Credit Agreement - Rocky Mountain v7
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CREDIT AGREEMENT
DATED AS OF
JANUARY 29TH, 2004
AMONG
RMG I, LLC
AS BORROWER,
DRAWBRIDGE SPECIAL OPPORTUNITIES FUND LP,
AS ADMINISTRATIVE AGENT,
AND
THE LENDERS PARTY HERETO
SOLE LEAD ARRANGER
PETROBRIDGE INVESTMENT MANAGEMENT LLC
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS 1
Section 1.01 Terms Defined Above 1
Section 1.02 Certain Defined Terms 1
Section 1.03 Terms Generally; Rules of Construction 17
Section 1.04 Accounting Terms and Determinations; GAAP 17
ARTICLE II COMMITMENT 18
Section 2.01 Loan; Funding of Development Projects 18
Section 2.02 Borrowings 18
Section 2.03 Use of Proceeds 19
Section 2.04 Fees 20
Section 2.05 Notes 20
ARTICLE III PAYMENTS OF PRINCIPAL AND INTEREST 21
Section 3.01 Repayment of Loans 21
Section 3.02 Interest 21
Section 3.03 Prepayments 21
Section 3.04 Mandatory Repayments 22
ARTICLE IV PAYMENTS; PRO RATA TREATMENT; SHARING OF SET-OFFS. 22
Section 4.01 Payments Generally; Pro Rata Treatment; Sharing of Set-offs 22
Section 4.02 Presumption of Payment by the Borrower 23
Section 4.03 Certain Deductions by the Administrative Agent 23
ARTICLE V INCREASED COSTS; TAXES 24
Section 5.01 Increased Costs 24
Section 5.02 Taxes 24
ARTICLE VI LOCKBOX PROCEDURES; CASUALTY PROCEEDS 25
Section 6.01 Lockbox Account 25
Section 6.02 Notice 26
Section 6.03 Casualty Proceeds 27
ARTICLE VII CONDITIONS PRECEDENT 27
Section 7.01 Initial Funding 27
Section 7.02 Subsequent Fundings 30
Section 7.03 All Fundings 30
Section 7.04 Conditions Precedent for the Benefit of the Lender 31
Section 7.05 No Waiver 31
ARTICLE VIII REPRESENTATIONS AND WARRANTIES 31
Section 8.01 Organization; Powers 31
Section 8.02 Authority; Enforceability 31
Section 8.03 Approvals; No Conflicts 31
Section 8.04 Financial Condition; No Material Adverse Change 32
Section 8.05 Litigation 32
Section 8.06 Environmental Matters 32
Section 8.07 Compliance with the Laws and Agreements; No Defaults 34
Section 8.08 Investment Company Act 34
Section 8.09 Public Utility Holding Company Act 34
Section 8.10 Taxes 34
Section 8.11 ERISA 34
Section 8.12 Disclosure; No Material Misstatements 35
Section 8.13 Insurance 36
Section 8.14 Restriction on Liens 36
Section 8.15 Subsidiaries 36
Section 8.16 Location of Business and Offices 36
Section 8.17 Properties; Titles, Etc 37
Section 8.18 Maintenance of Properties 38
Section 8.19 Gas Imbalances, Prepayments 38
Section 8.20 Marketing of Production 38
Section 8.21 Swap Agreements 39
Section 8.22 Use of Loans 39
Section 8.23 Solvency 39
Section 8.24 Casualty Events 39
Section 8.25 Material Agreements 39
Section 8.26 No Brokers 40
Section 8.27 Reliance 40
Section 8.28 Investments and Guaranties 40
Section 8.29 Payments by Purchasers of Production 40
Section 8.30 Existing Accounts Payable 40
ARTICLE IX AFFIRMATIVE COVENANTS 41
Section 9.01 Financial Statements; Other Information 41
Section 9.02 Notices of Material Events 44
Section 9.03 Existence; Conduct of Business 45
Section 9.04 Payment of Obligations 45
Section 9.05 Performance of Obligations under Loan Documents 45
Section 9.06 Operation and Maintenance of Properties 45
Section 9.07 Insurance 46
Section 9.08 Books and Records; Inspection Rights 46
Section 9.09 Compliance with Laws 47
Section 9.10 Environmental Matters 47
Section 9.11 Further Assurances 48
Section 9.12 Reserve Reports 48
Section 9.13 Title Information 49
Section 9.14 Additional Collateral; Additional Guarantors 49
Section 9.15 ERISA Compliance 50
Section 9.16 Swap Agreements 51
Section 9.17 Marketing of Production 51
Section 9.18 Overriding Royalty Interests 51
Section 9.19 Right of First Refusal 52
Section 9.20 Contract Operating Agreement 52
Section 9.21 Separate Entity 52
ARTICLE X NEGATIVE COVENANTS 52
Section 10.01 Financial Covenants 52
Section 10.02 Debt 53
Section 10.03 Liens 53
Section 10.04 Redemptions 53
Section 10.05 Investments, Loans and Advances 54
Section 10.06 Nature of Business 54
Section 10.07 Limitation on Leases 54
Section 10.08 Sale and Leasebacks 55
Section 10.09 Proceeds of Notes 55
Section 10.10 ERISA Compliance 55
Section 10.11 Sale or Discount of Receivables 56
Section 10.12 Mergers, Etc. 56
Section 10.13 Sale of Properties 56
Section 10.14 Environmental Matters 56
Section 10.15 Transactions with Affiliates 57
Section 10.16 Capital Expenditures 57
Section 10.17 Material Agreements 57
Section 10.18 Subsidiaries 57
Section 10.19 Negative Pledge Agreements; Dividend Restrictions 57
Section 10.20 Gas Imbalances, Take-or-Pay or Other Prepayments 57
Section 10.21 Swap Agreements 58
Section 10.22 Certain Activities 58
Section 10.23 Net Sales 58
Section 10.24 G&A Costs 58
Section 10.25 Press Release 59
ARTICLE XI EVENTS OF DEFAULT; REMEDIES 59
Section 11.01 Events of Default 59
Section 11.02 Remedies 61
Section 11.03 Disposition of Proceeds 61
ARTICLE XII THE ADMINISTRATIVE AGENT 62
Section 12.02 Duties and Obligations of Administrative Agent 62
Section 12.03 Action by Administrative Agent 63
Section 12.04 Reliance by Administrative Agent 63
Section 12.05 Subagents 63
Section 12.06 Resignation or Removal of Administrative Agent 64
Section 12.07 Agents as Lenders 64
Section 12.08 No Reliance 64
Section 12.09 Authority of Administrative Agent to Release
Collateral and Liens 65
ARTICLE XIII MISCELLANEOUS 65
Section 13.01 Notices 65
Section 13.02 Waivers; Amendments 66
Section 13.03 Expenses, Indemnity; Damage Waiver. 66
Section 13.04 Successors and Assigns 68
Section 13.05 Survival; Revival; Reinstatement 71
Section 13.06 Counterparts; Integration; Effectiveness 71
Section 13.07 Severability 72
Section 13.08 Right of Setoff 72
Section 13.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE
OF PROCESS 72
Section 13.10 Headings 73
Section 13.11 Confidentiality 73
Section 13.12 Interest Rate Limitation 74
Section 13.13 EXCULPATION PROVISIONS 75
Section 13.14 Collateral Matters; Swap Agreements 75
Section 13.15 No Third Party Beneficiaries 76
Section 13.16 Securitization 76
ANNEXES, EXHIBITS AND SCHEDULES
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Annex I List of Commitments
Exhibit A Form of Note
Exhibit B-1 Form of Initial Funding Disbursement Request
Exhibit B-2 Form of Subsequent Funding Request
Exhibit B-3 Form of Invoice Disbursement Request
Exhibit C Form of Direction Letter
Exhibit D Form of Compliance Certificate
Exhibit E Form of Legal Opinion of Hickey & Mackey, special
counsel to the Borrower
Exhibit F-1 Security Instruments
Exhibit F-2 Form of Security Agreement
Exhibit G Form of Assignment and Assumption
Exhibit H Form of Conveyance of Overriding Royalty Interest
Exhibit I Form of Warrant Agreement
Exhibit J Form of Letter-in-Lieu
Exhibit K Development Plan
Exhibit L Form of Pledge Agreement
Schedule 1.01 AFE Requirements
Schedule 1.02 Approved Counterparties
Schedule 8.05 Litigation
Schedule 8.06 Environmental Matters
Schedule 8.13 Insurance
Schedule 8.15 Subsidiaries and Partnerships
Schedule 8.17 Title to Properties
Schedule 8.19 Gas Imbalances
Schedule 8.20 Marketing Contracts
Schedule 8.21 Swap Agreements
Schedule 8.25 Material Agreements
Schedule 8.30 Past Due Accounts Payable
Schedule 9.02(e) Notice of Certain Events
Schedule 9.18(b)(i) 3% Properties
Schedule 9.18(b)(ii) 2% Properties
Schedule 10.02 Debt
Schedule 10.03 Excepted Liens
Schedule 10.05 Investments
Schedule 10.07 Leases
Schedule 10.23 Net Sales Volumes
This CREDIT AGREEMENT dated as of January 29, 2004, is among: RMG I, LLC, a
Wyoming flexible limited liability company duly formed and existing under the
laws of the State of Wyoming (the "Borrower"); each of the Lenders from time to
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time party hereto; Drawbridge Special Opportunities Fund LP, a Delaware limited
partnership (as administrative agent for the Lenders (in such capacity, together
with its successors in such capacity, the "Administrative Agent").
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R E C I T A L S
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A. The Borrower has requested that the Lenders provide certain loans to and
extensions of credit on behalf of the Borrower.
B. The Lenders have agreed to make such loans and extensions of credit
subject to the terms and conditions of this Agreement.
C. In consideration of the mutual covenants and agreements herein contained
and of the loans, extensions of credit and commitments hereinafter referred to,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above. As used in this Agreement, each
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term defined above has the meaning indicated above.
Section 1.02 Certain Defined Terms. As used in this Agreement,
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the following terms have the meanings specified below:
"Affiliate" means, with respect to a specified Person, another Person that
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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 Credit Agreement, as the same may from time to time
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be amended, modified, supplemented or restated.
"Applicable Percentage" means, with respect to any Lender, the percentage
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set forth on Annex I.
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"Applicable Rate" means, for any day, with respect to any Loan, eleven
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percent (11%) per annum.
"Approved Counterparty" means (a) any Lenders or any Affiliate of a Lender,
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any other Person whose long term senior unsecured debt rating is A-/A3 by S&P or
Moody's (or their equivalent) or higher, or (c) with regard to Swap Agreements
in respect of commodities, and subject to the conditions set forth therein, any
other Person listed on Schedule 1.02.
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"Approved Petroleum Engineers" means Netherland & Sewell and any other
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independent petroleum engineers reasonably acceptable to the Administrative
Agent.
"Arranger" means Petrobridge Investment Management LLC, in its capacity as
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the sole lead arranger hereunder.
"Assignment and Assumption" means an assignment and assumption entered into
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by a Lender and an assignee (with the consent of any party whose consent is
required by Section 13.04(b)), and accepted by the Administrative Agent, in the
form of Exhibit G or any other form approved by the Administrative Agent.
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"Board" means the Board of Governors of the Federal Reserve System of the
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United States of America or any successor Governmental Authority.
"Borrowing" means Loans made on the same date.
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"Business Day" means any day that is not a Saturday, Sunday or other day on
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which commercial banks in Houston, Texas or New York, New York are authorized or
required by law to remain closed.
"Capital Expenditures" means, in respect of any Person, for any period, the
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aggregate (determined without duplication) of all exploration and development
expenditures and costs that are capital in nature and any other expenditures
that are capitalized on the balance sheet of such Person in accordance with -
GAAP.
"Capital Leases" means, in respect of any Person, all leases which shall
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hav 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 Receipts" means all cash or cash equivalents received by or on behalf
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of the Borrower and its Subsidiaries with respect to the following: (a) sales of
Hydrocarbons from the Oil and Gas Properties, (b) cash representing operating
revenue earned or to be earned by the Borrower and its Subsidiaries, (c) any
insurance proceeds received by the Borrower or its Subsidiaries, (d) any
proceeds from Swap Agreements, and (e) any other cash or cash equivalents
received by the Borrower or its Subsidiaries from whatever source; provided that
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advances under the Loans, shall not constitute "Cash Receipts".
"Casualty Event" means any loss, casualty or other insured damage to, or
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any nationalization, taking under power of eminent domain or by condemnation or
similar proceeding of any Property of the Borrower or any of its Subsidiaries,
in each case having a total loss of value to such Property in excess of $50,000.
"Casualty Proceeds" has the meaning assigned to such term in Section
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6.04(b)(v).
"Casualty Proceeds Account" has the meaning assigned to such term in
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Section 6.03.
"Change in Control" means the acquisition of ownership, directly or
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indirectly,beneficially or of record, by anyone other than Rocky Mountain Gas,
Inc. of any Equity Interests of the Borrower or the acquisition of ownership,
directly or indirectly, beneficially or of record, by anyone other than US
Energy Corp. any Equity Interests of Rocky Mountain Gas, Inc.
"Change in Law" means (a) the adoption of any law, rule or regulation after
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the date of this Agreement by any Governmental Authority, (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(a)), 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.
"Code" means the Internal Revenue Code of 1986, as amended from time to
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time, and any successor statute.
"Collateral" means any and all (a) Properties of the Borrower and its
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Subsidiaries of whatsoever kind or description (whether now owned or hereafter
acquired and including, without limitation, all of their Oil and Gas
Properties), (b) of the issued and outstanding Equity Interests of the Borrower
and (d) other Properties of whatsoever kind or description in which an interest
is granted or pledged under a Security Instrument.
"Commitment" means, with respect to each Lender, the commitment of such
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Lender to make Loans hereunder, expressed as an amount representing the maximum
aggregate amount of such Lender's Loans hereunder. The amount representing each
Lender's Commitment is set forth on Annex I. Initially, the aggregate amount of
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the Commitments of the Lenders shall be equal to the Initial Commitment
($4,345,000); provided, however, that the Lenders may in their sole discretion,
but shall be under no obligation whatsoever to do so, make Loans hereunder up to
an aggregate amount equal to the sum of the Lenders' Commitments as set forth on
Annex I.
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"Commitment Fee" has the meaning assigned such term in Section 2.04(a).
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"Commitment Termination Date" has the meaning given such term in Section
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2.01(a).
"Consolidated Interest Expense" means, for any period, total interest
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expense and prepayment charges (including that which is capitalized and that
which is - attributable to capital leases, in accordance with GAAP) of the
Borrower and its - Consolidated Subsidiaries, as appropriate, on a consolidated
basis with respect to all outstanding indebtedness of the Borrower and its
Consolidated Subsidiaries, including, without limitation, all commissions,
discounts and other fees and charges owed with respect to any letters of credit,
amortization of debt, discount, expense, other deferred financing costs.
"Consolidated Net Income" means with respect to the Borrower and its
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Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Borrower and its Consolidated Subsidiaries, after allowances for
taxes for such period determined on a consolidated basis in accordance with
GAAP; provided that there shall be excluded from such net income ( to
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(to the extent otherwise included therein) the following: (a) the net income of
any Person in which the Borrower or any Consolidated Subsidiary has an interest
(which interest does not cause the net income of such other Person to be
consolidated with the net income of the Borrower and its Consolidated
Subsidiaries, in accordance with GAAP), except to the extent of the amount of
dividends or distributions actually paid in cash during such period by such
other Person to the Borrower or to a Consolidated Subsidiary; (b) the net income
(but not loss) during such period of any Consolidated Subsidiary to the extent
that the declaration or payment of dividends or similar distributions or
transfers or loans by that Consolidated Subsidiary is not at the time permitted
by operation of the terms of its charter or any agreement, instrument or
Governmental Requirement applicable to such Consolidated Subsidiary or is
otherwise restricted or prohibited, in each case determined in accordance with
GAAP; (c) the net income (or loss) of any Person acquired in a
pooling-of-interests transaction for any period prior to the date of such
transaction; (d) any extraordinary non-cash gains or losses during such period;
(e) any gains on collections from insurance policies or settlement; and (f) any
gains or losses attributable to writeups or writedowns of assets, including
ceiling test writedowns; and provided further that if the Borrower or any
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Consolidated Subsidiary shall acquire or dispose of any Property during such
period, then Consolidated Net Income shall be calculated after giving pro forma
effect to such acquisition or disposition, as if such acquisition or disposition
had occurred on the first day of such period.
"Consolidated Rents" means, for any period, the sum of all rental and other
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obligations required to be paid during such period by the Borrower or any
Subsidiary, as lessee under all leases of real or personal property (other than
capital leases), excluding any amount required to be paid by the lessee (whether
or not therein designated as rental or additional rental) on account of
maintenance and repairs, insurance, taxes, assessments, water rates and similar
charges; provided that, if at the date of determination, any such rental or
other obligations (or portion thereof) are contingent or not otherwise
definitely determinable by the terms of the related lease, the amount of such
obligations (or such portion thereof) (a) shall be assumed to be equal to the
amount of such obligations for the period of twelve consecutive calendar months
immediately preceding the date of determination or (b) if the related lease was
not in effect during such preceding twelve-month period, shall be the amount
estimated by the Borrower on a reasonable basis and in good faith.
"Consolidated Subsidiaries" means each Subsidiary of the Borrower (whether
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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.
"Contract Operating Agreement" means that certain Contract Operating and
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Management Agreement between Operator and Borrower, as may be amended, modified
or supplemented from time to time in accordance with this Agreement.
"Control" means the possession, directly or indirectly, of the power to
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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 body of a Person (other than as a limited partner of such other
Person) will be deemed to "control" such other Person. "Controlling" and
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"Controlled" have meanings correlative thereto.
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"Credit Agreement Termination Date" means the date on which the Commitments
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of the Lenders have terminated and all principal, interest and all other
Indebtedness have been paid in full, and all amounts due to any Lender or any of
their Affiliates under any Swap Agreements have been paid in full.
"Debt" means, for any Person, the sum of the following (without
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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)
accounts payable and 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 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
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Default or that upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Development Plan" shall mean the Borrower's Plan of Development for the
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Oil and Gas Properties and the related Hydrocarbon Interests attached as Exhibit
K, as approved by Administrative Agent, as the same may be amended from time to
time in accordance with the terms of this Agreement.
"Development Project" means each development project for the Oil and Gas
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Properties to be developed in accordance with the Development Plan.
"Direction Letters" means letters substantially in the form of Exhibit C.
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"Disbursement Date" has the meaning assigned to such term in Section
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3.01(a).
"Disqualified Capital Stock" means any Equity Interest that, by its terms
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(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 and all of the Commitments are terminated.
"Dollars" or "$" refers to lawful money of the United States of America.
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"EBITDA" means, for any period, the sum of Consolidated Net Income for such
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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
items added to Consolidated Net Income.
"Effective Date" means the date on which the conditions specified in
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Section 7.01 are satisfied (or waived in accordance with Section 13.02).
"Environmental Laws" means any and all Governmental Requirements pertaining
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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 Subsidiary is conducting or at any time has conducted business,
or where any Property of the Borrower or any Subsidiary is located, including
without limitation, the Oil Pollution Act of 1990 ("OPA"), as amended, the Clean
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Air Act, as amended, the Comprehensive Environmental, Response, Compensation,
and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution
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Control Act, as amended, the Occupational Safety and Health Act of 1970, as
amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as
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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"
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and "release" (or "threatened release") have the meanings specified in CERCLA,
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the terms "solid waste" and "disposal" (or "disposed") have the meanings
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specified in RCRA and the term "oil and gas waste" shall have the meaning
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specified in Section 91.1011 of the Texas Natural Resources Code ("Section
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91.1011"); provided, however, that (a) in the event either OPA, CERCLA, RCRA or
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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 Subsidiary is located establish a
meaning for "oil," "hazardous substance," "release," "solid waste," "disposal"
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or "oil and gas waste" which is broader than that specified in either OPA,
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CERCLA, RCRA or Section 91.1011, such broader meaning shall apply.
"Equity Interests" means shares of capital stock, partnership interests,
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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
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amended, and any successor statute.
"ERISA Affiliate" means each trade or business (whether or not
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incorporated) which together with the Borrower or a Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA Event" means (a) a "Reportable Event" described in section 4043 of
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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.
"Event of Default" has the meaning assigned such term in Section 11.01.
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"Excepted Liens" means: (a) Liens for Taxes, assessments or other
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governmental charges or levies that are not yet due or that are being contested
in good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP in an account controlled by Administrative
Agent; (b) Liens in connection with workers' compensation, unemployment
insurance or other social security, old age pension or public liability
obligations that are not yet due or that are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP in an account controlled by Administrative Agent; (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 have not been
outstanding for more than 60 days and 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, or other agreements that are usual and
customary in the oil and gas business and are for claims that have not been
outstanding for more than 60 days and 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
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does not materially impair the use of the Property covered by such Lien for the
purposes for which such Property is held by the Borrower or any Subsidiary or
materially impair the value of such Property subject thereto; (e) easements,
restrictions, servitudes, permits, conditions, covenants, exceptions or
reservations in any Property of the Borrower or any 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, 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 Subsidiary or materially impair the value of such Property
subject thereto; and (f) 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; provided, further that Liens
described in clauses (a) through (d) 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 Lender 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, and (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.
"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.
"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, as referred to in Section 8.04(a).
"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.
"General and Administrative Costs" means normal and customary expenses and
---------------------------------
costs that are classified as general and administrative costs, including
consulting fees, salary, rent, supplies, travel and entertainment, shareholder
and board member expense, insurance, accounting, legal, engineering and broker
related fees, required to manage the affairs of the Borrower (that are approved
by the Lenders).
"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 Subsidiary, any of their Properties, the
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 or not having the force of law), 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.
"Guarantor" means any Subsidiary of the Borrower that guarantees the
---------
Indebtedness pursuant to Section 9.14(b) and any other Person that guarantees
the Indebtedness pursuant to the Security Instruments.
"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 the Notes or on other
Indebtedness under laws applicable to such Lender that 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
including any rights to produce oil or gas from coal formations.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasoline, natural
------------
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
"Indebtedness" means any and all amounts owing or to be owing by the
------------
Borrower, any Subsidiary or any Guarantor: (a) to the Administrative Agent or
any Lender under any Loan Document; (b) to any Lender or any Affiliate of a
Lender under any Swap Agreement between the Borrower or any Subsidiary and such
Lender or Affiliate of a Lender while such Person (or in the case of its
Affiliate, the Person affiliated therewith) is a Lender hereunder and (c) all
renewals, extensions and/or rearrangements of any of the above.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
------------------
"Indemnitee" has the meaning assigned such term in Section 13.03(b).
----------
"Information" has the meaning assigned to such term in Section 13.11.
-----------
"Initial Commitment" has the meaning assigned such term in Section 2.01.
-------------------
"Initial Funding" has the meaning assigned such term in Section 2.02(a).
----------------
"Initial Funding Disbursement Request" means a written request by the
---------------------------------------
Borrower to the Lenders for the Initial Funding in the form of Exhibit B-1.
------------
"Initial Reserve Report" means the report of Netherland & Sewell dated as
------------------------
of October 23, 2003, with respect to certain Oil and Gas Properties of the
Borrower and its Subsidiaries as of November 1, 2003.
"Insolvent" means: (a) with reference to a Person other than a partnership,
---------
that (i) the sum of such Person's debts is greater than all of its properties,
at a fair valuation, exclusive of any properties transferred, concealed, or
removed with intent to hinder, delay, or defraud creditors or (ii) such Person
is generally not able to pay its debts as they become due, and (b) with
reference to a Person that is a partnership, that (i) such Person's financial
condition is such that the sum of its debts is greater than the aggregate of, at
a fair valuation, (A) all of such partnership's properties exclusive of
properties transferred, concealed or removed with intent to hinder, delay or
defraud creditors of the partnership, and (B) the sum of the excess of the value
of each general partner's non-partnership properties, exclusive of properties
transferred, concealed or removed with intent to hinder, delay or defraud
creditors, over such general partner's non-partnership debts or (ii) such Person
is generally not able to pay its debts as they become due.
"Investment" means, for any Person: (a) the acquisition (whether for cash,
----------
Property, services or securities or otherwise) of Equity Interests of any other
Person, the contribution of capital to 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) or capital contribution; (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 any other Person and (without duplication) any amount
committed to be advanced, lent or extended to such Person.
"Invoice Disbursement Request" means a written request by the Borrower for
-----------------------------
a Subsequent Funding relating to a Subsequent Funding Request that has been
previously approved by the Lenders, which Invoice Disbursement Request (i) shall
set forth the amount of the Subsequent Funding then requested to pay costs
incurred in connection with the Development Project covered by the related
Subsequent Funding Request, (ii) is accompanied by supporting invoices and other
documentation required by the Lenders and (iii) is substantially in the form of
Exhibit B-3.
- ------------
"Lenders" means the Persons listed on Annex I, 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.
"Letters-in-Lieu" means letters-in-lieu substantially in the form of
---------------
Exhibit J.
- ----------
"Liabilities" has the meaning assigned such term in Section 13.16.
-----------
"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) royalties, production payments and the like payable
out of Oil and Gas Properties. The term "Lien" shall include easements,
----
restrictions, servitudes, permits, conditions, covenants, encroachments,
exceptions, title exceptions or reservations. For the purposes of this
Agreement, the Borrower and its 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, the Security Instruments,
--------------
the ORRI Conveyance, the Warrant Agreements and the Contract Operating
Agreement.
"Loans" means the loans made by the Lenders to the Borrower pursuant to
-----
this Agreement.
"Lockbox Account" has the meaning assigned such term in Section 6.01(a).
----------------
"Lockbox Bank" has the meaning assigned such term in Section 6.01(a).
-------------
"Material Adverse Effect" means a material adverse effect on (a) the
-------------------------
business, operations, affairs, Properties, condition (financial or otherwise),
prospects, management or results of operations of the Borrower and the
Subsidiaries taken as a whole, (b) the ability of the Borrower, any 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 Agreements" has the meaning assigned such term in Section 8.25.
--------------------
"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 Subsidiaries.
"Maturity Date" means the date that is three years after the Effective
--------------
Date.
"Monthly Date" means the last day of each calendar month, but if
-------------
Administrative Agent determines with respect to any month that not all Cash
Receipts expected for such month have yet been deposited in the Lockbox Account,
it may at its election (and without obligation to provide any notice to the
Borrower or any other Person) defer the Monthly Date for up to four additional
Business Days.
"Moody's" means Moody's Investors Service, Inc. and any successor thereto
-------
that is a nationally recognized rating agency.
"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 Present Value" means, in respect of either of the Proved Developed
-------------------
Producing Reserves and the Total Proved Reserves, respectively, of the Oil and
Gas Properties, the present value of future cash flows (discounted at 10% per
annum) calculated by the Arranger in its sole and reasonable judgment (including
using a price curve determined by Arranger) after having reviewed the
information from the most recent Reserve Report delivered by the Borrower
pursuant to Section 7.01(p) or Section 9.12 and taking into account all other
factors which the Administrative Agent deems material.
"Notes" means the promissory notes of the Borrower described in Section
-----
2.05 and being substantially in the form of Exhibit A, together with all
---------
amendments, modifications, replacements, extensions and rearrangements thereof.
"Oil and Gas Properties" means with respect to Borrower (a) Borrower's
-------------------------
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 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
hereafter 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 wells, gas wells, injection wells or other wells, 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.
"Operator" means Rocky Mountain Gas, Inc. in its capacity as Operator under
--------
the Contract Operating Agreement.
"Operating Account" has the meaning assigned such term in Section 6.01(f).
------------------
"Operating Costs" means all costs (net to the Borrower and its
----------------
Subsidiaries) associated with the direct operation of the Borrower's and its
Subsidiaries' Oil and Gas Properties.
"ORRI Conveyance" means that certain Conveyance of Overriding Royalty
----------------
Interest in the form attached hereto as Exhibit H from the Borrower to Lenders.
"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 such term in Section 13.04(c)(i).
-----------
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
----
thereto.
"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.
"Pledge Agreement" means an agreement between Rocky Mountain Gas, Inc. and
-----------------
the Administrative Agent in substantially the form of Exhibit L, as the same may
---------
be amended, modified or supplemented from time to time.
"Post Default Rate" shall mean, in respect of the principal of any Loan or
------------------
any other amount payable by the Borrower under this Agreement or any other Loan
Document, a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default are cured or waived equal to two percent (2%) per annum above
the Applicable Rate, but in no event to exceed the Highest Lawful 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 Developed Non-Producing Reserves" has the meaning assigned such
------------------------------------------
term in the SPE Definitions.
"Proved Developed Producing Reserves" has the meaning assigned such term in
-----------------------------------
the SPE Definitions.
"Proved Undeveloped Reserves" has the meaning assigned such term in the SPE
---------------------------
Definitions.
"Rating Agencies" has the meaning assigned such term in Section 13.16.
----------------
"Redemption" means with respect to any Debt, the repurchase, redemption,
----------
prepayment, repayment or defeasance (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 13.04(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 9.10(a).
--------------
"Reserve Report" means the Initial Reserve Report and each other report, in
--------------
form and substance satisfactory to the Lenders in their sole discretion
(including, without limitation, the use of satisfactory methodologies and risk
analyses), setting forth, the updated estimates of Proved Developed Producing
Reserves; Proved Developed Non-Producing Reserves; and Proved Undeveloped
Reserves and projected production profiles and overall economics of the Oil and
Gas Properties, together with a projection of the rate of production and future
cash flows as of such date, based on the following pricing assumptions:
(a) oil and gas prices (as adjusted by Administrative Agent for btu
contentand quality) will be determined by Administrative Agent based on
Administrative Agent's then current forward product pricing curve, which prices
will be adjusted to reflect location and quality differentials and hedging
arrangements then in place;
(b) cash flow will be determined based on the Borrower's net production
(projected production profile less royalty volumes adjusted for working interest
ownership) multiplied by above prices, less (x) the Operating Costs and
production and severance taxes and (y) capital expenditures including any
abandonment costs; and
(c) Operating Costs and production and severance taxes shall be based
on actual costs.
"Residual Balance" means the balance in the Lockbox Account on the
-----------------
Disbursement Date after the payment of the amounts described in Section
6.01(b)(i) through Section 6.01(b)(iv).
<P>
"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.
"SEC" means the Securities and Exchange Commission or any successor
---
Governmental Authority.
"Securitization" has the meaning assigned such term in Section 13.16.
--------------
"Securitization Parties" has the meaning assigned such term in Section
-----------------------
13.16.
"Security Agreement" means an agreement between the Borrower and the
-------------------
Administrative Agent in substantially the form of Exhibit F-2, as the same may
-----------
be amended, modified or supplemented from time to time.
"Security Instruments" means the Security Agreement, the Pledge 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,
------------
guarantees, 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, the Notes and this Agreement, as such
agreements may be amended, modified, supplemented or restated from time to time.
"S&P" means Standard & Poor's Ratings Group, a division of The McGraw-Hill
---
Companies, Inc., and any successor thereto that is a nationally recognized
rating agency.
"SPE Definitions" means, with respect to any term, the definition thereof
----------------
adopted by the Board of Directors, Society for Petroleum Engineers (SPE) Inc.,
March 1997.
"Subsequent Funding Date" has the meaning assigned such term in Section
-------------------
2.02(b).
"Subsequent Funding Request" means a written request by the Borrower to the
--------------------------
Lenders relating to Subsequent Fundings with respect to a specific Development
Project. Such request shall be in the form of Exhibit B-2 and shall be delivered
-----------
by the Borrower accompanied by supporting data relating thereto, which data
shall include the identification of the items or activities on the Development
Plan for which funds are being sought, an AFE reflecting the total estimated
cost of such items or activities, the information described in Schedule 1.01,
-------------
and such additional information as the Lenders shall reasonably request for the
purpose of evaluating any Subsequent Funding relating thereto.
"Subsequent Fundings" has the meaning assigned such term in Section 2.01(a)
-------------------
"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 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.
"Total Debt" means, at any date, all Debt of the Borrower and its
-----------
Consolidated Subsidiaries on a consolidated basis.
"Total Proved Reserves" shall be as defined in the SPE Definitions.
-----------------------
"Transactions" means, with respect to (a) the Borrower, the execution,
------------
delivery and performance by the Borrower of this Agreement and each other Loan
Document to which it is a party, 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
to which it is a party, its guarantee of the Indebtedness and other obligations
and its grant of Liens on Mortgaged Properties and other Properties pursuant to
the Security Instruments.
"Warrant Agreement" means that certain Warrant Agreement from U.S. Energy
------------------
Corp., a Wyoming corporation to the Lenders in the form attached hereto as
Exhibit I, as the same may be amended, modified or supplemented from time to
- ----------
time.
"Wholly-Owned Subsidiary" means any 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 i) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such 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),
ii) 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, iii) any reference herein to any Person shall be construed to
include such Person's successors and assigns (subject to the restrictions
contained herein), iv) 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, v) 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 vi) 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 (or, with respect to the Borrower or
its Subsidiaries, as otherwise agreed by the Borrower and the Administrative
Agent), applied on a basis consistent with the Financial Statements except for
changes in which the Borrower's independent certified public accountants concur
and that are disclosed to Administrative Agent on the next date on which
financial statements are required to be delivered to the Lenders pursuant to
Section 9.01(a); provided that, unless the Borrower and the 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
COMMITMENT
Section 2.01 Loan; Funding of Development Projects
-----------------------------------------
(a) Loans. Subject to the terms and conditions of this
-----
Agreement, each Lender severally agrees to make Loans to the Borrower in an
aggregate principal amount not to exceed its Applicable Percentage of an initial
commitment of the Lenders of Four Million Three Hundred Forty Five Thousand
Dollars ($4,345,000) (the "Initial Commitment"), with subsequent Loans in an
-------------------
aggregate principal amount not to exceed such Lender's Applicable Percentage of
up to Twenty Million Six Hundred Fifty Five Thousand Dollars ($20,655,000), in
the manner and for the purposes provided in Section 2.01(b), Section 2.02(b) and
Section 2.03(b) ("Subsequent Fundings"); provided, however, that the aggregate
-------------------
amount of all Loans made hereunder shall not exceed Twenty-Five Million Dollars
($25,000,000). The Initial Funding shall be utilized only for the purposes
described in Section 2.03(a). Any amount of the Commitments which has not been
borrowed by the Borrower prior to June 30, 2006 (the "Commitment Termination
----------------------
Date") shall not be available to the Borrower for Loans from and after such
- ----
Commitment Termination Date.
(b) Subsequent Fundings. Each Subsequent Funding is intended
--------------------
to be used to fund all or a portion of additional development of the Borrower's
Oil and Gas Properties in accordance with the Development Plan, future legal
costs in connection with this Agreement, payment of the Commitment Fee and as is
otherwise set forth in Section 2.03(b) and must comply with the conditions
precedent set forth in Section 7.02 and Section 7.03. The Lenders shall not be
obligated to advance any funds in connection with a Subsequent Funding unless
the conditions precedent with respect thereto have been satisfied to the
Lenders' satisfaction. Upon satisfaction of the conditions to a Subsequent
Funding, such funding shall occur in accordance with Section 2.02 and Section
2.03.
Section 2.02 Borrowings . Subject to the satisfaction of all
----------
conditions precedent by the date of such funding:
(a) Initial Funding. On the Effective Date, each Lender
----------------
shall severally make a Loan to the Borrower in an amount equal to such Lender's
Applicable Percentage of the first $3,700,000 of the Initial Commitment (the
"Initial Funding") as set forth in the Initial Funding Disbursement Request
----------------
delivered to such Lender by 11:00 a.m. at least two Business Days prior to the
Effective Date and approved by the Lenders.
(b) Subsequent Funding. On each Subsequent Funding Date after
------------------
the Effective Date, each Lender shall severally make a Loan to the Borrower in
an aggregate principal amount equal to its Applicable Percentage of the amount
set forth in an approved Invoice Disbursement Request relating to an approved
Subsequent Funding Request, which amount shall not exceed either (i) the then
unutilized amount of such Lender's Commitment or (ii) when taken together with
the previously Subsequent Fundings made by the Lenders with respect to an
approved Subsequent Funding Request, 110% of the amount set forth in the AFE
relating to such Subsequent Funding Request. A "Subsequent Funding Date" shall
-----------------------
mean any Business Day prior to the Commitment Termination Date that is
designated as the funding date in an Invoice Disbursement Request, which Invoice
Disbursement Request must be delivered to Administrative Agent at least five
Business Days prior to the date upon which the Subsequent Funding under such
Invoice Disbursement Request is requested to occur. The Lenders shall have no
further obligation to fund any Loans after the Commitment Termination Date.
(c) Advances. Not later than 1:00 p.m. New York, New York time
--------
on the date specified for each Borrowing hereunder, each Lender shall make
available the amount of the Loan to be made by such Lender on such date in
immediately available funds, for the account of the Borrower. The Borrowing
shall, subject to the terms and conditions of this Agreement, be (1) made
available to the Borrower by transferring the same, in immediately available
funds, to the Borrower's Operating Account and (2) distributed directly to third
parties pursuant Section 2.03(c).
(d) Presumption of Funding by the Lenders. Unless the
------------------------------------------
Administrative Agent shall have received notice from a Lender prior to the
proposed date of the Borrowing that such Lender will not make available to the
Administrative Agent such Lender's share of such Borrowing, the Administrative
Agent may assume that such Lender has made such share available on such date in
accordance with Section 2.02(c) 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 share of the applicable Borrowing 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 (3) 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 (4) in
the case of the Borrower, the Applicable Rate. If such Lender pays such amount
to the Administrative Agent, then such amount shall constitute such Lender's
Loan included in such Borrowing.
(e) Minimum Amounts. All Borrowings made pursuant to the
----------------
notices described in Section 2.02(b) shall be in amounts of at least $100,000 or
the remaining balance of the Commitment, if less.
(f) Monthly Limit. There shall not be more than one Subsequent
-------------
Funding Date within any continuous 30 day period.
Section 2.03 Use of Proceeds. The proceeds of the Loans may
-----------------
be used only for the following purposes:
(a) Initial Funding. The proceeds of the Initial Funding may
---------------
be used only to:
(i) pay acquisition costs related to the acquisition
of the Oil and Gas Properties of Hi-Pro Production LLC in an amount equal to
$3,635,000;
(ii) pay transaction costs of up to $65,000 with
respect to the closing of the transaction contemplated by this Agreement
(including Arranger's and the Lender's transaction costs) as set forth in the
Initial Funding Disbursement Request approved by the Lenders; and
(b) Subsequent Fundings. The proceeds of any Subsequent Funding
-------------------
may be used only to:
(i) fund Development Projects, but only for the
amounts and purposes set forth in the applicable Subsequent Funding Request and
each Invoice Disbursement Request relating thereto for such Development Project;
(ii) pay any amounts due under Section 2.04; and
(iii) pay transaction costs not paid at the Effective
Date and legal costs incurred by any Lender and/or Administrative Agent in
connection with the administration of this Agreement.
(c) Direct Funding. The Lenders may, in their sole
---------------
discretion, disburse any portion of any advance directly to the Person or
Persons to whom such proceeds are to be paid, and impose such conditions as they
deem appropriate to insure that such funds are timely and properly paid to such
Persons.
Section 2.04 Fees
----
(a) Commitment Fee. The Borrower shall pay to Administrative
---------------
Agent a fee equal to 1.5% of all amounts committed to be loaned to the Borrower
hereunder. In connection with the initial funding, Borrower will pay $65,000
with respect to the Initial Commitment and Borrower will pay on any Subsequent
Funding Date such fee with respect to any amounts that have been committed to
hereunder in excess of the Initial Commitment to the extent that such fee has
not been paid on a previous Subsequent Funding Date ("Commitment Fee").
--------------
(b) Engineering Fee. The Borrower shall pay to the Arranger,
---------------
beginning with the August 15, 2004 Reserve Report, a semi-annual engineering fee
of $10,000 in connection with the delivery of each Reserve Report on the date of
the delivery of such Reserve Report.
Section 2.05 Notes. The Loans made by each Lender shall be evidenced
-----
by a single promissory note of the Borrower in substantially the form of Exhibit
-------
A, dated, in the case of (a) any Lender party hereto as of the date of this
- -
Agreement, as of the Effective Date or (b) any Lender that becomes a party
hereto pursuant to an Assignment and Assumption, as of the effective date of the
Assignment and Assumption, payable to the order of such Lender in a principal
amount equal to its Commitment as in effect on such date, and otherwise duly
completed. The date, amount and interest rate of each Loan made by each Lender,
and all payments made on account of the principal thereof, shall be recorded by
such Lender on its books for its Note, and, prior to any transfer, may be
endorsed by such Lender on a schedule attached to such Note or any continuation
thereof or on any separate record maintained by such Lender. Failure to make any
such notation or to attach a schedule shall not affect any Lender's or the
Borrower's rights or obligations in respect of such Loans or affect the validity
of such transfer by any Lender of its Note. In the event that any Lender's Loan
increases or decreases for any reason (whether pursuant to Section 13.04(b) or
otherwise), upon such Lender's request, the Borrower shall deliver or cause to
be delivered on the effective date of such increase or decrease, a new Note
payable to the order of such Lender in a principal amount equal to its Loan
after giving effect to such increase or decrease, and otherwise duly completed.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans
--------------------
(a) On each Monthly Date after the Effective Date thereafter
(each such date being a "Disbursement Date"), the Borrower shall repay principal
-----------------
(through Administrative Agent disbursing such funds from the Lockbox Account) by
an amount equal to (i) 100% of the Residual Balance in the Lockbox Account as of
each Disbursement Date less (ii) interest, fees and General and Administrative
Costs paid pursuant to Section 6.01(b)(iv)-(vii).
(b) Notwithstanding anything herein to the contrary, if not
paid prior thereto, the Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of such Lender's Loans and the accrued and unpaid interest thereon on the
Maturity Date.
Section 3.02 Interest
--------
(a) Interest Rates. The Borrower will pay to each Lender
---------------
interest on the unpaid principal amount of its Loans for the period commencing
on the date that such Loan is made to but excluding the date such Loan shall be
paid in full at the Applicable Rate, but in no event to exceed the Highest
Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, the
-----------------
Borrower will pay to the Lenders interest at the Post-Default Rate on the
principal of the Loans, and (to the fullest extent permitted by law) on any fees
and other amounts payable by the Borrower hereunder, under the Notes or under
any other Loan Document, for the period commencing on the date of any Event of
Default until the same is paid in full or all Events of Default are cured or
waived (after as well as before judgment).
(c) Due Dates. Accrued interest on the Loans shall be due
----------
and payable monthly on each Disbursement Date (regardless of whether or not
funds are available from the Lockbox Account); provided that (1) interest
accrued pursuant to Section 3.02(b) shall be payable on demand and (2) in the
event of any repayment or prepayment of any Loan pursuant to Section 3.03(a) or
Section 3.04, accrued interest on the principal amount repaid or prepaid shall
be payable on the date of such repayment or prepayment.
(d) 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), and in each case shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).
Section 3.03 Prepayments
-----------
(a) Voluntary Prepayments. The Borrower may prepay all or any
----------------------
portion of the Loans upon not less than 10 Business Days prior notice to the
Lenders, which notice shall be irrevocable and shall specify the prepayment date
(which shall be a Business Day) and the amount of the prepayment (which shall be
at least the lesser of $250,000 or the remaining principal balance outstanding
on the Loans) and effective only upon receipt by each Lender, provided that
interest on the principal prepaid, accrued to the prepayment date, shall be paid
on the prepayment date. Each prepayment of the Loans shall be applied ratably to
all Loans then outstanding.
(b) Reborrowing Prohibited; Application of Prepayments. Any
-----------------------------------------------------
voluntary or mandatory payments or prepayments on the Loans may not be
reborrowed.
(c) No Penalty. Prepayments permitted or required under this
-----------
Article III shall be without premium or penalty.
Section 3.04 Mandatory Repayments. In the event that the Borrower
---------------------
or its Subsidiaries sell, assign or otherwise dispose of any of their Oil and
Gas Properties, then the Borrower shall prepay the Loans on the date such sale
or other disposition of the Oil and Gas Properties occurs in an aggregate
principal amount equal to, unless otherwise agreed to in writing by the Lenders,
the proceeds of such sale or disposition, less the costs and fees associated
with such sale or disposition provided that such costs and fees are not in
excess of 1% of the proceeds from such sale or disposition or otherwise approved
by the Lenders.
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,
fees, or of amounts payable under Section 5.01, Section 5.02 or otherwise) prior
to 12:00 noon, New York, New York 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;
provided that Borrower shall not be responsible for paying any fees unless such
fees are then due and payable under this Agreement. 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 13.01, except that
payments pursuant to Section 5.01, Section 5.02 and Section 13.03 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 (3) 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 (4) 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 any of its Loans resulting in such
Lender receiving payment of a greater proportion of the aggregate amount of its
Loans 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 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 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 any of its Loans 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
Lenders 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 2.02(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.
ARTICLE V
INCREASED COSTS; TAXES
Section 5.01 Increased Costs.
----------------
(a) 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
Loans made by Lenders hereunder, to a level below that which such Lender 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, as the case may be, such additional amount or
amounts as will compensate such Lender or such Lender's holding company for any
such reduction suffered. In no event will the Lender's rate of return as a
result of this Section 5.01 be greater than the rate of return it is currently
receiving under this Agreement as of the Effective Date.
(b) 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 the immediately preceding
subsection (a) 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 30 days after receipt thereof.
(c) 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.
Section 5.02 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 5.02), the Administrative Agent or Lenders (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 30 days after written
demand therefore, for the full amount of any Indemnified Taxes or Other Taxes
paid by the Administrative Agent or such Lender, as the case may be, 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 5.02) 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 5.02 shall be delivered to the Borrower and shall be
conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable, but in any
----------------------
event within 30 days 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.
ARTICLE VI
LOCKBOX PROCEDURES; CASUALTY PROCEEDS
Section 6.01 Lockbox Account.
----------------
(a) The Borrower and the Administrative Agent shall establish
by the Effective Date and maintain at the Borrower's expense an interest-bearing
account (the "Lockbox Account") under Administrative Agent's exclusive control
---------------
with a bank (the "Lockbox Bank") reasonably acceptable to the Lenders which has
------------
entered into a lockbox account agreement pursuant to which all Cash Receipts to
be received by the Borrower shall be deposited, and the Borrower shall direct
(and hereby agrees to direct) each payor of any Cash Receipts now and in the
future to make payment to such Lockbox Account. The Borrower hereby irrevocably
appoints Administrative Agent as its attorney-in-fact (and such appointment
shall be deemed to be coupled with an interest so long as any Loans remain
outstanding) to address any direction letter or letter-in-lieu of division order
executed by the Borrower it may hold and deliver or have delivered any such
letter to any Person purchasing Hydrocarbons from the Oil and Gas Properties
that is not then directing payment for such Hydrocarbons to the Lockbox Account.
(b) On each Disbursement Date, Administrative Agent (on
behalf of the Lenders) shall direct the Lockbox Bank to make the following
payments from the Lockbox Account in the following order of priority and to the
extent funds remain available:
(i) amounts to the Borrower to (A) pay overriding
royalty interests created by any ORRI Conveyance and to pay other royalties and
overriding royalty interests (1) with respect to existing Oil and Gas
Properties, to the extent such burdens exist at the time of the execution of
this Agreement and (2) with respect to Properties that Borrower acquires
subsequent to the date of this Agreement to the extent such burdens exist at the
time that the Borrower acquires such Properties, and (B) to remit any revenues
attributable to the working interests of third parties that were paid to or
received by the Borrower, in each case, as the Lenders determine is reasonably
accurate in its good faith discretion) and any applicable severance tax or
ad-valorem tax;
(ii) payment to any third party (including Lenders
or any of their Affiliates) of any amounts due under any Swap Agreement of the
Borrower approved by the Lenders;
(iii) Operating Costs approved by the Lenders;
(iv) payment of any cash or cash equivalents
representing proceeds of insurance policies with respect to any casualty to any
of the Borrower's Property (the "Casualty Proceeds"), to the Casualty Proceeds
-----------------
Account subject to and in accordance with the provisions of Section 6.03;
(v) payment of all fees owed to any of the
Administrative Agent or the Lenders then due and unpaid under Section 2.04;
(vi) payment of all interest then accrued and unpaid
on the Loans;
(vii) payment to he Administrative Agent and the Lenders
of any other amounts due (other than principal on the Loans) under this
Agreement and any of the other Loan Documents;
(viii) General and Administrative Costs, approved by
the Lender;
(ix) payment of all conservation Taxes; and
(x) payment of all principal then due under
Section 3.01.
(c) The Administrative Agent may, at its option, apply sums
in the Lockbox Account to pay directly to the ultimate payee thereof some or all
of the payments described in Section 6.01, as the Lenders elect.
(d) Upon the Credit Agreement Termination Date, all amounts
remaining in the Lockbox Account shall be disbursed to the Borrower to the
account designated by the Borrower (the "Operating Account") in a written notice
-----------------
given by the Borrower to the Lenders from time to time, not later than 12:00
noon New York, New York time on a day which is two Business Days prior to the
date such payment shall become due.
Section 6.02 Notice. Immediately following execution of this Agreement,
------
the Borrower shall send the Direction Letters, to all Persons that owe or will
owe Cash Receipts to the Borrower, directing such persons to forward all such
amounts directly to the Lockbox Account. The Borrower hereby irrevocably
appoints the Administrative Agent as its attorney-in-fact (such appointment
being coupled with an interest) for sending any such notice to any Person who is
or may become obligated to make any payment of Cash Receipts to the Borrower.
With respect to Cash Receipts received directly by the Borrower, the Borrower
shall within two Business Days deposit, or cause to be deposited, all such
amounts in the Lockbox Account. If the Borrower has knowledge that any Person is
in receipt of Cash Receipts that would otherwise be properly deposited in the
Lockbox Account, the Borrower shall promptly notify such Person and the
Administrative Agent in writing of such circumstance and shall direct such
Person to deposit, or cause to be deposited, all such amounts in the Lockbox
Account.
Section 6.03 Casualty Proceeds. All Casualty Proceeds are hereby
------------------
assigned by the Borrower to the Administrative Agent, and the Borrower shall
have the right to collect any such payments, and such payments shall be
deposited by the Lenders or the Administrative Agent in an account at the
Lockbox Bank controlled by Administrative Agent (the "Casualty Proceeds
------------------
Account"). In the event of any casualty, the Borrower shall deliver within 30
- -------
days, a written report from an engineering firm acceptable to the Lenders
describing the nature of the casualty, the nature of any restoration required,
and a good faith estimate of the cost of such restoration. If the Lenders in
their sole discretion determine that the remediation is not in its best
interests, given the cost of such restoration and the affect such restoration
would have on the amount and timing of repayment of the Loans, then the Lenders
may apply such Casualty Proceeds to the prepayment of the outstanding principal
balance and accrued interest of the Loans and the other Indebtedness, whether or
not such Indebtedness is then due and payable. If the Lenders determine that
such Casualty Proceeds shall be used for restoration, then the proceeds shall be
disbursed from the Casualty Proceeds Account for such restoration in accordance
with procedures reasonably determined by the Lenders consistent with
construction loan funding principles. Notwithstanding the foregoing, if the
Lenders determine that the Casualty Proceeds shall be used for restoration and
such Casualty Proceeds are less than $50,000, then such amount shall be
disbursed from the Casualty Proceeds Account to the Borrower and the Borrower
shall utilize such proceeds solely for restoration of such casualty.
ARTICLE VII
CONDITIONS PRECEDENT
Section 7.01 Initial Funding. The obligations of the Lenders to make
----------------
their Loans under the Initial Funding shall not become effective until the date
on which each of the following conditions is satisfied (or waived in accordance
with Section 13.02):
(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 setting forth (i)
resolutions of its managing member with respect to the authorization of the
Borrower to execute and deliver the Loan Documents to which it is a party and to
enter into the transactions contemplated in those documents, (ii) the officers
or other designated persons of the Borrower (y) who are authorized to sign the
Loan Documents to which the Borrower is a party and (z) who will, until replaced
by another officer or officers duly authorized for that purpose, act as its
representative for the purposes of signing documents and giving notices and
other communications in connection with this Agreement and the transactions
contemplated hereby, (iii) specimen signatures of such authorized officers, and
(iv) the certificate of incorporation and bylaws, as amended, of the Borrower,
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.
(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 payable to the order of each Lender in a principal amount equal to its
Commitment dated as of the date hereof.
(g) The Borrower shall have delivered to the Administrative
Agent the Initial Funding Disbursement Request in the amount of $3,700,000.
(h) The Administrative Agent shall have received from the
Borrower duly executed counterparts of the ORRI Conveyance for each Lenders with
respect to the Borrower's Oil and Gas Properties as of the date of such funding.
(i) The Administrative Agent shall have received from U.S.
Energy Corp. duly executed counterparts of the Warrant Agreement for each
Lender.
(j) 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 Security
Agreement, the Pledge 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 on the Collateral, such Liens being
subject only to Excepted Liens identified in clauses (a) to (d) and (e) of the
definition thereof, but subject to the provisos at the end of such definition;
and
(ii) have received certificates, together with undated,
blank stock powers for each such certificate, representing all of the issued and
outstanding Equity Interests of the Borrower.
(k) The Administrative Agent shall have received an opinion of
Hickey & Mackey, special counsel to the Borrower, substantially in the form of
Exhibit E hereto.
- ----------
(l) The Administrative Agent shall have received a certificate
of insurance coverage of the Borrower evidencing that the Borrower and the
Operator are carrying insurance in accordance with Section 8.13.
(m) The Administrative Agent shall have received title
information as the Administrative Agent may require satisfactory to the
Administrative Agent setting forth the status of title to the Oil and Gas
Properties evaluated in the Initial Reserve Report as of the Effective Date.
(n) The Administrative Agent shall be satisfied with the
environmental condition of the Oil and Gas Properties of the Borrower and have
received such reports as in form and scope satisfactory to the Administrative
Agent and the Lenders as they may request related thereto, including a Phase 1
Environmental Report with respect to all wells a part of the Oil and Gas
Properties of the Borrower.
(o) The Administrative Agent shall have received a certificate
of a Responsible Officer of the Borrower certifying that the Borrower and the
Operator have received all consents and approvals required by Section 8.03.
(p) The Administrative Agent shall have received (i) the
financial statements referred to in Section 8.04(a), (ii) the Initial Reserve
Report accompanied by a certificate covering the matters described in Section
9.12(b) and (iii) copies of all material contracts or agreements, including, but
not limited to, all operating agreements covering the Oil and Gas Properties, as
well as all marketing, transportation, and processing agreements related to such
Oil and Gas Properties.
(q) The Administrative Agent shall have received appropriate
UCC search certificates reflecting no prior Liens encumbering the Properties the
Borrower for each of the following jurisdictions: State of Wyoming, Albany,
Converse, Platte, Campbell, and Johnson Counties, and any other jurisdiction
requested by the Administrative Agent.
(r) The Administrative Agent shall have received evidence that
the Borrower has purchased one or more commodity price floors, collars or swaps
acceptable to Administrative Agent and the Arranger (i) with one or more
Approved Counterparties, and (ii) that have aggregate notional volumes of not
less than 75% of the reasonably estimated projected natural gas production of
currently producing wells of Borrower for the first 24 months following the date
hereof, in each case, from its Proved Developed Producing Reserves, as
determined by reference to the Initial Reserve Reports.
(s) The Administrative Agent shall be satisfied that there are
no negative price deviations in the oil and gas prices that would have a
Material Adverse Effect on the value of the Borrower's Oil and Gas Properties.
(t) The Administrative Agent shall be satisfied that there
has been no Material Adverse Effect to the Borrower since December 1, 2003.
(u) The Administrative Agent shall have received Letters-in-Lieu
executed in blank by the Borrower, in such quantity as the Administrative Agent
may reasonably request.
(v) The Administrative Agent shall have received Direction
Letters executed in blank by the Borrower, in such quantity as the
Administrative Agent may reasonably request.
(w) Since December 1, 2003, there shall not have been any
disruption or adverse change in the financial or capital markets.
(x) The Borrower and the Lenders shall have agreed upon the
Development Plan.
(y) 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 Loans hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 13.02) at or prior to 2:00 p.m., New York, New York time, on
February 15, 2004 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).
Section 7.02 Subsequent Fundings. The obligation of the Lenders to
--------------------
make Loans to the Borrower with respect to any Subsequent Fundings is subject to
the following conditions:
(a) The satisfaction of the conditions set forth in
Section 7.03.
(b) The delivery to the Lenders and their approval (in
their sole discretion) in writing of (i) a Subsequent Funding Request (delivered
by the Borrower to the Lenders at least 30 days, but not more than 90 days,
prior to the date when the first Invoice Disbursement Request relating thereto
is to be delivered by the Borrower to the Lender) relating to a specific
Development Project and (ii) an Invoice Disbursement Request relating to an
approved Subsequent Funding Request. The Lenders' approval, if any, of any
Subsequent Funding Request shall be at their sole and unfettered discretion; any
such approval will require that the applicable Development Project is in
accordance with the (x) Development Plan (including as to scope of work, the
means and method of the work, the cost of the work, and the timing for the
commencement and completion of the work), and (y) other information delivered to
the Lenders in connection with the Subsequent Funding Request. No Lenders shall
have any obligation to approve any Subsequent Funding Request.
(c) Lenders are satisfied with Borrower's current hedging
position taking into consideration any proposed Development Projects being
proposed in connection with a Subsequent Funding.
Section 7.03 All Fundings. The obligation of the Lenders to make Loans
-------------
to the Borrower upon the occasion of each Borrowing hereunder (including the
Initial Funding) is subject to the further conditions precedent that, as of the
date of such Borrowing and after giving effect thereto:
(a) no Default shall have occurred and be continuing;
(b) no Material Adverse Effect shall have occurred; and
(c) the representations and warranties made or deemed made by
the Borrower or any Affiliate in Article VII and in the Loan Documents shall be
true on and as of the date of such borrowing with the same force and effect as
if made on and as of such date and following such new Borrowing, except to the
extent such representations and warranties are expressly limited to an earlier
date or the Lenders may expressly consent in writing to the contrary.
Section 7.04 Conditions Precedent for the Benefit of the Lender.
---------------------
All conditions precedent to the obligations of the Lenders to make any advance
is imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make any advance in the absence of strict
compliance with such conditions precedent.
Section 7.05 No Waiver. No waiver of any condition precedent shall
----------
preclude the Lenders from requiring such condition to be met prior to making any
subsequent advance of the Loans.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
Section 8.01 Organization; Powers. Each of the Borrower and the
---------------------
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 8.02 Authority; Enforceability. The Transactions are within
--------------------------
the Borrower's and each Guarantor's powers and have been duly authorized by all
necessary company and, if required, member action. Each Loan 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 8.03 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 (including
shareholders or any class of directors, whether interested or disinterested, of
the Borrower or any other 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
contemplated thereby, 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 that, 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 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
Subsidiary or its Properties, or give rise to a right thereunder to require any
payment to be made by the Borrower or such Subsidiary and (d) will not result in
the creation or imposition of any Lien on any Property of the Borrower or any
Subsidiary (other than the Liens created by the Loan Documents).
Section 8.04 Financial Condition; No Material Adverse Change.
----------------------------------------------------
(a) The Borrower has heretofore furnished to the Administrative
Agent and the Arranger the consolidated balance sheet and statements of income,
stockholders equity and cash flows for the Borrower and its Consolidated
Subsidiaries (i) as of and for the fiscal year ended 2002, and (ii) as of and
for the fiscal quarter and the portion of the fiscal year ended September 30,
2003, 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.
(b) Since November 1, 2003, (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 or its
Subsidiaries has been conducted only in the ordinary course consistent with past
business practices.
(c) Neither the Borrower nor any of its Subsidiaries 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, except as referred to or
reflected or provided for in the Financial Statements.
Section 8.05 Litigation.
----------
(a) Except as set forth on Schedule 8.05, 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 or any Subsidiary (i) that is not fully
covered by insurance (except for normal deductibles), or (ii) that involve any
Loan Document or the Transactions.
(b) Since the date of this Agreement, there has been no negative
change in the status of the matters disclosed in Schedule 8.05.
--------------
Section 8.06 Environmental Matters. Except as is set forth on
----------------------
Schedule 8.06:
- --------------
(a) neither any Property of the Borrower or any Subsidiary
nor the operations conducted thereon violate any order or requirement of any
court or Governmental Authority or any Environmental Laws.
(b) no Property of the Borrower or any 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 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 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 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 Subsidiary except in
compliance with Environmental Laws and so as not to pose an imminent and
substantial endangerment to public health or welfare or the environment.
(f) to the extent applicable, all Property of the Borrower
and each Subsidiary currently satisfies all design, operation, and equipment
requirements imposed by the OPA, 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 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.
(h) neither the Borrower's nor any Subsidiary's oil and gas
operations on its Oil and Gas Properties will be subject to any environmental
assessment requirements under the National Environmental Policy Act or any
analogous Governmental Regulation or any other environmental review or
assessment requirements in excess of environmental review and assessment
requirements required in connection with Borrower and its Subsidiaries obtaining
any permits or other required in completing recent wells on their Oil and Gas
Policies.
Section 8.07 Compliance with the Laws and Agreements; No Defaults.
---------------------------------------------------------
(a) Each of the Borrower and each 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.
(b) Neither the Borrower nor any Subsidiary is in default nor
has any event or circumstance occurred that, 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 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 Subsidiary or any of their Properties is bound.
(c) No Default has occurred and is continuing.
Section 8.08 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 8.09 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 8.10 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 Taxes that are being contested in good faith by appropriate
proceedings and for which the Borrower or such Subsidiary, as applicable, has
set aside adequate reserves in accordance with GAAP in an account controlled by
Administrative Agent. 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.
Section 8.11 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 that
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.
Section 8.12 Disclosure; No Material Misstatements. No written
----------------------------------------
information, statement, exhibit, certificate, document or report furnished to
either the Administrative Agent or the Lenders by the Borrower or any of its
Affiliates in connection with the negotiation of this Agreement and the other
Loan Documents contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statement contained therein not
materially misleading in the light of the circumstances in which made and with
respect to the Borrower and its Affiliates taken as a whole. There is no fact
peculiar to the Borrower or any of its Affiliates which has a Material Adverse
Effect or in the future is reasonably likely to have (so far as the Borrower can
now foresee) a Material Adverse Effect and which has not been set forth in this
Agreement, the Loan Documents or the other documents, certificates and
statements furnished to the Administrative Agent and the Lenders by or on behalf
of the Borrower or its Affiliates prior to, or on, the Effective Date in
connection with the transactions contemplated hereby. There are no statements or
conclusions in any Reserve Report that are based upon or include misleading
information or fail to take into account material information regarding the
matters report therein.
Section 8.13 Insurance. Schedule 8.13 attached hereto contains an
--------- --------------
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance that are owned or held by or
on behalf of the Borrower. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the date
of the closing have been paid, and no notice of cancellation or termination has
been received with respect to any such policy. Such policies are sufficient for
compliance with all Governmental Requirements and all agreements to which the
Borrower is a party; are valid, outstanding and enforceable policies; provide
adequate insurance coverage for the assets and operations of the Borrower in at
least such amounts and against at least such risks (but including in any event
public liability) as are usually insured against in the same general area by
companies engaged in the same or a similar business; will remain in full force
and effect through the respective dates set forth in Schedule 8.13 without the
-------------
payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this Agreement
and the Loan Documents. Neither the Borrower (nor to Borrower's knowledge any
prior owner of the Oil and Gas Properties) has been refused any insurance with
respect to its assets or operations, nor has it been limited below usual and
customary policy limits, by an insurance carrier to which it has applied for any
insurance or with which it has carried insurance during the last three years.
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 8.14 Restriction on Liens. Neither the Borrower nor any of the
----------------------
Subsidiaries is a party to any material agreement or arrangement, or subject to
any order, judgment, writ or decree, that 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 8.15 Subsidiaries. Except as set forth on Schedule 8.15,
------------ --------------
the Borrower has no Subsidiaries.
Section 8.16 Location of Business and Offices. The Borrower's
------------------------------------
jurisdiction of organization is Wyoming; the name of the Borrower as listed in
the public records of its jurisdiction of organization is RMG I, LLC; and the
organizational identification number of the Borrower in its jurisdiction of
organization is 2004-00460893 (or, in each case, as set forth in a notice
delivered to the Administrative Agent pursuant to Section 9.01(n) in accordance
with Section 13.01). The Borrower's principal place of business and chief
executive offices are located at the address specified in Section 13.01 (or as
set forth in a notice delivered pursuant to Section 9.01(n) and Section
13.01(c)). Each 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
--------
8.15 (or as set forth in a notice delivered pursuant to Section 9.01(n)).
- ----
Section 8.17 Properties; Titles, Etc.
-------------------------
(a) After giving full effect to the Excepted Liens and except
for the ORRI Conveyance, the Borrower owns the working interests and net
interests in production attributable to the Oil and Gas Properties reflected in
the Initial Reserve Report and set forth in the Schedule 8.17 and the ownership
-------------
of such Oil and Gas Properties shall not in any material respect obligate the
Borrower to bear the costs and expenses relating to the maintenance, development
and operations of each such Property in an amount in excess of the working
interest of each Oil and Gas Property set forth in the Schedule 8.17. All
-------------
information contained in the most recently delivered Reserve Report is true and
correct in all material respects as of the date thereof. No litigation or claims
are currently pending, or the best knowledge of the Borrower, threatened which
would question the Borrower's title to the Oil and Gas Properties.
(b) All leases and agreements referenced in the Initial
Reserve Report or the title opinions delivered in connection with the Initial
Funding 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 would affect in any material respect the conduct of the business of the
Borrower.
(c) The Property presently owned, leased or licensed by
the Borrower and its Subsidiaries including, without limitation, all easements
and rights of way, is all of the Property necessary to permit the Borrower and
its Subsidiaries to conduct their business in all material respects in the
manner contemplated by the Transaction Documents.
(d) All fixtures, improvements and personal property included
in the Properties of the Borrower and its Affiliates which are reasonably
necessary for the operation of its business are in good working condition and
are maintained in accordance with prudent business standards.
(e) The Borrower and each 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
Subsidiary does not infringe upon the rights of any other Person. The Borrower
and its 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.
Section 8.18 Maintenance of Properties. The Oil and Gas Properties
---------------------------
(and Properties unitized therewith) 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.
Specifically in connection with the foregoing (i) no Oil and Gas Property is
subject to having allowable production reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) and (ii)
none of the wells comprising a part of the Oil and Gas Properties (or Properties
unitized therewith) is deviated from the vertical more than the maximum
permitted by Government Requirements, and such wells 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 wells located on Properties unitized
therewith, such unitized Properties). All pipelines, wells, gas processing
plants, platforms and other material improvements, fixtures and equipment owned
in whole or in part by the Borrower or any of its 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 that are
operated by the Borrower or any of its Subsidiaries, in a manner consistent with
the Borrower's or its Subsidiaries' past practices.
Section 8.19 Gas Imbalances, Prepayments. As of the date hereof, except
----------------------------
as set forth on Schedule 8.19, on a net basis there are no gas imbalances, take
-------------
or pay or other prepayments that would require the Borrower or any of its
Subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor.
Except as set forth on Schedule 8.19, no material gas imbalances presently exist
-------------
with respect to any of the Borrower's Oil and Gas Properties. Except as set
forth in Schedule 8.19, none of the Borrower's Oil and Gas Properties are
--------------
subject to any contractual or other arrangement whereby payment for production
therefrom is to be deferred for a substantial period of time after the month in
which such production is delivered (i.e., in the case of oil, not in excess of
60 days, and in the case of gas, not in excess of 90 days). Except as set forth
on Schedule 8.19, none of the Oil and Gas Properties of the Borrower is subject
-------------
to a contractual or other arrangement for the sale of oil or gas production for
a fixed price which cannot be canceled on 90 days (or less) notice or which
contains terms which are not customary in the industry. None of the Oil and Gas
Properties of Borrower is subject at present to any regulatory refund obligation
and no facts exist which might cause the same to be imposed.
Section 8.20 Marketing of Production. Except for contracts listed
-------------------------
and in effect on the date hereof on Schedule 8.20, 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 Subsidiaries are receiving a price for all
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 that are not cancelable on 60 days notice or less without
penalty or detriment for the sale of production from the Borrower's or its
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. All proceeds from the sale of the Borrower's interests in Hydrocarbons
from its Oil and Gas Properties are currently being paid in full to the Borrower
by the purchaser thereof on a timely basis, and none of such proceeds are
currently being held in suspense by such purchaser or any other Person.
Section 8.21 Swap Agreements. Schedule 8.21, as of the date hereof, and
---------------- --------------
after the date hereof, each report required to be delivered by the Borrower
pursuant to Section 9.01(e), sets forth a true and complete list of all Swap
Agreements of the Borrower and each Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark to market value thereof, all credit support agreements
relating thereto (including any margin required or supplied) and the
counterparty to each such agreement.
Section 8.22 Use of Loans. The proceeds of the Loans shall be used
--------------
to reduce existing Debt (including payment of accounts payable), pay the costs
associated with the approved Development Projects set forth in the Development
Plan, pay the commitment fee referenced in Section 2.04 and pay the other costs
of the transactions related to this Agreement. 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 Loans will be
used for any purpose which violates the provisions of Regulations T, U or X of
the Board.
Section 8.23 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 has not incurred and does
not intend to incur, and does 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 does not have (and has no reason to believe
that it will have thereafter) unreasonably small capital for the conduct of its
business.
Section 8.24 Casualty Events. Since December 1, 2003, neither the
----------------
business nor any Properties of the Borrower have been materially and adversely
affected as a result of any fire, explosion, earthquake, flood, drought,
windstorm, accident, strike or other labor disturbance, embargo, requisition or
taking of Property or cancellation of contracts, permits or concessions by any
domestic or foreign Governmental Authority, riot, activities or armed forces or
acts of God or of any public enemy.
Section 8.25 Material Agreements. Set forth on Schedule 8.25 hereto
-------------------- --------------
is a complete and correct list of all material agreements and other instruments
of the Borrower setting forth each counterparty thereto (other than the Loan
Documents) relating to the purchase, transportation by pipeline, gas processing,
marketing, sale and supply of Hydrocarbons, farmout arrangements or other
material contract to which the Borrower is a party or by which its Properties is
bound (collectively "Material Agreements") and copies of such documents have
--------------------
been provided to the Administrative Agent. All such agreements are in full force
and effect and the Borrower is not in default thereunder, nor is there any
uncured default by any Affiliate predecessor in interest to the Borrower or, to
the Borrower's knowledge, by any predecessor in interest to the Borrower (other
than an Affiliate predecessor) or counterparty thereto, nor has the Borrower
altered any material item of such agreements since the Effective Date without
the prior written consent of the Lenders.
Section 8.26 No Brokers. Except for Sanders Morris Harris who will be
-----------
paid an amount not to exceed $220,000, no other Person is entitled to any
brokerage fee or finders fee or similar fee or commission in connection with
arranging the Loans contemplated by this Agreement.
Section 8.27 Reliance. In connection with the negotiation of and the
--------
entering into this Agreement, the Borrower acknowledges and represents that none
of the Lenders, the Administrative Agent, the Arranger, or any representative of
any of the foregoing is acting as a fiduciary or financial or investment advisor
for it; it is not relying upon any representations (whether written or oral) of
such Persons; it has consulted with its own legal, regulatory, tax, business
investment, financial and accounting advisors to the extent it has deemed
necessary, and it has made its own investment, hedging, and trading decisions
based upon its own judgment and upon any advice from such advisors as it has
deemed necessary and not upon any view expressed by any Lender, the
Administrative Agent, the Arranger, or any representative of any of the
foregoing; it has not been given by any Lender, the Administrative Agent, the
Arranger, or any representative of any of the foregoing (directly or indirectly
through any other Person) any advice, counsel, assurance, guarantee, or
representation whatsoever as to the expected or projected success,
profitability, return, performance, result, effect, consequence, or benefit
(either legal, regulatory, tax, financial, accounting, or otherwise) of this
Agreement or the transactions contemplated hereby; and it is entering into this
Agreement and the other Loan Documents with a full understanding of all of the
risks hereof and thereof (economic and otherwise), and it is capable of assuming
and willing to assume (financially and otherwise) those risks.
Section 8.28 Investments and Guaranties. The Borrower has not made
----------------------------
any investments in, advances to or guaranties of the obligations of any Person,
except as reflected in the financial statements described in Section 9.01(a).
Section 8.29 Payments by Purchasers of Production. All proceeds from
----------------------------------------
the sale of the Borrower's interests in Hydrocarbons from its Oil and Gas
Properties are currently being paid in full to the Borrower by the purchaser
thereof on a timely basis and at prices and terms comparable to market prices
and terms generally available at the time such prices and terms were negotiated
for oil and gas production from producing areas situated near such Oil and Gas
Properties, and none of such proceeds are currently being held in suspense by
such purchaser or any other Person.
Section 8.30 Existing Accounts Payable. Set forth on Schedule 8.30
--------------------------- --------------
hereto is a complete and correct list of all existing accounts payable of the
Borrower that are more than 30 days past due.
ARTICLE IX
AFFIRMATIVE COVENANTS
Until the Commitments have expired or been terminated and 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 9.01 Financial Statements; Other Information. The Borrower
------------------------------------------
will furnish to the Administrative Agent and the Arranger:
(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
Grant Thornton, Denver, Colorado or other 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 its Chief Financial Officer 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 9.01(a) or Section
9.01(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 9.13(b) and Section
10.01, 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 8.04 and, if any such change has occurred, specifying the effect
of such change on the financial statements accompanying such certificate.
(d) Certificate of Financial Officer - Consolidating Information
------------------------------------------------------------
If, at any time, all of the Consolidated Subsidiaries of the Borrower are not
Consolidated Subsidiaries, then concurrently with any delivery of financial
statements under Section 9.01(a) or Section 9.01(b), a certificate of a
Financial Officer setting forth consolidating spreadsheets that show all
Consolidated 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 9.01(a) and
Section 9.01(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 Subsidiary, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark-to-market value therefore, any new credit support
agreements relating thereto not listed on Schedule 8.21, any margin required or
-------------
supplied under any credit support document, and the counterparty to each such
agreement. In addition, Borrower shall furnish, within fifteen Business Days
following each calendar month, the Administrative Agent and the Arranger with
the Borrower's and its Subsidiaries hedge book in a format reasonably acceptable
to the Administrative Agent.
(f) Certificate of Insurer - Insurance Coverage. Concurrently
----------------------------------------------
with any delivery of financial statements under Section 9.01(a), a certificate
of insurance coverage from each insurer with respect to the insurance required
by Section 9.07, in form and substance satisfactory to the Administrative Agent,
and, if requested by the Administrative Agent or the Arranger, 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) Cash Flow. Within 25 days after the end of each
----------
calendar month, a current operating forecast of the Borrower and its
Subsidiaries as of the end of such calendar month and as of the fiscal year to
date.
(i) SEC and Other Filings; Reports to Shareholders. Promptly
----------------------------------------------
after the same become publicly available, 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, or
distributed by the Borrower to its shareholders generally, as the case may be.
(j) 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 Administrative
Agent or the Arranger pursuant to any other provision of this Section 9.01.
(k) Lists of Purchasers. Concurrently with the delivery of
---------------------
any Reserve Report to the Administrative Agent pursuant to Section 9.12, a list
of all Persons purchasing Hydrocarbons from the Borrower or any Subsidiary.
(l) Notice of Sales of Oil and Gas Properties. In the event the
-----------------------------------------
Borrower or any Subsidiary intends to sell, transfer, assign or otherwise
dispose of any Oil or Gas Properties or any Equity Interests in any Subsidiary
in accordance with Section 10.13, prior written notice of such disposition, the
price thereof and the anticipated date of closing.
(m) Notice of Litigation/Casualty Events. Prompt written notice,
------------------------------------
and in any event within five Business Days, of the delivery of any demand
letter, or the filing of any lawsuit or arbitration proceeding with an expected
potential liability in excess of $50,000, or the occurrence of any Casualty
Event or the commencement of any action or proceeding that could reasonably be
expected to result in a demand notice, lawsuit, arbitration proceeding, or
Casualty Event with respect to Borrower or Operator.
(n) Information Regarding Borrower and Guarantors. Prompt
------------------------------------------------
written notice (and in any event within twenty-five (25) 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. Within 25
-------------------------------------------------
days after the end of each calendar month, (i) a report setting forth, for such
calendar month, 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 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 such calendar month, and (ii) a
drilling schedule for the next 180 days for all Oil and Gas Properties which the
Borrower or any Subsidiary owns or controls or in which the Borrower or any
Subsidiary participates.
(p) Operating Reports. The Borrower shall prepare and
------------------
provide to the Lenders and Administrative Agent the following reports:
(i) on a monthly basis by the 25th of each month and in
connection with the delivery by the Borrower of any Invoice Disbursement
Request, a report through the end of the prior month setting forth as to each
Development Project (each well on an individual well by well basis), the actual
vs. estimated cost breakdown (for all activities, including dry hole and
completion activities) for such Development Project;
(ii) on a monthly basis by the 25th of each month
a cumulative report through the end of the prior month setting forth all amounts
to be disbursed pursuant to Section 3.01 and Section 6.01(b), including a
schedule identifying each category of payments identified as clauses (i) through
(x)of Section 6.01(b), with a detailed schedule of all items in each such
clause.
(iii) such other information as the Lenders may
reasonably request with respect to drilling, operation or property status
matters, including notice of any material changes with regard to oil and gas
prices received, contracts or production expenses or any material litigation
affecting the operation of the Oil and Gas Properties of the Borrower.
(q) 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, certificate of formation, by-laws, limited liability company
agreement, any preferred stock designation or any other organic document of the
Borrower or any Subsidiary.
(r) ORRI Payments. Promptly, but in any event within 5
--------------
days thereof, Borrower shall deliver to the Arranger a statement of all amounts
paid to the Lenders under any ORRI Conveyance.
(s) Members Materials. Promptly following any request
------------------
therefore, such materials and minutes for meetings of the members or managers of
the Borrower (other than any materials or information governed by a
confidentiality agreement prohibiting the sharing of such information with the
Administrative Agent or the Lenders).
(t) Other Requested Information. Promptly following any request
----------------------------
therefore, such other information regarding (i) the operations, business affairs
and financial condition of the Borrower or any Subsidiary (including, without
limitation, any Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA), or (ii) compliance with the terms of this
Agreement or any other Loan Document, in each case, as the Administrative Agent
or the Arranger may reasonably request.
Section 9.02 Notices of Material Events. The Borrower will furnish to
-----------------------------
the Administrative Agent and the Arranger prompt written notice of the
following:
(a) the occurrence of any Default or the occurrence of any
event that with notice or lapse of time, or both, would constitute and Event of
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 Administrative
Agent or the Arranger or any material adverse development in any action, suit,
proceeding, investigation or arbitration previously disclosed to the
Administrative Agent or the Arranger that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the filing or commencement of any action, suit,
proceeding, or arbitration by or on behalf of the Borrower or any of its
Affiliates claiming or asserting damages in favor of the Borrower of its
Affiliates valued in excess of $50,000;
(d) 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 $50,000;
(e) the occurrence of any event described in Schedule 9.02(e);
(f) any other development that results in, or could reasonably
be expected to result in, a Material Adverse Effect.
Each notice delivered under this Section 9.02 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 9.03 Existence; Conduct of Business. The Borrower will, and
--------------------------------
will cause each Subsidiary and Operator 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 jurisdiction in which its Oil and Gas Properties is located
or the ownership of its Properties requires such qualification.
Section 9.04 Payment of Obligations. The Borrower will, and will cause
------------------------
each Subsidiary and Operator to, pay its obligations (including Tax liabilities
of the Borrower and all of its Subsidiaries and any agreement material to the
business or operations of the Borrower or its Affiliates) before the same shall
become delinquent or in default, unless the Borrower is disputing such
obligations in good faith and has set aside an adequate reserve for such unpaid
obligations (except if, notwithstanding such good faith dispute and set aside of
adequate reserves, the failure to pay could reasonably be expected to result in
a Material Adverse Effect).
Section 9.05 Performance of Obligations under Loan Documents. The
----------------------------------------------------
Borrower will pay the Notes according to the reading, tenor and effect thereof,
and the Borrower will, and will cause each Subsidiary to, do and perform every
act and discharge all of the obligations to be performed and discharged by them
under the Loan Documents, including, without limitation, this Agreement, at the
time or times and in the manner specified.
Section 9.06 Operation and Maintenance of Properties. The Borrower,
-------------------------------------------
at its own expense, will, and will cause each Subsidiary and Operator 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 proration 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.
(b) keep, preserve and maintain all Oil and Gas Properties
and any other Property material to the conduct of its business in good repair,
working order and condition, ordinary wear and tear excepted.
(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) 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 9.06 (except with respect to Operator in which case
Borrower will cause Operator to comply with this Section 9.06).
(f) If the Operator breaches the Contract Operating Agreement
by failing to perform any of the covenants or obligations imposed upon it
thereunder, then the Collateral Agent or the Lenders shall have the right to
terminate the Contract Operating Agreement upon written notice to the Borrower
and Operator, and the Contract Operating Agreement shall terminate after the
expiration of 30 days after receipt by the Operator of such notice if the
Operator fails to remedy such default. Borrower shall cause the Operator to pay
on or before the due date thereof all royalties, burdens, lease operating
expenses, insurance and other maintenance expenses payable by the Operator on
any of the Oil and Gas Properties.
Section 9.07 Insurance. The Borrower will, and will cause each
---------
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 but in any event it will maintain at a minimum the
types of insurance and in such amounts as reflected on Schedule 8.13. 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 9.08 Books and Records; Inspection Rights. The Borrower will,
----------------------------------------
and will cause each Subsidiary and Operator 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 Subsidiary to, permit any representatives designated by the
Administrative Agent or the Arranger, upon reasonable prior notice, to visit and
inspect its Properties, to examine and make extracts from its books and records,
undertake appraisals of such Properties 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 9.09 Compliance with Laws. The Borrower will, and will cause
----------------------
each Subsidiary and Operator 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 9.10 Environmental Matters.
----------------------
(a) The Borrower shall at its sole expense: (13) comply, and
shall cause its Properties and operations and each Subsidiary and Operator and
each Subsidiary's Properties and Operator's Properties and operations to comply,
with all applicable Environmental Laws; (14) 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' or
Operator's operations except in compliance with applicable Environmental Laws;
(15) 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; (16) promptly commence and 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; and (17) 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 9.10(a) are timely and fully satisfied.
(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 Arranger in writing of any threatened action, investigation or inquiry
by any Governmental Authority or any demand or threatened 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 may result in liability
(whether individually or in the aggregate) in excess of $50,000, not fully
covered by insurance, subject to normal deductibles.
(c) The Borrower will, and will cause each Subsidiary and
Operator to, provide environmental audits and tests in accordance with American
Society of Testing Materials standards upon request by the Administrative Agent
and the Arranger 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 Arranger by any Governmental Authority), in connection with any future
acquisitions of Oil and Gas Properties or other Properties.
Section 9.11 Further Assurances.
-------------------
(a) The Borrower at its expense will, and will cause each
Subsidiary and Operator 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
Subsidiary, as the case may be, in the Loan Documents, including the Notes, 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 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 9.12 Reserve Reports.
----------------
(a) On or before each March 15 and August 15 the Borrower shall
furnish to the Administrative Agent and the Arranger a Reserve Report effective
as the previous January 1st and July 1st, as applicable. Each such Reserve
Report shall be prepared by one or more Approved Petroleum Engineers.
Notwithstanding the preceding, Borrower will not be required to deliver the
first Reserve Report hereunder until August 15, 2004.
(b) With the delivery of each Reserve Report, the Borrower shall
provide to the Administrative Agent and the Arranger 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, (ii) the Borrower or its
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 10.03, (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 8.19 with
respect to its Oil and Gas Properties evaluated in such Reserve Report which
would require the Borrower or any 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 therefore, (iv) none of their
Oil and Gas Properties have been sold since the date of the previous Reserve
Report delivered 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
--------
8.20 or Schedule 8.25 had such agreement been in effect on the date hereof and
- ---- -------------
(vi) all of the Oil and Gas Properties evaluated by such Reserve Report are
Mortgaged Properties.
(c) In connection with the delivery of the Reserve Reports to
be delivered in Section 9.12(a) above, the Borrower shall also furnish to the
Administrative Agent and the Arranger a reserve report with respect to the Oil
and Gas Properties conveyed to the Lenders as part of any ORRI Conveyance
provided to the Lenders under this Agreement.
Section 9.13 Title Information.
-----------
(a) On or before the delivery to the Administrative Agent
and the Arranger of each Reserve Report required by Section 9.12(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 have received, together with
title information previously delivered to the Administrative Agent, satisfactory
title information on all of the Oil and Gas Properties evaluated by such Reserve
Report.
(b) If the Borrower has provided title information for additional
Properties under Section 9.13(a), the Borrower shall, within 60 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) that are not
permitted by Section 10.03 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 clause (f) 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 have received, together with title information
previously delivered to the Administrative Agent, satisfactory title information
on all of the value of the Oil and Gas Properties evaluated by such Reserve
Report.
Section 9.14 Additional Collateral; Additional Guarantors.
-----------------------------------------------
(a) Promptly after the end of each month, the Borrower shall
review the current Mortgaged Properties to ascertain whether all Oil and Gas
Properties are Mortgaged Properties. If the Mortgaged Properties do not
represent all such Properties, then the Borrower shall, and shall cause its
Subsidiaries to, grant to the Administrative Agent as security for the
Indebtedness a senior Lien interest (subject only to Excepted Liens of the type
described in clauses (a) to (e) 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 all such Properties. 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 Subsidiary places a Lien on its Oil and Gas
Properties and such Subsidiary is not a Guarantor, then it shall become a
Guarantor and comply with Section 9.14(b).
(b) The Borrower shall promptly cause each Subsidiary to
guarantee the Indebtedness pursuant to a guaranty agreement in form and
substance reasonably acceptable to the Lenders. In connection with any such
guaranty, the Borrower shall, or shall cause such Subsidiary to: (A) execute and
deliver such guaranty agreement, (B) pledge all of the Equity Interests of such
Subsidiary (including, without limitation, delivery of original stock
certificates evidencing the Equity Interests of such Subsidiary, together with
an appropriate undated stock power for each certificate duly executed in blank
by the registered owner thereof), (C) grant a lien in and to all of the
Properties of such Subsidiary (including, without limitation, the Oil and Gas
Properties of such Subsidiary) pursuant to the Security Agreement and such other
deeds of trust, mortgages, agreements and instruments, in form and substance
satisfactory to the Administrative Agent, as the Administrative Agent may
request and (D) execute and deliver such other additional closing documents,
certificates and legal opinions as shall reasonably be requested by the
Administrative Agent.
(c) The Borrower will at all times cause all of the
Properties of the Borrower and each Subsidiary to be subject to a Lien of the
Security Instruments.
(d) All of the issued and outstanding Equity Interests of the
Borrower shall at all times be pledged to the Administrative Agent pursuant to
the Pledge Agreement (other than any Equity Interests that may be issued
pursuant to the Warrant Agreement).
Section 9.15 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 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 9.16 Swap Agreements. The Borrower shall maintain the hedged
----------------
position established by the Swap Agreements required under Section 7.01(r)
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. The Borrower
shall from time to time enter into Swap Agreements in respect of commodities so
that the notional volumes of all Swap Agreements, in the aggregate, are more
than 75% of the reasonably anticipated projected production from Borrower's
Proved Developed Producing Reserves for each month during the term of this
Agreement. Notwithstanding anything to the contrary in this Agreement, the
Borrower shall not assign, terminate or unwind any Swap Agreement entered into
on or before the Effective Date.
Section 9.17 Marketing of Production. All Hydrocarbons produced from
-------------------------
the Oil and Gas Properties shall be marketed on an arms-length basis using one
or more Persons that are not Affiliates of the Borrower, as reasonably
satisfactory to the Arranger.
Section 9.18 Overriding Royalty Interests.
------------------------------
(a) As additional consideration for the making of the Loans
by the Lenders, the Borrower agrees to convey to the Lenders, in undivided
shares proportionate to their respective Commitments, an overriding royalty
interest in the aggregate amount specified below in and to the Oil and Gas
Properties referred to below. The overriding royalty shall be conveyed with
respect to certain Oil and Gas Properties currently owned by the Borrower.
(b) The overriding royalty interest in any Oil and Gas Property
required to be conveyed with respect to any well shall equal (i) three percent
(3%) of 8/8ths (proportionately reduced) in the Oil and Gas Properties described
on Schedule 9.18(b)(i) and (ii) two percent (2%) of 8/8ths (proportionately
reduced) in the Oil and Gas Properties described on Schedule 9.18(b)(ii). The
overriding royalty shall be subject to the terms and conditions set forth in the
form of the ORRI Conveyance.
(c) An overriding royalty required to be conveyed hereby: (i)
with respect to any well now in existence shall be effective as of the first day
of the calendar month in which this Agreement is executed and with respect to
any future well the first day of the calendar month in which the relevant well
was completed, and (ii) shall survive any termination of the Credit Agreement.
(d) If, prior to finalization of the division order process,
the Borrower receives proceeds of production from a well with respect to which
the Borrower is required to convey an overriding royalty under this Section
9.18, the Borrower shall estimate the amount of such revenue payable on account
of the overriding royalty and shall pay such estimated proceeds to the Lenders;
provided that, upon the completion of the division order process, if any amounts
- --------
are determined to have been overpaid or underpaid to the Lenders, the Borrower
and the Lenders shall promptly make appropriate adjustments among themselves to
give effect to the correct division of interests, retroactive to the effective
date of such overriding royalty.
(e) Within twenty days (20) after the end of each fiscal
quarter, the Borrower will prepare a summary of all wells spudded during the
preceding fiscal quarter. Such summary shall indicate the date each well was
completed (or anticipated to be completed) and those wells for which an Override
pursuant to (c) above has been recorded in the appropriate land records and
delivered to the Lenders. For those wells where no override has been filed of
record, an approximate date of when the Borrower expects such override to be
recorded.
Section 9.19 Right of First Refusal. If at any time during the term
-------------------------
of this Agreement, Borrower desires to develop any Development Project or other
project for which there is insufficient funding available from Borrower's equity
capital, Borrower shall present to Arranger a financing request for such
projects, including, without limitation, all financial data that Borrower has
developed with respect to such projects and such other documentation required
under this Agreement with respect to a Development Project that is to be funded
under this Agreement, and any other information which Arranger may reasonably
request so as to enable Arranger to evaluate and determine whether Arranger
shall offer to finance such proposed project through this Agreement or another
facility agented by the Administrative Agent and with the Lenders as the lenders
thereunder.
Section 9.20 Contract Operating Agreement. Borrower will not amend,
------------------------------
restate, modify or waive any material provision of the Contract Operating
Agreement without the consent of the Lenders. In addition, Borrower will not
forgive any Debt outstanding under the Promissory Note dated January 29, 2004
made by Operator in favor of Borrower or modify any of the terms of such
Promissory Note without the prior written consent of Lenders.
Section 9.21 Separate Entity. Borrower will, (a) take all necessary
----------------
steps to maintain its separate entity and records, (b) will not commingle any
assets or business functions with any other Person, (c) maintain separate
financial statements, (d) not assume or guarantee the debts, liabilities or
obligations of others, (e) hold itself out to the public and creditors as an
entity separate from others, (f) not commit any fraud or misuse of the separate
entity legal status or any other injustice or unfairness, (g) not maintain its
assets in such a manner that it will be costly or difficult to segregate
ascertain or identify its individual assets from those of its partners or
Affiliates, (h) not take any action that might cause it to become insolvent, (i)
not fail to hold appropriate meetings (or act by unanimous written consent) to
authorize all appropriate actions, or fail in authorizing such actions, to
observe all formalities required by the Wyoming Limited Liability Company Act,
or fail to observe all formalities required by its organizational documents, (j)
not hold itself out to be responsible for the debts of another Person and (k)
not share any common logo with or hold itself out as or be considered as a
department or division of its partners, an Affiliate, or any other person or
entity.
ARTICLE X
NEGATIVE COVENANTS
Until the Commitments have expired or terminated and 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 10.01 Financial Covenants.
--------------------
(a) Ratio of Total Debt to EBITDA. The Borrower will not, at
-----------------------------
any time, permit the Borrower's ratio of Total Debt as of the last day of any
fiscal quarter to annualized EBITDA as of such time to be greater than
2.00:1.00. The foregoing ratio shall be annualized by multiplying EBITDA by
four.
(b) Ratio of EBITDA to Interest and Rents. The Borrower will
--------------------------------------
not permit on the last day of any fiscal quarter, the Borrower's ratio of EBITDA
to the sum of (A) Consolidated Interest Expense and (B) Consolidated Rents to be
less than 3.00:1.00.
(c) Current Ratio. The Borrower will not permit, as of the
--------------
last day of any fiscal quarter, the Borrower's ratio of (A) consolidated current
assets (excluding non-cash assets under FAS 133) to (B) consolidated current
liabilities (excluding (C) non-cash obligations under FAS 133), to be less than
1.00:1.00.
(d) Reserve Ratios of Proved Developed Producing Reserves to
------------------------------------------------------------
Total Debt. The Borrower will not permit, as of the last day of any fiscal
- -----------
quarter, from and after January 1, 2004, its ratio of the Net Present Value of
Proved Developed Producing Reserves, to Total Debt to be less than 1.00:1.00.
The foregoing ratio shall be determined by reference to the most recent Reserve
Report, based on a price curve determined by Arranger.
Section 10.02 Debt. Except as set forth on Schedule 10.02, the Borrower
----
will not, and will not permit any Subsidiary to, incur, create, assume or suffer
to exist any Debt, except:
(a) the Notes or other Indebtedness arising under the Loan
Documents or any guaranty of or suretyship arrangement for the Notes or other
Indebtedness arising under the Loan Documents.
(b) Debt of Borrower and its 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 that are not greater
than thirty (30) days past the date of invoice or delinquent and that are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP.
(d) Debt associated with bonds or surety obligations required
by Governmental Requirements in connection with the operation of the Oil and Gas
Properties.
Section 10.03 Liens. Except as set forth on Schedule 10.03, the Borrower
----- --------------
will not, and will not permit any 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.
Section 10.04 Redemptions.
-----------
(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.
Section 10.05 Investments, Loans and Advances. The Borrower will not,
----------------------------------
and will not permit any Subsidiary to, make or permit to remain outstanding any
Investments in or to any Person, except that the foregoing restriction shall not
apply to:
(a) Investments reflected in the Financial Statements or
that are disclosed to the Administrative Agent or the Arranger in Schedule
--------
10.05.
- -----
(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.
(f) deposits in money market funds investing exclusively in
Investments described in Section 10.05(c), Section 10.05(d) or Section 10.05(e).
Section 10.06 Nature of Business. Neither the Borrower nor any
--------------------
Subsidiary will allow any material change to be made in the character of its
business as an independent oil and gas exploration and production company. From
and after the date hereof, the Borrower and its 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 10.07 Limitation on Leases. Except with respect to the Leases
----------------------
set forth on Schedule 10.07, neither the Borrower nor any 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 Subsidiaries pursuant to all such leases or lease agreements,
including, without limitation, any residual payments at the end of any lease, to
exceed $25,000 in any period of twelve consecutive calendar months during the
life of such leases without the approval of the Lenders.
Section 10.08 Sale and Leasebacks. The Borrower will not enter into
---------------------
any arrangement, directly or indirectly, with any Person whereby the Borrower
shall sell or transfer any of its Property, whether now owned or hereafter
acquired, and whereby the Borrower shall then or thereafter rent or lease such
Property or any part thereof or other Property that the Borrower intends to use
for substantially the same purpose or purposes as the Property sold or
transferred.
Section 10.09 Proceeds of Notes. The Borrower will not permit the
-------------------
proceeds of the Notes to be used for any purpose other than those permitted by
Section 8.22. 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 10.10 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.
(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, (i) any Multiemployer Plan, or
(ii) 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 10.11 Sale or Discount of Receivables. Except for receivables
----------------------------------
obtained by the Borrower or any 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
Subsidiary will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable.
Section 10.12 Mergers, Etc. Neither the Borrower nor any Subsidiary will
------------
merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property to any other Person.
Section 10.13 Sale of Properties. The Borrower will not, and will not
--------------------
permit any Subsidiary to, sell, assign, farm-out, convey or otherwise transfer
(including through the sale of a Production Payment or overriding royalty
interest) any Property except for (a) the sale of Hydrocarbons in the ordinary
course of business; (b) the sale or transfer of equipment that is no longer
necessary for the business of the Borrower or such Subsidiary or is replaced by
equipment of at least comparable value and use; and (c) the sale or transfer of
any Property that, taken together with the sale of any other Properties during
any calendar year, in the aggregate, has a fair market value of less than
$50,000.
Section 10.14 Environmental Matters. The Borrower will not, and will not
---------------------
permit any 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 10.15 Transactions with Affiliates. The Borrower will not, and will
----------------------------
not permit any 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 (including, without limitation, Section 10.05), in the
ordinary course of business of the Borrower 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 10.16 Capital Expenditures. Except as provided for in the
---------------------
Development Plan or as expressly approved in writing by the Lender, the Borrower
will not, and will not permit any of its Subsidiaries to, make any Capital
Expenditures or incur costs associated with the exploration and development of
Borrower's and its Subsidiaries' Oil and Gas Properties (excluding normal lease
operating expenses) except for Capital Expenditures together with all other
costs totaling $50,000 or less in the aggregate.
Section 10.17 Material Agreements. The Borrower will not, and will not
--------------------
permit any Subsidiary to, enter into any contract or agreement that involves an
individual commitment from such Person of more than $50,000 in the aggregate in
any twelve month period (except for such contracts and agreements that relate to
the projects contemplated in the Development Plan).
Section 10.18 Subsidiaries. The Borrower will not, and will not permit
------------
any Subsidiary to, create or acquire any additional Subsidiary unless the
Borrower gives written notice to the Administrative Agent of such creation or
acquisition and complies with Section 9.14(b). The Borrower shall not, and shall
not permit any Subsidiary to, sell, assign or otherwise dispose of any Equity
Interests in any Subsidiary. Neither the Borrower nor any Subsidiary shall have
any Subsidiaries that are organized under the laws other than the United States
of America or any state thereof or the District of Columbia.
Section 10.19 Negative Pledge Agreements; Dividend Restrictions. The
-----------------------------------------------------
Borrower will not, and will not permit any Subsidiary to, create, incur, assume
or suffer to exist any contract, agreement or understanding (other than this
Agreement and the Security Instruments) that in any way prohibits or restricts
the granting, conveying, creation or imposition of any Lien on any of its
Property in favor of the Administrative Agent and the Lenders or restricts any
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 10.20 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 Subsidiary that
would require the Borrower or such Subsidiary to deliver Hydrocarbons at some
future time without then or thereafter receiving full payment therefore to
exceed .5 BCF of gas (on an mcf equivalent basis) in the aggregate.
Section 10.21 Swap Agreements. The Borrower will not, and will not
----------------
permit any 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) are not in excess of,
as of the date such Swap Agreement is executed, 75% of the reasonably
anticipated projected production from Proved Developed Producing Reserves 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 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 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 7.01(r). In no event shall any Swap Agreement contain any
requirement, agreement or covenant for the Borrower or any Subsidiary to post
collateral or margin to secure their obligations under such Swap Agreement or to
cover market exposures.
Section 10.22 Certain Activities. The Borrower shall not, and shall
-------------------
not permit any Subsidiary to, without the written consent of each Lender, (a)
take any action not in the ordinary course of the business of the Borrower
(unless such action could not reasonably be expected to have a Material Adverse
Effect), (b) file or settle any litigation or arbitral proceedings, or release
claim, for amount in excess of $250,000 in the aggregate, (c) either singly or
jointly, directly or indirectly, commence, join any other Person in commencing,
or authorize a trustee or other Person acting on its behalf or on behalf of
others to commence, any voluntary bankruptcy, reorganization, arrangement,
insolvency, liquidation, or receivership under the laws of the United States or
any state thereof, or (d) make a general assignment for the benefit of its
creditors.
Section 10.23 Net Sales. The Borrower shall not permit the net sales
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volume of Hydrocarbons from the Borrower's and its Subsidiaries' Oil and Gas
Properties for the periods indicated on Schedule 10.23 to be less than the
--------------
amount for such period as set forth in Schedule 10.23.
---------------
Section 10.24 G&A Costs. Without the prior consent of the Lenders
----------
the Borrower shall not incur and shall not permit any Subsidiary to incur
General and Administrative Costs on an annualized basis in excess of $-0-.
Section 10.25 Press Release. Without the prior consent of the Lenders,
--------------
such consent not to be unreasonably withheld, the Borrower shall not issue any
press release or make any public announcement of the this Agreement or the
credit facility being provided in connection therewith.
ARTICLE XI
EVENTS OF DEFAULT; REMEDIES
Section 11.01 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
11.01(a)) payable under any Loan Document, when and as the same shall become due
and payable, and such failure shall continue unremedied for one Business Day.
(c) any representation or warranty made or deemed made by or
on behalf of the Borrower or any of its Affiliates 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 Subsidiary shall fail to observe or
perform any covenant, condition or agreement contained in Section 9.01(k),
Section 9.01(n), Section 9.02, Section 9.03, Section 9.15, or in ARTICLE X.
(e) the Borrower or any of its Affiliates shall fail to observe
or perform any covenant, condition or agreement contained in this Agreement
(other than those specified in Section 11.01(a), Section 11.01(b) or Section
11.01(d)) or any other Loan Document, and such failure shall continue unremedied
for a period of 15 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
Affiliate otherwise becoming aware of such default.
(f) the Borrower or any Subsidiary shall fail to make any
payment (whether of principal or interest and regardless of amount) in respect
of any Material Indebtedness, when and as the same shall become due and payable.
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables or
permits (with or without the giving of notice, the lapse of time or both) the
holder or holders of any Material Indebtedness or any trustee or agent on its or
their behalf to cause any Material Indebtedness to become due, or to require the
Redemption thereof or any offer to Redeem to be made in respect thereof, prior
to its scheduled maturity or any event or condition requires the Borrower or any
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 of its Affiliates 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 (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Borrower or any of its Affiliates 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 of its Affiliates 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 11.01(h), (iii) apply for or consent
to the appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the Borrower or any of its Affiliates 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 of its Affiliates 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 $100,000 shall be rendered against the Borrower,
any 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 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 Subsidiary or
any of their Affiliates shall so state in writing.
(m) an ERISA Event shall have occurred that, in the opinion of
the Lenders, when taken together with all other ERISA Events that have occurred,
could reasonably be expected to result in a Material Adverse Effect.
(n) a Change in Control shall occur.
(o) Operator shall default under the Contract Operating
Agreement or Borrower defaults under the Contract Operating Agreement and
Operator has not waived such default.
Section 11.02 Remedies.
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(a) In the case of an Event of Default other than one
described in Section 11.01(h), Section 11.01(i) or Section 11.01(j), at any time
thereafter during the continuance of such Event of Default, the Administrative
Agent may, and at the request of the Lenders, shall, by notice to the Borrower,
declare the Notes 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 Notes and the other Loan Documents, 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 11.01(h), Section 11.01(i) or Section
11.01(j), the Notes and the principal of the Loans then outstanding, together
with accrued interest thereon and all fees and the other obligations of the
Borrower and the Guarantors accrued hereunder and under the Notes 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 and continuance of an Event
of Default,
the Administrative Agent is authorized to complete the Letters-in-Lieu and
deliver same, and 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 Notes,
whether by acceleration or otherwise, shall be applied: first, to reimbursement
of expenses and indemnities provided for in this Agreement and the Security
Instruments; second, to accrued interest on the Notes; third, to fees; fourth,
pro rata to principal outstanding on the Notes and Indebtedness referred to in
clause (b) of the definition of "Indebtedness" owing to a Lender or an Affiliate
of a Lender; and any excess shall be paid to the Borrower or as otherwise
required by any Governmental Requirement.
(d) From and after the existence of any Event of Default, Agent
shall have the right to terminate the Contract Operating Agreement without any
liability or obligation of the Lenders, the Agent or the Borrower to the
Operator with respect to such termination or otherwise, upon written notice
delivered by the Lenders or the Collateral Agent to the Borrower and the
Operator, and upon delivery of such notice such termination shall be effective
30 days thereafter with no right of the Operator to cure.
Section 11.03 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
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 Subsidiaries.
ARTICLE XII
THE ADMINISTRATIVE AGENT
(a) Appointment; Powers. 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.
Section 12.02 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 12.03, 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 VII 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 12.03 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 Lenders 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
Lenders 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 Lenders in
the written instructions (with indemnities) described in this Section 12.03,
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 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 Lenders, 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 12.04 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 any Note as the holder thereof for all purposes hereof unless
and until a written notice of the assignment or transfer thereof permitted
hereunder shall have been filed with the Administrative Agent.
Section 12.05 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 XII 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 in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.
Section 12.06 Resignation or Removal of Administrative Agent. Subject
-------------------------------------------------
to the appointment and acceptance of a successor Administrative Agent as
provided in this Section 12.06, 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 all of the Lenders. Upon any such
resignation or removal, the Lenders shall have the right, in consultation with
the Borrower, to appoint a successor. If no successor shall have been so
appointed by the Lenders 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 the 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 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 XII
and Section 13.03 shall continue in effect for the benefit of such retiring
Administrative 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 12.07 Agents as Lenders. The party serving as the 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 the
Administrative Agent, and such party 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 the
Administrative Agent hereunder.
Section 12.08 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 itself 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 Agent or any of
its Affiliates. In this regard, each Lender acknowledges that Vinson & Elkins
L.L.P. is acting in this transaction as special counsel to the Administrative
Agent only, except to the extent otherwise expressly stated in any legal opinion
or any Loan Document. 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 12.09 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 10.13 or is otherwise authorized by the terms
of the Loan Documents.
ARTICLE XIII
MISCELLANEOUS
Section 13.01 Notices.
-------
(a) Except in the case of notices and other communications
expressly permitted to be given by telephone (and subject to Section 13.01(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 877 North 8th West,
Riverton, Wyoming 82501 (Telecopy No. (307) 857-3050);
(ii) if to the Administrative Agent, to it at
Drawbridge Special Opportunities Fund LP, 1251 Avenue of the Americas, 16th
Floor, New York, New York 10020, Attention: Kevin Treacy (Telecopy No. (212)
798-6056).
(iii) if to the Arranger, to it at Petrobridge
Investment Management LLC, 1600 Smith Street, Suite 4250, Houston, TX 77002,
Attention of Mike Keener (Telecopy No. (713) 490-3867);
(iv) if to any other Lender, to it at its address
(or telecopy number) set forth on its applicable signature page.
(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 13.02 Waivers; Amendments.
--------------------
(a) No failure on the part of the Administrative Agent,
any Lender, or the Arranger 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 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
13.02(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
Lenders 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 Lenders or by the Borrower and the Administrative Agent
with the consent of all of the Lenders.
Section 13.03 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, charges and disbursements of counsel
and other outside consultants for the Administrative Agent, the reasonable
travel, photocopy, mailing, courier, telephone and other similar expenses, and
the cost of environmental audits and surveys and appraisals, in connection with
the ongoing enforcement and performance of the credit facilities provided for
herein as Administrative Agent deems appropriate, 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), (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 any 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 13.03, including, without limitation, all such out-of-pocket expenses
incurred during any workout, restructuring or negotiations in respect of such
Loans and any appraisal costs incurred by the Administrative Agent or the
Lenders.
(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 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 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 WILLFUL MISCONDUCT OF SUCH INDEMNITEE.
(c) To the extent that the Borrower fails to pay any amoun
required to be paid by it to the Administrative Agent under Section 13.03(a) or
(b), each Lender severally agrees to pay to such Administrative Agent such
Lender's Applicable Percentage (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 such Administrative Agent in its capacity as such.
(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, any Loan or the use
of the proceeds thereof.
(e) All amounts due under this Section 13.03 shall be payable
e promptly after written demand therefor.
Section 13.04 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 13.04. 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 13.04(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
13.04(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) without the prior written
consent of the Borrower.
(ii) Assignments shall be subject to the following
conditions:
(i) 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, the amount of the Commitment 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 $100,000 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;
(ii) 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;
(iii) 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 $10,000; and
(iv) the assignee, if it shall not be a Lender,
shall deliver to the Administrative Agent any information reasonably requested
by the Administrative Agent.
(iii) Subject to Section 13.04(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 and Section 13.03). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this Section 13.04 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 13.04(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 the Commitment of,
and principal amount of the Loans owing to, 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 Lender 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. In connection with any changes to the Register, if necessary, the
Administrative Agent will reflect the revisions on Annex I and forward a copy of
-------
such revised Annex I to the Borrower and each Lender.
--------
(v) Upon its receipt of a duly completed Assignment
and Assumption executed by an assigning Lender and an assignee, the assignee's
providing any information reasonably requested by the Administrative, the
processing and recordation fee referred to in Section 13.04(b) and any written
consent to such assignment required by Section 13.04(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 13.04(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 (i) such Lender's obligations under
--------
this Agreement shall remain unchanged, (ii) 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 13.02 that affects
such Participant. In addition such agreement must provide that the Participant
be bound by the provisions of Section 13.03. Subject to Section 13.04(c)(ii),
the Borrower agrees that each Participant shall be entitled to the benefits of
Section 5.01 and Section 5.02 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 13.04(b). To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 13.08 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 5.02 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.
(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 any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section 13.04(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.
Section 13.05 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 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 and so long as the Commitments have not
expired or terminated. The provisions of Section 5.01, Section 5.02 and Section
13.03 and ARTICLE XII shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, and the Commitments or 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 Lender's 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 13.06 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 7.01, 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 13.07 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 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 13.08 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 Subsidiary against any of and all the
obligations of the Borrower or any 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 13.08 are in addition to other rights
and remedies (including other rights of setoff) which such Lender or its
Affiliates may have.
Section 13.09 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
--------------------------------------------------------
PROCESS.
- -------
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK EXCEPT TO
THE EXTENT THAT UNITED STATES FEDERAL LAW PERMITS ANY LENDER TO CONTRACT FOR,
CHARGE, RECEIVE, RESERVE OR TAKE INTEREST AT THE RATE ALLOWED BY THE LAWS OF THE
STATE WHERE SUCH LENDER IS LOCATED.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE
LOAN DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES OF AMERICA FOR THE [SOUTHERN DISTRICT OF NEW YORK, MANHATTAN
DIVISION,] 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 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 13.09.
Section 13.10 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 13.11 Confidentiality. Each of the Administrative Agent and
---------------
the Lender 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 13.11, 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 13.11 or (ii) becomes
available to the Administrative Agent or any Lender on a non-confidential basis
from a source other than the Borrower. For the purposes of this Section 13.11,
"Information" means all information received from the Borrower or any Subsidiary
-----------
relating to the Borrower or any Subsidiary and their businesses, other than any
such information that is available to the Administrative Agent or any Lender on
a non-confidential basis prior to disclosure by the Borrower or a Subsidiary;
provided that, in the case of information received from the Borrower or any
- --------
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 13.11 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.
Notwithstanding anything herein to the contrary, each of the parties hereto (and
each employee, representative or other agent of such party) may disclose to any
and all Persons, without limitation of any kind, the U.S. federal income tax
treatment and tax structure of the transaction contemplated herein (as used in
this Section 13.11, the "Transaction") and all materials of any kind (including
-----------
opinions and other tax analyses) that are provided to the parties hereto
relating to such tax treatment and tax structure. For this purpose, "tax
structure" is limited to facts relevant to the U.S. federal income tax treatment
of the Transaction and does not include information relating to the identity of
the parties hereto, its affiliates, agents or advisors. Notwithstanding the
above provisions of this Section 13.11, and in accordance with Section
1.6011-4(b)(3)(iii) of the U.S. Treasury Regulations, each party to this
Agreement (and each employee, representative, or other agent of each party) may
disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure, for federal tax purposes, of the transactions
contemplated by this Agreement and all materials of any kind (including opinions
or other tax analyses) that are provided to such party relating to such tax
treatment and tax structure
Section 13.12 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 States of New York or Wyoming 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 Notes, it is
agreed as follows: (i) the aggregate of all consideration which constitutes
interest under law applicable to any Lender that is contracted for, taken,
reserved, charged or received by such Lender under any of the Loan Documents or
agreements or otherwise in connection with the Notes shall under no
circumstances exceed the maximum amount allowed by such applicable law, and any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Lender on the principal amount of the 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 Notes is accelerated by reason of an election of the
holder thereof resulting from any Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under law applicable to any Lender may
never include more than the maximum amount allowed by such applicable law, and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically by such Lender as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited by such Lender on the
principal amount of the 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 evidenced by the
Notes until payment in full so that the rate or amount of interest on account of
any Loans hereunder does not exceed the maximum amount allowed by such
applicable law. If at any time and from time to time (i) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful Rate
applicable to such Lender pursuant to this Section 13.12 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 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 13.12.
Section 13.13 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 13.14 Collateral Matters; Swap Agreements. The benefit of the
--------------------------------------
Security Instruments and of the provisions of this Agreement relating to any
collateral securing the Indebtedness shall also extend to and be available to
those Lenders or their Affiliates which are counterparties to any Swap Agreement
with the Borrower or any of its Subsidiaries on a pro rata basis in respect of
any obligations of the Borrower or any of its Subsidiaries which arise under any
such Swap Agreement while such Person or its Affiliate is a Lender, but only
while such Person or its Affiliate is a Lender, including any Swap Agreements
between such Persons in existence prior to the date hereof. No Lender or any
Affiliate of a Lender shall have any voting rights under any Loan Document as a
result of the existence of obligations owed to it under any such Swap
Agreements.
Section 13.15 No Third Party Beneficiaries. 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 13.16 Securitization. The Borrower hereby acknowledges that the
--------------
Lenders and their Affiliates may sell or securitize the Loans (a
"Securitization") through the pledge of the Loans as collateral security for
--------------
loans to the Lenders or their Affiliates or through the sale of the Loans or the
issuance of direct or indirect interests in the Loans, which loans to the
Lenders or their Affiliates or direct or indirect interests will be rated by
Moody's, S&P or one or more other rating agencies (the "Rating Agencies"). The
---------------
Borrower shall cooperate with the Lenders and their Affiliates to effect the
Securitization including, without limitation, by (a) amending this Agreement and
the other Loan Documents, and executing such additional documents, as reasonably
requested by the Lenders in connection with the Securitization, provided that
(i) any such amendment or additional documentation does not impose material
additional costs on the Borrower and (ii) any such amendment or additional
documentation does not materially adversely affect the rights, or materially
increase the obligations, of the Borrower under the Loan Documents or change or
affect in a manner adverse to the Borrower the financial terms of the Loans, (b)
providing such information as may be reasonably requested by the Lenders in
connection with the rating of the Loans or the Securitization, and (c) providing
in connection with any rating of the Loans a certificate (i) agreeing to
indemnify the Lenders and their Affiliates, any of the Rating Agencies, or any
party providing credit support or otherwise participating in the Securitization
(collectively, the "Securitization Parties") for any losses, claims, damages or
----------------------
liabilities (the "Liabilities") to which the Lenders, their Affiliates or such
-----------
Securitization Parties may become subject insofar as the Liabilities arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any Loan Document or in any writing delivered by or
on behalf of the Borrower or any Affiliate of the Borrower to the Lenders in
connection with any Loan Document or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein, or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and such indemnity
shall survive any transfer by the Lenders or their successors or assigns of the
Loans and (ii) agreeing to reimburse the Lenders and their Affiliates for any
legal or other expenses reasonably incurred by such Persons in connection with
defending the Liabilities.
[SIGNATURES BEGIN NEXT PAGE]
The parties hereto have caused this Agreement to be duly executed as of the
day and year first above written.
BORROWER: RMG I, LLC
By: /s/ Mark J. Larsen
--------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
ADMINISTRATIVE AGENT: DRAWBRIDGE SPECIAL OPPORTUNITIES
FUND LP
By: Drawbridge Special Opportunities GP LLC
By: /s/ Marc K. Furstein
-------------------------------------------
Marc K. Furstein
Chief Operating Officer
Address: 1251 Avenue of the Americas
Suite 1600
New York, New York 10020
Attention: Marc K. Furstein
LENDER: HIGHBRIDGE/ZWIRN SPECIAL
OPPORTUNITIES FUND, L.P.
By: Highbridge/Zwirn Capital Management,
LLC
By: /s/ Daniel B. Zwirn
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Daniel B. Zwirn
Managing Principal
Address: 9 West 57th Street
New York, New York 10019
Attention: Morris W. Macleod
Telecopy: (212) 287-4263
LENDER: DRAWBRIDGE SPECIAL OPPORTUNITIES
FUND LP
By: Drawbridge Special Opportunities GP LLC
By: Marc K. Furstein
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Marc K. Furstein
Chief Operating Officer
Address: 1251 Avenue of the Americas
Suite 1600
New York, New York 10020
Attention: Marc K. Furstein
Telecopy: