SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 15, 2004
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IMPERIAL PETROLEUM, INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-9923 95-3386019
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(State or other (Commission File No.) (I.R.S. Employer
jurisdiction of Identification No.)
incorporation)
11600 GERMAN PINES DRIVE, EVANSVILLE, IN 47725
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) - 867-1433
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ITEM 1. Changes in Control:
None.
ITEM 2. Acquisition or Disposition of Assets:
Registrant entered into and closed the acquisition of oil and gas assets
and wells on January 15, 2004 from Hillside Oil & Gas LLC. and from Warrior
Resources, Inc. (formerly Comanche Energy, Inc.) and its subsidiaries,
Double Eagle Petroleum Corporation and Enigima Energy Company LLC. Warrior
Resources, Inc. is an affiliate of the Registrant and the Registrant has
managed the assets of Warrior since acquiring an interest in the Warrior on
February 14, 2002. Approval was granted for the sale to the Registrant by
the Warrior shareholders in a Proxy Solicitation completed on August 29,
2003. Negotiations for the purchase of the assets of Hillside were at arms
length.
In connection with the asset purchases, the Company became the operator of
approximately 180 producing oil and gas wells located in the states of
Texas, New Mexico, Louisiana and Mississippi. The Company also purchased
royalty interests in approximately 230 wells in various states in the same
transaction. The Company purchased the properties at a combined cost of
$11,517,000 including fees and expenses and the assumption of $700,000 of
accounts payable. The financing for the acquisitions was arranged by
Jefferies & Company and provided by Highbridge/Zwirn Special Opportunities
Fund LLP and the Bank of Oklahoma.
ITEM 7. Financial Statements and Exhibits:
The table below provides ProForma Summaries of income and expenses for the
oil and gas properties acquired from Warrior Resources, Inc. and Hillside
Oil & Gas LLC for the prior two fiscal years.
WARRIOR RESOURCES HILLSIDE OIL & GAS TOTAL
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YEAR YEAR END YEAR END YEAR END YEAR END YEAR END
END
7/31/02 7/31/03 7/31/02 7/31/03 7/31/02 7/31/03
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Revenue 1246.1 1124.4 2115.1 1539.7 3361.2 2664.1
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Expenses
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Lse Opns 755.9 535.8 1340.3 866.1 2096.2 1401.9
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Prod Tax 71.7 62.3 100.1 77.1 171.8 139.4
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Total 827.6 598.1 1440.4 943.2 2268.0 1262.5
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Net Inc 418.5 526.3 674.7 596.5 1093.2 1401.6
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MBbls 16.6 3.3 56.3 23.0 72.9 26.3
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MMCF 260.3 175.8 137.9 105.1 398.2 280.9
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Exhibits
A. Asset Purchase Agreement by and between Imperial Petroleum, Inc., as
Buyer, and Hillside Oil & Gas LLC, as Seller, and dated July 9, 2003
and as amended October 16, 2003.
B. Asset Purchase Agreement by and between Imperial Petroleum, Inc., as
Buyer, and Double Eagle Petroleum Corp, as Seller, and dated July 15,
2004 and as amended October 31, 2003.
C. Retention and Fee Agreement with Jefferies & Company, Inc. dated June
26, 2003.
D. Indicative terms for financing between Highbridge/Zwirn Special
Opportunities Fund LLP and Imperial Petroleum, Inc. and dated August
13, 2003.
E. Consolidated Amended and Restated Credit Agreement and Related
Agreements by and between Imperial Petroleum, Inc., as Borrower, and
Highbridge/Zwirn Special Opportunities Fund LLP and dated January 15,
2004.
F. Promissory notes dated January 15, 2004 by Imperial Petroleum, Inc.,
as Borrower, and each of Hillside Oil & Gas LLC; R. Don Wright, Joe
Poe and Four Sevens Partners.
G. Warrant Agreement in favor of Jefferies & Company, Inc. dated January
15, 2004.
H. Warrant Agreement in favor of Highbridge/Zwirn Special Opportunities
Fund LP dated January 15, 2004 as included in E. above.
I. Press Release dated January 17, 2004.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Imperial Petroleum, Inc.
By: ___________________
Jeffrey T. Wilson
President
Dated: January 21, 2004
October 16, 2003
Mr. Gary Barker
Hillside Oil & Gas LLC
PO Box 8911
Midland, TX 79708
Re: Extension of Closing
Dear Sir:
This letter, when executed by Hillside, will serve as our agreement to amend
that certain Purchase And Sales Agreement executed between Hillside Oil & Gas
LLC , as Seller, and Imperial Petroleum, Inc., as Buyer, and dated July 9, 2003
as follows:
(1.) The Closing Date shall be extended to November 15, 2003.
(2.) The cash consideration to be paid to Hillside shall be adjusted from
$700,000 to $168,000 and Hillside shall assign to Imperial its accounts
payable as of the Closing Date for accounts related directly to the
properties acquired by Imperial as included on Exhibit "A" of the Purchase
and Sales Agreement. A listing of the accounts payable, including
outstanding taxes and royalties will be provided by Hillside and attached
to this letter amendment. The approximate amount of these accounts payable
is $348,000, including taxes and royalties.
(3.) Imperial and Hillside will execute a lease/purchase agreement for the
assets pledged to Commercial State Bank such that Imperial will "take-over"
the payments to Commercial State Bank for the remainder of the term of the
loan. Imperial will make a payment to Commercial State Bank at closing of
the Hillside transaction in the amount of $32,000 for accrued interest owed
on the loan. Hillside will execute a Bill of Sale (and such other documents
as may be necessary) to Imperial at closing, such that upon payoff of the
Commercial State Bank loan, Imperial shall have free and clear title to the
assets mortgaged. Imperial shall be responsible for all repairs and
maintenance of the mortgaged assets during the term of the lease/purchase
agreement.
(4.) To the extent required in the various states in which Hillside currently
operates, Hillside shall remain as the operator of record (in name only) of
the wells and leases, until such time as change of operator forms are
approved by the various state agencies. Imperial will make provisions with
the Bank of Oklahoma to retain the existing Letters of Credit with the Bank
regarding operations and plugging bonds.
(5.) Imperial will execute a Note Agreement with Hillside in an amount of
$324,000 in exchange for the 1.0 million shares of common stock to be
issued to Hillside as provided in the Purchase and Sale Agreement. The Note
will bear interest at the Bank of New York Prime Rate and monthly principal
and interest payments shall not exceed $8,000. The Note shall be secured by
1 million shares of Imperial common stock and shall have a term of 18
months, with the balance of the outstanding principal due at the end of the
term. Imperial shall have the right to pre-pay the Note obligation without
penalty at any time.
(6.) There shall be no accounting adjustments of income, expenses or overhead
for the period from March 31, 2003 to the Closing Date as originally
provided in the Agreement.
(7.) All other terms of the Purchase and Sales Agreement shall remain in full
force and effect.
Please sign in the space provided below.
Very Truly Yours, Agreed to and Accepted
this 16th day of
October 2003.
Jeffrey T. Wilson Hillside Oil & Gas LLC
President
By:-----------------------------
Gary Barker, Managing Partner
December 5, 2003
Mr. Gary Barker
Hillside Oil & Gas LLC
PO Box 8911
Midland, TX 79708
Re: Payment of Broker Fees
Dear Sir:
This letter, when executed by each of the parties below, will serve as our
mutual agreement to pay broker fees due in connection with the closing pursuant
to that certain Purchase And Sales Agreement executed between Hillside Oil & Gas
LLC , as Seller, and Imperial Petroleum, Inc., as Buyer, and dated July 9, 2003,
as amended, ("Hillside Transaction") such that Imperial will make payments on
behalf of itself and Hillside to the parties herein as follows:
(1.) Imperial will pay to R. Don Wright on behalf of Hillside at closing of the
Hillside Transaction a total consideration of $114,870. A cash payment of
$55,102.00 shall be paid at closing and the balance of $59,768.00 shall be
paid in six equal monthly installments and shall be secured by a Promissory
Note (attached hereto as Exhibit I).
(2.) Imperial will pay to Joe Poe on behalf of Hillside at closing of the
Hillside Transaction a total consideration of $ 57,435.00. A cash payment
of $ 20,102.00 shall be paid at closing and the balance of $37,333.00 shall
be paid in six equal monthly installments and shall be secured by a
Promissory Note (attached hereto as Exhibit II).
(3.) Imperial will pay to Four Sevens Partners Ltd. on behalf of itself at
closing of the Hillside Transaction a total consideration of $ 100,000. A
cash payment of $35,000.00 shall be paid at closing and the balance of
$65,000.00 shall be paid in six equal monthly installments and shall be
secured by a Promissory Note (attached hereto as Exhibit III).
Hillside warrants and represents by its signature hereto that no other claims
for broker fees or other fees due to third parties are due or will become due as
a result of the closing of the Hillside Transaction. Each of the parties below,
represents and warrants by their respective signatures hereto that upon receipt
of the amounts provided herein, each has received its full and complete payment
in satisfaction of any fees due for finder, broker or other agreements of
whatsoever kind, whether verbal or written, with each of Hillside and Imperial
or any of their respective officers, directors, employees, representatives and
agents in connection with the Hillside Transaction.
Please sign in the space provided below.
Very Truly Yours, Agreed to and Accepted this 5th day
of December 2003.
Jeffrey T. Wilson Hillside Oil & Gas LLC
President
By:--------------------------
Gary Barker, Managing Partner
Four Sevens Partners Ltd.
By:--------------------------
Joe Poe, Managing Partner
R. Don Wright, an individual
By:--------------------------
R. Don Wright
Joe Poe, an individual
By:---------------------------
Joe Poe
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), is entered into as of this
_____ day of June 2003, by and between Hillside Oil & Gas LLC ("Hillside or
Seller") a Texas Limited Liability company having its principal place of
business located at 308 n Colorado, Midland, TX 79701 as SELLER and Imperial
Petroleum, Inc., ("Imperial or Buyer"), a Nevada corporation located at 11600
German Pines Drive, Evansville, IN 47725 as BUYER.
W I T N E S S E T H:
WHEREAS, Imperial and Hillside have entered into that certain Letter of
Intent dated May 23, 2003 and attached hereto as Exhibit "A" and made a part
hereof; and
WHEREAS, Hillside is the owner of certain oil and gas wells, leases,
interests and assets comprising those properties set forth on Exhibit "B"
attached hereto; and
WHEREAS, Hillside desires to sell, transfer and assign to Imperial all of
its right, title and interest in and to those assets comprising those properties
as described on Exhibit "B" and any and all equipment used by Hillside in
conjunction with the operation of said properties and located on the premises,
collectively referred to as the "Acquired Assets"; and
WHEREAS, the Board of Directors of both Hillside and Imperial deem it in
the best interests of each to complete the transaction herein contemplated;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, provisions, covenants, representations and warranties herein
contained, the parties hereto hereby agree as follows:
1. Purchase and Sale of Assets.
1.01 Purchase and Sale. On and subject to the terms and conditions of this
Agreement, Imperial agrees to purchase from Hillside and Hillside agrees to
sell, transfer, convey and deliver to Imperial all of Hillside's right, title
and interest in and to the Acquired Assets, including without limitation, the
following assets:
(a) all of Hillside' right, title and interest in and to each of the
properties as more particularly described on Exhibit "B" attached hereto, and
all equipment, buildings, fixtures and other improvements located thereon and
all rights, easements, rights-of-way and other interests incidental thereto and
used or necessary for the use and enjoyment of the properties by Imperial;
(b) all machinery, equipment, trucks, tractors and trailers and related
spare components and parts, inventories of raw materials, supplies and minerals,
processed goods, goods in process, and tools located on the properties or used
in connection with the properties described in Exhibit "C";
(c) all certificates, licenses, permits, registrations and applications
therefor necessary, useful for, used or held for use by Hillside in the
ownership or operation of the properties (collectively, the "Permits"); whether
held in the name of Hillside or in an affiliate entity;
(d) all water wells and water rights, licenses, permits and applications
therefor to locate, drill for, produce, use, gather, restrict flow, store or
remove water on, from or to the properties (collectively, the "Water Rights");
and
(e) all books, records, ledgers, files, documents, correspondence, lists,
plats, maps, plans, drawings, blueprints, specifications, assays, studies,
reports and other written or printed materials necessary, useful for, held for
use by Hillside useful in the ownership or operation of the properties on
Exhibit "B", including any stock certificates, stock appreciation rights,
warrant certificates or similar documents conveying ownership of the properties;
1.02 Purchase Price. Imperial agrees to purchase the Acquired Assets from
Hillside at Closing in exchange for a total consideration not to exceed $ 5.88
million (the "Purchase Price") to be adjusted as provided in this Agreement and
comprised of the following:
(a) Payoff or assumption of the existing Bank of Oklahoma bank debt ($4.55
million as of 11/30/02) and the Commercial State Bank debt ($0.29 million as of
11/30/02) (collectively referred herein as the "Bank debt") that is secured by
the oil and gas interests and properties and certain equipment to be conveyed to
Imperial;
(b) A cash payment of Seven Hundred Thousand Dollars ($700,000.00) at
closing in readily available funds;
(c) One million shares of the restricted common stock of Imperial with
Demand registration rights as provided in Exhibit "D" attached hereto and made a
part hereof;
(d) An overhead allowance in favor of Hillside in the amount of $15,000 per
month from Effective Date until the Closing Date to be adjusted as provided
below, provided funds; are available out of cash flow from the Acquired Assets
and after normal monthly payment of principal and interest to the banks;
(e) Elimination of the personal guarantees of Mr. Gary Barker, Mr. John G.
Thagard and Mr. Monroe Robert Tripp Jr. from and all bank guarantees and other
future liabilities pertaining to the Acquired Assets.
The Purchase Price shall be allocated to the property interests on Exhibit "B"
attached hereto on the basis of the ratio of the Purchase Price to the
Discounted Present Value of Future Net Revenues for each individual property as
provided in that certain evaluation of the properties prepared by Russell K.
Hall and dated September 23, 2002. Within three (3) business days of the signing
of this Agreement, Imperial agrees to escrow with the Bank of Oklahoma an
Earnest Money Deposit of $100,000.00 subject to execution of a mutually
agreeable Escrow Agreement between the parties and the bank. The Escrowed Funds
shall be refundable under certain terms as provided in Section 8 below.
1.03 Effective Date: The purchase of the Acquired Assets shall be effective
as of 7:00 a.m. on March 1, 2003 ("Effective Date"), such that BUYER shall be
entitled to the proceeds from the production and sale of oil and natural gas
from and after the Effective Date and shall be responsible for expenses incurred
in connection with the direct operation of the properties from and after the
Effective Date.
1.04 Closing. Subject to the terms and provisions of this Agreement, the
closing of the transactions contemplated by this Agreement will be at 10:00 a.m.
at the offices Imperial Petroleum, Inc., 11600 German Pines Drive, Evansville,
IN 47725, on or before, August 31, 2003, or at such earlier or later date or
such other place or in such other manner as shall be mutually agreed upon by
Imperial and Hillside, such date and time sometimes being referred to herein as
the "Closing" or "Closing Date."
2. Representations and Warranties of Imperial.
Imperial represents and warrants to Hillside that, to the best of its
knowledge, the statements contained in this Section 2 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date.
2.01 Organization, Qualification and Corporate Power. Imperial is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Imperial is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification. Imperial has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it.
2.02 Authority. Imperial has all requisite corporate power and authority to
execute and deliver this Agreement and all agreements, instruments and documents
to be executed and delivered by Imperial hereunder, to consummate the
transactions contemplated hereby and to perform all terms and conditions hereof
to be performed by it. The execution and delivery of this Agreement by Imperial
and all agreements, instruments, and documents to be executed and delivered by
Imperial hereunder, the performance by Imperial of all the terms and conditions
hereto to be performed by it and the consummation of the transactions
contemplated hereby have been duly authorized and approved by the Board of
Directors of Imperial, and no other corporate proceedings of Imperial are
necessary with respect thereto. All persons who have executed and delivered this
Agreement, and all persons who will execute and deliver the other agreements,
documents and instruments to be executed and delivered by Imperial hereunder,
have been duly authorized to do so by all necessary actions on the part of
Imperial. This Agreement constitutes, and each other agreement and instrument to
be executed by Imperial hereunder, when executed and delivered by Imperial, will
constitute, the valid and binding obligation of Imperial enforceable against it
in accordance with its terms.
2.03 Capitalization. The entire authorized capital stock of Imperial, as of
the date of the Agreement, consists of 50,000,000 shares of common stock, par
value $0.006 per share, of which 25,958,885 shares are, as of the date of this
Agreement, issued and outstanding, including 116,667 shares held in treasury.
Certain employees and other individuals have been granted warrants to acquire
restricted common stock of Imperial, which if exercised would result in the
issuance of an additional 500,000 shares of common stock. All of the issued and
outstanding shares of Imperial common stock have been duly authorized, are
validly issued, fully paid, and non-assessable. Except as disclosed above, there
are no outstanding or authorized options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights or other agreements or commitments
to which Imperial is a party or which are binding upon Imperial providing for
the issuance, disposition or acquisition of any of its capital stock. Upon
issuance, the Imperial Shares to be issued to Sellers, pursuant to this
Agreement will be duly authorized, validly issued, fully paid and
non-assessable.
2.04 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any federal, state or local
government, governmental agency or court to which Imperial is subject or any
provision of its Certificate of Incorporation, Bylaws or Board of Directors or
stockholder resolutions of Imperial or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Imperial is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. Imperial is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other person or entity in
order for Imperial to consummate the transactions contemplated by this
Agreement.
2.05 Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
2.06 Representation. Imperial represents and warrants that in making the
decision to acquire the Acquired Assets, it has relied upon its own independent
investigations and the independent investigations by its representatives,
including its own professional legal, tax, and business advisors, and that
Imperial and its representatives have been given the opportunity to examine all
relevant documents and to ask questions of and to receive answers from Hillside.
3. Representations and Warranties Concerning Hillside.
Hillside, represents and warrants to Imperial that, to the best of their
knowledge, the statements contained in this Section 3 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date.
3.01 Authority. Hillside has all requisite power and authority to execute
and deliver this Agreement and all agreements, instruments and documents to be
executed and delivered by Hillside hereunder, to consummate the transactions
contemplated hereby and to perform all terms and conditions hereof to be
performed by it. This Agreement constitutes, and each other agreement and
instrument to be executed by Hillside hereunder, when executed and delivered by
Hillside, will constitute, the valid and binding obligation of Hillside
enforceable against it in accordance with its terms.
3.02 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which Hillside is subject or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Hillside is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. Hillside is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other party in order for
Hillside and Imperial to consummate the transactions contemplated by this
Agreement.
3.03 Title. The Acquired Assets are being transferred pursuant to this
Agreement to Buyer without warranty, either express or implied. To the best of
its knowledge, Hillside has not received or been notified of any adverse claims
against the Acquired Assets, and upon the Closing Date will transfer the
Acquired Assets free and clear of any liens, claims, mortgages, security
interests, pledges, encumbrances or restrictions on transfer of any kind or
nature. Imperial shall conduct its title investigation and notify Hillside in
writing of any defects in the title to the Acquired Assets from time to time but
in any event not later than 20 calendar days prior to the Closing Date and shall
propose an adjustment to the Purchase Price. Hillside shall have 10 calendar
days from receipt of notification to either cure the title defect or remove the
entire property from the sale and adjust the purchase price based upon the
Allocated Value or accept the proposed adjustment to the Purchase Price. All
adjustments to the Purchase Price shall first be deducted from the cash payment
due Hillside and subsequent adjustments from the common stock due Hillside based
upon an agreed value of $0.25 per share. In the event that the title adjustments
exceed 10% of the Purchase Price, Imperial, may at its own discretion terminate
the transaction.
3.04 Permits. To the best knowledge of Seller, Seller has received no
notice and has no knowledge of any revocation, termination or modification of
any Permit affecting the Acquired Assets that would have a material adverse
effect on the continued operation of the Acquired Assets by the Buyer after
Closing.
3.05 Governmental Approvals. To the best knowledge of Seller, Seller has
not received any notification of a required consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority (including, without limitation, any
department, bureau or agency), required to be obtained or made in connection
with the execution and delivery of this Agreement by Seller or the consummation
by Seller of the transactions contemplated hereby the failure of which to obtain
would have a material adverse affect on the Acquired Assets, Imperial or
Imperial's ability to own, operate or exploit the Acquired Assets. Seller has
not received any demands from the Texas Railroad Commission, Louisiana
Department of Natural Resources, The New Mexico Department of Natural Resources
or the Environmental Protection Agency, or any similar body having jurisdiction
over mineral rights and operations within the States of Texas, New Mexico or
Louisiana, to plug and abandon, repair, or otherwise alter the present
operations of any of the properties or wells comprising the Acquired Assets.
3.06 Tax Matters. To the best knowledge of Seller, there is no dispute or
claim concerning any federal, state or local tax liability either (A) claimed or
raised by any authority in writing or (B) as to which Hillside or any of the
directors and officers (and employees responsible for tax matters) of Hillside
or any affiliate have knowledge based upon personal contact with any agent of
such authority. Hillside has paid all of its outstanding tax obligations in each
jurisdiction where such obligation has been incurred on a timely basis.
3.07 Litigation. To the best knowledge of Seller, there is no litigation
and there are no arbitration proceedings or governmental proceedings, suits or
investigations pending, instituted or threatened against Hillside or any of the
Acquired Assets. Hillside has not received any notifications or charges from any
federal, state, or local governmental authority involving oil and gas,
occupational safety and health or water quality or other environmental matters.
3.08 Environment, Health and Safety. To the best knowledge of Seller, there
are no claims and Seller is not aware of the potential for any claims arising
out of environmental issues related to the operation or ownership of the
Acquired Assets. Seller expressly assumes any liability associated with
environmental issues relating to events that occurred prior to the Effective
Date.
3.09 Legal Compliance. To the best of its knowledge, Seller is not aware of
any issues or claims relating to legal compliance, including any potential
liabilities, associated with environmental, health or safety laws affecting the
Acquired Assets.
3.10 Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 3 not misleading.
3.11 Representation. Hillside represents and warrants that in making the
decision to sell the Acquired Assets and accept Imperial common stock in partial
payment thereof, it has relied upon its own independent investigations and the
independent investigations by its representatives, including its own
professional legal, tax, and business advisors, and that Hillside and its
representatives have been given the opportunity to examine all relevant
documents and to ask questions of and to receive answers from Imperial. Hillside
warrants that it is acquiring the Imperial shares for its own account and
without a plan or the intent to distribute the shares absent a valid
registration of the shares under the Securities Act of 1933, as amended, or
legal exemption therefrom. Hillside acknowledges that the shares, when issued,
will bear a restrictive legend in accordance with the Securities Act of 1933, as
amended.
4. Survival.
4.01 Survival. All of the representations and warranties of Hillside
contained in this Agreement and the representations of Imperial contained in
this Agreement shall survive for a period of one year after the Closing Date.
5. Conduct and Transactions prior to Closing.
5.01 Covenants of Hillside. Between the date of this Agreement and the
Closing Date or, if earlier termination of this Agreement:
(a) Hillside agrees to give Imperial its agents and representatives, full
access to the Acquired Assets and all of Hillside's premises and books and
records relating to the Acquired Assets and its operation, and to furnish
Imperial with such financial, title and operating data and other information
with respect to the Acquired Assets and its ownership and operation as Imperial
shall from time to time request; provided, however, that any such investigation
shall not affect any of the representations and warranties of Hillside
hereunder; and provided further, that any such investigation shall be conducted
in such manner as not to interfere unreasonably with the operation of the
business of Hillside. Hillside agrees to furnish to Imperial any title opinions,
title reviews or other material useful to Imperial in its review of the title to
the Acquired Assets vested in Hillside. In the event of termination of this
Agreement, Imperial will return to Hillside all documents, work papers, and
other material obtained from Hillside in connection with the transactions
contemplated hereby and will keep confidential any information obtained pursuant
to this Agreement unless such information is ascertainable from public or
published information or trade sources.
(b) Hillside will conduct its business relating to the Acquired Assets only
in the ordinary course. Hillside will not conduct any single operation on the
Acquired Assets requiring the expenditure of an amount greater than $50,000
without providing notice of and appropriate documentation to Imperial in writing
prior to the commencement of such operation. Hillside will not recomplete or
abandon any well comprising the Acquired Assets from the date of signing this
Agreement until Closing without providing notice of and appropriate
documentation to Imperial in writing prior to the commencement of such
operations.
(c) Hillside will: (i) promptly notify Imperial of the receipt of any
written notice or written claim of any termination or cancellation, or written
threat of termination or cancellation, of any of the Acquired Assets; (ii)
promptly notify Imperial of any action, suit, proceeding, claim or investigation
which is threatened or commenced against Hillside which relates to or affects in
any material respect the ownership or operation of the Acquired Assets by
Imperial after the Closing of this Agreement or the transactions contemplated
thereby; (iii) promptly notify Imperial of any condition or circumstance
occurring from the date hereof up to and including the Closing Date that would
cause the representations and warranties of Hillside contained herein to become
untrue in any material respect; and (iv) cooperate with Imperial to effect an
orderly transition of the ownership and operation of the Acquired Assets and use
its best efforts to protect the relationships with Hillside's existing customers
and suppliers relating to the Acquired Assets.
(d) Hillside agrees that neither it nor its affiliates nor any employee,
representative or advisor of Hillside or their affiliates will, directly or
indirectly, (i) solicit, initiate or encourage any Acquisition Proposal (as
defined below) relating to the Acquired Assets or afford access to the
properties or permits or the books and records relating to the Acquired Assets
or Permits, to any person that may be considering making or has made an
Acquisition Proposal. Hillside shall immediately cease or cause to be terminated
any existing activities, discussions or negotiations with any persons conducted
heretofore with respect to any Acquisition Proposal. As used herein, the term
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in, (i) the acquisition of all or a substantial portion of the Acquired
Assets (other than the transactions contemplated by this Agreement). The
provisions of this Section 5.01 shall remain in effect until the earlier of the
termination of this Agreement pursuant to Section 8 or the Closing.
5.02 Covenants of Imperial.
(a) Between the date of this Agreement and the Closing Date, Imperial
agrees to cause Imperial's officers to furnish Hillside with such financial and
operating data and other information with respect to the business and properties
of Imperial as Hillside shall from time to time reasonably request and provided
such information is in the public domain; provided, however, that any such
investigation shall not affect any of the representations and warranties of
Imperial hereunder; and provided further, that any such investigation shall be
conducted in such manner as not to interfere unreasonably with the operation of
the business of Imperial. In the event of termination of this Agreement,
Hillside will return to Imperial all documents, work papers and other material
obtained from Imperial in connection with the transactions contemplated hereby
and will use all reasonable efforts to keep confidential any information
obtained pursuant to this Agreement unless such information is ascertainable
from public or published information or trade sources.
(b) Imperial waives compliance by Hillside with the bulk sales law, if
applicable, in the states having jurisdiction in connection with the sale of
Acquired Assets contemplated by this Agreement. Hillside hereby agrees to
indemnify and hold Imperial harmless from and against all losses, damages and
expenses incurred by Imperial as a result of such noncompliance.
5.03 Consents. Prior to Closing, Hillside and Imperial shall each use their
or its respective best efforts to obtain the consent or approval of each person
(including any federal, state or local governmental authority) whose consent or
approval shall be required in order to permit Imperial or Hillside, as the case
may be, to consummate the transactions contemplated by this Agreement.
6. Conditions to Closing.
6.01 Conditions to Obligations of Imperial. The obligation of Imperial to
effect the Closing of the transactions contemplated by this Agreement shall be
subject to the following conditions:
(a) Hillside shall have furnished Imperial with certified copies of
resolutions duly adopted by its Board of Directors authorizing all necessary and
proper corporate action approving the execution, delivery and performance of
this Agreement.
(b) Except to the extent waived hereunder, (i) the representations and
warranties of Hillside contained herein shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time; and (ii) Hillside shall have performed all obligations and complied
with all covenants required by this Agreement to be performed or complied by
them prior to the Closing Date.
(c) Hillside shall have obtained and delivered to Imperial all consents
required to consummate the transactions contemplated by this Agreement.
(d) There shall not have occurred (i) any material adverse change in the
Acquired Assets or the business, properties, results of operations or financial
condition of Hillside, (ii) any loss of or damage to any of the Acquired Assets
(whether or not covered by insurance) of Hillside which will materially affect
or impair the ability of Imperial to own or operate the Acquired Assets.
(e) Hillside shall have made each and every payment of principal and
interest in regard to the Bank debt as required from the time of execution of
this Agreement to Closing.
(f) All statutory requirements for the valid consummation by Hillside of
the transactions contemplated by this Agreement shall have been fulfilled and
all authorizations, consents and approvals of all federal, state or local
governmental agencies and authorities required to be obtained in order to permit
consummation by Hillside of the transactions contemplated by this Agreement and
to permit the business now or previously carried on by Hillside at the Acquired
Assets to continue unimpaired to any material degree immediately following the
Closing Date shall have been obtained. Between the date of this Agreement and
the Closing Date, no governmental agency, whether federal, state or local, shall
have instituted (or threatened to institute) an investigation or other
proceeding which is pending at the Closing Date relating to the transactions
contemplated by this Agreement and between the date of this Agreement and the
Closing Date no action or proceeding shall have been instituted or, to the
knowledge of Hillside, shall have been threatened by any party (public or
private) before a court or other governmental body to restrain or prohibit the
transactions contemplated by this Agreement or to obtain damages in respect
thereof.
(g) Imperial shall have received from Hillside all files and records,
including without limitation, contracts, assignments, agreements, receipts,
deeds, leases, assays and correspondence and any other documents or files, which
in any way relate to the current or former operations of the Acquired Assets.
(h) Hillside shall have complied with the delivery requirements set forth
in Section 7.03 of this Agreement.
6.02 Conditions to Obligations of Hillside. The obligation of Hillside to
effect the Closing of the transactions contemplated by this Agreement shall be
subject to the following conditions:
(a) Imperial shall have furnished Hillside with certified copies of
resolutions duly adopted by its Board of Directors authorizing all necessary and
proper corporate action approving the execution, delivery and performance of
this Agreement.
(b) Except to the extent waived hereunder, (i) the representations and
warranties of Imperial contained herein shall be true in all material respects
at the Closing Date with the same effect as though made at such time; and (ii)
Imperial shall have performed all material obligations and complied with all
material covenants required by this Agreement to be performed or complied with
by it prior to the Closing Date.
(c) All statutory requirements for the valid consummation by Imperial of
the transactions contemplated by this Agreement shall have been fulfilled and
all authorizations, consents and approvals of all federal, state, local and
foreign governmental agencies and authorities required to be obtained in order
to permit consummation by Imperial of the transactions contemplated by this
Agreement shall have been obtained. Between the date of this Agreement and the
Closing Date, no governmental agency, whether federal, state or local, shall
have instituted (or threatened to institute) in a writing directed to Hillside,
Imperial or any of their subsidiaries, an investigation which is pending at the
Closing Date relating to the transactions contemplated by this Agreement and
between the date of this Agreement and the Closing Date no action or proceeding
shall have been instituted or, to the knowledge of Imperial, shall have been
threatened by any party (public or private) before a court or other governmental
body to restrain or prohibit the transactions contemplated by this Agreement or
to obtain the damages in respect thereof.
7. Actions at Closing.
7.01 Transactions at the Closing. At the Closing the following events shall
occur, each event under the control of one party hereto being a condition
precedent to the events under the control of the other party, and each event
being deemed to have occurred simultaneously with the other events.
7.02 Deliveries by Imperial. At Closing, Imperial will deliver to Hillside:
(a) certified copies of corporate resolutions and other corporate
proceedings taken by Imperial to authorize the execution, delivery and
performance of this Agreement; and
(b) Certificates of Incumbency and signatures of officers of Imperial dated
as of the date of this Agreement.
(c) Cash in the amount of $700,000 in the form of a certified bank check or
wire transfer.
(d) A duly issued stock certificate in the amount of 1,000,000 shares of
Imperial restricted common stock in the name of Hillside or its assigns with a
duly executed and authorized Demand Registration Agreement in the form attached
hereto as Exhibit "D".
(e) Duly executed releases of the personal guarantees of Mr. barker, Mr.
Thagard and Mr. Tripp, Jr. from Bank of Oklahoma and Commercial State Bank.
(f) Subject to approval by each of the Bank of Oklahoma and Commercial
State Bank as pertains to its debt, either an assumption agreement in connection
with the Bank debt of Hillside owed to each or sufficient cash to retire the
bank debt owed by Hillside to each and a release of any corporate guarantees or
mortgages.
7.03 Deliveries by Hillside. At Closing Hillside will deliver to Imperial:
(a) Such bills of sale, deeds, mineral deeds, assignments, certificates of
title, stock certificates and other instruments of transfer, assignment and
conveyance as Imperial shall reasonably request to vest in Imperial good and
marketable title to the Acquired Assets and any equipment thereon; and
(b) Certified copies of corporate resolutions and other corporate
proceedings taken by Imperial to authorize the execution, delivery and
performance of this Agreement; and
(c) Certificates of Incumbency and signatures of officers of Hillside as of
the date of this Agreement.
(d) An accounting of the income and expenses from the Acquired Assets since
March 1, 2003 (Effective Date) to the Closing Date, including all payments made
to the Bank of Oklahoma and Commercial State Bank out of the proceeds of
production attributable to the Acquired Assets. Any funds in excess of revenue
less normal operating expenses (including overhead adjusted to $15,000 per month
gross) less bank payments will be credited to Imperial and will reduce the cash
payment required as provided in 6.01(c) above.
(e) Copies of duly executed Change of Operator forms providing for the
resignation of Hillside as operator of the Acquired Assets and the election of
Imperial or its designee.
8. Termination.
8.01 Termination of the Agreement. The parties may terminate this Agreement
as provided below:
(a) Imperial and Hillside may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) Imperial may terminate this Agreement by giving written notice to
Hillside on or before the Closing Date if Imperial is not satisfied with the
results of its continuing business, legal and accounting due diligence regarding
Hillside;
(c) Imperial may terminate this Agreement by giving written notice to
Hillside at any time prior to the Closing (i) in the event Hillside has breached
any material representation, warranty or covenant contained in this Agreement in
any material respect, Imperial has notified Hillside of the breach and the
breach has continued without cure for a period of 10 days after the notice of
breach (ii) the aggregate of the uncured title defects exceeds 10% of the
Purchase Price or (iii) if the Closing shall not have occurred on or before
August 31, 2003, or such later date as may be agreed to by Imperial and Hillside
in writing, by reason of the failure of any condition precedent under Section
6.01 hereof (unless the failure results primarily from Imperial itself breaching
any representation, warranty or covenant contained in this Agreement); and
(d) Hillside may terminate this Agreement by giving written notice to
Imperial at any time prior to the Closing (i) in the event Imperial has breached
any material representation, warranty or covenant contained in this Agreement in
any material respect, Hillside has notified Imperial of the breach and the
breach has continued without cure for a period of 10 days after the notice of
breach (ii) the aggregate of the uncured title defects exceeds 10% or (iii) if
the Closing shall not have occurred on or before August31, 2003, or such later
date as may be agreed to by Imperial and Hillside in writing, by reason of the
failure of any condition precedent under Section 6.02 hereof (unless the failure
results primarily from Hillside itself breaching any representation, warranty or
covenant contained in this Agreement).
In the event that this Agreement is terminated under 8.01 (a), (c) or (d) above,
Imperial shall be entitled to a full return of the Escrowed Funds including any
interest accrued thereon.
8.02 Effect of Termination. If either Imperial or Hillside terminates this
Agreement pursuant to Section 8.01 above, all rights and obligations of the
parties hereunder shall terminate without any liability of any party to any
other party.
9. Miscellaneous.
9.01 Survival of Covenants, Representations and Warranties. Except as
otherwise specifically provided, the covenants, representations and warranties
contained herein shall expire and be terminated and extinguished upon the
expiration of one year from the Closing Date.
9.02 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Nevada.
9.03 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid if addressed as follows:
To: Imperial
Imperial Petroleum, Inc.
11600 German Pines Drive
Evansville, IN 47725
Attention: Mr. Jeffrey T. Wilson,
President
To: Hillside Corporation
Hillside Oil & Gas, LLC
308 N Colorado St.
Midland, TX 79701
Attention: Mr. Gary Baker
Managing Partner
9.04 No Assignment. This Agreement may not be assigned by either party or
by operation of law or otherwise and, in the event of an attempted assignment,
this Agreement shall terminate, except to the extent that Imperial shall have
the right to assign this Agreement and its rights hereunder to any of its
subsidiaries at any time.
9.05 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
1
9.06 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. For the purpose of this
Agreement, the Parties hereto agree that a facsimile copy shall have the same
effect as an original signature.
9.07 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.08 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Imperial and Hillside. No waiver by an party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
9.09 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10 Brokers & Expenses. Except as otherwise expressly provided herein,
each of the parties will bear his or its own costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. Each party hereto shall be responsible for
broker or similar fees arising with respect to broker's retained or engaged by
such party and shall indemnify the other party against such fees in connection
with the transactions contemplated herein.
9.11 Construction. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
Imperial Petroleum, Inc.
By: _______________________
Jeffrey T. Wilson
President
Hillside Oil & Gas, LLC
By: ________________________
Gary Barker
Managing Partner
December 15, 2003
Warrior Resources, Inc.
Double Eagle Petroleum Corp
Enigma Energy Company LLC
11600 German Pines
Evansville, IN 47725
Re: Amendment to Asset Purchase Agreement
Gentlemen:
In accordance with our discussions, this letter when executed by Warrior
Resources, Inc., Double Eagle Petroleum Corp, and Enigma Energy Company LLC will
constitute an amendment to that certain Asset Purchase Agreement between Double
Eagle Petroleum Corp, as Seller, and Imperial Petroleum, Inc., as Buyer, and
dated July 15, 2003, together with all amendments thereto as follows:
(1) The following properties as listed on Exhibit "A" to the Agreement
shall be deleted from the sale: All properties in Dimmit County,
Texas; the Lester B#I and the Ellis B#2.
(2) The working interest and net revenue interest in the Brawley Unit #1
and #2 wells shall be revised to 0.125000 WI and 0.010000 NRI and the
operator shall be MKS Consulting.
(3) All other terms and conditions shall remain in full force and effect.
Very Truly Yours,
Imperial Petroleum Inc. Warrior Resources, Inc. Enigma Energy Company LLC
Jeffrey T. Wilson Jeffrey T. Wilson Jeffrey T. Wilson
President President President
Double Eagle Petroleum Corp
Jeffrey T. Wilson
President
December 5, 2003
Warrior Resources, Inc.
Double Eagle Petroleum Corp
Enigma Energy Company LLC
11600 German Pines
Evansville, IN 47725
Re: Extension of Closing
Gentlemen:
This letter when executed by Warrior Resources, Inc., Double Eagle Petroleum
Corp and Enigma Energy Company LLC will serve as our agreement to amend the
Closing Date as provided in that certain Asset Purchase Agreement executed
between Double Eagle Petroleum Corp, as Seller, and Imperial Petroleum, Inc., as
Buyer, and dated July 15, 2003 together with all amendments thereto as follows:
(1) The Closing Date shall be extended to January 15, 2004.
(2) All other terms of the Asset Purchase Agreement and amendments thereto
shall remain in full force and effect.
Please sign in the space provided below.
Very Truly Yours,
Imperial Petroleum Inc. Warrior Resources, Inc. Enigma Energy Company LLC
Jeffrey T. Wilson Jeffrey T. Wilson Jeffrey T. Wilson
President President President
Double Eagle Petroleum Corp
Jeffrey T. Wilson
President
October 31, 2003
Double Eagle Petroleum Corp
11600 German Pines
Evansville, IN 47725
Re: Amendment and Extension of Closing
Gentlemen:
This letter, when executed by Double Eagle Petroleum Corp, Warrior Resources,
Inc. and Enigma Energy Company LLC, will serve as our agreement to amend that
certain Purchase And Sales Agreement executed between Double Eagle Petroleum
Corp , as Seller, and Imperial Petroleum, Inc., as Buyer, and dated July 15,
2003 as follows:
(1.) The Closing Date shall be extended to December 5, 2003.
(2.) The SELLER shall be amended to include Warrior Resources, Inc.,
("Warrior") an Oklahoma corporation, and Enigma Energy Company LLC,
("Enigma") a Texas Limited Liability company, and all warranties and
representations shall be true and correct as if provided by each
additional seller thereto. Both Warrior and Enigma shall become
signatory parties to the Asset Purchase Agreement.
(3.) All other terms of the Purchase and Sales Agreement and the amendment
thereto shall remain in full force and effect.
Please sign in the space provided below.
Very Truly Yours,
Imperial Petroleum Inc. Warrior Resources, Inc. Enigma Energy Company LLC
Jeffrey T. Wilson Jeffrey T. Wilson Jeffrey T. Wilson
President President President
Double Eagle Petroleum Corp
Jeffrey T. Wilson
President
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), is entered into as of this
_____ day of July 2003, by and between Double Eagle Petroleum Corp
("collectively referred herein as Double Eagle or Seller") an Oklahoma
corporation having its principal place of business located at 11600 German
Pines, Evansville, IN 47725 as SELLER and Imperial Petroleum, Inc., ("Imperial
or Buyer"), a Nevada corporation located at 11600 German Pines Drive,
Evansville, IN 47725 as BUYER.
W I T N E S S E T H:
WHEREAS, Double Eagle is the owner of certain oil and gas wells, leases,
interests and assets comprising those properties set forth on Exhibit "A"
attached hereto; and
WHEREAS, Double Eagle desires to sell, transfer and assign to Imperial all
of its right, title and interest in and to those assets comprising those
properties as described on Exhibit "A" and any and all equipment used by Double
Eagle in conjunction with the operation of said properties and located on the
premises, collectively referred to as the "Acquired Assets"; and
WHEREAS, Double Eagle has certain liabilities to trade creditors and others
as specifically set out in Exhibit "B" hereto and herein referred to as the
"Acquired Liabilities"; and
WHEREAS, the Board of Directors of both Double Eagle and Imperial deem it
in the best interests of each to complete the transaction herein contemplated;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, provisions, covenants, representations and warranties herein
contained, the parties hereto hereby agree as follows:
1. Purchase and Sale of Assets.
1.01 Purchase and Sale. On and subject to the terms and conditions of this
Agreement, Imperial agrees to purchase from Double Eagle and Double Eagle agrees
to sell, transfer, convey and deliver to Imperial all of Double Eagle's right,
title and interest in and to the Acquired Assets and Acquired Liabilities,
including without limitation, the following assets and liabilities:
(a) all of Double Eagle' right, title and interest in and to each of the
properties as more particularly described on Exhibit "A" attached hereto, and
all equipment, buildings, fixtures and other improvements located thereon and
all rights, easements, rights-of-way and other interests incidental thereto and
used or necessary for the use and enjoyment of the properties by Imperial;
(b) all machinery, equipment, trucks, tractors and trailers and related
spare components and parts, inventories of raw materials, supplies and minerals,
processed goods, goods in process, and tools located on the properties or used
in connection with the properties;
(c) all certificates, licenses, permits, registrations and applications
therefor necessary, useful for, used or held for use by Double Eagle in the
ownership or operation of the properties (collectively, the "Permits"); whether
held in the name of Double Eagle or in an affiliate entity;
(d) all water wells and water rights, licenses, permits and applications
therefor to locate, drill for, produce, use, gather, restrict flow, store or
remove water on, from or to the properties (collectively, the "Water Rights");
and
(e) all books, records, ledgers, files, documents, correspondence, lists,
plats, maps, plans, drawings, blueprints, specifications, assays, studies,
reports and other written or printed materials necessary, useful for, held for
use by Double Eagle useful in the ownership or operation of the properties on
Exhibit "B", including any stock certificates, stock appreciation rights,
warrant certificates or similar documents conveying ownership of the properties;
(f) all trade accounts and all accounts receivables of Double Eagle as more
fully described on Exhibit "B" attached hereto and made a part herein. It is the
express intention of the parties that Imperial acquire all trade accounts
payable and receivable of Double Eagle at closing.
1.03 Purchase Price. Imperial agrees to purchase the Acquired Assets and
Acquired Liabilities from Double Eagle at Closing in exchange for a total
consideration of $ 6.4 million (the "Purchase Price") to be adjusted as provided
in this Agreement and comprised of the following:
(a) Payoff or assumption of the existing Bank of Oklahoma bank debt
($3.7million as of 06/30/03 (referred herein as the "Bank debt") that is secured
by the oil and gas interests and properties and certain equipment to be conveyed
to Imperial.
(b) Two million shares of the restricted common stock of Imperial with
Demand Registration Rights as provided in Exhibit "C" attached hereto and made a
part hereof;
(c) Forgiveness of the Notes Payable to Imperial in the amount of $1.7
million.
(d) Assumption of trade accounts payable net of receivables of
approximately $0.5 million as provided on Exhibit "B" attached hereto.
1.03 Effective Date: The purchase of the Acquired Assets shall be effective
as of 7:00 a.m. on August 31, 2003 ("Effective Date"), such that BUYER shall be
entitled to the proceeds from the production and sale of oil and natural gas
from and after the Effective Date and shall be responsible for expenses incurred
in connection with the direct operation of the properties from and after the
Effective Date.
1.04 Closing. Subject to the terms and provisions of this Agreement, the
closing of the transactions contemplated by this Agreement will be at 10:00 a.m.
at the offices Imperial Petroleum, Inc., 11600 German Pines Drive, Evansville,
IN 47725, on or before, August 31, 2003, or at such earlier or later date or
such other place or in such other manner as shall be mutually agreed upon by
Imperial and Double Eagle, such date and time sometimes being referred to herein
as the "Closing" or "Closing Date."
2. Representations and Warranties of Imperial.
Imperial represents and warrants to Double Eagle that, to the best of its
knowledge, the statements contained in this Section 2 are correct and complete
as of the date of this Agreement and will be correct and complete as of the
Closing Date.
2.01 Organization, Qualification and Corporate Power. Imperial is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Imperial is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification. Imperial has full corporate power and authority to carry on the
business in which it is engaged and to own and use the properties owned and used
by it.
2.02 Authority. Imperial has all requisite corporate power and authority to
execute and deliver this Agreement and all agreements, instruments and documents
to be executed and delivered by Imperial hereunder, to consummate the
transactions contemplated hereby and to perform all terms and conditions hereof
to be performed by it. The execution and delivery of this Agreement by Imperial
and all agreements, instruments, and documents to be executed and delivered by
Imperial hereunder, the performance by Imperial of all the terms and conditions
hereto to be performed by it and the consummation of the transactions
contemplated hereby have been duly authorized and approved by the Board of
Directors of Imperial, and no other corporate proceedings of Imperial are
necessary with respect thereto. All persons who have executed and delivered this
Agreement, and all persons who will execute and deliver the other agreements,
documents and instruments to be executed and delivered by Imperial hereunder,
have been duly authorized to do so by all necessary actions on the part of
Imperial. This Agreement constitutes, and each other agreement and instrument to
be executed by Imperial hereunder, when executed and delivered by Imperial, will
constitute, the valid and binding obligation of Imperial enforceable against it
in accordance with its terms.
2.03 Capitalization. The entire authorized capital stock of Imperial, as of
the date of the Agreement, consists of 50,000,000 shares of common stock, par
value $0.006 per share, of which 25,958,885 shares are, as of the date of this
Agreement, issued and outstanding, including 116,667 shares held in treasury.
Certain employees and other individuals have been granted warrants to acquire
restricted common stock of Imperial, which if exercised would result in the
issuance of an additional 500,000 shares of common stock. All of the issued and
outstanding shares of Imperial common stock have been duly authorized, are
validly issued, fully paid, and non-assessable. Except as disclosed above or as
included in the acquisition agreement with Hillside Oil & Gas and the Engagement
Agreement with Jefferies & Co. which have been disclosed to Double Eagle, there
are no outstanding or authorized options, warrants, rights, contracts, calls,
puts, rights to subscribe, conversion rights or other agreements or commitments
to which Imperial is a party or which are binding upon Imperial providing for
the issuance, disposition or acquisition of any of its capital stock. Upon
issuance, the Imperial Shares to be issued to Sellers, pursuant to this
Agreement will be duly authorized, validly issued, fully paid and
non-assessable.
2.04 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any federal, state or local
government, governmental agency or court to which Imperial is subject or any
provision of its Certificate of Incorporation, Bylaws or Board of Directors or
stockholder resolutions of Imperial or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Imperial is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. Imperial is
not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other person or entity in
order for Imperial to consummate the transactions contemplated by this
Agreement.
2.05 Disclosure. The representations and warranties contained in this
Section 2 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 2 not misleading.
2.06 Representation. Imperial represents and warrants that in making the
decision to acquire the Acquired Assets, it has relied upon its own independent
investigations and the independent investigations by its representatives,
including its own professional legal, tax, and business advisors, and that
Imperial and its representatives have been given the opportunity to examine all
relevant documents and to ask questions of and to receive answers from Double
Eagle.
3. Representations and Warranties Concerning Double Eagle.
Double Eagle, represents and warrants to Imperial that, to the best of
their knowledge, the statements contained in this Section 3 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date.
3.01 Authority. Double Eagle has all requisite power and authority to
execute and deliver this Agreement and all agreements, instruments and documents
to be executed and delivered by Double Eagle hereunder, to consummate the
transactions contemplated hereby and to perform all terms and conditions hereof
to be performed by it. This Agreement constitutes, and each other agreement and
instrument to be executed by Double Eagle hereunder, when executed and delivered
by Double Eagle, will constitute, the valid and binding obligation of Double
Eagle enforceable against it in accordance with its terms.
3.02 Non-contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which Double Eagle is subject or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel or require any
notice under any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Double Eagle is a
party or by which it is bound or to which any of its assets is subject or result
in the imposition of any security interest upon any of its assets. Double Eagle
is not required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any federal, state or local government,
governmental agency, bank, financial institution or other party in order for
Double Eagle and Imperial to consummate the transactions contemplated by this
Agreement.
3.03 Title. The Acquired Assets are being transferred pursuant to this
Agreement to Buyer without warranty, either express or implied. To the best of
its knowledge, Double Eagle has not received or been notified of any adverse
claims against the Acquired Assets, except as disclosed to Buyer or as provided
in the Exhibit "B", and upon the Closing Date will transfer the Acquired Assets
free and clear of any liens, claims, mortgages, security interests, pledges,
encumbrances or restrictions on transfer of any kind or nature. Imperial shall
conduct its title investigation and notify Double Eagle in writing of any
defects in the title to the Acquired Assets from time to time but in any event
not later than 20 calendar days prior to the Closing Date and shall propose an
adjustment to the Purchase Price. Double Eagle shall have 10 calendar days from
receipt of notification to either cure the title defect or remove the entire
property from the sale and adjust the purchase price based upon the Allocated
Value or accept the proposed adjustment to the Purchase Price. All adjustments
to the Purchase Price shall first be deducted from the common stock due Double
Eagle based upon an agreed value of $0.25 per share. In the event that the title
adjustments exceed 10% of the Purchase Price, Imperial, may at its own
discretion terminate the transaction.
3.04 Permits. To the best knowledge of Seller, Seller has received no
notice and has no knowledge of any revocation, termination or modification of
any Permit affecting the Acquired Assets that would have a material adverse
effect on the continued operation of the Acquired Assets by the Buyer after
Closing.
3.05 Governmental Approvals. To the best knowledge of Seller, Seller has
not received any notification of a required consent, approval, waiver, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority (including, without limitation, any
department, bureau or agency), required to be obtained or made in connection
with the execution and delivery of this Agreement by Seller or the consummation
by Seller of the transactions contemplated hereby the failure of which to obtain
would have a material adverse affect on the Acquired Assets, Imperial or
Imperial's ability to own, operate or exploit the Acquired Assets. Seller has
not received any demands from the Texas Railroad Commission, Louisiana
Department of Natural Resources, The New Mexico Department of Natural Resources
or the Environmental Protection Agency, or any similar body having jurisdiction
over mineral rights and operations within the States of Texas, New Mexico or
Louisiana, to plug and abandon, repair, or otherwise alter the present
operations of any of the properties or wells comprising the Acquired Assets.
3.06 Tax Matters. To the best knowledge of Seller, there is no dispute or
claim concerning any federal, state or local tax liability either (A) claimed or
raised by any authority in writing or (B) as to which Double Eagle or any of the
directors and officers (and employees responsible for tax matters) of Double
Eagle or any affiliate have knowledge based upon personal contact with any agent
of such authority. Double Eagle has paid all of its outstanding tax obligations
in each jurisdiction where such obligation has been incurred on a timely basis.
3.07 Litigation. To the best knowledge of Seller, and except as disclosed
to Buyer , there is no litigation and there are no arbitration proceedings or
governmental proceedings, suits or investigations pending, instituted or
threatened against Double Eagle or any of the Acquired Assets. Double Eagle has
not received any notifications or charges from any federal, state, or local
governmental authority involving oil and gas, occupational safety and health or
water quality or other environmental matters.
3.08 Environment, Health and Safety. To the best knowledge of Seller, there
are no claims and Seller is not aware of the potential for any claims arising
out of environmental issues related to the operation or ownership of the
Acquired Assets. Seller expressly assumes any liability associated with
environmental issues relating to events that occurred prior to the Effective
Date.
3.09 Legal Compliance. To the best of its knowledge, Seller is not aware of
any issues or claims relating to legal compliance, including any potential
liabilities, associated with environmental, health or safety laws affecting the
Acquired Assets.
3.10 Disclosure. The representations and warranties contained in this
Section 3 do not contain any untrue statement of a fact or omit to state any
fact necessary in order to make the statements and information contained in this
Section 3 not misleading.
3.11 Representation. Double Eagle represents and warrants that in making
the decision to sell the Acquired Assets and accept Imperial common stock in
partial payment thereof, it has relied upon its own independent investigations
and the independent investigations by its representatives, including its own
professional legal, tax, and business advisors, and that Double Eagle and its
representatives have been given the opportunity to examine all relevant
documents and to ask questions of and to receive answers from Imperial. Double
Eagle warrants that it is acquiring the Imperial shares for its own account and
without a plan or the intent to distribute the shares absent a valid
registration of the shares under the Securities Act of 1933, as amended, or
legal exemption therefrom. Double Eagle acknowledges that the shares, when
issued, will bear a restrictive legend in accordance with the Securities Act of
1933, as amended.
4. Survival.
4.01 Survival. All of the representations and warranties of Double Eagle
contained in this Agreement and the representations of Imperial contained in
this Agreement shall survive for a period of one year after the Closing Date.
5. Conduct and Transactions prior to Closing.
5.01 Covenants of Double Eagle. Between the date of this Agreement and the
Closing Date or, if earlier termination of this Agreement:
(a) Double Eagle agrees to give Imperial its agents and representatives,
full access to the Acquired Assets and all of Double Eagle's premises and books
and records relating to the Acquired Assets and its operation, and to furnish
Imperial with such financial, title and operating data and other information
with respect to the Acquired Assets and its ownership and operation as Imperial
shall from time to time request; provided, however, that any such investigation
shall not affect any of the representations and warranties of Double Eagle
hereunder; and provided further, that any such investigation shall be conducted
in such manner as not to interfere unreasonably with the operation of the
business of Double Eagle. Double Eagle agrees to furnish to Imperial any title
opinions, title reviews or other material useful to Imperial in its review of
the title to the Acquired Assets vested in Double Eagle. In the event of
termination of this Agreement, Imperial will return to Double Eagle all
documents, work papers, and other material obtained from Double Eagle in
connection with the transactions contemplated hereby and will keep confidential
any information obtained pursuant to this Agreement unless such information is
ascertainable from public or published information or trade sources.
(b) Double Eagle will conduct its business relating to the Acquired Assets
only in the ordinary course. Double Eagle will not conduct any single operation
on the Acquired Assets requiring the expenditure of an amount greater than
$50,000 without providing notice of and appropriate documentation to Imperial in
writing prior to the commencement of such operation. Double Eagle will not
recomplete or abandon any well comprising the Acquired Assets from the date of
signing this Agreement until Closing without providing notice of and appropriate
documentation to Imperial in writing prior to the commencement of such
operations.
(c) Double Eagle will: (i) promptly notify Imperial of the receipt of any
written notice or written claim of any termination or cancellation, or written
threat of termination or cancellation, of any of the Acquired Assets; (ii)
promptly notify Imperial of any action, suit, proceeding, claim or investigation
which is threatened or commenced against Double Eagle which relates to or
affects in any material respect the ownership or operation of the Acquired
Assets by Imperial after the Closing of this Agreement or the transactions
contemplated thereby; (iii) promptly notify Imperial of any condition or
circumstance occurring from the date hereof up to and including the Closing Date
that would cause the representations and warranties of Double Eagle contained
herein to become untrue in any material respect; and (iv) cooperate with
Imperial to effect an orderly transition of the ownership and operation of the
Acquired Assets and use its best efforts to protect the relationships with
Double Eagle's existing customers and suppliers relating to the Acquired Assets.
(d) Double Eagle agrees that neither it nor its affiliates nor any
employee, representative or advisor of Double Eagle or their affiliates will,
directly or indirectly, (i) solicit, initiate or encourage any Acquisition
Proposal (as defined below) relating to the Acquired Assets or afford access to
the properties or permits or the books and records relating to the Acquired
Assets or Permits, to any person that may be considering making or has made an
Acquisition Proposal. Double Eagle shall immediately cease or cause to be
terminated any existing activities, discussions or negotiations with any persons
conducted heretofore with respect to any Acquisition Proposal. As used herein,
the term "Acquisition Proposal" means any offer or proposal for, or any
indication of interest in, (i) the acquisition of all or a substantial portion
of the Acquired Assets (other than the transactions contemplated by this
Agreement). The provisions of this Section 5.01 shall remain in effect until the
earlier of the termination of this Agreement pursuant to Section 8 or the
Closing.
5.02 Covenants of Imperial.
(a) Between the date of this Agreement and the Closing Date, Imperial
agrees to cause Imperial's officers to furnish Double Eagle with such financial
and operating data and other information with respect to the business and
properties of Imperial as Double Eagle shall from time to time reasonably
request and provided such information is in the public domain; provided,
however, that any such investigation shall not affect any of the representations
and warranties of Imperial hereunder; and provided further, that any such
investigation shall be conducted in such manner as not to interfere unreasonably
with the operation of the business of Imperial. In the event of termination of
this Agreement, Double Eagle will return to Imperial all documents, work papers
and other material obtained from Imperial in connection with the transactions
contemplated hereby and will use all reasonable efforts to keep confidential any
information obtained pursuant to this Agreement unless such information is
ascertainable from public or published information or trade sources.
(b) Imperial waives compliance by Double Eagle with the bulk sales law, if
applicable, in the states having jurisdiction in connection with the sale of
Acquired Assets contemplated by this Agreement. Double Eagle hereby agrees to
indemnify and hold Imperial harmless from and against all losses, damages and
expenses incurred by Imperial as a result of such noncompliance.
5.03 Consents. Prior to Closing, Double Eagle and Imperial shall each use
their or its respective best efforts to obtain the consent or approval of each
person (including any federal, state or local governmental authority) whose
consent or approval shall be required in order to permit Imperial or Double
Eagle, as the case may be, to consummate the transactions contemplated by this
Agreement.
6. Conditions to Closing.
6.01 Conditions to Obligations of Imperial. The obligation of Imperial to
effect the Closing of the transactions contemplated by this Agreement shall be
subject to the following conditions:
(a) Double Eagle shall have furnished Imperial with certified copies of
resolutions duly adopted by its Board of Directors authorizing all necessary and
proper corporate action approving the execution, delivery and performance of
this Agreement.
(b) Except to the extent waived hereunder, (i) the representations and
warranties of Double Eagle contained herein shall be true and correct in all
material respects at the Closing Date with the same effect as though made at
such time; and (ii) Double Eagle shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied by them prior to the Closing Date.
(c) Double Eagle shall have obtained and delivered to Imperial all consents
required to consummate the transactions contemplated by this Agreement,
including the consent of Bank of Oklahoma and the consent of a majority of the
shareholders of Double Eagle's parent corporation, Warrior Resources, Inc.
(d) There shall not have occurred (i) any material adverse change in the
Acquired Assets or the business, properties, results of operations or financial
condition of Double Eagle, (ii) any loss of or damage to any of the Acquired
Assets (whether or not covered by insurance) of Double Eagle which will
materially affect or impair the ability of Imperial to own or operate the
Acquired Assets.
(e) All statutory requirements for the valid consummation by Double Eagle
of the transactions contemplated by this Agreement shall have been fulfilled and
all authorizations, consents and approvals of all federal, state or local
governmental agencies and authorities required to be obtained in order to permit
consummation by Double Eagle of the transactions contemplated by this Agreement
and to permit the business now or previously carried on by Double Eagle at the
Acquired Assets to continue unimpaired to any material degree immediately
following the Closing Date shall have been obtained. Between the date of this
Agreement and the Closing Date, no governmental agency, whether federal, state
or local, shall have instituted (or threatened to institute) an investigation or
other proceeding which is pending at the Closing Date relating to the
transactions contemplated by this Agreement and between the date of this
Agreement and the Closing Date no action or proceeding shall have been
instituted or, to the knowledge of Double Eagle, shall have been threatened by
any party (public or private) before a court or other governmental body to
restrain or prohibit the transactions contemplated by this Agreement or to
obtain damages in respect thereof.
(f) Imperial shall have received from Double Eagle all files and records,
including without limitation, contracts, assignments, agreements, receipts,
deeds, leases, assays and correspondence and any other documents or files, which
in any way relate to the current or former operations of the Acquired Assets.
(g) Double Eagle shall have complied with the delivery requirements set
forth in Section 7.03 of this Agreement.
(h) Double Eagle shall have obtained at its cost and expense an opinion
from a third party stipulating the fairness of the proposed transaction to the
shareholders of Double Eagle's parent company, Warrior Resources, Inc.
6.02 Conditions to Obligations of Double Eagle. The obligation of Double
Eagle to effect the Closing of the transactions contemplated by this Agreement
shall be subject to the following conditions:
(a) Imperial shall have furnished Double Eagle with certified copies of
resolutions duly adopted by its Board of Directors authorizing all necessary and
proper corporate action approving the execution, delivery and performance of
this Agreement.
(b) Except to the extent waived hereunder, (i) the representations and
warranties of Imperial contained herein shall be true in all material respects
at the Closing Date with the same effect as though made at such time; and (ii)
Imperial shall have performed all material obligations and complied with all
material covenants required by this Agreement to be performed or complied with
by it prior to the Closing Date.
(c) All statutory requirements for the valid consummation by Imperial of
the transactions contemplated by this Agreement shall have been fulfilled and
all authorizations, consents and approvals of all federal, state, local and
foreign governmental agencies and authorities required to be obtained in order
to permit consummation by Imperial of the transactions contemplated by this
Agreement shall have been obtained. Between the date of this Agreement and the
Closing Date, no governmental agency, whether federal, state or local, shall
have instituted (or threatened to institute) in a writing directed to Double
Eagle, Imperial or any of their subsidiaries, an investigation which is pending
at the Closing Date relating to the transactions contemplated by this Agreement
and between the date of this Agreement and the Closing Date no action or
proceeding shall have been instituted or, to the knowledge of Imperial, shall
have been threatened by any party (public or private) before a court or other
governmental body to restrain or prohibit the transactions contemplated by this
Agreement or to obtain the damages in respect thereof.
7. Actions at Closing.
7.01 Transactions at the Closing. At the Closing the following events shall
occur, each event under the control of one party hereto being a condition
precedent to the events under the control of the other party, and each event
being deemed to have occurred simultaneously with the other events.
7.02 Deliveries by Imperial. At Closing, Imperial will deliver to Double
Eagle:
(a) certified copies of corporate resolutions and other corporate
proceedings taken by Imperial to authorize the execution, delivery and
performance of this Agreement; and
(b) Certificates of Incumbency and signatures of officers of Imperial dated
as of the date of this Agreement.
(c) A duly issued stock certificate in the amount of 2,000,000 shares of
Imperial restricted common stock in the name of Double Eagle or its assigns with
a duly executed and authorized Demand Registration Agreement in the form
attached hereto as Exhibit "C".
(d) Subject to approval by each of the Bank of Oklahoma as pertains to its
debt, either an assumption agreement in connection with the Bank debt of Double
Eagle or sufficient cash to retire the bank debt owed by Double Eagle and a
release of any corporate guarantees or mortgages.
7.03 Deliveries by Double Eagle. At Closing Double Eagle will deliver to
Imperial:
(a) Such bills of sale, deeds, mineral deeds, assignments, certificates of
title, stock certificates and other instruments of transfer, assignment and
conveyance as Imperial shall reasonably request to vest in Imperial good and
marketable title to the Acquired Assets and any equipment thereon; and
(b) Certified copies of corporate resolutions and other corporate
proceedings taken by Double Eagle to authorize the execution, delivery and
performance of this Agreement; and
(c) Certificates of Incumbency and signatures of officers of Double Eagle
as of the date of this Agreement.
(d) An accounting of the income and expenses from the Acquired Assets since
August 31, 2003 (Effective Date) to the Closing Date, including all payments
made to the Bank of Oklahoma and other trade accounts payables out of the
proceeds of production attributable to the Acquired Assets.
(e) Copies of duly executed Change of Operator forms providing for the
resignation of Double Eagle as operator of the Acquired Assets and the election
of Imperial or its designee.
(f) Assignments of any and all accounts receivables and trade accounts
payables from Double Eagle to Imperial as provided on Exhibit "B" attached
hereto.
(g) A copy of the Fairness Opinion and a copy of the results of the Proxy
Solicitation completed by the parent company of Double Eagle, Warrior Resources,
Inc.
8. Termination.
8.01 Termination of the Agreement. The parties may terminate this Agreement
as provided below:
(a) Imperial and Double Eagle may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(b) Imperial may terminate this Agreement by giving written notice to
Double Eagle on or before the Closing Date if Imperial is not satisfied with the
results of its continuing business, legal and accounting due diligence regarding
Double Eagle;
(c) Imperial may terminate this Agreement by giving written notice to
Double Eagle at any time prior to the Closing (i) in the event Double Eagle has
breached any material representation, warranty or covenant contained in this
Agreement in any material respect, Imperial has notified Double Eagle of the
breach and the breach has continued without cure for a period of 10 days after
the notice of breach (ii) the aggregate of the uncured title defects exceeds 10%
of the Purchase Price or (iii) if the Closing shall not have occurred on or
before August 31, 2003, or such later date as may be agreed to by Imperial and
Double Eagle in writing, by reason of the failure of any condition precedent
under Section 6.01 hereof (unless the failure results primarily from Imperial
itself breaching any representation, warranty or covenant contained in this
Agreement); and
(d) Double Eagle may terminate this Agreement by giving written notice to
Imperial at any time prior to the Closing (i) in the event Imperial has breached
any material representation, warranty or covenant contained in this Agreement in
any material respect, Double Eagle has notified Imperial of the breach and the
breach has continued without cure for a period of 10 days after the notice of
breach (ii) the aggregate of the uncured title defects exceeds 10% or (iii) if
the Closing shall not have occurred on or before August31, 2003, or such later
date as may be agreed to by Imperial and Double Eagle in writing, by reason of
the failure of any condition precedent under Section 6.02 hereof (unless the
failure results primarily from Double Eagle itself breaching any representation,
warranty or covenant contained in this Agreement).
8.02 Effect of Termination. If either Imperial or Double Eagle terminates
this Agreement pursuant to Section 8.01 above, all rights and obligations of the
parties hereunder shall terminate without any liability of any party to any
other party.
9. Miscellaneous.
9.01 Survival of Covenants, Representations and Warranties. Except as
otherwise specifically provided, the covenants, representations and warranties
contained herein shall expire and be terminated and extinguished upon the
expiration of one year from the Closing Date.
9.02 Governing Law. This Agreement and the legal relations between the
parties shall be governed by and construed in accordance with the laws of the
State of Nevada.
9.03 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if sent by registered mail or certified
mail, postage prepaid if addressed as follows:
To: Imperial
Imperial Petroleum, Inc.
11600 German Pines Drive
Evansville, IN 47725
Attention: Mr. Jeffrey T. Wilson,
President
To: Double Eagle Corporation
Double Eagle Oil & Gas, LLC
11600 German Pines Drive
Evansville, IN 47725
Attention: Mr. Jeffrey T. Wilson,
President
9.04 No Assignment. This Agreement may not be assigned by either party or
by operation of law or otherwise and, in the event of an attempted assignment,
this Agreement shall terminate, except to the extent that Imperial shall have
the right to assign this Agreement and its rights hereunder to any of its
subsidiaries at any time.
9.05 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements or representations by or among the parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
9.06 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. For the purpose of this
Agreement, the Parties hereto agree that a facsimile copy shall have the same
effect as an original signature.
9.07 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.08 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
Imperial and Double Eagle. No waiver by an party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
9.09 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.10 Brokers & Expenses. Except as otherwise expressly provided herein,
each of the parties will bear his or its own costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby. Each party hereto shall be responsible for
broker or similar fees arising with respect to broker's retained or engaged by
such party and shall indemnify the other party against such fees in connection
with the transactions contemplated herein.
9.11 Construction. The parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The parties intend
that each representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the party has not
breached shall not detract from or mitigate the fact that the party is in breach
of the first representation, warranty or covenant.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
Imperial Petroleum, Inc. "BUYER"
By: _______________________
Jeffrey T. Wilson
President
Double Eagle Petroleum Corp "SELLER"
By: ________________________
Jeffrey T. Wilson
President
June 26, 2003
IMPERIAL PETROLEUM CORPORATION
11600 German Pines
Evansville, In 47725
Attention:: Jeffrey T. Wilson, Chairman and President
Ladies and Gentlemen:
1. Retention. This letter agreement (the "Agreement") confirms that
IMPERIAL PETROLEUM CORPORATION (the "Company"), a Nevada corporation, has
engaged Jefferies & Company, Inc. ("Jefferies") to act as exclusive financial
advisor to and sole placement agent for the Company in connection with the
structuring, issuance and sale (the "Transaction") of up to $25,000,000 of notes
(the "Notes"). During the Term of the Agreement, the Company agrees that it will
not, directly or indirectly, offer any of the Notes or any similar securities
for sale to, or solicit any offer to purchase any of the same from, or otherwise
contact or approach with respect thereto with any person or persons, other than
through Jefferies.
2. Information on the Company. In connection with Jefferies' activities
hereunder, the Company will furnish Jefferies and its counsel with all materials
and information regarding the business and financial condition of the Company
(all such information so furnished being the "Information") and with a private
placement memorandum with respect to the Company and the Notes (such memorandum,
including all exhibits, supplements or amendments thereto, the "Offering
Materials"). The Company recognizes and confirms that Jefferies: (a) will use
and rely solely on the Information, the Offering Materials and on information
available from generally recognized public sources in performing the services
contemplated by this Agreement without having independently verified the same;
(b) is authorized as the Company's exclusive financial advisor and sole
placement agent to transmit to any prospective participant in the Transaction a
copy or copies of the Offering Materials, and the forms of purchase agreements
and other legal documentation necessary or advisable in connection with the
transactions contemplated hereby; (c) does not assume responsibility for the
accuracy or completeness of the Information, the Offering Materials or such
other information; (d) will not make an appraisal of any assets or liabilities
of the Company; and (e) retains the right to continue to perform due diligence
on the Company during the course of the engagement.
3. Use of Name. The Company agrees that any reference to Jefferies in any
release, communication, or other material is subject to Jefferies' prior written
approval, which may be given or withheld in its sole discretion. If Jefferies
resigns prior to the dissemination of any such release, communication or
material, no reference shall be made therein to Jefferies, despite any prior
written approval that may have been given therefor.
4. Use of Advice. No statements made or advice rendered by Jefferies in
connection with the services performed by Jefferies pursuant to this Agreement
will be quoted by, nor will any such statements or advice be referred to, in any
report, document, release or other communication, whether written or oral,
prepared, issued or transmitted by, the Company or any person or corporation
controlling, controlled by or under common control with, the Company or any
director, officer, manager, member, employee, agent or representative of any
such person, without the prior written authorization of Jefferies, which may be
given or withheld in its sole discretion, except to the extent required by law
(in which case the appropriate party shall so advise Jefferies in writing prior
to such use and shall consult with Jefferies with respect to the form and timing
of disclosure).
5. Compensation. In payment for services rendered and to be rendered
hereunder by Jefferies, the Company agrees to pay to Jefferies as follows:
(a) Upon consummation of the sale of the Notes, the Company shall pay
to Jefferies in cash a fee in an amount that is equal to 6% of the
aggregate principal amount of Notes issued which in no event shall be less
than $500,000 and shall grant to Jefferies warrants exercisable for five
years into an amount of the Company's common stock equivalent to 5% of the
fully diluted ownership of the Company, with a total exercise price of
$0.01. In addition, if the Company consummates the sale of the Notes and
undertakes within two years of the closing of the sale of the Notes (i) a
financing, then Jefferies shall be given the right, but not the obligation,
to act as lead manager or co-manager for such an offering and to receive at
least 70% of the aggregate gross spread from such an offering (such gross
spread in such transactions will be mutually determined in good faith by
the Company and Jefferies and shall be based on the prevailing market for
similar services); or (ii) a merger with or into, a consolidation with, a
sale of all or substantially all of its assets to, or an acquisition of all
or substantially all of the assets of, another person or group of
affiliated persons in a transaction or series of related transactions, then
Jefferies shall be given the right, but not the obligation, to act as a
financial advisor to the Company for such transaction or transactions and
to receive a fee in an amount to be mutually determined in good faith by
the Company and Jefferies and shall be based on the prevailing market for
similar services. The retention and compensation of Jefferies for such
subsequent transactions shall be outlined in a separate agreement or
agreements not considered part of this Agreement.
(b) In addition to the compensation to be paid to Jefferies as
provided in Section 5(a) hereof, without regard to whether any Transaction
is consummated or this Agreement expires or is terminated, the Company
shall pay to, or on behalf of, Jefferies, promptly as billed, all fees,
disbursements and out-of-pocket expenses incurred by Jefferies in
connection with its services to be rendered hereunder (including, without
limitation, the fees and disbursements of Jefferies' counsel, travel and
lodging expenses, word processing charges, messenger and duplicating
services, facsimile expenses and other customary expenditures).
(c) Jefferies may resign at any time and the Company may terminate
Jefferies' services at any time, each by giving prior written notice to the
other. If this Agreement expires, Jefferies resigns or the Company
terminates Jefferies' services for any reason, Jefferies and its counsel
shall be entitled to receive all of the amounts due pursuant to Sections
5(a) and 5(b) hereof up to and including the effective date of such
expiration, termination or resignation, as the case may be. If Jefferies'
services hereunder are terminated by the Company or this Agreement expires,
and the Company completes a transaction similar to the Transaction
contemplated herein within one year of such termination or expiration, then
the Company shall pay Jefferies concurrently with the closing of such
transaction in cash the fees as outlined in Section 5(a).
(d) All fees payable to Jefferies pursuant to this Section 5 shall be
payable in cash via wire transfer to an account designated by Jefferies. No
fee paid or payable to Jefferies or any of its affiliates shall be credited
against any other fee paid or payable to Jefferies or any of its
affiliates.
6. Representations and Warranties. The Company represents and warrants to
Jefferies that (a) this Agreement has been duly authorized, executed and
delivered by the Company; and, assuming the due execution by Jefferies,
constitutes a legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, and (b) the Information and
the Offering Materials will not, when delivered nor at any time prior to or at
the closing of the Transaction, contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company shall advise Jefferies promptly of the occurrence of any event or any
other change prior to the closing which results in the Information or the
Offering Materials containing any untrue statement of a material fact or
omitting to state any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
7. Indemnity; Limitation of Liability. Since Jefferies will be acting on
behalf of the Company as set forth in this Agreement, and as an integral part of
the consideration of the services to be rendered hereunder, the Company shall
indemnify Jefferies and certain other Indemnified Persons (as defined in
Schedule A hereto) in accordance with Schedule A attached hereto. The Company
shall not and shall cause its affiliates and their respective directors,
officers, managers, members, employees, shareholders and agents not to, initiate
any action or proceeding against Jefferies or any other Indemnified Person in
connection with this engagement or the Transaction unless such action or
proceeding is based solely upon the willful misconduct or gross negligence of
Jefferies or any such Indemnified Person. The parties hereto agree that
Jefferies and the Indemnified Persons shall not, and shall not be deemed to, owe
any fiduciary duties to the Company under this Agreement or otherwise.
8. Conditions of Placement. It is understood that the execution of this
Agreement shall not be deemed or construed as obligating Jefferies to purchase
any of the Notes and there is no obligation on the part of Jefferies to place
the Notes. Without limiting the foregoing, Jefferies' services to be performed
hereunder are subject to certain conditions, including, among others, (i)
approval of Jefferies' Underwriting Assistance Committee, to be given or
withheld in its sole discretion, (ii) satisfactory completion of due diligence
on the Company by Jefferies, (iii) the form and terms of the Notes being
mutually acceptable to the Company, Jefferies and prospective purchasers of the
Notes, (iv) market conditions, and (v) no adverse change in the condition of the
Company.
9. Survival of Certain Provisions. The indemnity and contribution
agreements contained in Schedule A to this Agreement and the provisions of
Sections 2, 3, 4, 5, 6, 7, 12, 13, 14, 15, 17 and 18 of this Agreement and this
Section 9 shall remain operative and in full force and effect regardless of (a)
any investigation made by or on behalf of Jefferies, or by or on behalf of any
affiliate of Jefferies or any person controlling or controlled by either, (b)
completion of the Transaction, (c) the resignation of Jefferies or any
termination of Jefferies' services or (d) any amendment, expiration or
termination of this Agreement, and shall be binding upon, and shall inure to the
benefit of, any successors, assigns, heirs and personal representatives of the
Company, Jefferies, and the Indemnified Persons.
10. Notices. Notice given pursuant to any of the provisions of this
Agreement shall be in writing and shall be mailed or delivered (a) if to the
Company, at the address set forth above, and (b) if to Jefferies, at the offices
of Jefferies at 11100 Santa Monica Boulevard, Suite 1000, Los Angeles,
California 90025, Attention: Lloyd H. Feller, Executive Vice President and
General Counsel.
11. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
12. Assignment. This Agreement may not be assigned by either party hereto
without the prior written consent of the other, to be given in the sole
discretion of the party from whom such consent is being requested. Any attempted
assignment of this Agreement made without such consent may be void, at the
option of the non-assigning party.
13. Third Party Beneficiaries. This Agreement has been and is made solely
for the benefit of the Company, Jefferies and the other Indemnified Persons
referred to in Schedule A hereof and their respective successors, assigns, heirs
and personal representatives, and no other person shall acquire or have any
right under or by virtue of this Agreement.
14. Construction and Choice of Law. This Agreement, together with Schedule
A attached hereto, incorporates the entire understanding of the parties and
supersedes all previous agreements relating to the subject matter hereof should
they exist. This Agreement and any issue arising out of or relating to the
parties' relationship hereunder shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of law.
15. Jurisdiction and Venue. Each party hereto consents specifically to the
exclusive jurisdiction of the federal courts of the United States sitting in the
Southern District of New York, or if such federal court declines to exercise
jurisdiction over any action filed pursuant to this Agreement, the courts of the
State of New York sitting in the County of New York, and any court to which an
appeal may be taken in connection with any action filed pursuant to this
Agreement, for the purposes of all legal proceedings arising out of or relating
to this Agreement and the parties agree not to commence any action, suit or
proceeding relating hereto except in such courts. In connection with the
foregoing consent, each party irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the
court's exercise of personal jurisdiction over each party to this Agreement or
the laying of venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum. Each party further irrevocably waives its right to a trial
by jury and consents that service of process may be effected in any manner
permitted under the laws of the State of New York.
16. Headings. The section headings in this Agreement have been inserted as
a matter of convenience of reference and are not part of this Agreement.
17. Press Announcements. At any time after the consummation or other public
announcement of the Transaction, Jefferies may place an announcement in such
newspapers and publications as it may choose, stating that Jefferies has acted
as exclusive financial advisor and sole placement agent to the Company in
connection with the Transaction, and may use, from time to time, the Company's
name and logo and a brief description of the Transaction in publications and/or
marketing materials prepared and/or distributed by Jefferies.
18. Amendment; Waiver. This Agreement may not be modified or amended except
in a writing duly executed by the parties hereto. No waiver by either party of
any breach of any provision of this Agreement shall be deemed a waiver of any
similar or any other provision of this Agreement at the same or any prior or
subsequent time. To be effective, a waiver must be set forth in writing signed
by the waiving party and must specifically refer to this Agreement and the
provision being waived.
19. Term. Except as provided herein, this Agreement shall run from the date
of this letter to a date of one year thereafter, unless extended by mutual
consent of the parties (the "Term").
Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein, whereupon
this letter and your acceptance shall constitute a binding agreement between the
Company and Jefferies as of the date first above written.
Sincerely,
JEFFERIES & COMPANY, INC.
By
Name:
Title:
Accepted and Agreed:
IMPERIAL PETROLEUM CORPORATION
By
Name:
Title:
SCHEDULE A
June 26, 2003
JEFFERIES & COMPANY, INC.
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, CA 90025
Ladies and Gentlemen:
This letter agreement is entered into pursuant to, and in order to induce
Jefferies & Company, Inc. ("Jefferies") to enter into, the engagement letter,
dated June 26, 2003(as amended from time to time in accordance with the terms
thereof, the "Agreement"), between IMPERIAL PETROLEUM CORPORATION (the
"Company"), a Nevada corporation, and Jefferies. Unless otherwise noted, all
capitalized terms used herein shall have the meanings set forth in the
Agreement.
Since Jefferies will be acting on behalf of the Company in connection with
the transactions contemplated by the Agreement, and as part of the consideration
for the agreement of Jefferies to furnish its services pursuant to such
Agreement, the Company agrees to indemnify and hold harmless Jefferies and its
affiliates and their respective officers, directors, managers, members,
partners, counsel, employees and agents, and any other persons controlling
Jefferies or any of its affiliates within the meaning of either Section 15 of
the Securities Act of 1933 or Section 20 of the Securities Exchange Act of 1934,
and the respective agents, employees, officers, directors, managers, members,
partners, counsel and shareholders of such persons (Jefferies and each such
other person being referred to as an "Indemnified Person"), to the fullest
extent lawful, from and against all claims, liabilities, losses, damages and
expenses (or actions in respect thereof), as incurred, related to or arising out
of or in connection with (i) actions taken or omitted to be taken by the
Company, its affiliates, employees or agents, (ii) actions taken or omitted to
be taken by any Indemnified Person (including acts or omissions constituting
ordinary negligence) pursuant to the terms of, or in connection with services
rendered pursuant to, the Agreement or any Transaction or proposed transaction
contemplated thereby or any Indemnified Person's role in connection therewith,
provided, however, that the Company shall not be responsible for any losses,
claims, damages, liabilities or expenses of any Indemnified Person to the
extent, and only to the extent, that it is finally judicially determined that
they are due solely to such Indemnified Person's willful misconduct or gross
negligence, and/or (iii) any untrue statement or alleged untrue statement of a
material fact contained in any of the Information, the Offering Materials, or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading.
The Company shall not settle or compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened action,
claim, suit or proceeding in which any Indemnified Person is or could be a party
and as to which indemnification or contribution could have been sought by such
Indemnified Person hereunder (whether or not such Indemnified Person is a party
thereto), unless such Indemnified Person has given its prior written consent or
the settlement, compromise, consent or termination includes an express
unconditional release of such Indemnified Person, satisfactory in form and
substance to such Indemnified Person, from all losses, claims, damages or
liabilities arising out of such action, claim, suit or proceeding.
If for any reason (other than the willful misconduct or gross negligence of
an Indemnified Person as provided above) the foregoing indemnity is unavailable
to an Indemnified Person or insufficient to hold an Indemnified Person harmless,
then the Company, to the fullest extent permitted by law, shall contribute to
the amount paid or payable by such Indemnified Person as a result of such
claims, liabilities, losses, damages or expenses in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and by Jefferies on the other, from the Transaction or proposed transaction
under the Agreement or, if allocation on that basis is not permitted under
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits received by the Company on the one hand and Jefferies on the
other, but also the relative fault of the Company and Jefferies, as well as any
relevant equitable considerations. Notwithstanding the provisions hereof, the
aggregate contribution of all Indemnified Persons to all claims, liabilities,
losses, damages and expenses shall not exceed the amount of fees actually
received by Jefferies pursuant to the Agreement with respect to the Transaction.
It is hereby further agreed that the relative benefits to the Company on the one
hand and Jefferies on the other with respect to any Transaction or proposed
transaction contemplated by the Agreement shall be deemed to be in the same
proportion as (i) the total value paid or contemplated to be paid or received or
contemplated to be received by the Company or the Company's shareholders, as the
case may be, in the transaction or transactions that are within the scope of the
Agreement, whether or not any such transaction is consummated, bears to (ii) the
fees paid to Jefferies with respect to such Transaction. The relative fault of
the Company on the one hand and Jefferies on the other with respect to the
Transaction shall be determined by reference to, among other things, whether any
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by Jefferies and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
No Indemnified Person shall have any liability to the Company or any
officer, director, employee or affiliate thereof in connection with the services
rendered pursuant to the Agreement except for any liability for claims,
liabilities, losses or damages finally judicially determined to have resulted
solely as a result of such Indemnified Person's willful misconduct or gross
negligence.
In addition, the Company agrees to reimburse the Indemnified Persons for
all expenses (including, without limitation, fees and expenses of counsel) as
they are incurred in connection with investigating, preparing, defending or
settling any such action or claim, whether or not in connection with litigation
in which any Indemnified Person is a named party. If any of Jefferies' personnel
appears as witnesses, are deposed or are otherwise involved in the defense of
any action against Jefferies, the Company or the Company officers, managers or
directors, the Company will pay Jefferies (i) with respect to each day that one
of Jefferies' professional personnel appears as a witness or is deposed and/or
(ii) with respect to each day that one of Jefferies' professional personnel is
involved in the preparation therefor, (a) a fee of $2,000 per day for each such
person with respect to each appearance as a witness or for a deposition and (b)
at a rate of $200 per hour with respect to each hour of preparation for any such
appearance and the Company will reimburse Jefferies for all reasonable expenses
incurred by Jefferies by reason of any of its personnel being involved in any
such action.
The indemnity, contribution and expense reimbursement obligations set forth
herein (i) shall be in addition to any liability the Company may have to any
Indemnified Person at common law or otherwise, (ii) shall survive the expiration
of the Term, (iii) shall apply to any modification of Jefferies' engagement and
shall remain in full force and effect following the completion or termination of
the Agreement, (iv) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of Jefferies or any other
Indemnified Person and (v) shall be binding on any successor or assign of the
Company and successors or assigns to the Company's business and assets.
If the Company enters into any agreement or arrangement with respect to, or
effects, any proposed sale, exchange, dividend or other distribution or
liquidation of all or a significant portion of its assets in one or a series of
transactions or any significant recapitalization or reclassification of its
outstanding securities, the Company shall provide for the assumption of its
obligations under this Agreement by another party satisfactory to Jefferies.
Please sign and return an original and one copy of this letter to the
undersigned to indicate your acceptance of the terms set forth herein, whereupon
this letter and your acceptance shall constitute a binding agreement between the
Company and Jefferies as of the date of the Agreement.
Sincerely,
IMPERIAL PETROLEUM CORPORATION
By
Name:
Title:
Accepted and Agreed:
JEFFERIES & COMPANY, INC.
By
Name:
Title:
INTERCOMPANY SUBORDINATION AGREEMENT
THIS INTERCOMPANY SUBORDINATION AGREEMENT (as amended, restated,
supplemented, or otherwise modified from time to time, this "Agreement"), dated
as of January 15, 2004, is made by and among IMPERIAL PETROLEUM, INC., a Nevada
corporation (the "Borrower"), and each of Borrower's undersigned Subsidiaries
(Borrower and such Subsidiaries are referred to hereinafter each individually as
an "Obligor", and individually and collectively, jointly and severally, as the
"Obligors"), in favor of HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P., a
Delaware limited partnership ("HZ"), as collateral agent for the below-defined
Lenders (in such capacity, together with any successor collateral agent, the
"Collateral Agent"):
WHEREAS, Borrower, the Lenders, the Collateral Agent, and HZ, as
administrative agent for the Lenders (in such capacity, together with any
successor administrative agent, the "Administrative Agent") have entered into
that certain Consolidated Amended and Restated Credit Agreement, dated as of
January 15, 2004 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement");
WHEREAS, the undersigned Subsidiaries of Borrower (collectively, the
"Guarantors") have executed that certain Guaranty dated as of January 15, 2004
(as amended, restated, supplemented, or otherwise modified from time to time,
the "Guaranty") in favor of the Collateral Agent for the benefit of the Lender
Group;
WHEREAS, each Obligor has made or may make certain loans or advances from
time to time to one or more other Obligors; and
WHEREAS, each Obligor has agreed to the subordination of such indebtedness
of each other Obligor to such Obligor, upon the terms and subject to the
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
conditions, representations, and warranties set forth herein and for other good
and valuable consideration, the parties hereto agree as follows:
SECTION 1 Definitions; Interpretation.
(a) Terms Defined in Credit Agreement. All capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned to
them in the Credit Agreement.
(b)Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Administrative Agent" has the meaning set forth in the recitals hereto.
"Agreement" has the meaning set forth in the preamble hereto.
"Collateral Agent" has the meaning set forth in the preamble hereto.
"Credit Agreement" has the meaning set forth in the recitals hereto.
"Guarantor" and "Guarantors" have the respective meanings set forth in the
recitals hereto.
"Insolvency Event" has the meaning set forth in Section 3.
"Lender Group" means, individually and collectively, Collateral Agent,
Administrative Agent and each of the Lenders.
"Lenders" means, individually and collectively, each of the financial
institutions listed on the signature pages of the Credit Agreement and any other
Person made a party thereto in accordance with the provisions of Section 12.07
thereof (together with their respective successors and assigns).
"Obligors" has the meaning set forth in the preamble hereto.
"Senior Debt" means the Obligations and other indebtedness and liabilities
of the Obligors to the Lender Group under or in connection with the Credit
Agreement and the other Loan Documents, including all unpaid principal of the
Loans, all interest accrued thereon, all fees due under the Credit Agreement and
the other Loan Documents, and all other amounts payable by the Obligors to the
Lender Group thereunder or in connection therewith, whether now existing or
hereafter arising, and whether due or to become due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and including without
limitation interest, fees, and other such amounts, which would accrue and become
due but for the commencement of an Insolvency Event, whether or not such
interest, fees, and other amounts are allowed or allowable in whole or in part
in any such Insolvency Event.
"Subordinated Debt" means, with respect to each Obligor, all indebtedness,
liabilities, and other obligations of any other Obligor owing to such Obligor in
respect of any and all loans or advances made by such Obligor to such other
Obligor whether now existing or hereafter arising, and whether due or to become
due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, including all fees and all other amounts payable by any other
Obligor to such Obligor under or in connection with any documents or instruments
related thereto.
"Subordinated Debt Payment" means any payment or distribution by or on
behalf of the Obligors, directly or indirectly, of assets of the Obligors of any
kind or character, whether in cash, property, or securities, including on
account of the purchase, redemption, or other acquisition of Subordinated Debt,
as a result of any collection, sale, or other disposition of collateral, or by
setoff, exchange, or in any other manner, for or on account of the Subordinated
Debt.
(c) Interpretation. Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the term "including" is not limiting, and the term
"or" has, except where otherwise indicated, the inclusive meaning represented by
the phrase "and/or." The words "hereof," "herein," "hereby," "hereunder," and
similar terms in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Section, subsection, clause,
schedule, and exhibit references are to this Agreement unless otherwise
specified. References to agreements and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto.
References to statutes or regulations are to be construed as including all
statutory and regulatory provisions consolidating, amending, or replacing the
statute or regulation referred to. The captions and headings are for convenience
of reference only and shall not affect the construction of this Agreement.
SECTION 2 Subordination to Payment of Senior Debt. As to each Obligor, all
payments on account of the Subordinated Debt shall be subject, subordinate, and
junior, in right of payment and exercise of remedies, to the extent and in the
manner set forth herein, to the prior payment, in full, in cash of the Senior
Debt.
SECTION 3 Subordination Upon Any Distribution of Assets of the Obligors. As
to each Obligor, in the event of any payment or distribution of assets of any
other Obligor of any kind or character, whether in cash, property, or
securities, upon the dissolution, winding up, or total or partial liquidation or
reorganization, readjustment, arrangement, or similar proceeding relating to
such other Obligor or its property, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership, arrangement, or similar proceedings or
upon an assignment for the benefit of creditors, or upon any other marshaling or
composition of the assets and liabilities of such other Obligor, or otherwise
(such events, collectively, the "Insolvency Events"): (i) all amounts owing on
account of the Senior Debt shall first be paid, in full, in cash, or payment
provided for in cash, before any Subordinated Debt Payment is made; and (ii) to
the extent permitted by applicable law, any Subordinated Debt Payment to which
such Obligor would be entitled except for the provisions hereof, shall be paid
or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of
creditors, or other liquidating agent making such payment or distribution
directly to Collateral Agent for the benefit of the Lender Group for application
to the payment of the Senior Debt in accordance with clause (i), after giving
effect to any concurrent payment or distribution or provision therefor to the
Lender Group, or Collateral Agent for the benefit thereof, in respect of such
Senior Debt.
SECTION 4 Payments on Subordinated Debt.
(a) Permitted Payments. So long as no Event of Default has occurred and is
continuing, each Obligor may make, and each other Obligor shall be entitled to
accept and receive, payments on account of the Subordinated Debt in the ordinary
course of business.
(b)No Payment Upon Senior Debt Defaults. Upon the occurrence of any Event
of Default, and until such Event of Default is cured or waived, each Obligor
shall not make, and each other Obligor shall not accept or receive, any
Subordinated Debt Payment.
SECTION 5 Subordination of Remedies. As long as any Senior Debt shall
remain outstanding and unpaid, following the occurrence of any Event of Default
and until such Event of Default is cured or waived, each Obligor shall not,
without the prior written consent of Collateral Agent:
(a) accelerate, make demand, or otherwise make due and payable prior to the
original due date thereof any Subordinated Debt or bring suit or institute any
other actions or proceedings to enforce its rights or interests in respect of
the obligations of any other Obligor owing to such Obligor;
(b) exercise any rights under or with respect to guaranties of the
Subordinated Debt, if any;
(c) exercise any rights to set-offs and counterclaims in respect of any
indebtedness, liabilities, or obligations of such Obligor to any other Obligor
against any of the Subordinated Debt; or
(d) commence, or cause to be commenced, or join with any creditor other
than the Lender Group, or Collateral Agent on behalf thereof, in commencing, any
bankruptcy, insolvency, or receivership proceeding against the other Obligor.
SECTION (6) Payment Over to Collateral Agent. In the event that,
notwithstanding the provisions of Sections 3, 4, and 5, any Subordinated Debt
Payments shall be received in contravention of such Sections 3, 4, and 5 by any
Obligor before all Senior Debt is paid, in full, in cash, such Subordinated Debt
Payments shall be held in trust for the benefit of the Lender Group and shall be
paid over or delivered to Collateral Agent for the benefit of the Lender Group
for application to the payment, in full, in cash of all Senior Debt remaining
unpaid to the extent necessary to give effect to such Sections 3, 4, and 5,
after giving effect to any concurrent payments or distributions to the Lender
Group in respect of the Senior Debt.
SECTION (7) Authorization to Collateral Agent. If, while any Subordinated
Debt is outstanding, any Insolvency Event shall occur and be continuing with
respect to the other Obligor or its property: (i) Collateral Agent, on behalf of
the Lender Group, hereby is irrevocably authorized and empowered (in the name of
each Obligor or otherwise), but shall have no obligation, to demand, sue for,
collect, and receive every payment or distribution in respect of the
Subordinated Debt and give acquittance therefor and to file claims and proofs of
claim and take such other action (including voting the Subordinated Debt) as it
may deem necessary or advisable for the exercise or enforcement of any of the
rights or interests of the Lender Group; and (ii) each Obligor shall promptly
take such action as Collateral Agent reasonably may request (A) to collect the
Subordinated Debt for the account of the Lender Group and to file appropriate
claims or proofs of claim in respect of the Subordinated Debt, (B) to execute
and deliver to Collateral Agent such powers of attorney, assignments, and other
instruments as it may request to enable it to enforce any and all claims with
respect to the Subordinated Debt, and (C) to collect and receive any and all
Subordinated Debt Payments.
SECTION 8 Certain Agreements of Each Obligor.
(a) No Benefits. Each Obligor understands that there may be various
agreements between the Lender Group and any other Obligor evidencing and
governing the Senior Debt, and each Obligor acknowledges and agrees that such
agreements are not intended to confer any benefits on such Obligor and that the
Lender Group and Collateral Agent on behalf thereof shall have no obligation to
such Obligor or any other Person to exercise any rights, enforce any remedies,
or take any actions which may be available to them under such agreements.
(b) No Interference. Each Obligor acknowledges that each other Obligor has
granted to Collateral Agent for the benefit of the Lender Group security
interests in all of such other Obligor's assets, and agrees not to interfere
with or in any manner oppose a disposition of any Collateral by the Lender
Group, or Collateral Agent on behalf thereof, in accordance with applicable law
and the Loan Documents.
(c) Reliance by the Lender Group. Each Obligor acknowledges and agrees that
the Lender Group will have relied upon and will continue to rely upon the
subordination provisions provided for herein and the other provisions hereof in
entering into the Loan Documents and making or issuing the Loans or other
financial accommodations thereunder.
(d) Waivers. Except as provided under the Credit Agreement, each Obligor
hereby waives any and all notice of the incurrence of the Senior Debt or any
part thereof and any right to require marshaling of assets.
(e) Obligations of Each Obligor Not Affected. Each Obligor hereby agrees
that at any time and from time to time, without notice to or the consent of such
Obligor, without incurring responsibility to such Obligor, and without impairing
or releasing the subordination provided for herein or otherwise impairing the
rights of the Lender Group hereunder: (i) the time for any other Obligor's
performance of or compliance with any of its agreements contained in the Loan
Documents may be extended or such performance or compliance may be waived by the
Lender Group or Collateral Agent on behalf thereof; (ii) the agreements of any
other Obligor with respect to the Loan Documents may from time to time be
modified by such other Obligor and the Lender Group or Collateral Agent on
behalf thereof for the purpose of adding any requirements thereto or changing in
any manner the rights and obligations of such other Obligor or the Lender Group
thereunder; (iii) the manner, place, or terms for payment of Senior Debt or any
portion thereof may be altered or the terms for payment extended, or the Senior
Debt may be renewed in whole or in part; (iv) the maturity of the Senior Debt
may be accelerated in accordance with the terms of any present or future
agreement by any other Obligor and the Lender Group or Collateral Agent on
behalf thereof; (v) any Collateral may be sold, exchanged, released, or
substituted and any Lien in favor of Collateral Agent for the benefit of the
Lender Group may be terminated, subordinated, or fail to be perfected or become
unperfected; (vi) any Person liable in any manner for Senior Debt may be
discharged, released, or substituted; and (vii) all other rights against the
other Obligor, any other Person, or with respect to any Collateral may be
exercised (or the Lender Group or Collateral Agent on behalf thereof may waive
or refrain from exercising such rights).
(f) Rights of the Lender Group Not to Be Impaired. No right of the Lender
Group or Collateral Agent on behalf thereof to enforce the subordination
provided for herein or to exercise its other rights hereunder shall at any time
in any way be prejudiced or impaired by any act or failure to act by any other
Obligor, the Lender Group, or Collateral Agent hereunder or under or in
connection with the other Loan Documents or by any noncompliance by the other
Obligor with the terms and provisions and covenants herein or in any other Loan
Document, regardless of any knowledge thereof the Lender Group or Collateral
Agent on behalf thereof may have or otherwise be charged with.
(g) Financial Condition of the Obligors. Except as provided under the
Credit Agreement, no Obligor shall have any right to require the Lender Group to
obtain or disclose any information with respect to: (i) the financial condition
or character of any other Obligor or the ability of the other Obligor to pay and
perform Senior Debt; (ii) the Senior Debt; (iii) the Collateral or other
security for any or all of the Senior Debt; (iv) the existence or nonexistence
of any guarantees of, or any other subordination agreements with respect to, all
or any part of the Senior Debt; (v) any action or inaction on the part of the
Lender Group or any other Person; or (vi) any other matter, fact, or occurrence
whatsoever.
(h) Acquisition of Liens or Guaranties. Except as permitted under the
Credit Agreement, no Obligor shall, without the prior consent of Collateral
Agent, acquire any right or interest in or to any Collateral not owned by such
Obligor or accept any guaranties for the Subordinated Debt.
SECTION 9 Subrogation.
(a) Subrogation. Until the payment and performance in full in cash of all
Senior Debt (or the collateralization thereof in a manner reasonably
satisfactory to Collateral Agent), no Obligor shall have, and no Obligor shall
directly or indirectly exercise, any rights that it may acquire by way of
subrogation under this Agreement, by any payment or distribution to the Lender
Group hereunder or otherwise. Upon the payment and performance in full in cash
of all Senior Debt, each Obligor shall be subrogated to the rights of the Lender
Group to receive payments or distributions applicable to the Senior Debt until
the Subordinated Debt shall be paid in full. For the purposes of the foregoing
subrogation, no payments or distributions to the Lender Group of any cash,
property, or securities to which any Obligor would be entitled except for the
provisions of Section 3, 4, or 5 shall, as among such Obligor, its creditors
(other than the Lender Group), and the other Obligor, be deemed to be a payment
by the other Obligors to or on account of the Senior Debt.
(b) Payments Over to the Obligors. If any payment or distribution to which
any Obligor would otherwise have been entitled but for the provisions of Section
3, 4, or 5 shall have been applied pursuant to the provisions of Section 3, 4,
or 5 to the payment of all amounts payable under the Senior Debt, such Obligor
shall be entitled to receive from the Lender Group any payments or distributions
received by the Lender Group in excess of the amount sufficient to pay in full
in cash all amounts payable under or in respect of the Senior Debt. If any such
excess payment is made to the Lender Group, the Lender Group shall promptly
remit such excess to such Obligor and until so remitted shall hold such excess
payment for the benefit of such Obligor.
SECTION 10 Continuing Agreement; Reinstatement.
(a) Continuing Agreement. This Agreement is a continuing agreement of
subordination and shall continue in effect and be binding upon each Obligor
until payment and performance in full in cash of the Senior Debt (or the
collateralization thereof in a manner reasonably satisfactory to Collateral
Agent). The subordinations, agreements, and priorities set forth herein shall
remain in full force and effect regardless of whether any party hereto in the
future seeks to rescind, amend, terminate, or reform, by litigation or
otherwise, its respective agreements with the other Obligor.
(b) Reinstatement. This Agreement shall continue to be effective or shall
be reinstated, as the case may be, if, for any reason, any payment of the Senior
Debt by or on behalf of any other Obligor shall be rescinded or must otherwise
be restored by the Lender Group, whether as a result of an Insolvency Event or
otherwise.
SECTION 11 Transfer of Subordinated Debt. No Obligor may assign or transfer
its rights and obligations in respect of the Subordinated Debt without the prior
written consent of Collateral Agent, and any such transferee or assignee, as a
condition to acquiring an interest in the Subordinated Debt shall agree to be
bound hereby, in form reasonably satisfactory to Collateral Agent.
SECTION 12 Obligations of the Obligors Not Affected. The provisions of this
Agreement are intended solely for the purpose of defining the relative rights of
each Obligor against the other Obligors, on the one hand, and of the Lender
Group against the Obligors, on the other hand. Nothing contained in this
Agreement shall (i) impair, as between each Obligor and the other Obligors, the
obligation of the other Obligors to pay their respective obligations with
respect to the Subordinated Debt as and when the same shall become due and
payable, or (ii) otherwise affect the relative rights of each Obligor against
the other Obligors, on the one hand, and of the creditors (other than the Lender
Group) of the other Obligors against the other Obligors, on the other hand.
SECTION 13 Endorsement of Obligor Documents; Further Assurances and
Additional Acts.
(a) Endorsement of Obligor Documents. At the request of Collateral Agent,
all documents and instruments evidencing any of the Subordinated Debt, if any,
shall be endorsed with a legend noting that such documents and instruments are
subject to this Agreement, and each Obligor shall promptly deliver to Collateral
Agent evidence of the same.
(b) Further Assurances and Additional Acts. Each Obligor shall execute,
acknowledge, deliver, file, notarize, and register at its own expense all such
further agreements, instruments, certificates, financing statements, documents,
and assurances, and perform such acts as Collateral Agent reasonably shall deem
necessary or appropriate to effectuate the purposes of this Agreement, and
promptly provide Collateral Agent with evidence of the foregoing reasonably
satisfactory in form and substance to Collateral Agent.
SECTION 14 Notices. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (including by
facsimile transmission) and shall be mailed, sent, or delivered in accordance
with the notice provisions contained in the Credit Agreement.
SECTION 15 No Waiver; Cumulative Remedies. No failure on the part of the
Lender Group or Collateral Agent on behalf thereof to exercise, and no delay in
exercising, any right, remedy, power, or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
remedy, power, or privilege preclude any other or further exercise thereof or
the exercise of any other right, remedy, power, or privilege. The rights and
remedies under this Agreement are cumulative and not exclusive of any rights,
remedies, powers, and privileges that may otherwise be available to the Lender
Group.
SECTION 16 Costs and Expenses. Each of the Obligors, jointly and severally,
agrees to pay to Collateral Agent, for the account of the Lender Group, on
demand, the (a) out-of-pocket costs and expenses of the Lender Group, and the
fees and disbursements of counsel to the Lender Group, in connection with the
negotiation, preparation, execution, delivery, and administration of this
Agreement, and any amendments, modifications, or waivers of the terms thereof;
and (b) costs and expenses of the Lender Group, and the fees and disbursements
of counsel, in connection with the enforcement or attempted enforcement of, and
preservation of rights or interests under, this Agreement, including any losses,
costs, and expenses sustained by the Lender Group as a result of any failure by
any Obligor to perform or observe its obligations contained in this Agreement.
SECTION 17 Survival. All covenants, agreements, representations and
warranties made in this Agreement shall, except to the extent otherwise provided
herein, survive the execution and delivery of this Agreement, and shall continue
in full force and effect so long as any Senior Debt remains unpaid. Without
limiting the generality of the foregoing, the obligations of each Obligor under
Section 16 shall survive the satisfaction of the Senior Debt.
SECTION 18 Benefits of Agreement. This Agreement is entered into for the
sole protection and benefit of the parties hereto and their successors and
assigns, and no other Person shall be a direct or indirect beneficiary of, or
shall have any direct or indirect cause of action or claim in connection with,
this Agreement.
SECTION 19 Binding Effect. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by each Obligor and the Lender Group and their
respective successors and permitted assigns.
SECTION 20 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 21 SUBMISSION TO JURISDICTION. THE PARTIES AGREE THAT ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK
OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OBLIGOR HEREBY
IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. EACH OBLIGOR HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES, AND
DOCUMENTS IN ANY SUIT, ACTION, OR PROCEEDING BROUGHT IN THE UNITED STATES OF
AMERICA ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS BY THE MAILING (BY REGISTERED MAIL OR CERTIFIED MAIL, POSTAGE
PREPAID) OR DELIVERING OF A COPY OF SUCH PROCESS TO OBLIGORS, IN CARE OF
BORROWER, AT THE BORROWER'S ADDRESS FOR NOTICES AS SET FORTH IN SECTION 12.01 OF
THE CREDIT AGREEMENT. EACH OBLIGOR AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENTS AND THE LENDERS TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION. EACH OBLIGOR
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING
OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND
ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO
THE EXTENT THAT ANY OBLIGOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH OBLIGOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS. THE FOREGOING TO THE CONTRARY
NOTWITHSTANDING, ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY MAY BE BROUGHT, AT THE AGENTS' OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE THE AGENTS ELECT TO BRING SUCH ACTION OR WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
SECTION 22 Entire Agreement; Amendments and Waivers.
(a) Entire Agreement. This Agreement constitutes the entire agreement of
each of the Obligors and the Lender Group with respect to the matters set forth
herein and supersedes any prior agreements, commitments, drafts, communications,
discussions, and understandings, oral or written, with respect thereto.
(b) Amendments and Waivers. No amendment to any provision of this Agreement
shall in any event be effective unless the same shall be in writing and signed
by each of the Obligors and Collateral Agent; and no waiver of any provision of
this Agreement, or consent to any departure by any Obligor therefrom, shall in
any event be effective unless the same shall be in writing and signed by
Collateral Agent. Any such amendment, waiver, or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 23 Conflicts. In case of any conflict or inconsistency between any
terms of this Agreement, on the one hand, and any documents or instruments in
respect of the Subordinated Debt, on the other hand, then the terms of this
Agreement shall control.
SECTION 24 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement or the validity or effectiveness of such provision
in any other jurisdiction.
SECTION 25 Interpretation. This Agreement is the result of negotiations
between, and have been reviewed by the respective counsel to, the Obligors and
the several members of the Lender Group and is the product of all parties
hereto. Accordingly, this Agreement shall not be construed against the Lender
Group merely because of the Lender Group's involvement in the preparation
hereof.
SECTION 26 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and bind effect of
this Agreement.
SECTION 27 Termination of Agreement. Upon payment and performance in full
in cash of the Senior Debt and termination of the Commitments, this Agreement
shall terminate and Collateral Agent on behalf of the Lender Group shall
promptly execute and deliver to each Obligor such documents and instruments as
shall be reasonably necessary to evidence such termination; provided, however,
that the obligations of each Obligor under Section 16 shall survive such
termination.
[Signature page follows]
IN WITNESS WHEREOF, each of the undersigned has executed and delivered this
Agreement as of the date first written above.
IMPERIAL PETROLEUM, INC.,
a Nevada corporation
By:
Name:
Title:
RIDGEPOINTE MINING COMPANY,
a Delaware corporation
By:
Name:
Title
GLOBAL/IMPERIAL JOINT VENTURE INC.,
a Nevada corporation
By:
Name:
Title:
PHOENIX METALS, INC.,
a Texas corporation
By:
Name:
Title:
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.,
a Delaware limited partnership,
as Collateral Agent
By: Highbridge/Zwirn Capital Management, LLC,
its general partner
By:
Name:
Title:
GUARANTY
THIS GUARANTY (as amended, modified or otherwise supplemented from time to
time, this "Guaranty"), dated as of January 15, 2004, is executed and delivered
by Ridgepointe Mining Company, a Delaware corporation, Global/Imperial Joint
Venture Inc., a Nevada corporation, and Phoenix Metals, Inc., a Texas
corporation, (each individually as a "Guarantor", and individually and
collectively, jointly and severally, as the "Guarantors"), in favor of
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P., a Delaware limited
partnership ("HZ"), as collateral agent for the Lenders (in such capacity,
together with any successor collateral agent, the "Collateral Agent"):
WHEREAS, Imperial Petroleum, Inc., a Nevada corporation ("Borrower"), the
Lenders (as defined below), the Collateral Agent, and HZ, as administrative
agent for the Lenders (in such capacity, together with any successor
administrative agent, the "Administrative Agent") have entered into that certain
Consolidated Amended and Restated Credit Agreement, dated as of January 15, 2004
(as amended, restated, supplemented or otherwise modified from time to time, the
"Credit Agreement");
WHEREAS, each Guarantor is a Subsidiary of Borrower;
WHEREAS, in order to induce the Lender Group to continue to extend
financial accommodations to Borrower pursuant to the Credit Agreement and in
consideration thereof, and in consideration of any loans or other financial
accommodations heretofore or hereafter extended by the Lender Group to Borrower,
whether pursuant to the Credit Agreement or otherwise, each of the Guarantors
has agreed to guaranty the Guarantied Obligations.
NOW, THEREFORE, in consideration of the foregoing, each of the Guarantors
hereby agrees, in favor of Collateral Agent, for the benefit of the Lender
Group, as follows:
1. Definitions and Construction.
(a) Definitions. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Credit Agreement. The
following terms, as used in this Guaranty, shall have the following meanings:
"Administrative Agent" shall have the meaning set forth in the recitals to
this Guaranty.
"Bankruptcy Code" shall mean the United State Bankruptcy Code (11
U.S.C.ss.101 et seq.), as amended, and any successor statute.
"Borrower" shall have the meaning set forth in the recitals to this
Guaranty.
"Code" shall mean the New York Uniform Commercial Code, as in effect from
time to time.
"Collateral Agent" shall have the meaning set forth in the preamble to this
Guaranty.
"Credit Agreement" shall have the meaning set forth in the recitals to
this Guaranty.
"Guarantied Obligations" shall mean, with respect to each Guarantor, the
due and punctual payment of the principal of, and interest (including, any and
all interest which, but for the application of the provisions of the Bankruptcy
Code, would have been due and payable on such amounts) on, any and all premium
on, the Indebtedness, and any and all fees, costs, and expenses owed by Borrower
to the Lender Group pursuant to the terms of the Credit Agreement or any other
Loan Document.
"Guarantor" and "Guarantors" shall have the respective meanings set forth
in the preamble to this Guaranty.
"Guaranty" shall have the meaning set forth in the preamble to this
Guaranty.
"Indebtedness" shall mean all present and future indebtedness, obligations,
and liabilities of Borrower to the Agents and the Lenders, or any of them, under
the Loan Documents, whether or not the right of payment in respect of such claim
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
disputed, undisputed, legal, equitable, secured, unsecured, and whether or not
such claim is discharged, stayed, or otherwise affected by any proceeding
referred to in Section 9.01 of the Credit Agreement. Without limiting the
generality of the foregoing, the Indebtedness includes (a) the obligation
(irrespective of whether a claim therefor is allowed in any Insolvency
Proceeding) to pay principal, interest, premiums, charges, expenses, fees,
attorneys' fees and disbursements, reimbursement obligations, indemnities and
other amounts payable by Borrower under the Loan Documents, and (b) the
obligation of Borrower to reimburse any amount in respect of any of the
foregoing that any Agent or any Lender may elect to pay or advance on behalf of
Borrower.
"Lender Group" means, individually and collectively, each of the Lenders,
Administrative Agent, and Collateral Agent.
"Lenders" means, individually and collectively, each of the lenders
identified on the signature pages of the Credit Agreement, and any other Person
made a party thereto in accordance with the provisions of Section 12.07 thereof
(together with their respective successors and assigns).
"Voidable Transfer" has the meaning ascribed to it in Section 23.
(b) Construction. Unless the context of this Guaranty clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the part includes the whole, the terms "include"
and "including" are not limiting, and the term "or" has the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and other similar terms refer to this Guaranty as a whole and not
to any particular provision of this Guaranty. Any reference in this Guaranty to
any of the following documents includes any and all alterations, amendments,
restatements, extensions, modifications, renewals, or supplements thereto or
thereof, as applicable: the Credit Agreement, this Guaranty, and the other Loan
Documents. Neither this Guaranty nor any uncertainty or ambiguity herein shall
be construed or resolved against Collateral Agent, any member of the Lender
Group or any Guarantor, whether under any rule of construction or otherwise. On
the contrary, this Guaranty has been reviewed by each Guarantor, Collateral
Agent, each member of the Lender Group and their respective counsel, and shall
be construed and interpreted according to the ordinary meaning of the words used
so as to fairly accomplish the purposes and intentions of Collateral Agent, the
Lender Group and each Guarantor. It is the intention of the parties hereto that
the terms and provisions of this Guaranty and the Credit Agreement shall be read
together and construed, to the fullest extent possible, to be in concert with
each other. In the event of a direct and irreconcilable conflict between the
terms and provisions of this Guaranty and the Credit Agreement, the terms and
provisions of the Credit Agreement shall control and govern; provided, however,
that the inclusion herein of additional obligations on the part of a Guarantor
and supplemental rights and remedies in favor of Collateral Agent, in each case
in respect of the Collateral, shall not be deemed a conflict with the Credit
Agreement.
2. Guarantied Obligations. Each Guarantor hereby irrevocably and
unconditionally guarantees to Collateral Agent for the benefit of the Lender
Group, as and for its own debt, until the full and final and indefeasible
payment thereof (subject to the provisions of Sections 22 and 23) in immediately
available funds has been made, the payment of the Guarantied Obligations, in
each case as and when the same shall become due and payable, whether at
maturity, pursuant to a mandatory prepayment requirement, by acceleration, or
otherwise; it being the intent of each Guarantor that the guaranty set forth
herein shall be a guaranty of payment and not a guaranty of collection.
3. Continuing Guaranty. This Guaranty includes Guarantied Obligations
arising under successive transactions continuing, compromising, extending,
increasing, modifying, releasing, or renewing the Guarantied Obligations,
changing the interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Guarantied Obligations after prior
Guarantied Obligations have been satisfied in whole or in part. To the maximum
extent permitted by law, each Guarantor hereby waives any right to revoke this
Guaranty as to future Indebtedness. If such a revocation is effective
notwithstanding the foregoing waiver, each Guarantor acknowledges and agrees
that (a) no such revocation shall be effective until written notice thereof has
been received by Collateral Agent, (b) no such revocation shall apply to any
Guarantied Obligations in existence on such date (including any subsequent
continuation, extension, or renewal thereof, or change in the interest rate,
payment terms, or other terms and conditions thereof), (c) no such revocation
shall apply to any Guarantied Obligations made or created after such date to the
extent made or created pursuant to a legally binding commitment of the Lender
Group in existence on the date of such revocation, and (d) any payment by
Borrower or from any source other than any Guarantor, subsequent to the date of
such revocation shall first be applied to that portion of the Guarantied
Obligations as to which the revocation is effective and which are not,
therefore, guarantied hereunder, and to the extent so applied shall not reduce
the maximum obligation of any Guarantor hereunder.
4. Performance Under this Guaranty. In the event that Borrower fails to
make any payment of any Guarantied Obligations, on the due date thereof, subject
to any applicable grace period, each Guarantor promptly (but without
duplication) shall pay or cause such payment to be made.
5. Primary Obligations. This Guaranty is a primary and original obligation
of each Guarantor, is not merely the creation of a surety relationship, and is
an absolute, unconditional, and continuing guaranty of payment which shall
remain in full force and effect without respect to future changes in conditions
(other than the indefeasible satisfaction (subject to the provisions of Sections
22 and 23) in full in immediately available funds of the Guarantied
Obligations). Each Guarantor agrees that such Guarantor is directly, jointly and
severally with any other guarantor of the Guarantied Obligations, liable to
Collateral Agent, for the benefit of the Lender Group, that the obligations of
such Guarantor hereunder are independent of the obligations of Borrower, or any
other guarantor, and that a separate action may be brought against such
Guarantor, whether such action is brought against Borrower or any other
guarantor or whether Borrower or any other guarantor is joined in such action.
Each Guarantor agrees that its liability hereunder shall be immediate and shall
not be contingent upon the exercise or enforcement by the Lender Group of
whatever remedies it may have against Borrower, or any other guarantor, or the
enforcement of any lien or realization upon any security the Lender Group may at
any time possess. Each Guarantor agrees that any release which may be given by
the Lender Group to any other guarantor shall not release such Guarantor. Each
Guarantor consents and agrees that the Lender Group or Collateral Agent on
behalf thereof shall be under no obligation to marshal any property or assets of
Borrower or any other guarantor in favor of such Guarantor, or against or in
payment of any or all of the Guarantied Obligations.
6. Waivers.
(a) To the fullest extent permitted by applicable law, each Guarantor
hereby waives: (i) notice of acceptance hereof; (ii) notice of any loans or
other financial accommodations made or extended under the Credit Agreement, or
the creation or existence of any Guarantied Obligations; (iii) notice of the
amount of the Guarantied Obligations, subject, however, to such Guarantor's
right to make inquiry of Collateral Agent to ascertain the amount of the
Guarantied Obligations at any reasonable time; (iv) notice of any adverse change
in the financial condition of Borrower or of any other fact that might increase
such Guarantor's risk hereunder; (v) notice of presentment for payment, demand,
protest, and notice thereof as to any instrument among the Loan Documents; (vi)
notice of any Default or Event of Default under the Credit Agreement; and (vii)
all other notices (except if such notice is specifically required to be given to
such Guarantor under this Guaranty or any other Loan Documents) and demands to
which such Guarantor might otherwise be entitled.
(b) To the fullest extent permitted by applicable law, each Guarantor
waives the right by statute or otherwise to require Collateral Agent to
institute suit against Borrower or to exhaust any rights and remedies which the
Lender Group has or may have against Borrower. In this regard, each Guarantor
agrees that it is bound to the payment of each and all Guarantied Obligations,
whether now existing or hereafter arising (however without duplication thereof),
as fully as if the Guarantied Obligations were directly owing to the Lender
Group by such Guarantor. Each Guarantor further waives any defense arising by
reason of any disability or other defense (other than the defense that the
Guarantied Obligations shall have been fully and finally performed and
indefeasibly paid (subject to the provisions of Sections 22 and 23)) of Borrower
or by reason of the cessation from any cause whatsoever of the liability of
Borrower in respect thereof.
(c) To the fullest extent permitted by applicable law, each Guarantor
hereby waives: (i) any rights to assert against the Lender Group or the
Collateral Agent on behalf thereof any defense (legal or equitable), set-off,
counterclaim, or claim which such Guarantor may now or at any time hereafter
have against Borrower or any other party liable to the Lender Group; (ii) any
defense, set-off, counterclaim, or claim, of any kind or nature, arising
directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guarantied Obligations or any
security therefor; (iii) any defense arising by reason of any claim or defense
based upon an election of remedies by the Lender Group or the Collateral Agent
on behalf thereof including any defense based upon an election of remedies by
Collateral Agent under the provisions of ss.ss. 580d and 726 of the California
Code of Civil Procedure, or any similar law of New York or any other applicable
jurisdiction; (iv) the benefit of any statute of limitations affecting such
Guarantor's liability hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of limitations applicable to
the Guarantied Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to such Guarantor's
liability hereunder.
(d) Until such time as all of the Guarantied Obligations have been fully,
finally and indefeasibly paid (subject to the provisions of Sections 22 and 23)
in full in immediately available funds, to the fullest extent permitted by
applicable law: (i) each Guarantor hereby waives and postpones any right of
subrogation such Guarantor has or may have as against Borrower with respect to
the Guarantied Obligations; (ii) in addition, each Guarantor hereby waives and
postpones any right to proceed against Borrower or any other Person, now or
hereafter, for contribution, indemnity, reimbursement, or any other suretyship
rights and claims (irrespective of whether direct or indirect, liquidated or
contingent), with respect to the Guarantied Obligations; and (iii) in addition,
each Guarantor also hereby waives and postpones any right to proceed or to seek
recourse against or with respect to any property or asset of Borrower.
(e) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION
SET FORTH IN THIS GUARANTY, EACH GUARANTOR HEREBY WAIVES, TO THE MAXIMUM EXTENT
SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL BENEFITS OR DEFENSES ARISING
DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE ss.ss.
2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2847,
2848, 2849, AND 2850, CALIFORNIA CODE OF CIVIL PROCEDURE ss.ss. 580a, 580b,
580c, 580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE OR
ANY SIMILAR PROVISION UNDER NEW YORK LAW OR ANY OTHER APPLICABLE JURISDICTION.
(f) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION
SET FORTH IN THIS GUARANTY, EACH GUARANTOR WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ALL RIGHTS AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES
BY THE LENDER GROUP OR THE COLLATERAL AGENT ON BEHALF THEREOF, EVEN THOUGH THAT
ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY
FOR A GUARANTIED OBLIGATION, HAS DESTROYED SUCH GUARANTOR'S RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST BORROWER BY THE OPERATION OF SECTION 580d
OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR OTHERWISE.
7. Releases. Each Guarantor consents and agrees that, without notice to or
by such Guarantor and without affecting or impairing the obligations of such
Guarantor hereunder, Collateral Agent may, by action or inaction, compromise or
settle, extend the period of duration or the time for the payment, or discharge
the performance of, or may refuse to, or otherwise not enforce, or may, by
action or inaction, release all or any one or more parties to, any one or more
of the terms and provisions of the Credit Agreement or any of the other Loan
Documents or may grant other indulgences to Borrower in respect thereof, or may
amend or modify in any manner and at any time (or from time to time) any one or
more of the Credit Agreement or any of the other Loan Documents, or may, by
action or inaction, release or substitute any other guarantor, if any, of the
Guarantied Obligations, or may enforce, exchange, release, or waive, by action
or inaction, any security for the Guarantied Obligations or any other guaranty
of the Guarantied Obligations, or any portion thereof.
8. No Election. Collateral Agent shall have the right to seek recourse
against each Guarantor to the fullest extent provided for herein and no election
by Collateral Agent to proceed in one form of action or proceeding, or against
any party, or on any obligation, shall constitute a waiver of Collateral Agent's
right to proceed in any other form of action or proceeding or against other
parties unless Collateral Agent has expressly waived such right in writing.
Specifically, but without limiting the generality of the foregoing, no action or
proceeding by Collateral Agent under any document or instrument evidencing the
Guarantied Obligations shall serve to diminish the liability of any Guarantor
under this Guaranty except to the extent that Collateral Agent finally and
unconditionally shall have realized indefeasible payment by such action or
proceeding.
9. Indefeasible Payment. Subject to the provisions of Sections 22 and 23,
the Guarantied Obligations shall not be considered indefeasibly paid for
purposes of this Guaranty unless and until all payments to Collateral Agent, for
the benefit of the Lender Group, are no longer subject to any right on the part
of any person whomsoever, including Borrower or any Guarantor, Borrower or any
Guarantor as a debtor in possession, or any trustee (whether appointed under the
Bankruptcy Code or otherwise) of Borrower's or any Guarantor's assets to
invalidate or set aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be fraudulent or
preferential. In the event that, for any reason, all or any portion of such
payments to Collateral Agent, for the benefit of the Lender Group is set aside
or restored, whether voluntarily or involuntarily, after the making thereof, the
obligation or part thereof intended to be satisfied thereby shall be revived and
continued in full force and effect as if said payment or payments had not been
made and each Guarantor shall be liable for the full amount the Lender Group or
the Collateral Agent on behalf thereof is required to repay plus any and all
costs and expenses (including reasonable attorneys fees) paid by the Lender
Group or the Collateral Agent on behalf thereof in connection therewith.
10. Financial Condition of Borrower. Each Guarantor represents and warrants
to Collateral Agent that it is currently informed of the financial condition of
Borrower and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Guarantied Obligations. Each
Guarantor further represents and warrants to Collateral Agent that it has read
and understands the terms and conditions of the Credit Agreement and the other
Loan Documents. Each Guarantor hereby covenants that it will continue to keep
itself informed of Borrower's financial condition, the financial condition of
other guarantors, if any, and of all other circumstances which bear upon the
risk of nonpayment or nonperformance of the Guarantied Obligations.
11. Subordination. Each Guarantor hereby agrees that any and all present
and future indebtedness of Borrower owing to such Guarantor is postponed in
favor of and subordinated to payment, in full, in immediately available funds,
of the Guarantied Obligations; provided, that so long as no Event of Default has
occurred and is continuing, such Guarantor may, subject to all Liens for the
benefit of the Lender Group, make loans to and receive payments in the ordinary
course of business from Borrower and each other Guarantor to the extent
permitted by the Credit Agreement and the other Loan Documents.
12. Payments; Application. All payments to be made hereunder by any
Guarantor shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be made
without deduction (whether for taxes or otherwise) or offset. All payments made
by any Guarantor hereunder shall be applied as follows: first, to all reasonable
costs and expenses (including reasonable attorneys fees) incurred by the Lender
Group in enforcing this Guaranty or in collecting the Guarantied Obligations;
second, to all accrued and unpaid interest, premium, if any, and fees owing to
the Lender Group constituting Guarantied Obligations; and third, to the balance
of the Guarantied Obligations.
13. Attorneys Fees and Costs. Each Guarantor agrees to pay, on demand, all
reasonable attorneys fees and all other reasonable costs and expenses which may
be incurred by Collateral Agent in the enforcement of this Guaranty, or in any
way arising out of the Guarantied Obligations (or any security therefor),
irrespective of whether suit is brought.
14. Notices. Unless otherwise specifically provided in this Guaranty, any
notice or other communication relating to this Guaranty or any other agreement
entered into in connection therewith shall be in writing, shall be delivered in
the manner set forth in the Credit Agreement, and shall be sent to Guarantors or
to Collateral Agent, as the case may be, at its addresses set forth below:
If to a Guarantor: c/o: IMPERIAL PETROLEUM, INC.
300 Holger Way
San Jose, California 95134
Attention: Chief Financial Officer
Telephone: _______________
Telecopier: _______________
with a copy to: HESKETT & HESKETT
501 Johnstone St.
Suite 501
Bartlesville, OK 74003
Attention: John Heskett, Esq.
Telephone: 918-336-1773
Telecopier: 918-336-3152
If to Collateral Agent: HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES
FUND, L.P.,
299 Park Avenue, Floors 21-23
New York, New York 10171
Attention: Kevin Genda
Telephone: 212-891-2117
Telecopier: 212-891-1541
with a copy to: PAUL, HASTINGS, JANOFSKY & WALKER LLP
515 South Flower Street, 25th Floor
Los Angeles, California 90071
Attn: John Francis Hilson, Esq.
Telephone: 213-683-6300
Telecopier: 213-627-0705
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other. Each Guarantor acknowledges and agrees that notices sent by Collateral
Agent shall be deemed sent when sent in the manner set forth in the Credit
Agreement.
15. Cumulative Remedies. No remedy under this Guaranty, under the Credit
Agreement, or any other Loan Document is intended to be exclusive of any other
remedy, but each and every remedy shall be cumulative and in addition to any and
every other remedy given under this Guaranty, under the Credit Agreement, or any
other Loan Document, and those provided by law. No delay or omission by the
Lender Group or Collateral Agent on behalf thereof to exercise any right under
this Guaranty shall impair any such right nor be construed to be a waiver
thereof. No failure on the part of the Lender Group or the Collateral Agent on
behalf thereof to exercise, and no delay in exercising, any right under this
Guaranty shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Guaranty preclude any other or further exercise
thereof or the exercise of any other right.
16. Severability of Provisions. Any provision of this Guaranty which is
prohibited or unenforceable under applicable law shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.
17. Entire Agreement; Amendments. This Guaranty, together with the other
Loan Documents to which the Guarantors are a party, constitutes the entire
agreement between each Guarantor and the Lender Group or Collateral Agent on
behalf thereof pertaining to the subject matter contained herein. This Guaranty
may not be altered, amended, or modified, nor may any provision hereof be waived
or noncompliance therewith consented to, except by means of a writing executed
by each Guarantor and Collateral Agent on behalf of the Lender Group. Any such
alteration, amendment, modification, waiver, or consent shall be effective only
to the extent specified therein and for the specific purpose for which given. No
course of dealing and no delay or waiver of any right or default under this
Guaranty shall be deemed a waiver of any other, similar or dissimilar, right or
default or otherwise prejudice the rights and remedies hereunder.
18. Successors and Assigns. This Guaranty shall be binding upon each
Guarantor and its successors and assigns and shall inure to the benefit of the
successors and assigns of the Lender Group and the Collateral Agent; provided,
however, no Guarantor may assign this Guaranty or delegate any of such
Guarantor's duties hereunder without Collateral Agent's prior written consent
and any unconsented assignment shall be absolutely void. In the event of any
assignment or other transfer of rights by the Lender Group or the Collateral
Agent, in each case in accordance with the Credit Agreement, the rights and
benefits herein conferred upon the Lender Group and the Collateral Agent shall
automatically extend to and be vested in such assignee or other transferee.
19. Counterparts; Telefacsimile Execution. This Guaranty may be executed in
any number of counterparts and by different parties on separate counterparts,
each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same
Guaranty. Delivery of an executed counterpart of this Guaranty by telefacsimile
shall be equally as effective as delivery of an original executed counterpart of
this Guaranty. Any party delivering an executed counterpart of this Guaranty by
telefacsimile also shall deliver an original executed counterpart of this
Agreement but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Guaranty.
20. No Third Party Beneficiary. This Guaranty is solely for the benefit of
the Lender Group and the Collateral Agent and their successors and assigns and
may not be relied on by any other Person.
21. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS GUARANTY, ITS CONSTRUCTION, INTERPRETATION, AND
ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED
ONLY IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER
PROPERTY MAY BE BROUGHT, AT THE COLLATERAL AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE THE COLLATERAL AGENT ELECTS TO BRING SUCH ACTION OR WHERE
SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH GUARANTOR AND EACH MEMBER
OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
21.
EACH GUARANTOR AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH GUARANTOR AND COLLATERAL AGENT REPRESENT
THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
22. Termination; Release of Guaranty. Upon the full and final payment of
all Guarantied Obligations in immediately available funds and the irrevocable
termination of all Commitments of the Lender Group to provide credit under the
Credit Agreement, this Guaranty shall terminate (subject to the provisions of
Section 23) and Collateral Agent shall execute any documents, instruments or
agreements, and shall take any other action requested by any Guarantor or
reasonably necessary to effect such termination.
23. Revival. If the payment of the Guarantied Obligations by Borrower or
any Guarantor should for any reason subsequently be declared to be void or
voidable under the provisions of the Bankruptcy Code relating to preferences and
other voidable or recoverable payments of money (collectively, a "Voidable
Transfer"), and if Collateral Agent or any other member of the Lender Group is
required to repay or restore, in whole or in part, any such Voidable Transfer
after the termination of this Guaranty, or elects to do so upon the reasonable
advice of its counsel, then this Guaranty and the liability of the Guarantors
hereunder automatically shall be revived, reinstated, and restored solely to the
extent of such Voidable Transfer and such liability shall exist as though such
termination and such Voidable Transfer had not been made.
24. Enforcement. Each of the beneficiaries of this Guaranty agree that this
guaranty may be enforced only by the action of Collateral Agent and that other
than Collateral Agent, no such beneficiary shall have any rights individually to
seek or enforce this Guaranty, it being understood and agreed that such rights
and remedies may be exercised by Collateral Agent for the benefit of each of the
members of the Lender Group upon the terms of this Guaranty and as set forth in
the Credit Agreement and the other Loan Documents.
[signature page follows]
IN WITNESS WHEREOF, the undersigned have executed and delivered this
Guaranty as of the date first written above.
RIDGEPOINTE MINING COMPANY,
a Delaware corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
GLOBAL/IMPERIAL JOINT VENTURE INC., a
Nevada corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
PHOENIX METALS, INC.,
a Texas corporation
By: __________________________________
Name: ________________________________
Title: _______________________________
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (as amended, restated, supplemented, or otherwise
modified from time to time, this "Agreement"), dated as of January 15, 2004, is
entered into by and between IMPERIAL PETROLEUM, INC., a Nevada corporation
("Borrower"), each of Borrower's undersigned Subsidiaries (Borrower and such
Subsidiaries are referred to hereinafter each individually as an "Pledgor", and
individually and collectively, jointly and severally, as the "Pledgors"), and
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P., a Delaware limited
partnership ("HZ"), as collateral agent for the below-defined Lenders (in such
capacity, together with any successor collateral agent, the "Collateral Agent"),
with reference to the following:
WHEREAS, each Pledgor beneficially owns the specified Equity Interests
identified as Pledged Interests in the Persons identified as Issuers listed
under the name of such Pledgor on Schedule A attached hereto (or any addendum
thereto); and
WHEREAS, Borrower, the Lenders (as defined below), the Collateral Agent,
abd HZ, as administrative agent for the Lender Group (in capacity, together with
its successors, if any, in capacity, "Administrative Agent") have entered into
that certain Consolidated Amended and Restated Credit Agreement, dated as of
January 15, 2004 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"), pursuant to which the Lender Group has
agreed to make certain financial accommodations to Borrower;
WHEREAS, to induce the Lender Group to make the financial accommodations
provided to Borrower pursuant to the Credit Agreement, each Pledgor desires to
pledge, grant, transfer, and assign to Collateral Agent, for the benefit of the
Lender Group, a security interest in the Collateral (as defined below) to secure
the Secured Obligations (as defined below), as provided herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations, and warranties set forth herein and for other good and valuable
consideration, the parties hereto agree as follows:
1. Definitions and Construction.
(a) Definitions.
All initially capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed thereto in the Credit Agreement. As used
in this Agreement:
"Administrative Agent" shall have the meaning ascribed thereto in the
recitals to this Agreement.
"Agreement" shall have the meaning ascribed thereto in the preamble hereto.
"Code" means the Uniform Commercial Code as in effect from time to time in
the State of New York.
"Collateral" shall mean the Pledged Interests, the Future Rights, the
Pledged Debt, and the Proceeds, collectively.
"Collateral Agent" shall have the meaning ascribed thereto in the preamble
to this Agreement.
"Credit Agreement" shall have the meaning ascribed thereto in the recitals
to this Agreement.
"Equity Interests" means all shares, units, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company, or equivalent entity,
whether voting or nonvoting, including general partner partnership interests,
limited partner partnership interests, common stock, preferred stock, or any
other "equity security" (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the SEC under the Exchange Act).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and any successor statute.
"Future Rights" shall mean: (a) all Equity Interests (other than Pledged
Interests) of the Issuers, and all securities convertible or exchangeable into,
and all warrants, options, or other rights to purchase, Equity Interests of the
Issuers; (b) to the extent of each Pledgor's interest therein, all shares of,
all securities convertible or exchangeable into, and all warrants, options, or
other rights to purchase Equity Interests of any Person in which such Pledgor,
after the date of this Agreement, acquires a direct equity interest,
irrespective of whether such Person is or becomes a Subsidiary of such Pledgor;
and (c) the certificates or instruments representing such additional Equity
Interests, convertible or exchangeable securities, warrants, and other rights
and all dividends, cash, options, warrants, rights, instruments, and other
property or proceeds from time to time received, receivable, or otherwise
distributed in respect of or in exchange for any or all of such Equity
Interests.
"Governing Documents" means, with respect to any Person, the certificate or
articles of incorporation or other similar formation documents, or by-laws or
other similar governing documents of such Person.
"Holder" and "Holders" shall have the meanings ascribed thereto in Section
3 of this Agreement.
"Issuers" shall mean each of the Persons identified as an Issuer on
Schedule A attached hereto (or any addendum thereto), and any successors
thereto, whether by merger or otherwise.
"Lender Group" means collectively the Lenders, Administrative Agent and
Collateral Agent.
"Lenders" means, individually and collectively, each of the lenders
identified on the signature pages of the Credit Agreement, and any other Person
made a party thereto in accordance with the provisions of Section 12.07 thereof
(together with their respective successors and assigns).
"Pledged Debt" shall mean all indebtedness for borrowed money from time to
time required to be pledged to the Collateral Agent pursuant to the terms of the
Credit Agreement and the promissory notes and other instruments evidencing the
Pledged Debt.
"Pledged Interests" shall mean all of the Equity Interests identified as
Pledged Interests on Schedule A attached hereto (or any addendum thereto).
"Pledgor" and "Pledgors" shall have the respective meanings set forth in
the preamble to this Agreement.
"Proceeds" shall mean all proceeds (including proceeds of proceeds) of the
Pledged Interests, Future Rights, and Pledged Debt including all: (a) rights,
benefits, distributions, premiums, profits, dividends, interest, cash,
instruments, documents of title, accounts, contract rights, inventory,
equipment, general intangibles, deposit accounts, chattel paper, and other
property from time to time received, receivable, or otherwise distributed in
respect of or in exchange for, or as a replacement of or a substitution for, any
of the Pledged Interests, Future Rights, Pledged Debt, or proceeds thereof
(including any cash, Equity Interests, or other securities or instruments issued
after any recapitalization, readjustment, reclassification, merger or
consolidation with respect to the Issuers and any security entitlements, as
defined in ss.8-102(a)(17) of the Code, with respect thereto); (b) "proceeds,"
as such term is used in the Code; (c) proceeds of any insurance, indemnity,
warranty, or guaranty (including guaranties of delivery) payable from time to
time with respect to any of the Pledged Interests, Future Rights, Pledged Debt,
or proceeds thereof; (d) payments (in any form whatsoever) made or due and
payable to any Pledgor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Pledged Interests, Future Rights, Pledged Debt, or proceeds thereof; and (e)
other amounts from time to time paid or payable under or in connection with any
of the Pledged Interests, Future Rights, Pledged Debt, or proceeds thereof.
"Secured Obligations" shall mean, in the case of Borrower, the prompt
payment and performance by Borrower of the Obligations; and (b) in the case of
each other Pledgor, the prompt payment and performance by such Pledgor of all
Indebtedness or other obligations of such Pledgor under this Agreement, any
Guaranty, or any other Loan Document to which such Pledgor is a party, in each
case, whether for principal, interest, fees, indemnification payments, expense
reimbursements or otherwise (including all interest, fees and expenses that, but
for the provisions of the Bankruptcy Code, would have accrued).
"Securities Act" shall have the meaning ascribed thereto in Section 9(c) of
this Agreement.
"Voidable Transfer" shall have the meaning ascribed thereto in Section 23
of this Agreement.
(b) Construction.
(i) Unless the context of this Agreement clearly requires otherwise,
references to the plural include the singular and to the singular include the
plural, the part includes the whole, the term "including" is not limiting, and
the term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and other similar terms in this Agreement refer to this Agreement
as a whole and not exclusively to any particular provision of this Agreement.
Article, section, subsection, exhibit, and schedule references are to this
Agreement unless otherwise specified. All of the exhibits or schedules attached
to this Agreement shall be deemed incorporated herein by reference. Any
reference to any of the following documents includes any and all alterations,
amendments, restatements, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable: this Agreement, the Credit Agreement, or any
of the other Loan Documents.
(ii) Neither this Agreement nor any uncertainty or ambiguity herein shall
be construed or resolved against Collateral Agent or any Pledgor, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by both of the parties and their respective counsel and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of the parties hereto.
(iii) In the event of any direct conflict between the express terms and
provisions of this Agreement, on the one hand, and of the Credit Agreement or
the Security Agreement, as applicable, on the other hand, the terms and
provisions of the Credit Agreement or the Security Agreement, as applicable,
shall control.
2. Pledge. As security for the prompt payment and performance of the
Secured Obligations in full by each Pledgor when due, whether at stated
maturity, by acceleration or otherwise, and as security for the prompt
performance by each Pledgor of such Pledgor's covenants and duties under each
Loan Document to which such Pledgor is a party, each Pledgor hereby pledges,
grants, transfers, and assigns to Collateral Agent, for the benefit of the
Lender Group, a security interest in all of such Pledgor's right, title, and
interest in and to the Collateral. Except as expressly set forth in this
Agreement or any other Loan Document, each Pledgor has no authority, express or
implied, to dispose of any item or portion of the Collateral.
3. Delivery and Registration of Collateral.
(a) All certificates, instruments, or promissory notes representing or
evidencing the Collateral shall be delivered by each Pledgor to Collateral Agent
or Collateral Agent's designee in accordance with the terms of the Credit
Agreement at a location designated by Collateral Agent and shall be held by or
on behalf of Collateral Agent pursuant hereto, and shall be in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to Collateral Agent.
(b) Upon the occurrence and during the continuance of an Event of Default,
Collateral Agent shall have the right, at any time in its discretion and without
notice to any Pledgor, to transfer to or to register on the books of the Issuers
(or, with respect to an Issuer which is a Subsidiary of Borrower, of any other
Person maintaining records with respect to the Collateral) in the name of
Collateral Agent or any of its nominees any or all of the Collateral. In
addition, Collateral Agent shall have the right, upon the occurrence and during
the continuance of an Event of Default, to exchange certificates or instruments
representing or evidencing the Collateral for certificates or instruments of
smaller or larger denominations.
(c) If, at any time and from time to time, any Collateral (including any
certificate or instrument representing or evidencing any Collateral) is in the
possession of a Person other than Collateral Agent or any Pledgor (a "Holder"),
then the applicable Pledgor shall promptly, at Collateral Agent's option, either
cause such Collateral to be delivered into Collateral Agent's possession, or
execute and deliver to such Holder a written notification/instruction, and take
all other steps necessary to perfect the security interest of Collateral Agent
in such Collateral, including obtaining from such Holder a written
acknowledgment that such Holder holds such Collateral for Collateral Agent, all
pursuant to the Code or other applicable law governing the perfection of
Collateral Agent's security interest in such Collateral in the possession of
such Holder. Each such notification/instruction and acknowledgment shall be in
form and substance reasonably satisfactory to Collateral Agent.
(d) Any and all Collateral (including dividends, interest, and other cash
distributions) at any time received or held by any Pledgor shall be so received
or held in trust for Collateral Agent and shall be forthwith delivered to
Collateral Agent in the same form as so received or held, with any necessary
endorsements; provided that cash dividends or distributions received by such
Pledgor, if and to the extent they are not prohibited by the Credit Agreement or
this Agreement, may be retained by such Pledgor in accordance with Section 4 and
used in the ordinary course of such Pledgor's business.
(e) If at any time and from time to time any Collateral consists of an
uncertificated security or a security in book entry form, then the applicable
Pledgor shall promptly cause such Collateral to be registered or entered, as the
case may be, in the name of Collateral Agent, for the benefit of the Lender
Group, or otherwise cause the security interest held by Collateral Agent, for
the benefit of the Lender Group, to be perfected in accordance with applicable
law.
4. Voting Rights and Dividends.
(a) So long as no Event of Default shall have occurred and be continuing,
each Pledgor shall be entitled to exercise any and all voting and other
consensual rights pertaining to the Collateral or any part thereof for any
purpose not inconsistent with the terms of the Loan Documents and shall be
entitled to receive and retain any cash dividends or distributions paid in
respect of the Collateral if and to the extent they are not prohibited by the
Credit Agreement.
(b) Upon the occurrence and during the continuance of an Event of Default,
at the election of Collateral Agent in its sole and absolute discretion, upon
the receipt by the applicable Pledgor of written notice of such election by
Collateral Agent, all rights of such Pledgor to exercise the voting and other
consensual rights or receive and retain cash dividends or distributions that it
would otherwise be entitled to exercise or receive and retain, as applicable
pursuant to Section 4(a), shall cease, and all such rights shall thereupon
become vested in Collateral Agent, who shall thereupon have the sole right to
exercise such voting or other consensual rights and to receive and retain such
cash dividends and distributions. Upon the receipt of such written notice by
such Pledgor, such Pledgor shall execute and deliver (or cause to be executed
and delivered) to Collateral Agent all such proxies and other instruments as
Collateral Agent may reasonably request for the purpose of enabling Collateral
Agent to exercise the voting and other rights which it is entitled to exercise
and to receive the dividends and distributions that it is entitled to receive
and retain pursuant to the preceding sentence.
5. Representations and Warranties. Each Pledgor represents, warrants, and
covenants as follows:
(a) such Pledgor has taken all steps it deems necessary or appropriate to
be informed on a continuing basis of changes or potential changes affecting the
Collateral (including rights of conversion and exchange, rights to subscribe,
payment of dividends, reorganizations or recapitalization, tender offers and
voting rights), and such Pledgor agrees that no member of the Lender Group shall
have any responsibility or liability for informing such Pledgor of any such
changes or potential changes or for taking any action or omitting to take any
action with respect thereto;
(b) none of the information herein or hereafter supplied to any member of
the Lender Group by or on behalf of such Pledgor in writing with respect to the
Collateral contains, or in the case of information hereafter supplied will
contain, any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, taken as a whole, in the light of the
circumstances under which they were made, not materially misleading;
(c) except to the extent otherwise permitted by the Credit Agreement, such
Pledgor is and will be the sole legal and beneficial owner of the Collateral
purported to be owned by such Pledgor (including the Pledged Interests and all
other Collateral acquired by such Pledgor after the date hereof) free and clear
of any adverse claim, Lien, or other right, title, or interest of any party,
other than Permitted Liens, including the Liens held by Collateral Agent for the
benefit of the Lender Group;
(d) this Agreement, and any delivery to Collateral Agent pursuant to the
terms of the Credit Agreement of the Pledged Interests representing Collateral
to the extent evidenced by a certificate (or the delivery to all Holders of the
Pledged Interests representing Collateral of the notification/instruction
referred to in Section 3 of this Agreement), creates a valid, perfected, and
first priority security interest in one hundred percent (100%) of the Pledged
Interests in favor of Collateral Agent securing payment of the Secured
Obligations, and all actions necessary to achieve such perfection have been duly
taken;
(e) Schedule A to this Agreement (as amended in accordance with the terms
hereof) is true and correct and complete in all material respects; without
limiting the generality of the foregoing: (i) all the Pledged Interests (to the
extent designated as such on Schedule A) are in certificated form, and, except
to the extent registered in the name of Collateral Agent or its nominee pursuant
to the provisions of this Agreement, are registered in the name of the
designated Pledgor; and (ii) the Pledged Interests as to each of the Issuers
constitute at least the percentage of all the fully diluted issued and
outstanding Equity Interests of such Issuer as set forth in Schedule A to this
Agreement;
(f) there are no presently existing Future Rights or Proceeds owned by such
Pledgor;
(g) the Pledged Interests that are interests in general partnerships,
limited partnerships or limited liability companies (a) are not dealt in or
traded on securities exchanges or in securities markets, (b) do not have terms
expressly providing that they are securities governed by Article 8 of the Code,
and (c) are not investment company securities, and are not, therefore,
"securities" governed by Article 8 of the Code;
(h) the Pledged Interests of any Issuer which is a corporation have been
duly authorized and validly issued and are fully paid and nonassessable;
(i)the Pledged Interests of each Issuer that is not a corporation have been
validly issued and are fully paid;
(j) the promissory notes or other instruments currently evidencing the
Pledged Debt have been, and all other promissory notes from time to time
evidencing Pledged Debt, when executed and delivered, will have been duly
authorized, executed and delivered by the respective makers thereof, and all
such promissory notes, as the may be, legal, valid and binding obligations of
such makers, enforceable against such makers in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws.
(k) the pledge of the Collateral pursuant to this Agreement does not
violate Regulation T, U or X of the Board of Governors of the Federal Reserve
System.
6. Further Assurances.
(a) Each Pledgor agrees that from time to time, at its expense, upon
Collateral Agent's reasonable request, such Pledgor will promptly execute and
deliver all further instruments and documents, and take all further action that
may be necessary or reasonably desirable in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable
Collateral Agent, on behalf of the Lender Group, to exercise and enforce its
rights and remedies hereunder with respect to any Collateral. Without limiting
the generality of the foregoing, each Pledgor will: (i) at the reasonable
request of Collateral Agent following the occurrence of an Event of Default,
mark conspicuously each of its records pertaining to the Collateral with a
legend, in form and substance reasonably satisfactory to Collateral Agent,
indicating that the Collateral is subject to the security interest granted
hereby; (ii) execute and file financing or continuation statements, or
amendments thereto, and other instruments or notices, as may be necessary or
reasonably desirable in order to perfect and preserve the security interests
granted or purported to be granted hereby; (iii) subject to any limitations set
forth in the Credit Agreement (including any requirements regarding the
provision of notice to such Pledgor and the timing of inspections as set forth
therein), allow inspection of the Collateral in the possession of such Pledgor
by Collateral Agent or Persons designated by Collateral Agent; and (iv) defend
such Pledgor's title to or Collateral Agent's security interest in the
Collateral owned by such Pledgor.
(b) Each Pledgor hereby authorizes Collateral Agent, on behalf of the
Lender Group, to file one or more financing or continuation statements, and
amendments thereto, relative to all or any part of the Collateral without the
signature of such Pledgor where permitted by law. A carbon, photographic, or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
7. Covenants of Pledgor. Each Pledgor shall:
(a) at all times keep at least one complete set of its records concerning
substantially all of the Collateral pledged by such Pledgor hereunder at its
chief executive office as set forth in Schedule B hereto, and not change the
location of such records without giving Collateral Agent at least thirty (30)
days prior written notice thereof;
(b) not permit any of the Issuers to: (i) authorize the amendment of or
amend the Governing Documents of such Issuer that is a general partnership,
limited partnership or limited liability company to provide that the Capital
Stock of such Issuer is governed by Article 8 of the Code, or (ii) authorize the
issuance of or issue certificates evidencing the Capital Stock of such Issuer
that is a general partnership, limited partnership or limited liability company;
(c) to the extent it may lawfully do so, prevent the Issuers from issuing
Future Rights or Proceeds, except for cash dividends and other distributions, if
any, that are not prohibited by the terms of the Credit Agreement or this
Agreement to be paid by any Issuer to such Pledgor; and
(d) upon receipt by such Pledgor of any material notice, report, or other
communication from any of the Issuers or any Holder relating to all or any part
of the Collateral, deliver a copy of such notice, report or other communication
to Collateral Agent as soon as possible, but in no event later than five (5)
days following the receipt thereof by such Pledgor.
8. Collateral Agent as Each Pledgor's Attorney-in-Fact.
(a) Each Pledgor hereby irrevocably appoints Collateral Agent, on behalf of
the Lender Group, as such Pledgor's attorney-in-fact, with full authority in the
place and stead of such Pledgor and in the name of such Pledgor, Collateral
Agent or otherwise, from time to time at Collateral Agent's discretion
exercisable only at such time as an Event of Default has occurred and is
continuing, to take any action and to execute any instrument that Collateral
Agent, on behalf of the Lender Group, may reasonably deem necessary or advisable
to exercise the powers, rights and remedies granted to the Collateral Agent
hereunder, including: (i) to receive, endorse, and collect all instruments made
payable to such Pledgor representing any dividend, interest payment or other
distribution in respect of the Collateral or any part thereof to the extent
permitted hereunder and to give full discharge for the same and to execute and
file governmental notifications and reporting forms in connection therewith;
(ii) to issue any notifications/instructions Collateral Agent deems necessary
pursuant to Section 3 of this Agreement; or (iii) to arrange for the transfer of
the Collateral on the books of any of the Issuers or any other Person to the
name of Collateral Agent or to the name of Collateral Agent's nominee.
(b) In addition to the designation of Collateral Agent as each Pledgor's
attorney-in-fact in subsection (a), each Pledgor hereby irrevocably appoints
Collateral Agent, on behalf of the Lender Group, as such Pledgor's agent and
attorney-in-fact to make, execute and deliver any and all documents and writings
which may be necessary or appropriate for approval of, or be required by, any
regulatory authority located in any city, county, state or country where such
Pledgor or any of the Issuers engage in business, in order to transfer or to
more effectively transfer any of the Pledged Interests or otherwise enforce the
rights granted hereunder to the Lender Group or Collateral Agent for the benefit
thereof, exercisable only at such time as an Event of Default has occurred and
is continuing.
9. Remedies upon Default. Upon the occurrence and during the continuance of
an Event of Default:
(a) Collateral Agent, on behalf of the Lender Group, may exercise in
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a secured
party on default under the Code (irrespective of whether the Code applies to the
affected items of Collateral), and Collateral Agent, on behalf of the Lender
Group, may also without notice (except as specified below) sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any
exchange, broker's board or at any of Collateral Agent's offices or elsewhere,
for cash, on credit or for future delivery, at such time or times and at such
price or prices and upon such other terms as Collateral Agent may deem
commercially reasonable, irrespective of the impact of any such sales on the
market price of the Collateral. To the maximum extent permitted by applicable
law, Collateral Agent may be the purchaser of any or all of the Collateral at
any such sale and shall be entitled, for the purpose of bidding and making
settlement or payment of the purchase price for all or any portion of the
Collateral sold at any such public sale, to use and apply all or any part of the
Secured Obligations as a credit on account of the purchase price of any
Collateral payable at such sale. Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of any
Pledgor, and each Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay, or appraisal that it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. Each Pledgor agrees that, to the extent notice of such sale shall be
required by law, at least ten (10) calendar days notice to such Pledgor of the
time and place of any public sale or the time after which a private sale is to
be made shall constitute reasonable notification. Collateral Agent shall not be
obligated to make any sale of Collateral regardless of notice of such sale
having been given. Collateral Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. To the maximum extent permitted by law, each Pledgor hereby waives
any claims against Collateral Agent arising because the price at which any
Collateral may have been sold at a private sale was less than the price that
might have been obtained at a public sale, even if Collateral Agent accepts the
first offer received and does not offer such Collateral to more than one
offeree.
(b) Each Pledgor hereby agrees that any sale or other disposition of the
Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies, or other financial institutions in the City of New
York, New York in disposing of property similar to the Collateral shall be
deemed to be commercially reasonable.
(c) Each Pledgor hereby acknowledges that the sale by Collateral Agent of
any Collateral pursuant to the terms hereof in compliance with the Securities
Act of 1933 as now in effect or as hereafter amended, or any similar statute
hereafter adopted with similar purpose or effect (the "Securities Act"), as well
as applicable "Blue Sky" or other state securities laws may require strict
limitations as to the manner in which Collateral Agent or any subsequent
transferee of the Collateral may dispose thereof. Each Pledgor acknowledges and
agrees that in order to protect Collateral Agent's interest it may be necessary
to sell the Collateral at a price less than the maximum price attainable if a
sale were delayed or were made in another manner, such as a public offering
under the Securities Act. Each Pledgor does not have any objection to a sale
made in such a manner and agrees that Collateral Agent and the Lender Group
shall have no obligation to obtain the maximum possible price for the
Collateral. Without limiting the generality of the foregoing, each Pledgor
agrees that, upon the occurrence and during the continuation of an Event of
Default, Collateral Agent may, subject to applicable law, from time to time
attempt to sell all or any part of the Collateral by a private placement,
restricting the bidders and prospective purchasers to those who will represent
and agree that they are purchasing for investment only and not for distribution.
In so doing, Collateral Agent may solicit offers to buy the Collateral or any
part thereof for cash, from a limited number of investors deemed by Collateral
Agent, in its reasonable judgment, to be institutional investors or other
responsible parties who might be interested in purchasing the Collateral. If
Collateral Agent shall solicit such offers, then the acceptance by Collateral
Agent of one of the offers shall be deemed to be a commercially reasonable
method of disposition of the Collateral.
(d)If Collateral Agent shall determine to exercise its right to sell all or
any portion of the Collateral pursuant to this Section, each Pledgor agrees
that, upon request of Collateral Agent, such Pledgor will, at its own expense:
(i) use commercially reasonable efforts to execute and deliver, and cause
the Issuers and the directors and officers thereof to execute and deliver, all
such instruments and documents, and to do or cause to be done all such other
acts and things, as may be necessary to register such Collateral under the
provisions of the Securities Act, and to cause the registration statement
relating thereto to become effective and to remain effective for such period as
prospectuses are required by law to be furnished, and to make all amendments and
supplements thereto and to the related prospectuses which, in the reasonable
opinion of Collateral Agent, are necessary, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto, including, without
limitation, using commercially reasonable efforts to cause the Issuers to make
available to their respective security holders, as soon as practicable, an
earnings statement covering a period of at least twelve months beginning after
the effective date of the registration statement which shall not contain an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading;
(ii) use commercially reasonable efforts to qualify the Collateral under
the state securities laws or "Blue Sky" laws and to obtain all necessary
governmental approvals for the sale of the Collateral, as requested by
Collateral Agent;
(iii) use commercially reasonable efforts to execute and deliver, or cause
the (iii)fficers and directors of the Issuers to execute and deliver, to any
person, entity or governmental authority as Collateral Agent may reasonably deem
necessary or appropriate, any and all documents and writings which, in
Collateral Agent's reasonable judgment, may be necessary for approval, or be
required by, any regulatory authority located in any city, county, state or
country where such Pledgor or the Issuers engage in business, in order to
transfer or to more effectively transfer the Pledged Interests or otherwise
enforce Collateral Agent's rights hereunder; and
(iv) use commercially reasonable efforts to do or cause to be done all such
other acts and things as may be necessary to make such sale of the Collateral or
any part thereof valid and binding and in compliance with applicable law.
Each Pledgor acknowledges that there is no adequate remedy at law for failure by
it to comply with the provisions of this Section and that such failure would not
be adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced.
(e) Collateral Agent is authorized to notify each Account Debtor with
respect to the Pledged Debt to make payment directly to the Collateral Agent (or
its designee) and may collect any and all moneys due or to become due to any
Pledgor in respect of the Pledged Debt, and each of the Pledgors hereby
authorizes such debt to make such payment directly to the Collateral Agent (or
its designee) without any duty of inquiry.
(f) EACH PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT PERMITTED BY LAW:
(i) ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING PRIOR TO THE TIME
SECURED PARTY DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS PROVIDED IN THIS
SECTION; (ii) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT IT NOW HAS OR
MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR STATUTE NOW EXISTING
OR HEREAFTER ENACTED; AND (iii) EXCEPT AS SET FORTH IN SUBSECTION (a) OF THIS
SECTION, ANY REQUIREMENT OF NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.
10. Application of Proceeds. Upon the occurrence and during the continuance
of an Event of Default, any cash held by Collateral Agent as Collateral and all
cash proceeds received by Collateral Agent in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral pursuant to
the exercise by Collateral Agent of its remedies as a secured creditor as
provided in Section 9 shall be applied from time to time by Administrative Agent
as provided in the Credit Agreement.
11. Duties of Collateral Agent. The powers conferred on Collateral Agent
hereunder are solely to protect its interests in the Collateral and shall not
impose on it any duty to exercise such powers. Except as provided in the Code,
or as expressly provided hereunder or under any other Loan Document, Collateral
Agent shall have no duty with respect to the Collateral or any responsibility
for taking any necessary steps to preserve rights against any Persons with
respect to any Collateral.
12. Choice of Law, Jurisdiction, and Venue.(a) THE VALIDITY OF THIS
AGREEMENT, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF
THE PARTIES HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) THE PARTIES AGREE THAT ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, EACH PLEDGOR HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH PLEDGOR HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL
LEGAL PROCESS, SUMMONS, NOTICES, AND DOCUMENTS IN ANY SUIT, ACTION, OR
PROCEEDING BROUGHT IN THE UNITED STATES OF AMERICA ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS BY THE MAILING
(BY REGISTERED MAIL OR CERTIFIED MAIL, POSTAGE PREPAID) OR DELIVERING OF A COPY
OF SUCH PROCESS TO PLEDGORS, IN CARE OF BORROWER, AT THE BORROWER'S ADDRESS FOR
NOTICES AS SET FORTH IN SECTION 12.01 OF THE CREDIT AGREEMENT. EACH PLEDGOR
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE AGENTS AND THE LENDERS TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN
ANY OTHER JURISDICTION. EACH PLEDGOOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION
BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT ANY
PLEDGOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT
OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR
TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, SUCH PLEDGOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT
OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. THE
FOREGOING TO THE CONTRARY NOTWITHSTANDING, ANY SUIT SEEKING ENFORCEMENT AGAINST
ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE AGENTS' OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE THE AGENTS ELECT TO BRING SUCH ACTION OR WHERE
SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.
13. Amendments; Etc. No amendment or waiver of any provision of this
Agreement nor consent to any departure by any Pledgor herefrom shall in any
event be effective unless the same shall be in writing and signed by Collateral
Agent and Pledgors, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No failure
on the part of Collateral Agent to exercise, and no delay in exercising any
right under this Agreement, any other Loan Document, or otherwise with respect
to any of the Secured Obligations, shall operate as a waiver thereof; nor shall
any single or partial exercise of any right under this Agreement, any other Loan
Document, or otherwise with respect to any of the Secured Obligations preclude
any other or further exercise thereof or the exercise of any other right. The
remedies provided for in this Agreement or otherwise with respect to any of the
Secured Obligations are cumulative and not exclusive of any remedies provided by
law.
14. Notices. Unless otherwise specifically provided herein, all notices and
other communications hereunder to Collateral Agent shall be in writing and shall
be mailed, sent or delivered, care of Borrower, in the manner provided for in
the Credit Agreement and all notices and other communications hereunder to any
Pledgor shall be in writing and shall be mailed, sent or delivered in care of
Borrower in accordance with the Credit Agreement.
15. Continuing Security Interest. This Agreement shall create a continuing
security interest in the Collateral and shall: (i) subject to Section 22, remain
in full force and effect until the indefeasible payment in full in immediately
available funds of the Secured Obligations, including the irrevocable
termination of any commitment to extend any financial accommodations under the
Credit Agreement; (ii) be binding upon each Pledgor and its successors and
assigns; and (iii) inure to the benefit of Collateral Agent and its successors,
transferees, and assigns. Subject to Section 22, upon the full and final payment
in immediately available funds of the Secured Obligations, including the
irrevocable termination of any commitment to extend any financial accommodations
under the Credit Agreement, the security interests granted herein shall
automatically terminate and all rights to the Collateral shall revert to
Pledgors. Upon any such termination, Collateral Agent will, at Pledgors'
expense, execute and deliver to Pledgors such documents as such Pledgor shall
reasonably request to evidence such termination. Such documents shall be
prepared by Pledgors and shall be in form and substance reasonably satisfactory
to Collateral Agent. Upon such termination, Collateral Agent will, at Pledgors'
expense, deliver to Pledgors the certificates evidencing its shares of Pledged
Interests (and any other non-cash property received as a dividend or
distribution or otherwise in respect of such Pledged Interests), together with
any cash then constituting the Collateral not then sold or otherwise disposed of
in accordance with the provisions hereof.
16. Security Interest Absolute. To the maximum extent permitted by law, all
rights of Collateral Agent, all security interests hereunder, and all
obligations of each Pledgor hereunder, shall be absolute and unconditional. To
the maximum extent permitted by law, each Pledgor hereby waives any right to
require Collateral Agent to: (A) proceed against or exhaust any security held
from such Pledgor; or (B) pursue any other remedy in Collateral Agent's power
whatsoever.
17.Headings. Section and subsection headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement or be given any substantive effect.
18. Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
19. Counterparts; Telefacsimile Execution. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver an original executed counterpart of this Agreement but the failure
to deliver an original executed counterpart shall not affect the validity,
enforceability, or binding effect hereof.
20. Waiver of Marshaling. Each Pledgor and Collateral Agent acknowledge and
agree that in exercising any rights under or with respect to the Collateral: (i)
Collateral Agent is under no obligation to marshal any Collateral; (ii) may, in
its absolute discretion, realize upon the Collateral in any order and in any
manner it so elects; and (iii) may, subject solely to Section 10 hereof, apply
the proceeds of any or all of the Collateral to the Secured Obligations in any
order and in any manner it so elects. Each Pledgor and Collateral Agent waive
any right to require the marshaling of any of the Collateral.
21. Waiver of Jury Trial. EACH PLEDGOR AND COLLATERAL AGENT HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PLEDGOR AND COLLATERAL AGENT
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
22. Revival. If the payment of the Secured Obligations by any Pledgor or
the transfer by any Pledgor to Collateral Agent or the Lender Group of any
property of such Pledgor should for any reason subsequently be declared to be
void or voidable under the provisions of the Bankruptcy Code relating to
preferences, and other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if Collateral Agent or the
Lender Group is required to repay or restore, in whole or in part, any such
Voidable Transfer, or elects to do so upon the reasonable advice of its counsel,
then, as to any such Voidable Transfer, or the amount thereof that Collateral
Agent or the Lender Group is required or elects to repay or restore, and as to
all reasonable costs, expenses, and attorneys fees of Collateral Agent or the
Lender Group related thereto, the liability of Pledgors automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
[Signature page to follow.]
IN WITNESS WHEREOF, each Pledgor and Collateral Agent have caused this
Agreement to be duly executed and delivered by their officers thereunto duly
authorized as of the date first written above.
IMPERIAL PETROLEUM, INC.,
a Nevada corporation
By:
Name:
Title:
RIDGEPOINTE MINING COMPANY,
a Delaware corporation
By:
Name:
Title:
GLOBAL/IMPERIAL JOINT VENTURE INC., a
Nevada corporation
By:
Name:
Title:
PHOENIX METALS, INC.,
a Texas corporation
By:
Name:
Title:
HIGHBRIDGE/ZWIRN SPECIAL
OPPORTUNITIES FUND, L.P.,
a Delaware limited partnership, as Collateral Agent
By: Highbridge/Zwirn Capital Management, LLC,
its general partner
By:
Name:
Title:
SCHEDULE A
TO
PLEDGE AGREEMENT
Pledgor: IMPERIAL PETROLEUM, INC.
Pledged Interests
Pledgor's
Issuer Number of Class Certificated Certificate Percentage Jurisdiction
Shares/ (Yes/No) Number(s) Ownership of Formation
Membership (if any)
Interests
Global/Imperial 5,000 Capital Yes 1 100% Nevada
Joint Venture, Inc.
Phoenix Metals, Inc. 30,000 Common Yes 1001 100% Texas
Ridgepointe Mining 12,560,730 Common Yes 1001 100% Delaware
Company
SCHEDULE B
TO
PLEDGE AGREEMENT
Pledgor: IMPERIAL PETROLEUM, INC.
Address of Chief Executive Office:
11600 German Pines
Evansville, IN 47725
Pledgor: RIDGEPOINTE MINING COMPANY
Address of Chief Executive Office:
11600 German Pines
Evansville, IN 47725
Pledgor: GLOBAL/IMPERIAL JOINT VENTURE INC.
Address of Chief Executive Office:
11600 German Pines
Evansville, IN 47725
Pledgor: PHOENIX METALS, INC.
Address of Chief Executive Office:
11600 German Pines
Evansville, IN 47725
CONSOLIDATED AMENDED AND RESTATED CREDIT AGREEMENT
This Consolidated Amended and Restated Credit Agreement (this "Agreement"),
dated as of January 15, 2004, by and among IMPERIAL PETROLEUM INC., a Nevada
corporation (the "Borrower"), the lenders from time to time party hereto (each a
"Lender" and collectively, the "Lenders"), HIGHBRIDGE/ZWIRN SPECIAL
OPPORTUNITIES FUND, L.P., a Delaware limited partnership ("HZ"), as collateral
agent for the Lenders (in such capacity, together with any successor collateral
agent, the "Collateral Agent"), HZ, as administrative agent for the Lenders (in
such capacity, together with any successor administrative agent, the
"Administrative Agent"; and together with the Collateral Agent, each an "Agent"
and collectively, the "Agents").
RECITALS
WHEREAS, Hillside Oil & Gas, LLC ("Hillside") and Existing Lender (as
hereafter defined) are parties to the Existing Hillside Credit Agreement (as
hereafter defined), pursuant to which from time to time the Existing Lender has
extended credit to Hillside;
WHEREAS, Warrior Resources, Inc. ("Warrior"), Warrior's Subsidiaries, and
Existing Lender are parties to the Existing Warrior Credit Agreement (as
hereafter defined), pursuant to which from time to time the Existing Lender has
extended credit to Warrior and its Subsidiaries;
WHEREAS, contemporaneously herewith (a) HZ has purchased the Indebtedness
of Hillside to Existing Lender under the Existing Hillside Credit Agreement, (b)
HZ has purchased the Indebtedness of Warrior and its Subsidiaries to Existing
Lender under the Existing Warrior Credit Agreement, (c) Borrower has assumed the
Indebtedness of Hillside, Warrior and Warrior's Subsidiaries under the Existing
Hillside Credit Agreement and the Existing Warrior Credit Agreement,
respectively, and (d) HZ has released Hillside, Warrior and Warrior's
Subsidiaries from their Indebtedness under the Existing Hillside Credit
Agreement and the Existing Warrior Credit Agreement, respectively;
WHEREAS, the Borrower, the Lenders, Administrative Agent and Collateral
Agent desire to amend and restate their respective obligations under the
Existing Hillside Credit Agreement and the Existing Warrior Credit Agreement
pursuant to the terms of this Agreement, with the Indebtedness evidenced by the
Existing Hillside Credit Agreement and the Existing Warrior Credit Agreement to
remain outstanding from and after the date of the purchase described above as a
loan subject to the terms and conditions of this Agreement;
WHEREAS, the Borrower has asked the Agents to arrange, and for the Lenders
to extend, credit to the Borrower on the terms and conditions set forth in this
Agreement through the making of loans on and after the Effective Date (as
hereafter defined) consisting of a term loan in the aggregate principal amount
of $650,000, and a revolving credit facility in an aggregate principal amount
not to exceed $18,000,000 at any time outstanding, all on the terms and
conditions of this Agreement;
WHEREAS, the proceeds of the loans made under the term loan and the
revolving credit facility will be used by the Borrower (i) fund the purchase
price under the Acquisition Agreements (as defined below), (ii) to pay fees and
expenses related to this Amended and Restated Credit Agreement and the other
Loan Documents (as hereafter defined), and (iii) for the Borrower's general
working capital purposes; and
WHEREAS, the Lenders are severally, and not jointly, willing to extend such
credit to the Borrower and are willing to consolidate, amend and restate the
Hillside Existing Credit Agreement and the Warrior Existing Credit Agreement in
their entirety on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto agree that the Hillside Existing
Credit Agreement and the Warrior Existing Credit Agreement are each hereby
consolidated, amended and restated in their entirety as follows:
ARTICLE 1
DEFINITIONS; CERTAIN TERMS
Section 1.01 Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account Receivable, chattel paper, or a
general intangible.
"Account Receivable" means, with respect to any Person, all of such
Person's now owned or hereafter acquired right, title, and interest with respect
to "accounts" (as that term is defined in the Code), and any and all "supporting
obligations" (as that term is defined in the Code) in respect thereof.
"Acquisition" means (a) any Stock Acquisition, or (b) any Asset
Acquisition.
"Acquisition Agreements" means, collectively, the Hillside Acquisition
Agreement, the Kentucky Acquisition Agreement, the Warrior Acquisition
Agreement, and each other agreement or document executed or delivered in
connection with any of the foregoing.
"Action" has the meaning specified therefor in Section 12.12.
"Administrative Agent" has the meaning specified therefor in the preamble
hereto.
"Administrative Agent's Account" means an account at a bank designated by
the Administrative Agent from time to time as the account into which the
Borrower shall make all payments to the Administrative Agent for the benefit of
the Agents and the Lenders under this Agreement and the other Loan Documents.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" of a Person means the power, directly or indirectly,
either to (i) vote 5% or more of the Capital Stock having ordinary voting power
for the election of directors of such Person or (ii) direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise. Notwithstanding anything herein to the contrary, in no event shall
any Agent or any Lender be considered an "Affiliate" of any Loan Party.
"After Acquired Property" means any interest in real property (other than
Oil and Gas Properties) acquired by the Borrower or any of its Subsidiaries
after the date hereof with a Current Value in excess of $500,000 in the case of
a fee interest or requiring the payment of annual rent exceeding in the
aggregate $500,000 in the case of a leasehold interest.
"Agent" has the meaning specified therefor in the preamble hereto.
"Agent Reserve" and "Agent Reserves" have the meanings specified therefor
in Section 2.01(b)(i).
"Agreement" means this Consolidated, Amended and Restated Credit Agreement,
including all amendments, modifications and supplements and any exhibits or
schedules to any of the foregoing, and shall refer to the Agreement as the same
may be in effect at the time such reference becomes operative.
"Applicable Reference Rate Margin" means 8.00 percentage points.
"Asset Acquisition" means any purchase or other acquisition by Borrower or
its Subsidiaries of all or substantially all of the assets of any other Person.
"Assignment and Acceptance" means an assignment and acceptance entered into
by an assigning Lender and an assignee, and accepted by the Collateral Agent, in
accordance with Section 12.07 hereof and substantially in the form of Exhibit
A-1 hereto or such other form acceptable to the Collateral Agent.
"Assignment Documents" means the Hillside Assignment Agreement, the Warrior
Assignment Agreement, and each assignment or other similar agreement, document
or instrument entered into between HZ and the Existing Lender in connection with
the purchase of the Indebtedness evidenced by the Existing Hillside Credit
Agreement and the Existing Warrior Credit Agreement from the Existing Lender,
including, without limitation, the assignments of mortgages or deeds of trust
related to the Oil and Gas Properties owned by the Loan Parties and UCC
assignments with respect to the Liens filed by the Existing Lender pursuant to
the Existing Hillside Credit Agreement or the Existing Warrior Credit Agreement.
"Assumption Agreement" means that certain Assumption Agreement by and among
Borrower, Hillside, BTT, Inc., Warrior, Double Eagle Petroleum Corporation,
Enigma Energy Company, L.L.C., and HZ which is in form and substance
satisfactory to Collateral Agent.
"Authorized Officer" means, with respect to any Person, the chief executive
officer, chief financial officer, controller, president or any executive or
senior vice president of such Person.
"Availability" means, at any time, the difference between (i) the lesser of
(A) the Borrowing Base and (B) the Total Revolving Credit Commitment and (ii)
the sum of (A) the aggregate outstanding principal amount of all Revolving
Loans, and (B) the aggregate amount, if any, of all trade payables of the
Borrower and its Subsidiaries aged in excess of historical levels.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.ss.
101, et seq.), as amended, and any successor statute.
"Basis Differential" means, in the case of any Oil and Gas Property, the
difference between the NYMEX Strip Price and the sales prices at the delivery
point where the gas or oil, as the case may be, produced by such Oil and Gas
Property, is sold.
"Board" means the Board of Governors of the Federal Reserve System of the
United States.
"Board of Directors" means, with respect to any Person, the board of
directors (or comparable managers) of such Person or any committee thereof duly
authorized to act on behalf of the board.
"Borrower" has the meaning specified therefor in the preamble hereto.
"Borrowing Base" means, as of any date of determination, the difference
between (a) the sum of (i) 60% of the PV-10 of the Proved Developed Producing
Reserves of the Borrower that are located in the United States and subject to a
Mortgage and UCC financing statements, that in each case create a first priority
perfected Lien in such Oil and Gas Properties in favor of the Collateral Agent
for the ratable benefit of the Lenders, (ii) 40% of the PV-10 of the Proved
Developed Non-Producing Reserves of the Borrower that are located in the United
States and subject to a Mortgage and UCC financing statements, that in each case
create a first priority perfected Lien in such Oil and Gas Properties in favor
of the Collateral Agent for the ratable benefit of the Lenders, and (iii) 10% of
the PV-10 of the Proved Undeveloped Reserves of the Borrower that are located in
the United States and subject to a Mortgage and UCC financing statements, that
in each case create a first priority perfected Lien in such Oil and Gas
Properties in favor of the Collateral Agent for the ratable benefit of the
Lenders, and (b) the sum of (i) the Hedge Reserve, and (ii) such other reserves
as the Administrative Agent may deem appropriate in the exercise of its business
judgment based upon the lending practices of the Administrative Agent, including
without limitation the Agent Reserves; provided, however, that the borrowing
capacity attributable to clause (iii) above shall not exceed the lesser of (x)
10% of the combined borrowing capacity under clauses (i), (ii) and (iii)
(without giving effect to this limitation) above and (y) $1,800,000.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required to close.
"Capital Expenditures" means, with respect to any Person for any period,
the sum of (i) the aggregate of all expenditures by such Person and its
Subsidiaries during such period that in accordance with GAAP are or should be
included in "property, plant and equipment" or in a similar fixed asset account
on its balance sheet, whether such expenditures are paid in cash or financed and
including all Capitalized Lease Obligations incurred during such period, and
(ii) to the extent not covered by clause (i) above, the aggregate of all
expenditures by such Person and its Subsidiaries during such period to acquire
by purchase or otherwise the business or fixed assets of, or the Capital Stock
of, any other Person.
"Capital Guideline" means any law, rule, regulation, policy, guideline or
directive of any Governmental Authority or any central bank (whether or not
having the force of law and whether or not the failure to comply therewith would
be unlawful) (i) regarding capital adequacy, capital ratios, capital
requirements, the calculation of a bank's capital or similar matters, or (ii)
affecting the amount of capital required to be obtained or maintained by any
Lender, any Person controlling any Lender or the manner in which any Lender, any
Person controlling any Lender allocates capital to any of its contingent
liabilities, advances, acceptances, commitments, assets or liabilities.
"Capitalized Lease" means, with respect to any Person, any lease of real or
personal property by such Person as lessee which is required under GAAP to be
capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means, with respect to any Person,
obligations of such Person and its Subsidiaries under Capitalized Leases, and,
for purposes hereof, the amount of any such obligation shall be the capitalized
amount thereof determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, and (ii) with respect
to any Person that is not a corporation, any and all partnership, membership or
other equity interests of such Person.
"Cash and Cash Equivalents" means all cash, deposit or securities account
balances, certificates of deposit or other financial instruments properly
classified as cash or cash equivalents under GAAP.
"Change of Control" means each occurrence of any of the following:
(a) the acquisition, directly or indirectly, by any person or group (within
the meaning of Section 13(d)(3) of the Exchange Act) (other than by a Permitted
Holder) of beneficial ownership of more than 10% of the aggregate outstanding
voting power of the Capital Stock of the Borrower;
(b) at any time the Permitted Holder ceases to have the power to appoint,
or ceases to have appointed, a majority of the individuals who compose the Board
of Directors of the Borrower,
(c) during any period of 12 consecutive months, individuals who at the
beginning of such period constituted the Board of Directors of the Borrower
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Borrower was approved
by a vote of at least a majority the directors of the Borrower then still in
office who were either directors at the beginning of such period, or whose
election or nomination for election was previously approved) cease for any
reason to constitute a majority of the Board of Directors of the Borrower;
(d) the Borrower ceases to own and control 100% of the shares of the
Capital Stock of the Borrower's Subsidiaries, unless otherwise permitted
hereunder; or
(e) (i) the Borrower consolidates with or merges into another entity or
conveys, transfers or leases all or substantially all of its property and assets
to any Person, or (ii) any entity consolidates with or merges into the Borrower,
which in either event (i) or (ii) is pursuant to a transaction in which the
outstanding voting Capital Stock of the Borrower is reclassified or changed into
or exchanged for cash, securities or other property.
"Code" means the New York Uniform Commercial Code, as in effect from time
to time.
"Collateral" means all of the property and assets and all interests therein
and proceeds thereof now owned or hereafter acquired by any Person upon which a
Lien is granted or purported to be granted by such Person as security for all or
any part of the Obligations.
"Collateral Agent" has the meaning specified therefor in the preamble
hereto.
"Collateral Agent Advances" has the meaning specified therefor in Section
10.08(a).
"Commitments" means, with respect to each Lender, such Lender's Revolving
Credit Commitment and Term Loan Commitment.
"Consolidated EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person and its Subsidiaries for such period,
plus (i) without duplication, the sum of the following amounts of such Person
and its Subsidiaries for such period and to the extent deducted in determining
Consolidated Net Income of such Person and its Subsidiaries for such period: (A)
Consolidated Net Interest Expense, (B) income tax expense, (C) depreciation
expense, and (D) amortization expense.
"Consolidated Funded Indebtedness" means, with respect to any Person at any
date, all Indebtedness of such Person, determined on a consolidated basis in
accordance with GAAP, which by its terms matures more than one year after the
date of calculation, and any such Indebtedness maturing within one year from
such date which is renewable or extendable at the option of such Person to a
date more than one year from such date, including, in any event, but without
duplication, with respect to the Borrower and its Subsidiaries, the Revolving
Loans and the amount of their Capital Lease Obligations.
"Consolidated Funded Senior Indebtedness" means, with respect to Borrower
and its Subsidiaries at any date, all Obligations under this Agreement other
than Obligations in respect of the Term Loan, determined on a consolidated basis
in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person and its Subsidiaries for such period,
determined on a consolidated basis and in accordance with GAAP, but excluding
from the determination of Consolidated Net Income (without duplication) (a) any
non-cash extraordinary or non-recurring gains or losses or non-cash gains or
losses from Dispositions, (b) restructuring charges, (c) effects of discontinued
operations, and (d) interest that is paid-in-kind.
"Consolidated Net Interest Expense" means, with respect to any Person for
any period, gross interest expense of such Person and its Subsidiaries for such
period determined on a consolidated basis and in accordance with GAAP
(including, without limitation, interest expense paid to Affiliates of such
Person), less (i) the sum of (A) interest income for such period and (B) gains
for such period on interest rate Hedging Agreements (to the extent not included
in interest income above and to the extent not deducted in the calculation of
gross interest expense), plus (ii) the sum of (A) losses for such period on
interest rate Hedging Agreements (to the extent not included in such gross
interest expense) and (B) the upfront costs or fees for such period associated
with interest rate Hedging Agreements (to the extent not included in such gross
interest expense), in each case, determined on a consolidated basis and in
accordance with GAAP.
"Consolidated Total Interest Expense" means, with respect to any Person for
any period, gross interest expense for such Person and its Subsidiaries for such
period determined on a consolidated basis and in accordance with GAAP (including
without limitation interest expense paid to Affiliates of such Person).
"Consolidated Total Senior Interest Expense" means, with respect to the
Borrower and its Subsidiaries for any period, gross interest expense incurred
under this Agreement for such period determined on a consolidated basis and in
accordance with GAAP.
"Contingent Obligation" means, with respect to any Person, any obligation
of such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, (i) the direct or indirect guaranty, endorsement (other than
for collection or deposit in the ordinary course of business), co-making,
discounting with recourse or sale with recourse by such Person of the obligation
of a primary obligor, (ii) the obligation to make take-or-pay or similar
payments, if required, regardless of nonperformance by any other party or
parties to an agreement, (iii) any obligation of such Person, whether or not
contingent, (A) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (B) to advance or supply
funds (1) for the purchase or payment of any such primary obligation or (2) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (C) to purchase
property, assets, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (D) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof;
provided, however, that the term "Contingent Obligation" shall not include any
product warranties extended in the ordinary course of business or delivery
obligations with respect to any volumetric production payment. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation with respect to which such
Contingent Obligation is made (or, if less, the maximum amount of such primary
obligation for which such Person may be liable pursuant to the terms of the
instrument evidencing such Contingent Obligation) or, if not stated or
determinable, the maximum reasonably anticipated liability with respect thereto
(assuming such Person is required to perform thereunder), as determined by such
Person in good faith.
"Current Value" has the meaning specified therefor in Section 7.01(o).
"Default" means an event which, with the giving of notice or the lapse of
time or both, would constitute an Event of Default.
"Disbursement Letter" means a Disbursement Letter, in form and substance
satisfactory to Collateral Agent.
"Disposition" means any transaction, or series of related transactions,
pursuant to which any Person or any of its Subsidiaries sells, assigns,
transfers or otherwise disposes of any property or assets (whether now owned or
hereafter acquired) to any other Person, in each case, whether or not the
consideration therefor consists of cash, securities or other assets owned by the
acquiring Person, excluding any sales of Inventory in the ordinary course of
business on ordinary business terms.
"Dollar," "Dollars" and the symbol "$" each means lawful money of the
United States of America.
"Effective Date" means the date, on or before January 15, 2004, on which
all of the conditions precedent set forth in Section 5.01 are first satisfied or
waived.
"Employee Plan" means an employee benefit plan (other than a Multiemployer
Plan) covered by Title IV of ERISA and maintained (or that was maintained at any
time during the six (6) calendar years preceding the date of any borrowing
hereunder) for employees of any Loan Party or any of its ERISA Affiliates.
"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter or other communication from any Governmental
Authority involving violations of Environmental Laws or Releases of Hazardous
Materials (i) from any assets, properties or businesses of any Loan Party or any
of its Subsidiaries or any predecessor in interest; (ii) from adjoining
properties or businesses; or (iii) onto any facilities which received Hazardous
Materials generated by any Loan Party or any of its Subsidiaries or any
predecessor in interest.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C.ss. 9601, et seq.), the Hazardous
Materials Transportation Act (49 U.S.C.ss.1801, et seq.), the Resource
Conservation and Recovery Act (42 U.S.C.ss. 6901, et seq.), the Federal Clean
Water Act (33 U.S.C.ss. 1251 et seq.), the Clean Air Act (42 U.S.C.ss. 7401 et
seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Oil
Pollution Act of 1990 (33 U.S.C.ss. 2701 et seq.), the Emergency Planning and
the Community Right-to-Know Act of 1986 (42 U.S.C.ss. 11001 et seq.), the
Hazardous Material Transportation Act (49 U.S.C.ss. 1801 et seq.), and the
Occupational Safety and Health Act (29 U.S.C.ss. 651 et seq.), as such laws may
be amended or otherwise modified from time to time, and any other present or
future federal, state, local or foreign statute, ordinance, rule, regulation,
order, judgment, decree, permit, license or other binding determination of any
Governmental Authority imposing liability or establishing standards of conduct
for protection of the environment or other government restrictions relating to
the protection of the environment or the release, emission, deposit, discharge,
leaching, migration or spill of any Hazardous Materials into the environment.
"Environmental Liabilities and Costs" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants and costs of
investigations and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any environmental condition or
a Release of Hazardous Materials from or onto (i) any property currently or
formerly owned by any Loan Party or any of its Subsidiaries or (ii) any facility
which received Hazardous Materials generated by any Loan Party or any of its
Subsidiaries.
"Environmental Lien" means any Lien in favor of any Governmental Authority
for Environmental Liabilities and Costs.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, and regulations
thereunder, in each case, as in effect from time to time. References to sections
of ERISA shall be construed also to refer to any successor sections.
"ERISA Affiliate" means, with respect to any Person, any trade or business
(whether or not incorporated) which is a member of a group of which such Person
is a member and which would be deemed to be a "controlled group" within the
meaning of Sections 414(b), (c), (m) and (o) of the IRC.
"Event of Default" means any of the events set forth in Section 9.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Hillside Credit Agreement" means that certain Loan Agreement
dated as of June 23, 2000, by and among the Hillside, BTT, Inc., and Existing
Lender, as amended, supplemented or otherwise modified from time to time prior
to the Effective Date.
"Existing Lender" means the Bank of Oklahoma, a National Association.
"Existing Warrior Credit Agreement" means that certain First Amended and
Restated Credit Agreement dated as of September 30, 2002, by and among Warrior,
Double Eagle Petroleum Corporation, Enigma Energy Company, L.L.C., and Existing
Lender, as amended, supplemented or otherwise modified from time to time prior
to the Effective Date.
"Extraordinary Receipts" means any cash received by the Borrower or any of
its Subsidiaries not in the ordinary course of business (and not consisting of
proceeds of Dispositions or Indebtedness), including, without limitation, (i)
foreign, United States, state or local tax refunds, (ii) pension plan
reversions, (iii) proceeds of insurance, (iv) judgments, proceeds of settlements
or other consideration of any kind in connection with any cause of action, (v)
condemnation awards (and payments in lieu thereof), (vi) indemnity payments and
(vii) any purchase price adjustment received in connection with any purchase
agreement.
"FASB 133" means Statement No. 133 of the Financial Accounting Standards
Board as it applies to Hedging Agreements.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal to, for each day during such period, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published 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 which is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"Fee Letter" means that certain fee letter agreement, dated as of the date
hereof, between the Borrower and the Administrative Agent.
"Field Survey and Audit" means a field survey and audit of the Loan Parties
and each other party to an Acquisition Agreement (including an analysis of their
accounts payable as of a date no earlier than 30 days prior to the Effective
Date) and an appraisal of the Collateral performed by auditors, examiners and/or
appraisers selected by the Collateral Agent, at the sole cost and expense of the
Borrower.
"Final Revolver Maturity Date" means January 15, 2007, or such earlier date
on which any Loan shall become due and payable in accordance with the terms of
this Agreement and the other Loan Documents.
"Final Term Loan Maturity Date" means January 15, 2008.
"Financial Statements" means (i) the audited consolidated balance sheet of
the Borrower and its Subsidiaries for the Fiscal Year ended July 31, 2002, and
the related consolidated statement of operations, shareholders' equity and cash
flows for the Fiscal Year then ended, and (ii) the unaudited consolidated
balance sheet of the Borrower and its Subsidiaries for the 9 months ended April
30, 2003, and the related consolidated statement of operations, shareholder's
equity and cash flows for the 9 months then ended.
"Fiscal Year" means the fiscal year of the Borrower and its Subsidiaries
ending on July 31of each year.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of (i) the TTM EBITDA of such Person and its Subsidiaries for
such period minus Capital Expenditures made by such Person and its Subsidiaries
during such period, to (ii) the sum of (A) all principal of Indebtedness of such
Person and its Subsidiaries scheduled to be paid or prepaid during such period
to the extent there is not an equivalent permanent reduction in the commitments
thereunder, plus (B) Consolidated Net Interest Expense of such Person and its
Subsidiaries for such period, plus (C) income taxes paid or payable by such
Person and its Subsidiaries during such period, plus (D) cash dividends or
distributions paid by such Person and its Subsidiaries (other than, in the case
of the Borrower, dividends or distributions paid to the Borrower or its
wholly-owned Subsidiaries) during such period, plus (E) Capital Expenditures
made by such Person and its Subsidiaries during such period, plus (F) all
amounts paid or payable by such Person and its Subsidiaries on Operating Lease
Obligations having a scheduled due date during such period. In determining the
Fixed Charge Coverage Ratio for a particular period (1) pro forma effect will be
given to: (a) the incurrence, repayment or retirement of any Indebtedness by
such Person and its Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired on the first day of such period and
(b) the acquisition (whether by purchase, merger or otherwise) or disposition
(whether by sale, merger or otherwise) of any property or assets acquired or
disposed of by such Person and its Subsidiaries since the first day of such
period, as if such acquisition or disposition occurred on the first day of such
period; (2) interest on Indebtedness bearing a floating interest rate will be
computed as if the rate as of the last day of the period had been the applicable
rate for the entire period; (3) if such Indebtedness bears, at the option of
such Person and its Subsidiaries, a fixed or floating rate of interest, interest
thereon will be computed by applying, at the option of such Person, either the
fixed or floating rate; and (4) interest on Indebtedness under a revolving
credit facility will be computed based upon the average daily balance of such
Indebtedness during such period.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States, applied on a consistent basis, provided that for
the purpose of Section 7.03 hereof and the definitions used therein, "GAAP"
shall mean generally accepted accounting principles in effect on the date hereof
and consistent with those used in the preparation of the Financial Statements,
provided, further, that if there occurs after the date of this Agreement any
change in GAAP that affects in any respect the calculation of any covenant
contained in Section 7.03 hereof, the Collateral Agent and the Borrower shall
negotiate in good faith amendments to the provisions of this Agreement that
relate to the calculation of such covenant with the intent of having the
respective positions of the Lenders and the Borrower after such change in GAAP
conform as nearly as possible to their respective positions as of the date of
this Agreement and, until any such amendments have been agreed upon, the
covenants in Section 7.03 hereof shall be calculated as if no such change in
GAAP has occurred.
"Governmental Authority" means any nation or government, any Federal,
state, city, town, municipality, county, local or other political subdivision
thereof or thereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantor" means (i) each Subsidiary of the Borrower, and (ii) each other
Person which guarantees, pursuant to Section 7.01(b) or otherwise, all or any
part of the Obligations.
"Guaranty" means each guaranty substantially in the form of Exhibit G-1,
made by any Guarantor in favor of the Collateral Agent for the benefit of the
Lenders, including those made pursuant to Section 7.01(b).
"Hazardous Materials" means (a) any element, compound or chemical that is
defined, listed or otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous substance or
chemical, hazardous waste, special waste, or solid waste under Environmental
Laws or that is likely to cause immediately, or at some future time, harm to or
have an adverse effect on, the environment or risk to human health or safety,
including, without limitation, any pollutant, contaminant, waste, hazardous
waste, toxic substance or dangerous good which is defined or identified in any
Environmental Law and which is present in the environment in such quantity or
state that it contravenes any Environmental Law; (b) petroleum and its refined
products; (c) polychlorinated biphenyls; (d) any substance exhibiting a
hazardous waste characteristic, including, without limitation, corrosivity,
ignitability, toxicity or reactivity as well as any radioactive or explosive
materials; and (e) any raw materials, building components (including, without
limitation, asbestos-containing materials) and manufactured products containing
hazardous substances listed or classified as such under Environmental Laws.
"Hedge Reserve" means an amount equal to the aggregate amount of cash
pledged to secure Borrower's Indebtedness in respect of Hedging Agreements.
"Hedging Agreement" means any interest rate, foreign currency, commodity or
equity swap, collar, cap, floor or forward rate agreement, or other agreement or
arrangement designed to protect against fluctuations in interest rates or
currency, commodity or equity values (including, without limitation, any option
with respect to any of the foregoing and any combination of the foregoing
agreements or arrangements), and any confirmation executed in connection with
any such agreement or arrangement.
"Highest Lawful Rate" means, with respect to any Agent or any Lender, the
maximum non-usurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the
Obligations under laws applicable to such Agent or such Lender which are
currently 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 non-usurious
interest rate than applicable laws now allow.
"Hillside" has the meaning set forth in the recitals to this Agreement.
"Hillside Acquisition Agreement" means that certain Purchase and Sale
Agreement dated as of July 9, 2003, as amended from time to time prior to the
date hereof, pursuant to which Borrower is acquiring all or substantially all of
the assets of Hillside.
"Hillside Assignment Agreement" means that certain Purchase and Sale
Agreement dated contemporaneously herewith by and between Existing Lender and HZ
pursuant to which HZ has acquired the Indebtedness evidenced by the Existing
Hillside Credit Agreement and the other agreements or documents executed or
delivered in connection therewith.
"Hydrocarbons" means oil, gas, coal seam gas, casinghead gas, condensate,
distillate, liquid hydrocarbons, gaseous hydrocarbons, all products refined,
separated, settled and dehydrated therefrom and all products refined therefrom,
including, without limitation, kerosene, liquefied petroleum gas, refined
lubricating oils, diesel fuel, drip gasoline, natural gasoline, helium, sulfur
and all other minerals.
"Hydrocarbon Interests" means all rights, titles, interests and estates now
owned or hereafter acquired in and to Hydrocarbon leases, Hydrocarbon or other
mineral fee or lease interests, farm-ins, overriding royalty and royalty
interests, net profit interests, oil payments, production payment interests and
similar mineral interests, including any reserved or residual interest of
whatever nature.
"HZ" has the meaning specified therefore in the preamble hereto.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money; (ii) all obligations of such
Person for the deferred purchase price of property or services (other than trade
payables or other accounts payable incurred in the ordinary course of such
Person's business and not outstanding for more than 90 days after the date such
payable was created); (iii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments or upon which interest payments
are customarily made; (iv) all reimbursement, payment or other obligations and
liabilities of such Person created or arising under any conditional sales or
other title retention agreement with respect to property used and/or acquired by
such Person, even though the rights and remedies of the lessor, seller and/or
lender thereunder may be limited to repossession or sale of such property; (v)
all Capitalized Lease Obligations of such Person; (vi) all obligations and
liabilities, contingent or otherwise, of such Person, in respect of letters of
credit, acceptances and similar facilities; (vii) all obligations and
liabilities, calculated on a basis satisfactory to the Collateral Agent and in
accordance with accepted practice, of such Person under Hedging Agreements;
(viii) all Contingent Obligations; (ix) liabilities incurred under Title IV of
ERISA with respect to any plan (other than a Multiemployer Plan) covered by
Title IV of ERISA and maintained for employees of such Person or any of its
ERISA Affiliates; (x) withdrawal liability incurred under ERISA by such Person
or any of its ERISA Affiliates with respect to any Multiemployer Plan; (xi) all
other items which, in accordance with GAAP, would be included as liabilities on
the liability side of the balance sheet of such Person; and (xii) all
obligations referred to in clauses (i) through (xi) of this definition of
another Person to the extent secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) a
Lien upon property owned by such Person, even though such Person has not assumed
or become liable for the payment of such Indebtedness. The Indebtedness of any
Person shall include the Indebtedness of any partnership of in which such Person
is a general partner and any Person's allocable share of any Indebtedness of any
joint venture in which such Person is a joint venturer, including Indebtedness
of which such Person is jointly and severally liable, but excluding any
non-recourse Indebtedness.
"Indemnified Matters" has the meaning specified therefor in Section 12.15.
"Indemnitees" has the meaning specified therefor in Section 12.15.
"Initial Reserve Report" has the meaning specified therefor in Section
5.01(k).
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other bankruptcy
or insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, or extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"Intercompany Subordination Agreement" means a subordination agreement
executed and delivered by Borrower, each of its Subsidiaries, and Collateral
Agent, the form and substance of which is reasonably satisfactory to Collateral
Agent.
"IRC" means the Internal Revenue Code of 1986, as amended (or any successor
statute thereto) and the regulations thereunder.
"Inventory" means all of each of the Loan Parties' now owned and/or
hereafter acquired right, title, and interest with respect to inventory as
defined in the Code, including Hydrocarbons.
"Kentucky Seller" means Renovared Energy Resources, Inc.
"Kentucky Acquisition Agreement" means that certain Purchase and Sale
Agreement dated as of April 9, 2003, as amended from time to time prior to the
date hereof, pursuant to which Borrower is acquiring certain of the assets of
Kentucky Seller.
"Lease" means any lease of real property to which any Loan Party or any of
its Subsidiaries is a party as lessor or lessee.
"Lender" has the meaning specified therefor in the preamble hereto.
"Liabilities" has the meaning specified therefor in Section 2.07.
"Lien" means any mortgage, deed of trust, pledge, lien (statutory or
otherwise), security interest, charge or other encumbrance or security or
preferential arrangement of any nature, including, without limitation, any
conditional sale or title retention arrangement, any Capitalized Lease and any
assignment, deposit arrangement or financing lease intended as, or having the
effect of, security.
"Loan" means the Term Loan or any Revolving Loan made by an Agent or a
Lender to the Borrower pursuant to Article II hereof.
"Loan Account" means an account maintained hereunder by the Administrative
Agent on its books of account at the Payment Office, and with respect to the
Borrower, in which the Borrower will be charged with all Loans made to, and all
other Obligations incurred by, the Borrower.
"Loan Document" means this Agreement, the Assignment Documents, the
Assumption Agreement, the Disbursement Letter, the Fee Letter, any Guaranty, the
Intercompany Subordination Agreement, any Mortgage, any Pledge Agreement, the
Registration Rights Agreement, any Security Agreement, any Transfer Order
Letter, any UCC Filing Authorization Letter, the Warrant, and any other
agreement, instrument, and other document executed and delivered by a Loan Party
pursuant hereto or thereto relating to, evidencing or securing any Loan or any
other Obligation.
"Loan Party" means Borrower and/or any Guarantor.
"Material Adverse Effect" means a material adverse effect on any of (i) the
operations, business, assets, properties, condition (financial or otherwise) or
prospects of any Loan Party or the Loan Parties taken as a whole, (ii) the
ability of any Loan Party to perform any of its obligations under any Loan
Document to which it is a party, (iii) the legality, validity or enforceability
of this Agreement or any other Loan Document, (iv) the rights and remedies of
any Agent or any Lender under any Loan Document, or (v) the validity, perfection
or priority of a Lien in favor of the Collateral Agent for the benefit of the
Lenders on any of the Collateral.
"Material Contract" means, with respect to any Person, (i) each contract or
agreement to which such Person or any of its Subsidiaries is a party involving
aggregate consideration payable to or by such Person or such Subsidiary of
$100,000 or more (other than purchase orders in the ordinary course of the
business of such Person or such Subsidiary and other than contracts that by
their terms may be terminated by such Person or Subsidiary in the ordinary
course of its business upon less than 60 days notice without penalty or premium)
and (ii) all other contracts or agreements material to the business, operations,
condition (financial or otherwise), performance, prospects or properties of such
Person or such Subsidiary.
"Moody's" means Moody's Investors Service, Inc. and any successor thereto.
"Mortgage" means a fee or leasehold mortgage, deed of trust or deed to
secure debt, in form and substance satisfactory to the Collateral Agent, made by
a Loan Party in favor of the Collateral Agent for the benefit of the Lenders,
securing the Obligations and delivered to the Collateral Agent pursuant to the
provisions hereof or otherwise.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which any Loan Party or any of its ERISA Affiliates has
contributed to, or has been obligated to contribute, at any time during the
preceding six (6) years.
"Net Cash Proceeds" means, (i) with respect to any Disposition by any
Person or any of its Subsidiaries, the amount of cash received (directly or
indirectly) from time to time (whether as initial consideration or through the
payment or disposition of deferred consideration) by or on behalf of such Person
or such Subsidiary, in connection therewith after deducting therefrom only (A)
the amount of any Indebtedness secured by any Lien permitted by Section 7.02(a)
on any asset (other than Indebtedness assumed by the purchaser of such asset)
which is required to be, and is, repaid in connection with such Disposition
(other than Indebtedness under this Agreement), (B) reasonable expenses related
thereto incurred by such Person or such Subsidiary in connection therewith, (C)
transfer taxes paid to any taxing authorities by such Person or such Subsidiary
in connection therewith, and (D) net income taxes to be paid in connection with
such Disposition (after taking into account any tax credits or deductions and
any tax sharing arrangements) and (ii) with respect to the issuance or
incurrence of any Indebtedness by any Person or any of its Subsidiaries, or the
sale or issuance by any Person or any of its Subsidiaries of any shares of its
Capital Stock, the aggregate amount of cash received (directly or indirectly)
from time to time (whether as initial consideration or through the payment or
disposition of deferred consideration) by or on behalf of such Person or such
Subsidiary in connection therewith, after deducting therefrom only (A)
reasonable expenses related thereto incurred by such Person or such Subsidiary
in connection therewith, (B) transfer taxes paid by such Person or such
Subsidiary in connection therewith and (C) net income taxes to be paid in
connection therewith (after taking into account any tax credits or deductions
and any tax sharing arrangements); in each case of clause (i) and (ii) to the
extent, but only to the extent, that the amounts so deducted are (x) actually
paid to a Person that, except in the case of reasonable out-of-pocket expenses,
is not an Affiliate of such Person or any of its Subsidiaries and (y) properly
attributable to such transaction or to the asset that is the subject thereof.
"Notice of Borrowing" has the meaning specified therefor in Section
2.02(a).
"NYMEX" means the New York Mercantile Exchange or its successor entity.
"NYMEX Strip Price" means as of any date of determination, the average of
the 24 succeeding monthly futures contract prices, commencing with the month
during which the determination date occurs, for each of the appropriate crude
oil and natural gas categories included in the most recent Reserve Report
provided by the Borrower to the Agents pursuant to Section 7.01(a)(vi) as quoted
on the NYMEX; provided, that if the NYMEX no longer provides futures contract
price quotes or has ceased to operate, the comparable futures contract prices
quoted on such other nationally recognized commodities exchange as Agent shall
designate.
"Obligations" means all present and future indebtedness, obligations, and
liabilities of each Loan Party to the Agents and the Lenders, or any of them,
under the Loan Documents, whether or not the right of payment in respect of such
claim is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, disputed, undisputed, legal, equitable, secured, unsecured, and whether
or not such claim is discharged, stayed or otherwise affected by any proceeding
referred to in Section 9.01. Without limiting the generality of the foregoing,
the Obligations of each Loan Party under the Loan Documents include (a) the
obligation (irrespective of whether a claim therefor is allowed in any
Insolvency Proceeding) to pay principal, interest, premiums, charges, expenses,
fees, attorneys' fees and disbursements, indemnities and other amounts payable
by such Person under the Loan Documents, and (b) the obligation of such Person
to reimburse any amount in respect of any of the foregoing that any Agent or any
Lender (in its sole discretion) may elect to pay or advance on behalf of such
Person.
"Oil and Gas Business" means (a) the acquisition, exploration,
exploitation, development, operation and disposition of interests in Oil and Gas
Properties and Hydrocarbons, (b) the gathering, marketing, treating, processing,
storage, selling and transporting of any production from such interests or
properties, including, without limitation, the marketing of Hydrocarbons
obtained from unrelated Persons, (c) any business relating to or arising from
exploration for or development, production, treatment, processing, storage,
transportation or marketing of oil, gas and other minerals and products produced
in association therewith, (d) any business relating to oilfield sales and
service, and (e) any activity that is ancillary or necessary or desirable to
facilitate the activities described in clauses (a) through (d) of this
definition.
"Oil and Gas Properties" means all Hydrocarbon Interests; the personal
property and/or real property now or hereafter pooled or unitized with
Hydrocarbon Interests; 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 having jurisdiction) which may affect all or
any portion of the Hydrocarbon Interests; all pipelines, gathering lines,
compression facilities, tanks and processing plants; all oil wells, gas wells,
water wells, injection wells, platforms, spars or other offshore facilities,
casings, rods, tubing, pumping units and engines, Christmas trees, derricks,
separators, gun barrels, flow lines, gas systems (for gathering, treating and
compression), and water systems (for treating, disposal and injection); all
interests held in royalty trusts whether presently existing or hereafter
created; all Hydrocarbons in and under and which may be produced, saved,
processed or attributable to the Hydrocarbon Interests, the lands covered
thereby and all Hydrocarbons in pipelines, gathering lines, tanks and processing
plants and all rents, issues, profits, proceeds, products, revenues and other
incomes from or attributable to the Hydrocarbon Interests; all tenements,
hereditaments, appurtenances and personal property and/or real property in any
way appertaining, belonging, affixed or incidental to the Hydrocarbon Interests,
and all rights, titles, interests and estates described or referred to above,
including any and all real property, now owned or hereafter acquired, used or
held for use in connection with the operating, working or development of any of
such Hydrocarbon Interests or personal property and/or real property and
including any and all surface leases, rights-of-way, easements and servitude
together with all additions, substitutions, replacements, accessions and
attachments to any and all of the foregoing; all Hydrocarbon leasehold, fee and
term interests, all overriding royalty interests, mineral interests, royalty
interests, net profits interests, net revenue interests, oil and gas payments,
production payments, carried interests, leases, subleases, farmouts and any and
all other interests in Hydrocarbons; in each case whether now owned or hereafter
acquired directly or indirectly.
"Operating Lease Obligations" means all obligations for the payment of rent
for any real or personal property under leases or agreements to lease, other
than Capitalized Lease Obligations.
"Other Taxes" has the meaning specified therefor in Section 2.08(a)(iii).
"Participant Register" has the meaning specified therefor in Section
12.07(b)(v).
"Payment Office" means the Administrative Agent's office located at 9 West
57th Street, 27th Floor, New York, New York 10019, or at such other office or
offices of the Administrative Agent as may be designated in writing from time to
time by the Administrative Agent to the Collateral Agent and the Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Acquisition" means any Acquisition so long as:
(a) no Default or Event of Default shall have occurred and be continuing or
would result from the consummation of the proposed Acquisition,
(b) the assets being acquired, or the Person whose Capital Stock is being
acquired, are useful in or engaged in, as applicable, the business of Parent
and/or its Subsidiaries or a business reasonably related thereto,
(c) Borrower has at least $500,000 of Availability after giving effect to
such Acquisition,
(d) the aggregate cash consideration paid or payable in respect of the
proposed Acquisition and all other Acquisitions consummated after the Effective
Date does not exceed $500,000,
(e) Borrower has provided Collateral Agent with written confirmation,
supported by reasonably detailed calculations, that on a pro forma basis,
created by adding the projected consolidated financial statements of Borrower
(including the consolidated financial statements of any other Person or assets
that were the subject of a prior Permitted Acquisition during the relevant
period) to the projected consolidated financial statements of the Person to be
acquired (or the historical financial statements related to the assets to be
acquired) pursuant to the proposed Acquisition (adjusted to eliminate expense
items that are projected not to be incurred and include income items that are
projected to be recognized, in each case, if the combination is accomplished at
the beginning of the relevant period; such eliminations and inclusions to be
mutually agreed upon by Borrower and Collateral Agent), Borrower would be in
compliance with the financial covenants in Section 7.03 hereof for the 12 months
ended immediately following to the proposed date of consummation of such
proposed Acquisition,
(f) Borrower has provided Collateral Agent with prior written notice of the
proposed Acquisition not less than 10 Business Days prior to the anticipated
closing date of the subject Acquisition together with such documentation that
Collateral Agent reasonably may require demonstrating that the proposed
Acquisition could not reasonably be expected to have a Material Adverse Effect
on Borrower (and Collateral Agent shall have 5 Business Days from and after the
receipt by Collateral Agent of such documentation to notify Borrower of its
contention that the proposed Acquisition cannot proceed because a Material
Adverse Effect could reasonably be expected to result from the proposed
Acquisition),
(g) in the case of an Asset Acquisition, the subject assets are being
acquired by Borrower,
(h) in the case of a Stock Acquisition, the subject Capital Stock is being
acquired in such Acquisition directly by Borrower,
(i) in the case of an Asset Acquisition, Borrower shall have executed and
delivered or authorized, as applicable, any and all security agreements,
financing statements, fixture filings, and other documentation reasonably
requested by Collateral Agent in order to include the newly acquired assets
within the collateral hypothecated under the Loan Documents,
(j) in the case of a Stock Acquisition, Borrower shall have executed and
delivered a pledge agreement respecting the Capital Stock being acquired and
shall have delivered to Collateral Agent possession of the original stock
certificates respecting all of the issued and outstanding shares of Capital
Stock of such acquired Person, together with stock powers with respect thereto
endorsed in blank,
(k) in the case of a Stock Acquisition, Borrower shall have caused such
acquired Person to execute and deliver a joinder to either this Agreement or the
Guaranty in order to make such Person a party hereto or thereto, together with
any and all security agreements, financing statements, fixture filings, and
other documentation reasonably requested by Collateral Agent in order to cause
such cause acquired Person to be obligated with respect to the Obligations and
to include the assets of the acquired Person within the collateral hypothecated
under the Loan Documents; and
(l) Borrower has provided Collateral Agent with such documentation as
Collateral Agent reasonably may require demonstrating that the aggregate
purchase consideration (including any deferred purchase consideration) is not in
excess of 2.5 times the TTM EBITDA (adjusted to eliminate expense items that
would not have been incurred and include income items that would have been
recognized, in each case, if the combination had been accomplished at the
beginning of the relevant period; such eliminations and inclusions to be
mutually agreed upon by Borrower and Collateral Agent) of the Person whose
Capital Stock is being acquired, or associated with the assets being acquired.
"Permitted Business Investments" means any investments made in the ordinary
course of, and of a nature that is or shall have become customary in, the Oil
and Gas Business as a means of actively exploiting, exploring for, developing,
processing, gathering, marketing or transporting oil and gas through agreements,
transactions, interests or arrangements which permit one to share risks or
costs, comply with regulatory requirements regarding local ownership or satisfy
other objectives customarily achieved through the conduct of Oil and Gas
Business jointly with third parties, including, without limitation, the entry
into operating agreements, working interests, royalty interests, mineral leases,
processing agreements, farm-out and farm-in agreements, division orders,
contracts for the sale, transportation or exchange of oil or natural gas,
unitization and pooling declarations and agreements and area of mutual interest
agreements, production sharing agreements or other similar or customary
agreements, transactions, properties, interests, and investments and
expenditures in connection therewith, and acquisitions of Oil and Gas Properties
that do not in the aggregate exceed $500,000 per Fiscal Year so long as, after
giving effect to any such acquisition, no Default or Event of Default has
occurred and is continuing and Borrower has Availability plus Qualified Cash of
at least $500,000; provided that an investment in capital stock, partnership
interests, joint venture interests, limited liability company interests or other
similar equity interests in a Person shall not constitute a Permitted Business
Investment.
"Permitted Dispositions" means (a) sales or other dispositions of Inventory
to buyers in the ordinary course of business, (b) sales or other dispositions of
obsolete or worn-out equipment in the ordinary course of business, (c) sales or
other dispositions of other property or assets for cash in an aggregate amount
not less than the fair market value of such property or assets, provided that
(i) no Default or Event of Default has occurred and is continuing or would
result therefrom and (ii) the Net Cash Proceeds of such Dispositions in the case
of clauses (b) and (c), do not exceed $500,000 in the aggregate in any
twelve-month period, (d) the use or transfer of money or Cash Equivalents by the
Borrower and its Subsidiaries in a manner that is not prohibited by the terms of
this Agreement or the other Loan Documents, (e) the licensing by the Borrower
and its Subsidiaries, on a non-exclusive basis, of patents, trademarks,
copyrights, and other intellectual property rights in the ordinary course of
business, (f) the granting of leases or subleases to other Persons not
materially interfering with the conduct of business of any of the Loan Parties,
(g) the sale or other disposition of the Capital Stock in Powder River Basin Gas
Corp., a Colorado corporation, that is owned by Borrower, substantially on the
terms set forth on Schedule P-1 hereto, and (h) the sale or other disposition of
the Capital Stock in Ridgepointe Mining Company, so long as Borrower certifies
to each Agent that purchase price received by Borrower in connection with such
sale or other disposition is not less than the then extant fair market value of
such Capital Stock.
"Permitted Holder" means Jeffrey Wilson.
"Permitted Indebtedness" means:
(a) any Indebtedness owing to any Agent and any Lender under this Agreement
and the other Loan Documents;
(b) Indebtedness incurred prior to the date hereof that is listed on
Schedule 7.02(b), and the extension of maturity, refinancing or modification of
the terms thereof; provided, however, that (i) such extension, refinancing or
modification is pursuant to terms that are not less favorable to the Loan
Parties and the Lenders than the terms of the Indebtedness being extended,
refinanced or modified and (ii) after giving effect to such extension,
refinancing or modification, the amount of such Indebtedness is not greater than
the amount of Indebtedness outstanding immediately prior to such extension,
refinancing or modification plus accrued interest thereon and the fees incurred
in connection with the extension, refinancing, or modification;
(c) Indebtedness evidenced by Capitalized Lease Obligations incurred after
the date hereof in order to finance Capital Expenditures made by the Loan
Parties in accordance with the provisions of Section 7.02(g), which
Indebtedness, when aggregated with the principal amount of all Indebtedness
incurred under this clause (c) and clause (d) of this definition, does not
exceed $250,000 at any time outstanding;
(d) purchase money Indebtedness incurred after the date hereof to enable a
Loan Party to acquire equipment in the ordinary course of its business, which
Indebtedness, when aggregated with the principal amount of all Indebtedness
incurred under this clause (d) and clause (c) of this definition, does not
exceed $250,000 at any time outstanding;
(e) Indebtedness permitted under Section 7.02(e);
(f) Indebtedness of the Borrower or any of its Subsidiaries under any
Hedging Agreement so long as such Hedging Agreements are used solely as a part
of its normal business operations as a risk management strategy and/or hedge
against changes resulting from market operations and not as a means to speculate
for investment purposes on trends and shifts in financial or commodities
markets; and
(g) Subordinated Debt.
"Permitted Investments" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency or instrumentality thereof and backed by the full faith and credit of the
United States, in each case, maturing within six months from the date of
acquisition thereof; (ii) commercial paper, maturing not more than 270 days
after the date of issue rated P-1 by Moody's or A-1 by Standard & Poor's; (iii)
certificates of deposit maturing not more than 270 days after the date of issue,
issued by commercial banking institutions and money market or demand deposit
accounts maintained at commercial banking institutions, each of which is a
member of the Federal Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000; (iv) repurchase agreements
having maturities of not more than 90 days from the date of acquisition which
are entered into with major money center banks included in the commercial
banking institutions described in clause (iii) above and which are secured by
readily marketable direct obligations of the United States Government or any
agency thereof, (v) money market accounts maintained with mutual funds having
assets in excess of $2,500,000,000; and (vi) tax exempt securities rated A or
better by Moody's or A+ or better by Standard & Poor's.
"Permitted Liens" means:
(a) Liens securing the Obligations;
(b) Liens for taxes, assessments and governmental charges the payment of
which is not required under Section 7.01(c);
(c) Liens imposed by law, such as carriers', warehousemen's, mechanics',
materialmen's and other similar Liens arising (provided they are subordinate to
the Collateral Agent's Liens on Collateral) in the ordinary course of business
and securing obligations (other than Indebtedness for borrowed money) that are
not overdue by more than 30 days or are being contested in good faith and by
appropriate proceedings promptly initiated and diligently conducted, and a
reserve or other appropriate provision, if any, as shall be required by GAAP
shall have been made therefor;
(d) Liens described on Schedule 7.02(a), but not the extension of coverage
thereof to other property or assets
(e) Liens arising under Capital Leases or securing purchase money
Indebtedness permitted under the definition of Permitted Indebtedness; provided,
however, that (A) no such Lien shall extend to or cover any other property of
any Loan Party or any of its Subsidiaries, and (B) the principal amount of the
Indebtedness secured by any such Lien shall not exceed the lesser of 80% of the
fair market value or the cost of the property so held or acquired;
(f) deposits and pledges of cash securing (i) obligations incurred in
respect of workers' compensation, unemployment insurance or other forms of
governmental insurance or benefits, (ii) the performance of bids, tenders,
leases, contracts (other than for the payment of money) and statutory
obligations or (iii) obligations on surety or appeal bonds, but only to the
extent such deposits or pledges are incurred or otherwise arise in the ordinary
course of business and secure obligations not past due;
(g) deposits and pledges of cash, in an aggregate amount at any time
outstanding not in excess of $100,000, securing obligations in respect of
Hedging Agreements to which Borrower is a party;
(h) easements, zoning restrictions and similar encumbrances on real
property and minor irregularities in the title thereto that are customarily
accepted in the Oil and Gas Business and that do not (i) secure obligations for
the payment of money or (ii) materially impair the value of such property or its
use by any Loan Party or any of its Subsidiaries in the normal conduct of such
Person's business;
(i) leases or subleases granted to other Persons not materially interfering
with the conduct of the business of the Borrower or any of its Subsidiaries;
(j) precautionary UCC financing statement filings regarding operating
leases;
(k) Liens arising out of the existence of judgments or awards not giving
rise to an Event of Default;
(l) statutory and common law landlords' liens under leases to which the
Borrower or any of its Subsidiaries is a party; and
(m) Liens securing Refinancing Indebtedness permitted to be incurred
hereunder; provided, that such Liens do not extend to any property or assets
other than the property or assets that served as collateral for the refinanced
Indebtedness.
"Person" means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or other enterprise or entity or Governmental
Authority.
"Petroleum Engineers" means Pollard, Gore & Harrison or such other
petroleum engineers of recognized national standing as may be selected by the
Borrower with the prior consent of the Agents.
"Pledge Agreement" means a Pledge Agreement made by a Loan Party in favor
of the Collateral Agent for the benefit of the Lenders, substantially in the
form of Exhibit P-1, securing the Obligations and delivered to the Collateral
Agent.
"Post-Default Rate" means a rate of interest per annum equal to the rate of
interest otherwise in effect from time to time pursuant to the terms of this
Agreement plus 4.00 percentage points, or, if a rate of interest is not
otherwise in effect, interest at the highest rate specified herein for any Loan
prior to the Event of Default plus 4.00 percentage points.
"property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Pro Rata Share" means:
(a) with respect to a Lender's obligation to make Revolving Loans and
receive payments of interest, fees, and principal with respect thereto, the
percentage obtained by dividing (i) such Lender's Revolving Credit Commitment,
by (ii) the Total Revolving Credit Commitment, provided, that, if the Total
Revolving Credit Commitment has been reduced to zero, the numerator shall be the
aggregate unpaid principal amount of such Lender's Revolving Loans (including
Collateral Agent Advances) and the denominator shall be the aggregate unpaid
principal amount of all Revolving Loans (including Collateral Agent Advances),
(b) with respect to a Lender's obligation to make the Term Loan and receive
payments of interest, fees, and principal with respect thereto, the percentage
obtained by dividing (i) such Lender's Term Loan Commitment, by (ii) the Total
Term Loan Commitment, provided that if the Total Term Loan Commitment has been
reduced to zero, the numerator shall be the aggregate unpaid principal amount of
such Lender's portion of the Term Loan and the denominator shall be the
aggregate unpaid principal amount of the Term Loan, and
(c) with respect to all other matters (including, without limitation, the
indemnification obligations arising under Section 10.05), the percentage
obtained by dividing (i) the sum of such Lender's Revolving Credit Commitment
and the unpaid principal amount of such Lender's portion of the Term Loan, by
(ii) the sum of the Total Revolving Credit Commitment and the aggregate unpaid
principal amount of the Term Loan; provided, that if such Lender's Revolving
Credit Commitment shall have been reduced to zero, such Lender's Revolving
Credit Commitment shall be deemed to be the aggregate unpaid principal amount of
such Lender's Revolving Loans (including Collateral Agent Advances) and if the
Total Revolving Credit Commitment shall have been reduced to zero, the Total
Revolving Credit Commitment shall be deemed to be the aggregate unpaid principal
amount of all Revolving Loans (including Collateral Agent Advances).
"Proved Developed Non-Producing Reserves" means those Oil and Gas
Properties designated as "proved developed non-producing" (in accordance with
the Definitions for Oil and Gas Reserves approved by the Board of Directors of
the Society for Petroleum Engineers, Inc. from time to time) in the Reserve
Report and used in establishing the Borrowing Base.
"Proved Developed Producing Reserves" means those Oil and Gas Properties
designated as "proved developed producing" (in accordance with the Definitions
for Oil and Gas Reserves approved by the Board of Directors of the Society for
Petroleum Engineers, Inc. from time to time) in the Reserve Report and used in
establishing the Borrowing Base.
"Proved Reserves" means those Oil and Gas Properties designated as "proved"
(in accordance with the Definitions for Oil and Gas Reserves approved by the
Board of Directors of the Society for Petroleum Engineers, Inc. from time to
time) in the Reserve Report and used in establishing the Borrowing Base.
"Proved Undeveloped Reserves" means those Oil and Gas Properties designated
as "proved undeveloped producing" (in accordance with the Definitions for Oil
and Gas Reserves approved by the Board of Directors of the Society for Petroleum
Engineers, Inc. from time to time) in the Reserve Report and used in
establishing the Borrowing Base.
"PV-10" means, as of any date of determination, the sum of the present
values of the amounts of net revenues before income taxes expected to be
received in each of the months following the date of determination on the basis
of estimated production from Proved Reserves during such months determined as
follows:
(a) each such monthly net revenue amount shall be calculated (x) on the
basis of the applicable NYMEX Strip Price for the appropriate category of oil or
gas as of such date of determination, adjusting such price to reflect (A) the
appropriate Basis Differential with respect to Hydrocarbons produced from
specific Oil and Gas Properties of the Borrower as set forth on Exhibit PV-10,
as such Exhibit may from time to time be amended at the request of the Borrower
with the consent of the Agents, which consent shall not be unreasonably
withheld, conditioned or delayed, (B) the prices for fixed price contracts for
such month, (C) the prices for hedged volumes for such month and (D) Btu
content, (y) assuming that production costs remain constant throughout the
periods of the calculation of such monthly net revenues, and (z) otherwise
applying the financial accounting and reporting standards prescribed by the SEC
for application of the successful efforts method of accounting for such revenues
under Rule 4-10 of Regulation S-X as promulgated by the SEC from time to time;
and
(b) the present value of each such monthly net revenue amount shall be
determined by discounting each such monthly net revenue amount from the month in
which it is expected to be received, on a monthly basis, to such date of
determination at a rate of 10% per annum.
"Qualified Cash" means, as of any date of determination, the amount of
unrestricted Cash and Cash Equivalents of the Borrower and its Subsidiaries that
is subject to a control agreement in favor of Collateral Agent and that is on
deposit with banks, or in securities accounts with securities intermediaries, or
any combination thereof.
"Rating Agencies" has the meaning specified therefor in Section 2.07.
"Reference Bank" means JPMorgan Chase Bank, its successors or any other
commercial bank designated by the Administrative Agent to Borrower from time to
time.
"Reference Rate" means the rate of interest publicly announced by the
Reference Bank in New York, New York from time to time as its reference rate,
base rate or prime rate. The reference rate, base rate or prime rate is
determined from time to time by the Reference Bank as a means of pricing some
loans to its borrowers and neither is tied to any external rate of interest or
index nor necessarily reflects the lowest rate of interest actually charged by
the Reference Bank to any particular class or category of customers. Each change
in the Reference Rate shall be effective from and including the date such change
is publicly announced as being effective.
"Register" has the meaning specified therefor in Section 12.07(b)(ii).
"Registered Loan" has the meaning specified therefore in Section
12.07(b)(ii).
"Registration Rights Agreement" means that certain Registration Rights
Agreement dated contemporaneously herewith by and between Borrower and HZ, which
is in form and substance satisfactory to HZ.
"Regulation T", "Regulation U" and "Regulation X" mean, respectively,
Regulations T, U and X of the Board or any successor, as the same may be amended
or supplemented from time to time.
"Related Fund" means, with respect to any Lender, any Affiliate (other than
individuals) of such Lender, including, without limitation, a fund or an account
managed by such Lender or an Affiliate of such Lender or its investment manager.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers and other closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through or in the ambient air,
soil, surface or ground water, or property.
"Remedial Action" means all actions taken to (i) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate or in any other way address
Hazardous Materials in the indoor or outdoor environment; (ii) prevent or
minimize a Release or threatened Release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities; or (iv)
perform any other actions authorized by 42 U.S.C. ss. 9601.
"Reportable Event" means an event described in Section 4043 of ERISA (other
than an event not subject to the provision for 30-day notice to the PBGC under
the regulations promulgated under such Section).
"Required Lenders" means Revolving Loan Lenders whose Pro Rata Shares
(calculated under clause (a) of the definition thereof) aggregate at least 51%.
"Reserve Report" means a report of the Petroleum Engineers in the form of
the Initial Reserve Report, setting forth, as of July 31 or January 31 of any
calendar year (a) the volumetric quantity and both the PV-10 and the SEC Value,
of the oil and gas reserves attributable to the Oil and Gas Properties of the
Borrower included in the calculation of the Borrowing Base, together with a
projection of the rate of production and future net income, taxes, operating
expenses and capital expenditures with respect thereto as of such date, and (b)
such other information as any Agent may reasonably request.
"Revolving Credit Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving Loans to the Borrower in the amount
set forth opposite such Lender's name in Schedule C-1 hereto, as such amount may
be terminated or reduced from time to time in accordance with the terms of this
Agreement.
"Revolving Loan" means a loan made by a Lender to the Borrower pursuant to
Section 2.01(a)(i).
"Revolving Loan Lender" means a Lender with a Revolving Credit Commitment.
"Revolving Loan Obligations" means any Obligations with respect to the
Revolving Loans (including without limitation, the principal thereof, the
interest thereon, and the fees and expenses specifically related thereto).
"Royalty Payments Suspense Account" means that certain entry in Borrower's
financial records identified as the "royalty suspense payments account".
"SEC" means the Securities and Exchange Commission or any other similar or
successor agency of the Federal government administering the Securities Act.
"SEC Value" means the future net revenues before income taxes from Proved
Reserves, estimated utilizing the actual price for the appropriate category of
oil or gas as of the date of determination and assuming that oil and natural gas
prices and production costs thereafter remain constant, then discounted at the
rate of 10% per year to obtain the present value, and otherwise applying the
financial accounting and reporting standards prescribed by the SEC for
application of the successful efforts method of accounting under Rule 4-10 and
Regulation S-X as promulgated by the SEC from time to time.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect from time to time.
"Securitization" has the meaning specified therefor in Section 2.07.
"Securitization Parties" has the meaning specified therefor in Section
2.07.
"Security Agreement" means a Security Agreement made by a Loan Party in
favor of the Collateral Agent for the benefit of the Lenders, substantially in
the form of Exhibit S-1, securing the Obligations and delivered to the
Collateral Agent.
"Settlement Period" has the meaning specified therefor in Section
2.02(d)(i) hereof.
"Solvent" means, with respect to any Person on a particular date, that on
such date (i) the fair value of the property of such Person is not less than the
total amount of the liabilities of such Person, (ii) the present fair salable
value of the assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its existing debts as
they become absolute and matured, (iii) such Person is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iv) such Person
does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. and any successor thereto.
"Stock Acquisition" means the purchase or other acquisition by Borrower or
its wholly-owned Subsidiaries of all of the Capital Stock of any other Person.
"Subordinated Debt" means Indebtedness of any Loan Party, the terms of
which are satisfactory to the Collateral Agent and the Required Lenders and
which has been expressly subordinated in right of payment to all Indebtedness of
such Loan Party under the Loan Documents and otherwise is on terms and
conditions (including, without limitation, subordination provisions, payment
terms, interest rates, covenants, remedies, defaults and other material terms)
satisfactory to the Collateral Agent and the Required Lenders.
"Subsidiary" means, with respect to any Person at any date, any
corporation, limited or general partnership, limited liability company, trust,
estate, association, joint venture or other business entity (i) the accounts of
which would be consolidated with those of such Person in such Person's
consolidated financial statements if such financial statements were prepared in
accordance with GAAP or (ii) of which more than 50% of (A) the outstanding
Capital Stock having (in the absence of contingencies) ordinary voting power to
elect a majority of the board of directors or other managing body of such
Person, (B) in the case of a partnership or limited liability company, the
interest in the capital or profits of such partnership or limited liability
company or (C) in the case of a trust, estate, association, joint venture or
other entity, the beneficial interest in such trust, estate, association or
other entity business is, at the time of determination, owned or controlled
directly or indirectly through one or more intermediaries, by such Person.
"Taxes" has the meaning specified therefor in Section 2.08(a).
"Term Loan" means, collectively, the loans made by the Term Loan Lenders to
the Borrower on the Term Loan Funding Date pursuant to Section 2.01(a)(iii).
"Term Loan Commitment" means, with respect to each Lender, the commitment
of such Lender to make its portion of the Term Loan to the Borrower in the
amount set forth in Schedule C-1 hereto, as the same may be terminated or
reduced from time to time in accordance with the terms of this Agreement.
"Term Loan Funding Date" means the date, on or before January 15, 2004, on
which the Term Loan is made.
"Term Loan Lender" means a Lender with a Term Loan Commitment.
"Term Loan Obligations" means any Obligations with respect to the Term Loan
(including without limitation, the principal thereof, the interest thereon, and
the fees and expenses specifically related thereto).
"Term Loan PIK Amount" means as of any date of determination, the amount of
all interest accrued with respect to the Term Loan that has been paid-in-kind by
being added to the balance thereof in accordance with Section 2.04(b).
"Termination Event" means (i) a Reportable Event with respect to any
Employee Plan, (ii) any event that causes any Loan Party or any of its ERISA
Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
IRC, (iii) the filing of a notice of intent to terminate an Employee Plan or the
treatment of an Employee Plan amendment as a termination under Section 4041 of
ERISA, (iv) the institution of proceedings by the PBGC to terminate an Employee
Plan, or (v) 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 Employee Plan.
"Title Insurance Policy" means a mortgagee's loan policy, in form and
substance satisfactory to the Collateral Agent, together with all
endorsements made from time to time thereto, issued by or on behalf of a
title insurance company satisfactory to the Collateral Agent, insuring the
Lien created by a Mortgage in an amount and on terms satisfactory to the
Collateral Agent, delivered to the Collateral Agent.
"Total Commitment" means the sum of the Total Revolving Credit Commitment
and the Total Term Loan Commitment.
"Total Revolving Credit Commitment" means $18,000,000, which amount is the
sum of the amounts of the Lenders' Revolving Credit Commitments.
"Total Term Loan Commitment" means $650,000, which amount is the sum of the
amounts of the Lenders' Term Loan Commitments.
"Transfer Order Letters" means the letters in lieu of division or transfer
orders, in form acceptable to the Collateral Agent.
"TTM EBITDA" means, as of any date of determination and with respect to a
Person, the Consolidated EBITDA of such Person and its Subsidiaries for the 12
month period most recently ended.
"UCC Filing Authorization Letter" means a letter duly executed by each Loan
Party authorizing the Collateral Agent to file appropriate financing statements
on Form UCC-1 without the signature of such Loan Party in such office or offices
as may be necessary or, in the opinion of the Collateral Agent, desirable to
perfect the security interests purported to be created by each Security
Agreement and Pledge Agreement.
"WARN" has the meaning specified therefor in Section 6.01(z).
"Warrior Acquisition Agreement" means that certain Purchase and Sale
Agreement dated as of July 15, 2003, as amended from time to time prior to the
date hereof, pursuant to which Borrower is acquiring all or substantially all of
the assets of Warrior and its Subsidiaries.
"Warrior Assignment Agreement" means that certain Purchase and Sale
Agreement dated contemporaneously herewith by and between Existing Lender and HZ
pursuant to which HZ has acquired the Indebtedness evidenced by the Existing
Warrior Credit Agreement and the other agreements or documents executed or
delivered in connection therewith.
"Warrant" means that certain Warrant Agreement dated contemporaneously
herewith by Borrower in favor of HZ.
Section 1.02 Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise, (a) any definition of or reference to any
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), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) 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, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights. References in this
Agreement to "determination" by any Person include estimates by such Person (in
the case of quantitative determinations) and beliefs by such Person (in the case
of qualitative determinations).
Section 1.03 Accounting and Other Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under GAAP. All terms used in this Agreement which are defined in Article 8
or Article 9 of the Code as in effect from time to time in the State of New York
and which are not otherwise defined herein shall have the same meanings herein
as set forth therein.
Section 1.04 Time References. Unless otherwise indicated herein, all
references to time of day refer to Eastern Standard Time or Eastern daylight
saving time, as in effect in New York City on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding"; provided, however, that with respect to a computation
of fees or interest payable to any Agent or any Lender, such period shall in any
event consist of at least one full day.
ARTICLE II
THE LOANS
Section 2.01 Commitments. (i) Subject to the terms and conditions and
relying upon the representations and warranties herein set forth:
(i) each Revolving Loan Lender severally agrees to make Revolving Loans to
the Borrower at any time and from time to time from the Effective Date to the
Final Revolver Maturity Date, or until the earlier reduction of its Revolving
Credit Commitment to zero in accordance with the terms hereof, in an aggregate
principal amount of Revolving Loans at any time outstanding not to exceed the
amount of such Lender's Revolving Credit Commitment or its Pro Rata Share of the
then extant Borrowing Base; and
(ii) each Term Loan Lender severally agrees to make its portion of the Term
Loan to the Borrower on the Term Loan Funding Date, in an aggregate principal
amount equal to the amount of such Lender's Term Loan Commitment.
(b) Notwithstanding the foregoing:
(i) The aggregate principal amount of Revolving Loans outstanding at any
time to the Borrower shall not exceed the lower of (A) the Total Revolving
Credit Commitment and (B) the then current Borrowing Base. The Revolving Credit
Commitment of each Lender shall automatically and permanently be reduced to zero
on the Final Revolver Maturity Date. Within the foregoing limits, the Borrower
may borrow, repay and reborrow the Revolving Loans, on or after the Effective
Date and prior to the Final Revolver Maturity Date, subject to the terms,
provisions and limitations set forth herein. Anything to the contrary in this
Agreement notwithstanding, the Administrative Agent may, and, at the request of
the Required Lenders, shall create reserves against the Borrowing Base or reduce
one or more of the percentages set forth in the definition of Borrowing Base
with respect to the stated categories of oil and gas reserves (in either case
without declaring an Event of Default) as the Administrative Agent determines,
in its reasonable judgment (from the perspective of an asset-based lender), as
being appropriate to reflect impediments to the Collateral Agent's ability to
realize upon the Collateral or impairments or reductions to the value of the
Collateral (in each case, an "Agent Reserve", and collectively, the "Agent
Reserves"). Without limiting the generality of the foregoing, Agent Reserves may
include (but are not limited to) reserves based upon (A) past due or accrued
taxes or other governmental charges, including ad valorem, personal property and
other taxes which may have priority over the Liens or security interests of the
Collateral Agent in the Collateral; (B) Liens in favor of third Persons,
including, without limitation, any Governmental Authority (whether or not such
Liens are Permitted Liens; (C) estimates of present and future costs, expenses,
deposits and liabilities related to the plugging and abandonment of the Oil and
Gas Properties (net of the amount thereof which has been taken into account in
the most recent Reserve Report or is fully secured by an escrow arrangement
acceptable to the Administrative Agent); (D) without duplication of the
foregoing, amounts owing by the Borrower to any Person, including, without
limitation, any Governmental Authority, to the extent secured by a Lien (whether
or not such Lien is a Permitted Lien) on, or trust (constructive or otherwise)
over, any of the Collateral (including proceeds thereof or collections from the
sale of Hydrocarbons which may from time to time come into the possession of any
of the Lenders or their agents), which Lien or trust, in the reasonable
determination of the Administrative Agent (from the perspective of an
asset-based lender), has a reasonable possibility of having a priority superior
to the Collateral Agent's Liens (such as landlord liens, ad valorem taxes,
production taxes, severance taxes, sales taxes, collections attributable to sale
of Hydrocarbons of Persons other than the Borrower or its Subsidiaries) in and
to such item of Collateral, proceeds or collection; and (E) to the extent not
taken into account in the most recent Reserve Report delivered to the Agents,
amounts which the Administrative Agent reasonably determines are appropriate to
account for interests of Persons other than the Loan Parties and natural gas
imbalances of the Loan Parties. The Borrower and the Agents understand and agree
that any amount of Agent Reserves shall not be considered a disbursement bearing
interest hereunder, but rather shall be an amount that is not available for
borrowing by the Borrower.
(ii) The aggregate principal amount of the Term Loan made on the Term Loan
Funding Date shall not exceed the Total Term Loan Commitment. Any principal
amount of the Term Loan which is repaid or prepaid may not be reborrowed.
Section 2.02 Making the Loans. (a) The Borrower shall give the
Administrative Agent prior telephonic notice (immediately confirmed in writing,
in substantially the form of Exhibit 2.02 hereto (a "Notice of Borrowing")), not
later than 12:00 noon (New York City time) on the date which is 5 Business Days
prior to the date of the proposed Loan (or such shorter period as the
Administrative Agent is willing to accommodate from time to time, but in no
event later than 12:00 noon (New York City time) on the borrowing date of the
proposed Loan). Such Notice of Borrowing shall be irrevocable and shall specify
(i) the principal amount of the proposed Loan, (ii) whether such Loan is a
Revolving Loan or a Term Loan, and (iii) the proposed borrowing date, which must
be a Business Day, and, with respect to the Term Loan, must be the Effective
Date. The Administrative Agent and the Lenders may act without liability upon
the basis of written, telecopied or telephonic notice believed by the
Administrative Agent in good faith to be from the Borrower (or from any
Authorized Officer thereof designated in writing purportedly from the Borrower
to the Administrative Agent). The Borrower hereby waives the right to dispute
the Administrative Agent's record of the terms of any such telephonic Notice of
Borrowing. The Administrative Agent and each Lender shall be entitled to rely
conclusively on any Authorized Officer's authority to request a Loan on behalf
of the Borrower until the Administrative Agent receives written notice to the
contrary. The Administrative Agent and the Lenders shall have no duty to verify
the authenticity of the signature appearing on any written Notice of Borrowing.
The proceeds of all Revolving Loans shall be disbursed by the Administrative
Agent into the Disbursement Account.
(b) Each Notice of Borrowing pursuant to this Section 2.02 shall be
irrevocable and the Borrower shall be bound to make a borrowing in accordance
therewith. Each Revolving Loan shall be made in a minimum amount of $500,000 and
shall be in integral multiples of $100,000 in excess thereof.
(c)(i)Except as otherwise provided in this Section 2.02(c), all Loans under
this Agreement shall be made by the Lenders simultaneously and proportionately
to their Pro Rata Shares of the Total Revolving Credit Commitment and the Total
Term Loan Commitment, as the case may be, it being understood that no Lender
shall be responsible for any default by any other Lender in that other Lender's
obligations to make a Loan requested hereunder, nor shall the Commitment of any
Lender be increased or decreased as a result of the default by any other Lender
in that other Lender's obligation to make a Loan requested hereunder, and each
Lender shall be obligated to make the Loans required to be made by it by the
terms of this Agreement regardless of the failure by any other Lender.
(ii) Notwithstanding any other provision of this Agreement, and in order to
reduce the number of fund transfers among the Borrower, the Agents and the
Lenders, the Borrower, the Agents and the Lenders agree that the Administrative
Agent may (but shall not be obligated to), and the Borrower and the Lenders
hereby irrevocably authorize the Administrative Agent to, fund, on behalf of the
Lenders with a Revolving Credit Commitment, Revolving Loans pursuant to Section
2.01, subject to the procedures for settlement set forth in Section 2.02(d);
provided, however, that (a) the Administrative Agent shall in no event fund any
such Revolving Loans if the Administrative Agent shall have received written
notice from the Collateral Agent or the Required Lenders prior to the time of
the proposed Revolving Loan that one or more of the conditions precedent
contained in Section 5.02 will not be satisfied at the time of the proposed
Revolving Loan, and (b) the Administrative Agent shall not otherwise be required
to determine that, or take notice whether, the conditions precedent in Section
5.02 have been satisfied. If the Borrower gives a Notice of Borrowing requesting
a Revolving Loan and the Administrative Agent elects not to fund such Revolving
Loan on behalf of the Revolving Loan Lenders, then promptly after receipt of the
Notice of Borrowing requesting such Revolving Loan, the Administrative Agent
shall notify each Revolving Loan Lender of the specifics of the requested
Revolving Loan and that it will not fund the requested Revolving Loan on behalf
of the Revolving Loan Lenders. If the Administrative Agent notifies the
Revolving Loan Lenders that it will not fund a requested Revolving Loan on
behalf of such Revolving Loan Lenders, each Revolving Loan Lender shall make its
Pro Rata Share of the Revolving Loan available to the Administrative Agent, in
immediately available funds, at the Payment Office no later than 3:00 p.m. (New
York City time) (provided that the Administrative Agent requests payment from
such Revolving Loan Lender not later than 1:00 p.m. (New York City time)) on the
date of the proposed Revolving Loan. The Administrative Agent will make the
proceeds of such Revolving Loans available to the Borrower on the day of the
proposed Revolving Loan by causing an amount, in immediately available funds,
equal to the proceeds of all such Revolving Loans received by the Administrative
Agent at the Payment Office or the amount funded by the Administrative Agent on
behalf of the Revolving Loan Lenders to be deposited in an account designated by
the Borrower.
(iii) If the Administrative Agent has notified the Revolving Loan Lenders
that the Administrative Agent, on behalf of such Revolving Loan Lenders, will
fund a particular Revolving Loan pursuant to Section 2.02(c)(ii), the
Administrative Agent may assume that each such Revolving Loan Lender has made
such amount available to the Administrative Agent on such day and the
Administrative Agent, in its sole discretion, may, but shall not be obligated
to, cause a corresponding amount to be made available to the Borrower on such
day. If the Administrative Agent makes such corresponding amount available to
the Borrower and such corresponding amount is not in fact made available to the
Administrative Agent by any such Revolving Loan Lender, the Administrative Agent
shall be entitled to recover such corresponding amount on demand from such
Revolving Loan Lender together with interest thereon, for each day from the date
such payment was due until the date such amount is paid to the Administrative
Agent, at the Federal Funds Rate for 3 Business Days and thereafter at the
Reference Rate. During the period in which such Revolving Loan Lender has not
paid such corresponding amount to the Administrative Agent, notwithstanding
anything to the contrary contained in this Agreement or any other Loan Document,
the amount so advanced by the Administrative Agent to the Borrower shall, for
all purposes hereof, be a Revolving Loan made by the Administrative Agent for
its own account. Upon any such failure by a Revolving Loan Lender to pay the
Administrative Agent, the Administrative Agent shall promptly thereafter notify
the Borrower of such failure and the Borrower shall immediately pay such
corresponding amount to the Administrative Agent for its own account.
(iv) Nothing in this Section 2.02(c) shall be deemed to relieve any
Revolving Loan Lender from its obligations to fulfill its Revolving Credit
Commitment hereunder or to prejudice any rights that the Administrative Agent or
the Borrower may have against any Revolving Loan Lender as a result of any
default by such Revolving Loan Lender hereunder.
(d)(i) With respect to all periods for which the Administrative Agent has
funded Revolving Loans pursuant to Section 2.02(c), on Friday of each week, or
if the applicable Friday is not a Business Day, then on the following Business
Day, or such shorter period as the Administrative Agent may from time to time
select (any such week or shorter period being herein called a "Settlement
Period"), the Administrative Agent shall notify each Revolving Loan Lender of
the unpaid principal amount of the Revolving Loans outstanding as of the last
day of each such Settlement Period. In the event that such amount is greater
than the unpaid principal amount of the Revolving Loans outstanding on the last
day of the Settlement Period immediately preceding such Settlement Period (or,
if there has been no preceding Settlement Period, the amount of the Revolving
Loans made on the date of such Revolving Loan Lender's initial funding), each
Revolving Loan Lender shall promptly (and in any event not later than 2:00 p.m.
(New York City time) if the Administrative Agent requests payment from such
Lender not later than 12:00 noon (New York City time) on such day) make
available to the Administrative Agent its Pro Rata Share of the difference in
immediately available funds. In the event that such amount is less than such
unpaid principal amount, the Administrative Agent shall promptly pay over to
each Revolving Loan Lender its Pro Rata Share of the difference in immediately
available funds. In addition, if the Administrative Agent shall so request at
any time when a Default or an Event of Default shall have occurred and be
continuing, or any other event shall have occurred as a result of which the
Administrative Agent shall determine that it is desirable to present claims
against the Borrower for repayment, each Revolving Loan Lender shall promptly
remit to the Administrative Agent or, as the case may be, the Administrative
Agent shall promptly remit to each Revolving Loan Lender, sufficient funds to
adjust the interests of the Revolving Loan Lenders in the then outstanding
Revolving Loans to such an extent that, after giving effect to such adjustment,
each such Revolving Loan Lender's interest in the then outstanding Revolving
Loans will be equal to its Pro Rata Share thereof. The obligations of the
Administrative Agent and each Revolving Loan Lender under this Section 2.02(d)
shall be absolute and unconditional. Each Revolving Loan Lender shall only be
entitled to receive interest on its Pro Rata Share of the Revolving Loans which
have been funded by such Revolving Loan Lender.
(ii)In the event that any Revolving Loan Lender fails to make any payment
required to be made by it pursuant to Section 2.02(d)(i), the Administrative
Agent shall be entitled to recover such corresponding amount on demand from such
Revolving Loan Lender together with interest thereon, for each day from the date
such payment was due until the date such amount is paid to the Administrative
Agent, at the Federal Funds Rate for 3 Business Days and thereafter at the
Reference Rate. During the period in which such Revolving Loan Lender has not
paid such corresponding amount to the Administrative Agent, notwithstanding
anything to the contrary contained in this Agreement or any other Loan Document,
the amount so advanced by the Administrative Agent to the Borrower shall, for
all purposes hereof, be a Revolving Loan made by the Administrative Agent for
its own account. Upon any such failure by a Revolving Loan Lender to pay the
Administrative Agent, the Administrative Agent shall promptly thereafter notify
the Borrower of such failure and the Borrower shall immediately pay such
corresponding amount to the Administrative Agent for its own account. Nothing in
this Section 2.02(d)(ii) shall be deemed to relieve any Revolving Loan Lender
from its obligation to fulfill its Revolving Credit Commitment hereunder or to
prejudice any rights that the Administrative Agent or the Borrower may have
against any Revolving Loan Lender as a result of any default by such Revolving
Loan Lender hereunder.
Section 2.03 Repayment of Loans; Evidence of Debt. (iii) The outstanding
principal of all Revolving Loans shall be due and payable on the Final Revolver
Maturity Date.
(b)The outstanding principal of the Term Loan shall be repaid in full on
the earlier of (i) the termination of the Total Revolving Credit Commitment and
(ii) the Final Term Loan Maturity Date.
(c) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the Indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.
(d) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(e) The entries made in the accounts maintained pursuant to subsections (c)
or (d) of this Section 2.03 shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(f) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall execute and deliver to such
Lender a promissory note payable to the order of such Lender (or, if requested
by such Lender, to such Lender and its registered assigns) in a form furnished
by the Collateral Agent and reasonably acceptable to the Borrower. Thereafter,
the Loans evidenced by such promissory note and interest thereon shall at all
times (including after assignment pursuant to Section 12.07) be represented by
one or more promissory notes in such form payable to the order of the payee
named therein (or, if such promissory note is a registered note, to such payee
and its registered assigns).
Section 2.04 Interest. (a) Revolving Loans. Each Revolving Loan shall bear
interest on the principal amount thereof from time to time outstanding, from the
date of such Loan until such principal is repaid, at a rate per annum equal to
the Reference Rate plus the Applicable Reference Rate Margin.
(b)Term Loan. The Term Loan shall bear interest on the principal amount
thereof from time to time outstanding, at a rate per annum equal 4.00 percentage
points; provided, that if as of any date, an Event of Default has occurred and
is continuing, at the election of Collateral Agent, the Term Loan (inclusive of
any Term Loan PIK Amount) shall (so long as an Event of Default has occurred and
is continuing) instead thereafter bear interest on the amount thereof
outstanding from time to time at a per annum rate of 5.00 percentage points,
which interest shall thus be paid-in-kind by being added to the principal
balance of the Term Loan (inclusive of any Term Loan PIK Amount theretofore so
added).
(c) Default Interest. Notwithstanding Sections 2.04(a) and (b), to the
extent permitted by law, upon the occurrence and during the continuance of an
Event of Default, the principal of, and all accrued and unpaid interest on, all
Loans, fees, indemnities, or any other Obligations of the Loan Parties under
this Agreement and the other Loan Documents, shall bear interest, from the date
such Event of Default occurred until the date such Event of Default is cured or
waived in writing in accordance herewith, at a rate per annum equal at all times
to the Post-Default Rate.
(d) Interest Payment. Interest on each Revolving Loan shall be payable
monthly, in arrears, on the first day of each month, commencing on the first day
of the month following the month in which such Loan is made and at maturity
(whether upon demand, by acceleration or otherwise). Interest on the Term Loan
shall be payable quarterly, in arrears, on the first day of each month,
commencing on the first day of the quarter following the Effective Date and at
maturity (whether upon demand, by acceleration or otherwise). Interest at the
Post-Default Rate shall be payable on demand. The Borrower hereby authorizes the
Administrative Agent to, and the Administrative Agent may, from time to time,
charge the Loan Account pursuant to Section 4.02 with the amount of any interest
payment due in cash hereunder.
(e) General. All interest shall be computed on the basis of a year of 360
days for the actual number of days, including the first day but excluding the
last day, elapsed.
Section 2.05 Reduction of Commitment; Prepayment of Loans.
(a) Reduction of Commitments.
(i) Revolving Credit Commitments. The Total Revolving Credit Commitment
shall terminate on the Final Revolver Maturity Date. The Borrower may, without
premium or penalty, reduce the Total Revolving Credit Commitment to an amount
(which may be zero) not less than the greater of (A) the sum of (I) the
aggregate unpaid principal amount of all Revolving Loans then outstanding, and
(II) the aggregate principal amount of all Revolving Loans not yet made as to
which a Notice of Borrowing has been given by the Borrower under Section 2.02,
and (B) $7,000,000. Each such reduction shall be in an amount which is an
integral multiple of $1,000,000 (unless the Total Revolving Credit Commitment in
effect immediately prior to such reduction is less than $1,000,000), shall be
made by providing not less than 5 Business Days prior written notice to the
Administrative Agent and shall be irrevocable. Once reduced, the Total Revolving
Credit Commitment may not be increased. Each such reduction of the Total
Revolving Credit Commitment shall reduce the Revolving Credit Commitment of each
Lender proportionately in accordance with its Pro Rata Share thereof.
(ii)Term Loan. The Total Term Loan Commitment shall terminate upon the
making of the Term Loan on the Term Loan Funding Date.
(b) Optional Prepayment.
(i) Revolving Loans. The Borrower may prepay without penalty or premium the
principal of any Revolving Loan, in whole or in part.
(ii)Term Loan. The Borrower may, upon at least 5 Business Days prior
written notice to the Administrative Agent, prepay without penalty or premium
the principal of the Term Loan, in whole or in part, so long as, (A) each Agent
has consented to such prepayment, and (B) after giving effect to such
prepayment, no Default or Event of Default has occurred and is continuing;
provided, that (so long as the conditions set forth in clauses (A) and (B) above
are satisfied as of the date of the prepayment) Borrower may prepay the Term
Loan in full on or before June 30, 2004 at 90% of the then outstanding principal
balance of the Term Loan; provided, further, that (so long as the conditions set
forth in clauses (A) and (B) above are satisfied as of the date of the
prepayment) Borrower may prepay the Term Loan in full after June 30, 2004 and on
or before December 31, 2004 at 95% of the then outstanding principal balance of
the Term Loan. Each prepayment made pursuant to this Section 2.05(b)(ii) shall
be accompanied by the payment of accrued and unpaid interest to the date of such
payment on the amount prepaid.
(c) Mandatory Prepayment.
(i) The Borrower shall prepay the Revolving Loans at any time when the
aggregate principal amount of all Revolving Loans exceeds the Borrowing Base, to
the full extent of any such excess, which prepayment shall be made before 5:00
p.m. New York time on each date when the aggregate principal amount of all
Revolving Loans exceeds the Borrowing Base. On each day that any Revolving Loans
are outstanding, the Borrower shall hereby be deemed to represent and warrant to
the Agents and the Lenders that the Borrowing Base calculated as of such day
equals or exceeds the aggregate principal amount of all Revolving Loans
outstanding on such day.
(ii) [intentionally omitted]
(iii) The Administrative Agent shall on each Business Day apply all funds
transferred to or deposited in the Administrative Agent's Account, to the
payment, in whole or in part, of the outstanding principal amount of the
Revolving Loans.
(iv) [intentionally omitted]
(v) Concurrent with the receipt of any proceeds of any Disposition by any
Loan Party or its Subsidiaries other than a Permitted Disposition (except
Permitted Dispositions of the type described in clauses (b) and (c) of the
definition of Permitted Dispositions), the Borrower shall prepay the outstanding
principal amount of the Revolving Loans in an amount equal to 100% of the Net
Cash Proceeds received by such Person in connection with such Disposition to the
extent that the aggregate amount of Net Cash Proceeds received by all Loan
Parties and their Subsidiaries (and not paid to the Administrative Agent as a
prepayment of the Loans) shall exceed for all such Dispositions since the
Effective Date $500,000. Nothing contained in this clause (v) shall permit any
Loan Party or any of its Subsidiaries to make a Disposition of any property
other than a Permitted Disposition.
(vi) Upon the issuance or incurrence by any Loan Party or any of its
Subsidiaries of any Indebtedness (other than Indebtedness referred to in clauses
(a), (b), (c), (d), (e) and (f) of the definition of Permitted Indebtedness), or
the sale or issuance by any Loan Party or any of its Subsidiaries of any shares
of its Capital Stock, the Borrower shall prepay the Revolving Loans in an amount
equal to 100% of the Net Cash Proceeds received by such Person in connection
therewith. The provisions of this subsection (vi) shall not be deemed to be
implied consent to any such issuance, incurrence or sale otherwise prohibited by
the terms and conditions of this Agreement.
(vii) Upon the receipt by any Loan Party or any of its Subsidiaries of any
Extraordinary Receipts, the Borrowers shall prepay the outstanding principal of
the Revolving Loans in an amount equal to 100% of such Extraordinary Receipts,
net of any reasonable expenses incurred in collecting such Extraordinary
Receipts.
(viii) In the event that the aggregate amount of the cash and Permitted
Investments of the Loan Parties and their Subsidiaries exceeds at any time
$2,500,000, the Borrower shall immediately prepay the outstanding principal of
the Revolving Loans in the amount equal to such excess.
(d) [intentionally omitted]
(e) Interest and Fees. Any prepayment made pursuant to this Section 2.05
(other than prepayments made pursuant to subsections (c)(i) and (c)(iii) of this
Section 2.05) shall be accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment, and if such prepayment would reduce the
amount of the outstanding Loans to zero at a time when the Total Revolving
Credit Commitment has been terminated, such prepayment shall be accompanied by
the payment of all fees accrued to such date pursuant to Section 2.06.
(f) Cumulative Prepayments. Except as otherwise expressly provided in this
Section 2.05, payments with respect to any subsection of this Section 2.05 are
in addition to payments made or required to be made under any other subsection
of this Section 2.05.
Section 2.06 Fees.
(a) [Intentionally Omitted]
(b) Fee Letter Fees. As and when due and payable under the terms of the Fee
Letter, the Borrower shall pay to the Administrative Agent the fees set forth in
the Fee Letter.
Section 2.07 Securitization. The Loan Parties hereby acknowledge 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, Standard & Poor's or one or more other rating agencies (the "Rating
Agencies"). The Loan Parties 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 Loan Parties and
(ii) any such amendment or additional documentation does not materially
adversely affect the rights, or materially increase the obligations, of the Loan
Parties under the Loan Documents or change or affect in a manner adverse to the
Loan Parties 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 any Loan Party 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.
Section 2.08 Taxes. (a) All payments made by the Loan Parties hereunder or
under any other Loan Document shall be made without set-off, counterclaim,
deduction or other defense. All such payments shall be made free and clear of
and without deduction for any present or future income, franchise, sales, use,
excise, stamp or other taxes, levies, imposts, deductions, charges, fees,
withholdings, restrictions or conditions of any nature now or hereafter imposed,
levied, collected, withheld or assessed by any jurisdiction (whether pursuant to
United States Federal, state, local or foreign law) or by any political
subdivision or taxing authority thereof or therein, and all interest, penalties
or similar liabilities, excluding taxes on the net income of, and branch profit
taxes of, any Lender or any Agent imposed by the jurisdiction in which such
Lender or such Agent is organized or any political subdivision thereof or taxing
authority thereof or any jurisdiction in which such Person's principal office or
relevant lending office is located or any political subdivision thereof or
taxing authority thereof (such nonexcluded taxes, levies, imposts, deductions,
charges, fees, withholdings, restrictions and conditions being hereinafter
collectively referred to as "Taxes"). If the Borrower shall be required by law,
rule, regulation or any interpretation of any relevant Governmental Authority to
deduct or to withhold any Taxes from or in respect of any amount payable
hereunder,
(i) the amount so payable shall be increased to the extent necessary so
that after making all required deductions and withholdings (including Taxes on
amounts payable to the Lenders or the Agents pursuant to this sentence) the
Lenders or the Agents receive an amount equal to the sum they would have
received had no such deduction or withholding been made,
(ii) the Borrower shall make such deduction or withholding, and
(iii) the Borrower shall pay the full amount deducted or withheld to the
relevant taxation authority in accordance with applicable law. Whenever any
Taxes are payable by the Borrower, as promptly as possible thereafter, the
Borrower shall send the Lenders and the Agents an official receipt (or, if an
official receipt is not available, such other documentation as shall be
satisfactory to the Lenders or the Agents, as the case may be) showing payment.
In addition, the Borrower agrees to pay any other present or future taxes,
charges or similar levies which arise from any payment made hereunder or from
the execution, delivery, or performance by any Loan Party, recordation or filing
of, or otherwise with respect to, this Agreement or any other Loan Document
other than the foregoing excluded taxes (hereinafter referred to as "Other
Taxes").
(b)The Borrower hereby indemnifies the Lenders and the Agents for the
amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.08) paid by any Lender or any Agent and any liability (including penalties,
interest and expenses for nonpayment, late payment or otherwise) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be paid within 15 days
from the date on which any such Lender or any such Agent makes written demand
therefor, which demand shall identify the nature and amount of Taxes or Other
Taxes for which indemnification is being sought and the basis of the claim.
(c) Each Lender that is organized in a jurisdiction other than the United
States, a State thereof or the District of Columbia hereby agrees that:
(i) it shall, no later than the Effective Date (or, in the case of a Lender
which becomes a party hereto pursuant to Section 12.07 hereof after the
Effective Date, the date upon which such Lender becomes a party hereto) deliver
to the Borrower and the Agents: (A) two accurate, complete and signed originals
of U.S. Internal Revenue Service Form W-8ECI or successor form, or (B) two
accurate, complete and signed originals of U.S. Internal Revenue Service Form
W-8BEN or successor form, in each case, indicating that such Lender is on the
date of delivery thereof entitled to receive payments of principal, interest and
fees for the account of its lending office under this Agreement free from, or
subject to a reduced rate of, withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office or offices or
selects an additional lending office for purposes of this Agreement, it shall,
at the same time or reasonably promptly thereafter, deliver to the Borrower and
the Agents the appropriate forms as described in clause (i) above in replacement
for, or in addition to, the forms previously delivered by it hereunder.
(d) If the Borrower fails to perform any of its obligations under this
Section 2.08, the Loan Parties shall indemnify the Lenders and the Agents for
any taxes, interest or penalties that may become payable as a result of any such
failure. The obligations of the Loan Parties under this Section 2.08 shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
ARTICLE III
[INTENTIONALLY OMITTED]
ARTICLE IV
FEES, PAYMENTS AND OTHER COMPENSATION
Section 4.01 Audit and Collateral Monitoring Fees. The Borrower
acknowledges that pursuant to Section 7.01(f), representatives of the Agents may
visit any Loan Party and/or conduct audits, inspections and/or field
examinations (including, without limitation, examinations and audits of such
Loan Party's major wells, rigs, pipeline distribution systems and operations)
("Audits") of any Loan Party and valuations or appraisals of any or all of the
Collateral and/or business or enterprise valuations of the Loan Parties at any
time and from time to time, and so long as no Event of Default has occurred and
is continuing, such Audits shall be conducted on reasonable notice during normal
business hours in a manner so as to not unduly disrupt the business of such Loan
Party. The Borrower agrees to pay (i) $1,500 per day per examiner plus the
examiner's out-of-pocket costs and expenses incurred in connection with all such
Audits and (ii) the cost of all Audits, appraisals and valuations conducted by
third party auditors or appraisers on behalf of the Agents; provided that so
long as no Event of Default has occurred and is continuing, the Borrower shall
be required to pay the fees and expenses of no more than 2 Audits during any
Fiscal Year.
Section 4.02 Payments; Computations and Statements.
(a) The Borrower will make each payment under this Agreement not later than
12:00 noon (New York City time) on the day when due, in lawful money of the
United States of America and in immediately available funds, to the
Administrative Agent's Account. All payments received by the Administrative
Agent after 12:00 noon (New York City time) on any Business Day will be credited
to the Loan Account on the next succeeding Business Day. All payments shall be
made by the Borrower without set-off, counterclaim, deduction or other defense
to the Agents and the Lenders. Except as provided in Section 2.02, after
receipt, the Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal ratably to the
Lenders in accordance with their Pro Rata Shares and like funds relating to the
payment of any other amount payable to any Lender to such Lender, in each case
to be applied in accordance with the terms of this Agreement, provided that the
Administrative Agent will cause to be distributed all interest and fees received
from or for the account of the Borrower not less than once each month and in any
event promptly after receipt thereof. The Lenders and the Borrower hereby
authorize the Administrative Agent to, and the Administrative Agent shall, from
time to time, charge the Loan Account of the Borrower with any amount due and
payable by the Borrower under any Loan Document. Each of the Lenders and the
Borrower agrees that the Administrative Agent shall have the right to make such
charges whether or not any Default or Event of Default shall have occurred and
be continuing or whether any of the conditions precedent in Section 5.02 have
been satisfied. Any amount charged to the Loan Account of the Borrower shall be
deemed a Revolving Loan hereunder made by the Revolving Loan Lenders to the
Borrower, funded by the Administrative Agent on behalf of the Revolving Loan
Lenders and subject to Section 2.02 of this Agreement. Whenever any payment to
be made under any such Loan Document shall be stated to be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day and such extension of time shall in such case be included in the computation
of interest or fees, as the case may be. All computations of fees shall be made
by the Administrative Agent on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such fees are payable. Each determination by the
Administrative Agent of an interest rate or fees hereunder shall be conclusive
and binding for all purposes in the absence of manifest error.
(b) The Administrative Agent shall provide the Borrower, promptly after the
end of each calendar month, a summary statement (in the form from time to time
used by the Administrative Agent) of the opening and closing daily balances in
the Loan Account of the Borrower during such month, the amounts and dates of all
Loans made to the Borrower during such month, the amounts and dates of all
payments on account of the Loans to the Borrower during such month and the Loans
to which such payments were applied, the amount of interest accrued on the Loans
to the Borrower during such month, and the amount and nature of any charges to
the Loan Account made during such month on account of fees, commissions,
expenses and other Obligations. All entries on any such statement shall be
presumed to be correct and, 30 days after the same is sent, shall be final and
conclusive absent manifest error.
Section 4.03 Sharing of Payments, Etc. Except as provided in Section 2.02
hereof, if any Lender shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) on account of any
Obligation in excess of its ratable share of payments on account of similar
obligations obtained by all the Lenders, such Lender shall forthwith purchase
from the other Lenders such participations in such similar obligations held by
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender of any interest or other amount paid by
the purchasing Lender in respect of the total amount so recovered). The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 4.03 may, to the fullest extent permitted by law,
exercise all of its rights (including the Lender's right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
Section 4.04 Apportionment of Payments. Subject to Section 2.02 hereof and
to any written agreement among the Agents and/or the Lenders:
(a) all payments of principal and interest in respect of outstanding Loans,
all payments of fees (other than the fees with respect to the audit and
collateral monitoring fees provided for in Section 4.01) and all other payments
in respect of any other Obligations, shall be allocated by the Administrative
Agent among such of the Lenders as are entitled thereto, in proportion to their
respective Pro Rata Shares or otherwise as provided herein or in any agreements
among the Lenders or, in respect of payments not made on account of Loans, as
designated by the Person making payment when the payment is made.
(b) Except as otherwise specifically provided in Section 2.05, the
Administrative Agent may, and upon the direction of the Required Lenders shall,
apply all payments in respect of any Obligations and all proceeds of the
Collateral (i) first, ratably to pay the Obligations in respect of any fees,
expense reimbursements, indemnities and other amounts then due to the Agents
until paid in full; (ii) second, ratably to pay any fees and indemnities then
due to the Revolving Loan Lenders until paid in full; (iii) third, ratably to
pay interest due in respect of the Revolving Loans and Collateral Agent Advances
until paid in full; (iv) fourth, ratably to pay principal of the Revolving Loans
and Collateral Agent Advances until paid in full; (v) fifth, ratably to pay any
fees and indemnities then due to the Term Loan Lenders until paid in full; (vi)
sixth, ratably to pay interest due in respect of the Term Loan until paid in
full; (vii) seventh, ratably to pay principal of the Term Loan until paid in
full, and (viii) eighth, to the ratable payment of all other Obligations then
due and payable.
(c) In each instance, so long as no Event of Default has occurred and is
continuing, Section 4.04(b) shall not be deemed to apply to any payment by the
Borrower specified by the Borrower to be for the payment of specific Obligations
then due and payable (or prepayable) under any provision of this Agreement.
(d) For purposes of the foregoing, "paid in full" means payment of all
amounts owing under the Loan Documents according to the terms thereof, including
loan fees, service fees, professional fees, interest (and specifically including
interest accrued after the commencement of any Insolvency Proceeding), default
interest, interest on interest, and expense reimbursements, whether or not the
same would be or is allowed or disallowed in whole or in part in any Insolvency
Proceeding.
(e) In the event of a direct conflict between the priority provisions of
this Section 4.04 and other provisions contained in any other Loan Document, it
is the intention of the parties hereto that both such priority provisions in
such documents shall be read together and construed, to the fullest extent
possible, to be in concert with each other. In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of this Section 4.04 shall control and govern.
Section 4.05 Increased Costs and Reduced Return. ? If any Lender or any
Agent shall have determined that the adoption or implementation of, or any
change in, any law, rule, treaty or regulation, or any policy, guideline or
directive of, or any change in, the interpretation or administration thereof by,
any court, central bank or other administrative or Governmental Authority, or
compliance by any Lender or any Agent or any Person controlling any such Lender
or any such Agent with any directive of, or guideline from, any central bank or
other Governmental Authority or the introduction of, or change in, any
accounting principles applicable to any Lender or any Agent or any Person
controlling any such Lender or any such Agent (in each case, whether or not
having the force of law), shall (i) subject any Lender or any Agent, or any
Person controlling any such Lender or any such Agent to any tax, duty or other
charge with respect to this Agreement or any Loan made by such Lender or such
Agent, or change the basis of taxation of payments to any Lender or any Agent or
any Person controlling any such Lender or any such Agent of any amounts payable
hereunder (except for taxes on the overall net income of any Lender or any Agent
or any Person controlling any such Lender or any such Agent), (ii) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against any Loan or against assets of or held by, or deposits with or for the
account of, or credit extended by, any Lender or any Agent or any Person
controlling any such Lender or any such Agent or (iii) impose on any Lender or
any Agent or any Person controlling any such Lender or any such Agent any other
condition regarding this Agreement or any Loan, and the result of any event
referred to in clauses (i), (ii) or (iii) above shall be to increase the actual
direct cost to any Lender or any Agent of making any Loan, or agreeing to make
any Loan, or to reduce any amount received or receivable by any Lender or any
Agent hereunder, then, upon demand by any such Lender or any such Agent, the
Borrower shall pay to such Lender or such Agent such additional amounts as will
compensate such Lender or such Agent for such increased costs or reductions in
amount.
(b) If any Lender or any Agent shall have determined that any change of any
Capital Guideline or the adoption or implementation of, or any change in, any
Capital Guideline by the Governmental Authority charged with the interpretation
or administration thereof, or compliance by any Lender or any Agent or any
Person controlling such Lender or such Agent with any Capital Guideline or with
any request or directive of any such Governmental Authority with respect to any
Capital Guideline, or the implementation of, or any change in, any applicable
accounting principles (in each case, whether or not having the force of law),
either (i) affects or would affect the amount of capital required or expected to
be maintained by any Lender or any Agent or any Person controlling such Lender
or such Agent, and any Lender or any Agent determines that the amount of such
capital is increased as a direct or indirect consequence of any Loans made or
maintained, any Lender's or any Agent's or any such other controlling Person's
other obligations hereunder, or (ii) has or would have the effect of reducing
the rate of return on any Lender's or any Agent's or any such other controlling
Person's capital to a level below that which such Lender or such Agent or such
controlling Person could have achieved but for such circumstances as a
consequence of any Loans made or maintained, or any agreement to make Loans, or
such Lender's or such Agent's or such other controlling Person's other
obligations hereunder (in each case, taking into consideration, such Lender's or
such Agent's or such other controlling Person's policies with respect to capital
adequacy), then, upon demand by any Lender or any Agent, the Borrower shall pay
to such Lender or such Agent from time to time such additional amounts as will
compensate such Lender or such Agent for such cost of maintaining such increased
capital or such reduction in the rate of return on such Lender's or such Agent's
or such other controlling Person's capital.
(c) All amounts payable under this Section 4.05 shall bear interest from
the date that is 10 days after the date of demand by any Lender or any Agent
until payment in full to such Lender or such Agent at the Reference Rate. A
certificate of such Lender or such Agent claiming compensation under this
Section 4.05, specifying the event herein above described and the nature of such
event shall be submitted by such Lender or such Agent to the Borrower, setting
forth the additional amount due and an explanation of the calculation thereof,
and such Lender's or such Agent's reasons for invoking the provisions of this
Section 4.05, and shall be final and conclusive absent manifest error.
ARTICLE V
CONDITIONS TO LOANS
Section 5.01 Conditions Precedent. The obligation of the Lenders (or any
member thereof) to make the initial Loans (or otherwise to extend any credit
provided for hereunder), is subject to the fulfillment, to the satisfaction of
the Agents, of each of the conditions precedent set forth below:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees, costs,
expenses and taxes then payable pursuant to the Fee Letter and Sections 2.06 and
12.04 of this Agreement.
(b) Representations and Warranties; No Event of Default. The following
statements shall be true and correct: (i) the representations and warranties
contained in Article VI and in each other Loan Document, certificate or other
writing delivered to any Agent or any Lender pursuant hereto or thereto on or
prior to the Effective Date are true and correct in all material respects
(except that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof) on and as of the Effective Date as though made
on and as of such date (it being understood and agreed that any representation
or warranty which by its terms is made as of a specified date shall be required
to be true and correct in all material respects only as of such specified date)
and (ii) no Default or Event of Default shall have occurred and be continuing on
the Effective Date or would result from this Agreement or the other Loan
Documents becoming effective in accordance with its or their respective terms.
(c) Legality. The making of the initial Loans shall not contravene any law,
rule or regulation applicable to any Agent or any Lender.
(d) Delivery of Documents. The Collateral Agent shall have received on or
before the Effective Date the following, each in form and substance satisfactory
to the Collateral Agent and, unless indicated otherwise, dated the Effective
Date:
(i) the Assumption Agreement, duly executed and delivered by each party
thereto;
(ii) the Disbursement Letter, duly executed and delivered by each Guarantor
(iii) a Guaranty, duly executed and delivered by each Guarantor;
(iv) the Fee Letter, duly executed and delivered by the Borrower and the
Administrative Agent;
(v) the Intercompany Subordination Agreement, duly executed and delivered
by each Loan Party;
(vi) a Mortgage with respect to each previously unencumbered Oil and Gas
Property of any Loan Party, duly executed and delivered by such Loan Party;
(vii) the Registration Rights Agreement, duly executed and delivered by
Borrower;
(viii) evidence of the recording of the Mortgages in such office or offices
as may be necessary or, in the opinion of the Collateral Agent, desirable to
perfect the Lien purported to be created thereby or to otherwise protect the
rights of the Collateral Agent and the Lenders thereunder;
(ix) new or updated title opinions or memoranda (as required by Collateral
Agent) of the Borrower's counsel (together with reliance letters with respect to
previous title opinions issued) with respect to the Oil and Gas Properties of
the Loan Parties as to the Loan Parties' Hydrocarbon Interest therein and that
the Mortgages on such Oil and Gas Properties are valid and enforceable first
priority mortgage Liens on such properties, free and clear of all defects and
encumbrances except Permitted Liens;
(x) the Assignment Documents, including UCC assignments, assignments of
existing Mortgages and other documents, as may be required by the Collateral
Agent, evidencing the assignment by the Existing Lenders of their Liens in the
properties of the Loan Parties;
(xi) a Pledge Agreement, duly executed and delivered by each Loan Party,
together with the original stock certificates representing all of the common
stock of such Loan Party's Subsidiaries and all intercompany promissory notes of
such Loan Party, accompanied by undated stock powers executed in blank and other
proper instruments of transfer;
(xii) a Security Agreement, duly executed and delivered by each Loan Party;
(xiii) a Warrant, duly executed and delivered by Borrower;
(xiv) a UCC Filing Authorization Letter, duly executed by each Loan Party,
together with appropriate financing statements on Form UCC-1 duly filed in such
office or offices as may be necessary or, in the opinion of the Collateral
Agent, desirable to perfect the security interests purported to be created by
each Security Agreement, each Pledge Agreement and each Mortgage;
(xv) certified copies of request for copies of information on Form UCC-11,
listing all effective financing statements which name as debtor any Loan Party
or any party to any Acquisition Agreement and which are filed in the offices
referred to in clause (xiv) above, together with copies of such financing
statements, none of which, except as otherwise agreed in writing by the
Collateral Agent, shall cover any of the Collateral and the results of searches
for any tax Lien and judgment Lien filed against such Person or its property,
which results, except as otherwise agreed to in writing by the Collateral Agent,
shall not show any such Liens;
(xvi) a copy of the resolutions of each Loan Party, certified as of the
Effective Date by an Authorized Officer thereof, authorizing (A) the
transactions contemplated by the Loan Documents to which Borrower is or will be
a party, and (B) the execution, delivery and performance by such Loan Party of
each Loan Document to which such Loan Party is or will be a party and the
execution and delivery of the other documents to be delivered by such Person in
connection herewith and therewith;
(xvii) a certificate of an Authorized Officer of each Loan Party,
certifying the names and true signatures of the representatives of such Loan
Party authorized to sign each Loan Document to which such Loan Party is or will
be a party and the other documents to be executed and delivered by such Loan
Party in connection herewith and therewith, together with evidence of the
incumbency of such authorized officers;
(xviii) with respect to each state that provides such certificates, a
certificate of the appropriate official(s) of the state of organization and each
state of foreign qualification of each Loan Party certifying as to the
subsistence in good standing of, and the payment of taxes by, such Loan Party in
such states;
(xix) a true and complete copy of the charter, certificate of formation,
certificate of limited partnership or other publicly filed organizational
document of each Loan Party certified as of a recent date not more than 30 days
prior to the Effective Date by an appropriate official of the state of
organization of such Loan Party which shall set forth the same complete name of
such Loan Party as is set forth herein and the organizational number of such
Loan Party, if an organized number is issued in such jurisdiction;
(xx) a copy of the by-laws or other organizational document of each Loan
Party, together with all amendments thereto, certified as of the Effective Date
by an Authorized Officer of such Loan Party;
(xxi) an opinion of Heskett & Heskett, counsel to the Loan Parties,
substantially in the form of Exhibit 5.01(d)(xvii);
(xxii) a certificate of an Authorized Officer of each Loan Party,
certifying as to the matters set forth in Section 5.01(b);
(xxiii) a copy of the Financial Statements, together with a certificate of
an Authorized Officer of the Borrower setting forth all existing Indebtedness,
pending or, to the extent known by a Loan Party, threatened litigation or claims
and other contingent liabilities of a Loan Party not otherwise reflected in such
Financial Statements;
(xxiv) a copy of the financial projections described in Section 6.01(g)(ii)
hereof;
(xxv) a certificate of the chief executive officer of Borrower, certifying
as to the solvency of the Loan Parties;
(xxvi) evidence of the insurance coverage required by Section 7.01 and the
terms of each Security Agreement and each Mortgage and such other insurance
coverage with respect to the business and operations of the Loan Parties as the
Collateral Agent may reasonably request, in each case, where requested by the
Collateral Agent, with such endorsements as to the named insureds or loss payees
thereunder as the Collateral Agent may request and providing that such policy
may be terminated or canceled (by the insurer or the insured thereunder) only
upon 30 days prior written notice to the Collateral Agent and each such named
insured or loss payee;
(xxvii) a certificate of an Authorized Officer of the Borrower, certifying
the names and true signatures of the persons that are authorized to provide
Notices of Borrowing and all other notices under this Agreement and the other
Loan Documents;
(xxviii) copies of the Acquisition Agreements and the other Material
Contracts as in effect on the Effective Date, certified as true and correct
copies thereof by an Authorized Officer of the Borrower, together with a
certificate of an Authorized Officer of the Borrower stating that such
agreements remain in full force and effect and that none of the Loan Parties has
breached or defaulted in any of its obligations under such agreements;
(xxix) such account control agreements and other documents as the Agents
may request with respect to the Loan Parties' cash management system; and
(xxx) Transfer Order Letters applicable to the production of oil and gas
from any Proved Reserves; and
(xxxi) such other agreements, instruments, approvals, opinions and other
documents, each satisfactory to the Collateral Agent in form and substance, as
the Collateral Agent may reasonably request.
(e) Material Adverse Effect. The Collateral Agent shall have determined, in
its sole judgment, that no event or development shall have occurred since July
31, 2002, which could reasonably be expected to result in a Material Adverse
Effect.
(f) Consummation of Acquisition of Existing Indebtedness. Concurrently with
the making of the initial Loans, the Lenders shall have purchased the Existing
Indebtedness at par from the Existing Lenders.
(g) Consummation of Acquisition. Concurrently with the making of the
initial Loans, (i) the Acquisition Agreements shall have been consummated and
Borrower shall have purchased pursuant to the Acquisition Agreements (no
provision of which shall have been amended or otherwise modified or waived
without the prior written consent of the Agents), and shall have become the
owner, free and clear of all Liens other than Permitted Liens, of all of the
assets contemplated to be purchased thereunder, and (ii) each of party to the
Acquisition Agreements shall have fully performed all of the obligations to be
performed by it thereunder.
(h) Proceedings; Receipt of Documents. All proceedings in connection with
the making of the initial Loans and the other transactions contemplated by this
Agreement and the other Loan Documents, and all documents incidental hereto and
thereto, shall be reasonably satisfactory to the Collateral Agent and its
counsel, and the Collateral Agent and such counsel shall have received all such
information and such counterpart originals or certified or other copies of such
documents as the Collateral Agent or such counsel may reasonably request.
(i) Management Reference Checks. The Collateral Agent shall have received
satisfactory reference checks for key management of each Loan Party.
(j) Due Diligence. The Agents shall have completed their business and legal
due diligence with respect to each Loan Party and the results thereof shall be
acceptable to the Agents, in their sole and absolute discretion. Without
limiting the foregoing, the Collateral Agent shall have received a Field Survey
and Audit, dated not earlier than 30 days prior to the Effective Date, and such
Field Survey and Audit and the results thereof shall be acceptable to the
Collateral Agent, in its sole and absolute discretion.
(k) Availability. After giving effect to all Loans to be made on the
Effective Date, the sum of Availability and Qualified Cash shall not be less
than $500,000. The Borrower shall deliver to the Collateral Agent a certificate
of the chief financial officer of the Borrower certifying as to the calculation
of Availability and Qualified Cash.
(l) Initial Reserve Report. The Lenders shall have received a Reserve
Report, dated as of September 1, 2003, with respect to the proved developed Oil
and Gas Properties of the Loan Parties (which Reserve Report shall have been
prepared by the Petroleum Engineers) in form and substance reasonably
satisfactory to the Lenders (the "Initial Reserve Report").
(m) Borrowing Base Certificate. The Lenders shall have received a borrowing
base certificate setting forth the Borrowing Base, which includes a roll forward
of production volumes and update of the NYMEX Strip Price from the Initial
Reserve Report.
(n) Material Litigation. The Administrative Agent shall have received and
reviewed information with respect to all material litigation of the Borrower and
its Subsidiaries, and shall be satisfied with the results of its review.
(o) Hedging Agreements. The Agents shall have received such evidence as
they shall require to demonstrate that Borrower has entered into Hedging
Agreements with respect to its Hydrocarbon production with one or more Persons
with the aggregate notional volumes of Hydrocarbons covered by such Hedging
Agreements constituting not less than 25% and not more than 75% of the aggregate
amount of the Borrower's estimated Hydrocarbon production volumes on an mcf
equivalent basis (where one barrel of oil is equal to six mcf of gas) for the
succeeding six calendar months after the Effective Date.
(p) Title to Oil and Gas Properties. The Agents and the Lenders shall be
satisfied as to the title of the Loan Parties to the Oil and Gas Properties
representing all the Oil and Gas Properties included in the Initial Reserve
Report.
Section 5.02 Conditions Precedent to All Loans. The obligation of any Agent
or any Lender to make any Loan is subject to the fulfillment of each of the
following conditions precedent:
(a) Payment of Fees, Etc. The Borrower shall have paid all fees, costs,
expenses and taxes then payable by the Borrower pursuant to this Agreement and
the other Loan Documents, including, without limitation, Sections 2.06 and 12.04
hereof.
(b) Representations and Warranties; No Event of Default. The following
statements shall be true and correct, and the submission by the Borrower to the
Administrative Agent of a Notice of Borrowing with respect to each such Loan,
and the Borrower's acceptance of the proceeds of such Loan, shall each be deemed
to be a representation and warranty by each Loan Party on the date of such Loan
that: (i) the representations and warranties contained in Article VI and in each
other Loan Document, certificate or other writing delivered any Agent or any
Lender pursuant hereto or thereto on or prior to the date of such Loan (except
to the extent that any such representations or warranties expressly relate
solely to an earlier date) are true and correct on and as of such date as though
made on and as of such date, (ii) at the time of and after giving effect to the
making of such Loan and the application of the proceeds thereof, no Default or
Event of Default has occurred and is continuing or would result from the making
of the Loan to be made, on such date and (iii) the conditions set forth in this
Section 5.02 have been satisfied as of the date of such request.
(c) Legality. The making of such Loan shall not contravene any law, rule or
regulation applicable to any Agent or any Lender.
(d) Notices. The Administrative Agent shall have received a Notice of
Borrowing pursuant to Section 2.02 hereof.
(e) Delivery of Documents. The Agents shall have received such other
agreements, instruments, approvals, opinions and other documents, each in form
and substance satisfactory to the Agents, as any Agent may reasonably request.
(f) Proceedings; Receipt of Documents. All proceedings in connection with
the making of such Loan and the other transactions contemplated by this
Agreement and the other Loan Documents, and all documents incidental hereto and
thereto, shall be satisfactory to the Agents and their counsel, and the Agents
and such counsel shall have received all such information and such counterpart
originals or certified or other copies of such documents, in form and substance
satisfactory to the Agents, as the Agents or such counsel may reasonably
request.
Section 5.03 Conditions Subsequent. The obligation of any Agent or any
Lender to continue to make Loans (or otherwise extend credit hereunder) is
subject to the fulfillment, on or before the date applicable thereto, of each of
the following conditions subsequent (the failure of the Borrower to so perform
or cause to be performed constituting an Event of Default):
(a) within 3 Business Days of the Effective Date, Collateral Agent shall
have received a supplemental title opinion with respect to the Oil and Gas
Properties acquired by Borrower pursuant to the Warrior Acquisition Agreement
which is in form and substance reasonably satisfactory to Collateral Agent;
(b) within 3 Business Days of the Effective Date, Collateral Agent shall
have received a schedule of each of the operators or other purchasers of royalty
or other interests in the various Oil and Gas Properties acquired by Borrower
pursuant to the Hillside Acquisition Agreement, certified as being true, correct
and complete by an Authorized Officer of Borrower;
(c) within 3 Business Days of the Effective Date, Collateral Agent shall
have received originally executed and notarized copies of the bills of sale and
other conveyance documents with respect to the Acquisition Documents in
appropriate form for recordation with the appropriate county recorder's office;
(d) within 10 days of the Effective Date, Ridgepoint Mining Company shall
have executed and delivered to Collateral Agent a mortgage with respect to its
interest in a gold mine in Utah which is in form and substance satisfactory to
Collateral Agent;
(e) within 10 days of the Effective Date, Collateral Agent shall have
received good standing certificates with respect to each Loan Party, each dated
within 10 days of the Effective Date, and which are in form and substance
satisfactory to Collateral Agent;
(f) use Borrower's commercially reasonable efforts to obtain an amendment
reasonably requested by Collateral Agent with respect to the financing statement
filed by Commercial State Bank with the Texas Secretary of State and identified
as filing number 01-042682;
(g) within 30 days of the Effective Date, Collateral Agent shall have
received executed endorsements to the Loan Parties' insurance policies which are
in form and substance satisfactory to Collateral Agent;
(h) within 60 days of the Effective Date, Collateral Agent shall have
received such originally executed and notarized release documents as it shall
reasonably require, each in recordable form, with respect to each of the Liens
described on Schedule 7.02(a) of this Agreement, and such other evidence as
Collateral Agent shall reasonably require to demonstrate the fact that such
Liens have been released and the Indebtedness secured by such Liens has been
satisfied in full; and
(i) within 60 days of the Effective Date, Borrower shall have delivered
title opinions with respect to each of its Oil and Gas Properties purchased
which are in form and substance reasonably satisfactory to Collateral Agent from
one or more law firms which are reasonably satisfactory to Collateral Agent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.01 Representations and Warranties. Each Loan Party hereby
represents and warrants to the Agents and the Lenders as follows:
(a)Organization, Good Standing, Etc. Each Loan Party (i) is a corporation,
limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of the state or jurisdiction of its
organization, (ii) has all requisite power and authority to conduct its business
as now conducted and as currently contemplated and, in the case of the Borrower,
to make the borrowings hereunder, and to execute and deliver each Loan Document
to which it is a party, and to consummate the transactions contemplated thereby,
and (iii) is duly qualified to do business and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary.
(b) Authorization, Etc. The execution, delivery and performance by each
Loan Party of each Loan Document to which it is or will be a party, (i) have
been duly authorized by all necessary action, (ii) do not and will not
contravene its charter or by-laws, its limited liability company or operating
agreement or its certificate of partnership or partnership agreement, as
applicable, or any applicable law or any contractual restriction binding on or
otherwise affecting it or any of its properties, (iii) do not and will not
result in or require the creation of any Lien (other than pursuant to any Loan
Document) upon or with respect to any of its properties, and (iv) do not and
will not result in any default, noncompliance, suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to its operations or any of its properties.
(c) Governmental Approvals. No authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority is required in
connection with the due execution, delivery and performance by any Loan Party of
any Loan Document to which it is or will be a party (other than the filing of
the Assignment Documents with respect to the Mortgages and UCC financing
statements and other action necessary to assign the Liens of the Existing
Lenders to the Collateral Agent).
(d) Enforceability of Loan Documents. This Agreement is, and each other
Loan Document to which any Loan Party is or will be a party, when delivered
hereunder, will be, a legal, valid and binding obligation of such Person,
enforceable against such Person in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws.
(e) Subsidiaries. Schedule 6.01(e) is a complete and correct description of
the name, jurisdiction of incorporation and ownership of the outstanding Capital
Stock of each Subsidiary of the Borrower. All of the issued and outstanding
shares of Capital Stock of such Subsidiaries have been validly issued and are
fully paid and nonassessable, and the holders thereof are not entitled to any
preemptive, first refusal or other similar rights. Except as indicated on such
Schedule, all such Capital Stock is owned by the Borrower or one or more of its
wholly-owned Subsidiaries, free and clear of all Liens. There are no outstanding
debt or equity securities of the Borrower or any of its Subsidiaries and no
outstanding obligations of the Borrower or any of its Subsidiaries convertible
into or exchangeable for, or warrants, options or other rights for the purchase
or acquisition from the Borrower or any of its Subsidiaries, or other
obligations of any Subsidiary to issue, directly or indirectly, any shares of
Capital Stock of any Subsidiary of the Borrower.
(f) Litigation; Commercial Tort Claims. Except as set forth in Schedule
6.01(f), (i) there is no pending or, to the best knowledge of any Loan Party,
threatened action, suit or proceeding affecting any Loan Party before any court
or other Governmental Authority or any arbitrator that (A) if adversely
determined, could reasonably be expected to result in a Material Adverse Effect
or (B) relates to this Agreement or any other Loan Document or any transaction
contemplated hereby or thereby and (ii) as of the Effective Date, none of the
Loan Parties holds any commercial tort claims in respect of which a claim has
been filed in a court of law or a written notice by an attorney has been given
to a potential defendant.
(g) Financial Condition.
(i) The Financial Statements, copies of which have been delivered to each
Agent and each Lender, fairly present the consolidated financial condition of
the Borrower and its Subsidiaries as at the respective dates thereof and the
consolidated results of operations of the Borrower and its Subsidiaries for the
fiscal periods ended on such respective dates, all in accordance with GAAP, and
since July 31, 2002, no event or development has occurred that has had or could
reasonably be expected to result in a Material Adverse Effect.
(ii) The Borrower has heretofore furnished to each Agent and each Lender
(A) projected monthly balance sheets, income statements and statements of cash
flows of the Borrower and its Subsidiaries for the period from November 1, 2003,
through October 31, 2003, and (B) projected annual balance sheets, income
statements and statements of cash flows of the Borrower and its Subsidiaries for
the Fiscal Years ending in 2003 through 2006, which projected financial
statements shall be updated from time to time pursuant to Section 7.01(a)(vii).
Such projections, as so updated, are believed by the Borrower at the time
furnished to be reasonable, have been prepared on a reasonable basis and in good
faith by the Borrower, and have been based on assumptions believed by the
Borrower to be reasonable at the time made and upon the best information then
reasonably available to the Borrower, and the Borrower is not aware of any facts
or information that would lead it to believe that such projections, as so
updated, are incorrect or misleading in any material respect.
(h) Compliance with Law, Etc. No Loan Party is in violation of its
organizational documents, any law, rule, regulation, judgment or order of any
Governmental Authority applicable to it or any of its property or assets, or any
material term of any agreement or instrument (including, without limitation, any
Material Contract) binding on or otherwise affecting it or any of its
properties, and no Default or Event of Default has occurred and is continuing.
The Loan Parties have not violated any laws or failed to obtain any license,
permit, franchise or other governmental authorization necessary for the
ownership of any their Oil and Gas Properties or the conduct of their business.
The Oil and Gas Properties (and properties utilized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
conformity with all applicable laws and all rules, regulations and orders of all
duly constituted activities having jurisdiction and in substantial 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 this connection, (i) no Oil
and Gas Property is subject to having allowable production reduced below the
full and regular allowable production (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 utilized therewith) are deviated from the
vertical more than the maximum permitted by applicable laws, regulations, rules
and orders, 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 real property utilized therewith, such utilized real
property) covered by the leases that are the subject of the title opinions
delivered pursuant to Section 5.01(d)(vii).
(i) ERISA. Except as set forth on Schedule 6.01(i), (i) each Employee Plan
is in substantial compliance with ERISA and the IRC, (ii) no Termination Event
has occurred nor is reasonably expected to occur with respect to any Employee
Plan, (iii) the most recent annual report (Form 5500 Series) with respect to
each Employee Plan, including any required Schedule B (Actuarial Information)
thereto, copies of which have been filed with the Internal Revenue Service and
delivered to the Agents, is complete and correct and fairly presents the funding
status of such Employee Plan, and since the date of such report there has been
no material adverse change in such funding status, (iv) copies of each agreement
entered into with the PBGC, the U.S. Department of Labor or the Internal Revenue
Service with respect to any Employee Plan have been delivered to the Agents, (v)
no Employee Plan had an accumulated or waived funding deficiency or permitted
decrease which would create a deficiency in its funding standard account or has
applied for an extension of any amortization period within the meaning of
Section 412 of the IRC at any time during the previous 60 months, and (vi) no
Lien imposed under the IRC or ERISA exists or is likely to arise on account of
any Employee Plan within the meaning of Section 412 of the IRC. Except as set
forth on Schedule 6.01(i), no Loan Party or any of its ERISA Affiliates has
incurred any withdrawal liability under ERISA with respect to any Multiemployer
Plan, or is aware of any facts indicating that it or any of its ERISA Affiliates
may in the future incur any such withdrawal liability. No Loan Party or any of
its ERISA Affiliates nor any fiduciary of any Employee Plan has (A) engaged in a
nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of
the IRC, (B) failed to pay any required installment or other payment required
under Section 412 of the IRC on or before the due date for such required
installment or payment, (C) engaged in a transaction within the meaning of
Section 4069 of ERISA or (D) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums, and there are no premium
payments which have become due which are unpaid. There are no pending or, to the
best knowledge of any Loan Party, threatened claims, actions, proceedings or
lawsuits (other than claims for benefits in the normal course) asserted or
instituted against (1) any Employee Plan or its assets, (2) any fiduciary with
respect to any Employee Plan, or (3) any Loan Party or any of its ERISA
Affiliates with respect to any Employee Plan. Except as required by Section
4980B of the Internal Revenue Code, no Loan Party or any of its ERISA Affiliates
maintains an employee welfare benefit plan (as defined in Section 3(1) of ERISA)
which provides health or welfare benefits (through the purchase of insurance or
otherwise) for any retired or former employee of any Loan Party or any of its
ERISA Affiliates or coverage after a participant's termination of employment.
(j) Taxes, Etc. All Federal, state and local tax returns and other reports
required by applicable law to be filed by any Loan Party have been filed, or
extensions have been obtained, and all taxes, assessments and other governmental
charges imposed upon any Loan Party or any property of any Loan Party and which
have become due and payable have been paid, except to the extent contested in
good faith by proper proceedings which stay the imposition of any penalty, fine
or Lien resulting from the non-payment thereof and with respect to which
adequate reserves have been set aside for the payment thereof in accordance with
GAAP.
(k) Regulations T, U and X. No Loan Party is or will be engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock (within the meaning of Regulation T, U or X), and no proceeds of any Loan
will be used to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock.
(l) Nature of Business. Other than as set forth on Schedule 6.01(l), no
Loan Party is engaged in any business other than the Oil and Gas Business.
(m) Adverse Agreements, Etc. No Loan Party is a party to any agreement or
instrument, or subject to any charter, limited liability company agreement,
partnership agreement or other corporate, partnership or limited liability
company restriction or any judgment, order, regulation, ruling or other
requirement of a court or other Governmental Authority, which has, or in the
future could reasonably be expected to result in, a Material Adverse Effect.
(n) Permits, Etc. Each Loan Party has, and is in compliance with, all
permits, licenses, authorizations, approvals, entitlements and accreditations
required for such Person lawfully to own, lease, manage or operate, or to
acquire, each business currently owned, leased, managed or operated, or to be
acquired, by such Person. No condition exists or event has occurred which, in
itself or with the giving of notice or lapse of time or both, would result in
the suspension, revocation, impairment, forfeiture or non-renewal of any such
permit, license, authorization, approval, entitlement or accreditation, and
there is no claim that any thereof is not in full force and effect. No Loan
Party has received any notices concerning, and there are no existing orders of,
proceedings pending before, or other requirements of, any Governmental
Authority, including the Bureau of Land Management and the Federal Energy
Regulatory Commission and any comparable state or local Governmental Authority,
which could or will materially interfere with, limit or otherwise restrict the
Oil and Gas Business of the Loan Parties or which could or will require any such
Loan Party to refund or otherwise return any portion of the proceeds received or
to be received from the sale of Hydrocarbons by any such Loan Party.
(o) Properties. (i) Each Loan Party has good and marketable title to, valid
leasehold interests in, or valid licenses to use, all property and assets
material to its business, free and clear of all Liens, except Permitted Liens.
All such properties and assets are in good working order and condition, ordinary
wear and tear excepted.
(ii) Part A of Schedule 6.01(o) sets forth a complete and accurate list, as
of the Effective Date, of the location, by state and street address, of all real
property owned or leased by each Loan Party, other than Oil and Gas Properties.
Part B of Schedule 6.01(o) sets forth a complete and accurate list, as of the
Effective Date, all Oil and Gas Properties whether leased or owned by any Loan
Party. As of the Effective Date, each Loan Party has valid leasehold interests
in the Leases described on Part C of Schedule 6.01(o) to which it is a party.
Part C of Schedule 6.01(o) sets forth with respect to each such Lease, the
commencement date, termination date, renewal options (if any) and annual base
rents. Each such Lease is valid and enforceable in accordance with its terms in
all material respects and is in full force and effect. No consent or approval of
any landlord or other third party in connection with any such Lease is necessary
for any Loan Party to enter into and execute the Loan Documents to which it is a
party, except as set forth on Part C of Schedule 6.01(o). To the best knowledge
of any Loan Party, except as set forth on Part C of Schedule 6.01(o), no other
party to any such Lease is in default of its obligations thereunder, and no Loan
Party (or any other party to any such Lease) has at any time delivered or
received any notice of default which remains uncured under any such Lease and,
as of the Effective Date, no event has occurred which, with the giving of notice
or the passage of time or both, would constitute a default under any such Lease.
(iii) The Borrower and its Subsidiaries each have good and marketable title
to all of its Oil and Gas Properties set forth on Part B of Schedule 6.01(o)
(other than the Oil and Gas Properties set forth on Part D of Schedule 6.01(o))
which constitute real property and good title to all of its Oil and Gas
Properties set forth on Part B Schedule 6.01(o) (other than the Oil and Gas
Properties set forth on Part D of Schedule 6.01(o)) which constitute personal
property, in each case except for Permitted Liens, and to the best of Borrower's
knowledge, the Borrower and its Subsidiaries each have good and marketable title
to all of its Oil and Gas Properties set forth on Part B of Schedule 6.01(o)
which constitute real property and good title to all of its Oil and Gas
Properties set forth on Part B of Schedule 6.01(o) which constitute personal
property, in each case except for Permitted Liens, and in each case the quantum
and nature of the interest of the Borrower and its Subsidiaries in and to the
Oil and Gas Properties as set forth in the Initial Reserve Report or each
Reserve Report, as the case may be, includes the entire interest of the Borrower
and its Subsidiaries in such Oil and Gas Properties as of the date of the
Initial Reserve Report or such applicable Reserve Report, as the case may be,
and are complete and accurate in all material respects as of the date of the
Initial Reserve Report or such applicable Reserve Report, as the case may be;
and there are no "back-in" or "reversionary" interests held by third parties
which could materially reduce the interest of the Borrower or its Subsidiaries
in such Oil and Gas Properties except as expressly set forth in the Initial
Reserve Report or such applicable Reserve Report, as the case may be. The PV-10
of the Proved Reserves located on the Real Property described on Part D of
Schedule 6.01(o) does not exceed $450,000. The ownership of the Oil and Gas
Properties by the Borrower and its Subsidiaries shall not in any material
respect obligate any such Loan Party to bear the costs and expenses relating to
the maintenance, development or operations of each such Oil and Gas Property in
an amount in excess of the working interest of such Loan Party in each Oil and
Gas Property set forth in the Initial Reserve Report or the most recent Reserve
Report, as the case may be.
(iv) The Loan Parties' marketing, gathering, transportation, processing and
treating facilities and equipment, together with any marketing, gathering,
transportation, processing and treating contracts in effect among the Loan
Parties and any other Person, are sufficient to gather, transport, process
and/or treat, reasonably anticipated volumes of production of Hydrocarbons from
the Oil and Gas Properties of the Loan Parties subject to force majeure.
(p) Full Disclosure. Each Loan Party has disclosed to the Agents all
agreements, instruments and corporate or other restrictions to which it is
subject, and all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
None of the other reports, financial statements, certificates or other
information furnished by or on behalf of any Loan Party to the Agents in
connection with the negotiation of this Agreement or delivered hereunder (as
modified or supplemented by other information so furnished) contains any
material misstatement of fact or omits to state any material fact necessary to
make the statements therein, in the light of the circumstances under which it
was made, not misleading; provided that, with respect to projected financial
information, each Loan Party represents only that such information was prepared
in good faith based upon assumptions believed to be reasonable at the time.
There is no contingent liability or fact that could reasonably be expected to
result in a Material Adverse Effect which has not been set forth in a footnote
included in the Financial Statements or a Schedule hereto.
(q) Operating Lease Obligations. On the Effective Date, none of the Loan
Parties has any Operating Lease Obligations other than the Operating Lease
Obligations set forth on Schedule 6.01(q).
(r) Environmental Matters. Except as set forth on Schedule 6.01(r), (i) the
operations of each Loan Party are in material compliance with all Environmental
Laws; (ii) there has been no Release at any of the properties owned or operated
by any Loan Party or a predecessor in interest, or at any disposal or treatment
facility which received Hazardous Materials generated by any Loan Party or any
predecessor in interest which could reasonably be expected to result in a
Material Adverse Effect; (iii) no Environmental Action has been asserted against
any Loan Party or any predecessor in interest nor does any Loan Party have
knowledge or notice of any threatened or pending Environmental Action against
any Loan Party or any predecessor in interest which could reasonably be expected
to result in a Material Adverse Effect; (iv) no Environmental Actions have been
asserted against any facilities that may have received Hazardous Materials
generated by any Loan Party or any predecessor in interest which could
reasonably be expected to result in a Material Adverse Effect; (v) no property
now or formerly owned or occupied by a Loan Party has been used as a treatment
or disposal site for any Hazardous Material; (vi) no Loan Party has failed to
report to the proper Governmental Authority the occurrence of any Release which
is required to be so reported by any Environmental Laws which could reasonably
be expected to result in a Material Adverse Effect; (vii) each Loan Party holds
all licenses, permits and approvals required under any Environmental Laws in
connection with the operation of the business carried on by it, except for such
licenses, permits and approvals as to which a Loan Party's failure to maintain
or comply with could not reasonably be expected to result in a Material Adverse
Effect; and (viii) no Loan Party has received any notification pursuant to any
Environmental Laws that (A) any work, repairs, construction or Capital
Expenditures are required to be made in respect as a condition of continued
compliance with any Environmental Laws, or any license, permit or approval
issued pursuant thereto or (B) any license, permit or approval referred to above
is about to be reviewed, made subject to limitations or conditions, revoked,
withdrawn or terminated, in each case, except as could not reasonably be
expected to result in a Material Adverse Effect.
(s) Insurance. Each Loan Party keeps its property adequately insured and
bonded against and maintains (i) insurance to such extent and against such
risks, including fire, as is customary with companies in the same or similar
businesses, (ii) worker's compensation insurance in the amount required by
applicable law, (iii) public liability insurance, which shall include product
liability insurance, in the amount customary with companies in the same or
similar business against claims for personal injury or death on properties
owned, occupied or controlled by it, and (iv) performance bonds related to
operations on or pertaining to its Oil and Gas Properties and (v) such other
insurance and performance bonds as may be required by law or as may be
reasonably required by the Collateral Agent (including, without limitation,
against larceny, embezzlement or other criminal misappropriation). Schedule
6.01(s) sets forth a list of all insurance maintained by Borrower on the
Effective Date and all performance bonds related to operations on or pertaining
to the Oil and Gas Properties of the Loan Parties as in effect on the Effective
Date.
(t) Use of Proceeds. The proceeds of the Loans shall be used to (i) fund
the purchase price under the Acquisition Agreements, (ii) to pay fees and
expenses related to this Agreement and the other Loan Documents, and (iii) for
the Borrower's general working capital purposes.
(u) Solvency. After giving effect to the transactions contemplated by this
Agreement and before and after giving effect to each Loan, each Loan Party is,
and the Loan Parties on a consolidated basis are, Solvent.
(v) Location of Bank Accounts. Schedule 6.01(v) sets forth a complete and
accurate list as of the Effective Date of all deposit, checking and other bank
accounts, all securities and other accounts maintained with any broker dealer
and all other similar accounts maintained by each Loan Party, together with a
description thereof (i.e., the bank or broker dealer at which such deposit or
other account is maintained and the account number and the purpose thereof).
(w) Intellectual Property. Except as set forth on Schedule 6.01(w), each
Loan Party owns or licenses or otherwise has the right to use all licenses,
permits, patents, patent applications, trademarks, trademark applications,
service marks, tradenames, copyrights, copyright applications, franchises,
authorizations, non-governmental licenses and permits and other intellectual
property rights that are necessary for the operation of its business, without
infringement upon or conflict with the rights of any other Person with respect
thereto, except for such infringements and conflicts which, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect. Set forth on Schedule 6.01(w) is a complete and accurate list as of the
Effective Date of all such material licenses, permits, patents, patent
applications, trademarks, trademark applications, service marks, tradenames,
copyrights, copyright applications, franchises, authorizations, non-governmental
licenses and permits and other intellectual property rights of each Loan Party.
No slogan or other advertising device, product, process, method, substance, part
or other material now employed, or now contemplated to be employed, by any Loan
Party infringes upon or conflicts with any rights owned by any other Person, and
no claim or litigation regarding any of the foregoing is pending or threatened,
except for such infringements and conflicts which could not reasonably be
expected to result in, individually or in the aggregate, a Material Adverse
Effect. To the best knowledge of each Loan Party, no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or proposed, which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.
(x) Material Contracts. Set forth on Schedule 6.01(x) is a complete and
accurate list as of the Effective Date of all Material Contracts of each Loan
Party, showing the parties and subject matter thereof and amendments and
modifications thereto. Each such Material Contract (i) is in full force and
effect and is binding upon and enforceable against each Loan Party that is a
party thereto and, to the best knowledge of such Loan Party, all other parties
thereto in accordance with its terms, (ii) has not been otherwise amended or
modified, and (iii) is not in default due to the action of any Loan Party or, to
the best knowledge of any Loan Party, any other party thereto.
(y) Holding Company and Investment Company Acts. None of the Loan Parties
is (i) a "holding company" or a "subsidiary company" of a "holding company" or
an "affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935, as amended, or (ii) an "investment company"
or an "affiliated person" or "promoter" of, or "principal underwriter" of or
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended.
(z) Employee and Labor Matters. There is (i) no unfair labor practice
complaint pending or, to the best knowledge of any Loan Party, threatened
against any Loan Party before any Governmental Authority and no grievance or
arbitration proceeding pending or threatened against any Loan Party which arises
out of or under any collective bargaining agreement, (ii) no strike, labor
dispute, slowdown, stoppage or similar action or grievance pending or threatened
against any Loan Party or (iii) to the best knowledge of any Loan Party, no
union representation question existing with respect to the employees of any Loan
Party and no union organizing activity taking place with respect to any of the
employees of any Loan Party. No Loan Party or any of its ERISA Affiliates has
incurred any liability or obligation under the Worker Adjustment and Retraining
Notification Act ("WARN") or similar state law, which remains unpaid or
unsatisfied. The hours worked and payments made to employees of any Loan Party
have not been in violation of the Fair Labor Standards Act or any other
applicable legal requirements, except to the extent such violations could not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. All material payments due from any Loan Party on account of
wages and employee health and welfare insurance and other benefits have been
paid or accrued as a liability on the books of such Loan Party, except where the
failure to do so could not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(aa) Customers and Suppliers. There exists no actual or threatened
termination, cancellation or limitation of, or modification to or change in, the
business relationship between (i) any Loan Party, on the one hand, and any
customer or any group thereof, on the other hand, whose agreements with any Loan
Party are individually or in the aggregate material to the business or
operations of such Loan Party, or (ii) any Loan Party, on the one hand, and any
material supplier thereof, on the other hand.
(bb) No Bankruptcy Filing. No Loan Party is contemplating either the filing
of a petition by it under any state, federal or foreign bankruptcy or insolvency
laws or the liquidation of all or a major portion of such Loan Party's assets or
property, and no Loan Party has any knowledge of any Person contemplating the
filing of any such petition against it.
(cc) Separate Existence.
(i) All customary formalities regarding the corporate existence of each
Loan Party have been at all times since its formation observed.
(ii) Each Loan Party has at all times since its formation accurately
maintained its financial statements, accounting records and other organizational
documents separate from those of any Affiliate of such Loan Party and any other
Person. No Loan Party has at any time since its formation commingled its assets
with those of any of its Affiliates or any other Person. Each Loan Party has at
all times since its formation accurately maintained its own bank accounts and
separate books of account.
(iii) Each Loan Party has at all times since its formation paid its own
liabilities from its own separate assets.
(iv) Each Loan Party has at all times since its formation identified itself
in all dealings with the public, under its own name and as a separate and
distinct Person. No Loan Party has at any time since its formation identified
itself as being a division or a part of any other Person.
(dd) Name; Jurisdiction of Organization; Organizational ID Number; Chief
Place of Business; Chief Executive Office; FEIN. Schedule 6.01(dd) sets forth a
complete and accurate list as of the date hereof of (i) the exact legal name of
each Loan Party, (ii) the jurisdiction of organization of each Loan Party, (iii)
the organizational identification number of each Loan Party (or indicates that
such Loan Party has no organizational identification number), (iv) each place of
business of each Loan Party, (v) the chief executive office of each Loan Party
and (vi) the federal employer identification number of each Loan Party.
(ee) Tradenames. Schedule 6.01(ee) hereto sets forth a complete and
accurate list as of the Effective Date of all tradenames used by each Loan
Party.
(ff) Locations of Collateral. There is no location at which any Loan Party
has any Collateral (except for Inventory in transit) other than (i) those
locations listed on Schedule 6.01(ff) and (ii) any other locations approved in
writing by the Collateral Agent from time to time. Schedule 6.01(ff) hereto
contains a true, correct and complete list, as of the Effective Date, of the
legal names and addresses of each warehouse at which Collateral of each Loan
Party is stored. None of the receipts received by any Loan Party from any
warehouse states that the goods covered thereby are to be delivered to bearer or
to the order of a named Person or to a named Person and such named Person's
assigns.
(gg) Security Interests. Each Security Agreement and each Pledge Agreement,
as assigned pursuant to the Assignment Documents creates in favor of the
Collateral Agent, for the benefit of the Lenders, a legal, valid and enforceable
security interest in the Collateral covered thereby. The UCC-1 financing
statements assigned to the Collateral Agent pursuant to the Assignment
Documents, create perfected, first priority security interests (subject to
Permitted Liens), and no further recordings or filings are or will be required
in connection with the creation, perfection or enforcement of such security
interests and Liens.
(hh) Oil and Gas Imbalances. Except as set forth on Schedule 6.01(hh) or on
the most recent certificate delivered pursuant to Section 7.01(a)(vi), on a net
basis there are not gas imbalances, take-or-pay oil and gas or other prepayments
with respect the Borrower's Oil and Gas Properties which would require such
Person either to make cash settlements for such production or deliver
Hydrocarbons produced from such Oil and Gas Properties at some future time
without then or thereafter receiving full payments therefor exceeding 1% percent
of the current monthly production of oil and gas from the Oil and Gas Properties
of the Borrower in the aggregate.
(ii) Hedging Agreements. Schedule 6.01(ii) sets forth, as of the Effective
Date, a true and complete list of all Hedging Agreements (including commodity
price swap agreements, forward agreements or contracts of sale which provide for
prepayment for deferred shipment or delivery of any Hydrocarbons) of the
Borrower and each Subsidiary of the Borrower, the material terms thereof
(including the type, term, effective date, termination date and notional amounts
or volumes), the net mark to market value thereof (including the hedged prices),
all credit support agreements relating thereto, interest rate(s) or exchange
rate(s), as applicable, margin required or supplied), and the counterparty to
each such agreement.
(jj) Schedules. All of the information which is required to be scheduled to
this Agreement is set forth on the Schedules attached hereto, is correct and
accurate and does not omit to state any information material thereto.
kk) Representations and Warranties in Documents; No Default. All
representations and warranties set forth in this Agreement and the other Loan
Documents are true and correct in all respects at the time as of which such
representations were made and on the Effective Date. No Event of Default has
occurred and is continuing and no condition exists which constitutes a Default
or an Event of Default.
ARTICLE VII
COVENANTS OF THE LOAN PARTIES
Section 7.01 Affirmative Covenants. So long as any principal of or interest
on any Loan, or any other Obligation (whether or not due) shall remain unpaid or
any Lender shall have any Commitment hereunder, each Loan Party shall:
(a) Reporting Requirements. Furnish to each Agent and each Lender:
(i) as soon as available and in any event within 45 days after the end of
each fiscal quarter of the Borrower, consolidated and consolidating balance
sheets, consolidated and consolidating statements of operations and retained
earnings and consolidated and consolidating statements of cash flows of the
Borrower and its Subsidiaries as at the end of such quarter, and for the period
commencing at the end of the immediately preceding Fiscal Year and ending with
the end of such quarter, setting forth in each case in comparative form the
figures for the corresponding date or period of the immediately preceding Fiscal
Year, all in reasonable detail and certified by an Authorized Officer of the
Borrower as fairly presenting, in all material respects, the financial position
of the Borrower and its Subsidiaries as of the end of such quarter and the
results of operations and cash flows of the Borrower and its Subsidiaries for
such quarter, in accordance with GAAP applied in a manner consistent with that
of the most recent audited financial statements of the Borrower and its
Subsidiaries furnished to the Agents and the Lenders, subject to normal year-end
audit adjustments and the absence of footnotes;
(ii) as soon as available, and in any event within 90 days after the end of
each Fiscal Year of the Borrower and its Subsidiaries, consolidated and
consolidating balance sheets, consolidated and consolidating statements of
operations and retained earnings and consolidated and consolidating statements
of cash flows of the Borrower and its Subsidiaries as at the end of such Fiscal
Year, setting forth in each case in comparative form the corresponding figures
for the immediately preceding Fiscal Year, all in reasonable detail and prepared
in accordance with GAAP, and accompanied by a report and an unqualified opinion,
prepared in accordance with generally accepted auditing standards, of
independent certified public accountants of recognized standing selected by the
Borrower and satisfactory to the Agents (which opinion shall be without (A) a
"going concern" or like qualification or exception, (B) any qualification or
exception as to the scope of such audit, or (C) any qualification which relates
to the treatment or classification of any item and which, as a condition to the
removal of such qualification, would require an adjustment to such item, the
effect of which would be to cause any noncompliance with the provisions of
Section 7.03, together with a written statement of such accountants (1) to the
effect that, in making the examination necessary for their audit of such
financial statements, they have not obtained any knowledge of the existence of
an Event of Default or a Default under Section 7.03 and (2) if such accountants
shall have obtained any knowledge of the existence of an Event of Default or
such Default under Section 7.03, describing the nature thereof;
(iii) as soon as available, and in any event within 30 days after the end
of each fiscal month of the Borrower and its Subsidiaries, internally prepared
consolidated and consolidating balance sheets, consolidated and consolidating
statements of operations and retained earnings and consolidated and
consolidating statements of cash flows as at the end of such fiscal month, and
for the period commencing at the end of the immediately preceding Fiscal Year
and ending with the end of such fiscal month, all in reasonable detail and
certified by an Authorized Officer of the Borrower as fairly presenting, in all
material respects, the financial position of the Borrower and its Subsidiaries
as at the end of such fiscal month and the results of operations, retained
earnings and cash flows of the Borrower and its Subsidiaries for such fiscal
month, in accordance with GAAP applied in a manner consistent with that of the
most recent audited financial statements furnished to the Agents and the
Lenders, subject to normal year-end audit adjustments and the absence of
footnotes;
(iv) simultaneously with the delivery of the financial statements of the
Borrower and its Subsidiaries required by clauses (i), (ii) and (iii) of this
Section 7.01(a), a certificate of an Authorized Officer of the Borrower (A)
stating that such Authorized Officer has reviewed the provisions of this
Agreement and the other Loan Documents and has made or caused to be made under
his or her supervision a review of the condition and operations of the Borrower
and its Subsidiaries during the period covered by such financial statements with
a view to determining whether the Borrower and its Subsidiaries were in
compliance with all of the provisions of this Agreement and such Loan Documents
at the times such compliance is required hereby and thereby, and that such
review has not disclosed, and such Authorized Officer has no knowledge of, the
existence during such period of an Event of Default or Default or, if an Event
of Default or Default existed, describing the nature and period of existence
thereof and the action which the Borrower and its Subsidiaries propose to take
or have taken with respect thereto and (B) attaching a schedule showing the
calculation of the financial covenants specified in Section 7.03;
(v) as soon as available and in any event within 30 days after the end of
each fiscal month of the Borrower and its Subsidiaries, reports in form and
detail satisfactory to the Agents and certified by an Authorized Officer of the
Borrower as being accurate and complete (A) listing all Accounts Receivable of
the Loan Parties as of such day, which shall include the amount and age of each
Account Receivable, showing separately those which are more than 30, 60, 90 and
120 days old and a description of all Liens, set-offs, defenses and
counterclaims with respect thereto, together with a reconciliation of such
schedule with the schedule delivered to the Agents pursuant to this clause
(v)(A) for the immediately preceding fiscal month, the name and mailing address
of each Account Debtor with respect to each such Account Receivable and such
other information as any Agent may request, (B) listing all accounts payable of
the Loan Parties as of each such day which shall include the amount and age of
each account payable, the name and mailing address of each account creditor and
such other information as any Agent may request, (C) a certificate of an
Authorized Officer certifying that all insurance premiums payable during such
month with respect to insurance required to be maintained by the Loan Parties
hereunder were timely paid, identifying the insurance company that was paid, the
amount that was owed and the amount that was paid, (D) reports in form and
substance satisfactory to the Agents describing the amounts that have been paid
from and added to the Royalty Payment Suspense Account during such month and
detailed information with respect to any single account in an amount greater
than $250,000 that was paid from or added to the Royalty Payment Suspense
Account during such month, (E) reports that include a calculation of the Loan
Parties' cash disbursements and cash receipts during such month, and (F) a
listing of the name and mailing address of each Account Debtor with respect to
the Accounts Receivable referenced in clause (A) above and the name and mailing
address of each account creditor with respect to the accounts payable referenced
in clause (B) above;
(vi) not later than 50 days after July 31st of each year and 30 days after
January 31st and of each year, a Reserve Report, prepared by the Petroleum
Engineers who shall certify such Reserve Report to be true and accurate and to
have been prepared in accordance with the procedures used in the Initial Reserve
Report, and together with each such Reserve Report, a certificate of an
Authorized Officer certifying that, to the best of his knowledge (A) the
information contained in the Reserve Report and any other information delivered
in connection therewith is true and correct, (B) the Borrower and its
Subsidiaries own good and defensible title to its Oil and Gas Properties
evaluated in such Reserve Report and such Properties are free and clear of all
Liens except for Permitted Liens, (C) 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 with respect to its Oil and Gas Properties evaluated in such Reserve
Report which would require the Borrower or its Subsidiaries to deliver
Hydrocarbons produced from such Oil and Gas Properties or make cash payments at
some future time without then or thereafter receiving full payment therefor, (D)
except as set forth on an exhibit to the certificate, none of its Oil and Gas
Properties have been sold since the date of the Reserve Report, most recently
delivered pursuant to this Section 7.01(a)(vi), which exhibit shall list all of
its Oil and Gas Properties sold and in such detail as is reasonably required by
the Collateral Agent, (E) attached as an exhibit to the certificate is a list of
its Oil and Gas Properties added to and deleted from the Reserve Report most
recently delivered pursuant to this Section 7.01(a)(vi) and a list of all
Persons disbursing proceeds to the Borrower or its Subsidiaries, as applicable,
from its Oil and Gas Properties, (F) attached to the certificate as an exhibit
is a list of all of the Oil and Gas Properties evaluated by such Reserve Report
that are subject to a Mortgage, a Security Agreement and UCC financing
statements, that in each case create a first priority perfected Lien in such
Properties in favor of the Collateral Agent for the ratable benefit of the
Lenders and (G) except as set forth on an exhibit to such certificate, there has
not been any change in the working interest or net revenue interest of the
Borrower and its Subsidiaries in any of the Oil and Gas Properties included on
such Reserve Report, which change has occurred since the date of the last
certificate delivered pursuant to this Section 7.01(a)(vi), such exhibit to set
forth the reason for such change; provided that the Required Lenders shall have
the right to require the Borrower to cause to be delivered up to 2 additional
Reserve Reports per calendar year, at the Borrower's expense.
(vii) as soon as available and in any event within 30 days after the end of
each month ending after the Effective Date, a report setting forth, in form
reasonably acceptable to the Agents, the calculation of the PV-10 of the Proved
Reserves composing the Borrowing Base as determined by the Reserve Report most
recently delivered by the Borrower under Section 7.01(a)(vi), such calculation
to be made by multiplying (x) the volumetric quantity of the categories of
estimated Proved Reserves set forth in such Reserve Report less such aggregate
projected production of Proved Reserves since the date of and as provided in
such Reserve Report by (y) the applicable NYMEX Strip Price as of the last
Business Day of the month preceding the date of the delivery by the Borrower of
such report to the Agents; each such report shall (A) also include a discussion
of (I) any changes since the date of such Reserve Report in the categorization
of any Oil and Gas Properties among Proved Developed Producing Reserves, Proved
Developed Non-Producing Reserves, Proved Undeveloped Reserves and "other", (II)
any changes in the working interest or net revenue interest in the Oil and Gas
Properties of the Borrower and its Subsidiaries reflected on such Reserve
Report, and (III) such other information as the Agents shall reasonably consider
appropriate or necessary from the perspective of an asset-based lender; and (B)
be accompanied by a certificate of an Authorized Officer of the Borrower
certifying to the completeness and accuracy of the report, including the
calculation of the PV-10 of Proved Reserves comprising the Borrowing Base;
(viii) as soon as available and in any event within 30 days after each
month, a report, in form and substance satisfactory to the Agents, setting forth
as of the last Business Day of such month, a summary of its hedging positions
under all Hedging Agreements (including commodity price swap agreements, forward
agreements or contracts of sale which provide for prepayment for deferred
shipment or delivery of Hydrocarbons of the Loan Parties), including the type,
term, effective date, termination date and notional principal amounts or
volumes, the hedged price(s), interest rate(s) or exchange rate(s), as
applicable, the net mark to market value thereof and any credit support
agreements relating thereto (including any margin required or supplied), and the
counterparty to each such agreement;
(ix) within 30 days of the end of each month, a report on a lease-by-lease
or unit basis, showing (A) the gross proceeds from the sale of Hydrocarbon
products produced from the Oil and Gas Properties, (B) the quantity of
Hydrocarbon products sold, (C) the severance, gross production, occupation, or
gathering taxes deducted from or paid out of the proceeds, (D) the lease
operating expenses, tangible drilling costs, and capital expenditures, (E) the
number of wells operated (or the numbers of pooled units), drilled, or
abandoned, the name, address, telephone number, and contact with the purchaser
of production for all of the Oil and Gas Properties, and (G) such other
information as the Agents may reasonable request;
(x) (A) on or before July 1 of each year, financial projections,
supplementing and superseding the financial projections for the period referred
to in Section 6.01(g)(ii)(A), prepared on a monthly basis and otherwise in form
and substance satisfactory to the Agents, for the immediately succeeding Fiscal
Year for the Borrower and its Subsidiaries and (B) on or before the last day of
each fiscal quarter, financial projections, supplementing and superseding the
financial projections for the period referred to in Section 6.01(g)(ii)(B), in
form and substance satisfactory to the Agents, for each remaining quarterly
period in such Fiscal Year, all such financial projections to be prepared on a
reasonable basis and in good faith, and to be based on assumptions believed by
the Borrower to be reasonable at the time made and from the best information
then available to the Borrower;
(xi) promptly after submission to any Governmental Authority, all documents
and information furnished to such Governmental Authority in connection with any
investigation of any Loan Party other than routine inquiries by such
Governmental Authority;
(xii) as soon as possible, and in any event within 3 days after the
occurrence of an Event of Default or Default or the occurrence of any event or
development that could reasonably be expected to result in a Material Adverse
Effect, the written statement of an Authorized Officer of the Borrower setting
forth the details of such Event of Default or Default or other event or
development having a Material Adverse Effect and the action which the affected
Loan Party proposes to take with respect thereto; provided, that the disclosure
by Borrower of an event shall not be deemed to be an admission by Borrower that
such event could reasonably be expected to result in a Material Adverse Effect
unless Borrower states in such disclosure that such event could reasonably be
expected to result in a Material Adverse Effect (though either Agent shall in
any event be free to assert that such event could reasonably be expected to
result in a Material Adverse Effect);
(xiii) (A) as soon as possible and in any event within 10 days after any
Loan Party or any ERISA Affiliate thereof knows or has reason to know that (1)
any Reportable Event with respect to any Employee Plan has occurred, (2) any
other Termination Event with respect to any Employee Plan has occurred, or (3)
an accumulated funding deficiency has been incurred or an application has been
made to the Secretary of the Treasury for a waiver or modification of the
minimum funding standard (including installment payments) or an extension of any
amortization period under Section 412 of the IRC with respect to an Employee
Plan, a statement of an Authorized Officer of the Borrower setting forth the
details of such occurrence and the action, if any, which such Loan Party or such
ERISA Affiliate proposes to take with respect thereto, (B) promptly and in any
event within 3 days after receipt thereof by any Loan Party or any ERISA
Affiliate thereof from the PBGC, copies of each notice received by any Loan
Party or any ERISA Affiliate thereof of the PBGC's intention to terminate any
Plan or to have a trustee appointed to administer any Plan, (C) promptly and in
any event within 10 days after the filing thereof with the Internal Revenue
Service if requested by any Agent, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with respect to each
Employee Plan and Multiemployer Plan, (D) promptly and in any event within 10
days after any Loan Party or any ERISA Affiliate thereof knows or has reason to
know that a required installment within the meaning of Section 412 of the IRC
has not been made when due with respect to an Employee Plan, (E) promptly and in
any event within 3 days after receipt thereof by any Loan Party or any ERISA
Affiliate thereof from a sponsor of a Multiemployer Plan or from the PBGC, a
copy of each notice received by any Loan Party or any ERISA Affiliate thereof
concerning the imposition or amount of withdrawal liability under Section 4202
of ERISA or indicating that such Multiemployer Plan may enter reorganization
status under Section 4241 of ERISA, and (F) promptly and in any event within 10
days after any Loan Party or any ERISA Affiliate thereof sends notice of a plant
closing or mass layoff (as defined in WARN) to employees, copies of each such
notice sent by such Loan Party or such ERISA Affiliate thereof;
(xiv) promptly after the commencement thereof but in any event not later
than 5 Business Days after service of process with respect thereto on, or the
obtaining of knowledge thereof by, any Loan Party, notice of each action, suit
or proceeding before any court or other Governmental Authority or other
regulatory body or any arbitrator which, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(xv) as soon as available, but in any event not later than 30 days after
the end of each quarter, a report, certified by an Authorized Officer of
Borrower: (A) setting forth the total amount actually paid by each Loan Party
during the preceding quarter for (I) plugging and abandonment costs for previous
or ongoing plugging and abandonment operations pertaining to the producing or
previously producing Oil and Gas Properties of the Loan Parties, and (II)
general bond and supplemental bond payments pertaining to plugging and
abandonment costs; and (B) estimating the future payments for (I) and (II) above
for each of the succeeding 2 quarters;
(xvi) as soon as possible and in any event within 5 Business Days after
execution, receipt or delivery thereof, copies of any material notices that any
Loan Party executes or receives in connection with any Material Contract;
(xvii) promptly after the sending or filing thereof, copies of all
statements, reports and other information any Loan Party sends to any holders of
its Indebtedness or its securities or files with the SEC or any national
(domestic or foreign) securities exchange;
(xviii) promptly upon receipt thereof, copies of all financial reports
(including, without limitation, management letters), if any, submitted to any
Loan Party by its auditors in connection with any annual or interim audit of the
books thereof; and
(xix) promptly upon request, such other information concerning the
condition or operations, financial or otherwise, of any Loan Party as any Agent
may from time to time may reasonably request.
(b) Additional Guaranties and Collateral Security. Cause:
(i) each Subsidiary of any Loan Party to execute and deliver to the
Collateral Agent promptly and in any event within 3 Business Days after the
formation or acquisition thereof (A) a Guaranty in form and substance
satisfactory to Collateral Agent guaranteeing the Obligations, (B) a Security
Agreement, (C) if such Subsidiary has any Subsidiaries, a Pledge Agreement
together with (x) certificates evidencing all of the Capital Stock of any Person
owned by such Subsidiary, (y) undated stock powers executed in blank with
signature guaranteed, and (z) such opinion of counsel and such approving
certificate of such Subsidiary as the Collateral Agent may reasonably request in
respect of complying with any legend on any such certificate or any other matter
relating to such shares, (D) one or more Mortgages creating on the real property
or Oil and Gas Properties of such Subsidiary a perfected, first priority Lien on
such real property or Oil and Gas Properties, a Title Insurance Policy covering
such real property or a title opinion from Borrower's counsel covering such Oil
and Gas Properties, as applicable, a current ALTA survey of any such real
property and a surveyor's certificate, each in form and substance satisfactory
to the Collateral Agent, together with such other agreements, instruments and
documents as the Collateral Agent may require whether comparable to the
documents required under Section 7.01(o) or otherwise, (E) a joinder to the
Intercompany Subordination Agreement, and (F) such other agreements,
instruments, approvals, legal opinions or other documents reasonably requested
by the Collateral Agent in order to create, perfect, establish the first
priority of or otherwise protect any Lien purported to be covered by any such
Security Agreement, Pledge Agreement, or Mortgage, or otherwise to effect the
intent that such Subsidiary shall become bound by all of the terms, covenants
and agreements contained in the Loan Documents and that all property and assets
of such Subsidiary shall become Collateral for the Obligations; and
(ii) each owner of the Capital Stock of any such Subsidiary to execute and
deliver promptly and in any event within 3 Business Days after the formation or
acquisition of such Subsidiary a Pledge Agreement, together with (A)
certificates evidencing all of the Capital Stock of such Subsidiary, (B) undated
stock powers or other appropriate instruments of assignment executed in blank
with signature guaranteed, (C) such opinion of counsel and such approving
certificate of such Subsidiary as the Collateral Agent may reasonably request in
respect of complying with any legend on any such certificate or any other matter
relating to such shares and (D) such other agreements, instruments, approvals,
legal opinions or other documents requested by the Collateral Agent.
(c) Compliance with Laws, Etc. Comply, and cause each of its Subsidiaries
to comply, in all material respects with all applicable laws, rules, regulations
and orders (including, without limitation, all Environmental Laws), such
compliance to include, without limitation, (i) paying before the same become
delinquent all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or profits or upon any of its properties, and (ii)
paying all other lawful claims which if unpaid might become a Lien or charge
upon any of its properties, except, in each case, to the extent contested in
good faith by proper proceedings which stay the imposition of any penalty, fine
or Lien resulting from the non-payment thereof and with respect to which
adequate reserves have been set aside for the payment thereof in accordance with
GAAP.
(d) Preservation of Existence, Etc. Maintain and preserve, and cause each
of its Subsidiaries to maintain and preserve, its existence, rights and
privileges, and become or remain, and cause each of its Subsidiaries to become
or remain, duly qualified and in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary.
(e) Keeping of Records and Books of Account. Keep, and cause each of its
Subsidiaries to keep, adequate records and books of account, with complete
entries made to permit the preparation of financial statements in accordance
with GAAP.
(f) Inspection Rights. Permit, and cause each of its Subsidiaries to
permit, the agents and representatives of any Agent at any time and from time to
time during normal business hours, at the expense of the Borrower, to examine
and make copies of and abstracts from its records and books of account, to visit
and inspect its properties, to verify leases, notes, accounts receivable,
deposit accounts and its other assets, to conduct audits, physical counts,
valuations, appraisals, Phase I Environmental Site Assessments (and, if
requested by the Collateral Agent based upon the results of any such Phase I
Environmental Site Assessment, a Phase II Environmental Site Assessment) or
examinations, to engage a qualified engineer to audit the Loan Parties' material
wells, rigs and pipeline distribution systems and operations, and to discuss its
affairs, finances and accounts with any of its directors, officers, managerial
employees, independent accountants or any of its other representatives.
(g) Maintenance of Properties, Etc.
(i) Maintain and preserve, and cause each of its Subsidiaries to maintain
and preserve, all of its properties which are necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted, and comply, and cause each of its Subsidiaries to comply, at all
times with the provisions of all leases to which it is a party as lessee or
under which it occupies property, so as to prevent any loss or forfeiture
thereof or thereunder.
(ii) Maintain, preserve and keep, and cause each of its Subsidiaries to
maintain, preserve and keep, all operating equipment used with respect to its
Oil and Gas Properties, and oil and gas gathering assets in proper repair,
working order and condition, and make all necessary or appropriate repairs,
renewals, replacements, additions and improvements thereto so that the
efficiency of the operating equipment shall at all times be properly preserved
and maintained.
(iii) Operate and produce with respect to the Loan Parties' Oil and Gas
Properties in accordance with good engineering practices, as a prudent operator
and the following requirements: (A) the amount of Hydrocarbons produced from any
well shall not exceed in any month the lower of (I) the maximum amount that such
well is capable of producing at its maximum efficient rate of flow or (II) the
respective allowable rate of flow under applicable orders, rules, regulations or
laws, if any; (B) the amount of Hydrocarbons produced from the Loan Parties'
wells shall be sufficient to prevent a net migration of Hydrocarbons from the
reservoirs to which proved reserves are attributed; and (C) subject to field
rules established by governmental authorities having or asserting jurisdiction,
the amount of Hydrocarbons produced from the Loan Parties' wells shall be
equitable and ratable, based on factors used in determining such field rules.
(iv) With respect to any Loan Party's Oil and Gas Properties, and oil and
gas gathering assets which are operated by operators other than the Borrower or
a Subsidiary of the Borrower, enforce the operators' contractual obligations to
maintain, develop, and operate such properties subject to the applicable
operating agreements and in accordance with standard operating procedures as a
prudent operator.
(v) When due and payable: (A) pay and discharge all delay rentals,
royalties, expenses and indebtedness accruing under the lease, contract or other
agreements affecting or pertaining to its Oil and Gas Properties, (B) perform,
observe and comply 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 the accompanying elements therefrom and other
material properties so long as such properties are capable of producing
Hydrocarbons and the accompanying elements in quantities and at prices providing
for continued efficient and profitable operations of business and (C) do all
other things necessary to keep unimpaired, except for Permitted Liens, its
rights with respect thereto and prevent any forfeiture thereof or a default
thereunder.
(vi) Operate, and cause its Subsidiaries to operate, its Oil and Gas
Properties and other material properties on a continuous basis for the
production of Hydrocarbons and in a careful and efficient manner in accordance
with the usual and customary practices of the industry and in substantial
compliance with all applicable contracts and agreements and in compliance in all
material respects with all material laws
(h) Maintenance of Insurance. Maintain, and cause each of its Subsidiaries
to maintain, insurance with responsible and reputable insurance companies or
associations (including, without limitation, comprehensive general liability,
hazard, rent and business interruption insurance) with respect to its properties
(including all real properties leased or owned by it) and business, in such
amounts and covering such risks as is required by any Governmental Authority
having jurisdiction with respect thereto or as is carried generally in
accordance with sound business practice by companies in similar businesses
similarly situated and in any event in amount, adequacy and scope reasonably
satisfactory to the Collateral Agent. All policies covering the Collateral are
to be made payable to the Collateral Agent for the benefit of the Lenders, as
its interests may appear, in case of loss, under a standard non-contributory
"lender" or "secured party" clause and are to contain such other provisions as
the Collateral Agent may require to fully protect the Lenders' interest in the
Collateral and to any payments to be made under such policies. All certificates
of insurance are to be delivered to the Collateral Agent and the policies are to
be premium prepaid, with the loss payable and additional insured endorsement in
favor of the Collateral Agent and such other Persons as the Collateral Agent may
designate from time to time, and shall provide for not less than 30 days prior
written notice to the Collateral Agent of the exercise of any right of
cancellation. If any Loan Party or any of its Subsidiaries fails to maintain
such insurance, the Collateral Agent may arrange for such insurance, but at the
Borrower's expense and without any responsibility on the Collateral Agent's part
for obtaining the insurance, the solvency of the insurance companies, the
adequacy of the coverage, or the collection of claims. Upon the occurrence and
during the continuance of an Event of Default, the Collateral Agent shall have
the sole right, in the name of the Lenders, any Loan Party and its Subsidiaries,
to file claims under any insurance policies, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute any
and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies. During the period of
the drilling of wells and the construction of any other improvements comprising
a part of the Oil and Gas Properties, the Borrower shall, or, as applicable,
shall cause its contractors or subcontractors to, obtain and maintain well
control insurance (including coverage for costs and redrilling) and builder's
risk insurance, as applicable, in such form and amounts as is customary in the
industry and worker's compensation insurance covering all persons employed by
the Borrower or its agents or subcontractors of any tier in connection with any
construction affecting such Oil and Gas Properties, including, without
limitation, all agents and employees of the Borrower and the Borrower's
subcontractors with respect to whom death or bodily injury claims could be
asserted against the Borrower.
(i) Obtaining of Permits, Etc. Obtain, maintain and preserve, and cause
each of its Subsidiaries to obtain, maintain and preserve, and take all
necessary action to timely renew, all permits, licenses, authorizations,
approvals, entitlements and accreditations which are necessary or useful in the
proper conduct of its business.
(j) Environmental. (i) Keep any property either owned or operated by it or
any of its Subsidiaries free of any Environmental Liens; (ii) comply, and cause
each of its Subsidiaries to comply, in all material respects with Environmental
Laws and provide to the Collateral Agent any documentation of such compliance
which the Collateral Agent may reasonably request; (iii) immediately notify the
Agents of any Release of a Hazardous Material in excess of any reportable
quantity from or onto property owned or operated by it or any of its
Subsidiaries and take any Remedial Actions required to abate said Release; (iv)
promptly provide the Agents with written notice within 10 days of the receipt of
any of the following: (A) notice that an Environmental Lien has been filed
against any property of any Loan Party or any of its Subsidiaries; (B)
commencement of any Environmental Action or notice that an Environmental Action
will be filed against any Loan Party or any of its Subsidiaries; and (C) notice
of a violation, citation or other administrative order which could reasonably be
expected to result in a Material Adverse Effect and (v) defend, indemnify and
hold harmless the Agents and the Lenders and their transferees, and their
respective employees, agents, officers and directors, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs or
expenses (including, without limitation, attorney and consultant fees,
investigation and laboratory fees, court costs and litigation expenses) arising
out of (A) the presence, disposal, Release or threatened Release of any
Hazardous Materials on any property at any time owned or occupied by any Loan
Party or any of its Subsidiaries (or its predecessors in interest or title), (B)
any personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to such Hazardous Materials, (C) any request
for information, investigation, lawsuit brought or threatened, settlement
reached or order by a Governmental Authority relating to the presence or Release
of such Hazardous Materials, (D) any violation of any Environmental Law and/or
(E) any Environmental Action filed against any Agent or any Lender.
(k) Further Assurances. Take such action and execute, acknowledge and
deliver, and cause each of its Subsidiaries to take such action and execute,
acknowledge and deliver, at its sole cost and expense, such agreements,
instruments or other documents as any Agent may require from time to time in
order (i) to carry out more effectively the purposes of this Agreement and the
other Loan Documents, (ii) to subject to valid and perfected first priority
Liens (subject to Permitted Liens) any of the Collateral or any other property
of any Loan Party and its Subsidiaries, (iii) to establish and maintain the
validity and effectiveness of any of the Loan Documents and the validity,
perfection and priority of the Liens intended to be created thereby, and (iv) to
better assure, convey, grant, assign, transfer and confirm unto each Agent and
each Lender the rights now or hereafter intended to be granted to it under this
Agreement or any other Loan Document. In furtherance of the foregoing, to the
maximum extent permitted by applicable law, each Loan Party (A) authorizes each
Agent to execute any such agreements, instruments or other documents in such
Loan Party's name and to file such agreements, instruments or other documents in
any appropriate filing office, (B) authorizes each Agent to file any financing
statement required hereunder or under any other Loan Document, and any
continuation statement or amendment with respect thereto, in any appropriate
filing office without the signature of such Loan Party, and (C) ratifies the
filing of any financing statement, and any continuation statement or amendment
with respect thereto, filed without the signature of such Loan Party prior to
the date hereof.
(l) Change in Collateral; Collateral Records. (i) Give the Collateral Agent
not less than 30 days prior written notice of any change in the location of any
Collateral, other than to (or in-transit between) locations set forth on
Schedule 6.01(ff) and with respect to which the Collateral Agent has filed
financing statements and otherwise fully perfected its Liens thereon, (ii)
advise the Collateral Agent promptly, in sufficient detail, of any material
adverse change relating to the type, quantity or quality of the Collateral or
the Lien granted thereon and (iii) execute and deliver, and cause each of its
Subsidiaries to execute and deliver, to the Collateral Agent for the benefit of
the Lenders from time to time, solely for the Collateral Agent's convenience in
maintaining a record of Collateral, such written statements and schedules as the
Collateral Agent may reasonably require, designating, identifying or describing
the Collateral.
(m) [Intentionally Omitted]
(n) Subordination. Cause all Indebtedness and other obligations now or
hereafter owed by it to any of its Affiliates, to be subordinated in right of
payment and security to the Indebtedness and other Obligations owing to the
Agents and the Lenders in accordance with a subordination agreement in form and
substance satisfactory to the Agents.
(o) After Acquired Property.
(i) Upon the acquisition by it or any other Loan Party of any After
Acquired Property, immediately so notify the Collateral Agent, setting forth
with specificity a description of the interest acquired, the location of the
real property, any structures or improvements thereon and either an appraisal or
such Loan Party's good-faith estimate of the current value of such real property
(for purposes of this Section, the "Current Value"). The Collateral Agent shall
notify such Loan Party whether it intends to require a Mortgage and the other
documents referred to below or in the case of leasehold, a leasehold Mortgage or
landlord's waiver (pursuant to Section 7.01(m) hereof). Upon receipt of such
notice requesting a Mortgage, the Person which has acquired such After Acquired
Property shall immediately furnish to the Collateral Agent the following, each
in form and substance satisfactory to the Collateral Agent: (i) a Mortgage with
respect to such real property and related assets located at the After Acquired
Property, each duly executed by such Person and in recordable form; (ii)
evidence of the recording of the Mortgage referred to in clause (i) above in
such office or offices as may be necessary or, in the opinion of the Collateral
Agent, desirable to create and perfect a valid and enforceable first priority
lien on the property purported to be covered thereby or to otherwise protect the
rights of the Agents and the Lenders thereunder, (iii) a Title Insurance Policy,
(iv) a survey of such real property, certified to the Collateral Agent and to
the issuer of the Title Insurance Policy by a licensed professional surveyor
reasonably satisfactory to the Collateral Agent, (v) Phase I Environmental Site
Assessments with respect to such real property, certified to the Collateral
Agent by a company reasonably satisfactory to the Collateral Agent, (vi) in the
case of a leasehold interest, a certified copy of the lease between the landlord
and such Person with respect to such real property in which such Person has a
leasehold interest, and the certificate of occupancy with respect thereto, (vii)
in the case of a leasehold interest, an attornment and nondisturbance agreement
between the landlord (and any fee mortgagee) with respect to such real property
and the Collateral Agent, and (viii) such other documents or instruments
(including guarantees and opinions of counsel) as the Collateral Agent may
reasonably require. The Borrower shall pay all fees and expenses, including
reasonable attorneys' fees and expenses, and all title insurance charges and
premiums, in connection with each Loan Party's obligations under this Section
7.01(o).
(ii) With respect to any Oil and Gas Property acquired after the Effective
Date by the Borrower or any other Loan Party, promptly (and in any event within
10 days after the acquisition thereof): (A) execute and deliver to the
Collateral Agent such amendments to the Mortgages, the Security Agreements or
such other documents as the Collateral Agent shall deem necessary or advisable
to grant to the Collateral Agent, for the benefit of the Lenders, a Lien on such
Oil and Gas Property; (B) take all actions necessary or advisable to cause such
Lien to be duly perfected in accordance with all applicable law, including,
without limitation, the filing of Mortgages or financing statements in such
jurisdictions as may be requested by the Collateral Agent; and (C) if requested
by the Collateral Agent, deliver to the Collateral Agent legal opinions from the
Borrower's counsel relating to title and to the matters described in clauses (A)
and (B) immediately preceding, which opinions shall be in form and substance,
and from counsel, reasonably satisfactory to the Collateral Agent.
(p) Fiscal Year. Cause the Fiscal Year of the Borrower and its Subsidiaries
to end on July 31 of each calendar year unless the Agents consent to a change in
such Fiscal Year (and appropriate related changes to this Agreement).
(q) Borrowing Base. Maintain all Revolving Loans in compliance with the
then current Borrowing Base.
(r) Protection Against Drainage. To the extent that the Oil and Gas
Properties (i) are operated by the Borrower or its Subsidiaries, the Borrower
shall, or shall cause its Subsidiaries to, act as a prudent operator in an
effort to identify and prevent the occurrence of any drainage of Hydrocarbons
from the Oil and Gas Properties and (ii) are not operated by the Borrower of its
Subsidiaries, the Borrower shall utilize, or shall cause its Subsidiaries to
utilize, its property and contractual rights as a prudent owner in an effort to
identify and prevent the occurrence of any drainage of Hydrocarbons from the Oil
and Gas Properties.
(s) Additional Title Opinions. The Borrower shall, from time to time upon
the reasonable request of the Collateral Agent, take such actions and execute
and deliver such documents and instruments as the Collateral Agent shall require
to ensure that the Collateral Agent shall, at all times, have received
satisfactory title opinions (including if requested, supplemental or new title
opinions addressed to it), which title opinions shall be in form and substance
acceptable to the Collateral Agent in its sole discretion and shall include
opinions regarding the before payout and after payout ownership interests held
by the Borrower and its Subsidiaries for all wells located on the Oil and Gas
Properties covered thereby as to the ownership of Oil and Gas Properties of the
Borrower and its Subsidiaries.
(t) Hedging Agreements. Maintain in effect one or more Hedging Agreements
with respect to its Hydrocarbon production with one or more Persons with the
aggregate notional volumes of Hydrocarbons covered by such Hedging Agreements
constituting not less than 25% and not more than 75% of the aggregate amount of
the Borrower's estimated Hydrocarbon production volumes on an mcf equivalent
basis (where one barrel of oil is equal to six mcf of gas) for the succeeding 6
calendar months on a rolling 6 calendar month basis for such period from Oil and
Gas Properties classified as Proved Developed Producing Reserves as of the date
of the most recent Reserve Report delivered pursuant to Section 7.01(a)(vi) plus
the estimated production from anticipated drilling by the Loan Parties during
such succeeding 6 months. Borrower shall use such Hedging Agreements solely as a
part of its normal business operations as a risk management strategy and/or
hedge against changes resulting from market conditions related to the Loan
Parties' Oil and Gas Business and not as a means to speculate for investment
purposes on trends and shifts in financial or commodities markets.
(u) Use of Proceeds. Use the proceeds of the Loans to (i) fund the purchase
price under the Acquisition Agreements, (ii) to pay fees and expenses related to
this Agreement and the other Loan Documents, and (iii) for the Borrower's
general working capital purposes.
(v) Chief Financial Officer. In the event that the employment of any chief
financial officer hired by the Borrower terminates after the Effective Date,
retain a temporary chief financial officer who works not less than 30 hours per
week until such time as a full-time permanent chief financial officer is
retained by Borrower.
Section 7.02 Negative Covenants. So long as any principal of or interest on
any Loan or any other Obligation (whether or not due) shall remain unpaid or any
Lender shall have any Commitment hereunder, the Borrower shall not:
(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Lien upon or
with respect to any of its properties, whether now owned or hereafter acquired;
file or suffer to exist under the Uniform Commercial Code or any similar law or
statute of any jurisdiction, a financing statement (or the equivalent thereof)
that names it or any of its Subsidiaries as debtor; sign or suffer to exist any
security agreement authorizing any secured party thereunder to file such
financing statement (or the equivalent thereof); sell any of its property or
assets subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including sales of accounts receivable) with
recourse to it or any of its Subsidiaries or assign or otherwise transfer, or
permit any of its Subsidiaries to assign or otherwise transfer, any account or
other right to receive income; other than, as to all of the above, Permitted
Liens; provided, that, no Liens shall be permitted on any assets included in the
Borrowing Base other than the Liens of the Collateral Agent for the benefit of
the Lenders.
(b) Indebtedness. Create, incur, assume, guarantee or suffer to exist, or
otherwise become or remain liable with respect to, or permit any of its
Subsidiaries to create, incur, assume, guarantee or suffer to exist or otherwise
become or remain liable with respect to, any Indebtedness other than Permitted
Indebtedness.
(c) Fundamental Changes; Dispositions. Wind-up, liquidate or dissolve, or
merge, consolidate or amalgamate with any Person, or convey, sell, lease or
sublease, transfer or otherwise dispose of, whether in one transaction or a
series of related transactions, all or any part of its business, property or
assets, whether now owned or hereafter acquired (or agree to do any of the
foregoing), or purchase or otherwise acquire, whether in one transaction or a
series of related transactions, all or substantially all of the assets of any
Person (or any division thereof) (or agree to do any of the foregoing), or
permit any of its Subsidiaries to do any of the foregoing; provided, however,
that
(i) any wholly-owned Subsidiary of any Loan Party (other than the Borrower)
may be merged into such Loan Party or another wholly-owned Subsidiary of such
Loan Party, or may consolidate with another wholly-owned Subsidiary of such Loan
Party, so long as (A) no other provision of this Agreement would be violated
thereby, (B) such Loan Party gives the Agents at least 30 days prior written
notice of such merger or consolidation, (C) no Default or Event of Default shall
have occurred and be continuing either before or after giving effect to such
transaction, (D) the Lenders' rights in any Collateral, including, without
limitation, the existence, perfection and priority of any Lien thereon, are not
adversely affected by such merger or consolidation and (E) the surviving
Subsidiary, if any, is joined as a Loan Party hereunder and is a party to a
Guaranty and a Security Agreement and the Capital Stock of which Subsidiary is
the subject of a Pledge Agreement, in each case, which is in full force and
effect on the date of and immediately after giving effect to such merger or
consolidation; and
(ii) any Loan Party and its Subsidiaries may make Permitted Dispositions.
(d) Change in Nature of Business. Make, or permit any of its Subsidiaries
to make, any change in the nature of its business as described in Section
6.01(l).
(e) Loans, Advances, Investments, Etc. Make or commit or agree to make any
loan, advance guarantee of obligations, other extension of credit or capital
contributions to, or hold or invest in or commit or agree to hold or invest in,
or purchase or otherwise acquire or commit or agree to purchase or otherwise
acquire any shares of the Capital Stock, bonds, notes, debentures or other
securities of, or make or commit or agree to make any other investment in, any
other Person, or purchase or own any futures contract or otherwise become liable
for the purchase or sale of currency or other commodities at a future date in
the nature of a futures contract, or permit any of its Subsidiaries to do any of
the foregoing, except for: (i) investments existing on the date hereof, as set
forth on Schedule 7.02(e) hereto, but not any increase in the amount thereof as
set forth in such Schedule or any other modification of the terms thereof, (ii)
temporary loans and advances by the Borrower to the Guarantors and by Borrower's
Subsidiaries to the Borrower or to a Guarantor, made in the ordinary course of
business, (iii) Permitted Investments, and (iv) Permitted Business Investments.
(f) Lease Obligations. (i) Create, incur or suffer to exist, or permit any
of its Subsidiaries to create, incur or suffer to exist, any obligations as
lessee (x) for the payment of rent for any real or personal property in
connection with any sale and leaseback transaction, (y) for the payment of rent
for any real or personal property under leases or agreements to lease other than
(A) Capitalized Lease Obligations for property other than Oil and Gas Properties
which would not cause the aggregate amount of all obligations under Capitalized
Leases entered into after the Effective Date owing by all Loan Parties and their
Subsidiaries in any Fiscal Year to exceed the amounts set forth in subsection
(g) of this Section 7.02, and (B) Operating Lease Obligations for property other
than Oil and Gas Properties which would not cause the aggregate amount of all
such Operating Lease Obligations incurred after the Effective Date and owing by
all Loan Parties and their Subsidiaries in any Fiscal Year to exceed $250,000 or
(z) for the payment of rent or hire of Oil and Gas Properties of any kind
whatsoever (real or personal, including capital leases but excluding leases of
Hydrocarbon Interests and leases directly related to oil and gas field
operations constituting a Permitted Disposition), under leases or lease
agreements which would cause the aggregate amount of all payments made by such
Person pursuant to such leases or lease agreements to exceed $250,000, in any
period of 12 consecutive calendar months in the aggregate, or create, incur,
assume or suffer to exist any obligation for the payment of rent or hire of Oil
and Gas Properties of any kind whatsoever (real or personal, including capital
leases but excluding royalty payments under leases of Hydrocarbon Interests),
for oil and gas field operations under leases or lease agreements (other than
leases for any drilling, workover or other rig related activities, but including
leases or vehicles, compressors, and the like) which would cause the aggregate
amount of all payments made by such Persons pursuant to such leases or lease
agreements to exceed $250,000 in any period of 12 consecutive calendar months.
(g) Capital Expenditures. Make or commit or agree to make, or permit any of
its Subsidiaries to make or commit or agree to make, any Capital Expenditure (by
purchase or Capitalized Lease) that would cause the aggregate amount of all
Capital Expenditures made by the Loan Parties and their Subsidiaries to exceed
(i) $1,500,000 during the 12 month period ending on December 31, 2004, (ii)
$2,500,000 during the 12 month period ending on December 31, 2005, or (iii)
$3,500,000 during the 12 month period ending on December 31, 2006.
(h) Restricted Payments. Except with respect to the obligations described
on Schedule 7.02(h), (i) declare or pay any dividend or other distribution,
direct or indirect, on account of any Capital Stock of any Loan Party or any of
its Subsidiaries, now or hereafter outstanding, (ii) make any repurchase,
redemption, retirement, defeasance, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any Capital Stock of any
Loan Party or any direct or indirect Borrower of any Loan Party, now or
hereafter outstanding, (iii) make any payment to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights for the purchase
or acquisition of shares of any class of Capital Stock of any Loan Party, now or
hereafter outstanding, or (iv) pay any management fees or any other fees or
expenses (including the reimbursement thereof by any Loan Party or any of its
Subsidiaries) pursuant to any management, consulting or other services agreement
to any of the shareholders or other equityholders of any Loan Party or any of
its Subsidiaries or other Affiliates, or to any other Subsidiaries or Affiliates
of any Loan Party; provided, however, (A) any Subsidiary of the Borrower may pay
dividends to the Borrower, and (B) the Borrower may pay dividends in the form of
common Capital Stock, provided that no such payment shall be made if an Event of
Default shall have occurred and be continuing or would result from the making of
any such payment.
(i) Federal Reserve Regulations. Permit any Loan or the proceeds of any
Loan under this Agreement to be used for any purpose that would cause such Loan
to be a margin loan under the provisions of Regulation T, U or X of the Board.
(j) Transactions with Affiliates. Enter into, renew, extend or be a party
to, or permit any of its Subsidiaries to enter into, renew, extend or be a party
to, any transaction or series of related transactions (including, without
limitation, the purchase, sale, lease, transfer or exchange of property or
assets of any kind or the rendering of services of any kind) with any Affiliate,
except (i) in the ordinary course of business in a manner and to an extent
consistent with past practice and necessary or desirable for the prudent
operation of its business, for fair consideration and on terms no less favorable
to it or its Subsidiaries than would be obtainable in a comparable arm's length
transaction with a Person that is not an Affiliate thereof, (ii) transactions
with another Loan Party and (iii) transactions permitted by Section 7.02(e) or
(h).
(k) Limitations on Dividends and Other Payment Restrictions Affecting
Subsidiaries. Create or otherwise cause, incur, assume, suffer or permit to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Subsidiary of any Loan Party (i) to pay dividends or to
make any other distribution on any shares of Capital Stock of such Subsidiary
owned by any Loan Party or any of its Subsidiaries, (ii) to pay or prepay or to
subordinate any Indebtedness owed to any Loan Party or any of its Subsidiaries,
(iii) to make loans or advances to any Loan Party or any of its Subsidiaries or
(iv) to transfer any of its property or assets to any Loan Party or any of its
Subsidiaries, or permit any of its Subsidiaries to do any of the foregoing;
provided, however, that nothing in any of clauses (i) through (iv) of this
Section 7.02(k) shall prohibit or restrict compliance with:
(A) this Agreement and the other Loan Documents;
(B) any agreements in effect on the date of this Agreement and described on
Schedule 7.02(k);
(C) any applicable law, rule or regulation (including, without limitation,
applicable currency control laws and applicable state corporate statutes
restricting the payment of dividends in certain circumstances);
(D) in the case of clause (iv), any agreement setting forth customary
restrictions on the subletting, assignment or transfer of any property or asset
that is leased or licensed; or
(E) in the case of clause (iv), any agreement, instrument or other document
evidencing a Permitted Lien that restricts, on customary terms, the transfer of
any property or assets subject thereto.
(l) Limitation on Issuance of Capital Stock. Except for the issuance or
sale of common stock by the Borrower, issue or sell or enter into any agreement
or arrangement for the issuance and sale of, or permit any of its Subsidiaries
to issue or sell or enter into any agreement or arrangement for the issuance and
sale of, any shares of its Capital Stock, any securities convertible into or
exchangeable for its Capital Stock or any warrants.
(m) Modifications of Indebtedness, Organizational Documents and Certain
Other Agreements; Etc. (i) Amend, modify or otherwise change (or permit the
amendment, modification or other change in any manner of) any of the provisions
of any of its or its Subsidiaries' Indebtedness or of any instrument or
agreement (including, without limitation, any purchase agreement, indenture,
loan agreement or security agreement) relating to any such Indebtedness if such
amendment, modification or change would shorten the final maturity or average
life to maturity of, or require any payment to be made earlier than the date
originally scheduled on, such Indebtedness, would increase the interest rate
applicable to such Indebtedness, would change the subordination provisions, if
any, of such Indebtedness, or would otherwise be adverse to the Lenders or the
issuer of such Indebtedness in any respect, (ii) except for the Obligations,
make any voluntary or optional payment, prepayment, redemption, defeasance,
sinking fund payment or other acquisition for value of any of its or its
Subsidiaries' Indebtedness (including, without limitation, by way of depositing
money or securities with the trustee therefor before the date required for the
purpose of paying any portion of such Indebtedness when due), or refund,
refinance, replace or exchange any other Indebtedness for any such Indebtedness
(except to the extent such Indebtedness is otherwise expressly permitted by the
definition of "Permitted Indebtedness"), or make any payment, prepayment,
redemption, defeasance, sinking fund payment or repurchase of any outstanding
Indebtedness as a result of any asset sale, change of control, issuance and sale
of debt or equity securities or similar event, or give any notice with respect
to any of the foregoing, (iii) except as permitted by Section 7.02(c), amend,
modify or otherwise change its name, jurisdiction of organization,
organizational identification number or FEIN or (iv) amend, modify or otherwise
change its certificate of incorporation or bylaws (or other similar
organizational documents), including, without limitation, by the filing or
modification of any certificate of designation, or any agreement or arrangement
entered into by it, with respect to any of its Capital Stock (including any
shareholders' agreement), or enter into any new agreement with respect to any of
its Capital Stock, except any such amendments, modifications or changes or any
such new agreements or arrangements pursuant to this clause (iv) that either
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
(n) Investment Company Act of 1940. Engage in any business, enter into any
transaction, use any securities or take any other action or permit any of its
Subsidiaries to do any of the foregoing, that would cause it or any of its
Subsidiaries to become subject to the registration requirements of the
Investment Company Act of 1940, as amended, by virtue of being an "investment
company" or a company "controlled" by an "investment company" not entitled to an
exemption within the meaning of such Act.
(o) Compromise of Accounts Receivable. Compromise or adjust any Account
Receivable (or extend the time of payment thereof) or grant any discounts,
allowances or credits or permit any of its Subsidiaries to do so other than,
provided no Default or Event of Default has occurred and is continuing, in the
ordinary course of its business; provided, however, in no event shall any such
discount, allowance or credit exceed $100,000 in the aggregate and no such
extension of the time for payment extend beyond 120 days from the original due
date thereof.
(p) ERISA. (i) Engage, or permit any ERISA Affiliate to engage, in any
transaction described in Section 4069 of ERISA; (ii) engage, or permit any ERISA
Affiliate to engage, in any prohibited transaction described in Section 406 of
ERISA or 4975 of the IRC for which a statutory or class exemption is not
available or a private exemption has not previously been obtained from the U.S.
Department of Labor; (iii) adopt or permit any ERISA Affiliate to adopt any
employee welfare benefit plan within the meaning of Section 3(1) of ERISA which
provides benefits to employees after termination of employment other than as
required by Section 601 of ERISA or applicable law; (iv) fail to make any
contribution or payment to any Multiemployer Plan which it or any ERISA
Affiliate may be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto; or (v) fail, or permit any
ERISA Affiliate to fail, to pay any required installment or any other payment
required under Section 412 of the IRC on or before the due date for such
installment or other payment.
(q) Environmental. Permit the use, handling, generation, storage,
treatment, Release or disposal of Hazardous Materials at any property owned or
leased by it or any of its Subsidiaries, except in compliance with Environmental
Laws and so long as such use, handling, generation, storage, treatment, Release
or disposal of Hazardous Materials does not result in a Material Adverse Effect.
(r) Certain Agreements. Agree to any material amendment or other material
change to or material waiver of any of its rights under any Material Contract.
(s) Forward Sales. Except in accordance with ordinary practice in the Oil
and Gas Business, enter into or permit to exist any advance payment agreement or
other arrangement pursuant to which the Borrower or any of its Subsidiaries,
having received full or substantial payment of the purchase price for a
specified quantity of Hydrocarbons upon entering the date of such agreement or
arrangement, is required to deliver, in one or more installments subsequent to
the date of such agreement or arrangement, such quantity of Hydrocarbons
pursuant to and during the terms of such agreement or arrangement.
(t) Hedging Agreements. Enter into any Hedging Agreement, other than
Hedging Agreements entered into the ordinary course of business to hedge or
mitigate the management of its liabilities, provided that such Hedging
Agreements may not be entered into for speculative purposes.
(u) Limitation on Negative Pledge Clauses. Enter into with any Person any
agreement which prohibits or limits the ability of the Borrower or any
Subsidiary to create, incur, assume or suffer to exist any Lien, in favor of any
of the Agents, the Lenders under the Loan Documents and their respective
assignees under the Loan Documents or any Person refinancing all or a portion of
the Commitments hereunder, upon any of its property, assets or revenues, whether
now owned or hereafter acquired.
(v) Oil and Gas Imbalances. Enter into any contracts or agreements which
warrant production of Hydrocarbons (other than Hedging Agreements otherwise
permitted hereunder) and will not hereafter allow gas imbalances, take-or-pay or
other prepayment with respect to their Oil and Gas Properties which would
require any Loan Party to deliver Hydrocarbons produced on Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefor to exceed, during any monthly period, 1% of the current aggregate
monthly gas production for such monthly period from the Oil and Gas Properties.
(w) Board of Directors. From and after the date that is 90 days after the
Effective Date, no less than 75% of the members of the Board of Directors shall
be comprised of individuals who are not Affiliates of Borrower.
(x) Chief Financial Officer. Fail to retain or continue to retain a full
time permanent chief financial officer for a period of more than 60 consecutive
days.
Section 7.03 Financial Covenants. So long as any principal of or interest
on any Loan or any other Obligation (whether or not due) shall remain unpaid or
any Lender shall have any Commitment hereunder, each Loan Party shall not:
(a) Leverage Ratio. Permit the ratio of Consolidated Funded Indebtedness as
of the last day of each fiscal period set forth below to Annualized EBITDA of
the Borrower and its Subsidiaries for such fiscal period to be greater than the
applicable ratio set forth below:
Fiscal Period Leverage Ratio
three month period ending
on March 31, 2004 4.00:1.00
six month period ending
on June 30, 2004 4.00:1.00
nine month period ending
on September 30, 2004 3.50:1.00
twelve month period ending
on December 31, 2004 3.50:1.00
twelve month period ending
on March 31, 2005 3.00:1.00
twelve month period ending
on June 30, 2005 3.00:1.00
twelve month period ending
on September 30, 2005 2.50:1.00
twelve month period ending
on December 31, 2005 2.50:1.00
each twelve month period ending on
March 31, 2006 or on the last day
of any fiscal quarter thereafter
2.00:1.00
(b) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio of
the Borrower and its Subsidiaries for each period set forth below to be less
than the amount set forth opposite such date:
Fiscal Quarter End Fixed Charge Coverage
Ratio
three month period ending
on March 31, 2004 0.50:1.00
six month period ending
on June 30, 2004 0.50:1.00
nine month period ending
on September 30, 2004 0.50:1.00
each twelve month period ending on 0.50:1.00
December 31, 2004 or on the last
day of any fiscal quarter
thereafter
(c) Interest Coverage Ratio. Permit the ratio of Consolidated EBITDA of the
Borrower and its Subsidiaries to Consolidated Total Interest Expense of the
Borrower and its Subsidiaries for any period below to be less than the amount
set forth opposite such period:
Period Interest Coverage Ratio
three month period ending
on March 31, 2004 2.00:1.00
six month period ending
on June 30, 2004 2.00:1.00
nine month period ending
on September 30, 2004 2.00:1.00
twelve month period ending
on December 31, 2004 2.00:1.00
twelve month period ending
on March 31, 2005 2.50:1.00
twelve month period ending
on June 30, 2005 3.00:1.00
twelve month period ending
on September 30, 2005 3.00:1.00
twelve month period ending
on December 31, 2005 3.00:1.00
each twelve month period ending on March 31, 2006 or on the last day
of any fiscal quarter of Borrower 4.00:1.00 thereafter
(d) Consolidated EBITDA. Permit EBITDA of the Borrower and its Subsidiaries
for any period set forth below to be less than the applicable amount set forth
below:
Fiscal Quarter End Consolidated EBITDA
three month period ending
on March 31, 2004 $500,000
six month period ending
on June 30, 2004 $1,250,000
nine month period ending
on September 30, 2004 $1,900,000
twelve month period ending
on December 31, 2004 $2,500,000
twelve month period ending
on March 31, 2005 $3,500,000
twelve month period ending
on June 30, 2005 $3,500,000
twelve month period ending
on September 30, 2005 $4,500,000
twelve month period ending
on December 31, 2005 $4,500,000
twelve month period ending
on March 31, 2006 $6,000,000
twelve month period ending
on June 30, 2006 $6,000,000
each twelve month period ending on
September 30, 2006 or on the last
day of any fiscal quarter of $8,000,000
Borrower thereafter
ARTICLE VIII
MANAGEMENT, COLLECTION AND STATUS OF
ACCOUNTS RECEIVABLE AND OTHER COLLATERAL
Section 8.01 Collection of Accounts Receivable; Management of Collateral.
(a) On or prior to the Effective Date, the Borrower shall assist the
Administrative Agent in establishing, and, during the term of this Agreement,
maintaining blocked accounts (the "Blocked Accounts") with respect to the Loan
Parties' principal concentration accounts with the financial institution set
forth on Schedule 8.01 hereto (the "Blocked Account Bank"), and entering into a
control agreement relating to the Blocked Account with the applicable Loan
Parties, Collateral Agent, and the Blocked Account Bank. Each Loan Party shall
irrevocably instruct its Account Debtors, with respect to its Accounts
Receivable consisting of credit or debit card payments, to remit all payments to
be made by them, whether by means of checks or other drafts or by wire transfer
or by Automated Clearing House, Inc. payment, to a Blocked Account and shall
instruct the Blocked Account Bank to deposit all amounts received by it to a
Blocked Account at such Blocked Account Bank on the day received or, if such day
is not a Business Day, on the next succeeding Business Day. Each Loan Party will
enforce, collect and receive all amounts owing on its Accounts Receivable for
the Agents' benefit and on the Administrative Agent's behalf, but at the Loan
Parties' expense; such privilege shall terminate, at the election of any Agent,
upon the occurrence and during the continuance of an Event of Default. All
checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness received directly by the Loan Parties from any Account Debtor, as
proceeds from their Accounts Receivable, or as proceeds of any other Collateral,
shall be held by the Loan Parties in trust for the Agents and the Lenders and
upon receipt be deposited by the Loan Parties in original form and no later than
the next Business Day after receipt thereof into a Blocked Account. The Loan
Parties shall not commingle such collections with their own funds or with the
proceeds of any assets not included in the Collateral. All funds received in the
Blocked Accounts (i) after the occurrence and during the continuance of an Event
of Default, shall be sent by wire transfer or Automated Clearing House, Inc.
payment to the Payment Office to be credited to the Administrative Agent's
Account for application at the end of each Business Day to reduce the then
principal balance of the Revolving Loans, conditional upon final payment to the
Administrative Agent, and (ii) at all other times, may be transferred to an
operating account of the Borrower or one of its Subsidiaries. No checks, drafts
or other instruments received by the Administrative Agent shall constitute final
payment to the Administrative Agent unless and until such checks, drafts or
instruments have actually been collected.
(b) After the occurrence and during the continuance of an Event of Default,
the Collateral Agent may send a notice of assignment and/or notice of the
Lenders' security interest to any and all Account Debtors and, thereafter, the
Collateral Agent shall have the sole right to collect the Accounts Receivable
and payment intangibles of the Borrower and its Subsidiaries and/or, to the
extent permitted by applicable law, take possession of the Collateral and the
books and records relating thereto. After the occurrence and during the
continuation of an Event of Default, the Borrower and its Subsidiaries shall
not, without prior written consent of the Collateral Agent, grant any extension
of time of payment of any Account Receivable or payment intangible, compromise
or settle any Account Receivable or payment intangible for less than the full
amount thereof, release, in whole or in part, any Person or property liable for
the payment thereof, or allow any credit or discount whatsoever thereon.
(c) The Borrower hereby appoints each Agent or its designee on behalf of
such Agent as the Borrower's attorney-in-fact with power exercisable during the
continuance of an Event of Default to (i) endorse any Loan Party's name upon any
notes, acceptances, checks, drafts, money orders or other evidences of payment
relating to the Accounts Receivable or payment intangibles of such Loan Party,
(ii) sign any Loan Party's name on any invoice or bill of lading relating to any
of the Accounts Receivable or payment intangibles of such Loan Party, drafts
against Account Debtors with respect to Accounts Receivable or payment
intangibles of such Loan Party, assignments and verifications of Accounts
Receivable or payment intangibles and notices to Account Debtors with respect to
Accounts Receivable or payment intangibles of such Loan Party, (iii) send
verification of Accounts Receivable of the Loan Parties, and (iv) after the
occurrence and during the continuation of an Event of Default, notify the Postal
Service authorities to change the address for delivery of mail addressed to the
Loan Parties to such address as such Agent may designate and to do all other
acts and things necessary to carry out this Agreement. All acts of said attorney
or designee are hereby ratified and approved, and said attorney or designee
shall not be liable for any acts of omission or commission (other than acts of
omission or commission constituting gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction), or for any
error of judgment or mistake of fact or law; this power being coupled with an
interest is irrevocable until all of the Loans and other Obligations under the
Loan Documents are paid in full and all of the Commitments are terminated.
(d) Nothing herein contained shall be construed to constitute any Agent as
agent of any Loan Party for any purpose whatsoever, and the Agents shall not be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof (other than from acts of omission or commission constituting
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction). The Agents shall not, under any circumstance
or in any event whatsoever, have any liability for any error or omission or
delay of any kind occurring in the settlement, collection or payment of any of
the Accounts Receivable of the Loan Parties or any instrument received in
payment thereof or for any damage resulting therefrom (other than acts of
omission or commission constituting gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction). The
Agents, by anything herein or in any assignment or otherwise, do not assume any
of the obligations under any contract or agreement assigned to any Agent and
shall not be responsible in any way for the performance by the Loan Parties of
any of the terms and conditions thereof.
(e) If any Account Receivable of the Loan Parties includes a charge for any
tax payable to any Governmental Authority, each Agent is hereby authorized (but
in no event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the Borrower's account and to charge the Borrower therefor
provided that such tax is not being disputed by appropriate action. The Borrower
shall notify the Agents if any Account Receivable of the Loan Parties includes
any taxes due to any such Governmental Authority and, in the absence of such
notice, the Agents shall have the right to retain the full proceeds of such
Account Receivable and shall not be liable for any taxes that may be due by
reason of the sale and delivery creating such Account Receivable.
(f) Notwithstanding any other terms set forth in the Loan Documents, the
rights and remedies of the Agents and the Lenders herein provided, and the
obligations of the Borrower set forth herein, are cumulative of, may be
exercised singly or concurrently with, and are not exclusive of, any other
rights, remedies or obligations set forth in any other Loan Document or as
provided by law.
Section 8.02 Accounts Receivable Documentation. The Borrower shall at such
intervals as the Agents may require, execute and deliver confirmatory written
assignments of the Accounts Receivable to the Agents and furnish such further
schedules and/or information as any such Agent may require relating to the
Accounts Receivable, including, without limitation, sales invoices or the
equivalent, credit memos issued, remittance advices, reports and copies of
deposit slips and copies of original shipping or delivery receipts for all
merchandise sold. In addition, the Loan Parties shall notify the Agents of any
non-compliance in respect of the representations, warranties and covenants
contained in Section 8.03. The items to be provided under this Section 8.02 are
to be in form reasonably satisfactory to the Agents. The Borrower's failure to
give any of such items to the Agents shall not affect, terminate, modify or
otherwise limit the Collateral Agent's Lien on the Collateral. The Borrower
shall not re-date any invoice or sale or make sales on extended dating beyond
that customary in the Borrower's industry, and shall not re-bill any Accounts
Receivable without promptly disclosing the same to the Agents and providing the
Agents with a copy of such re-billing, identifying the same as such. If the
Borrower becomes aware of anything materially detrimental to any of the
Borrower's customers' credit, the Borrower will promptly advise the Agents
thereof.
Section 8.03 tatus of Accounts Receivable and Other Collateral. With
respect to Collateral of any Loan Party at the time the Collateral becomes
subject to the Collateral Agent's Lien, each Loan Party covenants, represents
and warrants: (a) such Loan Party shall be the sole owner, free and clear of all
Liens (except for the Liens granted in the favor of the Collateral Agent for the
benefit of the Lenders and Permitted Liens), and shall be fully authorized to
sell, transfer, pledge and/or grant a security interest in each and every item
of said Collateral; (b) each Account Receivable shall be a good and valid
account representing a bona fide indebtedness incurred by the Account Debtor
therein named, for a fixed sum as set forth in the invoice relating thereto; (c)
no Account Receivable shall be subject to any defense, offset, counterclaim,
discount or allowance except as may be stated in the invoice relating thereto,
discounts and allowances as may be customary in such Loan Party's business and
as otherwise disclosed to the Agents; (d) none of the transactions underlying or
giving rise to any Account Receivable shall violate any applicable state or
federal laws or regulations, and all documents relating thereto shall be legally
sufficient under such laws or regulations and shall be legally enforceable in
accordance with their terms; (e) no agreement under which any deduction or
offset of any kind, other than normal trade discounts, may be granted or shall
have been made by such Loan Party at or before the time such Account Receivable
is created; (f) all agreements, instruments and other documents relating to any
Account Receivable shall be true and correct and in all material respects what
they purport to be; (g) all signatures and endorsements that appear on all
material agreements, instruments and other documents relating to any Account
Receivable shall be genuine and all signatories and endorsers shall have full
capacity to contract; (h) such Loan Party shall maintain books and records
pertaining to said Collateral in such detail, form and scope as the Agents shall
reasonably require; (i) such Loan Party shall immediately notify the Agents if
any Account Receivable arises out of contracts with any Governmental Authority,
and will execute any instruments and take any steps required by the Agents in
order that all monies due or to become due under any such contract shall be
assigned to the Collateral Agent and notice thereof given to such Governmental
Authority under the Federal Assignment of Claims Act or any similar state or
local law; (j) such Loan Party will, immediately upon learning thereof, report
to the Agents any material loss or destruction of, or substantial damage to, any
of the Collateral, and any other matters affecting the value, enforceability or
collectability of any of the Collateral; (k) if any amount payable under or in
connection with any Account Receivable is evidenced by a promissory note or
other instrument, such promissory note or instrument shall be immediately
pledged, endorsed, assigned and delivered to the Collateral Agent for the
benefit of the Lenders as additional Collateral; (l) such Loan Party shall not
re-date any invoice or sale or make sales on extended dating beyond that which
is customary in the ordinary course of its business and in the industry; (m)
such Loan Party shall conduct a physical count of its Inventory at such
intervals as any Agent may request and such Loan Party shall promptly supply the
Agents with a copy of such count accompanied by a report of the value (based on
the lower of cost (on a first in first out basis) and market value) of such
Inventory; and (n) such Loan Party is not and shall not be entitled to pledge
any Agent's or any Lender's credit on any purchases or for any purpose
whatsoever.
Section 8.04 Collateral Custodian. Upon the occurrence and during the
continuance of any Default or Event of Default, the Collateral Agent may at any
time and from time to time employ and maintain on the premises of any Loan Party
a custodian selected by the Collateral Agent who shall have full authority to do
all acts necessary to protect the Agents' and the Lenders' interests. Each Loan
Party hereby agrees to, and to cause its Subsidiaries to, cooperate with any
such custodian and to do whatever the Collateral Agent may reasonably request to
preserve the Collateral. All costs and expenses incurred by the Collateral Agent
by reason of the employment of the custodian shall be the responsibility of the
Borrower and charged to the Loan Account.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.01 Events of Default. If any of the following Events of Default
shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of or interest on any
Loan, any Collateral Agent Advance, or any fee, indemnity or other amount
payable under this Agreement or any other Loan Document when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise);
(b) any representation or warranty made or deemed made by or on behalf of
any Loan Party or by any officer of the foregoing under or in connection with
any Loan Document or under or in connection with any report, certificate, or
other document delivered to any Agent or any Lender pursuant to any Loan
Document shall have been incorrect in any material respect when made or deemed
made;
(c) any Loan Party shall fail to perform or comply with any covenant or
agreement contained in Article VII or Article VIII, or any Loan Party shall fail
to perform or comply with any covenant or agreement contained in any Security
Agreement to which it is a party, any Pledge Agreement to which it is a party or
any Mortgage to which it is a party;
(d) any Loan Party shall fail to perform or comply with any other term,
covenant or agreement contained in any Loan Document to be performed or observed
by it and, except as set forth in subsections (a), (b) and (c) of this Section
9.01, such failure, if capable of being remedied, shall remain unremedied for 15
days after the earlier of the date a senior officer of any Loan Party becomes
aware of such failure and the date written notice of such default shall have
been given by any Agent to such Loan Party;
(e) any Loan Party shall fail to pay any principal of or interest on any of
its Indebtedness (excluding Indebtedness evidenced by this Agreement) in excess
of $100,000, or any premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Indebtedness, or any other default under any
agreement or instrument relating to any such Indebtedness, or any other event,
shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased or an offer to prepay, redeem,
purchase or defease such Indebtedness shall be required to be made, in each
case, prior to the stated maturity thereof;
(f) any Loan Party (i) shall institute any proceeding or voluntary case
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for any such Person or for any substantial part of its
property, (ii) shall be generally not paying its debts as such debts become due
or shall admit in writing its inability to pay its debts generally, (iii) shall
make a general assignment for the benefit of creditors, or (iv) shall take any
action to authorize or effect any of the actions set forth above in this
subsection (f);
(g) any proceeding shall be instituted against any Loan Party or any of its
Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief of debtors, or seeking the entry of an order for relief or
the appointment of a receiver, trustee, custodian or other similar official for
any such Person or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of 45 days or any
order, judgment or decree shall be entered against any Loan Party in such
proceeding (including, without limitation, the entry of an order for relief
against any such Person or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property);
(h) any provision of any Loan Document shall at any time for any reason
(other than pursuant to the express terms thereof) cease to be valid and binding
on or enforceable against any Loan Party intended to be a party thereto, or the
validity or enforceability thereof shall be contested by any party thereto, or a
proceeding shall be commenced by any Loan Party or any Governmental Authority
having jurisdiction over any of them, seeking to establish the invalidity or
unenforceability thereof, or any Loan Party shall deny in writing that it has
any liability or obligation purported to be created under any Loan Document;
(i) any Assignment Document, any Security Agreement, any Pledge Agreement,
any Mortgage or any other security document, after delivery thereof pursuant
hereto, shall for any reason fail or cease to create a valid and perfected and,
except to the extent permitted by the terms hereof or thereof, first priority
Lien in favor of the Collateral Agent for the benefit of the Lenders on any
Collateral purported to be covered thereby;
(j) any bank at which any deposit account, blocked account, or lockbox
account of any Loan Party is maintained shall fail to comply with any of the
terms of any deposit account, blocked account, lockbox account or similar
agreement to which such bank is a party or any securities intermediary,
commodity intermediary or other financial institution at any time in custody,
control or possession of any investment property of any Loan Party shall fail to
comply with any of the terms of any investment property control agreement to
which such Person is a party;
(k) one or more judgments or orders for the payment of money exceeding
$100,000 in the aggregate shall be rendered against the Parent or any of its
Subsidiaries and remain unsatisfied and either (i) enforcement proceedings shall
have been commenced by any creditor upon any such judgment or order, or (ii)
there shall be a period of 10 consecutive days after entry thereof during which
a stay of enforcement of any such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; provided, however, that any such
judgment or order shall not give rise to an Event of Default under this
subsection (k) if and for so long as (A) the amount of such judgment or order is
covered by a valid and binding policy of insurance between the defendant and the
insurer covering full payment thereof (subject to customary deductibles) and (B)
such insurer has been notified, and has not disputed the claim made for payment,
of the amount of such judgment or order;
(l) any Loan Party is enjoined, restrained or in any way prevented by the
order of any court or any Governmental Authority from conducting all or any part
of its business for more than 15 days;
(m) any material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or other casualty which
causes, for more than 15 days, the cessation or substantial curtailment of
revenue producing activities at any facility of any Loan Party, if any such
event or circumstance could reasonably be expected to result in a Material
Adverse Effect;
(n) any cessation of a substantial part of the business of any Loan Party
for a period which materially and adversely affects the ability of any Loan
Party to continue its business on a profitable basis;
(o) the loss, suspension or revocation of, or failure to renew, any license
or permit now held or hereafter acquired by the Borrower or any of its
Subsidiaries, if such loss, suspension, revocation or failure to renew could
reasonably be expected to result in a Material Adverse Effect;
(p) the indictment, or the threatened indictment of the Parent or any of
its Subsidiaries under any criminal statute, or commencement or threatened
commencement of criminal or civil proceedings against any Loan Party, pursuant
to which statute or proceedings the penalties or remedies sought or available
include forfeiture to any Governmental Authority of any material portion of the
property of such Person;
(q) any Loan Party or any of its ERISA Affiliates shall have made a
complete or partial withdrawal from a Multiemployer Plan, and, as a result of
such complete or partial withdrawal, any Loan Party or any of its ERISA
Affiliates incurs a withdrawal liability in an annual amount exceeding $50,000;
or a Multiemployer Plan enters reorganization status under Section 4241 of
ERISA, and, as a result thereof any Loan Party's or any of its ERISA Affiliates'
annual contribution requirements with respect to such Multiemployer Plan
increases in an annual amount exceeding $50,000;
(r) any Termination Event with respect to any Employee Plan shall have
occurred, and, 30 days after notice thereof shall have been given to any Loan
Party by any Agent, (i) such Termination Event (if correctable) shall not have
been corrected, and (ii) the then current value of such Employee Plan's vested
benefits exceeds the then current value of assets allocable to such benefits in
such Employee Plan by more than $50,000 (or, in the case of a Termination Event
involving liability under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the IRC, the
liability is in excess of such amount);
(s) the Borrower or any of its Subsidiaries shall be liable for any
Environmental Liabilities and Costs the payment of which could reasonably be
expected to result in a Material Adverse Effect;
(t) a Change of Control shall have occurred; or
(u) an event or development occurs which could reasonably be expected to
result in a Material Adverse Effect;
(i) then, and in any such event, the Collateral Agent may, and shall at the
request of the Required Lenders, by notice to the Borrower, (i) terminate or
reduce all Commitments, whereupon all Commitments shall immediately be so
terminated or reduced, (ii) declare all or any portion of the Loans then
outstanding to be due and payable, whereupon all or such portion of the
aggregate principal of all Loans, all accrued and unpaid interest thereon, all
fees and all other amounts payable under this Agreement and the other Loan
Documents shall become due and payable immediately, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by each Loan Party and (iii) exercise any and all of its other rights and
remedies under applicable law, hereunder and under the other Loan Documents;
provided, however, that upon the occurrence of any Event of Default described in
subsection (f) or (g) of this Section 9.01, without any notice to any Loan Party
or any other Person or any act by any Agent or any Lender, all Commitments shall
automatically terminate and all Loans then outstanding, together with all
accrued and unpaid interest thereon, all fees and all other amounts due under
this Agreement and the other Loan Documents shall become due and payable
automatically and immediately, without presentment, demand, protest or notice of
any kind, all of which are expressly waived by each Loan Party.
ARTICLE X
AGENTS
Section 10.01 Appointment. Each Lender (and each subsequent maker of any
Loan by its making thereof) hereby irrevocably appoints and authorizes the
Administrative Agent and the Collateral Agent to perform the duties of each such
Agent as set forth in this Agreement including: (i) to receive on behalf of each
Lender any payment of principal of or interest on the Loans outstanding
hereunder and all other amounts accrued hereunder for the account of the Lenders
and paid to such Agent, and, subject to Section 2.02 of this Agreement, to
distribute promptly to each Lender its Pro Rata Share of all payments so
received; (ii) to distribute to each Lender copies of all material notices and
agreements received by such Agent and not required to be delivered to each
Lender pursuant to the terms of this Agreement, provided that the Agents shall
not have any liability to the Lenders for any Agent's inadvertent failure to
distribute any such notices or agreements to the Lenders; (iii) to maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Obligations, the Loans, and related matters and to maintain,
in accordance with its customary business practices, ledgers and records
reflecting the status of the Collateral and related matters; (iv) to execute or
file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to this Agreement or any other Loan
Document; (v) to make the Loans and Collateral Agent Advances, for such Agent or
on behalf of the applicable Lenders as provided in this Agreement or any other
Loan Document; (vi) to perform, exercise, and enforce any and all other rights
and remedies of the Lenders with respect to the Loan Parties, the Obligations,
or otherwise related to any of same to the extent reasonably incidental to the
exercise by such Agent of the rights and remedies specifically authorized to be
exercised by such Agent by the terms of this Agreement or any other Loan
Document; (vii) to incur and pay such fees necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to this
Agreement or any other Loan Document; and (viii) subject to Section 10.03 of
this Agreement, to take such action as such Agent deems appropriate on its
behalf to administer the Loans and the Loan Documents and to exercise such other
powers delegated to such Agent by the terms hereof or the other Loan Documents
(including, without limitation, the power to give or to refuse to give notices,
waivers, consents, approvals and instructions and the power to make or to refuse
to make determinations and calculations) together with such powers as are
reasonably incidental thereto to carry out the purposes hereof and thereof. As
to any matters not expressly provided for by this Agreement and the other Loan
Documents (including, without limitation, enforcement or collection of the
Loans), the Agents shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions of the Required Lenders shall be
binding upon all Lenders and all makers of Loans; provided, however, that the
Agents shall not be required to take any action which, in the reasonable opinion
of any Agent, exposes such Agent to liability or which is contrary to this
Agreement or any other Loan Document or applicable law.
Section 10.02 Nature of Duties. The Agents shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. The duties of the Agents shall be mechanical and
administrative in nature. The Agents shall not have by reason of this Agreement
or any other Loan Document a fiduciary relationship in respect of any Lender.
Nothing in this Agreement or any other Loan Document, express or implied, is
intended to or shall be construed to impose upon the Agents any obligations in
respect of this Agreement or any other Loan Document except as expressly set
forth herein or therein. Each Lender shall make its own independent
investigation of the financial condition and affairs of the Loan Parties in
connection with the making and the continuance of the Loans hereunder and shall
make its own appraisal of the creditworthiness of the Loan Parties and the value
of the Collateral, and the Agents shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto, whether coming into their possession
before the initial Loan hereunder or at any time or times thereafter, provided
that, upon the reasonable request of a Lender, each Agent shall provide to such
Lender any documents or reports delivered to such Agent by the Loan Parties
pursuant to the terms of this Agreement or any other Loan Document. If any Agent
seeks the consent or approval of the Required Lenders to the taking or
refraining from taking any action hereunder, such Agent shall send notice
thereof to each Lender. Each Agent shall promptly notify each Lender any time
that the Required Lenders have instructed such Agent to act or refrain from
acting pursuant hereto.
Section 10.03 Rights, Exculpation, Etc. The Agents and their directors,
officers, agents or employees shall not be liable to any Lender for any action
taken or omitted to be taken by them under or in connection with this Agreement
or the other Loan Documents, except for their own gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction. Without limiting the generality of the foregoing, the Agents (i)
may treat the payee of any Loan as the owner thereof until the Collateral Agent
receives written notice of the assignment or transfer thereof, pursuant to
Section 12.07 hereof, signed by such payee and in form satisfactory to the
Collateral Agent; (ii) may consult with legal counsel (including, without
limitation, counsel to any Agent or counsel to the Loan Parties), independent
public accountants, and other experts selected by any of them and shall not be
liable for any action taken or omitted to be taken in good faith by any of them
in accordance with the advice of such counsel or experts; (iii) make no warranty
or representation to any Lender and shall not be responsible to any Lender for
any statements, certificates, warranties or representations made in or in
connection with this Agreement or the other Loan Documents; (iv) shall not have
any duty to any Lender to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement or the
other Loan Documents on the part of any Person, the existence or possible
existence of any Default or Event of Default, or to inspect the Collateral or
other property (including, without limitation, the books and records) of any
Person; (v) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; and (vi) shall not be deemed to have made
any representation or warranty regarding the existence, value or collectability
of the Collateral, the existence, priority or perfection of the Collateral
Agent's Lien thereon, or any certificate prepared by any Loan Party in
connection therewith, nor shall the Agents be responsible or liable to the
Lenders for any failure to monitor or maintain any portion of the Collateral.
The Agents shall not be liable to any Lender for any apportionment or
distribution of payments made in good faith pursuant to Section 4.04, and if any
such apportionment or distribution is subsequently determined to have been made
in error the sole recourse of any Lender to whom payment was due but not made,
shall be to recover from other Lenders any payment in excess of the amount which
they are determined to be entitled. The Agents may at any time request
instructions from the Lenders with respect to any actions or approvals which by
the terms of this Agreement or of any of the other Loan Documents the Agents are
permitted or required to take or to grant, and if such instructions are promptly
requested, the Agents shall be absolutely entitled to refrain from taking any
action or to withhold any approval under any of the Loan Documents until they
shall have received such instructions from the Required Lenders. Without
limiting the foregoing, no Lender shall have any right of action whatsoever
against any Agent as a result of such Agent acting or refraining from acting
under this Agreement or any of the other Loan Documents in accordance with the
instructions of the Required Lenders.
Section 10.04 Reliance. Each Agent shall be entitled to rely upon any
written notices, statements, certificates, orders or other documents or any
telephone message believed by it in good faith to be genuine and correct and to
have been signed, sent or made by the proper Person, and with respect to all
matters pertaining to this Agreement or any of the other Loan Documents and its
duties hereunder or thereunder, upon advice of counsel selected by it.
Section 10.05 Indemnification. To the extent that any Agent is not
reimbursed and indemnified by any Loan Party, the Lenders will reimburse and
indemnify such Agent from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by, or asserted against such Agent in any way relating to or arising
out of this Agreement or any of the other Loan Documents or any action taken or
omitted by such Agent under this Agreement or any of the other Loan Documents,
in proportion to each Lender's Pro Rata Share, including, without limitation,
advances and disbursements made pursuant to Section 10.08; provided, however,
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, advances
or disbursements for which there has been a final judicial determination that
such liability resulted from such Agent's gross negligence or willful
misconduct. The obligations of the Lenders under this Section 10.05 shall
survive the payment in full of the Loans and the termination of this Agreement.
Section 10.06 Agents Individually. With respect to its Pro Rata Share of
the Total Commitment hereunder and the Loans made by it, each Agent shall have
and may exercise the same rights and powers hereunder and is subject to the same
obligations and liabilities as and to the extent set forth herein for any other
Lender or maker of a Loan. The terms "Lenders" or "Required Lenders" or any
similar terms shall, unless the context clearly otherwise indicates, include
each Agent in its individual capacity as a Lender or one of the Required
Lenders. Each Agent and its Affiliates may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business with the
Borrower as if it were not acting as an Agent pursuant hereto without any duty
to account to the other Lenders.
Section 10.07 Successor Agent. [(a) Each Agent may resign from the
performance of all its functions and duties hereunder and under the other Loan
Documents at any time by giving at least 30 Business Days prior written notice
to the Borrower and each Lender. Such resignation shall take effect upon the
acceptance by a successor Agent of appointment pursuant to clauses (c) and (d)
below or as otherwise provided below.
(b) Upon any such notice of resignation, the Required Lenders shall appoint
a successor Agent. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Loan Documents. After any Agent's resignation
hereunder as an Agent, the provisions of this Article X shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was an
Agent under this Agreement and the other Loan Documents.
(c) If a successor Agent shall not have been so appointed within the thirty
(30) Business Day period referenced in Section 10.07(a), the retiring Agent,
with the consent of the other Agent shall then appoint a successor Agent who
shall serve as an Agent until such time, if any, as the Required Lenders, with
the consent of the other Agent, appoint a successor Agent as provided above.
Section 10.08 Collateral Matters.
(a) The Collateral Agent may from time to time make such disbursements and
advances ("Collateral Agent Advances") which the Collateral Agent, in its sole
discretion, deems necessary or desirable to preserve, protect, prepare for sale
or lease or dispose of the Collateral or any portion thereof, to enhance the
likelihood or maximize the amount of repayment by the Borrower of the Loans and
other Obligations or to pay any other amount chargeable to the Borrower pursuant
to the terms of this Agreement, including, without limitation, costs, fees and
expenses as described in Section 12.04. The Collateral Agent Advances shall be
repayable on demand and be secured by the Collateral. The Collateral Agent
Advances shall constitute Obligations hereunder which may be charged to the Loan
Account in accordance with Section 4.02. The Collateral Agent shall notify each
Lender and the Borrower in writing of each such Collateral Agent Advance, which
notice shall include a description of the purpose of such Collateral Agent
Advance. Without limitation to its obligations pursuant to Section 10.05, each
Lender agrees that it shall make available to the Collateral Agent, upon the
Collateral Agent's demand, in Dollars in immediately available funds, the amount
equal to such Lender's Pro Rata Share of each such Collateral Agent Advance. If
such funds are not made available to the Collateral Agent by such Lender, the
Collateral Agent shall be entitled to recover such funds on demand from such
Lender, together with interest thereon for each day from the date such payment
was due until the date such amount is paid to the Collateral Agent, at the
Federal Funds Rate for 3 Business Days and thereafter at the Reference Rate.
(b) The Lenders hereby irrevocably authorize the Collateral Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Collateral Agent upon any Collateral upon termination of the Total Commitment
and payment and satisfaction of all Loans and all other Obligations which have
matured and which the Collateral Agent has been notified in writing are then due
and payable; or constituting property being sold or disposed of in the ordinary
course of any Loan Party's business and in compliance with the terms of this
Agreement and the other Loan Documents; or constituting property in which the
Loan Parties owned no interest at the time the Lien was granted or at any time
thereafter; or if approved, authorized or ratified in writing by the Lenders.
Upon request by the Collateral Agent at any time, the Lenders will confirm in
writing the Collateral Agent's authority to release particular types or items of
Collateral pursuant to this Section 10.08(b).
(c) Without in any manner limiting the Collateral Agent's authority to act
without any specific or further authorization or consent by the Lenders (as set
forth in Section 10.08(b)), each Lender agrees to confirm in writing, upon
request by the Collateral Agent, the authority to release Collateral conferred
upon the Collateral Agent under Section 10.08(b). Upon (i) receipt by the
Collateral Agent of confirmation from the Lenders of its authority to release
any particular item or types of Collateral, and upon prior written request by
any Loan Party or (ii) prior written request by any Loan Party to release any
item or types of Collateral constituting property being sold or disposed of in
compliance with this Agreement or the other Loan Documents, the Collateral Agent
shall (and is hereby irrevocably authorized by the Lenders to) execute such
documents as may be necessary to evidence the release of the Liens granted to
the Collateral Agent for the benefit of the Lenders upon such Collateral;
provided, however, that (i) the Collateral Agent shall not be required to
execute any such document on terms which, in the Collateral Agent's opinion,
would expose the Collateral Agent to liability or create any obligations or
entail any consequence other than the release of such Liens without recourse or
warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Obligations or any Lien upon (or obligations of any Loan Party in
respect of) all interests in the Collateral retained by any Loan Party.
(d) The Collateral Agent shall have no obligation whatsoever to any Lender
to assure that the Collateral exists or is owned by the Loan Parties or is cared
for, protected or insured or has been encumbered or that the Lien granted to the
Collateral Agent pursuant to this Agreement or any other Loan Document has been
properly or sufficiently or lawfully created, perfected, protected or enforced
or is entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Collateral Agent in this Section 10.08 or in any other Loan
Document, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, the Collateral Agent may act in any
manner it may deem appropriate, in its sole discretion, given the Collateral
Agent's own interest in the Collateral as one of the Lenders and that the
Collateral Agent shall have no duty or liability whatsoever to any other Lender,
except as otherwise provided herein.
Section 10.09 Agency for Perfection. Each Agent and each Lender hereby
appoints each other Agent and each other Lender as agent and bailee for the
purpose of perfecting the security interests in and liens upon the Collateral in
assets which, in accordance with Article 9 of the Code, can be perfected only by
possession or control (or where the security interest of a secured party with
possession or control has priority over the security interest of another secured
party) and each Agent and each Lender hereby acknowledges that it holds
possession or control of any such Collateral for the benefit of the Collateral
Agent as secured party. Should any Lender obtain possession or control of any
such Collateral, such Lender shall notify the Collateral Agent thereof, and,
promptly upon the Collateral Agent's request therefor shall deliver possession
or control of such Collateral to the Collateral Agent or in accordance with the
Collateral Agent's instructions. Each Loan Party by its execution and delivery
of this Agreement hereby consents to the foregoing.
ARTICLE XI
[INTENTIONALLY OMITTED]
ARTICLE XII
MISCELLANEOUS
Section 12.01 Notices, Etc. All notices and other communications provided
for hereunder shall be in writing and shall be mailed, telecopied or delivered,
if to any Loan Party, at the following address:
Imperial Petroleum Inc.
11600 German Pines
Evansville, IN 47725
Attention: Jeffrey T. Wilson, President
Telephone: (812) 867-1433
Telecopier: (812) 867-1678
with a copy to:
Heskett & Heskett
501 Johnstone St.
Suite 501
Bartlesville, OK 74003
Attention: John Heskett, Esq.
Telephone: (918) 336-1773
Telecopier: (918) 336-3152
if to the Administrative Agent, to it at the
following address:
Highbridge/Zwirn Special Opportunities Fund, L.P.
9 West 57th Street
27th Floor
New York, New York 10019
Attention: Morris MacLeod
Telephone: 212-287-4676
Telecopier: 212-287-4263
if to the Collateral Agent, to it at the following address:
Highbridge/Zwirn Special Opportunities Fund, L.P.
9 West 57th Street
27th Floor
New York, New York 10019
Attention: Morris MacLeod
Telephone: 212-287-4676
Telecopier: 212-287-4263
in each case, with a copy to:
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street, 25th Floor
Los Angeles, California 90071
Attention: John Francis Hilson, Esq.
Telephone: 213-683-6000
Telecopier: 213-996-3300
or, as to each party, at such other address as shall be designated by such
party in a written notice to the other parties complying as to delivery with the
terms of this Section 12.01. All such notices and other communications shall be
effective, (i) if mailed, when received or 3 days after deposited in the mails,
whichever occurs first, (ii) if telecopied, when transmitted and confirmation
received, or (iii) if delivered, upon delivery, except that notices to any Agent
pursuant to Article II shall not be effective until received by such Agent.
Section 12.02 Amendments, Etc. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent to any departure by
any Loan Party therefrom, shall in any event be effective unless the same shall
be in writing and signed by the Required Lenders or by the Collateral Agent with
the consent of the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given, provided, however, that no amendment, waiver or consent shall (i)
increase the Commitment of any Lender, reduce the principal of, or interest on,
the Loans payable to any Lender, reduce the amount of any fee payable for the
account of any Lender, or postpone or extend any date fixed for any payment of
principal of, or interest or fees on, the Loans payable to any Lender, in each
case without the written consent of each Lender affected thereby, (ii) increase
the Total Commitment without the written consent of each Lender affected
thereby, (iii) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans that is required for the Lenders or any of
them to take any action hereunder without the written consent of each Revolving
Loan Lender affected thereby, (iv) release all or a substantial portion of the
Collateral (except as otherwise provided in this Agreement and the other Loan
Documents), subordinate any Lien granted in favor of the Collateral Agent for
the benefit of the Lenders, or release the Borrower or any Guarantor without the
written consent of each Lender affected thereby, (v) amend, modify or waive
Section 4.04, Section 7.02(c) or this Section 12.02 of this Agreement without
the written consent of each Revolving Loan Lender affected thereby, (vi) amend
the definition of "Availability", "Final Revolver Maturity Date", "Final Term
Loan Maturity Date", "Required Lenders", or "Pro Rata Share" without the written
consent of each Revolving Loan Lender affected thereby, or (vii) amend the
definition of "Borrowing Base", "PV-10", "Proved Developed Producing Reserves",
"Proved Developed Non-Producing Reserves, "Proved Undeveloped Reserves", "Proved
Reserves", "NYMEX Strip Price", "Reserve Report" or Basis Differential" that
would result in an increase of the Borrowing Base (or in any definition
contained in this Agreement used in connection with the definition of the
foregoing terms that would result in an increase in the Borrowing Base), in each
case, without the written consent of each Revolving Loan Lender affected
thereby. Notwithstanding the foregoing, no amendment, waiver or consent shall,
unless in writing and signed by an Agent, affect the rights or duties of such
Agent (but not in its capacity as a Lender) under this Agreement or the other
Loan Documents.
Section 12.03 No Waiver; Remedies, Etc. No failure on the part of any Agent
or any Lender to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
and remedies of the Agents and the Lenders provided herein and in the other Loan
Documents are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Agents and the Lenders
under any Loan Document against any party thereto are not conditional or
contingent on any attempt by the Agents and the Lenders to exercise any of their
rights under any other Loan Document against such party or against any other
Person.
Section 12.04 Expenses; Taxes; Attorneys' Fees. The Borrower will pay on
demand, all costs and expenses incurred by or on behalf of each Agent (and, in
the case of costs and expenses contemplated by clauses (b) through (m) below,
each Lender), regardless of whether the transactions contemplated hereby are
consummated, including, without limitation, reasonable fees, costs, client
charges and expenses of counsel for each Agent (and, in the case of costs and
expenses contemplated by clauses (b) through (m) below, each Lender),
accounting, due diligence, periodic field audits, physical counts, valuations,
investigations, searches and filings, monitoring of assets, appraisals of
Collateral, title searches and reviewing environmental assessments,
miscellaneous disbursements, examination, travel, lodging and meals, arising
from or relating to: (a) the negotiation, preparation, execution, delivery,
performance and administration of this Agreement and the other Loan Documents
(including, without limitation, the preparation of any additional Loan Documents
pursuant to Section 7.01(b) or the review of any of the agreements, instruments
and documents referred to in Section 7.01(f)), (b) any requested amendments,
waivers or consents to this Agreement or the other Loan Documents whether or not
such documents become effective or are given, (c) the preservation and
protection of any of the Lenders' rights under this Agreement or the other Loan
Documents, (d) the defense of any claim or action asserted or brought against
any Agent or any Lender by any Person that arises from or relates to this
Agreement, any other Loan Document, the Agents' or the Lenders' claims against
any Loan Party, or any and all matters in connection therewith, (e) the
commencement or defense of, or intervention in, any court proceeding arising
from or related to this Agreement or any other Loan Document, (f) the filing of
any petition, complaint, answer, motion or other pleading by any Agent or any
Lender, or the taking of any action in respect of the Collateral or other
security, in connection with this Agreement or any other Loan Document, (g) the
protection, collection, lease, sale, taking possession of or liquidation of, any
Collateral or other security in connection with this Agreement or any other Loan
Document, (h) any attempt to enforce any Lien or security interest in any
Collateral or other security in connection with this Agreement or any other Loan
Document, (i) any attempt to collect from any Loan Party, (j) all liabilities
and costs arising from or in connection with the past, present or future
operations of any Loan Party involving any damage to real or personal property
or natural resources or harm or injury alleged to have resulted from any Release
of Hazardous Materials on, upon or into such property, (k) any Environmental
Liabilities and Costs incurred in connection with the investigation, removal,
cleanup and/or remediation of any Hazardous Materials present or arising out of
the operations of any facility owned or operated by any Loan Party, (l) any
Environmental Liabilities and Costs incurred in connection with any
Environmental Lien, or (m) the receipt by any Agent or any Lender of any advice
from professionals with respect to any of the foregoing. Without limitation of
the foregoing or any other provision of any Loan Document: (x) the Borrower
agrees to pay all stamp, document, transfer, recording or filing taxes or fees
and similar impositions now or hereafter determined by any Agent or any Lender
to be payable in connection with this Agreement or any other Loan Document, and
the Borrower agrees to save each Agent and each Lender harmless from and against
any and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
impositions, (y) the Borrower agrees to pay all broker fees that may become due
in connection with the transactions contemplated by this Agreement and the other
Loan Documents, and (z) if the Borrower fails to perform any covenant or
agreement contained herein or in any other Loan Document, any Agent may itself
perform or cause performance of such covenant or agreement, and the expenses of
such Agent incurred in connection therewith shall be reimbursed on demand by the
Borrower.
Section 12.05 Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, any Agent or any Lender may, and is hereby
authorized to, at any time and from time to time, without notice to any Loan
Party (any such notice being expressly waived by the Loan Parties) and to the
fullest extent permitted by law, set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held and other
Indebtedness at any time owing by such Agent or such Lender to or for the credit
or the account of any Loan Party against any and all obligations of the Loan
Parties either now or hereafter existing under any Loan Document, irrespective
of whether or not such Agent or such Lender shall have made any demand hereunder
or thereunder and although such obligations may be contingent or unmatured. Each
Agent and each Lender agrees to notify such Loan Party promptly after any such
set-off and application made by such Agent or such Lender provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Agents and the Lenders under this Section 12.05
are in addition to the other rights and remedies (including other rights of
set-off) which the Agents and the Lenders may have under this Agreement or any
other Loan Documents of law or otherwise.
Section 12.06 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 12.07 Assignments and Participations. (a) This Agreement and the
other Loan Documents shall be binding upon and inure to the benefit of each Loan
Party and each Agent and each Lender and their respective successors and
assigns; provided, however, that none of the Loan Parties may assign or transfer
any of its rights hereunder without the prior written consent of each Lender and
any such assignment without the Lenders' prior written consent shall be null and
void.
(b)Each Lender may, with the written consent of the Collateral Agent,
assign to one or more other lenders or other entities all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitments and the Loans made by it); provided, however,
that (i) such assignment is in an amount which is at least $5,000,000 or a
multiple of $1,000,000 in excess thereof (or the remainder of such Lender's
Commitment) (except such minimum amount shall not apply to an assignment by a
Lender to an Affiliate of such Lender or a Related Fund), (ii) the parties to
each such assignment shall execute and deliver to the Collateral Agent, for its
acceptance, an Assignment and Acceptance, together with any promissory note
subject to such assignment and such parties shall deliver to the Collateral
Agent a processing and recordation fee of $5,000 (except the payment of such fee
shall not be required in connection with an assignment by a Lender to an
Affiliate of such Lender or a Related Fund, and (iii) no written consent of the
Collateral Agent shall be required in connection with any assignment by a Lender
to an Affiliate of such Lender or a Related Fund. Upon such execution, delivery
and acceptance, from and after the effective date specified in each Assignment
and Acceptance, which effective date shall be at least 3 Business Days after the
delivery thereof to the Collateral Agent (or such shorter period as shall be
agreed to by the Collateral Agent and the parties to such assignment), (A) the
assignee thereunder shall become a "Lender" hereunder and, in addition to the
rights and obligations hereunder held by it immediately prior to such effective
date, have the rights and obligations hereunder that have been assigned to it
pursuant to such Assignment and Acceptance and (B) the assigning Lender
thereunder shall, to the extent that rights and obligations hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto).
(i) By executing and delivering an Assignment and Acceptance, the assigning
Lender and the assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (A) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or any other Loan
Document or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (B) the assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Loan Party or any of its Subsidiaries or the performance or observance by any
Loan Party of any of its obligations under this Agreement or any other Loan
Document furnished pursuant hereto; (C) such assignee confirms that it has
received a copy of this Agreement and the other Loan Documents, together with
such other documents and information it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (D)
such assignee will, independently and without reliance upon the assigning
Lender, any Agent or any Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement and the other Loan
Documents; (E) such assignee appoints and authorizes the Agents to take such
action as agents on its behalf and to exercise such powers under this Agreement
and the other Loan Documents as are delegated to the Agents by the terms hereof
and thereof, together with such powers as are reasonably incidental hereto and
thereto; and (F) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and the
other Loan Documents are required to be performed by it as a Lender.
(ii) The Collateral Agent shall, on behalf of the Borrower, maintain, or
cause to be maintained at the Payment Office, a copy of each Assignment and
Acceptance delivered to and accepted by it and a register (the "Register") for
the recordation of the names and addresses of the Lenders and the Commitments
of, and principal amount of the Loans (the "Registered Loans") owing to each
Lender from time to time. The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the Agents
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower and any Lender at any reasonable time
and from time to time upon reasonable prior notice. In the case of any
assignment not reflected in the Register, the assigning Lender shall maintain a
comparable register.
(iii) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee, together with any promissory notes subject to
such assignment, the Collateral Agent shall, if the Collateral Agent consents to
such assignment and if such Assignment and Acceptance has been completed (i)
accept such Assignment and Acceptance and (ii) record the information contained
therein in the Register.
(iv) A Registered Loan (and the registered note, if any, evidencing the
same) may be assigned or sold in whole or in part only by registration of such
assignment or sale on the Register (and each registered note shall expressly so
provide). Any assignment or sale of all or part of such Registered Loan (and the
registered note, if any, evidencing the same) may be effected only by
registration of such assignment or sale on the Register, together with the
surrender of the registered note, if any, evidencing the same duly endorsed by
(or accompanied by a written instrument of assignment or sale duly executed by)
the holder of such registered note, whereupon, at the request of the designated
assignee(s) or transferee(s), one or more new registered notes in the same
aggregate principal amount shall be issued to the designated assignee(s) or
transferee(s). Prior to the registration of assignment or sale of any Registered
Loan (and the registered note, if any, evidencing the same), the Agents shall
treat the Person in whose name such Registered Loan (and the registered note, if
any, evidencing the same) is registered as the owner thereof for the purpose of
receiving all payments thereon and for all other purposes, notwithstanding
notice to the contrary.
(v) In the event that any Lender sells participations in a Registered Loan,
such Lender shall maintain a register on which it enters the name of all
participants in the Registered Loans held by it (the "Participant Register"). A
Registered Loan (and the registered note, if any, evidencing the same) may be
participated in whole or in part only by registration of such participation on
the Participant Register (and each registered note shall expressly so provide).
Any participation of such Registered Loan (and the registered note, if any,
evidencing the same) may be effected only by the registration of such
participation on the Participant Register.
(vi) Any foreign Person who purchases or is assigned or participates in any
portion of such Registered Loan shall provide the Agents (in the case of a
purchase or assignment) or the Lender (in the case of a participation) with a
completed Internal Revenue Service Form W-8BEN (Certificate of Foreign Status)
or a substantially similar form for such purchaser, participant or any other
affiliate who is a holder of beneficial interests in the Registered Loan.
(c) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement and the other Loan Documents (including, without limitation, all or a
portion of its Commitments, the Loans made by it); provided, that (i) such
Lender's obligations under this Agreement (including without limitation, its
Commitments hereunder) and the other Loan Documents shall remain unchanged; (ii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, and the Borrower, the Agents 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 and
the other Loan Documents; and (iii) a participant shall not be entitled to
require such Lender to take or omit to take any action hereunder except (A)
action directly effecting an extension of the maturity dates or decrease in the
principal amount of the Loans, (B) action directly effecting an extension of the
due dates or a decrease in the rate of interest payable on the Loans or the fees
payable under this Agreement, or (C) actions directly effecting a release of all
or a substantial portion of the Collateral or any Loan Party (except as set
forth in Section 10.08 of this Agreement or any other Loan Document). The Loan
Parties agree that each participant shall be entitled to the benefits of Section
2.08 and Section 4.05 of this Agreement with respect to its participation in any
portion of the Commitments and the Loans as if it was a Lender.
Section 12.08 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
this Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement. The foregoing shall apply to each other Loan
Document mutatis mutandis.
Section 12.09 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN THE STATE OF NEW YORK.
Section 12.10 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF
NEW YORK OR OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES, AND
DOCUMENTS IN ANY SUIT, ACTION, OR PROCEEDING BROUGHT IN THE UNITED STATES OF
AMERICA ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS BY THE MAILING (BY REGISTERED MAIL OR CERTIFIED MAIL, POSTAGE
PREPAID) OR DELIVERING OF A COPY OF SUCH PROCESS TO THE BORROWER, AT THE
BORROWER'S ADDRESS FOR NOTICES AS SET FORTH IN SECTION 12.01. THE BORROWER
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE AGENTS AND THE LENDERS TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW
OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN
ANY OTHER JURISDICTION. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR
HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY
LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Section 12.11 WAIVER OF JURY TRIAL, ETC. THE BORROWER, EACH AGENT AND EACH
LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR
OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION, PROCEEDINGS OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE BORROWER
CERTIFIES THAT NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF ANY AGENT OR ANY
LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY AGENT OR ANY LENDER
WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO
ENFORCE THE FOREGOING WAIVERS. THE BORROWER HEREBY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO
THIS AGREEMENT.
Section 12.12 Consent by the Agents and Lenders. Except as otherwise
expressly set forth herein to the contrary, if the consent, approval,
satisfaction, determination, judgment, acceptance or similar action (an
"Action") of any Agent or any Lender shall be permitted or required pursuant to
any provision hereof or any provision of any other agreement to which any Loan
Party is a party and to which any Agent or any Lender has succeeded thereto,
such Action shall be required to be in writing and may be withheld or denied by
such Agent or such Lender, in its sole discretion, with or without any reason,
and without being subject to question or challenge on the grounds that such
Action was not taken in good faith.
Section 12.13 No Party Deemed Drafter. Each of the parties hereto agrees
that no party hereto shall be deemed to be the drafter of this Agreement.
Section 12.14 Reinstatement; Certain Payments. If any claim is ever made
upon any Agent or any Lender for repayment or recovery of any amount or amounts
received by such Agent or such Lender in payment or on account of any of the
Obligations, such Agent or such Lender shall give prompt notice of such claim to
each other Agent and Lender and the Borrower, and if such Agent or such Lender
repays all or part of such amount by reason of (i) any judgment, decree or order
of any court or administrative body having jurisdiction over such Agent or such
Lender or any of its property, or (ii) any good faith settlement or compromise
of any such claim effected by such Agent or such Lender with any such claimant,
then and in such event each Loan Party agrees that (A) any such judgment,
decree, order, settlement or compromise shall be binding upon it notwithstanding
the cancellation of any Indebtedness hereunder or under the other Loan Documents
or the termination of this Agreement or the other Loan Documents, and (B) it
shall be and remain liable to such Agent or such Lender hereunder for the amount
so repaid or recovered to the same extent as if such amount had never originally
been received by such Agent or such Lender.
Section 12.15 Indemnification.
(a) General Indemnity. In addition to the Borrower's other Obligations
under this Agreement, the Borrower agrees to, jointly and severally, defend,
protect, indemnify and hold harmless each Agent and each Lender and all of their
respective officers, directors, employees, attorneys, consultants and agents
(collectively called the "Indemnitees") from and against any and all losses,
damages, liabilities, obligations, penalties, fees, reasonable costs and
expenses (including, without limitation, reasonable attorneys' fees, costs and
expenses) incurred by such Indemnitees, whether prior to or from and after the
Effective Date, whether direct, indirect or consequential, as a result of or
arising from or relating to or in connection with any of the following: (i) the
negotiation, preparation, execution or performance or enforcement of this
Agreement, any other Loan Document or of any other document executed in
connection with the transactions contemplated by this Agreement, (ii) any
Agent's or any Lender's furnishing of funds to the Borrower under this Agreement
or the other Loan Documents, including, without limitation, the management of
any such Loans, (iii) any matter relating to the financing transactions
contemplated by this Agreement or the other Loan Documents or by any document
executed in connection with the transactions contemplated by this Agreement or
the other Loan Documents, or (iv) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a
party thereto (collectively, the "Indemnified Matters"); provided, however, that
the Borrower shall not have any obligation to any Indemnitee under this Section
12.15(a) for any Indemnified Matter caused by or attributable to the gross
negligence or willful misconduct of such Indemnitee, as determined by a final
judgment of a court of competent jurisdiction.
(b) Environmental Indemnity. Without limiting Section 12.15(a) hereof, the
Borrower agrees to, jointly and severally, defend, indemnify, and hold harmless
the Indemnitees against any and all Environmental Liabilities and Costs and all
other claims, demands, penalties, fines, liability (including strict liability),
losses, damages, costs and expenses (including without limitation, reasonable
legal fees and expenses, consultant fees and laboratory fees), arising out of
(i) any Releases or threatened Releases (x) at any property presently or
formerly owned or operated by any Loan Party or any Subsidiary of any Loan
Party, or any predecessor in interest, or (y) of any Hazardous Materials
generated and disposed of by any Loan Party or any Subsidiary of any Loan Party,
or any predecessor in interest; (ii) any violations of Environmental Laws; (iii)
any Environmental Action relating to any Loan Party or any Subsidiary of any
Loan Party, or any predecessor in interest; (iv) any personal injury (including
wrongful death) or property damage (real or personal) arising out of exposure to
Hazardous Materials used, handled, generated, transported or disposed by any
Loan Party or any Subsidiary of any Loan Party, or any predecessor in interest;
and (v) any breach of any warranty or representation regarding environmental
matters made by the Borrower in Section 6.01(r) or the breach of any covenant
made by the Borrower in Section 7.01(j). Notwithstanding the foregoing, the
Borrower shall not have any obligation to any Indemnitee under this subsection
(b) regarding any potential environmental matter covered hereunder which is
caused by or attributable to the gross negligence or willful misconduct of such
Indemnitee, as determined by a final judgment of a court of competent
jurisdiction.
(c) The indemnification for all of the foregoing losses, damages, fees,
costs and expenses of the Indemnitees are chargeable against the Loan Account.
To the extent that the undertaking to indemnify, pay and hold harmless set forth
in this Section 12.15 may be unenforceable because it is violative of any law or
public policy, the Borrower shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law, to the payment and
satisfaction of all Indemnified Matters incurred by the Indemnitees. The
indemnities set forth in this Section 12.15 shall survive the repayment of the
Obligations and discharge of any Liens granted under the Loan Documents.
Section 12.16 Records. The unpaid principal of and interest on the Loans,
the interest rate or rates applicable to such unpaid principal and interest, the
duration of such applicability, the Commitments, and the accrued and unpaid fees
payable pursuant to the Fee Letter and Section 2.06 hereof shall at all times be
ascertained from the records of the Agents, which shall be conclusive and
binding absent manifest error.
Section 12.17 Binding Effect. This Agreement shall become effective when it
shall have been executed by the Borrower, each Agent and each Lender and
thereafter shall be binding upon and inure to the benefit of each Loan Party,
each Agent and each Lender, and their respective successors and assigns, except
that the Loan Parties shall not have the right to assign their rights hereunder
or any interest herein without the prior written consent of each Lender, and any
assignment by any Lender shall be governed by Section 12.07 hereof.
Section 12.18 Interest. It is the intention of the parties hereto that each
Agent and each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby or by any other Loan
Document would be usurious as to any Agent or any Lender under laws applicable
to it (including the laws of the United States of America and the State of New
York or any other jurisdiction whose laws may be mandatorily applicable to such
Agent or such Lender notwithstanding the other provisions of this Agreement),
then, in that event, notwithstanding anything to the contrary in this Agreement
or any other Loan Document or any agreement entered into in connection with or
as security for the Obligations, it is agreed as follows: (i) the aggregate of
all consideration which constitutes interest under law applicable to any Agent
or any Lender that is contracted for, taken, reserved, charged or received by
such Agent or such Lender under this Agreement or any other Loan Document or
agreements or otherwise in connection with the Obligations shall under no
circumstances exceed the maximum amount allowed by such applicable law, any
excess shall be canceled automatically and if theretofore paid shall be credited
by such Agent or such Lender on the principal amount of the Obligations (or, to
the extent that the principal amount of the Obligations shall have been or would
thereby be paid in full, refunded by such Agent or such Lender, as applicable,
to the Borrower); and (ii) in the event that the maturity of the Obligations is
accelerated by reason of 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 Agent or 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 Agent or such Lender, as applicable, as of the
date of such acceleration or prepayment and, if theretofore paid, shall be
credited by such Agent or such Lender, as applicable, on the principal amount of
the Obligations (or, to the extent that the principal amount of the Obligations
shall have been or would thereby be paid in full, refunded by such Agent or such
Lender to the Borrower). All sums paid or agreed to be paid to any Agent or any
Lender for the use, forbearance or detention of sums due hereunder shall, to the
extent permitted by law applicable to such Agent or such Lender, be amortized,
prorated, allocated and spread throughout the full term of the Loans until
payment in full so that the rate or amount of interest on account of any Loans
hereunder does not exceed the maximum amount allowed by such applicable law. If
at an time and from time to time (i) the amount of interest payable to any Agent
or any Lender on any date shall be computed at the Highest Lawful Rate
applicable to such Agent or such Lender pursuant to this Section 12.18 and (ii)
in respect of any subsequent interest computation period the amount of interest
otherwise payable to such Agent or such Lender would be less than the amount of
interest payable to such Agent or such Lender computed at the Highest Lawful
Rate applicable to such Agent or such Lender, then the amount of interest
payable to such Agent or such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Agent or such Lender until the total amount of interest
payable to such Agent or such Lender shall equal the total amount of interest
which would have been payable to such Agent or such Lender if the total amount
of interest had been computed without giving effect to this Section 12.18.
For purposes of this Section 12.18, the term "applicable law" shall mean
that law in effect from time to time and applicable to the loan transaction
between the Borrower, on the one hand, and the Agents and the Lenders, on the
other, that lawfully permits the charging and collection of the highest
permissible, lawful non-usurious rate of interest on such loan transaction and
this Agreement, including laws of the State of New York and, to the extent
controlling, laws of the United States of America.
The right to accelerate the maturity of the Obligations does not include
the right to accelerate any interest that has not accrued as of the date of
acceleration.
Section 12.19 Confidentiality. Each Agent and each Lender agrees (on behalf
of itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with its customary procedures for handling confidential information
of this nature and in accordance with safe and sound practices of comparable
commercial finance companies, any material non-public information supplied to it
by the Loan Parties pursuant to this Agreement or the other Loan Documents (and
which at the time is not, and does not thereafter become, publicly available or
available to such Person from another source not known to be subject to a
confidentiality obligation to such Person not to disclose such information),
provided that nothing herein shall limit the disclosure of any such information
(i) to the extent required by statute, rule, regulation or judicial process,
(ii) to counsel for any Agent or any Lender, (iii) to examiners or
Securitization Parties or to the auditors or accountants of any Agent or Lender,
(iv) in connection with any litigation to which any Agent or any Lender is a
party or (v) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) first agrees, in writing, to be bound by confidentiality provisions
similar in substance to this Section 12.19. Each Agent and each Lender agrees
that, upon receipt of a request or identification of the requirement for
disclosure pursuant to clause (iv) hereof, it will make reasonable efforts to
keep the Loan Parties informed of such request or identification; provided that
the each Loan Party acknowledges that each Agent and each Lender may make
disclosure as required or requested by any Governmental Authority or
representative thereof and that each Agent and each Lender may be subject to
review by Securitization Parties or other regulatory agencies and may be
required to provide to, or otherwise make available for review by, the
representatives of such parties or agencies any such non-public information.
Section 12.20 Integration. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
Section 12.21 No Novation. This Agreement does not extinguish the
obligations for the payment of money outstanding under the Existing Hillside
Credit Agreement or under the Existing Warrior Credit Agreement or discharge or
release the obligations or the liens or priority of any mortgage, pledge,
security agreement or any other security therefor. Nothing herein contained
shall be construed as a novation of the obligations of Borrower outstanding
under the Existing Hillside Credit Agreement or under the Existing Warrior
Credit Agreement or instruments securing the same, which shall remain in full
force and effect, except as modified hereby or by instruments executed
concurrently herewith. Nothing expressed or implied in this Agreement shall be
construed as a release or other discharge of the Borrower or any other Loan
Party from any of its obligations or liabilities under the Existing Hillside
Credit Agreement or under the Existing Warrior Credit Agreement or any of the
security agreements, pledge agreements, mortgages, guaranties or other loan
documents executed in connection therewith, except as amended hereby and by the
other Loan Documents. The Borrower and each other Loan Party hereby (i) confirms
and agrees that each Loan Document to which it is a party is, and shall continue
to be, in full force and effect and is hereby ratified and confirmed in all
respects except that on and after the Effective Date all references in any such
Loan Document to "the Credit Agreement", "thereto", "thereof", "thereunder" or
words of like import referring to the Existing Hillside Credit Agreement or the
Existing Warrior Credit Agreement shall mean the Existing Hillside Credit
Agreement and the Existing Warrior Credit Agreement as consolidated, amended and
restated by this Agreement; and (ii) confirms and agrees that to the extent that
any such Loan Document purports to assign or pledge to the Collateral Agent, for
the benefit of the Lenders, or to grant to the Collateral Agent for the benefit
of the Lenders a security interest in or lien on, any collateral as security for
the Obligations of the Loan Parties from time to time existing in respect of the
Existing Hillside Credit Agreement, the Existing Warrior Credit Agreement and
the Loan Documents, such pledge, assignment and/or grant of the security
interest or lien is hereby ratified and confirmed in all respects.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
IMPERIAL PETROLEUM INC.
By:
Name:
Title:
COLLATERAL AGENT AND LENDER:
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.
By: Highbridge/Zwirn Capital Management, LLC
By:
Name:
Title:
ADMINISTRATIVE AGENT AND LENDER:
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.
By: Highbridge/Zwirn Capital Management, LLC
By:
Name:
Title:
LENDER
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.
By: Highbridge/Zwirn Capital Management, LLC,
its general partner
By:
Name:
Title:
BANK OF OKLAHOMA
By:
Name:
Title:
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of January 15, 2004
by and among
IMPERIAL PETROLEUM INC.,
as Borrower,
THE LENDERS FROM TIME TO TIME PARTY HERETO,
as Lenders,
and
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.,
as Collateral Agent and Administrative Agent,
SCHEDULE AND EXHIBITS
Schedule C-1 Lenders and Lenders' Commitments
Schedule F-1 Facilities
Schedule 6.01(e) Subsidiaries
Schedule 6.01(f) Litigation; Commercial Tort Claims
Schedule 6.01(i) ERISA Schedule
6.01(o)(A) Real Property Schedule
6.01(o)(B) Oiland Gas Property Schedule
6.01(q) Operating Leases Schedule
6.01(r) Environmental Matters Schedule
6.01(s) Insurance Schedule
6.01(v) Bank Accounts
Schedule 6.01(w) Intellectual Property Schedule
6.01(x) Material Contracts
Schedule 6.01(dd) Name; Jurisdiction of Organization; Organizational
ID Number; Chief Place of Business; Chief Executive
Office; FEIN
Schedule 6.01(ee) Tradenames Schedule
6.01(ff) Collateral Locations Schedule
6.01(hh) Oil and Gas Imbalances Schedule
6.01(ii) Hedging Agreements Schedule
7.02(a) Existing Liens Schedule
7.02(b) Existing Indebtedness Schedule
7.02(e) Existing Investments
Schedule 7.02(k) Limitations on Dividends and Other Payment Restrictions
Schedule 8.01 Blocked Account Banks and Blocked Accounts
Exhibit A-1 Form of Assignment and Acceptance
Exhibit G-1 Form of Guaranty
Exhibit I-1 Form of Intercompany Subordination Agreement
Exhibit P-1 Form of Pledge Agreement
Exhibit S-1 Form of Security Agreement
Exhibit 2.02 Form of Notice of Borrowing
Exhibit 5.01(d)(xv) Form of Opinion of Counsel
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT Of 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS THE PERSON REQUESTING THE
TRANSFER OF THIS WARRANT SHALL FURNISH, WITH RESPECT TO SUCH TRANSFER, AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO IMPERIAL PETROLEUM, INC. TO THE
EFFECT THAT SUCH SALE, TRANSFER, ASSIGNMENT OR DISPOSITION WILL NOT INVOLVE ANY
VIOLATION OF THE REGISTRATION PROVISIONS OF THE ACT OR ANY SIMILAR OR
SUPERSEDING STATUTE OR OF ANY APPLICABLE STATE SECURITIES LAW.
Date: January __, 2004
IMPERIAL PETROLEUM, INC.
(a Nevada corporation)
Warrant for the purchase of 1,915,719 Shares of Common Stock
par value $.006 per share
VOID AFTER 5:00 P.M. CENTRAL TIME ON JANUARY __, 2008.
FOR VALUE RECEIVED, Imperial Petroleum, Inc., a Nevada corporation (the
"Company"), hereby certifies that Highbridge/Zwirn Special Opportunities Fund,
L.P., a Delaware limited partnership, or its assigns (the "Holder"), is
entitled, subject to the provisions of this common stock purchase warrant (as
amended, restated, supplemented, or otherwise modified from time to time, this
"Warrant"), to purchase from the Company at any time, or from time to time
during the period commencing on the date hereof ("Base Date") and expiring at
5:00 p.m. Central time, on January ___, 2008 (the "Expiration Date"), up to
1,915,719 fully paid and non-assessable shares of the Company's authorized but
unissued common stock, par value $0.006 per share (the "Common Stock"), at a
price equal to $0.01 per share (the "Exercise Price").
This Warrant is being issues pursuant to that certain Financing Agreement
of even date herewith by and among the Company, the Holder, and the lenders from
time to time party thereto (the "Financing Agreement").
The term "Common Stock" means the Common Stock, par value $0.006 per share,
of the Company as constituted on the Base Date, together with any other equity
securities that may be issued by the Company in respect thereof or in
substitution therefor. The Exercise Price and/or the number of shares of Common
Stock to be received upon the exercise of this Warrant may be adjusted from time
to time as hereinafter set forth. The shares of Common Stock deliverable or
delivered upon such exercise, as adjusted from time to time, are hereinafter
referred to as "Warrant Stock."
On receipt by the Company of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and in
case of any such loss, theft or destruction of this Warrant, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company will execute and deliver to the Holder, in lieu thereof, a
new Warrant in substantially identical form and substance.
1. Exercise of Warrant. This Warrant may be exercised, subject to the
requirements set forth below, in whole, or in part, at any time during the
period commencing on the Base Date and expiring at 5:00 p.m. Central time on the
Expiration Date set forth above, or, if such day is a day on which banking
institutions in Evansville, Indiana are authorized by law to close, then on the
next succeeding day that shall not be such a day, by presentation and surrender
of this Warrant certificate to the Company at its principal office, or at the
office of its stock transfer agent, if any, with the Warrant Exercise Form
attached hereto duly executed and upon payment (either in cash or by certified
or official bank check or by wire transfer, payable to the order of the Company)
of the aggregate Exercise Price for the number of shares specified in such form
and instruments of transfer, if appropriate, duly executed by the Holder. If
this Warrant should be exercised in part only, the Company shall, upon surrender
of this Warrant certificate for cancellation, execute and deliver a new Warrant
certificate evidencing the rights of the Holder thereof to purchase the balance
of the shares purchasable hereunder. Upon receipt by the Company of this Warrant
certificate, together with the Exercise Price, at its office, or by the stock
transfer agent of the Company at its office, if any, in proper form for exercise
as described above, together with an agreement to comply with the restrictions
on transfer and related covenants contained herein and a representation as to
investment intent, signed by the Holder (and if other than the original Holder
accompanied by proof, reasonably satisfactory to counsel for the Company, of the
right of such person or persons to exercise the Warrant), the Holder shall be
deemed to be the holder of record for the shares of Common Stock issuable upon
such exercise, even if the stock transfer books of the Company shall then be
closed or certificates representing such shares of Common Stock shall not have
been delivered to the Holder. The Company shall pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on exercise of this Warrant. The Company
shall promptly thereafter, and, in any event, within ten (10) days after such
exercise, issue certificate(s) evidencing the Common Stock so purchased.
2. Reservation of Shares; Taxes. The Company shall at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and other securities) from time
to time receivable upon exercise of this Warrant. All such shares (and other
securities) shall be duly authorized and, when issued upon exercise, shall be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
charges, and preemptive rights with respect to the issue thereof. The parties
hereto agree that, for income tax purposes, this Warrant is issued as
consideration of the continuance of making of Loans under the Financing
Agreement and the purchase price to be attributed to this Warrant is $100.00.
3. No Fractional Shares Issued. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the Fair Market Value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant.
4. Transfer.
(a) Securities Laws. Neither this Warrant nor the Warrant Stock issuable
upon the exercise hereof has been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or under any state securities laws and unless
so registered may not be transferred, sold, pledged, hypothecated or otherwise
disposed of unless an exemption from such registration is available. In the
event Holder desires to transfer this Warrant or any of the Warrant Stock
issued, the Holder must give the Company prior written notice of such proposed
transfer including the name and address of the proposed transferee. Such
transfer may be made only either (i) upon registration of the Warrants pursuant
to the Securities Act of 1933 and applicable state securities laws; or (ii) upon
publication by the Securities and Exchange Commission (the "Commission") of a
ruling, interpretation, opinion or "no action letter" based upon facts presented
to said Commission, or (iii) upon receipt by the Company of an opinion of
counsel to the Company, in either case to the effect that the proposed transfer
will not violate the provisions of the Securities Act, the Securities Exchange
Act of 1934, as amended, or the rules and regulations promulgated under either
such act
(b) Conditions to Transfer. Prior to any such proposed transfer, and as a
condition thereto, if such transfer is not made pursuant to an effective
registration statement under the Securities Act, the Holder will, if requested
by the Company, deliver to the Company an agreement by such transferee to be
bound by the terms and conditions of this Warrant.
(c) Indemnity. The Holder acknowledges that the Holder understands the
meaning and legal consequences of this Section 4, and the Holder hereby agrees
to indemnify and hold harmless the Company, its representatives and each officer
and director thereof from and against any and all loss, damage or liability
(including all reasonable outside attorney's fees and costs incurred in
enforcing this indemnity provision) due to or arising out of (a) the inaccuracy
of any representation or the breach of any warranty of the Holder contained in,
or any other breach of, this Warrant, (b) any transfer of any of this Warrant or
the Warrant Stock in violation of the Securities Act, the Securities Exchange
Act of 1934, as amended, applicable state securities laws or the rules and
regulations promulgated under with of such acts, (c) any transfer of this
Warrant or any of the Warrant Stock not in accordance with this Warrant or (d)
any materially untrue statement or omission to state any material fact in
connection with the investment representations or with respect to the facts and
representations supplied by the Holder to counsel to the Company upon which its
opinion as to a proposed transfer shall have been based. Notwithstanding the
foregoing, the liability of any Holder pursuant to this subsection (c) shall be
limited to an amount equal to the aggregate Exercise Price to be paid by Holder
to purchase the Common Stock issuable upon exercise of this Warrant, which gives
rise to such obligation to indemnify.
(d) Transfer. Except as restricted hereby, this Warrant and the Warrant
Stock issued may be transferred by the Holder in whole or in part at any time or
from time to time. Upon surrender of this Warrant certificate to the Company or
at the office of its stock transfer agent, if any, with the Assignment Form
annexed hereto duly executed and funds sufficient to pay any transfer tax, and
upon compliance with the foregoing provisions, the Company shall, without
charge, execute and deliver a new Warrant certificate in the name of the
assignee named in such instrument of assignment, and this Warrant certificate
shall promptly be cancelled. Any assignment, transfer, pledge, hypothecation or
other disposition of this Warrant attempted contrary to the provisions of this
Warrant, or any levy of execution, attachment or other process attempted upon
this Warrant, shall be null and void and without effect.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity, until this Warrant has been exercised and, until such time, the rights
of the Holder are limited to those expressed in this Warrant. The foregoing
notwithstanding, the Company will transmit to the Holder such information,
documents, and reports as are generally distributed to the holders of any class
or series of the securities of the Company.
6. Anti-Dilution Provisions.
(a) Adjustments for Initial Errors.
(i) The Company hereby acknowledges that the initial number of shares of
Common Stock purchasable upon the exercise of this Warrant (the "Exercise
Quantity") was calculated based upon the Company's representation that the
number of outstanding shares of capital stock of the Company as of the Base
Date, calculated on a fully diluted basis, and including shares issuable
pursuant to the exercise of this Warrant (such shares as calculated, being
referred to as "Fully Diluted Shares") totaled 47,892,971 shares. If for any
reason it shall hereafter be determined that four percent (4%) of the number of
Fully Diluted Shares as of the Base Date differed from the Exercise Quantity,
then the Company or the Holder (whichever shall discover such error) shall
notify the other of such determination in writing and the Company shall
forthwith (but in no event more than five (5) days thereafter) reissue the
outstanding Warrant with an appropriate proportional adjustment in the number of
shares of Common Stock purchasable upon the exercise of this Warrant to be
effective as of and from the Base Date.
(ii) Any adjustments to the Exercise Price and the number of shares of
Common Stock issuable upon exercise of this Warrant pursuant to the other
subsections of this Section 6 prior to the date of any increase or decrease in
the Exercise Quantity pursuant to Section 6(a)(i) shall be recalculated as if
such increased or decreased Exercise Quantity had been the Exercise Quantity
since the Base Date, but no such adjustment shall affect the number of shares of
Common Stock issued upon any exercise of this Warrant prior to the date any such
adjustment is made.
(b) Stock Splits. Dividends. Etc. If the Company shall at any time
subdivide its outstanding shares of Common Stock (or other securities at the
time receivable upon the exercise of the Warrant) by re-capitalization,
reclassification, conversion or split-up thereof, or if the Company shall
declare a stock dividend or distribute shares of Common Stock to its
stockholders, the number of shares of Common Stock subject to this Warrant
immediately prior to such subdivision shall be proportionately increased, and if
the Company shall at any time combine the outstanding shares of Common Stock by
re-capitalization, reclassification or combination, the number of shares of
Common Stock subject to this Warrant immediately prior to such combination shall
be proportionately decreased. Any such adjustment and adjustment to the Exercise
Price pursuant to this Section 6 shall be effective at the close of business on
the effective date of such subdivision or combination or if any adjustment is
the result of a stock dividend or distribution then the effective date for such
adjustment based thereon shall be the record date therefor. Whenever the number
of shares of Common Stock purchasable upon the exercise of this Warrant is
adjusted, as provided in this Section 6, the Exercise Price shall be adjusted by
multiplying such Exercise Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise immediately prior to such adjustment, and
(y) the denominator of which shall be the number of shares of Common Stock so
purchasable immediately thereafter. Such adjustment shall be made successively
whenever such a subdivision, re-capitalization, reclassification, or combination
is made.
(c) Adjustment for Reorganization. Consolidation. Merger. Etc. In case (i)
of any reorganization of the Company (or any other corporation, the securities
of which are at the time receivable on the exercise of this Warrant) after the
Base Date, (ii) after the Base Date the Company (or any such other corporation)
shall consolidate with or merge into another corporation or convey all or
substantially all of its assets to another corporation, or (iii) of a
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant, then, and in each such case, the Holder of this
Warrant upon the exercise as provided in Section 1 at any time after the
consummation of such reorganization, consolidation, merger, conveyance, or
reclassification shall be entitled to receive, in lieu of the securities and
property receivable upon the exercise of this Warrant prior to such event, the
securities or property to which such Holder would have been entitled upon such
event if such Holder had exercised this Warrant immediately prior thereto. In
each such case, the terms of this Warrant shall be applicable to the securities
or property received upon the exercise of this Warrant after such event.
(d) Other Issuances and Adjustments.
(i) In case the Company shall, at any time after the Base Date, issue
shares of Common Stock, or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or acquire shares
of Common Stock at a price per share of Common Stock (determined in the case of
such rights, options, warrants, or convertible or exchangeable securities by
dividing (x) the total amount received and/or receivable by the Company in
consideration of the sale and issuance of such rights, options, warrants, or
convertible or exchangeable securities, plus the total minimum consideration
payable to the Company upon exercise, conversion, or exchange thereof by (y) the
total maximum number of shares of Common Stock covered by such rights, options,
warrants, or convertible or exchangeable securities) less than the Fair Market
Value per share of Common Stock (in the case of rights, options, warrants or
convertible or exchangeable securities, determined at the time of issuance of
such securities rather than upon exercise thereof), in each case on the date the
Company fixes the offering price of such shares, rights, options, warrants, or
convertible or exchangeable securities, then the Exercise Price shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction (i) the numerator of
which shall be the sum of (A) the number Fully Diluted Shares immediately prior
to such sale and issuance plus (B) the number of shares of Common Stock which
the aggregate consideration received or receivable (determined as provided
herein) in connection with such sale or issuance would purchase at such Fair
Market Value per share, and (ii) the denominator of which shall be the total
number of Fully Diluted Shares immediately after such sale and issuance. Such
adjustment shall be made successively whenever such an issuance is made.
(ii) In case the Company shall, at any time after the Base Date, make or
agree to (i) any downward adjustment in the exercise, exchange or conversion
price of, (ii) any increase in the number of shares of Common Stock issuable
upon the exercise, conversion or exchange of, or (iii) any change in the
consideration payable for the exercise, conversion or exchange of, any rights,
options, warrants or convertible or exchangeable securities containing the right
to subscribe for or acquire shares of Common Stock, other than such adjustment
that is specifically contemplated and required under the terms of any such
instrument as of the Base Date, then the Exercise Price shall be adjusted so
that it shall equal the price determined by multiplying the Exercise Price in
effect immediately prior thereto by a fraction the numerator of which shall be
the sum of (A) the number of Fully Diluted Shares immediately prior thereto,
plus (B) the number of shares of Common Stock to be issued upon such exercise,
conversion or exchange immediately prior thereto, multiplied by the aggregate
amount of the Fair Market Value of the consideration to be received by the
Company upon such exercise, conversion or exchange immediately thereafter, and
the denominator shall be the sum of (X) the number of shares of Fully Diluted
Shares immediately thereafter, plus (Y) the number of shares of Common Stock to
be issued upon such exercise, conversion or exchange immediately thereafter,
multiplied by the aggregate amount of the Fair Market Value of the consideration
to be received by the Company upon such exercise, conversion or exchange
immediately prior thereto. Such adjustment shall be made successively whenever
such an issuance is made.
(iii) For the purposes of an adjustment under this Section 6(d), the
maximum number of shares of Common Stock which the holder of any right, option,
warrant or convertible or exchangeable security shall be entitled to subscribe
for or purchase shall be deemed to be issued and outstanding. Furthermore, the
consideration received by the Company therefor shall be deemed to be equal to
the price per share of Common Stock (determined in the case of such rights,
options, warrants, or convertible or exchangeable securities by dividing (x) the
total amount received and/or receivable by the Company in consideration of the
sale and issuance of such rights, options, warrants, or convertible or
exchangeable securities, plus the total minimum consideration payable to the
Company upon exercise, conversion, or exchange thereof by (y) the total maximum
number of shares of Common Stock covered by such rights, options, warrants, or
convertible or exchangeable securities) multiplied by the number of shares
deemed issued and outstanding in the previous sentence. In case the Company
shall issue shares of Common Stock, or issue or make an adjustment to the
exercise, exchange or conversion price of rights, options, warrants, or
convertible or exchangeable securities containing the right to subscribe for or
acquire shares of Common Stock for a consideration consisting, in whole or in
part, of consideration other than cash or its equivalent, then in determining
the price per share of Common Stock and the consideration received by the
Company, the Board of Directors of the Company shall determine, in good faith,
the Fair Market Value of said property, and such determination shall be
described in a duly adopted board resolution certified by the Company's
Secretary or Assistant Secretary, provided, that in the event the Board of
Directors is unable to make such a determination, then the Fair Market Value of
such consideration shall be determined in the same manner as a Valuation
Procedure under Section 6(f) hereof.
(e) Certificate as to Adjustments. In each case of an adjustment in the
number of shares of Common Stock receivable on the exercise of this Warrant, the
Company at its expense shall promptly compute such adjustment in accordance with
the terms of the Warrant and prepare a certificate executed by an officer of the
Company setting forth such adjustment and showing the facts upon which such
adjustment is based. The Company shall forthwith mail a copy of each such
certificate to each Holder.
(f) Adjustment of Number of Shares. Upon each adjustment in the Exercise
Price called for under this Section 6, the number of shares of Common Stock
purchasable hereunder shall be adjusted, to the nearest whole share, to the
product obtained by multiplying the number of shares of Common Stock purchasable
immediately prior to such adjustment in the Exercise Price by a fraction, the
numerator of which shall be the Exercise Price immediately prior to such
adjustment and the denominator of which shall be the Exercise Price immediately
thereafter, after giving effect to the cumulative adjustments in Exercise Price
called for under this Section 6.
(g) Fair Market Value. "Fair Market Value" as of a particular date (the
"Determination Date") shall mean (i) if the Common Stock is publicly traded at
the time of determination, the average of the closing prices on such day of the
Common Stock on all domestic securities exchanges on which the Common Stock is
then listed, or, if there have been no sales on any such exchange on such day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day or, (ii) if on any such day the Common Stock is not so
listed, the average of the representative bid and asked prices quoted on the
NASDAQ system as of 4:00 P.M., New York time, on such day, or if on any day such
security is not quoted on the NASDAQ system, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, and in each such (A) and (B) case averaged over a period
of ten (10) days consisting of the day as of which "Fair Market Value" is being
determined and the nine consecutive business days prior to such day. If at any
time the Common Stock is not listed on any domestic securities exchange or
quoted in the NASDAQ System or the domestic over-the-counter market, the Fair
Market Value will be the fair value thereof on the business day prior to the
date of exercise of this Warrant as determined by the Company's Board of
Directors acting in good faith and as agreed to by Holder in its reasonable
discretion.
(h) Notices of Record Date. Etc. In case:
(i) the Company shall take a record of the holders of its Common Stock (or
other securities at the time receivable upon the exercise of the Warrant) for
the purpose of entitling them to receive any dividend (other than a cash
dividend at the same rate of the last cash dividend theretofore paid) or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities, or to receive any other
right;
(ii) of any voluntary or involuntary dissolution, liquidation or winding-up
of the Company;
(iii) of (A) a reorganization of the Company; (B) the acquisition, directly
or indirectly, by any person, entity or group (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) of the beneficial
ownership of securities of more than fifty percent (50%) of the total combined
voting power of all outstanding securities of the Company; (C) a merger or
consolidation in which the Company is not the surviving entity, except for a
transaction in which the stockholders of the Company immediately prior to such
merger or consolidation hold, in the aggregate, securities possessing more than
fifty percent (50%) of the total combined voting power of all outstanding voting
securities of the surviving entity immediately after such merger or
consolidation; (D) a reverse merger in which the Company is the surviving entity
but in which securities possessing more than fifty percent (50%) of the total
combined voting power of all outstanding voting securities of the Company are
transferred to or acquired by a person or entity different from the persons or
entities holding those securities immediately prior to such merger; or (E) the
sale, transfer or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company (each, a
"Change of Control Transaction"); then, and in each such case, the Company
shall mail or cause to be mailed to each Holder a notice specifying, as the case
may be, (A) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (B) the date on which such Change of Control
Transaction, reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding up is to take place, and the
time, if any, to be fixed, as to which the holders of record of Common Stock (or
such other securities at the time receivable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or such other
securities) for securities or other property deliverable upon such Change of
Control Transaction, reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up. Such notice shall be mailed
at least twenty-five (25) days prior to the date therein specified, and this
Warrant may be exercised prior to said date during the term of the Warrant.
Notwithstanding the foregoing, however, in case of (ii) or (iii), the Holder may
elect to require the Company to redeem all or any portion of this Warrant for an
amount equal to the "Warrant Liquidation Value" (as defined below) by giving
written notice to the Company of such election prior to the later of (a) fifteen
(15) days after receipt of the Company's notice and (b) ten (10) days prior to
the consummation of the event specified in (ii) or (iii) (the "Expiration
Date"). Upon receipt of such election, the Company shall be obligated to redeem
this Warrant or portion thereof on the later of (a) the occurrence of the event
specified in (ii) or (iii) or (b) five days after the Company's receipt of such
election. If any proposed Change of Control Transaction does not occur, all
requests for redemption in connection therewith shall be automatically
rescinded, or if there has been a material change in the terms or the timing of
the transaction, the Holder may rescind its request for redemption by giving
written notice of such rescission to the Company within five days following
receipt by such holder of the Company's notice regarding such material change.
The Warrant Liquidation Value shall be defined as an amount in cash equal to the
aggregate consideration which is due and payable with respect to the Common
Stock issuable upon conversion of this Warrant upon any liquidation of the
Company (whether voluntary or involuntary), assuming the conversion into Common
Stock of all then-outstanding shares of preferred stock of the Company
immediately prior to such event (herein, the "Warrant Liquidation Value"),
(i) Threshold for Adjustments. Anything in paragraph 6(a), 6(b), or 6(c) to
the contrary notwithstanding, the Company shall not be required to give effect
to any adjustment until the cumulative resulting adjustment in the Exercise
Price shall have required a change of the Exercise Price by a least $0.0005 per
share, but when the cumulative net effect of more than one adjustment so
determined shall be to change the Exercise Price by at least $0.0005 per share,
such full change in the Exercise Price shall thereupon be given effect. No
adjustment shall be made by reason of the issuance of shares upon conversion
rights, stock issuance rights or similar rights currently outstanding or any
change in the number of treasury shares held by the Company.
7. Legend. Unless the shares of Warrant Stock have been registered under
the Securities Act, upon exercise of any of this Warrant and the issuance of any
of the shares of Warrant Stock, all certificates representing shares of Warrant
Stock shall bear on the face thereof substantially the following legend, insofar
as is consistent with New York law:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE
PROVISIONS OF THAT ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION
OF COUNSEL TO THE COMPANY IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION."
8. Registration. Reference is hereby made to that certain Registration
Rights Agreement of even date herewith between the Company and Holder for
certain provisions relating to rights of the holder of the Warrant and/or
Warrant Stock to require the registration of the Warrant Stock.
9. Representations and Warranties. The Company represents and warrants to
the Holder as follows:
(a) This Warrant has been duly authorized and executed by the Company and
is a valid and binding obligation of the Company enforceable in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
(b) The Warrant Stock has been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable and is not subject to any
preemptive right of any stockholder of the Company;
(c) The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the holders thereof are as set forth in the
certificate of incorporation of the Company, as amended to the Base Date (as so
amended, the "Charter"), a true and complete copy of which has been delivered by
the Company to the original holder of this Warrant;.
(d) As of the Base Date, the authorized capital stock of the Company (of
all classes and series, including Common Stock and preferred stock), the par
value thereof, and the issued and outstanding amounts thereof, are as set forth
on Schedule 9(d) hereof. The issuance and sale of all such interests was in
compliance with all applicable federal and state securities laws, and all issued
and outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid, and non-assessable. Other than this Warrant, and
other than as specified on Schedule 9(d) hereof, as of the Base Date there are
no preemptive rights or any outstanding subscriptions, options, warrants,
rights, convertible securities, calls or other agreements, arrangements or
commitments (including, without limitation, registration rights agreements and
anti-dilution rights) relating to the issued or unissued shares of the Company's
capital stock or other securities, including any right of conversion or exchange
under any outstanding security or other instrument. There are not any
outstanding bonds, debentures, notes or other indebtedness of the Company having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of the Company may vote.
As of the Base Date, other than as specified on Schedule 9(d) hereof, the
Company is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital stock or any security
convertible into or exchangeable for any of its capital stock;
(e) The execution and delivery of this Warrant are not, and the issuance
and delivery of the Warrant Stock upon exercise of this Warrant in accordance
with the terms hereof will not be, inconsistent with the Charter or by-laws of
the Company, do not and will not contravene, in any material respect, any
governmental rule or regulation, judgment or order applicable to the Company, do
not and will not conflict with or contravene any provision of, or constitute a
default under, any indenture, mortgage, contract or other instrument of which
the Company is a party or by which it is bound or require the consent or
approval of, the giving of notice to, the registration or filing with or the
taking of any action in respect of or by, any federal, state or local government
authority or agency or other person, except for the filing of notices pursuant
to federal and state securities laws, which filings may be effected. This
Warrant and the Warrant Stock are not and will not, be subject to any voting
trust agreement or other contract, agreement, arrangement, commitment or
understanding to which the Company is a party, including such agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting or disposition thereof other than the Registration Rights Agreement;
(f) There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Company to perform its obligations under this Warrant.
10. Indemnification. The Company shall indemnify, save and hold harmless
Holder and the holder of any Warrant Stock from and against any and all
liability, loss, cost, damage, reasonable attorneys' and accountants' fees and
expenses, court costs and all other out-of-pocket expenses reasonably incurred,
by such holder in connection with interpreting, preserving, exercising and/or
enforcing any of the terms hereof.
11. Notices. All notices required hereunder shall be in writing and shall
be deemed given (a) when delivered personally, (b) the next business day when
sent by nationally recognized overnight courier service procuring a return
receipt, or (c) within three business days after mailing when by certified or
registered mail, return receipt requested, to the following addresses, or at
such other address of which the Company or Holder has been advised by notice
hereunder:
If to the Company: Imperial Petroleum Inc.
11600 German Pines
Evansville, IN 47725
Attention: Jeffrey T. Wilson, President
Telephone: (812) 867-1433
Telecopier: (812) 867-1678
in each case, with a copy to:
Heskett & Heskett
501 Johnstone St.
Suite 501
Bartlesville, OK 74003
Attention: John Heskett, Esq.
Telephone: (918) 336-1773
Telecopier: (918) 336-3152
If to the Holder: Highbridge/Zwirn Special Opportunities Fund, L.P.
9 West 57th Street
27th Floor
New York, New York 10019
Attention: Morris MacLeod
Telephone: 212-287-4676
Telecopier: 212-287-4263
with a copy to:
Paul, Hastings, Janofsky & Walker LLP
515 South Flower Street, 25th Floor
Los Angeles, California 90071
Attention: John Francis Hilson, Esq.
Telephone: 213-683-6000
Telecopier: 213-996-3300
12. Applicable Law. This Warrant is issued under and shall for all purposes
be governed by and construed in accordance with the laws of the state of New
York.
13. Severability. The validity, legality or enforceability of the remainder
of this Warrant shall not be affected even if one or more of its provisions
shall be held to be invalid, illegal or unenforceable in any respect.
14. Waivers Strictly Construed. With regard to any power, remedy or right
provided herein or otherwise available to any party hereunder (i) no waiver or
extension of time shall be effective unless expressly contained in a writing
signed by the waiving party, and (ii) no alteration, modification or impairment
shall be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or other indulgence.
15. Complete Agreement and Modifications. This Warrant represents the
entire agreement of the Company with respect to the subject matter hereof and
may be changed only by a written agreement executed by the Company and the
Holder.
16. Survival of Representations, Warranties and Agreements. Each of the
respective representations and warranties of the Company and the Holder hereof
contained herein shall survive the Base Date, the exercise or conversion of this
Warrant (or any part hereof) and the termination or expiration of any rights
hereunder. Each of the respective agreements of each of the Company and the
Holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
17. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the Holder hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by the
Holder), may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
18. Acceptance. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to the foregoing terms and conditions.
19. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its
behalf, in its corporate name, by its duly authorized officer, all as of the
date first written above.
Imperial Petroleum, Inc.
By:__________________________
Jeffrey T. Wilson, President
Warrant Exercise Form
To: Imperial Petroleum, Inc.
1. The undersigned hereby elects to purchase _____ shares of Common Stock of
Imperial Petroleum, Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full. ? (check
here)
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name or names as are specified below:
---------------------------
(Name) ______________________________
------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares in violation of
the Securities Act of 1933, as amended.
---------------------------- ---------------------
(Signature) (Date)
4. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
- -----------------------------
(Name)
5. I elect to convert this Warrant for ____________ shares of Common Stock (as
such term is defined therein).
Date: By (Warrantholder):
---------------------- ------------------------
Name (Print):
------------------------------
Its:
---------------------------------------
Assignment Form
(To be executed only upon the assignment
of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto
___________________________________________________________, whose address is
___________________________________________________________, all of the rights
of the undersigned under the within Warrant, with respect to ___________________
shares of Common Stock of Imperial Petroleum, Inc. and, if such shares shall not
include all the Warrant Stock issuable as provided in the within Warrant, that a
new Warrant of like tenor for the Warrant Stock not being transferred hereunder
be issued in the name of and delivered to the undersigned, and does hereby
irrevocably constitute and appoint
___________________________________________________________ Attorney to register
such transfer on the books of Imperial Petroleum, Inc. maintained for the
purpose, with full power of substitution in the premises.
Dated:_____________, ______ HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.
By: Highbridge/Zwirn Capital Management, LLC
By: ________________________________
Name: _______________________________
Its: _______________________________
NOTICE: The signature on this Assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The undersigned transferee whose address is______________________________,
hereby agrees to be bound by the terms and conditions of the within Warrant.
Dated:_____________, ______ (Transferee)
By: ________________________________
(Signature of Transferee)
Name: _______________________________
Its: _______________________________
Schedule 9(d)
ASSUMPTION AGREEMENT
THIS ASSUMPTION AGREEMENT (this "Agreement"), dated as of January 15, 2004,
is made among HILLSIDE OIL & GAS, LLC, a Texas limited liability company
("Hillside"), BTT, INC., a Texas corporation ("BTT"), ENIGMA ENERGY COMPANY,
L.L.C. ("Enigma"), and DOUBLE EAGLE PETROLEUM CORPORATION, an Oklahoma
corporation ("Double Eagle"; and together with Hillside, BTT, and Enigma, each a
"Company" and collectively, the "Companies"), IMPERIAL PETROLEUM, INC., a Nevada
corporation ("Borrower"), and HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.,
a Delaware limited partnership ("HZ").
R E C I T A L S
A. Bank of Oklahoma, a national association ("Bank") and each Company has
entered into certain credit and lending arrangements (the "Lending
Arrangements"). Such Lending Arrangements are evidenced by and/or documented in
those agreements, documents and/or instruments, as the case may be, described in
Exhibit A attached hereto and incorporated herein by reference (collectively, as
the same may have been amended, restated or otherwise modified from time to
time, the "Loan Documents").
B. Bank has transferred and assigned all of its right, title and interest
in and to the Loan Documents and in and to the Lending Arrangements evidenced
thereby to HZ, pursuant to certain purchase and sale agreements, dated
contemporaneously herewith, by and between Bank and HZ (as it may be amended or
modified from time to time).
C. Borrower desires to acquire from each Company and assume, and each such
Company desires to assign and transfer to Borrower, all of such Company's right,
title and interest in the relevant Loan Documents, together with all duties,
obligations and liabilities of such Company's thereunder. Immediately following
such assignment and assumption by Borrower, HZ desires to release each Company
from all of its duties, obligations and liabilities, in and under the relevant
Loan Documents.
D. Borrower is in a position to fully perform all obligations that may
exist under the Loan Documents.
E. HZ desires to recognize Borrower as the successor party to the Loan
Documents upon such assignment and assumption.
NOW, THEREFORE, in consideration of the mutual agreements herein contained,
the parties hereto hereby agree as follows:
SECTION 1. Assignment and Assumption.
(a) For adequate consideration, the receipt of which is hereby acknowledged
by the Companies, each Company hereby assigns and transfers to Borrower, as of
the date hereof and subject to and upon the terms and conditions stated in this
Agreement, and Borrower hereby accepts and assumes, all of each such Company's
right, title and interest in and under the relevant Loan Documents, and all
duties, obligations and liabilities of each such Company therein and related
thereto. Borrower hereby agrees to be bound by all of the Loan Documents as if
it had been an original party thereto as such Company, and by all of the duties
and obligations of each such Company thereunder and related thereto. Borrower
hereby makes, as of the date hereof, for the benefit of HZ, each of the
representations and warranties made in any of the Loan Documents by any Company.
(b) Immediately following the assignment and assumption described in clause
(a) above, HZ hereby releases each of the Companies from each of its duties,
obligations and liabilities under the Loan Documents. The Companies, Borrower
and HZ agree that as of the date hereof, no Company shall have any right, title
or interest in, and no duties, obligations or liabilities under, with respect to
or in connection with, the relevant Loan Documents, and all such rights, duties,
obligations and liabilities shall be rights, duties, obligations and liabilities
of Borrower, exclusively.
SECTION 2. Representations and Warranties.
Each Company and Borrower represents and warrants to the other and to HZ
that it has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder; its execution and delivery
of this Agreement, and the performance of its obligations hereunder, have been
authorized by all necessary corporate action and do not violate any laws or
orders by which it is bound; and this Agreement constitutes its legal, valid and
binding obligations, enforceable against it in accordance with the terms hereof.
SECTION 3. Benefits of Agreement.
This Agreement is entered into for the sole protection and benefit of the
parties hereto and their respective successors and assigns, and no other person
shall be a direct or indirect beneficiary of, or shall have any direct or
indirect cause of action or claim in connection with, this Agreement.
SECTION 4. Entire Agreement; Amendment.
This Agreement, including Exhibit A hereto, contains the entire agreement
of the parties with respect to the subject matter hereof and supersedes any and
all prior drafts, agreements, commitments, discussions and understandings, oral
or written, with respect thereto. This Agreement, including Exhibit A hereto,
may not be modified, amended or otherwise altered except by the written
agreement of the parties.
SECTION 5. Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, sent by telefacsimile, telexed, telegraphed or sent by
courier service or United States mail and shall be deemed to have been given
when deposited in the mails or delivered to the telegraph company or telecopied
or telexed, as the case may be, respectively, addressed as aforesaid. For the
purposes hereof, the addresses of the parties hereto (until notice of a change
thereof is delivered as provided in this Section 5) shall be as set forth below
each party's name on the signature pages hereof, or, as to each party, at such
other address as may be designated by such party in a written notice to the
other.
SECTION 6. Binding Effect; Assignment.
This Agreement, including Exhibit A hereto, shall be binding upon and inure
to the benefit of the Companies, Borrower, HZ and their respective successors
and assigns; provided that Borrower shall not assign or otherwise transfer its
rights and obligations hereunder or thereunder without the prior written consent
of HZ.
SECTION 7. Counterparts.
This Agreement may be executed by the parties to this Agreement on separate
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
SECTION 8. Severability.
Whenever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under all applicable laws and
regulations. If, however, any provision of this Agreement shall be prohibited by
or invalid under any such law or regulation in any jurisdiction, it shall, as to
such jurisdiction, be deemed modified to conform to the minimum requirements of
such law or regulation, or, if for any reason it is not deemed so modified, it
shall be ineffective and invalid only to the extent of such prohibition or
invalidity without affecting the remaining provisions of this Agreement or the
validity or effectiveness of such provision in any other jurisdiction.
SECTION 9. CHOICE OF LAW.
THE VALIDITY OF THIS AGREEMENT, INCLUDING EXHIBIT A ATTACHED HERETO, ITS
CONSTRUCTION, INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO, SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW.
SECTION 10. WAIVER OF JURY TRIAL.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION, CAUSE OF ACTION,
CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT, OR
IN ANY WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE DEALING OF THE
PARTIES WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTIONS RELATED HERETO, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY
LAW, EACH OF THE PARTIES HERETO HEREBY AGREES THAT ANY SUCH ACTION, CAUSE OF
ACTION, CLAIM, DEMAND, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A
JURY AND THAT EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION WITH
ANY COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER
PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
[Signature page to follow.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANIES:
HILLSIDE OIL & GAS, LLC,
a Texas limited liability company
By: __________________________________
Name: ________________________________
Title: _________________________________
Address for Notices:
BTT, INC.,
a Texas corporation
By: __________________________________
Name: ________________________________
Title: _________________________________
Address for Notices:
ENIGMA ENERGY COMPANY, L.L.C.
By: __________________________________
Name: ________________________________
Title: _________________________________
Address for Notices:
DOUBLE EAGLE PETROLEUM CORPORATION,
an Oklahoma corporation
By: __________________________________
Name: ________________________________
Title: _________________________________
Address for Notices:
BORROWER:
IMPERIAL PETROLEUM, INC.,
a Nevada corporation
By: __________________________________
Name: ________________________________
Title: _________________________________
Address for Notices:
HZ:
HIGHBRIDGE/ZWIRN SPECIAL
OPPORTUNITIES FUND, L.P.,
a Delaware limited partnership
By: Highbridge/Zwirn Capital Management, LLC
By: __________________________________
Name: ________________________________
Title: _________________________________
Address for Notices:
9 West 57th Street
27th Floor
New York, New York 10019
Exhibit A
Loan Documents
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement"), is entered into as of January
15, 2004, by and between IMPERIAL PETROLEUM, INC., a Nevada corporation
("Borrower"), each of Borrower's undersigned Subsidiaries (Borrower and such
Subsidiaries are referred to hereinafter each individually as an "Debtor", and
individually and collectively, jointly and severally, as the "Debtors") and
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P., a Delaware limited
partnership ("HZ"), as collateral agent for the Lenders (in such capacity,
together with its successors, if any, in such capacity, "Collateral Agent"),
with reference to the following:
WHEREAS, concurrently herewith, Borrower, the lenders from time to time a
party thereto (together with their successors and assigns, the "Lenders"), HZ,
as administrative agent for such Lenders (in such capacity, together with its
successors, if any, in such capacity, "Administrative Agent"), and Collateral
Agent are entering into that certain Consolidated, Amended and Restated Credit
Agreement dated concurrently herewith (as amended, restated, supplemented or
otherwise modified from time to time, the "Credit Agreement"), pursuant to which
the below defined Lender Group has agreed to make certain financial
accommodations to Borrower;
WHEREAS, to induce the Lender Group (as hereinafter defined) to make the
financial accommodations provided to Borrower pursuant to the Credit Agreement,
each Debtor desires to pledge, grant, transfer, and assign to Collateral Agent,
for the benefit of the Lender Group (as hereinafter defined), a security
interest in the Collateral (as hereinafter defined) to secure the Secured
Obligations (as hereinafter defined), as provided herein.
NOW THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and each intending to
be bound hereby, Collateral Agent and each Debtor agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. All capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to them in the Credit Agreement.
As used in this Agreement, the following terms shall have the following
definitions:
"Accounts" means an "account" (as that term is defined in the Code), and
any and all "supporting obligations" (as that term is defined in the Code) in
respect thereof.
"Account Debtor" means any Person who is or who may become obligated under,
with respect to, or on account of, an Account, chattel paper, or a General
Intangible.
"Administrative Agent" has the meaning specified therefor in the recitals
hereto.
"Agreement" means this Security Agreement and any joinders, extensions,
riders, supplements, notes, amendments, or modifications to or in connection
with this Security Agreement.
"Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.ss.101
et seq.), as amended, and any successor statute.
"Books" means all of each Debtor's now owned or hereafter acquired books
and records (including all of its Records indicating, summarizing, or evidencing
its assets (including the Collateral) or liabilities, all of each Debtor's
Records relating to its business operations or financial condition, and all of
its goods or General Intangibles related to such information).
"Code" means the New York Uniform Commercial Code, as in effect from time
to time.
"Collateral" means all of each Debtor's now owned or hereafter acquired
right, title, and interest in and to each of the following: all of its Accounts,
all of the Books, all of its commercial tort claims, all of its Deposit
Accounts, all of its Equipment, all of its General Intangibles, all of its
Inventory, all of its Investment Property (including all of its securities and
Securities Accounts), all of its Negotiable Collateral, money or other assets of
Borrower that now or hereafter come into the possession, custody, or control of
any member of the Lender Group, and the proceeds and products, whether tangible
or intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all Accounts, Books, Deposit Accounts,
Equipment, General Intangibles, Inventory, Investment Property, Negotiable
Collateral, Real Property, money, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
"Collateral Access Agreement" means a landlord waiver, mortgagee waiver,
bailee letter, or acknowledgement agreement of any warehouseman, processor,
lessor, consignee, or other Person in possession of, having a Lien upon, or
having rights or interests in the Equipment or Inventory, in each case, in form
and substance satisfactory to Collateral Agent.
"Collateral Agent" has the meaning specified therefor in the preamble
hereto.
"copyright" shall have the meaning ascribed to such term in the Copyright
Act, and includes unregistered copyrights.
"Copyright Act" means the United States Copyright Act of 1976, as amended,
and any successor statute, and the rules promulgated thereunder.
"Credit Agreement" has the meaning specified therefor in the recitals
hereto.
"Debtor" of "Debtors" shall have the respective meanings specified therefor
in the preamble hereto.
"Deposit Account" means any "deposit account" (as that term is defined in
the Code).
"Equipment" means equipment (as that term is defined in the Code) and
includes machinery, machine tools, motors, furniture, furnishings, fixtures,
vehicles (including motor vehicles), computer hardware, tools, parts, and goods
(other than consumer goods, farm products, or Inventory), wherever located,
including all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing.
"Event of Default" has the meaning specified therefor in Section 6.
"General Intangibles" means "general intangibles" (as that term is defined
in the Code), including payment intangibles, contract rights, rights to payment,
rights arising under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks, copyrights,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, infringement claims, computer programs,
information contained on computer disks or tapes, software, literature, reports,
catalogs, money, deposit accounts, insurance premium rebates, tax refunds, and
tax refund claims, and any and all "supporting obligations" (as defined in the
Code) in respect thereof, and any other personal property other than goods,
Accounts, Investment Property, and Negotiable Collateral.
"HZ" shall have the meaning specified therefor in the preamble hereto.
"Indemnitees" has the meaning specified therefor in Section 9.3.
"Inventory" means "inventory" (as that term is defined in the Code), and
any and all "supporting obligations" (as that term is defined in the Code) in
respect thereof.
"Investment Property" means "investment property" (as that term is defined
in the Code), and any and all "supporting obligations" (as that term is defined
in the Code) in respect thereof.
"Insolvency Proceeding" means any proceeding commenced by or against any
Person under any provision of the Bankruptcy Code or under any other bankruptcy
or insolvency law, assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
"Lenders" means, individually and collectively, each of the Lenders
identified on the signature pages of the Credit Agreement, and any other Person
made a party thereto in accordance with the provisions of Section 12.07 thereof
(together with their respective successors and assigns).
"Lender Group" means, individually and collectively, each of the Lenders,
Administrative Agent and Collateral Agent.
"Lender Group Expenses" means all (a) costs or expenses (including, without
limitation, taxes, insurance premiums, attorney and consultant fees,
investigation and laboratory fees, feasibility studies, court costs and
litigation expenses) required to be paid by any Debtor under any of the Loan
Documents that are paid or incurred by the Lender Group; (b) fees or charges
paid or incurred by Collateral Agent in connection with the Lender Group's
transactions with any Debtor, including, fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public record searches
(including tax lien, litigation, and UCC searches and including searches with
the patent and trademark office, the copyright office, or the department of
motor vehicles), filing, recording, publication, appraisal (including periodic
Collateral appraisals or business valuations to the extent of the fees and
charges (and up to the amount of any limitation) contained in this Agreement or
the Credit Agreement), real estate surveys, real estate title policies and
endorsements, and environmental audits; (c) costs and expenses incurred by
Collateral Agent in the disbursement of funds to any Debtor (by wire transfer or
otherwise); (d) charges paid or incurred by Collateral Agent resulting from the
dishonor of checks; (e) reasonable costs and expenses paid or incurred by the
Lender Group to correct any default or enforce any provision of the Loan
Documents, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, or advertising to sell the
Collateral, or any portion thereof, irrespective of whether a sale is
consummated; (f) audit fees and expenses of Collateral Agent related to audit
examinations of the Books to the extent of the fees and charges (and up to the
amount of any limitation) contained in this Agreement or the Credit Agreement;
(g) reasonable costs and expenses of third party claims or any other suit paid
or incurred by the Lender Group in enforcing or defending the Loan Documents or
in connection with the transactions contemplated by the Loan Documents or the
Lender Group's relationship with any Debtor or any guarantor of the Secured
Obligations; (h) Collateral Agent's, Administrative Agent's and each Lender's
reasonable fees and expenses (including attorneys fees) incurred in advising,
structuring, drafting, reviewing, administering, or amending the Loan Documents;
and (i) Collateral Agent's, Administrative Agent's and each Lender's reasonable
fees and expenses (including attorneys fees) incurred in terminating, enforcing
(including attorneys fees and expenses incurred in connection with a "workout,"
a "restructuring," or an Insolvency Proceeding concerning any Debtor or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.
"Negotiable Collateral" means letters of credit, letter of credit rights,
notes, drafts, instruments, promissory notes, documents, chattel paper
(including electronic chattel paper and tangible chattel paper), Debtor's Books
relating to any of the foregoing, and any and all "supporting obligations" (as
defined in the Code) in respect of the foregoing.
"Obligations" shall have the meaning specified therefor in the Credit
Agreement.
"Permitted Protest" means the right of any Debtor to protest any Lien other
than any such Lien that secures the Secured Obligations, tax (other than payroll
taxes or taxes that are the subject of a United States federal tax lien), or
rental payment, provided that (a) a reserve with respect to such obligation is
established on the books of such Debtor in an amount that is reasonably
satisfactory to Collateral Agent, (b) any such protest is instituted and
diligently prosecuted by such Debtor in good faith, and (c) Collateral Agent is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the Liens of Collateral
Agent in and to the Collateral for the benefit of the Lender Group.
"Record" means information that is inscribed on a tangible medium or which
is stored in an electronic or other medium and is retrievable in perceivable
form.
"Secured Obligations" shall mean: (a) in the case of Borrower, the prompt
payment and performance by Borrower of the Obligations; and (b) in the case of
each other Debtor, the prompt payment and performance by such Debtor of all
obligations of such Debtor under this Agreement, any guaranty issued in favor of
any member of the Lender Group, or any other Loan Document to which such Debtor
is a party, whether for principal, interest, fees, indemnification payments,
expense reimbursements or otherwise (including all interest, fees and expenses
that, but for the provisions of the Bankruptcy Code, would have accrued).
"Voidable Transfer" has the meaning specified therefor in Section 16.8.
1.2 Code. Any terms used in this Agreement which are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.3 Construction. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be followed by the phrase "without limitation". The word "will" shall be
construed to have the same meaning and effect as the word "shall". Unless the
context requires otherwise, (a) any definition of or reference to any 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); (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns; (c) 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; (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement; and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights. References in this
Agreement to "determination" by any Agent include estimates by such Agent (in
the case of quantitative determinations) and beliefs by such Agent (in the case
of qualitative determinations).Any reference in this Agreement or in any of the
other Loan Documents to this Agreement or any of the other Loan Documents shall
include all alterations, amendments, restatements, changes, extensions,
modifications, renewals, replacements, substitutions, and supplements, thereto
and thereof, as applicable. In the event of a direct conflict between the terms
and provisions of this Agreement and the Credit Agreement, it is the intention
of the parties hereto that both such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each other. In
the event of any actual, irreconcilable conflict that cannot be resolved as
aforesaid, the terms and provisions of the Credit Agreement shall control and
govern; provided, however, that the inclusion herein of additional obligations
on the part of Debtors and supplemental rights and remedies in favor of
Collateral Agent, in each case in respect of the Collateral, shall not be deemed
a conflict with the Credit Agreement.
1.4 Schedules and Exhibits. All of the schedules and exhibits attached to
this Agreement shall be deemed incorporated herein by reference.
2. CREATION OF SECURITY INTEREST.
2.1 Grant of Security Interest.
(a) Each Debtor, in order to secure the prompt payment of all of such
Debtor's Secured Obligations and the prompt performance of all covenants and
duties of such Debtor under the Loan Documents, hereby grants to Collateral
Agent, for the benefit of the Lender Group, continuing security interests in all
of its currently existing and hereafter acquired or arising Collateral.
(b) Collateral Agent's security interests in the Collateral for the benefit
of the Lender Group shall attach to all Collateral without further act on the
part of the Lender Group or any Debtor.
(c) Except as expressly set forth in this Agreement or any other Loan
Document, no Debtor has any authority, express or implied, to dispose of any
item or portion of the Collateral.
2.2 Negotiable Collateral. In the event that any Collateral of any Debtor,
including proceeds, is evidenced by or consists of Negotiable Collateral, such
Debtor shall, immediately upon the request of Collateral Agent, endorse and
assign such Negotiable Collateral to Collateral Agent and deliver physical
possession of such Negotiable Collateral to Collateral Agent.
2.3 Collection of Accounts, General Intangibles, Negotiable Collateral. At
any time, Collateral Agent or Collateral Agent's designee may: (a) notify
customers or Account Debtors of any Debtor that such Debtor's Accounts, General
Intangibles, and Negotiable Collateral have been assigned to Collateral Agent or
that Collateral Agent has a security interest therein for the benefit of the
Lender Group; and (b) collect any Debtor's Accounts, General Intangibles, and
Negotiable Collateral directly and charge, or cause Administrative Agent to
charge for the benefit of Collateral Agent, the collection costs and expenses
incurred by Collateral Agent in connection with any such collection of such
Accounts, General Intangibles and Negotiable Collateral to the Loan Account.
Each Debtor agrees that such Debtor will hold in trust for Collateral Agent, as
Collateral Agent's trustee, any cash receipts, checks, and other items of
payment (including, insurance proceeds, proceeds of cash sales, rental proceeds,
and tax refunds) that Debtor receives and immediately will deliver said cash
receipts, checks, and other items of payment to Collateral Agent in their
original form as received by such Debtor.
2.4 Delivery of Additional Documentation Required. Each Debtor shall
execute, and deliver to Collateral Agent, prior to or concurrently with such
Debtor's execution and delivery of this Agreement and at any time thereafter at
the request of Collateral Agent, all financing statements, continuation
financing statements, fixture filings, security agreements, chattel mortgages,
pledges, mortgages, deeds of trust, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices, schedules of
accounts, letters of authority, and all other documents that Collateral Agent
may reasonably request, in form satisfactory to Collateral Agent, to perfect and
continue perfected Collateral Agent's security interests in the Collateral for
the benefit of the Lender Group and in order to fully consummate all of the
transactions contemplated under the Loan Documents.
2.5 Power of Attorney. Each Debtor hereby irrevocably makes, constitutes,
and appoints Collateral Agent (and any of Collateral Agent's officers,
employees, or agents (including Administrative Agent) designated by Collateral
Agent) as such Debtor's true and lawful attorney, with power to: (a) if such
Debtor refuses to, or fails timely to execute and deliver any of the documents
described in Section 2.4, sign the name of such Debtor on any of the documents
described in Section 2.4; (b) at any time that an Event of Default has occurred
and is continuing or the Lender Group, or Collateral Agent on behalf thereof,
deems itself insecure (in accordance with Section 1-208 of the Code), sign such
Debtor's name on any invoice or bill of lading relating to any Account, drafts
against Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors; (c) send requests for verification of
Accounts; (d) endorse such Debtor's name on any checks, notices, acceptances,
money orders, drafts, or other item of payment or security that may come into
Collateral Agent's or any other member of the Lender Group's possession; (e) at
any time that an Event of Default has occurred and is continuing or the Lender
Group, or Collateral Agent on behalf thereof, deems itself insecure (in
accordance with Section 1-208 of the Code), notify the post office authorities
to change the address for delivery of such Debtor's mail to an address
designated by Collateral Agent, to receive and open all mail addressed to such
Debtor, and to retain all mail relating to the Collateral and forward all other
mail to such Debtor; (f) at any time that an Event of Default has occurred and
is continuing or the Lender Group, or Collateral Agent on behalf thereof, deems
itself insecure (in accordance with Section 1-208 of the Code), make, settle,
and adjust all claims under such Debtor's policies of insurance and make all
determinations and decisions with respect to such policies of insurance; and (g)
at any time that an Event of Default has occurred and is continuing or the
Lender Group, or Collateral Agent on behalf thereof, deems itself insecure (in
accordance with Section 1-208 of the Code), settle and adjust disputes and
claims respecting the Accounts directly with Account Debtors, for amounts and
upon terms which Collateral Agent determines to be reasonable, and Collateral
Agent may cause to be executed and delivered any documents and releases which
Collateral Agent determines to be necessary. The appointment of Collateral Agent
as Debtors' attorney, and each and every one of Collateral Agent's rights and
powers, being coupled with an interest, is irrevocable until all of the Secured
Obligations have been fully and finally performed and paid in cash and the
obligations of the Lender Group to extend credit under the Credit Agreement have
been irrevocably terminated.
2.6 Right to Inspect. Collateral Agent (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter to
inspect each Debtor's Books and to check, test, and appraise the Collateral in
order to verify such Debtor's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
3. REPRESENTATIONS AND WARRANTIES.
Each Debtor represents and warrants as follows:
3.1 No Prior Encumbrances. Such Debtor has good and marketable title to the
Collateral, free and clear of all Liens except Permitted Liens.
3.2 Place of Business/Chief Executive Office; FEIN. The chief executive
office of such Debtor and all other locations at which such Debtor has a place
of business are set forth on Schedule 6.01(dd) of the Credit Agreement. Such
Debtor's FEIN and organizational identification number are set forth on Schedule
6.01(dd) of the Credit Agreement.
3.3 Location of Equipment. Except as set forth on Schedule 6.01(ff) of the
Credit Agreement, the Equipment are not stored with a bailee, warehouseman, or
similar party (without Collateral Agent's prior written consent) and are located
only at the locations identified on Schedule 6.01(ff) of the Credit Agreement or
otherwise permitted by the Credit Agreement.
3.4 Reliance by Collateral Agent; Cumulative. The warranties,
representations, and agreements set forth herein shall be conclusively presumed
to have been relied upon by Collateral Agent and the Lender Group, and shall be
cumulative and in addition to any and all other warranties, representations, and
agreements which such Debtor shall now or hereinafter give, or cause to be
given, to Collateral Agent or the Lender Group.
4. AFFIRMATIVE COVENANTS.
Each Debtor covenants and agrees that, until payment in full in cash of the
Secured Obligations, and unless Collateral Agent shall otherwise consent in
writing, such Debtor shall do all of the following:
4.1 Location of Equipment. Keep the Equipment only at the locations
identified on Schedule 6.01(ff) of the Credit Agreement or otherwise permitted
by the Credit Agreement.
4.2 Title to Equipment. Upon Collateral Agent's request, deliver to
Collateral Agent, properly endorsed, any and all evidences of ownership of,
certificates of title, or applications for title to any items of Equipment.
4.3 Maintenance of Equipment. Keep and maintain the Equipment in good
operating condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Such Debtor shall not
permit any item of Equipment to become a fixture to real estate or an accession
to other property, and the Equipment is now and shall at all times remain
personal property.
4.4 Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against such
Debtor or any of such Debtor's property to be paid in full, before delinquency
or before the expiration of any extension period, except to the extent that the
validity of such assessment or tax shall be the subject of a Permitted Protest.
Such Debtor shall make due and timely payment or deposit of all taxes,
assessments, or contributions required of it by law, and will execute and
deliver to Collateral Agent, on demand, appropriate certificates attesting to
the payment or deposit thereof. Such Debtor will make timely payment or deposit
of all tax payments and withholding taxes required of it by applicable laws, and
will, upon request, furnish Collateral Agent with proof satisfactory to
Collateral Agent indicating that such Debtor has made such payments or deposits,
other than assessments or taxes that are the subject of a Permitted Protest.
Such Debtor shall deliver satisfactory evidence of payment of applicable excise
taxes in each jurisdictions in which (a) such Debtor conducts business or is
required to pay any such excise tax, (b) where such Debtor's failure to pay any
such applicable excise tax would result in a Lien on the properties or assets of
such Debtor, or (c) where such Debtor's failure to pay any such applicable
excise tax would constitute a Material Adverse Effect.
4.5 Lender Group Expenses. Such Debtor shall immediately and without demand
reimburse Collateral Agent for all sums expended by Collateral Agent which
constitute Lender Group Expenses and such Debtor hereby authorizes and approves
all advances and payments by Collateral Agent for items constituting Lender
Group Expenses.
5. NEGATIVE COVENANTS.
Each Debtor covenants and agrees that until payment in full of the Secured
Obligations, it will not do any of the following without the prior written
consent of the Collateral Agent:
5.1 Change Name. Change such Debtor's name, FEIN, business structure, or
identity, or add any new fictitious name.
5.2 Nature of Business; Fiscal Year. (a) Make any change in the principal
nature of such Debtor's business, or (b) without the prior written consent of
Collateral Agent, change the date of its fiscal year.
5.3 Equipment with Bailees. Except as set forth on Schedule 6.01(ff) of the
Credit Agreement, the Equipment shall not at any time now or hereafter be stored
with a bailee, warehouseman, or similar party without Collateral Agent's prior
written consent.
6. EVENTS OF DEFAULT.
The occurrence of an Event of Default (as defined in the Credit Agreement)
shall constitute an "Event of Default" under this Agreement.
7. COLLATERAL AGENT'S RIGHTS AND REMEDIES.
7.1 Rights and Remedies. Upon the occurrence, and during the continuation,
of an Event of Default, the Required Lenders (at their election but without
notice of their election and without demand) may, except to the extent otherwise
expressly provided or required below, authorize and instruct Collateral Agent to
do any one or more of the following on behalf of the Lender Group (and
Collateral Agent, acting upon the instructions of the Required Lenders, shall do
the same on behalf of the Lender Group), all of which are authorized by each
Debtor:
(a) Proceed directly and at once, without notice, against such Debtor to
collect and recover the full amount or any portion of the Secured Obligations,
without first proceeding against any security or collateral for the Secured
Obligations.
(b) Without notice to such Debtor (such notice being expressly waived), and
without constituting a retention of any collateral in satisfaction of an
obligation (within the meaning of the Code), set off and apply to the Secured
Obligations any and all (i) balances and deposits of such Debtor held by the
Lender Group (including any amounts received in any blocked accounts or any
lockbox accounts), or (ii) indebtedness at any time owing to or for the credit
or the account of such Debtor held by the Lender Group;
(c) Hold or cause to be held, as cash collateral, any and all balances and
deposits of such Debtor held by the Lender Group, and any amounts received in
any blocked accounts or any lockbox accounts, to secure the full and final
repayment in cash of all of the Secured Obligations;
(d) Exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein and in the Credit Agreement and the other Loan
Documents or otherwise available to it, all the rights and remedies available to
it at law (including those of a secured party under the Code) or in equity.
(e) Settle or adjust disputes and claims directly with Account Debtors for
amounts and upon terms which Collateral Agent considers advisable, and in such
cases, Collateral Agent shall credit, or shall cause Administrative Agent to
credit, the Loan Account with only the net amounts received by Collateral Agent
in payment of such disputed Accounts after deducting all Lender Group Expenses
incurred or expended in connection therewith;
(f) [Intentionally omitted];
(g) Without notice or demand, make such payments and do such acts as
Collateral Agent considers necessary or reasonable to protect its security
interest in the Collateral. Each Debtor agrees to assemble the Collateral if
Collateral Agent so requires, and to make the Collateral available to Collateral
Agent as Collateral Agent may designate. Each Debtor authorizes Collateral Agent
to enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Collateral Agent's
determination appears to be prior or superior to its security interest and to
pay all expenses incurred in connection therewith. With respect to each Debtor's
owned premises, such Debtor hereby grants Collateral Agent a license to enter
into possession of such premises and to occupy the same, without charge, for up
to one hundred twenty (120) days in order to exercise any of Collateral Agent's
rights or remedies provided herein, at law, in equity, or otherwise;
(h) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Collateral Agent is hereby granted a license or other right to use,
without charge, such Debtor's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the Collateral,
in completing production of advertising for sale and selling any Collateral, and
such Debtor's rights under all licenses and all franchise agreements shall inure
to the Lender Group's benefit;
(i) Sell all or any part of the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including such Debtor's premises) as
Collateral Agent determines is commercially reasonable. It is not necessary that
the Collateral be present at any such sale. Collateral Agent on behalf of the
Lender Group shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in such Debtor, which right or equity is hereby waived or released to
the extent permitted by law;
(j) Give notice of any disposition of the Collateral as follows:
(i) Collateral Agent shall give each Debtor and each holder of a
security interest in the Collateral who has filed with Collateral Agent a
written request for notice, a notice in writing of the time and place of
public sale, or, if the sale is a private sale or some other disposition
other than a public sale is to be made of the Collateral, then the time on
or after which the private sale or other disposition is to be made;
(ii) The notice shall be personally delivered or mailed, postage
prepaid, to each Debtor as provided in Section 12.01 of the Credit
Agreement, at least 5 days before the date fixed for the sale, or at least
5 days before the date on or after which the private sale or other
disposition is to be made; no notice needs to be given prior to the
disposition of any portion of the Collateral that is perishable or
threatens to decline speedily in value or that is of a type customarily
sold on a recognized market. Notice to Persons other than such Debtor
claiming an interest in the Collateral, shall be sent to such addresses as
they have furnished in writing to Collateral Agent;
(iii) If the sale is to be a public sale, Collateral Agent also shall
give notice of the time and place by publishing a notice one time at least
5 days before the date of the sale in a newspaper of general circulation in
the county in which the sale is to be held;
(k) By an instrument in writing, appoint a receiver (which term shall
include a receiver and manager) of all or any part of the Collateral and may
remove or replace such receiver from time to time or may institute proceedings
in any court of competent jurisdiction for the appointment of such receiver;
(l) Require such Debtor to establish one or more lockbox or other
restricted accounts satisfactory to Collateral Agent for the collection of
Accounts of such Debtor, General Intangibles, or Negotiable Collateral;
(m) Notify customers or Account Debtors of such Debtor that such Debtor's
Accounts, General Intangibles, and Negotiable Collateral have been assigned to
Collateral Agent or that Collateral Agent has a security interest therein;
(n) Collect such Debtor's Accounts, General Intangibles, and Negotiable
Collateral directly, and charge the collection costs and expenses as Lender
Group Expenses; but, unless and until the Lender Group does so or gives such
Debtor other written instructions, such Debtor shall collect all of such
Debtor's Accounts, General Intangibles, and Negotiable Collateral for the Lender
Group, receive in trust all payments thereon as the Lender Group's trustee, and
immediately deliver said payments to Administrative Agent for the benefit of the
Lender Group in their original form as received from such Account Debtor; and
(o) Any deficiency which exists after disposition of the Collateral as
provided above will be paid immediately by such Debtor up to the maximum amount,
if any, of such Debtor's liability under the Credit Agreement or any other Loan
Document. Any excess will be returned to such Debtor, without interest and
subject to the rights of third parties, by Collateral Agent as provided in the
Loan Documents.
Except as required by law, Collateral Agent may take any or all of the foregoing
action without demand, presentment, protest, advertisement or notice of any kind
to or upon such Debtor or any other Person.
7.2 Remedies Cumulative. The rights and remedies of Collateral Agent and
the Lender Group under this Agreement, the Loan Documents, and all other
agreements shall be cumulative. Collateral Agent and the Lender Group shall have
all other rights and remedies not inconsistent herewith as provided under the
Code, by law, or in equity. No exercise by Collateral Agent or the Lender Group
of one right or remedy shall be deemed an election, and no waiver by Collateral
Agent or the Lender Group of any Event of Default on such Debtor's part shall be
deemed a continuing waiver. No delay by Collateral Agent or the Lender Group
shall constitute a waiver, election, or acquiescence by it.
8. TAXES AND EXPENSES REGARDING THE COLLATERAL. If any Debtor fails to pay
any monies (whether taxes, rents, assessments, insurance premiums, or otherwise)
due to third persons or entities, or fails to make any deposits or furnish any
required proof of payment or deposit, all as required under the terms of this
Agreement, then, to the extent that Collateral Agent determines that such
failure by such Debtor could have a material adverse effect on the Lender
Group's interests in the Collateral, in Collateral Agent's discretion and
without prior notice to such Debtor, Collateral Agent may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up, or
cause Administrative Agent to set up, such reserves in the Loan Account as
Collateral Agent deems necessary to protect the Lender Group from the exposure
created by such failure; or (c) obtain and maintain insurance policies insuring
such Debtor's ownership and use of the Collateral, and take any action with
respect to such policies as Collateral Agent deems prudent. Any amounts paid or
deposited by Collateral Agent shall constitute Lender Group Expenses, shall
immediately become additional Secured Obligations, shall bear interest at the
applicable rate described in the Credit Agreement, and shall be secured by the
Collateral. Any payments made by Collateral Agent shall not constitute an
agreement by Collateral Agent to make similar payments in the future or a waiver
by Collateral Agent of any Event of Default under this Agreement. Collateral
Agent need not inquire as to, or contest the validity of, any such expense, tax,
security interest, encumbrance, or lien and the receipt of the usual official
notice for the payment thereof shall be conclusive evidence that the same was
validly due and owing. Collateral Agent shall use its reasonable efforts to
provide notice to such Debtor of any action taken by it under this Section 8.
9. WAIVERS; INDEMNIFICATION.
9.1 Demand; Protest; etc. To the extent permitted by law, each Debtor
waives demand, protest, notice of protest, notice of default or dishonor, notice
of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Collateral Agent
on which such Debtor may in any way be liable.
9.2 Collateral Agent's Liability for Collateral. So long as Collateral
Agent complies with its obligations, if any, under the Code, Collateral Agent
shall not in any way or manner be liable or responsible for: (a) the safekeeping
of the Collateral; (b) any loss or damage thereto occurring or arising in any
manner or fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person. All risk of loss, damage, or destruction of the Collateral
shall be borne by Debtors.
9.3 Indemnification. Each Debtor agrees to defend, indemnify, save, and
hold harmless Collateral Agent and all of its respective officers, directors,
employees, attorneys, consultants and agents (collectively, the "Indemnitees")
from and against: (a) all obligations, demands, claims, and liabilities claimed
or asserted by any other Person, and (b) all losses (including attorneys fees
and disbursements) in any way suffered, incurred, or paid by Collateral Agent or
any of the Indemnities as a result of or in any way arising out of, following,
or consequential to transactions with such Debtor, whether under this Agreement,
the Credit Agreement, the other Loan Documents or otherwise, but excluding any
obligations, demands, claims, liabilities, and losses caused by Collateral
Agent's gross negligence or willful misconduct as determined by a final judgment
of a court of competent jurisdiction. This provision shall survive the
termination of this Agreement.
10. NOTICES.
All notices and other communications hereunder to Collateral Agent shall be
in writing and shall be mailed, sent or delivered in accordance with the Credit
Agreement and all notices and other communications hereunder to Debtors shall be
in writing and shall be mailed, sent or delivered in care of Borrower in
accordance with the Credit Agreement.
11. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN
THE STATE OF NEW YORK.
12. CONSENT TO JURISDICTION, SERVICE OF PROCESS AND VENUE.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE COUNTY OF NEW YORK OR OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH DEBTOR HEREBY IRREVOCABLY ACCEPTS
IN RESPECT OF SUCH DEBTOR'S PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. DEBTOR FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO DEBTOR IN ACCORDANCE WITH THE PROVISIONS OF SECTION
10, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. EACH
DEBTOR HEREBY IRREVOCABLY APPOINTS THE SECRETARY OF STATE OF THE STATE OF NEW
YORK AS SUCH DEBTOR'S AGENT FOR SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION
OR PROCEEDING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER GROUP TO
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST DEBTOR IN ANY OTHER JURISDICTION. EACH
DEBTOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH SUCH DEBTOR MAY NOW OR HEREAFTER HAVE TO THE
JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT ANY DEBTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH DEBTOR
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS SECURED OBLIGATIONS
UNDER THIS AGREEMENT.
13. WAIVER OF JURY TRIAL, ETC.
EACH DEBTOR AND THE LENDER GROUP HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS
AGREEMENT OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER
AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION
THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION
WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDINGS OR COUNTERCLAIM
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH DEBTOR CERTIFIES THAT
NO OFFICER, REPRESENTATIVE, AGENT OR ATTORNEY OF COLLATERAL AGENT HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT COLLATERAL AGENT ON BEHALF OF THE
LENDER GROUP WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM,
SEEK TO ENFORCE THE FOREGOING WAIVERS. EACH DEBTOR HEREBY ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR COLLATERAL AGENT'S ENTERING INTO THIS
AGREEMENT ON BEHALF OF THE LENDER GROUP.
14. DESTRUCTION OF DEBTOR's DOCUMENTS.
All written information, schedules, agings, reports or similar papers
delivered to Collateral Agent may be destroyed or otherwise disposed of by
Collateral Agent four (4) months after they are delivered to or received by
Collateral Agent, unless any Debtor requests, in writing, the return of said
documents, schedules or other papers and makes arrangements, at such Debtor's
expense, for their return.
15. AUTHORIZATION.
Without limiting any authorization to file financing statements issued
prior to the date hereof, each Debtor hereby authorizes the filing of any
financing statements or continuation statements, and amendments to financing
statements, in any jurisdictions and with any filing offices as Collateral Agent
may determine, in its sole discretion, are necessary or advisable to perfect the
security interest granted to Collateral Agent in connection herewith. Such
financing statements may describe the collateral in the same manner as described
in any security agreement or pledge agreement entered into by the parties in
connection herewith or may contain an indication or description of collateral
that describes such property in any other manner as Collateral Agent may
determine, in its sole discretion, is necessary, advisable or prudent to ensure
the perfection of the security interest in the collateral granted to Collateral
Agent in connection therewith, including, without limitation, describing such
property as "all assets" or "all personal property," and including, without
limitation, describing such property as "whether now owned or hereafter
acquired".
16. GENERAL PROVISIONS.
16.1 Effectiveness. This Agreement shall be binding and deemed effective
when executed by each Debtor and accepted and executed by Collateral Agent.
16.2 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of each of the parties;
provided, however, that no Debtor may assign this Agreement or any rights or
duties hereunder without prior written consent of the Lender Group and any
prohibited assignment shall be absolutely void. No consent to an assignment by
the Lender Group shall release any Debtor from its Secured Obligations. On
behalf of the Lender Group, Collateral Agent may assign this Agreement and its
rights and duties hereunder and no consent or approval by any Debtor is required
in connection with any such assignment.
16.3 Section Headings. Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Agreement.
16.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Collateral Agent, the
Lender Group, or Debtors, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to fairly accomplish the purposes and intentions of all parties hereto.
16.5 Severability of Provisions. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
16.6 Amendments in Writing. This Agreement can only be amended by a writing
signed by both Collateral Agent and each Debtor.
16.7 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of
this Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
16.8 Revival and Reinstatement of Obligations. If the incurrence or payment
of the Secured Obligations by any Debtor or the transfer by any Debtor to
Collateral Agent or the Lender Group of any property of such Debtor should for
any reason subsequently be declared to be void or voidable under any state or
federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Collateral Agent or the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that Collateral Agent or
the Lender Group is required or elects to repay or restore, and as to all
reasonable costs, expenses, and attorneys fees of Collateral Agent or the Lender
Group related thereto, the liability of Debtors automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
IMPERIAL PETROLEUM, INC.,
a Nevada corporation
By:
Name:
Title:
RIDGEPOINTE MINING COMPANY,
a Delaware corporation
By:
Name:
Title:
GLOBAL/IMPERIAL JOINT VENTURE INC., a
Nevada corporation
By:
Name:
Title:
PHOENIX METALS, INC.,
a Texas corporation
By:
Name:
Title:
HIGHBRIDGE/ZWIRN SPECIAL
OPPORTUNITIES FUND, L.P.,
a Delaware limited partnership,
as Collateral Agent
By: Highbridge/Zwirn Capital Management,LLC
By:
Name:
Title:
Schedule C-1
Commitments
================================================================================
Lender Revolving Credit Term Loan Total Commitment
Commitment Commitment
================================================================================
Highbridge/Zwirn Special $18,000,000 $0 $18,000,000
Opportunities Fund, L.P.
================================================================================
Bank of Oklahoma, N.A. $0 $650,000 $650,000
================================================================================
================================================================================
All Lenders $18,000,000 $650,000 $18,650,000
================================================================================
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement" dated as of January 15,
2004, between IMPERIAL PETROLEUM, INC., a Nevada corporation (the "Company"),
and Highbridge/Zwirn Special Opportunities Fund, L.P., a Delaware limited
partnership (the "Security Holder").
1. Introduction.
(a) Securities Purchase Agreement. The Company and the Security Holder have
today executed that certain Warrant (the "Warrant"), pursuant to which the
Company has agreed, among other things, to grant the Security Holder the right
to purchase from the Company up to _______ fully paid and non-assessable shares
of the Company's authorized but unissued common stock, par value $0.006 per
share (the "Common Stock"), at a price equal to $0.01 per share.
(b) Definition of Securities. The Common Stock is collectively herein to as
the "Securities."
(c) National Market Representation. The Company represents and warrants
that the Company's Common Stock is currently eligible for listing on the
National Association of Security Dealers' Over-the-Counter Bulletin Board
("OTC-BB") under the symbol "IPTM". Certain capitalized terms used in this
Agreement are defined in Section 3 hereof; references to sections shall be to
sections of this Agreement.
2. Registration under Securities Act, etc.
2.1 Registration Upon Demand.
(a) Registration of Registrable Securities. At any time after three (3)
months from the date of this Agreement and before the termination of this
Agreement, the holders of twenty percent (20%) of the HZ Registrable Securities
currently outstanding and/or exercisable may deliver to the Company a written
request that all or a portion of the HZ Registrable Securities be registered
pursuant to the terms of this Agreement (a "Registration Request"). Within sixty
(60) days after a Registration Request, the Company shall prepare and file a
registration statement to effect the registration, under the Securities Act of
such Registrable Securities that relate to the Securities; all to the extent
requisite to permit the public disposition of such Registrable Securities so to
be registered. The Company shall use its best efforts to cause the Registration
Statement which is the subject of this Section 2.1(a) (the "Registration
Statement") to be declared effective by the Commission upon the earlier to occur
of (i) [120 days] after the date of the Registration Request, (ii) [ninety (90)]
days following the filing of the Registration contemplated by this Section 2.1,
or (iii) ten (10) business days after receipt of a "no review" or similar letter
from the Commission (the "Required Effectiveness Date"). Nothing contained
herein shall be deemed to limit the number of Registrable Securities to be
registered by the Company hereunder. The Company shall not be required to file
more than two (2) Registration Statements pursuant to this Section 2.1.
(b) Registration Statement Form. Registrations under this Section 2.1 shall
be on Form S-1, Form S-2, Form S-3 or such other appropriate registration form
of the Commission as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified by
the Security Holder; provided, however, such intended method of disposition
shall not include an underwritten offering of the Registrable Securities.
(c) Expenses. The Company will pay all Registration Expenses in connection
with any registration required by this Section 2.1.
(d) Effective Registration Statement. A registration requested pursuant to
this Section 2.1 shall not be deemed to have been effected (i) unless a
registration statement with respect thereto has become effective within the time
period specified herein, provided that a registration which does not become
effective after the Company has filed a registration statement with respect
thereto solely by reason of the refusal to proceed of any holder of Registrable
Securities (other than a refusal to proceed based upon the advice of counsel in
the form of a letter signed by such counsel and provided to the Company relating
to a disclosure matter unrelated to such holder) shall be deemed to have been
effected by the Company unless the holders of the Registrable Securities shall
have elected to pay all Registration Expenses in connection with such
registration, (ii) if, after it has become effective, such registration becomes
subject to any stop order, injunction or other order or extraordinary
requirement of the Commission or other governmental agency or court for any
reason or (iii) if, after it has become effective, such registration ceases to
be effective for more than an aggregate of ninety (90) days.
(e) Priority in Demand Registrations. A registration requested pursuant to
this Section 2.1 shall not include in such Registration Request any securities
which are not Registrable Securities without the prior written consent of the
holders of at least a majority of the HZ Registrable Securities included in such
registration. If such Registration Request is (A) an underwritten offering and
the managing underwriters advise the Company in writing that in their opinion or
(B) such Registration Request is a resale shelf registration statement pursuant
to Rule 415 of the Securities Act and in the opinion of the holders of a
majority of the HZ Registrable Securities, the number of Registrable Securities
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Registrable Securities and other securities, if
any, which can be sold in an orderly manner in such offering within a price
range acceptable to the holders of a majority of the HZ Registrable Securities
initially requesting registration, the Company shall include in such
registration (1) first, the number of HZ Registrable Securities requested to be
included in such registration, pro rata among the holders of such Registrable
Securities on the basis of the number of shares owned by each such holder, (2)
second, the Other Registrable Securities requested to be included in such
registration, pro rata among the holders of such Other Registrable Securities
and (3) third, the other securities requested to be included in such
registration, pro rata among the holders of such other securities.
(f) Plan of Distribution. The Company hereby agrees that the Registration
Statement shall include a plan of distribution section reasonably acceptable to
the Security Holder and substantially in the form annexed hereto; provided,
however, such plan of distribution section shall be modified by the Company so
as to not provide for the disposition of the Registrable Securities on the basis
of an underwritten offering.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If at any time after the date
hereof the Company proposes to register any of its securities under the
Securities Act (other than by a registration in connection with an acquisition
in a manner which would not permit registration of Registrable Securities for
sale to the public, on Form S-8, or any successor form thereto on Form S-4 or
any successor form thereto and other than pursuant to Section 2.1), on an
underwritten basis (either best-efforts or firm-commitment), then, the Company
will each such time give prompt written notice to all holders of HZ Registrable
Securities ("HZ Holders") of its intention to do so and of such HZ Holders'
rights under this Section 2.2. Upon the written request of any such HZ Holder
made within ten (10) days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such HZ
Holder and the intended method of disposition thereof), the Company will,
subject to the terms of this Agreement effect the registration under the
Securities Act of the Registrable Securities, to the extent requisite to permit
the disposition (in accordance with the intended methods thereof as aforesaid)
of such Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the securities
which the Company proposes to register, provided that if, at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason either not to register
or to delay registration of such securities, the Company may, at its election,
give written notice of such determination to each HZ Holder and, thereupon, (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this Section
2.2 shall relieve the Company of its obligation to effect any registration upon
a Registration Request under Section 2.1, nor shall any such registration
hereunder be deemed to have been effected pursuant to Section 2.1. The Company
will pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 2.2. The right
provided the holders of the Registrable Securities pursuant to this Section
shall be exercisable at their sole discretion.
(b) Priority in Incidental Registrations. If the managing underwriter of
the underwritten offering contemplated by this Section 2.2 shall inform the
Company and holders of the Registrable Securities requesting such registration
by letter of its belief that the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering, then
the Company will include in such registration, to the extent of the number which
the Company is so advised can be sold in such offering, (i) first, the HZ
Registrable Securities requested to be included in such registration, (ii)
second, securities proposed by the Company to be sold for its own account, and
(iii) third, Registrable Securities (other than HZ Registrable Securities) and
securities of other selling security holders requested to be included in such
registration pro rata on the basis of the number of shares of such securities so
proposed to be sold and so requested to be included.
2.3 Registration Procedures. If and whenever the Company is required to
effect the registration of any Registrable Securities under the Securities Act
as provided in Section 2.1 and, as applicable, 2.2, the Company shall, as
expeditiously as possible:
(a) prepare and file with the Commission the Registration Statement to
effect such registration (including such audited financial statements as may be
required by the Securities Act or the rules and regulations promulgated
thereunder) and thereafter use its best efforts to cause such registration
statement to be declared effective by the Commission, as soon as practicable,
but in any event no later than the Required Effectiveness Date (with respect to
a registration pursuant to Section 2.1); provided, however, that before filing
such registration statement or any amendments thereto, the Company will furnish
to the counsel selected by the holders of Registrable Securities which are to be
included in such registration, copies of a such documents proposed to be filed;
(b) with respect to any Registration Statement pursuant to Section 2.1,
prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to comply with the
provisions of the Securities Act in order to permit the disposition of all
Registrable Securities covered by such registration statement or such time as
all of the Securities which are the subject of such registration statement cease
to be Registrable Securities (such period, the "Registration Maintenance
Period");
(c) furnish to each holder of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act, and
such other documents, as such holder and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities owned by such holder;
(d) use its reasonable efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement under
such other securities laws or blue sky laws as any holder thereof shall
reasonably request, to keep such registrations or qualifications in effect for
so long as such registration statement remains in effect, and take any other
action which may be reasonably necessary to enable such holder to consummate the
disposition in such jurisdictions of the securities owned by such holder, except
that the Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this subdivision (d) be obligated to be so qualified
or to consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause all Registrable Securities covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the holder or
holders thereof to consummate the disposition of such Registrable Securities;
(f) in connection with an underwritten offering, furnish to each holder of
Registrable Securities a signed counterpart, addressed to such holder, and the
underwriters of:
(i) an opinion of counsel for the Company, dated the effective date of
such registration statement (or, if such registration includes an
underwritten public offering, an opinion dated the date of the closing
under the underwriting agreement), reasonably satisfactory in form and
substance to such holder) including that the prospectus and any prospectus
supplement forming a part of the Registration Statement does not contain an
untrue statement of a material fact or omits 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
(ii) a "comfort" letter (or, in the case of any such Person which does
not satisfy the conditions for receipt of a "comfort" letter specified in
Statement on Auditing Standards No. 72, an "agreed upon procedures"
letter), dated the effective date of such registration statement (or, if
such registration includes an underwritten public offering, a "comfort"
letter dated the date of the closing under the underwriting agreement),
signed by the independent public accountants who have certified the
Company's financial statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in accountants' letters
delivered to the underwriters in underwritten public offerings of
securities (with, in the case of an "agreed upon procedures" letter, such
modifications or deletions as may be required under Statement on Auditing
Standards No. 35) and, in the case of the accountants' letter, such other
financial matters, and, in the case of the legal opinion, such other legal
matters, as such holder (or the underwriters) may reasonably request;
(g) notify holders of the Registrable Securities and their respective
counsel promptly and confirm such advice in writing promptly after the Company
has knowledge thereof:
(i) when the Registration Statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the Registration
Statement has been filed, and, with respect to the Registration Statement
or any post-effective amendment thereto, when the same has become
effective;
(ii) of any request by the Commission for amendments or supplements to
the Registration Statement or the prospectus or for additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings by any Person for that purpose; and
(iv) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose;
(h) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in such
registration statement as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and at the request of any such holder promptly
prepare and furnish to such holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(i) use its best efforts to obtain the withdrawal of any order suspending
the effectiveness of the Registration Statement at the earliest possible moment;
(j) otherwise use its best efforts to comply with all applicable rules and
regulations of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period of at
least twelve months, but not more than eighteen months, beginning with the first
full calendar month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(k) enter into such agreements and take such other actions as the Security
Holder shall reasonably request in writing in order to expedite or facilitate
the disposition of such Registrable Securities; and
(l) use its best efforts to list all Registrable Securities covered by such
registration statement on any securities exchange on which any of the
Registrable Securities are then listed.
The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such holder and the distribution of such securities as the Company may
from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to Section
2.1, or amendment thereto or any prospectus or any supplement thereto (including
such documents incorporated by reference and proposed to be filed after the
initial filing of the Registration Statement) to which the Security Holder shall
reasonably object, provided that the Company may file such document in a form
required by law or upon the advice of its counsel.
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby.
The Security Holder agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in subdivision (h)
of this Section 2.3, the Security Holder will forthwith discontinue its
disposition of Registrable Securities pursuant to the Registration Statement
relating to such Registrable Securities until its receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (h) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in its
possession of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice.
2.4 Underwritten Offerings.
(a) Incidental Underwritten Offerings. If the Company at any time proposes
to register any of its securities under the Securities Act as contemplated by
Section 2.2 and such securities are to be distributed by or through one or more
underwriters, the Company will, if requested by the Security Holder as provided
in Section 2.2 and subject to the provisions of Section 2.2(a), use its
reasonable efforts to arrange for such underwriters to include all the
Registrable Securities to be offered and sold by such holder among the
securities to be distributed by such underwriters.
(b) Holdback Agreements. Subject to such other reasonable requirements as
may be imposed by the underwriter as a condition of inclusion of a holder's
Registrable Securities in the registration statement, each such holder agrees by
acquisition of Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any option for the
purchase of, effect any public sale or distribution of or otherwise dispose of,
except as part of such underwritten registration, any equity securities of the
Company, during such reasonable period of time requested by the underwriter;
provided however, such period shall not exceed the 120 day period commencing 30
days prior to the commencement of such underwritten offering and ending 90 days
following the completion of such underwritten offering.
(c) Participation in Underwritten Offerings. No holder of Registrable
Securities may participate in any underwritten offering under Section 2.2 unless
such holder of Registrable Securities (i) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved,
subject to the terms and conditions hereof, by the holders of a majority of
Registrable Securities to be included in such underwritten offering and (ii)
completes and executes all questionnaires, indemnities, underwriting agreements
and other documents (other than powers of attorney) required under the terms of
such underwriting arrangements. Notwithstanding the foregoing, no underwriting
agreement (or other agreement in connection with such offering) shall require
any holder of Registrable Securities to make any representations or warranties
to or agreements with the Company or the underwriters other than representations
and warranties contained in a writing furnished by such holder expressly for use
in the related registration statement or representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation required
by law.
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. In the event of any registration of any
securities of the Company under the Securities Act, the Company will, and hereby
does agree to, indemnify and hold harmless the holder of any Registrable
Securities covered by such registration statement its directors and officers,
each other Person who participates as an underwriter in the offering or sale of
such securities and each other Person, if any, who controls such holder or any
such underwriter within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which such holder or any
such director or officer or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and the Company will
reimburse such holder and each such director, officer, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding, provided that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
holder or underwriter stating that it is for use in the preparation thereof and,
provided further that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or to any other Person, if any, who controls such underwriter within the meaning
of the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such Person's failure to send or give a copy of the final prospectus, as
the same may be then supplemented or amended, within the time required by the
Securities Act to the Person asserting the existence of an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if
such statement or omission was corrected in such final prospectus or an
amendment or supplement thereto. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of such holder or
any such director, officer, underwriter or controlling person and shall survive
the transfer of such securities by such holder.
(b) Indemnification by the Holders. The Company may require as a condition
to including any Registrable Securities in any registration statement filed
pursuant to this Agreement, that the Company shall have received an undertaking
satisfactory to it from the holder of such Registrable Securities, to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 2.6) the Company, each director of the Company,
each officer of the Company and each other Person, if any, who controls the
Company within the meaning of the Securities Act, with respect to any statement
or alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company through an
instrument duly executed by such holder specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Any such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer or controlling person
and shall survive the transfer of such securities by such holder. The obligation
to indemnify shall be individual, not joint and several, for each holder and
shall be limited to the net amount of proceeds received by such holder from the
sale of Registrable Securities pursuant to such Registration Statement.
(c) Notices of Claims etc. Promptly after receipt by an indemnified party
of notice of the commencement of any action or proceeding involving a claim
referred to in the preceding subdivisions of this Section 2.6, such indemnified
party will, if a claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of such action,
provided that the failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 2.6, except to the extent that the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to sue, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that specified in the
preceding subdivisions of this Section 2.6 (with appropriate modifications)
shall be given by the Company and each holder of Registrable Securities (but
only if and to the extent required pursuant to the terms of 2.6(b)) with respect
to any required registration or other qualification of securities under any
Federal or state law or regulation of any governmental authority, other than the
Securities Act.
(e) Indemnification Payments. The indemnification required by this Section
2.6 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in the preceding
subdivisions of this Section 2.6 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to therein,
then each indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such expense, loss, claim, damage or liability (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company on
the one hand and the holder or underwriter, as the case may be, on the other
from the distribution of the Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other in
connection with the statements or omissions which resulted in such expense,
loss, damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the holder or underwriter, as the case may be, on the other in connection
with the distribution of the Registrable Securities shall be deemed to be in the
same proportion as the total net proceeds received by the Company from the
initial sale of the Registrable Securities by the Company to the purchasers bear
to the total net proceeds received by all selling holders participating in such
offering or the underwriting discounts and commissions received by the
underwriter, as the case may be. The relative fault of the Company on the one
hand and of the holder or underwriter, as the case may be, on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the underwriter and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission, provided that the foregoing
contribution agreement shall not inure to the benefit of any indemnified party
if indemnification would be unavailable to such indemnified party by reason of
the provisions contained in the first sentence of subdivision (a) of this
Section 2.6, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (b) of this Section 2.6 had been
available under the circumstances.
The Company and the holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (f) were
determined by pro rata allocation (even if the holders and any underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and subdivision (c) of this
Section 2.6, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any amount
in excess of the amount by which (i) in the case of any such holder, the net
proceeds received by such holder from the sale of Registrable Securities or (ii)
in the case of an underwriter, the total price at which the Registrable
Securities purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such holder or
underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
3. Definitions. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
"Agreement": As defined in Section 1.
"Commission": The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
"Common Stock": As defined in Section 1.
"Company": As defined in the introductory paragraph of this Agreement.
"Exchange Act": The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.
"HZ Holder": As defined in Section 2.2(a).
"HZ Registrable Securities": (i) Any capital stock of the Company owned or
acquired by the Security Holder and (ii) any Common Stock issued or issuable
with respect to or exchanged for the securities referred to in clause (i) above
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"OTC-BB": As defined in Section 1.
"Other Registrable Securities": Any Registrable Securities that are not HZ
Registrable Securities.
"Person": A corporation, association, partnership, organization, business,
individual, governmental or political subdivision thereof or a governmental
agency.
"Registrable Securities": The HZ Registrable Securities and any Securities
issued or issuable with respect to such Securities by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. Once issued such securities shall
cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been distributed in accordance
with such registration statement, (b) they shall be have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force, (d) they shall have ceased to be outstanding, (e) on the expiration of
the applicable Registration Maintenance Period or (f) any and all legends
restricting transfer thereof have been removed in accordance with the provisions
of Rule 144(k) (or any successor provision) under the Securities Act. The
Securities shall constitute Registrable Securities while owned by (a) the
Purchaser or any affiliate or (b) a transferee of at least 100,000 of the
Initial Shares.
"Registration Expenses": All expenses incident to the Company's performance
of or compliance with this Agreement, including, without limitation, all
registration, filing and NASD fees; all stock exchange and any other listing
fees; all fees and expenses of complying with securities or blue sky laws; all
word processing, duplicating and printing expenses, messenger and delivery
expenses; the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits or
"cold comfort " letters required by or incident to such performance and
compliance; in connection with an underwritten offering, the reasonable fees and
disbursements of not more than one law firm (not to exceed $25,000) retained by
the holder or holders of more than 50% of the Registrable Securities; premiums
and other costs of policies of insurance of the Company against liabilities
arising out of the public offering of the Registrable Securities being
registered and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any; provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Registration Request": As defined in Section 2.1.
"Required' Effectiveness Date": As defined in Section 2.1.
"Securities": As defined in Section 1(b).
"Securities Act": The Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.
"Security Holder": As defined in the Introductory paragraph to this
Agreement.
"Warrant": As defined in Section 1.
4. Rule 144. The Company shall timely file the reports required to be filed
by it under the Securities Act and the Exchange Act (including but not limited
to the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, will, upon the request of any
holder of Registrable Securities, make publicly available other information) and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company will deliver to such holder
a written statement as to whether it has complied with the requirements of this
Section 4.
5. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51% or more of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent is sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Warrant or at such other address as such party shall have furnished to the
Company in writing, or (b) in the case of any other holder of Registrable
Securities, at the address that such holder shall have furnished to the Company
in writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of Such Registrable
Securities who has furnished an address to the Company, or (c) in the case of
the Company, at the address set forth on the signature page hereto, to the
attention of its Chief Executive Officer, or at such other address, or to the
attention of such other officer, as the Company shall have furnished to each
holder of Registrable Securities at the time outstanding. Each such notice,
request or other communication shall be effective (i) if given by mail, 72 hours
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (ii) if given by any other means (including,
without limitation, by fax or air courier) when delivered at the address
specified above, provided that any such notice, request or communication shall
not be effective until received.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
HZ Registrable Securities. Each of the holders of the HZ Registrable Securities
agrees, by accepting any portion of the HZ Registrable Securities after the date
hereof, to the provisions of this Agreement including, without limitation,
appointment of a representative to act on behalf of such HZ Holder pursuant to
the terms hereof which such actions shall be made in the good faith discretion
of the HZ Holder's representative and be binding on all persons for all
purposes.
9. Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
10. No Inconsistent Agreements. The Company shall not hereafter enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement or which grants any registration rights to any holder of the Company's
securities that are superior to the rights of the holders of Registrable
Securities without the prior written consent of the holders of a majority of the
Registrable Securities.
11. Remedies. Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that, in addition to any other rights and
remedies existing in its favor, any party shall be entitled to specific
performance and/or other injunctive relief from any court of law or equity of
competent jurisdiction (without posting any bond or other security) in order to
enforce or prevent violation of the provisions of this Agreement.
12. Successors and Assigns. All covenants and agreements in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not. In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit of purchasers
or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
13. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
14. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts (including by manual telecopied signature pages), any one of
which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same Agreement.
15. Governing Law. All issues and questions concerning the construction,
validity, interpretation and enforcement of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of New York, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
IN WITNESS WHEREOF, the parties have executed this Registration Agreement
as of the date first written above.
IMPERIAL PETROLEUM, INC.
By _________________________________
Name _______________________________
Its __________________________________
HIGHBRIDGE/ZWIRN SPECIAL
OPPORTUNITIES FUND, L.P.
By: Highbridge/Zwirn Capital Management, LLC
By __________________________________
Name _______________________________
Its __________________________________
October 20, 2003
Jeffrey T. Wilson
President
Imperial Petroleum Inc.
100 NW Second Street
Evansville, IN 47708
Re: Indicative Terms for Financing
Dear Mr. Wilson:
In accordance with our recent discussions, Highbridge/Zwirn Special
Opportunities Fund, L.P. and/or its Affiliates and Participants ("Lender") is
pleased to present the following financing proposal for Imperial Petroleum Inc.
("Borrower"). This letter is subject to the conditions listed herein and should
not be relied upon by any third party. The proposed financing would be as
follows however all terms are subject to confirmatory due diligence:
1. Maximum Credit Line: Revolving credit facility (the "Facility") of up to
$18,000,000 (the "Maximum Revolver Commitment") with borrowing mechanics to
be mutually agreed upon and with availability limited by the borrowing base
formula described below.
2. Collateral: As collateral for all of Borrower's obligations owing to
Lender, Lender shall have a first priority security interest in all of the
properties and assets of Borrower and its subsidiaries including the assets
(the "Acquired Assets") of Warrior Resources, Hillside Oil & Gas and
Kentucky Well & Lease. The collateral includes, but is not limited to, all
of Borrower's and its subsidiaries' present and future accounts receivable,
inventory, oil and gas properties and assets (including leaseholds),
pipelines and transportation assets, furniture, fixtures, and equipment,
and any other tangible and intangible assets (the "Collateral").
3. Purpose: The purpose of the financing is to provide funds (a) for Borrower
to complete the acquisition of all of the Acquired Assets, and (b) for
working capital and the payment of fees and expenses.
4. Interest Rates: All advances under the Facility shall bear interest
at a rate per annum equal to the Reference Rate (as defined below) plus
8.00% for the life of the loan, payable monthly in arrears. As used herein,
"Reference Rate" means the rate of interest publicly announced from time to
time by JPMorgan Chase Bank in New York, New York as its reference rate,
base rate or prime rate. After the occurrence and during the continuance of
an event of default, Lender would be entitled to increase the interest rate
to a rate that is 4.0 percentage points higher than the per annum rate
otherwise applicable. The rate of interest would be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and would
be payable monthly in arrears. Lender would require a blocked-on-demand
collection account that would be subject to a deposit account control among
Borrower, Lender and the depositary bank. Lender would be given the right
to instruct the bank as to the disposition of funds in such deposit account
upon the occurrence of certain events to be mutually agreed upon by
Borrower and Lender.
5. Fees:
a. Closing Fee: A closing fee of 3.0% times the amount of the Maximum
Revolver Commitment would be earned and payable upon the closing of
the transaction.
b. Anniversary Fee: An anniversary fee of 2.0% times the amount of the
Maximum Revolver Commitment would accrue and be payable on the one,
two and three year anniversary of the effective date. If the Facility
is repaid in full prior to an anniversary date, a fee would be due and
payable in full on such date of prepayment and such fee would be in an
amount equal to (a) 2.0% times the Maximum Revolver Commitment, times
(b) a fraction, the numerator of which is the number of days since the
Closing Date or the last anniversary date, as applicable and the
denominator of which is 360.
c. Administrative Fee: An administrative fee of $25,000 would be payable
quarterly, in advance.
6. Warrants: Warrants in an amount equal to 4% (on a fully diluted basis) of
the Company struck at $0.01. The documentation would include customary
anti-dilution, registration rights, and other equity protections.
7. Borrowing Base: Advances under the Facility would be limited by a borrowing
base ("Borrowing Base") equal to the least of:
(a) the Maximum Revolver Commitment,
(b) an amount equal to the sum of (A) 60% of the value of Borrower's
domestic proved developed producing reserves (such term to be defined
in the definitive loan documentation and shall be based upon input
from Lender's engineering firm), plus (B) 40% of the value of
Borrower's domestic proved developed non-producing reserves (such term
to be defined in the definitive loan documentation and shall be based
upon input from Lender's engineering firm), plus (C) 10% of the value
of Borrower's domestic proved undeveloped reserves (such term to be
defined in the definitive loan documentation and shall be based upon
input from Lender's engineering firm) ("PUD Reserves"); provided,
however, the aggregate amount of advances made against PUD Reserves
shall not exceed the lesser of (i) 10% of the combined availability
generated under clauses (A), (B) and (C) above, and (ii) $1,800,000.
The outstanding balance of the Facility, together with all accrued and
unpaid interest would be due and payable in full on the Maturity Date (as
defined below).
8. Loan Maturity and Prepayment: The Facility would mature thirty-six months
after the effective date (the "Maturity Date"). Termination of the Facility
by Borrower prior to the Maturity Date would not be subject to an early
termination fee.
9. Covenants: There would be affirmative and negative covenants, as reasonably
determined by Lender, consistent with a loan facility of this nature,
including financial covenants such as interest coverage ratio, debt
coverage ratio, minimum EBITDDA, minimum liquidity and current ratio. The
actual financial covenants required by Lender will be determined based on
the results of Lender's due diligence. The financial covenant compliance
levels would be set at mutually agreed upon levels based on projections to
be provided by Borrower. Any exceptions to the affirmative and negative
covenants would be mutually agreed upon by Borrower and Lender. Without
limiting the generality of the foregoing, there would be the following
reporting covenants:
a) As of the end of each six-month period commencing 12/31/03,
Borrower would be required to provide a reserve report, prepared by an
independent third party, using standard engineering practices and
using prices based on the NYMEX Strip Price (as defined on Exhibit A
hereto) with flat prices for the period after 24 months from the date
of determination discounted to a present value using a ten percent
(10%) discount factor ("Reserve Report"). Borrower would be required
to deliver the Reserve Report to Lender within 50 days after 12/31 of
each year and within 30 days after 6/30 of each year. Lender would
also have the right to require up to 2 additional Reserve Reports per
year.
b) On a monthly basis, Borrower would be required to provide an update
of the borrowing base using the NYMEX Strip Price gas as of the end of
the month with flat prices thereafter. Borrower would be required to
deliver such updates to Lender within 30 days after the end of the
applicable month.
10. Conditions Precedent: The following are some, but not all, of the
conditions precedent to any loan closing:
a. Each of Borrower and its subsidiaries shall be in good standing in its
state of organization and qualified to do business and in good
standing in other states where it has collateral of any material
value.
b. Loan origination costs including, but not limited to, reasonable audit
fees, attorneys fees, search fees, title fees, documentation and
filing fees shall be paid by Borrower. In addition, ongoing audit fees
(with respect to audits conducted by Lender after the closing), fees
and expenses incurred with respect to the work performed after the
closing by an engineering firm reasonably satisfactory to Lender
(including without limitation fees and expenses incurred in connection
with the preparation of Reserve Reports), and all other out of pocket
expenses incurred by Lender in connection with the Facility after the
closing shall be paid by Borrower.
c. Lender's receipt of final approval from its senior credit committee
and completion of its due diligence, which results shall be reasonably
satisfactory to Lender. Lender's due diligence would include, among
other things, a review of and satisfaction with (1) the Collateral as
updated to the date that is not more than 3 business days prior to the
closing; (2) Borrower's books and records as updated to most current
month ended available prior to closing; (3) a background check on
Borrower's senior management; (4) a review of interim financial
statements through June 30, 2003 of Borrower including detailed
accounts payable data; and (5) balance sheet projections in form and
substance reasonably satisfactory to Lender.
d. With respect to the proposed financing and the Collateral outlined in
this letter, Borrower shall have (i) received duly executed and
delivered acquisition agreements relative to the Acquired Assets
containing terms and conditions satisfactory to Lender, and (ii)
executed and/or delivered such documents, instruments, security
agreements, mortgages, insurance, financing statements, guarantees,
verifications, tax lien and litigation searches, good standing
certificates, opinions of counsel and such other reasonable
documentation required by and reasonably acceptable to Lender (after
consultation with its counsel).
e. Lender shall have received evidence that the Borrower shall have
entered into commodities hedging agreements with respect to its
hydrocarbon production with one or more counterparties, each of which
are rated at least BBB by Standard & Poor's and Baa2 by Moody's, with
the aggregate notional volumes of hydrocarbons covered by such
commodities hedging agreements at levels which are satisfactory to
Lender;
f. Lender shall have reviewed the accounts payable being assumed by
Borrower in connection with the acquisition of the Acquired Assets,
the results of which are acceptable to Lender;
g. Borrower shall have availability under the Facility and unrestricted
cash and cash equivalents in an aggregate amount to be determined by
Lender prior to the closing date; and
h. The indebtedness owing to the Bank of Oklahoma shall have been
purchased by Lender and its participants, the liens securing such
indebtedness shall have been assigned to Lender, and the Bank of
Oklahoma shall have purchased a last-out participation in the Facility
in the amount of $650,000, which shall be on terms and conditions
acceptable to Lender.
11. Closing Date: If the transaction contemplated by this letter of intent is
not consummated by November 30, 2003, then the terms and conditions set
forth herein shall thereafter expire, without further notice or act of any
kind by Lender or any other party.
12. Expenses; Deposit: In connection with Borrower's request for financing,
Borrower understands and acknowledges that it will be necessary for Lender
to make certain financial, legal, and collateral investigations and
determinations. Recognizing that in connection herewith the Lender is
incurring substantial costs and expenses (including, without limitation,
fees and disbursements of the Lender's counsel, filing and recording fees,
costs and expenses of due diligence, transportation, duplication,
messenger, appraisal, audit, and consultant costs and expenses) (the
"Expenses"), you hereby agree to pay, or reimburse the Lender, on demand
for all such Expenses, regardless of whether any of the transactions
contemplated hereby are consummated and regardless of whether they are
incurred before or after the date of this letter. You also agree to pay all
Expenses of the Lender (including, without limitation, fees and
disbursements of counsel) incurred in connection with the enforcement of
any of its rights and remedies hereunder.
In order for Lender to continue with this process, it will require a
deposit (in addition to any deposit previously sent to Lender) in the
amount of $121,500 (the "Deposit"), of which Deposit (a) $10,000 shall be
due and payable to Lender in immediately available funds on or before
October 21, 2003, (b) $65,000 shall be due and payable to Lender in
immediately available funds on or before November 3, 2003, and (c) the
unpaid balance of such Deposit shall be due and payable to Lender on or
before the earlier to occur of the closing date of the Facility or December
3, 2003. The Deposit will be held by Lender and applied to Lender's
Expenses. Lender will provide a detailed breakdown of the Expenses at the
request of Borrower.
Any balance of the Deposit will be returned to Borrower after deducting the
Expenses. The Deposit will not be segregated and may be commingled with
other funds and Borrower will not be entitled to receive interest on the
Deposit.
13. Governing Law: The definitive loan documentation would be governed by, and
construed and enforced in accordance with, the internal laws of the State
of New York.
If the foregoing correctly sets forth Borrower's understanding of the
financing arrangements which have been previously discussed, please sign
below and return this letter with the Deposit.
Unless accepted by Borrower before noon EST on October 22, 2003 this letter
of interest shall expire. Please retain a copy of this letter, which will
serve as a receipt for the Deposit.
THIS LETTER OF INTENT IS NOT A COMMITMENT, BUT RATHER AN OUTLINE OF A PROPOSED
FINANCING TRANSACTION. ACCORDINGLY, IT SHOULD NOT BE RELIED ON BY THIRD PARTIES.
Sincerely,
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES FUND, L.P.
- -------------------------------
By: Daniel B. Zwirn
Title: Managing Principal
Acknowledged and accepted this _____ day of October, 2003.
IMPERIAL PETROLEUM INC.
By: ____________________________
Title: ___________________________
EXHIBIT A
"NYMEX Strip Price" means, as of any date of determination, the average of
the 24 succeeding monthly futures contract prices, commencing with the month
during which the determination date occurs, for each of the appropriate crude
oil and natural gas categories included in the most recent reserve report
provided by the Borrower to the Lender, as quoted on the NYMEX; provided, that
if the NYMEX no longer provides futures contract price quotes or has ceased to
operate, the future contract prices used shall be the comparable futures
contract prices quoted on such other nationally recognized commodities exchange
as the Lender shall designate.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(THE "ACT") OR APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD, OFFERED FOR
SALE, ASSIGNED, TRANSFERRED OR DISPOSED OF UNLESS REGISTERED PURSUANT TO THE
PROVISIONS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION AND THE PROVISION OF THIS NOTE ARE
COMPLIED WITH.
PROMISSORY NOTE
$65,000.00 January 15, 2004
FOR VALUE RECEIVED, the undersigned, Imperial Petroleum, Inc., a Nevada
corporation with its address at 11600 German Pines, Evansville, Indiana 47725
("Borrower"), HEREBY PROMISES TO PAY to the order of Four Sevens Partners Ltd.
at 115 N. Henderson St., FT. Worth, TX 76102 ("Lender"), or at such other place
as may be designated in writing by Lender, or its successors or assigns, in
lawful money of the United States of America and in immediately available funds,
the sum of__Sixty Five Thousand Dollars ($_65,000.00) together with accrued
interest thereon from the date hereof until the date paid at the rate of 8.5 %
per annum, on or before the sooner to occur of July 15, 2004.
Payment of principal, interest and any other amounts due hereunder shall be
made in lawful money of the United State of America. All amounts paid hereunder
shall be credited first to the payment of accrued and unpaid interest, and then
to the payment of outstanding principal. Principal and interest shall be due and
payable in six monthly installments on or before the last day of the month
beginning with the first payment due on or before January 31, 2004.
This Note is secured by 186,000 shares of the restricted common stock of
Imperial Petroleum, Inc. to be held in escrow by Roger D. Brown, attorney,
("Escrow Agent") against payment of the Note. Release of the shares shall be
made promptly by the Escrow Agent upon written request by Borrower with proof of
payment attached in the form of cancelled checks or wire transfer verifications
in the name of the Lender. In the Event of Default as described herein, Lender
hereby expressly agrees to accept the shares of common stock pledged herein as
full and complete payment for any remaining amounts due under the Note,
including accrued interest thereon.
This Note may be prepaid by Borrower in whole or in part at any time
without premium or penalty.
Any one or more of the following events shall be an "Event of Default":
(a) any payment of principal or interest is not made within ten (10)
business days after notice to the Borrower that same was not paid when
due;
(b) Borrower becomes insolvent or unable to pay its debts generally as
they become due, or makes an assignment for the benefit of creditors;
or
(c) relief is sought by or against Borrower by legal action pursuant to
any insolvency or bankruptcy law.
In the case any one or more Events of Default hereunder shall occur and be
continuing, Lender may proceed to protect and enforce Lender's rights either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant, condition, or agreement contained in this Note, or
in aid of the exercise of any power granted in this Note to enforce any other
legal or equitable right of Lender. After an Event of Default, Borrower shall
pay to Lender immediately upon written demand therefor any amounts reasonably
expended or incurred by Lender in the collection of any amount due hereunder,
including, without limitation, attorney's fees and costs, whether or not any
legal action is instituted in connection therewith.
This Note shall be binding upon Borrower, its successors and assigns, and
shall inure to the benefit of and be enforceable by Lender, his heirs and
personal representatives.
This Note may not be changed, waived, discharged or terminated except by an
instrument in writing signed by Lender. A waiver of any provision of this Note
shall be interpreted narrowly and only for the specific contractual provision
and the specific time period set forth therein. No failure by Lender to enforce
any right or exercise any remedy hereunder shall waive Lender's right to enforce
such right or exercise such remedy at a later time.
Borrower hereby waives presentment, demand, protest, notice of dishonor and
all other notices and demands, except as expressly set forth herein.
This Note shall be construed and governed in all respects by the laws of
the State of Nevada applicable to contracts made and to be performed therein.
Any notice or communication required or sent in connection with this Note
shall be sent by first class mail, postage prepaid, addressed as set forth
above. Any such address may be changed by sending notice of such change at least
ten (10) days prior to the effective date of the change.
IN WITNESS WHEREOF, Borrower has executed this Note on the day and year
first above written.
IMPERIAL PETROLEUM, INC.
By:_____________________________
Jeffrey T. Wilson, President
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(THE "ACT") OR APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD, OFFERED FOR
SALE, ASSIGNED, TRANSFERRED OR DISPOSED OF UNLESS REGISTERED PURSUANT TO THE
PROVISIONS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION AND THE PROVISION OF THIS NOTE ARE
COMPLIED WITH.
PROMISSORY NOTE
$292,000.00 January 15, 2004
FOR VALUE RECEIVED, the undersigned, Imperial Petroleum, Inc., a Nevada
corporation with its address at 11600 German Pines, Evansville, Indiana 47725
("Borrower"), HEREBY PROMISES TO PAY to the order of Hillside Oil & Gas LLC at
PO Box 8911 , Midland, TX 79708 ("Lender"), or at such other place as may be
designated in writing by Lender, or its successors or assigns, in lawful money
of the United States of America and in immediately available funds, the sum
of__Two Hundred Ninety Two Thousand Dollars ($_292,000.00) together with accrued
interest thereon from the date hereof until the date paid at the rate of 8.5 %
per annum, on or before the sooner to occur of June 15, 2005.
Payment of principal, interest and any other amounts due hereunder shall be
made in lawful money of the United State of America. All amounts paid hereunder
shall be credited first to the payment of accrued and unpaid interest, and then
to the payment of outstanding principal. Principal and interest shall be due and
payable in eighteen monthly installments on or before the last day of the month
beginning with the first payment due on or before February 28, 2005.
This Note is secured by 1,000,000 shares of the restricted common stock of
Imperial Petroleum, Inc. to be held in escrow by Hillside Oil & Gas LLC against
payment of the Note. Release of the shares shall be made promptly by the
Hillside upon written request by Borrower with proof of payment attached in the
form of cancelled checks or wire transfer verifications in the name of the
Lender. In the Event of Default as described herein, Lender hereby expressly
agrees to accept the shares of common stock pledged herein as full and complete
payment for any remaining amounts due under the Note, including accrued interest
thereon.
This Note may be prepaid by Borrower in whole or in part at any time
without premium or penalty.
Any one or more of the following events shall be an "Event of Default":
(a) any payment of principal or interest is not made within ten (10)
business days after notice to the Borrower that same was not paid when
due;
(b) Borrower becomes insolvent or unable to pay its debts generally as
they become due, or makes an assignment for the benefit of creditors;
or
(c) relief is sought by or against Borrower by legal action pursuant to
any insolvency or bankruptcy law.
In the case any one or more Events of Default hereunder shall occur and be
continuing, Lender may proceed to protect and enforce Lender's rights either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant, condition, or agreement contained in this Note, or
in aid of the exercise of any power granted in this Note to enforce any other
legal or equitable right of Lender. After an Event of Default, Borrower shall
pay to Lender immediately upon written demand therefor any amounts reasonably
expended or incurred by Lender in the collection of any amount due hereunder,
including, without limitation, attorney's fees and costs, whether or not any
legal action is instituted in connection therewith.
This Note shall be binding upon Borrower, its successors and assigns, and
shall inure to the benefit of and be enforceable by Lender, his heirs and
personal representatives.
This Note may not be changed, waived, discharged or terminated except by an
instrument in writing signed by Lender. A waiver of any provision of this Note
shall be interpreted narrowly and only for the specific contractual provision
and the specific time period set forth therein. No failure by Lender to enforce
any right or exercise any remedy hereunder shall waive Lender's right to enforce
such right or exercise such remedy at a later time.
Borrower hereby waives presentment, demand, protest, notice of dishonor and
all other notices and demands, except as expressly set forth herein.
This Note shall be construed and governed in all respects by the laws of
the State of Nevada applicable to contracts made and to be performed therein.
Any notice or communication required or sent in connection with this Note
shall be sent by first class mail, postage prepaid, addressed as set forth
above. Any such address may be changed by sending notice of such change at least
ten (10) days prior to the effective date of the change.
IN WITNESS WHEREOF, Borrower has executed this Note on the day and year
first above written.
IMPERIAL PETROLEUM, INC.
By:_____________________________
Jeffrey T. Wilson, President
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(THE "ACT") OR APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD, OFFERED FOR
SALE, ASSIGNED, TRANSFERRED OR DISPOSED OF UNLESS REGISTERED PURSUANT TO THE
PROVISIONS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION AND THE PROVISION OF THIS NOTE ARE
COMPLIED WITH.
PROMISSORY NOTE
$37,333.00 January 15, 2004
FOR VALUE RECEIVED, the undersigned, Imperial Petroleum, Inc., a Nevada
corporation with its address at 11600 German Pines, Evansville, Indiana 47725
("Borrower"), HEREBY PROMISES TO PAY to the order of Joe Poe at _PO Box 4470,
Horseshoe Bay, TX 78657 ("Lender"), or at such other place as may be designated
in writing by Lender, or its successors or assigns, in lawful money of the
United States of America and in immediately available funds, the sum of__Thirty
Seven Thousand Three Hundred Thirty Three Dollars ($_37,333.00) together with
accrued interest thereon from the date hereof until the date paid at the rate of
8.5 % per annum, on or before the sooner to occur of July 15, 2004.
Payment of principal, interest and any other amounts due hereunder shall be
made in lawful money of the United State of America. All amounts paid hereunder
shall be credited first to the payment of accrued and unpaid interest, and then
to the payment of outstanding principal. Principal and interest shall be due and
payable in six monthly installments on or before the last day of the month
beginning with the first payment due on or before January 31, 2004.
This Note is secured by 107,000 shares of the restricted common stock of
Imperial Petroleum, Inc. to be held in escrow by Roger D. Brown, attorney,
("Escrow Agent") against payment of the Note. Release of the shares shall be
made promptly by the Escrow Agent upon written request by Borrower with proof of
payment attached in the form of cancelled checks or wire transfer verifications
in the name of the Lender. In the Event of Default as described herein, Lender
hereby expressly agrees to accept the shares of common stock pledged herein as
full and complete payment for any remaining amounts due under the Note,
including accrued interest thereon.
This Note may be prepaid by Borrower in whole or in part at any time
without premium or penalty.
Any one or more of the following events shall be an "Event of Default":
(a) any payment of principal or interest is not made within ten (10)
business days after notice to the Borrower that same was not paid when
due;
(b) Borrower becomes insolvent or unable to pay its debts generally as
they become due, or makes an assignment for the benefit of creditors;
or
(c) relief is sought by or against Borrower by legal action pursuant to
any insolvency or bankruptcy law.
In the case any one or more Events of Default hereunder shall occur and be
continuing, Lender may proceed to protect and enforce Lender's rights either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant, condition, or agreement contained in this Note, or
in aid of the exercise of any power granted in this Note to enforce any other
legal or equitable right of Lender. After an Event of Default, Borrower shall
pay to Lender immediately upon written demand therefor any amounts reasonably
expended or incurred by Lender in the collection of any amount due hereunder,
including, without limitation, attorney's fees and costs, whether or not any
legal action is instituted in connection therewith.
This Note shall be binding upon Borrower, its successors and assigns, and
shall inure to the benefit of and be enforceable by Lender, his heirs and
personal representatives.
This Note may not be changed, waived, discharged or terminated except by an
instrument in writing signed by Lender. A waiver of any provision of this Note
shall be interpreted narrowly and only for the specific contractual provision
and the specific time period set forth therein. No failure by Lender to enforce
any right or exercise any remedy hereunder shall waive Lender's right to enforce
such right or exercise such remedy at a later time.
Borrower hereby waives presentment, demand, protest, notice of dishonor and
all other notices and demands, except as expressly set forth herein.
This Note shall be construed and governed in all respects by the laws of
the State of Nevada applicable to contracts made and to be performed therein.
Any notice or communication required or sent in connection with this Note
shall be sent by first class mail, postage prepaid, addressed as set forth
above. Any such address may be changed by sending notice of such change at least
ten (10) days prior to the effective date of the change.
IN WITNESS WHEREOF, Borrower has executed this Note on the day and year
first above written.
IMPERIAL PETROLEUM, INC.
By:_____________________________
Jeffrey T. Wilson, President
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
(THE "ACT") OR APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD, OFFERED FOR
SALE, ASSIGNED, TRANSFERRED OR DISPOSED OF UNLESS REGISTERED PURSUANT TO THE
PROVISIONS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN
AVAILABLE EXEMPTION FROM SUCH REGISTRATION AND THE PROVISION OF THIS NOTE ARE
COMPLIED WITH.
PROMISSORY NOTE
$59,768.00 January 15, 2004
FOR VALUE RECEIVED, the undersigned, Imperial Petroleum, Inc., a Nevada
corporation with its address at 11600 German Pines, Evansville, Indiana 47725
("Borrower"), HEREBY PROMISES TO PAY to the order of R. Don Wright at R. Don
Wright & Co., PO Box 5771, Abilene, TX 79608 ("Lender"), or at such other place
as may be designated in writing by Lender, or its successors or assigns, in
lawful money of the United States of America and in immediately available funds,
the sum of__Fifty Nine Thousand Seven Hundred Sixty Eight Dollars ($_59,768.00)
together with accrued interest thereon from the date hereof until the date paid
at the rate of 8.5 % per annum, on or before the sooner to occur of July 15,
2004.
Payment of principal, interest and any other amounts due hereunder shall be
made in lawful money of the United State of America. All amounts paid hereunder
shall be credited first to the payment of accrued and unpaid interest, and then
to the payment of outstanding principal. Principal and interest shall be due and
payable in six monthly installments on or before the last day of the month
beginning with the first payment due on or before January 31, 2004.
This Note is secured by 170,000 shares of the restricted common stock of
Imperial Petroleum, Inc. to be held in escrow by Roger D. Brown, attorney,
("Escrow Agent") against payment of the Note. Release of the shares shall be
made promptly by the Escrow Agent upon written request by Borrower with proof of
payment attached in the form of cancelled checks or wire transfer verifications
in the name of the Lender. In the Event of Default as described herein, Lender
hereby expressly agrees to accept the shares of common stock pledged herein as
full and complete payment for any remaining amounts due under the Note,
including accrued interest thereon.
This Note may be prepaid by Borrower in whole or in part at any time
without premium or penalty.
Any one or more of the following events shall be an "Event of Default":
(a) any payment of principal or interest is not made within ten (10)
business days after notice to the Borrower that same was not paid when
due;
(b) Borrower becomes insolvent or unable to pay its debts generally as
they become due, or makes an assignment for the benefit of creditors;
or
(c) relief is sought by or against Borrower by legal action pursuant to
any insolvency or bankruptcy law.
In the case any one or more Events of Default hereunder shall occur and be
continuing, Lender may proceed to protect and enforce Lender's rights either by
suit in equity or by action at law, or both, whether for the specific
performance of any covenant, condition, or agreement contained in this Note, or
in aid of the exercise of any power granted in this Note to enforce any other
legal or equitable right of Lender. After an Event of Default, Borrower shall
pay to Lender immediately upon written demand therefor any amounts reasonably
expended or incurred by Lender in the collection of any amount due hereunder,
including, without limitation, attorney's fees and costs, whether or not any
legal action is instituted in connection therewith.
This Note shall be binding upon Borrower, its successors and assigns, and
shall inure to the benefit of and be enforceable by Lender, his heirs and
personal representatives.
This Note may not be changed, waived, discharged or terminated except by an
instrument in writing signed by Lender. A waiver of any provision of this Note
shall be interpreted narrowly and only for the specific contractual provision
and the specific time period set forth therein. No failure by Lender to enforce
any right or exercise any remedy hereunder shall waive Lender's right to enforce
such right or exercise such remedy at a later time.
Borrower hereby waives presentment, demand, protest, notice of dishonor and
all other notices and demands, except as expressly set forth herein.
This Note shall be construed and governed in all respects by the laws of
the State of Nevada applicable to contracts made and to be performed therein.
Any notice or communication required or sent in connection with this Note
shall be sent by first class mail, postage prepaid, addressed as set forth
above. Any such address may be changed by sending notice of such change at least
ten (10) days prior to the effective date of the change.
IN WITNESS WHEREOF, Borrower has executed this Note on the day and year
first above written.
IMPERIAL PETROLEUM, INC.
By:_____________________________
Jeffrey T. Wilson, President
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement" dated as of January 15
2004, between IMPERIAL PETROLEUM, INC., a Nevada corporation (the "Company"),
and Jefferies & Company, Inc., a Delaware corporation (the "Security Holder").
1. Introduction.
(a) Securities Purchase Agreement. The Company today issued to the
Security Holder that certain Warrant (the "Warrant"), pursuant to which the
Company has agreed, among other things, to grant the Security Holder the
right to purchase from the Company up to 2,394,649 fully paid and
non-assessable shares of the Company's authorized but unissued common
stock, par value $0.006 per share (the "Common Stock"), at a price equal to
$0.01 per share.
(b) Definition of Securities. The Common Stock is collectively herein
to as the "Securities."
(c) National Market Representation. The Company represents and
warrants that the Company's Common Stock is currently eligible for listing
on the National Association of Security Dealers' Over-the-Counter Bulletin
Board ("OTC-BB") under the symbol "IPTM". Certain capitalized terms used in
this Agreement are defined in Section 3 hereof; references to sections
shall be to sections of this Agreement.
2. Registration under Securities Act, etc.
2.1 Registration Upon Demand.
(a) Registration of Registrable Securities. At any time after three
(3) months from the date of this Agreement and before the termination of
this Agreement, the holders of twenty percent (20%) of the Registrable
Securities currently outstanding and/or exercisable may deliver to the
Company a written request that all or a portion of the Registrable
Securities be registered pursuant to the terms of this Agreement (a
"Registration Request"). Within sixty (60) days after a Registration
Request, the Company shall prepare and file a registration statement to
effect the registration, under the Securities Act of such Registrable
Securities that relate to the Securities; all to the extent requisite to
permit the public disposition of such Registrable Securities so to be
registered. The Company shall use its best efforts to cause the
Registration Statement which is the subject of this Section 2.1(a) (the
"Registration Statement") to be declared effective by the Commission upon
the earlier to occur of (i) 120 days after the date of the Registration
Request, (ii) ninety (90) days following the filing of the Registration
contemplated by this Section 2.1, or (iii) ten (10) business days after
receipt of a "no review" or similar letter from the Commission (the
"Required Effectiveness Date"). Nothing contained herein shall be deemed to
limit the number of Registrable Securities to be registered by the Company
hereunder. The Company shall not be required to file more than two (2)
Registration Statements pursuant to this Section 2.1.
(b) Registration Statement Form. Registrations under this Section 2.1
shall be on Form S-1, Form S-2, Form S-3 or such other appropriate
registration form of the Commission as shall permit the disposition of such
Registrable Securities in accordance with the intended method or methods of
disposition specified by the Security Holder; provided, however, such
intended method of disposition shall not include an underwritten offering
of the Registrable Securities.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration required by this Section 2.1.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective
within the time period specified herein, provided that a registration which
does not become effective after the Company has filed a registration
statement with respect thereto solely by reason of the refusal to proceed
of any holder of Registrable Securities (other than a refusal to proceed
based upon the advice of counsel in the form of a letter signed by such
counsel and provided to the Company relating to a disclosure matter
unrelated to such holder) shall be deemed to have been effected by the
Company unless the holders of the Registrable Securities shall have elected
to pay all Registration Expenses in connection with such registration, (ii)
if, after it has become effective, such registration becomes subject to any
stop order, injunction or other order or extraordinary requirement of the
Commission or other governmental agency or court for any reason or (iii)
if, after it has become effective, such registration ceases to be effective
for more than an aggregate of ninety (90) days.
(e) Priority in Demand Registrations. A registration requested
pursuant to this Section 2.1 shall not include in such Registration Request
any securities which are not Registrable Securities without the prior
written consent of the holders of at least a majority of the Registrable
Securities included in such registration. If such Registration Request is
(A) an underwritten offering and the managing underwriters advise the
Company in writing that in their opinion or (B) such Registration Request
is a resale shelf registration statement pursuant to Rule 415 of the
Securities Act and in the opinion of the holders of a majority of the
Registrable Securities, the number of Registrable Securities and, if
permitted hereunder, other securities requested to be included in such
offering exceeds the number of Registrable Securities and other securities,
if any, which can be sold in an orderly manner in such offering within a
price range acceptable to the holders of a majority of the Registrable
Securities initially requesting registration, the Company shall include in
such registration (1) first, the number of Registrable Securities requested
to be included in such registration, pro rata among the holders of such
Registrable Securities on the basis of the number of shares owned by each
such holder, and (2) second, the other securities requested to be included
in such registration, pro rata among the holders of such other securities.
(f) Plan of Distribution. The Company hereby agrees that the
Registration Statement shall include a plan of distribution section
reasonably acceptable to the Security Holder and the Company; provided,
however, such plan of distribution section shall be modified by the Company
so as to not provide for the disposition of the Registrable Securities on
the basis of an underwritten offering.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If at any time after the
date hereof the Company proposes to register any of its securities under
the Securities Act (other than by a registration in connection with an
acquisition in a manner which would not permit registration of Registrable
Securities for sale to the public, on Form S-8, or any successor form
thereto on Form S-4 or any successor form thereto and other than pursuant
to Section 2.1), on an underwritten basis (either best-efforts or
firm-commitment), then, the Company will each such time give prompt written
notice to all holders of Registrable Securities ("Holders") of its
intention to do so and of such Holders' rights under this Section 2.2. Upon
the written request of any such Holder made within ten (10) days after the
receipt of any such notice (which request shall specify the Registrable
Securities intended to be disposed of by such Holder and the intended
method of disposition thereof), the Company will, subject to the terms of
this Agreement effect the registration under the Securities Act of the
Registrable Securities, to the extent requisite to permit the disposition
(in accordance with the intended methods thereof as aforesaid) of such
Registrable Securities so to be registered, by inclusion of such
Registrable Securities in the registration statement which covers the
securities which the Company proposes to register, provided that if, at any
time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for
any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each Holder and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such registration
(but not from its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder or
holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under Section 2.1, and (ii) in
the case of a determination to delay registering, shall be permitted to
delay registering any Registrable Securities, for the same period as the
delay in registering such other securities. No registration effected under
this Section 2.2 shall relieve the Company of its obligation to effect any
registration upon a Registration Request under Section 2.1, nor shall any
such registration hereunder be deemed to have been effected pursuant to
Section 2.1. The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 2.2. The right provided the holders of the Registrable Securities
pursuant to this Section shall be exercisable at their sole discretion.
(b) Priority in Incidental Registrations. If the managing underwriter
of the underwritten offering contemplated by this Section 2.2 shall inform
the Company and holders of the Registrable Securities requesting such
registration by letter of its belief that the number of securities
requested to be included in such registration exceeds the number which can
be sold in such offering, then the Company will include in such
registration, to the extent of the number which the Company is so advised
can be sold in such offering, (i) first, the Registrable Securities
requested to be included in such registration, (ii) second, securities
proposed by the Company to be sold for its own account, and (iii) third,
Registrable Securities (other than Registrable Securities) and securities
of other selling security holders requested to be included in such
registration pro rata on the basis of the number of shares of such
securities so proposed to be sold and so requested to be included.
2.3 Registration Procedures. If and whenever the Company is required to
effect the registration of any Registrable Securities under the Securities Act
as provided in Section 2.1 and, as applicable, 2.2, the Company shall, as
expeditiously as possible:
(a) prepare and file with the Commission the Registration Statement to
effect such registration (including such audited financial statements as
may be required by the Securities Act or the rules and regulations
promulgated thereunder) and thereafter use its best efforts to cause such
registration statement to be declared effective by the Commission, as soon
as practicable, but in any event no later than the Required Effectiveness
Date (with respect to a registration pursuant to Section 2.1); provided,
however, that before filing such registration statement or any amendments
thereto, the Company will furnish to the counsel selected by the holders of
Registrable Securities which are to be included in such registration,
copies of a such documents proposed to be filed;
(b) with respect to any Registration Statement pursuant to Section
2.1, prepare and file with the Commission such amendments and supplements
to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
and to comply with the provisions of the Securities Act in order to permit
the disposition of all Registrable Securities covered by such registration
statement or such time as all of the Securities which are the subject of
such registration statement cease to be Registrable Securities (such
period, the "Registration Maintenance Period");
(c) furnish to each holder of Registrable Securities covered by such
registration statement such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus contained
in such registration statement (including each preliminary prospectus and
any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such holder and underwriter, if any, may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities owned by such holder;
(d) use its reasonable efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities laws or blue sky laws as any holder thereof
shall reasonably request, to keep such registrations or qualifications in
effect for so long as such registration statement remains in effect, and
take any other action which may be reasonably necessary to enable such
holder to consummate the disposition in such jurisdictions of the
securities owned by such holder, except that the Company shall not for any
such purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it would not but for the
requirements of this subdivision (d) be obligated to be so qualified or to
consent to general service of process in any such jurisdiction;
(e) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the holder or holders thereof to consummate the disposition of such
Registrable Securities;
(f) in connection with an underwritten offering, furnish to each
holder of Registrable Securities a signed counterpart, addressed to such
holder, and the underwriters of:
(i) an opinion of counsel for the Company, dated the effective
date of such registration statement (or, if such registration includes
an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), reasonably satisfactory in
form and substance to such holder) including that the prospectus and
any prospectus supplement forming a part of the Registration Statement
does not contain an untrue statement of a material fact or omits 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
(ii) a "comfort" letter (or, in the case of any such Person which
does not satisfy the conditions for receipt of a "comfort" letter
specified in Statement on Auditing Standards No. 72, an "agreed upon
procedures" letter), dated the effective date of such registration
statement (or, if such registration includes an underwritten public
offering, a "comfort" letter dated the date of the closing under the
underwriting agreement), signed by the independent public accountants
who have certified the Company's financial statements included in such
registration statement, covering substantially the same matters with
respect to such registration statement (and the prospectus included
therein) and, in the case of the accountants' letter, with respect to
events subsequent to the date of such financial statements, as are
customarily covered in accountants' letters delivered to the
underwriters in underwritten public offerings of securities (with, in
the case of an "agreed upon procedures" letter, such modifications or
deletions as may be required under Statement on Auditing Standards No.
35) and, in the case of the accountants' letter, such other financial
matters, and, in the case of the legal opinion, such other legal
matters, as such holder (or the underwriters) may reasonably request;
(g) notify holders of the Registrable Securities and their respective
counsel promptly and confirm such advice in writing promptly after the
Company has knowledge thereof:
(i) when the Registration Statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to
the Registration Statement has been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when
the same has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus or for
additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings by any Person for that purpose; and
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable
Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threat of any proceeding for such
purpose;
(h) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, upon discovery that, or
upon the happening of any event as a result of which, the prospectus
included in such registration statement as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and at the
request of any such holder promptly prepare and furnish to such holder a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing;
(i) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(j) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) enter into such agreements and take such other actions as the
Security Holder shall reasonably request in writing in order to expedite or
facilitate the disposition of such Registrable Securities; and
(l) use its best efforts to list all Registrable Securities covered by
such registration statement on any securities exchange on which any of the
Registrable Securities are then listed.
The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish the Company such information
regarding such holder and the distribution of such securities as the
Company may from time to time reasonably request in writing.
The Company will not file any registration statement pursuant to Section
2.1, or amendment thereto or any prospectus or any supplement thereto
(including such documents incorporated by reference and proposed to be
filed after the initial filing of the Registration Statement) to which the
Security Holder shall reasonably object, provided that the Company may file
such document in a form required by law or upon the advice of its counsel.
The Company represents and warrants to each holder of Registrable
Securities that it has obtained all necessary waivers, consents and
authorizations necessary to execute this Agreement and consummate the
transactions contemplated hereby.
The Security Holder agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in subdivision
(h) of this Section 2.3, the Security Holder will forthwith discontinue its
disposition of Registrable Securities pursuant to the Registration
Statement relating to such Registrable Securities until its receipt of the
copies of the supplemented or amended prospectus contemplated by
subdivision (h) of this Section 2.3 and, if so directed by the Company,
will deliver to the Company (at the Company's expense) all copies, other
than permanent file copies, then in its possession of the prospectus
relating to such Registrable Securities current at the time of receipt of
such notice.
2.4 Underwritten Offerings.
(a) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by the
Security Holder as provided in Section 2.2 and subject to the provisions of
Section 2.2(a), use its reasonable efforts to arrange for such underwriters
to include all the Registrable Securities to be offered and sold by such
holder among the securities to be distributed by such underwriters.
(b) Holdback Agreements. Subject to such other reasonable requirements
as may be imposed by the underwriter as a condition of inclusion of a
holder's Registrable Securities in the registration statement, each such
holder agrees by acquisition of Registrable Securities, if so required by
the managing underwriter, not to sell, make any short sale of, loan, grant
any option for the purchase of, effect any public sale or distribution of
or otherwise dispose of, except as part of such underwritten registration,
any equity securities of the Company, during such reasonable period of time
requested by the underwriter; provided however, such period shall not
exceed the 120 day period commencing 30 days prior to the commencement of
such underwritten offering and ending 90 days following the completion of
such underwritten offering.
(c) Participation in Underwritten Offerings. No holder of Registrable
Securities may participate in any underwritten offering under Section 2.2
unless such holder of Registrable Securities (i) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved, subject to the terms and conditions hereof, by the holders of a
majority of Registrable Securities to be included in such underwritten
offering and (ii) completes and executes all questionnaires, indemnities,
underwriting agreements and other documents (other than powers of attorney)
required under the terms of such underwriting arrangements. Notwithstanding
the foregoing, no underwriting agreement (or other agreement in connection
with such offering) shall require any holder of Registrable Securities to
make any representations or warranties to or agreements with the Company or
the underwriters other than representations and warranties contained in a
writing furnished by such holder expressly for use in the related
registration statement or representations, warranties or agreements
regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation
required by law.
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the reasonable opinion of such holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. In the event of any registration
of any securities of the Company under the Securities Act, the Company
will, and hereby does agree to, indemnify and hold harmless the holder of
any Registrable Securities covered by such registration statement its
directors and officers, each other Person who participates as an
underwriter in the offering or sale of such securities and each other
Person, if any, who controls such holder or any such underwriter within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint or several, to which such holder or any such director or
officer or underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company will reimburse such holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, liability, action or proceeding, provided that the
Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by such holder or underwriter
stating that it is for use in the preparation thereof and, provided further
that the Company shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or to any
other Person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person's failure to send or give a copy of the
final prospectus, as the same may be then supplemented or amended, within
the time required by the Securities Act to the Person asserting the
existence of an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus or an amendment or supplement thereto.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or any such director,
officer, underwriter or controlling person and shall survive the transfer
of such securities by such holder.
(b) Indemnification by the Holders. The Company may require as a
condition to including any Registrable Securities in any registration
statement filed pursuant to this Agreement, that the Company shall have
received an undertaking satisfactory to it from the holder of such
Registrable Securities, to indemnify and hold harmless (in the same manner
and to the same extent as set forth in subdivision (a) of this Section 2.6)
the Company, each director of the Company, each officer of the Company and
each other Person, if any, who controls the Company within the meaning of
the Securities Act, with respect to any statement or alleged statement in
or omission or alleged omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to the Company through
an instrument duly executed by such holder specifically stating that it is
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement.
Any such indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such
securities by such holder. The obligation to indemnify shall be individual,
not joint and several, for each holder and shall be limited to the net
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such Registration Statement.
(c) Notices of Claims etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 2.6, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this Section
2.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to
the extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified
party of a release from all liability, or a covenant not to sue, in respect
to such claim or litigation. No indemnified party shall consent to entry of
any judgment or enter into any settlement of any such action the defense of
which has been assumed by an indemnifying party without the consent of such
indemnifying party.
(d) Other Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this Section 2.6 (with appropriate
modifications) shall be given by the Company and each holder of Registrable
Securities (but only if and to the extent required pursuant to the terms of
2.6(b)) with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
Section 2.6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received
or expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in the preceding
subdivisions of this Section 2.6 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or
liability (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the holder or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of
the holder or underwriter, as the case may be, on the other in connection
with the statements or omissions which resulted in such expense, loss,
damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the holder or underwriter, as the case may be, on the other in
connection with the distribution of the Registrable Securities shall be
deemed to be in the same proportion as the total net proceeds received by
the Company from the initial sale of the Registrable Securities by the
Company to the purchasers bear to the total net proceeds received by all
selling holders participating in such offering or the underwriting
discounts and commissions received by the underwriter, as the case may be.
The relative fault of the Company on the one hand and of the holder or
underwriter, as the case may be, on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the underwriter
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, provided that
the foregoing contribution agreement shall not inure to the benefit of any
indemnified party if indemnification would be unavailable to such
indemnified party by reason of the provisions contained in the first
sentence of subdivision (a) of this Section 2.6, and in no event shall the
obligation of any indemnifying party to contribute under this subdivision
(f) exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided
for under subdivisions (b) of this Section 2.6 had been available under the
circumstances.
The Company and the holders of Registrable Securities agree that it would
not be just and equitable if contribution pursuant to this subdivision (f)
were determined by pro rata allocation (even if the holders and any
underwriters were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
in the preceding sentence and subdivision (c) of this Section 2.6, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any
amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price at which
the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any
damages that such holder or underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
3. Definitions. As used herein, unless the context otherwise requires, the
following terms have the following respective meanings:
"Agreement": As defined in Section 1.
"Commission": The Securities and Exchange Commission or any other Federal
agency at the time administering the Securities Act.
"Common Stock": As defined in Section 1.
"Company": As defined in the introductory paragraph of this Agreement.
"Exchange Act": The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder.
"Holder": As defined in Section 2.2(a).
"Registrable Securities": (i) Any capital stock of the Company owned or
acquired by the Security Holder and (ii) any Common Stock issued or issuable
with respect to or exchanged for the securities referred to in clause (i) above
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"OTC-BB": As defined in Section 1.
"Person": A corporation, association, partnership, organization, business,
individual, governmental or political subdivision thereof or a governmental
agency.
"Registrable Securities": The Registrable Securities and any Securities
issued or issuable with respect to such Securities by way of stock dividend or
stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization. Once issued such securities shall
cease to be Registrable Securities when (a) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been distributed in accordance
with such registration statement, (b) they shall be have been distributed to the
public pursuant to Rule 144 (or any successor provision) under the Securities
Act, (c) they shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer shall have been delivered by
the Company and subsequent disposition of them shall not require registration or
qualification of them under the Securities Act or any similar state law then in
force, (d) they shall have ceased to be outstanding, (e) on the expiration of
the applicable Registration Maintenance Period or (f) any and all legends
restricting transfer thereof have been removed in accordance with the provisions
of Rule 144(k) (or any successor provision) under the Securities Act. The
Securities shall constitute Registrable Securities while owned by (a) the
Security Holder or any affiliate or (b) a transferee of at least 100,000 shares
of Registrable Securities.
"Registration Expenses": All expenses incident to the Company's performance
of or compliance with this Agreement, including, without limitation, all
registration, filing and NASD fees; all stock exchange and any other listing
fees; all fees and expenses of complying with securities or blue sky laws; all
word processing, duplicating and printing expenses, messenger and delivery
expenses; the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits or
"cold comfort " letters required by or incident to such performance and
compliance; in connection with an underwritten offering, the reasonable fees and
disbursements of not more than one law firm (not to exceed $25,000) retained by
the holder or holders of more than 50% of the Registrable Securities; premiums
and other costs of policies of insurance of the Company against liabilities
arising out of the public offering of the Registrable Securities being
registered and any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any; provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
"Registration Maintenance Period": As defined in Section 2.3.
"Registration Request": As defined in Section 2.1.
"Required' Effectiveness Date": As defined in Section 2.1.
"Securities": As defined in Section 1(b).
"Securities Act": The Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder.
"Security Holder": As defined in the Introductory paragraph to this
Agreement.
"Warrant": As defined in Section 1.
4. Rule 144. The Company shall timely file the reports required to be filed
by it under the Securities Act and the Exchange Act (including but not limited
to the reports under Sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, will, upon the request of any
holder of Registrable Securities, make publicly available other information) and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Company will deliver to such holder
a written statement as to whether it has complied with the requirements of this
Section 4.
5. Amendments and Waivers. This Agreement may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of the holder or
holders of the sum of the 51% or more of the shares of (i) Registrable
Securities issued at such time, plus (ii) Registrable Securities issuable upon
exercise or conversion of the Securities then constituting derivative securities
(if such Securities were not fully exchanged or converted in full as of the date
such consent is sought). Each holder of any Registrable Securities at the time
or thereafter outstanding shall be bound by any consent authorized by this
Section 5, whether or not such Registrable Securities shall have been marked to
indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action by any holder
or holders of Registrable Securities pursuant to this Agreement or any
determination of any number or percentage of shares of Registrable Securities
held by any holder or holders of Registrable Securities contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all notices,
requests and other communications to any Person provided for hereunder shall be
in writing and shall be given to such Person (a) in the case of a party hereto
other than the Company, addressed to such party in the manner set forth in the
Warrant or at such other address as such party shall have furnished to the
Company in writing, or (b) in the case of any other holder of Registrable
Securities, at the address that such holder shall have furnished to the Company
in writing, or, until any such other holder so furnishes to the Company an
address, then to and at the address of the last holder of Such Registrable
Securities who has furnished an address to the Company, or (c) in the case of
the Company, at the address set forth on the signature page hereto, to the
attention of its Chief Executive Officer, or at such other address, or to the
attention of such other officer, as the Company shall have furnished to each
holder of Registrable Securities at the time outstanding. Each such notice,
request or other communication shall be effective (i) if given by mail, 72 hours
after such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (ii) if given by any other means (including,
without limitation, by fax or air courier) when delivered at the address
specified above, provided that any such notice, request or communication shall
not be effective until received.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto. In addition, and whether or
not any express assignment shall have been made, the provisions of this
Agreement which are for the benefit of the parties hereto other than the Company
shall also be for the benefit of and enforceable by any subsequent holder of any
Registrable Securities. Each of the holders of the Registrable Securities
agrees, by accepting any portion of the Registrable Securities after the date
hereof, to the provisions of this Agreement including, without limitation,
appointment of a representative to act on behalf of such Holder pursuant to the
terms hereof which such actions shall be made in the good faith discretion of
the Holder's representative and be binding on all persons for all purposes.
9. Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
10. No Inconsistent Agreements. The Company shall not hereafter enter into
any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement or which grants any registration rights to any holder of the Company's
securities that are superior to the rights of the holders of Registrable
Securities without the prior written consent of the holders of a majority of the
Registrable Securities.
11. Remedies. Any Person having rights under any provision of this
Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that, in addition to any other rights and
remedies existing in its favor, any party shall be entitled to specific
performance and/or other injunctive relief from any court of law or equity of
competent jurisdiction (without posting any bond or other security) in order to
enforce or prevent violation of the provisions of this Agreement.
12. Successors and Assigns. All covenants and agreements in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not. In addition, whether or not any express assignment has been
made, the provisions of this Agreement which are for the benefit of purchasers
or holders of Registrable Securities are also for the benefit of, and
enforceable by, any subsequent holder of Registrable Securities.
13. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
14. Counterparts. This Agreement may be executed simultaneously in two or
more counterparts (including by manual telecopied signature pages), any one of
which need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same Agreement.
15. Governing Law. All issues and questions concerning the construction,
validity, interpretation and enforcement of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of New York, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of New York or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
IN WITNESS WHEREOF, the parties have executed this Registration Agreement
as of the date first written above.
IMPERIAL PETROLEUM, INC.
By _________________________________
Name Jeffrey T. Wilson
Its President
JEFFERIES & COMPANY, INC.
By __________________________________
Name Todd A. Dittmann
Its Managing Director
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT Of 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF UNLESS THE PERSON REQUESTING THE
TRANSFER OF THIS WARRANT SHALL FURNISH, WITH RESPECT TO SUCH TRANSFER, IF
REQUESTED BY IMPERIAL PETROLEUM, INC., AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO IMPERIAL PETROLEUM, INC. TO THE EFFECT THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR DISPOSITION WILL NOT INVOLVE ANY VIOLATION OF THE REGISTRATION
PROVISIONS OF THE ACT OR ANY SIMILAR OR SUPERSEDING STATUTE OR OF ANY APPLICABLE
STATE SECURITIES LAW.
Date: January 15, 2004
IMPERIAL PETROLEUM, INC.
(a Nevada corporation)
Warrant for the purchase of 2,394,649 Shares of Common Stock
par value $.006 per share
VOID AFTER 5:00 P.M. CENTRAL TIME ON JANUARY 15, 2009.
FOR VALUE RECEIVED, Imperial Petroleum, Inc., a Nevada corporation (the
"Company"), hereby certifies that Jefferies & Company, Inc., a Delaware
corporation, or its assigns (the "Holder"), is entitled, subject to the
provisions of this common stock purchase warrant (as amended, restated,
supplemented, or otherwise modified from time to time, this "Warrant"), to
purchase from the Company at any time, or from time to time during the period
commencing on the date hereof ("Base Date") and expiring at 5:00 p.m. Central
time, on January 15, 2009 (the "Expiration Date"), up to 2,394,649 fully paid
and non-assessable shares of the Company's authorized but unissued common stock,
par value $0.006 per share (the "Common Stock"), at a price equal to $0.01 per
share (the "Exercise Price").
This Warrant is being issued pursuant to that certain engagement letter
dated June 26, 2003 by and among the Company and the Holder.
The term "Common Stock" means the Common Stock, par value $0.006 per share,
of the Company as constituted on the Base Date, together with any other equity
securities that may be issued by the Company in respect thereof or in
substitution therefor. The Exercise Price and/or the number of shares of Common
Stock to be received upon the exercise of this Warrant may be adjusted from time
to time as hereinafter set forth. The shares of Common Stock deliverable or
delivered upon such exercise, as adjusted from time to time, are hereinafter
referred to as "Warrant Stock."
On receipt by the Company of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant, and in
case of any such loss, theft or destruction of this Warrant, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company will execute and deliver to the Holder, in lieu thereof, a
new Warrant in substantially identical form and substance.
1. Exercise of Warrant. This Warrant may be exercised, subject to the
requirements set forth below, in whole, or in part, at any time during the
period commencing on the Base Date and expiring at 5:00 p.m. Central time on the
Expiration Date set forth above, or, if such day is a day on which banking
institutions in Evansville, Indiana are authorized by law to close, then on the
next succeeding day that shall not be such a day, by presentation and surrender
of this Warrant certificate to the Company at its principal office, or at the
office of its stock transfer agent, if any, with the Warrant Exercise Form
attached hereto duly executed and upon payment (either in cash or by certified
or official bank check or by wire transfer, payable to the order of the Company)
of the aggregate Exercise Price for the number of shares specified in such form
and instruments of transfer, if appropriate, duly executed by the Holder. If
this Warrant should be exercised in part only, the Company shall, upon surrender
of this Warrant certificate for cancellation, execute and deliver a new Warrant
certificate evidencing the rights of the Holder thereof to purchase the balance
of the shares purchasable hereunder. Upon receipt by the Company of this Warrant
certificate, together with the Exercise Price, at its office, or by the stock
transfer agent of the Company at its office, if any, in proper form for exercise
as described above, together with an agreement to comply with the restrictions
on transfer and related covenants contained herein and a representation as to
investment intent, signed by the Holder (and if other than the original Holder
accompanied by proof, reasonably satisfactory to counsel for the Company, of the
right of such person or persons to exercise the Warrant), the Holder shall be
deemed to be the holder of record for the shares of Common Stock issuable upon
such exercise, even if the stock transfer books of the Company shall then be
closed or certificates representing such shares of Common Stock shall not have
been delivered to the Holder. The Company shall pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the issue or
delivery of shares of Common Stock on exercise of this Warrant. The Company
shall promptly thereafter, and, in any event, within ten (10) days after such
exercise, issue certificate(s) evidencing the Common Stock so purchased.
2. Reservation of Shares; Taxes. The Company shall at all times reserve for
issuance and delivery upon exercise of this Warrant all shares of Common Stock
or other shares of capital stock of the Company (and other securities) from time
to time receivable upon exercise of this Warrant. All such shares (and other
securities) shall be duly authorized and, when issued upon exercise, shall be
validly issued, fully paid and non-assessable, and free from all taxes, liens,
charges, and preemptive rights with respect to the issue thereof.
3. No Fractional Shares Issued. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant, but the
Company shall pay the Holder an amount equal to the Fair Market Value of such
fractional share of Common Stock in lieu of each fraction of a share otherwise
called for upon any exercise of this Warrant.
4. Transfer.
(a) Securities Laws. Neither this Warrant nor the Warrant Stock
issuable upon the exercise hereof has been registered under the Securities
Act of 1933, as amended (the "Securities Act"), or under any state
securities laws and unless so registered may not be transferred, sold,
pledged, hypothecated or otherwise disposed of unless an exemption from
such registration is available. In the event Holder desires to transfer
this Warrant or any of the Warrant Stock issued, the Holder must give the
Company prior written notice of such proposed transfer including the name
and address of the proposed transferee. Such transfer may be made only
either (i) upon registration of the Warrants pursuant to the Securities Act
of 1933 and applicable state securities laws; or (ii) upon publication by
the Securities and Exchange Commission (the "Commission") of a ruling,
interpretation, opinion or "no action letter" based upon facts presented to
said Commission, or (iii) if requested by the Company, upon receipt by the
Company of an opinion of counsel to the Holder, in either case to the
effect that the proposed transfer will not violate the provisions of the
Securities Act, the Securities Exchange Act of 1934, as amended, or the
rules and regulations promulgated under either such act
(b) Conditions to Transfer. Prior to any such proposed transfer, and
as a condition thereto, if such transfer is not made pursuant to an
effective registration statement under the Securities Act, the Holder will,
if requested by the Company, deliver to the Company an agreement by such
transferee to be bound by the terms and conditions of this Warrant.
(c) Indemnity. The Holder acknowledges that the Holder understands the
meaning and legal consequences of this Section 4, and the Holder hereby
agrees to indemnify and hold harmless the Company, its representatives and
each officer and director thereof from and against any and all loss, damage
or liability (including all reasonable outside attorney's fees and costs
incurred in enforcing this indemnity provision) due to or arising out of
(a) the inaccuracy of any representation or the breach of any warranty of
the Holder contained in, or any other breach of, this Warrant, (b) any
transfer of any of this Warrant or the Warrant Stock in violation of the
Securities Act, the Securities Exchange Act of 1934, as amended, applicable
state securities laws or the rules and regulations promulgated under with
of such acts, (c) any transfer of this Warrant or any of the Warrant Stock
not in accordance with this Warrant or (d) any materially untrue statement
or omission to state any material fact in connection with the investment
representations or with respect to the facts and representations supplied
by the Holder to counsel to the Company upon which its opinion as to a
proposed transfer shall have been based. Notwithstanding the foregoing, the
liability of any Holder pursuant to this subsection (c) shall be limited to
an amount equal to the aggregate Exercise Price to be paid by Holder to
purchase the Common Stock issuable upon exercise of this Warrant, which
gives rise to such obligation to indemnify.
(d) Transfer. Except as restricted hereby, this Warrant and the
Warrant Stock issued may be transferred by the Holder in whole or in part
at any time or from time to time. Upon surrender of this Warrant
certificate to the Company or at the office of its stock transfer agent, if
any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any transfer tax, and upon compliance with the foregoing
provisions, the Company shall, without charge, execute and deliver a new
Warrant certificate in the name of the assignee named in such instrument of
assignment, and this Warrant certificate shall promptly be cancelled. Any
assignment, transfer, pledge, hypothecation or other disposition of this
Warrant attempted contrary to the provisions of this Warrant, or any levy
of execution, attachment or other process attempted upon this Warrant,
shall be null and void and without effect.
5. Rights of the Holder. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or in
equity, until this Warrant has been exercised and, until such time, the rights
of the Holder are limited to those expressed in this Warrant. The foregoing
notwithstanding, the Company will transmit to the Holder such information,
documents, and reports as are generally distributed to the holders of any class
or series of the securities of the Company.
6. Anti-Dilution Provisions.
(a) Adjustments for Initial Errors.
(i) The Company hereby acknowledges that the initial number of
shares of Common Stock purchasable upon the exercise of this Warrant
(the "Exercise Quantity") was calculated based upon the Company's
representation that the number of outstanding shares of capital stock
of the Company as of the Base Date, calculated on a fully diluted
basis, and including shares issuable pursuant to the exercise of this
Warrant (such shares as calculated, being referred to as "Fully
Diluted Shares") totaled 45,977,252 shares. If for any reason it shall
hereafter be determined that five percent (5%) of the number of Fully
Diluted Shares as of the Base Date differed from the Exercise
Quantity, then the Company or the Holder (whichever shall discover
such error) shall notify the other of such determination in writing
and the Company shall forthwith (but in no event more than five (5)
business days thereafter) reissue the outstanding Warrant with an
appropriate proportional adjustment in the number of shares of Common
Stock purchasable upon the exercise of this Warrant to be effective as
of and from the Base Date.
(ii) Any adjustments to the Exercise Price and the number of
shares of Common Stock issuable upon exercise of this Warrant pursuant
to the other subsections of this Section 6 prior to the date of any
increase or decrease in the Exercise Quantity pursuant to Section
6(a)(i) shall be recalculated as if such increased or decreased
Exercise Quantity had been the Exercise Quantity since the Base Date,
but no such adjustment shall affect the number of shares of Common
Stock issued upon any exercise of this Warrant prior to the date any
such adjustment is made.
(b) Stock Splits. Dividends. Etc. If the Company shall at any time
subdivide its outstanding shares of Common Stock (or other securities at
the time receivable upon the exercise of the Warrant) by re-capitalization,
reclassification, conversion or split-up thereof, or if the Company shall
declare a stock dividend or distribute shares of Common Stock to its
stockholders, the number of shares of Common Stock subject to this Warrant
immediately prior to such subdivision shall be proportionately increased,
and if the Company shall at any time combine the outstanding shares of
Common Stock by re-capitalization, reclassification or combination, the
number of shares of Common Stock subject to this Warrant immediately prior
to such combination shall be proportionately decreased. Any such adjustment
and adjustment to the Exercise Price pursuant to this Section 6 shall be
effective at the close of business on the effective date of such
subdivision or combination or if any adjustment is the result of a stock
dividend or distribution then the effective date for such adjustment based
thereon shall be the record date therefor. Whenever the number of shares of
Common Stock purchasable upon the exercise of this Warrant is adjusted, as
provided in this Section 6(b), the Exercise Price shall be adjusted by
multiplying such Exercise Price immediately prior to such adjustment by a
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise immediately prior to such adjustment,
and (y) the denominator of which shall be the number of shares of Common
Stock so purchasable immediately thereafter. Such adjustment shall be made
successively whenever such a subdivision, re-capitalization,
reclassification, or combination is made.
(c) Adjustment for Reorganization. Consolidation. Merger. Etc. In case
(i) of any reorganization of the Company (or any other corporation, the
securities of which are at the time receivable on the exercise of this
Warrant) after the Base Date, (ii) after the Base Date the Company (or any
such other corporation) shall consolidate with or merge into another
corporation or convey all or substantially all of its assets to another
corporation, or (iii) of a reclassification, change or conversion of
securities of the class issuable upon exercise of this Warrant, then, and
in each such case, the Holder of this Warrant upon the exercise as provided
in Section 1 at any time after the consummation of such reorganization,
consolidation, merger, conveyance, or reclassification shall be entitled to
receive, in lieu of the securities and property receivable upon the
exercise of this Warrant prior to such event, the securities or property to
which such Holder would have been entitled upon such event if such Holder
had exercised this Warrant immediately prior thereto. In each such case,
the terms of this Warrant shall be applicable to the securities or property
received upon the exercise of this Warrant after such event.
(d) Other Issuances and Adjustments.
(i) In case the Company shall, at any time after the Base Date,
issue shares of Common Stock, or rights, options, warrants or
convertible or exchangeable securities containing the right to
subscribe for or acquire shares of Common Stock at a price per share
of Common Stock (determined in the case of such rights, options,
warrants, or convertible or exchangeable securities by dividing (x)
the total amount received and/or receivable by the Company in
consideration of the sale and issuance of such rights, options,
warrants, or convertible or exchangeable securities, plus the total
minimum consideration payable to the Company upon exercise,
conversion, or exchange thereof by (y) the total maximum number of
shares of Common Stock covered by such rights, options, warrants, or
convertible or exchangeable securities) less than the Fair Market
Value per share of Common Stock (in the case of rights, options,
warrants or convertible or exchangeable securities, determined at the
time of issuance of such securities rather than upon exercise
thereof), in each case on the date the Company fixes the offering
price of such shares, rights, options, warrants, or convertible or
exchangeable securities, then the Exercise Price shall be adjusted so
that it shall equal the price determined by multiplying the Exercise
Price in effect immediately prior thereto by a fraction (i) the
numerator of which shall be the sum of (A) the number Fully Diluted
Shares immediately prior to such sale and issuance plus (B) the number
of shares of Common Stock which the aggregate consideration received
or receivable (determined as provided herein) in connection with such
sale or issuance would purchase at such Fair Market Value per share,
and (ii) the denominator of which shall be the total number of Fully
Diluted Shares immediately after such sale and issuance. Such
adjustment shall be made successively whenever such an issuance is
made.
(ii) In case the Company shall, at any time after the Base Date,
make or agree to (i) any downward adjustment in the exercise, exchange
or conversion price of, (ii) any increase in the number of shares of
Common Stock issuable upon the exercise, conversion or exchange of, or
(iii) any change in the consideration payable for the exercise,
conversion or exchange of, any rights, options, warrants or
convertible or exchangeable securities containing the right to
subscribe for or acquire shares of Common Stock, other than such
adjustment that is specifically contemplated and required under the
terms of any such instrument as of the Base Date, then the Exercise
Price shall be adjusted so that it shall equal the price determined by
multiplying the Exercise Price in effect immediately prior thereto by
a fraction the numerator of which shall be the sum of (A) the number
of Fully Diluted Shares immediately prior thereto, plus (B) the number
of shares of Common Stock to be issued upon such exercise, conversion
or exchange immediately prior thereto, multiplied by the aggregate
amount of the Fair Market Value of the consideration to be received by
the Company upon such exercise, conversion or exchange immediately
thereafter, and the denominator shall be the sum of (X) the number of
shares of Fully Diluted Shares immediately thereafter, plus (Y) the
number of shares of Common Stock to be issued upon such exercise,
conversion or exchange immediately thereafter, multiplied by the
aggregate amount of the Fair Market Value of the consideration to be
received by the Company upon such exercise, conversion or exchange
immediately prior thereto. Such adjustment shall be made successively
whenever such an issuance is made.
(iii) For the purposes of an adjustment under this Section 6(d),
the maximum number of shares of Common Stock which the holder of any
right, option, warrant or convertible or exchangeable security shall
be entitled to subscribe for or purchase shall be deemed to be issued
and outstanding. Furthermore, the consideration received by the
Company therefor shall be deemed to be equal to the price per share of
Common Stock (determined in the case of such rights, options,
warrants, or convertible or exchangeable securities by dividing (x)
the total amount received and/or receivable by the Company in
consideration of the sale and issuance of such rights, options,
warrants, or convertible or exchangeable securities, plus the total
minimum consideration payable to the Company upon exercise,
conversion, or exchange thereof by (y) the total maximum number of
shares of Common Stock covered by such rights, options, warrants, or
convertible or exchangeable securities) multiplied by the number of
shares deemed issued and outstanding in the previous sentence. In case
the Company shall issue shares of Common Stock, or issue or make an
adjustment to the exercise, exchange or conversion price of rights,
options, warrants, or convertible or exchangeable securities
containing the right to subscribe for or acquire shares of Common
Stock for a consideration consisting, in whole or in part, of
consideration other than cash or its equivalent, then in determining
the price per share of Common Stock and the consideration received by
the Company, the Board of Directors of the Company shall determine, in
good faith, the Fair Market Value of said property, and such
determination shall be described in a duly adopted board resolution
certified by the Company's Secretary or Assistant Secretary, provided,
that in the event the Board of Directors is unable to make such a
determination, then the Fair Market Value of such consideration shall
be determined in the same manner as a Valuation Procedure under
Section 6(f) hereof.
(e) Certificate as to Adjustments. In each case of an adjustment in
the number of shares of Common Stock receivable on the exercise of this
Warrant, the Company at its expense shall promptly compute such adjustment
in accordance with the terms of the Warrant and prepare a certificate
executed by an officer of the Company setting forth such adjustment and
showing the facts upon which such adjustment is based. The Company shall
forthwith mail a copy of each such certificate to each Holder.
(f) Adjustment of Number of Shares. Upon each adjustment in the
Exercise Price called for under this Section 6, the number of shares of
Common Stock purchasable hereunder shall be adjusted, to the nearest whole
share, to the product obtained by multiplying the number of shares of
Common Stock purchasable immediately prior to such adjustment in the
Exercise Price by a fraction, the numerator of which shall be the Exercise
Price immediately prior to such adjustment and the denominator of which
shall be the Exercise Price immediately thereafter, after giving effect to
the cumulative adjustments in Exercise Price called for under this Section
6.
(g) Fair Market Value. "Fair Market Value" as of a particular date
(the "Determination Date") shall mean (i) if the Common Stock is publicly
traded at the time of determination, the average of the closing prices on
such day of the Common Stock on all domestic securities exchanges on which
the Common Stock is then listed, or, if there have been no sales on any
such exchange on such day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day or, (ii) if on any such
day the Common Stock is not so listed, the average of the representative
bid and asked prices quoted on the NASDAQ system as of 4:00 P.M., New York
time, on such day, or if on any day such security is not quoted on the
NASDAQ system, the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization, and in each such (A) and (B) case averaged over a period of
ten (10) days consisting of the day as of which "Fair Market Value" is
being determined and the nine consecutive business days prior to such day.
If at any time the Common Stock is not listed on any domestic securities
exchange or quoted on the NASDAQ System or the domestic over-the-counter
market, the Fair Market Value will be the fair value thereof on the
business day prior to the date of exercise of this Warrant as determined by
the Company's Board of Directors acting in good faith and as agreed to by
any Holder in its reasonable discretion.
(h) Notices of Record Date. Etc. In case:
(i) the Company shall take a record of the holders of its Common
Stock (or other securities at the time receivable upon the exercise of
the Warrant) for the purpose of entitling them to receive any dividend
(other than a cash dividend at the same rate of the last cash dividend
theretofore paid) or other distribution, or any right to subscribe
for, purchase or otherwise acquire any shares of stock of any class or
any other securities, or to receive any other right;
(ii) of any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
(iii) of (A) a reorganization of the Company; (B) the
acquisition, directly or indirectly, by any person, entity or group
(within the meaning of Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended) of the beneficial ownership of securities of more
than fifty percent (50%) of the total combined voting power of all
outstanding securities of the Company; (C) a merger or consolidation
in which the Company is not the surviving entity, except for a
transaction in which the stockholders of the Company immediately prior
to such merger or consolidation hold, in the aggregate, securities
possessing more than fifty percent (50%) of the total combined voting
power of all outstanding voting securities of the surviving entity
immediately after such merger or consolidation; (D) a reverse merger
in which the Company is the surviving entity but in which securities
possessing more than fifty percent (50%) of the total combined voting
power of all outstanding voting securities of the Company are
transferred to or acquired by a person or entity different from the
persons or entities holding those securities immediately prior to such
merger; or (E) the sale, transfer or other disposition (in one
transaction or a series of related transactions) of all or
substantially all of the assets of the Company (each, a "Change of
Control Transaction"); then, and in each such case, the Company shall
mail or cause to be mailed to each Holder a notice specifying, as the
case may be, (A) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution or right, or (B)
the date on which such Change of Control Transaction, reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding up is to take place, and the time, if any, to
be fixed, as to which the holders of record of Common Stock (or such
other securities at the time receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock
(or such other securities) for securities or other property
deliverable upon such Change of Control Transaction, reorganization,
reclassification, consolidation, merger, conveyance, dissolution,
liquidation or winding-up. Such notice shall be mailed at least
twenty-five (25) days prior to the date therein specified, and this
Warrant may be exercised prior to said date during the term of the
Warrant.
Notwithstanding the foregoing, however, in case of (ii) or (iii),
the Holder may elect to require the Company to redeem all or any
portion of this Warrant for an amount equal to the "Warrant
Liquidation Value" (as defined below) by giving written notice to the
Company of such election prior to the later of (a) fifteen (15) days
after receipt of the Company's notice and (b) ten (10) days prior to
the consummation of the event specified in (ii) or (iii) (the
"Expiration Date"). Upon receipt of such election, the Company shall
be obligated to redeem this Warrant or portion thereof on the later of
(a) the occurrence of the event specified in (ii) or (iii) or (b) five
days after the Company's receipt of such election. If any proposed
Change of Control Transaction does not occur, all requests for
redemption in connection therewith shall be automatically rescinded,
or if there has been a material change in the terms or the timing of
the transaction, the Holder may rescind its request for redemption by
giving written notice of such rescission to the Company within five
days following receipt by such holder of the Company's notice
regarding such material change.
The Warrant Liquidation Value shall be defined as an amount in
cash equal to the aggregate consideration which is due and payable
with respect to the Common Stock issuable upon conversion of this
Warrant upon any liquidation of the Company (whether voluntary or
involuntary), assuming the conversion into Common Stock of all
then-outstanding shares of preferred stock of the Company immediately
prior to such event (herein, the "Warrant Liquidation Value"),
(i) Threshold for Adjustments. Anything in paragraph 6(d) to the
contrary notwithstanding, the Company shall not be required to give
effect to any adjustment until the cumulative resulting adjustment in
the Exercise Price shall have required a change of the Exercise Price
by a least $0.0005 per share, but when the cumulative net effect of
more than one adjustment so determined shall be to change the Exercise
Price by at least $0.0005 per share, such full change in the Exercise
Price shall thereupon be given effect. No adjustment shall be made by
reason of the issuance of shares upon conversion rights, stock
issuance rights or similar rights currently outstanding or any change
in the number of treasury shares held by the Company.
7. Legend. Unless the shares of Warrant Stock have been registered under
the Securities Act, upon exercise of any of this Warrant and the issuance of any
of the shares of Warrant Stock, all certificates representing shares of Warrant
Stock shall bear on the face thereof substantially the following legend, insofar
as is consistent with New York law:
"THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR
SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED
PURSUANT TO THE PROVISIONS OF THAT ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN OPINION OF COUNSEL TO THE COMPANY IS OBTAINED STATING THAT
SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION."
8. Registration. Reference is hereby made to that certain Registration
Rights Agreement of even date herewith between the Company and Holder for
certain provisions relating to rights of the holder of the Warrant and/or
Warrant Stock to require the registration of the Warrant Stock.
9. Representations and Warranties. The Company represents and warrants to
the Holder as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and
other equitable remedies;
(b) The Warrant Stock has been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable and is not
subject to any preemptive right of any stockholder of the Company;
(c) The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the holders thereof are as set forth in
the certificate of incorporation of the Company, as amended to the Base
Date (as so amended, the "Charter"), a true and complete copy of which has
been delivered by the Company to the original holder of this Warrant;.
(d) As of the Base Date, the authorized capital stock of the Company
(of all classes and series, including Common Stock and preferred stock),
the par value thereof, and the issued and outstanding amounts thereof, are
as set forth on Schedule 9(d) hereof. The issuance and sale of all such
interests was in compliance with all applicable federal and state
securities laws, and all issued and outstanding shares of capital stock of
the Company are duly authorized, validly issued, fully paid, and
non-assessable. Other than this Warrant, and other than as specified on
Schedule 9(d) hereof, as of the Base Date there are no preemptive rights or
any outstanding subscriptions, options, warrants, rights, convertible
securities, calls or other agreements, arrangements or commitments
(including, without limitation, registration rights agreements and
anti-dilution rights) relating to the issued or unissued shares of the
Company's capital stock or other securities, including any right of
conversion or exchange under any outstanding security or other instrument.
There are not any outstanding bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of the Company may vote. As of the Base Date, other than
as specified on Schedule 9(d) hereof, the Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or any security convertible into or
exchangeable for any of its capital stock;
(e) The execution and delivery of this Warrant are not, and the
issuance and delivery of the Warrant Stock upon exercise of this Warrant in
accordance with the terms hereof will not be, inconsistent with the Charter
or by-laws of the Company, do not and will not contravene, in any material
respect, any governmental rule or regulation, judgment or order applicable
to the Company, do not and will not conflict with or contravene any
provision of, or constitute a default under, any indenture, mortgage,
contract or other instrument of which the Company is a party or by which it
is bound or require the consent or approval of, the giving of notice to,
the registration or filing with or the taking of any action in respect of
or by, any federal, state or local government authority or agency or other
person, except for the filing of notices pursuant to federal and state
securities laws, which filings may be effected. This Warrant and the
Warrant Stock are not and will not, be subject to any voting trust
agreement or other contract, agreement, arrangement, commitment or
understanding to which the Company is a party, including such agreement,
arrangement, commitment or understanding restricting or otherwise relating
to the voting or disposition thereof other than the Registration Rights
Agreement;
(f) There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company
in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
10. Indemnification. The Company shall indemnify, save and hold harmless
Holder and the holder of any Warrant Stock from and against any and all
liability, loss, cost, damage, reasonable attorneys' and accountants' fees and
expenses, court costs and all other out-of-pocket expenses reasonably incurred,
by such holder in connection with interpreting, preserving, exercising and/or
enforcing any of the terms hereof.
11. Notices. All notices required hereunder shall be in writing and shall
be deemed given (a) when delivered personally, (b) the next business day when
sent by nationally recognized overnight courier service procuring a return
receipt, or (c) within three business days after mailing when by certified or
registered mail, return receipt requested, to the following addresses, or at
such other address of which the Company or Holder has been advised by notice
hereunder:
If to the Company: Imperial Petroleum Inc.
11600 German Pines
Evansville, IN 47725
Attention: Jeffrey T. Wilson, President
Telephone: (812) 867-1433
Telecopier: (812) 867-1678
in each case, with a copy to:
Heskett & Heskett
501 Johnstone St.
Suite 501
Bartlesville, OK 74003
Attention: John Heskett, Esq.
Telephone: (918) 336-1773
Telecopier: (918) 336-3152
If to the Holder: Jefferies & Company, Inc.
520 Madison Ave., 8th Floor
New York, New York 10022
Attention: General Counsel
Telephone: 212-284-2266
Telecopier: 212-284-2280
12. Applicable Law. This Warrant is issued under and shall for all purposes
be governed by and construed in accordance with the laws of the state of New
York, without regard to its principles or rules of conflict of laws to the
extent such principles or rules would require or permit the application of the
laws of another jurisdiction.
13. Severability. The validity, legality or enforceability of the remainder
of this Warrant shall not be affected even if one or more of its provisions
shall be held to be invalid, illegal or unenforceable in any respect.
14. Waivers Strictly Construed. With regard to any power, remedy or right
provided herein or otherwise available to any party hereunder (i) no waiver or
extension of time shall be effective unless expressly contained in a writing
signed by the waiving party, and (ii) no alteration, modification or impairment
shall be implied by reason of any previous waiver, extension of time, delay or
omission in exercise, or other indulgence.
15. Complete Agreement and Modifications. This Warrant represents the
entire agreement of the Company with respect to the subject matter hereof and
may be changed only by a written agreement executed by the Company and the
Holder.
16. Survival of Representations, Warranties and Agreements. Each of the
respective representations and warranties of the Company and the Holder hereof
contained herein shall survive the Base Date, the exercise or conversion of this
Warrant (or any part hereof) and the termination or expiration of any rights
hereunder. Each of the respective agreements of each of the Company and the
Holder hereof contained herein shall survive indefinitely until, by their
respective terms, they are no longer operative.
17. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the Holder hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by the
Holder), may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
18. Acceptance. Receipt of this Warrant by the Holder shall constitute
acceptance of and agreement to the foregoing terms and conditions.
19. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed on its
behalf, in its corporate name, by its duly authorized officer, all as of the
date first written above.
Imperial Petroleum, Inc.
By:____________________________
Jeffrey T. Wilson, President
Warrant Exercise Form
To: Imperial Petroleum, Inc.
1. The undersigned hereby elects to purchase _____ shares of Common Stock of
Imperial Petroleum, Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full. ? (check
here)
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name or names as are specified below:
- ----------------------------- -----------------------------
(Name)
-----------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being acquired for
the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares in violation of
the Securities Act of 1933, as amended.
- ------------------------------ -----------------------
(Signature) (Date)
4. Please issue a new Warrant for the unexercised portion of the attached
Warrant in the name of the undersigned or in such other name as is specified
below:
- -----------------------------
(Name)
-------------------------------
Date:_______________________ By (Warrantholder):
-------------------------------
Name (Print):
-------------------------------
Its:
Assignment Form
(To be executed only upon the assignment
of the within Warrant)
FOR VALUE RECEIVED, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto _____________________________________,
whose address is __________________________________________, all of the rights
of the undersigned under the within Warrant, with respect to ___________________
shares of Common Stock of Imperial Petroleum, Inc. and, if such shares shall not
include all the Warrant Stock issuable as provided in the within Warrant, that a
new Warrant of like tenor for the Warrant Stock not being transferred hereunder
be issued in the name of and delivered to the undersigned, and does hereby
irrevocably constitute and appoint ____________________________________ Attorney
to register such transfer on the books of Imperial Petroleum, Inc. maintained
for the purpose, with full power of substitution in the premises.
Dated:_____________, ______ JEFFERIES & COMPANY, INC.
By: _____________________________________
Name: ____________________________________
Its: ____________________________________
NOTICE: The signature on this Assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatever.
The undersigned transferee whose address is_______________________________,
hereby agrees to be bound by the terms and conditions of the within Warrant.
Dated:_____________, ______ (Transferee)
By: ____________________________________
(Signature of Transferee)
Name: ___________________________________
Its: ____________________________________
Schedule 9(d)
Authorized Common Shares: 50,000,000
Authorized Preferred Shares: 0
Outstanding Common Shares: 37,298,103
Outstanding Warrants:
6,284,500 warrants outstanding prior to closing
1,915,719 warrants issued to HZ Capital at closing
2,394,649 warrants issued hereunder
For Immediate Release
IMPERIAL CLOSES PURCHASE OF OIL AND GAS ASSETS
EVANSVILLE, IN.....January 16, 2004 -- Imperial Petroleum, Inc. ("Imperial" or
the "Company")(OTCBB Symbol ... IPTM) announced today that it has completed the
purchase of the oil and gas assets of Warrior Resources, Inc. (formerly Comanche
Energy, Inc.) and Hillside Oil & Gas LLC in a total transaction valued at
approximately $11.96 million. As a result of the acquisition Imperial will
become the operator of some 146 wells in the states of Louisiana, Mississippi,
New Mexico and Texas and an additional 230 royalty properties in various states
producing an estimated 280 barrels of oil per day and 1.6 million cubic feet of
gas per day. Net proven reserves to the Company's interest as estimated by third
party engineers are 1.3 million barrels of oil and 29.5 billion cubic feet of
natural gas resulting in a discounted present worth at 10% of approximately
$49.3 million.
Jeffrey T. Wilson, President of Imperial said "We are excited to have
completed these previously announced acquisitions with the new $18.65 million
credit facility. Jefferies & Company assisted us in arranging the financing and
acted as an advisor on the acquisitions.. Our new financing will allow us the
flexibility to develop the inventory of behind pipe and undeveloped reserves
associated with these properties and to continue our growth plan through
additional acquisitions."
Imperial, through its subsidiaries and affiliates, is active in crude oil
and natural gas production and gold mining. Imperial is headquartered in
Evansville, IN.
This press release may contain "forward-looking statements" as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such statements
are based on management's current expectations and are subject to a number of
factors and uncertainties which could cause actual results to differ materially
from those described herein. Although the Company believes that the expectations
in such statements are reasonable, there can be no assurance that such
expectations will prove to be correct.
For further information contact: Jeffrey T. Wilson, President
(812-867-1433).