EXHIBIT 10.7
LOAN AGREEMENT
BETWEEN
GOODRICH PETROLEUM COMPANY, L.L.C.,
A LOUISIANA LIMITED LIABILITY COMPANY (BORROWER)
AND
MALLOY ENERGY COMPANY, L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY (LENDER)
TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS.......................................................... 1
1.1 Defined Terms......................................................... 1
1.2 Accounting Terms...................................................... 5
1.3 Singular/Plural....................................................... 5
1.4 Other Terms........................................................... 5
ARTICLE II. AMOUNT AND TERMS OF THE LOANS....................................... 6
2.1 Loans................................................................. 6
2.2 Note.................................................................. 7
2.3 Payments; Mandatory Prepayments....................................... 7
2.4 Interest.............................................................. 8
2.5 Method of Payments; Computations...................................... 9
2.6 Use of Proceeds....................................................... 9
2.7 Recovery of Payments.................................................. 9
2.8 Subordination......................................................... 10
ARTICLE III. CLOSING; CONDITIONS OF CLOSING AND BORROWING....................... 10
3.1 Conditions of Closing and the making of the Initial Loan.............. 10
3.2 Conditions of All Loans............................................... 10
ARTICLE IV. REPRESENTATIONS AND WARRANTIES...................................... 11
4.1 Corporate Organization and Power...................................... 11
4.2 Litigation; Government Regulation..................................... 11
4.3 Taxes................................................................. 11
4.4 Enforceability of Loan Documents; Compliance with Other Instruments... 11
4.5 Event of Default...................................................... 12
4.6 Full Disclosure....................................................... 12
4.7 Title to Assets....................................................... 12
4.8 Use of Proceeds....................................................... 12
4.9 Priority.............................................................. 12
ARTICLE V. AFFIRMATIVE COVENANTS................................................ 13
5.1 Financial and Business Information about the Borrower................. 13
5.2 Notice of Certain Events.............................................. 13
5.3 Corporate Existence and Maintenance of Properties..................... 13
5.4 Payment of Debt....................................................... 14
5.5 Maintenance of Insurance.............................................. 14
5.6 Maintenance of Books and Records; Inspection.......................... 14
5.7 Compliance with Laws.................................................. 14
5.8 Name Change........................................................... 15
5.9 Additional Collateral................................................. 15
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ARTICLE VI. NEGATIVE COVENANTS.................................................. 15
6.1 Merger, Consolidation, Ownership...................................... 15
6.2 Liens and Encumbrances................................................ 15
6.3 Disposition of Assets................................................. 15
6.4 Transactions with Related Persons..................................... 15
ARTICLE VII. EVENTS OF DEFAULT.................................................. 16
7.1 Events of Default..................................................... 16
ARTICLE VIII. RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT ....................... 17
8.1 Remedies.............................................................. 17
8.2 Right of Setoff....................................................... 18
ARTICLE IX. LENDER ACQUISITION RIGHTS........................................... 18
9.1 Option Interest....................................................... 18
9.2 Extension of Election Period.......................................... 19
9.3 Reduction of Maximum Line of Credit Amount............................ 19
ARTICLE X. MISCELLANEOUS........................................................ 19
10.1 Survival.............................................................. 19
10.2 Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.......... 20
10.3 Notice................................................................ 20
10.4 Amendments, Waivers, etc.............................................. 21
10.5 Rights and Remedies Cumulative, Non-Waiver, etc....................... 21
10.6 Binding Effect, Assignment............................................ 22
10.7 Severability.......................................................... 22
10.8 Entire Agreement...................................................... 22
10.9 Interpretation........................................................ 22
10.10 Counterparts, Effectiveness........................................... 22
10.11 Conflict of Terms..................................................... 22
10.12 Injunctive Relief..................................................... 22
10.13 Expenses of the Lender................................................ 23
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LOAN AGREEMENT
THIS LOAN AGREEMENT, effective as of the 8th day of March, 2002, is made
between GOODRICH PETROLEUM COMPANY, L.L.C., a Louisiana limited liability
company (the "Borrower") and MALLOY ENERGY COMPANY, L.L.C., a Delaware limited
liability company (the "Lender").
RECITALS
WHEREAS, the Lender is willing to make the Loans described herein based on
the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Lender hereby
agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Defined Terms. For purposes of this Loan Agreement, in addition to
the terms defined elsewhere in this Loan Agreement, the following terms shall
have the meanings set forth below:
"Affiliate" shall mean, as to any Person, each of the Persons that directly
or indirectly, through one or more intermediaries, owns or controls, or is
controlled by or under common control with, such Person. For the purpose of
this definition, "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of management and policies through the
ownership of voting securities, by agreement or otherwise.
"Agreement" or "this Agreement" or "Loan Agreement" shall mean this Loan
Agreement and any amendments, modifications and supplements hereto, any
replacements, renewals, extensions and restatements hereof, and any substitutes
herefor, in whole or in part and all Schedules and Exhibits hereto.
"Authorized Officer" shall mean any officer of the Borrower authorized by
Borrower to take the action specified herein.
"Bankruptcy Code" shall mean 11 U.S.C. (S) 101 et seq., as amended, and any
successor statute or statute having substantially the same function.
"Borrowing" shall mean the incurrence by the Borrower on a given date of a
Loan.
"Borrowing Date" shall have the meaning assigned to such term in Section
2.1.
"Business Day" shall mean any day other than a Saturday or Sunday, a legal
holiday or a day on which commercial banks in New York, New York, are required
by law to be closed.
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"Capital Lease" shall mean any lease of any property that would, in
accordance with GAAP, be required to be classified and accounted for as a
capital lease on the balance sheet of the lessee.
"Closing" shall mean the closing of the execution and delivery of this
Agreement.
"Closing Date" shall mean the date upon which the Closing takes place.
"Collateral" shall mean (x) all right, title and interest of the Borrower
in the Collateral described in the Mortgage and (y) all other collateral at any
time and from time to time granted to secure any of the Obligations, whether in
accordance with Section 5.9 hereof or otherwise.
"Default" shall mean any event that, with the passage of time or giving of
notice, or both, would constitute an Event of Default.
"Dollars" or "$" shall mean dollars of the United States of America.
"Event of Default" shall have the meaning specified in Article VII hereof.
"Financing Statements" shall mean financing statements approved for filing
in accordance with the applicable adopted version of the Uniform Commercial Code
and all other titles, documents, and certificates that the Lender may require
from the Borrower or any other Loan Party to describe and perfect the security
interests created hereunder, under the Mortgage or under the other Loan
Documents, and all assignments thereof and amendments thereto, in form and
substance satisfactory to the Lender.
"GAAP" shall mean generally accepted accounting principles, as in effect
from time to time, applied on a consistent basis.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any central bank thereof, any municipal,
local, city or county government, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Highest Lawful Rate" shall have the meaning specified in Section 2.4(c)
hereof.
"IRS" shall mean the Internal Revenue Service and any successor thereto.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Loan" shall have the meaning specified in Section 2.1(a).
"Loan Documents" shall mean and collectively refer to this Agreement, the
Note, the Mortgage, the Financing Statements, and any and all agreements,
instruments and documents, including, without limitation, guaranties, mortgages,
deeds to secure debt, deeds of trust, chattel mortgages, pledges, powers of
attorney, consents, assignments, contracts, notices, security agreements, trust
account agreements and all other written matters, whether heretofore, now or
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hereafter, executed by or on behalf of the Borrower or any Subsidiary or any
other Person and delivered to the Lender, with respect to securing the
Obligations under this Agreement and the other Loan Documents or otherwise with
respect to the extensions of credit contemplated by this Agreement, including,
without limitation, those agreements and other documents executed and delivered
in accordance with Section 5.9 hereof, and in each case, together with any
amendments, modifications and supplements thereto, any replacements, renewals,
extensions and restatements thereof, and any substitutes therefor, in whole or
in part.
"Loan Party" means the Borrower or any other Person who at any time
executes and delivers to the Lender a Loan Document.
"Margin Stock" means any margin stock within the meaning of Regulation U or
X of the Board of Governors of the Federal Reserve System or any other
regulations, interpretations or rulings thereunder.
"Material Adverse Effect" or "Material Adverse Change" shall mean a
material adverse effect upon, or a material adverse change in, any of (a) the
condition (financial or otherwise), operations, business, properties or
prospects of the Borrower or any of its Subsidiaries; or (b) the ability of the
Borrower or any Loan Party to perform under the Loan Documents.
"Maturity Date" shall mean December 31, 2004.
"Maximum Line of Credit Amount" shall mean at any time the maximum amount
of Loans that may be advanced at such time pursuant to the terms hereof and
shall initially be $7,700,000.00, subject to reduction from time to time
pursuant to the provisions of Article IX hereof.
"Mortgage" shall mean that certain Mortgage and Security Agreement dated as
of the date hereof by and between the Borrower and the Lender pursuant to which
the Borrower has granted to the Lender a mortgage on and security interest in
all of its property and assets as collateral security for the Obligations under
this Agreement and the other Loan Documents.
"Notice of Borrowing" shall have the meaning assigned to such term in
Section 2.1(b).
"Note" shall mean the promissory note referred to in the first sentence of
Section 2.2 together with any amendments, modifications and supplements thereto
and renewals, extensions and restatements thereof, and any substitutes therefor.
"Obligations" shall mean (i) the Loans and all other loans, advances,
indebtedness, liabilities, obligations, covenants and duties owing, arising, due
or payable from the Borrower or any other Loan Parties to the Lender of any kind
or nature, present or future, howsoever evidenced, created, incurred, acquired
or owing, arising under this Agreement, the Note or the other Loan Documents,
whether direct or indirect, absolute or contingent, primary or secondary, due or
to become due, now existing or hereafter arising and however acquired and (ii)
all interest (including, to the extent permitted by law, all post-petition
interest), charges, expenses, fees, attorneys' fees and any other sums payable
by the Borrower or any other Loan Party to the Lender under this Agreement or
any of the other Loan Documents.
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"Oil and Gas Assets" shall have the meaning assigned to such term in
Article IX hereof.
"Option Interests" shall have the meaning assigned to such term in Article
IX hereof.
"Permitted Liens" shall mean any of the following liens, restrictions or
encumbrances securing any liability or indebtedness of the Borrower or any
Subsidiary on, or otherwise affecting, any of the Borrower's or such
Subsidiary's property, real or personal, whether now owned or hereafter
acquired:
(a) Senior Liens;
(b) Liens granted to Lender;
(c) Liens imposed by mandatory provisions of law of carriers, warehousemen,
mechanics, repairmen and materialmen and other like liens required by provisions
of law and incurred in the ordinary course of business for sums not yet due and
payable (or with respect to any obligation not greater than $5,000, not more
than sixty (60) days past the date of service) or that are being contested in
good faith and with due diligence by appropriate proceedings;
(d) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of governmental
insurance or benefits, or liens arising from good faith deposits in connection
with letters of credit, bids, tenders, statutory obligations, leases and
contracts (other than for borrowed money) entered into in the ordinary course of
business, provided that all such liens in the aggregate would not have a
Material Adverse Effect;
(e) Liens for current taxes, assessments or other governmental charges that
are not delinquent or remain payable without any penalty or that are being
contested in good faith and with due diligence by appropriate proceedings,
provided that all such liens in the aggregate have no Material Adverse Effect;
(f) Easements, rights of way, zoning restrictions and other similar
encumbrances on real estate that do not materially impair the value of the
property to which they relate; and
(g) Any other liens or encumbrances constituting Permitted Liens under the
Senior Agreement or as the Lender may otherwise approve in writing from time to
time.
"Person" shall mean a corporation, an association, a joint venture, a
partnership, an organization, a business, an individual, a trust or a government
or political subdivision thereof or any government agency or other Governmental
Authority or any other legal entity.
"Purchase Agreement" shall have the meaning assigned to such term in
Article IX hereof.
"Requirement of Law" means, as to any Person, the charter, articles or
certificate of incorporation and bylaws or other organizational or governing
documents of such Person, and any statute, law, treaty, rule, regulation, order,
decree, writ, injunction or determination of any arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
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"Senior Agreement" shall mean that certain Credit Agreement dated November
9, 2001 by and between Goodrich Petroleum Company, L.L.C., the Lenders now or
hereafter party thereto (the "Senior Lenders") and BNP Paribas, as agent for
such Senior Lenders (the "Senior Agent"), as the same may be modified, amended
or restated from time to time.
"Senior Indebtedness" shall mean (i) all loans, advances, indebtedness,
liabilities, obligations, covenants and duties owing, arising, due or payable
from the Borrower to Senior Agent, any Senior Lender or any of their respective
Affiliates of any kind or nature, present or future, howsoever evidenced,
created, incurred, acquired or owing arising under the Senior Agreement, or any
other Loan Document (as defined in the Senior Agreement) or Swap Agreement (as
defined in the Senior Agreement), or in any other way related to such agreement,
whether direct or indirect, absolute or contingent, primary or secondary, due or
to become due, now existing or hereafter arising and however acquired and (ii)
all interest (including, to the extent permitted by law, all post-petition
interest), charges, expenses, fees, attorneys' fees and any other sums payable
by the Borrower to Senior Agent or any Senior Lender under the Senior Agreement,
any Swap Agreement or any of the other Loan Documents (as defined in the Senior
Agreement).
"Senior Liens" shall mean the liens granted in favor of Senior Agent or any
Senior Lender pursuant to or in connection with the Senior Agreement.
"Subordination Agreement" means that certain Subordination and
Intercreditor Agreement of even date herewith by and among Lender, Borrower, the
"Guarantors" described therein and Senior Agent, as the same may be modified,
restated or amended from time to time.
"Subsidiary" of any Person means (x) any entity of which more than 50% (in
number of votes) of the voting capital stock (or equivalent interests) is owned
of record or beneficially, directly or indirectly through one or more
intermediaries, by that Person or (y) any general or limited partnership of
which such Person, or any of its Subsidiaries, is the sole, controlling or
managing general partner.
"Uniform Commercial Code" shall mean the Uniform Commercial Code of the
State of New York, as amended from time to time, unless in any particular
instance the Uniform Commercial Code of another state is applicable, in which
case it shall mean the Uniform Commercial Code of such state.
1.2. Accounting Terms. Any accounting terms used in this Agreement that
are not specifically defined shall have the meanings customarily given them in
accordance with GAAP, acknowledging that Borrower employs the cash method of
accounting for income tax reporting purposes.
1.3 Singular/Plural. Unless the context otherwise requires, words in the
singular include the plural and words in the plural include the singular.
1.4 Other Terms. All other terms contained in this Agreement shall, when
the context so indicates, have the meanings provided for by the Uniform
Commercial Code of the
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State of New York, as in effect on the date hereof, to the extent the same are
used or defined therein.
ARTICLE II.
AMOUNT AND TERMS OF THE LOANS
2.1 Loans.
(a) Until the Maturity Date, and subject to the terms and conditions herein
contained, the Lender shall provide a line of credit (the "Line of Credit") to
the Borrower as provided in this Section 2.1. The parties hereto agree that all
loans made under the Line of Credit shall be subject to and on the terms and
conditions of this Agreement (each such loan, a "Loan" and collectively, the
"Loans"). The Loans shall be made to the Borrower, from time to time on any
Business Day during the period from the date hereof to but not including the
Maturity Date, provided that (i) the aggregate principal amount of the Loans at
any time outstanding shall not exceed the Maximum Line of Credit Amount; and
(ii) no Borrowing shall be requested by the Borrower or made by the Lender if,
immediately after giving effect thereto, a Default or Event of Default would
exist. The proceeds of the Loans shall be used by Borrower for capital
expenditures, for acquisitions of oil and gas interests, for drilling and
completion expenses, for general working capital needs and for any other purpose
approved by Lender, but in no event shall the proceeds of any Loan be used for
the purpose of purchasing or carrying any Margin Stock.
(b) The Borrower may request no more than two (2) Borrowings under the Line
of Credit in any calendar month. Whenever the Borrower desires to make a
Borrowing under the Line of Credit, the Borrower will give the Lender written
notice (by telecopier or otherwise), prior to 11:00 a.m., Houston time, at least
five (5) Business Days prior to such Borrowing. Each such notice (each, a
"Notice of Borrowing") shall be irrevocable and shall be appropriately completed
to specify (i) the principal amount of the Loan to be made pursuant to such
Borrowing; (ii) the requested date of the Borrowing (the "Borrowing Date"),
which shall be a Business Day; and (iii) the intended use of the proceeds of
such Borrowing. In addition, the Borrower shall deliver such other
documentation relating to the proposed Borrowing or the Borrower's business and
operations as the Lender may, in its sole discretion, request.
(c) The Lender will make the amount of such Borrowing available to the
Borrower according to the instructions contained in the Notice of Borrowing, no
later than 2:00 p.m., Houston time, on the Borrowing Date. The Borrower hereby
authorizes the Lender to disburse the proceeds of each Borrowing in accordance
with the terms of any written instructions from any of the Authorized Officers.
(d) Interest on the Loans shall accrue in accordance with the provisions of
Section 2.4. Accrued (and theretofore unpaid) interest on the Loans shall be
payable the first day of each month commencing with May, 2002 and continuing
monthly thereafter.
(e) The Borrower shall have the right from time to time to prepay the
Loans, in whole or in part, without premium or penalty, and may reborrow any
sums so repaid on the terms set forth herein.
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(f) The Loans are subject to payment, from time to time, as a result of the
Lender's obligation to pay for Option Interests by reducing the amount of
outstanding principal on the Loans as more specifically set forth in Article IX
hereof.
2.2 Note.
(a) The Loans made by the Lender shall be evidenced by a promissory note
appropriately completed in substantially the form of Exhibit A. The Note issued
to the Lender shall (i) be executed by the Borrower, (ii) be payable to the
order of the Lender, (iii) be dated as of the date hereof, (iv) be in a stated
principal amount equal to the initial Maximum Line of Credit Amount, (v) bear
interest in accordance with the provisions of Section 2.4, as the same may be
applicable from time to time, and (vi) be entitled to all of the benefits of
this Agreement and the other Loan Documents and subject to the provisions hereof
and thereof.
(b) The Lender will record on its internal records the amount of each Loan
made by it and each payment received by it in respect thereof; provided,
however, that the failure of the Lender to make any such recordation or any
error in such recordation shall not affect the Borrower's obligations in respect
of such Loans. Within 30 days after the end of each month, the Lender shall
furnish to the Borrower a detailed summary of all Borrowings, interest charges,
payments and prepayments hereunder during such month; provided, however, that
the failure to so furnish any such summary(ies) shall not affect the Borrower's
obligations hereunder or under any other Loan Document; nor shall the Lender
have any liability for any such failure(s).
2.3 Payments; Mandatory Prepayments.
(a) In the event that the principal amount of Loans outstanding as of any
date shall exceed the Maximum Line of Credit Amount as of such date, the
Borrower shall prepay the amount of such excess within five (5) days after
receipt of notice of such excess from the Lender.
(b) The Borrower shall repay the Note in full on the Maturity Date,
together with all accrued and unpaid interest thereon to such date.
(c) All payments under this Agreement and the Note shall be made in the
State of New York to such bank account as shall be designated from time to time
by the Lender to the Borrower.
In the event that payments made hereunder by the Borrower at any particular
time are insufficient to satisfy in full the outstanding Obligations, such
payments shall be applied (i) first, to expenses due pursuant to the terms of
this Agreement or any other Loan Document, (ii) second, to accrued and unpaid
interest on Loans and (iii) third, to the outstanding principal amount of Loans.
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2.4 Interest.
(a) The Borrower will pay interest in respect of the unpaid principal
amount from time to time of the Loans, from the date of Borrowing thereof until
such principal amount shall be paid in full, at a rate per annum equal to the
lesser of (i) eight percent (8%) per annum and (ii) the Highest Lawful Rate.
(b) Upon the occurrence and during the continuance of an Event of Default,
all outstanding principal amounts of the Loans and, if and to the extent
permitted by law, all interest accrued on the Loans and all other fees and
amounts not paid when due hereunder, shall bear interest at a rate per annum
equal to the lesser of (i) twelve percent (12%) per annum and (ii) the Highest
Lawful Rate and such interest shall be payable on demand. To the greatest
extent permitted by law, interest shall continue to accrue after the filing by
or against the Borrower of any petition seeking any relief in bankruptcy or
under any law pertaining to insolvency or debtor relief.
(c) It is the intention of the parties hereto to conform strictly to
applicable usury laws regarding the use, forbearance or detention of the
indebtedness evidenced by this Agreement, the Note and the other Loan Documents,
whether such laws are now or hereafter in effect, including the laws of the
United States of America or any other jurisdiction whose laws are applicable,
and including any subsequent revisions to or judicial interpretations of those
laws, in each case to the extent they are applicable to this Agreement, the Note
and the other Loan Documents (the "Applicable Usury Laws"). Accordingly, if any
acceleration of the maturity of the Note or any payment by the Borrower or any
other Person results in the Borrower or such other Person being deemed to have
paid any interest in excess of the Maximum Amount, as hereinafter defined, or to
have paid unearned interest in violation of any Applicable Usury Law, or if any
transaction contemplated hereby or by any other Loan Document would otherwise be
usurious under any Applicable Usury Laws, then, in that event, notwithstanding
anything to the contrary in this Agreement or any other Loan Document or any
other agreement or instrument, it is agreed as follows: (i) the provisions of
this Section 2.4(c) shall govern and control; (ii) the aggregate of all interest
under Applicable Usury Laws that is contracted for, charged or received under
this Agreement, or under any of the other aforesaid agreements or instruments or
otherwise shall under no circumstances exceed the Maximum Amount, and any excess
shall be promptly refunded to the Borrower or such other Person by the Lender;
(iii) neither the Borrower nor any other Person shall be obligated to pay the
amount of such interest to the extent that it is in excess of the Maximum
Amount; and (iv) the effective rate of interest on the Loan shall be ipso facto
reduced to the Highest Lawful Rate, and the provisions of this Agreement, the
Note and the other Loan Documents immediately shall be deemed reformed, without
the necessity of the execution of any new document or instrument, so as to
comply with all Applicable Usury Laws. All sums paid, or agreed to be paid, to
the Lender for the use, forbearance or detention of the indebtedness of the
Borrower to the Lender evidenced by this Agreement and the Note and the other
Loan Documents shall, to the fullest extent permitted by the Applicable Usury
Laws, be amortized, pro rated, allocated and spread throughout the full term of
the indebtedness evidenced by this Agreement, the Note and the other Loan
Documents so that the actual rate of interest does not exceed the Highest Lawful
Rate in effect at any particular time during the full term thereof. As used
herein, the term "Highest Lawful Rate" means the maximum rate of interest, if
any, that may be charged under all Applicable Usury Laws on the principal
balance of the Loans from
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time to time outstanding; and the term "Maximum Amount" means the maximum
nonusurious amount of interest which may be lawfully contracted for, charged or
received by the Lender in connection with the indebtedness evidenced by this
Agreement, the Note and other Loan Documents under all Applicable Usury Laws. If
at any time the stated rate of interest provided for under Sections 2.4(a) or
(b), together with any other fees and additional amounts payable hereunder or
under any other agreements or instruments that are deemed to constitute interest
under Applicable Usury Laws (the "Additional Interest"), exceeds the Highest
Lawful Rate, then the amount of interest to accrue pursuant to this Agreement
and the Note and the other Loan Documents shall be limited, notwithstanding
anything to the contrary in this Agreement or the Note or any other Loan
Document or any other agreement or instrument, to the amount of interest that
would accrue at the Highest Lawful Rate; provided, however, that to the fullest
extent permitted by Applicable Usury Laws, any subsequent reductions in the
Interest Rate shall not reduce the interest to accrue pursuant to this
Agreement, the Note and the other Loan Documents below the Highest Lawful Rate
until the aggregate amount of interest actually accrued pursuant to this
Agreement, the Note and the other Loan Documents, together with all Additional
Interest, equals the amount of interest which would have accrued if the stated
interest rate provided hereunder had at all times been in effect and such
Additional Interest, if any, had been paid in full.
2.5 Method of Payments; Computations.
(a) Except as expressly set forth in Article IX hereof, all payments by the
Borrower hereunder and under the Note shall be made without setoff, counterclaim
or other defense, in Dollars and in immediately available funds to the Lender
prior to 2 p.m., Houston time, on the date payment is due. Any such payment
made as required hereinabove, but after 2 p.m., Houston time, shall be deemed to
have been made on the next succeeding Business Day. If any payment falls due on
a day that is not a Business Day, then such due date shall be extended to the
next succeeding Business Day, and such extension of time shall then be included
in the computation of payment of interest, fees or other applicable amounts.
(b) All computations of interest and fees hereunder shall be made on the
basis of a year consisting of 365 or 366 days, as applicable, and the actual
number of days (including the first day, but excluding the last day) elapsed.
2.6 Use of Proceeds. The proceeds of each Loan shall be used for the
purposes specified in the Notice of Borrowing relating to such Loan and in
accordance with Section 2.1(a) hereof.
2.7 Recovery of Payments. The Borrower agrees that to the extent the
Borrower makes a payment or payments to or for the account of the Lender, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or similar
state or federal law, or otherwise at law or equity, then, to the extent of such
payment or repayment and to the extent permitted by law, the Obligation intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been received.
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2.8 Subordination. The Obligations shall be, to the extent and in the
manner set forth in the Subordination Agreement, subordinated and junior in
right of payment to the prior indefeasible payment in full of all Senior Debt
(as defined therein).
ARTICLE III.
CLOSING; CONDITIONS OF CLOSING AND BORROWING
3.1 Conditions of Closing and the making of the Initial Loan. No Loans
shall be made by Lender hereunder unless the following conditions precedent
shall have been satisfied:
(a) The Lender shall have received the following, each dated as of the
Closing Date (unless otherwise specified):
(i) counterparts hereof signed by each of the parties hereto;
(ii) the Note;
(iii) the Mortgage, duly completed and executed by the Borrower;
(iv) an acknowledgement copy, or other evidence satisfactory to the
Lender, of the proper filing or recording of each document (including
Financing Statements) to be filed or recorded in each jurisdiction in which
the filing or recording is necessary or appropriate in order to create in
favor of the Lender, a valid, legal and perfected first priority security
interest in or lien on the Collateral that is the subject of the Mortgage,
subject only to Permitted Liens;
3.2 Conditions of All Loans. No Loans shall be made by Lender unless the
following conditions precedent have been satisfied on the relevant Borrowing
Date:
(a) The Lender shall have received a Notice of Borrowing in accordance with
Section 2.1(b);
(b) Each of the representations and warranties made by the Borrower and
each other Loan Party contained in Article IV or any other Loan Document shall
be true and correct on and as of such Borrowing Date, with the same effect as if
made on and as of the Borrowing Date, except to the extent, with the prior
written consent of the Lender, the facts upon which such representation and
warranty are based may be changed as a result of transactions permitted or
contemplated hereby or such representation or warranty relates solely to a prior
date;
(c) No Default or Event of Default shall have occurred and be continuing on
such date, both immediately before and after giving effect to the Loans to be
made; and
(d) The security interests in the Collateral previously pledged to the
Lender pursuant to the Loan Documents shall remain perfected security interests
second in priority only to the Senior Liens and other applicable Permitted Liens
and shall be in full force and effect.
(e) The use of proceeds of the Borrowing, as specified in the Notice of
Borrowing, shall comply with Section 2.1.
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(f) The Lender shall have received such other documents or certificates, in
form and substance reasonably satisfactory to the Lender, as it may reasonably
request in connection with such Loan.
Each giving of a Notice of Borrowing and the consummation of each Borrowing
shall be deemed to constitute a representation by the Borrower that the
statements contained in subsections (b), (c), (d) and (e) above are true, both
as of the date of such notice or request and as of the relevant Borrowing Date.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Loan Agreement and extend
the credit contemplated hereby, the Borrower makes the following warranties and
representations to the Lender:
4.1 Corporate Organization and Power. (a) The Borrower is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Louisiana and each other Loan Party is an entity duly
organized, validly existing and in good standing under the laws of its state of
organization; and (b) each of the Borrower and the other Loan Parties has the
power to own and grant a lien on and security interest in the Collateral it has
granted in favor of the Lender and to engage in the transactions contemplated
hereby and by the other Loan Documents to which it is a party; and each has the
full power, authority and legal right to execute and deliver this Agreement and
the other Loan Documents to which it is a party and to perform and observe the
terms and provisions thereof.
4.2 Litigation; Government Regulation. (a) There are no judgments,
injunctions or similar orders or decrees and no actions, suits, investigations
or proceedings pending (pursuant to which the Borrower or any of its
Subsidiaries has been served) or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries or their respective
businesses at law or in equity before any court, arbitrator or other
Governmental Authority that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect, and (b) neither the Borrower nor
any of its Subsidiaries is in material violation of or in material default under
any Requirement of Law.
4.3 Taxes. Neither the Borrower nor any of its Subsidiaries is delinquent
in the payment of any material amount of taxes that have been levied or assessed
by any Governmental Authority against it or its assets. Each of the Borrower
and its Subsidiaries (a) has timely filed all tax returns required to be filed
by law, and has paid all taxes shown on said returns and all other assessments
or fees levied upon it or upon its properties to the extent that such taxes,
assessments or fees have become due, and if not due, such taxes have been
adequately provided for and sufficient reserves therefor established on its
books of account, and (b) is current with respect to payment of all federal and
state withholding taxes, social security taxes and other payroll taxes.
4.4 Enforceability of Loan Documents; Compliance with Other Instruments.
Each of the Loan Documents to which the Borrower or any other Loan Party is a
party, has been
11
duly authorized by all necessary action on the part of each such Loan Party, has
been validly executed and delivered by each such Loan Party which is a party
thereto and is the legal, valid and binding obligation of each such Loan Party
which is a party thereof, enforceable against each such Loan Party in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditor's rights generally or by general principles of equity.
Neither the Borrower nor any of its Subsidiaries is in default with respect to
any indenture, loan agreement, mortgage, lease, deed or similar agreement
related to the borrowing of monies to which it is a party or by which it, or any
of its property, is bound except where such default could not reasonably be
expected to have a Material Adverse Effect. Neither the execution, delivery or
performance of the Loan Documents by the Borrower or any other Loan Party, nor
compliance by the Borrower or any other Loan Party therewith: (a) conflicts or
will conflict with or results or will result in any breach of, or constitutes or
will constitute with the passage of time or the giving of notice or both, a
default under, (i) any Requirement of Law or (ii) any written or oral agreement
or instrument to which the Borrower or any other Loan Party is a party or by
which it, or any of its property, is bound, or (b) results or will result in the
creation or imposition of any lien, charge or encumbrance upon the properties of
the Borrower or any other Loan Party pursuant to any such agreement or
instrument.
4.5 Event of Default. No Default or Event of Default has occurred and is
continuing.
4.6 Full Disclosure. There is no fact related to the business of the
Borrower or any of its Subsidiaries that the Borrower has not disclosed to the
Lender that may reasonably be expected to result in a Material Adverse Effect.
4.7 Title to Assets. The Borrower has good and indefeasible title to the
Collateral purported to be covered by the Mortgage, and each other Loan Party
that is a party to a Loan Document contemplated by Section 5.9 has good and
indefeasible title to the Collateral purported to be covered thereby, in each
case free and clear of all liens, claims, security interests and encumbrances
except Permitted Liens, including without limitation the Senior Liens.
4.8 Use of Proceeds. The Borrower's use of the proceeds of any Loans made
by the Lender to the Borrower pursuant to this Agreement are and will be legal
and proper business uses, and such uses are and will be consistent in all
material respects with all applicable laws and statutes, as in effect from time
to time, and with Section 2.1 (a) hereof.
4.9 Priority. Except for Permitted Liens, when the initial Loans are made
hereunder, this Agreement, together with the other Loan Documents, will create
valid and perfected security interests and liens in and upon the Collateral
purported to be covered thereby second only in priority to the Senior Liens, in
each case enforceable against the Borrower and all other Persons in all relevant
jurisdictions and securing the payment of all Obligations purported to be
secured thereby.
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ARTICLE V.
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of this
Agreement and the payment in full of all principal and interest with respect to
the Loans together with all other amounts then due and owing hereunder, it will
comply and cause its Subsidiaries to comply with the following covenants.
5.1 Financial and Business Information about the Borrower and its
Subsidiaries. The Borrower shall provide the following financial information
and statements, and such additional information as requested by the Lender from
time to time, all in form and detail reasonably acceptable to the Lender:
(a) within 120 days of the end of each fiscal year of the Borrower, the
Borrower's annual financial statements, compiled by a certified public
accountant;
(b) within 45 days of the end of each calendar quarter, the Borrower's
unaudited quarterly financial statements; and
(c) upon the Lender's request, the Borrower will furnish such information
about the Collateral or the financial condition and operations of the Borrower
and each of its Subsidiaries as the Lender may from time to time reasonably
request and Borrower may supply without violation of its obligations to any
third party.
5.2 Notice of Certain Events. The Borrower shall promptly, but in no
event later than five (5) Business Days after the Borrower or any of its
Subsidiaries obtains knowledge thereof, give written notice to the Lender of:
(a) Any attachment, judgment, lien, levy or order that is placed on,
assessed against or threatened against the Borrower or any of its Subsidiaries
or any of the Collateral, except for Permitted Liens including, without
limitation, the Senior Liens;
(b) Any Default or Event of Default; and
(c) Any matter that has resulted in a Material Adverse Change or that could
reasonably be expected to have a Material Adverse Effect.
5.3 Corporate Existence and Maintenance of Properties. The Borrower shall
and shall cause each of its Subsidiaries to:
(a) Maintain and preserve in full force and effect (i) its existence as a
limited liability company, in the case of the Borrower, or other legal entity,
in the case of each such Subsidiary, and (ii) all material rights, privileges
and franchises;
(b) Keep its properties in good working order and condition (normal wear
and tear excepted) and from time to time make all needed repairs to, renewals of
or replacements of its properties (except to the extent that any of such
properties are obsolete or are being replaced); and
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(c) File or cause to be filed in a timely manner all reports, applications,
estimates and licenses and other filings required by any Governmental Authority
that, if not timely filed, could reasonably be expected to have a Material
Adverse Effect.
5.4 Payment of Debt. The Borrower shall and shall cause each of its
Subsidiaries to pay all material indebtedness when due and all other obligations
in accordance with customary trade practices.
5.5 Maintenance of Insurance.
(a) The Borrower shall and shall cause each of its Subsidiaries to maintain
and pay for insurance on its properties, assets and business, now owned or
hereafter acquired, against such casualties, risks and contingencies, and in
such types and amounts and with such insurance companies, as shall be customary
in its business and reasonably satisfactory to the Lender and, if requested,
deliver certificates and copies of policies of such insurance to the Lender,
provided, however, that such types and amounts of insurance in effect at the
Closing Date shall continue to be satisfactory for the business of the Borrower
(in existence as of the date hereof) as conducted as of the date of this
Agreement.
(b) If the Borrower or any of its Subsidiaries fails to obtain and maintain
any of the policies of insurance required to be maintained hereunder or to pay
any premium in whole or in part, then the Lender may, at the Borrower's expense,
without waiving or releasing any obligation or Default by the Borrower
hereunder, procure the same, but shall not be required to do so. All sums so
disbursed by the Lender, including reasonable expenses and other charges related
thereto, shall be payable on demand by the Borrower to the Lender and shall be
additional Obligations hereunder, secured by the Collateral.
(c) Upon the reasonable request of the Lender from time to time, the
Borrower shall deliver to the Lender evidence that the insurance required to be
maintained pursuant to this Agreement is in effect.
5.6 Maintenance of Books and Records; Inspection. The Borrower shall and
shall cause each of its Subsidiaries to maintain adequate books, accounts and
records and, upon reasonable request, to permit employees or agents of the
Lender to inspect the properties of the Borrower or such Subsidiary relating to
this Agreement and the other Loan Documents and to examine or audit the books,
records, working papers and accounts of the Borrower and each such Subsidiary
and make copies and memoranda of them, and to discuss the affairs, finances and
accounts of the Borrower and its Subsidiaries with its officers, all at such
times and from time to time during business hours as may be reasonably
requested.
5.7 Compliance with Laws. The Borrower shall and shall cause each of its
Subsidiaries to (i) have all material licenses, permits, certifications,
approvals and authorizations required by Governmental Authorities or necessary
to the ownership, occupation or use of its properties or the conduct of its
business and maintain the same at all times in full force and effect for so long
as is required, and (ii) comply in all material respects with all Requirements
of Law in respect of the conduct of its business, the ownership of its property
and the Collateral.
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5.8 Name Change. The Borrower shall notify the Lender at least thirty
(30) days prior to the effective date of any change of its name or the name of
any Loan Party, and prior to such effective date the Borrower shall, or shall
cause such Loan Party, as applicable, to have executed any required amended or
new Financing Statements and other Loan Documents necessary to maintain and
continue the mortgage on and perfected security interest of the Lender in all of
its Collateral and shall have taken such other actions and executed such
documents as the Lender shall reasonably require.
5.9 Additional Collateral. At any time the Borrower or any other Person
pledges, assigns or grants a lien or security interest or otherwise provides
collateral security in any property to secure any of the Senior Indebtedness,
the Borrower shall, or shall cause such other Person, as the case may be, to
execute and deliver to the Lender appropriate agreements, instruments and
documents, in form and substance satisfactory to the Lender, granting a valid
and perfected lien and security interest in favor of the Lender, to secure all
of the Obligations, in all such property, second only in priority to the Senior
Liens; provided, however, that no such grant need be made in any capital stock
of the Borrower or any of its Subsidiaries.
ARTICLE VI.
NEGATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of this
Agreement and the payment in full of all principal and interest with respect to
the Loans together with all other amounts then due and owing hereunder:
6.1 Merger, Consolidation, Ownership. The Borrower will not, and will not
permit any of its Subsidiaries to, liquidate, wind up or dissolve, or enter into
any consolidation, merger or other such combination, or agree to do any of the
foregoing; nor shall the Borrower or any of its Subsidiaries at any time,
directly or indirectly, purchase or carry any Margin Stock.
6.2 Liens and Encumbrances. The Borrower will not, and will not permit
any of its Subsidiaries to, create, assume or suffer to exist any deed of trust,
mortgage or encumbrance, lien (including a lien of attachment, judgment or
execution) or security interest (including the interest of a conditional seller
of goods), securing a charge or obligation, in or on any of its property, real
or personal, whether now owned or hereafter acquired, except for Permitted Liens
including, without limitation, the Senior Liens.
6.3 Disposition of Assets. The Borrower will not, and will not permit any
of its Subsidiaries to, sell, lease, transfer, convey or otherwise dispose of
any of its assets or property, including, without limitation, the Collateral,
except for sales of assets or property in the ordinary course of business and as
otherwise may be permitted under the terms of the Senior Agreement.
6.4 Transactions with Related Persons. Other than transactions with the
Lender and its Affiliates, the Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly make any loan or advance to, or
purchase, assume or guarantee any debt to or from, any of its officers,
directors, stockholders or Affiliates, or subcontract any operations to any
15
Affiliate, or enter into any transaction with any Affiliate, except (a) in the
ordinary course of and pursuant to the reasonable requirements of the Borrower's
or such Subsidiary's business and (b) upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than the Borrower or such
Subsidiary would obtain in a comparable arm's-length transaction with a Person
not an Affiliate.
ARTICLE VII.
EVENTS OF DEFAULT
7.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) The Borrower fails to pay when due any principal of or interest on the
Note within three (3) days of the date the same becomes due or fails to pay
within ten (10) days of the date when due any fees, expenses or other payments
hereunder or under any other Loan Document;
(b) The Borrower or any other Loan Party fails or neglects to observe,
perform or comply with any term, provision, condition or covenant contained
herein or in any Loan Document except those specified in subsection (a) above
(and except to the extent that violations of any such provisions or covenants
otherwise trigger an Event of Default under any of the other subparagraphs of
this Section 7.1), and such failure, if capable of being remedied, shall remain
unremedied for fifteen (15) business days after the earlier of (i) notice
thereof from the Lender or (ii) the Borrower or such Loan Party, as the case may
be, acquires knowledge thereof;
(c) The Borrower or any of its Subsidiaries fails or neglects to observe,
perform or comply with any term, provision, condition or covenant contained in
the Senior Agreement or any other material contract for borrowed money, and such
failure or neglect continues beyond any grace period provided for therein;
(d) If any representation or warranty made in writing by or on behalf of
the Borrower or any other Loan Party in this Agreement, in the other Loan
Documents or in any other agreement now existing or hereafter executed between
the Borrower or such other Loan Party and the Lender in connection with any Loan
Document, or in connection with the transactions contemplated hereby or thereby,
shall prove to have been false or misleading in any material respect when made;
(e) The occurrence of an "Event of Default" under any of the Loan
Documents;
(f) The occurrence of any material uninsured damage to or loss, theft or
destruction of the Collateral or other assets of the Borrower or any of its
Subsidiaries that has a Material Adverse Effect;
(g) The Borrower or any Loan Party shall (i) file a voluntary petition or
commence a voluntary case seeking liquidation, winding-up, reorganization,
dissolution, arrangement, readjustment of debts or any other relief under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, (ii) consent to the institution of, or fail to
controvert in a timely and appropriate manner, any petition or case of the
16
type described in subsection (h) below, (iii) apply for or consent to the
appointment of or taking possession by a custodian, trustee, receiver or similar
official for or of itself or all or a substantial part of its properties or
assets, (iv) fail generally to pay its debts generally as they become due, or
(v) make a general assignment for the benefit of creditors;
(h) Any involuntary petition or case shall be filed or commenced against
the Borrower or any Loan Party seeking liquidation, winding-up, reorganization,
dissolution, arrangement, readjustment of debts, the appointment of a custodian,
trustee, receiver or similar official for it or all or a substantial part of its
properties or any other relief under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect, and
such petition or case shall continue undismissed and unstayed for a period of
sixty (60) days; or an order, judgment or decree approving or ordering any of
the foregoing shall be entered in any such proceeding;
(i) A notice of lien, levy or assessment in excess of $1,000,000 is filed
of record against any portion of the assets of the Borrower or any of its
Subsidiaries by the United States, or any department, agency or instrumentality
thereof, or by any other Governmental Authority or if any taxes or debts in
excess of $1,000,000 owing at any time or times hereafter to any one of them
becomes a lien or encumbrance (other than a Permitted Lien) upon the Collateral
or any other asset of the Borrower or any of its Subsidiaries, and the same is
not dismissed, released, discharged or stayed pending appeal within thirty (30)
days after the same becomes a lien or encumbrance or, in the case of ad valorem
taxes, prior to the last day when payment may be made without penalty;
(j) The entry of a judgment or the issuance of a warrant of attachment,
execution or similar process against the Borrower or any of its Subsidiaries or
any of their respective assets that is $1,000,000 or more in excess of proceeds
of insurance which shall not be dismissed, discharged, stayed pending appeal or
bonded within sixty (60) days after entry;
(k) The occurrence of any Material Adverse Change; or
(l) The existence of any security interests, liens or other encumbrances in
any property of the Borrower or any of its Subsidiaries in excess of $20,000 in
the aggregate at any time other than Permitted Liens including the Senior Liens.
ARTICLE VIII.
RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
8.1 Remedies. Upon and at any time after the occurrence and during the
continuance of any Event of Default, the Lender may take any or all of the
following actions at the same or different times:
(a) Declare all or any part of the outstanding principal amount of the
Loans, all unpaid interest accrued thereon, and all other amounts (excluding
unearned interest) payable under this Agreement, the Note and the other Loan
Documents to be immediately due and payable, whereupon such outstanding
principal amounts, accrued interest and other such amounts shall become
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate or other notice or legal process of any kind, all of which
are hereby
17
knowingly and expressly waived by the Borrower to the extent permitted by law
(provided that, upon the occurrence of an Event of Default pursuant to Sections
7.1(g) or (h), all of such outstanding principal amounts, accrued and unpaid
interest and other such amounts shall automatically become immediately due and
payable);
(b) Terminate any further obligation on the part of the Lender to make any
Loans hereunder; and
(c) Exercise all rights and remedies available to it under this Agreement,
the other Loan Documents and applicable law.
8.2 Right of Setoff. The Lender may, and is hereby authorized by the
Borrower, at any time and from time to time, to the fullest extent permitted by
applicable law, to set off any other indebtedness at any time owing by the
Lender to or for the credit or the account of the Borrower against any or all of
the Obligations now or hereafter existing, which are then due and payable. The
Lender agrees to notify the Borrower ten (10) days prior to any such setoff or
application.
ARTICLE IX.
LENDER ACQUISITION RIGHTS AND MAXIMUM LINE OF CREDIT
9.1 Option Interest. In connection with the transaction contemplated by
the Purchase and Sale Agreement between the Borrower and the Lender dated as of
March 4, 2002 (the "Purchase Agreement") and this Agreement, the Borrower hereby
grants to the Lender the right to acquire up to thirty percent (30%) of the
Borrower's or any of its Affiliates' interest in any Oil and Gas Assets acquired
by the Borrower or any of its Affiliates during the period commencing with the
Effective Time (as defined in the Purchase Agreement) and, subject to Section
9.2, ending on the Maturity Date (the "Option Interests") for a pro-rata portion
of the Acquisition Cost (hereinafter defined) paid therefor by the Borrower or
one or more of its Affiliates; provided, however, that in no event shall the
Lender be entitled to acquire more than the dollar amount of Option Interests
equal to the Maximum Line of Credit Amount as in effect immediately prior to any
termination thereof in accordance with (S) 8.1 hereof. As used herein, the term
Oil and Gas Assets shall mean any right, title or interest, whether direct or
indirect, in, to or under any oil and gas property, oil and gas lease, mineral
interest, overriding royalty interest, net profits interest, production payment,
royalty interest, or other interest in oil and gas (including farmin agreements
or similar contractual rights to acquire such interest) in the State of
Louisiana, but shall exclude any leasehold interest within the boundaries of the
projects described on Exhibit B hereto. As used herein, the term Acquisition
Cost shall mean and include the price paid for the acquisition, together with
all land-related and title review costs and expenses (including landman costs),
brokerage fees and commissions, title examination fees and expenses, filing
fees, attorney fees and other costs and expenses reasonably incurred by Borrower
in connection with the acquisition. If any of the Option Interests covers
contiguous lands that are partially within the State of Louisiana and partially
outside the State of Louisiana, the Lender's acquisition rights pursuant to this
Article IX shall also apply to that portion of such contiguous lands that are
outside the State of Louisiana. Within five (5) business days of the closing of
any acquisition of Oil and Gas Assets constituting Option Interests, the
Borrower will give the Lender written notice thereof and
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provide access to any and all information or data with respect to the terms of
the acquisition and the Oil and Gas Assets covered thereby. Except as provided
in Section 9.2 of this Agreement, the Lender must elect within a period of
ninety (90) days from the date of its receipt of such notice whether to
participate in the Option Interests. Such election must be made by written
notice to the Borrower setting forth the percentage interest (not greater than
thirty percent (30%)) in the Option Interests to be acquired by the Lender and
the method of payment therefor. Failure by the Lender to notify the Borrower of
its election within such ninety (90) day period shall be deemed an election not
to participate. Payment by the Lender for Option Interests shall be made, at the
Lender's option, by payment in cash or by reduction of the then outstanding
principal amounts due the Lender under this Agreement, the Note or any other
Loan Document (together, in the case of any such reduction, with the delivery of
cash to the extent necessary to pay any amount due in respect of such Option
Interest in excess of the aggregate amount of all principal amounts then
outstanding). For purposes of this Agreement, reductions of amounts due to the
Lender under this Agreement, the Note and the other Loan Documents shall be
treated as a payment of principal by the Borrower to the Lender. For each dollar
paid (or deemed paid) by the Lender, in respect of Option Interests acquired by
Lender under this Article IX, the Maximum Line of Credit Amount shall be
automatically and permanently reduced by a corresponding amount. The closing of
the Lender's acquisition of any Option Interests shall occur within five (5)
business days of the Borrower's receipt of a notice from the Lender setting
forth its election to acquire Option Interests. If Lender elects to acquire the
Option Interests, such acquisition shall be effective as of the date that
Borrower acquires the Oil and Gas Assets and the Borrower and Lender shall make
such accounting adjustments and payments as are necessary to give effect to the
Lender's acquisition as of such effective date.
9.2 Extension of Election Period. In the event that the terms of the
Subordination Agreement prohibit the Borrower's exchange of the Option Interest
for reduction of outstanding obligations due to the Lender as herein described,
and the Lender does not elect to pay for such Option Interest in cash, then the
ninety (90) day period provided for Lender's election to participate in the
Option Interests shall be extended until ninety (90) days from the date after
such prohibition under the Subordination Agreement is extinguished, whether by
operation of the provisions of the Subordination Agreement, or by payment in
full of all Senior Indebtedness, or otherwise.
9.3 Reduction of Maximum Line of Credit Amount. The Borrower has informed
the Lender that it is considering making an acquisition from Greka Energy of an
interest in the Potash Field in Plaquemines Parish, Louisiana, and in
anticipation of that acquisition the parties have agreed that the Maximum Line
of Credit Amount shall initially be $7,700,000. In the event that the Borrower
has not for any reason completed such Potash Field acquisition by December 31,
2002, then, the Maximum Line of Credit Amount shall automatically and without
further action be reduced by $2,700,000 effective as of January 1, 2003.
ARTICLE X.
MISCELLANEOUS
10.1 Survival. The representations and warranties made by or on behalf of
the Borrower in this Agreement and in each other Loan Document shall survive the
execution and
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delivery of this Agreement and each such other Loan Document until the
satisfaction of all of Obligations and the termination of this Agreement.
10.2 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT, THE NOTE AND (EXCEPT AS OTHERWISE PROVIDED THEREIN)
EACH OTHER LOAN DOCUMENT SHALL BE DEEMED TO BE CONTRACTS MADE UNDER AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
(b) ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO OR ARISING DIRECTLY OR
INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT, THE
NOTE OR ANY OTHER LOAN DOCUMENT MAY BE LITIGATED, AT THE SOLE DISCRETION AND
ELECTION OF THE LENDER, IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK. THE BORROWER HEREBY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND HEREBY
WAIVES ANY RIGHTS IT MAY HAVE TO TRANSFER OR CHANGE THE JURISDICTION OR VENUE OF
ANY LITIGATION BROUGHT AGAINST IT BY THE LENDER IN ACCORDANCE WITH THIS SECTION.
(c) The Borrower hereby irrevocably designates CT Corporation System, or
such other corporate process agent as is acceptable to the Lender, as the
designee, appointee and agent of the Borrower to receive, for and on behalf of
the Borrower, service of process out of any of the aforementioned courts in any
legal action or proceeding with respect to this Agreement, any other Loan
Document or any document related thereto and agrees to take all necessary steps
to effectuate such appointment. It is understood that a copy of such process
served by such agent will be promptly forwarded by mail to the Borrower at its
address specified below, but the failure of the Borrower to receive such copy
shall not to the extent permitted by law affect in any way the service of such
process. The Borrower further irrevocably consents to the service of process of
any of the courts set forth in clause (b) above in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Borrower at such address, such service to become effective four
(4) days after mailing. Nothing herein shall affect the right of the Lender to
serve process in any other manner permitted by law.
(d) THE BORROWER AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, IRREVOCABLY, AND UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION, SUIT, PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT
RELATES TO OR ARISES OUT OF ANY OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR
OTHERWISE WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL
INDUCEMENT FOR THE LENDER ENTERING INTO THIS AGREEMENT.
10.3 Notice. All notices and other communications provided for hereunder
or in connection herewith shall be in writing (including telegraphic, telex,
facsimile transmission or cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered to the party to be notified at the following
addresses:
20
If to the Lender: Malloy Energy Company, L.L.C.
Bay Street at the Waterfront
P.O. Box 1979
Sag Harbor, New York 11963
Attention: Patrick Malloy
Telephone: 631-725-4540
Telecopier: 631-725-0334
If to the Borrower: Goodrich Petroleum Company, L.L.C.
815 Walker, Suite 1040
Houston, Texas 77002
Attention: Robert C. Turnham, Jr.
Telephone: (713) 780-9494
Telecopier: (713) 780-9254
or to such other address as any party may designate for itself by like notice to
all other parties hereto. All such notices and communications shall be deemed
to have been given (i) if mailed as provided above by any method other than
overnight delivery service, on the third Business Day after deposit in the
mails, (ii) telegraphed, telexed, telecopied or cabled, when delivered to the
telegraph company, confirmed by telex answerback, transmitted by telecopier
(with such transmission machine confirmed), or delivered to the cable company,
respectively, or (iii) if delivered by hand, or mailed by overnight delivery
services, upon delivery.
10.4 Amendments, Waivers, etc. Except as may be otherwise specifically
set forth in this Agreement or the other Loan Documents, neither this Agreement
nor any other Loan Document nor any provision hereof or thereof may be amended,
modified, waived, discharged or terminated, and no consent to any departure by
any Loan Party from any provision hereof or thereof may be given, except in a
writing signed by all parties thereto.
10.5 Rights and Remedies Cumulative, Non-Waiver, etc. The enumeration of
the Lender's rights and remedies set forth in this Agreement and the other Loan
Documents is not intended to be exhaustive, and the exercise by the Lender of
any right or remedy shall not preclude the exercise of any other rights or
remedies, all of which shall be cumulative, and shall be in addition to any
other right or remedy given hereunder, under the other Loan Documents or under
any other agreement between the Borrower and the Lender, or any of them, or that
may now or hereafter exist in law or in equity or by suit or otherwise. No
delay or failure to take action on the part of the Lender in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude other
or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between any of the Borrower and the Lender or their agents or
employees shall be effective to change, modify or discharge any provision of
this Agreement or to constitute a waiver of any Event of Default. No notice to
or demand upon the Borrower in any case shall entitle the Borrower to any other
or further notice or demand in similar or other circumstances or constitute a
waiver of the right of the Lender to exercise any right or remedy or take any
other or further action in any circumstances without notice or demand.
21
10.6 Binding Effect, Assignment. All of the terms of this Agreement and
the other Loan Documents to which the Borrower is a party shall be binding upon,
inure to the benefit of and be enforceable by the respective successors and
assigns of the Borrower and the Lender; provided, however, that the Borrower may
not sell, assign or transfer this Agreement or any other Loan Document or any
portion hereof or thereof, including, without limitation, any of its rights,
title, interests, remedies, powers and duties hereunder or thereunder.
10.7 Severability. To the extent any provision of this Agreement or any
other Loan Document is prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining provisions
hereof or thereof.
10.8 Entire Agreement. THIS AGREEMENT AND THE DOCUMENTS AND INSTRUMENTS
EXECUTED AND DELIVERED CONTEMPORANEOUSLY HEREWITH AND THE OTHER LOAN DOCUMENTS
EMBODY THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND
SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR
WRITTEN, RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THIS AGREEMENT, THE
NOTE, THE OTHER LOAN DOCUMENTS AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
10.9 Interpretation. The captions to the various sections and subsections
of this Agreement have been inserted for convenience only and shall not limit or
affect any of the terms hereof. Unless the context otherwise requires, words in
the singular include the plural and words in the plural include the singular,
and the use of any gender shall be applicable to all genders.
10.10 Counterparts, Effectiveness. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all of
which shall together constitute one and the same instrument. This Agreement
shall become effective upon the execution of a counterpart hereof by each of the
parties hereto.
10.11 Conflict of Terms. Except as otherwise provided in this Agreement
and except as otherwise provided in the other Loan Documents, if any provision
contained in this Agreement is in conflict with, or inconsistent with, any
provision of the other Loan Documents, the provision contained in this Agreement
shall control.
10.12 Injunctive Relief. The Borrower recognizes that in the event it
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy of law may prove to be inadequate relief to the
Lender. The Borrower therefore agrees that the Lender, shall be entitled to the
fullest extent permitted by law to temporary and permanent
22
injunctive relief without the necessity of proving actual damages in any case
where a remedy at law, would prove to be inadequate relief.
10.13 Expenses of the Lender. The Borrower will be liable to reimburse,
on demand, the Lender for any and all costs and expenses including, without
limitation, the fees and expenses of the Lender's counsel and of any other
counsel, experts, consultants or agents, which the Lender may incur in
connection with (i) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any Collateral, (ii) the
exercise or enforcement of any rights of the Lender hereunder or under any of
the other Loan Documents, or (iii) the failure by the Borrower or any other Loan
Party to perform or observe any of the provisions hereof or of any of the other
Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
LENDER:
MALLOY ENERGY COMPANY, L.L.C.
By: Malloy Oil and Gas Corporation
Managing Member
By:
-------------------------------------
Name: Patrick E. Malloy, III
Title: President
BORROWER:
GOODRICH PETROLEUM COMPANY,
L.L.C.
By:
-------------------------------------
Name: Robert C. Turnham, Jr.
Title: Executive V.P. and Chief Operating Officer
23
ASSIGNMENT AND BILL OF SALE
THAT, GOODRICH PETROLEUM COMPANY, L.L.C., a Louisiana limited liability
company, with a place of business at 815 Walker, Suite 1040, Houston, Texas
77002 (herein called "Assignor"), in consideration of Ten Dollars ($10.00) and
other good and valuable consideration to it in hand paid, the receipt and
sufficiency of which are hereby acknowledged, does hereby grant, bargain,
convey, sell, assign, and transfer unto MALLOY ENERGY COMPANY, L.L.C., a
Delaware limited liability company, with a place of business at Bay Street on
the Waterfront, Sag Harbor, New York 11963 (herein called "Assignee"), effective
as of 12:00 a.m., local time, where the Assets (as defined below) are located on
January 1, 2002 (the "Effective Time"), the undivided interests set forth below
in and to the following (all of which shall collectively be referred to
hereinafter as the "Assets"):
(a) An undivided thirty percent (30%) of 8/8 interest in the "shallow rights"
(as described in Exhibit A) and an undivided fifteen percent (15%) of 8/8
interest in the "deep rights" (as described in Exhibit A), under the
leasehold estates created by the oil and gas leases described in Exhibit
A-1 hereto (the "Leases") and the lands covered thereby (the "Lands"),
together with all overriding royalty interests, production payments and
other payments out of or measured by the value of oil and gas production
from or attributable to the Leases;
(b) An undivided thirty percent (30%) of 8/8 interest in the oil and gas wells
located on the Leases hereto and any other wellbores, plugged or unplugged,
shut in, or permanently or temporarily abandoned that are located on the
Leases (the "Wells"); such undivided interests in the Wells being not less
than the interests shown on Exhibit A-2 under the heading, "Working
Interest", and such undivided interests in the Wells entitling Assignee to
not less than the interests in total production set forth on ExhibitA-2
under the heading, "Net Revenue Interest".
(c) An undivided thirty percent (30%) of 8/8 interest in all of the personal
property, fixtures and improvements appurtenant to the Wells, or the Leases
or used or obtained in connection with the operation of the Wells, or the
Leases or with the production, treatment, sale or disposal of hydrocarbons
or water produced therefrom or attributable thereto, including without
limitation, salt water disposal wells, pipelines, gathering lines and
systems and compression facilities appurtenant to or located upon the
Leases (the "Personalty");
(d) An undivided thirty percent (30%) of 8/8 interest in all oil, gas and other
hydrocarbons produced from or attributable to the "shallow rights" under
the Leases after the Effective Time and proceeds from the sale thereof and
an undivided fifteen percent (15%) of 8/8 interest in all oil, gas and
other hydrocarbons produced from or attributable to the "deep rights" under
the Leases after the Effective Time and proceeds from the sale thereof
("Hydrocarbons"), subject to a proportionate part of all royalty,
overriding royalty and other lease burdens of record and in effect as of
the Effective Time;
(e) To the extent transferable, an undivided thirty percent (30%) of 8/8
interest in all agreements, product purchase and sale contracts, surface
leases, gas gathering contracts, salt water disposal leases, processing
agreements, compression agreements, equipment leases, permits, rights-of-
way, easements, licenses, farmouts and farmins, options, orders, pooling,
spacing or consolidation agreements and operating agreements, including
rights of operatorship thereunder, and all other agreements relating to the
Wells, Leases, Hydrocarbons and Personalty, including, without limitation,
the rights-of-way, permits, contracts and agreements described on Exhibit
A-3 (the "Contracts");
(f) To the extent transferable at no cost or liability to Seller, an undivided
thirty percent (30%) of 8/8 interest in all seismic licenses, permits and
all other rights to geological and/or geophysical data and information
relating to the Wells, Leases, Hydrocarbons and Personalty (the "Seismic
Rights");
(g) An undivided thirty percent (30%) of 8/8 interest in that certain escrow
account no. 5149 at Compass Bank, Texas, Houston, Texas, and a like
interest in all proceeds therein, as more fully described on Exhibit A-4
(the "Escrow Account");
(h) An undivided thirty percent (30%) of 8/8 interest in all the property,
rights, privileges, benefits and appurtenances in any way belonging to,
incidental to, or appertaining to the property, interests and rights
described above, including the Wells, Leases, Personalty, Lands, Contracts,
Hydrocarbons and Seismic Rights (the "Benefits");
(i) All applicable files, records and data (or copies thereof), subject to any
restrictions on Assignor's disclosure of same including, without
limitation, land and lease files, well files, title records including
abstracts of title, title opinions, contracts, production records, all logs
including electric logs, core data, pressure data and decline curves and
graphical production curves and all related materials in the possession of
Assignor; and
(j) To the extent any of the Contracts, Personalty, Seismic Rights or Benefits
relate to the "deep rights" (as described in Exhibit A), the undivided
interest to be transferred to Assignee shall be limited to fifteen percent
(15%) of 8/8.
1. ASSIGNOR EXPRESSLY DISCLAIMS ANY WARRANTY, EXPRESS, IMPLIED, AT COMMON
LAW, BY STATUTE OR OTHERWISE, AS TO THE CONDITION OF THE OIL AND GAS INTERESTS
INCLUDING (i) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR OF FITNESS
FOR A PARTICULAR PURPOSE OR OF FREEDOM FROM HIDDEN DEFECTS, (ii) ANY IMPLIED OR
EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, AND (iii) ANY
IMPLIED OR EXPRESS WARRANTY AS TO THE ENVIRONMENTAL CONDITION OF THE OIL AND GAS
INTERESTS, IT BEING EXPRESSLY UNDERSTOOD BY
2
ASSIGNEE THAT THE ASSETS, INCLUDING ALL PERSONAL PROPERTY, FIXTURES AND ITEMS
ARE BEING CONVEYED TO ASSIGNEE AS IS, WHERE IS, WITH ALL FAULTS, AND IN THEIR
PRESENT CONDITION AND STATE OF REPAIR AND THAT ASSIGNEE HAS BEEN GIVEN THE
OPPORTUNITY TO MAKE OR CAUSE TO BE MADE SUCH INSPECTIONS AS ASSIGNEE DEEMS
APPROPRIATE.
2. Assignee, in consideration of the mutual benefits to be derived
hereunder by its acceptance hereof, understands and agrees to the following
terms and conditions:
(a) This Assignment is made subject to that certain Purchase and Sale Agreement
dated March 4, 2002, between Assignor and Assignee, and all terms and
conditions of said Purchase and Sale Agreement are incorporated herein by
reference to the same extent end with the same effect as if copied in full
herein. The terms of the Purchase and Sale Agreement shall govern any
conflict between this Assignment and Bill of Sale and the Purchase and Sale
Agreement.
(b) ASSIGNEE AGREES TO RELEASE, DEFEND, INDEMNIFY AND HOLD ASSIGNOR, ITS
AFFILIATED, PARENT AND SUBSIDIARY ENTITIES AND THEIR RESPECTIVE AGENTS,
REPRESENTATIVES, SHARE HOLDERS, OFFICERS, DIRECTORS AND EMPLOYEES
(COLLECTIVELY "INDEMNITEES"); HARMLESS FROM ANY DAMAGES, EXPENSES
(INCLUDING COURT COST AND ATTORNEY'S FEES), CIVIL FINES, PENALTIES, AND
OTHER COSTS AND LIABILITIES INCURRED AS A RESULT OF CLAIMS, DEMANDS, AND
CAUSES OF ACTION ASSERTED, IN CONNECTION WITH THE ASSETS (BUT ONLY AS TO
ASSIGNEE'S UNDIVIDED INTEREST THEREIN), INCLUDING BUT NOT LIMITED) TO ANY
COSTS, EXPENSES, AND LIABILITIES WHATSOEVER ARISING OUT OF, OR IN
CONNECTION WITH, THE PLUGGING AND ABANDONING OF ANY WELLS, REMOVAL OR
MODIFICATION OF FACILITIES (INCLUDING PIPELINES), CLOSURE OF PITS, AND
RESTORATION OF THE SURFACE REGARDLESS OF WHETHER THE OBLIGATION TO PLUG,
REMOVE, MODIFY, CLOSE OR RESTORE AROSE PRIOR TO OR SUBSEQUENT TO THE
EFFECTIVE TIME. ASSIGNEE'S INDEMNIFICATION OF INDEMNITEES SHALL EXTEND TO
AND INCLUDE, WITHOUT LIMITATION, CLAIMS, CAUSES OF ACTION AND DEMANDS BASED
ON (i) THE NEGLIGENCE OF ASSIGNOR, ASSIGNEE, OR THIRD PARTIES, WHETHER SUCH
NEGLIGENCE IS ACTIVE OR PASSIVE, JOINT, CONCURRENT OR SOLE, OR (ii)
ASSIGNOR'S OR ASSIGNEE'S STRICT LIABILITY, OR (iii) OTHER FAULT OR,
RESPONSIBILITY OF ASSIGNOR. NOTWITHSTANDING THE ABOVE PROVISIONS OR ANY
OTHER PROVISION OF THIS AGREEMENT, ASSIGNEE'S INDEMNIFICATION OF ASSIGNOR
SHALL NOT INCLUDE LOSSES SUSTAINED OR LIABILITIES
3
INCURRED AS A RESULT OF ASSIGNOR'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
3. This Assignment is executed without any representations or warranties
whatsoever, express or implied, including, but not limited to, representations
or warranties as to the title (except as to claims arising by, through or under
Assignor) or the condition and state of repair of the Assets or its va1ue,
quality, merchantability, suitability or fitness for any uses or purposes, or
freedom from vices or defects or dangerous conditions, whether hidden or
apparent.
4. Assignee acknowledges that the Assets has been used for exploration,
development, and production of oil and gas and that there may be petroleum,
produced water, wastes, or other materials located on, under or associated with
the Assets. Equipment and sites included in the Assets may contain wastes,
asbestos, hazardous substances, or naturally occurring radioactive material
("NORM"). NORM may affix or attach itself to the inside of wells, materials,
and equipment as scale, or in other forms; the wells, materials and equipment
located on or included in the Assets may contain NORM and other wastes or
hazardous substances; and NORM containing material and other wastes or hazardous
substances may have been buried, come in contact with the soil, or otherwise
been disposed of on the Assets. Special procedures may be required for the
remediation, removal, transportation, or disposal of wastes, asbestos, hazardous
substances; and NORM from the Interests and Assets. The presence of wastes,
asbestos, hazardous substances or NORM in or on the Assets shall be the sole
responsibility of Assignee, and, with respect to the undivided interests herein
acquired, Assignee agrees to defend, indemnify and hold harmless Assignor from
any and all claims arising from and/or related to the presence of any such
materials, substances or wastes.
5. Assignee hereby assumes Assignee's proportionate part of all duties,
liabilities and obligations, express or implied, imposed upon Assignor under the
provisions of the Leases and any and all assignments, subleases, farmout
agreements, assignments of overrides, joint operating agreements, easements,
rights-of-way, and all other contracts, agreements arid instruments affecting
the Assets to the extent they are described in Exhibit A and are binding on
Assignor, and under all applicable laws, rules, regulations, orders and
ordinances; including, but not limited to, the plugging and abandonment of the
wells included in this assignment, and the clean-up and restoration of the
premises on which the wells are located. Assignee agrees to defend, indemnify
and hold harmless Assignor from and against, any and all claims, obligations,
liabilities, costs, expenses, losses and damages of any kind or character
sustained by it as a result of any failure of Assignee to perform such
obligations as more fully set forth in the Purchase and Sale Agreement.
6. Assignee agrees that it will not assign, sublease or transfer, in whole
or part, any rights acquired herein or by virtue of the above identified
Purchase and Sale Agreement without requiring its assignees, subleases, and
transferees to expressly assume all obligations owed to Assignor under the terms
of this assignment and the Purchase and Sale Agreement as to the undivided
interest so assigned, and all such pertinent terms shall be incorporated into
any and all future instruments translative of title.
4
TO HAVE AND TO HOLD the same unto the said Assignee forever. The
provisions hereof shall be covenants running with the land and shall inure to
the benefit of and be binding upon Assignor and Assignee, their respective
personal representatives, successors and assigns.
Assignor covenants that Assignor shall execute such additional documents
and take such further actions as Assignee may reasonably request for the purpose
of transferring to Assignee all properties and interests intended to be
transferred by this Assignment.
IN WITNESS HEREOF, the undersigned have executed this instrument on the
date of the acknowledgments annexed hereto, but to be effective for all purposes
as of the Effective Time.
ASSIGNOR:
WITNESSES
GOODRICH PETROLEUM COMPANY, L.L.C.
- -------------------------------
Printed Name: By:
------------------ -------------------------------
Name: Robert C. Turnham, Jr.
Title: Chief Operating Officer
- -------------------------------
Printed Name:
------------------
ASSIGNEE:
WITNESSES MALLOY ENERGY COMPANY, L.L.C.
By: Malloy Oil and Gas Corporation,
Managing Member
- -------------------------------
Printed Name:
------------------ By:
-------------------------------
Name: Patrick E. Malloy, III
- ------------------------------- Title: President
Printed Name:
------------------
5
ACKNOWLEDGEMENTS
STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
On this _____ day of March, 2002, before me appeared Robert C. Turnham,
Jr., to me personally known, who, being by me duly sworn, did say that he is the
Chief Operating Officer of GOODRICH PETROLEUM COMPANY, L.L.C., a Louisiana
limited liability company, and that said instrument was signed on behalf of said
limited liability company by authority of its Board of Directors and said
appearer acknowledged said instrument to be the free act and deed of said
limited liability company.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
[S E A L]
------------------------------------------------
Notary Public in and for the State of Texas
STATE OF (S)
(S)
COUNTY OF (S)
On this ____ day of March, 2002, before me appeared Patrick E. Malloy, III,
to me personally known, who, being by me duly sworn, did say that he is the
President of Malloy Oil and Gas Corporation, a Delaware corporation, Managing
Member of MALLOY ENERGY COMPANY, L.L.C., and that said instrument was signed on
behalf of said limited liability company by authority of its Members and said
appearer acknowledged said instrument to be the free act and deed of said
limited liability company.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
[S E A L]
------------------------------------------------
Notary Public in and for the State of
----------
6
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT (this "AGREEMENT") is made
as of March 8, 2002, by and among BNP PARIBAS, as agent ("SENIOR AGENT") for the
lenders (the "SENIOR LENDERS") party to the herewith defined Credit Agreement,
MALLOY ENERGY COMPANY, L.L.C., a Delaware limited liability company
("SUBORDINATED CREDITOR"), GOODRICH PETROLEUM COMPANY, L.L.C., a Louisiana
limited liability company ("BORROWER"), GOODRICH PETROLEUM CORPORATION, a
Delaware corporation ("GOODRICH"), and GOODRICH PETROLEUM COMPANY-LAFITTE,
L.L.C., a Louisiana limited liability company ("LAFITTE", and collectively with
Goodrich herein referred to as the "GUARANTORS").
WHEREAS, Subordinated Creditor and Borrower have entered into a Loan
Agreement of even date herewith (as amended, modified, supplemented, restated,
extended or renewed from time to time, the "SUBORDINATED LOAN AGREEMENT"),
pursuant to which Subordinated Creditor has agreed, among other things, to make
certain loans and advances to Borrower in the maximum principal amount of
$7,700,000 and Borrower has agreed, among other things, to assign, transfer and
convey the Option Interests (as defined in the Subordinated Loan Agreement) to
Subordinated Creditor in accordance with the terms and provisions of the
Subordinated Loan Agreement and the Purchase Agreement (as defined in the
Subordinated Loan Agreement and herein so called);
WHEREAS, to secure the obligations under the Subordinated Loan Agreement,
Borrower has granted and from time to time may grant to Subordinated Creditor a
lien and security interest in certain assets of Borrower (the "SUBORDINATED
COLLATERAL"), including, without limitation, certain oil and gas properties and
related assets now owned or hereafter acquired by Borrower that constitute
Senior Collateral (hereinafter defined);
WHEREAS, Senior Agent, Senior Lenders and Borrower have previously entered
into that certain Credit Agreement dated as of November 9, 2001 (as amended,
modified, supplemented, restated, extended or renewed from time to time
including, without limitation, pursuant to the First Amendment (hereinafter
defined), the "CREDIT AGREEMENT"), by and among Senior Agent, Senior Lenders and
Borrower pursuant to which, among other things, the Senior Lenders have agreed
to make certain loans and other extensions of credit to Borrower;
WHEREAS, to assure the payment and performance of the Obligation under the
Credit Agreement, Guarantors executed a Guaranty Agreement dated as of November
9, 2001 (together with all modifications, amendments, renewals, extensions, and
restatements thereof, the "GUARANTY AGREEMENT"), in favor of Senior Agent and
the Senior Lenders;
WHEREAS, to secure the "Obligation" (as such term is defined in the Credit
Agreement and herein so called) under the Credit Agreement, Borrower and
Guarantors have granted and from time to time may grant to Senior Agent, for the
benefit of the Senior Lenders, a first priority lien and security interest in
certain property and assets, including, without limitation, certain oil and gas
properties and related assets now owned or hereafter acquired by Borrower and
Lafitte and all of the capital stock of Borrower and Lafitte (such property and
assets, together with any and all other collateral now or hereafter granted,
assigned or pledged to Senior Agent or any Senior Lender at any time to secure
the Obligation, and all products and proceeds of the foregoing, herein
collectively referred to as the "SENIOR COLLATERAL");
WHEREAS, at the request of and as an accommodation to Borrower and the
Guarantors, Borrower, Guarantors, Senior Agent and the Senior Lenders are
entering into that certain First Amendment to Credit Agreement of even date
herewith (the "FIRST AMENDMENT") pursuant to which, among other things, certain
covenants contained in the Credit Agreement have been modified and amended to
permit Borrower to incur the indebtedness arising under the Subordinated Loan
Agreement and to grant liens and security interests in favor of the Subordinated
Creditor in the Subordinated Collateral to secure such indebtedness; and
WHEREAS, as a condition precedent to Senior Agent's and each Senior
Lender's agreement to enter into the First Amendment, Senior Agent has required
that Subordinated Creditor, Borrower and Guarantors execute this Subordination
and Intercreditor Agreement.
NOW, THEREFORE, in consideration of the above recitals and the provisions
set forth herein, Senior Agent (on behalf of the Senior Lenders), Subordinated
Creditor, Borrower, and each Guarantor agree as follows:
1. DEFINITIONS. Unless otherwise indicated, terms defined in the
introductory paragraph of this Agreement or in the Recitals to this Agreement
are used herein with their meaning as defined in such paragraph or Recitals;
additionally, the following terms in this Agreement shall have the meanings
indicated:
"BLOCKAGE PERIOD" has the meaning assigned to such term in SECTION 4 of
this Agreement.
"OPTION INTERESTS" has the meaning assigned to such term in the
Subordinated Loan Agreement.
"PAYMENT DEFAULT" means the failure by the Borrower or any Guarantor to pay
all or any portion of the Senior Debt when due, whether at maturity, by
acceleration or otherwise.
"SENIOR AGENT" means Senior Agent and its successors and assigns as "AGENT"
under the Credit Agreement.
"SENIOR DEBT" means: (a) the Obligation and all other indebtedness,
liabilities, and obligations of every kind or nature, absolute or contingent,
now or existing or hereafter arising, of Borrower, or any Guarantor, owed to
Senior Agent or any Senior Lender or their affiliates under the Senior
Documents, including, without limitation, the principal of, and interest on
(including any interest accruing after the commencement of any bankruptcy,
insolvency, or similar proceeding with respect to Borrower or any Guarantor,
whether or not allowed as a claim in such proceeding), and all premiums, fees,
charges, expenses, and indemnities arising under or in connection with, the
Senior Documents; and (b) any modifications, amendments, refinancing,
restatements, supplements, renewals, or extensions of any indebtedness,
liability, or obligation described in the immediately preceding CLAUSE (A)
above.
"SENIOR DOCUMENTS" means the Credit Agreement, the Guaranty Agreement and
any Swap Agreement (as defined in the Senior Loan Agreement) by and among
Borrower and/or any Guarantor and Senior Agent or any Senior Lender or any of
their affiliates and all mortgages, security agreements, documents, instruments
and other agreements executed pursuant to or in connection therewith and
providing security for the Credit Agreement, the Guaranty Agreement or such Swap
Agreement, as applicable, and all amendments, modifications, renewals,
extensions, supplements, refinancings, and restatements thereof.
2
"SENIOR LENDERS" means the Senior Lenders, their respective successors and
assigns, and any person or entity who refinances all or any portion of the
Senior Debt.
"SUBORDINATED CREDITOR" means Subordinated Creditor and its successors and
assigns.
"SUBORDINATED DOCUMENTS" means the Subordinated Loan Agreement, any
promissory note evidencing the indebtedness thereunder, and the Subordinated
Security Documents, together with all renewals, extensions, amendments,
supplements, modifications, or restatements thereof.
"SUBORDINATED MATURITY DATE" has the meaning assigned to such term in
SECTION 5 of this Agreement.
"SUBORDINATED OBLIGATION" means the "Obligations" (as defined in the
Subordinated Loan Agreement) and all other indebtedness and obligations now and
from time to time hereafter owed by Borrower to Subordinated Creditor evidenced
by or arising under the Subordinated Documents, including principal, interest,
fees, and charges and all other present or future liabilities, indebtedness, or
obligations of Borrower to Subordinated Creditor under the Subordinated
Documents.
"SUBORDINATED SECURITY DOCUMENTS" means any and all security agreements,
mortgages, assignments, pledges, financing statements, documents, agreements or
other encumbrances now or hereafter securing all or any part of the Subordinated
Obligation (together with all now-existing or hereafter arising amendments,
modifications, restatements, or modifications thereto).
2. SUBORDINATION TO SENIOR DEBT. Notwithstanding any other provision of
any Subordinated Documents, the Subordinated Obligation is and shall be
subordinate and junior in right of payment, to the extent and in the manner
hereinafter set forth, to the prior indefeasible payment in full of all Senior
Debt. Except as and to the extent provided hereinafter, Subordinated Creditor
will not ask, demand, sue for, take, or receive from Borrower or any Guarantor,
by set-off or in any other manner, direct or indirect payment (whether in cash
or property) of the whole or any part of the Subordinated Obligation, or any
transfer of any property (including, without limitation, any transfer or
conveyance of any Option Interest) in payment thereof or as security therefor
(other than any collateral security taken in accordance with the terms of this
Agreement), unless and until the Senior Lenders have no further commitment to
extend any credit to Borrower under the Senior Documents and all Senior Debt has
been indefeasibly paid in full.
3. DISTRIBUTIONS IN LIQUIDATION AND BANKRUPTCY. In the event of any
distribution, division, or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise of all or any part of the assets
of Borrower or any Guarantor, or the proceeds thereof (including any assets now
or hereafter securing any Subordinated Obligation), (i) upon any indebtedness of
Borrower or any Guarantor as a result of the liquidation, dissolution, or other
winding up, partial or complete, of Borrower or any Guarantor, (ii) as a result
of any receivership, insolvency, or bankruptcy proceeding, or assignment for the
benefit of creditors or marshaling of assets, or (iii) as a result of any
proceeding by or against Borrower or any Guarantor for any relief under any
bankruptcy or insolvency law or laws relating to the relief of debtors,
readjustment of indebtedness, arrangements, reorganizations, compositions, or
extensions, then and in any such event:
(a) The Senior Lenders shall be entitled to receive payment in full of
all Senior Debt before Subordinated Creditor shall be entitled to receive
any payment or other distributions on, or with respect to, the Subordinated
Obligation;
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(b) Any payment or distribution of any kind or character, whether in
cash, securities, or other property, which but for these provisions would
be payable or deliverable upon or with respect to the Subordinated
Obligation shall instead be paid or delivered directly to Senior Agent for
the benefit of the holders of the Senior Debt for application on the Senior
Debt, whether then due or not due, until the Senior Debt shall have first
been fully and indefeasibly paid in full and the Senior Lenders shall have
no further commitment to extend any credit to Borrower or any Guarantor;
(c) In the event that Subordinated Creditor shall not have filed a claim
in any bankruptcy, insolvency, or similar proceeding with respect to
Borrower or any Guarantor at least fifteen (15) days prior to the
expiration of the time to file such claims, then Senior Agent, on behalf of
Subordinated Creditor, shall be authorized to file a claim with respect to
the Subordinated Obligation; and
(d) Should any such direct or indirect payment be made to Subordinated
Creditor upon or with respect to the Subordinated Obligation prior to the
payment in full of the Senior Debt as provided herein, Subordinated
Creditor will forthwith deliver the same to Senior Agent in precisely the
form received (except for the endorsement or assignment by Subordinated
Creditor where necessary) for application on the Senior Debt, whether then
due or not due. Until so delivered, the payment or distribution shall be
held in trust by Subordinated Creditor as property of the holders of the
Senior Debt. In the event of failure of Subordinated Creditor to make any
such endorsement or assignment, Senior Agent, and each of its officers and
employees are hereby irrevocably authorized to make the same.
4. PERMITTED PAYMENTS. Until such time as the Senior Debt is paid and
performed in full and the Senior Lenders have no further commitments to extend
credit to Borrower under the Senior Documents, Subordinated Creditor shall not
receive or accept any payment from Borrower or any Guarantor with respect to the
Subordinated Obligation without the prior written consent of Senior Agent;
provided that, so long as Senior Agent has not delivered written notice to each
of the Borrower and the Subordinated Creditor (a "BLOCKAGE NOTICE") that a
"Default", "Potential Default", or Borrowing Base Deficiency (as each such term
is defined in the Credit Agreement) exists (or would arise after giving effect
to any such payment) under the Senior Debt or under the Senior Documents,
Borrower may pay, and Subordinated Creditor may accept (i) payments consisting
of accrued and unpaid interest owed under the Subordinated Loan Agreement (the
"ACCRUED SUBORDINATED INTEREST"); (ii) principal payments on any outstanding
loans made by Subordinated Creditor under the Subordinated Loan Agreement in an
amount up to, and as a direct offset against, the sale price owed by
Subordinated Creditor to Borrower for any Option Interest in the Potash Field
(contemplated to be acquired by Borrower from Greka Energy, Inc.) in Plaquemines
Parish, Louisiana if the closing of such acquisition by the Borrower is upon
terms and conditions consistent with those previously disclosed to Senior Agent
and occurs before April 30, 2002; (iii) principal payments on any outstanding
loans made by Subordinated Creditor under the Subordinated Loan Agreement to
finance the acquisition by Borrower of oil and gas properties in the State of
Louisiana solely in an amount up to, and as a direct offset against, the sale
price owed by Subordinated Creditor to Borrower for any sale to Subordinated
Creditor of an Option Interest in such oil and gas properties which is
consummated within ten (10) days of such acquisition by Borrower; and (iv) other
payments of principal on any outstanding loans made by Subordinated Creditor
under the Subordinated Loan Agreement (including, without limitation, any such
payments made or deemed made in respect of the sale by Borrower of any Option
Interests to Subordinated Creditor) so long as, in the case of this clause (iv),
the "Committed Usage" (as such term is defined in the Credit Agreement as in
effect on the date hereof) does not exceed (or would not exceed after giving
effect to any such principal payment) eighty percent (80%) of the lesser of the
"Commitments" or the then current "Borrowing Base" (as each of such terms is
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defined in the Credit Agreement), as such Borrowing Base may be redetermined by
the Senior Agent and the Senior Lenders to reflect any sale of Option Interests
giving rise to such payments; provided, however, that if such a "Default",
"Potential Default" or "Borrowing Base Deficiency" exists, under the Senior Debt
or under the Senior Documents, other than as a result of a Payment Default, for
a period of 180 consecutive days after delivery of a Blockage Notice (a
"BLOCKAGE PERIOD") and the Senior Lenders have not declared all Senior Debt to
be due and payable within such time, Borrower may thereafter resume payments,
and Subordinated Creditor may accept payments, of any amounts described in the
immediately preceding CLAUSES (I) through (IV); provided, further, that during
any 360-day consecutive period, only one such Blockage Period may commence;
provided, moreover, that nothing contained in this Agreement shall limit the
rights of Subordinated Creditor to take actions toward collection of the
Subordinated Obligation or otherwise to enforce its rights and remedies with
respect to the Subordinated Obligations (x) in accordance with and pursuant to
Section 5 of this Agreement or (y) upon at least fifteen (15) days prior written
notice to Senior Agent, at any time or from time to time on or after the
Subordinated Maturity Date subject to the rights of the Senior Agent and Senior
Lenders to receive payment in full of all Senior Debt then due and payable prior
to any payment of the Subordinated Obligation and the other rights of the Senior
Agent and the Senior Lenders as provided in SECTIONS 3 and 8 hereof. No
"Default", "Potential Default" or "Borrowing Base Deficiency" under the Senior
Debt or under the Senior Documents giving rise to, or occurring during the first
120 consecutive days of, any Blockage Period shall be, or be made, the basis for
any subsequent Blockage Period. During any Blockage Period the Senior Agent
shall respond to reasonable inquiries by the Subordinated Creditor as to the
amount and payment status of the Senior Debt.
5. LIMITATION ON ACCELERATION OR EXERCISE OF REMEDIES PRIOR TO THE
SUBORDINATED MATURITY DATE. Notwithstanding any other provision of this
Agreement to the contrary, prior to the Subordinated Maturity Date unless the
Senior Lenders have accelerated the maturity of the Senior Debt, Subordinated
Creditor shall be prohibited from taking, except with the prior written consent
of the Senior Agent, any action towards the collection of the Subordinated
Obligation or the payment of any other amounts in respect of the Subordinated
Obligation (x) during any Blockage Period or (y) during the sixty (60) day
period after the occurrence of a Payment Default, including, without limitation:
(a) suing for payment of the Subordinated Obligation (including, without
limitation, the commencement or joining with any other creditors of Borrower or
any Guarantor in the commencement of any bankruptcy, reorganization,
receivership, readjustment of debt, dissolution, liquidation, or insolvency
proceeding against Borrower or any Guarantor), (b) exercising any right of set-
off for the collection of any amounts due in respect of the Subordinated
Obligation, or (c) commencing or prosecuting a Lien Enforcement Action;
provided, however, that the Subordinated Creditor may, without the consent of
the Senior Agent or any Senior Lender, accelerate the maturity of the
Subordinated Obligation at any time in accordance with the Subordinated Loan
Agreement; and provided, further, that from and after the stated maturity date
of the loans made under the Subordinated Loan Agreement (the "SUBORDINATED
MATURITY DATE"), the Subordinated Creditor may, upon at least fifteen (15) days
prior written notice to Senior Agent, at any time and from time to time under
all circumstances take any action (including a Lien Enforcement Action)
available to it by agreement or otherwise, without the consent of the Senior
Agent or any Senior Lender, to enforce its rights and remedies with respect to
the Subordinated Obligation, subject only to the right of the Senior Lenders to
receive payment in full of all Senior Debt then due and payable prior to any
payment of the Subordinated Obligation, and subject to the provisions of
Sections 3 and 8 hereof. "LIEN ENFORCEMENT ACTION" shall mean any action,
whether legal, equitable, judicial, non-judicial, or otherwise, to enforce any
lien, security interest, or other encumbrance now or in the future securing all
or any Subordinated Obligation, including, without limitation, any repossession,
foreclosure, public sale, private sale, or retention of all or any part of the
collateral securing the Subordinated Obligation. Any Lien Enforcement Action
taken by Subordinated Creditor shall be expressly undertaken, prosecuted,
settled, compromised, or otherwise effected at all times subject to the senior
and prior rights of Senior Agent and
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the Senior Lenders in and to any such collateral hereunder and under applicable
law, and all such collateral or proceeds thereof, or rights obtained with
respect thereto, shall be subject to the senior and prior rights of Senior Agent
and the Senior Lenders hereunder and under applicable law.
6. CONTINUING SUBORDINATION. The subordination effected by these
provisions is a continuing subordination and may not be modified or terminated
by Subordinated Creditor or any other holder of any Subordinated Obligation
until the Senior Lenders have no further commitments to lend to Borrower and all
of the Senior Debt shall have been indefeasibly paid in full. At any time and
from time to time, without consent of or notice to Subordinated Creditor or any
other holder of all or any portion of the Subordinated Obligation, and without
impairing or affecting the obligations of any of them hereunder:
(a) The time for Borrower's or any Guarantor's performance of, or
compliance with, any of its agreements contained in the Senior Documents,
or any other agreement, instrument, or document relating to the Senior
Debt, may be modified or extended or such performance or compliance may be
waived;
(b) Senior Agent or any Senior Lender may exercise or refrain from
exercising any rights under the Senior Documents, or any other agreement,
instrument, or document relating to the Senior Debt;
(c) The Senior Documents, or any other agreement, instrument, or
document relating to the Senior Debt, may be revised, amended, or otherwise
modified for the purpose of adding or changing any provisions thereof
(including, without limitation, increases in the principal amount of loans
to the Borrower or increases in the interest charges or fees), or changing
in any manner the rights of Senior Agent or any Senior Lender, Borrower or
any Guarantor, any other obligor of the Senior Debt;
(d) Payment of the Senior Debt or any portion thereof may be extended,
refunded, or refinanced or any notes evidencing such Senior Debt may be
renewed in whole or in part;
(e) The maturity of the Senior Debt may be accelerated, and any
collateral security therefor or any other rights of Senior Agent or any
Senior Lender may be exchanged, sold, surrendered, released, or otherwise
dealt with, in accordance with applicable law and the terms of any present
or future agreement with Borrower or any Guarantor, or any other obligor,
and any other agreement of subordination (and the debt covered thereby) may
be surrendered, released, or discharged, or the terms thereof modified or
otherwise dealt with in any manner;
(f) Any guarantor liable in any manner for payment of any Senior Debt
may be released by holders of Senior Debt; and
(g) Notwithstanding the occurrence of any of the foregoing, these
subordination provisions shall remain in full force and effect with respect
to the Senior Debt, as the same shall have been extended, renewed,
modified, increased or refinanced.
7. WAIVERS. Subordinated Creditor hereby waives, and agrees not to
assert: (a) any right, now or hereafter existing, to require Senior Agent or
any Senior Lender to proceed against or exhaust any collateral at any time
securing the Senior Debt, or to marshal any assets in favor of Subordinated
Creditor or any other holder of the Subordinated Obligation; and (b) any notice
of the incurrence of Senior Debt, it being understood that Senior Agent or any
Senior Lender may, in reliance upon these subordination
6
provisions, make advances under the Senior Documents, or any other agreement,
document, or instrument now or hereafter relating to the Senior Debt, without
notice to or authorization of Subordinated Creditor.
8. LIEN SUBORDINATION AND STANDBY. The parties hereto hereby agree that
any lien, security interest, encumbrance, charge, or claim of Subordinated
Creditor on any assets or property of Borrower or any Guarantor, or any proceeds
or revenues therefrom which Subordinated Creditor may have at any time as
security for any Subordinated Obligation shall be, and hereby is, subordinated
to all liens, security interests, encumbrances, claims, or changes, now or
hereafter granted to Senior Agent or any Senior Lender by Borrower or any
Guarantor, notwithstanding the date or order of attachment or perfection of any
such lien, security interest, encumbrance, or claim or charge or the provision
of any applicable law. Until the Senior Lenders have no further commitment to
extend credit to Borrower and Senior Agent and the Senior Lenders have received
indefeasible payment in full of the Senior Debt, Subordinated Creditor agrees
(x) that, except as otherwise expressly provided in Sections 4 and 5 of this
Agreement, the Subordinated Creditor will not, without the prior written consent
of the Senior Agent, take any Lien Enforcement Action against any and all
collateral for the Subordinated Obligation and (y) that Senior Agent, upon not
less than fifteen (15) days prior written notice to the Subordinated Creditor
with respect to any disposition or release of oil and gas properties, may
release or dispose of any or all of the collateral for the Senior Debt, whether
through judicial or nonjudicial proceedings in accordance with applicable law or
pursuant to a consensual agreement between the Borrower and/or any Guarantor and
Senior Agent or any Senior Lender regarding any such release or disposition and
regardless of whether or not Subordinated Creditor has commenced any Lien
Enforcement Action or other action or proceeding to collect the Subordinated
Obligation with respect to such collateral, without consent by Subordinated
Creditor including, without limitation, releasing any such collateral in
connection with a sale or assignment by Borrower or such Guarantor (whether or
not all or any portion of the net proceeds from such sale or assignment are used
to repay the Senior Debt or the Subordinated Obligation), but excluding,
however, any transaction whereby Senior Agent or any Senior Lender takes title
thereto; provided, however, that nothing herein is intended to or does waive any
right Subordinated Creditor may otherwise have to notice under applicable law;
and provided further, however, that if at the time of any such release, sale or
other disposition (i) a "DEFAULT" or an "EVENT OF DEFAULT" (each as defined in
the Credit Agreement) has occurred and is continuing, (ii) the aggregate Net
Disposition Amount (hereinafter defined) from the release, sale or other
disposition of all such collateral since the occurrence of such Default or Event
of Default, as the case may be, exceeds $7,500,000, and (iii) less than seventy-
five percent (75%) of the Net Disposition Amount of any such release, sale or
other disposition in excess of, in the aggregate, $7,500,000 is to be paid to or
credited by the Senior Lenders and applied as a permanent reduction of the
Senior Debt (or, if there is no outstanding indebtedness owed to the Senior
Lenders, then to the Subordinated Obligation), no such release, sale or other
disposition of any such collateral which also constitutes Subordinated
Collateral may be consummated without the prior written consent of Subordinated
Creditor. Subordinated Creditor agrees that any such sale, release or other
disposition of collateral shall be made free and clear of any liens or security
interests granted by holders of the Subordinated Obligation. Upon Senior
Agent's request, Subordinated Creditor shall execute and deliver any releases or
other documents and agreements that Senior Agent or Borrower, reasonably deems
necessary to release or otherwise dispose of the collateral as provided herein
free of Subordinated Creditor's interest in same. As used herein, the term "NET
DISPOSITION AMOUNT" shall mean with respect to any sale, release or other
disposition of collateral, including any foreclosure sale, the proceeds received
from such sale, release or other disposition, net of the reasonable costs and
expenses incurred in connection with such sale, release or other disposition.
9. SUBROGATION. Until the Senior Lenders have no further commitment to
extend credit to Borrower and the Senior Debt shall have been indefeasibly paid
in full, Subordinated Creditor hereby agrees not to exercise any right of
subrogation with respect to the rights of Senior Agent and the Senior Lenders to
receive payments or distributions and with respect to any rights to any
collateral for the Senior
7
Debt. Upon indefeasible payment in full of the Senior Debt and termination of
any commitment of the Senior Lenders to lend or extend credit to the Borrower,
Subordinated Creditor shall be subrogated, to the extent permitted by law, to
all rights of the holders of Senior Debt.
10. MODIFICATION OF SUBORDINATED OBLIGATION; TAKING OF ADDITIONAL
SUBORDINATED COLLATERAL. Unless and until the Senior Lenders have no further
commitment to extend credit to Borrower and all Senior Debt has been
indefeasibly paid in full, Subordinated Creditor shall not (i) modify, amend or
waive any term or provision of the Subordinated Loan Agreement (or enter into
any other agreement which would have the effect of directly or indirectly
modifying, waiving or amending any term or provision of the Subordinated Loan
Agreement), in each case in a manner that increases the maximum principal amount
of loans which may be made thereunder or the amount of any scheduled payment or
amortization of the loans outstanding thereunder, or shortens the time when due
for any such payment, or increases any rate or amount of interest, fees or other
sums payable to Subordinated Creditor thereunder, or which results in the
covenants, events of default, or other material terms and provisions contained
therein being more restrictive on the Borrower than those in effect on the date
hereof, in each case without the prior written consent of Senior Agent, or (ii)
modify, amend or supplement any Subordinated Security Documents or enter into or
accept any additional Subordinated Security Documents or take any other action
which would result in each case in Subordinated Creditor obtaining liens and
security interests on property or assets of the Borrower or any Guarantor which
do not constitute Senior Collateral, without in each case providing at least
thirty (30) days prior written notice thereof to Senior Agent describing, in
reasonable detail, any such property or assets. The Borrower shall furnish to
(x) Senior Agent copies of all amendments, modifications and waivers of any of
the terms or provisions of the Subordinated Documents within ten (10) days of
the execution thereof, and (y) the Subordinated Creditor copies of all
amendments, modifications and waivers of any of the terms or provisions of the
Senior Documents within ten (10) days of the execution thereof.
11. SUBORDINATION NOT IMPAIRED BY BORROWER OR GUARANTOR. No right of any
holder of Senior Debt to enforce the subordination of the Subordinated
Obligation shall be impaired by any act or failure to act by Borrower or any
Guarantor.
12. NO THIRD PARTY BENEFICIARIES. SECTIONS 2 through 11 of this Agreement
are not intended to give or confer any rights to any person other than the
holders of the Senior Debt and the Subordinated Creditor. No other party,
including Borrower or any Guarantor, is intended to be a third party beneficiary
of this Agreement, except that Borrower and each Guarantor shall comply with
their respective agreements and obligations under this Agreement.
13. REPRESENTATIONS AND WARRANTIES. Subordinated Creditor hereby
represents and warrants that: (a) the execution and delivery of this Agreement
and the performance by Subordinated Creditor of its obligations hereunder have
received all necessary approvals, corporate or otherwise, and do not and will
not contravene or conflict with any provision of law or any provision of any
indenture, instrument, or other agreement to which Subordinated Creditor is a
party or by which it or its property may be bound or affected; (b) Subordinated
Creditor has full power, authority, and legal right to make and perform this
Agreement; (c) Subordinated Creditor has not assigned or transferred any
indebtedness owing by Borrower or any Guarantor, or any of the collateral for
the Subordinated Obligation and Subordinated Creditor will not assign or
transfer same unless (i) such assignee or transferee expressly assumes the
obligations of Subordinated Creditor hereunder and agrees to be bound hereby,
and (ii) Subordinated Creditor shall have given at least ten days prior written
notice to Senior Agent at the address set forth by its signature below (unless
otherwise notified in writing by Senior Agent); and (d) this Agreement is the
legal, valid, and binding obligation of Subordinated Creditor, enforceable
against Subordinated Creditor in accordance with its terms.
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14. NO WAIVER. No failure on the part of Senior Agent or any Senior
Lender to exercise, no delay in exercising, and no course of dealing with
respect to, any right or remedy hereunder will operate as a waiver thereof; nor
will any single or partial exercise of any right or remedy hereunder preclude
any other or further exercise thereof or the exercise of any other right or
remedy. This Agreement may not be amended or modified except by written
agreement of Senior Agent, Subordinated Creditor, Borrower and the Guarantors,
and no consent or waiver hereunder shall be valid unless in writing and signed
by the party to be charged thereby.
15. SUCCESSOR AND ASSIGNS. This Agreement, and the terms, covenants, and
conditions hereof, shall be binding upon and inure to the benefit of the parties
hereto, and their respective heirs, personal representatives, successors, and
assigns.
16. GOVERNING LAW. THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first above written.
BNP PARIBAS, as Senior Agent
Notice Address: By:
--------------------------------------
Name:
1200 Smith Street, Suite 3100 Title:
Houston, Texas 77002
Attention: Mr. Brian M. Malone
GOODRICH PETROLEUM COMPANY, L.L.C.,
as Borrower
Notice Address: By:
--------------------------------------
Name:
815 Walker Street Title:
Houston, Texas 77002
Attention: Mr. Robert C. Turnham
GOODRICH PETROLEUM COMPANY -
LAFITTE, L.L.C., as a Guarantor
Notice Address: By:
--------------------------------------
Name:
815 Walker Street Title:
Houston, Texas 77002
Attention: Mr. Robert C. Turnham
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GOODRICH PETROLEUM CORPORATION,
as a Guarantor
Notice Address: By:
--------------------------------------
Name:
815 Walker Street Title:
Houston, Texas 77002
Attention: Mr. Robert C. Turnham
MALLOY ENERGY COMPANY, L.L.C.,
as Subordinated Creditor
By: Malloy Oil and Gas Corporation
Managing Member
Notice Address: By:
--------------------------------------
Patrick E. Malloy, III
President
Bay Street at the Waterfront
P.O. Box 1979
Sag Harbor, NY 11963
Attn: Mr. Patrick E. Malloy, III
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