EXHIBIT 99.7
TERM LOAN AND SECURITY AGREEMENT
[EXIT FACILITY]
among
PANACO, INC.
Borrower
MID RIVER LLC,
Administrative Agent
and
THE LENDERS NAMED HEREIN,
Lenders
$38,000,000
DATED AS OF NOVEMBER 16, 2004
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS AND TERMS...................................................................... 1
1.1 Definitions....................................................................................... 1
1.2 Number and Gender of Words; Other References...................................................... 16
1.3 Accounting Principles............................................................................. 16
SECTION 2. TERM LOAN FACILITY......................................................................... 17
SECTION 3. TERMS OF PAYMENT........................................................................... 17
3.1 Loan Accounts, Notes, and Payments................................................................ 17
3.2 Payments.......................................................................................... 18
3.3 Prepayments....................................................................................... 18
3.4 Interest Accrual.................................................................................. 18
3.5 Post-Default Rate................................................................................. 18
3.6 Interest Recapture................................................................................ 18
3.7 Interest Calculations............................................................................. 19
3.8 Maximum Rate...................................................................................... 19
3.9 Application of Payments........................................................................... 19
3.10 Sharing of Payments, Etc. ........................................................................ 20
3.11 Offset............................................................................................ 20
3.12 Collection of Accounts............................................................................ 20
3.13 Crediting Payments; Application of Collections.................................................... 21
SECTION 4. TAXES...................................................................................... 21
4.1 General........................................................................................... 21
4.2 Stamp and Documentary Taxes....................................................................... 22
4.3 Indemnification for Taxes......................................................................... 22
4.4 Changes in Applicable Lending Office.............................................................. 22
4.5 Survival.......................................................................................... 22
SECTION 5. SECURITY................................................................................... 22
5.1 Collateral........................................................................................ 22
5.2 Grant of Security Interest in Personal Property Collateral........................................ 22
5.3 Negotiable Collateral and Chattel Paper........................................................... 23
5.4 Delivery of Additional Documentation Required..................................................... 24
5.5 Power of Attorney................................................................................. 24
5.6 Right to Verify Accounts.......................................................................... 25
5.7 Right to Inspect Properties and Books and Records; Communication with Accountants................. 25
5.8 Right to Inspect Collateral....................................................................... 25
5.9 Right to Require Collateral Appraisals............................................................ 25
5.10 Control Agreements................................................................................ 25
5.11 Grant of License to Use Proprietary Rights........................................................ 26
5.12 Commercial Tort Claims............................................................................ 26
5.13 Letters in Lieu/Power of Attorney................................................................. 26
5.14 Assignment of Runs................................................................................ 27
SECTION 6. CONDITIONS PRECEDENT TO CLOSING............................................................ 27
SECTION 7. REPRESENTATIONS AND WARRANTIES............................................................. 27
7.1 Organization, Powers, Qualification, Good Standing, Business, and Subsidiaries.................... 27
7.2 Authorization of Borrowing, etc. ................................................................. 28
7.3 Collateral and Security Interests................................................................. 28
7.4 Financial Condition............................................................................... 30
7.5 Title to Collateral............................................................................... 30
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7.6 Proved Reserves; Ownership of Oil and Gas Properties.............................................. 31
7.7 Operations of Oil and Gas Properties.............................................................. 32
7.8 Maintenance of Properties......................................................................... 32
7.9 Marketing of Production........................................................................... 32
7.10 Leases............................................................................................ 33
7.11 Non-Consent Operations............................................................................ 33
7.12 Condition of Equipment............................................................................ 33
7.13 Wells............................................................................................. 33
7.14 Swap Agreements................................................................................... 33
7.15 Hedging Agreement................................................................................. 33
7.16 Compliance with the Law........................................................................... 33
7.17 Litigation; Adverse Facts......................................................................... 34
7.18 Payment of Taxes.................................................................................. 34
7.19 Performance of Agreements; Materially Adverse Agreements.......................................... 34
7.20 Governmental Regulation........................................................................... 34
7.21 Securities Activities............................................................................. 34
7.22 Employee Plans.................................................................................... 35
7.23 Environmental Protection.......................................................................... 35
7.24 Disclosure........................................................................................ 36
7.25 Purpose of Credit Facility........................................................................ 36
SECTION 8. AFFIRMATIVE COVENANTS...................................................................... 37
8.1 Financial Statements and Other Reports............................................................ 37
8.2 Collateral Reporting.............................................................................. 40
8.3 Corporate Existence............................................................................... 41
8.4 Payment of Taxes and Claims; Tax Consolidation.................................................... 41
8.5 Operation and Maintenance of Properties; Insurance................................................ 41
8.6 Inspection; Lender Meeting........................................................................ 42
8.7 Compliance with Laws, etc. ....................................................................... 42
8.8 Borrower's Remedial Action Regarding Hazardous Materials.......................................... 44
8.9 Oil and Gas Property Title Information............................................................ 44
8.10 Additional Collateral............................................................................. 44
8.11 Payment of Obligation; Leases..................................................................... 45
8.12 Further Assurances................................................................................ 45
8.13 Location of Inventory and Equipment............................................................... 45
8.14 Use of Proceeds................................................................................... 45
8.15 Reorganization Plan............................................................................... 45
SECTION 9. NEGATIVE COVENANTS......................................................................... 45
9.1 Indebtedness...................................................................................... 46
9.2 Prohibition on Liens.............................................................................. 46
9.3 Investments....................................................................................... 46
9.4 Change in Location of Chief Executive Office; Inventory and Equipment with Bailees................ 47
9.5 Restriction on Fundamental Changes; Asset Sales................................................... 47
9.6 Sales and Lease-Backs............................................................................. 47
9.7 Sale or Discount of Receivables................................................................... 47
9.8 Transactions with Affiliates...................................................................... 47
9.9 Distributions; Repurchases of Capital Stock....................................................... 48
9.10 Conduct of Business............................................................................... 48
9.11 Amendments or Waivers of Agreements............................................................... 48
9.12 Gas Imbalances, Take-or-Pay or Other Prepayments.................................................. 48
9.13 Swap Agreements................................................................................... 48
9.14 No Prohibited Transactions Under ERISA............................................................ 49
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9.15 Maintenance of Proprietary Rights................................................................. 49
SECTION 10. DEFAULT.................................................................................... 50
10.1 Failure to Make Payments When Due................................................................. 50
10.2 Default in Other Agreements....................................................................... 50
10.3 Breach of Certain Covenants....................................................................... 50
10.4 Breach of Warranty................................................................................ 50
10.5 Other Defaults Under Loan Documents............................................................... 50
10.6 Involuntary Bankruptcy; Appointment of Receiver, etc.............................................. 50
10.7 Voluntary Bankruptcy, Appointment of Receiver, etc................................................ 50
10.8 Judgments and Attachments......................................................................... 51
10.9 Dissolution....................................................................................... 51
10.10 Employee Plans.................................................................................... 51
10.11 Change of Control................................................................................. 51
10.12 Failure of Security............................................................................... 51
10.13 Confirmation Order................................................................................ 51
10.14 Lien Challenge.................................................................................... 51
SECTION 11. RIGHTS AND REMEDIES........................................................................ 51
11.1 Remedies Upon Event of Default.................................................................... 52
11.2 Waivers........................................................................................... 53
11.3 Performance by Administrative Agent............................................................... 53
11.4 Delegation of Duties; Reliance.................................................................... 54
11.5 Not in Control.................................................................................... 54
11.6 Course of Dealing................................................................................. 54
11.7 Cumulative Rights................................................................................. 55
11.8 Application of Proceeds........................................................................... 55
11.9 Certain Proceedings............................................................................... 55
11.10 Expenditures by Lenders........................................................................... 55
11.11 INDEMNIFICATION................................................................................... 55
SECTION 12. AGREEMENT AMONG LENDERS.................................................................... 56
12.1 Administrative Agent.............................................................................. 56
12.2 Expenses.......................................................................................... 57
12.3 Proportionate Absorption of Losses................................................................ 57
12.4 Delegation of Duties; Reliance.................................................................... 58
12.5 Limitation of Liability........................................................................... 58
12.6 Event of Default; Collateral...................................................................... 59
12.7 Limitation of Liability........................................................................... 60
12.8 Relationship of Lenders........................................................................... 60
12.9 Benefits of Agreement............................................................................. 60
12.10 Obligations Several............................................................................... 61
SECTION 13. MISCELLANEOUS.............................................................................. 61
13.1 Headings.......................................................................................... 61
13.2 Nonbusiness Days.................................................................................. 61
13.3 Communications.................................................................................... 61
13.4 Form and Number of Documents...................................................................... 62
13.5 Survival.......................................................................................... 62
13.6 Governing Law..................................................................................... 62
13.7 Invalid Provisions................................................................................ 62
13.8 ENTIRETY.......................................................................................... 62
13.9 JURISDICTION; VENUE; SERVICE OF PROCESS; JURY TRIAL............................................... 62
13.10 Amendments, Consents, Conflicts, and Waivers...................................................... 63
13.11 Multiple Counterparts............................................................................. 64
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13.12 Successors and Assigns; Assignments and Participations............................................ 64
13.13 Uniform Commercial Code........................................................................... 65
13.14 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances....................... 65
13.15 Uniform Commercial Code........................................................................... 1
13.16 Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances....................... 1
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SCHEDULES AND EXHIBITS
Schedule C - Commercial Tort Claims
Schedule P - Proprietary Rights
Schedule 2.1 - Lenders and Commitments
Schedule 2.7 - Initial Collection Account Banks
Schedule 6 - Conditions Precedent to Closing
Schedule 7.1 - Subsidiaries/Capitalization
Schedule 7.2 - Locations of Collateral; Borrower's address, FEIN and
Organizational ID Number
Schedule 7.5(a)(i) - Oil and Gas Properties
Schedule 7.5(a)(ii) - Net Revenue Interests
Schedule 7.5(a)(iii) - Material Contracts
Schedule 7.5(a)(iv) - Real Property
Schedule 7.6(e) - Imbalances or "Take or Pay" Payments
Schedule 7.7 - Operations of Hydrocarbon Interests
Schedule 8.5 - Insurance
Schedule 9.1 - Existing Indebtedness
Schedule 9.2 - Existing Liens
Exhibit A - Form of Term Loan Note
Exhibit B - [Intentionally Left Blank]
Exhibit C - Form of Assignment and Assumption
Exhibit D - Form of Letter in Lieu of Transfer Order
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TERM LOAN AND SECURITY AGREEMENT
THIS TERM LOAN AND SECURITY AGREEMENT is entered into as of November 16,
2004, among PANACO, INC., a Delaware corporation ("BORROWER"), Lenders
(hereinafter defined), and MID RIVER LLC, a Delaware limited liability company,
as Administrative Agent (hereinafter defined), for itself and the other Lenders.
RECITALS
WHEREAS, Borrower is a reorganized debtor in Case No. 02-37811 (the
"CHAPTER 11 CASE") in the United States Bankruptcy Court for the Southern
District Of Texas, Houston Division (the "COURT"); and
WHEREAS, Borrower is a party to that certain Amended and Restated Loan and
Security Agreement (as amended) dated as of September 30, 1999, among the
Borrower, Mid River LLC, as substitute agent, and the various lenders party
thereto; and
WHEREAS, the Borrower has filed that certain Fifth Amended Joint Plan of
Reorganization, as modified, dated as of October 29, 2004, and that certain
Fifth Amended Joint Disclosure Statement Under Section 1125 of the Bankruptcy
Code Regarding Fifth Amended Joint Plan of Reorganization Under Chapter 11 of
the Bankruptcy Code of Panaco, Inc., dated as of August 25, 2004 (together with
any amendment or modifications thereto consented to by the Lenders,
collectively, the "REORGANIZATION PLAN"); and
WHEREAS, the Reorganization Plan was confirmed pursuant to that certain
Findings of Fact, Conclusions of Law and Order Confirming Fifth Amended Plan of
Reorganization, as Modified, and Disallowing Ballots of James Maxwell and Bob
Mallory entered by the Court in the Chapter 11 Case on November 3, 2004 (the
"CONFIRMATION ORDER"), after a final hearing under Bankruptcy Rule 3020, which
Order is reasonably satisfactory in form and substance to Administrative Agent
and the Required Lenders, and
WHEREAS, as set forth in the Reorganization Plan and Confirmation Order,
Borrower is restructuring the claims of Lenders in the Chapter 11 Case in
accordance with the Reorganization Plan; and
WHEREAS, Administrative Agent and the Lenders are willing to extend such
financing to Borrower in accordance with and subject to the terms and conditions
set forth in this Agreement:
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS AND TERMS.
1.1 DEFINITIONS. As used herein:
ACCOUNT DEBTOR means any Person who is or who may become obligated under,
with respect to, or on account of, an Account, Chattel Paper, or a General
Intangible.
ACCOUNTS means all of Borrower's now owned or hereafter acquired right,
title, and interest with respect to "accounts" as that term is defined in the
UCC, and any and all Supporting Obligations in respect thereof.
TERM LOAN AND SECURITY AGREEMENT
ADMINISTRATIVE AGENT means Mid River LLC, a Delaware limited liability
company, and its permitted successors and assigns as "ADMINISTRATIVE AGENT" for
Lenders under the Loan Documents.
AFFILIATE of any Person means any other individual or entity (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person, or (ii) 5% or more
of the Voting Stock (or in the case of an entity which is not a corporation, 5%
or more of the voting equity interest) of which is beneficially owned or held by
such Person; and, for purposes of this definition only, "control," "controlled
by," and "under common control with" mean possession, directly or indirectly, of
the power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract, or otherwise).
AGREEMENT means this Term Loan and Security Agreement (as the same may
hereafter be amended, modified, supplemented, or restated from time to time).
APPLICABLE LENDING OFFICE means, for each Lender, the "Lending Office" of
such Lender (or an affiliate of such Lender) designated on SCHEDULE 2.1,
attached hereto or such other office that such Lender (or an affiliate of such
Lender) may from time to time specify to Administrative Agent and Borrowers by
written notice in accordance with the terms hereof.
ASSIGNMENT AND ASSUMPTION means an assignment and assumption entered into
by a Lender and its assignee and accepted by Administrative Agent, in
substantially the form of EXHIBIT C or any other form approved by Administrative
Agent.
AUTHORIZATIONS means all material filings, recordings, and registrations
with, and all material validations or exemptions, approvals, orders,
authorizations, consents, franchises, licenses, certificates, certificates of
compliance, grants of authority, and permits from, any Governmental Authority.
BOOKS means Borrower's now owned or hereafter acquired books and records
(including all of its Records indicating, summarizing, or evidencing its assets
(including the Collateral) or liabilities, all of Borrower's records relating to
its business operations or financial condition, and all of its goods or General
Intangibles related to such information).
BORROWER is defined in the preamble to this Agreement.
BORROWING means any amount disbursed (a) by one or more Lenders under the
Loan Documents, whether such amount constitutes an original disbursement of
funds or the continuation of an amount outstanding, or (b) by any Lender in
accordance with, and to satisfy the obligations of any Borrower under, any Loan
Document.
BUSINESS DAY means for all purposes, any day other than Saturday, Sunday,
and any other day on which commercial banking institutions are required or
authorized by Law to be closed in Dallas, Texas or New York, New York.
CAPITAL LEASE means any capital lease or sublease which should be
capitalized on a balance sheet in accordance with GAAP.
CASH EQUIVALENTS means:
TERM LOAN AND SECURITY AGREEMENT
2
(a) Readily marketable, direct, full faith and credit obligations of
the United States of America, or obligations guaranteed by the full faith
and credit of the United States of America, maturing within not more than
one year from the date of acquisition;
(b) Readily marketable, direct obligations issued by any state of
the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within not more than
one year from the date of acquisition, and, at the time of acquisition,
having the highest rating obtainable from either Moody's Investors
Service, Inc. ("MOODY'S") or Standard and Poor's Rating Group (a division
of McGraw-Hill, Inc., "S&P");
(c) Commercial paper maturing no more than one year from the date of
issuance and rated, at the time of acquisition, at least P-1 from Moody's
or at least A-1 from S&P;
(d) Short term certificates of deposit or banker's acceptances
maturing within one year from the date of issuance having a rating of at
least P-1 from Moody's or at least A-1 from S&P, issued by any Lender or
any commercial bank organized under the Laws of the United States of
America, or any state thereof or the District of Columbia, having combined
capital and surplus of not less than $250,000,000 (each Lender and such
commercial bank being herein called a "CASH EQUIVALENT BANK") and not
subject to set off Rights in favor of such bank;
(e) Eurodollar time deposits maturing within one year purchased
directly from any Cash Equivalent Bank (provided such deposit is with such
Cash Equivalent Bank or any other Cash Equivalent Bank); and
(f) any money market or mutual fund which invests only in the
foregoing types of investments and the liquidity of which is satisfactory
to Administrative Agent.
CHANGE OF CONTROL means that (a) except as otherwise permitted under the
Reorganization Plan, a majority of the members of the Board of Directors do not
constitute Continuing Directors, or (b) Borrower ceases to own, directly or
indirectly, and control 100% of the outstanding Stock of each of its
Subsidiaries extant as of the Closing Date.
CHATTEL PAPER means all of Borrower's now owned or hereafter acquired
right, title and interest in respect of "chattel paper" as such term is defined
in the UCC, including, without limitation, any tangible or electronic Chattel
Paper.
CLOSING DATE means the date upon which this Agreement has been executed by
Borrower, Lenders, and Administrative Agent and all conditions precedent
specified in SECTION 6 have been satisfied or waived.
CODE means the Internal Revenue Code of 1986, as amended, together with
the rules and regulations promulgated thereunder.
COLLATERAL means all of Borrower's now owned or hereafter acquired right,
title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Chattel Paper,
TERM LOAN AND SECURITY AGREEMENT
3
(d) Commercial Tort Claims,
(e) Deposit Accounts,
(f) Equipment,
(g) General Intangibles,
(h) Inventory,
(i) Investment Property (including all of its securities and
Securities Accounts),
(j) Negotiable Collateral,
(k) Proprietary Rights,
(l) Oil and Gas Properties,
(m) Supporting Obligations,
(n) money, cash, Cash Equivalents, or other assets of Borrower that
now or hereafter come into the possession, custody, or control of any
member of the Lenders,
(o) the proceeds and products, whether tangible or intangible, of
any of the foregoing, including proceeds of insurance covering any or all
of the foregoing, and any and all Accounts, Books, Chattel Paper, Deposit
Accounts, Equipment, General Intangibles, Inventory, Investment Property,
Negotiable Collateral, Proprietary Rights, Oil and Gas Properties,
Supporting Obligations, money, deposit accounts, or other tangible or
intangible property resulting from the sale, exchange, collection, or
other disposition of any of the foregoing, or any portion thereof or
interest therein, and the proceeds thereof; provided, however, that
Collateral shall not include any molds or tools that are owned by third
parties but located on Borrower's premises, and
(p) to the extent not included in the foregoing, all other personal
property of Borrower of any kind or description.
COLLATERAL DOCUMENTS means the Mortgages, the Letters in Lieu, and all
other security agreements, pledge agreements, mortgages, financing statements,
assignments of partnership interests, and guaranties at any time delivered to
Administrative Agent to create or evidence Liens securing the Obligation (or any
part thereof), together with all reaffirmations, amendments, and modifications
thereof or supplements thereto.
COLLECTIONS means all cash, checks, notes, instruments, and other items of
payment (including insurance proceeds, proceeds of cash sales, rental proceeds,
and tax refunds) of Borrower.
COMMERCIAL TORT CLAIMS means all of Borrower's now owned or hereafter
acquired right, title and interest with respect to any "commercial tort claim"
as such term is defined in the UCC, including without limitation, the Commercial
Tort Claims on SCHEDULE C.
TERM LOAN AND SECURITY AGREEMENT
4
COMMITMENT PERCENTAGE means, at any date of determination, for any Lender,
the proportion (stated as a percentage) that its Committed Sum bears to the
aggregate Committed Sums of all Lenders.
COMMITTED SUM means, at any date of determination occurring prior to the
initial Borrowing, the amount stated beside such Lender's name on SCHEDULE 2.1
to this Agreement.
CONTINUING DIRECTOR means (a) any member of the Board of Directors who was
a director (or comparable manager) of Borrower on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors after the Closing Date
if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Borrower and whose initial assumption of office resulted from such contest or
the settlement thereof.
CONTRACTUAL OBLIGATION means, as applied to any Person, any provision of
any security or equity issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement, or other instrument
to which that Person is a party or by which it or any of its properties is bound
or to which it or any of its properties is subject.
DDA means any checking or other demand deposit account maintained by
Borrower.
DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, fraudulent
transfer or conveyance, suspension of payments, or similar Laws from time to
time in effect affecting the Rights of creditors generally.
DEPOSIT ACCOUNTS means all of Borrower's now owned or hereafter acquired
right, title and interest with respect to any "deposit account" as such term is
defined in the UCC, including, without limitation, any DDAs.
DESIGNATED ACCOUNT means account number 033595241 of Panaco maintained
with Borrower's Designated Account Bank, or such other deposit account of Panaco
(located within the United States) which has been designated, in writing and
from time to time, by Borrower to Administrative Agent.
DESIGNATED ACCOUNT BANK means First American Bank, SSB, whose office is
located at One Lincoln Park, 8401 N. Central Expressway #500, Dallas, TX 752255.
DOLLARS and the symbol $ means lawful money of the United States of
America.
EMPLOYEE PLAN means, at any time, each Single-Employer Plan and each
Multiemployer Plan.
ENVIRONMENTAL CLAIM means any written accusation, allegation, notice of
violation, claim, demand, abatement order or other order, or direction
(conditional or otherwise) by any Governmental Authority or any Person for any:
costs of investigation and remediation; contribution or indemnity; direct,
indirect, or consequential damages, including, without limitation, personal
injury (including sickness, disease, or death), tangible or intangible property
damage, natural resources, or other damages or adverse effects on the
environment; or for fines, penalties, or restrictions, in each case relating to,
resulting from, or in connection with Hazardous Materials or any violation of
Environmental Laws and relating to Borrower, any of its Subsidiaries, any of
their respective Affiliates that are directly or indirectly controlled by
Borrower, or any Facility which in any case could reasonably be expected to have
a Material Adverse Effect.
TERM LOAN AND SECURITY AGREEMENT
5
ENVIRONMENTAL LAW means all laws, statutes, ordinances, judicial, or
administrative orders, rules, regulations, plans, policies, or decrees and the
like relating to (a) environmental matters, including, without limitation, those
relating to fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses, or injuries resulting from the Release or threatened
Release of Hazardous Materials, (b) the generation, use, storage,
transportation, or disposal of Hazardous Materials, or (c) occupational safety
and health, public health and safety, industrial hygiene or protection of the
environment, including environmentally sensitive aspects such as wetlands and
endangered species, in any manner applicable to Borrower or any of its
Subsidiaries or any of their respective properties, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C.
Section 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. Section
651 et seq.) and the Emergency Planning and Community Right-to-Know Act (42
U.S.C. Section 11001 et seq.), each as amended or supplemented, and any
analogous future or present local, state and federal statutes and regulations
promulgated pursuant thereto, each as in effect as of the date of determination.
The term "oil" shall have the meaning specified in OPA, the terms "hazardous
substance" and "release" (or "threatened release") have the meanings specified
in CERCLA, the terms "solid waste" and "disposal" (or "disposed") have the
meanings specified in RCRA and the term "oil and gas waste" shall have the
meaning specified in Section 91.1011 of the Texas Natural Resources Code
("SECTION 91.1011"); provided, however, that (a) in the event either OPA,
CERCLA, RCRA or Section 91.1011 is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment and (b) to the extent the laws of the state or
other jurisdiction in which any Property of the Borrower or any Subsidiary is
located establish a meaning for "oil," "hazardous substance," "release," "solid
waste," "disposal" or "oil and gas waste" which is broader than that specified
in either OPA, CERCLA, RCRA or Section 91.1011, such broader meaning shall
apply.
EQUIPMENT means all of Borrower's now owned or hereafter acquired right,
title, and interest with respect to equipment, machinery, machine tools, motors,
furniture, furnishings, fixtures, vehicles (including motor vehicles), computer
hardware, tools, parts, and goods (other than consumer goods, farm products, or
Inventory), wherever located, including all attachments, accessories,
accessions, replacements, substitutions, additions, and improvements to any of
the foregoing.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and rulings thereunder.
ERISA AFFILIATE means any Borrower or trade or business (whether or not
incorporated) which, for purposes of Title IV of ERISA, is, or has been within
the past six years, a member of any Borrower's controlled group or which is, or
has been within the past six years, under common control with any Borrower
within the meaning of Section 414(b), (c), (m), or (o) of the Code.
ERISA EVENT means (i) a "reportable event" within the meaning of Section
4043(c) of ERISA and the regulations issued thereunder with respect to any
Employee Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation or with respect to which no penalty will be
assessed by the PBGC for failure to satisfy such notice requirements); (ii) the
failure to meet the minimum funding standard of Section 412 of the Code with
respect to any Employee Plan (whether or not waived in accordance with Section
412(d) of the Code) or the failure to make by its due date a required
installment under Section 412(m) of the Code with respect to any Single-Employer
Plan or the failure to make any required contribution to a Multiemployer Plan;
(iii) the provision by the
TERM LOAN AND SECURITY AGREEMENT
6
administrator of any Employee Plan pursuant to Section 4041(a)(2) of ERISA of a
notice of intent to terminate such plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the withdrawal by Borrower or any of its ERISA
Affiliates from any Employee Plan with two or more contributing sponsors or the
termination of any such Employee Plan resulting, in either case, in liability
pursuant to Section 4063 or 4064 of ERISA, respectively; (v) the institution by
the PBGC of proceedings to terminate any Employee Plan pursuant to Section 4042
of ERISA; (vi) the imposition of liability on Borrower or any of its ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the
application of Section 4212(c) of ERISA; (vii) the withdrawal by Borrower or any
of its ERISA Affiliates in a complete or partial withdrawal (within the meaning
of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan resulting in
withdrawal liability pursuant to Section 4201 of ERISA, or the receipt by
Borrower or any of its ERISA Affiliates of written notice from any Multiemployer
Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245
of ERISA, or that it intends to terminate or has terminated under Section 4042
of ERISA or under Section 4041A of ERISA if such termination would result in
liability to Borrower or any of its ERISA Affiliates; (viii) the imposition on
Borrower or any of its ERISA Affiliates of fines, penalties, or taxes under
Chapter 43 of the Code or under Section 409 or 502(c), (i) or (l) or 4071 of
ERISA in respect of any Employee Plan; (ix) the failure of any Employee Plan (or
any other Employee Plan intended to be qualified under Section 401(a) of the
Code) to qualify under Section 401(a) of the Code, or the failure of any trust
forming part of any Employee Plan to qualify for exemption from taxation under
Section 501(a) of the Code; or (x) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Code or pursuant to ERISA with respect to any
Employee Plan.
EVENT OF DEFAULT is defined in SECTION 10.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended from
time to time, and any successor statute.
EXHIBIT means an exhibit to this Agreement unless otherwise specified.
FACILITIES means any and all real property (including, without limitation,
all buildings, fixtures, or other improvements located thereon) now, hereafter,
or heretofore owned, leased, operated, or used by Borrower or any of its
Subsidiaries (but only as to portions of buildings actually leased or used) or
any of their respective predecessors or any of their respective Affiliates that
are directly or indirectly controlled by Borrower.
FEDERAL FUNDS RATE means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined (which
determination shall be conclusive and binding, absent manifest error) by
Administrative Agent to be equal to the weighted average of the rates on
overnight Federal funds transactions with member banks of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding such day;
provided that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day, and (b) if no such rate
is so published on such next succeeding Business Day, the Federal Funds Rate for
such day shall be the average rate charged to Administrative Agent (in its
individual capacity) on such day on such transactions as determined by
Administrative Agent (which determination shall be conclusive and binding,
absent manifest error).
FISCAL YEAR means the fiscal year of Borrower and its Subsidiaries ending
on December 31 of each calendar year.
TERM LOAN AND SECURITY AGREEMENT
7
GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board which are applicable from time to time.
GENERAL INTANGIBLES means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "general intangibles" (as
that term is defined in the UCC), including payment intangibles, contract
rights, rights to payment, rights arising under common law, statutes, or
regulations, choses or things in action, goodwill, patents, trade names,
trademarks, servicemarks, copyrights, blueprints, drawings, purchase orders,
customer lists, monies due or recoverable from pension funds, route lists,
rights to payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on computer disks
or tapes, software, literature, reports, catalogs, money, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims, and any and all
Supporting Obligations in respect thereof, and any other personal property other
than goods, money, Accounts, Chattel Paper, Commercial Tort Claims, Deposit
Accounts, Investment Property, and Negotiable Collateral.
GOVERNMENTAL AUTHORITY means any (a) state, county, city, town, village,
or other local, state, or federal judicial, executive, regulatory, or
legislative instrumentality, (b) private arbitration board or panel, or (c)
central bank.
HAZARDOUS MATERIALS means (a) any chemical, material or substance defined
as or included in the definition of "hazardous substances", "pollutant or
contaminant", "hazardous wastes", "hazardous materials", "extremely hazardous
waste", "restricted hazardous waste", "infectious waste", "toxic substances" or
any other formulations intended to define, list or classify substances by reason
of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws;
(b) any oil, petroleum, petroleum fraction, or petroleum derived substance; (c)
any drilling fluids, produced waters, and other wastes associated with the
exploration, development or production of crude oil, natural gas, or geothermal
resources; (d) any flammable substances or explosives; (e) any radioactive
materials; (f) asbestos in any form; (g) urea formaldehyde foam insulation; (h)
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls; (i) pesticides; (j) infectious materials;
(k) toxic mold; and (l) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any Governmental Authority.
HYDROCARBON INTERESTS means all rights, titles, interests and estates now
or hereafter acquired in and to oil and gas leases, oil, gas and mineral leases,
or other liquid or gaseous hydrocarbon leases, mineral fee interests, overriding
royalty and royalty interests, net profit interests and production payment
interests, including any reserved or residual interests of whatever nature.
HYDROCARBONS means oil, gas, casinghead gas, drip gasoline, natural
gasoline, condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons and
all products refined or separated therefrom.
INDEBTEDNESS means, as applied to any Person, (a) all indebtedness for
borrowed money, (b) that portion of obligations with respect to Capital Leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP, (c) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money (other than accounts
payable incurred in the ordinary course of business and accrued expenses
incurred in the ordinary course of business), (d) any obligation owed for all or
any part of the deferred purchase price of property or services (excluding any
such obligations incurred under ERISA and other trade payables incurred in the
ordinary course of business) and (e) all indebtedness secured by any Lien on any
property or asset owned or held by that
TERM LOAN AND SECURITY AGREEMENT
8
Person regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person.
INVENTORY means all Borrower's now owned or hereafter acquired right,
title, and interest with respect to "inventory," as that term is defined in the
UCC.
INVESTMENT means (a) any direct or indirect purchase or other acquisition
by Borrower or any of its Subsidiaries of, or of a beneficial interest in, stock
or other securities or equity of any other Person (other than a Person that,
prior to such purchase or acquisition, was a wholly-owned Subsidiary of
Borrower), or (b) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment, and travel expenses, drawing accounts, and
similar expenditures in the ordinary course of business) or capital contribution
by Borrower or any of its Subsidiaries to any other Person other than a
wholly-owned Subsidiary of Borrower, including all Indebtedness and accounts
receivable acquired from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business;
provided, however, that the term "Investment" shall not include (i) current
trade and customer accounts receivable for goods furnished or services rendered
in the ordinary course of business and payable in accordance with customary
trade terms, (ii) advances and prepayments to suppliers for goods and services
in the ordinary course of business, (iii) stock or other securities acquired in
connection with the satisfaction or enforcement of Indebtedness or claims due or
owing to Borrower or any of its Subsidiaries or as security for any such
Indebtedness or claims, (iv) cash held in deposit accounts with banks, trust
companies, and Lenders, and (v) shares in a mutual fund that invests solely in
Cash Equivalents. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, or write-ups, write-downs, or write-offs
with respect to such Investment.
INVESTMENT PROPERTY means all of Borrower's now owned or hereafter
acquired right, title, and interest with respect to "investment property" as
that term is defined in the UCC, and any and all supporting obligations in
respect thereof.
LAWS means all applicable statutes, laws, treaties, ordinances, tariff
requirements, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, or interpretations of any Governmental Authority.
LENDERS means, on any date of determination, the financial institutions
named on SCHEDULE 2.1 (as the same may be amended from time to time to reflect
the assignments made in accordance with SECTION 13.12(b) of this Agreement), and
subject to the terms and conditions of this Agreement, and their respective
successors and assigns (but not any Participant who is not otherwise a party to
this Agreement).
LIEN means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind, and any other
Right of or arrangement with any creditor (other than under or relating to
subordination or other intercreditor arrangements) to have its claim satisfied
out of any property or assets, or the proceeds therefrom, prior to the general
creditors of the owner thereof.
LITIGATION means any action by or before any Governmental Authority.
LOAN DOCUMENTS means (a) this Agreement, the Term Loan Notes, and the
Collateral Documents, (b) all agreements, documents, or instruments in favor of
Administrative Agent or Lenders ever delivered pursuant to this Agreement or
otherwise delivered in connection with all or any part of the Obligation, and
(c) any and all future renewals, extensions, restatements, reaffirmations, or
amendments of, or supplements to, all or any part of the foregoing.
TERM LOAN AND SECURITY AGREEMENT
9
LOAN PARTIES means, on any date of determination, Borrower and any other
obligor under a Loan Document other than Administrative Agent or Lenders.
LOCKBOX ACCOUNT shall mean a depositary account established pursuant to
one of the Lockbox Agreements.
LOCKBOX AGREEMENTS means Lockbox Operating Procedural Agreements and those
certain Depository Account Agreements, in form and substance satisfactory to
Administrative Agent, each of which is among Borrower, Administrative Agent, and
one of the Lockbox Banks.
LOCKBOX BANKS means Southwest Bank of Texas or such other banks as may be
agreed to by Borrower and Lender from time to time.
LOCKBOXES has the meaning set forth in SECTION 3.12(a).
MARGIN STOCK has the meaning assigned to that term in Regulation U.
MATERIAL ADVERSE EFFECT means any (a) material impairment of the ability
of any Loan Party to perform any payment or other obligations under any Loan
Document, (b) material and adverse effect on the business, operations,
prospects, properties, assets, or condition (financial or otherwise) of Borrower
and its Subsidiaries (taken as a whole), (c) material adverse effect upon the
legality, validity, binding effect, or enforceability against a Loan Party of
any Loan Document to which it is a party, or (d) a material impairment in the
perfection or priority of Administrative Agent's security interest in the
Collateral or in the value of such Collateral.
MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for each Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest which,
under applicable Law, such Lender is permitted to contract for, charge, take,
reserve, or receive on the Obligation.
MORTGAGE means a security instrument (whether designated as a deed of
trust or a mortgage or by any similar title) executed and delivered by any Loan
Party to the Administrative Agent, in the form as may be approved by
Administrative Agent in its sole discretion, in each case with such changes
thereto as may be recommended by Administrative Agent's local counsel based on
local laws or customary local mortgage or deed of trust practices, as such
security instrument may be amended, supplemented, or otherwise modified from
time to time. "MORTGAGES" means all such security instruments.
MORTGAGED PROPERTY means any Property owned by the Borrower which is
subject to the Liens existing and to exist under the terms of the Mortgages.
MULTIEMPLOYER PLAN means a multiemployer plan as defined in Sections 3(37)
or 4001(a)(3) of ERISA or Section 414(f) of the Code to which any Borrower, any
Subsidiary thereof, or any ERISA Affiliate of any Borrower is making, has made,
is accruing, or has accrued, an obligation to make contributions or has, within
any of the preceding five plan years, made or accrued an obligation to make
contributions.
NEGOTIABLE COLLATERAL means all of Borrower's now owned and hereafter
acquired right, title, and interest with respect to letters of credit, letter of
credit rights, instruments, promissory notes, drafts, and documents and any and
all Supporting Obligations in respect thereof.
TERM LOAN AND SECURITY AGREEMENT
10
NYMEX PRICE means, as of the date of the determination thereof, the
average of the 24 succeeding monthly futures contract prices, commencing with
the month during which the determination is to be made, for each of the
appropriate crude oil or natural gas categories included in the most recent
Reserve Report provided by Borrower to Administrative Agent pursuant to SECTION
8.2, as quoted on the New York Mercantile Exchange ("NYMEX"), or, if the NYMEX
no longer provides futures contract price quotes for 24 month periods, the
longest period of quotes of less than 24 months shall be used, and, if the NYMEX
no longer provides such futures contract quotes or has ceased to operate, the
Administrative Agent shall designate another nationally recognized commodities
exchange to replace the NYMEX.
NYMEX VALUE means, at any date of determination thereof as to any Proved
Reserves of Borrower, the result of
(a) the discounted present value of future net revenues (i.e., after
deducting production and ad valorem taxes and less future capital costs
and operating expenses) from Proved Reserves of Borrower as of such date
utilizing the NYMEX Price for the appropriate category of oil or gas as
quoted in a nationally recognized publication for such pricing as selected
as of such date by Administrative Agent and assuming that production costs
thereafter remain constant, then discounted at a rate of 10% per year to
obtain the present value; minus
(b) to the extent not taken into account in SUBPARAGRAPH (a) above,
the discounted present value (discounted at a rate of 10% per year) of
Borrower's future plugging and abandonment expenses; minus
(c) to the extent not taken into account in SUBPARAGRAPH (a) above,
minority interests and other interests of Persons other than Borrower and
any natural gas balancing liabilities of Borrower.
OBLIGATION means all present and future indebtedness, liabilities, and
obligations, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed to Administrative Agent, any Lender, or any Affiliate of any
Lender by any Loan Party arising from, by virtue of, or pursuant to any Loan
Document, together with all interest accruing thereon, fees, costs, and expenses
(including, without limitation, all reasonable attorneys' fees and expenses
incurred in the enforcement or collection thereof) payable under the Loan
Documents.
OFFICER'S CERTIFICATE means, with respect to any Person, a certificate
executed on behalf of such Person, (a) if such Person is a partnership, by the
chairman of the Board (if an officer) or chief executive officer and/or by the
chief financial officer of its general partner and (b) if such Person is a
corporation, on behalf of such corporation by its chairman of the board (if an
officer) or chief executive officer or its chief financial officer or vice
president.
OIL AND GAS PROPERTIES means (a) Hydrocarbon Interests; (b) the Properties
now or hereafter pooled or unitized with Hydrocarbon Interests; (c) all
presently existing or future unitization, pooling agreements and declarations of
pooled units and the units created thereby (including without limitation all
units created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; (d) all
operating agreements, contracts and other agreements, including production
sharing contracts and agreements, which relate to any of the Hydrocarbon
Interests or the production, sale, purchase, exchange or processing of
Hydrocarbons from or attributable to such Hydrocarbon Interests; (e) all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; (f) all tenements,
TERM LOAN AND SECURITY AGREEMENT
11
hereditaments, appurtenances and Properties in any manner appertaining,
belonging, affixed or incidental to the Hydrocarbon Interests and (g) all
Properties, rights, titles, interests and estates described or referred to
above, including any and all Property, real or personal, now owned or
hereinafter acquired and situated upon, used, held for use or useful in
connection with the operating, working or development of any of such Hydrocarbon
Interests or Property (excluding drilling rigs, automotive equipment, rental
equipment or other personal Property which may be on such premises for the
purpose of drilling a well or for other similar temporary uses) and including
any and all oil wells, gas wells, injection wells or other wells, buildings,
structures, fuel separators, liquid extraction plants, plant compressors, pumps,
pumping units, field gathering systems, tanks and tank batteries, fixtures,
valves, fittings, machinery and parts, engines, boilers, meters, apparatus,
equipment, appliances, tools, implements, cables, wires, towers, casing, tubing
and rods, surface leases, rights-of-way, easements and servitudes together with
all additions, substitutions, replacements, accessions and attachments to any
and all of the foregoing.
PARTICIPANT is defined in SECTION 13.12(c).
PBGC means the Pension Benefit Guaranty Corporation, or any successor
thereof, established pursuant to ERISA.
PERMITTED LIENS means (a) Liens held by Administrative Agent for the
benefit of the Lenders, (b) Liens for unpaid taxes that either (i) are not yet
due and payable or (ii) are the subject of Permitted Protests, (c) Liens set
forth on SCHEDULE 9.2, (d) the interests of lessors under operating leases and
purchase money Liens of lessors under capital leases to the extent that the
acquisition or lease of the underlying asset is permitted under SECTION 9.2(c)
and so long as the Lien only attaches to the asset purchased or acquired and
only secures the purchase price of the asset, (e) Liens arising by operation of
law in favor of warehousemen, landlords, carriers, mechanics, materialmen,
laborers, or suppliers, or other like Liens arising by operation of law
incidental to the exploration, development, operation and maintenance of Oil and
Gas Properties, in each case incurred in the ordinary course of business of
Borrower and not in connection with the borrowing of money, which Liens are for
sums not yet due and payable whether or not perfected pursuant to applicable
law, (f) Liens arising from deposits made in connection with obtaining worker's
compensation or other unemployment insurance, (g) Liens on deposits and escrowed
funds made to secure performance of bids, tenders and leases (to the extent
permitted under this Agreement) incurred in the ordinary course of business of
Borrower and not in connection with the borrowing of money, (h) Liens of or
resulting from any judgment or award that do not result in and reasonably could
not be expected to result in a Material Adverse Effect and as to which the time
for the appeal or petition for rehearing of which has not yet expired, or in
respect of which Borrower is in good faith prosecuting an appeal or proceeding
for a review and in respect of which a stay of execution pending such appeal or
proceeding for review has been secured, (i) Liens with respect to the Oil and
Gas Properties that are exceptions to the title opinions issued in connection
with the Mortgages, (j) with respect to any Oil and Gas Properties consisting of
Hydrocarbon Interests acquired by Borrower or any of its Subsidiaries after the
date of this Agreement, (i) minor defects in title which (A) do not affect the
marketability thereof or restrict the full use or other benefits of ownership by
Borrower or such Subsidiary, as the case may be, and (B) do not affect the
ability of Borrower or such Subsidiary, as the case may be, to receive a share
of production or proceeds from, allocated to, or attributable to such
Hydrocarbon Interests equal to the interest of Borrower or such Subsidiary, as
the case may be, therein as represented herein or in the other Loan Documents,
and (C) do not materially interfere with the ordinary conduct of the business of
Borrower or such Subsidiary, as the case may be, and (D) do not interfere with
or impair the value of Administrative Agent's Lien therein for the benefit of
the Lenders, and (E) are customarily waived by reasonable and prudent operators,
and (ii) Liens reserved in leases or farmout agreements for rent or royalties
and for compliance with the terms of the farmout agreements or leases in the
case of leasehold estates, to the extent that any such Lien referred to in this
clause does not materially impair the use of the Hydrocarbon Interest covered by
such Lien for the purposes for which such
TERM LOAN AND SECURITY AGREEMENT
12
Hydrocarbon Interest is held by the Borrower or any Subsidiary, does not
materially interfere with or impair the value of such Hydrocarbon Interest
subject thereto or Administrative Agent's Lien therein for the benefit of the
Lenders, is customarily waived by reasonable and prudent operators, and is
consented to in writing by Administrative Agent, (k) farmout, carried working
interests, joint operating, unitization, royalty, overriding royalty, sales and
similar agreements relating to the exploration or development of, or production
from, Oil and Gas Properties or the sale of the hydrocarbons after they are
produced which are existing at the time of acquisition of such Oil and Gas
Property, are usual and customary for the industry, and are disclosed to and
approved by Administrative Agent.
PERMITTED PROTEST means the right of Borrower to protest any Lien other
than any such Lien that secures the Obligations, tax (other than payroll taxes
or taxes that are the subject of a United States federal tax lien), or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the books of Borrower in an amount that is reasonably
satisfactory to Administrative Agent, (b) any such protest is instituted and
diligently prosecuted by Borrower in good faith, and (c) Administrative Agent is
satisfied that, while any such protest is pending, there will be no impairment
of the enforceability, validity, or priority of any of the Agent's Liens in and
to the Collateral.
PERSON means any individual, entity, or Governmental Authority.
PERSONAL PROPERTY COLLATERAL means all Collateral other than Oil and Gas
Properties.
POST-DEFAULT RATE means a per annum rate of interest equal from day to day
to the lesser of (a) the then-effective non-Default interest rate, plus 2% and
(b) the Maximum Rate.
POTENTIAL DEFAULT means the occurrence of any event or existence of any
circumstance which, with the giving of notice or lapse of time or both, would
become an Event of Default.
PROPERTY means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible, including, without
limitation, cash, securities, accounts and contract rights.
PROPRIETARY RIGHTS means all of Borrower's now owned and hereafter arising
or acquired licenses, franchises, permits, patents, patent rights, copyrights,
works which are the subject matter of copyrights, trademarks, service marks,
trade names, trade styles, patent, trademark and service mark applications, and
all licenses and rights related to any of the foregoing, including those
patents, trademarks, service marks, trade names and copyrights set forth on
SCHEDULE P hereto, and all other rights under any of the foregoing, all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing, and all rights to sue for past,
present and future infringement of any of the foregoing.
PROVED DEVELOPED NON-PRODUCING RESERVES means Proved Reserves of Borrower,
other than Proved Developed Producing Reserves and Proved Undeveloped Reserves,
that can be expected to be recovered through existing wells with existing
equipment and operating methods.
PROVED DEVELOPED PRODUCING RESERVES means Proved Reserves of Borrower,
other than Proved Developed Non-Producing Reserves and Proved Undeveloped
Reserves, that can be expected to be recovered from currently producing zones
under the continuation of present operating methods.
PROVED RESERVES means at any particular time, the estimated quantities of
Hydrocarbons which geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs attributable
to Hydrocarbon Interests included or to be included in the Reserve Report under
existing economic and operating conditions.
TERM LOAN AND SECURITY AGREEMENT
13
PROVED UNDEVELOPED RESERVES means Proved Reserves of Borrower, other than
Proved Developed Producing Reserves and Proved Developed Non-Producing Reserves,
that are expected to be recovered from new wells on undrilled acreage, or from
existing wells where a relatively major expenditure is required for
recompletion.
PV-10 VALUE means, at any date of determination thereof, as to any Proved
Reserves, the result of:
(a) the discounted present value of future net revenues (i.e., after
deducting production and ad valorem taxes and less future capital costs
and operating expenses) from such Proved Reserves as most recently
estimated in a Reserve Report utilizing the spot price for the appropriate
category of oil or gas as quoted in a nationally recognized publication
selected by Administrative Agent for such pricing as of the date of the
determination of PV-10 Value and assuming that production costs thereafter
remain constant, then discounted at a rate of 10% per year to obtain the
present value; minus
(b) to the extent not taken into account in SUBPARAGRAPH (a) above,
the discounted present value of Borrower's future plugging and abandonment
expenses; minus
(c) to the extent not taken into account in SUBPARAGRAPH (a) above,
minority interests and other interests of Persons other than Borrower and
any natural gas balancing liabilities of Borrower.
REGULATION D means Regulation D of the Board of Governors of the Federal
Reserve System, as amended.
REGULATION U means Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
RELEASE means any release, spill, emission, emptying, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching, or migration of Hazardous Materials into or in the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers, or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater, or
property.
REPRESENTATIVES means representatives, officers, directors, employees,
attorneys, and agents.
REQUIRED LENDERS means those Lenders holding 65% or more of the Term Loan
Principal Debt.
RESERVE REPORT means a report, in form and substance satisfactory to
Administrative Agent,, prepared by a firm of independent petroleum engineers
acceptable to Administrative Agent evaluating the oil and gas reserves
attributable to the Hydrocarbon Interests of Borrower and its Subsidiaries (as
determined on an unconsolidated basis) which shall, among other things, (a)
identify the wells covered thereby, (b) specify said third party's opinions with
respect to the total volume of Proved Reserves (specifying with such opinions
the terms of categories Proved Developed Producing Reserves, Proved Developed
Non-Producing Reserves and Proved Undeveloped Reserves) which Borrower has the
right to produce (or cause to be produced) for its own account, (c) set forth
said firm's opinions with respect to the PV-10 Value and the NYMEX Value of each
of the categories of the Proved Reserves as specified in SUBCLAUSE (b) above,
(d) set forth said firm's opinions with respect to the projected future rate of
TERM LOAN AND SECURITY AGREEMENT
14
production of the Proved Reserves, (e) contain such other information as
requested by Administrative Agent with respect to the projected rate of
production, gross revenues, operating expenses, net income, taxes, capital
expenditures and other capital costs, net revenues and present value of future
net revenues attributable to such reserves and production therefrom, and (f)
contain a statement of the price and escalation parameters, procedures and
assumptions upon which such determinations were based.
RIGHTS means rights, remedies, powers, privileges, and benefits.
SCHEDULE means, unless specified otherwise, a schedule attached to this
Agreement, as the same may be supplemented and modified from time to time in
accordance with the terms of the Loan Documents.
SECURITIES ACCOUNT means a "securities account" as that term is defined in
the UCC.
SECURITIES ACT means the Securities Act of 1933, as the same may be
amended, modified or supplemented from time to time, and any successor statute
thereto, and any and all rules or regulations promulgated from time to time
thereunder.
SINGLE-EMPLOYER PLAN means an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and established or maintained by any Borrower, Subsidiary thereof,
or ERISA Affiliate of any Borrower, but not including any Multiemployer Plan.
SUBSIDIARY of any Person means (a) any entity of which an aggregate of
more than 50% (in number of votes) of the stock, membership interests, or other
equity interests is owned of record or beneficially, directly or indirectly, by
such Person, or (b) any partnership (limited or general) of which such Person
shall at any time be the controlling general partner determined in accordance
with GAAP or own more than 50% of the issued and outstanding partnership
interests.
SUPPORTING OBLIGATIONS means all of Borrower's now owned or hereafter
acquired right, title and interest with respect to any "supporting obligation"
as that term is defined in the UCC.
SWAP AGREEMENT means any agreement with respect to any swap, forward,
future or derivative transaction or option or similar agreement, whether
exchange traded, "over-the-counter" or otherwise, involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrower or the
Subsidiaries shall be a Swap Agreement.
TAXES is defined in SECTION 4.1.
TERM LOAN FACILITY means the credit facility as described in and subject
to the limitations set forth in SECTION 2 hereof.
TERM LOAN NOTE means a promissory note substantially in the form of
EXHIBIT A, and all renewals and extensions of all or any part thereof.
TERM LOAN PRINCIPAL DEBT means, on any date of determination, the
aggregate unpaid principal balance of the sum of all Borrowings under the Term
Loan Facility.
TERM LOAN AND SECURITY AGREEMENT
15
TERMINATION DATE means the earlier of (a) September 30, 2011, and (b) the
effective date of any other acceleration of the Term Loan Principal Debt.
TRADEMARKS means all Borrower's now owned or hereafter arising or acquired
trademarks, service marks, trade names, trade styles, trademark and service mark
applications, and all licenses and rights related thereto, described in the
definition of Proprietary Rights.
UCC or UNIFORM COMMERCIAL CODE means the Uniform Commercial Code as in
effect from time to time in the State of New York - or, when the context
implies, the Uniform Commercial Code as in effect from time to time in any other
applicable jurisdiction - and shall include all successor provisions under any
subsequent version or amendment to any Article of the Uniform Commercial Code.
UNFUNDED CURRENT LIABILITY means, with respect to any Employee Plan, the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under such Employee Plan as of the close of its most recent plan year
exceeds the fair market value of the assets allocable thereto, each determined
in accordance with Statement of Financial Accounting Standards No. 35, based
upon the actuarial assumptions used by such Employee Plan's actuary in the most
recent annual valuation of such Employee Plan.
VOTING STOCK means securities (as such term is defined in Section 2(1) of
the Securities Act) of any class or classes, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of the
corporate directors (or Persons performing similar functions).
WALL STREET JOURNAL LIBOR DAILY FLOATING RATE means, for any day, a
fluctuating rate of interest equal to the one month London interbank offered
rate as published in the "Money Rates" Section of The Wall Street Journal on the
immediately preceding banking day (or, if such source is not available, such
alternate source as determined by the Administrative Agent), as adjusted from
time to time in the Administrative Agent's sole discretion for reserve
requirements, deposit insurance assessment rates and other regulatory costs.
1.2 NUMBER AND GENDER OF WORDS; OTHER REFERENCES. Unless otherwise
specified in the Loan Documents, (a) where appropriate, the singular includes
the plural and vice versa, and words of any gender include each other gender,
(b) heading and caption references may not be construed in interpreting
provisions, (c) monetary references are to currency of the United States of
America, (d) section, paragraph, annex, schedule, exhibit, and similar
references are to the particular Loan Document in which they are used, (e)
references to "telecopy," "facsimile," "fax," or similar terms are to facsimile
or telecopy transmissions, (f) references to "including" mean including without
limiting the generality of any description preceding that word, (g) the rule of
construction that references to general items that follow references to specific
items are limited to the same type or character of those specific items is not
applicable in the Loan Documents, (h) references to any Person include that
Person's heirs, personal representatives, successors, trustees, receivers, and
permitted assigns, (i) references to any Law include every amendment or
supplement to it, rule and regulation adopted under it, and successor or
replacement for it, and (j) references to any Loan Document or other document
include every renewal and extension of it, amendment and supplement to it, and
replacement or substitution for it.
1.3 ACCOUNTING PRINCIPLES. Except as otherwise expressly provided herein,
all accounting and financial terms used in the Loan Documents and the compliance
with each financial covenant therein shall be determined in accordance with
GAAP, and, all accounting principles shall be applied on a consistent basis so
that the accounting principles in a current period are comparable in all
material respects to those applied during the preceding comparable period. If
Borrower or Required Lenders
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determine that a change in GAAP from that in effect on the date hereof has
altered the treatment of certain financial data to its detriment under this
Agreement, such party may, by written notice to the others and Administrative
Agent not later than ten days after the effective date of such change in GAAP,
request renegotiation of the financial covenants affected by such change. If
Borrower and Required Lenders have not agreed on revised covenants within 30
days after delivery of such notice, then, for purposes of this Agreement, GAAP
will mean generally accepted accounting principles on the date just prior to the
date on which the change that gave rise to the renegotiation occurred.
SECTION 2. TERM LOAN FACILITY. Each Lender severally, but not jointly, agrees to
restructure the claims of the Lenders in the Chapter 11 Case in accordance with
the terms of the Reorganization Plan in the amount of such Lender's Commitment
Percentage of $38,000,000. If all or any portion of the Term Loan Principal Debt
is paid or prepaid, then the amount so repaid may not be re-borrowed.
SECTION 3. TERMS OF PAYMENT.
3.1 LOAN ACCOUNTS, NOTES, AND PAYMENTS.
(a) Loan Accounts; Noteless Transaction. The Term Loan Principal
Debt owed to each Lender shall be evidenced by one or more loan accounts
or records maintained by such Lender in the ordinary course of business.
The loan accounts or records maintained by Administrative Agent and each
Lender shall be prima facie evidence absent manifest error of the amount
of the Term Loan made by Borrower from each Lender under this Agreement
and the interest and principal payments thereon. Any failure to so record
or any error in doing so shall not, however, limit or otherwise affect the
obligation of Loan Parties under the Loan Documents to pay any amount
owing with respect to the Obligation.
(b) Notes. Upon the request of any Lender, made through
Administrative Agent, the Principal Debt owed to such Lender may be
evidenced by a Term Loan Note. In such event, Borrower shall promptly
prepare, execute, and deliver to such Lender such Note payable to the
order of such Lender.
(c) Payment. All payments of principal, interest, and other amounts
to be made by Borrower under this Agreement and the other Loan Documents
shall be made to Administrative Agent via the following wiring
instructions:
Fleet Bank
ABA No. 021-200-339
For account of Mid River LLC
Account no. 94 293 82 604
in Dollars and in funds which are or will be available for immediate use
by Administrative Agent by 1:00 p.m., New York, New York time on the day due,
without setoff, deduction, or counterclaim. Payments made after 1:00 p.m., New
York, New York time shall be deemed made on the Business Day next following.
Administrative Agent shall pay to each Lender any payment of principal,
interest, or other amount to which such Lender is entitled hereunder on the same
day Administrative Agent shall have received the same from Borrower; provided
such payment is received by Administrative Agent prior to 1:00 p.m., New York,
New York time, and otherwise before 1:00 p.m., New York, New York time on the
Business Day next following.
(d) Payment Assumed. Unless Administrative Agent has received notice
from Borrower prior to the date on which any payment is due under this
Agreement that Borrower will
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not make that payment in full, Administrative Agent may assume that
Borrower has made the full payment due and Administrative Agent may, in
reliance upon that assumption, cause to be distributed to the appropriate
Lender on that date the amount then due to such Lenders. If and to the
extent Borrower does not make the full payment due to Administrative
Agent, each Lender shall repay to Administrative Agent on demand the
amount distributed to that Lender by Administrative Agent together with
interest for each day from the date that Lender received payment from
Administrative Agent until the date that Lender repays Administrative
Agent (unless such repayment is made on the same day as such
distribution), at an annual interest rate equal to the Federal Funds Rate.
3.2 PAYMENTS. The principal of and accrued interest upon the Term Loan
Principal Debt shall be due and payable as follows:
(a) Interest, computed as stated below, shall be due and payable quarterly
as it accrues, commencing March 15, 2005, and thereafter, on the 15th day of
each succeeding June, September, December and March, and at maturity; and,
(b) Principal shall be due and payable (i) in twenty-seven (27) equal
quarterly installments, each in the amount of $1,357,142.86, commencing on March
15, 2005, and thereafter, on the 15th day of each succeeding June, September,
December and March, through and including September 15, 2011, and (ii) in one
final installment, on December 15, 2011, in the amount of the unpaid principal
balance of and accrued unpaid interest upon the Loan as of such date.
3.3 PREPAYMENTS. The Borrower shall have the right at any time and from
time to time to prepay any Borrowing in whole or in part. All such prepayments
shall be made, together with accrued interest to the date of such prepayment on
the principal amount prepaid.
3.4 INTEREST ACCRUAL. Except as otherwise provided in this Agreement, the
Term Loan Principal Debt bears interest at a rate per annum equal to the lesser
of (a) the Wall Street Journal LIBOR Daily Floating Rate plus four percent (4%)
and (b) the Maximum Rate. Each change in such per annum rate of interest,
subject to the terms of this Agreement, will become effective, without notice to
Borrower or any other Person, upon the effective date of such change.
3.5 POST-DEFAULT RATE. At the option of Required Lenders and to the extent
permitted by Law, all past-due Term Loan Principal Debt and past due interest
accruing on any of the Obligation shall bear interest from maturity (stated or
by acceleration) at the Post-Default Rate until paid; provided that, the
Post-Default Rate shall automatically apply in the case of SECTION 11.3 where
the Post-Default Rate is specified.
3.6 INTEREST RECAPTURE. If the designated rate applicable to any Borrowing
exceeds the Maximum Rate, the rate of interest on such Borrowing shall be
limited to the Maximum Rate, but any subsequent reductions in such designated
rate shall not reduce the rate of interest thereon below the Maximum Rate until
the total amount of interest accrued thereon equals the amount of interest which
would have accrued thereon if such designated rate had at all times been in
effect. In the event that at maturity (stated or by acceleration), or at final
payment of the Term Loan Principal Debt, the total amount of interest paid or
accrued is less than the amount of interest which would have accrued if such
designated rates had at all times been in effect, then, at such time and to the
extent permitted by Law, Borrower shall pay an amount equal to the difference
between (a) the lesser of the amount of interest which would have accrued if
such designated rates had at all times been in effect and the amount of interest
which would
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have accrued if the Maximum Rate had at all times been in effect, and (b) the
amount of interest actually paid or accrued on the Term Loan Principal Debt.
3.7 INTEREST CALCULATIONS. Interest will be calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed but computed as if each calendar year consisted of 360 days (unless the
calculation would result in an interest rate greater than the Maximum Rate, in
which event interest will be calculated on the basis of a year of 365 or 366
days, as the case may be). All interest rate determinations and calculations by
Administrative Agent are conclusive and binding absent manifest error.
3.8 MAXIMUM RATE. Regardless of any provision contained in any Loan
Document, neither Administrative Agent nor any Lender shall ever be entitled to
contract for, charge, take, reserve, receive, or apply, as interest on all or
any part of the Obligation, any amount in excess of the Maximum Rate, and, if
Lenders ever do so, then such excess shall be deemed a partial prepayment of
principal and treated hereunder as such and any remaining excess shall be
refunded to Borrower. In determining if the interest paid or payable exceeds the
Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted under
applicable Law, (a) treat all Borrowings as but a single extension of credit,
(b) characterize any non-principal payment as an expense, fee, or premium rather
than as interest, (c) exclude voluntary prepayments and the effects thereof, and
(d) amortize, prorate, allocate, and spread the total amount of interest
throughout the entire contemplated term of the Obligation. However, if the
Obligation is paid and performed in full prior to the end of the full
contemplated term thereof, and if the interest received for the actual period of
existence thereof exceeds the Maximum Amount, Lenders shall refund such excess,
and, in such event, Lenders shall not, to the extent permitted by Law, be
subject to any penalties provided by any Laws for contracting for, charging,
taking, reserving, or receiving interest in excess of the Maximum Amount. If the
laws of the state of Texas are applicable for purposes of determining the
"Maximum Rate" or the "Maximum Amount," then those terms mean the "weekly
ceiling" from time to time in effect under Texas Finance Code Section 303.009,
as amended. Borrower agrees that Chapter 346 of the Texas Finance Code, as
amended (which regulates certain revolving credit loan accounts and revolving
tri-party accounts), does not apply to the Obligation.
3.9 APPLICATION OF PAYMENTS.
(a) No Default. If no Event of Default or Potential Default exists,
payments and prepayments shall be applied in the order and manner as
Borrower may direct.
(b) Default. If an Event of Default or Potential Default exists, any
payment or prepayment (including proceeds from the exercise of any Rights)
shall be applied to the Obligation in the following order: (i) to the
ratable payment of all fees, expenses, and indemnities for which
Administrative Agent or Lenders have not been paid or reimbursed in
accordance with the Loan Documents (as used in this SECTION 3.9(b), a
"ratable payment" for any Lender or Administrative Agent shall be, on any
date of determination, that proportion which the portion of the total
fees, expenses, and indemnities owed to such Lender or Administrative
Agent bears to the total aggregate fees and indemnities owed to all
Lenders and Administrative Agent on such date of determination); and (ii)
to the payment of the remaining Obligation in the order and manner
Required Lenders deem appropriate.
Subject to the provisions of SECTION 11 and provided that Administrative
Agent shall not in any event be bound to inquire into or to determine the
validity, scope, or priority of any interest or entitlement of any Lender and
may suspend all payments or seek appropriate relief (including, without
limitation, instructions from Required Lenders or an action in the nature of
interpleader) in the event of any doubt or
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dispute as to any apportionment or distribution contemplated hereby,
Administrative Agent shall promptly distribute such amounts to each Lender in
accordance with the Agreement and the related Loan Documents.
3.10 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment or
prepayment with respect to the Obligation (whether voluntary, involuntary, or
otherwise) which is in excess of its share of any such payment in accordance
with the relevant Rights of the Lenders under the Loan Documents, then such
Lender shall purchase from the other Lenders such participations as shall be
necessary to cause such purchasing Lender to share the excess payment with each
other Lender in accordance with the relevant Rights under the Loan Documents. If
all or any portion of such excess payment is subsequently recovered from such
purchasing Lender, then the purchase shall be rescinded and the purchase price
restored to the extent of such recovery. Borrower agrees that any Lender
purchasing a participation from another Lender pursuant to this SECTION 3.10
may, to the fullest extent permitted by Law, exercise all of its Rights of
payment (including the Right of offset) with respect to such participation as
fully as if such Lender were the direct creditor of Borrower in the amount of
such participation.
3.11 OFFSET. If an Event of Default exists, each Lender shall be entitled
to exercise (for the benefit of all Lenders) the Rights of offset and/or
banker's Lien against each and every account and other property, or any interest
therein, which any Borrower may now or hereafter have with, or which is now or
hereafter in the possession of, such Lender to the extent of the full amount of
the Obligation.
3.12 COLLECTION OF ACCOUNTS.
(a) Borrower (i) shall establish and maintain lock boxes
("LOCKBOXES") at one or more banks set forth on SCHEDULE 2.7, (ii) shall
request in writing and otherwise take such reasonable steps to ensure that
all Account Debtors forward payment directly to such Lockboxes, (iii)
shall and shall cause each of its Subsidiaries to instruct all Account
Debtors with respect to the Accounts, General Intangibles, and Negotiable
Collateral of such Borrower or such Subsidiary, as the case may be, to
remit all Collections in respect thereof to such Lockbox Account, and (iv)
shall, and shall cause each of its Subsidiaries to, deposit all other
Collections received by Borrower from any source immediately upon receipt
in to the Lockboxes. Borrower, each of Borrower's Subsidiaries,
Administrative Agent, and the Lockbox Banks shall enter into the Lockbox
Agreements, which among other things shall provide for the opening of a
Lockbox Account for the deposit of Collections at a Lockbox Bank. Borrower
agrees that all Collections and other amounts received by Borrower or any
of its Subsidiaries from any Account Debtor or any other source
immediately upon receipt shall be deposited into a Lockbox Account. No
Lockbox Agreement or arrangement contemplated thereby shall be modified by
Borrower or any of its Subsidiaries without the prior written consent of
Administrative Agent. Upon the terms and subject to the conditions set
forth in the Lockbox Agreements, all amounts received in each Lockbox
Account shall be wired each Business Day into the Administrative Agent's
Account; provided, however, that Administrative Agent reserves the right,
in its sole discretion, to require that any amounts received in a Lockbox
Account which may represent amounts attributable to trust funds (i.e.,
production taxes, severance taxes, or payroll taxes) or amounts
attributable to Hydrocarbon Interests of third Persons be segregated by
the Lockbox Bank and held in a separate account or otherwise as directed
by Administrative Agent.
(b) The Lockboxes, Collection Accounts and Designated Account shall
be cash collateral accounts, with all cash, checks and similar items of
payment in such accounts securing payment of the Obligations and all other
Indebtedness, and in which each Loan Party shall have granted a Lien to
Administrative Agent hereunder and pursuant to the other Loan Documents.
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(c) Borrower shall and shall cause its Designated Affiliates,
officers, employees, agents, directors or other Persons acting for or in
concert with such Borrower (each a "RELATED PERSON") to (i) hold in trust
for Administrative Agent all checks, cash and other items of payment
received by Borrower or any such Related Person, and (ii) within one (1)
Business day after receipt by such Borrower or any Related Person of any
checks, cash or other items of payment, deposit the same into a Collection
Account of such Borrower. Each Borrower and each Related Person thereof
acknowledges and agrees that all cash, checks or items of payment
constituting proceeds of Collateral are the property of Administrative
Agent for the benefit of Lenders. All proceeds of the sale or other
disposition of any Collateral, shall be deposited directly into the
applicable Borrower Collection Account.
3.13 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS. The receipt of any
Collections by Administrative Agent (whether from transfers to Administrative
Agent by the Lockbox Banks pursuant to the Lockbox Agreements or otherwise)
immediately shall be applied provisionally to reduce the Obligations outstanding
under SECTION 2, but shall not be considered a payment on account unless such
Collection item is a wire transfer of immediately available federal funds and is
made to the Administrative Agent Account or unless and until such Collection
item is honored when presented for payment; provided, however, that
Administrative Agent reserves the right, in its sole discretion, to exclude from
such provisional reduction and payment the amount of any such Collections that
Administrative Agent determines may constitute trust funds (e.g., production
taxes, severance taxes, or payroll taxes) or amounts attributable to Hydrocarbon
Interests of third Persons. From and after the Closing Date, Administrative
Agent shall be entitled to charge Borrower for 1 Business Day of `clearance' or
`float' at the rate set forth in SECTION 3.4, on all Collections that are
received by the Lockbox Banks or Administrative Agent (regardless of whether
forwarded by the Lockbox Banks to Administrative Agent, whether provisionally
applied to reduce the Obligations under SECTION 2, or otherwise). This
across-the-board 1 Business Day clearance or float charge on all Collections is
acknowledged by the parties to constitute an integral aspect of the pricing of
the Lender Group's financing of Borrower, and shall apply irrespective of the
characterization of whether receipts are owned by Borrower or Administrative
Agent, and whether or not there are any outstanding Advances, the effect of such
clearance or float charge being the equivalent of charging 1 Business Day of
interest on such Collections. Should any Collection item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment, and interest shall be recalculated accordingly. Anything to the
contrary contained herein notwithstanding, any Collection item shall be deemed
received by Administrative Agent only if it is received into the Administrative
Agent Account on a Business Day on or before 2:00 p.m. New York time. If any
Collection item is received into the Administrative Agent Account on a
non-Business Day or after 2:00 p.m. New York time on a Business Day, it shall be
deemed to have been received by Administrative Agent as of the opening of
business on the immediately following Business Day. Anything contained herein to
the contrary notwithstanding, the economic benefit of the 1 Business Day
clearance or float charge provided for in this SECTION 3.13 is not for the
ratable benefit of the Lenders, but instead shall be for the sole and separate
account of Administrative Agent.
SECTION 4. TAXES.
4.1 GENERAL. Any and all payments by Borrower to or for the account of any
Lender or Administrative Agent hereunder or under any other Loan Document shall
be made free and clear of and without deduction for any and all present or
future taxes, excluding, in the case of each Lender and Administrative Agent,
taxes imposed on its income and franchise Taxes imposed on it by the
jurisdiction under the Laws of which such Lender (or its Applicable Lending
Office) or Administrative Agent (as the case may be) is organized or the
jurisdiction in which the principal office or the Applicable Lending
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Office of such Lender or Administrative Agent is located, or any political
subdivision thereof (all such non-excluded taxes, referred to herein as
"TAXES"). If Borrower shall be required by Law to deduct any Taxes from or in
respect of any sum payable under any Loan Document to any Lender or
Administrative Agent, (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this SECTION 4.1) such Lender or Administrative
Agent receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable Law, and (iv) Borrower shall furnish to
Administrative Agent, the original or a certified copy of a receipt evidencing
payment thereof.
4.2 STAMP AND DOCUMENTARY TAXES. In addition, Borrower agrees to pay any
and all present or future stamp or documentary taxes and any other excise or
property taxes or charges or similar levies which arise from any payment made
under any Loan Document or from the execution or delivery of, or otherwise with
respect to, any Loan Document (hereinafter referred to as "OTHER TAXES").
4.3 INDEMNIFICATION FOR TAXES. Borrower agrees to indemnify each Lender
and Administrative Agent for the full amount of Taxes and Other Taxes
(including, without limitation, any Taxes or Other Taxes imposed or asserted by
any jurisdiction on amounts payable under this SECTION 4) paid by such Lender or
Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect thereto.
4.4 CHANGES IN APPLICABLE LENDING OFFICE. If Borrower is required to pay
or will be required to pay additional amounts to or for the account of any
Lender pursuant to this SECTION 4.4, then such Lender will agree to use
reasonable efforts to change the jurisdiction of its Applicable Lending Office
so as to eliminate or reduce any such additional payment which may thereafter
accrue if such change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender.
4.5 SURVIVAL. Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in this
SECTION 4 shall survive the payment in full of the Obligation.
SECTION 5. SECURITY.
5.1 COLLATERAL. To secure the full and complete payment and performance of
the Obligation, Borrower shall enter into Collateral Documents (in form and
substance acceptable to Administrative Agent) pursuant to which, among other
things, Borrower shall grant, pledge, assign, and create first priority Liens in
favor of Administrative Agent (for the ratable benefit of Lenders) in and to all
of the Borrower's assets including (but not limited to): (i) the Oil and Gas
Properties and (ii) the Personal Property Collateral.
5.2 GRANT OF SECURITY INTEREST IN PERSONAL PROPERTY COLLATERAL. Borrower
hereby grants to Administrative Agent, for the benefit of the Lenders, a
continuing security interest in all of its right, title, and interest in all
currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt repayment of any and all of the Obligations
in accordance with the terms and conditions of the Loan Documents and in order
to secure prompt performance by Borrower of each of its covenants and duties
under the Loan Documents. Administrative Agent's Liens in and to the Personal
Property Collateral shall attach to all Personal Property Collateral without
further act on the part of Administrative Agent or Borrower. Anything contained
in this Agreement or any other Loan Document
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22
to the contrary notwithstanding, except for dispositions permitted by SECTION
9.5, Borrower has no authority, express or implied, to dispose of any item or
portion of the Collateral.
5.3 NEGOTIABLE COLLATERAL AND CHATTEL PAPER. Borrower covenants and agrees
with Lenders that from and after the Closing Date and until the date of
termination of this Agreement:
(a) In the event that any Collateral, including proceeds, is
evidenced by or consists of Negotiable Collateral, and if and to the
extent that perfection or priority of Administrative Agent's security
interest with respect to such Collateral is dependent on or enhanced by
possession, Borrower, immediately upon the request of Administrative
Agent, shall endorse and deliver physical possession of such Negotiable
Collateral to Administrative Agent;
(b) Borrower shall take all steps reasonably necessary to grant
Administrative Agent control of all electronic Chattel Paper in accordance
with the Code and all "transferable records" as defined in each of the
Uniform Electronic Transactions Act and the Electronic Signatures in
Global and National Commerce Act; and
(c) In the event Borrower, with Administrative Agent's consent,
retains possession of any Chattel Paper or instruments otherwise required
to be endorsed and delivered to Administrative Agent pursuant to SECTION
5.3(a), all of such Chattel Paper and instruments shall be marked with the
following legend: "This writing and the obligations evidenced or secured
thereby are subject to the security interest of Mid River LLC, as
Administrative Agent."
5.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower authorizes
Administrative Agent to file, transmit, or communicate, as applicable, UCC
financing statements, in-lieu financing statements and amendments describing the
Personal Property Collateral as "all personal property of debtor" or "all assets
of debtor" or words of similar effect, in order to perfect Administrative
Agent's Liens on the Personal Property Collateral without Borrower's signature.
Notwithstanding the foregoing, at any time upon the request of Administrative
Agent, Borrower shall execute (or cause to be executed) and deliver to
Administrative Agent, any and all financing statements, original financing
statements in lieu of continuation statements, fixture filings, security
agreements, pledges, assignments, endorsements of certificates of title, and all
other documents (the "ADDITIONAL DOCUMENTS") upon which Borrower's signature may
be required that Administrative Agent may request, in form and substance
satisfactory to Administrative Agent, to perfect and continue perfected or
better perfect Administrative Agent's Liens in the Collateral (whether now owned
or hereafter arising or acquired), to create and perfect Liens in favor of
Administrative Agent in any Collateral (including, but not limited to, Oil and
Gas Property) acquired after the Closing Date, and in order to fully consummate
all of the transactions contemplated hereby and under the other Loan Documents.
To the maximum extent permitted by applicable law, Borrower authorizes
Administrative Agent to execute any such Additional Documents in Borrower's name
and authorizes Administrative Agent to file such executed Additional Documents
in any appropriate filing office. Borrower also hereby ratifies its
authorization for Administrative Agent to have filed in any jurisdiction any
financing statements or amendments thereto if filed prior to the date hereof.
Borrower shall not terminate, amend or file a correction statement with respect
to any Code financing statement filed pursuant to this SECTION 5.4 without
Administrative Agent's prior written consent. In addition, on such periodic
basis as Administrative Agent shall require, Borrower shall (a) provide
Administrative Agent with a report of all new patentable, copyrightable, or
trademarkable materials acquired or generated by Borrower during the prior
period, (b) cause all patents, copyrights, and trademarks acquired or generated
by Borrower that are not already the subject of a registration with the
appropriate filing office (or an application therefor diligently prosecuted) to
be registered with such appropriate filing office in a manner sufficient to
impart constructive notice of Borrower's ownership thereof, and (c) cause to be
prepared, executed, and delivered to Administrative Agent supplemental schedules
to the applicable Loan
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23
Documents to identify such patents, copyrights, and trademarks as being subject
to the security interests created thereunder. Borrower grants Administrative
Agent a power-of-attorney, irrevocable so long as this Agreement is in
existence, to amend SCHEDULE P to include any Proprietary Rights including (but
not limited to) future Trademarks.
5.5 POWER OF ATTORNEY. Borrower hereby irrevocably makes, constitutes, and
appoints Administrative Agent (and any of Administrative Agent's officers,
employees, or agents designated by Administrative Agent) as Borrower's true and
lawful attorney, with power to (a) if Borrower refuses to, or fails timely to
execute and deliver any of the documents described in SECTION 5.4, sign the name
of Borrower on any of the documents described in SECTION 5.4, (b) sign
Borrower's name on any invoice or bill of lading relating to the Collateral,
drafts against Account Debtors, or notices to Account Debtors, (c) send requests
for verification of Accounts, (d) endorse Borrower's name on any Collection item
that may come into the Lender Group's possession, (e) make, settle, and adjust
all claims under Borrower's policies of insurance and make all determinations
and decisions with respect to such policies of insurance, and (f) settle and
adjust disputes and claims respecting the Accounts, Chattel Paper, or General
Intangibles directly with Account Debtors, for amounts and upon terms that
Administrative Agent determines to be reasonable, and Administrative Agent may
cause to be executed and delivered any documents and releases that
Administrative Agent determines to be necessary. The appointment of
Administrative Agent as Borrower's attorney, and each and every one of its
rights and powers, being coupled with an interest, is irrevocable until all of
the Obligations have been fully and finally repaid and performed and the Lender
Group's obligations to extend credit hereunder are terminated.
5.6 RIGHT TO VERIFY ACCOUNTS. Administrative Agent may, without expense to
Administrative Agent, use such of Borrower's respective personnel, supplies,
properties, premises and assets as Administrative Agent deems to be reasonably
necessary for maintaining or enforcing Administrative Agent's Liens.
5.7 RIGHT TO INSPECT PROPERTIES AND BOOKS AND RECORDS; COMMUNICATION WITH
ACCOUNTANTS. Administrative Agent and Lenders may (at the expense of Borrower)
visit and inspect any of Borrower's properties, examine its corporate, financial
and operating records, and make copies thereof or abstracts therefrom and to
discuss its affairs, finances and accounts with its directors, officers and
independent public accountants at such reasonable times during normal business
hours and as soon as may be reasonably desired, upon reasonable advance notice
to Borrower; provided, however, when a Event of Default or Potential Default
exists, Administrative Agent or any Lender may do any of the foregoing at the
expense of Borrower at any time during normal business hours and without advance
notice.
5.8 RIGHT TO INSPECT COLLATERAL. Administrative Agent and each Lender
(through any of their respective officers, employees, or agents) shall have the
right, from time to time hereafter to inspect the Books and to make copies or
abstracts thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, quality, value, condition
of, or any other matter relating to, the Collateral or any portion thereof.
5.9 RIGHT TO REQUIRE COLLATERAL APPRAISALS. Whenever a Event of Default or
Potential Default exists, and at such other times not more frequently than once
per calendar year as Administrative Agent or the Lenders may request,
Administrative Agent may request (at Borrower's expense) that Borrower provide
Administrative Agent and the Lenders with appraisals or updates thereof of all
or any material portion of the Collateral (including, without limitation,
Collateral consisting of Inventory or Equipment) from an appraiser, and prepared
on a basis, satisfactory to Administrative Agent and Lenders,
TERM LOAN AND SECURITY AGREEMENT
24
such appraisals and updates to include, without limitation, information required
by applicable law and regulation and by the internal policies of the Lenders.
5.10 CONTROL AGREEMENTS. Borrower agrees that it will not transfer assets
out of any Securities Accounts and, if to another securities intermediary,
unless each of Borrower, Administrative Agent, and the substitute securities
intermediary have entered into a Control Agreement. No arrangement contemplated
hereby or by any Control Agreement in respect of any Securities Accounts or
other Investment Property shall be modified by Borrower without the prior
written consent of Administrative Agent. Upon the occurrence and during the
continuance of a Event of Default or Potential Default, Administrative Agent may
notify any securities intermediary to liquidate the applicable Securities
Account or any related Investment Property maintained or held thereby and remit
the proceeds thereof to Administrative Agent's Account.
5.11 GRANT OF LICENSE TO USE PROPRIETARY RIGHTS. For the purpose of
enabling Administrative Agent to exercise rights and remedies under SECTION 11
hereof (including, without limitation, in order to take possession of, hold,
preserve, process, assemble, prepare for sale, market for sale, sell or
otherwise dispose of Collateral) at such time as Administrative Agent shall be
lawfully entitled to exercise such rights and remedies, Borrower hereby grants
to Administrative Agent, for the benefit of Administrative Agent and the
Lenders, exercisable solely upon the occurrence and during the continuance of a
Event of Default an irrevocable, nonexclusive license (exercisable without
payment of royalty or other compensation to Borrower) to use, license or
sublicense any Proprietary Rights now owned or hereafter acquired by Borrower,
and wherever the same may be located, and including in such license access to
all media in which any of the licensed items may be recorded or stored and to
all computer software and programs used for the compilation or printout thereof.
5.12 COMMERCIAL TORT CLAIMS. Borrower shall promptly notify Administrative
Agent in writing in the event Borrower shall incur or otherwise obtain a
Commercial Tort Claim in excess of $100,000 after the Closing Date against any
third party and, upon the request of Administrative Agent, shall promptly amend
SCHEDULE C, authorize the filing of additional UCC financing statements or
amendments to existing UCC financing statements, and do such other acts or
things deemed necessary or desirable by Administrative Agent to grant
Administrative Agent a first priority, perfected security interest in any such
Commercial Tort Claim.
5.13 LETTERS IN LIEU/POWER OF ATTORNEY.
(a) Borrower shall provide to Administrative Agent undated letters,
in the form of EXHIBIT D attached hereto, from Borrower in blank to each
purchaser of production and disburser of proceeds of production from or
attributable to the Mortgaged Properties, with the addressees left blank,
authorizing and directing the addressees to make future payments
attributable to production from the Mortgaged Properties directly to
Administrative Agent for the ratable benefit of the Banks.
(b) Borrower hereby designates Administrative Agent as its agent and
attorney-in-fact, to act in their name, place, and stead for the purpose
of completing and delivering any and all of the letters in lieu of
transfer orders delivered by Borrower to Administrative Agent, including,
without limitation, completing any blanks contained in such letter and
attaching exhibits thereto describing the relevant Collateral. The
Borrower hereby ratifies and confirms all that Administrative Agent shall
lawfully do or cause to be done by virtue of this power of attorney and
the rights granted with respect to such power of attorney. This power of
attorney is coupled with the interest of Administrative Agent in the
Collateral, shall commence and be in full
TERM LOAN AND SECURITY AGREEMENT
25
force and effect as of the Closing Date and shall remain in full force and
effect and shall be irrevocable so long as any Obligation remains
outstanding or unpaid. The powers conferred on Administrative Agent by
this appointment are solely to protect the interests of Administrative
Agent and each of the Lenders under the Loan Documents and shall not
impose any duty upon Administrative Agent to exercise any such powers.
Administrative Agent shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and shall not
be responsible to Borrower or any other Person for any act or failure to
act with respect to such powers, except for gross negligence or willful
misconduct.
5.14 ASSIGNMENT OF RUNS. Notwithstanding that, under Section V of the
Mortgages, Borrower has assigned to Administrative Agent for the ratable benefit
of the Lenders all of the proceeds of runs accruing to the Mortgaged Properties
covered thereby:
(a) Until such time as Administrative Agent shall notify Borrower to
the contrary, Borrower shall be entitled to receive from the purchasers or
disbursers of production all such proceeds of runs, subject however to the
liens created under the Mortgages, which liens are hereby affirmed and
ratified. Upon the occurrence and during the continuance of a Potential
Default or such other time as Administrative Agent shall in its discretion
so elect, Administrative Agent may deliver to the addressees the
letters-in-lieu described in SECTION 5.13 above and may exercise all
rights and remedies granted under the Mortgages, including the right to
obtain possession of all proceeds of runs then held by Borrower or to
receive directly from the purchaser or disburser of production all other
proceeds of runs.
(b) In no case shall any failure, whether purposed or inadvertent,
by Administrative Agent to collect directly any such proceeds of runs
constitute in any way a waiver, remission or release of any of its rights
under the Mortgages, nor shall any release of any other proceeds of runs
or of any rights of Administrative Agent to collect other proceeds of runs
thereafter.
(c) Borrower will upon the instruction of Administrative Agent join
with Administrative Agent in notifying in writing and accompanied (if
necessary) by certified copies of the Mortgages the purchasers or
disbursers of production produced from the Mortgaged Properties of the
existence of the Mortgages, and instructing that all proceeds of runs be
paid directly to Administrative Agent for the ratable benefit of the
Banks.
SECTION 6. CONDITIONS PRECEDENT TO CLOSING.
This Agreement shall not become effective, and Lenders shall not be
obligated to advance any Term Loan Principal Debt, unless Administrative Agent
has received all of the agreements, documents, instruments, and other items
described on SCHEDULE 6. Each condition precedent in this Agreement is material
to the transactions contemplated in this Agreement, and time is of the essence
in respect of each thereof.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
Each Loan Party represents and warrants to each Lender that the following
statements are and will be true and correct, and, unless specifically limited,
shall remain so until indefeasible payment in full, in cash, of the Obligation.
7.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS, AND
SUBSIDIARIES.
TERM LOAN AND SECURITY AGREEMENT
26
(a) Organization and Powers. Borrower is a corporation duly
organized and validly existing under the Laws of the State of Delaware and
has all requisite corporate or partnership (as applicable) power and
authority to own and operate its properties, to carry on its business as
now conducted and as proposed to be conducted, to enter into the Loan
Documents, to carry out the transactions contemplated thereby and pay the
Obligation and to grant to Administrative Agent Liens upon and security
interests in the Collateral.
(b) Qualification and Good Standing. Borrower is qualified to do
business and in good standing, in every jurisdiction where its assets are
located and wherever necessary to carry out its business and operations,
except in jurisdictions where the failure to be so qualified or in good
standing has not had and will not have a Material Adverse Effect.
(c) Conduct of Business. Borrower and its Subsidiaries are engaged
only in the businesses permitted to be engaged in pursuant to SECTION
9.10.
(d) Borrower and Subsidiaries. All of the Subsidiaries of Borrower
as of the Closing Date are identified in SCHEDULE 7.1. The capital stock
or other equity interests of each of the Subsidiaries of Borrower
identified in SCHEDULE 7.1 is duly authorized, validly issued, fully paid,
and nonassessable and none of such capital stock or other equity interests
constitutes Margin Stock. Borrower and each of the Subsidiaries of
Borrower identified in SCHEDULE 7.1 are duly organized, validly existing,
and in good standing under the laws of their respective jurisdictions of
organization set forth therein, has full corporate power and authority to
own their assets and properties and to operate their business as presently
owned and conducted and as proposed to be conducted, and are qualified to
do business and in good standing in every jurisdiction where their assets
are located and wherever necessary to carry out their business and
operations, in each case except where failure to be so qualified or in
good standing or a lack of such corporate power and authority has not had
and will not have a Material Adverse Effect. SCHEDULE 7.1 correctly sets
forth the ownership interest of Borrower in each of its Subsidiaries
identified therein.
7.2 AUTHORIZATION OF BORROWING, ETC.
(a) Authorization of Borrowing. The execution, delivery and
performance of the Loan Documents and the issuance, delivery, and payment
of the Obligation have been duly authorized by all necessary corporate
and/or partnership (as applicable) action on the part of each of the Loan
Parties party thereto.
(b) No Conflict. After giving effect to the consummation of the
transactions contemplated hereby to occur on the Closing Date, the
execution, delivery, and performance by each of the applicable Loan
Parties of the Loan Documents, the issuance, delivery, and payment of the
Obligation, and the consummation of the transactions contemplated by the
Loan Documents do not and will not (i) violate any provision of any Law or
any governmental rule or regulation applicable to any Loan Party, the
Certificate or Articles of Incorporation or Bylaws (or other analogous
organizational document) of any Loan Party, or any order, judgment, or
decree of any Governmental Authority binding on any Loan Party, (ii)
conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any Contractual Obligation of any
Loan Party, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of any Loan Party (other than
any Liens created under any of the Loan Documents in favor of
Administrative Agent on behalf of Lenders), or (iv) require any approval
of stockholders or any approval or consent of any Person under any
Contractual Obligation of any Loan Party, except for such approvals or
consents which will be obtained on or before the Closing Date and
disclosed in writing to Lenders.
TERM LOAN AND SECURITY AGREEMENT
27
(c) Governmental Consents. The execution, delivery, and performance
by the Loan Parties of the Loan Documents, the issuance, delivery, and
payment of the Obligation, and the consummation of the transactions
contemplated by the Loan Documents do not and will not require any
registration with, consent or approval of, or notice to, or other action
to, with, or by, any federal, state, or other Governmental Authority
except to the extent obtained on or before the Closing Date other than
filings and recordings necessary to perfect the Liens in the Collateral.
(d) Binding Obligation. Each of the Loan Documents has been duly
executed and delivered by each of the Loan Parties party thereto and is
the legally valid and binding obligation of each such Loan Party,
enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar Laws relating to or limiting creditors' rights
generally or by equitable principles relating to enforceability.
7.3 COLLATERAL AND SECURITY INTERESTS
(a) Collateral Documents. The security interests created in favor of
Administrative Agent under this Agreement and the other Loan Documents
will at all times from and after the Closing Date constitute, as security
for the Obligation, a legal, valid, and enforceable security interest in
and Lien on all of the Collateral referred to therein in favor of
Administrative Agent for the benefit of the Lenders subject only to
Permitted Liens. No consents, filings, or recordings are required in order
to perfect (or maintain the perfection or priority of) the security
interests purported to be created by any of the Collateral Documents,
other than such as have been obtained and which remain in full force and
effect and UCC financing statements, and periodic UCC continuation filings
or as is specifically otherwise permitted by the terms of any applicable
Collateral Document.
(b) Accounts. The Accounts are bona fide existing payment
obligations of Account Debtors created by the sale and delivery of
Inventory or the rendition of services to such Account Debtors in the
ordinary course of Borrower's business, owed to Borrower without known
defenses, disputes, offsets, counterclaims, or rights of return or
cancellation.
(c) Inventory. All Inventory (excluding obsolete Inventory) is of
good and merchantable quality, free from defects.
(d) Equipment. All of the Equipment, excluding the Discontinued
Assets, is used or held for use in Borrower's business and is fit for such
purposes.
(e) Location of Inventory and Equipment. The Inventory and Equipment
are not stored with a bailee, warehouseman, or similar party and are
located only at the locations identified on SCHEDULE 7.2 or otherwise
permitted by SECTION 9.4, except for Inventory and Equipment which:
(i) are located on the Oil and Gas Properties;
(ii) are in-transit for delivery in the ordinary course of
business to Borrower from Borrower's suppliers or to
Borrower's Oil and Gas Properties;
(iii) are located in Texas, Louisiana, Mississippi or Alabama
(or in the Federal Outer Continental Shelf and adjacent to any
such state in-transit in the ordinary course of business
between Borrower's Oil and Gas Properties);
TERM LOAN AND SECURITY AGREEMENT
28
(iv) consist of well pipe being coated in the ordinary course
of business by a processor for Borrower; and
(v) or have a value of less than $50,000 for all such
Inventory and Equipment.
(f) Location of Chief Executive Office; FEIN; Organizational ID
Number. Set forth on SCHEDULE 7.2 are (a) the address of Borrower's chief
executive office, (b) Borrower's FEIN, and (c) Borrower's Organizational
ID Number issued by its state of incorporation.
(g) Natural Gas Act or the Natural Gas Policy Act of 1978. Neither
the Borrower nor any of its Subsidiaries has violated, and neither the
Borrower, nor any Subsidiary will be in violation of, any provisions of
the Natural Gas Act or the Natural Gas Policy Act of 1978 or any other
Federal or State law or any of the regulations thereunder (including those
of the respective Conservation Commissions and Land Offices of the various
jurisdictions having authority over its Oil and Gas Properties) with
respect to its Oil and Gas Properties which would create a Material
Adverse Effect, and the Borrower and each Subsidiary have or will have
made all necessary rate filings, certificate applications, well category
filings, interim collection filings and notices, and any other filings or
certifications, and has or will have received all necessary regulatory
authorizations (including without limitation necessary authorizations, if
any, with respect to any processing arrangements conducted by it or others
respecting its Oil and Gas Properties or production therefrom) required
under said laws and regulations with respect to all of its Oil and Gas
Properties or production therefrom so as not to create a Material Adverse
Effect. To the best of the Borrower's knowledge, said material rate
filings, certificate applications, well category filings, interim
collection filings and notices, and other filings and certifications
contain no untrue statements of material facts nor do they omit any
statements of material facts necessary in said filings.
(h) Trademark Collateral.
(i) The Trademarks are subsisting and have not been adjudged
invalid or unenforceable in whole or in part;
(ii) To the best of Borrower's knowledge, each of the
Trademarks is valid and enforceable;
(iii) To the best of Borrower's knowledge, there is no
outstanding claim that the use of any of the Trademarks violates the
rights of any third person;
(iv) Borrower is the sole and exclusive owner of the entire
and unencumbered fight, title and interest in and to each of the
Trademarks, free and clear of any liens, charges and encumbrances,
except Permitted Liens (including without limitation pledges,
assignments, licenses, registered user agreements and covenants by
Borrower not to sue third persons), except for the Licenses referred
to in SCHEDULE P attached hereto; and
(v) Borrower has used, and will continue to use for the
duration of this Agreement, proper statutory notice, where
appropriate, in connection with its use of the Trademarks.
TERM LOAN AND SECURITY AGREEMENT
29
7.4 FINANCIAL CONDITION. Throughout the Chapter 11 Case, Borrower has
delivered to Administrative Agent, monthly unaudited balance sheets and
income statements, the most recent of which is dated as of September 30,
2004. All such statements were prepared in good-faith, based on sound
business accounting procedures, and fairly present, in all material
respects, the financial condition of the entities described in such
financial statements as at the respective dates thereof and the results of
operations of the entities described therein for each of the periods then
ended, subject, to changes resulting from audit and normal year-end
adjustments and the absence of footnote disclosure required in accordance
with GAAP. Neither Borrower nor any of its Subsidiaries has (and will not
immediately following the closing of the transactions contemplated by this
Agreement) any contingent liability or liability for taxes, long-term
lease, or unusual forward or long-term commitment that is not reflected in
the most recent financial statements delivered pursuant to SECTION 8.1,
the notes thereto and which in any such case is material in relation to
the business, operations, properties, assets, condition (financial or
otherwise), or prospects of Borrower and its Subsidiaries taken as a
whole.
7.5 TITLE TO COLLATERAL.
(a) Borrower's books and records reflect that Borrower has good,
marketable and indefeasible title to the Collateral, free and clear of all
Liens (except for Permitted Liens), including but not limited to:
(i) Ownership of the Oil and Gas Properties listed on SCHEDULE
7.5(a)(i);
(ii) The amount of the Net Revenue Interest of the Oil and Gas
Properties, as set forth on SCHEDULE 7.5(a)(ii);
(iii) All rights under the Material Contracts listed on
SCHEDULE 7.5(a)(iii); and
(iv) Ownership of the Real Property, to the extent stated on
SCHEDULE 7.5(a)(iv).
(b) All material leases and agreements necessary for the conduct of
the business of the Borrower and the Subsidiaries are valid and
subsisting, in full force and effect, and there exists no default or event
or circumstance which with the giving of notice or the passage of time or
both would give rise to a default under any such lease or leases.
(c) The rights and Properties presently owned, leased or licensed by
the Borrower and the Subsidiaries including, without limitation, all
easements and rights of way, include all rights and Properties necessary
to permit the Borrower and the Subsidiaries to conduct their business in
all material respects in the same manner as its business has been
conducted prior to the date hereof.
(d) All of the Properties of the Borrower and the Subsidiaries which
are reasonably necessary for the operation of their businesses are in good
working condition and are maintained in accordance with prudent business
standards.
(e) The Borrower and each Subsidiary owns, or is licensed to use,
all trademarks, tradenames, copyrights, patents and other intellectual
Property material to its business, and the use thereof by the Borrower and
such Subsidiary does not infringe upon the rights of any other Person,
except for any such infringements that, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
The Borrower and its Subsidiaries
TERM LOAN AND SECURITY AGREEMENT
30
either own or have valid licenses or other rights to use all databases,
geological data, geophysical data, engineering data, seismic data, maps,
interpretations and other technical information used in their businesses
as presently conducted, subject to the limitations contained in the
agreements governing the use of the same, which limitations are customary
for companies engaged in the business of the exploration and production of
Hydrocarbons, with such exceptions as could not reasonably be expected to
have a Material Adverse Effect.
7.6 PROVED RESERVES; OWNERSHIP OF OIL AND GAS PROPERTIES.
(a) Borrower's books and records reflect the following: (i) Borrower
has fee simple legal title to or valid leasehold interest in (in each
case, good marketable and indefeasible, except for Permitted Liens) to all
Proved Reserves, and of which Borrower is the beneficial owner of, to the
full extent of the quantity of interest specified in the most recent
Reserve Report delivered to Administrative Agent by Borrower, and all of
the information with respect thereto contained on SCHEDULES 7.5(a)(i),
7.5(a)(ii), 7.5(a)(iii), 7.6(e) and 7.7 with respect thereto is true and
correct; (ii) all Hydrocarbon Interests of which the Proved Reserves are a
part are in full force and effect and Borrower is in full compliance with
its obligations thereunder; (iii) all wells drilled and Hydrocarbons
produced with respect to such Proved Reserves were drilled and produced in
compliance with all applicable regulations; (iv) there are no outstanding
authorizations for expenditures with respect to any Proved Reserves which
are not reflected in the most recent Reserve Report delivered by Borrower
to Administrative Agent; and (v) all of such Proved Reserves are a part of
the Oil and Gas Properties described in SCHEDULE 7.5(a)(i), are covered by
the engineering reports which Borrower has previously delivered to and
which have been relied upon by Administrative Agent in connection with
this Agreement, and are part of the Oil and Gas Properties covered by the
Mortgages.
(b) Borrower's books and records reflect that Borrower has fee
simple legal title to or valid leasehold interest in (in each case, good,
marketable and indefeasible, except for Permitted Liens) to all Proved
Developed Producing Reserves, and of which Borrower is the beneficial
owner of, to the full extent of the quantity of interest specified in the
most recent Reserve Report delivered to Administrative Agent by Borrower,
and all of the information with respect thereto contained on SCHEDULES
7.5(a)(i), 7.5(a)(ii), 7.5(a)(iii), 7.6(e) AND 7.7 is true and correct.
(c) Borrower's books and records reflect that Borrower has fee
simple legal title to or valid leasehold interest in, (in each case, good
marketable and indefeasible, except for Permitted Liens all Proved
Developed Non-Producing Reserves), and of which Borrower is the beneficial
owner of, to the full extent of the quantity of interest specified in the
most recent Reserve Report delivered to Administrative Agent by Borrower,
and all of the information with respect thereto contained on SCHEDULES
7.5(a)(i), 7.5(a)(ii), 7.5(a)(iii), 7.6(e) AND 7.7 is true and correct.
(d) Borrower's books and records reflect that Borrower has fee
simple legal title to or valid leasehold interest in (in each case, good,
marketable and indefeasible, except for Permitted Liens to all Proved
Undeveloped Reserves), and of which Borrower is the beneficial owner of,
to the full extent of the quantity of interest specified in the most
recent Reserve Report delivered to Administrative Agent by Borrower, and
all of the information with respect thereto contained on SCHEDULES
7.5(a)(i), 7.5(a)(ii), 7.5(a)(iii), 7.6(e) AND 7.7 is true and correct.
(e) All of Borrower's marketing arrangements with respect to its
Proved Reserves are valid, enforceable and in full force and effect.
Except as disclosed on SCHEDULE 7.6(e), there
TERM LOAN AND SECURITY AGREEMENT
31
do not exist any gas imbalances, take or pay or other prepayments which
would require the Borrower or any of its Subsidiaries to deliver
Hydrocarbons produced from the Oil and Gas Properties at some future time
without then or thereafter receiving full payment therefor exceeding
50mmcf equivalent in the aggregate.
(f) Borrower's books and records reflect that, without limiting the
foregoing, after giving full effect to the Permitted Liens, Borrower owns
the net revenue interests in production attributable to the Oil and Gas
Properties covered by the Mortgages as is reflected in the most recently
delivered Reserve Report and the ownership of such Properties shall not in
any material respect obligate Borrower to bear the costs and expenses
relating to the maintenance, development and operations of each such
Property in an amount in excess of the working interest of each such
Property set forth in the most recently delivered Reserve Report. All
information contained in the most recently delivered Reserve Report is
true and correct in all material respects as of the date thereof.
(g) There has not been any Material Adverse Effect in the Oil and
Gas Properties since the date of the most recent Reserve Report.
7.7 OPERATIONS OF OIL AND GAS PROPERTIES. With respect to each Hydrocarbon
Interest which is a working interest, Borrower is the operator except as set
forth on SCHEDULE 7.7.
7.8 MAINTENANCE OF PROPERTIES. The Oil and Gas Properties (and Properties
unitized therewith) have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all Government Requirements and in
conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties. Specifically in
connection with the foregoing, (i) no Oil and Gas Property is subject to having
allowable production reduced below the full and regular allowable (including the
maximum permissible tolerance) because of any overproduction (whether or not the
same was permissible at the time) and (ii) none of the wells comprising a part
of the Oil and Gas Properties (or Properties unitized therewith) is deviated
from the vertical more than the maximum permitted by Government Requirements,
and such wells are, in fact, bottomed under and are producing from, and the well
bores are wholly within, the Oil and Gas Properties (or in the case of wells
located on Properties unitized therewith, such unitized Properties). All
pipelines, wells, gas processing plants, platforms and other material
improvements, fixtures and equipment owned in whole or in part by the Borrower
or any of its Subsidiaries that are necessary to conduct normal operations are
being maintained in a state adequate to conduct normal operations, and with
respect to such of the foregoing which are operated by the Borrower or any of
its Subsidiaries, in a manner consistent with the Borrower's or its
Subsidiaries' past practices.
7.9 MARKETING OF PRODUCTION. Except for contracts disclosed in writing to
the Administrative Agent or included in the most recently delivered Reserve
Report (with respect to all of which contracts the Borrower represents that it
or its Subsidiaries are receiving a price for all production sold thereunder
which is computed substantially in accordance with the terms of the relevant
contract and are not having deliveries curtailed substantially below the subject
Property's delivery capacity), no material agreements exist which are not
cancelable on 30 days notice or less without penalty or detriment for the sale
of production from the Borrower's or its Subsidiaries' Hydrocarbons (including,
without limitation, calls on or other rights to purchase, production, whether or
not the same are currently being exercised) that (a) pertain to the sale of
production at a fixed price and (b) have a maturity or expiry date of longer
than six (6) months from the date hereof.
TERM LOAN AND SECURITY AGREEMENT
32
7.10 LEASES. The oil and gas leases associated with the Oil and Gas
Properties are in full force and effect in accordance with their respective
terms, and there exist no material defaults in the performance of any obligation
thereunder. Additionally, Borrower is not aware of any event that with notice or
lapse of time, or both, would constitute a default under any such oil and gas
leases.
7.11 NON-CONSENT OPERATIONS. There have been no operations associated with
the Oil and Gas Properties under an operating agreement, unit agreement or
governmental order with respect to which Borrower has become a non-consenting
party.
7.12 CONDITION OF EQUIPMENT. All of the wells, facilities and equipment
associated with the Oil and Gas Properties are: (a) structurally sound with no
material defects known to Borrower, (b) in good operating condition, and (c)
have been and are maintained in accordance with prudent business standards.
7.13 WELLS. Each oil or gas well located on the Oil and Gas Properties is:
(a) properly permitted, (b) in compliance with all applicable Laws, and (c)
within the production tolerances allocated by the governmental entity or tribal
authority having appropriate jurisdiction. All of the leaseholds in which there
are located Hydrocarbon Interests of Borrower having a PV-10 Value of $100,000
are producing Hydrocarbons in commercial quantities. Each of Borrower's
producing wells listed on SCHEDULE 7.6(a)(ii) is located on an Oil and Gas
Property described in the legal description contained in an Oil and Gas Property
Mortgage which has been duly executed and delivered to Administrative Agent.
7.14 SWAP AGREEMENTS. As of the date hereof, and after the date hereof,
each report required to be delivered by the Borrower to Administrative Agent or
Lenders, sets forth, a true and complete list of all Swap Agreements of the
Borrower and each Subsidiary, the material terms thereof (including the type,
term, effective date, termination date and notional amounts or volumes), the net
mark to market value thereof, all credit support agreements relating thereto
(including any margin required or supplied) and the counterparty to each such
agreement.
7.15 HEDGING AGREEMENT. As of the Closing Date, there are no Hedging
Agreements (including commodity price swap agreements, forward agreements or
contracts of sale which provide for prepayment for deferred shipment or delivery
of oil, gas or other commodities) of the Borrower and each of its Subsidiaries.
7.16 COMPLIANCE WITH THE LAW. Neither Borrower nor any of its Subsidiaries
has violated any requirement of a Governmental Authority or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of the Property or the conduct of its business, which violation or
failure could reasonably be expected to result in (in the event such violation
or failure were asserted by any Person through appropriate action) a Material
Adverse Effect. Except for such acts or failures to act as do not result in and
could not reasonably be expected to result in a Material Adverse Effect, the Oil
and Gas Properties have been maintained, operated and developed in a good and
workmanlike manner and in conformity with all applicable laws and all rules,
regulations and orders of al duly constituted authorities having jurisdiction
and in conformity with the provisions of all leases, subleases or other
contracts comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of the Oil and Gas Properties; specifically in this
connection, (i) after the Closing Date, no Oil and Gas Properties are subject to
having allowable production reduced below the full and regular allowable
(including the maximum permissible tolerance) because of any overproduction
(whether or not the same was permissible at the time) prior to the Closing Date
and (ii) none of the wells comprising a part of the Oil and Gas Properties are
deviated from the vertical more than the maximum permitted by applicable laws,
regulations, rules and orders, and such wells are, in fact bottomed under and
TERM LOAN AND SECURITY AGREEMENT
33
are producing from the Oil and Gas Properties. Neither Borrower nor any of its
Subsidiaries has entered into, and the Oil and Gas Properties are not subject
to, any agreements, consent orders, administrative orders or similar obligations
based on a violation or alleged violation of Legal Requirements.
7.17 LITIGATION; ADVERSE FACTS. There is no action, suit, proceeding,
arbitration, or governmental investigation (whether or not purportedly on behalf
of Borrower or any of its Subsidiaries) at law or in equity or before or by any
Governmental Authority, domestic or foreign, pending or, to the knowledge of
Borrower, threatened against or affecting Borrower or any of its Subsidiaries or
any property of Borrower or any of its Subsidiaries that, either individually or
in the aggregate together with all other such actions, proceedings, and
investigations, has had, or could reasonably be expected to result in, a
Material Adverse Effect. Neither Borrower nor any of its Subsidiaries is subject
to or in default with respect to any final judgment, writ, injunction, decree,
rule, or regulation of any Governmental Authority, domestic or foreign, that has
had, or could reasonably be expected to result in, a Material Adverse Effect.
7.18 PAYMENT OF TAXES. All material tax returns and reports of Borrower
and its Subsidiaries required to be filed by any of them have been timely filed,
and all material taxes, assessments, fees, and other governmental charges upon
Borrower and its Subsidiaries and upon their respective properties, assets,
income, businesses, and franchises which are due and payable have been paid when
due and payable, except for Delaware corporate franchise and like fees, taxes
and assessments. Borrower does not know of any proposed tax assessment against
Borrower or any of its Subsidiaries other than those which are being actively
contested by Borrower or such Subsidiary in good faith and by appropriate
proceedings and for which reserves or other appropriate provisions, if any, as
may be required in conformity with GAAP shall have been made or provided
therefor.
7.19 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS.
(a) All of the contracts associated with the Oil and Gas Properties
of Borrower are in full force and effect in accordance with their
respective terms, and there exist no defaults in the performance of any
obligation thereunder. Additionally, Borrower is not aware of any event
that with notice or lapse of time, or both, would constitute a default
under any such contracts.
(b) Neither Borrower nor any of its Subsidiaries is in default in
the performance, observance, or fulfillment of any of the obligations,
covenants, or conditions contained in any of its Contractual Obligations,
and no condition exists that, with the giving of notice or the lapse of
time or both, would constitute such a default, except where the
consequences, direct or indirect, of such default or defaults, if any,
would not have a Material Adverse Effect.
(c) Neither Borrower nor any of its Subsidiaries is a party to or is
otherwise subject to any agreement or instrument or any charter or other
internal restriction which has had, or could reasonably be expected (based
upon assumptions that are reasonable at the time made) to result in,
individually or in the aggregate, a Material Adverse Effect.
7.20 GOVERNMENTAL REGULATION. Neither Borrower nor any of its Subsidiaries
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act, or the Investment Company
Act of 1940 or under any other federal or state statute or regulation which may
limit its ability to incur Indebtedness or which may otherwise render all or any
portion of the Obligation unenforceable.
7.21 SECURITIES ACTIVITIES. Neither Borrower nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying any Margin Stock.
TERM LOAN AND SECURITY AGREEMENT
34
7.22 EMPLOYEE PLANS.
(a) Borrower and each of its ERISA Affiliates are in substantial
compliance with all applicable provisions and requirements of ERISA with
respect to each Employee Plan, and have substantially performed all their
obligations under each Employee Plan, except to the extent that any
non-compliance with ERISA or any such failure to perform would not result
in material liability of Borrower or any of its ERISA Affiliates.
(b) No ERISA Event has occurred which has resulted or is reasonably
likely to result in any material liability to the PBGC or to any other
Person.
(c) Except to the extent required under Section 4980B of the Code
and/or Section 601 of ERISA, neither Borrower nor any of its Subsidiaries
maintains or contributes to any employee welfare benefit plan (as defined
in Section 3(1) of ERISA) that provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of Borrower or any of its Subsidiaries, except to the extent
that the provision of such benefits would not have a Material Adverse
Effect.
(d) No Employee Plan has an Unfunded Current Liability in an amount
that would have a Material Adverse Effect.
7.23 ENVIRONMENTAL PROTECTION. Except where no Material Adverse Effect
could reasonably be expected to result therefrom:
(a) the operations of Borrower and each of its Subsidiaries
(including, without limitation, all operations and conditions at or in the
Facilities) comply in all material respects with all Environmental Laws;
(b) Borrower and each of its Subsidiaries have obtained, and have
timely filed responses for, all material Authorizations under
Environmental Laws necessary to their respective operations, and all such
Authorizations are in good standing, and Borrower and each of its
Subsidiaries are in compliance with all material terms and conditions of
such Authorizations;
(c) neither Borrower nor any of its Subsidiaries has received (i)
any notice or claim to the effect that it is or may be liable to any
Person as a result of or in connection with any Hazardous Materials or
(ii) any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. Section 9604), Section 3007 of the Resource Conservation and
Recovery Act (42 U.S.C. Section 6927), or comparable state laws, and, to
the best knowledge of Borrower, none of the operations of Borrower or any
of its Subsidiaries is the subject of any federal or state investigation
relating to or in connection with any Hazardous Materials at any Facility
or at any other location;
(d) none of the operations of Borrower or any of its Subsidiaries is
subject to any judicial or administrative proceeding alleging the
violation of or liability under any Environmental Laws which could
reasonably be expected to have a Material Adverse Effect;
(e) to the knowledge of Borrower, neither Borrower nor any of its
Subsidiaries nor any of their respective Facilities or operations are
subject to any outstanding written order or agreement with any
Governmental Authority or private party relating to (i) any Environmental
Laws or (ii) any Environmental Claims;
TERM LOAN AND SECURITY AGREEMENT
35
(f) neither Borrower nor any of its Subsidiaries has any material
contingent liability in connection with any Release of any Hazardous
Materials by Borrower or any of its Subsidiaries;
(g) neither Borrower nor any of its Subsidiaries nor, to the
knowledge of Borrower, any predecessor of Borrower or any of its
Subsidiaries, has filed any notice under any Environmental Law indicating
past or present treatment or Release of Hazardous Materials at any
Facility, and none of Borrower's or any of its Subsidiaries' operations
involves the generation, transportation, treatment, storage, or disposal
of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state
equivalent;
(h) to the knowledge of Borrower, no Hazardous Materials exist on or
under any Facility in a manner that has a reasonable possibility of giving
rise to an Environmental Claim having a Material Adverse Effect, and
neither Borrower nor any of its Subsidiaries has filed any notice or
report of a Release of any Hazardous Materials that has a reasonable
possibility of giving rise to an Environmental Claim having a Material
Adverse Effect;
(i) neither Borrower nor any of its Subsidiaries nor, to the best
knowledge of Borrower, any of their respective predecessors has disposed
of any Hazardous Materials in a manner that has a reasonable possibility
of giving rise to an Environmental Claim having a Material Adverse Effect;
(j) to the knowledge of Borrower no underground storage tanks or
surface impoundments are on or at any Facility; and
(k) to the knowledge of Borrower, no Lien in favor of any Person
relating to or in connection with any Environmental Claim has been filed
or has been attached to any Facility.
7.24 DISCLOSURE. The representations and warranties of Borrower and its
Subsidiaries contained in the Loan Documents and in any other document,
certificate, or written statement furnished to Lenders by or on behalf of
Borrower or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement, when taken together, do not contain any untrue
statement of a material fact or omit to state a material fact (known to
Borrower, in the case of any document not furnished by it) necessary in order to
make the statements contained herein or therein not misleading in light of the
circumstances in which the same were made. Any projections and pro forma
financial information contained in such materials are based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made, it being recognized by Lenders that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.
There is no fact known (or which should upon the reasonable exercise of
diligence be known) to Borrower (other than matters of a general economic
nature) that has had, or could reasonably be expected to result in, a Material
Adverse Effect and that has not been disclosed herein or in such other
documents, certificates, and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
7.25 PURPOSE OF CREDIT FACILITY. Borrower will use all of the Term Loan
Principal Debt (other than proceeds used to pay reasonable fees and expenses
incurred by Borrower in connection with this Agreement) to restructure the
claims of Lenders in the Chapter 11 Case in accordance with the terms of the
Reorganization Plan. No part of the Term Loan Principal Debt will be used,
directly or indirectly, for a purpose which violates any Law, including, without
limitation, the provisions of Regulations T, U, or X (as enacted by the Board of
Governors of the Federal Reserve System, as amended).
TERM LOAN AND SECURITY AGREEMENT
36
SECTION 8. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, until payment in full of all of the
Term Loan Principal Debt and other Obligation, unless Required Lenders shall
otherwise give prior written consent, Borrower shall perform, and shall cause
each of its Subsidiaries to perform, all covenants in this SECTION 8.
8.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Borrower will maintain, and
cause each of its Subsidiaries to maintain, a system of accounting established
and administered in accordance with sound business practices to permit
preparation of financial statements in conformity with GAAP. Borrower will
deliver to Administrative Agent:
(a) Monthly Financials: as soon as available and in any event within
30 days after the calendar month-end, a company prepared balance sheet,
income statement, and statement of cash flow covering Borrower's
operations during such period.
(b) Year-End Financials: as soon as available and in any event
within 90 days after the end of each Fiscal Year, (i) the consolidated and
consolidating balance sheets of Borrower and its Subsidiaries as at the
end of such Fiscal Year and the related consolidated and consolidating
statements of income and consolidated statement of cash flows of Borrower
and its Subsidiaries for such Fiscal Year, setting forth in comparative
form the corresponding figures for the previous fiscal year, all in
reasonable detail and certified by the chief financial officer of Borrower
that they fairly present, in all material respects, the financial
condition of Borrower and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated, and (ii) in the case of such consolidated financial statements,
a report thereon of independent certified public accountants of recognized
national standing selected by Borrower and reasonably satisfactory to
Required Lenders, which report shall be unqualified as to going concern
and scope of audit, and shall state that such consolidated financial
statements fairly present, in all material respects, the consolidated
financial position of Borrower and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated in conformity with GAAP applied on a basis consistent
with prior years (except as otherwise disclosed in such financial
statements) and that the examination by such accountants in connection
with such consolidated financial statements has been made in accordance
with generally accepted auditing standards;
(c) Officer's Certificate: together with each delivery of financial
statements of Borrower and its Subsidiaries pursuant to SECTIONS 8.1(a)
and (b) above, an Officer's Certificate of Borrower stating that: (i) all
financial statements delivered or caused to be delivered to the Lenders
have been prepared in accordance with GAAP (except, in the case of
unaudited financials statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present the financial
condition of the Borrower, (ii) the representations and warranties of the
Borrower in the Loan Documents are true and correct in all material
respects on and as of the date of the certificate, as though made on and
as of such date (except to the extent that such representations and
warranties relate solely to an earlier date), the signer has reviewed the
terms of this Agreement and has made, or caused to be made under its
supervision, a review in reasonable detail of the transactions and
condition of Borrower and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signers do not have knowledge of the existence as at the date
of such Officer's Certificate, of any condition or event that constitutes
a Event of Default or Potential Default, or, if any such condition or
event existed or exists, specifying the nature and period of existence
thereof and what action Borrower has taken, is taking, and proposes to
take with respect thereto;
TERM LOAN AND SECURITY AGREEMENT
37
(d) Accountants' Certification: together with each delivery of
consolidated financial statements of Borrower and its Subsidiaries
pursuant to CLAUSE (b) above, a written statement by the independent
certified public accountants giving the report thereon (i) stating that
their audit examination has included a reading of the terms of this
Agreement and the other Loan Documents as they relate to accounting
matters, and (ii) stating whether, in connection with their audit
examination, any condition or event, insofar as such condition or event
relates to accounting matters, that constitutes a Event of Default or
Potential Default has come to their attention and, if such a condition or
event has come to their attention, specifying the nature and period of
existence thereof; provided that such accountants shall not be liable by
reason of any failure to obtain knowledge of any such Event of Default or
Potential Default that would not be disclosed in the course of their audit
examination. Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate
with Administrative Agent and to release to Administrative Agent whatever
financial information concerning Borrower that Administrative Agent may
request. Borrower hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Administrative Agent, at
Borrower's expense, copies of Borrower's financial statements, papers
related thereto, and other accounting records of any nature in their
possession, and to disclose to Administrative Agent any information they
may have regarding Borrower's business affairs and financial conditions;
(e) Accountants' Reports: promptly upon receipt thereof (unless
restricted by applicable professional standards), copies of all reports
submitted to Borrower by independent certified public accountants in
connection with each annual, interim, or special audit of the financial
statements of Borrower and its respective Subsidiaries made by such
accountants, including, without limitation, any comment letter submitted
by such accountants to management in connection with their annual audit;
(f) SEC Filings and Press Releases: promptly upon their becoming
available, copies of (i) all financial statements, reports, notices, and
proxy statements sent or made available generally by Borrower to its
security Lenders, (ii) all regular and periodic reports and all
registration statements (other than on Form S-8 or a similar form) and
prospectuses, if any, filed by Borrower or any of its Subsidiaries with
any securities exchange or with the Securities and Exchange Commission or
any Governmental Authority or private regulatory authority, and (iii) all
press releases and other statements made available generally by Borrower
or any of its Subsidiaries to the public concerning material developments
in the business of Borrower or any of its Subsidiaries;
(g) Events of Default, etc.: promptly upon any officer of Borrower
obtaining knowledge (i) of any condition or event that constitutes an
Event of Default or Potential Default, or becoming aware that any Lender
has given any notice (other than to Administrative Agent) or taken any
other action with respect to a claimed Event of Default or Potential
Default, (ii) that any Person has given any notice to Borrower or any of
its Subsidiaries or taken any other action with respect to a claimed
default or event or condition of the type referred to in SECTION 10.2,
(iii) of any condition or event that would be required to be disclosed in
a current report filed by Borrower with the Securities and Exchange
Commission on Form 8-K (Items 1, 2, 4, 5, and 6 of such Form as in effect
on the date hereof) if Borrower were required to file such reports under
the Exchange Act, or (iv) of the occurrence of any event or change that
has caused or evidences, either in any case or in the aggregate, a
Material Adverse Effect, an Officer's Certificate specifying the nature
and period of existence of such condition, event, or change, or specifying
the notice given or action taken by any such Person and the nature of such
claimed Event of Default, Potential Default, default, event, or condition,
and what action Borrower has taken, is taking and proposes to take with
respect thereto:
TERM LOAN AND SECURITY AGREEMENT
38
(h) Litigation or Other Proceedings: (i) promptly upon any officer
of Borrower obtaining knowledge of (x) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial, or otherwise), governmental investigation, or
arbitration against or affecting Borrower or any of its Subsidiaries or
any property of Borrower or any of its Subsidiaries (collectively,
"PROCEEDINGS") not previously disclosed in writing by Borrower to Lenders
or (y) any material development in any Proceeding that, in any case:
(A) if adversely determined, has a reasonable possibility of
giving rise to a Material Adverse Effect; or
(B) seeks to enjoin or otherwise prevent the consummation of,
or to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Borrower to enable Lenders and their counsel to
evaluate such matters; and (ii) within 45 days after the end of each
fiscal quarter of Borrower, a schedule of all Proceedings involving any
alleged liability of, or claims against or affecting, Borrower or any of
its Subsidiaries equal to or greater than $1,000,000 and promptly after
request by Administrative Agent such other information as may be
reasonably requested by Administrative Agent to enable Administrative
Agent and its counsel to evaluate any of such Proceedings;
(i) ERISA Events: promptly upon becoming aware of the occurrence of
any ERISA Event that would result in a material liability, a written
notice specifying the nature thereof, what action Borrower or any of its
ERISA Affiliates has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor, or the PBGC with respect
thereto;
(j) ERISA Notices: with reasonable promptness, copies of (i) all
written notices received by Borrower or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event; and (ii) such other
documents or governmental reports or filings relating to any Employee Plan
as Administrative Agent shall reasonably request;
(k) Insurance: as soon as practicable and in any event by the last
day of each Fiscal Year, a report in form and substance satisfactory to
Administrative Agent outlining all material insurance coverage maintained
as of the date of such report by Borrower and its Subsidiaries and all
material insurance coverage planned to be maintained by Borrower and its
Subsidiaries in the immediately succeeding Fiscal Year;
(l) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and reports,
whether prepared by personnel of Borrower or any of its Subsidiaries or by
independent consultants, with respect to significant environmental matters
at any Facility or which relate to an Environmental Claim which could
result in a Material Adverse Effect;
(m) Regulatory Notices: promptly upon receipt, (i) notification of
any non-renewal, cancellation, termination, revocation, suspension,
impairment, or material modification of, or of any hearing, proceeding, or
investigation regarding, any Authorization held by Borrower or any of its
Subsidiaries which is reasonably likely to have a Material Adverse Effect,
(ii) copies of all notices or other documents received related to any
allegation or investigation regarding non-compliance with any applicable
insurance or other regulation or any other item reasonably likely to
materially adversely affect the Borrower's Authorization, (iii) any
material notice relating to
TERM LOAN AND SECURITY AGREEMENT
39
the maintenance by Borrower or any of its Subsidiaries of their respective
qualification for, participation in, and payment under, private insurance
programs and federal, state, and local governmental programs providing for
the payment and reimbursement of services rendered, and (iv) any material
notice relating to the accreditation of Borrower or any of its
Subsidiaries;
(n) Other Information: with reasonable promptness, such other
information and data with respect to Borrower or any of its Subsidiaries
as from time to time may be reasonably requested by Administrative Agent;
and
(o) Lists of Purchasers. Concurrently with the delivery of any
Reserve Report to the Administrative Agent pursuant to SECTION 8.2, a list
of Persons purchasing Hydrocarbons from the Borrower or any Subsidiary
accounting for at least 80% of the revenues resulting from the sale of all
Hydrocarbons in the one-year period prior to the "as of" date of such
Reserve Report.
(p) Production Report and Lease Operating Statements. Within 90 days
after the end of each fiscal quarter, a report setting forth, for each
calendar month during the then current fiscal year to date, the volume of
production and sales attributable to production (and the prices at which
such sales were made and the revenues derived from such sales) for each
such calendar month from the Oil and Gas Properties, and setting forth the
related ad valorem, severance and production taxes and lease operating
expenses attributable thereto and incurred for each such calendar month.
8.2 COLLATERAL REPORTING. Provide Administrative Agent with the following
documents at the following times in form satisfactory to Administrative Agent
during the term of this Agreement on a separate Borrower-by-Borrower basis, as
well as on a consolidated basis:
(a) By the last day of the month following each calendar quarter
(i.e., the last day of April, July, October and January), a report: (i)
listing the total amount actually paid by Borrower during the preceding
quarter for: (A) plugging and abandonment costs for previous or ongoing
plugging and abandonment operations pertaining to the Oil and Gas
Properties, and (B) general bond and supplemental bond payments pertaining
to plugging and abandonment costs; and (ii) estimating the future payments
for (A) and (B), above, for each of the succeeding two quarters;
(b) Reserve Reports prepared by an independent petroleum engineering
consultant pertaining to the six-month period ending December 31st and
June 30th of each year (with such Reserve Report shall be in form and
substance satisfactory to Administrative Agent), and shall: (i) be
accompanied by a certification of Borrower to the effect that nothing has
occurred since the date of the last Reserve Report that could reasonably
be expected to result in a Material Adverse Effect, except that which has
previously been disclosed to Administrative Agent in writing: and (ii)
contain such other information as may be reasonably requested by
Administrative Agent.
Each delivery of a Reserve Report by Borrower to Administrative Agent
shall constitute a representation and warranty by Borrower to
Administrative Agent that, unless otherwise disclosed to Administrative
Agent in writing on or prior to the date of such delivery, (w) Borrower
(or its Subsidiary, as the case may be) owns the Oil and Gas Properties
described in the Reserve Report free and clear of any Liens (except
Permitted Liens) and (x) each of the Oil and Gas Properties described in
such Reserve Report constitute at least ninety-five (95%) of the value of
Borrower's Proved Reserves in the Oil and Gas Property Collateral; and
TERM LOAN AND SECURITY AGREEMENT
40
(c) Upon request by Administrative Agent from time to time, copies of
Borrower's lease files, well files and contract files (including production
reports on each well, marketing contracts, and information regarding locations
of and equipment located on each well).
8.3 CORPORATE EXISTENCE.
Borrower will, and will cause each of its Subsidiaries to, at all times
preserve and keep in full force and effect its corporate existence and all
rights and franchises material to the business of Borrower and its Subsidiaries
(on a consolidated basis).
8.4 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION.
(a) Borrower will, and will cause each of its Subsidiaries to, pay
all taxes, assessments, and other governmental charges imposed upon it or
any of its properties or assets or in respect of any of its income,
businesses, or franchises before any penalty accrues thereon, and all
claims (including, without limitation, claims for labor, services,
materials, and supplies) for sums that have become due and payable and
that by law have or may become a Lien upon any of its properties or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; provided that no such charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor.
(b) Borrower will not, nor will it permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return
with any Person (other than Subsidiaries of Borrower).
8.5 OPERATION AND MAINTENANCE OF PROPERTIES; INSURANCE.
Borrower will maintain or cause to be maintained, the insurance policies
described on SCHEDULE 8.5 in full force and effect. Additionally, Borrower
shall:
(a) At its expense, do or cause to be done all things reasonably
necessary to preserve and keep in good repair, working order and
efficiency (except for normal wear and tear) all of its Oil and Gas
Properties and other material Properties including, without limitation,
all equipment, machinery and facilities, and from time to time will make
all the reasonably necessary repairs, renewals and replacements so that at
all times the state and condition of its Oil and Gas Properties and other
material Property will be fully preserved and maintained, allowing for
depletion in the ordinary course of business, except to the extent a
portion of such Oil and Gas Properties is no longer capable of producing
Hydrocarbons in commercial quantities (in which case Borrower shall fully
comply with all of its obligations and Legal Requirements pertaining to
plugging and abandoning its wells related to such portion). Borrower
shall, and shall cause each of its Subsidiaries to, promptly: (i) pay and
discharge, or make reasonable and customary efforts to cause to be paid
and discharged, all delay rentals, royalties, expenses and indebtedness
accruing under the leases or other agreements affecting or pertaining to
its Oil and Gas Properties; (ii) perform or make reasonable and customary
efforts to cause to be performed, in accordance with industry standards
the obligations required by each and all of the assignments, deeds,
leases, sub-leases, contracts and agreements affecting its interests in
its Oil and Gas Properties and other material Property and prevent any
forfeiture thereof or a default thereunder, except (A) to the extent a
portion of such Oil and Gas Properties is no longer capable of producing
Hydrocarbons in economically reasonable amounts. Borrower shall, and shall
cause each of its Subsidiaries, to
TERM LOAN AND SECURITY AGREEMENT
41
operate its Oil and Gas Properties and other material Property or cause or
make reasonable and customary efforts to cause such Oil and Gas Property
Collateral and other material Property to be operated in a reasonably
prudent manner in accordance with the practices of the industry and in
compliance in all material respects with all applicable contracts and
agreements and in compliance in all material respects with all Legal
Requirements.
(b) At its expense, maintain the Equipment in good operating
condition and repair (ordinary wear and tear excepted), and make all
necessary replacements thereto, so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than those
items of Equipment that constitute fixtures on the Closing Date, Borrower
shall not permit any item of Equipment to become a fixture to real estate
or an accession to other property, and such Equipment shall at all times
remain personal property.
(c) At its expense, (i) explore, develop and maintain the leases,
wells, units and acreage to which the Oil and Gas Properties pertains in a
prudent and economical manner, (ii) act prudently and in accordance with
customary industry standards in managing or operating the Oil and Gas
Properties, (iii) pay and promptly discharge all rentals, delay rentals,
royalties, overriding royalties, payments of production and other
indebtedness or obligations accruing under the leases comprising the Oil
and Gas Properties, and perform every act required to keep such leases in
full force and effect, (iv) deliver all operating agreements, pooling or
unitization agreements, sales or processing contracts, drilling and/or
development agreements, pipeline transportation agreements and other
material agreements which pertain to the Oil and Gas Properties, (v)
deliver production information on a monthly basis, (vi) deliver copies of
all reports, forms and other documents and data submitted by Borrower or
any of its Subsidiaries to the Federal Energy Regulatory Commission, the
applicable state conservation agencies and any other applicable
Governmental Authorities, (vii) not mortgage, pledge or otherwise encumber
or sell the Oil and Gas Properties, (viii) not alter any Material Contract
relating to the Oil and Gas Properties except to the limited extent
permitted under this Agreement, (ix) pay on or before the due date thereof
all of Borrower's and each of its Subsidiaries' lease operating expenses
and other liabilities with respect to which a mineral lien,
subcontractor's lien, mechanic's lien, materialmen's lien or other Lien
against any of the Collateral may arise which may have a priority superior
to Administrative Agent's Lien on such Collateral, and (x) perform all
acts and execute such documents as Administrative Agent may require in
order to maintain the existence, perfection and first priority of
Administrative Agent's Lien on the Oil and Gas Properties and the other
Collateral.
8.6 INSPECTION; LENDER MEETING. Borrower shall, and shall cause each of
its Subsidiaries to, permit any authorized representatives designated by any
Lender to visit and inspect any of the properties of Borrower or any of its
Subsidiaries, including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances, and accounts with its and their officers and independent public
accountants, all upon reasonable advance notice and at such reasonable times
during normal business hours and as often as may be reasonably requested.
Without in any way limiting the foregoing, Borrower will, upon the request of
Administrative Agent, participate in a meeting of Administrative Agent and
Lenders once during each Fiscal Year to be held at Borrower's corporate offices
(or such other location as may be agreed to by Borrower and Administrative
Agent) at such time as may be agreed to by Borrower and Administrative Agent.
8.7 COMPLIANCE WITH LAWS, ETC.
(a) Borrower shall, and shall cause each of its Subsidiaries to,
comply with the requirements of all applicable Laws, rules, regulations,
and orders of any Governmental
TERM LOAN AND SECURITY AGREEMENT
42
Authority, including all Environmental Laws, noncompliance with which
could reasonably be expected to cause a Material Adverse Effect.
(b) Establish and implement such procedures as may be reasonably
necessary to continuously determine and assure that: (i) all Property and
the operations conducted thereon are in compliance with and do not violate
the requirements of any Environmental Laws, (ii) no oil, Hazardous
Materials or solid wastes are disposed of or otherwise Released except in
compliance with Environmental Laws, (iii) no Hazardous Materials will be
released on or to any such Property in a quantity equal to or exceeding
that quantity which requires reporting under CERCLA, and (iv) no oil, oil
and gas exploration and production wastes, or Hazardous Materials is
released on or to any such Property so as to pose an imminent and
substantial endangerment to public health or welfare or the environment.
(c) Borrower agrees that Administrative Agent may, from time to time
and in its reasonable discretion, retain, at Borrower's expense, an
independent professional consultant to review any report relating to
Hazardous Materials prepared by or for Borrower and to conduct its own
investigation, no more frequently than bi-annually, of any facility
currently owned, leased, operated, or used by Borrower or any of its
Subsidiaries, and Borrower agrees to use all reasonable efforts to obtain
permission for Administrative Agent's professional consultant to conduct
its own investigation of any such Facility previously owned, leased,
operated, or used by Borrower or any of its Subsidiaries. Borrower shall
use its reasonable efforts to obtain for Administrative Agent and its
agents, employees, consultants, and contractors the right, upon reasonable
notice to Borrower, to enter into or on to the facilities currently owned,
leased, operated, or used by Borrower or any of its Subsidiaries to
perform such tests on such property as are reasonably necessary to conduct
such a review and/or investigation. Borrower and Administrative Agent
hereby acknowledge and agree that any report of any investigation
conducted at the request of Administrative Agent pursuant to this SECTION
8.7(c) will be obtained and shall be used by Administrative Agent and
Lenders for the purposes of Lenders' internal credit decisions and to
protect Lenders' security interests, if any, created by the Loan
Documents. Administrative Agent agrees to deliver a copy of any such
report to Borrower with the understanding that Borrower acknowledges and
agrees that (i) it will indemnify, and hold harmless Administrative Agent
and each Lender from any costs, losses, or liabilities relating to
Borrower's use of or reliance on such report, (ii) neither Administrative
Agent nor any Lender makes any representation or warranty with respect to
such report, and (iii) by delivering such report to Borrower, neither
Administrative Agent nor any Lender is requiring or recommending the
implementation of any suggestions or recommendations contained in such
report.
(d) Borrower shall promptly advise Administrative Agent in writing
and in reasonable detail of (i) any Release of any Hazardous Materials
required to be reported to any federal, state, local, or foreign
Governmental Authority under any applicable Environmental Laws, (ii) any
and all written communications with respect to any Environmental Claims
that have a reasonable possibility of giving rise to a Material Adverse
Effect or with respect to any Release of Hazardous Materials required to
be reported to any federal, state, or local Governmental Authority, (iii)
any remedial action taken by Borrower or any other Person in response to
(y) any Hazardous Materials on, under, or about any Facility, the
existence of which has a reasonable possibility of resulting in an
Environmental Claim having a Material Adverse Effect, or (z) any
Environmental Claim that could have a Material Adverse Effect, (iv)
Borrower's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of any Facility that could cause such
Facility or any part thereof to be subject to any restrictions on the
ownership, occupancy, transferability, or use thereof under any
Environmental Laws, and (v) any request for information from any
Governmental Authority that suggests such
TERM LOAN AND SECURITY AGREEMENT
43
Governmental Authority is investigating whether Borrower or any of its
Subsidiaries may be potentially responsible for a Release of Hazardous
Materials.
(e) Borrower shall, at its own expense, provide copies of such
documents or information as Administrative Agent may reasonably request in
relation to any matters disclosed pursuant to this SECTION 8.7.
8.8 BORROWER'S REMEDIAL ACTION REGARDING HAZARDOUS MATERIALS. Borrower
shall promptly take, and shall cause each of its Subsidiaries promptly to take,
any and all necessary remedial action in connection with the presence, storage,
use, disposal, transportation, or Release of any Hazardous Materials on or under
any Facility in order to reasonably prevent or mitigate damage to the property
or to persons of third parties and to comply with all applicable Environmental
Laws and Authorizations unless the failure to so comply could not reasonably be
expected to have a Material Adverse Effect. In the event Borrower or any of its
Subsidiaries undertakes any remedial action with respect to any Hazardous
Materials on or under any Facility, Borrower or such Subsidiary shall conduct
and complete such remedial action in material compliance with all applicable
Environmental Laws, and in accordance with the policies, orders, and directives
of all federal, state, and local Governmental Authorities except when, and only
to the extent that, Borrower's or such Subsidiary's liability for such presence,
storage, use, disposal, transportation, or discharge of any Hazardous Materials
is being contested in good faith by Borrower or such Subsidiary.
8.9 OIL AND GAS PROPERTY TITLE INFORMATION.(a) On or before the delivery
to Administrative Agent of each Reserve Report required by SECTION 8.2
Borrower will provide Administrative Agent with current title opinions
covering the Oil and Gas Property for which title opinions have not
previously been provided to Administrative Agent so that at all times the
value of the Proved Reserves for which title opinions are or have been
provided to Administrative Agent shall equal or exceed ninety-five percent
(95%) of the NYMEX Value of all of the Oil and Gas Property as set forth
in the most recently delivered Reserve Report of Proved Reserves.
(b) Borrower shall cure all title defects or exceptions which are
not Permitted Liens, or substitute acceptable Oil and Gas Property with no
title defects or exceptions except for Permitted Liens covering Oil and
Gas Property of an equivalent value, within 30 days after a request by
Administrative Agent to cure such defects or exceptions. Upon the
discovery of any title defect or exception which is not a Permitted Lien,
Administrative Agent shall have the right to exercise the right to remedy
such title defect or exception in its sole discretion from time to time
(and any failure to so exercise this remedy at any time shall not be a
waiver as to future exercise of the remedy by Administrative Agent).
8.10 ADDITIONAL COLLATERAL.
(a) Should Borrower or any of its Subsidiaries purchase, otherwise
acquire or own any Oil and Gas Property that is not already included in
the Oil and Gas Properties and the subject of an Oil and Gas Properties
Mortgage in favor of Administrative Agent other than Oil and Gas
Properties owned on the date of this Agreement, which have a NYMEX Value
of $100,000 or less (until such time as the NYMEX Value thereof exceeds
$100,000) for the benefit of the Lenders, Borrower will grant or cause to
be granted to Administrative Agent as security for the Obligations a
first-priority Lien (subject only to Permitted Liens) on all of Borrower's
or such Subsidiary's, as the case may be, interest in such Oil and Gas
Properties not already subject to a Lien of such an Mortgage
simultaneously with Borrower's or such Subsidiary's purchase, acquisition
or ownership of such Oil and Gas Properties which Lien will be created and
perfected by and in accordance with the provisions of an Mortgage and
other security agreements and
TERM LOAN AND SECURITY AGREEMENT
44
financing statements, or other security instruments, all in form and
substance satisfactory to Administrative Agent in its sole discretion and
in sufficient executed (and acknowledged where necessary or appropriate)
counterparts for recording purposes.
(b) Concurrently with the granting of the Lien or other action
referred to in SECTION 8.10(a) above, Borrower will provide to
Administrative Agent title information and a title opinion in form and
substance satisfactory to Administrative Agent in its sole discretion with
respect to Borrower's or such Subsidiary's, as the case may be, interest
in such Oil and Gas Properties.
8.11 PAYMENT OF OBLIGATION; LEASES.
(a) The Loan Parties shall pay the Obligation in accordance with the
terms and provisions of the Loan Documents.
(b) The Borrower shall pay when due all rents and other amounts
payable under any leases to which Borrower is a party or by which
Borrower's properties and assets are bound.
8.12 FURTHER ASSURANCES. At any time or from time to time upon the request
of Administrative Agent, Borrower will, at its expense, promptly execute,
acknowledge, and deliver such further documents and do such other acts and
things as Administrative Agent may reasonably request in order to effect fully
the purposes of the Loan Documents and to provide for payment of the Obligation
in accordance with the terms of this Agreement and the other Loan Documents. In
furtherance and not in limitation of the foregoing, Borrower shall take, and
cause each of its Subsidiaries to take, such actions as Administrative Agent may
reasonably request from time to time (including, without limitation, the
execution and delivery of guaranties, security agreements, pledge agreements,
mortgages, deeds of trust, landlord's consents and estoppels, stock powers,
financing statements, and other documents, the filing or recording of any of the
foregoing, title insurance with respect to any of the foregoing that relates to
an interest in real property, and the delivery of stock certificates and other
collateral with respect to which perfection is obtained by possession) to ensure
that the Obligation is guarantied by the Guarantors and is secured by the
Collateral.
8.13 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Inventory and Equipment
only at the locations identified on SCHEDULE 7.2; provided, however, that
Borrower may amend SCHEDULE 7.2 so long as such amendment occurs by written
notice to Administrative Agent not less than 30 days prior to the date on which
Inventory or Equipment is moved to such new location, so long as such new
location is within the continental United States, and so long as, at the time of
such written notification, Borrower provides any financing statements or fixture
filings necessary to perfect and continue perfected Administrative Agent's Liens
on such assets and also provides to Administrative Agent a satisfactory landlord
waiver to the extent Administrative Agent does not have a Collateral Access
Agreement.
8.14 USE OF PROCEEDS. Borrower shall use all of the Term Loan Principal
Debt (other than proceeds used to pay reasonable fees and expenses incurred by
Borrower in connection with this Agreement) to restructure the claims of Lenders
in the Chapter 11 Case in accordance with the terms of the Reorganization Plan.
No part of the Term Loan Principal Debt will be used, directly or indirectly,
for a purpose which violates any Law, including, without limitation, the
provisions of Regulations T, U, or X (as enacted by the Board of Governors of
the Federal Reserve System, as amended).
8.15 REORGANIZATION PLAN. Comply with the provisions of the Reorganization
Plan.
SECTION 9. NEGATIVE COVENANTS.
TERM LOAN AND SECURITY AGREEMENT
45
Borrower covenants and agrees that, until payment in full of all of the
Term Loan Principal Debt and other Obligation, unless Required Lenders shall
otherwise give prior written consent, Borrower shall perform, and shall cause
each of its Subsidiaries to perform, all covenants in this SECTION 9.
9.1 INDEBTEDNESS. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume, or guaranty, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(a) Each of the Loan Parties may become and remain liable with
respect to the Obligation;
(b) Borrower and its Subsidiaries, as applicable, may remain liable
with respect to Indebtedness described in SCHEDULE 9.1; and
(c) Indebtedness of Borrower and its Subsidiaries; provided that
such Indebtedness may consist only of Capital Leases capitalized on the
consolidated balance sheet of Borrower and its Subsidiaries and other
Indebtedness secured by Liens permitted under SECTION 9.2(a)(iii);
provided further that, the aggregate amount of all Indebtedness
outstanding under this CLAUSE (c) at any time shall not exceed $500,000.
9.2 PROHIBITION ON LIENS. Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume, or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement, or other
similar notice of any Lien with respect to any such property, asset, income, or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(a) Permitted Liens;
(b) Liens described in SCHEDULE 9.2;
(c) Purchase money security interests (including mortgages,
conditional sales, Capital Leases, and any other title retention or
deferred purchase devices) in real or tangible personal property of
Borrower or any of its Subsidiaries existing or created at the time of
acquisition thereof or within 30 days thereafter, and the renewal,
extension, and refunding of any such security interest in an amount not
exceeding the amount thereof remaining unpaid immediately prior to such
renewal, extension, or refunding; provided, however, that such
Indebtedness is permitted by Section 9.1(c); and
(d) Liens in favor of Administrative Agent granted pursuant to the
Collateral Documents; and
(e) Non-consensual Liens existing on the Closing Date in favor of
contractors, subcontractors, co-working owners (whether acting as
operating or non-operating), arising solely from the conduct of oil and
gas operations associated with the Collateral.
9.3 INVESTMENTS. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person except Borrower and its Subsidiaries may make and own Investments in Cash
Equivalents.
TERM LOAN AND SECURITY AGREEMENT
46
9.4 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND EQUIPMENT
WITH BAILEES. Relocate its chief executive office to a new location without
Borrower providing 30 days prior written notification thereof to Administrative
Agent and so long as, at the time of such written notification, Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected Administrative Agent's Liens and also provides to
Administrative Agent a satisfactory Collateral Access Agreement with respect to
such new location. The Inventory and Equipment shall not at any time now or
hereafter be stored with a bailee, warehouseman, or similar party without
Administrative Agent's prior written consent.
9.5 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES. Borrower shall not,
and shall not permit any of its Subsidiaries to:
(a) change any Borrower's, or any of its Subsidiaries' name,
corporate structure (within the meaning of the UCC), identity, or add any
new trade, dba, or fictitious name;
(b) alter the corporate, capital, or legal structure of Borrower or
any of its Subsidiaries, create any new Subsidiaries or enter into any
transaction of merger or consolidation, or liquidate, wind-up, or dissolve
itself (or suffer any liquidation or dissolution);
(c) sell, lease, assign, farm-out, convey, transfer, or otherwise
dispose of any of any Borrower's or any of its Subsidiaries' Properties or
assets other than (i) sales of Inventory to buyers in the ordinary course
of such Borrower's business as currently conducted, (ii) farmouts of
nonproven acreage or nonproven depths and assignments in connection with
such farmouts, and (iii) the sale or transfer of Equipment that is no
longer necessary for the business of Borrower or such Subsidiary and is
replaced by Equipment of at least comparable value and use; or
(d) cause, permit, or suffer, directly or indirectly, any Change in
Control.
9.6 SALES AND LEASE-BACKS. Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, become or remain liable as lessee
or as a guarantor or other surety with respect to any lease, whether an
operating lease or a Capital Lease, of any property (whether real, personal, or
mixed), whether now owned or hereafter acquired, (i) which Borrower or any of
its Subsidiaries has sold or transferred or is to sell or transfer to any other
Person (other than Borrower or any of its Subsidiaries) or (ii) which Borrower
or any of its Subsidiaries intends to use for substantially the same purpose as
any other property which has been or is to be sold or transferred by Borrower or
any of its Subsidiaries to any Person (other than Borrower or any of its
Subsidiaries) in connection with such lease.
9.7 SALE OR DISCOUNT OF RECEIVABLES. Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, sell with recourse,
or discount or otherwise sell for less than the face value thereof, any of its
notes or accounts receivable other than private self-pay receivables and
receivables over 180 days old.
9.8 TRANSACTIONS WITH AFFILIATES. Borrower shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly, enter into or permit to
exist any transaction (including, without limitation, the purchase, sale, lease,
or exchange of any property or the rendering of any service) with any Affiliate
of Borrower, on terms that are less favorable to Borrower or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not an Affiliate; provided that the foregoing restriction shall not apply to
(i) any transaction between Borrower and any of its Subsidiaries or between any
of its Subsidiaries, and (ii) reasonable and customary fees paid to members of
the boards of directors of Borrower and its Subsidiaries.
TERM LOAN AND SECURITY AGREEMENT
47
9.9 DISTRIBUTIONS; REPURCHASES OF CAPITAL STOCK. Make any distribution or
declare or pay any dividends (in cash or other property, other than capital
Stock) on, or purchase, acquire, redeem, or retire any of Borrower's capital
Stock, of any class, whether now or hereafter outstanding.
(a) directly or indirectly sell, assign, pledge, or otherwise
encumber or dispose of any shares of capital stock or, other equity
securities of any of its Subsidiaries, except as permitted under this
Agreement or the Collateral Documents or to qualify directors if required
by applicable law; or
(b) permit any of its Subsidiaries directly or indirectly to sell,
assign, pledge, or otherwise encumber or dispose of any shares of capital
stock or other equity securities of any of its Subsidiaries (including
such Subsidiary), except (a) as permitted under this Agreement or the
Collateral Documents or to Borrower, another wholly-owned Subsidiary of
Borrower or (b) to qualify directors if required by applicable law.
9.10 CONDUCT OF BUSINESS. Borrower shall not, and shall not permit any of
its Subsidiaries to, engage in any business other than (a) the businesses
engaged in by Borrower and its Subsidiaries on the Closing Date and (b) such
other lines of business as may be consented to by Administrative Agent and
Required Lenders.
9.11 AMENDMENTS OR WAIVERS OF AGREEMENTS. Without the prior written
consent of Required Lenders, neither Borrower nor any of its Subsidiaries shall
agree to any amendment, restatement, supplement, or other modification to, or
waive any of its rights under, any Related Agreement if such amendment,
restatement, supplement, modification, or waiver would be materially adverse to
the Lenders.
9.12 GAS IMBALANCES, TAKE-OR-PAY OR OTHER PREPAYMENTS. Borrower shall not,
and shall not permit any of its Subsidiaries to, enter into any contracts or
agreements which warrant production of Hydrocarbons and will not hereafter allow
gas imbalances, take-or-pay or other prepayments with respect to its Oil and Gas
Properties which would require such Person to deliver Hydrocarbons produced on
Oil and Gas Properties at some future time without then or thereafter receiving
full payment therefor to exceed, during any monthly period, five percent (5%) of
the current aggregate monthly gas production for such monthly period from the
Oil and Gas Properties.
9.13 SWAP AGREEMENTS. The Borrower will not, and will not permit any
Subsidiary to, enter into any Swap Agreements with any Person other than (a)
Swap Agreements in respect of commodities (i) with an Approved Counterparty and
(ii) the notional volumes for which (when aggregated with other commodity Swap
Agreements then in effect other than basis differential swaps on volumes already
hedged pursuant to other Swap Agreements) do not exceed, as of the date such
Swap Agreement is executed, 80% of the reasonably anticipated projected
production from proved, developed, producing Oil and Gas Properties for each
month during the period during which such Swap Agreement is in effect for each
of crude oil and natural gas, calculated separately, and (b) Swap Agreements in
respect of interest rates with an Approved Counterparty, as follows: (i) Swap
Agreements effectively converting interest rates from fixed to floating, the
notional amounts of which (when aggregated with all other Swap Agreements of the
Borrower and its Subsidiaries then in effect effectively converting interest
rates from fixed to floating) do not exceed 50% of the then outstanding
principal amount of the Borrower's Debt for borrowed money which bears interest
at a fixed rate and (ii) Swap Agreements effectively converting interest rates
from floating to fixed, the notional amounts of which (when aggregated with all
other Swap Agreements of the Borrower and its Subsidiaries then in effect
effectively converting interest rates from floating to fixed) do not exceed 75%
of the then outstanding principal amount of the Borrower's Debt for borrowed
money which bears interest at a floating rate. In no event shall any Swap
Agreement to which
TERM LOAN AND SECURITY AGREEMENT
48
the Borrower or any Subsidiary is a party contain any requirement,
agreement or covenant for the Borrower or any Subsidiary to post cash or
other collateral or margin to secure their obligations under such Swap
Agreement or to cover market exposures.
9.14 NO PROHIBITED TRANSACTIONS UNDER ERISA. Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in any
prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the
Code for which a statutory or class exemption is not available or a
private exemption has not been previously obtained from the Department of
Labor.
(b) permit to exist with respect to any Employee Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and
412 of the Code), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay
timely required contributions or annual installments due with respect to
any waived funding deficiency to any Employee Plan;
(d) terminate, or permit any Subsidiary of Borrower to terminate,
any Employee Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to make any
required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay any
required installment or any other payment required under Section 412 of
the Code on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a Plan
resulting in an increase in current liability for the plan year such that
either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of the
Code; or
(h) withdraw, or permit any Subsidiary of Borrower to withdraw, from
any Multiemployer Plan where such withdrawal is reasonably likely to
result in any liability of any such entity under Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably would be
expected to result in a claim against or liability of Borrower, any of its
Subsidiaries or any ERISA Affiliate in excess of $250,000.
9.15 MAINTENANCE OF PROPRIETARY RIGHTS.
Do any act, or omit to do any act, where good business judgment dictates
otherwise whereby the Proprietary Rights or any registration or
application appurtenant thereto, may become abandoned, invalidated,
unenforceable, avoided, avoidable, or will otherwise diminish in value.
Borrower shall notify Administrative Agent immediately if it knows of any
reason or has reason to know of any ground under which this result may
occur. Borrower shall take appropriate action at its expense, where good
business judgment calls for the same, to halt the infringement of the
TERM LOAN AND SECURITY AGREEMENT
49
Proprietary Rights and shall properly exercise its duty to control the
nature and quality of the goods offered by any licensees in connection
with the licenses set forth in SCHEDULE P.
SECTION 10. DEFAULT.
The term "EVENT OF DEFAULT" means the occurrence of any one or more of the
following events:
10.1 FAILURE TO MAKE PAYMENTS WHEN DUE. Failure or refusal to pay all or
any part of the Term Loan Principal Debt when due, whether at stated maturity,
by acceleration, by notice of prepayment, or otherwise; or failure or refusal to
pay any interest, fees, or any other part of the Obligation within five days
after the date due; or
10.2 DEFAULT IN OTHER AGREEMENTS. (a) Failure of Borrower or any of its
Subsidiaries to pay when due any principal of or interest on any Indebtedness
(other than Indebtedness referred to in SECTION 10.1); or (b) breach or default
by Borrower or any of its Subsidiaries with respect to any Indebtedness, or (c)
any loan agreement, mortgage, indenture or other agreement relating to such
Indebtedness; or
10.3 BREACH OF CERTAIN COVENANTS. Failure of any Loan Party to perform or
comply with any term or condition contained in this Agreement; or
10.4 BREACH OF WARRANTY. Any representation, warranty, certification, or
other statement made by Borrower or any of its Subsidiaries in any Loan Document
or in any statement or certificate at any time given by Borrower or any of its
Subsidiaries in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as of which made;
or
10.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS. Any Loan Party shall default in
the performance of or compliance with any term contained in this Agreement or
any of the other Loan Documents, other than any such term referred to in any
other Section of this SECTION 10, and such default shall not have been remedied
or waived within 30 days after the earlier of (a) an officer of Borrower
becoming aware of such default or (b) receipt by Borrower of notice from
Administrative Agent or any Lender of such default; or
10.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (a) A court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of Borrower or any of its Subsidiaries in an involuntary case under the
Bankruptcy Code or under any other applicable Debtor Relief Law now or hereafter
in effect, which decree or order is not stayed; or any other similar relief
shall be granted under any applicable federal or state law; or (b) an
involuntary case shall be commenced against Borrower or any of its Subsidiaries
under the Bankruptcy Code or under any other Debtor Relief Law now or hereafter
in effect; or a decree or order of a court having jurisdiction in the premises
for the appointment of a receiver, liquidator, sequestrator, trustee, custodian,
or other officer having similar powers over Borrower or any of its Subsidiaries,
or over all or a substantial part of its property, shall have been entered; or
there shall have occurred the involuntary appointment of an interim receiver,
trustee, or other custodian of Borrower or any of its Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution, or
similar process shall have been issued against any substantial part of the
property of Borrower or any of its Subsidiaries, and any such event described in
this CLAUSE (b) shall continue for 60 days unless dismissed, bonded, or
discharged; or
10.7 VOLUNTARY BANKRUPTCY, APPOINTMENT OF RECEIVER, ETC. (a) Borrower or
any of its Subsidiaries shall have an order for relief entered with respect to
it or commence a voluntary case under
TERM LOAN AND SECURITY AGREEMENT
50
the Bankruptcy Code or under any other applicable Debtor Relief Law now or
hereafter in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion of an involuntary case to a voluntary
case, under any Debtor Relief Law, or shall consent to the appointment of or
taking possession by a receiver, trustee, or other custodian for all or a
substantial part of its property; or Borrower or any of its Subsidiaries shall
make any assignment for the benefit of creditors; or (b) Borrower or any of its
Subsidiaries shall be unable, or shall fail generally, or shall admit in writing
its inability, to pay its debts as such debts become due; or the Board of
Directors of Borrower or any of its Subsidiaries (or any committee thereof)
shall adopt any resolution or otherwise authorize any action to approve any of
the actions referred to in CLAUSE (a) above or this CLAUSE (b); or
10.8 JUDGMENTS AND ATTACHMENTS. Any money judgment, writ, or warrant of
attachment or similar process shall be entered or filed against Borrower or any
of its Subsidiaries or any of their respective assets and shall remain
undischarged, unvacated, unbonded, or unstayed for a period of 60 days (or in
any event later than five days prior to the date of any proposed sale
thereunder); or
10.9 DISSOLUTION. Any order, judgment, or decree shall be entered against
Borrower or any of its Subsidiaries decreeing the dissolution or split up of
Borrower or that Subsidiary and such order shall remain undischarged or unstayed
for a period in excess of 30 days; or
10.10 EMPLOYEE PLANS. There shall occur one or more ERISA Events which
individually or in the aggregate results in a Material Adverse Effect; or there
shall exist an Unfunded Current Liability, individually or in the aggregate for
all Pension Plans (excluding for purposes of such computation any Employee Plans
with respect to which there is no Unfunded Current Liability), which would have
a Material Adverse Effect; or
10.11 CHANGE OF CONTROL. The occurrence of a Change of Control; or
10.12 FAILURE OF SECURITY. Upon execution and delivery thereof, any
Collateral Document shall, at any time, cease to be in full force and effect
(other than by reason of a release of Collateral thereunder in accordance with
the terms hereof or thereof, the satisfaction in full of the Obligation or any
other termination of such Collateral Document in accordance with the terms
hereof or thereof) or shall be declared null and void, or the validity or
enforceability thereof shall be contested in writing by any Loan Party, or
Administrative Agent shall not have or shall cease to have a valid security
interest in any Collateral purported to be covered thereby, perfected and with
the priority required by the relevant Collateral Document, for any reason other
than the failure of Administrative Agent or any Lender to take any action within
its control, subject only to Liens permitted under the applicable Collateral
Documents; or
10.13 CONFIRMATION ORDER. The entry of any order amending, supplementing,
staying, vacating, or otherwise modifying the Loan Documents or the Confirmation
Order without the written consent of Administrative Agent and Required Lenders;
or
10.14 LIEN CHALLENGE. The commencement of a suit or action against
Administrative Agent or any Lender, and, as to any suit or action brought by any
Person other than Borrower or an officer or employee of Borrower, the
continuation thereof without dismissal for 30 days after service thereof on
Administrative Agent or any Lender, that asserts, by or on behalf of Borrower,
any claim or legal or equitable remedy which seeks to subordinate, invalidate,
reduce or impair the claim or Lien of Administrative Agent or such Lender
hereunder or under any other Loan Document.
SECTION 11. RIGHTS AND REMEDIES.
TERM LOAN AND SECURITY AGREEMENT
51
11.1 REMEDIES UPON EVENT OF DEFAULT.
(a) Debtor Relief. If an Event of Default exists under SECTION 10.6
or 10.7, the commitment to extend credit hereunder shall automatically
terminate and the entire unpaid balance of the Obligation shall
automatically become due and payable without any action or notice of any
kind whatsoever.
(b) Other Event of Defaults. If any Event of Default exists,
Administrative Agent may (and, subject to the terms of SECTION 12, shall
upon the request of Required Lenders) or Required Lenders may, do any one
or more of the following: (i) if the maturity of the Obligation has not
already been accelerated under SECTION 11.1(a), declare the entire unpaid
balance of the Obligation, or any part thereof, immediately due and
payable, whereupon it shall be due and payable; (ii) terminate the
commitments of Lenders to extend credit hereunder; (iii) reduce any claim
to judgment; (iv) to the extent permitted by Law, exercise (or request
each Lender to, and each Lender shall be entitled to, exercise) the Rights
of offset or banker's Lien against the interest of each Borrower in and to
every account and other property of any Borrower which are in the
possession of Administrative Agent or any Lender to the extent of the full
amount of the Obligation (to the extent permitted by Law, each Loan Party
being deemed directly obligated to each Lender in the full amount of the
Obligation for such purposes); and (v) exercise any and all other legal or
equitable Rights afforded by the Loan Documents, the Laws of the State of
New York, or any other applicable jurisdiction as Administrative Agent or
Required Lenders (as the case may be) shall deem appropriate, or
otherwise, including, but not limited to, the Right to bring suit or other
proceedings before any Governmental Authority either for specific
performance of any covenant or condition contained in any of the Loan
Documents or in aid of the exercise of any Right granted to Administrative
Agent or any Lender in any of the Loan Documents.
(c) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Administrative Agent considers
advisable, and in such cases, Administrative Agent will credit the Loan
Account with only the net amounts received by Administrative Agent in
payment of such disputed Accounts after deducting all Lender Group
Expenses incurred or expended in connection therewith;
(d) Cause Borrower to hold all returned Inventory in trust for the
Lenders, segregate all returned Inventory from all other assets of
Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of the Lender Group;
(e) Without notice to or demand upon Borrower, make such payments
and do such acts as Administrative Agent considers necessary or reasonable
to protect its security interests in the Collateral. Borrower agrees to
assemble the Personal Property Collateral if Administrative Agent so
requires, and to make the Personal Property Collateral available to
Administrative Agent at a place that Administrative Agent may designate
which is reasonably convenient to both parties. Borrower authorizes
Administrative Agent to enter the premises where the Personal Property
Collateral is located, to take and maintain possession of the Personal
Property Collateral, or any part of it, and to pay, purchase, contest, or
compromise any Lien that in Administrative Agent's determination appears
to conflict with Administrative Agent's Liens and to pay all expenses
incurred in connection therewith and to charge Borrower's Loan Account
therefor. With respect to any of Borrower's owned or leased premises,
Borrower hereby grants Administrative Agent a license to enter into
possession of such premises and to occupy the same, without charge, in
order to exercise any of the Lender Group's rights or remedies provided
herein, at law, in equity, or otherwise;
TERM LOAN AND SECURITY AGREEMENT
52
(f) Without notice to Borrower (such notice being expressly waived),
and without constituting a retention of any collateral in satisfaction of
an obligation (within the meaning of the UCC), set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by the
Lenders, or (ii) Debt at any time owing to or for the credit or the
account of Borrower held by the Lenders;
(g) Hold, as cash collateral, any and all balances and deposits of
Borrower held by the Lender Group, to secure the full and final repayment
of all of the Obligations;
(h) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein)
the Personal Property Collateral. Borrower hereby grants to Administrative
Agent a license or other right to use, without charge, Borrower's labels,
patents, copyrights, trade secrets, trade names, trademarks, service
marks, and advertising matter, or any property of a similar nature, as it
pertains to the Personal Property Collateral, in completing production of,
advertising for sale, and selling any Personal Property Collateral and
Borrower's rights under all licenses and all franchise agreements shall
inure to the Lender Group's benefit;
(i) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions,
for cash or on terms, in such manner and at such places (including
Borrower's premises) as Administrative Agent determines is commercially
reasonable. It is not necessary that the Personal Property Collateral be
present at any such sale;
(j) Administrative Agent shall give notice of the disposition of the
Personal Property Collateral as follows:
(i) Administrative Agent shall give Borrower a notice in
writing of the time and place of public sale, or, if the sale is a
private sale or some other disposition other than a public sale is
to be made of the Personal Property Collateral, the time on or after
which the private sale or other disposition is to be made; and
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in SECTION 13, at least
five (5) days before the earliest time of disposition set forth in
the notice; no notice needs to be given prior to the disposition of
any portion of the Personal Property Collateral that is perishable
or threatens to decline speedily in value or that is of a type
customarily sold on a recognized market;
(iii) Administrative Agent, on behalf of the Lender Group may
credit bid and purchase at any public sale;
11.2 WAIVERS. To the extent permitted by Law, the Loan Parties hereby
waive presentment and demand for payment, protest, notice of intention to
accelerate, notice of acceleration, and notice of protest and nonpayment, and
agree that their respective liability with respect to the Obligation (or any
part thereof) shall not be affected by any renewal or extension in the time of
payment of the Obligation (or any part thereof), by any indulgence, or by any
release or change in any security for the payment of the Obligation (or any part
thereof).
11.3 PERFORMANCE BY ADMINISTRATIVE AGENT. If any covenant, duty, or
agreement of any Loan Party is not performed in accordance with the terms of the
Loan Documents, after the occurrence and during the continuance of an Event of
Default, Administrative Agent may, at its option (but subject to the approval of
Required Lenders), perform or attempt to perform such covenant, duty, or
agreement on
TERM LOAN AND SECURITY AGREEMENT
53
behalf of such Loan Party. In such event, any amount expended by Administrative
Agent in such performance or attempted performance shall be payable by the Loan
Parties, jointly and severally, to Administrative Agent on demand, shall become
part of the Obligation, and shall bear interest at the Post-Default Rate from
the date of such expenditure by Administrative Agent until paid. Notwithstanding
the foregoing, it is expressly understood that Administrative Agent does not
assume, and shall never have, except by its express written consent, any
liability or responsibility for the performance of any covenant, duty, or
agreement of any Borrower.
11.4 DELEGATION OF DUTIES; RELIANCE. Administrative Agent may perform any
of its duties or exercise any of its Rights under the Loan Documents by or
through its Representatives. Administrative Agent and its Representatives shall
(a) be entitled to rely upon (and shall be protected in relying upon) any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telecopy, telegram, telex or teletype message, statement, order, or other
documents or conversation believed by it or them to be genuine and correct and
to have been signed or made by the proper Person and, with respect to legal
matters, upon opinion of counsel selected by Administrative Agent, (b) be
entitled to deem and treat each Lender as the owner and Lender of the Obligation
owed to such Lender for all purposes until, subject to SECTION 13.12, written
notice of the assignment or transfer thereof shall have been given to and
received by Administrative Agent (and any request, authorization, consent, or
approval of any Lender shall be conclusive and binding on each subsequent
Lender, assignee, or transferee of the Obligation owed to such Lender or portion
thereof until such notice is given and received), (c) not be deemed to have
notice of the occurrence of an Event of Default unless a responsible officer of
Administrative Agent, who handles matters associated with the Loan Documents and
transactions thereunder, has received written notice from a Lender or Borrower
and stating that such notice is a "Notice of Default," and (d) be entitled to
consult with legal counsel (including counsel for Borrower), independent
accountants, and other experts selected by Administrative Agent and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, or experts.
11.5 NOT IN CONTROL. Nothing in any Loan Document shall, or shall be
deemed to (a) give Administrative Agent or any Lender the Right to exercise
control over the assets (including real property), affairs, or management of any
Loan Party, (b) preclude or interfere with compliance by any Loan Party thereof
with any Law, or (c) require any act or omission by any Loan Party thereof that
may be harmful to Persons or property. Any "Material Adverse Effect" or other
materiality qualifier in any representation, warranty, covenant, or other
provision of any Loan Document is included for credit documentation purposes
only and shall not, and shall not be deemed to, mean that Administrative Agent
or any Lender acquiesces in any non-compliance by any Loan Party with any Law or
document, or that Administrative Agent or any Lender does not expect the Loan
Parties to promptly, diligently, and continuously carry out all appropriate
removal, remediation, and termination activities required or appropriate in
accordance with all Environmental Laws. The Administrative Agent and the Lenders
have no fiduciary relationship with or fiduciary duty to any Loan Party arising
out of or in connection with the Loan Documents, and the relationship between
the Administrative Agent and the Lenders, on the one hand, and Loan Parties, on
the other hand, in connection with the Loan Documents is solely that of debtor
and creditor. The power of the Administrative Agent and Lenders under the Loan
Documents is limited to the Rights provided in the Loan Documents, which Rights
exist solely to assure payment and performance of the Obligation and may be
exercised in a manner calculated by the Administrative Agent and Lenders in
their respective good faith business judgment.
11.6 COURSE OF DEALING. The acceptance by Administrative Agent or Lenders
at any time and from time to time of partial payment on the Obligation shall not
be deemed to be a waiver of any Event of Default then existing. No waiver by
Administrative Agent, Required Lenders, or Lenders of any Event of Default shall
be deemed to be a waiver of any other then-existing or subsequent Event of
Default. No delay or omission by Administrative Agent, Required Lenders, or
Lenders in exercising any Right under
TERM LOAN AND SECURITY AGREEMENT
54
the Loan Documents shall impair such Right or be construed as a waiver thereof
or any acquiescence therein, nor shall any single or partial exercise of any
such Right preclude other or further exercise thereof, or the exercise of any
other Right under the Loan Documents or otherwise.
11.7 CUMULATIVE RIGHTS. All Rights available to Administrative Agent and
Lenders under the Loan Documents are cumulative of and in addition to all other
Rights granted to Administrative Agent and Lenders at law or in equity, whether
or not the Obligation is due and payable and whether or not Administrative Agent
or Lenders have instituted any suit for collection, foreclosure, or other action
in connection with the Loan Documents.
11.8 APPLICATION OF PROCEEDS. Any and all proceeds ever received by
Administrative Agent or Lenders from the exercise of any Rights pertaining to
the Obligation shall be applied to the Obligation in the order and manner set
forth in SECTION 3.9.
11.9 CERTAIN PROCEEDINGS. Each Loan Party will promptly execute and
deliver, or cause the execution and delivery of, all applications, certificates,
instruments, registration statements, and all other documents and papers
Administrative Agent or Lenders may reasonably request in connection with the
obtaining of any consent, approval, registration, qualification, permit,
license, or Authorization of any Governmental Authority or other Person
necessary or appropriate for the effective exercise of any Rights under the Loan
Documents. Because the Loan Parties agree that Administrative Agent's and
Lenders' remedies at Law for failure of the Loan Parties to comply with the
provisions of this Section would be inadequate and that such failure would not
be adequately compensable in damages, the Loan Parties agree that the covenants
of this Section may be specifically enforced.
11.10 EXPENDITURES BY LENDERS. Borrower shall promptly pay within fifteen
(15) Business Days after request therefor (a) all reasonable costs, fees, and
expenses paid or incurred by Administrative Agent, incident to any Loan Document
(including, but not limited to, the reasonable fees and expenses of counsel to
Administrative Agent in connection with the negotiation, preparation, delivery,
execution, coordination, and administration of the Loan Documents and any
related amendment, waiver, or consent) and (b) all reasonable costs and expenses
of Lenders and Administrative Agent incurred by Administrative Agent or any
Lender in connection with the enforcement of the obligations of any Borrower
arising under the Loan Documents (including, without limitation, costs and
expenses incurred in connection with any workout or bankruptcy) or the exercise
of any Rights arising under the Loan Documents (including, but not limited to,
reasonable attorneys' fees including allocated cost of internal counsel, court
costs, and other costs of collection), all of which shall be a part of the
Obligation and shall bear interest at the Post-Default Rate from the date due
until the date repaid.
11.11 INDEMNIFICATION. Borrower agrees, to indemnify and hold harmless
Administrative Agent, and each Lender, and each of their respective affiliates
and their respective officers, directors, employees, agents, attorneys, and
advisors (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities (including, without limitation, any Environmental
Liabilities), costs, and expenses (including, without limitation, reasonable
attorneys' fees) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation, or proceeding or preparation of defense in connection therewith) the
Loan Documents, any of the transactions contemplated herein or the actual or
proposed use of the proceeds of the Borrowings (including any of the foregoing
arising from the negligence of the Indemnified Party), except to the extent such
claim, damage, loss, liability, cost, or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. In the
case of an investigation, litigation, or other proceeding to which the indemnity
in this SECTION 11.11
TERM LOAN AND SECURITY AGREEMENT
55
applies, such indemnity shall be effective whether or not such investigation,
litigation, or proceeding is brought by Borrower, any other Loan Party, their
directors, shareholders, or creditors or an Indemnified Party or any other
Person or any Indemnified Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated. Borrower agrees not to
assert any claim against any indemnified party on any theory of liability, for
special, indirect, consequential, or punitive damages arising out of or
otherwise relating to the Loan Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Borrowings. Without
prejudice to the survival of any other agreement of the Loan Parties hereunder,
the agreements and obligations of the Loan Parties contained in this SECTION
11.11 shall survive the payment in full of the Borrowings and all other amounts
payable under the Loan Documents.
SECTION 12. AGREEMENT AMONG LENDERS.
12.1 ADMINISTRATIVE AGENT.
(a) Appointment of Administrative Agent. Each Lender hereby appoints
Mid River LLC (and Mid River LLC hereby accepts such appointment) as its
nominee and agent, in its name and on its behalf: (i) to act as nominee
for and on behalf of such Lender in and under all Loan Documents; (ii) to
arrange the means whereby the funds of Lenders are to be made available to
Borrower under the Loan Documents; (iii) to take such action as may be
requested by any Lender under the Loan Documents (when such Lender is
entitled to make such request under the Loan Documents and after such
requesting Lender has obtained the concurrence of such other Lenders as
may be required under the Loan Documents); (iv) to receive all documents
and items to be furnished to Lenders under the Loan Documents; (v) to
timely distribute, and Administrative Agent agrees to so distribute, to
each Lender all material information, requests, documents, and items
received from Borrower under the Loan Documents; (vi) to promptly
distribute to each Lender its ratable part of each payment or prepayment
(whether voluntary, as proceeds of Collateral upon or after foreclosure,
as proceeds of insurance thereon, or otherwise) in accordance with the
terms of the Loan Documents; and (vii) to deliver to the appropriate
Persons requests, demands, approvals, and consents received from Lenders;
provided, however, Administrative Agent shall not be required to take any
action which exposes Administrative Agent to personal liability or which
is contrary to the Loan Documents or applicable Law.
(b) Resignation or Removal of Administrative Agent. Successor
Administrative Agent. Administrative Agent may resign at any time with or
without cause as Administrative Agent under the Loan Documents by giving
written notice thereof to Lenders and may be removed as Administrative
Agent under the Loan Documents at any time with cause by Required Lenders.
Should the initial or any successor Administrative Agent ever cease to be
a party hereto or should the initial or any successor Administrative Agent
ever resign or be removed as Administrative Agent, then Required Lenders
shall elect the successor Administrative Agent from among the Lenders
(other than the resigning Administrative Agent). If no successor
Administrative Agent shall have been so appointed by Required Lenders,
within 30 days after the retiring Administrative Agent's giving of notice
of resignation or Required Lenders' removal of the retiring Administrative
Agent, then the retiring Administrative Agent may, on behalf of Lenders,
appoint a successor Administrative Agent. Upon the acceptance of any
appointment as Administrative Agent under the Loan Documents by a
successor Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all the Rights of the retiring
Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations of Administrative Agent under
the Loan Documents, and each Lender shall execute such documents as any
Lender may reasonably request to reflect such change in and under the Loan
Documents. After any retiring Administrative Agent's resignation
TERM LOAN AND SECURITY AGREEMENT
56
or removal as Administrative Agent under the Loan Documents, the
provisions of this SECTION 12 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under
the Loan Documents.
(c) Administrative Agent as a Lender. Non-Fiduciary. Administrative
Agent, in its capacity as a Lender, shall have the same Rights under the
Loan Documents as any other Lender and may exercise the same as though it
were not acting as Administrative Agent; the term "Lender" shall, unless
the context otherwise indicates, include Administrative Agent; and any
resignation, or removal of Administrative Agent hereunder shall not impair
or otherwise affect any Rights which it has or may have in its capacity as
an individual Lender. Each Lender and Borrower agree that Administrative
Agent is not a fiduciary for Lenders or for Borrower but simply is acting
in the capacity described herein to alleviate administrative burdens for
both Borrower and Lenders, that Administrative Agent has no duties or
responsibilities to Lenders or Borrower except those expressly set forth
herein, and that Administrative Agent in its capacity as a Lender has all
Rights of any other Lender.
(d) Other Activities of Administrative Agent. Administrative Agent
and its Affiliates may now or hereafter be engaged in one or more loan,
letter of credit, leasing, or other financing transactions with Borrower,
act as trustee or depositary for Borrower, or otherwise be engaged in
other transactions with Borrower (collectively, the "OTHER ACTIVITIES")
not the subject of the Loan Documents. Without limiting the Rights of
Lenders specifically set forth in the Loan Documents, Administrative Agent
and its Affiliates shall not be responsible to account to Lenders for such
other activities, and no Lender shall have any interest in any other
activities, any present or future guaranties by or for the account of
Borrower which are not contemplated or included in the Loan Documents, any
present or future offset exercised by Administrative Agent and its
Affiliates in respect of such other activities, any present or future
property taken as security for any such other activities, or any property
now or hereafter in the possession or control of Administrative Agent or
its Affiliates which may be or become security for the obligations of
Borrower arising under the Loan Documents by reason of the general
description of indebtedness secured or of property contained in any other
agreements, documents, or instruments related to any such other
activities; provided that, if any payments in respect of such guaranties
or such property or the proceeds thereof shall be applied to reduction of
the Obligation, then each Lender shall be entitled to share in such
application ratably.
12.2 EXPENSES. Upon demand by Administrative Agent, each Lender shall pay
its ratable portion (determined as of the date reimbursement is sought
hereunder) of any reasonable expenses (including, without limitation, court
costs, reasonable attorneys' fees, and other costs of collection) incurred by
Administrative Agent in connection with any of the Loan Documents if and to the
extent such Administrative Agent does not receive reimbursement therefor from
other sources within 60 days after incurred; provided that, each Lender shall be
entitled to receive its ratable portion of any reimbursement for such expenses,
or part thereof, which Administrative Agent subsequently receives from such
other sources.
12.3 PROPORTIONATE ABSORPTION OF LOSSES. Except as otherwise provided in
the Loan Documents, nothing in the Loan Documents shall be deemed to give any
Lender any advantage over any other Lender insofar as the Obligation is
concerned, or to relieve any Lender from absorbing its ratable portion of any
losses sustained with respect to the Obligation (except to the extent such
losses result from unilateral actions or inactions of any Lender that are not
made in accordance with the terms and provisions of the Loan Documents).
TERM LOAN AND SECURITY AGREEMENT
57
12.4 DELEGATION OF DUTIES; RELIANCE. Administrative Agent may perform any
of its duties or exercise any of its Rights under the Loan Documents by or
through its Representatives. Administrative Agent and its Representatives shall
(a) be entitled to rely upon (and shall be protected in relying upon) any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telecopy, telegram, telex or teletype message, statement, order, or other
documents or conversation believed by it or them to be genuine and correct and
to have been signed or made by the proper Person and, with respect to legal
matters, upon opinion of counsel selected by Administrative Agent, (b) be
entitled to deem and treat each Lender as the owner and Lender of the Obligation
owed to such Lender for all purposes until, subject to SECTION 13.12, written
notice of the assignment or transfer thereof shall have been given to and
received by Administrative Agent (and any request, authorization, consent, or
approval of any Lender shall be conclusive and binding on each subsequent
Lender, assignee, or transferee of the Obligation owed to such Lender or portion
thereof until such notice is given and received), (c) not be deemed to have
notice of the occurrence of an Event of Default or Potential Default unless a
responsible officer of Administrative Agent, who handles matters associated with
the Loan Documents and transactions thereunder, has received written notice from
a Lender or Borrower and stating that such notice is a "Notice of Default," and
(d) be entitled to consult with legal counsel (including counsel for Borrower),
independent accountants, and other experts selected by Administrative Agent and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts.
12.5 LIMITATION OF LIABILITY.
(a) General. Neither Administrative Agent nor any of its
Representatives shall be liable for any action taken or omitted to be
taken by it or them under the Loan Documents in good faith and reasonably
believed by it or them to be within the discretion or power conferred upon
it or them by the Loan Documents or be responsible for the consequences of
any error of judgment, except for fraud, gross negligence, or willful
misconduct; and neither Administrative Agent nor any of its
Representatives has a fiduciary relationship with any Lender by virtue of
the Loan Documents (provided that, nothing herein shall negate the
obligation of Administrative Agent to account for funds received by it for
the account of any Lender).
(b) Non-Discretionary Actions, Indemnification. Unless indemnified
to its satisfaction against loss, cost, liability, and expense,
Administrative Agent shall not be compelled to do any act under the Loan
Documents or to take any action toward the execution or enforcement of the
powers thereby created or to prosecute or defend any suit in respect of
the Loan Documents. If Administrative Agent requests instructions from
Lenders or Required Lenders, as the case may be, with respect to any act
or action (including, but not limited to, any failure to act) in
connection with any Loan Document, Administrative Agent shall be entitled
(but shall not be required) to refrain (without incurring any liability to
any Person by so refraining) from such act or action unless and until it
has received such instructions. Except where action of Required Lenders or
all Lenders is required in the Loan Documents, Administrative Agent may
act hereunder in its own discretion without requesting instructions. In no
event, however, shall Administrative Agent or any of its Representatives
be required to take any action which it or they determine could incur for
it or them criminal or onerous civil liability. Without limiting the
generality of the foregoing, no Lender shall have any right of action
against Administrative Agent as a result of Administrative Agent's acting
or refraining from acting hereunder in accordance with the instructions of
Required Lenders (or all Lenders if required in the Loan Documents).
(c) Independent Credit Decision. Administrative Agent shall not be
responsible in any manner to any Lender or any Participant for, and each
Lender represents and warrants that it has not relied upon Administrative
Agent in respect of, (i) the creditworthiness of any Borrower
TERM LOAN AND SECURITY AGREEMENT
58
and the risks involved to such Lender, (ii) the effectiveness,
enforceability, genuineness, validity, or the due execution of any Loan
Document, (iii) any representation, warranty, document, certificate,
report, or statement made therein or furnished thereunder or in connection
therewith, (iv) the existence, priority, or perfection of any Lien
hereafter granted or purported to be granted under any Loan Document, or
(v) observation of or compliance with any of the terms, covenants, or
conditions of any Loan Document on the part of any Borrower. Each Lender
agrees to indemnify Administrative Agent and its Representatives and hold
them harmless from and against (but limited to such Lender's Pro Rata Part
of) any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses, and reasonable
disbursements of any kind or nature whatsoever which may be imposed on,
asserted against, or incurred by them in any way relating to or arising
out of the Loan Documents or any action taken or omitted by them under the
Loan Documents (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE
OF ADMINISTRATIVE AGENT OR ITS REPRESENTATIVES), to the extent
Administrative Agent and its Representatives are not reimbursed for such
amounts by any Borrower (provided that, Administrative Agent and its
Representatives shall not have the Right to be indemnified hereunder for
its or their own fraud, gross negligence, or willful misconduct).
12.6 EVENT OF DEFAULT; COLLATERAL.
(a) Upon the occurrence and continuance of an Event of Default,
Lenders agree to promptly confer in order that Required Lenders or
Lenders, as the case may be, may agree upon a course of action for the
enforcement of the Rights of Lenders; and Administrative Agent shall be
entitled to refrain from taking any action (without incurring any
liability to any Person for so refraining) unless and until Administrative
Agent shall have received instructions from Required Lenders. All Rights
of action under the Loan Documents and all Rights to the Collateral, if
any, hereunder may be enforced by Administrative Agent and any suit or
proceeding instituted by Administrative Agent in furtherance of such
enforcement shall be brought in its name as Administrative Agent without
the necessity of joining as plaintiffs or defendants any Lender, and the
recovery of any judgment shall be for the benefit of Lenders subject to
the expenses of Administrative Agent. In actions with respect to any
property of the Loan Parties, Administrative Agent is acting for the
ratable benefit of each Lender. Any and all agreements to subordinate
(whether made heretofore or hereafter) other indebtedness or obligations
of the Loan Parties to the Obligation shall be construed as being for the
ratable benefit of each Lender.
(b) Each Lender authorizes and directs Administrative Agent to enter
into the Collateral Documents for the benefit of the Lenders. Except to
the extent unanimity or a supermajority is required hereunder, each Lender
agrees that any action taken by the Required Lenders in accordance with
the provisions of the Loan Documents, and the exercise by the Required
Lenders of the powers set forth herein or therein, together with such
other powers as are reasonably incidental thereto, shall be authorized and
binding upon all of the Lenders.
(c) Administrative Agent is hereby authorized on behalf of all of
the Lenders, without the necessity of any notice to or further consent
from any Lender, from time to time to take any action with respect to any
Collateral or Collateral Documents which may be necessary to perfect and
maintain perfected the Liens upon the Collateral granted pursuant to the
Collateral Documents.
(d) Administrative Agent shall have no obligation whatsoever to any
Lender or to any other Person to assure that the Collateral exists or is
owned by any Borrower or is cared for, protected, or insured or has been
encumbered or that the Liens granted to Administrative Agent herein or
pursuant hereto have been properly or sufficiently or lawfully created,
perfected,
TERM LOAN AND SECURITY AGREEMENT
59
protected, or enforced, or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure, or fidelity, or to continue exercising, any of the Rights
granted or available to Administrative Agent in this SECTION 12.6 or in
any of the Collateral Documents; it being understood and agreed that in
respect of the Collateral, or any act, omission, or event related thereto,
Administrative Agent may act in any manner it may deem appropriate, in its
sole discretion, given Administrative Agent's own interest in the
Collateral as one of the Lenders and that Administrative Agent shall have
no duty or liability whatsoever to any Lender, other than to act without
gross negligence or willful misconduct.
(e) Lenders hereby irrevocably authorize Administrative Agent, at
its option and in its discretion, to release any Lien granted to or held
by Administrative Agent upon any Collateral: (i) upon payment and
satisfaction of the Obligation; (ii) constituting property in which no
Borrower or Parent owned an interest at the time the Lien was granted or
at any time thereafter; (iii) upon the sale, transfer, or disposition of
Collateral which is expressly permitted pursuant to the Loan Documents; or
(iv) if approved, authorized, or ratified in writing by all necessary
Lenders. Upon request by Administrative Agent at any time, Lenders will
confirm in writing Administrative Agent's authority to release particular
types or items of Collateral pursuant to this SECTION 12.6.
(f) In furtherance of the authorizations set forth in this SECTION
12.6, each Lender hereby irrevocably appoints Administrative Agent its
attorney-in-fact, with full power of substitution, for and on behalf of
and in the name of each such Lender, (i) to enter into Collateral
Documents (including, without limitation, any appointments of substitute
trustees under any Collateral Document), (ii) to take action with respect
to the Collateral and Collateral Documents to perfect, maintain, and
preserve Lender's Liens, and (iii) to execute instruments of release or to
take other action necessary to release Liens upon any Collateral to the
extent authorized in PARAGRAPH (e) hereof. This power of attorney shall be
liberally, not restrictively, construed so as to give the greatest
latitude to Administrative Agent's power, as attorney, relative to the
Collateral matters described in this SECTION 12.6. The powers and
authorities herein conferred on Administrative Agent may be exercised by
Administrative Agent through any Person who, at the time of the execution
of a particular instrument, is an officer of Administrative Agent. The
power of attorney conferred by this SECTION 12.6(f) is granted for
valuable consideration and is coupled with an interest and is irrevocable
so long as the Obligation, or any part thereof, shall remain unpaid or
Lenders are obligated to make any Borrowings under the Loan Documents.
12.7 LIMITATION OF LIABILITY. To the extent permitted by Law, (a)
Administrative Agent (acting in its agent capacity) shall not incur any
liability to any other Lender or Participant except for acts or omissions
resulting from its own fraud, gross negligence or willful misconduct, and (b)
neither Administrative Agent nor any Lender or Participant shall incur any
liability to any other Person for any act or omission of any other Lender or
Participant.
12.8 RELATIONSHIP OF LENDERS. Nothing herein shall be construed as
creating a partnership or joint venture among Administrative Agent and Lenders.
12.9 BENEFITS OF AGREEMENT. None of the provisions of this SECTION 12
shall inure to the benefit of any Borrower or any other Person other than
Lenders; consequently, no Borrower or any other Person shall be entitled to rely
upon, or to raise as a defense, in any manner whatsoever, the failure of
Administrative Agent or any Lender to comply with such provisions.
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60
12.10 OBLIGATIONS SEVERAL. The obligations of Lenders hereunder are
several, and each Lender hereunder shall not be responsible for the obligations
of the other Lenders hereunder, nor will the failure of one Lender to perform
any of its obligations hereunder relieve the other Lenders from the performance
of their respective obligations hereunder.
SECTION 13. MISCELLANEOUS.
13.1 HEADINGS. The headings, captions, and arrangements used in any of the
Loan Documents are, unless specified otherwise, for convenience only and shall
not be deemed to limit, amplify, or modify the terms of the Loan Documents, nor
affect the meaning thereof.
13.2 NONBUSINESS DAYS. In any case where any payment or action is due
under any Loan Document on a day which is not a Business Day, such payment or
action may be delayed until the next-succeeding Business Day, but interest and
fees shall continue to accrue in respect of any payment to which it is
applicable until such payment is in fact made.
13.3 COMMUNICATIONS. Unless otherwise specifically provided herein or any
other Loan Document, all notices shall be in writing addressed to the respective
party as set forth below and may be personally served, faxed, telecopied, or
sent by overnight courier service or United States mail and shall be deemed to
have been given: (a) if delivered in person, when delivered; (b) if delivered by
fax or telecopy, on the date of transmission if transmitted on a Business Day
before 4:00 p.m. New York time or, if not, on the next succeeding Business Day;
(c) if delivered by overnight courier, the next succeeding Business Day after
delivery to such courier properly addressed; or (d) if by U.S. Mail, four (4)
Business Days after depositing in the United States mail, with postage prepaid
and properly addressed.
If to Borrower:
Panaco, Inc.
c/o National Energy Group, Inc.
Attn: Philip D. Devlin
1400 One Energy Square
4925 Greenville Avenue
Dallas, TX 75206
Fax/Telecopy No.: (214) 692-3910
If to Administrative Agent:
Mid River LLC
767 Fifth Ave., 47th Floor
New York, NY 10153
Attn: Keith Schaitkin
Fax/Telecopy No.: (212) 488-1158
With a copy to:
Haynes and Boone, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Attn: Jeffrey L. Curtis
TERM LOAN AND SECURITY AGREEMENT
61
Fax/Telecopy No.: 214/200-0720
If to any Lender: Its address indicated on SCHEDULE 2.1, in an Assignment
and Acceptance Agreement, or in a notice to Administrative Agent and Borrowers
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this SECTION
13.3.
13.4 FORM AND NUMBER OF DOCUMENTS. Each agreement, document, instrument,
or other writing to be furnished under any provision of the Loan Documents must
be in form and substance and in such number of counterparts as may be reasonably
satisfactory to Administrative Agent and its counsel.
13.5 SURVIVAL. All covenants, agreements, undertakings, representations,
and warranties made in any of the Loan Documents shall survive all closings
under the Loan Documents and, except as otherwise indicated, shall not be
affected by any investigation made by any party. All Rights of, and provisions
relating to, reimbursement and indemnification of Administrative Agent or any
Lender (and any other provision of the Loan Documents that expressly provides
for such survival) shall survive termination of this Agreement, payment in full
of the Obligation, and any assignment by any Lender.
13.6 GOVERNING LAW. The Loan Documents have been entered into pursuant to
Section 5-1401 of the New York General Obligations Law and the substantive laws
of the State of New York (except to the extent the laws of another jurisdiction
govern the creation, perfection, validity, or enforcement of Liens under the
Collateral Documents), and the applicable federal laws of the United States of
America shall govern the validity, construction, enforcement and interpretation
of the Loan Documents.
13.7 INVALID PROVISIONS. If any provision in any Loan Document is held to
be illegal, invalid, or unenforceable, such provision shall be fully severable;
the appropriate Loan Document shall be construed and enforced as if such
provision had never comprised a part thereof; and the remaining provisions
thereof shall remain in full force and effect and shall not be affected by such
provision or by its severance therefrom. Administrative Agent, Lenders, and each
Borrower party to such Loan Document agree to negotiate, in good faith, the
terms of a replacement provision as similar to the severed provision as may be
possible and be legal, valid, and enforceable.
13.8 ENTIRETY. THE RIGHTS AND OBLIGATIONS OF EACH BORROWER, LENDERS, AND
ADMINISTRATIVE AGENT SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS,
DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN SUCH PARTIES
ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS AGREEMENT (AS AMENDED IN
WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY ANY
LOAN PARTY, ANY LENDER, AND/OR ADMINISTRATIVE AGENT (TOGETHER WITH ALL
COMMITMENT LETTERS AND FEE LETTERS AS THEY RELATE TO THE PAYMENT OF FEES AFTER
THE CLOSING DATE) REPRESENT THE FINAL AGREEMENT BETWEEN THE LOAN PARTIES,
LENDERS, AND ADMINISTRATIVE AGENT, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY SUCH PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH PARTIES.
13.9 JURISDICTION; VENUE; SERVICE OF PROCESS; JURY TRIAL. EACH PARTY
HERETO (INCLUDING EACH GUARANTOR BY EXECUTION OF A GUARANTY), IN EACH CASE FOR
ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY (A) IRREVOCABLY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE STATE (PURSUANT TO SECTION 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW) AND FEDERAL COURTS LOCATED IN THE BOROUGH OF
MANHATTAN IN THE STATE OF NEW YORK, AND AGREES AND CONSENTS THAT SERVICE OF
PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING
TERM LOAN AND SECURITY AGREEMENT
62
ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS AND THE OBLIGATION BY
SERVICE OF PROCESS AS PROVIDED BY NEW YORK LAW, (B) IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION
WITH THE LOAN DOCUMENTS AND THE OBLIGATION BROUGHT IN ANY SUCH COURT, (C)
IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM, (D) AGREES TO DESIGNATE AND MAINTAIN AN
AGENT FOR SERVICE OF PROCESS IN NEW YORK IN CONNECTION WITH ANY SUCH LITIGATION
AND TO DELIVER TO ADMINISTRATIVE AGENT EVIDENCE THEREOF, IF REQUESTED, (E)
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES THEREOF BY CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, AT ITS ADDRESS SET FORTH
HEREIN, (F) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY
HERETO ARISING OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE OBLIGATION
SHALL BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS, AND (G) IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY LOAN
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED thereby. The scope of each of the
foregoing waivers is intended to be all-encompassing of any and all disputes
that may be filed in any court and that relate to the subject matter of this
transaction, including, without limitation, contract claims, tort claims, breach
of duty claims, and all other common law and statutory claims. The Loan Parties
and each other party to the Loan Documents acknowledge that this waiver is a
material inducement to the agreement of each party hereto to enter into a
business relationship, that each has already relied on this waiver in entering
into the Loan Documents, and each will continue to rely on each of such waivers
in related future dealings. The Loan Parties and each other party to the Loan
Documents warrant and represent that they have reviewed these waivers with their
legal counsel, and that they knowingly and voluntarily agree to each such waiver
following consultation with legal counsel. THE WAIVERS IN THIS SECTION 13.9 ARE
IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, SUPPLEMENTS, AND
REPLACEMENTS TO OR OF THIS OR ANY OTHER LOAN DOCUMENT. In the event of
Litigation, this Agreement may be filed as a written consent to a trial by the
court.
13.10 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS.
(a) Except as otherwise specifically provided in this SECTION 13.10
or otherwise in the Loan Documents, (i) this Agreement may only be
amended, modified, or waived by an instrument in writing executed jointly
by Borrower and Required Lenders, and, in the case of any matter affecting
Administrative Agent (except removal of Administrative Agent as provided
in SECTION 13) by Administrative Agent, and may only be supplemented by
documents delivered or to be delivered in accordance with the express
terms hereof, and (ii) the other Loan Documents may only be the subject of
an amendment, modification, or waiver if Borrower and Required Lenders,
and, in the case of any matter affecting Administrative Agent (except as
set forth above), such Administrative Agent, have approved same.
(b) Any amendment to or consent or waiver under any Loan Document
which purports to accomplish any of the following must be approved by
Borrower and by each Lender adversely affected thereby, and, in the case
of any matter affecting Administrative Agent, by Administrative Agent: (i)
postpones or delays any date fixed by the Loan Documents for any payment
of all or any part of the Obligation payable to such Lender or
Administrative Agent; (ii) reduces the interest rate or decreases the
amount of any payment of principal, interest, fees, or other sums payable
to Administrative Agent or any such Lender hereunder (except such
reductions as are contemplated by this Agreement); (iii) changes the
definition of "REQUIRED
TERM LOAN AND SECURITY AGREEMENT
63
LENDERS" or this SECTION 13.10(b) or any other provisions of the Loan
Documents that require the unanimous consent of the Lenders; (iv) changes
the order of application of any payment or prepayment set forth in
SECTIONS 3.3 and 3.12 in any manner that adversely affects such Lender or
Administrative Agent; or (v) releases all or a substantial portion of the
Collateral. Without the consent of such Lender, no Lender's "COMMITMENT
PERCENTAGE" may be increased.
(c) Any conflict or ambiguity between the terms and provisions of
this Agreement and terms and provisions in any other Loan Document shall
be controlled by the terms and provisions herein.
(d) No course of dealing nor any failure or delay by Administrative
Agent, any Lender, or any of their respective Representatives with respect
to exercising any Right of Administrative Agent or any Lender hereunder
shall operate as a waiver thereof. A waiver must be in writing and signed
by Administrative Agent and requisite Lenders to be effective, and such
waiver will be effective only in the specific instance and for the
specific purpose for which it is given.
13.11 MULTIPLE COUNTERPARTS. The Loan Documents may be executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of any Loan Document, it shall not be necessary to produce or
account for more than one such counterpart. It is not necessary that each Lender
execute the same counterpart so long as identical counterparts are executed by
Borrower, each Lender, and each Co-Administrative Agent. This Agreement shall
become effective when counterparts hereof shall have been executed and delivered
to Administrative Agent by each Lender, Administrative Agent, and Borrower, or,
when Administrative Agent shall have received telecopied, telexed, or other
evidence satisfactory to it that such party has executed and is delivering to
Administrative Agent a counterpart hereof.
13.12 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns hereby, except that Borrower may not, assign or otherwise transfer
any of its Rights or obligations hereunder without the prior written
consent of each Lender. Nothing in this Agreement, expressed or implied,
shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby,
Participants to the extent provided in SECTION 13.12(d) and, to the extent
expressly contemplated hereby, the Affiliates of each of the
Administrative Agent and the Lenders) any legal or equitable Right,
remedy, or claim under or by reason of this Agreement.
(b) Any Lender may at any time assign to one or more Persons all or
a portion of its Rights and obligations under this Agreement (including
all or a portion of the Term Loan Principal Debt owing to it). The parties
to each assignment by a Lender shall execute and deliver to Administrative
Agent an Assignment and Assumption.
(c) Any Lender may at any time, without the consent of, or notice
to, Borrower or Administrative Agent, sell participations to any Person
(other than a natural person or Borrower or any of Borrowers' Affiliates
or Subsidiaries) (each, a "PARTICIPANT") in all or a portion of such
Lender's Rights and/or obligations under this Agreement (including all or
a portion of the Term Loan Principal Debt owing to it); provided that (i)
such Lender's obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, and (iii) Borrower,
Administrative Agent, and the other Lenders shall continue to deal solely
and directly with such Lender in connection
TERM LOAN AND SECURITY AGREEMENT
64
with such Lender's Rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole Right
to enforce this Agreement and to approve any amendment, modification, or
waiver of any provision of this Agreement; provided that such agreement or
instrument may provide that such Lender will not, without the consent of
the Participant, agree to any amendment, modification, or waiver with
respect to the following: extending the due date for payment of any amount
in respect of principal (other than mandatory prepayments), interest, or
fees due under the Loan Documents, reducing the interest rate or the
amount of principal or fees applicable to the Obligation (except such
reductions as are contemplated by the Loan Documents), or releasing all or
any substantial portion of the Collateral for the Obligation under the
Loan that affects such Participant. Borrower agrees that each Participant
shall be entitled to the benefits of SECTION 4 to the same extent as if it
were a Lender and had acquired its interest by assignment.
(d) Any Lender may at any time pledge or assign a security interest
in all or any portion of its Rights under this Agreement to secure
obligations of such Lender, including without limitation any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that
no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
13.13 UNIFORM COMMERCIAL CODE. References to the "UCC" or "Uniform
Commercial Code" in the Collateral Documents shall be to the Uniform Commercial
Code as in effect from time to time in the State of New York or, when the
context implies, the Uniform Commercial Code as in effect from time to time in
any other applicable jurisdiction. References to the provisions of the "UCC" or
"Uniform Commercial Code" in the Collateral Documents shall include all
successor provisions under any subsequent version or amendment to any Article of
the Uniform Commercial Code.
13.14 DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. The obligations of Borrower under the Loan Documents shall remain
in full force and effect until payment in full of the Term Loan Principal Debt
and of all interest, fees, and other amounts of the Obligation then due and
owing, except that SECTIONS 4, 11, and 12, and any other provisions under the
Loan Documents expressly intended to survive by the terms hereof or by the terms
of the applicable Loan Documents, shall survive such termination. If at any time
any payment of the principal of or interest on any Note or any other amount
payable by any Borrower under any Loan Document is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy, or
reorganization of such Borrower or otherwise, the obligations of each Borrower
under the Loan Documents with respect to such payment shall be reinstated as
though such payment had been due but not made at such time.
[REMAINDER OF PAGE INTENTIONALLY BLANK;
SIGNATURE PAGE(s) TO FOLLOW.]
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65
13.15 UNIFORM COMMERCIAL CODE. References to the "UCC" or "Uniform
Commercial Code" in the Collateral Documents shall be to the Uniform Commercial
Code as in effect from time to time in the State of New York or, when the
context implies, the Uniform Commercial Code as in effect from time to time in
any other applicable jurisdiction. References to the provisions of the "UCC" or
"Uniform Commercial Code" in the Collateral Documents shall include all
successor provisions under any subsequent version or amendment to any Article of
the Uniform Commercial Code.
13.16 DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. The obligations of Borrower under the Loan Documents shall remain
in full force and effect until payment in full of the Term Loan Principal Debt
and of all interest, fees, and other amounts of the Obligation then due and
owing, except that SECTIONS 4, 11, and 12, and any other provisions under the
Loan Documents expressly intended to survive by the terms hereof or by the terms
of the applicable Loan Documents, shall survive such termination. If at any time
any payment of the principal of or interest on any Note or any other amount
payable by any Borrower under any Loan Document is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy, or
reorganization of such Borrower or otherwise, the obligations of each Borrower
under the Loan Documents with respect to such payment shall be reinstated as
though such payment had been due but not made at such time.
[REMAINDER OF PAGE INTENTIONALLY BLANK;
SIGNATURE PAGE(s) TO FOLLOW.]
TERM LOAN AND SECURITY AGREEMENT
1
PANACO, INC.,
Borrower
By:_______________________________
Bob G. Alexander,
President
MID RIVER LLC,
as Administrative Agent and Lender
By:_______________________________
Name:_________________________
Its:__________________________
SIGNATURE PAGE TO
TERM LOAN AND SECURITY AGREEMENT
2
EXHIBIT A
FORM OF TERM LOAN NOTE
__________, ___
FOR VALUE RECEIVED, the undersigned ("BORROWER"), hereby promise to pay to
the order of ______________________ ("LENDER"), at the offices of MID RIVER LLC,
a Delaware limited liability company, as Administrative Agent for Lender and
others described below, the aggregate Term Loan Principal Debt owed by Borrower
to Lender pursuant to the Loan Documents (together with accrued and unpaid
interest thereon) at such interest rates, on such dates, and in such amounts as
are specified in the Loan Agreement (hereinafter defined).
This note has been executed and delivered under, and is subject to the
terms of, the Term Loan and Security Agreement, dated as of November 16, 2004
(as amended, modified, supplemented, or restated from time to time, the "LOAN
AGREEMENT"), among Borrower, Administrative Agent, and Lender and other lenders
party thereto, and is one of the "Term Loan Notes" referred to therein.
Capitalized terms used herein shall have the meaning assigned to such terms in
the Loan Agreement unless otherwise defined herein. Reference is made to the
Loan Agreement for provisions affecting this note regarding applicable interest
rates, principal and interest payment dates, final maturity, voluntary and
mandatory prepayments, acceleration of maturity, exercise of Rights, payment of
reasonable attorneys' fees, court costs, and other costs of collection, certain
waivers by Borrower and others now or hereafter obligated for payment of any
sums due hereunder and security for the payment hereof. Without limiting the
immediately preceding sentence, reference is made to SECTION 3.8 of the Loan
Agreement for usury savings provisions.
THIS NOTE AND THE OTHER LOAN DOCUMENTS HAVE BEEN ENTERED INTO PURSUANT TO
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND THE SUBSTANTIVE LAWS
OF THE STATE OF NEW YORK, AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES
OF AMERICA SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT AND
INTERPRETATION HEREOF.
PANACO, INC.
By:_____________________________________
Name:________________________________
Title:_______________________________
EXHIBIT B
[Intentionally Left Blank]
EXHIBIT C
FORM OF ASSIGNMENT AND ASSUMPTION
This Assignment and Assumption (the "ASSIGNMENT AND ASSUMPTION") is
dated as of the Effective Date set forth below and is entered into by and
between [Insert name of Assignor] ("ASSIGNOR") and [Insert name of Assignee]
("ASSIGNEE"). Capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Loan Agreement identified below (as
amended, the "LOAN AGREEMENT"), receipt of a copy of which is hereby
acknowledged by Assignee. The Standard Terms and Conditions set forth in ANNEX 1
attached hereto are hereby agreed to and incorporated herein by reference and
made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, Assignor hereby irrevocably sells and
assigns to Assignee, and Assignee hereby irrevocably purchases and assumes from
Assignor, subject to and in accordance with the Standard Terms and Conditions
and the Loan Agreement, as of the Effective Date inserted by Administrative
Agent as contemplated below (i) all of Assignor's Rights and obligations in its
capacity as a Lender under the Loan Agreement and any other Loan Document to the
extent related to the amount and percentage interest identified below and (ii)
to the extent permitted to be assigned under applicable Law, all claims, suits,
causes of action, and any other Right of Assignor (in its capacity as a Lender)
against any Person, whether known or unknown, arising under or in connection
with the Loan Agreement, any other Loan Document or the transactions governed
thereby, or in any way based on or related to any of the foregoing, including
without limitation contract claims, tort claims, malpractice claims, statutory
claims, and all other claims at Law or in equity related to the Rights and
obligations sold and assigned pursuant to CLAUSE (i) above (the Rights and
obligations sold and assigned pursuant to CLAUSES (i) and (ii) above,
collectively, the "ASSIGNED INTEREST"). Such sale and assignment is without
recourse to Assignor and, except as expressly provided in this Assignment and
Assumption, without representation or warranty by Assignor.
1. Assignor: ______________________________
2. Assignee: ______________________________
[and is an Affiliate/Related Fund of _______
[Identify Lender](1)]
3. Borrower: Panaco, Inc.
4. Administrative Agent: Mid River, LLC, as administrative agent under
the Loan Agreement
5. Loan Agreement: Term Loan and Security Agreement dated as of
November __, 2004, among Borrower,
Administrative Agent, and the Lenders named
therein
- ------------
(1) Select as applicable.
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6. Assigned Interest:
Aggregate Amount of Term Loan Amount of Term Loan Principal Percentage Assigned of Term
Principal Debt for all Lenders* Debt Assigned* Loan Principal Debt
- ------------------------------- ----------------------------- ---------------------------
$ $ %
7. Trade Date: ______________(2)
Effective Date: _____________ ___, 20___
[TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF
RECORDATION OF TRANSFER IN THE REGISTER THEREFORE.]
The terms set forth in this Assignment and Assumption are hereby agreed to:
[INSERT ASSIGNOR'S SIGNATURE BLOCK]
By:_____________________________________
Name:________________________________
Title:_______________________________
[INSERT ASSIGNEE'S SIGNATURE BLOCK]
By:_____________________________________
Name:________________________________
Title:_______________________________
ACCEPTED:
MID RIVER LLC, as Administrative Agent
By:____________________________________
Name:_______________________________
Title:______________________________
- -------------------
* Amount to be adjusted by the counterparties to take into account any
payments or prepayments made between the Trade Date and the Effective
Date.
(2) To be completed if Assignor and Assignee intend that the minimum
assignment amount is to be determined as of the Trade Date.
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ANNEX 1
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
1. Representations and Warranties.
1.1 Assignor. Assignor (a) represents and warrants that (i) it is
the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien, encumbrance, or other adverse claim, and
(iii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect
to (i) any statements, warranties, or representations made in or in connection
with the Loan Agreement or any other Loan Document, (ii) the execution,
legality, validity, enforceability, genuineness, sufficiency, or value of the
Loan Documents or any Collateral thereunder, (iii) the financial condition of
Borrower, any Loan Party, any of their Subsidiaries or Affiliates, or any other
Person obligated in respect of any Loan Document, or (iv) the performance or
observance by Borrower, any Loan Party, any of their Subsidiaries or Affiliates,
or any other Person of any of their respective obligations under any Loan
Document.
1.2. Assignee. Assignee (a) represents and warrants that (i) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Loan Agreement, (ii) from
and after the Effective Date, it shall be bound by the provisions of the Loan
Agreement as a Lender thereunder and, to the extent of the Assigned Interest,
shall have the obligations of a Lender thereunder, (iii) it has received a copy
of the Loan Agreement, together with copies of the most recent Financial
Statements delivered pursuant to Section 8.1 thereof, as applicable, and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Assumption and to
purchase the Assigned Interest on the basis of which it has made such analysis
and decision independently and without reliance on Administrative Agent or any
other Lender, and (iv) if it is a Lender organized under the Laws of a
jurisdiction outside of the United States, attached to the Assignment and
Assumption is any documentation required to be delivered by it pursuant to the
terms of the Loan Agreement, duly completed and executed by Assignee; and (b)
agrees that (i) it will, independently and without reliance on Administrative
Agent, Assignor, or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Loan Documents, and
(ii) it will perform in accordance with their terms all of the obligations which
by the terms of the Loan Documents are required to be performed by it as a
Lender.
2. Payments. From and after the Effective Date, Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees, and other amounts) to Assignor for amounts which have
accrued to but excluding the Effective Date and to Assignee for amounts which
have accrued from and after the Effective Date.
3. General Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Assumption
by telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the Laws of the State of New York.
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EXHIBIT D
FORM OF LETTER IN LIEU
__________________________
__________________________
__________________________
Attn: Division Order Department
Re: Letter in Lieu of Transfer Order
Gentlemen:
PANACO, INC., as Mortgagor, has executed the mortgages and financing
statements described on EXHIBIT A attached hereto (collectively, the "MORTGAGE")
for the benefit of MID RIVER LLC, ("LENDER"), granting a mortgage on and
pledging those certain properties (the "PLEDGED PROPERTIES") described in the
Mortgage to secure certain obligations also described in the Mortgage. Enclosed
is a copy of the Mortgage covering the Pledged Properties.
EXHIBIT B attached hereto lists the properties which are subject to the
Mortgage for which you are accounting to Mortgagor and the decimal interest in
production heretofore paid to Mortgagor with respect to its interest in each
given property.
Pursuant to the assignment of production provision in the Mortgage,
Mortgagor transferred and assigned all of its interests in the Pledged
Properties to Lender. Therefore, Mortgagor hereby authorizes and instructs you
that all future payments attributable to the Pledged Properties, which would
otherwise be paid to Mortgagor, should be made to:
if by wire transfer:
Mid River LLC
For the Account of Panaco, Inc.
___________________________________________
___________________________________________
Account No.________________________________
if by check, check made payable to:
___________________________________________
___________________________________________
until notified in writing by Lender to discontinue such payments. Also,
Mortgagor hereby requests that you change your records to reflect that Lender is
entitled to the proceeds of production attributable to the Pledged Properties.
In consideration of your acceptance of this Letter-in-Lieu of Transfer
Order, Lender and Mortgagor agree as follows:
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1. Mortgagor has heretofore executed Transfer or Division Orders to you
covering each of the properties referred to in EXHIBIT B attached to this
letter. This letter is being executed by the undersigned in lieu of
execution of separate Transfer or Division Orders. With respect to
proceeds from the sale of oil, gas and other hydrocarbons as to which you
account hereunder, Lender agrees that it will be bound by the terms,
conditions, warranties and covenants of all such Transfer or Division
Orders heretofore executed by Mortgagor now in force, with the same effect
as though it had executed the originals thereof; PROVIDED, HOWEVER, the
aggregate liability of Lender with respect to any warranty,
representation, covenant or indemnification contained therein or in this
letter shall be limited to an amount equal to the amounts disbursed by you
to Lender hereunder.
2. Mortgagor hereby agrees that you are relieved of any responsibility
in connection with the application of the proceeds paid by you to Lender
as hereinabove specified and payment made by you to Lender shall be
binding and conclusive as between you and Mortgagor.
In the absence of a question about the enclosed schedule, you are
respectfully requested to make disbursement to Lender as instructed herein and
NOT TO SUSPEND OR DELAY any payments by virtue of the assignment of production
from Mortgagor to Lender. Should you require additional documentation prior to
implementing the manner of disbursement requested herein, notwithstanding the
warranties and indemnifications contained hereinabove, please suspend
disbursements to Mortgagor, pending execution of such additional documentation
as you may reasonably require.
In order that we may have a record evidencing your acceptance of this
Letter-in-Lieu of Transfer Order, we request that you execute one copy of this
letter in the space provided below and return the same to Lender in the enclosed
self-addressed envelope.
Very truly yours,
PANACO, INC., a Delaware corporation,
Mortgagor
By: _____________________________
Name:________________________
Title:_______________________
MID RIVER LLC, Lender
By: _____________________________
Name:________________________
Title:_______________________
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ACCEPTED this _____ day of ___________, 20___.
_______________________________________, Purchaser of Production
By: _____________________________
Name:________________________
Title:_______________________
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