied with the status of
title to the Oil and Gas Properties evaluated by such Reserve Report.
(b) If the Borrower has provided title information for additional
Properties under Section 8.13(a), the Borrower shall, within 90 days of notice
from the Administrative Agent that title defects or exceptions exist with
respect to such additional Properties, either (i) cure any such title defects or
exceptions (including defects or exceptions as to priority) which are not
permitted by Section 9.03 raised by such information, (ii) substitute acceptable
Mortgaged Properties with no title defects or exceptions except for Excepted
Liens (other than Excepted Liens described in clauses (e), (g) and (h) of such
definition) having an equivalent value or (iii) deliver title information in
form and substance acceptable to the Administrative Agent so that the
Administrative Agent shall be reasonably satisfied with the status of title to
the Oil and Gas Properties evaluated by such Reserve Report.
(c) If the Borrower is unable to cure any title defect requested by
the Administrative Agent or the Lenders to be cured within the 90-day period or
the Borrower does not comply with the requirements to provide acceptable title
information to the Oil and Gas Properties evaluated in the most recent Reserve
Report, such default shall not be a Default, but instead the Administrative
Agent and/or the Majority Lenders shall have the right to exercise the following
remedy in their sole discretion from time to time, and any failure to so
exercise this remedy at any time shall not be a waiver as to future exercise of
the remedy by the Administrative Agent or the Lenders. To the extent that the
Administrative Agent or the Majority Lenders are not satisfied with title to any
Mortgaged Property after the 90-day period has elapsed, the Administrative Agent
may send a notice to the Borrower and the Lenders that the then outstanding
Total Reserve Value shall be reduced by an amount as determined by the Majority
Lenders to cause the Borrower to be in compliance with the requirement to
provide acceptable title information to the Oil and Gas Properties. This new
Total Reserve Value shall become effective immediately after receipt of such
notice.
Section 8.14 Additional Collateral; Additional Guarantors.
(a) In connection with each redetermination of the Total Reserve
Value, the Borrower shall review the Reserve Report and the list of current
Mortgaged Properties (as described in Section 8.12(b)(vi)) to ascertain whether
the Mortgaged Properties represent at least 80% of the total value of the Oil
and Gas Properties evaluated in the most recently completed Reserve Report after
giving effect to exploration and production activities, acquisitions,
dispositions and production. In the event that the Mortgaged Properties do not
represent at least 80% of such total value, then the Borrower shall, and shall
cause its Restricted Subsidiaries to,
56
grant, within thirty (30) days of delivery of the certificate required under
Section 8.12(a), to the Administrative Agent as security for the Indebtedness a
first-priority Lien interest (subject only to Excepted Liens of the type
described in clauses (a) to (d) and (f) of the definition thereof, but subject
to the provisos at the end of such definition) on additional Oil and Gas
Properties not already subject to a Lien of the Security Instruments such that
after giving effect thereto, the Mortgaged Properties will represent at least
80% of such total value. All such Liens will be created and perfected by and in
accordance with the provisions of deeds of trust, security agreements and
financing statements or other Security Instruments, all in form and substance
reasonably satisfactory to the Administrative Agent and in sufficient executed
(and acknowledged where necessary or appropriate) counterparts for recording
purposes. In order to comply with the foregoing, if any Restricted Subsidiary
places a Lien on its Oil and Gas Properties and such Restricted Subsidiary is
not a Guarantor, then it shall become a Guarantor and comply with Section
8.14(b).
(b) In the event that (i) the Borrower determines that any Restricted
Subsidiary is a Material Domestic Subsidiary or (ii) any Domestic Subsidiary
incurs or guarantees any Debt, the Borrower shall promptly cause such Restricted
Subsidiary to guarantee the Indebtedness pursuant to the Guaranty Agreement. In
connection with any such guaranty, the Borrower shall, or shall cause such
Restricted Subsidiary to, (A) execute and deliver a supplement to the Guaranty
Agreement executed by such Subsidiary, (B) pledge all of the Equity Interests of
such new Subsidiary (including, without limitation, delivery of original stock
certificates evidencing the Equity Interests of such Subsidiary, together with
an appropriate undated stock powers for each certificate duly executed in blank
by the registered owner thereof) and (C) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.
(c) In the event that the Borrower or any Domestic Subsidiary becomes
the owner of a Foreign Subsidiary which has total assets in excess of
$1,000,000, then the Borrower shall promptly, or shall cause such Domestic
Subsidiary to promptly, guarantee the Indebtedness pursuant to the Guaranty
Agreement. In connection with any such guaranty, the Borrower shall, or shall
cause such Domestic Subsidiary to, (i) execute and deliver a supplement to the
Guaranty Agreement, (ii) pledge 65% of all the Equity Interests of such Foreign
Subsidiary (including, without limitation, delivery of original stock
certificates evidencing such Equity Interests of such Foreign Subsidiary,
together with appropriate stock powers for each certificate duly executed in
blank by the registered owner thereof) and (iii) execute and deliver such other
additional closing documents, certificates and legal opinions as shall
reasonably be requested by the Administrative Agent.
Section 8.15 ERISA Compliance. The Borrower will promptly furnish and will
cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the
Administrative Agent (i) promptly after the filing thereof with the United
States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA
Event or of any "prohibited transaction," as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by the President or the principal Financial
Officer, the Subsidiary or the ERISA Affiliate, as the case may be, specifying
the nature thereof, what action the Borrower, the Subsidiary or the
57
ERISA Affiliate is taking or proposes to take with respect thereto, and, when
known, any action taken or proposed by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto, and (iii) immediately upon
receipt thereof, copies of any notice of the PBGC's intention to terminate or to
have a trustee appointed to administer any Plan. With respect to each Plan
(other than a Multiemployer Plan), the Borrower will, and will cause each
Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a timely manner,
without incurring any late payment or underpayment charge or penalty and without
giving rise to any Lien, all of the contribution and funding requirements of
section 412 of the Code (determined without regard to subsections (d), (e), (f)
and (k) thereof) and of section 302 of ERISA (determined without regard to
sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the
PBGC in a timely manner, without incurring any late payment or underpayment
charge or penalty, all premiums required pursuant to sections 4006 and 4007 of
ERISA.
Section 8.16 Swap Agreements. The Borrower shall or shall cause one or more
of its Restricted Subsidiaries (which is a Guarantor) to maintain the hedged
position established by the Swap Agreements required under Section 6.01(q)
during the period specified therein and shall neither assign, terminate or
unwind any such Swap Agreements nor sell any Swap Agreements if the effect of
such action (when taken together with any other Swap Agreements executed
contemporaneously with the taking of such action) would have the effect of
canceling its positions under such Swap Agreements required hereby.
Section 8.17 Unrestricted Subsidiaries. The Borrower:
(a) will cause the management, business and affairs of each of the
Borrower and its Restricted Subsidiaries to be conducted in such a manner
(including, without limitation, by keeping separate books of account, furnishing
separate financial statements of Unrestricted Subsidiaries to creditors and
potential creditors thereof and by not permitting Properties of the Borrower and
its respective Restricted Subsidiaries to be commingled) so that each
Unrestricted Subsidiary that is a corporation will be treated as a corporate
entity separate and distinct from Borrower and the Restricted Subsidiaries.
(b) will not, and will not permit any of the Restricted Subsidiaries
to, incur, assume, guarantee or be or become liable for any Debt of any of the
Unrestricted Subsidiaries.
(c) will not permit any Unrestricted Subsidiary to hold any Equity
Interest in, or any Debt of, the Borrower or any Restricted Subsidiary.
Section 8.18 Marketing Activities. The Borrower will not, and will not
permit any of its Restricted Subsidiaries to, engage in marketing activities for
any Hydrocarbons or enter into any contracts related thereto other than (i)
contracts for the sale of Hydrocarbons scheduled or reasonably estimated to be
produced from their proved Oil and Gas Properties during the period of such
contract, (ii) contracts for the sale of Hydrocarbons scheduled or reasonably
estimated to be produced from proved Oil and Gas Properties of third parties
during the period of such contract associated with the Oil and Gas Properties of
the Borrower and its Restricted Subsidiaries that the Borrower or one of its
Restricted Subsidiaries has the right to market pursuant to joint operating
agreements, unitization agreements or other similar contracts that are usual and
customary in the oil and gas business and (iii) other contracts for the purchase
and/or
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sale of Hydrocarbons of third parties (A) which have generally offsetting
provisions (i.e. corresponding pricing mechanics, delivery dates and points and
volumes) such that no "position" is taken and (B) for which appropriate credit
support has been taken to alleviate the material credit risks of the
counterparty thereto.
ARTICLE IX
NEGATIVE COVENANTS
Until the principal of and interest on each Loan and all fees payable
hereunder and all other amounts payable under the Loan Documents have been paid
in full, the Borrower covenants and agrees with the Lenders that:
Section 9.01 Financial Covenants.
(a) Total Reserve Value to Total Debt Ratio. The Borrower will not at
any time permit its ratio of Total Reserve Value to Total Debt to be less than
1.5 to 1.0.
(b) Ratio of Total Debt to EBITDA. The Borrower will not, at any time,
permit its ratio of Total Debt as of such time to EBITDA for the period of four
fiscal quarters ending on the last day of the fiscal quarter immediately
preceding the date of determination for which financial statements are available
to be greater than 4.0 to 1.0.
Section 9.02 Debt. The Borrower will not, and will not permit any
Restricted Subsidiary to, incur, create, assume or suffer to exist any Debt,
except:
(a) the Loans, any Notes or other Indebtedness arising under the Loan
Documents or any guaranty of or suretyship arrangement for the Loans, any Notes
or other Indebtedness arising under the Loan Documents.
(b) Debt of the Borrower and its Restricted Subsidiaries existing on
the date hereof that is reflected in the Financial Statements.
(c) accounts payable and accrued expenses, liabilities or other
obligations to pay the deferred purchase price of Property or services, from
time to time incurred in the ordinary course of business which are not greater
than sixty (60) days past the date of invoice or delinquent or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP.
(d) Debt under Capital Leases not to exceed $2,000,000.
(e) Debt (including guarantees) associated with bonds or surety
obligations required by Governmental Requirements in connection with the
operation of the Oil and Gas Properties.
(f) intercompany Debt between the Borrower and any Restricted
Subsidiary or between Restricted Subsidiaries to the extent permitted by Section
9.05(g); provided that such Debt is not held, assigned, transferred, negotiated
or pledged to any Person other than the Borrower or one of its Wholly-Owned
Subsidiaries, and, provided further, that any such Debt
59
owed by either the Borrower or a Guarantor shall be subordinated to the
Indebtedness on terms set forth in the Guaranty Agreement.
(g) endorsements of negotiable instruments for collection in the
ordinary course of business.
(h) Debt under the Senior Unsecured Notes, the principal amount of
which does not exceed $130,000,000 in the aggregate and any Permitted
Refinancing Debt in respect thereof.
(i) Debt now or hereafter outstanding under the Senior Revolving
Credit Agreement (and any guaranties thereof by the Guarantors), provided that
(A) the aggregate principal amount of the Senior Revolving Credit Agreement
shall not exceed $400,000,000, (B) no part of the Debt for principal owing under
the Senior Revolving Credit Agreement is subordinated in right or payment to any
other Debt for principal owing under the Senior Revolving Credit Agreement, and
(C) at the time each such item of Debt is incurred (1) the aggregate amount
thereof does not exceed the Borrowing Base then in effect under the Senior
Revolving Credit Agreement (or, if such "Borrowing Base" ever ceases to exist or
diverges materially from a conventional commercial bank borrowing base, does not
exceed a conventional commercial bank borrowing base), and (2) after giving
effect to the incurrence of such Debt, no Default or Event of Default then
exists under Section 9.01.
(j) other Debt not to exceed $2,000,000 in the aggregate at any one
time outstanding.
Section 9.03 Liens. The Borrower will not, and will not permit any
Restricted Subsidiary to, create, incur, assume or permit to exist any Lien on
any of its Properties (now owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness.
(b) Excepted Liens.
(c) Liens securing Capital Leases permitted by Section 9.02(d) but
only on the Property under lease.
(d) Liens on Property not constituting collateral for the Indebtedness
and not otherwise permitted by the foregoing clauses of this Section 9.03;
provided that the aggregate principal or face amount of all Debt secured under
this Section 9.03(d) shall not exceed $2,000,000 at any time.
(e) Liens on Property securing the Senior Revolving Credit Agreement
permitted by Section 9.02(i) provided; however, that no Lien shall be granted on
any Property to secure the Senior Revolving Credit Agreement unless the Lien is
also being granted to secure the Indebtedness, this Agreement and the other Loan
Documents.
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Section 9.04 Dividends, Distributions and Redemptions, Repayment of Senior
Unsecured Notes.
(a) Restricted Payments. The Borrower will not, and will not permit
any of its Subsidiaries to, declare or make, or agree to pay or make, directly
or indirectly, any Restricted Payment, return any capital to its stockholders or
make any distribution of its Property to its Equity Interest holders, except (i)
the Borrower may declare and pay dividends with respect to its Equity Interests
payable solely in additional shares of its Equity Interests (other than
Disqualified Capital Stock), (ii) Subsidiaries may declare and pay dividends
ratably with respect to their Equity Interests, (iii) the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Borrower and its
Subsidiaries, (iv) the Borrower may declare and pay scheduled cash dividends
with respect to its Designated Preferred Stock at a coupon not to exceed 8% per
annum, provided that at the time such dividend is declared and paid (1) no
Borrowing Base deficiency exists and (2) no Event of Default exists or would
result from the payment of such dividend, (v) the Borrower may redeem,
repurchase or otherwise acquire its Designated Preferred Stock, provided that at
the time such redemption, repurchase or acquisition (1) no Borrowing Base
deficiency exists, (2) no Event of Default exists or would result from the
redemption, repurchase or acquisition and (3) the aggregate consideration paid
does not exceed $6,000,000 and (vi) the Borrower may terminate its directors' or
employees' option agreements or restricted stock agreements under any of
Borrower's incentive stock plans provided; however, that the aggregate amounts
paid in respect thereof do not exceed $1,000,000.
(b) Redemption of Senior Unsecured Notes; Amendment of Senior
Indenture. The Borrower will not, and will not permit any Restricted Subsidiary
to, prior to the date that is ninety-one (91) days after the Maturity Date: (i)
call, make or offer to make any optional or voluntary Redemption of or otherwise
optionally or voluntarily Redeem (whether in whole or in part) the Senior
Unsecured Notes or any Permitted Refinancing Debt in respect thereof; provided
that the Borrower may prepay the Senior Unsecured Notes and any premiums
relating thereto (1) with the proceeds of any Permitted Refinancing Debt or with
the Net Cash Proceeds of any sale of Equity Interests (other than Disqualified
Capital Stock) of the Borrower or (2) pursuant to the terms of the Senior
Indenture relating to a "change of control" and the redemption and/or repayment
of the Senior Unsecured Notes, provided that such prepayment of the Senior
Unsecured Notes and any premiums relating thereto in (2) above does not exceed
$5,000,000 or (ii) amend, modify, waive or otherwise change, consent or agree to
any amendment, modification, waiver or other change to, any of the terms of the
Senior Unsecured Notes, any Permitted Refinancing Debt or the Senior Indenture
if (A) the effect thereof would be to shorten its maturity or average life or
increase the amount of any payment of principal thereof or increase the rate or
shorten any period for payment of interest thereon or (B) such action requires
the payment of a consent fee (howsoever described), provided that the foregoing
shall not prohibit the execution of other indentures or agreements in connection
with the issuance of Permitted Refinancing Debt or the execution of supplemental
indentures to add guarantors if required by the terms of any Senior Indenture
provided such Person complies with Section 8.14(b).
Section 9.05 Investments, Loans and Advances. The Borrower will not, and
will not permit any Restricted Subsidiary to, make or permit to remain
outstanding any Investments in or to any Person, except that the foregoing
restriction shall not apply to:
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(a) Investments reflected in the Financial Statements or which are
disclosed to the Lenders in Schedule 9.05.
(b) accounts receivable arising in the ordinary course of business.
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, in each case
maturing within one year from the date of creation thereof.
(d) commercial paper maturing within one year from the date of
creation thereof rated in the highest grade by S&P or Moody's.
(e) deposits maturing within one year from the date of creation
thereof with, including certificates of deposit issued by, any Lender or any
office located in the United States of any other bank or trust company which is
organized under the laws of the United States or any state thereof, has capital,
surplus and undivided profits aggregating at least $100,000,000 (as of the date
of such bank or trust company's most recent financial reports) and has a short
term deposit rating of no lower than A2 or P2, as such rating is set forth from
time to time, by S&P or Moody's, respectively or, in the case of any Foreign
Subsidiary, a bank organized in a jurisdiction in which the Foreign Subsidiary
conducts operations having assets in excess of $500,000,000 (or its equivalent
in another currency).
(f) deposits in money market funds investing exclusively in
Investments described in Section 9.05(c), Section 9.05(d) or Section 9.05(e).
(g) Investments (i) made by the Borrower in or to the Guarantors, (ii)
made by any Restricted Subsidiary in or to the Borrower or any Guarantor, (iii)
made by the Borrower or any Restricted Subsidiary in or to all other Domestic
Subsidiaries which are not Guarantors in an aggregate amount at any one time
outstanding not to exceed $400,000, and (iv) made by the Borrower or any
Restricted Subsidiary in or to any Foreign Subsidiary in an aggregate amount at
any one time outstanding not to exceed $200,000.
(h) subject to the limits in Section 9.07, Investments (including,
without limitation, capital contributions) in general or limited partnerships or
other types of entities (each a "venture") entered into by the Borrower or a
Restricted Subsidiary with others in the ordinary course of business; provided
that (i) any such venture is engaged exclusively in oil and gas exploration,
development, production, processing and related activities, including
transportation, (ii) the interest in such venture is acquired in the ordinary
course of business and on fair and reasonable terms and (iii) such venture
interests acquired and capital contributions made (valued as of the date such
interest was acquired or the contribution made) do not exceed, in the aggregate
at any time outstanding an amount equal to $1,000,000.
(i) subject to the limits in Section 9.07, Investments in direct
ownership interests in additional Oil and Gas Properties and gas gathering
systems related thereto or related to farm-out, farm-in, joint operating, joint
venture or area of mutual interest agreements, gathering systems, pipelines or
other similar arrangements which are usual and customary in the oil and gas
exploration and production business located within the geographic boundaries of
the United States of America.
62
(j) loans or advances to employees, officers or directors in the
ordinary course of business of the Borrower or any of its Restricted
Subsidiaries, in each case only as permitted by applicable law, including
Section 402 of the Sarbanes Oxley Act of 2002, but in any event not to exceed
$100,000 in the aggregate at any time.
(k) Investments in stock, obligations or securities received in
settlement of debts arising from Investments permitted under this Section 9.05
owing to the Borrower or any Restricted Subsidiary as a result of a bankruptcy
or other insolvency proceeding of the obligor in respect of such debts or upon
the enforcement of any Lien in favor of the Borrower or any of its Restricted
Subsidiaries; provided that the Borrower shall give the Administrative Agent
prompt written notice in the event that the aggregate amount of all Investments
held at any one time under this Section 9.05(k) exceeds $1,000,000.
(l) Investments in Unrestricted Subsidiaries, provided that the
aggregate amount of all such Investments at any one time shall not exceed
$10,000,000 (or its equivalent in other currencies as of the date of
Investment).
Section 9.06 Designation and Conversion of Restricted and Unrestricted
Subsidiaries; Debt of Unrestricted Subsidiaries.
(a) Unless designated as an Unrestricted Subsidiary on Schedule 7.15
as of the date hereof or thereafter, assuming compliance with Section 9.06(b),
any Person that becomes a Subsidiary of the Borrower or any of its Restricted
Subsidiaries shall be classified as a Restricted Subsidiary.
(b) The Borrower may designate by written notification thereof to the
Administrative Agent, any Restricted Subsidiary, including a newly formed or
newly acquired Subsidiary, as an Unrestricted Subsidiary if (i) prior, and after
giving effect, to such designation, no Default would exist and (ii) such
designation is deemed to be an Investment in an Unrestricted Subsidiary in an
amount equal to the fair market value as of the date of such designation of the
Borrower's direct and indirect ownership interest in such Subsidiary and such
Investment would be permitted to be made at the time of such designation under
Section 9.05(l). Except as provided in this Section 9.06(b), no Restricted
Subsidiary may be redesignated as an Unrestricted Subsidiary.
(c) The Borrower may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary if after giving effect to such designation, (i) the
representations and warranties of the Borrower and its Restricted Subsidiaries
contained in each of the Loan Documents are true and correct on and as of such
date as if made on and as of the date of such redesignation (or, if stated to
have been made expressly as of an earlier date, were true and correct as of such
date), (ii) no Default would exist and (iii) the Borrower complies with the
requirements of Section 8.13(c), Section 8.17 and Section 9.16. Any such
designation shall be treated as a cash dividend in an amount equal to the lesser
of the fair market value of the Borrower's direct and indirect ownership
interest in such Subsidiary or the amount of the Borrower's cash investment
previously made for purposes of the limitation on Investments under Section
9.05(l).
63
(d) The Borrower shall not permit the aggregate principal amount of
all Non-Recourse Debt outstanding at any one time to exceed $20,000,000.
Section 9.07 Nature of Business; International Operations. Neither the
Borrower nor any Restricted Subsidiary will allow any material change to be made
in the character of its business as an independent oil and gas exploration and
production company. From and after the date hereof, the Borrower and its
Domestic Subsidiaries will not acquire or make any other expenditure (whether
such expenditure is capital, operating or otherwise) in or related to, any Oil
and Gas Properties not located within the geographical boundaries of the United
States.
Section 9.08 Limitation on Leases. Neither the Borrower nor any Restricted
Subsidiary will create, incur, assume or suffer to exist any obligation for the
payment of rent or hire of Property of any kind whatsoever (real or personal but
excluding Capital Leases and leases of Hydrocarbon Interests), under leases or
lease agreements which would cause the aggregate amount of all payments made by
the Borrower and the Restricted Subsidiaries pursuant to all such leases or
lease agreements, including, without limitation, any residual payments at the
end of any lease, to exceed $5,000,000 in any period of twelve consecutive
calendar months during the life of such leases.
Section 9.09 Proceeds of Notes. The Borrower will not permit the proceeds
of the Loans to be used for any purpose other than those permitted by Section
7.22. Neither the Borrower nor any Person acting on behalf of the Borrower has
taken or will take any action which might cause any of the Loan Documents to
violate Regulations T, U or X or any other regulation of the Board or to violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereinafter be in
effect. If requested by the Administrative Agent, the Borrower will furnish to
the Administrative Agent and each Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 or such other form referred to
in Regulation U, Regulation T or Regulation X of the Board, as the case may be.
Section 9.10 ERISA Compliance. The Borrower and the Subsidiaries will not
at any time:
(a) engage in, or permit any ERISA Affiliate to engage in, any
transaction in connection with which the Borrower, a Subsidiary or any ERISA
Affiliate could be subjected to either a civil penalty assessed pursuant to
subsections (c), (i) or (l) of section 502 of ERISA or a tax imposed by Chapter
43 of Subtitle D of the Code.
(b) terminate, or permit any ERISA Affiliate to terminate, any Plan in
a manner, or take any other action with respect to any Plan, which could result
in any liability of the Borrower, a Subsidiary or any ERISA Affiliate to the
PBGC.
(c) fail to make, or permit any ERISA Affiliate to fail to make, full
payment when due of all amounts which, under the provisions of any Plan,
agreement relating thereto or applicable law, the Borrower, a Subsidiary or any
ERISA Affiliate is required to pay as contributions thereto.
64
(d) permit to exist, or allow any ERISA Affiliate to permit to exist,
any accumulated funding deficiency within the meaning of section 302 of ERISA or
section 412 of the Code, whether or not waived, with respect to any Plan.
(e) permit, or allow any ERISA Affiliate to permit, the actuarial
present value of the benefit liabilities under any Plan maintained by the
Borrower, a Subsidiary or any ERISA Affiliate which is regulated under Title IV
of ERISA to exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of ERISA.
(f) contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to,
any Multiemployer Plan.
(g) acquire, or permit any ERISA Affiliate to acquire, an interest in
any Person that causes such Person to become an ERISA Affiliate with respect to
the Borrower or a Subsidiary or with respect to any ERISA Affiliate of the
Borrower or a Subsidiary if such Person sponsors, maintains or contributes to,
or at any time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan
that is subject to Title IV of ERISA under which the actuarial present value of
the benefit liabilities under such Plan exceeds the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities.
(h) incur, or permit any ERISA Affiliate to incur, a liability to or
on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of
ERISA.
(i) contribute to or assume an obligation to contribute to, or permit
any ERISA Affiliate to contribute to or assume an obligation to contribute to,
any employee welfare benefit plan, as defined in section 3(1) of ERISA,
including, without limitation, any such plan maintained to provide benefits to
former employees of such entities, that may not be terminated by such entities
in their sole discretion at any time without any material liability.
(j) amend, or permit any ERISA Affiliate to amend, a Plan resulting in
an increase in current liability such that the Borrower, a Subsidiary or any
ERISA Affiliate is required to provide security to such Plan under section
401(a)(29) of the Code.
Section 9.11 Sale or Discount of Receivables. Except for receivables
obtained by the Borrower or any Restricted Subsidiary out of the ordinary course
of business or the settlement of joint interest billing accounts in the ordinary
course of business or discounts granted to settle collection of accounts
receivable or the sale of defaulted accounts arising in the ordinary course of
business in connection with the compromise or collection thereof and not in
connection with any financing transaction, neither the Borrower nor any
Restricted Subsidiary will discount or sell (with or without recourse) any of
its notes receivable or accounts receivable.
Section 9.12 Mergers, Etc. With the exception of the Mergers, the Borrower
will not, and will not permit any Restricted Subsidiary to, merge into or
consolidate with any other
65
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its Property to any other
Person (whether now owned or hereafter acquired) (any such transaction, a
"consolidation"), or liquidate or dissolve; provided that the Borrower or any
Restricted Subsidiary may participate in a consolidation with any other Person;
provided that:
(a) any Restricted Subsidiary (including a Foreign Subsidiary) may
participate in a consolidation with the Borrower (provided that the Borrower
shall be the continuing or surviving corporation) or any other Restricted
Subsidiary that is a Domestic Subsidiary (provided that if one of such parties
to the consolidation is a Foreign Subsidiary, such Domestic Subsidiary shall be
the continuing or surviving Person) and if one of such Restricted Subsidiaries
is a Wholly-Owned Subsidiary, then the surviving Person shall be a Wholly-Owned
Subsidiary; and
(b) any Foreign Subsidiary of the Borrower may participate in a
consolidation with any one or more Foreign Subsidiaries; provided that if one of
such Foreign Subsidiaries is a Wholly-Owned Subsidiary, the survivor shall be a
Wholly-Owned Subsidiary.
Section 9.13 Sale of Properties. The Borrower will not, and will not permit
any Restricted Subsidiary to, sell, assign, farm-out, convey or otherwise
transfer any Property except for (a) the sale of Hydrocarbons in the ordinary
course of business; (b) farmouts of undeveloped acreage and assignments in
connection with such farmouts; (c) the sale or transfer of equipment that is no
longer necessary for the business of the Borrower or such Restricted Subsidiary
or is replaced by equipment of at least comparable value and use; (d) the sale,
transfer or other disposition of Equity Interests in Unrestricted Subsidiaries;
the sale or other disposition (including Casualty Events) of any Oil and Gas
Property or any interest therein or any Restricted Subsidiary owning Oil and Gas
Properties; provided that (i) the consideration received in respect of such sale
or other disposition shall be cash, (ii) the consideration received in respect
of such sale or other disposition shall be equal to or greater than the fair
market value of the Oil and Gas Property, interest therein or Restricted
Subsidiary subject of such sale, lease or other disposition (as reasonably
determined by the board of directors of the Borrower and, if requested by the
Administrative Agent, the Borrower shall deliver a certificate of a Responsible
Officer of the Borrower certifying to that effect); provided that if a
"Borrowing Base" deficiency under the Senior Revolving Credit Agreement shall
exist, then either (1) the Majority Lenders must have consented, such consent
not to be unreasonably withheld or delayed, to such sale, lease or other
disposition, (2) the sale, lease or other disposition must occur pursuant to an
auction held in accordance with procedures that are ordinary and customary in
the oil and gas industry or (3) the sale, lease or other disposition must occur
pursuant to a non-binding bid process conducted by the Borrower or a regionally
or nationally recognized oil and gas asset disposition advisory company in
accordance with procedures that are customary in the oil and gas industry, (iii)
at such time and after giving effect to such sale, lease or other disposition,
no Borrowing Base deficiency under the Senior Revolving Credit Agreement shall
exist, provided, that the condition that no Borrowing Base deficiency under the
Senior Revolving Credit Agreement shall exist at the time of any such sale,
lease or other disposition shall not apply if the Borrower notifies the
Administrative Agent that proceeds of such sale, lease or other disposition
shall be used to remedy a Borrowing Base deficiency under the Senior Revolving
Credit Agreement and the Borrower in fact uses such proceeds to remedy such
Borrowing Base deficiency, to the extent thereof, with any surplus proceeds
being used for one or more of the purposes permitted by
66
clause (v) of this Section 9.13, (iv) if such sale or other disposition of Oil
and Gas Property or Restricted Subsidiary owning Oil and Gas Properties included
in the most recently delivered Reserve Report during any period between two
successive determinations of Total Reserve Value is sold for a price in excess
of 10% of the Borrowing Base of the Senior Revolving Credit Agreement,
individually or in the aggregate, then the Total Reserve Value shall be reduced,
effective immediately upon such sale or disposition, by an amount equal to the
value, if any, assigned such Property in the most recently delivered Reserve
Report and (v) an amount equal to 100% of the net proceeds received from such
sale, lease or other disposition shall be used within 90 days of such
disposition: (1) to acquire Property, plant and equipment or any business entity
used or useful in carrying on the business of the Borrower and its Restricted
Subsidiaries and having a fair market value at least equal to the fair market
value of the Properties sold, leased or otherwise disposed of or to improve or
replace any existing Property of the Borrower and its Subsidiaries used or
useful in carrying on the business of the Borrower and its Subsidiaries, (2) to
repay or retire Debt under the Senior Revolving Credit Agreement (with a
permanent reduction in the commitments thereunder) or (3) to prepay the Loans;
and sales and other dispositions of Properties not regulated by Section 9.13(a)
to (e) having a fair market value not to exceed $4,000,000 during any 12-month
period.
Section 9.14 Environmental Matters. The Borrower will not, and will not
permit any Restricted Subsidiary to, cause or permit any of its Property to be
in violation of, or do anything or permit anything to be done which will subject
any such Property to any Remedial Work under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such
violations or remedial obligations could reasonably be expected to have a
Material Adverse Effect.
Section 9.15 Transactions with Affiliates. The Borrower will not, and will
not permit any Restricted Subsidiary to, enter into any transaction, including,
without limitation, any purchase, sale, lease or exchange of Property or the
rendering of any service, with any Affiliate (other than the Guarantors and
Wholly-Owned Subsidiaries of the Borrower) unless such transactions are
otherwise permitted under this Agreement and are upon fair and reasonable terms
no less favorable to it than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate.
Section 9.16 Subsidiaries. The Borrower will not, and will not permit any
Restricted Subsidiary to, create or acquire any additional Restricted Subsidiary
or redesignate an Unrestricted Subsidiary as a Restricted Subsidiary unless the
Borrower gives written notice to the Administrative Agent of such creation or
acquisition and complies with Section 8.14(b) and Section 8.14(c). The Borrower
shall not, and shall not permit any Restricted Subsidiary to, sell, assign or
otherwise dispose of any Equity Interests in any Restricted Subsidiary except in
compliance with Section 9.13(e).
Section 9.17 Negative Pledge Agreements; Dividend Restrictions. The
Borrower will not, and will not permit any Restricted Subsidiary to, create,
incur, assume or suffer to exist any contract, agreement or understanding (other
than this Agreement, the Security Instruments or Capital Leases creating Liens
permitted by Section 9.03(c)) which in any way prohibits or restricts the
granting, conveying, creation or imposition of any Lien on any of its Property
in
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favor of the Administrative Agent and the Lenders or restricts any Restricted
Subsidiary from paying dividends or making distributions to the Borrower or any
Guarantor, or which requires the consent of or notice to other Persons in
connection therewith.
Section 9.18 Gas Imbalances, Take-or-Pay or Other Prepayments. The Borrower
will not allow gas imbalances, take-or-pay or other prepayments with respect to
the Oil and Gas Properties of the Borrower or any Restricted Subsidiary that
would require the Borrower or such Restricted Subsidiary to deliver Hydrocarbons
at some future time without then or thereafter receiving full payment therefor
to exceed 1.5 bcf of gas (on an mcf equivalent basis) in the aggregate.
Section 9.19 Swap Agreements. The Borrower will not, and will not permit
any Restricted Subsidiary to, enter into any Swap Agreements with any Person
other than (a) Swap Agreements in respect of commodities (i) with an Approved
Counterparty and (ii) the notional volumes for which (when aggregated with other
commodity Swap Agreements then in effect other than basis differential swaps on
volumes already hedged pursuant to other Swap Agreements) do not exceed, as of
the date such Swap Agreement is executed, 85% of the reasonably anticipated
projected production (as shown in the Borrower's most recent Reserve Report)
from proved, developed, producing Oil and Gas Properties for each month during
the period during which such Swap Agreement is in effect for each of crude oil
and natural gas, calculated separately, (b) Swap Agreements in respect of
interest rates with an Approved Counterparty, as follows: (i) Swap Agreements
effectively converting interest rates from fixed to floating, the notional
amounts of which (when aggregated with all other Swap Agreements of the Borrower
and its Restricted Subsidiaries then in effect effectively converting interest
rates from fixed to floating) do not exceed 50% of the then outstanding
principal amount of the Borrower's Debt for borrowed money which bears interest
at a fixed rate and (ii) Swap Agreements effectively converting interest rates
from floating to fixed, the notional amounts of which (when aggregated with all
other Swap Agreements of the Borrower and its Restricted Subsidiaries then in
effect effectively converting interest rates from floating to fixed) do not
exceed 75% of the then outstanding principal amount of the Borrower's Debt for
borrowed money which bears interest at a floating rate, and (c) Swap Agreements
required under Section 6.01(q). In no event shall any Swap Agreement contain any
requirement, agreement or covenant for the Borrower or any Restricted Subsidiary
to post collateral or margin to secure their obligations under such Swap
Agreement or to cover market exposures.
Section 9.20 Merger Documents. The Borrower will not, and will not permit
any of its Subsidiaries to, amend, modify or supplement any of the Merger
Documents if the effect thereof could reasonably be expected to have a Material
Adverse Effect (and provided that the Borrower promptly furnishes to the
Administrative Agent a copy of such amendment, modification or supplement).
Section 9.21 Anti-Layering. Notwithstanding the foregoing, the Borrower
will not, and will not permit any Subsidiary to, incur, create, assume or suffer
to exist any Debt if such Debt is subordinate or junior in ranking in right of
payment to the Senior Revolving Credit Agreement, unless such Debt is expressly
subordinated in right of payment to the obligations under this Agreement.
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ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One or more of the following events shall
constitute an "Event of Default":
(a) the Borrower shall fail to pay any principal of any Loan when and
as the same shall become due and payable, whether at the due date thereof or at
a date fixed for prepayment thereof or otherwise.
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in Section 10.01(a))
payable under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of three
Business Days.
(c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Restricted Subsidiary in or in connection with any Loan
Document or any amendment or modification of any Loan Document or waiver under
such Loan Document, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document or any
amendment or modification thereof or waiver thereunder, shall prove to have been
incorrect when made or deemed made.
(d) the Borrower or any Restricted Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in Section 8.01(i),
Section 8.01(m), Section 8.01(q), Section 8.02, Section 8.03, Section 8.15 or in
ARTICLE IX.
(e) the Borrower or any Restricted Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in this Agreement (other
than those specified in Section 10.01(a), Section 10.01(b) or Section 10.01(d))
or any other Loan Document, and such failure shall continue unremedied for a
period of 30 days after the earlier to occur of (A) notice thereof from the
Administrative Agent to the Borrower (which notice will be given at the request
of any Lender) or (B) a Responsible Officer of the Borrower or such Restricted
Subsidiary otherwise becoming aware of such default.
(f) the Borrower or any Restricted Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness prior to the longer of (i) three (3) Business Days
after the same shall become due and payable or (ii) the expiration of any
applicable grace period.
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity, or to require the
Redemption thereof or any offer to Redeem to be made in respect thereof, prior
to its scheduled maturity or require the Borrower or any Restricted Subsidiary
to make an offer in respect thereof.
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of the Borrower or any Restricted Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or
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(ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any Restricted Subsidiary or
for a substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 30 days or an order or decree approving
or ordering any of the foregoing shall be entered.
(i) the Borrower or any Restricted Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking liquidation, reorganization
or other relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in Section 10.01(h), (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Borrower or any Restricted Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing.
(j) the Borrower or any Restricted Subsidiary shall become unable,
admit in writing its inability or fail generally to pay its debts as they become
due.
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $2,000,000 (to the extent not covered by independent third
party insurance provided by insurers of the highest claims paying rating or
financial strength as to which the insurer does not dispute coverage and is not
subject to an insolvency proceeding) shall be rendered against the Borrower, any
Restricted Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to attach or levy upon any assets of the Borrower or any Restricted
Subsidiary to enforce any such judgment.
(l) the Loan Documents after delivery thereof shall for any reason,
except to the extent permitted by the terms thereof, cease to be in full force
and effect and valid, binding and enforceable in accordance with their terms
against the Borrower or a Guarantor party thereto or shall be repudiated by any
of them, or cease to create a valid and perfected Lien of the priority required
thereby on any of the collateral purported to be covered thereby, except to the
extent permitted by the terms of this Agreement, or the Borrower or any
Restricted Subsidiary or any of their Affiliates shall so state in writing.
(m) an ERISA Event shall have occurred that, in the opinion of the
Majority Lenders, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of the Borrower
and its Subsidiaries in an aggregate amount exceeding (i) $500,000 in any year
or (ii) $1,000,000 for all periods.
(n) a Change in Control shall occur.
Section 10.02 Remedies.
(a) In the case of an Event of Default other than one described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j), at any time thereafter
during the continuance of such Event of Default, the Administrative Agent, at
the direction of the Majority Lenders, shall,
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by notice to the Borrower, take either or both of the following actions, at the
same or different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Notes, if any, and
the Loans then outstanding to be due and payable in whole (or in part, in which
case any principal not so declared to be due and payable may thereafter be
declared to be due and payable), and thereupon the principal of the Loans so
declared to be due and payable, together with accrued interest thereon and all
fees and other obligations of the Borrower and the Guarantors accrued hereunder
and under the Loans, the Notes, if any, and the other Loan Documents (including,
without limitation, shall become due and payable immediately, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other notice of any kind, all of which are hereby waived by the
Borrower and each Guarantor; and in case of an Event of Default described in
Section 10.01(h), Section 10.01(i) or Section 10.01(j), the Notes, if any, and
the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and the other obligations of the Borrower and Guarantors
accrued hereunder and under the Loans, the Notes, if any, and the other Loan
Documents, shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower and each Guarantor.
(b) In the case of the occurrence of an Event of Default, the
Administrative Agent and the Lenders will have all other rights and remedies
available at law and equity.
(c) All proceeds realized from the liquidation or other disposition of
collateral or otherwise received after maturity of the Loans, whether by
acceleration or otherwise, shall be applied: first, to reimbursement of expenses
and indemnities provided for in this Agreement and the Security Instruments;
second, to accrued interest on the Loans; third, to fees; fourth, pro rata to
principal outstanding on the Loans; fifth, to any other Indebtedness; and any
excess shall be paid to the Borrower or as otherwise required by any
Governmental Requirement.
ARTICLE XI
THE ADMINISTRATIVE AGENT
Section 11.01 Appointment; Powers.
(a) Each of the Lenders hereby irrevocably appoints the Administrative
Agent as its agent and authorizes the Administrative Agent to take such actions
on its behalf and to exercise such powers as are delegated to the Administrative
Agent by the terms hereof and the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto.
(b) The Administrative Agent is hereby designated as the CUSIP agent
for all parties and is authorized to take all necessary or desirable steps to
obtain CUSIP Numbers from the CSB Service Bureau and to include those numbers on
all Loan Documents. The Administrative Agent is further authorized to take all
actions necessary or desirable to maintain accurate and updated information with
the CSB, including in connection with any amendment, modification, or
restatement of this Agreement. After the Effective Date, the Administrative
Agent is authorized to allow the CSB to publish the CUSIP Data to CUSIP
Subscribers.
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Section 11.02 Duties and Obligations of Administrative Agent. The
Administrative Agent shall not have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has occurred
and is continuing, (b) the Administrative Agent shall not have any duty to take
any discretionary action or exercise any discretionary powers, except as
provided in Section 11.03, and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Borrower or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
under any other Loan Document or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth herein or in any other Loan Document, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document, (v) the satisfaction of
any condition set forth in ARTICLE VI or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent
or as to those conditions precedent expressly required to be to the
Administrative Agent's satisfaction, (vi) the existence, value, perfection or
priority of any collateral security or the financial or other condition of the
Borrower and its Subsidiaries or any other obligor or guarantor, or (vii) any
failure by the Borrower or any other Person (other than itself) to perform any
of its obligations hereunder or under any other Loan Document or the performance
or observance of any covenants, agreements or other terms or conditions set
forth herein or therein.
Section 11.03 Action by Administrative Agent. The Administrative Agent
shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby that the Administrative Agent is required to exercise in
writing as directed by the Majority Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 12.02) and in all cases the Administrative Agent shall be fully
justified in failing or refusing to act hereunder or under any other Loan
Documents unless it shall (a) receive written instructions from the Majority
Lenders or the Lenders, as applicable, (or such other number or percentage of
the Lenders as shall be necessary under the circumstances as provided in Section
12.02) specifying the action to be taken and (b) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions as aforesaid and any action taken or failure to act pursuant
thereto by the Administrative Agent shall be binding on all of the Lenders. If a
Default has occurred and is continuing, then the Administrative Agent shall take
such action with respect to such Default as shall be directed by the requisite
Lenders in the written instructions (with indemnities) described in this Section
11.03, provided that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default as it shall deem advisable in the best interests of the Lenders.
In no event, however, shall the
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Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement, the Loan Documents or applicable law. The Administrative Agent shall
not be liable for any action taken or not taken by it with the consent or at the
request of the Majority Lenders or the Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 12.02), and otherwise the Administrative Agent shall not be
liable for any action taken or not taken by it hereunder or under any other Loan
Document or under any other document or instrument referred to or provided for
herein or therein or in connection herewith or therewith INCLUDING ITS OWN
ORDINARY NEGLIGENCE, except for its own gross negligence or willful misconduct.
Section 11.04 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon, and shall not incur any liability for relying
upon, any notice, request, certificate, consent, statement, instrument, document
or other writing believed by it to be genuine and to have been signed or sent by
the proper Person. The Administrative Agent also may rely upon any statement
made to it orally or by telephone and believed by it to be made by the proper
Person, and shall not incur any liability for relying thereon and each of the
Borrower, and the Lenders hereby waives the right to dispute the Administrative
Agent's record of such statement, except in the case of gross negligence or
willful misconduct by the Administrative Agent. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
accountants and other experts selected by it, and shall not be liable for any
action taken or not taken by it in accordance with the advice of any such
counsel, accountants or experts. The Administrative Agent may deem and treat the
payee of the Note, if any, as the holder thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof permitted
hereunder shall have been filed with the Administrative Agent.
Section 11.05 Subagents. The Administrative Agent may perform any and all
its duties and exercise its rights and powers by or through any one or more
sub-agents appointed by the Administrative Agent. The Administrative Agent and
any such sub-agent may perform any and all its duties and exercise its rights
and powers through their respective Related Parties. The exculpatory provisions
of the preceding Sections of this ARTICLE XI shall apply to any such sub-agent
and to the Related Parties of the Administrative Agent and any such sub-agent,
and shall apply to their respective activities as Administrative Agent.
Section 11.06 Resignation or Removal of Administrative Agent. Subject to
the appointment and acceptance of a successor Administrative Agent as provided
in this Section 11.06, the Administrative Agent may resign at any time by
notifying the Lenders, and the Borrower, and the Administrative Agent may be
removed at any time with or without cause by the Majority Lenders. Upon any such
resignation or removal, the Majority Lenders shall have the right, with the
consent of the Borrower, which consent shall not be unreasonably withheld or
delayed, to appoint a successor. If no successor shall have been so appointed
and shall have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation or removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent. Upon the acceptance of
its appointment as Administrative Agent hereunder by a successor, such successor
shall succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Administrative Agent, and the retiring Administrative
Agent shall be discharged from its
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duties and obligations hereunder. The fees payable by the Borrower to a
successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrower and such successor.
After the Administrative Agent's resignation hereunder, the provisions of this
ARTICLE XI and Section 12.03 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while it was acting
as Administrative Agent.
Section 11.07 Administrative Agent as a Lender. Each bank serving as an
Administrative Agent hereunder shall have the same rights and powers in its
capacity as a Lender as any other Lender and may exercise the same as though it
were not an Administrative Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Borrower or any Subsidiary or other Affiliate thereof as if it were not an
Administrative Agent hereunder.
Section 11.08 No Reliance. Each Lender acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement and each
other Loan Document to which it is a party. Each Lender also acknowledges that
it will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document, any
related agreement or any document furnished hereunder or thereunder. The
Administrative Agent shall not be required to keep themselves informed as to the
performance or observance by the Borrower or any of its Subsidiaries of this
Agreement, the Loan Documents or any other document referred to or provided for
herein or to inspect the Properties or books of the Borrower or its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, neither the Administrative Agent nor the Arranger shall have any duty
or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Borrower (or any
of its Affiliates) which may come into the possession of such Administrative
Agent or any of its Affiliates. In this regard, each Lender acknowledges that
Xxxxxx & Xxxxxx L.L.P. is acting in this transaction as special counsel to the
Arranger only in respect of the Senior Revolving Credit Agreement. Each other
party hereto will consult with its own legal counsel to the extent that it deems
necessary in connection with the Loan Documents and the matters contemplated
therein.
Section 11.09 Authority of Administrative Agent to Release Collateral and
Liens. Each Lender hereby authorizes the Administrative Agent to release any
collateral that is permitted to be sold or released pursuant to the terms of the
Loan Documents. Each Lender hereby authorizes the Administrative Agent to
execute and deliver to the Borrower, at the Borrower's sole cost and expense,
any and all releases of Liens, termination statements, assignments or other
documents reasonably requested by the Borrower in connection with any sale or
other disposition of Property to the extent such sale or other disposition is
permitted by the terms of Section 9.13 or is otherwise authorized by the terms
of the Loan Documents.
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Section 11.10 The Arranger. The Arranger shall have no duties,
responsibilities or liabilities under this Agreement and the other Loan
Documents other than its duties, responsibilities and liabilities in its
capacity as Lender hereunder.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices.
(a) Except in the case of notices and other communications expressly
permitted to be given by telephone (and subject to Section 12.01(b)), all
notices and other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(i) if to the Borrower, to it at 0000 Xxxxxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000, Attention: Xxxxx X. Xxxxxxx (Telecopy No. (000) 000-0000),
with a copy to Xxxxxx, Xxxxxxx Law Firm L.L.C., 000 Xxxxx Xxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxx 00000, Attention: Xxxxx X. Xxxxxxx (Telecopy No. (316)
660-6011);
(ii) if to the Administrative Agent, to it at 000 Xxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxxxx, Loan Assistant (Telecopy
No. (000) 000-0000), with a copy to 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxx 00000, Attention: Xxxxx Xxxxxx (Telecopy No. (000) 000-0000); and
(iii) if to any other Lender, to it at its address (or telecopy
number) set forth in its Administrative Questionnaire.
(b) Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to ARTICLE II, ARTICLE III, ARTICLE IV and ARTICLE V
unless otherwise agreed by the Administrative Agent and the applicable Lender.
The Administrative Agent or the Borrower may, in its discretion, agree to accept
notices and other communications to it hereunder by electronic communications
pursuant to procedures approved by it; provided that approval of such procedures
may be limited to particular notices or communications.
(c) Any party hereto may change its address or telecopy number for
notices and other communications hereunder by notice to the other parties
hereto. All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt.
Section 12.02 Waivers; Amendments.
(a) No failure on the part of the Administrative Agent or any Lender
to exercise and no delay in exercising, and no course of dealing with respect
to, any right, power or privilege, or any abandonment or discontinuance of steps
to enforce such right, power or privilege, under any of the Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under any of the Loan Documents
75
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies of the Administrative Agent
and the Lenders hereunder and under the other Loan Documents are cumulative and
are not exclusive of any rights or remedies that they would otherwise have. No
waiver of any provision of this Agreement or any other Loan Document or consent
to any departure by the Borrower therefrom shall in any event be effective
unless the same shall be permitted by Section 12.02(b), and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given. Without limiting the generality of the foregoing, the making of a
Loan shall not be construed as a waiver of any Default, regardless of whether
the Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.
(b) Neither this Agreement nor any provision hereof nor any Security
Instrument nor any provision thereof may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Borrower
and the Majority Lenders or by the Borrower and the Administrative Agent with
the consent of the Majority Lenders; provided that no such agreement shall (i)
increase the Commitment of any Lender without the written consent of such
Lender, (ii) modify the definition of Total Reserve Value without the consent of
each Lender, (iii) reduce the principal amount of the Loan or reduce the rate of
interest thereon, or reduce any fees payable hereunder, or reduce any other
Indebtedness hereunder or under any other Loan Document, without the written
consent of each Lender affected thereby, (iv) postpone the scheduled date of
payment or prepayment of the principal amount of the Loan, or any interest
thereon, or any fees payable hereunder, or any other Indebtedness hereunder or
under any other Loan Document, or reduce the amount of, waive or excuse any such
payment, or postpone or extend the Maturity Date without the written consent of
each Lender affected thereby, (v) change Section 4.01(b) or Section 4.01(c) in a
manner that would alter the pro rata sharing of payments required thereby,
without the written consent of each Lender, (vi) waive or amend Section 6.01,
Section 8.14, or Section 10.02(c), or change the definition of the terms
"Domestic Subsidiary", "Foreign Subsidiary", "Material Domestic Subsidiary" or
"Subsidiary", without the written consent of each Lender, (vii) release any
Guarantor (except as set forth in the Guaranty Agreement), release a substantial
portion of the collateral (other than as provided in Section 11.09), or reduce
the percentage set forth in Section 8.14(a) to less than 80%, without the
written consent of each Lender, or (viii) change any of the provisions of this
Section 12.02(b) or the definition of "Majority Lenders" or any other provision
hereof specifying the number or percentage of Lenders required to waive, amend
or modify any rights hereunder or under any other Loan Documents or make any
determination or grant any consent hereunder or any other Loan Documents,
without the written consent of each Lender; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Administrative Agent hereunder or under any other Loan Document without the
prior written consent of the Administrative Agent. Notwithstanding the
foregoing, any supplement to Schedule 7.15 (Subsidiaries) shall be effective
simply by delivering to the Administrative Agent a supplemental schedule clearly
marked as such and, upon receipt, the Administrative Agent will promptly deliver
a copy thereof to the Lenders.
Section 12.03 Expenses, Indemnity; Damage Waiver.
(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and its Affiliates, including, without
limitation, the reasonable fees,
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charges and disbursements of counsel and other outside consultants for the
Administrative Agent, the reasonable travel, photocopy, mailing, courier,
telephone and other similar expenses, including all Intralinks expenses, and the
cost of environmental audits and surveys and appraisals, in connection with the
syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration (both before and after the
execution hereof and including advice of counsel to the Administrative Agent as
to the rights and duties of the Administrative Agent and the Lenders with
respect thereto) of this Agreement and the other Loan Documents and any
amendments, modifications or waivers of or consents related to the provisions
hereof or thereof (whether or not the transactions contemplated hereby or
thereby shall be consummated) including, without limitation, fees and expenses
incurred in the process of obtaining and maintaining the CUSIP Numbers and the
information relative thereto with the CSB, (ii) all costs, expenses, Taxes,
assessments and other charges incurred by the Administrative Agent or any Lender
in connection with any filing, registration, recording or perfection of any
security interest contemplated by this Agreement or any Security Instrument or
any other document referred to therein, (iii) all out-of-pocket expenses
incurred by the Administrative Agent or any Lender, including the fees, charges
and disbursements of any counsel for the Administrative Agent or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement or any other Loan Document, including its rights under this
Section 12.03, or in connection with the Loans made hereunder, including,
without limitation, all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans.
(b) THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE
ARRANGER, AND EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN "INDEMNITEE") AGAINST, AND HOLD EACH
INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND
RELATED EXPENSES, INCLUDING THE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL
FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEE ARISING OUT
OF, IN CONNECTION WITH, OR AS A RESULT OF (i) THE EXECUTION OR DELIVERY OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED
HEREBY OR THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OR THE PARTIES TO ANY
OTHER LOAN DOCUMENT OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR THEREUNDER OR
THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR BY ANY OTHER LOAN
DOCUMENT, (ii) THE FAILURE OF THE BORROWER OR ANY RESTRICTED SUBSIDIARY TO
COMPLY WITH THE TERMS OF ANY LOAN DOCUMENT, INCLUDING THIS AGREEMENT, OR WITH
ANY GOVERNMENTAL REQUIREMENT, (iii) ANY INACCURACY OF ANY REPRESENTATION OR ANY
BREACH OF ANY WARRANTY OR COVENANT OF THE BORROWER OR ANY GUARANTOR SET FORTH IN
ANY OF THE LOAN DOCUMENTS OR ANY INSTRUMENTS, DOCUMENTS OR CERTIFICATIONS
DELIVERED IN CONNECTION THEREWITH, (iv) ANY LOAN OR THE USE OF THE PROCEEDS
THEREFROM, (v) ANY OTHER ASPECT OF THE LOAN DOCUMENTS, (vi) THE OPERATIONS OF
THE BUSINESS OF THE BORROWER AND ITS SUBSIDIARIES BY THE BORROWER AND ITS
SUBSIDIARIES, (vii) ANY ASSERTION THAT THE LENDERS WERE NOT ENTITLED TO RECEIVE
THE PROCEEDS RECEIVED PURSUANT TO THE SECURITY
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INSTRUMENTS, (viii) ANY ENVIRONMENTAL LAW APPLICABLE TO THE BORROWER OR ANY
SUBSIDIARY OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE
PRESENCE, GENERATION, STORAGE, RELEASE, THREATENED RELEASE, USE, TRANSPORT,
DISPOSAL, ARRANGEMENT OF DISPOSAL OR TREATMENT OF OIL, OIL AND GAS WASTES, SOLID
WASTES OR HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (ix) THE BREACH OR
NON-COMPLIANCE BY THE BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW
APPLICABLE TO THE BORROWER OR ANY SUBSIDIARY, (x) THE PAST OWNERSHIP BY THE
BORROWER OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY OF
THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD
RESULT IN PRESENT LIABILITY, (xi) THE PRESENCE, USE, RELEASE, STORAGE,
TREATMENT, DISPOSAL, GENERATION, THREATENED RELEASE, TRANSPORT, ARRANGEMENT FOR
TRANSPORT OR ARRANGEMENT FOR DISPOSAL OF OIL, OIL AND GAS WASTES, SOLID WASTES
OR HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY THE
BORROWER OR ANY SUBSIDIARY OR ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF
HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR
ANY OF ITS SUBSIDIARIES, (xii) ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO
THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (xiii) ANY OTHER ENVIRONMENTAL,
HEALTH OR SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS, OR (xiv) ANY
ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO
ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY AND
REGARDLESS OF WHETHER ANY INDEMNITEE IS A PARTY THERETO, AND SUCH INDEMNITY
SHALL EXTEND TO EACH INDEMNITEE NOTWITHSTANDING THE SOLE OR CONCURRENT
NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE,
WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL
TYPES OF NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF
ONE OR MORE OF THE INDEMNITEES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNITEES; PROVIDED THAT SUCH INDEMNITY SHALL
NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS,
DAMAGES, LIABILITIES OR RELATED EXPENSES ARE DETERMINED BY A COURT OF COMPETENT
JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS
NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH INDEMNITEE.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent under Section 12.03(a) or (b), each
Lender severally agrees to pay to the Administrative Agent such Lender's
Percentage Share (determined as of the time that the applicable unreimbursed
expense or indemnity payment is sought) of such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was incurred by or asserted against the
Administrative Agent in its capacity as such.
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(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the Transactions, or any Loan or the use of the
proceeds thereof.
(e) All amounts due under this Section 12.03 shall be payable not
later than five days after written demand therefor.
Section 12.04 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 12.04. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants (to the extent
provided in Section 12.04(c)) and, to the extent expressly contemplated hereby,
the Related Parties of each of the Administrative Agent and the Lenders) any
legal or equitable right, remedy or claim under or by reason of this Agreement.
(b) (i) Subject to the conditions set forth in Section 12.04(b)(ii),
any Lender may assign to one or more assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:
(A) the Borrower, provided that no consent of the Borrower
shall be required for an assignment to a Lender, an Affiliate of a Lender, an
Approved Fund or, if an Event of Default has occurred and is continuing, any
other assignee; and
(B) the Administrative Agent, provided that no consent of
the Administrative Agent shall be required for an assignment to an assignee that
is a Lender immediately prior to giving effect to such assignment.
(ii) Assignments shall be subject to the following additional
conditions:
(A) except in the case of an assignment to a Lender or an
Affiliate of a Lender or an assignment of the entire remaining amount of the
assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Assumption with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000 unless each of the
Borrower and the Administrative Agent otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing;
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(B) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and obligations
under this Agreement;
(C) the parties to each assignment shall execute and deliver
to the Administrative Agent an Assignment and Assumption, together with a
processing and recordation fee of $3,500; and
(D) the assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire.
(iii) Subject to Section 12.04(b)(iv) and the acceptance and
recording thereof, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto and,
to the extent of the interest assigned by such Assignment and Assumption, have
the rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Section
5.01, Section 5.02, Section 5.03 and Section 12.03). Any assignment or transfer
by a Lender of rights or obligations under this Agreement that does not comply
with this Section 12.04 shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with Section 12.04(c).
(iv) The Administrative Agent, acting for this purpose as an
agent of the Borrower, shall maintain at one of its offices a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and Commitments and principal amount of
the Loans, each Lender pursuant to the terms hereof from time to time (the
"Register"). The entries in the Register shall be conclusive, and the Borrower,
the Administrative Agent, and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and
Assumption executed by an assigning Lender and an assignee, the assignee's
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in Section
12.04(b) and any written consent to such assignment required by Section
12.04(b), the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this Section 12.04(b).
(c) (i) Any Lender may, without the consent of the Borrower or the
Administrative Agent, sell participations to one or more banks or other entities
(a "Participant") in all or a portion of such Lender's rights and obligations
under this Agreement (including all or a portion of its Commitment and the Loans
owing to it); provided that (A) such Lender's
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obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrower, the Administrative Agent, and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the proviso to Section 12.02 that
affects such Participant. In addition such agreement must provide that the
Participant be bound by the provisions of Section 12.03. Subject to Section
12.04(c)(ii), the Borrower agrees that each Participant shall be entitled to the
benefits of Section 5.01, Section 5.02 and Section 5.03 to the same extent as if
it were a Lender and had acquired its interest by assignment pursuant to Section
12.04(b). To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 12.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 4.01(c) as though it were a
Lender.
(ii) A Participant shall not be entitled to receive any greater
payment under Section 5.01 or Section 5.03 than the applicable Lender would
have been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such Participant
is made with the Borrower's prior written consent. A Participant that would
be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 5.03 unless the Borrower is notified of the
participation sold to such Participant and such Participant agrees, for the
benefit of the Borrower, to comply with Section 5.03(e) as though it were a
Lender.
(d) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including, without limitation, any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section 12.04(d) shall not apply
to any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
(e) Notwithstanding any other provisions of this Section 12.04, 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 the Borrower and the Guarantors to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
state.
Section 12.05 Survival; Revival; Reinstatement.
(a) All covenants, agreements, representations and warranties made by
the Borrower herein and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any
Loans, regardless of any investigation made by any such other party or on
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its behalf and notwithstanding that the Administrative Agent, or any Lender may
have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any fee or any other amount payable under this Agreement is outstanding
and unpaid. The provisions of Section 5.01, Section 5.02, Section 5.03 and
Section 12.03 and ARTICLE XI shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, the termination of this Agreement, any other Loan
Document or any provision hereof or thereof.
(b) To the extent that any payments on the Indebtedness or proceeds of
any collateral are subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver or other Person under any bankruptcy law, common law or
equitable cause, then to such extent, the Indebtedness so satisfied shall be
revived and continue as if such payment or proceeds had not been received and
the Administrative Agent's and the Lenders' Liens, security interests, rights,
powers and remedies under this Agreement and each Loan Document shall continue
in full force and effect. In such event, each Loan Document shall be
automatically reinstated and the Borrower shall take such action as may be
reasonably requested by the Administrative Agent and the Lenders to effect such
reinstatement.
Section 12.06 Counterparts; Integration; Effectiveness.
(a) This Agreement may be executed in counterparts (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract.
(b) This Agreement, the other Loan Documents and any separate letter
agreements with respect to fees payable to the Administrative Agent constitute
the entire contract among the parties relating to the subject matter hereof and
thereof and supersede any and all previous agreements and understandings, oral
or written, relating to the subject matter hereof and thereof. THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES
HERETO AND THERETO 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.
(c) Except as provided in Section 6.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.
Section 12.07 Severability. Any provision of this Agreement or any other
Loan Document held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without
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affecting the validity, legality and enforceability of the remaining provisions
hereof or thereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.
Section 12.08 Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other obligations (of whatsoever
kind, including, without limitations obligations under Swap Agreements) at any
time owing by such Lender or Affiliate to or for the credit or the account of
the Borrower or any Restricted Subsidiary against any of and all the obligations
of the Borrower or any Restricted Subsidiary owed to such Lender now or
hereafter existing under this Agreement or any other Loan Document, irrespective
of whether or not such Lender shall have made any demand under this Agreement or
any other Loan Document and although such obligations may be unmatured. The
rights of each Lender under this Section 12.08 are in addition to other rights
and remedies (including other rights of setoff), which such Lender or its
Affiliates may have.
Section 12.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) THIS AGREEMENT AND THE NOTES, IF ANY, SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT TO THE
EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR,
CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE
STATE WHERE SUCH LENDER IS LOCATED. CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH
REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT, THE LOANS OR THE NOTES, IF ANY.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS
SHALL BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT
PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS NON-EXCLUSIVE AND DOES NOT
PRECLUDE A PARTY FROM OBTAINING JURISDICTION OVER ANOTHER PARTY IN ANY COURT
OTHERWISE HAVING JURISDICTION.
(c) EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY
OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
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PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO IT AT THE ADDRESS SPECIFIED IN SECTION 12.01 OR SUCH OTHER
ADDRESS AS IS SPECIFIED PURSUANT TO SECTION 12.01 (OR ITS ASSIGNMENT AND
ASSUMPTION), SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH
MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF A PARTY OR ANY HOLDER OF ANY
NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANOTHER PARTY IN ANY OTHER
JURISDICTION.
(d) EACH PARTY HEREBY (i) IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN; (ii) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (iii) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iv)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE LOAN
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 12.09.
Section 12.10 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
Section 12.11 Confidentiality. Each of the Administrative Agent and the
Lenders agrees to maintain the confidentiality of the Information (as defined
below), except that Information may be disclosed (a) to its and its Affiliates'
directors, officers, employees and agents, including accountants, legal counsel
and other advisors (it being understood that the Persons to whom such disclosure
is made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement or any other Loan Document, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section 12.11, to
(i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii)
any actual or prospective counterparty (or its advisors) to any Swap Agreement
relating to the Borrower and its obligations, (g) with the consent of the
Borrower or (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section 12.11
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or (ii) becomes available to the Administrative Agent or any Lender on a
nonconfidential basis from a source other than the Borrower. For the purposes of
this Section 12.11, "Information" means all information received from the
Borrower or any Restricted Subsidiary relating to the Borrower or any Restricted
Subsidiary and their businesses, other than any such information that is
available to the Administrative Agent or any Lender on a nonconfidential basis
prior to disclosure by the Borrower or a Restricted Subsidiary; provided that,
in the case of information received from the Borrower or any Restricted
Subsidiary after the date hereof, such information is clearly identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 12.11 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
Section 12.12 Interest Rate Limitation. It is the intention of the parties
hereto that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of Texas or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Loans, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Loans,
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by such Lender to the
Borrower); and (ii) in the event that the maturity of the Loans, is accelerated
by reason of an election of the holder thereof resulting from any Event of
Default under this Agreement or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest under
law applicable to any Lender may never include more than the maximum amount
allowed by such applicable law, and excess interest, if any, provided for in
this Agreement or otherwise shall be canceled automatically by such Lender as of
the date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Lender on the principal amount of the Indebtedness (or, to the
extent that the principal amount of the Indebtedness shall have been or would
thereby be paid in full, refunded by such Lender to the Borrower). All sums paid
or agreed to be paid to any Lender for the use, forbearance or detention of sums
due hereunder shall, to the extent permitted by law applicable to such Lender,
be amortized, prorated, allocated and spread throughout the stated term of the
Loans until payment in full so that the rate or amount of interest on account of
any Loans hereunder does not exceed the maximum amount allowed by such
applicable law. If at any time and from time to time (i) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful Rate
applicable to such Lender pursuant to this Section 12.12 and (ii) in respect of
any subsequent interest computation period the amount of interest otherwise
payable to such Lender would be less than the amount of interest payable to such
Lender computed at the Highest Lawful Rate applicable to such Lender, then the
amount of interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed
85
at the Highest Lawful Rate applicable to such Lender until the total amount of
interest payable to such Lender shall equal the total amount of interest which
would have been payable to such Lender if the total amount of interest had been
computed without giving effect to this Section 12.12. To the extent that Chapter
303 of the Texas Finance Code is relevant for the purpose of determining the
Highest Lawful Rate applicable to a Lender, such Lender elects to determine the
applicable rate ceiling under such Chapter by the weekly ceiling from time to
time in effect. Chapter 346 of the Texas Finance Code does not apply to the
Borrower's obligations hereunder.
Section 12.13 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; THAT IT HAS IN FACT READ THIS
AGREEMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,
CONDITIONS AND EFFECTS OF THIS AGREEMENT; THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT LEGAL COUNSEL OF ITS CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS; AND THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ON THE BASIS THAT THE PARTY HAD
NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT
"CONSPICUOUS."
Section 12.14 No Third Party Beneficiaries. The lenders under the Senior
Revolving Credit Agreement are express beneficiaries of Annex II of this
Agreement, and this Agreement, the other Loan Documents, and the agreement of
the Lenders to make Loans hereunder are solely for the benefit of the Borrower,
and no other Person (including, without limitation, any Subsidiary of the
Borrower, any obligor, contractor, subcontractor, supplier or materialsman)
shall have any rights, claims, remedies or privileges hereunder or under any
other Loan Document against the Administrative Agent or any Lender for any
reason whatsoever. There are no third party beneficiaries.
Section 12.15 USA Patriot Act Notice. Each Lender hereby notifies the
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required
to obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow such Lender to identify the Borrower in accordance with the Act.
Section 12.16 Amendment and Restatement of Existing Credit Agreement. This
amendment amends and restates and supercedes in its entirety the Existing Credit
Agreement.
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[SIGNATURES BEGIN NEXT PAGE]
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The parties hereto have caused this Agreement to be duly executed as of the
day and year first above written.
BORROWER: PETROHAWK ENERGY CORPORATION
By:
------------------------------------
Xxxxx X. Xxxxxx
President and Chief Executive
Officer
SIGNATURE PAGE (TERM LOAN)-1
ADMINISTRATIVE AGENT: BNP PARIBAS,
as Administrative Agent and a Lender
By:
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Name:
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Title:
---------------------------------
By:
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Name:
----------------------------------
Title:
---------------------------------
SIGNATURE PAGE (TERM LOAN)-2
LENDER: BNP PARIBAS
By:
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Name:
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Title:
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By:
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Name:
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Title:
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SIGNATURE PAGE (TERM LOAN)-3
ANNEX I
COMMITMENTS
NAME OF LENDER PERCENTAGE SHARE COMMITMENT AMOUNT INCREMENTAL COMMITMENTS
-------------- ---------------- ----------------- -----------------------
BNP Paribas 100.00% $150,000,000.00 $100,000,000.00
TOTAL 100.00% $150,000,000.00
Annex I 1
ANNEX II
TERMS OF SUBORDINATION
Section 1.1 Subordination of Obligations. The Borrower and each Restricted
Subsidiary covenant and agree, and each Term Lender by its acceptance of a Term
Note, if requested, covenants and agrees, that the payment of the Subordinated
Obligations shall, to the extent set forth in this Annex II, be subordinate and
junior and subject in right of payment to the prior payment in full in cash of
all Senior Indebtedness, whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed.
Section 1.2 Payment Default or Acceleration. Except under circumstances
when the terms of Section 1.5 of this Annex II are applicable, if (a) a Payment
Default or Senior Indebtedness Acceleration shall have occurred and be
continuing and (b) the Term Lenders or the Term Administrative Agent or other
representative shall have received a Payment Default Notice, then neither the
Borrower nor any Restricted Subsidiary may make, and no Term Lender shall
accept, receive or collect, any direct or indirect payment or distribution of
any kind or character (in cash, securities, other Property, by setoff, or
otherwise other than Reorganization Securities) of any properties or assets of
the Borrower or any Restricted Subsidiary on account of the Subordinated
Obligations during the Payment Blockage Period; provided, however, that in the
case of any payment on or in respect of any Subordinated Obligation that would
(in the absence of any such Payment Default Notice) have been due and payable on
any date (a "Scheduled Payment Date") during such Payment Blockage Period
pursuant to the terms of the Term Notes, if requested, as in effect on the date
hereof or as amended consistent with the provisions of Section 1.12 of this
Annex II, the provisions of this Section 1.2 shall not prevent the making and
acceptance of such payment (a "Scheduled Payment"), together with any additional
default interest as is due on the Term Notes, if requested, on or after the date
immediately following the termination of such Payment Blockage Period. In the
event that, notwithstanding the foregoing, either the Borrower or any Restricted
Subsidiary shall make any payment or distribution to any Term Lender prohibited
by the foregoing provisions of this Section 1.2, then and in such event such
payment or distribution shall be held in trust for the benefit of and
immediately shall be paid over to the holders of the Senior Indebtedness or the
Senior Indebtedness Representative for application against the Senior
Indebtedness remaining unpaid until such Senior Indebtedness is paid in full in
cash and all letters of credit are fully cash collateralized. Any Payment
Default Notice shall be deemed received by the Term Lenders upon the date of
actual receipt by the Term Lenders or the Term Administrative Agent or other
representative of such Payment Default Notice in writing.
Section 1.3 Non-Payment Default. Except under circumstances when the terms
of Section 1.2 of this Annex II or Section 1.5 of this Annex II are applicable,
if (a) a Non-Payment Default shall have occurred and be continuing, (b) the Term
Lenders or the Term Administrative Agent or other representative shall have
received a Non-Payment Default Notice, and (c) no Non-Payment Default Notice
shall have been given within the 360 day period immediately preceding the giving
of such Non-Payment Default Notice, then neither the Borrower nor any Restricted
Subsidiary may make, and no Term Lender shall accept, receive or collect, any
direct
Annex II-1
or indirect payment or distribution of any kind or character (in cash,
securities, other Property, by setoff, or otherwise other than Reorganization
Securities) of any properties or assets of the Borrower or any Restricted
Subsidiary on account of the Subordinated Obligations during the Non-Payment
Blockage Period; provided, however, that in the case of any Scheduled Payment on
or in respect of any Subordinated Obligation that would (in the absence of any
such Non-Payment Default Notice) have been due and payable on any Scheduled
Payment Date during such Non-Payment Blockage Period pursuant to the terms of
the Loan Documents as in effect on the date hereof or as amended consistent with
the requirements of Section 1.12 of this Annex II, the provisions of this
Section 1.3 shall not prevent the making and acceptance of such Scheduled
Payment, together with any additional default interest as is due on the Term
Notes, if any, on or after the date immediately following the termination of
such Non-Payment Blockage Period. In the event that, notwithstanding the
foregoing, the Borrower or any Restricted Subsidiary shall make any payment or
distribution to any Term Lender prohibited by the foregoing provisions of this
Section 1.3, then and in such event such payment or distribution shall be held
in trust for the benefit of and immediately shall be paid over to the holders of
the Senior Indebtedness or the Senior Indebtedness Representative for
application against the Senior Indebtedness remaining unpaid until such Senior
Indebtedness are paid in full in cash and all letters of credit are fully cash
collateralized. Any Non-Payment Default Notice shall be deemed received by the
Term Lenders upon the date of actual receipt by the Term Lenders or the Term
Administrative Agent or other representative of such Non-Payment Default Notice
in writing.
Section 1.4 Standstill. At any time that the Term Lenders are not permitted
to receive payments on the Subordinated Obligations pursuant to either Section
1.2 or 1.3 of this Annex II, the Term Lenders and the Term Administrative Agent
or other representative of the Term Lenders will not commence any Enforcement
Action relative to the Borrower or any Restricted Subsidiary during the
Standstill Period. Upon the termination of the Standstill Period, the Term
Lenders may exercise all rights or remedies they may have in law or equity;
provided, however, that if a Standstill Period terminates pursuant to clause (e)
of the definition thereof, no Term Lender and no agent or representative thereof
shall exercise any remedies against, or attempt to foreclose upon, garnish,
sequester or execute upon, any Property known to it as constituting collateral
for the Senior Indebtedness (other than to file or record any judgment Liens it
may have obtained against such collateral) during the period that such
Standstill Period would have been in effect but for termination pursuant to
clause (e) of the definition of "Standstill Period;" provided further, that the
Payment Blockage Period or the Non-Payment Blockage Period, as the case may be,
if not also terminated, shall continue for its full period notwithstanding the
termination of the Standstill Period. Notwithstanding the foregoing, no
Standstill Period may be commenced while any other Standstill Period exists or
within 180 days following the termination of any prior Standstill Period
(provided that this sentence shall not relieve any Term Lender of its obligation
to provide notice under Section 1.9 of this Annex II).
Section 1.5 Insolvency; Bankruptcy; Etc. In the event of the institution of
any Insolvency Proceeding relative to the Borrower or any Restricted Subsidiary,
then:
(a) The holders of the Senior Indebtedness shall be entitled to
receive payment in full in cash of the Senior Indebtedness and cash collateral
in respect of all outstanding letters of credit before the Term Lenders are
entitled to receive any direct or indirect
Annex II-2
payment or distribution of any kind or character, whether in cash, Property or
securities (other than Reorganization Securities) on account of the Subordinated
Obligations.
(b) Any direct or indirect payment or distribution of any kind or
character, whether in cash, Property or securities, by setoff or otherwise,
which may be payable or deliverable in such proceedings in respect of the
Subordinated Obligations but for the provisions of this Annex II shall be paid
or delivered by the Person making such payment or distribution, whether the
Borrower, a Subsidiary of the Borrower, a trustee in bankruptcy, a receiver, a
liquidating trustee, or otherwise, directly to the holders of the Senior
Indebtedness or the Senior Indebtedness Representative, to the extent necessary
to make payment in full in cash of all Senior Indebtedness remaining unpaid and
fully cash collateralize all outstanding letters of credit; provided, however,
that no such delivery of any Reorganization Securities shall be made to any
holders of the Senior Indebtedness. In the event that, notwithstanding the
foregoing provisions of this Section 1.5, any Term Lender shall have received
any such payment or distribution of any kind or character, whether in cash,
Property or securities, by setoff or otherwise, before all Senior Indebtedness
is paid in full in cash and all letters of credit have been fully cash
collateralized., which is to be paid to the holders of the Senior Indebtedness
under the foregoing provisions of this Section 1.5, then and in such event such
payment or distribution shall be held in trust for the benefit of and
immediately shall be paid over to the holders of the Senior Indebtedness or the
Senior Indebtedness Representative for application to the payment of all Senior
Indebtedness remaining unpaid until all such Senior Indebtedness shall have been
paid in full in cash and all letters of credit have been fully cash
collateralized.
(c) If no proof of claim is filed in any Insolvency Proceeding with
respect to any Subordinated Obligations by the tenth day prior to the bar date
for any such proof of claim, the Senior Indebtedness Representative may, after
notice to the Term Lenders or the Term Administrative Agent or other
representative, file such a proof of claim on behalf of the Term Lenders, and
each Term Lender hereby irrevocably appoints the Senior Indebtedness
Representative as its agent and attorney-in-fact for such limited purpose;
provided, that the foregoing shall not confer to the holder of any Senior
Indebtedness the right to vote on behalf of the Term Lenders in any Insolvency
Proceedings.
Section 1.6 No Impairment. No right of any present or future holder of
Senior Indebtedness to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Borrower or any Restricted Subsidiary or by any non-compliance by
the Borrower or any Restricted Subsidiary with the terms, provisions, and
covenants of this Annex II, the Term Loan Agreement or the Term Notes, if any,
regardless of any knowledge thereof any such Term Lender may have or be
otherwise charged with. The provisions of this Annex II shall be enforceable
directly by any present or future holder of the Senior Indebtedness and/or the
Senior Indebtedness Representative.
Section 1.7 Rights of Creditors; Subrogation. The provisions of this Annex
II are for the purpose of defining the relative rights of the holders of the
Senior Indebtedness on the one hand, and the Term Lenders on the other hand, and
nothing herein shall impair, as between the Borrower and the Guarantors and the
Term Lenders, the obligation of the Borrower and the Guarantors, which are
unconditional and absolute, to pay to the Term Lenders the principal
Annex II-3
thereof and interest thereon in accordance with their terms and the provisions
thereof, nor shall anything herein, except as otherwise provided in Section 1.4
of this Annex II, prevent the Term Lenders from exercising all remedies
otherwise permitted by applicable law or hereunder upon default under the Term
Loan Agreement or under the Term Notes, if requested, (including the right to
demand payment and xxx for performance thereof and of the Term Notes, if
requested, and to accelerate the maturity thereof as provided by the terms of
the Term Notes, if requested), subject to the rights of holders of the Senior
Indebtedness under this Annex II. Upon payment in full of the Senior
Indebtedness in cash and termination of the commitments of any holder of the
Senior Indebtedness to make loans or extensions of credit, and expiration or
termination of all letters of credit issued by any holder of the Senior
Indebtedness, the Term Lenders shall, to the extent of any payments or
distributions paid or delivered to the holders of the Senior Indebtedness or
otherwise applied to the Senior Indebtedness pursuant to the provisions of this
Annex II, be subrogated to the rights of the holders of the Senior Indebtedness
to receive payments or distributions of assets of the Borrower or any Guarantor
made on Senior Indebtedness (and any security therefor) until the Subordinated
Obligations shall be paid in full (and, for this purpose, no such payments or
distributions paid or delivered to the holders of the Senior Indebtedness or
otherwise applied to the Senior Indebtedness shall be deemed to have discharged
the Subordinated Obligations), and, for the purposes of such subrogation, no
payments to the holders of the Senior Indebtedness of any cash, assets, stock,
or obligations to which the Term Lenders would be entitled except for the
provisions of this Annex II shall, as between the Borrower and the Guarantors,
any of their respective creditors (other than the holders of the Senior
Indebtedness), and the Term Lenders, be deemed to be a payment by the Borrower
or any Guarantor to or on account of Subordinated Obligations. The fact that
failure to make any payment on account of the Subordinated Obligations is caused
by reason of the operation of any provision of this Annex II shall not be
construed as preventing the occurrence of an Event of Default.
Section 1.8 Payments on Senior Indebtedness. In the event that any Term
Lender determines in good faith that evidence is required with respect to the
right of any holder of the Senior Indebtedness to participate in any payment or
distribution pursuant to this Annex II or the amount of such participation, such
Term Lender may request such Person to furnish evidence to the reasonable
satisfaction of such Term Lender as to the amount of Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Annex II, and if such evidence is not furnished, such Term
Lender may defer any payment to such Person pending judicial determination as to
the right of such Person to receive such payment; provided that, upon the
written request of such Person to such Term Lender, such payment shall be made
to the court having jurisdiction over such judicial determination or to another
Person mutually satisfactory to such Person and such Term Lender, as escrowee,
to be held and invested pending such judicial determination in accordance with
such instructions as shall be mutually satisfactory to such Person and such Term
Lender and upon such judicial determination becoming final and non-appealable to
be distributed in accordance therewith to the Person entitled thereto.
Section 1.9 Notice of Acceleration, Enforcement Action.
Annex II-4
(a) Each Term Lender agrees that in the event any Event of Default
shall occur, and as a result thereof, any Term Lender or the Term Administrative
Agent or other representative of such Term Lender accelerates maturity of the
Term Notes, if any, then such Term Lender or the Term Administrative Agent or
other representative shall give prompt (and in any event within three (3)
Business Days) notice thereof in writing to the holders of the Senior
Indebtedness or the Senior Indebtedness Representative. Neither the Borrower nor
any Restricted Subsidiary may pay any Term Notes until ten (10) Business Days
after the Senior Indebtedness Representative receives the notice described above
and, after that ten (10) Business Day period, may pay any Term Notes, and the
Term Lenders may receive or collect such payment, only if the provisions of this
Annex II do not prohibit such payment at that time.
(b) Each Term Lender agrees that in the event any Event of Default
shall occur, and as a result thereof, any Term Lender or the Term Administrative
Agent or other representative of such Term Lender intends to commence any
Enforcement Action, then such Term Lender or the Term Administrative Agent or
other representative shall first deliver notice thereof in writing to the Senior
Indebtedness Representative both (i) not less than ten (10) days prior to taking
any such Enforcement Action, and (ii) one (1) Business Day after such
Enforcement Action is taken.
Section 1.10 Reinstatement. The provisions of this Annex II shall remain in
force and effect until the indefeasible payment in full in cash of all Senior
Indebtedness and the termination of all commitments of any holder of the Senior
Indebtedness to make loans or extensions of credit, and expiration or
termination of all letters of credit issued by any holder of the Senior
Indebtedness. To the extent any payment of or distribution in respect of the
Senior Indebtedness (whether by or on behalf of the Borrower or any of its
Subsidiaries, as proceeds of security or enforcement of any right of set off or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to the Borrower or any Restricted Subsidiary or any receiver, trustee
in bankruptcy, liquidating trustee, agent or other similar person under any
bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then
if such payment or distribution is recovered by, or paid over to, the Borrower
or any Restricted Subsidiary or such receiver, trustee in bankruptcy,
liquidating trustee, agent or other similar Person, the Senior Indebtedness or
part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment has not occurred and the
provisions of this Annex II shall continue to be applicable in respect of said
reinstated Senior Indebtedness.
Section 1.11 Rights of holders of the Senior Indebtedness. The holders of
the Senior Indebtedness may, at any time and from time to time subject to the
terms of the Senior Indebtedness, without the consent of or notice to the Term
Lenders or the Term Administrative Agent or other representative of the Term
Lenders, without incurring responsibility to the Term Lenders and without
impairing or releasing the subordination or other benefits provided in this
Annex II or the obligations hereunder of the Term Lenders to the holders of the
Senior Indebtedness, do any one or more of the following: (a) change the manner,
place or terms of payment or extend the time of payment of, or renew, increase
(but not in excess of the cap provided for in the definition of "Senior
Indebtedness"), alter or amend, Senior Indebtedness or any instrument evidencing
the same or any covenant or agreement under which Senior Indebtedness is
outstanding or secured or any liability of any obligor thereon; (b) sell,
exchange,
Annex II-5
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (c) settle or compromise any Senior Indebtedness
or any liability of any obligor thereon or release any Person liable in any
manner for the payment of Senior Indebtedness; and (d) waive any default under
Senior Indebtedness and exercise or refrain from exercising any rights against
the Borrower, any Restricted Subsidiary or any other Person. The foregoing
provisions are not intended to permit a change to the definition of "Senior
Indebtedness".
Section 1.12 Amendments. No amendment of this Annex II, or the definitions
used in this Annex II, or which would have the effect of modifying this Annex
II, or the definitions used in this Annex II, shall be effective unless it is in
writing and made with the prior written consent of each of the Required Senior
Revolving Lenders or by the Senior Indebtedness Representative acting at their
written discretion on their behalf.
Section 1.13 Identity of Term Lenders for Notice Purposes. For purposes of
any notice required or permitted to be given hereunder by the holders of the
Senior Indebtedness or the Senior Indebtedness Representative to the Term
Lenders, or any of them, the holders of the Senior Indebtedness and the Senior
Indebtedness Representative shall be entitled to rely, conclusively, on the
identity and address of each Term Lender as set forth in the Term Loan Agreement
or as otherwise set forth in the most recent notice received by the Senior
Indebtedness Representative from a Term Lender referring to the Term Loan
Agreement for purposes of providing the identity and address of each Term
Lender. The Term Lenders agree that any notices required to be given to the Term
Lenders shall be effective if such notice is given to the Term Administrative
Agent or other representative of the Term Lenders. For so long as the
Subordinated Obligations are outstanding, the Term Lenders agree to designate
and maintain an agent or other representative for such purposes.
Section 1.14 Liens.
(a) All Liens granted by the Borrower, or, if applicable, any
Guarantor, which at any time secure the Term Loan Agreement, any Term Note or
any other Term Loan Document are hereby made, and will at all times prior to the
full payment or discharge of the Senior Indebtedness be, subject and subordinate
to all Liens granted by the Borrower or any Guarantor which at any time secure
the Senior Indebtedness, which subordination shall be effective whether or not
all such Liens securing Senior Indebtedness have been properly recorded, filed
and otherwise perfected prior to all such Liens securing any Term Note and
regardless of the relative priority of such Liens as determined without regard
to this Annex II. The mortgages included in the Senior Revolving Documents do
(and other mortgages, security agreements and similar Senior Revolving Documents
may) describe the indebtedness secured thereby in a manner which might include
indebtedness other than the Senior Indebtedness. For so long as any Term Note is
outstanding, as between the Term Lenders and the holders of the Senior
Indebtedness, only the Senior Indebtedness shall be deemed to be secured by any
Liens granted under the Senior Revolving Documents.
(b) Each Term Lender agrees that it will not initiate, join in or
prosecute any claim, action or other proceeding challenging the validity or
enforceability of the Senior Indebtedness or the Liens securing the Senior
Indebtedness.
Annex II-6
Section 1.15 Legend.
(a) Each Term Note shall be conspicuously inscribed with a legend
substantially in the form and substance as follows:
PAYMENT OF THIS INSTRUMENT SHALL, TO THE EXTENT SET FORTH IN ANNEX II
OF THE TERM LOAN AGREEMENT DATED JULY 28, 2005 BY AND AMONG PETROHAWK
ENERGY CORPORATION, BNP PARIBAS, AS ADMINISTRATIVE AGENT AND THE TERM
LENDERS PARTIES THERETO, BE SUBORDINATE AND JUNIOR IN RIGHT OF PAYMENT
TO THE PRIOR PAYMENT IN FULL OF ALL SENIOR INDEBTEDNESS, THE
PROVISIONS OF WHICH ANNEX II OF SUCH LOAN AGREEMENT BEING INCORPORATED
HEREIN AND BY THIS REFERENCE BEING MADE A PART HEREOF.
(b) The Borrower and each Term Lender or the Term Administrative Agent
or other representative of the Term Lenders shall cause each mortgage, security
agreement and other instrument securing all or any part of the Subordinated
Obligations to be conspicuously inscribed with a legend substantially in the
form and substance as follows:
ALL LIENS GRANTED BY THIS INSTRUMENT SHALL, TO THE EXTENT SET FORTH IN
ANNEX II OF THE TERM LOAN AGREEMENT DATED JULY 28, 2005 BY AND AMONG
PETROHAWK ENERGY CORPORATION, BNP PARIBAS, AS ADMINISTRATIVE AGENT AND
TERM LENDERS PARTIES THERETO, BE SUBORDINATE AND JUNIOR TO ALL LIENS
GRANTED BY GRANTOR TO SECURE THE SENIOR INDEBTEDNESS REGARDLESS OF THE
RELATIVE PRIORITY OF SUCH LIENS AS DETERMINED WITHOUT REGARD TO SUCH
ANNEX II OF SUCH TERM LOAN AGREEMENT, THE PROVISIONS OF WHICH ANNEX II
OF SUCH TERM LOAN AGREEMENT BEING INCORPORATED HEREIN AND BY THIS
REFERENCE BEING MADE A PART HEREOF.
Section 1.16 Successors and Assigns. Each Term Lender acknowledges and
agrees that the provisions of this Annex II are, and are intended to be, an
inducement and a consideration to each holder of the Senior Indebtedness to
make, extend and continue the Senior Indebtedness; and each holder of the Senior
Indebtedness shall be deemed conclusively to have relied upon the provisions of
this Annex II in permitting the Borrower to incur the Subordinated Obligations
and in making, extending, continuing and/or acquiring such Senior Indebtedness.
This Annex II shall pass to and be fully binding upon the successors and assigns
of each Term Lender and shall inure to the benefit of the present and future
holders of the Senior Indebtedness and the Senior Indebtedness Representative
and their respective successors and assigns (including without limitation any
Person refinancing any Senior Indebtedness).
Annex II-7
Section 1.17 Defined Terms.
(a) Each capitalized term used in this Annex II, but not defined
herein, shall have the meaning ascribed such term in the Term Loan Agreement.
(b) The following terms have the following meanings when used in this
Annex II:
"Blockage Period" means a Non-Payment Blockage Period or a Payment Blockage
Period.
"Eligible Swap Agreement" means any present or future Swap Agreement
between the Borrower or any Restricted Subsidiary and any Senior Revolving
Lender or any Affiliate of any Senior Revolving Lender. For the avoidance of
doubt, a Swap Agreement ceases to be an Eligible Swap Agreement if the Person
that is the counterparty to the Borrower under a Swap Agreement ceases to be a
Senior Revolving Lender under the Senior Revolving Credit Agreement (or, in the
case of an affiliate of a Senior Revolving Lender, the Person affiliated
therewith ceases to be a Senior Revolving Lender under the Senior Revolving
Credit Agreement).
"Enforcement Action" means, with respect to any Subordinated Obligations:
any enforcement of any right or remedy including any enforcement or foreclosure
of Liens granted by the Borrower or any Restricted Subsidiary to secure any or
all of such Subordinated Obligations, any enforcement or foreclosure of Liens on
any capital stock or other equity interests in the Borrower or any Restricted
Subsidiary which may be granted by the Borrower or its Subsidiaries or any
holder of equity in the Borrower to secure any or all of such Subordinated
Obligations, or any other efforts to collect proceeds from the Borrower's or any
of its Subsidiary's assets or properties (including proceeds of production) to
satisfy the Subordinated Obligations, including, without limitation, the
commencement, or the joining with any other creditor of the Borrower or any
Restricted Subsidiary in the commencement of any Insolvency Proceeding against
the Borrower or any Restricted Subsidiary; provided, that none of the following
shall constitute an Enforcement Action: (a) acceleration of any of the
Subordinated Obligations following acceleration of any of the Senior
Indebtedness (provided that such acceleration of Senior Indebtedness has not
previously been rescinded), (b) acceleration of any of the Senior Indebtedness
following acceleration of any of the Subordinated Obligations (provided that
such acceleration of the Subordinated Obligations has not previously been
rescinded), (c) actions by any Term Lender to obtain possession of or receive
Reorganization Securities, or (d) taking any action described above in this
proviso during the existence of any Insolvency Proceeding subject to the
jurisdiction of a court of competent authority.
"Existing Credit Agreement" means that certain $50,000,000 Second Lien Term
Loan Agreement dated as of the November 23, 2004 among the Borrower, BNP
Paribas, as administrative agent and the financial institutions listed therein
from time to time as Term Lenders, as from time to time renewed, extended,
amended, supplemented, or restated, and any agreements representing the
refinancing, replacement, or substitution in whole or in part of the loans made
or incurred under such Term Loan Agreement.
Annex II-8
"Insolvency Proceeding" shall mean (a) any voluntary or involuntary case,
action, or proceeding before any Governmental Authority having jurisdiction over
the applicable Person or its assets relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up, or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors, or other similar arrangement in
respect of its creditors generally or any substantial portion of its creditors;
in each case whether undertaken under U.S. Federal, state, or foreign law.
"Non-Payment Blockage Period" means, with respect to any Non-Payment
Default, the period from and including the date of receipt by the Term Lenders
or the Term Administrative Agent or other representative of a Non-Payment
Default Notice relating thereto until the first to occur of (a) the date upon
which the Senior Indebtedness have been paid in full in cash, all commitments of
any holder of Senior Indebtedness to make loans or extensions of credit have
terminated, and all letters of credit issued by any holder of Senior
Indebtedness have expired, terminated or fully collateralized in cash, (b) the
179th day after receipt of such Non-Payment Default Notice, (c) the date on
which the Non-Payment Default which is the subject of such Non-Payment Default
Notice has been waived in writing by the applicable holder or holders of the
Senior Indebtedness or an agent or representative on their behalf, cured, or
ceased to exist, or (d) the date upon which the Person(s) giving such
Non-Payment Default Notice notify the Term Lenders or the Term Administrative
Agent or other representative in writing of the termination of such Non-Payment
Blockage Period.
"Non-Payment Default" means the occurrence of any event under any Senior
Revolving Document evidencing Senior Indebtedness, not constituting a Payment
Default, which gives the holder(s) of such Senior Indebtedness, or an agent or
representative acting on behalf of such holder(s), the right to cause the
maturity of such Senior Indebtedness to be accelerated immediately without any
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace period.
"Non-Payment Default Notice" means a written notice from or on behalf of
the Senior Indebtedness Representative that a Non-Payment Default has occurred
and is continuing which identifies such Non-Payment Default and specifically
designates such notice as a "Non-Payment Default Notice".
"Payment Blockage Period" means, with respect to any Payment Default or
Senior Indebtedness Acceleration, the period from and including the date of
receipt by the Term Lenders or the Term Administrative Agent or other
representative of a Payment Default Notice relating thereto until the first to
occur of (a) the date upon which the Senior Indebtedness have been paid in full
in cash, all commitments of any holder of Senior Indebtedness to make loans or
extensions of credit have terminated, and all letters of credit issued by any
holder of Senior Indebtedness have expired, terminated or fully collateralized
in cash, (b) if such Payment Default Notice relates to a Payment Default, the
date on which the Payment Default which is the subject of such Payment Default
Notice has been waived in writing by the applicable holder or holders of the
Senior Indebtedness or an agent or representative on their behalf, cured or
ceased to exist, or if such Payment Default Notice relates to a Senior
Indebtedness Acceleration, the date on which such acceleration is rescinded,
annulled or ceased to exist, or (c) the day upon which the
Annex II-9
Person(s) giving such Payment Default Notice notify the Term Lenders or the Term
Administrative Agent or other representative in writing of the termination of
such Payment Blockage Period.
"Payment Default" means a default by the Borrower or any Guarantor in the
payment of any amount owing with respect to the Senior Indebtedness, whether
with respect to principal, interest, premium, letter of credit reimbursement
obligations, commitment fees or letter of credit fees or otherwise when the same
becomes due and payable, whether at maturity or at a date fixed for payment of
an installment or prepayment or by declaration or acceleration or otherwise.
"Payment Default Notice" means a written notice from or on behalf of the
Senior Indebtedness Representative that either (i) a Payment Default with
respect to such Senior Indebtedness has occurred and is continuing, or (ii) a
Senior Indebtedness Acceleration with respect to such Senior Indebtedness has
occurred and is continuing.
"Reorganization Securities" means (a) debt securities that are issued
pursuant to an Insolvency Proceeding the payment of which is subordinate and
junior at least to the extent provided in this Annex II to the payment of the
Senior Indebtedness outstanding at the time of the issuance thereof (including
any refinancing of Senior Indebtedness pursuant to an Insolvency Proceeding) and
to the payment of all debt securities issued in exchange for such Senior
Indebtedness in such Insolvency Proceeding (whether such subordination is
effected by the terms of such securities, an order or decree issued in such
Insolvency Proceeding, by agreement of the Term Lenders or otherwise), or (b)
equity securities that are issued pursuant to an Insolvency Proceeding;
provided, in either case, that such securities are authorized by an order or
decree made by a court of competent jurisdiction in such Insolvency Proceeding.
"Required Senior Revolving Lenders" means Senior Revolving Lenders holding
at least sixty-six and two-thirds percent (66-2/3%) of the outstanding Senior
Indebtedness, or if no principal amount of Loans or letters of credit is then
outstanding, Senior Revolving Lenders holding at least sixty-six and two-thirds
percent (66-2/3%) of the total commitments.
"Senior Indebtedness" means and includes (a) all principal indebtedness for
loans now outstanding or hereafter incurred, and all letter of credit
reimbursement obligations now existing or hereafter arising, under the Senior
Revolving Credit Agreement, provided that the aggregate outstanding principal
amount of Senior Indebtedness under this clause (a) shall not exceed
$400,000,000 at any time, and provided further, that if the aggregate principal
amount of Senior Indebtedness (constituting principal and letter of credit
reimbursement obligations) shall exceed $400,000,000, then the subordination of
the Term Notes, if any, as contemplated by Annex II to the Senior Indebtedness
of $400,000,000 or less shall not be impaired, (b) all amounts now or hereafter
owing to any of the Senior Revolving Lenders or any of their Affiliates under
any Eligible Swap Agreement, (c) all interest accruing on the Senior
Indebtedness described in the preceding clauses (a) and (b), and (d) all other
monetary obligations (whether now outstanding or hereafter incurred) for which
the Borrower or any Guarantor is responsible or liable as obligor, guarantor or
otherwise under or pursuant to any of the Senior Revolving Documents including,
without limitation, all fees, penalties, yield protections, breakage costs,
damages, indemnification obligations, reimbursement obligations, and expenses
(including, without limitation, fees and
Annex II-10
expenses of counsel to the Senior Indebtedness Representative and the Senior
Revolving Lenders) together with interest on the foregoing to the extent
provided for in the Senior Revolving Documents. The interest described in the
preceding clause (c) and the premiums and penalties described in the preceding
clause (d) include, without limitation, all interest accruing after the
commencement of any Insolvency Proceeding under the terms of the Senior
Revolving Documents whether or not such interest constitutes an allowed claim in
any such Insolvency Proceeding.
"Senior Indebtedness Acceleration" means with respect to the Senior
Indebtedness that the holder or holders of such Senior Indebtedness, or an agent
or representative on behalf of such holder or holders, have caused the maturity
of such Senior Indebtedness to be accelerated.
"Senior Indebtedness Default" means a Payment Default or a Non-Payment
Default.
"Senior Indebtedness Representative" means (a) initially, BNP Paribas, as
administrative agent for the Senior Revolving Lenders under the Senior Revolving
Credit Agreement or (b) such other Person selected by the Majority Lenders (as
such term is defined in the Senior Revolving Credit Agreement) to replace BNP
Paribas or the then Senior Indebtedness Representative.
"Senior Revolving Credit Agreement" means that certain Amended and Restated
Senior Revolving Credit Agreement as amended and restated on July 28, 2005 among
the Borrower, BNP Paribas, as administrative agent and the financial
institutions listed therein from time to time as Senior Revolving Lenders, as
from time to time renewed, extended, amended, supplemented, or restated, and any
agreements representing the refinancing, replacement, or substitution in whole
or in part of the revolving credit loans and letter of credit liabilities made
or incurred under such Senior Revolving Credit Agreement.
"Senior Revolving Documents" means, collectively, (a) the Senior Revolving
Credit Agreement and the Eligible Swap Agreements, (b) any note, bond or other
instrument evidencing Senior Indebtedness, (c) all mortgages, security
agreements, pledge agreements or financing statements evidencing, creating or
perfecting any Lien to secure the Senior Indebtedness in any way, (d) all
guarantees of the Senior Indebtedness, (d) all other documents, instruments or
agreements relating to the Senior Indebtedness now or hereafter executed or
delivered by and among the Borrower, any Restricted Subsidiary, the Senior
Indebtedness Representative or any Senior Revolving Lender, including without
limitation each of the other the "Loan Documents" as such term is defined in the
Senior Revolving Credit Agreement, and (e) all renewals, extensions, amendments,
modifications or restatements of the foregoing.
"Senior Revolving Lenders" means all Persons which now or hereafter
constitute a "Lender" under the Senior Revolving Credit Agreement and their
respective successors and assigns, and all Person refinancing any Senior
Indebtedness and their respective successors and assigns.
"Standstill Period" means the period beginning with the commencement of a
Blockage Period and ending on the earliest of (a) the date when the Senior
Indebtedness Default giving rise
Annex II-11
to such Blockage Period has been cured or waived in writing, (b) the date of the
repayment in full in cash of the Senior Indebtedness, (c) the date that is 90
days after the commencement of a Blockage Period, (d) the end of the Non-Payment
Blockage Period applicable to such Senior Indebtedness Default, (e) the date on
which the Senior Indebtedness shall have been declared due and payable prior to
its stated maturity or any holder of Senior Indebtedness commences proceedings
to collect any Senior Indebtedness or realize upon any material part of the
collateral for any Senior Indebtedness and (f) the date upon which any
Insolvency Proceeding is commenced.
"Subordinated Obligations" means any and all indebtedness (whether for
principal, interest, fees, indemnifications or otherwise, but not expenses) now
or hereafter owing by the Borrower or any Restricted Subsidiary under or in
connection with the Term Loan Agreement, the Term Notes, if requested, any
mortgage, guaranty or other security instrument given in connection therewith,
and any letter agreement or other agreement providing for payment of fees in
connection therewith.
"Term Administrative Agent" means BNP Paribas, in its capacity as
administrative agent for the Term Lenders under the Term Loan Agreement,
together with any successors in such capacity.
"Term Lenders" means all Persons which now or hereafter constitute a
"Lender" under the Term Loan Agreement and their respective successors and
assigns, and all Person refinancing any Senior Indebtedness and their respective
successors and assigns.
"Term Loan Agreement" means that certain $150,000,000 Amended and Restated
Second Lien Term Loan Agreement dated as of the July 28, 2005 among the
Borrower, BNP Paribas, as administrative agent and the financial institutions
listed therein from time to time as Term Lenders, as from time to time renewed,
extended, amended, supplemented, or restated, and any agreements representing
the refinancing, replacement, or substitution in whole or in part of the loans
made or incurred under such Term Loan Agreement.
"Term Loan Documents" means, collectively, (a) the Term Loan Agreement, (b)
the Term Notes, if requested, and any other note, bond or other instrument
evidencing Senior Indebtedness, (c) all mortgages, security agreements, pledge
agreements or financing statements evidencing, creating or perfecting any Lien
to secure the Term Loan Agreement and the Term Notes, if requested, in any way,
(d) all guarantees thereof, (d) all other documents, instruments or agreements
relating to the Term Loan Agreement or the Term Note, if requested, now or
hereafter executed or delivered by and among the Borrower, any Restricted
Subsidiary, the Term Administrative Agent or any Term Lender, including without
limitation each of the other the "Loan Documents" as such term is defined in the
Term Loan Agreement, and (e) all renewals, extensions, amendments, modifications
or restatements of the foregoing.
"Term Notes" means each promissory note requested by a Lender and issued
under the Term Loan Agreement evidencing the term loans made pursuant to the
term thereof, as from time to time renewed, extended, amended, supplemented, or
restated, and any agreements representing the refinancing, replacement, or
substitution in whole or in part thereof.
Annex II-12
