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EXHIBIT 4.38
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OIL & GAS REVOLVING CREDIT
AND
TERM LOAN AGREEMENT
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GMAC COMMERCIAL CREDIT LLC
(AS A LENDER AND AS AGENT)
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WITH
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TRANSTEXAS GAS CORPORATION
(BORROWER)
AND
GALVESTON BAY PIPELINE COMPANY
AND
GALVESTON BAY PROCESSING CORPORATION
(GUARANTORS)
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as of March 15, 2000
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OIL & GAS REVOLVING CREDIT
AND TERM LOAN AGREEMENT
Oil & Gas Revolving Credit and Term Loan Agreement dated as of March
15, 2000 among TRANSTEXAS GAS CORPORATION, a corporation organized under the
laws of the State of Delaware ("Borrower"), the Guarantors (as hereafter
defined) which are now or which become a party hereto, the financial
institutions which are now or which become a party hereto (collectively, the
"Lenders" and individually a "Lender") and GMAC COMMERCIAL CREDIT LLC
("GMACCC"), a limited liability company organized under the laws of the State
of New York, as agent for the Lenders (GMACCC, in such capacity, the "Agent").
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower, Lenders and Agent hereby agree as follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement, the Note, or any
certificate, report or Ancillary Document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of
determining compliance with financial covenants in this Agreement, such
accounting terms shall be defined in accordance with GAAP applied in
preparation of the audited financial statements of Borrower for the fiscal year
ended January 31, 1999.
1.2. General Terms. For purposes of this Agreement the following terms
shall have the following meanings:
"Accounts" means "accounts," as that term is defined in
Article 9 of the Uniform Commercial Code as in effect in the State of New York,
together with the proceeds and products thereof.
"Adjusted Consolidated Net Income" of any Person for any
period means the net income (loss) of such Person and its consolidated
Subsidiaries for such period, determined in accordance with GAAP, excluding
(without duplication) (i) all extraordinary gains (but not losses), (ii) the
net income, if positive, of any other Person, other than a consolidated
Subsidiary, in which such Person or any of its consolidated Subsidiaries has an
interest, except to the extent of the amount of any dividends or distributions
actually paid in cash to such Person or a consolidated Subsidiary of such
Person during such period, (iii) the net income, if positive, of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition, and (iv) the net income, if positive, of any Subsidiary of
such Person to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute,
rule, or governmental regulation applicable to such Subsidiary.
"Adjusted Consolidated Tangible Assets" means (without
duplication), as of the date of determination, (A) the sum of (i) discounted
future net cash flows from proved oil and
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gas reserves of Borrower and its Subsidiaries, calculated in accordance with
SEC guidelines (before any state or federal income tax), as estimated in a
Proved Reserve Report as of a date no earlier than Borrower's most recent
fiscal year end (or, if such Proved Reserve Report is unavailable, or if the
date of determination is after the end of the first fiscal quarter of the most
recent fiscal year of Borrower, as estimated by Borrower engineers on the same
basis as of a date no earlier than the end of the most recent fiscal quarter,
which estimates shall be confirmed in writing by a report by nationally
recognized independent petroleum engineers in accordance with SEC guidelines in
the event of a Material Change), (ii) the Net Working Capital of Borrower on a
date no earlier than the date of Borrower's latest consolidated annual or
quarterly financial statements, and (iii) with respect to all other tangible
assets (which are deemed to include mineral lease-hold interests) of Borrower
and its Subsidiaries, the net book value of such other tangible assets on a
date no earlier than the date of Borrower's latest consolidated annual or
quarterly financial statements, minus (B) minority interests and, to the extent
not otherwise taken into account in determining Adjusted Consolidated Tangible
Assets, any gas balancing liabilities of Borrower and its Subsidiaries. In
addition to, but without duplication of the foregoing, for purposes of this
definition, "Adjusted Consolidated Tangible Assets" shall be calculated after
giving effect, on a pro forma basis, to (1) any Permitted Investment, on or
before the date of the transaction giving rise to the need to calculate
Adjusted Consolidated Tangible Assets (the "Assets Transaction Date"), in any
other Person that, as a result of such investment, becomes a Subsidiary of
Borrower, (2) the acquisition, on or before the Assets Transaction Date (by
merger, consolidation, or purchase of stock or assets), of any business or
assets, including, without limitation, Permitted Investments, and (3) any sales
or other dispositions of assets (other than sales of Hydrocarbons or other
mineral products in the ordinary course of business) occurring on or prior to
the Assets Transaction Date. For purposes of calculating the ratio of
Borrower's Adjusted Consolidated Tangible Assets to total consolidated Debt of
Borrower and its Subsidiaries, Debt of a Subsidiary that is not a wholly-owned
Subsidiary of Borrower (which Debt is non-recourse to Borrower or any of its
other Subsidiaries or any of their assets) shall be included only to the extent
of Borrower's pro rata ownership interest in such Subsidiary.
"Adjusted Net Assets" of a Guarantor means the lesser of (a)
the amount by which the Guarantor's property, at a fair valuation, exceeds the
sum of its debts (including unliquidated or contingent debts), (b) the amount
by which the present fair salable value of the Guarantor's assets exceeds the
amount that will be required to pay its probable liability on its existing
debts as they become absolute and matured, (c) the amount by which the
Guarantor's assets exceed the maximum amount that would constitute unreasonably
small capital for its business, or (d) the amount by which the Guarantor's
assets exceed the amount that such Guarantor should reasonably retain to pay
its debts (including unliquidated or contingent debts) as they mature.
"Advances" means and includes the Revolving Advances, Swingline
Loans and the Term Loan.
"Advance Rates" means the advance rates with respect to
Eligible Hydrocarbon Reserves set forth in the definition of Borrowing Base.
"Affiliate" means, with respect to any specified Person, (i)
any other Person directly or indirectly controlling or controlled by, or under
direct or indirect common control with, such specified Person, or (ii) any
director or controlling shareholder of such other Person or
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(iii) any officer of such specified Person or such other Person. For purposes
of this definition, the term "control" means (a) the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, or (b) without limiting the foregoing, the beneficial
ownership of 10% or more of the voting power of the voting common equity of
such Person (on a fully diluted basis) or of warrants or other rights to
acquire such equity (regardless of whether presently exercisable).
"Affiliate Transaction" means, with respect to any Person,
any transaction or series of related transactions with any Affiliate of such
Person (including, without limitation: (i) the sale, lease, transfer or other
disposition of properties, assets or securities to such Affiliate, (ii) the
purchase or lease of any property, assets or securities from such Affiliate
(iii) an Investment in such Affiliate and (iv) entering into or amending any
contract or agreement with or for the benefit of any such Affiliate.
"Agent" has the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Agent Reserve Update Report" has the meaning set forth in
Section 2.1 hereof.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the higher of (i) the Prime Rate in effect on such day and (ii) 1/2 of
1% plus the Federal Funds Rate in effect on such day.
"Ancillary Documents" means the Security Documents, the Notes
and any and all other agreements, instruments and documents, including, without
limitation, guaranties, pledges, powers of attorney, consents, and all other
writings heretofore, now or hereafter executed by Borrower or any Subsidiary
and delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
"Asset Sale" means any direct or indirect conveyance, sale,
transfer or other disposition, in one transaction or a series of related
transactions, of any of the properties, businesses or assets of Borrower or any
Subsidiary of Borrower, whether owned on the Closing Date or thereafter
acquired; provided, however, that "Asset Sale" shall not include (i) any
disposition of Inventory in the ordinary course of business or Receivables in
accordance with the Receivables Facility, (ii) any pledge or disposition of
assets (if such pledge or disposition would otherwise constitute an Asset Sale)
to the extent and only to the extent that it results in the creation of a
Permitted Lien (other than the creation of a Permitted Lien in connection with
a Drilling Production Payment or a Drilling Program, which in either case shall
be treated as an Asset Sale hereunder), (iii) any issuance or disposition of
securities that is made pursuant to and in accordance with the Plan of
Reorganization or a Plan Order, or (iv) the Davis Transactions.
"Attributable Debt" in respect of a Sale and Leaseback
Transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in such transaction, determined in accordance
with GAAP, or, in the event that such rate of interest is not reasonably
determinable, discounted at the rate of interest of 15%) of the obligation of
the lessee for net rental payments during the remaining term of the lease
included in such Sale and
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Leaseback Transaction (including any period for which such lease has been
extended or may, at the option of the lessor, be extended).
"Bank" shall mean The Bank of New York and any successor thereto.
"Board of Directors" means, with respect to any Person, the board
of directors of such Person or any committee of the board of directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Bondholder Lenders" shall have the meaning set forth in Section
8.1(k).
"Borrower" means TransTexas Gas Corporation, a Delaware
corporation, and all permitted successors and assigns.
"Borrower Entity(ies)" means, individually or collectively,
Borrower and each of its Subsidiaries.
"Borrower's Account" has the meaning set forth in Section 2.9.
"Borrowing Base" means, as of any date of determination, an
amount equal to (x) fifty percent (50%) of (i) the PV10 of Eligible Hydrocarbon
Reserves as per the most recent Proved Reserves Report, minus (ii) the then
outstanding balance of Production Payments relating to wells comprising part of
the most recent Proved Reserves Report or, if more recent, the latest Borrowing
Base Certificate minus (y) such reserves as Agent may deem proper and necessary
from time to time, in each case without duplication.
"Borrowing Base Certificate" means a certificate duly executed by
an authorized officer of Borrower appropriately completed and in substantially
the form of Exhibit 1.2(A).
"Business Day" means any day other than a day on which commercial
banks in New York are authorized or required by law to close.
"Capital Expenditures" of a Person means expenditures (whether
paid in cash or accrued as a liability) by such Person or any of its
Subsidiaries that, in conformity with GAAP, are or would be included in
"capital expenditures," "additions to property, plant, or equipment" or
comparable items in the consolidated financial statements of such Person
consistent with prior accounting practices.
"Capital Lease" as applied to any Person, means any lease of any
property (whether real, personal, or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capital Stock" means, with respect to any Person, any capital
stock of such Person and shares, interests, participations, or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into corporate stock), warrants
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or options to purchase any of the foregoing, including without limitation, each
class of common stock and preferred stock of such Person, if such Person is a
corporation, and each general or limited partnership interest or other equity
interest of such Person, if such Person is a partnership.
"Capitalized Lease Obligation" means obligations under a lease
that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Debt represented by such obligations
shall be the capitalized amount of such obligations, as determined in
accordance with GAAP.
"Cash Equivalents" means (a) Dollars, (b) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than one year
from the date of acquisition, (c) certificates of deposit with maturities of
one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding one year, and overnight bank deposits, in each case,
with any Eligible Institution, (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in
clauses (b) and (c) entered into with any Eligible Institution, (e) commercial
paper rated "P-1," "A-1" or the equivalent thereof by Moody's Investors
Service, Inc. or Standard & Poor's Ratings Group, respectively, and in each
case maturing within one year after the date of acquisition, (f) shares of
money market funds that invest solely in Dollars and securities of the types
described in clauses (a) through (e) above, (g) demand and time deposits and
certificates of deposit with any commercial bank organized in the United States
not meeting the qualifications specified in clause (c) above or an Eligible
Institution, provided, however, that such deposits and certificates support
bonds, letters of credit and other similar types of obligations incurred are in
the ordinary course of business, (h) deposits, including deposits denominated
in foreign currency, with any Eligible Institution; provided, however, that all
such deposits do not exceed $10 million in the aggregate at any one time, and
(i) demand or fully insured time deposits used in the ordinary course of
business with commercial banks insured by the Federal Deposit Insurance
Corporation.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Sections 9601 et
seq.
"Change of Control" means the occurrence of the following event:
during any period of three consecutive years or less beginning at or after
11:59 p.m., New York, New York time on the Closing Date, individuals who at the
beginning of such period constituted the Board of Directors of Borrower
(together with any new directors (a) whose election by such Board of Directors
during such period or whose nomination by such Board of Directors, for election
by the stockholders of Borrower during such period, was made or approved by a
vote of not less than 60% of the directors of Borrower then still in office who
were either directors at the beginning of such period or whose election or
nomination for election during such period was previously so approved, or (b)
in the case of the Class B Director, elected during such period by the holders
of the Class B Common Stock voting separately as a class in such election)
cease for any reason to constitute a majority of the Board of Directors of
Borrower then in office.
"Charges" shall mean all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, gross income,
gross receipts, sales, use, ad valorem, value added, transfer, franchise,
profits, inventory, capital stock, license,
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withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation and property taxes, custom duties, fees,
assessments, liens, claims and charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts, imposed
by any taxing or other authority, domestic or foreign (including, without
limitation, the Pension Benefit Guaranty Corporation or any environmental
agency or superfund), upon the Collateral, Borrower or any of its Affiliates.
"Class B Common Stock" means the Class B Common Stock, par value
$0.01 per share, of Borrower.
"Class B Director" means the Person elected to the Board of
Directors of Borrower by the holders of the Class B Common Stock voting
separately as a class in such election.
"Closing Date" means the date upon which the conditions precedent
set forth in Article VIII have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended from
time to time and the regulations promulgated thereunder.
"Collateral" means and includes all property and interests in
property of Borrower and its Subsidiaries, now owned or hereafter acquired,
upon which a Lien is created in favor of Agent, for its benefit and for the pro
rata benefit of the Lenders in accordance with the Security Documents.
"Commitment" of any Lender means its obligation to make Advances
in the amount set forth below such Lender's name on the signature page hereof,
as same may be adjusted upon any assignment by a Lender pursuant to Sections
17.3(b) and 17.16 hereof.
"Commitment Percentage" of any Lender means the quotient of such
Lender's Commitment divided by the aggregate Commitments, as same may be
adjusted upon any assignment by a Lender pursuant to Sections 17.3(b) and 17.16
hereof.
"Commitment Transfer Supplement" means a document in the form of
Exhibit 17.3 hereto, properly completed, by which the Purchasing Lender
purchases the interest of a Lender under this Agreement.
"Confirmation Order" means the order pursuant to Section 1129 of
the Bankruptcy Code confirming Borrower's Plan of Reorganization entered by the
court in the Borrower's case on February 7, 2000.
"Consents" means all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of any Governmental Body
and other third parties, domestic or foreign, necessary to carry on Borrower's
business, including, without limitation, any Consents required under all
applicable federal, state or other applicable law.
"Consolidated Coverage Ratio" means for any period, the ratio of
(i) the sum of Consolidated EBITDA of Borrower for such period, plus the net
proceeds received by Borrower
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and its consolidated Subsidiaries in respect of Indebtedness for borrowed money
(other than Indebtedness under this Agreement or the Receivables Facility )
incurred during such period, plus, without duplication, the net proceeds
received by Borrower and its consolidated Subsidiaries from asset sales (other
than sales of Inventory and Hydrocarbons in the ordinary course of business)
consummated during such period, to (ii) the sum of Consolidated Interest
Expense of Borrower for such period, plus Capital Expenditures of Borrower
during such period, plus required principal payments by Borrower and its
consolidated Subsidiaries on Indebtedness for borrowed money (other than
Indebtedness under this Agreement or the Receivables Facility) during such
period, plus cash dividends.
"Consolidated EBITDA" of any Person for any period, unless
otherwise defined herein, means (a) the Consolidated Net Income of such Person
for such period, plus (b) the sum, without duplication (and only to the extent
such amounts are deducted from net revenues in determining such Consolidated
Net Income), of (i) the provision for income taxes for such period, for such
Person and its consolidated Subsidiaries, (ii) depreciation, depletion, and
amortization of such Person and its consolidated Subsidiaries for such period,
and (iii) Consolidated Fixed Charges of such Person for such period, determined
in each case, on a consolidated basis for such Person and its consolidated
Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" on any date (the
"Transaction Date") means, with respect to any Person, the ratio, on a pro
forma basis, of (i) the aggregate amount of Consolidated EBITDA of such Person
(attributable to continuing operations and businesses and exclusive of the
amounts attributable to operations and businesses discontinued or disposed of,
on a pro forma basis as if such operations and businesses were discontinued or
disposed of on the first day of the Reference Period) for the Reference Period
to (ii) the aggregate Consolidated Fixed Charges of such Person (exclusive of
amounts attributable to discontinued operations and businesses on a pro forma
basis as if such operations and businesses were discontinued or disposed of on
the first day of the Reference Period, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such Person's Consolidated Fixed Charges subsequent
to the Transaction Date) during the Reference Period; provided, however, that
for purposes of such computation, in calculating Consolidated EBITDA and
Consolidated Fixed Charges, (a) the transaction giving rise to the need to
calculate the Consolidated Fixed Charge Coverage Ratio shall be assumed to have
occurred on the first day of the Reference Period (b) the incurrence of any
Debt or issuance of Disqualified Capital Stock during the Reference Period or
subsequent thereto and on or prior to the Transaction Date shall be assumed to
have occurred on the first day of such Reference Period, (c) Consolidated
Interest Expense attributable to any Debt (whether existing or being incurred)
bearing a floating interest rate shall be computed as if the rate in effect on
the Transaction Date had been the applicable rate for the entire period, unless
such Person or any of its Subsidiaries is a party to a Swap Obligation (that
remains in effect for the 12-month period after the Transaction Date) that has
the effect of fixing the interest rate on the date of computation, in which
case such rate (whether higher or lower) shall be used, and (d) if Borrower or
any Subsidiary of Borrower has repaid, repurchased, defeased or otherwise
discharged any Debt or Disqualified Capital Stock since the beginning of the
period measured by the four full fiscal quarters ended immediately before the
Transaction Date or if any Debt is to be repaid, repurchased, defeased or
otherwise discharged (in each case other than Debt incurred under any revolving
credit facility unless such Debt has been permanently repaid and has not been
replaced) on the Transaction Date, EBITDA and Consolidated Fixed Charges for
such
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period shall be calculated on a pro forma basis as if such discharge had
occurred on the first day of such period and as if Borrower or such Subsidiary
has not earned the interest income which has actually accrued during such
period in respect of cash or Cash Equivalents used to repay, repurchase,
defease or otherwise discharge such Debt.
"Consolidated Fixed Charges" of any Person for any period means
(without duplication) the sum of (i) Consolidated Interest Expense of such
Person for such period, (ii) dividend requirements of such Person and its
consolidated Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to Preferred
Stock paid, accrued, or scheduled to be paid or accrued during such period, in
each case to the extent attributable to such period and excluding items
eliminated in consolidation, (iii) one-third of the Consolidated Operating
Lease Obligations for such period, and (iv) fees paid, accrued, or scheduled to
be paid or accrued during such period by such Person and its Subsidiaries in
respect of performance bonds or other guarantees of payment. For purposes of
clause (ii) above, dividend requirements shall be increased to an amount
representing the pre-tax earnings that would be required to cover such dividend
requirements; accordingly, the increased amount shall be equal to a fraction,
the numerator of which is such dividend requirements and the denominator of
which is 1 minus the applicable actual combined effective Federal, state, local
and foreign income tax rate of such Person and its Subsidiaries (expressed as a
decimal), on a consolidated basis, for the fiscal year immediately preceding
the date of the transaction giving rise to the need to calculate Consolidated
Fixed Charges.
"Consolidated Interest Expense" of any Person means, for any
period, the aggregate interest (without duplication), whether expensed or
capitalized, paid, accrued, or scheduled to be paid or accrued during such
period in respect of all Debt of such Person and its consolidated Subsidiaries
(including (i) amortization of deferred financing costs and original issue
discount and non-cash interest payments or accruals, (ii) the interest portion
of all deferred payment obligations, calculated in accordance with the
effective interest method, and (iii) all commissions, discounts, other fees,
and charges owed with respect to letters of credit and banker's acceptance
financing and costs associated with Swap Obligations, in each case to the
extent attributable to such period determined on a consolidated basis in
accordance with GAAP). For purposes of this definition, (x) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined to be the rate of interest implicit in such Capitalized
Lease Obligation in accordance with GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and
(y) Consolidated Interest Expense attributable to any Debt represented by the
guarantee by such Person or a Subsidiary of such Person other than with respect
to Debt of such Person or a Subsidiary of such Person shall be deemed to be the
interest expense attributable to the item guaranteed.
"Consolidated Net Income" of any Person for any period means the
net income (loss) of such Person and its consolidated Subsidiaries for such
period, determined in accordance with GAAP, plus asset impairment charges, less
(without duplication) (i) all extraordinary, unusual and nonrecurring gains
(but not losses), (ii) the net income, if positive, of any other Person, other
than a consolidated Subsidiary, in which such Person or any of its consolidated
subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such Person or a
consolidated Subsidiary of such Person during such period, but not in excess of
such Person's pro rata share of such other Person's aggregate net
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income earned during such period or earned during the immediately preceding
period and not distributed during such period, (iii) the net income, if
positive, of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition, and (iv) the net income, if
positive, of any Subsidiary of such Person to the extent that the declaration
or payment of dividends or similar distributions is not at the time permitted
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule, or governmental regulation applicable
to such Subsidiary.
"Consolidated Operating Lease Obligations" means, for any period,
the aggregate amount of all obligations for rent paid or accrued under all
Operating Leases of Borrower and its Subsidiaries as lessee (net of sublease
income), all as determined on a consolidated basis in conformity with GAAP.
"Contract Rate" means, as applicable, the Revolving Interest Rate
and the Term Loan Rate.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Borrower, are treated as a single employer
under Section 414 of the Code.
"Coverage Shortfall" has the meaning set forth in Section 2.1
hereof.
"Davis Transactions" shall mean the transfer and conveyance by
Borrower of certain properties to Davis Petroleum Corp. and any related
transactions, all as approved by the Order of the Bankruptcy Court dated
November 30, 1999, in case No. 99-21550-C-11, in the United States Bankruptcy
Court for the Southern District of Texas, Corpus Christi Division
"Debt" means, with respect to any Person, without duplication
(i) all liabilities contingent or otherwise, of such Person (a) for borrowed
money (whether or not the recourse of the lender is to the whole of the assets
of such Person or only to a portion thereof), (b) evidenced by bonds, notes,
debentures, or similar instruments or letters of credit or representing the
balance deferred and unpaid of the purchase price of any property acquired by
such Person or services received by such Person (other than long-term service
or supply contracts which require minimum periodic payments), (c) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks or Swap
Obligations, (d) for the payment of money relating to a Capitalized Lease
Obligation, and (e) the Attributable Debt associated with any Sale and
Leaseback Transaction; (ii) reimbursement obligations of such Person with
respect to letters of credit; (iii) all liabilities of others of the kind
described in the preceding clause (i) or (ii) that such Person has guaranteed
or that is otherwise its legal liability (to the extent of such guaranty or
other legal liability) other than for endorsements, with recourse, of
negotiable instruments in the ordinary course of business; (iv) all obligations
secured by a Lien (other than Permitted Liens, except to the extent the
obligations secured by such Permitted Liens are otherwise included in clause
(i), (ii) or (iii) of this definition and are obligations of such Person) to
which the property or assets (including, without limitation, leasehold
interests and any other tangible or intangible property rights) of such Person
are subject, regardless of whether the obligations secured thereby shall have
been assumed by or shall otherwise be such Person's legal liability (but, if
such obligations are not assumed by such Person or are not otherwise such
Person's legal liability, the amount of such Debt shall be deemed to be limited
to the fair market value of such property or
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assets determined as of the end of the preceding fiscal quarter); and (v) any
and all deferrals, renewals, extensions, refinancings, and refundings (whether
direct or indirect) of, or amendments, modifications, or supplements to, any
liability of the kind described in any of the preceding clauses (i) through
(iv) regardless of whether between or among the same parties; provided,
however, that, notwithstanding the foregoing, "Debt" shall include obligations
related to Drilling Production Payments, whether denominated as
Dollar-Denominated Production Payments or Volumetric Production Payments, but
shall not include Dollar-Denominated Production Payments or Volumetric
Production Payments related to Drilling Programs.
"Dedication Percentage" means:
(a) fifty percent (50%) from 9:00 a.m. on March 1, 2000 until
9:00 a.m., Texas time, on September 1, 2000;
(b) sixty-two percent (62%) from 9:00 a.m., Texas time, on
September 1 until 9:00 a.m., Texas time, on March 1, 2001; and
(c) seventy percent (70%) from and after 9:00 a.m., Texas time,
on March 1, 2001.
"Default" means an event which, with the giving of notice or
passage of time or both, would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 3.1 hereof.
"Defaulting Lender" has the meaning set forth in Section 2.14(a)
hereof.
"Disqualified Capital Stock" means, with respect to any Person,
any Capital Stock of such Person or its Subsidiaries that, by its terms or by
the terms of any security into which it is convertible or exchangeable, is, or
upon the happening of an event or the passage of time would be, required to be
redeemed or repurchased by such Person or its Subsidiaries, including at the
option of the holder, in whole or in part, or has, or upon the happening of an
event or passage of time would have, a redemption or similar payment due, on or
prior to the maturity date of the Indenture Notes.
"Documents" means, collectively, this Agreement and the Ancillary
Documents.
"Dollars" and the sign "$" means lawful money of the United
States of America.
"Dollar-Denominated Production Payments" means production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.
"Drilling Production Payment" means a Dollar-Denominated
Production Payment or a Volumetric Production Payment conveyed to a third party
in accordance with the provisions of Sections 6.2 and 6.3.
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"Drilling Program" means any current or future arrangement
between Borrower or any Subsidiary of Borrower and another Person pursuant to
which (i) such Person agrees, or has, prior to the Closing Date, agreed, to
drill, or perform operations to enhance recovery from, a well or wells on
mineral interests, owned by Borrower or such Subsidiary and (ii) Borrower or
such Subsidiary agrees, or has, prior to the Closing Date, agreed, to convey or
assign to such Person an interest in such well or wells in accordance with
clause (l)(1) of the definition of "Permitted Liens."
"Effective Date" means the effective date of the Final Order
approving the Plan of Reorganization.
"Eligible Hydrocarbon Reserves" means Hydrocarbon Reserves of
Borrower: (a) in which Borrower has defensible and indefeasible title and as to
which Agent has a first priority perfected lien and security interest (subject
only to Permitted Prior Liens described in clauses (a), (g) and (h) of the
definition of Permitted Prior Liens), and as to which only Permitted Liens
exist, and (b) which are set forth in the most recent Proved Reserves Report
delivered to Agent or such other reserve report prepared by an independent
petroleum reserve engineer acceptable to Agent and as adjusted in the most
recent Borrowing Base Certificate.
"Eligible Institution" means a commercial banking institution
that has combined capital and surplus of not less than $500 million and that is
rated "A" (or higher) according to Moody's Investors Service, Inc. or Standard
& Poor's Ratings Group at the time as of which any investment or rollover
therein is made.
"Environmental Complaint" has the meaning set forth in Section
5.9(c) hereof.
"Environmental Laws" means, if and to the extent applicable under
the circumstances at the time in question, all federal, state and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" means and includes, as to any Person, all of such
Person's now owned or hereafter acquired Vehicles, drilling rigs, workover
rigs, fracture stimulation equipment, well site compressors, rolling stock and
related equipment and other assets accounted for as equipment by such Person on
its financial statements, all proceeds thereof (from insurance or otherwise),
and all documents of title, books, records, ledger cards, files,
correspondence, and computer files, tapes, disks and related data processing
software that at any time evidence or contain information relating to the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time and the rules and regulations promulgated
thereunder.
"ERISA Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA, maintained for employees of Borrower or any member of
the Controlled Group
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or any such ERISA Plan to which Borrower or any member of the Controlled Group
is required to contribute on behalf of any of its employees.
"Event of Default" means the occurrence and continuance of any of
the events set forth in Article X hereof.
"Excess Cash Flow" means with respect to any period, the sum of
(i) Consolidated Net Income of Borrower and its consolidated Subsidiaries, plus
(ii) all depletion, depreciation, amortization and non cash dividends of
Borrower and its consolidated Subsidiaries minus (iii) principal payments of
any term loan debt (including (x) Production Payments during such period and
(y) mandatory repayments of Revolving Advances resulting from a Coverage
Shortfall during such period which amounts could not be reborrowed by Borrower
during such Period) for such period minus (iv) Capital Expenditures of Borrower
and its consolidated subsidiaries for such period (excluding the financed
portions thereof).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Assets" means assets acquired by Borrower or any
Subsidiary of Borrower in exchange for assets of Borrower or such Subsidiary,
respectively, in connection with an Asset Sale, which acquired assets include
proved reserves with a value that, together with the cash or Cash Equivalents
received therefor by Borrower or any of its Subsidiaries, is equal to or
greater than the value of the proved reserves included in the assets disposed
of by Borrower or such Subsidiary in connection with such Asset Sale; provided,
however, that during any fiscal year Borrower or any of its Subsidiaries can
collectively acquire assets (other than proved reserves, cash or Cash
Equivalents) with a fair market value of up to $20 million in exchange for
assets of Borrower or such Subsidiaries that include proved reserves, and such
assets acquired by Borrower or such Subsidiaries shall constitute "Exchange
Assets" hereunder.
"Existing DIP Facility" has the meaning set forth in Section
2.11(a) of this Agreement.
"Existing Agreements" means the Services Agreement.
"Federal Funds Rate" means, for any day, the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of quotations for such day on such
transactions received by the Bank from three Federal funds brokers of
recognized standing selected by the Bank.
"Final Order" shall mean an order of the Bankruptcy Court that is
in effect and is not stayed, and as to which the time to appeal, petition for
certiorari, or move for reargument or rehearing has expired and as to which no
appeal, petition for certiorari, or other proceedings for reargument or
rehearing shall then be pending or as to which any right to appeal, petition
for certiorari, reargue, or rehear shall have been waived in writing in form
and substance satisfactory to the Agent, or in the event that an appeal, writ
of certiorari, or reargument or rehearing thereof
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has been sought, such order of the Bankruptcy Court shall have been affirmed by
the highest court to which such order was appealed, or certiorari, reargument
or rehearing has been denied, and the time to take any further appeal, petition
for certiorari or move for reargument or rehearing shall have expired.
"First Lien Debt" means any Debt or other obligation secured by a
Lien described in one or more of clauses (a) through (o) of this definition,
including, in each case, any refinancings thereof:
(a) pledges of assets or deposits of cash or Cash
Equivalents to secure (1) the performance of bids, trade contracts
(other than borrowed money), leases, statutory obligations, surety
bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business (or to secure
reimbursement obligations or letters of credit in support of such
bonds) in an aggregate amount not in excess of 5% of the SEC PV10
indicated on Borrower's most recent Reserve Report at the time such
pledges or deposits are made, (2) appeal or supercedes bonds (or to
secure reimbursement obligations or letters of credit in support of
such bonds) in an amount not to exceed $10 million at any one time
outstanding, or (3) pledges or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment
insurance, and other types of social security legislation, property
insurance and liability insurance;
(b) Liens encumbering customary initial deposits and
margin deposits of cash or Cash Equivalents securing Swap Obligations
or Permitted Hedging Transactions and Liens encumbering contract
rights under Permitted Hedging Transactions;
(c) Liens granted on Equipment to the extent granted to
secure Debt incurred pursuant to Section 6.3 hereof;
(d) Liens granted in connection with the Presale of Gas,
provided, however, that all of the proceeds from such Presale of Gas
shall be applied to repay the outstanding Obligations;
(e) Liens created on or Production Payments granted with
respect to undivided interests in, acreage drilled or to be drilled
pursuant to Drilling Programs, on Hydrocarbons produced therefrom and
on the proceeds of such Hydrocarbons to secure or to provide provision
for payment of the Borrower's obligations under such Drilling
Programs, provided, however, that (1) the number of wells included in
such program commenced in any fiscal year does not exceed 30 per
fiscal year (plus the number of wells included in programs commenced
in prior years but not yet completed), (2) such obligations are
limited to a percentage of production from such wells, (3) such Liens
survive only until the Person to whom such Lien was granted has
received production with a value equal to the costs, expenses and fees
related to property and services provided or paid for by such Person
plus an agreed-upon interest component, and (4) such Liens secure
obligations that are nonrecourse to each of Borrower or its
Subsidiaries;
(f) any extension, renewal, or replacement of Liens
created or existing pursuant to any of clauses (a) through (e) or (g)
through (i) of this definition, provided,
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however, that such Liens would have otherwise been permitted under
such clauses, and provided further, that the Liens permitted by this
clause (i) do not secure any additional Debt or encumber any
additional property;
(g) Liens constituting or securing (1) Royalty Payment
Obligations referred to in clause (iii) of the definition of such term
and (2) Drilling Production Payments or;
(h) Liens on the proceeds of any property securing First
Lien Debt or on deposit accounts containing only such proceeds and
which at no time contains or contained proceeds of Receivables;
(i) Liens (including extensions and renewals thereof) on
real or personal property, acquired after the Closing Date ("New
Property"); provided, however, that (1) such Lien is created solely
for the purpose of securing Debt incurred to finance the cost
(including the cost of improvements or construction) of New Property
subject thereto and such Lien is created prior to or within six months
after the later of the acquisition, the completion of construction, or
the commencement of full operation of such New Property, (2) the
principal amount of the Debt secured by such Lien does not exceed 100%
of such cost including costs and fees related to the financing
thereof, and (3) any such Lien shall not extend to or cover any
property or assets other than such item of New Property, any
improvements on such New Property and any throughput, capacity or
similar agreements related to the operation of such New Property.
"GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time.
"Galveston Bay Pipeline" means Galveston Bay Pipeline Company, a
subsidiary of Borrower.
"Galveston Bay Processing" means Galveston Bay Processing
Corporation, a subsidiary of Borrower.
"GB Facility Asset Sale" means:
(a) With respect to Galveston Bay Pipeline, the sale of
all or substantially all of the assets (but which assets shall be
exclusive of Inventory and Receivables) of Galveston Bay Pipeline
other than a Sale and Leaseback Transaction resulting in a Capital
Lease which constitutes, as to Galveston Bay Pipeline, a GB Financing
Document; and
(b) With respect to Galveston Bay Processing, the sale
of all or substantially all of the assets (but which assets shall be
exclusive of Inventory and Receivables) of Galveston Bay Processing
other than a Sale and Leaseback Transaction resulting in a Capital
Lease which constitutes, as to Galveston Bay Processing, a GB
Financing Document.
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"GB Facility Financing" means:
(a) With respect to Galveston Bay Pipeline, (i) the
incurrence of Debt by, including the renewal or extension of Debt
previously incurred by, Galveston Bay Pipeline that is secured by a
mortgage or deed of trust constituting, with respect to Galveston Bay
Pipeline, a GB Financing Document, (ii) a Sale and Leaseback
Transaction resulting in a Capital Lease which constitutes, as to
Galveston Bay Pipeline, a GB Financing Document; and
(b) With respect to Galveston Bay Processing, (i) the
incurrence of Debt by, including the renewal or extension of Debt
previously incurred by, Galveston Bay Processing that is secured by a
mortgage or deed of trust constituting, with respect to Galveston Bay
Processing, a GB Financing Document, (ii) a Sale and Leaseback
Transaction resulting in a Capital Lease which constitutes, as to
Galveston Bay Pipeline, a GB Financing Document.
"GB Financing Beneficiary" means, with respect to a GB Financing
Documents, the mortgagee, beneficiary, secured party or lessor
thereunder, as the case may be.
"GB Financing Document" means:
(a) With respect to Galveston Bay Pipeline, (i) a
mortgage or deed of trust pursuant to which Galveston Bay Pipeline
encumbers all or substantially all of its rights, titles and interests
in and to all or substantially all of the GB Pipeline Facility for the
purpose of securing Debt of Galveston Bay Processing, or (ii) a
Capital Lease to which Galveston Bay Pipeline is party as lessee
executed by Galveston Bay Pipeline in connection with the closing of a
Sale and Leaseback transaction pursuant to which all or substantially
all of Galveston Bay Pipeline's rights, titles and interests in and to
all or substantially all of the GB Pipeline Facility are conveyed and
concurrently leased back by Galveston Bay Pipeline; and
(b) With respect to Galveston Bay Processing, (i) a
mortgage or deed of trust pursuant to which Galveston Bay Processing
encumbers all or substantially all of its rights, titles and interests
in and to all or substantially all of the GB Processing Facility for
the purpose of securing Debt of Galveston Bay Processing, or (ii) a
Capital Lease to which Galveston Bay Processing is party as lessee
executed by Galveston Bay Processing in connection with the closing of
a Sale and Leaseback transaction pursuant to which all or
substantially all of Galveston Bay Processing's rights, titles and
interests in and to all or substantially all of the GB Processing
Facility are conveyed and concurrently leased back by Galveston Bay
Processing.
"GB Nondisturbance and Attornment Agreement" means a
nondisturbance and attornment agreement in recordable form, duly executed and
acknowledged by the appropriate GB financing Beneficiary for the benefit of
Borrower and of Agent, relative to GB/TransTexas Pipeline Agreement or a
GB/TransTexas Processing Agreement, as the case may be, and to such appropriate
GB Financing Beneficiary's GB Financing Document, and containing provisions,
with respect to each GB/TransTexas Pipeline Agreement or GB/TransTexas
Processing Agreement in question, comparable in substance to the provisions
contained in the Jefferies Nondisturbance and Attornment Agreement.
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"GB Pipeline Facility" means the dual 16 inch O.D. (gas) and 8
inch O.D. (oil) transmission pipelines, co-owned, as of the date of this
Agreement, by Galveston Bay Pipeline and Davis Petroleum Pipeline L.L.C., that
extend from Lot 12, Block 139 of the San Leon Townsite, Amos Edwards League
Survey, Abstract 10, Galveston County, Texas, to the Eagle Point Platform
(co-owned, as of the date of this Agreement, by Borrower and Davis Petroleum
Corp.) in State Tract 331, Galveston Bay, Texas, including the real property,
interests in real property, and the personal property, plant and equipment
associated with such pipelines.
"GB Processing Facility" means the property, plant and equipment
comprising the hydrocarbon processing facility owned and operated by Galveston
Bay Processing at Winnie, Texas (including the real property and interests in
real property, situated in Winnie, Jefferson County, Texas, associated with
such facility).
"GB/TransTexas Processing Agreement" means each of (a) the
Amended Natural Gas Treating and Condensate Handling Agreement, dated March 16,
2000, between Borrower and Galveston Bay Processing, as amended, and (b) each
other agreement in effect at the time in question between Borrower and
Galveston Bay Processing relating to the processing of Hydrocarbons by
Galveston Bay Processing at the GB Processing Facility.
"GB/TransTexas Pipeline Agreement" means each of (a) the Amended
Transportation Agreement dated as of March 16, 2000, between Borrower and
Galveston Bay Pipeline, as amended, and (b) each other agreement in effect at
the time in question between Borrower and Galveston Bay Pipeline relating to
the transportation of Hydrocarbons by Galveston Bay Pipeline through the GB
Pipeline Facility.
"Gillespie Price Method" shall have the meaning set forth in the
definition of Valuation Amount.
"GMACCC" has the meaning set forth in the preamble to this
Agreement and shall include its successors and assigns.
"Governmental Body" means any nation or government, any state or
other political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.
"Guarantor" means (i) each Material Subsidiary of Borrower
joining in the execution of this Agreement for the purposes of evidencing its
Guaranty and of agreeing to be bound by the terms of this Agreement, (ii) each
Material Subsidiary of Borrower that becomes (or is required to become) a
guarantor of the Obligations of Borrower under this Agreement in accordance
with Article XVI, and (iii) each Material Subsidiary of Borrower executing a
joinder agreement in which such Material Subsidiary agrees to become and be a
guarantor of the Obligations and to be bound by the terms of this Agreement.
"Guaranty" means the guaranty of the Obligations made by each
Guarantor in favor of Agent for its benefit and for the ratable benefit of
Lenders as provided in Article XVI of this Agreement.
"Hazardous Discharge" has the meaning set forth in Section
5.10(d) hereof.
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"Hazardous Substance" means, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances
or related materials as defined in CERCLA, the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA or any
other applicable Environmental Law and in the regulations adopted pursuant
thereto.
"Hazardous Wastes" means all waste materials subject to
regulation under RCRA or applicable state law, and any other applicable Federal
and state laws now in force or hereafter enacted relating to hazardous waste
disposal.
"Headquarters Facility" means the real property (including the
improvements thereon, the fixtures, other than trade fixtures, affixed or
attached thereto, and the personal property used in connection with the
operation thereof) owned by Borrower and located at 1300 North Sam Houston
Parkway East, Houston, Texas.
"Hedging Subsidiary" means a Subsidiary of Borrower engaged
solely in the business of facilitating Permitted Hedging Transactions with
Borrower or any of its subsidiaries.
"Hedging Transaction" means non-speculative transactions in
futures, forwards, swaps or option contracts (including both physical and
financial settlement transactions) engaged in by Borrower or any of its
Subsidiaries as part of its normal business operations as a risk management
strategy or hedge against adverse changes in market conditions in the oil and
natural gas industry.
"Hydrocarbon Reserves" means and includes, as to any Person, any
and all of such Person's now owned or hereafter acquired Hydrocarbon reserves
in place.
"Hydrocarbons" means oil, natural gas, condensate and natural gas
liquids, each as such terms are used in the Proved Reserves Report.
"Indenture" means the Indenture dated as of the date hereof by
Borrower, as Issuer, and Firstar Bank, N.A., as Trustee, pursuant to which the
Indenture Notes were issued as the same may be amended, supplemented or
modified from time to time.
"Indenture Notes" means the $200,000,000 of Senior Secured Notes
due 2004 issued pursuant to the Indenture.
"Insurance Proceeds" means the interest in and to all proceeds
(net of costs of collection, including attorney's fees) which now or hereafter
may be paid under any insurance policies now or hereafter obtained by or on
behalf of Borrower or any Guarantor in connection with any assets thereof,
together with interest payable thereon and the right to collect and receive the
same, including, without limitation, proceeds of casualty insurance, title
insurance, business interruption insurance and any other insurance now or
hereafter maintained with respect to such assets.
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"Intercreditor Agreement" means the intercreditor agreement dated
as of the date hereof by and among Agent, the Trustee, Receivables Lender and
Borrower.
"Interest Rate or Currency Agreement" of any Person means any
forward contract, futures contract, swap, option or other financial agreement
or arrangement (including, without limitation, caps, floors, collars, puts and
similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates.
"Inventory" means and includes all of Borrower's, and each of
Borrower's Subsidiaries', now owned or hereafter acquired inventory (as such
term is defined in the Uniform Commercial Code), including, without limitation,
casing, drill pipe and other supplies accounted for as inventory by Borrower on
its consolidated financial statements (excluding any Hydrocarbons), all
proceeds thereof (from insurance or otherwise), and all documents of title,
books, records, ledger cards, files, correspondence, and computer files, tapes,
disks and related data processing software that at any time evidence or contain
information relating to the foregoing.
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether for cash, property, services,
securities or otherwise) of Capital Stock, bonds, notes, debentures,
partnership or other ownership interests or other securities issued by such
other Person or any agreement to make any such acquisition; (b) the making by
such Person of any deposit with, or advance, loan or other extension of credit
to, such other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other Person and (without duplication) any amount
committed to be advanced, loaned or extended to such other Person; (c) the
entering into of any guarantee (other than any Guaranty hereunder) of, or other
credit support or contingent obligation with respect to, Debt or other
liability of such other Person; (d) the entering into of any Swap Obligation
with such other Person; or (e) the making of any capital contribution by such
Person to such other Person.
"Investment Grade Rating" means, with respect to any Person or
issue of debt securities or preferred stock, a rating in one of the four
highest letter rating categories (without regard to "+" or "-" or other
modifiers) by any rating agency or if any such rating agency has ceased using
letter rating categories or the four highest of such letter rating categories
are not considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).
"Jefferies" means Jefferies Analytical Trading Group, Inc.
"Jefferies Nondisturbance and Attornment Agreement" means the
Nondisturbance and Attornment Agreement dated on or about March 15, 2000, among
Jefferies, Borrower, Galveston Bay Processing, Agent and the Trustee, as
amended.
"Junior Preferred Stock" means Borrower's junior preferred stock,
$1.00 par value.
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"Lender" and "Lenders" has the meaning ascribed to such term in
the preamble to this Agreement, and shall include each Person which is a
permitted Participant, successor or assign of any Lender.
"Lien" means any mortgage, deed of trust, lien, pledge, charge,
security interest, collateral assignment or other encumbrance for security
purposes of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Loan Year" means each period of 12 consecutive months commencing
on the Closing Date and ending on the day prior to each anniversary thereof.
"M&M Claims" means Liens of mechanics and materialmen on the
Collateral.
"Material Adverse Effect" means a material adverse effect on (i)
the condition, operations, assets, business or prospects of the Borrower or any
Guarantor, (ii) Borrower's ability to pay the Obligations in accordance with
the terms thereof, (iii) the value of the Collateral, or the Liens on the
Collateral or the priority of such Liens, or (iv) the practical realization of
the benefits of Agent's and Lenders' rights and remedies under this Agreement
and the Ancillary Documents.
"Material Change" means an increase or decrease of more than 10%
since the then most recent Proved Reserve Report in the discounted future net
cash flows (excluding changes that result from changes in prices) from proved
oil and gas reserves of Borrower and its consolidated Subsidiaries (before any
state or federal income tax); provided, however, that the following will be
excluded from the Material Change calculation: (i) any acquisitions since the
then most recent Proved Reserve Report of oil and gas reserves that have been
estimated by independent petroleum engineers and on which a report or reports
have been prepared by such independent petroleum engineers within 12 months of
the acquisition, (ii) any reserves added since the then most recent Proved
Reserve Report attributable to the drilling or recompletion of wells not
included in previous reserve estimates, and (iii) any disposition of properties
existing on the date of then most recent Proved Reserve Report that have been
disposed of.
"Material Subsidiary" means, at any particular time, any
Subsidiary that, together with its Subsidiaries, owns assets valued at $100,000
or more.
"Maximum Loan Amount" means $52,500,000 less repayments of the
Term Loan.
"Maximum Revolving Advance Amount" shall mean $30,000,000
(inclusive of outstanding Swingline Loans).
"Maximum Swingline Loan Amount" means at any time the lesser of
(i) $1,500,000 and (ii) the Maximum Revolving Advance Amount at such time less
the outstanding balance of Revolving Advances at such time.
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"Mortgage" means each mortgage, deed of trust, trust deed, deed
to secure debt, assignment, assignment of production, security agreement,
financing statement or similar document, however styled, executed by Borrower,
or any other Person, in favor of Agent for the ratable benefit of Agent and
Lenders primarily for the purpose of creating or granting a Lien on Real
Property and/or Hydrocarbons, or any interests therein, to secure all or any
part of the Obligations.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Sections 3(37) and 4001 (a)(3) of ERISA.
"Net Cash Proceeds" means an amount equal to the aggregate amount
of cash received by Borrower and its Subsidiaries in respect of an Asset Sale,
less the sum of (i) all reasonable out-of-pocket fees, commissions, and other
expenses incurred in connection with such Asset Sale, including the amount
(estimated in good faith by Borrower) of income, franchise, sales and other
applicable taxes to be paid, payable or accrued by Borrower or any Subsidiary
of Borrower (in each case as estimated in good faith by Borrower or such
Subsidiary without giving effect to tax attributes unrelated to such Asset
Sale) in connection with such Asset Sale, and (ii) the aggregate amount of cash
so received which is used to retire any then existing Debt of Borrower or its
Subsidiaries (other than the Obligations), as the case may be, which is
required by the terms of such Debt to be repaid in connection with such Asset
Sale.
"Net GB Financing Proceeds" means an amount equal to the
aggregate amount of cash received by Galveston Bay Pipeline or Galveston Bay
Processing, as the case may be, in respect of a GB Facility Financing to which
Galveston Bay Pipeline or Galveston Bay Processing, as the case may be, is a
party, less the sum of (i) all reasonable out-of-pocket fees, commissions, and
other expenses incurred in connection with such GB Facility Financing,
including the amount (estimated in good faith by Borrower) of income,
franchise, sales and other applicable taxes to be paid, payable or accrued by
Borrower or by Galveston Bay Pipeline or Galveston Bay Processing, as the case
may be (in each case as estimated in good faith by Borrower or by Galveston Bay
Pipeline or Galveston Bay Processing, as the case may be, without giving effect
to tax attributes unrelated to such GB Facility Financing), in connection with
such GB Facility Financing, (ii) the aggregate amount of cash so received which
is used to retire any then existing Debt of Galveston Bay Pipeline or Galveston
Bay Processing (other than the Obligations), as the case may be, which is
required by the terms of such Debt to be repaid in connection with such GB
Facility Financing, (iii) the aggregate amount of cash so received which is
used to retire any then existing Debt (other than the Obligations) that is
secured by assets of Galveston Bay Pipeline or Galveston Bay Processing, as the
case may be, and (iv) the aggregate amount of cash so received which is used to
retire indebtedness of Borrower in respect of Allowed Priority Tax Claims under
the Plan, Allowed Claims of prepetition secured creditors in class 2 under the
Plan, and Allowed Claims of prepetition secured creditors in classes 5 and 6B
under the Plan.
"Net Proceeds" means (a) in the case of any sale by a Person of
Qualified Capital Stock, the aggregate net cash proceeds received by such
Person from the sale of Qualified Capital Stock (other than to a Subsidiary)
after payment of reasonable out-of-pocket expenses, commissions and discounts
incurred in connection therewith, and (b) in the case of any exchange,
exercise, conversion or surrender of any outstanding securities or Debt of such
Person for or into shares of Qualified Capital Stock of such Person, the net
book value of such
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outstanding securities as adjusted on the books of such Person or Debt of such
Person to the extent recorded in accordance with GAAP, in each case, on the
date of such exchange, exercise, conversion or surrender (plus any additional
amount required to be paid by the holder of such Debt or securities to such
Person upon such exchange, exercise, conversion or surrender and less (i) any
and all payments made to the holders of such Debt or securities and (ii) all
other expenses incurred by such Person in connection therewith, in each case,
in so far as such payments or expenses are incident to such exchange, exercise,
conversion, or surrender).
"Net Working Capital" of any Person means (i) all current assets
of such Person and its consolidated Subsidiaries, minus (ii) all current
liabilities of such Person and its consolidated Subsidiaries other than the
current portion of long term debt, each item to be determined in conformity
with GAAP.
"Net Worth" of any Person means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for Debt,
the cost of treasury stock (not otherwise deducted from stockholder's equity),
and the principal amount of any promissory notes receivable from the sale of
the Capital Stock of such Person or any of its Subsidiaries, each item to be
determined in conformity with GAAP.
"New Property" has the meaning specified in clause (s) in the
definition of the term "Permitted Liens" set forth in Section 1.2.
"Nominee" means any Person who has or holds any right, title or
interest in any oil and gas or mineral lease as a nominee for Borrower or any
of its Subsidiaries.
"Nominee Property" means any property, lease, interest or other
asset with respect to which any Person has or holds any right, title or
interest as a Nominee.
"Non-Officer Affiliate" means, as to any specified Person, any
Affiliate of such Person that is not an Officer Affiliate of such Person.
"Note" or "Notes" means, individually or collectively, the Term
Note, the Revolving Credit Note and the Swingline Note.
"NYMEX Spot Price Method" has the meaning set forth in the
definition "Valuation Amount".
"Obligations" means and includes any and all of Borrower's Debt
and/or liabilities to Agent or the Lenders, of every kind, nature and
description, direct or indirect, secured or unsecured, joint, several, joint
and several, absolute or contingent, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated, arising
under or out of or in connection with this Agreement, the Ancillary Documents
or under any other agreement between Agent or the Lenders and Borrower
delivered or given in connection therewith or herewith and all obligations of
Borrower to Agent or the Lenders to perform acts or refrain from taking any
action hereunder or thereunder.
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"Officer Affiliate" means, as to any specified Person, any other
Person who is an Affiliate of such specified Person by reason of such other
Person's inclusion within the class of Persons described in clause (iii) of the
definition of the term "Affiliate" set forth in this Section 1.2, whether or
not such other Person is included within either or both of the classes of
Persons described in clauses (i) and (ii) of the definition of the term
"Affiliate" set forth in this Section 1.2, and any Affiliate of such other
Person (other than Borrower and Borrower's Subsidiaries).
"Operating Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee which
is not a Capital Lease or a lease of a mineral interest.
"Overadvance" means the amount by which the sum of the
outstanding balance of Revolving Advances and Swingline Loans exceeds the
lesser of (x) the Maximum Revolving Advance Amount or (y) the Borrowing Base.
"Parent" of any Person means a corporation or other entity
owning, directly or indirectly at least 50% of the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
directors of the Person, or other Persons performing similar functions for any
such Person.
"Participant" has the meaning set forth in Section 15.3(b) of
this Agreement.
"Payment Office" means initially 1290 Avenue of the Americas, New
York, New York 10104; thereafter, such other office of Agent, if any, which it
may designate by notice to Borrower and each Lender to be the Payment Office.
"Permitted Hedging Transactions" means non-speculative
transactions in futures, forwards, swaps or option contracts (including both
physical and financial settlement transactions) engaged in by Borrower or its
Subsidiaries as part of their normal business operations as a risk-management
strategy or hedge against adverse changes in the prices of natural gas,
condensate, or oil; provided, however, that such transactions do not, on a
monthly basis, relate to more than 90% of Borrower Entities' average net
hydrocarbon production (mcfe) per month for the most recent 3-month period
measured at the time of such incurrence; and, provided, further, that, at the
time of such transaction (i) the counterparty to any such transaction is an
Eligible Institution or a Person that has an Investment Grade Rating, or (ii)
such counterparty's obligation pursuant to such transaction is unconditionally
guaranteed in full by, or secured by a letter of credit issued by, an Eligible
Institution or a Person that has an Investment Grade Rating.
"Permitted Investment" means, when used with reference to
Borrower and its Subsidiaries:
(i) trade credit extended to Persons in the ordinary course of
business;
(ii) purchases of Cash Equivalents;
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(iii) Investments by Borrower or its wholly owned Subsidiaries in
wholly owned Subsidiaries of Borrower;
(iv) Swap Obligations;
(v) the receipt of Capital Stock in lieu of cash in connection
with the settlement of litigation;
(vi) advances to officers and employees in connection with the
performance of their duties in the ordinary course of business in an amount not
to exceed $500,000 in the aggregate outstanding at any time;
(vii) margin deposits in connection with Permitted Hedging
Transactions;
(viii) Investments and expenditures made in the ordinary course
of business by Borrower and its Subsidiaries, and of a nature that, at the time
of expenditure, is customary in the oil and gas business as a means of actively
exploiting, exploring for, acquiring, developing, processing, gathering,
marketing or transporting oil or gas through agreements, transactions,
interests or arrangements which permit a Person to share risks or costs, comply
with regulatory requirements regarding local ownership or satisfy other
objectives customarily achieved through the conduct of the oil and gas business
jointly with third parties, including, without limitation, (a) ownership
interests in oil and gas properties or gathering systems and (b) Investments
and expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties; provided, however, that in the case of any joint venture engaged in
processing, gathering, marketing or transporting oil or gas, (1) all Debt of
such joint venture that would not otherwise constitute Debt of one of Borrower
Entities shall be deemed Debt of Borrower in proportion to its direct or
indirect ownership interest in such joint venture, and (2) such joint venture
shall be reasonably anticipated, at the time of Investment, to enhance the
value of the reserves of Borrower Entities or marketability of production from
such reserves;
(ix) the Guaranty and any guaranty by Borrower or any Subsidiary
of Borrower that is permitted under Section 6.3(e);
(x) deposits permitted by the definition of Permitted Liens or
any extension, renewal, or replacement of any of them,
(xi) an Investment in Capital Stock resulting from an Asset Sale
pursuant to Section 6.2,
(xii) any Guaranty by Borrower of the obligations of any wholly
owned Subsidiary of Borrower to the extent such obligations so guaranteed (A)
do not constitute Debt unless and only to the extent such Debt is otherwise
permitted under Section 6.3, and (B) except to the extent such obligations
constitute Debt otherwise permitted under Section 6.3, such
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obligations are of the type customarily incurred by such wholly owned
Subsidiary in favor of third parties in the ordinary course of conducting its
Related Business, or
(xiii) other Investments, provided, however, that such
Investments do not exceed $1 million in the aggregate at any time.
"Permitted Liens" means:
(a) Liens imposed by Governmental Bodies for taxes,
assessments, or other Charges (i) not yet due or (ii) which are being contested
in good faith and by appropriate proceedings, if (1) adequate reserves with
respect thereto are maintained on the books of any of the Borrower Entities in
accordance with GAAP and (2) such Liens (other than with respect to Permitted
Prior Liens) do not prime the Liens of Agent on the Collateral;
(b) statutory Liens of landlords, carriers.
warehousemen, mechanics, materialmen, repairmen, mineral interest owners, or
other like Liens arising by operation of law in the ordinary course of
business, provided, however, that (1) the underlying obligations are not
overdue for a period of more than 45 days, or (2) such Liens are being
contested in good faith and by appropriate proceedings and adequate reserves
with respect thereto are maintained on the books of any of Borrower Entities in
accordance with GAAP;
(c) pledges of assets or deposits of cash or Cash
Equivalents to secure (1) the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of
business (or to secure reimbursement obligations or letters of credit in
support of such bonds) in an aggregate amount not in excess of 5% of the PV10
indicated on Borrower's most recent Proved Reserve Report at the time such
pledges or deposits are made, (2) appeal or supercedeas bonds (or to secure
reimbursement obligations or letters of credit in support of such bonds) in an
amount not to exceed $10 million at any one time outstanding, or (3) pledges or
deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance, and other types of social security
legislation, property insurance and liability insurance;
(d) Liens encumbering customary initial deposits and
margin deposits securing Swap Obligations or Permitted Hedging Transactions and
Liens encumbering contract rights under Permitted Hedging Transactions;
(e) pledges of assets to secure margin obligations,
settlement obligations, reimbursement obligations or letters of credit in
connection with Permitted Hedging Transactions; provided, however, that, at the
time such pledge is made (or, if such pledge secures future Permitted Hedging
Transactions, at the time any such Permitted Hedging Transaction is entered
into), the maximum aggregate exposure under such Permitted Hedging Transactions
does not exceed the greater of (1) $10 million or (2) 5% of the PV10 indicated
on Borrower's then most recent Proved Reserves Report;
(f) easements, rights-of-way, zoning, similar
restrictions and other similar encumbrances or title defects incurred in the
ordinary course of business which, in the aggregate, are not material in
amount, and which do not in any case materially detract from the
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value of the property subject thereto (as such property is used by any of
Borrower or any of its Subsidiaries) or materially interfere with the ordinary
conduct of the business of any of Borrower or any of its Subsidiaries;
(g) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount and for a period not resulting in
an Event of Default with respect thereto;
(h) (1) Liens securing Debt or other obligations not in
excess of $3 million, (2) Liens existing on the Closing Date, and (3) Liens
existing on the Closing Date encumbering assets owned by Galveston Bay
Processing or Galveston Bay Pipeline or created after the Closing Date to
secure a GB Facility Financing;
(i) Liens securing (1) Allowed Priority Tax Claims under
the Plan, (2) Allowed Claims in classes 2, 5, 6A or 6B under the Plan, (3) Debt
incurred pursuant to Section 6.3(j), or (4) refinancing Debt incurred pursuant
to Section 6.3(f) with respect to Liens described in subsections (1), (2) or
(3) of this clause (i);
(j) Liens granted on (1) Equipment to the extent granted
to secure Debt incurred pursuant to Section 6.3 or (2) Inventory, Receivables
or Hydrocarbons which are subordinated to the Liens in favor of Agent (or
subordinated to the Liens of the Receivables Lender under the Receivables
Facility) in a manner satisfactory to Agent under this Agreement and GMACCC
under the Receivables Facility, as the case may be;
(k) Liens granted in connection with the Presale of Gas;
(l) Liens created on or Production Payments granted with
respect to undivided interests in, acreage drilled or to be drilled pursuant to
Drilling Programs, on Hydrocarbons produced therefrom and on the proceeds of
such Hydrocarbons to secure or to provide provision for payment of the Borrowed
Obligations under such Drilling Programs, provided, however, that (1) the
number of wells included in such program commenced in any fiscal year does not
exceed 30 per fiscal year (plus the number of wells included in programs
commenced in prior years but not yet completed), (2) such obligations are
limited to a percentage of production from such wells, (3) such Liens survive
only until the Person to whom such Lien was granted has received production
with a value equal to the costs, expenses and fees related to property and
services provided or paid for by such Person plus an agreed-upon interest
component, and (4) such Liens secure obligations that are nonrecourse to each
of Borrower or its Subsidiaries;
(m) Liens on the assets of any entity existing at the
time such assets are acquired by any of Borrower Entities, whether by merger,
consolidation, purchase of assets or otherwise so long as such Liens (1) are
not created, incurred or assumed in contemplation of such assets being acquired
by any of Borrower Entities and (2) do not extend to any other assets of any of
Borrower or its Subsidiaries;
(n) any extension, renewal, or replacement of Liens
created pursuant to any of clauses (a) through (g), (h) 3, (k) through (m), or
(q) through (s) of this definition, provided, however, that such Liens would
have otherwise been permitted under such clauses, and
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provided further, that the Liens permitted by this clause (n) do not secure any
additional Debt or encumber any additional property;
(o) Liens constituting or securing (1) Royalty Payment
Obligations and (2) Drilling Production Payments;
(p) Liens on the assets of any of the Borrower Entities
in favor of another Borrower Entity;
(q) Liens on the proceeds of any property subject to a
Permitted Lien (other than Net GB Financing Proceeds that are received directly
by Borrower or that are distributed to the Company by Galveston Bay Pipeline or
Galveston Bay Property, as the case may be) or on deposit accounts containing
any such proceeds;
(r) Liens on the proceeds of any property that is not
Collateral;
(s) Liens (including extensions and renewals thereof) on
real or personal property, acquired after the Closing Date ("New Property");
provided, however, that (1) such Lien is created solely for the purpose of
securing Debt incurred to finance the cost (including the cost of improvements
or construction) of New Property subject thereto and such Lien is created prior
to or within six months after the later of the acquisition, the completion of
construction, or the commencement of full operation of such New Property, (2)
the principal amount of the Debt secured by such Lien does not exceed 100% of
such cost including costs and fees related to the financing thereof, and (3)
any such Lien shall not extend to or cover any property or assets other than
such item of New Property, any improvements on such New Property and any
throughput, capacity or similar agreements related to the operation of such New
Property;
(t) Liens securing obligations under the Indenture and
the Indenture Notes, provided that such Liens are expressly subordinated to the
Liens securing the Obligations;
(u) Liens under the Security Documents;
(v) Liens securing the Receivables Facility; and
(w) Liens (including extensions and renewals thereof) on
the Headquarters Facility, provided, however, that (1) such Liens are created
solely for the purpose of securing Debt Incurred by Borrower concurrently with
the creation of such Liens, (2) the principal amount of the Debt secured by
such Liens at the time of Incurrence does not exceed 100% of the Appraised
Value of the Headquarters Facility as determined by an Appraisal dated not more
than six (6) months prior to the date on which such Liens are created, and (3)
any such Lien shall not extend to or cover any property or assets other than
the Headquarters Facility and any leases and rents derived from the ownership
and operation of the Headquarters Facility.
"Permitted Prior Liens" means:
(a) Liens imposed by Governmental Bodies for taxes,
assessments, or other Charges consisting of ad valorem taxes, severance taxes
and well usage taxes not yet due
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or which are being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of any of
the Borrower Entities in accordance with GAAP;
(b) statutory Liens of landlords, carriers,
warehousemen, mechanics, materialmen, repairmen, mineral interest owners, or
other like Liens arising by operation of law in the ordinary course of
business, provided, however, that (1) the underlying obligations are not
overdue for a period of more than 45 days, or (2) such Liens are being
contested in good faith and by appropriate proceedings and adequate reserves
with respect thereto are maintained on the books of any of Borrower Entities in
accordance with GAAP; provided, further, that (except with respect to Mechanics
or Materialmens liens) no further action must be taken by the holders of such
liens in order to obtain priority over the liens of Agent or the Collateral;
(c) pledges or deposits of cash or Cash Equivalents to
secure (1) the performance of bids, trade contracts (other than borrowed
money), leases, statutory obligations, surety bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business
(or to secure reimbursement obligations or letters of credit in support of such
bonds) in an aggregate amount not in excess of 5% of the PV10 indicated on
Borrower's most recent Proved Reserve Report at the time such pledges or
deposits are made, (2) appeal or supercedeas bonds (or to secure reimbursement
obligations or letters of credit in support of such bonds) in an amount not to
exceed $10 million at any one time outstanding, or (3) pledges or deposits made
in the ordinary course of business in connection with worker's compensation,
unemployment insurance, and other types of social security legislation,
property insurance and liability insurance;
(d) Liens encumbering customary initial deposits and
margin deposits of cash or Cash Equivalents securing Swap Obligations or
Permitted Hedging Transactions and Liens encumbering contract rights under
Permitted Hedging Transactions;
(e) easements, rights-of-way, zoning, similar
restrictions and other similar encumbrances or title defects incurred in the
ordinary course of business which, in the aggregate, are not material in
amount, and which do not in any case materially detract from the value of the
property subject thereto (as such property is used by any of Borrower or any of
its Subsidiaries) or materially interfere with the ordinary conduct of the
business of any of Borrower or any of its Subsidiaries;
(f) Liens securing Allowed Priority Tax Claims, Allowed
Claims under Classes 2 and 5 under the Plan and other Liens given priority
under the Plan and existing on the Closing Date;
(g) Liens on the assets of any entity existing at the
time such assets are acquired by any of the Borrower Entities, whether by
merger, consolidation, purchase of assets or otherwise so long as such Liens
(1) are not created, incurred or assumed in contemplation of such assets being
acquired by any of Borrower Entities and (2) do not extend to any other assets
of any of Borrower or its Subsidiaries;
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(h) Liens constituting or securing Royalty Payment
Obligations to the extent such Liens exist and are perfected at the time the
Collateral is acquired by Borrower and such acquisition occurs after the date
hereof;
(i) Liens on the proceeds of any property subject to a
Permitted Prior Lien to the extent the holder of such Lien has done all acts
necessary to maintain its priority claim to such proceeds;
(j) Liens on the proceeds of any property that is not
Collateral;
(k) Liens (including extensions and renewals thereof) on
real or personal property, acquired after the Closing Date ("New Property");
provided, however, that (1) such Lien is created solely for the purpose of
securing Debt incurred to finance the cost (including the cost of improvements
or construction) of New Property subject thereto and such Lien is created prior
to or within six months after the later of the acquisition, the completion of
construction, or the commencement of full operation of such New Property, (2)
the principal amount of the Debt secured by such Lien does not exceed 100% of
such cost including costs and fees related to the financing thereof, and (3)
any such Lien shall not extend to or cover any property or assets other than
such item of New Property, any improvements on such New Property and any
throughput, capacity or similar agreements related to the operation of such New
Property and (4) the holder of such Lien has done all acts necessary to
maintain its priority claim with respect to such Lien;
(l) Liens securing the Receivables Facility;
(m) Liens with respect to which Agent has released or
subordinated the Lien of the Security Documents in accordance with the terms of
this Agreement; and
(n) any extension, renewal, or replacement of Permitted
Prior Liens, provided, however, that such Liens would have otherwise been
Permitted Prior Liens, and provided further, that the Liens described by this
clause (n) do not secure any additional Debt or encumber any additional
property and the holder of such Lien has done all acts necessary to maintain
its priority claim with respect to such Lien.
"Person" means any individual, sole proprietorship,
partnership, corporation, business trust, joint stock company, trust,
unincorporated organization, association, limited liability company,
institution, public benefit corporation, joint venture, entity or government
(whether Federal, state, county, city, municipal or otherwise, including any
instrumentality, division, agency, body or department thereof).
"Plan of Reorganization" or "Plan" means Borrower's Second
Amended Modified and Restated Plan of Reorganization under Chapter 11 of the
Bankruptcy Code, dated January 25, 2000, in Case No. 99-21550-C-11, in the
United States Bankruptcy Court for the Southern District of Texas, Corpus
Christi Division.
"Preferred Stock" means, with respect to any Person, any
class or classes (however designated) of Capital Stock of such Person that is
preferred as to the payment of
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dividends, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person over shares of Capital
Stock of any other class of such corporation.
"Prepayment Date" has the meaning set forth in Section 13.1
hereof.
"Presale of Gas" means any advance payment agreement or other
arrangement pursuant to which Borrower or any Guarantor, having received full
payment of the purchase price for a specified quantity of Hydrocarbons prior to
the first scheduled date of delivery, is required to deliver, in one or more
installments subsequent to the date of such agreement or arrangement, such
quantity of Hydrocarbons to the purchaser of such Hydrocarbons pursuant to and
during the term of such agreement or arrangement; provided, however, that the
term "Presale of Gas" shall not include (i) any such agreement or other
arrangement covering deliveries of Hydrocarbons for a period not exceeding
three calendar months and pursuant to which Borrower or such Guarantor has
received full payment of the purchase price within 120 days of the last
scheduled date of delivery, (ii) a transaction to the extent and only to the
extent that it results in the creation of any Permitted Lien under clauses (l)
or (o) of the definition of "Permitted Liens," (iii) Permitted Hedging
Transactions, or (iv) an Asset Sale involving Hydrocarbon Reserves.
"Prime Rate" means the prime commercial lending rate of the
Bank as publicly announced to be in effect from time to time, such rate to be
adjusted automatically, without notice, on the effective date of any change in
such rate. This rate of interest is determined from time to time by the Bank as
a means of pricing some loans to its customers and is neither tied to any
external rate of interest or index nor does it necessarily reflect the lowest
rate of interest actually charged by the Bank to any particular class or
category of customers of the Bank.
"Production Payments" means Dollar Denominated Production
Payments and Volumetric Production Payments.
"Pro Forma Balance Sheet" has the meaning set forth in
Section 4.5(a) hereof.
"Pro Forma Financial Statements" has the meaning set forth in
Section 4.5(b) hereof.
"Projections" has the meaning set forth in Section 4.5(b)
hereof.
"Proved Reserves Report" means a report prepared by an
independent petroleum reserve engineer acceptable to Agent with respect to
proved Hydrocarbon Reserves.
"Purchasing Lender" has the meaning set forth in Section 15.3
hereof.
"PV10" means the Valuation Amount at a 10% discount rate.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Capital Stock.
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. Sections 6901 et seq., as same may be amended from time to time.
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"Real Property" means all of Borrower's right, title and
interest in and to the owned and leased real property.
"Receivables" means and includes, as to any Person, any and
all of such Person's now owned or hereafter acquired Accounts, all products and
proceeds thereof, and all books, records, ledger cards, files, correspondence,
and computer files, tapes, disks or software that at any time evidence or
contain information relating to such Person's Accounts.
"Receivables Facility" means that certain Third Amended and
Restated Accounts Receivables Management Agreement and Security Agreement dated
as of the date hereof by and between GMACCC and Borrower.
"Receivables Lender" means GMACCC, as the lender under the
Receivables Facility.
"Reference Period" with regard to any Person means the four
full fiscal quarters of such Person ended on or immediately preceding any date
upon which any determination is to be made pursuant to the terms of this
Agreement.
"Refinancing Debt" has the meaning specified in Section 6.3.
"Related Business" means (i) the exploration for, acquisition
of, development of, production, transportation, gathering, and processing (in
connection with natural gas and natural gas liquids only) of, crude oil,
natural gas, condensate, and natural gas liquids; provided, however, that the
Related Business shall not include any refining or distilling of Hydrocarbons
other than processing and fractionating natural gas and natural gas liquids,
(ii) the drilling and energy services business and pipeline services business,
(iii) owning and operating a Hedging Subsidiary, or (iv) owning or operating
facilities designed for separation, dehydration, treatment, stabilization,
processing or storage of Hydrocarbons and related operations.
"Release" has the meaning set forth in Section 4.7(c)(i)
hereof.
"Release Request" means a written request of Borrower in the
form of an officer's certificate delivered pursuant to Section 6.15.
"Reportable Event" means a reportable event described in
Section 4043(b) of ERISA or of the regulations promulgated thereunder.
"Required Lenders" means Lenders holding at least sixty-six
and two-thirds percent (66 2/3%) of the Advances and if no Advances are
outstanding then Lenders holding sixty-six and two thirds percent (66 2/3%) of
the aggregate Commitments.
"Restricted Investment" means any direct or indirect
Investment by Borrower or any Subsidiary of Borrower other than a Permitted
Investment.
"Restricted Payment" means, with respect to any Person, (i)
any Restricted Investment, (ii) any dividend or other distribution on shares of
Capital Stock of such Person or any Subsidiary of such Person, (iii) any
payment on account of the purchase, redemption, or
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other acquisition or retirement for value of any shares of Capital Stock of
such Person, and (iv) any defeasance, redemption, repurchase, or other
acquisition or retirement for value, or any payment in respect of any amendment
in anticipation of or in connection with any such retirement, acquisition, or
defeasance, in whole or in part, of any Subordinated Debt, directly or
indirectly, of such Person or a Subsidiary of such Person prior to the
scheduled maturity or prior to any scheduled repayment of principal in respect
of such Subordinated Debt; provided, however, that the term "Restricted
Payment" does not include (i) any dividend, distribution, or other payment on
shares of Capital Stock of a Person solely in shares of Qualified Capital Stock
of such Person that is at least as junior in ranking as the Capital Stock on
which such dividend, distribution, or other payment is to be made, (ii) any
defeasance, redemption, repurchase or other acquisition or retirement for value
of Capital Stock of a Person payable in or from any combination of (A) shares
of Qualified Capital Stock of such Person and (B) the Net Proceeds of a
concurrent sale of Qualified Capital Stock of such Person, in each case to the
extent such Qualified Capital Stock is at least as junior in ranking as the
Capital Stock retired, (iii) any dividends made pursuant to the certificates of
designation of the Senior Preferred Stock and the Junior Preferred Stock, (iv)
any dividend, distribution, or other payment to Borrower from any of its
Subsidiaries, (v) any defeasance, redemption, repurchase, or other acquisition
or retirement for value, in whole or in part, of any Subordinated Debt of such
Person payable in or from any combination of (A) shares of Qualified Capital
Stock of such Person and (B) the Net Proceeds of a concurrent sale of Qualified
Capital Stock, or both, (vi) any payments or distributions made pursuant to and
in accordance with the Plan, or (vii) the redemption, purchase, retirement or
other acquisition of any Debt, including any premium paid thereon, with the
proceeds of any refinancing Debt permitted to be incurred pursuant to Section
6.3(f).
"Revolving Advances" means Advances made pursuant to Section
2.1 hereof.
"Revolving Credit Note" means, collectively, the promissory
notes in favor of each Lender referred to in Section 2.1 hereof.
"Revolving Interest Rate" means an interest rate per annum
equal to 13 1/2% per annum.
"Royalty Payment Obligations" means (i) royalties, overriding
royalties (including those granted in connection with Drilling Programs),
revenue interests, net revenue interests, net profit interests, and
reversionary interests, (ii) the interests of others in pooling or unitization
agreements, production sales contracts and operating agreements, (iii) Liens
arising under, in connection with or related to farm-out, farm-in, joint
operating, pooling, unitization or area of mutual interest agreements or other
similar or customary arrangements, agreements or interests, and (iv) similar
burdens on the property of Borrower or any Subsidiary of Borrower; each as
incurred in the ordinary course of business and to the extent such burdens are
limited in recourse to (x) the properties subject to such interests or
agreements, (y) the Hydrocarbons produced from such properties, and (z) the
proceeds of such Hydrocarbons.
"Sale and Leaseback Transaction" means an arrangement
relating to property owned on the Closing Date or thereafter acquired whereby
Borrower or a Subsidiary of Borrower transfers such property to a Person and
leases it back from such Person.
"SEC" means the Securities and Exchange Commission.
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"SEC Method" has the meaning set forth in the definition
"Valuation Amount".
"Security Agreement" means each Security and Pledge
Agreement, dated as of the Closing Date, between Borrower and the Agent for its
benefit and for the ratable benefit of Lenders, as same may be amended from
time to time.
"Security Documents" means each Mortgage, each Security
Agreement and all other security agreements, pledge agreements, mortgages,
deeds of trust, collateral assignments and other agreements or conveyances at
any time delivered to Agent to secure all or any part of the Obligations of
Borrower pursuant to this Agreement, any one or more of the Security Documents,
and/or the Notes.
"Security Interests" means the Liens on the Collateral
created by the Security Documents in favor of the Agent for the benefit of the
Lenders.
"Senior Preferred Stock" means Borrower's senior preferred
stock, $1.00 par value.
"Settlement Date" has the meaning set forth in Section
2.11(c)(ii).
"Subordinated Debt" means Debt which is subordinated and
junior in right of payment to the Obligations in a manner satisfactory to
Agent.
"Subsidiary" with respect to any Person, means (i) a
corporation with respect to which such Person or its Subsidiaries owns,
directly or indirectly, at least fifty percent of such corporation's Capital
Stock with voting power, under ordinary circumstances, to elect directors, or
(ii) a partnership in which such Person or a subsidiary of such Person is, at
the time, a general partner of such partnership and has more than 50% of the
total voting power of partnership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of managers thereof, or
(iii) any other Person (other than a corporation or a partnership) in which
such Person, one or more Subsidiaries of such Person, or such Person and one or
more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof has (x) more than a fifty percent ownership interest, or
(y) the power to elect or direct the election of a majority of the directors or
other governing body of such other Person; provided, however, that a joint
venture an investment in which would constitute a Permitted Investment under
clause (ix) of the definition thereof shall not be deemed a Subsidiary.
"Swap Obligation" of any Person means any Interest Rate or
Currency Agreement entered into with one or more financial institutions or one
or more futures exchanges in the ordinary course of business and not for
purposes of speculation that is designed to protect such Person against
fluctuations in (x) interest rates with respect to Debt incurred and which
shall have a notional amount no greater than 105% of the principal amount of
the Debt being hedged thereby, or (y) currency exchange rate fluctuations.
"Swingline Lender" means GMACCC, or if GMACCC shall resign as
Swingline Lender, another Lender selected by Agent and reasonably acceptable to
Borrower.
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"Swingline Loan" means each advance made by Swingline Lender
pursuant to Section 2.5.
"Swingline Note" means the promissory note of Borrower in
form and substance acceptable to Agent, issued to evidence the Swingline Loan.
"TCW/Southern" means Southern Producer Services, L.P., TCW
Portfolio No. 1555 DR V Sub-Custody Partnership, L.P. and TCW DR VI Investment
Partnership, L.P., together with their successors and assigns as owners of the
TCW/Southern Production Payment.
"TCW/Southern Mandatory Offered Wells" means all of the
following wells that are drilled during the period beginning one day prior to
the date hereof and ending on and including March 31, 2001:
(a) each well not already subject to the
TCW/Southern Production Payment that either (i) has a bottom hole location that
is within 1500 feet of any lands and depths that are at such time subject to
the TCW/Southern Production Payment, or (ii) penetrates a geological reservoir
in communication with a zone either produced or able to be produced from any
well that is at such time subject to the TCW/Southern Production Payment,
provided that with respect to the Obenhaus No. 1 Gas Unit in Wharton County,
Texas, any TCW/Southern Mandatory Offered Wells shall be limited to wells
located on such unit, and
(b) each other well with its bottom hole
location in State Tracts 308, 329, 330, 331, 332, 351, 352 and 353 in Galveston
County, Texas, the adjacent acreage in the City of San Leon, Texas that was
originally made subject to the TCW/Southern Production Payment, and any other
acreage that is now or hereafter included in any production unit with any of
the foregoing acreage.
References herein to each well described in the foregoing paragraph (a) shall
include the associated drilling unit of at least 80 acres, and references
herein to each well described in the foregoing paragraph (b) shall include the
associated drilling unit of at least 160 acres.
"TCW/Southern Order" means the Order of the Bankruptcy Court
dated February 2, 2000, in case No. 99-21550-C-11, in the United States
Bankruptcy Court for the Southern District of Texas, Corpus Christi Division,
approving the TCW/Southern Production Payment Transaction.
"TCW/Southern Production Payment" means the Drilling
Production Payment conveyed as contemplated by the TCW/Southern Order and as
part of the TCW/Southern Production Payment Transaction by Borrower to
TCW/Southern pursuant to that certain Production Payment Conveyance dated on or
about the date hereof as from time to time supplemented and amended.
"Term" means the Closing Date through March 14, 2005, as same
may be extended in accordance with the provisions of Section 13.1 hereof.
"Term Loan" means the Advances made pursuant to Section 2.4
hereof.
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"Term Loan Rate" means an interest rate per annum equal to
14%.
"Term Note" means, collectively, the promissory notes in
favor of each Lender referred to in Section 2.5 hereof.
"Termination Event" means (i) a Reportable Event with respect
to any ERISA Plan or Multiemployer Plan; (ii) the withdrawal of either Borrower
or any member of the Controlled Group from a ERISA Plan or Multiemployer Plan
during a plan year in which such entity was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a ERISA Plan in a distress termination described in Section 4041(c)
of ERISA; (iv) the institution by the PBGC of proceedings to terminate a ERISA
Plan or Multiemployer Plan; (v) any event or condition (a) which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any ERISA Plan or Multiemployer Plan,
or (b) that may result in termination of a Multiemployer Plan pursuant to
Section 4041A of ERISA; or (vi) the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA, of either Borrower or any member of
the Controlled Group from a Multiemployer Plan.
"Transactions" has the meaning set forth in Section 4.5
hereof.
"Trustee" means Firstar Bank, N.A., as the Trustee under the
Indenture.
"Undrawn Availability" at a particular date means an amount
equal to (a) the lesser of (i) the Borrowing Base or (ii) the Maximum Revolving
Advance Amount, minus (b) the sum of (i) the outstanding amount of Advances
(other than the Term Loan) plus (ii) fees and expenses for which Borrower is
liable but which have not been paid or charged to Borrower's Account plus (iii)
any Coverage Shortfall.
"Valuation Amount" means, as of the date of calculation, the
value of future revenues from proved Hydrocarbon Reserves calculated on one of
the following price assumptions (i) the trailing twelve month average of prices
for oil, condensate and gas as calculated at the end of the month immediately
preceding the date of calculation (the "SEC Method"), (ii) the closing NYMEX
spot price (as adjusted) for the prompt month for oil, condensate and gas as of
the date of calculation held constant ("NYMEX Spot Price Method"), or (iii) the
price of oil, condensate and gas for projected reserves as and when extracted
during the next five (5) years employed by the engineering firm of Cawley,
Gillespie & Associates in its report dated as of November 1, 1999, as updated
and adjusted in a manner acceptable to Agent (the "Gillespie Price Method");
provided, however, with respect to Oil & Gas Reserves which are subject to
either hedging or purchase contracts with fixed prices, the applicable contract
price shall be utilized in determining the Valuation Amount. For purposes of
calculating the Borrowing Base on the Closing Date, the Gillespie Price Method
shall be utilized. In connection with subsequent determinations of the
Valuation Amount, the Borrower shall utilize whichever of the foregoing methods
Agent determines in its sole and absolute discretion is appropriate under the
circumstances; provided; that, unless Agent gives ten days notice to the
Borrower to the contrary, the SEC Method shall be presumed to be appropriate
(subject to the above proviso).
"Vehicles" means all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.
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"Volumetric Production Payments" means production payment
obligations recorded as deferred revenue in accordance with GAAP, together with
all undertakings and obligations in connection therewith.
"Voting Stock" means Capital Stock of a Person having
generally the right to vote in the election of directors of such Person.
"Week" means the time period commencing with the opening of
business on a Wednesday and ending on the end of business the following
Tuesday.
"Weighted Average Life" means, as of the date of
determination, with respect to any debt instrument, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such debt instrument multiplied by the amount of such principal payment by (ii)
the sum of all such principal payments.
1.3. Uniform Commercial Code Terms. All terms used herein and defined
in the Uniform Commercial Code as adopted in the State of New York shall have
the meaning given therein unless otherwise defined herein.
1.4. Certain Matters of Construction. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. All references to any
instruments or agreements to which Agent is a party, including, without
limitation, references to any of the Ancillary Documents, shall include any and
all modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS.
2.1. Revolving Advances. Subject to the terms and conditions set forth
in this Agreement (including, without limitation, the provision of Section 7.16
regarding the rights of Bondholder Lenders and their tranferees who elect to
refuse to make Advances after the Closing Date), each Lender, severally and not
jointly, will make Revolving Advances to Borrower in aggregate amounts
outstanding at any time not greater than such Lender's Commitment Percentage of
the lesser of (x) the Maximum Revolving Advance Amount or (y) the Borrowing
Base. Notwithstanding the foregoing, if at any time (a) the PV10 of proved
developed Hydrocarbon Reserves, excluding Hydrocarbon Reserves attributable to
wells subject to Production Payments, to the extent of the Dedication
Percentage applicable to the Hydrocarbon Reserves at such wells (so that, for
example, if the Dedication Percentage is 70%, only 30% of the Hydrocarbon
Reserves attributable to Borrower's interest in such wells shall be included in
the calculation of the PV10 and Hydrocarbon Reserves for purposes of this
test), shall be less than 100% of the sum of outstanding Advances or (b) the
PV10 of total proved developed producing reserves (including wells subject to
Production Payments, but excluding any PV10
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attributable to the interest of the entity to whom the Production Payments are
owed) shall be less than 100% of the sum of outstanding Advances, then the
amount of such difference (a "Coverage Shortfall") shall be due and owing upon
the date required for delivery of the next scheduled Borrowing Base
Certificate, if such Borrowing Base Certificate indicates the existence of a
Coverage Shortfall. Agent may, in its discretion and at Borrower's expense,
require the independent engineer which prepared the most recent Proved Reserves
Report to redetermine the Borrowing Base more often than specified herein if
there is a decrease in Hydrocarbon prices or production rates to a sustained
low level or other market factors arising that may adversely affect the value
of the Collateral and, if such independent engineer fails to do so in a timely
manner, Agent may retain a second independent engineer of its own choosing to
redetermine the Borrowing Base (each such update an "Agent Reserve Update
Report"). The Revolving Advances shall be evidenced by secured promissory notes
(collectively, the "Revolving Credit Note") substantially in the form attached
hereto as Exhibit 2.1 executed in favor of each Lender in accordance with such
Lender's Commitment. Upon the request of any Lender whose Commitment may
increase upon any upward adjustment in such Lender's Commitment in accordance
with the terms hereof, Borrower hereof agrees to deliver replacement Notes to
such Lenders.
2.2. Procedure for Borrowing Revolving Advances. Borrower shall notify
Agent prior to 12:00 p.m. (New York City time) on a Business Day of its request
to incur, effective three (3) Business Days after receipt by Agent of such
notification (the "Advance Effective Date"), a Revolving Advance hereunder.
Should any amount required to be paid as interest hereunder, or as fees or
other charges under this Agreement or any other agreement with Agent or
Lenders, or with respect to any other Obligation, become due, which, with
respect to such deemed Advances, shall be the Advance Effective Date, same
shall be deemed a request for a Revolving Advance as of the date such payment
is due, in the amount required to pay in full such interest, fee, charge or
Obligation under this Agreement or any other agreement with Agent or Lenders,
and such request shall be irrevocable. To the extent the Obligations
outstanding after giving effect to any such deemed request results in an
Overadvance, such Overadvance may be charged, at the option of Agent, to the
Receivables Facility in an amount not to exceed the availability thereunder,
and such amount shall be deemed an obligation of Borrower under the Receivables
Facility. Agent and Lenders will not make any Advance pursuant to any notice
from Borrower unless Agent has received the most recent Borrowing Base
Certificate required pursuant to Section 9.2 hereof.
2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed
from whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrower to Agent or Lenders,
shall be charged to Borrower's Account on Agent's books. During the Term,
Borrower may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions of this Agreement.
The proceeds of each Revolving Advance requested by Borrower or deemed to have
been requested by Borrower under Section 2.2 hereof shall, with respect to
requested Revolving Advances to the extent the Lenders make such Revolving
Advances, be made available to Borrower on the Advance Effective Date by way of
credit to Borrower's operating account at Bank, or such other bank as Borrower
may designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested, be disbursed to Agent on the Advance
Effective Date to be applied to the outstanding Obligations giving rise to such
deemed request.
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2.4. Term Loan. Subject to the terms and conditions of this Agreement,
each Lender, severally and not jointly, will make a Term Loan to Borrower in
the sum equal to such Lender's Commitment Percentage of $22,500,000. The Term
Loan shall be advanced on the Closing Date and shall be, with respect to
principal, payable in twenty (20) equal consecutive quarterly installments of
$56,250 each, commencing July 1, 2000 and on the first day of each October,
January, April and July thereafter with a final installment of the unpaid
principal balance of the Term Loan at the end of the Term. The Term Loan shall
be subject to acceleration upon the occurrence of an Event of Default under
this Agreement or termination of this Agreement and shall be evidenced by and
subject to the terms and conditions set forth in secured promissory notes
(collectively, the "Term Note") attached hereto as Exhibit 2.4 executed in
favor of each Lender in accordance with such Lender's Commitment.
2.5. Swingline Loans.
(i) Agent, in its sole and absolute discretion,
may convert any request by Borrower for a Revolving Advance in excess of the
Borrowing Base into a request for an Advance under the Swingline Loan.
Aggregate outstanding Swingline Loans shall not exceed, at any time, the
Maximum Swingline Loan Amount. Borrower shall repay the aggregate principal
balance of each Swingline Loan within five (5) Business Days after the creation
thereof. Agent agrees to notify Lenders of each Lender's share of the
obligation to make a Revolving Advance to repay the Swingline Loan (or portion
thereof).
(ii) Each of the Lenders hereby unconditionally
and irrevocably agrees to fund to Agent for the benefit of Swingline Lender, in
lawful money of the United States and in same day funds, not later than 12:00
p.m. New York City time on the Business Day immediately following the Business
Day of such Lender's receipt of notice from Agent, such Lender's share of a
Revolving Advance (which Revolving Advance shall be deemed to be requested by
Borrower) in the principal amount of such portion of the Swingline Loan which
is required to be paid to Swingline Lender under this Section 2.5 (regardless
of whether the conditions precedent thereto set forth in this Agreement are
then satisfied and whether or not Borrower has provided a notice of borrowing
under Section 2.2 and whether or not any Default or Event of Default exists or
all or any of the Advances have been accelerated, but subject to the other
provisions of this Section 2.5). The proceeds of any such Revolving Advance
shall be immediately paid over to Agent for the benefit of Swingline Lender for
application to the Swingline Loan.
(iii) In the event that an Event of Default shall
occur and either (i) such Event of Default is of the type described in Section
10.7 hereof or (ii) no further Revolving Advances are being made under this
Agreement, so long as any such Event of Default is continuing, then, each of
the Lenders (other than Swingline Lender) shall be deemed to have irrevocably,
unconditionally and immediately purchased from Swingline Lender such Lender's
pro rata share of the Swingline Loan outstanding as of the date of the
occurrence of such Event of Default. Each Lender shall effect such purchase by
making available an amount equal to its participation on the date of such
purchase in Dollars in immediately available funds to Agent for the benefit of
Swingline Lender. In the event any Lender fails to make available to Swingline
Lender when due the amount of such Lender's participation in the Swingline
Loan, Swingline Lender shall be entitled to recover such amount on demand from
such Lender together with interest at the Federal Funds Rate. Each such
purchase by a Lender shall be made without recourse to Swingline Lender,
without representation or warranty of any kind, and shall be
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effected and evidenced pursuant to documents reasonably acceptable to Swingline
Lender. The obligations of the Lenders under this Section 2.5 shall be
absolute, irrevocable and unconditional, shall be made under all circumstances
and shall not be affected, reduced or impaired for any reason whatsoever.
2.6. Maximum Advances. Except as otherwise provided herein, the
aggregate balance of Revolving Advances outstanding at any time shall not
exceed the lesser of (a) the Maximum Revolving Advance Amount or (b) the
Borrowing Base.
2.7. Repayment of Advances.
(a) The Revolving Advances shall be due and payable in full
on the last day of the Term subject to earlier prepayment as herein provided.
The Term Loan shall be due and payable as provided in Section 2.4 hereof and in
the Term Note. Swingline Loans shall be due and payable as provided in Section
2.5 hereof and in the Swingline Note.
(b) All payments of principal, interest and other amounts
payable hereunder, or under any of the related agreements shall be made to
Agent at the Payment Office not later than 1:00 P.M. (New York Time) on the due
date therefor in lawful money of the United States of America in federal funds
or other funds immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrower's Account or by making Advances or charging the Receivables
Facility as provided in Section 2.2 hereof.
(c) Borrower shall pay principal, interest, and all other
amounts payable hereunder, or under any Ancillary Documents, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
2.8. Repayment of Excess Advances. The aggregate balance of any type
Advances outstanding at any time in excess of the maximum amount of such
Advances permitted hereunder shall be immediately due and payable without the
necessity of any demand, at the Payment Office, whether or not a Default or
Event of Default has occurred.
2.9. Statement of Account. Agent shall maintain, in accordance with
its customary procedures, a loan account ("Borrower's Account") in the name of
Borrower in which shall be recorded the date and amount of each Advance made by
Agent or Lenders and the date and amount of each payment in respect thereof;
provided, however, the failure by Agent to record the date and amount of any
Advance shall not adversely affect Agent or any Lender. Each month, Agent shall
send to Borrower and each Lender a statement showing the accounting for the
Advances made, payments made or credited in respect thereof, and other
transactions between Lenders and Borrower, during such month. The monthly
statements shall be deemed correct and binding upon Borrower in the absence of
manifest error and shall constitute an account stated between Lenders and
Borrower unless Agent receives a written statement of Borrower's specific
exceptions thereto within thirty (30) days after such statement is received by
Borrower. The records of Agent with respect to the Borrower's Account shall be
prima facie evidence of the amounts of Advances and other charges thereto and
of payments applicable thereto.
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2.10. Additional Payments. Any sums expended by Agent or any Lender
due to Borrower's failure to perform or comply with its obligations under this
Agreement or any Ancillary Document including, without limitation, Borrower's
obligations under Section 5.1 hereof, may be charged to Borrower's Account as a
Revolving Advance and added to the Obligations.
2.11. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances and Swingline Loans
shall be advanced according to the Commitment Percentages of the Lenders. The
Term Loan shall be advanced according to the Commitment Percentages of the
Lenders. Notwithstanding the foregoing, in accordance with the Plan of
Reorganization, $20,000,000 of outstanding Debt of Borrower to Credit Suisse
First Boston Management Corporation, as administrative agent for itself and
certain other financial institutions under that certain Credit Agreement dated
April 27, 1999 (the "Existing DIP Facility") shall be assumed and made part of
the Advances made on of the Closing Date.
(b) Each payment (including each prepayment) by Borrower on
account of the principal of and interest on the Revolving Credit Notes, shall
be applied to the Revolving Advances pro rata according to the Commitment
Percentages of the Lenders. Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the Term Notes, shall
be applied to the Term Loan pro rata according to the Commitment Percentages of
the Lenders. Except as expressly provided herein, all payments (including
prepayments) to be made by Borrower on account of principal, interest and fees
shall be made without set-off or counterclaim and shall be made to Agent on
behalf of the Lenders to the Payment Office, in each case on or prior to 1:00
P.M., New York time, in Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary contained in
Sections 2.11(a) and (b) hereof (but subject to the provisions of Section
7.16), commencing with the first Business Day following the Closing Date, each
borrowing of Revolving Advances shall be advanced by Agent only after Agent has
received each Lender's Commitment Percentage of the Revolving Advance requested
by Borrower and each payment by Borrower on account of Revolving Advances shall
be applied first to those Swingline Loans or Revolving Advances made by Agent.
Each of the Lenders hereby unconditionally and irrevocably agrees to fund to
Agent, in lawful money of the United States and in same day funds, not later
than 12:00 p.m. New York City time on the Business Day immediately following
the Business Day of such Lender's receipt of notice from Agent, such Lender's
Commitment Percentage of a Revolving Advance request by Borrower.
(ii) All regularly scheduled payments of principal or
interest on Advances, if received prior to 1:00 p.m., New York time, shall be
remitted the same day to the Lenders in the amount of each Lender's pro rata
share, and if such payments are received after 1:00 p.m., New York time, Agent
shall remit to each Lender its pro rata share of such payment on the next
Business Day. With respect to all other payments, on the second (2nd) Business
Day of each calendar week, or more frequently as aggregate cumulative payments
in excess of $1,000,000 are received with respect to the Advances (other than
Swing Line Loan) (each, a "Settlement Date"), Agent will advise each Lender by
telephone, or telecopy of the amount of such Lender's Commitment Percentage of
principal, interest and fees paid for the benefit of Lenders with respect
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to each applicable Advance. Provided that such Lender has made all payments
required to be made by it and purchased all participations required to be
purchased by it under this Agreement and the other Ancillary Documents as of
such Settlement Date, Agent will pay to each Lender with funds in an amount
equal to its Commitment Percentage of the amount of such repayment. Such
payments shall be made by wire transfer to such Lender's account not later than
1:00 p.m. (2:00 p.m. New York time) on the next Business Day following each
Settlement Date.
(iii) Each Lender shall be entitled to earn
interest at the applicable Contract Rate on outstanding Advances which it has
funded and until such Lender has received its share of any repayment of such
Advances, such Lender shall receive interest at the Contract Rate.
(iv) Promptly following the first day of each
month, Agent shall submit to each Lender a detailed certificate with respect to
all payments received from or on behalf of Borrower and Advances made by each
Lender and/or Agent during the immediately preceding month. Such certificate of
Agent shall be conclusive in the absence of manifest error.
(d) If any Lender or Participant (a "benefited Lender") shall
at any time receive any payment of all or part of its Advances, or interest
thereon, or receive any Collateral in respect thereof (whether voluntarily or
involuntarily or by set-off) in a greater proportion than any such payment to
and Collateral received by any other Lender, if any, in respect of such other
Lender's Advances, or interest thereon, and such greater proportionate payment
or receipt of Collateral is not expressly permitted hereunder, such benefited
Lender shall purchase for cash from the other Lenders a participation in such
portion of each such other Lender's Advances, or shall provide such other
Lender with the benefits of any such Collateral, or the proceeds thereof, as
shall be necessary to cause such benefited Lender to share the excess payment
or benefits of such Collateral or proceeds ratably with each of the Lenders;
provided, however, that if all or any portion of such excess payment or
benefits is thereafter recovered from such benefited Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. Each Lender so purchasing a portion of
another Lender's Advances may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as fully as
if such Lender were the direct holder of such portion.
2.12. Mandatory Prepayment from Excess Cash Flow. Borrower shall
prepay the outstanding amount of the Term Loan in an amount equal to 50% of
Excess Cash Flow for each fiscal year commencing with fiscal year 2001, payable
upon delivery of the financial statements to Agent referred to in and required
by Section 9.7 for such fiscal year but in any event not later than one hundred
five (105) days after the end of each such fiscal year, which amount shall be
applied to the outstanding principal installments on the Term Loan in the
inverse order of the maturities thereof. In the event that the financial
statement is not so delivered, then a calculation based upon estimated amounts
shall be made by Agent upon which calculation Borrower shall make the
prepayment required by this Section 2.12, subject to adjustment when the
financial statement is delivered to Agent as required hereby. The calculation
made by Agent shall not be deemed a waiver of any rights Agent or Lenders may
have as a result of the failure by Borrower to deliver such financial
statement.
2.13. Use of Proceeds. All Advances (other than Swingline Loans) shall
be made in accordance with the Commitment Percentage of the Lenders and
Borrower shall apply the
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proceeds of such Advances to (i) to fund distributions under, and comply with
certain requirements of, the Plan of Reorganization and (ii) to provide for its
working capital needs.
2.14. Defaulting Lender.
(a) Notwithstanding anything to the contrary contained
herein, in the event any Lender (x) has refused (which refusal constitutes a
breach by such Lender of its obligations under this Agreement) to make
available its portion of any Advance or (y) notifies either Agent or Borrower
that it does not intend to make available its portion of any Advance (if the
actual refusal would constitute a breach by such Lender of its obligations
under this Agreement) (each, a "Lender Default"), all rights and obligations
hereunder of such Lender (a "Defaulting Lender") as to which a Lender Default
is in effect and of the other parties hereto shall be modified to the extent of
the express provisions of this Section 2.14 while such Lender Default remains
in effect.
(b) Advances shall be incurred pro rata from Lenders which
are not Defaulting Lenders (the "Non-Defaulting Lenders") based on their
respective Commitment Percentages applied to the total amount of the Requested
Advance, and no Commitment Percentage of any Lender or any pro rata share of
any Advances required to be advanced by any Lender shall be increased as a
result of such Lender Default. Amounts received in respect of principal of any
type of Advances shall be applied to reduce the applicable Advances of each
Lender pro rata based on the aggregate of the outstanding Advances of that type
of all Lenders at the time of such application; provided, that, such amount
shall not be applied to any Advances of a Defaulting Lender at any time when,
and to the extent that, the aggregate amount of Advances of any Non-Defaulting
Lender exceeds such Non-Defaulting Lender's Commitment Percentage of all
Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to give
instructions to Agent or to approve, disapprove, consent to or vote on any
matters relating to this Agreement and the Ancillary Documents. All amendments,
waivers and other modifications of this Agreement and the Ancillary Documents
may be made without regard to a Defaulting Lender and, for purposes of the
definition of "Required Lenders", a Defaulting Lender shall be deemed not to be
a Lender and not to have Advances outstanding.
(d) Other than as expressly set forth in this Section 2.14,
the rights and obligations of a Defaulting Lender (including the obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing
in this Section 2.14 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Ancillary Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively cures to
the satisfaction of Agent the breach which caused a Lender to become a
Defaulting Lender, such Defaulting Lender shall no longer be a Defaulting
Lender and shall be treated as a Lender under this Agreement.
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III. INTEREST AND FEES.
3.1. Interest. Interest on Advances shall be payable in arrears on the
last day of each month. Interest charges shall be computed on the actual
principal amount of Advances outstanding during the month at a rate per annum
equal to the applicable Contract Rate. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the Obligations shall
bear interest at the applicable Contract Rate plus two (2%) percent per annum
(the "Default Rate"), provided, however, upon the occurrence of an Event of
Default described in Section 10.5, the Default Rate shall not be imposed until
thirty (30) days from the occurrence of such Event of Default, assuming such
Event of Default is continuing as of the end of such thirty (30) day period.
3.2. (a) Structuring Fee. Upon the execution of this Agreement,
Borrower shall pay to Agent a structuring fee of $573,750. The structuring fee
shall be earned in full on the Closing Date and shall not be subject to rebate
or proration for any reason whatsoever.
(b) Origination Fee. Upon the execution of this Agreement,
Borrower shall pay to Agent an origination fee equal to (i) $300,000 with
respect to Revolving Advances and (ii) $225,000 with respect to the Term Loan.
The origination fee shall be earned in full on the Closing Date and shall not
be subject to rebate or proration for any reason whatsoever.
(c) Facility Fee. If, for any quarter during the Term, the
average daily unpaid balance of the Revolving Advances for each day of such
quarter does not equal the Maximum Revolving Advance Amount, then Borrower
shall pay to Agent for the ratable benefit of the Lenders a fee at a rate equal
to one quarter of one percent (.25%) per annum on the amount by which the
Maximum Revolving Advance Amount exceeds such average daily unpaid balance (the
"Unused Portion"); provided, however, the facility fee on GMACC's Commitment
Percentage of Unused Portion shall equal three-eighths of one percent (3/8%).
Such fee shall be payable to Agent in arrears on the last day of each quarter
and on the last day of the Term.
(d) Administration Fee. Upon the execution of this Agreement
and on each anniversary date hereof, Borrower shall pay Agent, for its own
account and not for the benefit of Lenders, an administration fee of $48,000.
Except as set forth in Section 14.3(b) hereof, the administration fee shall be
deemed earned in full on the date when same is due and payable hereunder and
shall not be subject to rebate or proration upon termination of this Agreement
for any reason.
3.3. Collateral Monitoring Fee. Subject to Section 5.10 of this
Agreement and as set forth below, Borrower shall pay to Agent on the first day
of each month following any month in which Agent performs any collateral
monitoring - namely any field examination, collateral analysis or other
business analysis, the need for which is to be determined by Agent and which
monitoring is undertaken by Agent or for Agent's benefit - a collateral
monitoring fee in an amount per day equal to Agent's then standard rates and
commissions for each person employed to perform such monitoring plus all costs
and disbursements incurred by Agent in the performance of such examination or
analysis; provided, however, the maximum aggregate amount that Agent may charge
for the foregoing collateral monitoring fee during any calendar year,
commencing with calendar year 2000, shall equal $25,000 provided that there
shall be no such maximum amount during any calendar year in which an Event of
Default has occurred or if the results of any field examination are deemed
unsatisfactory in Agent's reasonable discretion.
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3.4. Computation of Interest and Fees. Interest and fees hereunder
shall be computed on the basis of a year of 365/6 days and for the actual
number of days elapsed. If any payment to be made hereunder becomes due and
payable on a day other than a Business Day, the due date thereof shall be
extended to the next succeeding Business Day and interest thereon shall be
payable at the applicable Contract Rate during such extension.
3.5. Maximum Charges. In no event whatsoever shall interest and other
charges charged hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that Agent or any Lender has received interest
and other charges hereunder in excess of the highest rate permissible hereto,
such excess amount shall be first applied to any unpaid principal balance owed
by Borrower, and if the then remaining excess amount is greater than the
previously unpaid principal balance, the Lenders shall promptly refund such
excess amount to Borrower and the provisions hereof shall be deemed amended to
provide for such permissible rate.
3.6. Increased Costs. In the event that any applicable law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this Section
3.6, the term "Lender" shall include Agent or any Lender and any corporation or
bank controlling Agent or any Lender) with any request or directive (whether or
not having the force of law) from any central bank or other financial, monetary
or other authority, shall:
(a) subject Agent or any Lender to any tax of any kind
whatsoever with respect to this Agreement or change the basis of taxation of
payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Ancillary Documents (except for changes
in the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);
(b) impose, modify or hold applicable any reserve, special
deposit, assessment or similar requirement against assets held by, or deposits
in or for the account of, advances or loans by, or other credit extended by,
any office of Agent or any Lender, including (without limitation) pursuant to
Regulation D of the Board of Governors of the Federal Reserve System; or
(c) impose on Agent or any Lender any other condition with
respect to this Agreement, any Ancillary Documents; and the result of any of
the foregoing is to increase the cost to Agent or any Lender of making,
renewing or maintaining its Advances hereunder by an amount that Agent or such
Lender deems to be material or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any of the Advances by an
amount that Agent or such Lender deems to be material, then, in any case
Borrower shall promptly pay Agent or such Lender, upon its demand, such
additional amount as will compensate Agent or such Lender for such additional
cost or such reduction, as the case may be. Agent or such Lender shall certify
the amount of such additional cost or reduced amount to Borrower, and such
certification shall be conclusive absent manifest error.
(d) If Lenders are owed such additional amount or amounts at
any one time pursuant to this Section 3.6 in excess of three-fourths of one
percent (3/4 of 1%) of the average daily balance of Advances for the preceding
30 days, then the Borrower shall have the right to
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terminate this Agreement, subject to the terms and provisions of Section 13.1
of this Agreement; provided, however, (i) no such termination shall be
effective until Borrower has paid all of the Obligations (except as set forth
in clause (ii) below) in immediately available funds and (ii) Borrower shall
not be obligated to pay to Lenders any early termination fee described in
Section 13.1 of this Agreement.
3.7. Capital Adequacy.
(a) In the event that Agent or any Lender shall have
determined that any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Body, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by Agent or any Lender (for purposes of this Section 3.7, the term "Lender"
shall include Agent or any Lender and any corporation or bank controlling Agent
or any Lender) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on Agent or any Lender's capital as a consequence of its obligations hereunder
to a level below that which Agent or such Lender could have achieved but for
such adoption, change or compliance (taking into consideration Agent's and each
Lender's policies with respect to capital adequacy) by an amount deemed by
Agent or any Lender to be material, then, from time to time, Borrower shall pay
upon demand to Agent or such Lender such additional amount or amounts as will
compensate Agent or such Lender for such reduction. In determining such amount
or amounts, Agent or such Lender may use any reasonable averaging or
attribution methods. The protection of this Section 3.7 shall be available to
Agent and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition.
(b) A certificate of Agent or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent or such Lender with
respect to Section 3.7(a) hereof when delivered to Borrower shall be conclusive
absent manifest error.
(c) If Agent or any Lender is owed such additional amounts or
amounts at any one time pursuant to Section 3.7(a) hereof in excess of
three-fourths of one percent (3/4 of 1%) of the average daily balance of
Advances for the preceding 30 days, then the Borrower shall have the right to
terminate this Agreement, subject to the terms and provisions of Section 13.1
of this Agreement; provided, however, (i) no such termination shall be
effective until Borrower has paid all of the Obligations (except as set forth
in clause (ii) below) in immediately available funds and (ii) Borrower shall
not be obligated to pay to Lenders any early termination fee described in
Section 13.1 of this Agreement.
IV. REPRESENTATIONS AND WARRANTIES.
Borrower and each Guarantor, represents and warrants as follows:
4.1. Authority. Borrower and each Guarantor has full power, authority
and legal right to enter into this Agreement and the Ancillary Documents to
which it is a party and to perform all Obligations hereunder and thereunder.
The execution, delivery and performance of this
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Agreement and of the Ancillary Documents (a) are within Borrower's and each
Guarantor's corporate powers, have been duly authorized, are not in
contravention of law or the terms of Borrower's or any Guarantor's by-laws,
certificate of incorporation or other applicable documents relating to
Borrower's or any Guarantor's formation or to the conduct of Borrower's or any
Guarantor's business or of any material agreement or undertaking to which
Borrower or any Guarantor is a party or by which Borrower or any Guarantor is
bound, and (b) will not conflict with nor result in any breach in any of the
provisions of or constitute a default under or result in the creation of any
Lien except Permitted Liens upon any asset of Borrower or any Guarantor under
the provisions of any material agreement, charter document, instrument, by-law,
or other instrument to which Borrower or any Guarantor is a party or by which
it or its property may be bound.
4.2. Formation and Qualification. (a) Each of Borrower and each
Guarantor is duly incorporated and in good standing under the laws of the state
of its incorporation and is qualified to do business and is in good standing in
every other state or jurisdiction in which qualification and good standing are
necessary for Borrower and each Guarantor to conduct its business and own its
property except where the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect. Borrower has delivered to Agent
true and complete copies of its and each of its Guarantor's certificate of
incorporation and by-laws and will promptly notify Agent of any amendment or
changes thereto.
(b) The only Material Subsidiaries of Borrower are listed on
Schedule 4.2(b).
4.3. Survival of Representations and Warranties. All representations
and warranties of Borrower contained in this Agreement and the Ancillary
Documents shall be true at the time of Borrower's execution of this Agreement
and the Ancillary Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto.
4.4. Tax Returns. Borrower's and each Guarantor's federal tax
identification number is set forth on Schedule 4.4. Borrower and each Guarantor
have filed all federal, state and local tax returns and other reports they are
required by law to file and, giving effect to the Plan and the Confirmation
Order, have paid all taxes, assessments, fees and other governmental charges
that are due and payable. Except as listed on Schedule 4.4, Federal, state and
local income tax returns of Borrower and each Guarantor have been examined and
reported upon by the appropriate taxing authority or closed by applicable
statute and satisfied for all years prior to and including the year ending July
31, 1999. The provision for taxes on the books of Borrower and each Guarantor
are adequate for all years not closed by applicable statutes, and for its
current fiscal year, and Borrower has no knowledge of any deficiency or
additional assessment in connection therewith not provided for on its books or
the books of any of its Subsidiaries. Other than with respect to prepetition
taxes no tax Lien has been filed and, to the knowledge of Borrower, no claim is
being asserted, with respect to any such tax, fee or other charge.
4.5. Financial Statements.
(a) The pro forma balance sheet of Borrower and its Subsidiaries
on a consolidated basis (the "Pro Forma Balance Sheet") furnished to Agent on
the Closing Date (i) reflects the consummation of the transactions contemplated
by the Plan of Reorganization and
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under this Agreement (the "Transactions"), (ii) is accurate, complete and
correct, (iii) fairly reflects the financial condition of Borrower and its
Subsidiaries on a consolidated basis as of the Closing Date after giving effect
to the Transactions, and (iv) has been prepared in accordance with GAAP,
consistently applied. The Pro Forma Balance Sheet of Borrower and its
Subsidiaries on a consolidated basis has been certified as accurate, complete
and correct in all material respects by the President and Chief Financial
Officer of Borrower. All financial statements referred to in this subsection
4.5(a), including the related schedules and notes thereto, have been prepared,
in accordance with GAAP, except as may be disclosed in such financial
statements.
(b) The twelve-month cash flow projections of Borrower and its
Subsidiaries on a consolidated basis and its projected balance sheets as of the
Closing Date, copies of which are annexed hereto as Exhibit 4.5(b) (the
"Projections") were prepared under the supervision of the Chief Financial
Officer of Borrower, are based on underlying assumptions which provide a
reasonable basis for the projections contained therein and reflect Borrower's
judgment, based on present circumstances, of the expected conditions and course
of action for the projected period. The cash flow Projections together with the
Pro Forma Balance Sheet, are referred to as the "Pro Forma Financial
Statements".
4.6. Corporate Name. Neither Borrower nor any Guarantor has been known
by any other corporate name in the past five years except as set forth on
Schedule 4.6, nor has Borrower or any Guarantor been the surviving corporation
of a merger or consolidation or acquired all or substantially all of the assets
of any Person during the preceding five (5) years.
4.7. O.S.H.A. and Environmental Compliance.
(a) Except as disclosed on Schedule 4.7, each of Borrower and each
of its Subsidiaries has duly complied in all material respects with, and its
facilities, business, assets, property, leaseholds and Equipment are in
compliance in all material respects with, the applicable provisions of the
Federal Occupational Safety and Health Act, the Environmental Protection Act,
RCRA and all other Environmental Laws; there are no outstanding citations,
notices or orders of material non-compliance issued to Borrower or any of its
Subsidiaries or relating to its business, assets, property, leaseholds or
Equipment under any such laws, rules or regulations.
(b) Except as disclosed on Schedule 4.7, each of Borrower and each
of its Subsidiaries has been issued or has made application for all required
federal, state and local licenses, certificates or permits relating to all
applicable Environmental Laws.
(c) Except as disclosed on Schedule 4.7, (i) there are no visible
signs of releases, spills, discharges, leaks or disposal (collectively referred
to as "Releases") of a reportable quantity of Hazardous Substances at, upon,
under or within any Real Property or any premises leased by Borrower or any of
its Subsidiaries other than as are in compliance in all material respects with
all applicable Environmental Laws; (ii) there are no underground storage tanks
or polychlorinated biphenyls on the Real Property or any premises leased by
Borrower or any of its Subsidiaries; (iii) neither the Real Property nor any
premises leased by Borrower or any of its Subsidiaries has ever been used by
Borrower or any Subsidiary of Borrower or, to Borrower's knowledge, by any other
Person as a treatment, storage or disposal facility of
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Hazardous Waste in violation of any applicable Environmental Laws; and (iv) no
Hazardous Substances are present on the Real Property or any other premises
leased by Borrower or any of its Subsidiaries, excepting such quantities as are
handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the Related Businesses of Borrower or any of its
Subsidiaries or of its tenants.
4.8. Solvency; No Litigation, Violation, Debt or Default.
(a) Upon the Effective Date, Borrower and each of its Subsidiaries
will be solvent, able to pay its debts as they mature, have capital sufficient
to carry on its business and all businesses in which it is about to engage, and
(i) upon the Effective Date, the fair present saleable value of the assets,
calculated on a going concern basis, of Borrower and its Subsidiaries on a
consolidated basis is in excess of the amount of the liabilities of Borrower and
its Subsidiaries on a consolidated basis and (ii) subsequent to the Closing
Date, the fair saleable value of its assets (calculated on a going concern
basis) will be in excess of the amount of its liabilities.
(b) Neither Borrower nor any Guarantor has (i) any pending or
threatened litigation, arbitration, actions or proceedings which could
reasonably be expected to have a Material Adverse Effect, except as disclosed on
Schedule 4.8(b)(i) and (ii) Debt other than the Obligations and indebtedness
contemplated in the Plan of Reorganization, except as disclosed on Schedule
4.8(b)(ii).
(c) Neither Borrower nor any Guarantor is in violation of any
applicable statute, regulation or ordinance in any respect which could
reasonably be expected to have a Material Adverse Effect on Borrower or such
Guarantor, nor is Borrower or any Guarantor in violation of any order of any
court, Governmental Body or arbitration board or tribunal.
(d) Neither Borrower nor any member of the Controlled Group
maintains or contributes to any ERISA Plan other than those listed on Schedule
4.8(d) hereto. Except as set forth in Schedule 4.8(d), (i) no ERISA Plan has
incurred any "accumulated funding deficiency," as defined in Section 302(a)(2)
of ERISA and Section 412(a) of the Code, whether or not waived, and Borrower and
each member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each ERISA Plan, (ii) each
ERISA Plan which is intended to be a qualified plan under Section 401(a) of the
Code as currently in effect has been determined by the Internal Revenue Service
to be qualified under Section 401(a) of the Code and the trust related thereto
is exempt from federal income tax under Section 501(a) of the Code, (iii)
neither Borrower nor any member of the Controlled Group has incurred any
liability to the PBGC other than for the payment of premiums, and there are no
premium payments which have become due which are unpaid, (iv) no ERISA Plan has
been terminated by the plan administrator thereof or by the PBGC, and there is
no occurrence which would cause the PBGC to institute proceedings under Title IV
of ERISA to terminate any ERISA Plan, (v) at this time, the current value of the
assets of each ERISA Plan exceeds the present value of the accrued benefits and
other liabilities of such ERISA Plan and neither Borrower nor any member of the
Controlled Group knows of any facts or circumstances which would materially
change the value of such assets and accrued benefits and other liabilities, (vi)
neither Borrower nor any member of the Controlled Group has breached any of the
responsibilities,
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obligations or duties imposed on it by ERISA with respect to any ERISA Plan,
(vii) neither Borrower nor any member of a Controlled Group has incurred any
liability for any excise tax arising under Section 4972 or 4980B of the Code,
and no fact exists which could give rise to any such liability, (viii) neither
Borrower nor any member of the Controlled Group nor any fiduciary of, nor any
trustee to, any ERISA Plan, has engaged in a "prohibited transaction" described
in Section 406 of the ERISA or Section 4975 of the Code nor taken any action
which would constitute or result in a Termination Event with respect to any
such ERISA Plan which is subject to ERISA, (ix) Borrower and each member of the
Controlled Group has made all contributions due and payable with respect to
each ERISA Plan, (x) there exists no event described in Section 4043(b) of
ERISA, for which the thirty (30) day notice period contained in 29 CFR Section
2615.3 has not been waived, (xi) neither Borrower nor any member of the
Controlled Group has any fiduciary responsibility for investments with respect
to any plan existing for the benefit of persons other than employees or former
employees of Borrower and any member of the Controlled Group, and (xii) neither
Borrower nor any member of the Controlled Group has withdrawn, completely or
partially, from any Multiemployer Plan so as to incur liability under the
Multiemployer Pension Plan Amendments Act of 1980.
4.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by Borrower and its
Subsidiaries are set forth on Schedule 4.9, are valid and have been duly
registered or filed with all appropriate governmental authorities and
constitute all of the intellectual property rights which are necessary for the
operation of its business; to Borrower's knowledge, there is no objection to or
pending challenge to the validity of any such patent, trademark, copyright,
design right, tradename, trade secret or license and Borrower is not aware of
any grounds for any challenge, except as set forth in Schedule 4.9 hereto. Each
patent, patent application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service mark
license, design right, copyright, copyright application and copyright license
owned or held by Borrower and each Guarantor and all trade secrets used by
Borrower and each Guarantor consists of original material or property developed
by Borrower or such Guarantor or was lawfully acquired by Borrower or such
Guarantor from the proper and lawful owner thereof. Each of such items has been
maintained so as to preserve the value thereof from the date of creation or
acquisition thereof.
4.10. Licenses and Permits. Except as set forth in Schedule 4.10, each
of Borrower and each of its Subsidiaries (a) is in compliance with and (b) has
procured and is now in possession of, all material licenses or permits required
by any applicable federal, state or local law or regulation for the operation
of its business in each jurisdiction wherein it is now conducting or proposes
to conduct business except where the failure to procure such licenses or
permits could reasonably be expected to have a Material Adverse Effect.
4.11. Default of Debt. Neither Borrower nor any of its Subsidiaries is
in default in the payment of the principal of or interest on any Debt or under
any instrument or agreement under or subject to which any Debt has been issued
and no event has occurred under the provisions of any such instrument or
agreement which with or without the lapse of time or the giving of notice, or
both, constitutes or would constitute an event of default thereunder.
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4.12. No Default. Neither Borrower nor any of it Subsidiaries is in
default in the payment or performance of any of its contractual obligations the
nonpayment or nonperformance of which could reasonably be expected to have a
Material Adverse Effect and no Default or Event of Default has occurred and is
continuing.
4.13. No Burdensome Restrictions. Neither Borrower nor any of it
Subsidiaries is party to any contract or agreement the performance of which
could reasonably be expected to have a Material Adverse Effect. Neither
Borrower nor any of it Subsidiaries has agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien
which is not a Permitted Lien.
4.14. No Labor Disputes. Neither Borrower nor any of it Subsidiaries
is involved in any labor dispute; there are no strikes or walkouts or union
organization of any of Borrower's or any Guarantor's employees threatened or in
existence and no labor contract is scheduled to expire during the Term other
than as set forth on Schedule 4.14 hereto.
4.15. Margin Regulations. Neither Borrower nor any of it Subsidiaries
is engaged, nor will it engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. No part of the
proceeds of any Advance will be used for "purchasing" or "carrying" "margin
stock" as defined in Regulation U of such Board of Governors.
4.16. Investment Company Act. Neither Borrower nor any of it
Subsidiaries is an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, nor is it controlled by
such a company.
4.17. Disclosure. No representation or warranty made by Borrower in
this Agreement or in any financial statement, report, certificate or any
Ancillary Document furnished in connection herewith or therewith contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading. There is no
fact known to Borrower or which reasonably should be known to Borrower which
Borrower has not disclosed to Agent in writing with respect to the transactions
contemplated by this Agreement which could reasonably be expected to have a
Material Adverse Effect.
4.18. Delivery of Indenture Documentation. Agent has received complete
copies of the Indenture (including all exhibits, schedules and disclosure
letters referred to therein or delivered pursuant thereto, if any) and all
amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent.
4.19. Swaps. Neither Borrower nor any of it Subsidiaries is a party
to, nor will it be a party to, any swap agreement whereby Borrower or any such
Guarantor has agreed or will agree to swap interest rates or currencies unless
same provides that damages upon termination
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following an event of default thereunder are payable on an unlimited "two-way
basis" without regard to fault on the part of either party.
4.20. Conflicting Agreements; Governmental Approvals. Except as
disclosed on Schedule 4.20, no provision of any material mortgage, indenture,
contract, agreement, judgment, decree or order binding on Borrower or any
Guarantor or affecting the Collateral conflicts with, or requires any Consent
which has not already been obtained to, or would in any way prevent the
execution, delivery or performance of, the terms of this Agreement or the
Ancillary Documents. Other than the Confirmation Order no approval or consent
of any regulatory or administrative commission or authority, or of any other
Governmental Body, is necessary to authorize the execution and delivery of this
Agreement and that no such approval or consent is necessary to authorize the
observance or performance by Borrower of the covenants herein contained.
4.21. Application of Certain Laws and Regulations. Neither Borrower
nor any Subsidiary of Borrower is subject to any statute, rule or regulation
which regulates the incurrence of any Debt.
4.22. Business and Property of Borrower; Title. Upon and after the
Closing Date, neither Borrower nor any of it Subsidiaries propose to engage in
any business other than a Related Business. On the Closing Date, each of
Borrower and each of its Subsidiaries will own all the property and possess all
of the rights and Consents necessary for the conduct of the business of
Borrower and such Guarantor. Each of the Borrower and its Subsidiaries has good
and indefeasible title in fee simple to, or a valid leasehold interest in
(subject to exceptions noted in the title opinions delivered to Agent), all its
Real Property, and good title to, or a valid leasehold interest in, all its
other property, and none of such property is subject to any Lien except as
permitted by Section 6.4.
4.23. Security Interests. As of the Closing Date, the Agent for the
ratable benefit of the Lenders shall have a legal, valid and enforceable, first
priority (subject to Permitted Prior Liens) perfected security interest in all
right, title and interest of the Borrower in the "Collateral" described in the
Security Documents.
4.24. Insurance. The Borrower and its Subsidiaries have with respect
to its properties and business, insurance covering the risks, in the amounts,
with the deductible or other retention amounts, and with the carriers, listed
on Schedule 4.24, which insurance meets the requirements of Section 5.4 hereof
as of the Closing Date.
4.25. Plan of Reorganization. The Agent has received the Confirmation
Orders and the Confirmation Orders have become Final Orders, unless receipt of
the Final Order has been waived with the consent of the Required Lenders. All
other conditions precedent to the confirmation and effectiveness of the Plan of
Reorganization have been satisfied or waived and the Effective Date has
occurred.
4.26. Indenture Qualification. As of the date on which this
representation and warranty is made, the offering and issuance of the Indenture
Notes pursuant to the Plan of Reorganization are exempt from registration under
Section 5 of the Securities Act and the Indenture is qualified under the Trust
Indenture Act of 1939, as amended.
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4.27. Location of Borrower. Borrower's and each Guarantor's chief
executive office is located at 1300 North Sam Houston Parkway East, Houston,
Texas.
4.2. Representations, Warranties and Covenants Concerning the
Mortgages. Borrower hereby makes all of the additional representations,
warranties and covenants set forth on Exhibit 4.27 of this Agreement.
V. AFFIRMATIVE COVENANTS.
Borrower and each Guarantor shall, and shall cause each of their
respective Subsidiaries to, until payment in full of the Obligations and
termination of this Agreement:
5.1. Payment of Obligations. Duly and punctually pay the principal of
and interest on all of the Obligations, including each and every obligation
owing under the Notes as the same shall become due and payable under the Notes
and in accordance with the terms of this Agreement and pay to Agent on demand
all usual and customary fees and expenses which Agent incurs in connection with
the forwarding of Advance proceeds. Agent may, without making demand, charge
the account of Borrower for all such fees and expenses.
5.2. Corporate Existence. Borrower and each Guarantor shall do or
cause to be done all things necessary to preserve and keep in full force and
effect their respective corporate existence in accordance with the respective
organizational documents of each of them and the rights (charter and statutory)
and corporate franchises of Borrower and each Guarantor; provided, however,
that neither Borrower nor any Guarantor shall be required to preserve, with
respect to itself, any right of franchise, and with respect to any of its
Subsidiaries, any such existence, right or franchise, if (a) the Board of
Directors of Borrower or such Guarantor shall determine that the preservation
thereof is no longer desirable in the conduct of the business of Borrower or
such Guarantor and (b) the loss thereof is not disadvantageous in any material
respect to Agent and Lenders.
5.3. Payment of Taxes and Other Claims. The Borrower and each
Guarantor shall pay or discharge or cause to be paid or discharged, before the
same shall become delinquent all taxes, assessments and governmental charges
(including withholding taxes and any penalties, interest and additions to
taxes) levied or imposed upon Borrower or such Guarantor or any of their
respective properties and assets; provided, however, that Borrower shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment or charge whose amount, applicability or validity is being contested
in good faith by appropriate proceedings and for which disputed amounts
adequate reserves have been established in accordance with GAAP and so long as
such taxes (other than ad valorem and severance taxes), assessments or charges
do not prime Agent's Lien on the Collateral.
5.4. Maintenance of Properties and Insurance.
(a) Each of Borrower and each Guarantor shall cause the properties
used or useful to the conduct of their respective businesses to be maintained
and kept in good condition, repair and working order (reasonable wear and tear
excepted) and supplied with all necessary equipment and shall cause to be made
all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in its reasonable judgement may be necessary, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
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(b) Each of Borrower and each Guarantor shall provide, or
shall cause to be provided, for itself and each of its Subsidiaries, insurance
(including appropriate self-insurance) against loss or damage of the kinds that
in its reasonable, good faith opinion, are adequate and appropriate for the
conduct of its business and the business of such Subsidiaries in a prudent
manner, with reputable insurers or with the government of the United States of
America or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as is customary, in its reasonable, good faith
opinion, and adequate and appropriate for the conduct of Borrower's and such
Guarantor's business in a prudent manner for companies engaged in a similar
business. In addition, all such insurance shall be payable to Agent as loss
payee, as its interests may appear, under a "standard" or "Texas" loss payee
clause. Without limiting the foregoing, each of Borrower and each Guarantor
shall (i) keep all of its physical property insured with hazard insurance on an
"all risks" basis, with broad form flood and earthquake coverages, with a full
replacement cost endorsement and an "agreed amount" clause in an amount equal
to 100% of the full replacement cost of such property, (ii) maintain all such
workers' compensation or similar insurance as may be required by law, and (iii)
maintain, in amounts and with deductibles equal to those generally maintained
by businesses engaged in similar activities in similar geographic areas,
general public liability insurance against claims of bodily injury, death or
property damage occurring on, in or about the properties of Borrower and each
Guarantor. Whether or not an Event of Default exists, Agent will make available
to Borrower insurance proceeds covering properties subject to the TCW/Southern
Production Payment for the purpose of permitting Borrower to use such funds for
the repair of such properties and Borrower shall use such funds to diligently
repair such properties as promptly as possible. The balance of any proceeds
remaining after application to repair shall be remitted to Agent to be applied
to the Obligations.
All policies of insurance shall provide for at least ten
days' prior written cancellation notice to Agent. In the event of failure by
Borrower and any Guarantor or provide and maintain insurance as described
herein; provided, however, Agent may, at its option, provide such insurance and
charge the amount thereof to Borrower and Guarantors. The Borrower and each
Guarantor shall furnish Agent with certificates of insurance and policies
evidencing compliance with the foregoing insurance provision.
(c) Borrower and each Guarantor will explore, develop and
maintain (or cause to be explored, developed and maintained) the leases, wells,
units and acreage to which the mineral interests pertain in a prudent manner,
and as may be reasonably necessary for the prudent and economical operation of
(and in an effort to maximize the production capacity of) such leases, wells,
units and acreage in accordance with reasonable and customary industry
standards for similar owners of mineral interests.
(d) Borrower and each Guarantor will act prudently and in
accordance with customary industry standards in managing or operating its
assets, properties, business and investments. Borrower and each Guarantor will
keep in good working order and condition, ordinary wear and tear excepted, all
of its assets and properties which are necessary to the conduct of its
business, including, without limitation, all wells and equipment necessary or
useful in the operation of the Hydrocarbon Reserves.
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5.5. Compliance with Laws; Violations. Borrower will comply in all
material respects at all times with all Laws applicable to the Collateral, and
shall promptly notify Agent in writing of any violation of any law, statute,
regulation or ordinance of any Governmental Body, or of any agency thereof,
applicable to Borrower which could reasonably be expected to have a Material
Adverse Effect.
5.6. Execution of Supplemental Instruments. Execute and deliver to
Agent from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
5.7. Payment of Debt. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature, except when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and Borrower and each Guarantor shall have provided for such
reserves as Agent may reasonably deem proper and necessary, subject at all
times to any applicable subordination arrangement in favor of Lenders.
5.8. Standards of Financial Statements. Cause all financial
statements referred to in Sections 9.6, 9.11 and 9.12 as to which GAAP is
applicable to be complete and correct in all material respects (subject, in the
case of interim financial statements, to normal and recurring year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
5.9. Environmental Matters. (a) Borrower and each Guarantor shall
ensure and shall cause each of its Subsidiaries to ensure that the Real
Property remains in compliance in all material respects with all applicable
Environmental Laws.
(b) Each of Borrower and each Guarantor will do all things
necessary to systematically assure and monitor continued compliance in all
material respects with all applicable Environmental Laws, including periodic
reviews of such compliance.
(c) In the event any of Borrower or any Guarantor, gives or
receives notice of any material release or threat of release of a reportable
quantity of any Hazardous Substances on its Real Property (any such event being
hereinafter referred to as a "Hazardous Discharge") or receives any notice of
material violation, request for information or notification that it is
potentially responsible for investigation or cleanup of environmental
conditions on its Real Property, demand letter or complaint, order, citation,
or other written notice with regard to any material Hazardous Discharge or
material violation of any Environmental Laws affecting its Real Property or its
interest therein (any of the foregoing is referred to herein as an
"Environmental Complaint") from any Governmental Body, then Borrower shall
within five (5) Business Days, give written notice of same to the Agent
detailing facts and circumstances of which Borrower or such Subsidiary is aware
giving rise to the Hazardous Discharge or Environmental Complaint and
periodically inform Agent of the status of the matter. Such information is to
be provided to allow Agent to protect its security interest in the Collateral
for the benefit of Lenders and is not intended to create nor shall it create
any obligation upon the Agent or any Lender with respect thereto.
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(d) Each of Borrower and each Guarantor shall respond
promptly to any Hazardous Discharge or Environmental Complaint applicable to it
and take all necessary action in order to safeguard the health of any Person
and to avoid subjecting the Collateral to any claim or Lien other than a
Permitted Lien.
(e) Borrower and each Guarantor shall each jointly and
severally defend and indemnify the Agent and each Lender, its officers,
directors, employees and agents and hold the Agent and each Lender, its
officers, directors, employees and agents harmless from and against all loss,
liability, damage and expense, claims, costs, fines and penalties, including
attorney's fees, suffered or incurred by the Agent or any Lender, its officers,
directors, employees and agents under or on account of any violation by
Borrower or any Guarantor of any Environmental Laws, including, without
limitation, the assertion of any Lien thereunder other than Permitted Liens,
with respect to any Hazardous Discharge, the presence of any Hazardous
Substances in violation of applicable Environmental Laws affecting Borrower's
or such Guarantor's property, whether or not the same originates or emerges
from Borrower's or such Guarantor's property or any contiguous real estate,
including any loss of value of the Collateral as a result of the foregoing,
except to the extent such loss, liability, damage and expense is directly
attributable to any Hazardous Discharge resulting from actions on the part of
the Lender, its officers, directors, employees and agents. The obligations of
Borrower and each Guarantor under this Section 5.9 shall arise upon the
discovery of the presence of any Hazardous Substances in violation of
applicable Environmental Laws on Borrower's or such Guarantor's property,
whether or not any federal, state, or local environmental agency has taken or
threatened any action in connection with the presence of any Hazardous
Substances. The obligation and the indemnifications hereunder shall survive the
termination of this Agreement.
(f) For purposes of Section 5.9 and 4.7, all references to
Real Property shall be deemed to include all of Borrower's and each Guarantor's
right, title and interest in and to its owned and leased premises;
5.10. Inspections. At all times during normal business hours and
upon reasonable notice (unless a Default or Event of Default has occurred or
Agent reasonably suspects that a Default or Event of Default has occurred, in
which event no prior notice shall be required), Agent shall have the right to
(a) visit and inspect Borrower's and each Guarantor's properties and the
Collateral, (b) inspect, audit and make extracts from Borrower's and each
Guarantor's relevant books and records, including, but not limited to,
management letters prepared by independent accountants, and (c) discuss with
Borrower's and each Guarantor's principal officers and independent accountants,
the business, assets, liabilities, financial condition results of operations
and business prospects of Borrower. Agent may conduct inspections at Borrower's
and each Guarantor's properties no more than four (4) times per Loan Year
unless an Event of Default has occurred or the results of any audit report are
not satisfactory to Agent in its discretion, in which event there shall be no
limit on the number of inspection performed. Borrower and each Guarantor will
deliver to Agent any instrument necessary for Agent to obtain records from any
service bureau maintaining records for such Borrower or Guarantor.
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5.11. Dismissal of Appeals. Borrower shall use commercially
reasonable efforts to have dismissed any presently filed and pending appeals to
the Confirmation Order, including, without limitation such appeal pending by
High River Limited Partnership in the United States District Court, Southern
District of Texas and shall immediately make application to have such appeals
dismissed on the grounds of mootness.
VI. NEGATIVE COVENANTS
Neither Borrower nor any Guarantor shall and neither Borrower nor any
Guarantor shall permit any of its Subsidiaries to, until satisfaction in full
of the Obligations and termination of this Agreement:
6.1. Mergers, Consolidations and Other Fundamental Changes.
(a) Consolidate with or merge with or into any other Person,
or, directly or indirectly, sell, lease, assign, transfer or convey all or
substantially all of its assets (computed on a consolidated basis), to another
Person or group of Persons acting in concert, whether in a single transaction
or through a series of related transactions, unless:
(i) either (x) Borrower or such Guarantor, as the case may
be, shall be the continuing Person, or (y) the Person (if other than Borrower)
formed by such consolidation or into which Borrower or such Guarantor, as the
case may be, is merged or to which all or substantially all of the properties
and assets of Borrower or such Guarantor, as the case may be, are transferred as
an entirety or substantially as an entirety (Borrower or such Guarantor, as the
case may be, or such other Person being hereinafter referred to as the
"Surviving Person") shall be a corporation or partnership organized and validly
existing under the laws of the United States, any State thereof or the District
of Columbia, and shall expressly assume, by a joinder agreement supplemental
hereto and any supplements to any Security Documents as Agent in its sole
discretion may require, executed and delivered to Agent on or prior to the
consummation of such transaction, in form satisfactory to the Agent, all the
obligations of the Borrower or such Guarantor, as the case may be, under this
Agreement and the Ancillary Documents and shall execute such Security Documents
as may be necessary to maintain the Lien of Agent on the Collateral of the
Surviving Person;
(ii) No Default or Event of Default shall exist or shall
occur immediately after giving effect to such transaction;
(iii) immediately after giving effect to such transaction,
on a pro forma basis, (x) the Net Worth of the Surviving Person is at least
equal to the Net Worth of such predecessor or transferring entity immediately
prior to such transaction, and (y) the Surviving Person immediately after giving
effect on a pro forma basis to the Consolidated Fixed Charges of the Surviving
Person, (A) the Consolidated Fixed Charge Coverage Ratio of the Surviving Person
for the Reference Period is greater than 2.5 to 1, and (B) the Surviving
Person's Adjusted Consolidated Tangible Assets are equal to or greater than 150%
of the total consolidated principal amount or accreted value, as the case may
be, of Debt of the Surviving Person; and
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(iv) Borrower has delivered to Agent an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger, assignment, or transfer and such supplemental agreements comply with
this Section 6.1(a) and that all conditions precedent herein provided relating
to such transaction have been satisfied.
For purposes of this Section 6.1(a), the Consolidated Fixed Charge Coverage
Ratio shall be determined on a pro forma consolidated basis (giving effect to
such transaction) for the four fiscal quarters immediately preceding such
transaction.
(b) For purposes of clause (a), the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of Borrower or any Guarantor,
which properties and assets, if held by Borrower or such Guarantor instead of
such Subsidiaries, would constitute all or substantially all of the properties
and assets of the Borrower or such Guarantor, on a consolidated basis, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of Borrower and such Guarantor.
(c) Notwithstanding anything contained in the foregoing to
the contrary, any Subsidiary of Borrower or any Guarantor with a Net Worth
greater than zero may merge into Borrower or any Guarantor (or a wholly owned
Subsidiary of Borrower or any Guarantor) at any time, provided, however, that
Borrower shall have delivered to Agent an Officers' Certificate stating that
such Subsidiary has a Net Worth greater than zero and such merger does not
result in a Default or an Event of Default hereunder.
(d) Upon any consolidation or merger, or any transfer of
assets in accordance with Section 6.1(a), the Surviving Person formed by such
consolidation or into which Borrower or any Guarantor is merged or to which
such transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, Borrower or any Guarantor under this
Agreement, the Security Documents and the other Ancillary Documents with the
same effect as if such Surviving Person had been named as Borrower or a
Guarantor herein. When a Surviving Person duly assumes all of the obligations
of Borrower pursuant hereto, the predecessor shall be released from such
obligations.
6.2. Asset Sales. (a) Consummate an Asset Sale unless (x) with
respect to Asset Sales by any Guarantor an amount equal to the Net Cash
Proceeds therefrom is (A) applied to repay the Obligations in such order as
Agent may determine, (B) used to make cash payments in the ordinary course of
business and consistent with past practices that are not otherwise prohibited
by this Agreement, provided, however, that the aggregate amount so used
pursuant to this clause (B) from and after the Closing Date does not exceed $3
million (without duplication of amounts used for Capital Expenditures in
accordance with clause (C) of this Section 6.2 below), or (C) used for Capital
Expenditures in a Related Business within 180 days after the date of such Asset
Sale or used to reimburse Borrower and its Subsidiaries for Capital
Expenditures made prior to such Asset Sale, or (y) with respect to proposed
Asset Sales by Borrower resulting in Net Cash Proceeds which, when aggregated
with the Net Cash Proceeds of all other Asset Sales in the same fiscal year
(other than Asset Sales to which Agent has consented hereunder) exceeds
$1,000,000 in such fiscal year, such Asset Sale shall not be consummated unless
Agent shall have given its prior written consent and Borrower shall deposit
with Agent an amount equal to the amount of such Net Cash Proceeds in excess of
$1,000,000, to be held as cash collateral for
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the Obligations. Absent the existence of an Event of Default, Agent shall
release such cash collateral in an amount (i) which Borrower certifies to Agent
was previously expended by Borrower for Capital Expenditures by Borrower prior
to such Asset Sale and such expended amount has not been previously reimbursed
to Borrower, or (ii) which represents the imminent expenditure of funds by
Borrower for Capital Expenditures in a Related Business within 180 days after
the date of such Asset Sale upon the receipt by Agent of proof reasonably
satisfactory to Agent of such imminent expenditure of funds.
(b) Notwithstanding the foregoing limitations on Asset Sales
and restrictions on and requirements for the use of Net Cash Proceeds
therefrom, Borrower and Guarantors, as the case may be, may at any time and
from time to time, but subject to Subsection 6.2(c) below, effect any of the
following transactions, and the Net Cash Proceeds, if any, realized from any of
the following transactions shall not be subject to the application requirements
of Section 6.2(a):
(i) Borrower and Guarantors may engage in Asset
Sales incident to and resulting from a transaction expressly
permitted under Section 6.1;
(ii) Borrower and Guarantors may sell, assign,
lease, license, transfer, abandon or otherwise dispose of (a)
damaged, worn out, unserviceable or other obsolete property
in the ordinary course of business, or (b) other property no
longer necessary for the proper conduct of their business;
(iii) Borrower and Guarantors may convey, sell,
transfer or otherwise dispose of Hydrocarbons or other
mineral products in the ordinary course of business; and
(iv) Borrower and Guarantors may convey, sell,
transfer or otherwise dispose of Drilling Production Payments
and interests related to Drilling Programs; provided,
however, that an amount equal to the Net Cash Proceeds of
each such conveyance, sale, transfer or other disposition
shall be used for Capital Expenditures (including without
limitation the reimbursement of Borrower and Guarantors for
Capital Expenditures already made) or to repay the
Obligations.
(c) Notwithstanding any other provision of this Section 6.2,
Borrower shall not transfer any Collateral included in the Borrowing Base if,
after giving effect to such transfer and any repayment of Obligations
hereunder, an Overadvance shall exist.
(d) Notwithstanding anything to the contrary contained in
this Section 6.2, Borrower shall not effect the consummation of, and shall not
permit Galveston Bay Pipeline or Galveston Bay Processing, as the case may be,
to consummate a GB Facility Asset Sale unless an amount equal to the Net GB
Financing Proceeds resulting therefrom is (i) distributed by Galveston Bay
Pipeline or Galveston Bay Processing, as the case may be, to Borrower and used
by Borrower for Capital Expenditures in a Related Business of Borrower, each
within 180 days after the date of consummation of such GB Facility Asset Sale,
or (ii) to the extent not used in accordance with clause (i) preceding with 180
days after the date of consummation of such GB Facility Asset Sale, applied by
Borrower to repay the Obligations.
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6.3. Limitation on Incurrence of Additional Debt. Except as set forth
in this Section 6.3, from and after the Closing Date, directly or indirectly,
create, incur, assume, guarantee, or otherwise become liable for, contingently
or otherwise (to "Incur" or, as appropriate, an "Incurrence"), any Debt,
except:
(a) the Obligations and the Guaranty;
(b) Debt evidenced by the Indenture and the Indenture
Notes; provided, however, the aggregate principal amount outstanding under the
Indenture shall not exceed $200,000,000;
(c) Debt outstanding under the Receivables Facility;
(d) Debt in an aggregate principal amount outstanding
not to exceed at any one time $67.5 million;
(e) Subordinated Debt of Borrower solely to any wholly
owned Subsidiary of Borrower, or Debt of any wholly owned Subsidiary of
Borrower solely to Borrower or to any wholly owned Subsidiary of Borrower;
provided, however, that if any Subsidiary holding such Debt, for any reason, is
no longer deemed a Subsidiary of Borrower, any outstanding Debt incurred by
Borrower or another Subsidiary pursuant to this Section 6.3(b) shall constitute
a new incurrence of Debt and be subject to the restrictions of Section 6.3.
(f) Debt of Borrower or any Guarantor secured by a
Permitted Lien that meets the requirements of clause (c), (d), or (e) of the
definition of "Permitted Liens" set forth in Section 1.1;
(g) (1) any guaranty of Debt permitted by clauses (a),
(b), (c), or (k) hereof, which guaranty shall not be included in the
determination of the amount of Debt which may be incurred pursuant to (a), (b),
(c), or (k) hereof, or (2) any guarantee by Borrower of the obligations of any
wholly owned Subsidiary of Borrower to the extent such obligations so
guaranteed (A) do not constitute Debt (unless and only to the extent such Debt
is otherwise permitted under this Section 6.3) and (B) except to the extent
such obligations constitute Debt otherwise permitted under this Section 6.3,
such obligations are of the type customarily Incurred by such wholly owned
Subsidiary in favor of third parties in the ordinary course of conducting its
Related Business;
(h) Borrower and any Guarantor may incur Debt as an
extension, renewal, replacement, or refunding of (i) any item of the Debt
permitted to be incurred by Section 6.3(k), (ii) Debt existing on the Closing
Date that is secured by assets of Galveston Bay Pipeline, up to a maximum
principal amount of such Debt so extended, renewed, replaced or refunded under
this Section 6.3(h) not to exceed $2,000,000, (iii) Debt existing on the
Closing Date (other than this Agreement and the Receivables Facility) that is
secured by assets of Galveston Bay Processing, up to a maximum principal amount
of such Debt so extended, renewed, replaced or refunded under this Section
6.3(h) not to exceed $10,000,000 or (iv) the Debt permitted to be incurred by
this Section 6.3(h) (each such item of Debt is referred to as "Refinancing
Debt"), provided, however, that (1) the maximum principal amount of each item
of Refinancing Debt (or, if such item of Refinancing Debt is issued with
original issue discount, the original issue price of such
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item of Refinancing Debt) permitted under this clause (g) may not exceed the
lesser of (x) the principal amount of the item of Debt being extended, renewed,
replaced, or refunded plus reasonable financing fees and other associated
reasonable out-of-pocket expenses including consent payments, premium, if any,
and related fees, in each case other than those paid to a Affiliate
(collectively, "Refinancing Fees"), or (y) if such item of Debt being extended,
renewed, replaced, or refunded was issued at an original issue discount, the
original issue price, plus amortization of the original issue discount as of
the time of the Incurrence of such item of Refinancing Debt plus Refinancing
Fees, (2) each item of Refinancing Debt has a Weighted Average Life and a final
maturity that is equal to or greater than the related Debt being extended,
renewed, replaced, or refunded at the time of such extension, renewal,
replacement, or refunding, and (3) each item of Refinancing Debt shall rank
with respect to the Obligations to an extent no less favorable in respect
thereof to the Lenders than the related Debt being refinanced;
(i) Debt represented by trade payables or accrued
expenses, in each case incurred on normal, customary terms in the ordinary
course of business, not overdue for a period of more than 45 days (or, if
overdue for a period of more than 45 days, being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto being
maintained on the books of Borrower or any Guarantor in accordance with GAAP)
and not constituting any amounts due to banks or other financial institutions;
(j) Swap Obligations of Borrower or any Guarantor;
(k) Debt of Borrower or any Guarantor to holders of
Allowed Priority Tax Claims under the Plan of Reorganization, to holders of
Allowed Claims in classes 2, 5, 6A or 6B under the Plan of Reorganization, or
under surety bonds, letters of credit or reimbursement obligations related to
or constituting collateral securing Borrower's or any Guarantor's obligations
thereunder;
(l) letters of credit and reimbursement obligations
relating thereto to the extent collateralized by cash or Cash Equivalents;
(m) Debt outstanding on the date hereof and listed on
Schedule 4.8(b)(ii) hereof;
(n) Debt secured by a Permitted Lien that meets the
requirements of clause (w) of the definition of "Permitted Liens" set forth in
Section 1.2;
(o) the Attributable Debt incurred by Borrower in
connection with a Sale and Leaseback Transaction of the Headquarters Facility
if the aggregate principal amount thereof at the time of incurrence does not
exceed 100% of the appraised Value of the Headquarters Facility as determined
by an Appraisal dated not more than six (6) months prior to the date on which
such Sale and Leaseback Transaction is consummated; and
(p) Debt in respect of Drilling Production Payments not
to exceed the limitation set forth in Section 7.4 of this Agreement.
Debt incurred and Disqualified Capital Stock issued by any
Person that is not a Subsidiary of Borrower, which Debt or Disqualified Capital
Stock is outstanding at the time such
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Person becomes a Subsidiary of, or is merged into, or consolidated with
Borrower or one of its Subsidiaries, as the case may be, shall be deemed to
have been incurred or issued, as the case may be, at the time such Person
becomes a Subsidiary of, or is merged into, or consolidated with Borrower or
one of its Subsidiaries.
Notwithstanding anything to the contrary contained in this
Section 6.3 or in Section 6.4, Borrower shall not effect the consummation of,
and shall not permit Galveston Bay Pipeline or Galveston Bay Processing, as the
case may be, to consummate, a GB Facility Financing unless (A) concurrently
with the consummation of such GB Facility Financing Borrower shall cause a duly
executed and acknowledged GB Consent and Subordination Agreement to be
delivered to the Agent and (B) an amount equal to the Net GB Financing Proceeds
resulting therefrom is (i) used by Galveston Bay Pipeline or Galveston Bay
Processing, as the case may be, for Capital Expenditures in a Related Business
of such Person within 180 days after the date of consummation of such GB
Facility Financing, (ii) distributed by Galveston Bay Pipeline or Galveston Bay
Processing, as the case may be, to Borrower and used by Borrower for Capital
Expenditures in a Related Business of such Borrower, each within 180 days after
the date of consummation of such GB Facility Financing, (iii) used, in part, as
contemplated in the preceding clause (i), and used, in part, as contemplated in
the preceding clause (ii), or (iv) to the extent not used in accordance with
clause (i), (ii) or (iii) preceding within 180 days after the date of
consummation of such GB Facility Financing, distributed by Galveston Bay
Pipeline or Galveston Bay Processing, as the case may be, to Borrower and, on
the 181st day after the date of consummation of such GB Facility Financing,
such amount, if any, distributed to Borrower pursuant to this clause (iv) shall
be deemed to be included within the Net Cash Proceeds subject to application
pursuant to Section 6.2(a)(x)(A).
For the purpose of determining compliance with this Section
6.3, (A) if an item of Debt meets the criteria of more than one of the types of
Debt described in the above clauses, Borrower, Guarantors or the Subsidiary in
question shall have the right to determine in its sole discretion the category
to which such Debt applies and shall not be required to include the amount and
type of such Debt in more than one of such categories and may elect to
apportion such item of Debt between or among any two or more of such categories
otherwise applicable, and (B) the amount of any Debt which does not pay
interest in cash or which was issued at a discount to face value shall be
deemed to be equal to the amount of the liability in respect thereof determined
in accordance with GAAP.
6.4. Creation of Liens. Create or suffer to exist any Lien upon or
against any of its property or assets now owned or hereafter acquired, except
Permitted Liens. For the purpose of determining compliance with this Section
6.4, if a Lien meets the criteria of more than one of the types of Permitted
Liens, Borrower, Guarantors or the Subsidiary in question shall have the right
to determine in its sole discretion the category of Permitted Lien to which
such Lien applies, shall not be required to include such Lien in more than one
of such categories, and may elect to apportion such Lien between or among any
two or more categories otherwise applicable.
6.5. Limitation on Investments, Loans and Advances. Make any
advance, loan, extension of credit or capital contribution to, or purchase any
stock, bonds, note, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any Person,
except pursuant to a Permitted Investment.
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6.6. Limitation on Restricted Payments. Directly or indirectly
make any Restricted Payment.
6.7. Nature of Business. Neither Borrower nor any Guarantor shall
directly or indirectly engage to any substantial extent in any line or lines of
business activity other than a Related Business or such other business
activities as are reasonably related or incidental thereto.
6.8. Limitation on Transactions with Affiliates.
(a) Neither Borrower or any Guarantor shall enter directly or
indirectly into, or permit to exist, any Affiliate Transaction with any Officer
Affiliate, except for (i) transactions that constitute Permitted Investments
under clause (vi) of the definition of the term "Permitted Investments" set
forth in Section 1.2, (ii) employee compensation arrangements relating to the
full-time employment of Officer Affiliates by Borrower or any of its
Subsidiaries, (iii) the Existing Agreements, and (iv) transactions effected
pursuant to and in accordance with the terms of the Existing Agreements.
(b) Neither Borrower or any Guarantor shall enter directly or
indirectly into, or permit to exist, any Affiliate Transaction with any
Non-Officer Affiliate, except for (i) transactions made in good faith, the
terms of which are (x) fair and reasonable to Borrower or such Subsidiary, as
the case may be, (y) at least as favorable as the terms which could be obtained
by Borrower or such Guarantor, as the case may be, in a comparable transaction
made on an arm's length basis with Persons who are not Affiliates and (z) such
transaction must first be unanimously approved by the Board of Directors of
Borrower or such Guarantor which is the transacting party pursuant to a Board
Resolution, as fair and reasonable to Borrower or such Guarantor, as the case
may be, and on terms which are at least as favorable as the terms which could
be obtained by Borrower or such Guarantor, as the case may be, on an arm's
length basis with Persons who are not Affiliates, (ii) transactions between
Borrower, any Guarantor and any wholly-owned Subsidiary of Borrower or any
Guarantor or transactions between wholly-owned Subsidiaries of Borrower or any
Guarantor, (iii) transactions pursuant to the Indenture and related documents,
in each case, as amended, and (iv) transactions effected pursuant to and in
accordance with the terms and provisions of any court-approved settlement
relating to the Debtors' First Amended Objection of Claims of Orion Refining
Corporation (TransTexas Claim No. 1187) and TCR Holding Corporation (TransTexas
Claim No. 971) filed on February 11, 2000, in the TransTexas Case; and (v) any
employee compensation arrangement or ordinary course expense advance.
(c) Without limiting the foregoing provisions of Section
6.8(b), with respect to any Affiliate Transaction or series of Affiliate
Transactions (other than any Affiliate Transaction described clauses (ii),
(iii), or (iv) of Section 6.8(b)) with an aggregate value in excess of $5
million, Borrower must first obtain a favorable written opinion as to the
fairness of such transaction to Borrower or such Subsidiary, as the case may
be, from a financial point of view, from a nationally recognized investment
banking or "big 5" accounting firm.
6.9. Subsidiaries. Form any Material Subsidiary unless such
Material Subsidiary executes and delivers a joinder to this Agreement joining
this Agreement as a Guarantor and such other documents and instruments deemed
appropriate by Agent with respect to such Subsidiary promptly following such
formation or acquisition.
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6.10. Fiscal Year and Accounting Changes. Change its fiscal year
from January 31 or make any significant change (i) in accounting treatment and
reporting practices except as required by GAAP or (ii) in tax reporting
treatment except as required by law; provided, however, that Borrower may
change its tax year to conform to its fiscal year.
6.11. Amendment of Articles of Incorporation, By-Laws. Amend or
modify any material term or provision of its Articles of Incorporation or
By-Laws unless required by law and except to the extent such amendment could
not reasonably be expected to have a Material Adverse Effect.
6.12. Compliance with ERISA. (i) (x) Maintain, or permit any member
of the Controlled Group to maintain, or (y) become obligated to contribute, or
permit any member of the Controlled Group to become obligated to contribute, to
any ERISA Plan, other than those ERISA Plans disclosed on Schedule 4.8(d); (ii)
engage, or permit any member of the Controlled Group to engage, in any
non-exempt "prohibited transaction", as that term is defined in section 406 of
ERISA and Section 4975 of the Code; (iii) incur, or permit any member of the
Controlled Group to incur, any "accumulated funding deficiency", as that term
is defined in Section 302 of ERISA or Section 412 of the Code; (iv) terminate,
or permit any member of the Controlled Group to terminate, any ERISA Plan where
such event could result in any liability of Borrower or any member of the
Controlled Group or the imposition of a lien on the property of Borrower or any
member of the Controlled Group pursuant to Section 4068 of ERISA; (v) assume,
or permit any member of the Controlled Group to assume, any obligation to
contribute to any Multiemployer Plan not disclosed on Schedule 4.8(d); (vi)
incur, or permit any member of the Controlled Group to incur, any withdrawal
liability to any Multiemployer Plan; (vii) fail promptly to notify Agent of the
occurrence of any Termination Event; (viii) fail to comply, or permit a member
of the Controlled Group to fail to comply, with the requirements of ERISA or
the Code or other applicable laws in respect of any ERISA Plan; (ix) fail to
meet, or permit any member of the Controlled Group to fail to meet, all minimum
funding requirements under ERISA or the Code or postpone or delay or allow any
member of the Controlled Group to postpone or delay any funding requirement
with respect of any ERISA Plan.
6.13. Prepayment of Indenture Notes. At any time, directly or
indirectly, prepay the Indenture Notes or repurchase, redeem, retire or
otherwise acquire any Indenture Notes except, so long as an Event of Default
does not exist or would not exist after giving effect thereto, regularly
scheduled or required repayments, purchases or redemptions or refinancing of
the Indenture Notes by the Borrower pursuant to Article III or Section 4.14(b)
et seq. of the Indenture or as otherwise permitted hereunder.
6.14. Limitations on Restricting Subsidiary Dividends. Except as
listed on Schedule 6.14 or in connection with a GB Facility Financing, Borrower
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, create, assume, or suffer to exist any consensual encumbrance or
restriction on the ability of any Subsidiary of Borrower to pay dividends or
make other distributions on the Capital Stock of any Subsidiary of Borrower,
except encumbrances and restrictions existing under this Agreement, the
Receivables Facility or the Indenture (or any refinancing of any such Debt
facilities incurred in accordance with Section 6.3(g)), and any agreement of a
Person acquired by Borrower or a Subsidiary of Borrower, which restrictions
existed at the time of acquisition, were not put in place in anticipation of
such
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acquisition and are not applicable to any Person or property, other than the
Person or any property of the Person so acquired.
6.15. Changes Relating to Subordinated Debt. Amend the terms of any
Subordinated Debt if the effect of such amendment is to: (a) increase the
interest rate on such Debt; (b) shorten the maturity of such Subordinated Debt;
(c) change any event of default or add any covenant with respect to such Debt;
(d) change the payment provisions of such Debt; (e) change the subordination
provisions thereof; or (f) change or amend any other term if such change or
amendment would materially increase the obligations of the obligor or confer
additional material rights on the holder of such Debt in a manner adverse to
Borrower, Agent or any Lender.
VII. FINANCIAL COVENANTS.
Borrower shall, until payment of the Obligations and termination of
this Agreement:
7.1. Consolidated Coverage Ratio. Not permit the Consolidated
Coverage Ratio for Borrower and its Subsidiaries on a consolidated basis at the
end of each fiscal quarter with respect to the immediately preceding fiscal
period set forth below (ending on the last day of such fiscal quarter) to be
less than Consolidated Coverage Ratio set forth below as corresponds to the
applicable fiscal period:
Period Coverage Ratio
------ --------------
One quarter ended 4/30/00 .33 to 1
Two quarters ended 7/31/00 .40 to 1
Three quarters ended 10/31/00 .45 to 1
Four Quarters Ended
-------------------
1/31/01 .50 to 1
4/30/01 .55 to 1
7/31/01 .60 to 1
10/31/01 .65 to 1
1/31/02 .70 to 1
4/30/02 .75 to 1
7/31/02 .80 to 1
10/31/02 .85 to 1
1/31/03 .90 to 1
4/30/03 1.00 to 1
7/31/03 1.10 to 1
10/31/03 1.20 to 1
1/31/04 and thereafter 1.25 to 1
until the end of the Term
7.2. Consolidated Net Income. Not permit the sum of (i)
Consolidated Net Income for Borrower and its Subsidiaries on a consolidated
basis plus (ii) dividend requirements of Borrower and its consolidated
Subsidiaries (whether in cash or otherwise (except dividends
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payable solely in shares of Qualified Capital Stock)) with respect to Preferred
Stock paid, accrued, or scheduled to be paid or accrued during each period set
forth below (in each case to the extent attributable to such period and
excluding items eliminated in consolidation) at the end of each fiscal quarter
with respect to the immediately preceding fiscal period set forth below (ending
on the last day of such fiscal quarter) to be less than the amount set forth
below as corresponds to the applicable fiscal period:
Fiscal Period Net Income
------------- ----------
One quarter ended 4/30/00 ($12,000,000)
Two quarters ended 7/31/00 ($25,000,000)
Three quarters ended 10/31/00 ($38,000,000)
Four Quarters Ended
-------------------
1/31/01 ($40,000,000)
4/30/01 ($37,500,000)
7/31/01 ($35,000,000)
10/31/01 ($32,500,000)
1/31/02 ($30,000,000)
4/30/02 ($27,500,000)
7/31/02 ($25,000,000)
10/31/02 ($22,500,000)
1/31/03 ($20,000,000)
4/30/03 ($15,000,000)
7/31/03 ($10,000,000)
10/31/03 ($ 5,000,000)
1/31/04 and thereafter 0
until the end of the Term
7.3. Minimum Consolidated EBITDA. Not permit Consolidated EBITDA
for Borrower and its Subsidiaries on a consolidated basis at the end of each
fiscal quarter with respect to the immediately preceding fiscal period set
forth below (ending on the last day of such fiscal quarter) to be less than the
Consolidated EBITDA set forth below as corresponds to the applicable fiscal
period:
Fiscal Period EBITDA
------------- ------
One quarter ended 4/30/00 $18,000,000
Two quarters ended 7/31/00 $38,000,000
Three quarters ended 10/31/00 $60,000,000
Four Quarters Ended
-------------------
1/31/01 $80,000,000
4/30/01 $82,500,000
7/31/01 $85,000,000
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10/31/01 $ 87,500,000
1/31/02 $ 90,000,000
4/30/02 $ 92,500,000
7/31/02 $ 95,000,000
10/31/02 $ 97,500,000
1/31/03 $100,000,000
4/30/03 $102,500,000
7/31/03 $105,000,000
10/31/03 $107,500,000
1/31/04 and thereafter until $110,000,000
the end of the Term
7.4. Drilling Production Payments. From and after the Closing
Date, outstanding Debt with respect to Drilling Production Payments shall not,
in the aggregate exceed the amounts set forth below during the periods set
forth:
Maximum Drilling Production
Amount of Period Payment Liabilities
---------------- -------------------
Closing Date through 10/31/00 $60,000,000
11/1/00 through 1/31/01 $57,500,000
2/1/01 through 4/30/01 $55,000,000
5/1/01 through 7/31/01 $50,000,000
8/1/01 through 10/31/01 $45,000,000
11/1/01 through 1/31/02 $40,000,000
2/1/02 through 4/30/02 $35,000,000
5/1/02 and thereafter until $30,000,000
the end of the Term
Neither the foregoing provisions nor anything else in this Agreement or the
Ancillary Documents shall be deemed to prevent Borrower from offering to
TCW/Southern, as supplements and additions to the TCW/Southern Production
Payment, any TCW/Southern Mandatory Offered Wells that Borrower is obligated to
offer pursuant to the terms of the Production Payment Purchase Agreement on or
about the date hereof, between TCW/Southern and Borrower, and upon request
Agent shall execute such documents as may be necessary to permit any such
TCW/Southern Mandatory Offered Well to be made subject to the TCW/Southern
Production Payment and to confirm that the interests therein added to the
TCW/Southern Production Payment (but not Borrower's retained interests) are
free from any Liens under the Ancillary Documents. In addition (but not in
limitation of the foregoing), Borrower may make additional wells and acreage,
other than TCW/Southern Mandatory Offered Wells, subject to the TCW/Southern
Production Payment or any other Drilling Production Payment, provided that:
(a) Borrower shall not, without the Agent's consent, so make
subject any proved Hydrocarbon Reserves that have been given value in any
Proved Reserves Report submitted by Borrower in connection with any Borrowing
Base determination.
(b) the Debt attributable to any such Drilling Production
Payment, plus all then existing Debt of Borrower and its Subsidiaries in
respect of other Drilling Production
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Payments, shall not exceed the foregoing limitations in this Section 7.4 on the
maximum amount of Drilling Production Payment Debt that Borrower can incur, and
(c) Borrower shall certify to Agent that the foregoing
conditions have been satisfied and that no Event of Default then exists.
Subject to such conditions, Agent shall upon request execute such documents as
may be necessary to permit the proposed Drilling Production Payment transaction
to be implemented.
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of Lenders to
make the initial Advances requested to be made on the Closing Date is subject
to the satisfaction or waiver by Lenders, immediately prior to or concurrently
with the making of such Advances, of the following conditions precedent:
(a) Loan Documents. Agent shall have received this Agreement,
the Notes, the Security Documents, the Guaranties (executed by all Material
Subsidiaries) and the other Ancillary Documents (including all Exhibits and
Schedules) duly executed and delivered by an authorized officer of Borrower;
(b) Filings, Registrations and Recordings. Each document
(including, without limitation, any Uniform Commercial Code financing
statement) required by this Agreement, any Ancillary Document or under law or
reasonably requested by the Agent to be filed, registered or recorded in order
to create, in favor of Agent, a perfected security interest in or lien upon the
Collateral shall have been executed by Borrower;
(c) Corporate Proceedings of Borrower. Agent shall have
received a copy of the resolutions in form and substance reasonably
satisfactory to Agent, of the Board of Directors of Borrower and the Guarantors
authorizing (i) the execution, delivery and performance of Documents to which
it is a party and the Receivables Facility and (ii) the granting by Borrower of
the security interests in and liens upon the Collateral, in each case certified
by the Secretary or an Assistant Secretary of Borrower as of the Closing Date;
and, such certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of such
certificate;
(d) Incumbency Certificates of Borrower. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of Borrower
and each Guarantor, dated the Closing Date, as to the incumbency and signature
of the officers of Borrower and each Guarantor executing the Document to which
it is a party, together with evidence of the incumbency of such Secretary or
Assistant Secretary;
(e) Certificates. Agent shall have received a copy of the
Amended and Restated Certificate of Incorporation of Borrower and each
Guarantor, and all amendments thereto, certified by the Secretary of State or
other appropriate official of its jurisdiction of incorporation together with
copies of the Amended and Restated By-Laws of Borrower and each Guarantor
certified as accurate and complete by the Secretary of Borrower and such
Guarantor;
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(f) Good Standing Certificates. Agent shall have received
good standing certificates for Borrower and each Guarantor dated as of a recent
date issued by the Secretary of State or other appropriate official of
Borrower's and each Guarantor's jurisdiction of incorporation and each
jurisdiction where the conduct of Borrower's and each Guarantor's business
activities or the ownership of its properties necessitates qualification;
(g) Legal Opinions. Agent shall have received the executed
legal opinions of Gardere & Wynne, LLP and local counsel, each in form and
substance satisfactory to Agent which shall cover such matters incident to the
transactions contemplated by this Agreement and the Ancillary Documents as
Agent may reasonably require and Borrower hereby authorizes and directs such
counsel on its behalf and on behalf of Guarantors to deliver such opinions to
Agent and the Lenders;
(h) No Litigation. (i) No litigation, investigation or
proceeding before or by any arbitrator or Governmental Body shall be continuing
or threatened against Borrower or any Guarantor or against the officers or
directors of Borrower or any Guarantor (A) in connection with the Documents or
any of the transactions contemplated thereby and which, in the reasonable
opinion of Agent, is deemed material or (B) other than litigation described in
Borrower's or such Guarantor's Exchange Act filings, which if adversely
determined, could, in the reasonable opinion of Agent, have a Material Adverse
Effect; and (ii) no injunction, writ, restraining order or other order of any
nature materially adverse to Borrower or any Guarantor or the conduct of its
business or inconsistent with the due consummation of the Transactions shall
have been issued by any Governmental Body;
(i) Solvency Certificate; Pro Forma Financial Statements;
Projections. Agent shall have received a Solvency Certificate in the form of
Exhibit 8.1(i) executed by the Chief Financial Officer of Borrower along with a
copy of the Pro Forma Financial Statements and Projections which shall be
satisfactory in all respects to Agent;
(j) Collateral Examination. Agent shall have completed
Collateral examinations (including title examinations) and received appraisals,
the results of which shall be satisfactory in form and substance to the Agent;
(k) Fees. Agent shall have received all fees payable to Agent
and the Lenders on or prior to the Closing Date pursuant to Article III hereof
and counsel for Credit Suisse First Boston Management Corporation, Angelo
Gordon & Co., L.P. and Oaktree Capital Management, LLC, as general partner and
investment manager of certain funds and accounts it manages (collectively the
"Bondholder Lenders') shall have received all amounts due and payable to the
Bondholder Lenders on or prior to the Closing Date pursuant to Section 17.9(b)
hereof;
(l) Insurance. Agent shall have received in form and
substance satisfactory to Agent, certified copies of Borrower's and each
Guarantor's casualty insurance policies, together with loss payable
endorsements on Agent's standard form of loss payee endorsement naming Agent as
loss payee, and certified copies of Borrower's and each Guarantor's liability
insurance policies, together with endorsements naming Agent as a co-insured;
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(m) Environmental Reports. Agent shall have received all
environmental studies and reports prepared by independent environmental
engineering firms of all Real Property on Schedule 8.1(m);
(n) Payment Instructions. Agent shall have received written
instructions from Borrower directing the application of proceeds of the initial
Advances made pursuant to this Agreement;
(o) Consents. Agent shall have received any and all Consents
necessary to permit the effectuation of the transactions contemplated by this
Agreement and the Ancillary Documents; and, Agent shall have received such
Consents and waivers of such third parties as might assert claims with respect
to the Collateral, as Agent and its counsel shall deem necessary;
(p) No Adverse Material Change. (i) Since October 31, 1999,
the date of the last quarterly Financial Statement filed with the SEC and
supplementing the Disclosure Statement, there shall not have occurred (x) any
material adverse change in the financial condition operations, properties or
prospects of Borrower and its Subsidiaries, either individually or taken as a
whole, (y) no material damage or destruction to any of the Collateral nor any
material depreciation in the value thereof and (z) no event, condition or state
of facts which could reasonably be expected to have a Material Adverse Effect
and (ii) no representations made or information supplied to Agent or any Lender
shall have been proven to be inaccurate or misleading in any material respect;
(q) Review of Working Capital Accounts. Agent shall have
completed its review of Borrower's working capital accounts;
(r) Contract Review. Agent shall have reviewed all material
contracts of Borrower and each Guarantor including, without limitation, leases,
union contracts, labor contracts, vendor supply contracts, license agreements
and distributorship agreements, working capital accounts, marketing agreements
and such contracts and agreements shall be satisfactory in all respects to
Agent;
(s) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of Borrower dated as of the
date hereof, stating that (i) all representations and warranties set forth in
this Agreement and the Ancillary Documents are true and correct on and as of
such date, (ii) Borrower is on such date in compliance with all the terms and
provisions set forth in this Agreement and the Ancillary Documents and (iii) on
such date no Default or Event of Default has occurred or is continuing;
(t) Borrowing Base Certificate. Agent shall have received a
Borrowing Base Certificate demonstrating to the satisfaction of Agent that the
aggregate amount of Eligible Reserves is sufficient in value and amount to
support Advances in the amount requested by Borrower on the Closing Date;
(u) Receivables Facility. The Receivables Facility shall
close effective on the Closing Date;
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(v) Indenture. Agent shall have received executed copies of
the Indenture, the Indenture Notes, and other related agreements, each
certified as of the Closing Date by the Secretary or Assistant Secretary of the
Borrower (x) to be a true, correct and complete copy of such document and (y)
not to have been amended or rescinded from the form so certified and to be in
full force and effect;
(w) Confirmation Orders. The Agent shall have received a
certificate of the Secretary or Assistant Secretary of the Borrower, dated as
of the Closing Date, certifying (x) that attached thereto are true, correct and
complete copies of each of the Confirmation Orders (including the Plan of
Reorganization attached to such Confirmation Order) and (y) that no appeal or
motion for rehearing has been filed in connection with such Confirmation
Orders;
(x) Intercreditor Agreement. Agent shall have received the
fully executed Intercreditor Agreement, which Intercreditor Agreement shall be
satisfactory in form and substance to Agent in its sole discretion;
(y) Liens. The Security Documents shall create in favor of
the Agent for the benefit of the Lenders a first priority perfected security
interest (subject to Permitted Prior Liens) in all Collateral.
(x) Proved Reserves Report. The Agent and the Lenders shall
have received a Proved Reserves Report with respect to proven Hydrocarbon
Reserves of the Borrower, which shall be in form and substance satisfactory to
the Agent and the Lenders.
(y) Plan of Reorganization. The terms and conditions of the
Plan of Reorganization shall not have been amended or modified from the form of
the Plan of Reorganization attached to the Confirmation Order without the
approval of the Required Lenders; provided, however, that modifications which
in the reasonable judgment of the Agent do not impair or adversely affect the
rights and remedies of the Lenders may be implemented by the Borrower without
such approval. All conditions precedent to the effectiveness of the Plan of
Reorganization shall have been satisfied (or waived), the Confirmation Order
shall have become a Final Order and the Effective Date shall have occurred.
(z) Implementation of the Plan. In accordance with the terms
of the Plan of Reorganization, (i) the Borrower shall have issued the Class A
Common Stock, the Class B Common Stock, the Junior Preferred Stock, the Senior
Preferred Stock, the Warrants, and the Senior Secured Notes to all holders of
Allowed Claims and Interests entitled to receive same and (ii) the Borrower
shall have distributed cash to all holders of Allowed Claims entitled to
receive same.
(aa) Distributions. Borrower shall have established
procedures to ensure Agent of the payment of distributions due under the Plan
of Reorganization and all ongoing payments due in connection with ongoing
operations and to the holders of royalty interests and with respect to
severance taxes, which procedures shall be satisfactory to Agent in its sole
and absolute discretion.
(bb) Reports. Agent shall have received reports on
investigations conducted by Agent and/or its designees, with respect to
Borrower's and each Guarantor's business and assets,
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including compliance with all applicable laws, the conclusions of such report
to be reasonably satisfactory to Agent.
(cc) Debt Obligations. The Agent shall have reviewed all
documentation relating to all debt obligations of the Borrower and each
Guarantor, and shall be satisfied in all respects with such review. Agent shall
have received evidence that the total amount of Drilling Production Payment
liability does not exceed $60,000,000.
(dd) Minimum PV10. (i) The PV10 of total proved Hydrocarbon
Reserves (utilizing the Gillespie Price Method), excluding Hydrocarbon Reserves
attributable to wells subject to Production Payments to the extent of the
Dedication Percentage applicable to the Hydrocarbon Reserves at such wells,
shall not be less than 100% of the outstanding Obligations (after giving effect
to the initial Advances under this Agreement). (ii) The PV10 (utilizing the
Gillespie Price Method) of total proved developed producing Hydrocarbons
(including wells subject to Production Payments, but excluding any PV10
attributable to the interest of the entity to whom the Production Payments are
owed) shall not be less than 100% of the outstanding Obligations (after giving
effect to the initial Advances under this Agreement).
(ee) Distribution Channels. Agent shall have obtained the
right, pursuant to appropriate documentation, to utilize any and all rights
with respect to pipeline distribution and processing necessary to market the
now existing or hereafter acquired Hydrocarbon Reserves.
(ff) Minimum Syndication. GMACCC shall have received
Commitments from other Lenders of not less than $20,000,000 effective on the
Closing Date, which condition shall be deemed satisfied if $20,000,000 of
Obligations under the Existing DIP Facility become $20,000,000 of Obligations
under this Agreement.
(gg) Other. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
Transactions shall be satisfactory in form and substance to Agent, the Lenders
and their counsel.
8.2. Conditions to Each Advance. The agreement of Lenders to make
any Advance requested to be made on any date (including, without limitation,
its initial Advance), is subject to the satisfaction of the following
conditions precedent as of the date such Advance is made:
(a) Distributions. Borrower shall have established procedures
to ensure Agent of the payment of distributions due under the Plan of
Reorganization and all ongoing payments due in connection with ongoing
operations and to the holders of royalty interests and with respect to
severance taxes, which procedures shall be satisfactory to Agent in its sole
and absolute discretion.
(b) Representations and Warranties. Each of the
representations and warranties made by Borrower in or pursuant to this
Agreement and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement or any related agreement shall be true and correct in all
material respects on and as of such date as if made on and as of such date,
provided that any representation or warranty made as of a specific date shall
be true and correct in all material respects as of such specific date;
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(c) No Default. No Event of Default or Default shall have
occurred and be continuing on such date, or would exist after giving effect to
the Advances requested to be made, on such date; provided, however that Agent
in its sole discretion, may continue to make Advances notwithstanding the
existence of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default;
(d) Maximum Advances. In the case of any Advances requested
to be made, after giving effect thereto, the aggregate Advances shall not
exceed the maximum amount of Advances permitted under Section 2.1 hereof; and
(e) Counsel for the Bondholder Lenders shall have received
all amounts due and payable to the Bondholder Lenders on or after the Closing
Date pursuant to Section 17.9(b) hereof.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWER.
Borrower and each Guarantor shall, until satisfaction in full of the
Obligations and the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning
thereof, report to Agent all matters materially affecting the value,
enforceability or collectability of any portion of the Collateral including,
without limitation, Borrower's reclamation or repossession of, or the return to
Borrower of, a material amount of goods or claims or disputes asserted by any
Customer or other obligor.
9.2. Borrowing Base Certificate. Deliver to Agent on or before
the twenty-fifth (25th) day of each month as and for the prior month a
Borrowing Base Certificate.
9.3. Proved Reserves Report. Furnish Agent on a six month basis a
Proved Reserves Report, prepared as of February 1 and August 1 of each year,
and delivered to Agent within 45 days of such date. Borrower may submit an
interim Proved Reserve Report prepared by the petroleum engineer which prepared
the most recent Proved Reserves Report or by an independent petroleum engineer
approved by Agent, prior to the date required hereunder for purposes of
calculating the Borrowing Base. In addition, Agent may require an Agent's
Proved Reserve Report as set forth in Section 2.1 hereof. Any Proved Reserve
Report, any reserve update included in any Borrowing Base Certificate or
Agent's Proved Reserve Report prepared by (i) Netherland, Sewell & Associates,
Inc. shall be prepared in accordance with the SEC Method or (ii) Cawley,
Gillespie & Associates shall be based upon the current NYMEX spot price and on
the Gillespie Method.
9.4. Intentionally Omitted
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9.5. Material Occurrences. Promptly notify Agent in writing upon
the occurrence of (a) any Event of Default or Default; (b) any event of default
under the Indenture; (c) any event which with the giving of notice or lapse of
time, or both, would constitute an event of default under the Indenture; (d)
any event, development or circumstance whereby any financial statements or
other reports furnished to Agent fail in any material respect to present
fairly, in accordance with GAAP consistently applied, the financial condition
or operating results of Borrower as of the date of such statements; (e) any
accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971
of the Code, could subject Borrower to a tax imposed by Section 4971 of the
Code; (f) each and every default by Borrower which might reasonably be expected
to result in the acceleration of the maturity of any Debt in excess of
$5,000,000, including the names and addresses of the holders of such Debt with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Debt; and (g)
any other development in the business or affairs of Borrower which could
reasonably be expected to have a Material Adverse Effect; in each case
describing the nature thereof and the action Borrower proposes to take with
respect thereto.
9.6. SEC Reports. Whether or not the Borrower is subject to the
reporting requirements of Section 13 or Section 15(d) of the Exchange Act, the
Borrower shall deliver to the Agent and each Lender, within 60 days after the
end of each fiscal quarter (other than any fiscal quarter ending a fiscal year)
and within 105 days after the end of each fiscal year quarterly and annual
financial statements, respectively, substantially equivalent to financial
statements that would have been included in the reports filed with the
Securities and Exchange Commission (the "SEC") if the Borrower were subject to
the reporting requirements of Section 13 or Section 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Borrower's independent certified public accountants as such would be required
in such reports to the SEC, and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, unless the SEC will not accept such reports, file
with the SEC the annual, quarterly and other reports which it is or would have
(if it were subject to such reporting obligations) been required to file with
the SEC. Annual and quarterly financial statements required to be delivered by
Borrower under this Section 9.6 shall be accompanied by comparable
consolidating balance sheets and consolidating income statements for each
Material Subsidiary (reviewed, with respect to annual information only, by
Borrower's independent certified public accountants).
9.7. Compliance Certificate; Notice of Default. Deliver to Agent
within 60 days after the end of each of its fiscal quarters, or 105 days after
the end of a fiscal quarter that is also the end of a fiscal year, an Officer's
Certificate equivalent to the certificate delivered to the Trustee under
Section 4.7(a) of the Indenture and complying with Section 314(a)(4) of the
Trust Indenture Act, as amended, and stating that a review of its activities
and the activities of its Subsidiaries during the preceding fiscal quarter has
been made under the supervisions of the signing officers with a view to
determining whether Borrower and its Subsidiaries have kept, observed,
performed and fulfilled its obligations under this Agreement and further
stating, as to each such Officer signing such certificate, regardless of
whether the signer knows of any failure by Borrower or any Subsidiary of
Borrower to comply with any conditions or covenants in this Agreement, or of
the occurrence of any Default, and, if such signer does know of such a failure
to comply or Default, the certificate shall describe such failure or Default
with particularity.
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(a) Deliver to Agent within 105 days after the end of each of
its fiscal years a written report of a firm of independent certified public
accountants with an established national reputation stating that in conducting
their audit for such fiscal year, nothing has come to their attention that
caused them to believe that the Company or any Subsidiary of the Company was not
in compliance with the provisions set forth in Sections 6.2, 6.3 or 6.7.
(b) Deliver to Agent, immediately upon becoming aware of any
Default or Event of Default under this Agreement, an Officers' Certificate
specifying such Default or Event of Default and what action Borrower is taking
or proposes to take with respect thereto. Neither Agent nor any Lender shall be
deemed to have knowledge of a Default or an Event of Default unless one of its
officers receives notice of the Default giving rise thereto from Borrower.
(c) Deliver to Agent, promptly after the occurrence thereof,
an Officers' Certificate informing Agent in reasonable detail of (i) any change
in the composition of the Board of Directors of Borrower or any of its
Subsidiaries, and/or (ii) any amendment to the charter or by-laws of Borrower or
any of its Subsidiaries.
9.8. Quarterly Financial Statements. Furnish Agent within sixty (60)
days after the end of each fiscal quarter, an unaudited balance sheet of
Borrower on a consolidated and consolidating basis and unaudited statements of
income and stockholders' equity and cash flow of Borrower reflecting results of
operations from the beginning of the fiscal year to the end of such quarter and
for such quarter, prepared consistent with the reporting requirements of the
Exchange Act, whether or not Borrower is subject to such reporting requirements
and on a basis consistent with prior practices and complete and correct in all
material respects, subject to normal year end adjustments. The reports shall be
accompanied by a certificate of Borrower's President and/or Chief Financial
Officer which shall state that, based on an examination sufficient to permit him
to make an informed statement, no Default or Event of Default exists, or, if
such is not the case, specifying such Default or Event of Default, its nature,
when it occurred, whether it is continuing and the steps being taken by Borrower
with respect to such default and, such certificate shall have appended thereto
calculations which set forth Borrower's compliance with the requirements or
restrictions imposed by Article VII hereof.
9.9. Other Reports. Furnish Agent as soon as available, but in any
event within ten (10) days after the issuance thereof, (i) with copies of such
financial statements, reports and returns as Borrower shall send to its
stockholders and (ii) copies of all material notices sent pursuant to the
Indenture.
9.10. Additional Information. Furnish Agent with such additional
information as Agent shall reasonably request in order to enable Agent and
Lenders to determine whether the terms, covenants, provisions and conditions of
this Agreement and the Notes have been complied with by Borrower including,
without limitation and without the necessity of any request by Agent, (a) copies
of all environmental audits and reviews, (b) at least thirty (30) days prior
thereto, notice of Borrower's opening of any new office or place of business or
Borrower's closing of any existing office or place of business, (c) promptly
upon Borrower's learning thereof, notice of any labor dispute to which Borrower
may become a party, any strikes or walkouts relating to any of its plants or
other facilities, and the expiration of any labor contract to which Borrower is
a party or by which Borrower is bound, and (d) promptly after its incurrence,
notice of the incurrence of additional Drilling Production Payment liability.
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9.11. Projected Operating Budget. Furnish Agent, no later than thirty
(30) days prior to the beginning of each of Borrower's fiscal years commencing
with fiscal year 2001, a month by month projected operating budget and cash flow
of Borrower on a consolidated or consolidating basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by Borrower's President or President and/or Chief Financial
Officer to the effect that such projections have been prepared on the basis of
sound financial planning practice consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.
9.12. Intentionally Omitted.
9.13. Notice of Suits, Adverse Events. Promptly notify Agent in writing
of any litigation, suit or administrative proceeding affecting Borrower, whether
or not the claim is covered by insurance, and of any suit or administrative
proceeding, which could reasonably be expected to have a Material Adverse
Effect. Furnish Agent with prompt notice of (i) any lapse or other termination
of any Consent issued to Borrower by any Governmental Body or any other Person
that is material to the operation of Borrower's business, (ii) any refusal by
any Governmental Body or any other Person to renew or extend any such Consent;
and (iii) copies of any periodic or special reports filed by Borrower with any
Governmental Body or Person, if such reports indicate any material change in the
business, operations, affairs or condition of Borrower, or if copies thereof are
requested by Agent, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate to
Borrower.
9.14. ERISA Notices and Requests. Furnish Agent with immediate written
notice in the event that (i) Borrower or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which Borrower or member of the Controlled Group has taken, is taking, or
proposes to take with respect thereto and, when known, any action taken or
threatened by the Service, Department of Labor or PBGC with respect thereto,
(ii) Borrower or any member of the Controlled Group knows or has reason to know
that a prohibited transaction (as defined in Sections 406 of ERISA and 4975 of
the Code) has occurred together with a written statement describing such
transaction and the action which Borrower or any member of the Controlled Group
has taken, is taking or proposes to take with respect thereto, (iii) a funding
waiver request has been filed with respect to any Plan together with all
communications received by either Borrower or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits of any existing
ERISA Plan or the establishment of any new ERISA Plan or the commencement of
contributions to any ERISA Plan to which either Borrower or any member of the
Controlled Group was not previously contributing shall occur, (v) Borrower or
any member of the Controlled Group shall receive from the PBGC a notice of
intention to terminate a ERISA Plan or to have a trustee appointed to administer
a ERISA Plan, together with copies of each such notice, (vi) Borrower or any
member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the Service regarding the qualification of a ERISA
Plan under Section 401(a) of the Code, together with copies of each such letter;
(vii) Borrower or any member of the Controlled Group shall receive a notice
regarding the imposition of withdrawal liability, together with copies of each
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such notice; (viii) Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix)
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.15. Additional Documents. Execute and deliver to Agent, upon request,
such documents and agreements as Agent may, from time to time, reasonably
request to carry out the purposes, terms or conditions of this Agreement.
9.16. Environmental Reports. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.6 and 9.8, with a
certificate signed by the President and/or Chief Financial Officer of Borrower
stating, to the best of his knowledge, that Borrower is in compliance in all
material respects with all applicable Environmental Laws. To the extent Borrower
is not in compliance in all material respects with such applicable Environmental
Laws, the certificate shall set forth with specificity all areas of
non-compliance and the proposed action Borrower will implement in order to
achieve full compliance.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein or in any Ancillary Document when
due;
10.2. any representation or warranty made or deemed made by Borrower in
this Agreement or any Ancillary Document or in any certificate, document or
financial or other statement furnished at any time in connection herewith or
therewith shall prove to have been misleading in any material respect on the
date when made or deemed to have been made;
10.3. failure by Borrower to perform, keep or observe any term or
covenant contained in Article VII of this Agreement.
10.4. issuance of a notice of Lien, levy, assessment, injunction or
attachment against Borrower's, any Subsidiary's or any Guarantor's property
having an aggregate value in excess of $1,000,000 which is not stayed or lifted
within thirty (30) days;
10.5. failure or neglect of Borrower to perform, keep or observe any
term, provision, condition or covenant contained in (i) this Agreement or any
Ancillary Document (other than any provision embodied in or covered by any other
clause of this Article X) and the same shall remain unremedied for thirty (30)
days or more after written notice from Agent to Borrower of
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any such failure and (ii) Article VI of this Agreement and the same shall remain
unremedied for ten (10) days or more after the occurrence thereof;
10.6. any judgment is rendered or judgment liens filed against
Borrower, any Subsidiary or any Guarantor for an amount in excess of $1,000,000
which within thirty (30) days of such rendering or filing is not either
satisfied, stayed or discharged of record;
10.7. Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within thirty (30) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
10.8. Borrower shall admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business;
10.9. any Material Subsidiary of Borrower, or any Guarantor, shall (i)
apply for, consent to or suffer the appointment of, or the taking of possession
by, a receiver, custodian, trustee, liquidator or similar fiduciary of itself or
of all or a substantial part of its property, (ii) admit in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business, (iii) make a general assignment for the
benefit of creditors, (iv) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a bankrupt
or insolvent, (vi) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vii) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
10.10. any change in Borrower's condition or affairs (financial or
otherwise) which in Agent's opinion materially impairs the Collateral or the
ability of Borrower to perform its Obligations under this Agreement;
10.11. any Lien created hereunder or provided for hereby or under any
related agreement, with respect Collateral having a value of $75,000 or greater,
for any reason ceases to be or is not a valid and perfected Lien having a first
priority interest (other than Permitted Prior Liens);
10.12. a default or event of default has occurred and been declared and
continuing under the Indenture or the Receivables Facility of any Ancillary
Document which default shall not have been cured or waived within any applicable
grace period;
10.13. a default by Borrower or any Subsidiary or Guarantor in the
payment, when due (after any applicable grace period or extension for the
payment thereof) of any principal of or interest on any Debt having a principal
amount, individually or in the aggregate, in excess of $1,000,000, except so
long as the requisite holder or holders of such Debt shall have waived such
default;
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10.14. a default of the obligations of Borrower under any other
agreement to which it is a party shall occur which may reasonably be expected to
have a Material Adverse Effect and which default is not cured within any
applicable grace period;
10.15. any Change of Control shall occur and Agent shall fail to
consent to such Change of Control within twenty (20) days after the occurrence
of such Change of Control;
10.16. any material provision of this Agreement shall, for any reason,
cease to be valid and binding on Borrower, or Borrower shall so claim in writing
to Agent;
10.17. if (i) any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent, trademark or tradename
of Borrower, the continuation of which is material to the continuation of
Borrower's business, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such license, permit, trademark, tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(c) schedule or conduct a hearing on the renewal of any license, permit,
trademark, tradename or patent necessary for the continuation of Borrower's
business and the staff of such Governmental Body issues a report recommending
the termination, revocation, suspension or material, adverse modification of
such license, permit, trademark, tradename or patent; (ii) any agreement which
is necessary or material to the operation of Borrower's business shall be
revoked or terminated and not replaced by a substitute acceptable to Agent
within thirty (30) days after the date of such revocation or termination, and
such revocation or termination and non-replacement could have a Material Adverse
Effect;
10.18. any portion of the Collateral shall be seized or taken by a
Governmental Body;
10.19. an event or condition specified in Sections 4.8(d), 6.13 or 9.14
hereof shall occur or exist with respect to any ERISA Plan and, as a result of
such event or condition, together with all other such events or conditions,
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Agent be reasonably likely to incur, a liability to a ERISA Plan or the PBGC (or
both) which, in the reasonable judgment of Agent, could have a Material Adverse
Effect;
10.20. if any Guarantor (i) attempts to terminate or (ii) challenges
the validity of, or its liability under, any Guaranty; or
10.21. if any Guarantor default in the payment of any of its payment
obligations under the Guaranty and such default shall continue for a period of
ten (10) days hereunder or under the Guaranty or if any proceeding shall be
brought by Borrower or any Guarantor to challenge the validity, binding effect
of this Agreement or the Guaranty, or should this Agreement or the Guaranty
cease to be a valid, binding and enforceable obligation of a Guarantor.
10.22. if the average NYMEX closing market price of gas per MMBTU drop
below $1.50 in any month, unless the PV10 attributable to proved developed
producing wells (excluding any PV10 attributable to wells subject to Production
Payments) is at least 140% of the outstanding Obligations.
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XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated, and (ii) any of the other Events of Default and at any
time thereafter (such default not having previously been cured), at the option
of Required Lenders, all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Revolving Advances. Upon the occurrence of any
Event of Default, Agent shall have the right to exercise any and all other
rights and remedies provided for herein, under the Uniform Commercial Code and
at law or equity generally, including, without limitation, the right to
foreclose the security interests granted herein and to realize upon any
Collateral by any available judicial procedure and/or to take possession of and
sell any or all of the Collateral with or without judicial process. Agent may
enter any of Borrower's premises or other premises without legal process and
without incurring liability to Borrower therefor, and Agent may thereupon, or at
any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as Agent may deem advisable and
Agent may require Borrower to make the Collateral available to Lenders at a
convenient place. With or without having the Collateral at the time or place of
sale, Agent may sell the Collateral, or any part thereof, at public or private
sale, at any time or place, in one or more sales, at such price or prices, and
upon such terms, either for cash, credit or future delivery, as Agent may elect.
Except as to that part of the Collateral which is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Agent shall give Borrower reasonable notification of such sale or sales,
it being agreed that in all events written notice mailed to Borrower at least
five (5) days prior to such sale or sales is reasonable notification. At any
public sale Agent or any Lender may bid for and become the purchaser, and Agent,
any Lender or any other purchaser at any such sale thereafter shall hold the
Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and such right and equity are hereby
expressly waived and released by Borrower. In connection with the exercise of
the foregoing remedies, Agent is granted permission, without charge, to use all
of Borrower's trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and other proprietary rights which are used
in connection with the Collateral for the purpose of disposing of such Inventory
and (b) Equipment for the purpose of completing the manufacture of such
Collateral. The proceeds realized from the sale of any Collateral shall be
applied in accordance with Section 11.5 hereof. If any deficiency shall arise,
Borrower shall remain liable to Agent and the Lenders therefor.
11.2. Agent's Discretion. Agent shall have the right in its sole
discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent's or Lenders' rights hereunder.
11.3. Setoff. In addition to any other rights which Agent or any Lender
may have under applicable law, upon the occurrence of an Event of Default
hereunder, Agent and such Lender shall have a right to apply any of Borrower's
property held by Agent and such Lender or by the Bank to reduce the Obligations.
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11.4. Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
11.5. Allocation of Payments After Event of Default. Notwithstanding
any other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Ancillary Documents or in respect of the Collateral may, at
Agent's discretion, be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket
costs and expenses (including without limitation, reasonable
attorneys' fees) of the Agent in connection with enforcing the
rights of the Lenders under this Agreement and the Ancillary
Documents and any protective advances made by the Agent with
respect to the Collateral under or pursuant to the terms of
this Document;
SECOND, to payment of any fees owed to the Agent;
THIRD, to the payment of all reasonable out-of-pocket
costs and expenses (including without limitation, reasonable
attorneys' fees) of each of the Lenders in connection with
enforcing its rights under this Agreement and the Ancillary
Documents or otherwise with respect to the Obligations owing
to such Lender;
FOURTH, to the payment of all of the Obligations
consisting of accrued fees and interest;
FIFTH, to the payment of the outstanding principal
amount of the Obligations;
SIXTH, to all other Obligations and other obligations
which shall have become due and payable under the Ancillary
Documents or otherwise and not repaid pursuant to clauses
"FIRST" through "FIFTH" above;
SEVENTH, to the payment of the surplus, if any, to
whoever may be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be
applied in the numerical order provided until exhausted prior to application to
the next succeeding category; and (ii) each of the Lenders shall receive (so
long as it is not a Defaulting Lender) an amount equal to its pro rata share
(based on the proportion that the then outstanding Advances held by such Lender
bears to the aggregate then outstanding Advances) of amounts available to be
applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH" above.
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XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Borrower and each Guarantor hereby waives
notice of non-payment of any of the Receivables, demand, presentment, protest
and notice thereof with respect to any and all instruments, notice of acceptance
hereof, notice of loans or advances made, credit extended, Collateral received
or delivered, or any other action taken in reliance hereon, and all other
demands and notices of any description, except such as are expressly provided
for herein.
12.2. Delay. No delay or omission on Agent's or any Lender's part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each of
Borrower, each Guarantor (except for any successor or assign of a Guarantor in
connection with a transaction as a result of which the relevant Guaranty will be
released or terminated pursuant to the terms of this Agreement), Agent and each
Lender, shall become effective on the date hereof and shall continue in full
force and effect until the last day of the Term unless sooner terminated as
herein provided. The Term may be extended, with the written consent of all
Lenders, for successive periods of one (1) year each by Borrower giving Agent a
written request to extend the Term no more than 90 days nor less than 60 days
prior to the then scheduled end of the Term. If all Lenders do not consent to
such request at least 30 days before the then scheduled end of the Term, then
there shall not be any one year extensions of the Term. Borrower may terminate
this Agreement at any time upon forty-five (45) days' prior written notice upon
payment in full of the Obligations. This Agreement shall also terminate upon the
effective date of termination of the Receivables Facility. In the event the
Obligations are prepaid in full prior to the last day of the Term (the date of
such prepayment hereinafter referred to as the "Prepayment Date"), Borrower
shall pay an early termination fee in an amount equal to (a) $600,000 if the
Prepayment Date occurs from the Closing Date to and including the date
immediately preceding the first anniversary of the Closing Date, (b) $400,000 if
the Prepayment Date occurs on or after the first
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anniversary of the Closing Date to and including the date immediately preceding
the second anniversary of the Closing Date, (c) $200,000 if the Prepayment Date
occurs on or after the second anniversary of the Closing Date to and including
the date immediately preceding the third anniversary of the Closing Date, (d)
$100,000 if the Prepayment Date occurs on or after the third anniversary of the
Closing Date to and including the date which immediately precedes the last day
of the Term, provided that if GMACCC shall assign 50% or more of the Commitments
under this Agreement to one or more Lenders, the foregoing early termination fee
shall equal 50% of the foregoing fees.
13.2. Termination. The termination of the Agreement shall not affect
any of Borrower's, any Guarantor's, Agent's or any Lender's rights, or any of
the Obligations having their inception prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights or interests created or Obligations
have been fully disposed of, concluded or liquidated. The Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrower's Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of Borrower have been paid or performed in full after the
termination of this Agreement or Borrower has furnished Agent and the Lenders
with an indemnification satisfactory to Agent and the Lenders with respect
thereto. Accordingly, Borrower and each Guarantor waives any rights which it may
have under Section 9-404(1) of the Uniform Commercial Code to demand the filing
of termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to Borrower, or to file them with
any filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid in full in immediately
available funds. All representations, warranties, covenants, waivers and
agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. REGARDING AGENT.
14.1. Appointment. Each Lender hereby designates GMACCC to act as Agent
for such Lender under this Agreement and the Ancillary Documents. Each Lender
hereby irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Ancillary Documents and to exercise such
powers and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal, interest, fees (except fees set forth herein which are
payable to Agent for its own account and not for the benefit of Lenders),
charges and collections received pursuant to this Agreement, for the ratable
benefit of Lenders; provided, however, the Bondholder Lenders' aggregate share
of the fees set forth in Sections 3.2(a) and 3.2(b) shall equal, and Agent shall
remit to Bondholder Lenders, an amount equal to $200,000. Agent may perform any
of its duties hereunder by or through its agents or employees. As to any matters
not expressly provided for by this Agreement (including without limitation,
collection of the Notes) Agent shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding;
provided, however, that Agent shall not be required to take any action which
exposes Agent to liability or
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which is contrary to this Agreement or the Ancillary Documents or applicable law
unless Agent is furnished with an indemnification reasonably satisfactory to
Agent with respect thereto.
14.2. Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Ancillary Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct, or (ii) responsible in any manner for any recitals,
statements, representations or warranties made by Borrower or any officer
thereof contained in this Agreement, or in any of the Ancillary Documents or in
any certificate, report, statement or Ancillary Document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Ancillary Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, or any of the
Ancillary Documents or for any failure of Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Ancillary Documents
(including the failure of any Guarantor to perform under its Guaranty), or to
inspect the properties, books or records of Borrower or any Guarantor. The
duties of Agent as respects the Advances to Borrower shall be mechanical and
administrative in nature; Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender; and nothing in this Agreement,
expressed or implied, is intended to or shall be so construed as to impose upon
Agent any obligations in respect of this Agreement except as expressly set forth
herein.
14.3. Lack of Reliance on Agent and Resignation.
(a) Independently and without reliance upon Agent or any other
Lender, each Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of Borrower in connection
with the making and the continuance of the Advances hereunder and the taking or
not taking of any action in connection herewith, and (ii) its own appraisal of
the creditworthiness of Borrower. Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before making of the Advances or at any time or times thereafter except as shall
be provided by Borrower pursuant to the terms hereof. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, collectability or sufficiency of this
Agreement or any Ancillary Document, or of the financial condition of Borrower,
or be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement, the
Note, the Ancillary Documents or the financial condition of Borrower, or the
existence of any Event of Default or any Default.
(b) Agent may resign on sixty (60) days' written notice to
each of Lenders and Borrower and upon such resignation, the Required Lenders
will promptly designate a successor Agent reasonably satisfactory to Borrower.
If a successor Agent shall not have been so appointed within said sixty (60) day
period, the retiring Agent, upon notice to Borrower, shall then appoint a
successor Agent who shall serve as Agent until such time as Required Lenders
appoint a successor Agent as provided herein. Any prepaid fees paid to Agent in
the year in
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which Agent's resignation is effective shall be prorated and the portion of such
fees attributable to the number of full calendar months after the effective date
of such resignation shall be remitted to the replacement Agent.
(c) Any such successor Agent shall succeed to the rights,
powers and duties of Agent, and the term "Agent" shall mean such successor agent
effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent. After any Agent's resignation as Agent, the
provisions of this Article XIV shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement.
14.4. Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Ancillary Document, Agent shall be
entitled to refrain from such act or taking such action unless and until Agent
shall have received instructions from the Required Lenders; and Agent shall not
incur liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
14.5. Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or
Ancillary Document or telephone message believed by it to be genuine and correct
and to have been signed, sent or made by the proper person or entity, and, with
respect to all legal matters pertaining to this Agreement and the Ancillary
Documents and its duties hereunder, upon advice of counsel selected by it. Agent
may employ agents and attorneys-in-fact and shall not be liable for the default
or misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
14.6. Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Ancillary Documents, unless Agent has received notice from a Lender or
Borrower referring to this Agreement or the Ancillary Documents, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders subject to the proviso in Section 14.1; provided, that, unless and until
Agent shall have received such directions, Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
Lenders.
14.7. Indemnification. To the extent Agent is not reimbursed and
indemnified by Borrower, each Lender will reimburse and indemnify Agent in
proportion to its respective portion of the Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against Agent in performing its
duties hereunder, or in any way relating to or arising out of this Agreement or
any Ancillary Document; provided that, Lenders shall not be liable for any
portion of such liabilities, obligations, losses,
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damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent's gross (not mere) negligence or willful misconduct.
14.8. Agent in its Individual Capacity. With respect to the obligation
of Agent to lend under this Agreement, the Advances made by it shall have the
same rights and powers hereunder as any other Lender and as if it were not
performing the duties as Agent specified herein; and the term "Lender" or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity as a Lender. Agent may engage in business with
Borrower as if it were not performing the duties specified herein, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
14.9. Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7 and 9.8 from Borrower pursuant to the
terms of this Agreement, Agent will promptly furnish such documents and
information to Lenders.
14.10. Borrower's Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or the Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy Borrower's obligations to make payments for the account of the Agent or
Lenders or the relevant one or more of them pursuant to this Agreement.
XV. RELEASE OF COLLATERAL.
15.1. Disposition of Certain Collateral Without Requesting Release.
(a) Borrower or its Subsidiaries may, so long as an Event of
Default shall not have occurred and be continuing or would exist after giving
effect thereto and without requesting or receiving the consent of Agent (or any
lender, trustee or collateral agent under any of the Security Documents), (i)
make cash payments (including repayments of Debt permitted to be incurred
hereby) that are not otherwise prohibited by this Agreement, and (ii) dispose of
Collateral, free from the Agent's security interests, pursuant to 6.2(b);
provided, however, Borrower shall not dispose of or transfer any Collateral
included in the Borrowing Base or make any payment if after giving effect
thereto an Overadvance shall exist.
(b) The right of Borrower to rely upon the provisions of
Sections 15.1(a) with respect to transactions described in Section 6.2(b)(iv)
from the date of this Agreement to December 31, 2000, and for each twelve-month
period thereafter beginning on January 1 (a "Twelve-Month Period") shall be
conditioned upon Borrower delivering to Agent, on or before January 30, 2001,
and thereafter within 30 days following the end of such Twelve-Month Period, an
Officers' Certificate to the effect that the proceeds of all of such
dispositions which involve Collateral during such Twelve-Month Period (other
than those such dispositions wherein Borrower has complied with Section 15.2)
were used by Borrower or its Subsidiaries in connection with their businesses
and in accordance with the terms of Section 6.2 herein.
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15.2. Requesting Release of Collateral.
(a) Upon receipt of a Release Request, Agent shall execute and
deliver, within five Business Days from the receipt of such Release Request, any
instruments deemed by Borrower to be reasonably necessary or reasonably
appropriate to release all or a part of the Collateral from the security
interests of Agent, if the provisions of this Section 15.2 have been complied
with. Any such Release Request shall request Agent to execute one or more
specifically described release instruments (which release instruments shall
accompany such Release Request) and shall certify (i) that no Event of Default
has occurred and is continuing (or with respect to a Release Request relating to
any of the Security Documents, that no event of default has occurred and is
continuing or would exist after giving effect thereto under the applicable
Security Document), (ii) that no Collateral included in the Borrowing Base shall
be disposed of if after giving effect to such disposition (and any payment of
Obligations in connection therewith) an Overadvance shall exist, and (iii) that
one of the conditions of this Section 15.2 set forth below (specifying such
condition) has been fulfilled, and if such specified condition is described in
clause (i) below, that the conditions of Section 15.1(a), if applicable, have
been, or simultaneously with or immediately following the release will be,
fulfilled:
(i) the Collateral will be disposed of in compliance
with Section 15.1(a);
(ii) the Net Proceeds from the Collateral to be
released will be used within five (5) Business Days to repay
the Obligations;
(iii) the Collateral is to be released in connection
with an Asset Sale made in compliance with Section 6.2; all of
the conditions precedent to the termination of the Security
Document under which the Lien in the Collateral to be released
was created, or to the release of such Collateral from the
Lien created by such Security Document, as set forth in such
Security Document, have been satisfied;
(iv) the Collateral to be released secures, or will
secure upon release, debt or other obligations that constitute
First Lien Debt; or
(v) the release of the Collateral to be released is
required pursuant to, or is required in order to effect
compliance with, the Plan or a Plan Order.
(b) At the request of Borrower (or with respect to releases
under the Security Documents, the grantor of the security interest thereunder),
Agent shall, in lieu of releasing any Collateral pursuant to this Section 15.2,
execute and deliver a Subordination Agreement with respect to such Collateral in
form and substance acceptable to Agent.
XVI. GUARANTY.
16.1. Guaranty. Each Guarantor jointly and severally unconditionally
guaranties to each Lender the prompt payment when due (whether by acceleration
or otherwise) of all present and future Obligations, and irrespective of the
genuineness, validity, regularity or enforceability of such Obligations, or of
any instrument evidencing any of the Obligations or of any collateral
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therefor or of the existence or extent of such collateral, and irrespective of
the allowability, allowance or disallowance of any or all of the Obligations in
any case commenced by or against Borrower under Title 11, United States Code,
including, without limitation, post-petition interest, fees, costs and charges
that would have accrued or been added to the Obligations but for the
commencement of such case.
16.2. No Impairment. Agent may at any time and from time to time,
either before or after the maturity thereof, without notice to or further
consent of any Guarantor, extend the time of payment of, exchange or surrender
any collateral for, renew or extend any of the Obligations or increase or
decrease the interest rate thereon, and may also make any agreement with
Borrower or with any other party to or person liable on any of the Obligations,
or interested therein, for the extension, renewal, payment, compromise,
discharge or release thereof, in whole or in part, or for any modification of
the terms thereof or of any Ancillary Documents, or make any election of rights
Agent may deem desirable under the United States Bankruptcy Code, as amended, or
any other federal or state bankruptcy, reorganization, moratorium or insolvency
law relating to or affecting the enforcement of creditors' rights generally (any
of the foregoing, an "Insolvency Law") without in any way impairing or affecting
the obligations of Guarantors hereunder. The obligations of Guarantors hereunder
shall be effective regardless of the subsequent incorporation, merger or
consolidation of Borrower, or any change in the composition, nature, personnel
or location of Borrower and shall extend to any successor entity to Borrower,
including a debtor in possession or the like under any Insolvency Law.
16.3. Guaranty Absolute. Each Guarantor guarantees that the Obligations
will be paid strictly in accordance with the terms of this Agreement and/or any
other document, instrument or agreement creating or evidencing the Obligations,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of Borrower with respect
thereto. Each Guarantor hereby knowingly accepts the full range of risk
encompassed within a contract of "continuing guaranty" which risk includes the
possibility that Borrower will contract additional indebtedness for which such
Guarantor may be liable hereunder after Borrower's financial condition or
ability to pay its lawful debts when they fall due has deteriorated, whether or
not Borrower has properly authorized incurring such additional indebtedness.
Each Guarantor acknowledges that (i) no oral representations, including any
representations to extend credit or provide other financial accommodations to
Borrower, have been made by Agent or any Lender to induce such Guarantor to
enter into this Agreement and (ii) any extension of credit to Borrower shall be
governed solely by the provisions of this Loan Agreement and the Ancillary
Documents. The liability of each Guarantor under this Agreement shall be
absolute and unconditional, in accordance with its terms, and shall remain in
full force and effect without regard to, and shall not be released, suspended,
discharged, terminated or otherwise affected by, any circumstance or occurrence
whatsoever, including, without limitation: (a) any waiver, indulgence, renewal,
extension, amendment or modification of or addition, consent or supplement to or
deletion from or any other action or inaction under or in respect of this
Agreement and the Ancillary Documents or any other instruments or agreements
relating to the Obligations or any assignment or transfer of any thereof; (b)
any lack of validity or enforceability of any of this Agreement, the Ancillary
Documents or any assignment or transfer of any thereof; (c) any furnishing of
any additional security to Agent or its assignees or any acceptance thereof or
any release of any security by Agent or its assignees; (d) any limitation on any
party's liability or obligation under this Agreement, the Ancillary Documents or
any other documents, instruments or agreements relating to the Obligations or
any assignment or transfer
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of any thereof or any invalidity or unenforceability, in whole or in part, of
any such document, instrument or agreement or any term thereof; (e) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Borrower or any Guarantor, or
any action taken with respect to this Agreement by any trustee or receiver, or
by any court, in any such proceeding, whether or not the undersigned shall have
notice or knowledge of any of the foregoing; (f) any exchange, release or
nonperfection of any Collateral, or any release, or amendment or waiver of or
consent to departure from any guaranty or security, for all or any of the
Obligations; or (g) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, any Guarantor. Any amounts due from any
Guarantor to Agent and Lenders shall bear interest until such amounts are paid
in full at the highest rate then applicable to the Obligations.
16.4. Waivers. (a) This is a guaranty of payment and not of collection.
Neither Agent nor any Lender shall be under any obligation to institute suit,
exercise rights or remedies or take any other action against Borrower or any
other person liable with respect to any of the Obligations or resort to any
collateral security held by it to secure any of the Obligations as a condition
precedent to any Guarantor being obligated to perform as agreed herein and each
Guarantor hereby waives any and all rights which it may have by statute or
otherwise which would require Agent or any Lender to do any of the foregoing.
Each Guarantor further consents and agrees that Lender shall not be under any
obligation to marshal any assets in favor of any Guarantor, or against or in
payment of any or all of the Obligations. Each Guarantor hereby waives all
rights of suretyship. Each Guarantor hereby waives any rights to interpose any
defense, counterclaim or offset of any nature and description which it may have
or which may exist between and among Agent, any Lender, Borrower and/or any
Guarantor with respect to any Guarantor's obligations hereunder, or which
Borrower may assert on the underlying debt, including but not limited to failure
of consideration, breach of warranty, fraud, payment (other than cash payment in
full of the Obligations), statute of frauds, bankruptcy, infancy, statute of
limitations, accord and satisfaction, and usury.
(b) Each Guarantor further waives (i) notice of the acceptance
of this Agreement, of the making of any such loans or extensions of credit, and
of all notices and demands of any kind to which such Guarantor may be entitled,
including, without limitation, notice of adverse change in Borrower's financial
condition or of any other fact which might materially increase the risk of any
Guarantor and (ii) presentment to or demand of payment from anyone whomsoever
liable upon any of the Obligations, protest, notices of presentment, non-payment
or protest and notice of any sale of collateral security or any default of any
sort.
16.5. Payments from Guarantor. Agent, with or without notice to any
Guarantor, may apply on account of the Obligations any payment from any
Guarantor or any other guarantor, or amounts realized from any security for the
Obligations.
16.6. No Termination. This is a continuing irrevocable guaranty and
shall remain in full force and effect and be binding upon each Guarantor and
each Guarantor's successors and assigns, until all of the Obligations have been
paid in full and this Agreement has been terminated. If any of the present or
future Obligations are guaranteed by Persons in addition to Guarantors, the
death, release or discharge in whole or in part or the bankruptcy, merger,
consolidation, incorporation, liquidation or dissolution of one or more of them
shall not discharge or affect the liabilities of any Guarantor hereunder.
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16.7. Recapture. Anything in this Agreement to the contrary
notwithstanding, if Agent or any Lender receives any payment or payments on
account of the liabilities guarantied hereby, which payment or payments or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver, or
any other party under any Insolvency Law, common law or equitable doctrine, then
to the extent of any sum not finally retained by Agent or any Lender, each
Guarantor's obligations to Agent or such Lender shall be reinstated and this
Agreement shall remain in full force and effect (or be reinstated) until payment
shall have been made to Lender, which payment shall be due on demand.
16.8. Guaranties of Borrower and Material Subsidiaries. Borrower and
each of its Material Subsidiaries acknowledge, by their execution and delivery
of this Agreement and each Guaranty, that Agent and Lenders are relying on the
provisions of this Article XVI in extending credit hereunder on the Closing
Date, that all Material Subsidiaries of Borrower are benefiting by the financing
being provided by Agent and Lenders and that the Holders would not have agreed
to provide such financing without the guaranties of all Material Subsidiaries.
16.9. Release of Galveston Bay Pipeline.
Upon receipt of a written request of Borrower in the form of
an Officer's Certificate, the Agent shall execute and deliver, within five
Business Days from the receipt of such written request, any instruments deemed
by Borrower to be reasonably necessary or reasonably appropriate to release
Galveston Bay Pipeline from the Guaranty, if the provisions of this Section 16.9
have been complied with. Any such written request shall request the Agent to
execute one or more specifically described release instruments (which release
instruments shall accompany such written request) and shall certify (i) that no
Event of Default has occurred and is continuing, and (ii) that Galveston Bay
Pipeline is to be released from the Guaranty in connection with a GB Facility
Financing made in compliance with Section 6.3.
16.10. Release of Galveston Bay Processing.
Upon receipt of a written request of Borrower in the form of
an Officer's Certificate, the Agent shall execute and deliver, within five
Business Days from the receipt of such written request, any instruments deemed
by Borrower to be reasonably necessary or reasonably appropriate to release
Galveston Bay Processing from the Guaranty, if the provisions of this Section
16.10 have been complied with. Any such written request shall request the Agent
to execute one or more specifically described release instruments (which release
instruments shall accompany such written request) and shall certify (i) that no
Event of Default has occurred and is continuing, and (ii) that Galveston Bay
Processing is to be released from the Guaranty in connection with a GB Facility
Financing made in compliance with Section 6.3 provided, however, Agent shall not
be required to deliver such release until Galveston Bay Processing shall have
delivered to Agent a general release in form and substance satisfactory to
Agent.
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XVII. MISCELLANEOUS.
17.1. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or against Borrower or any Guarantor with respect to any of the Obligations,
this Agreement or any related agreement may be brought in any court of competent
jurisdiction in the State of New York, United States of America, and, by
execution and delivery of this Agreement, Borrower and each Guarantor accepts
for itself and in connection with its properties, generally and unconditionally,
the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees
to be bound by any judgment rendered thereby in connection with this Agreement.
Borrower and each Guarantor hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
registered mail (return receipt requested) directed to Borrower or any Guarantor
at its address set forth in Section 17.6 and service so made shall be deemed
completed five (5) days after the same shall have been so deposited in the mails
of the United States of America. Nothing herein shall affect the right to serve
process in any manner permitted by law or shall limit the right of Agent or any
Lender to bring proceedings against Borrower or any Guarantor in the courts of
any other jurisdiction. Borrower and each Guarantor waive any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non
conveniens. Any judicial proceeding by Borrower or any Guarantor against Agent
or any Lender involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in the City
of New York, State of New York.
17.2. Entire Understanding. (a) This Agreement and the documents
executed concurrently herewith contain the entire understanding between
Borrower, Guarantors, Agent and each Lender and supersedes all prior agreements
and understandings, if any, relating to the subject matter hereof. Any promises,
representations, warranties or guarantees not herein contained and hereinafter
made shall have no force and effect unless in writing, and executed by the party
or parties making such representations, warranties or guarantees. Neither this
Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing,
signed by the party to be charged. Borrower and each Guarantor acknowledges that
it has been advised by counsel in connection with the execution of this
Agreement and Ancillary Documents and is not relying upon oral representations
or statements inconsistent with the terms and provisions of this Agreement.
(b) The Required Lenders, Agent with the consent in writing of
the Required Lenders, and Borrower may, subject to the provisions of this
Section 17.2(b), from time to time enter into written supplemental agreements to
this Agreement, the Notes or the Ancillary Documents executed by Borrower and
each Guarantor, for the purpose of adding or deleting any provisions or
otherwise changing, varying or waiving in any manner the rights of the Lenders,
Agent, Borrower or Guarantors thereunder or the conditions, provisions or terms
thereof of waiving any Event of Default thereunder, but only to the extent
specified in such written agreements; provided, however, that no such
supplemental agreement shall, without the consent of all the Lenders:
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(i) increase the Commitment Percentages of any Lender
or alter any provision in respect of the sharing of Obligations and duties among
Agent and Lenders or among the Lenders.
(ii) increase the Maximum Revolving Advance Amount or
the Term Loan;
(iii) extend the maturity of any Note or the due date
for any amount payable hereunder, or decrease the rate of interest or reduce any
fee payable by Borrower to Lenders pursuant to this Agreement;
(iv) alter the definition of the term Required
Lenders or alter, amend or modify this Section 17.2(b);
(v) release any Collateral other than in compliance
with Article XV of the Loan Agreement;
(vi) change the rights and duties of Agent; or
(vii) waive the conditions precedent contained in
Section 8.1(k) or Section 8.2(e) hereof.
Any such supplemental agreement shall apply equally to each Lender and shall be
binding upon Borrower, Guarantors, Lenders and Agent and all future holders of
the Obligations. In the case of any waiver, Borrower, Guarantors, Agent and
Lenders shall be restored to their former positions and rights, and any Event of
Default waived shall be deemed to be cured and not continuing, but no waiver of
a specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
17.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure to the
benefit of Borrower, each Guarantor, Agent, each Lender, all future holders of
the Obligations and their respective successors and assigns, except neither
Borrower nor any Guarantor may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of Agent and
each Lender.
(b) Borrower and each Guarantor acknowledges that in the
regular course of commercial banking business one or more Lenders may at any
time and from time to time sell, subject to clause (f), below, participating
interests in the Advances to other financial institutions pursuant to a
participation agreement in form and substance satisfactory to such Lender and
consented to in writing by Agent in its discretion (each such Participant or
purchaser of a participating interest, a "Participant"). Each Participant may
exercise all rights of payment (including without limitation rights of set-off)
with respect to the portion of such Advances held by it or other Obligations
payable hereunder as fully as if such Participant were the direct holder thereof
provided that Borrower shall not be required to pay to any Participant more than
the amount which it would have been required to pay to Lender which granted an
interest in its
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Advances or other Obligations payable hereunder to such Participant had such
Lender retained such interest in the Advances hereunder or other Obligations
payable hereunder and in no event shall Borrower be required to pay any such
amount arising from the same circumstances and with respect to the same Advances
or other Obligations payable hereunder to both such Lender and such Participant.
Borrower hereby grants to any Participant a continuing security interest in any
deposits, moneys or other property actually or constructively held by such
Participant as security for the Participant's interest in the Advances.
(c) Any Lender may sell, assign or transfer, subject to clause
(f), below, all or any part of its rights under this Agreement and the Ancillary
Documents to one or more additional banks or financial institutions and one or
more additional banks or financial institutions may commit to make Advances
hereunder (each a "Purchasing Lender"), in minimum amounts of not less than
$1,000,000, with respect to Bondholder Lenders and their Transferees and
$5,000,000, with respect to all other Lenders, pursuant to a Commitment
Transfer Supplement, executed by a Purchasing Lender, the transferor Lender and
Agent and delivered to Agent for recording. Upon such execution, delivery,
acceptance and recording, from and after the transfer effective date determined
pursuant to such Commitment Transfer Supplement, (i) Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein (subject to the
provisions of Section 7.16 hereof pursuant to which such Purchasing Lender may
elect to refuse to make Advances after the Closing Date), and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Ancillary Documents. Borrower and each Guarantor hereby consents to the addition
of such Purchasing Lender and the resulting adjustment of the Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Ancillary Documents. Borrower and each Guarantor shall execute
and deliver such further documents and do such further acts and things in order
to effectuate the foregoing.
(d) Agent shall maintain at its address a copy of each
Commitment Transfer Supplement delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Advances owing to each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and Borrower, Guarantors, Agent and Lenders may
treat each Person whose name is recorded in the Register as the owner of the
Advance recorded therein for the purposes of this Agreement. The Register shall
be available for inspection by Borrower, any Guarantor or any Lender at any
reasonable time and from time to time upon reasonable prior notice. Agent shall
receive a fee in the amount of $3,000 payable by the applicable Purchasing
Lender upon the effective date of each transfer or assignment to such Purchasing
Lender.
(e) Borrower and each Guarantor authorizes each Lender to
disclose to any Participant or Purchasing Lender and any prospective Participant
or Purchasing Lender any and
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all financial information in such Lender's possession concerning Borrower and
each Guarantor which has been delivered to such Lender by or on behalf of
Borrower or any Guarantor pursuant to this Agreement or in connection with such
Lender's credit evaluation of Borrower or any Guarantor provided such party
agrees to be bound by the confidentiality provision of Section 17.15 hereof.
17.4. Application of Payments. Agent shall have the continuing and
exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
Borrower makes a payment or Agent or any Lender receives any payment or proceeds
of the Collateral for Borrower's benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
17.5. Indemnity. Borrower and each Guarantor shall indemnify Agent,
each Lender and each of their respective officers, directors, Affiliates,
employees and agents from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
fees and disbursements of counsel) which may be imposed on, incurred by, or
asserted against Agent or any Lender in any litigation, proceeding or
investigation instituted or conducted by any Governmental Body or any other
Person with respect to any aspect of, or any transaction contemplated by, or
referred to in, or any matter related to, this Agreement or the Ancillary
Documents, whether or not Agent or any Lender is a party thereto, except to the
extent that any of the foregoing arises out of the willful misconduct or gross
(not mere) negligence of the party being indemnified.
17.6. Notice. Any notice or request hereunder may be given to Borrower,
any Guarantor or to Agent or any Lender at their respective addresses set forth
below or at such other address as may hereafter be specified in a notice
designated as a notice of change of address under this Section. Any notice or
request hereunder shall be given by (a) hand delivery, (b) overnight courier,
(c) registered or certified mail, return receipt requested, or (d) telecopy to
the number set out below (or such other number as may hereafter be specified in
a notice designated as a notice of change of address) with electronic
confirmation of its receipt. Any notice or other communication required or
permitted pursuant to this Agreement shall be deemed given (a) when personally
delivered to any officer of the party to whom it is addressed, (b) on the
earlier of actual receipt thereof or three (3) days following posting thereof by
certified or registered mail, postage prepaid, or (c) upon actual receipt
thereof when sent by a recognized overnight delivery service or (d) upon actual
receipt thereof when sent by telecopier to the number set forth below with
electronic confirmation of its receipt, in each case addressed to each party at
its address set forth below or at such other address as has been furnished in
writing by a party to the other by like notice:
(A) If to Agent at: GMAC Commercial Credit LLC
1290 Avenue of the Americas
New York, New York 10104
Attention: Jack MacGowan,
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with a copy to: Thomas Strachan
Telephone: (212) 408-
Telecopier: (212) 408-4317
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif, Esq.
Telephone: (212) 946-0294
Telecopier: (212) 594-7167
(B) If to Lender other than Agent, as specified on the signature
pages hereof
(C) If to Borrower or
any Guarantor, at: c/o TransTexas Gas Corporation
1300 North Sam Houston Parkway East,
Suite 310
Houston, Texas 77032
Attention: Ed Donahue
Telephone: (281) 987-8600
Telecopier: (281) 986-8865
with a copy to: Gardere & Wynne, LLP
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201-4761
Attention: Barry Drees
Telephone: (214) 999-4567
Telecopier: (214) 999-4667
17.7. Survival. The obligations of Borrower under Sections 3.6, 3.7,
4.9, 14.7 and 17.5 shall survive termination of this Agreement and the Ancillary
Documents and payment in full of the Obligations.
17.8. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
17.9. Expenses.
(a) All costs and expenses including, without limitation,
reasonable attorneys' fees and disbursements incurred by Agent, Agent on behalf
of the Lenders and the Lenders (i) in all efforts made to enforce payment of any
Obligation or effect collection of any Collateral, or (ii) in connection with
the entering into, modification, amendment, administration and enforcement of
this Agreement or any consents or waivers hereunder and all related agreements,
documents and instruments, or (iii) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent's security interest in or Lien on any of the
Collateral, whether through judicial proceedings or otherwise, or (iv) in
defending or prosecuting any actions or proceedings
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arising out of or relating to Agent's or any Lender's transactions with
Borrower, or (v) in connection with any advice given to Agent or any Lender with
respect to its rights and obligations under this Agreement and all related
agreements, shall be reimbursed by Borrower and may be charged to Borrower's
Account or the Receivables Facility and shall be part of the Obligations.
(b) The Borrower shall reimburse all costs and expenses of the
Bondholder Lenders including, without limitation, reasonable attorneys' fees and
disbursements incurred by the Bondholder Lenders, in accordance with (i) the
debtor-in-possession financing order, dated June 16, 1999, relating to the
Bondholder Lenders and the Borrower in the bankruptcy proceeding of the Borrower
then pending in the United States Bankruptcy Court for the Southern District of
Texas, Corpus Christi Division and (ii) the respective invoices provided by the
Bondholder Lenders' New York and Texas co-counsel to the Borrower on or prior to
the Closing Date.
17.10. Injunctive Relief. Borrower and each Guarantor recognizes that,
in the event Borrower or any Guarantor fails to perform, observe or discharge
any of its obligations or liabilities under this Agreement, any remedy at law
may prove to be inadequate relief to the Lenders; therefore, Agent, if Agent so
requests, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving that actual damages are not an
adequate remedy.
17.11. Consequential Damages. Neither Agent, any Lender nor any agent
or attorney for any of them shall be liable to Borrower or any Guarantor for any
special, direct, punitive, exemplary or consequential damages arising from any
breach of contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations.
17.12. Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
17.13. Counterparts; Telecopied Signatures. This Agreement may be
executed in any number of and by different parties hereto on separate
counterparts, all of which, when so executed, shall be deemed an original, but
all such counterparts shall constitute one and the same agreement. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.
17.14. Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
17.15. Confidentiality. Agent, each Lender and each Transferee agree to
use commercially reasonable efforts (equivalent to the efforts Agent or such
Lender applies to maintain the confidentiality of its own confidential
information) to maintain as confidential all non-public information obtained by
Agent, such Lender or such Transferee pursuant to this Agreement; provided,
however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, outside auditors, counsel and other
professional advisors (provided such advisors are informed of and agree to be
bound by the confidentiality
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provisions of this Agreement), (b) to Agent, any Lender or to any prospective
Transferees and Purchasing Lenders (provided that such prospective Transferees
and Purchasing Lenders agree to be bound by the confidentiality provisions of
the Agreement), (c) as required or requested by any governmental authority or
representative thereof or pursuant to legal process and (d) which ceases to be
confidential through no fault of Agent or such Lender; provided, further that
unless specifically prohibited by applicable law or court order, Agent, each
Lender and each Transferee shall use its best efforts prior to disclosure
thereof, to notify Borrower of the applicable request for disclosure of such
non-public information (A) by a governmental authority or representative thereof
(other than any such request in connection with an examination of the financial
condition of a Lender or a Transferee by such governmental authority) or (B)
pursuant to legal process.
17.16. Provisions Relating to Bondholder Lenders.
(a) Notwithstanding anything in this Agreement to the
contrary, Agent, each Lender, Borrower and each Guarantor
hereby acknowledge and agree that Bondholder Lenders shall not
make, or be obligated to make, Advances after the Closing Date
and that for purposes of this Agreement, in the event any
additional Advances are made hereunder, the Bondholder Lenders
shall be treated as Defaulting Lenders in accordance with
Section 2.14 hereof, except that (i) Advances made by Lenders
which are not Defaulting Lenders shall be made pro rata based
on their respective Commitment Percentages applied to the
total amount of the approved Advance plus their respective
Commitment Percentages applied to the principal amount that
the Defaulting Lender(s) have elected not to fund and that
such other Lenders have agreed to fund, (ii) each Lender's
Commitment Percentage shall be adjusted upon each new Advance
made hereunder, provided that neither Agent nor any Lender
shall be obligated to make Advances in excess of its
Commitment, and (iii) notwithstanding the provisions of
Section 2.14(c), Bondholder Lenders shall continue to retain
their rights to give instructions to Agent and to approve,
disapprove, consent to or vote on any matters relating to this
Agreement and the Ancillary Documents up to its then
outstanding Commitment Percentage and the definition of
"Required Lenders" shall continue to include each of the
Bondholder Lenders up to its then outstanding Commitment
Percentage. Each Bondholder Lender consents to any such
Advance made by Agent as a non-Bondholder Lender and any
reduction in such Bondholder Lender's Commitment Percentage
resulting therefrom. If any Lender desires to increase its
Commitment above that which is in effect on the Closing Date
due to the Bondholder Lenders' not funding any additional
Advances, it may do so and its Commitment and Commitment
Percentage shall be automatically amended and adjusted,
respectively.
(b) Each transferee of the Bondholder Lenders shall
be treated as a "Lender" required to make Advances hereunder
after the Closing Date unless such Transferee notifies Agent
in its Commitment Transfer Supplement that it wishes to be
treated as a Bondholder Lender pursuant to the terms of this
Section 17.16.
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OIL & GAS REVOLVING CREDIT
AND TERM LOAN AGREEMENT
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the day and year first above written.
TRANSTEXAS GAS CORPORATION, as Borrower
By:
------------------------------------
Its:
-----------------------------------
GALVESTON BAY PROCESSING CORPORATION, as
Guarantor
By:
------------------------------------
Its:
-----------------------------------
GALVESTON BAY PIPELINE COMPANY, as Guarantor
By:
------------------------------------
Its:
-----------------------------------
GMAC COMMERCIAL CREDIT LLC, as a Lender and
as Agent
By:
------------------------------------
Its:
-----------------------------------
Commitment Percentage: 61.90477%
Commitment Amount: $32,500,000
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OIL & GAS REVOLVING CREDIT
AND TERM LOAN AGREEMENT
'
CREDIT SUISSE FIRST BOSTON MANAGEMENT
CORPORATION, as a Lender
By:
------------------------------------
Its:
-----------------------------------
Commitment Percentage: 12.69841%
Commitment Amount: $6,666,666.67
ANGELO GORDON & CO. L.P., as a Lender
By:
------------------------------------
Its:
-----------------------------------
Commitment Percentage: 12.69841%
Commitment Amount: $6,666,666.67
OAKTREE CAPITAL MANAGEMENT,
as general partner and
investment manager of
certain funds and accounts
it manages, as Lender
By:
------------------------------------
Its:
-----------------------------------
Commitment Percentage: 12.69841%
Commitment Amount: $6,666,666.66
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the board of directors
of said corporation, and that he signed his name thereto by like order.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of GMAC Commercial Credit LLC,
the corporation described in and which executed the foregoing instrument and
that he signed his name thereto by order of the board of directors of said
corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
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STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
On this _____ day of ______________, 2000, before me personally came
______________________________, to me known, who, being by me duly sworn, did
depose and say that he is the __________________ of _______________________, the
corporation described in and which executed the foregoing instrument and that he
signed his name thereto by order of the board of directors of said corporation.
------------------------------
Notary Public
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TABLE OF CONTENTS
I. DEFINITIONS..............................................................................................1
1.1. Accounting Terms................................................................................1
1.2. General Terms...................................................................................1
1.3. Uniform Commercial Code Terms..................................................................35
1.4. Certain Matters of Construction................................................................35
II. ADVANCES, PAYMENTS......................................................................................35
2.1. Revolving Advances.............................................................................35
2.2. Procedure for Borrowing Revolving Advances.....................................................36
2.3. Disbursement of Advance Proceeds...............................................................36
2.4. Term Loan......................................................................................37
2.5. Swingline Loans................................................................................37
2.6. Maximum Advances...............................................................................38
2.7. Repayment of Advances..........................................................................38
2.8. Repayment of Excess Advances...................................................................38
2.9. Statement of Account...........................................................................38
2.10. Additional Payments............................................................................39
2.11. Manner of Borrowing and Payment................................................................39
2.12. Mandatory Prepayments..........................................................................40
2.13. Use of Proceeds................................................................................40
2.14. Defaulting Lender..............................................................................41
III. INTEREST AND FEES.......................................................................................42
3.1. Interest.......................................................................................42
3.2. (a) Structuring Fee............................................................................42
(b) Origination Fee............................................................................42
(c) Facility Fee...............................................................................42
(d) Administration Fee.........................................................................42
3.3. Collateral Monitoring Fee......................................................................42
3.4. Computation of Interest and Fees...............................................................43
3.5. Maximum Charges................................................................................43
3.6. Increased Costs................................................................................43
3.7. Capital Adequacy...............................................................................44
IV. REPRESENTATIONS AND WARRANTIES..........................................................................44
4.1. Authority......................................................................................44
4.2. Formation and Qualification....................................................................45
4.3. Survival of Representations and Warranties.....................................................45
4.4. Tax Returns....................................................................................45
4.5. Financial Statements...........................................................................45
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4.6. Corporate Name.................................................................................46
4.7. O.S.H.A. and Environmental Compliance..........................................................46
4.8. Solvency; No Litigation, Violation, Indebtedness or Default....................................47
4.9. Patents, Trademarks, Copyrights and Licenses...................................................48
4.10. Licenses and Permits...........................................................................48
4.11. Default of Indebtedness........................................................................48
4.12. No Default.....................................................................................49
4.13. No Burdensome Restrictions.....................................................................49
4.14. No Labor Disputes..............................................................................49
4.15. Margin Regulations.............................................................................49
4.16. Investment Company Act.........................................................................49
4.17. Disclosure.....................................................................................49
4.18. Delivery of Credit Suisse Documentation........................................................49
4.19. Swaps..........................................................................................49
4.20. Conflicting Agreements.........................................................................50
4.21. Application of Certain Laws and Regulations....................................................50
4.22. Business and Property of Borrower; Title.......................................................50
4.23. Security Interests.............................................................................50
4.24. Insurance......................................................................................50
4.25. Plan of Reorganization.........................................................................50
4.26. Indenture Qualification........................................................................50
4.27. Location of Borrower...........................................................................51
V. AFFIRMATIVE COVENANTS...................................................................................51
5.1. Payment of Debt................................................................................51
5.2. Corporate Existence............................................................................51
5.3. Payment of Taxes and Other Claims..............................................................51
5.4. Maintenance of Properties and Insurance........................................................51
5.5. Compliance with Laws; Violations...............................................................53
5.6. Execution of Supplemental Instruments..........................................................53
5.7. Payment of Indebtedness........................................................................53
5.8. Standards of Financial Statements..............................................................53
5.9. Environmental Matters..........................................................................53
5.10. Inspections....................................................................................54
VI. NEGATIVE COVENANTS......................................................................................55
6.1. Mergers, Consolidations and Other Fundamental Changes..........................................55
6.2. Asset Sales....................................................................................56
6.3. Limitation on Incurrence of Additional Indebtedness............................................58
6.4. Creation of Liens..............................................................................60
6.5. Limitation on Investments, Loans and Advances..................................................60
6.6. Limitation on Restricted Payments..............................................................61
6.7. Nature of Business.............................................................................61
6.8. Limitation on Transactions with Affiliates.....................................................61
6.9. Subsidiaries...................................................................................61
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6.10. Fiscal Year and Accounting Changes.............................................................62
6.11. Amendment of Articles of Incorporation, By-Laws................................................62
6.12. Compliance with ERISA..........................................................................62
6.13. Prepayment of Indenture Notes..................................................................62
6.14. Limitations on Restricting Subsidiary Dividends................................................62
6.15. Changes Relating to Subordinated Debt..........................................................63
VII. FINANCIAL COVENANTS.....................................................................................63
7.1. Consolidated Coverage Ratio....................................................................63
7.2. Consolidated Net Income........................................................................63
7.3. Consolidated Minimum EBITDA....................................................................64
7.4. Drilling Production Payments...................................................................65
VIII. CONDITIONS PRECEDENT....................................................................................66
8.1. Conditions to Initial Advances.................................................................66
(a) Loan Documents........................................................................66
(b) Filings, Registrations and Recordings.................................................66
(c) Corporate Proceedings of Borrower.....................................................66
(d) Incumbency Certificates of Borrower...................................................66
(e) Certificates..........................................................................66
(f) Good Standing Certificates............................................................67
(g) Legal Opinions........................................................................67
(h) No Litigation.........................................................................67
(i) Solvency Certificate; Pro Forma financial Statements; Projections.....................67
(j) Collateral Examination................................................................67
(k) Fees..................................................................................67
(l) Insurance.............................................................................67
(m) Environmental Reports.................................................................68
(n) Payment Instructions..................................................................68
(o) Consents..............................................................................68
(p) No Adverse Material Change............................................................68
(q) Review of Working Capital Accounts....................................................68
(r) Contract Review.......................................................................68
(s) Closing Certificate...................................................................68
(t) Borrowing Base Certificate............................................................68
(u) Receivables Facility..................................................................68
(v) Indenture.............................................................................69
(w) Confirmation Orders...................................................................69
(y) Intercreditor Agreement...............................................................69
(z) Liens.................................................................................69
(aa) Proved Reserves Report................................................................69
(bb) Plan of Reorganization................................................................69
(cc) Implementation of the Plan............................................................70
(dd) Distributions.........................................................................70
(ee) Reports...............................................................................70
iii
105
(ff) Debt Obligations......................................................................70
(gg) Minimum PV10..........................................................................70
(hh) Distribution Channels.................................................................70
(ii) Minimum Syndication...................................................................70
(jj) Other.................................................................................70
8.2. Conditions to Each Advance.....................................................................70
(a) Distributions.........................................................................70
(b) Representations and Warranties........................................................70
(c) No Default............................................................................71
(d) Maximum Advances......................................................................71
IX. INFORMATION AS TO BORROWER..............................................................................71
9.1. Disclosure of Material Matters.................................................................71
9.2. Borrowing Base Certificate.....................................................................71
9.3. Proved Reserves Report.........................................................................71
9.4. Intentionally Omitted..........................................................................71
9.5. Material Occurrences...........................................................................72
9.6. SEC Reports....................................................................................72
9.7. Compliance Certificate; Notice of Default......................................................72
9.8. Quarterly Financial Statements.................................................................73
9.9. Other Reports..................................................................................73
9.10. Additional Information.........................................................................73
9.11. Projected Operating Budget.....................................................................74
9.12. Intentionally Omitted..........................................................................74
9.13. Notice of Suits, Adverse Events................................................................74
9.14. ERISA Notices and Requests.....................................................................74
9.15. Additional Documents...........................................................................75
9.16. Environmental Reports..........................................................................75
X. EVENTS OF DEFAULT.......................................................................................75
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..............................................................78
11.1. Rights and Remedies............................................................................78
11.2. Agent's Discretion.............................................................................78
11.3. Setoff.........................................................................................78
11.4. Rights and Remedies not Exclusive..............................................................79
11.5. Allocation of Payments After Event of Default..................................................79
XII. WAIVERS AND JUDICIAL PROCEEDINGS........................................................................80
12.1. Waiver of Notice...............................................................................80
12.2. Delay..........................................................................................80
12.3. Jury Waiver....................................................................................80
iv
106
XIII. EFFECTIVE DATE AND TERMINATION..........................................................................80
13.1. Term...........................................................................................80
13.2. Termination....................................................................................81
XIV. REGARDING AGENT.........................................................................................81
14.1. Appointment....................................................................................81
14.2. Nature of Duties...............................................................................82
14.3. Lack of Reliance on Agent and Resignation......................................................82
14.4. Certain Rights of Agent........................................................................83
14.5. Reliance.......................................................................................83
14.6. Notice of Default..............................................................................83
14.7. Indemnification................................................................................83
14.8. Agent in its Individual Capacity...............................................................84
14.9. Delivery of Documents..........................................................................84
14.10. Borrower's Undertaking to Agent................................................................84
XV. RELEASE OF COLLATERAL...................................................................................84
15.1. Disposition of Certain Collateral Without Requesting Release...................................84
15.2. Requesting Release of Collateral...............................................................85
XVI. GUARANTY................................................................................................85
16.1. Guaranty.......................................................................................86
16.2. No Impairment..................................................................................86
16.3. Guaranty Absolute..............................................................................86
16.4. Waivers........................................................................................87
16.5. Payments from Guarantor........................................................................87
16.6. No Termination.................................................................................87
16.7. Recapture......................................................................................88
16.8. Guaranties of Borrower and Material Subsidiaries...............................................88
16.9. Release of Galveston Bay Pipeline..............................................................88
16.10. Release of Galveston Bay Processing............................................................88
XVII. MISCELLANEOUS...........................................................................................89
17.1. Governing Law..................................................................................89
17.2. Entire Understanding...........................................................................89
17.3. Successors and Assigns; Participations; New Lenders............................................90
17.4. Application of Payments........................................................................92
17.5. Indemnity......................................................................................92
17.6. Notice.........................................................................................92
17.7. Survival.......................................................................................93
17.8. Severability...................................................................................93
17.9. Expenses.......................................................................................93
17.10. Injunctive Relief..............................................................................94
17.11. Consequential Damages..........................................................................94
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107
17.12. Captions.......................................................................................94
17.13. Counterparts, Telecopied Signatures............................................................94
17.14. Construction...................................................................................94
17.15. Confidentiality................................................................................94
17.16. Provisions Relating to Bondholder Lenders......................................................95
4.18. Evidence of Title..............................................................................vi
4.19. Notification of Legal Proceedings..............................................................vi
4.21. Transfer or Division Orders....................................................................vi
vi
108
Exhibit 4.27
All defined terms herein not otherwise defined in the Agreement shall
have the meanings ascribed thereto in the Mortgages.
A. Representations and Warranties. Borrower hereby warrants and
represents, as of the date hereof (giving effect to the Confirmation Order and
the transactions contemplated thereunder and under the Plan and the Security
Documents to the Agent and Lenders as follows:
1. Leases. With respect to Leases covering all wells and Lands
to which value has been ascribed in that certain reserve report,
prepared as of November 1, 1999 (the "Netherland Reserve Report"), by
Netherland Sewell & Associates, LLC: (a) the Leases are valid,
subsisting leases as to all such wells and Lands, and are superior and
paramount to all other Oil and Gas Leases respecting the properties to
which they pertain and all rentals, royalties and other amounts due and
payable in accordance with the terms of the Leases have been duly paid
or provided for; (b) the Leases are in full force and effect; and (c)
except as disclosed in writing by Borrower to Lender, Borrower, and to
the best of Borrower's knowledge all other parties to the Leases, have
performed in all material respects all obligations required to be
performed by them and are not in material default under nor in receipt
of any claim of material default under any Lease, and no event has
occurred which, with the passage of time or the giving of notice or
both, would cause a material breach of, or default under, any Lease,
and Borrower has no knowledge of any material breach or anticipated
breach by the other parties to any Lease.
2. Documents. Each of the existing Material Production Sale
Contracts is valid, binding and enforceable in accordance with its
respective terms (except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or moratorium or other
similar laws relating to creditor's rights and by general equitable
principles which may limit the right to obtain equitable remedies
(regardless of whether such enforceability is considered in a
proceeding at equity or at law), and except as rights to indemnity
thereunder may be limited by applicable law) and is in full force and
effect, and no material default on the part of any party thereto exists
thereunder. To the best knowledge of Borrower, all amounts due and
payable in accordance with the terms of each Material Production Sale
Contract have been duly paid or provided for and the obligations to be
performed under each of the Material Production Sale Contracts have
been duly performed, in all material respects in accordance with the
terms of such contracts and any related agreements, and in conformity
with all applicable laws, rules, regulations and orders of all courts
and regulatory authorities having jurisdiction.
3. Title. Except for Permitted Liens, Borrower has (a) good
and indefeasible title to, and is possessed of, the portion of the
Collateral constituting the leasehold estates under the Leases referred
to in A1 above (b) good and marketable title to the portion of the
Collateral constituting Pipeline Assets or other personal property for
the use and operation of such Pipeline Assets as it has been used in
the past and as it is proposed to be used in the business of storing
and transporting Hydrocarbons and other products and
109
any lack of title to such Pipeline Assets or personal property related
thereto has not had and will not have any material adverse effect on
Borrower's ability to use the Pipeline Assets and related personal
property as it is proposed to be used in Borrower's business and will
not materially increase the cost of such use, and (c) good title to the
portion of the Collateral constituting personal property that is not
described in the foregoing clause (b). Borrower owns, in the aggregate,
not more than the amount of undivided working interests and not less
than the amount of net revenue interests in the Leases set forth in the
Netherland Reserve Report. For purposes of this Paragraph (c), "working
interest" shall refer to Borrower's share of expense in the applicable
Lease, well or drilling and production unit shown in the Netherland
Reserve Report, and "net revenue interest" shall refer to Borrower's
share of production from the applicable Lease, well or drilling and
production unit after satisfaction of all royalties, overriding
royalties, production payments or similar non-operating interests. Each
of the Material Production Sale Contracts is free from any material
credit, deduction, allowance, defense, dispute, setoff, or counterclaim
(other than current charges provided for in such instruments but not
yet due and payable), and there is no material extension or indulgence
with respect thereto. Borrower is not aware of any defect in or
challenge to its ownership of the rights or other interests in any of
the Collateral that would, individually or in the aggregate, materially
lessen the value of the Collateral for its use as part of the Pipeline
Assets or materially interfere with the ordinary conduct of the
business of Borrower or the use of the Collateral for the purposes for
which held, except as expressly disclosed to Lender in writing.
4. Contracts. Borrower is not obligated by virtue of any
prepayment under any Production Sale Contract, balancing agreement or
other similar contract providing for the sale by Borrower of
Hydrocarbons, helium and/or other minerals, which contains a "take or
pay" clause or under any similar prepayment agreement or arrangement,
including, without limitation, "gas balancing agreements" to deliver
Hydrocarbons, helium and/or other minerals (amounting to a material
portion of the Hydrocarbons, helium and/or other minerals covered
hereby) at some future time without then or thereafter receiving full
payment therefor.
5. Producing Wells. All producing wells located on the Lands
have been drilled, operated and produced in conformity in all material
respects with all applicable laws, rules, regulations and orders of all
regulatory authorities having jurisdiction and are subject to no
material penalties on account of past production, and such wells are,
in fact, bottomed under and are producing from, and the well bores are
wholly within, the Lands.
6. Pipelines and Pipeline Assets. All Pipelines and Pipeline
Assets have been constructed and operated in conformity in all material
respects with all applicable laws, rules, regulations and orders of all
regulatory authorities having jurisdiction and, except as expressly
disclosed in writing to Lender, are subject to no material penalties on
account of past operations.
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B. Particular Covenants and Agreements of Borrower. Borrower hereby
covenants to Agent and Lenders as follows:
1. Operation of Collateral. So long as the Obligations or any
part thereof remains unpaid, and whether or not Borrower is the
operator of the Collateral, Borrower shall, at Borrower's own expense:
(a) do all things necessary to keep
unimpaired Borrower's rights and remedies in or under the
Collateral and, except as otherwise permitted in this
Agreement, shall (i) not abandon any well or forfeit,
surrender, release or default under (other than any
abandonment, forfeiture, surrender, release or default that,
individually or in the aggregate with all other such defaults,
would not have a Material Adverse Effect) any Lease to which
value has been ascribed in the Proved Reserve Report, or in
the event Borrower is not the operator, shall use commercially
reasonable efforts to prevent any of the above, unless
undertaken in the ordinary course of business, (ii) enter into
or otherwise acquire obligations under Production Sale
Contracts (as defined in the Mortgages) only on terms and
conditions to which a reasonably prudent producer, seller,
purchaser, or processor, as applicable, of Subject Minerals,
would agree, and (iii) not abandon, sell, convey, assign,
lease or otherwise transfer any right, title or interest of
Borrower into or under the Pipelines or the Pipeline Assets,
or consent to any of the foregoing except as permitted in
Section 6.2 of this Agreement;
(b) except as otherwise permitted in this
Agreement, perform or cause to be performed, each and all
covenants, agreements, terms, conditions and limitations
imposed upon Borrower or its predecessors in interest (except
where any failure to so perform or cause to be performed,
individually or in the aggregate with all other such failures,
would not have a Material Adverse Effect) and expressly
contained in (i) the Leases and any instrument or document
relating thereto, and (ii) any assignment or other form of
conveyance, under or through which the Leases, the Pipelines,
Pipeline Assets, Lands, or Rights-of-Way and Franchises, or an
undivided interest therein are now held, and perform or cause
to be performed all implied covenants and obligations imposed
upon Borrower in connection therewith or with any document or
instrument relating thereto;
(c) cause, or in the event Borrower is not
the operator of the Subject Interests or the Pipeline Assets,
use commercially reasonable efforts to cause, the Subject
Interests and the Pipeline Assets to be maintained, developed,
protected against drainage, and continuously operated for the
production of Hydrocarbons, helium and/or other minerals, and
the gathering, storing, transmission and distribution of
Hydrocarbons, as applicable, in a good and workmanlike manner
as would be operated by a prudent operator and in compliance
in all material respects with all applicable operating
agreements and contracts, and all applicable federal, state
and local laws, rules and regulations, excepting those being
contested in good faith in such a manner as not to
111
jeopardize the Agent's or Lender's rights in and to the
Subject Interests or the Pipeline Assets, as applicable;
(d) except as otherwise permitted in this
Agreement, cause to be paid, promptly as and when due and
payable, except where the failure to make any such payments
would not, individually or in the aggregate, have a Material
Adverse Effect, all rentals, delay rentals, royalties and
Obligations payable in respect of the Subject Interests, and
all expenses incurred in or arising from the operation or
development of the Subject Interests, or, in the event
Borrower is not the operator, shall use its best efforts to
cause each of the foregoing to be paid;
(e) cause the Equipment necessary for the
Borrower's business operations to be kept in good and
effective operating condition (reasonable wear and tear
excepted) and all repairs, renewals, replacements, additions
and improvements thereof or thereto, needful to the production
of the Subject Minerals, to be promptly made;
(f) except as otherwise permitted by this
Agreement, cause the Pipelines to be kept in good and
effective operating condition (reasonable wear and tear
excepted), and all repairs, renewals, replacements, additions
and improvements thereof or thereto, necessary to the
gathering, storing, transmission and distribution of
Hydrocarbons through the Pipelines, to be promptly made;
(g) deliver, or cause to be delivered, to
Agent a copy of any notice, demand or other communication from
any other party to any material Leases or any material
Production Sale Contract, relating to any alleged, potential
or actual material breach thereunder or material breach of any
of the covenants, agreements, terms, or limitations thereof or
purporting to terminate or in any other way adversely affect
the rights of Borrower thereunder.
2. Recording, Etc. Borrower will promptly and at Borrower's
expense record, register, deposit and file this and every other
instrument in addition or supplemental hereto in such offices and
places and at such times and as often as may be necessary to perfect,
preserve, protect and renew the lien and security interest hereof as a
recorded lien on the real property and fixtures now or hereafter
comprising the Collateral and perfected security interest on the
personal property and fixtures now or hereafter comprising the
Collateral, as the case may be and the rights and remedies of the Agent
hereunder, and otherwise will do and perform all matters or things
necessary or expedient to be done or observed by reason of any law or
regulation of the State of Texas or of the United States of America or
any other state of the United States or of any other competent
authority, for the purpose of effectively creating, maintaining and
preserving the lien and security interest created by this Agreement and
the perfection and priority thereof.
112
3. Records, Statements and Reports. Borrower will keep proper
books of record and account in which complete and correct entries will
be made of Borrower's transactions in accordance with GAAP consistently
applied.
4. Further Assurances. Borrower will execute and deliver such
other and further instruments and will use its best efforts to do such
other and further acts as in the opinion of Agent may be necessary or
desirable to carry out more effectively the purposes of the Mortgage,
including, without limiting the generality of the foregoing, (a) prompt
correction of any defect which may hereafter be discovered in the title
to the Collateral or any part thereof other than Permitted Liens or in
the execution and acknowledgment of the Mortgage, the Notes or other
document executed in connection herewith or therewith, (b) prompt
execution and delivery of all division or transfer orders that in the
opinion of the Lender are needed to transfer effectively to Agent the
assigned proceeds of production from the Subject Interests, (c)
obtaining any necessary governmental approvals, including, without
limitation, those of the State of Texas and (d) prompt execution of any
supplements or amendments to this Agreement for purposes of
memorializing the encumbrance of any after acquired property.
5. Adverse Claim. Borrower will warrant and forever defend,
subject to the Permitted Liens, the title to the Collateral unto the
Agent against every Person whomsoever lawfully claiming the same or any
part thereof. Should an adverse claim be made against or a cloud
develop upon the title to any part of the Collateral, other than
Permitted Liens, or upon the lien and security interest created by the
Mortgage, Borrower agrees that it will immediately defend such adverse
claim or take appropriate action to remove such cloud at Borrower's
expense, and Borrower further agrees that after prior notice to
Borrower, Agent may take such other action as it deems advisable to
protect and preserve their interests in the Collateral, and, in such
event, Borrower will indemnify Lenders and Agent against any and all
costs, attorneys' fees and other expenses which it or they may incur in
defending against any such adverse claim or taking action to remove any
such cloud.
6. Notice of Pooling or Unitization. Except as otherwise
provided in the Mortgages hereof, Borrower will promptly notify Agent
in writing upon the first filing of any petition or request with any
governmental or regulatory agency regarding any pooling or unitization
arrangement pertaining to the Collateral or any part thereof, and any
pooling or unitization arrangement which is imposed or which Borrower
learns may be imposed on the Collateral or any part thereof, which
would cause Borrower to suffer a significant reduction in income on a
monthly basis from the Collateral.
7. Compliance with Operating Agreements. Borrower agrees to
promptly pay all bills for labor and materials incurred in the
operation of the Collateral and will promptly pay its share of all
costs and expenses incurred under any joint operating agreement
affecting the Collateral or any portion thereof (except for those
amounts being disputed in good faith and for which adequate reserves
have been made); will furnish Agent, as and when requested, full
information as to the status of any joint account
113
maintained with others under any such operating agreement; will not
take any action to incur any liability or lien thereunder.
8. Evidence of Title. Promptly upon receipt of a written
request from Agent, Borrower will furnish and deliver, at the election
of Agent, either (a) complete or supplemental abstracts of title, as
the case may be, prepared by competent abstractors, or (b) title
opinions prepared by competent legal counsel and, in either event,
covering title to property described in the most recent Proved Reserve
Report from the sovereignty of the soil to the latest practicable date,
when taken together with abstracts and/or title opinions previously
furnished to Agent by Borrower. Should Borrower fail to furnish such
abstracts upon such request, Agent may obtain such abstracts, and any
and all costs incurred thereby shall be payable by Borrower to Agent
upon demand at the principal offices of Agent. The abstracts shall be
and constitute a part of the Collateral as defined above.
9. Notification of Legal Proceedings. Borrower will notify
Agent promptly and in writing of the commencement of any legal material
proceedings affecting the Collateral or any part thereof, and will take
such action as may be necessary to preserve the rights of Borrower, the
Agent and Lenders affected thereby; and should Borrower fail or refuse
to take any such action, Agent may at its election take such action on
behalf and in the name and at the cost and expense of Borrower.
20. Transfer or Division Orders. Upon written request of Agent
(but subject to the consent in writing of Lender under the Receivables
Facility), Borrower will execute and deliver written notices of
assignments to any persons, corporations or other entities owing or
which may in the future owe to Borrower monies or accounts arising in
connection with (a) any oil, gas or mineral production from all or any
portion of the Collateral; (b) any gas contracts, processing contracts
or other contracts relating to all or any portion of the Collateral; or
(c) the operation of or production from all or any portion of the
Collateral. The notices of assignments shall advise the third parties
that all of the monies or accounts described above have been assigned
to Agent, and if required by Agent, shall also require and direct that
future payments thereof, including amounts then owing and unpaid, be
paid directly to Agent.
31. Performance of Gas Contracts. Borrower will perform and
observe in all material respects all of its obligations under each
contract relating to the sale of gas produced from or attributable to
the Collateral except where the failure to do so could not have a
Material Adverse Effect.
42. Borrower Holds as Nominee. In the event that the Agent
forecloses or attempts to foreclose on the Collateral, but such
foreclosure will not become effective as to some or all of the
Collateral unless and until the consent of a third party is obtained,
then Borrower agrees to hold title to such portion of the Collateral as
nominee for Agent or any other party who would have acquired such
Collateral at foreclosure until such time as the necessary consents are
obtained. In acting as nominee, Borrower shall take such acts, and only
such acts, with respect to the Collateral as Agent or any other party
who
114
would have acquired the same may direct and the beneficial interest
under such Collateral shall run to Agent or such other party. Borrower
shall enter into a nominee agreement in form and substance satisfactory
to Agent or such other party and execute any other documents or
agreements reasonably necessary to effectuate the provisions of this
section.
115
EXHIBIT 1.2A
TRANSTEXAS GAS CORPORATION
BORROWING BASE CERTIFICATE
Calculated under method (i)*, (ii)* or (iii)*
as defined in "Valuation Amount"
(*Circle method used)
Borrower's Certificate for the period commencing __________ and ending _________
CALCULATION OF LOAN VALUE
1. PV10 of Eligible Hydrocarbon Reserves from $ ________
most recent Proved Reserve Report $ ________
2. Hydrocarbon production revenues during the $ ________
period, calculated at the average price
realized by Borrower $ ________
3. PV10 of Borrower's Hydrocarbon Reserves $ ________
balance at end of the period (1 above
minus 2 above) $ ________
4. Plus adjustments for capital expenditures
during period $ ________
5. Adjusted PV10 of Hydrocarbon Reserves
balance at end of period (3 above plus 4
above) $ ________
6. Estimated Production Payment Liabilities
at the end of the period relating to wells
comprising part of the most recent Proved
Reserves Report $ ________
7. End-of-period PV10 of Eligible Hydrocarbon
Reserves (5 above minus 6 above) $ ________
8. Loan value @ 50% of net Eligible
Hydrocarbon Reserves (not greater than
$52,500,000) $ ________
Exit Facility Loan Balance $ ________
Availability (A8 above minus B above) before Reserves $ ________
NYMEX Natural Gas Average Price per MMBtu for prior month $ ________
Low-price calculation (Calculation necessary only if D
above is $1.50 or less) $ ________
1. PV10 of Proved Developed Producing wells
(excluding any PV10 attributable to wells
subject to Production Payments) (Must be
not less than 140% of Exit Facility Loan
Balance) $ ________
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F. CALCULATION OF COVERAGE SHORTFALL I
(PROVED DEVELOPED RESERVES)
1. PV10 of Total Proved Developed Producing
Reserves, from most recent Proved Reserves
Report $ ________
2. Hydrocarbon production revenues during the
period, calculated at the average price
realized by borrower $ ________
3. PV10 of Total Proved Developed Reserves at
end of period (1 minus 2) $ ________
4. PV10 of Total Proved Developed Reserves
subject to Production Payment(s)
calculated at the Dedication Percentage
applicable to such wells $ ________
5. Plus adjustments for capital expenditure
during period $ ________
6. Adjusted PV10 of Total Proved Developed
Reserves not dedicated to Production
Payment(s) at end of period (3 minus 4,
plus 5) $ ________
7. Exit Facility Balance $ ________
8. Excess/(Shortfall) (6 minus 7) $ ________
(1) G. Calculation of Coverage Shortfall II
(PROVED DEVELOPED PRODUCING RESERVES)
1. PV10 of Total Proved Developed Producing
Reserves, from most recent Proved Reserves
Report $ ________
2. Hydrocarbon production revenues during the
period, calculated at the average price
realized by borrower $ ________
3. PV10 of Total Proved Developed Producing
Reserves at end of period (1 minus 2) $ ________
4. Outstanding balance of Production Payments
relating to wells comprising part of the
most recent Proved Reserves Report $ ________
5. Plus adjustments for capital expenditures
during period $ ________
6. Adjusted PV10 of Total Proved Developed
Producing Reserves, net of Production
Payment(s) at end of period (3 minus 4,
plus 5) $ ________
7. Exit Facility Balance $ ________
8. Excess/(Shortfall) (6 minus 7) $ ________
117
H. Amounts secured by or subject to Permitted Prior
Liens that Prime Agent's Lien on Hydrocarbon
Reserves $ ________
All Royalty Payments, Materials Payables, Mechanics Payables, Severance
Taxes and Ad Valorem Taxes have been paid in accordance with Sections
5.3 and 5.7 of the Exit Facility.
The undersigned (President, Chief Financial Officer or Treasurer)
certifies that the above statements are true and correct and that there
exist no Events of Default under the Exit Facility.
All capitalized terms used in this Certificate which are not defined
herein shall have the meanings given to them in the Oil & Gas Revolving
Credit and Term Loan Agreement dated ___________, 2000 (the "Exit
Facility") by and among TransTexas Gas Corporation ("Borrower"), the
Lenders named therein and GMAC Commercial Credit LLC as Agent for the
Lenders.
Dated:
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Name:
-------------------------
Title:
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