Execution Form
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
REVOLVING LINE OF CREDIT
OF UP TO $500,000,000.00
AMONG
BANK ONE, NA
As Administrative Agent, LC Issuer and a Bank,
UNION BANK OF CALIFORNIA, N.A.
As Syndication Agent and a Bank,
GUARANTY BANK, FSB and HIBERNIA NATIONAL BANK
Each As a Co-Agent and as a Bank,
OTHER FINANCIAL
INSTITUTIONS AND BANKS,
As Banks,
ULTRA RESOURCES, INC.
As Borrower
AND
BANC ONE CAPITAL MARKETS, INC.
As Lead Arranger and Sole Book Manager
June 9, 2004
TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS.......................................................................... 1
ARTICLE II. THE LOANS AND LETTERS OF CREDIT...................................................... 16
2.01 The Commitment........................................................................... 16
2.02 Notice and Manner of Borrowing........................................................... 16
2.03 Payment Procedure........................................................................ 17
2.04 Payments of Interest under the Notes..................................................... 18
2.05 General Provisions Relating to Interest.................................................. 19
2.06 Borrowing Base Determination............................................................. 20
2.07 Mandatory Prepayment Due to a Loan Excess................................................ 21
2.08 Other Mandatory Prepayments.............................................................. 21
2.09 Prepayment and Conversion................................................................ 22
2.10 Increased Cost of Loans.................................................................. 22
2.11 Change of Law............................................................................ 24
2.12 Mitigation: Mandatory Assignment......................................................... 24
2.13 Pro Rata Treatment and Payments.......................................................... 25
2.14 Sharing of Payments and Setoffs.......................................................... 25
2.15 Advances to Satisfy Obligations of the Borrower.......................................... 25
2.16 Assignment of Production................................................................. 25
2.17 Commitment Fee........................................................................... 26
2.18 Addition/Deletion of Borrowing Base Oil & Gas Properties................................. 26
2.19 Adjustment to Aggregate Commitment Amount................................................ 26
2.20 Facility LCs............................................................................. 27
ARTICLE III. CONDITIONS........................................................................... 31
3.01 General Conditions to Closing and to all Disbursements................................... 31
3.02 Deliveries at the Closing................................................................ 32
3.03 Documents Required for Subsequent Disbursements Involving Additional Borrowing Base
Oil and Gas Properties................................................................... 34
ARTICLE IV. REPRESENTATIONS AND WARRANTIES....................................................... 34
4.01 Existence................................................................................ 34
4.02 Due Authorization........................................................................ 35
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4.03 Valid and Binding Obligations............................................................ 35
4.04 Scope and Accuracy of Financial Statements............................................... 35
4.05 Title to Borrowing Base Oil and Gas Properties........................................... 35
4.06 Oil and Gas Leases....................................................................... 36
4.07 Oil and Gas Contracts.................................................................... 36
4.08 Producing Wells.......................................................................... 36
4.09 [This section is intentionally omitted].................................................. 36
4.10 Authorizations and Consents.............................................................. 36
4.11 Environmental Laws....................................................................... 36
4.12 Compliance with Laws, Rules, Regulations and Orders...................................... 37
4.13 Liabilities, Litigation and Restrictions................................................. 37
4.14 Existing Indebtedness.................................................................... 38
4.15 Material Commitments..................................................................... 38
4.16 Margin Stock............................................................................. 38
4.17 Proper Filing of Tax Returns and Payment of Taxes Due.................................... 38
4.18 ERISA.................................................................................... 38
4.19 Investment Company Act Compliance........................................................ 39
4.20 Public Utility Holding Company Act Compliance............................................ 39
4.21 Insurance................................................................................ 39
4.22 Material Misstatements and Omissions..................................................... 39
ARTICLE V. AFFIRMATIVE COVENANTS................................................................ 39
5.01 Use of Funds............................................................................. 39
5.02 Maintenance and Access to Records........................................................ 39
5.03 Quarterly Unaudited Financial Statements................................................. 40
5.04 Annual Audited Financial Statements...................................................... 40
5.05 Compliance Certificate................................................................... 40
5.06 Statement of Material Adverse Change..................................................... 40
5.07 Title Defects............................................................................ 40
5.08 Additional Information................................................................... 40
5.09 Compliance with Laws and Payment of Assessments and Charges.............................. 41
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5.10 Maintenance of Existence and Good Standing............................................... 41
5.11 Further Assurances....................................................................... 41
5.12 Initial Expenses of the Bank............................................................. 41
5.13 Subsequent Expenses of the Administrative Agent and the Arranger......................... 41
5.14 Maintenance of Tangible Property......................................................... 42
5.15 Maintenance of Insurance................................................................. 42
5.16 Inspection of Tangible Assets/Right of Audit............................................. 42
5.17 Payment of Note and Performance of Obligations........................................... 42
5.18 Borrowing Base........................................................................... 42
5.19 Compliance with Environmental Laws....................................................... 43
5.20 INDEMNIFICATION.......................................................................... 43
5.21 Transactions with Affiliates............................................................. 44
5.22 Leases................................................................................... 45
5.23 Operation of Borrowing Base Oil and Gas Properties....................................... 45
5.24 [This section is intentionally omitted].................................................. 45
5.25 Payment of Taxes, Etc.................................................................... 45
5.26 Notice of Litigation..................................................................... 45
5.27 Notice of Events of Default.............................................................. 45
5.28 Notice of Change of Principal Offices.................................................... 46
5.29 [This section is intentionally omitted].................................................. 46
5.30 Employee Benefit Plans................................................................... 46
5.31 Payment of Obligations................................................................... 46
5.32 [This section is intentionally omitted].................................................. 46
ARTICLE VI. NEGATIVE COVENANTS................................................................... 46
6.01 Other Indebtedness....................................................................... 46
6.02 Loans or Advances........................................................................ 46
6.03 Mortgages or Pledges of Assets........................................................... 46
6.04 Sales of Assets.......................................................................... 47
6.05 Dividends................................................................................ 47
6.06 [This section is intentionally omitted].................................................. 47
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6.07 [This section is intentionally omitted].................................................. 47
6.08 Investments.............................................................................. 47
6.09 Changes in Structure or Business......................................................... 47
6.10 Pooling or Unitization................................................................... 47
6.11 Hedge Agreements......................................................................... 48
6.12 Capital Stock of Borrower................................................................ 48
6.13 Margin Stock............................................................................. 48
6.14 [This section is intentionally omitted].................................................. 48
6.15 Current Ratio............................................................................ 48
6.16 EBITDA to Interest Ratio................................................................. 48
6.17 [This section is intentionally omitted].................................................. 48
6.18 Intercompany Transfers................................................................... 48
ARTICLE VII. EVENTS OF DEFAULT.................................................................... 49
7.01 Enumeration of Events of Default......................................................... 49
7.02 Rights Upon Unmatured Event of Default................................................... 51
7.03 Rights Upon Default...................................................................... 52
7.04 Remedies................................................................................. 52
7.05 Right of Set-off......................................................................... 52
ARTICLE VIII. THE ADMINISTRATIVE AGENT............................................................. 53
8.01 Authorization and Action................................................................. 53
8.02 Administrative Agent's Reliance, Etc..................................................... 53
8.03 The Administrative Agent and Affiliates.................................................. 54
8.04 Bank Credit Decision..................................................................... 54
8.05 Administrative Agent's Indemnity......................................................... 54
8.06 Successor Administrative Agent........................................................... 55
8.07 Notice of Default........................................................................ 55
ARTICLE IX. MISCELLANEOUS........................................................................ 56
9.01 Security Interests in Deposits and Right of Offset or the Banker's Lien.................. 56
9.02 Survival of Representations, Warranties and Covenants.................................... 56
9.03 Notices and Other Communications......................................................... 56
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9.04 Parties in Interest...................................................................... 57
9.05 Successors and Assigns; Participation; Purchasing Banks.................................. 57
9.06 Renewals and Extensions.................................................................. 60
9.07 No Waiver by the Administrative Agent, the Banks or the LC Issuer........................ 60
9.08 GOVERNING LAW............................................................................ 61
9.09 Incorporation of Exhibits and Schedules.................................................. 61
9.10 Survival Upon Unenforceability........................................................... 61
9.11 Rights of Third Parties.................................................................. 61
9.12 Amendments or Modifications.............................................................. 61
9.13 Agreement Construed as an Entirety....................................................... 62
9.14 Number and Gender........................................................................ 62
9.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS................................................ 62
9.16 Controlling Provision Upon Conflict...................................................... 62
9.17 Time, Place and Method of Payments....................................................... 63
9.18 Termination.............................................................................. 63
9.19 Non-Application of Chapter 346 of Texas Finance Code..................................... 63
9.20 Counterpart Execution.................................................................... 63
9.21 Power of Attorney........................................................................ 63
9.22 Amended and Restated Agreement........................................................... 64
9.23 WAIVER OF JURY TRIAL..................................................................... 64
EXHIBITS
EXHIBIT A [Intentionally Omitted]
EXHIBIT B Form of Revolving Note
EXHIBIT C Compliance Certificate
EXHIBIT D Security Instruments
EXHIBIT E Request for Advance
EXHIBIT F Additional Bank Certificate
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SCHEDULES
Schedule 1.01(b) Commitment Amount and Aggregate Commitment
Schedule 4.01 Information Regarding the Borrower and its Subsidiaries
Schedule 4.07 Certain Oil and Gas Contracts
Schedule 4.11 Environment Impact Statement
Schedule 4.14 Existing Indebtedness
Schedule 4.15 Material Commitments
Schedule 4.21 Insurance Certificates
Schedule 9.05(d) Commitment Transfer Supplement
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 9,
2004, is by and among ULTRA RESOURCES, INC., a Wyoming corporation ("Borrower"),
the several banks and financial institutions from time to time parties to this
Credit Agreement (the "Banks," such term to include all undersigned Banks and
all other financial institutions which subsequently become parties to this
Agreement in accordance with Section 2.19(a) or Section 9.05 hereof), BANK ONE,
NA, a national banking association ("Bank One") as a Bank, as the LC Issuer
(hereinafter defined) and as Administrative Agent for the Banks (in such latter
capacity and together with its successors and permitted assigns in such
capacity, the "Administrative Agent").
W I T N E S S E T H
WHEREAS, Borrower, Borrower's affiliate Ultra Petroleum (USA) Inc., and
Bank One entered into that certain Credit Agreement dated March 22, 2000, as
amended by that certain First Amendment to Credit Agreement dated July 19, 2001
by and between Borrower and Bank One as Lender, (the "Original Credit
Agreement");
WHEREAS, the Original Credit Agreement was amended and restated pursuant
to that certain First Amended and Restated Credit Agreement dated March 1, 2002,
by and between Borrower, the Administrative Agent and the banks party thereto,
as amended by that certain First Amendment to First Amended and Restated Credit
Agreement dated November 4, 2002, and by a Letter Agreement dated February 18,
2003, and by the Second Amendment to First Amended and Restated Credit Agreement
dated as of May 14, 2003, and by that certain Third Amendment to First Amended
and Restated Credit Agreement dated as of December 12, 2003, (the "Prior Credit
Agreement");
WHEREAS, Borrower has requested that Bank One and the other banks amend
and restate the Prior Credit Agreement, and the Banks are willing to do so in
accordance with the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Banks, the LC Issuer, the Administrative Agent and the
Borrower agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
indicated:
"ABR" means a fluctuating rate of interest equal to the higher of (i) a
rate per annum equal to the prime rate of interest announced from time to time
by Bank One or its parent (which is not necessarily the lowest rate charged to
any customer), changing when and as said prime rate changes, and (ii) the sum of
the Federal Funds Effective Rate most recently determined by the Administrative
Agent plus one-half percent (1/2%) per annum.
1
"ABR Loan" means any Loan from time to time for which interest thereon is
to be computed on the basis of the ABR plus the ABR Margin, as elected by
Borrower pursuant to Section 2.04 hereof.
"ABR Margin" means the applicable margin set forth in the Pricing Grid
under the caption, "ABR Margin," determined based on the Utilization Percentage
prevailing from time to time.
"Additional Bank Certificate" shall have the meaning assigned to such term
in Section 2.19(a).
"Administrative Agent" has the meaning stated therefor in the preamble of
this Agreement.
"Affiliate" means, as applied to any Person, any other Person, directly or
indirectly, controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by," and "under common control
with"), as applied to any Person, means either: (a) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract, or otherwise, or (b) the legal or beneficial ownership of or voting
rights with respect to twenty percent (20%) or more of the equity interest in
such Person.
"Aggregate Commitment Amount" means the lesser of: (a) the Borrowing Base
in effect from time to time, or (b) the amount stated as the Aggregate
Commitment Amount on Schedule 1.01(b) attached hereto, as the same may be
amended from time to time as provided in this Agreement, including in accordance
with the provisions of Section 2.19(a); provided that the Aggregate Commitment
Amount shall not at any time exceed $500,000,000.
"Aggregate Outstanding Credit Exposure" means, at any time, the aggregate
of the Outstanding Credit Exposure of all the Banks.
"Agreement" means this Second Amended and Restated Credit Agreement, as
the same may be amended, restated, modified or supplemented from time to time.
"Applicable Law" means that law in effect from time to time and applicable
to the Notes which lawfully permits the charging and collection of the highest
permissible lawful, non-usurious rate of interest on the Notes, including laws
of the State of Texas and laws of the United States of America; Chapter 303 of
the Texas Finance Code shall be included in the laws of the State of Texas in
determining Applicable Law; and for the purpose of applying said Chapter 303 to
the Notes, the interest ceiling applicable to the Notes under said Chapter 303
shall be the indicated weekly rate ceiling from time to time in effect.
"Applicable Margin" means the applicable LIBOR Margin or ABR Margin
provided for in the Pricing Grid set forth below based upon the Utilization
Percentage.
"Arranger" means Banc One Capital Markets, Inc., in its capacity as lead
arranger and sole book manager.
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"Bank(s)" has the meaning stated therefor in the preamble of this
Agreement.
"Borrower" has the meaning stated therefor in the preamble of this
Agreement.
"Borrowing" means a group of Loans made by the Banks to Borrower on a
single date.
"Borrowing Base" means the maximum loan amount with respect to the
Borrowing Base Oil and Gas Properties, as determined by the Administrative Agent
and approved by the Required Banks from time to time in accordance with Section
2.06 of this Agreement.
"Borrowing Base Oil and Gas Properties" means those oil and gas reserves
attributable to the Oil and Gas Properties of the Borrower evaluated in the most
recently delivered Reserve Report, including, without limitation, those Oil and
Gas Properties of the Borrower subject to the liens created by a Security
Instrument.
"Breakage Costs" means all reasonable losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
any Bank to fund its LIBOR Loans but excluding loss of anticipated profit with
respect to any LIBOR Loans) which such Bank sustains: (i) if for any reason
(other than a default by such Bank or the Administrative Agent) a borrowing of
LIBOR Loans does not occur on a date specified therefor in a Request for
Advance; (ii) if any repayment or conversion of any LIBOR Loans occurs on a date
which is not the last day of an Interest Period applicable thereto; (iii) if any
prepayment of any LIBOR Loans is not made on any date specified in a notice of
prepayment given by Borrower; or (iv) as a consequence of any default by the
Borrower to repay LIBOR Loans when required by the terms of this Agreement.
"Business Day" means a day other than a Saturday, Sunday or legal holiday
for commercial banks under the laws of the State of Texas, provided that with
respect to transactions under this Agreement relating to LIBOR Loans, such day
must also be a Eurodollar Business Day.
"Change of Control" means any of the following events: (a) any "person" or
"group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) has become, directly or
indirectly, the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all such shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), by way of merger, consolidation or otherwise, of a majority or more of
the common stock of Borrower on a fully-diluted basis, after giving effect to
the conversion and exercise of all outstanding warrants, options and other
securities of the Borrower (whether or not such securities are then currently
convertible or exercisable) or (b) during any period of two consecutive calendar
years, individuals who at the beginning of such period constituted the board of
directors of the Borrower cease for any reason to constitute a majority of the
directors of the Borrower then in office unless (i) such new directors were
elected by a majority of the directors of the Borrower who constituted the board
of directors of the Borrower at the beginning of such period (or by directors so
elected) or (ii) the reason for such directors failing to constitute a majority
is a result of retirement by directors due to age, death or disability.
3
"Closing" has the meaning provided in Section 3.01.
"Co-Agent" means Hibernia National Bank and Guaranty Bank, FSB,
respectively, and each successor to such agent position.
"Commitment" means, as to any Bank, the obligation of such Bank to make
Loans to, and participate in Facility LCs issued upon the application of, the
Borrower in an aggregate amount at any one time outstanding not to exceed the
lesser of (i) such Bank's Commitment Amount and (ii) such Bank's Percentage
Share of the Borrowing Base then in effect.
"Commitment Amount" means at any time, for any Bank, the amount set forth
opposite such Bank's name on Schedule 1.01(b) under the heading "Commitment
Amount," as such amount may be changed as provided in this Agreement, including
in accordance with the provisions of Section 2.19.
"Commitment Transfer Supplement" means a Commitment Transfer Supplement
executed by a Bank and a Purchasing Bank substantially in the form of Schedule
9.05(d) and registered with the Administrative Agent pursuant to Section 9.05(d)
hereof.
"Compliance Certificate" means the certificate of the President or other
Responsible Officer of the Borrower submitted to the Administrative Agent from
time to time pursuant to this Agreement and attesting to the financial covenants
and stating, to such officer's knowledge, whether or not an Event of Default or
an Unmatured Event of Default has occurred and is continuing and, if such an
event has occurred, the actions being taken by the Borrower, to remedy such
situation and that GAAP has been used in the preparation of the Financial
Statements, which certificate shall be in the form attached hereto as Exhibit
"C."
"Consolidated Financial Statements" means, as of any reporting period, the
consolidated and consolidating Financial Statements of Ultra Petroleum Corp. and
its Subsidiaries, prepared in accordance with GAAP.
"COPAS" means the Accounting Procedure Joint Operations Recommended by the
Council of Petroleum Accountants, with respect to onshore and offshore
operations, respectively, including the most current versions thereof and any
other recent versions thereof commonly in use.
"Credit Extension" means the making of a Loan or the issuance of a
Facility LC hereunder.
"Credit Extension Date" means the date on which a Loan is advanced or a
Facility LC is issued.
"Current Assets" means at any time, all assets that should, in accordance
with GAAP, be classified as current assets on a consolidated balance sheet of
Borrower, plus the then current availability under the aggregate Commitments.
"Current Liabilities" means all liabilities which would, in accordance
with GAAP, be included as current liabilities plus short term liabilities (which
have been reclassified as non-
4
current) to be refinanced with the Aggregate Commitment Amount on a consolidated
balance sheet of Ultra Petroleum Corp. as of the date of calculation less
current maturities on the Obligations.
"Current Ratio" means the ratio derived from dividing Current Assets by
Current Liabilities.
"Dollars" and "$" means dollars in lawful currency of the United States of
America.
"EBITDA" means, for any reporting period, net income on a consolidated
basis before deductions for interest expense, taxes, depreciation, depletion,
amortization and other non-cash expenses, less non-cash income.
"Environmental Laws" means (a) the following federal laws as they may be
cited, referenced and amended from time to time: the Clean Air Act, the Clean
Water Act, the Safe Drinking Water Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Endangered Species Act, the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Hazardous Materials Transportation Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control Act, and the Oil Pollution Act
of 1990; (b) any and all environmental statutes of any state in which property
of the Borrower is situated, as they may be cited, referenced and amended from
time to time; (c) any rules or regulations promulgated under or adopted pursuant
to the above federal and state laws; and (d) any other federal, state or local
statute or any requirement, rule, regulation, code, ordinance or order adopted
pursuant thereto, including, without limitation, those relating to the
generation, transportation, treatment, storage, recycling, disposal, handling or
release of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereof.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 of ERISA.
"Eurodollar Business Day" means a day on which dealings are carried on in
the LIBOR Market.
"Event of Default" means any of the events specified in Section 7.01 of
this Agreement.
"Facility LC" is defined in Section 2.20(A).
"Facility LC Application" is defined in Section 2.20(C).
"Facility Termination Date" means May 1, 2008.
"Federal Funds Effective 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 by the Federal
Reserve Bank of New York for such day on the next succeeding Business Day or, if
such rate is not so published for any day which is a
5
Business Day, the average of the quotations for the day of such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.
"Financial Statements" means the statements of the financial condition of
the indicated Person, on a consolidated basis, as at the point in time and for
the period indicated and consisting of at least a balance sheet, income
statement and statement of cash flows, all expressed in terms of United States
Dollars, and when the foregoing are audited, accompanied by the certification of
such Person's independent certified public accountants and footnotes to any of
the foregoing, all of which shall be prepared in accordance with GAAP applied on
a basis consistent with that of the preceding year, except for any inconsistency
that results from changes in GAAP from year to year.
"Floating Rate" means a per annum interest rate determined by reference to
the following schedule:
- LIBOR + LIBOR Margin at Borrower's option pursuant to Section 2.04,
or ABR + ABR Margin
- After the occurrence and during the continuation of an Event of
Default, the Floating Rate determined in accordance with the
forgoing schedule shall, in each case, be increased by two percent
(2%) per annum, not to exceed the Maximum Rate.
"GAAP" means generally accepted accounting principles recognized as such
by the Financial Accounting Standards Board (or a generally recognized
successor), applied on a consistent basis, and which are applicable as of the
date of Closing, except that solely for purposes of the definition of Financial
Statements herein, changes in GAAP from time to time (if any) shall be applied
and reflected in the Financial Statements. Accounting principles are applied on
a "consistent basis" when the accounting principles observed in a current period
are comparable in all material respects to those accounting principles applied
in a preceding period.
"Guarantor(s)" means, individually and collectively, Ultra Petroleum
Corp., a Yukon Territory of Canada corporation, and UP Energy Corporation, a
Nevada corporation.
"Guaranty" means the unlimited guaranty agreement of Borrower's Obligation
to Banks under this Agreement, in form and in substance satisfactory to the
Administrative Agent, duly executed by each Guarantor.
"Hazardous Substances" means flammables, explosives, radioactive
materials, hazardous wastes, asbestos or any material containing asbestos,
polychlorinated biphenyls (PCBs), toxic substances or related materials,
petroleum and petroleum products and associated oil or natural gas exploration,
production and development wastes or any substances defined as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic substances"
under the Comprehensive Environmental Response, Compensation and Liability Act,
as amended, the Superfund Amendments and Reauthorization Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended, the Toxic Substances Control Act, as amended, or
any other Environmental Laws now or hereafter enacted or promulgated by any
regulatory authority or governmental body, but only to the extent any such law
is or becomes applicable to the Borrower or any of its property.
6
"Hedge Agreement" means any swap agreement, cap, collar, floor, exchange
transaction, forward agreement or exchange or protection agreement related to
Hydrocarbons or interest rates, or any option with respect to such transaction,
as more specifically provided in those certain master swap agreements on
International Swaps and Derivatives Association forms and the schedules thereto
and any confirmations thereunder entered into by Borrower with any other Person.
"Hydrocarbons" means crude oil, condensate, natural gas, natural gas
liquids and other hydrocarbons.
"Increased Costs" has the meaning stated therefor in Section 2.10(A)(3) of
this Agreement.
"Indebtedness" means, as to any Person, without duplication (a) all items
of indebtedness or liability for borrowed money that in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet as at the date as of which Indebtedness is to be
determined, (b) indebtedness secured by (or for which the holder of such
indebtedness has a right, contingent or otherwise, to be secured by) any
mortgage, deed of trust, pledge, lien, security interest, or other charge or
encumbrance existing on or encumbering property owned by the Person whose
Indebtedness is being determined, whether or not the indebtedness secured
thereby shall have been assumed, (c) all indebtedness of others which such
Person has directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business), discounted with
recourse, agreed (contingently or otherwise) to purchase or repurchase or
otherwise acquire, or in respect of which such Person has agreed to supply or
advance funds (whether by way of loan, purchase of securities or capital
contribution, through a commitment to pay for property or services regardless of
the nondelivery of such property or the nonfurnishing of such services or
otherwise), or in respect of which such Person has otherwise become directly or
indirectly liable, contingently or otherwise, whether now existing or hereafter
arising, and (d) all leases (excluding Leases constituting Oil and Gas
Properties) that, in accordance with GAAP, should not be reflected on the
Borrower's balance sheet.
"Interest Period" means as to any LIBOR Loan the period commencing on and
including the date of such Loan (or on the effective date of the election
pursuant to Section 2.04(B) by which such Loan became a LIBOR Loan) and ending
on and including the day preceding the numerically corresponding day (or if
there is no such numerically corresponding day, the last day) in the 1st, 2nd,
3rd or 6th calendar month after the date of such Loan, as selected by the
Borrower in accordance with Section 2.04(B), and after such selected month, such
period commencing on and including the day immediately following the last day of
the then ending Interest Period for such Loan and ending on and including the
day preceding the day numerically corresponding to the first day of such
Interest Period (or if there is no such numerically corresponding day, the last
day), in the 1st, 2nd, 3rd or 6th calendar month after the first day of such
Interest Period, as so selected by the Borrower; provided, however, that if any
Interest Period would otherwise end on a day immediately prior to a day that is
not a Business Day it shall be extended so as to end on the day immediately
prior to the next succeeding Business Day unless the same would fall in a
different calendar month, in which case such Interest Period shall
7
end on the day immediately preceding the first Business Day immediately
preceding such next succeeding Business Day.
"Investment" in any Person means any stock, bond, note or other evidence
of Indebtedness or any other security (other than current trade and customer
accounts) of, or loan to, such Person.
"Laws" means all ordinances, statutes, rules, regulations, orders,
injunctions, writs, or decrees of any government or political subdivision or
agency thereof, or any court or similar entity established by any thereof.
"LC Fee" is defined in Section 2.20(D).
"LC Issuer" means Bank One (or any subsidiary or Affiliate of Bank One
designated by Bank One and reasonably acceptable to Borrower) in its capacity as
issuer of Facility LCs hereunder.
"LC Obligations" means, at any time, the sum, without duplication, of (i)
the aggregate undrawn stated amount under all Facility LCs outstanding at such
time plus (ii) the aggregate unpaid amount at such time of all Reimbursement
Obligations.
"LC Payment Date" is defined in Section 2.20(E).
"Leases" means oil and gas leases and all oil, gas and mineral leases
constituting any part of the Borrowing Base Oil and Gas Properties.
"LIBOR" means, with respect to each Interest Period, the rate of interest
per annum at which deposits of not less than $1,000,000.00 in United States
dollars are offered in the LIBOR Market for a period of time equal or comparable
to such Interest Period and in an amount equal to or comparable to the principal
amount of the LIBOR Loan to which such Interest Period relates as appearing on
Reuters Screen FRBD as of 11:00 AM (London time) two (2) Business Days before
the first day of the applicable Interest Period, as adjusted for maximum
statutory reserves, provided, however, that if such rate is not available on
Reuters Screen FRBD, then within five (5) Business Days of receipt of
notification, the Administrative Agent and the Borrower shall enter into good
faith negotiations for a period of fifteen (15) days (or such shorter period as
is required to agree to the alternative basis) with a view to agreeing on an
alternative basis for determining the rate of interest applicable to LIBOR
Loans, and if no alternative basis is agreed within the fifteen (15) day period,
the LIBOR Loan shall be deemed to have converted to an ABR Loan as of the end of
the last Interest Period.
"LIBOR Loan" means any Loan from time to time for which interest thereon
is to be computed at a Floating Rate based on LIBOR plus the LIBOR Margin, as
elected by Borrower pursuant to Section 2.04 hereof.
"LIBOR Margin" means the applicable margin set forth in the Pricing Grid
under the caption, "LIBOR Margin," determined based on the Utilization
Percentage prevailing from time to time.
8
"LIBOR Market" means the London interbank offered interest rate market
created by major London clearing banks for deposits in United States dollars.
"Limitation Period" means any period while any amount remains owing on the
Notes when interest on such amount, calculated at the applicable rate prescribed
on the Notes, plus any fees payable hereunder and deemed to be interest under
applicable Law, would exceed the Maximum Rate.
"Loan" means, singly, any advance by the Banks to the Borrower pursuant to
this Agreement and "Loans" means, cumulatively, the aggregate sum of all money
advanced by the Banks to the Borrower pursuant to this Agreement.
"Loan Documents" means this Agreement, the Notes, the Facility LC
Applications, the Security Instruments, the Guaranties, any Hedge Agreements in
which Administrative Agent or any Bank (or any of their respective Affiliates)
is a counterparty to Borrower and all other promissory notes, security
agreements, and other instruments, documents, and agreements executed and
delivered pursuant to or in connection with this Agreement, as such instruments,
documents, and agreements may be amended, modified, renewed, extended, or
supplemented from time to time.
"Loan Excess" means, at any point in time, the amount, if any, by which
the Aggregate Outstanding Credit Exposure exceeds the Aggregate Commitment
Amount then in effect.
"Marketable Title" means good and defensible title, as set forth,
qualified and/or limited on Exhibit "A," free and clear of all mortgages, liens
and encumbrances, except for Permitted Encumbrances.
"Material Adverse Change" means any change in the business, property,
condition (financial or otherwise) or results of operations of the Borrower or
either Guarantor which has a Material Adverse Effect, including, but not limited
to, Administrative Agent, any Bank, the LC Issuer or any Responsible Officer of
Borrower acquiring knowledge of any facts or circumstances that differ from the
facts and/or circumstances represented in Article IV of this Agreement or in any
other Loan Document (including, but not limited to, any such facts and
circumstances represented based on the knowledge of Borrower or its Responsible
Officer), if such actual facts and circumstances, compared to the facts and
circumstances so represented, would have a Material Adverse Effect.
"Material Adverse Effect" means a material adverse effect on (i) the
business, property, condition (financial or otherwise), results of operations of
the Borrower or either Guarantor, or (ii) the ability of the Borrower or a
Guarantor to perform its obligations under the Loan Documents to which it is a
party.
"Maximum Rate" means the maximum rate of non-usurious interest permitted
from day to day by Applicable Law, including Chapter 303 of the Texas Finance
Code (and as the same may be incorporated by reference in other Texas statutes),
but otherwise without limitation, that rate based upon the "indicated weekly
rate ceiling."
"Modify" and "Modification" are defined in Section 2.20(A).
9
"Multi-employer Plan" means a plan described in Section 4001(a)(3) of
ERISA which covers employees of the Borrower or any ERISA Affiliate.
"Net Income" means, for any period, the net income (or loss) of the
Borrower on a consolidated basis after allowances for taxes for such period,
determined in accordance with GAAP; provided that there shall be excluded from
such net income (to the extent otherwise included therein) the net income of any
Person in which the Borrower has an interest (which interest does not cause the
net income of such other Person to be consolidated with the net income of the
Borrower in accordance with GAAP), except to the extent of the amount of
dividends or distributions actually paid in such period by such other Person to
the Borrower.
"Note" and "Notes" means (i) individually, any promissory note issued by
Borrower payable to the order of a Bank evidencing the Loans made by that Bank
pursuant to Section 2.01 hereof and being substantially in the form of the note
attached as Exhibit B hereto, together with any and all further renewals,
extensions for any period, increases or rearrangements thereof, and any
promissory note or notes given in replacement or substitution therefor, and (ii)
collectively, all such Notes.
"Obligations" means all obligations, indebtedness, and liabilities of the
Borrower to the Banks and the LC Issuer, now existing or hereafter arising under
this Agreement and the other Loan Documents, including, but not limited to, the
Indebtedness evidenced by the Notes and the Reimbursement Obligations, and all
interest accruing thereon and all reasonable attorneys' fees and other expenses
incurred in the administration, enforcement or collection thereof.
"Oil and Gas Properties" means fee, leasehold or other interests in or
under mineral estates or oil, gas and other liquid or gaseous hydrocarbon leases
with respect to properties situated in the United States, including, without
limitation, overriding royalty and royalty interests, leasehold estate
interests, net profits interests, production payment interests and mineral fee
interests, together with contracts executed in connection therewith and all
tenements, hereditaments, appurtenances and properties, real or personal,
appertaining, belonging, affixed or incidental thereto.
"Original Credit Agreement" has the meaning stated therefor in the first
recital of this Agreement.
"Outstanding Credit Exposure" means, as to any Bank at any time, the sum
of (i) the aggregate principal amount of its Loans outstanding at such time,
plus (ii) an amount equal to its Percentage Share of the LC Obligations at such
time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Percentage Share" means, as to any Bank, a fraction (expressed as a
percentage), the numerator of which shall be such Bank's Commitment Amount, and
the denominator of which shall be the Aggregate Commitment Amount stated on
Schedule 1.01(b) attached hereto, as Schedule 1.01(b) may be amended, modified
or supplemented in accordance with the provisions of the Agreement, including
Section 2.19 hereof.
10
"Permitted Asset Sales" means (a) sales, leases, assignments, transfers or
disposals of, in one or any series of related transactions, (i) any of
Borrower's assets, whether now owned or hereafter acquired, including transfers
to Affiliates, with respect to which the net proceeds in an arms-length
transaction do not exceed $10,000,000 in the aggregate during any period
beginning on the date of Administrative Agent's written notice to Borrower
pursuant to Section 2.06 of a Borrowing Base redetermination (except that the
first such period shall begin at Closing) and ending on the date of the next
such written notice from Administrative Agent to Borrower or (ii) surplus, worn
out or obsolete equipment of nominal value to Borrower, and (b) sales of
Hydrocarbons in the ordinary course of business.
"Permitted Encumbrances" means:
(A) Liens for taxes, assessments, or similar charges, incurred in
the ordinary course of business that are not yet due and
payable;
(B) Liens of mechanics, materialmen, warehousemen, carriers,
landlords or other like liens, securing obligations incurred
in the ordinary course of business that are not yet due and
payable;
(C) Pledges or deposits in connection with or to secure workmen's
compensation, unemployment insurance, pensions or other
employee benefits;
(D) Encumbrances consisting of covenants, zoning restrictions,
rights, easements, liens, governmental environmental
permitting and operation restrictions, operating restrictions
under leases consistent with other leases in the same
geographical area, operating constraints under the
Environmental Impact Statement described on Schedule 4.11, the
exercise by governmental bodies or third parties of eminent
domain or condemnation rights, or any other restrictions on
the use of real property, none of which materially impairs the
use of such property by the Borrower in the operation of its
business, and none of which is violated in any material
respect by existing or proposed operations;
(E) Liens of operators and/or co-working interest owners under
joint operating agreements or similar contractual arrangements
with respect to the Borrower's proportionate share of the
expense of exploration, development and operation of oil, gas
and mineral leasehold or fee interests owned jointly with
others, to the extent that same relate to sums not yet
overdue, or if they relate to sums that are overdue, then to
the extent that the same are being contested in good faith by
appropriate proceedings and execution of the associated lien
has been stayed, either pursuant to agreement of the lien
claimant or by a valid order of a court having jurisdiction;
(F) Liens securing surety or other bonds required in the normal
course of business and Liens on cash deposits securing
Permitted Hedge
11
Agreements, not to exceed $2,000,000.00 in the aggregate at
any time in effect;
(G) The following, if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings,
so long as levy and execution thereon have been stayed and
continue to be stayed and they do not, in the aggregate,
materially detract from the value of the property of the
Borrower, or materially impair the use thereof in the
operation of its business:
(1) Claims or liens for taxes, assessments, or charges due
and payable and subject to interest or penalty;
(2) Claims, liens, and encumbrances upon, and defects of
title to, real or personal property, including any
attachment of personal or real property or other legal
process prior to adjudication of a dispute on the
merits;
(3) Claims or liens of mechanics, materialmen, warehousemen,
carriers, or other like liens; and
(4) Adverse judgments on appeal;
(H) Liens securing payment and performance of the Obligations;
(I) Liens securing purchase money obligations included in the
definition of Permitted Indebtedness if such liens encumber
only the property for which such purchase money obligation was
incurred; and
(J) Inchoate liens in respect of royalty owners.
"Permitted Hedge Agreement" means any Hedge Agreement which Borrower
enters into with or through a counterparty that has a credit rating of at least
"A-" by Standard and Poors or "A3" by Moody's Investment Service, together with
the confirmations which Borrower may hereafter enter into with or through such
counterparty covering, in the aggregate, for all such Hedge Agreements, not more
than seventy-five percent (75%) of the Proved Reserves that are (i) attributable
to Borrower's interest in the Borrowing Base Oil and Gas Properties and (ii)
projected to be produced during the term(s) of such Hedge Agreement(s).
"Permitted Indebtedness" means:
(A) The Loans and Facility LCs;
(B) Unsecured current accounts payable incurred in the ordinary
course of business which are (i) not more than sixty (60) days
overdue, or (ii) being contested in good faith by appropriate
proceedings, or (iii) the subject of usual and customary
review and evaluation;
12
(C) Extensions of credit from suppliers or contractors who are not
Affiliates of Borrower for the performance of labor or
services or the provision of supplies or materials under
applicable contracts or agreements in connection with
Borrower's oil and gas exploration and development activities,
which are not overdue or are being contested in good faith by
appropriate proceedings;
(D) Letters of credit or performance bonds required to be obtained
by the Borrower in the normal course of its business to assure
the proper plugging and abandonment of oil or gas drilling or
production locations or bonds required by any governmental
agency or instrumentality in the normal course of the
Borrower's business;
(E) Borrower's (i) purchase money obligations; (ii) capital lease
obligations; and (iii) other obligations supporting Borrower's
acquisition or use of any capital asset that had not been
acquired and was not in use by Borrower as of the date of the
Closing; of up to Five Million Dollars ($5,000,000) in the
aggregate outstanding at any time, so long as no such
obligation under clauses (i) through (iii) exceeds the fair
market value of the respective asset(s) thereby acquired or
used;
(F) Income taxes payable that are not overdue;
(G) Accrued abandonment liabilities;
(H) Indebtedness arising out of Permitted Hedge Agreements;
(I) Other Indebtedness incurred by the Borrower not to exceed, in
the aggregate at any time outstanding, Two Million Dollars
($2,000,000.00); and
(J) Indebtedness comprising intercompany loans made to Borrower by
Sino-American, provided that the interest rate, if any,
applicable to any such intercompany loan shall not exceed on
any date the ABR on such date.
"Person" means an individual, company, corporation, partnership, joint
venture, limited liability company, trust, association, unincorporated
organization or a government or any agency or political subdivision thereof.
"Plan" means, at any time, any employee benefit plan which is covered by
ERISA and in respect of which the Borrower or any ERISA Affiliate is (or, if
such plan were terminated at such time, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.
13
"Pricing Grid" means the following table:
UTILIZATION PERCENTAGE LIBOR MARGIN ABR MARGIN COMMITMENT FEE
> or = 90% 187.5 b.p. 87.5 b.p. 50.0 b.p.
> or = 75% < 90% 175.0 b.p. 75.0 b.p. 37.5 b.p.
> or = 50% < 75% 150.0 b.p. 50.0 b.p. 37.5 b.p.
< 50% 125.0 b.p. 25.0 b.p. 30.0 b.p.
"Prior Credit Agreement" has the meaning stated therefor in the second
recital of this Agreement.
"Prior Note" means the Note held by Bank One as of the Closing, which was
issued by Borrower to Bank One pursuant to the Prior Credit Agreement, together
with all deferrals, renewals, extensions, amendments, modifications or
rearrangements thereof.
"Production Revenue" means revenues of the Borrower from the sale of its
oil and gas production minus any applicable oil and gas production taxes and
royalties.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code of 1954, as amended from time
to time.
"Purchasing Bank" shall have the meaning assigned to that term in Section
9.05 hereof.
"Proved Reserves" means the estimated quantities of crude oil, condensate,
natural gas liquids and natural gas which geological and engineering data
demonstrate with reasonable certainty to be recoverable by primary producing
mechanisms in future years from known reservoirs underlying lands or interests
therein constituting Oil and Gas Properties, under existing economic and
operating conditions. Reserves which can be produced economically through
application of improved recovery techniques (i.e., fluid injection) will be
included in Proved Reserves when successful testing by a pilot project or the
operation of an installed program in the reservoir provides support for the
engineering analysis on which the pilot project or installed program was based.
In general, the economic productivity of the estimated proved reserves is
supported by actual production or a conclusive formation test; however, in
certain instances proved reserves are assigned to reservoirs on the basis of a
combination of electrical and other type logs and core analyses which indicate
these reservoirs are analogous to similar reservoirs in the same field which are
producing or have demonstrated the ability to produce on a formation test.
"PW9" means the present worth of future net income, discounted to present
value at the simple interest rate of nine percent (9%) per year.
"Reimbursement Obligations" means, at any time, the aggregate of all
obligations of the Borrower then outstanding under Section 2.20 to reimburse the
LC Issuer for amounts paid by the LC Issuer in respect of any one or more
drawings under Facility LCs.
14
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"Request for Advance" means the written or verbal (confirmed in writing
within one (1) Business Day) request by the Borrower to the Administrative Agent
for an advance by the Banks pursuant to this Agreement, which Request for
Advance shall be in substantially the form attached hereto as Exhibit "E",
signed by an authorized officer of the Borrower and which shall include a
statement of the amount requested to be advanced, the date of the requested
advance and such other information as the Administrative Agent in its reasonable
discretion deems necessary.
"Required Banks" means, at any time, Banks holding at least sixty-six and
two-thirds percent (66 2/3%) of the Aggregate Commitment Amount or, if the
Aggregate Commitment Amount has been terminated, Banks having at least sixty-six
and two-thirds percent (66 2/3%) of the Aggregate Outstanding Credit Exposure.
"Required Number" means: in the case of notices hereunder (i) relative to
borrowings, prepayments, elections of LIBOR Loans, selections of Interest
Periods for, or other transactions in respect of, LIBOR Loans: by 10:00 a.m.,
Central Standard Time on the third Business Day prior to the proposed activity;
or (ii) relative to all transactions in respect of ABR Loans: the same Business
Day by 1:00 p.m., Central Standard Time; it being understood, however, that in
the case of notices involving transactions in respect of more than one type of
Loan (such as a change in type of Loan in accordance with Section 2.04(B)),
"Required Number" means that number of days, as indicated above in respect of
the Loans involved, which would constitute the longest applicable period of
time.
"Reserve Report" means a report prepared by a company engineer or an
independent petroleum engineer or firm of engineers satisfactory to the
Administrative Agent in the reasonable exercise of its discretion regarding the
Proved Reserves attributable to the Oil and Gas Properties of the Borrower
evaluated in such report, using the criteria and parameters required by and
acceptable to the Securities and Exchange Commission, and incorporating the
present cost of appropriate plugging and abandonment obligations to be incurred
in the future, taking into account any plugging and abandonment fund required to
be accrued or established by Borrower out of cash flow from such Oil and Gas
Properties covered by such report with respect to such future obligations.
"Responsible Officer" means, as to any Person, its president, chief
executive officer and any senior vice president, provided that if any such
officer's position does not exist within a Person or if two or more of such
positions are held by the same individual, then such term shall mean each of the
three most senior duly elected and acting officers of such Person.
"Security Instruments" means the security instruments described on Exhibit
"D," in form and substance satisfactory to the Administrative Agent, to be
executed by Borrower pursuant to Section 3.02, and the Security Instruments as
defined in the Prior Credit Agreement, each of which shall continue to secure
Borrower's Obligations, and any and all other instruments or documents hereafter
executed in connection with or as security for the payment of the Notes and
performance of the Obligations.
15
"Sino-American" means Sino-American Energy Corporation, a Texas
corporation.
"Subsidiary" means, as to any Person, any corporation in which such
Person, directly or indirectly through its Subsidiaries, owns more than fifty
percent (50%) of the stock of any class or classes having by the terms thereof
the ordinary voting power to elect a majority of the directors of such
corporation, and any partnership, association, joint venture, or other entity in
which such Person, directly or indirectly through its Subsidiaries, has more
than a fifty percent (50%) equity interest at the time.
"Syndication Agent" means Union Bank of California, and each successor to
such agent position.
"Transfer Order Letters" means the letters in lieu of division or transfer
orders, in form acceptable to the Administrative Agent.
"Unmatured Event of Default" means any event or occurrence which solely
with: (a) the lapse of any applicable grace period as stated or expressly
referred to in Article VII hereof, or (b) the giving of notice required by this
Agreement, or (c) both, will ripen into an Event of Default.
"Utilization Percentage" means the percentage of the Borrowing Base
represented by the aggregate principal amount of all Credit Extensions
outstanding from time to time.
Undefined Terms. Undefined financial accounting terms used in this
Agreement shall be defined according to GAAP.
ARTICLE II.
THE LOANS AND LETTERS OF CREDIT
2.01 The Commitment. From and including the date of this Agreement and
prior to the Facility Termination Date, each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to (i) make Loans to the Borrower
and (ii) participate in Facility LCs issued upon the request of the Borrower,
provided that, after giving effect to the making of each Loan and the issuance
of each Facility LC, (x) such Bank's Outstanding Credit Exposure shall not
exceed its Commitment and (y) the Aggregate Outstanding Credit Exposure shall
not exceed the Aggregate Commitment Amount. The Loans advanced by each Bank to
the Borrower shall be evidenced by the Banks' respective Notes from the
Borrower. Subject to the terms of this Agreement, the Borrower may borrow, repay
and reborrow up to the Aggregate Commitment Amount at any time prior to the
Facility Termination Date. All Commitments to extend credit hereunder shall
expire on the Facility Termination Date. The LC Issuer will issue Facility LCs
hereunder on the terms and conditions set forth in Section 2.20.
2.02 Notice and Manner of Borrowing.
(a) The amount and date of each Credit Extension shall be designated in
a Request for Advance executed by Borrower, to be received by the Administrative
Agent at least the Required Number of, but not more than ten (10), Business Days
prior to the date of such Credit Extension, which date shall be a Business Day.
The Administrative Agent shall promptly
16
advise the Banks and, if applicable, the LC Issuer, of any Request for Advance
given pursuant to this Section 2.02, of each Bank's Percentage Share of any
requested Borrowing and, if applicable, the amount requested for any Facility LC
by telephone, confirmed promptly in writing, or telecopier. Upon satisfaction of
the applicable conditions set forth in Article III, each Borrowing shall be made
at the office of the Administrative Agent, and shall be funded prior to 3:00
o'clock p.m., Houston, Texas time, on the day so requested in immediately
available funds in the amount so requested.
(b) Each Bank shall make each Loan to be made by it hereunder on the
date of the proposed Borrowing by wire transfer of immediately available funds
to the Administrative Agent in Houston, Texas, not later than 2:00 p.m.,
Houston, Texas time, and upon fulfillment of the applicable conditions set forth
in Article III, the Administrative Agent will make such funds available to
Borrower shall direct to the Administrative Agent from time to time or, if a
Borrowing shall not occur on such date because any condition precedent herein
specified shall not have been met, return the amounts so received to the
respective Banks as soon as practicable. Unless the Administrative Agent shall
have received notice from a Bank prior to the date of any proposed Borrowing
that such Bank will not make available to the Administrative Agent such Bank's
Percentage Share of such Borrowing, the Administrative Agent may assume that
such Bank has made its Percentage Share available to the Administrative Agent on
the date of such Borrowing in accordance with this paragraph (b) and the
Administrative Agent may, in reliance upon such assumption, make available to
Borrower on such date a corresponding amount. If, and to the extent that, such
Bank shall not have made its Percentage Share available to the Administrative
Agent, such Bank and Borrower severally agree to repay to the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to Borrower
until the date such amount is repaid to the Administrative Agent at (i) in the
case of Borrower, the interest rate applicable at the time to the Loans
comprising such Borrowing and (ii) in the case of such Bank, the Federal Funds
Effective Rate. If such Bank shall repay to the Administrative Agent such
corresponding amount, such amount shall constitute such Bank's Loan as part of
such Borrowing for purposes of this Agreement.
2.03 Payment Procedure. All payments and prepayments made by Borrower
under this Agreement shall be made to the Administrative Agent at its office
specified in Section 9.03 for the account of the Banks in immediately available
funds before 11:00 a. m., Houston, Texas time, on the date that such payment is
required to be made. The Administrative Agent will promptly thereafter cause to
be distributed like funds relating to such payments or prepayments ratably to
the Banks (and if the payment relates to amounts owed to a particular Bank only,
in like funds to such Bank), in each case, to be applied in accordance with the
terms of this Agreement. Borrower hereby authorizes the Administrative Agent, if
and to the extent payment or prepayment (including prepayments required pursuant
to Section 2.11 hereof) is not made when due hereunder or under the Notes or any
other Loan Document, to charge from time to time against Borrower's account with
the Administrative Agent any amount so due. Any payment received and accepted by
the Administrative Agent (or any branch or Affiliate thereof) after such time
shall be considered for all purposes (including the calculation of interest, to
the extent permitted by law) as having been made on the next following Business
Day.
17
2.04 Payments of Interest under the Notes. Subject to the terms and
provisions of this Agreement, interest on the Loan, calculated at the Floating
Rate, shall be due and payable as follows:
(A) Interest on ABR Loans shall be calculated on the basis of a
365/366-day year, as applicable, and on LIBOR Loans on the basis of a
360-day year, in each case counting the actual number of days elapsed.
Interest on the outstanding principal balance of the Loans shall accrue
for each day at either a Floating Rate based on ABR plus the ABR Margin
for such day for ABR Loans, or a Floating Rate based on LIBOR for the
Interest Period which includes such day plus the LIBOR Margin for such day
for LIBOR Loans, all as elected and specified (including specification as
to length of Interest Period, as permitted by the definition of that term,
with respect to any election of a Floating Rate based on LIBOR) by the
Borrower in accordance with Section 2.04(B); provided that:
(1) In the absence of an election by the Borrower of a
Floating Rate based on LIBOR plus the LIBOR Margin, or, having made
such election, but upon the Required Number of days prior to the end
of the then current Interest Period the Borrower fails or is not
entitled under the terms of this Agreement to elect to continue a
Floating Rate based on LIBOR plus the LIBOR Margin and specify the
applicable Interest Period therefor, then upon the expiration of
such then current Interest Period, interest on the Loans shall
accrue for each day at a Floating Rate based on ABR plus the ABR
Margin for such day, until the Borrower, pursuant to Section
2.04(B), elects a different Floating Rate and specifies the Interest
Period for the Loans.
(2) Interest accruing on any LIBOR Loan during any Interest
Period shall be payable on the first Business Day of the next
Interest Period except that: (a) with respect to LIBOR Loans for
which Borrower has selected an Interest Period of six (6) months,
interest will be payable on the first Business Day following the
ninetieth (90th) day after the commencement of such Interest Period
and on the first Business Day of the next Interest Period, (b)
interest will be payable on the Facility Termination Date on any
LIBOR Loan with an Interest Period ending on the Facility
Termination Date; and provided that (c) all accrued interest on any
LIBOR Loan converted or prepaid pursuant to Section 2.11 shall be
paid immediately upon such prepayment or conversion.
(B) By at least the Required Number of days prior to the advance
of any Loan hereunder, the Borrower shall select the initial Floating Rate
to be charged on such Loan, and from time to time thereafter the Borrower
may elect, on at least the Required Number of days irrevocable prior
written (or verbal, promptly confirmed by written) notice to the
Administrative Agent, an initial Floating Rate for any additional Loan, or
to change the Floating Rate on any Loan to any other Floating Rate
(including, when applicable, the selection of the Interest Period);
provided that; (i) the Borrower shall not select an Interest Period that
extends beyond the Facility Termination Date; (ii) except as otherwise
provided in Section 2.11 no such change from a Floating Rate based on
LIBOR plus the LIBOR Margin to another Floating Rate shall become
effective on a
18
day other than the day, which must be a Business Day, next following the
last day of the Interest Period last effective for such LIBOR Loan; (iii)
any elections made by the Borrower pursuant to this Section 2.04(B) shall
be in the amount of $1,000,000, plus any additional increment of
$1,000,000, or such lesser amount as constitutes the balance of all Loans
then outstanding hereunder; (iv) notwithstanding anything herein to the
contrary, the Borrower may not make any election under this Section
2.04(B) that would result in Loans outstanding based on more than six (6)
different LIBORs without the consent of the Required Banks to do so; and
(v) the first day of each Interest Period as to a LIBOR Loan shall be a
Business Day.
(C) Interest on ABR Loans shall be paid monthly in arrears on the
first Business Day of each calendar month (for the immediately preceding
month) commencing with the month following any month during which interest
begins to accrue at a Floating Rate based on ABR plus the ABR Margin, as
elected by Borrower pursuant to Section 2.04(B), and on the date the
principal of such Loans shall be due (on the stated Facility Termination
Date, on acceleration, or otherwise).
2.05 General Provisions Relating to Interest. It is the intention of the
parties hereto to comply strictly with the usury Laws of the State of Texas and
the United States of America and, in this connection, there shall never be
collected, charged or received on any sums advanced hereunder interest in excess
of the Maximum Rate. For purposes of Chapter 303 of the Texas Finance Code, as
amended, the Borrower agrees that the maximum rate to be charged shall be the
"indicated (weekly) rate ceiling" as defined in said Chapter, provided that the
Bank may also rely to the extent permitted by applicable Laws of the State of
Texas or the United States of America, on alternative maximum rates of interest
under other applicable Laws of the State of Texas or the United States of
America applicable to the Loans, if greater. Notwithstanding anything herein or
in the Notes to the contrary, during any Limitation Period, the interest rate to
be charged on amounts evidenced by the Notes shall be the Maximum Rate and the
obligation of the Borrower for any fees payable hereunder and deemed to be
interest under applicable Law shall be suspended. During any period or periods
of time following a Limitation Period, to the extent permitted by applicable
Laws of the State of Texas or the United States of America, the interest rate to
be charged hereunder shall remain at the Maximum Rate until such time as there
has been paid to each Bank (a) the amount of interest in excess of the Maximum
Rate that such Bank would have received during the Limitation Period had the
interest rate remained at the relevant rates specified in the Note, and (b) all
interest and fees otherwise due to such Bank but for the effect of such
Limitation Period.
If under any circumstances the aggregate amounts paid on the Notes or
under this Agreement include amounts which by Law are deemed interest and which
would exceed the amount permitted if the Maximum Rate were in effect, the
Borrower stipulates that such payment and collection will have been and will be
deemed to have been, to the extent permitted by applicable Laws of the State of
Texas or the United States of America, the result of mathematical error on the
part of both the Borrower and the Banks, and each Bank shall promptly refund the
amount of such excess (to the extent only of such interest payments above the
Maximum Rate which could lawfully have been collected and retained) upon
discovery of such error by such Bank or notice thereof from the Borrower.
19
2.06 Borrowing Base Determination. The Borrowing Base in effect as of the
Closing is Three Hundred Fifteen Million Dollars ($315,000,000.00) based upon
the Netherland Sewell Report dated as of January 23, 2004, relative to the
Proved Reserves attributable to the Oil and Gas Properties of the Borrower
included in such Reserve Report.
The Borrowing Base shall be re-determined from time to time pursuant to
the following provisions of this Section. On or before each October 1 and April
1, commencing October 1, 2004, until the Facility Termination Date, the Borrower
shall furnish to the Administrative Agent a Reserve Report, which shall set
forth, as of each preceding July 1 or January 1, as applicable, the Proved
Reserves attributable to the Oil and Gas Properties of the Borrower included in
such Reserve Report. Each October Reserve Report may be prepared by the
Borrower's own engineers and shall be certified by the President or other
Responsible Officer of the Borrower. Each April Reserve Report shall be a
complete report prepared by independent reservoir engineers acceptable to
Administrative Agent relating to the Proved Reserves attributable to the Oil and
Gas Properties of the Borrower included in such Reserve Report. Upon receipt of
each such Reserve Report, the Administrative Agent shall, within forty-five (45)
days following the delivery of such Reserve Report, make a determination of the
Borrowing Base which shall become effective upon approval by the Required Banks
and subsequent written notification from the Administrative Agent to the
Borrower, and which, subject to the other provisions of this Agreement, shall be
the Borrowing Base until the effective date of the next redetermination of the
Borrowing Base as set forth in this Section 2.06. The Administrative Agent may,
subject to approval of the Required Banks, and must, upon the request of the
Required Banks, redetermine the Borrowing Base at any time, and from time to
time, which redetermination shall become effective upon approval by the Required
Banks and subsequent written notification from the Administrative Agent to the
Borrower and which, subject to the other provisions of this Agreement, shall be
the basis on which the Borrowing Base shall thereafter be calculated until the
effective date of the next redetermination of the Borrowing Base, as set forth
in this Section.
The Administrative Agent shall have the right to initiate one unscheduled
redetermination of the Borrowing Base between any two consecutive scheduled
redeterminations thereof by requesting in writing, not more than once between
any two consecutive scheduled deliveries of Reserve Reports, that the Borrower
provide an unscheduled Reserve Report regarding the Proved Reserves attributable
to the Oil and Gas Properties of the Borrower included in such Reserve Report
with an effective date not more than ninety (90) days prior to Borrower's
delivery of such Reserve Report to Administrative Agent, and such Reserve Report
shall be delivered to Administrative Agent within ninety (90) days after
Borrower's receipt of such written request. The Borrower shall have the right to
request, by written notice to Administrative Agent, one unscheduled
redetermination of the Borrowing Base between any two consecutive scheduled
redeterminations thereof, subject to contemporaneously providing to
Administrative Agent a Reserve Report with an effective date not more than
ninety (90) days prior to the date of such notice.
If at any time the Required Banks cannot otherwise agree on a
redetermination of the Borrowing Base, then the Borrowing Base, shall be set on
the basis of the Administrative Agent's calculation of the "weighted arithmetic
average" (as hereinafter calculated) of the Borrowing Base, as determined by
each individual Bank and communicated to Administrative Agent in writing.
However, the amount of the Borrowing Base shall never be increased at any
20
time without the unanimous consent of the Banks, notwithstanding anything else
herein to the contrary. For purposes of this paragraph, the "weighted arithmetic
average" of the Borrowing Base shall be determined by first multiplying the
Borrowing Base proposed in writing to Administrative Agent by each Bank by such
Bank's Percentage Share, and then adding the results of each such calculation,
with the resultant sum being the Borrowing Base.
The Borrowing Base shall represent the Required Banks' approval of the
Administrative Agent's determination, in accordance with their customary lending
practices, of the maximum loan amount with respect to the Borrowing Base Oil and
Gas Properties and the Borrower acknowledges, for purposes of this Agreement,
such determination by the Administrative Agent as being the maximum loan amount
with respect to the Borrowing Base Oil and Gas Properties. In making any
redetermination of the Borrowing Base, the Administrative Agent and the Banks
shall apply the parameters and other credit factors consistently applied then
generally being utilized by the Administrative Agent and each such Bank,
respectively, for Borrowing Base redeterminations for other similarly situated
borrowers. The Borrower, Required Banks and the Administrative Agent acknowledge
that (a) due to the uncertainties of the oil and gas extraction process, the
Borrowing Base Oil and Gas Properties are not subject to evaluation with a high
degree of accuracy and are subject to potential rapid deterioration in value,
and (b) for this reason and the difficulties and expenses involved in
liquidating and collecting against the Borrowing Base Oil and Gas Properties,
the Administrative Agent's determination of the maximum loan amount with respect
to the Borrowing Base Oil and Gas Properties contains an equity cushion, which
equity cushion is acknowledged by the Borrower as essential for the adequate
protection of the Banks.
2.07 Mandatory Prepayment Due to a Loan Excess. Within sixty (60) days
after receipt of written notice from Administrative Agent that a Loan Excess
exists, including, but not limited to, any notice establishing a redetermined
Borrowing Base that is less than the Aggregate Outstanding Credit Exposure,
Borrower shall either (i) prepay the principal of the Notes in an aggregate
amount at least equal to such Loan Excess or (ii) add to the Borrowing Base Oil
and Gas Properties additional Oil and Gas Properties of the Borrower sufficient
in value, as determined pursuant to Section 2.06, to increase the Borrowing Base
to equal the unpaid principal amount of the Aggregate Outstanding Credit
Exposure.
2.08 Other Mandatory Prepayments.
(A) On each date on which the Borrower sells any of its Borrowing
Base Oil and Gas Properties, other than Permitted Asset Sales, the
Borrowing Base will be automatically reduced to the loan value (determined
in accordance with the procedures for determining the Borrowing Base) of
the remaining Borrowing Base Oil and Gas Properties, and the Borrower
shall be required to make the prepayment, if any, required pursuant to
Section 2.07.
(B) Except to the extent otherwise provided in Section 2.08(A), if
on any date the Outstanding Credit Exposure exceeds the amount of the then
effective Aggregate Commitment, the Borrower shall be required to
immediately prepay the Loans by the amount of such excess.
21
2.09 Prepayment and Conversion. Upon the Required Number of days written
notice to the Administrative Agent, the Borrower may, without the payment of
penalty or premium, prepay the principal of the Loans or voluntarily convert the
applicable Floating Rate of any Loan prior to the termination of the applicable
Interest Period in whole or in part, from time to time. Any partial payment or
conversion of ABR Loans shall be made in the sum of not less than $1,000,000,
and any partial payment or conversion of LIBOR Loans shall be made in the sum of
not less than $1,000,000 or any $1,000,000 increment in addition thereto. With
respect to any such prepayment or conversion of any LIBOR Loan the Borrower
agrees to pay to the Banks upon the request of the Administrative Agent such
amount or amounts as will compensate the Banks for Breakage Costs, excluding,
however, any such Breakage Costs resulting from a payment or prepayment made
more than sixty (60) days prior to the Administrative Agent's request for
payment of Breakage Costs. The payment of any such Breakage Costs to the Banks
shall be made within thirty (30) days of a request therefor from Administrative
Agent. If LIBOR cannot be determined on the date of such prepayment, the
Administrative Agent shall calculate LIBOR by interpolating LIBOR in effect
immediately prior to the prepayment and LIBOR in effect immediately after the
prepayment.
2.10 Increased Cost of Loans.
(A) Notwithstanding any other provisions herein, if as a result of
any regulatory change after the date hereof
(1) the basis of taxation of payments to any Bank of the
principal of, or interest on, any LIBOR Loan or any other amounts
due under this Agreement in respect of any such LIBOR Loan (except
for taxes imposed on the overall net income or receipts of such
Bank, and franchise or other taxes imposed generally on such Bank),
by the jurisdiction (or any political subdivision therein) in which
the Bank has its principal office (if such other taxes do not
specifically affect the cost to the Bank of making the Loans) is
changed;
(2) any reserve, special deposit, or similar requirement
(including without limitation any reserve requirement under
regulations of the Board of Governors of the Federal Reserve System)
against assets of, deposits with, or for the account of, or credit
extended by such Bank, is imposed, increased, modified, or deemed
applicable; or
(3) any other condition affecting this Agreement or any
LIBOR Loan is imposed on such Bank or (in the case of LIBOR Loans)
the LIBOR Market; and the result of any of the foregoing is to
increase the actual direct cost to such Bank of making or
maintaining any such LIBOR Loan (and such increase shall not have
been compensated by a corresponding increase in the interest rate
applicable to the respective Loans) by an amount deemed by such Bank
to be material (such increases in cost and reductions in amounts
receivable being herein called "Increased Costs"), then the Borrower
shall pay such Bank, within thirty (30) days after its written
demand, such additional amount or amounts as will compensate such
Bank for those Increased Costs. No Bank will demand to be
compensated by Borrower for such Increased Costs unless such Bank
generally
22
makes such demands to its other LIBOR Loan customers who are
similarly situated. A certificate of such Bank setting forth the
basis for the determination of such amount necessary to compensate
such Bank as aforesaid (including a representation by such Bank that
it is generally making demands as required by the preceding
sentence), accompanied by documentation showing reasonable support
for such increased costs or reduced sums received by such Bank,
shall be delivered to the Borrower and shall be conclusive, save for
manifest error, as to such determination and such amount. The
affected Bank shall notify the Borrower, as promptly as practicable
after such Bank obtains knowledge of any Increased Costs or other
sums payable pursuant to this Section 2.10 and determines to request
compensation therefor, or any event occurring after the Closing
which will entitle such Bank to compensation pursuant to this
Section; provided that, notwithstanding anything herein to the
contrary, the Borrower shall not be obligated for the payment of any
Increased Costs or other sums payable pursuant to this Section 2.10
to the extent such Increased Costs or other sums accrued more than
90 days prior to the date upon which the Borrower was given such
notice. If the Borrower is required to indemnify or pay additional
amounts pursuant to this Section 2.10, then the Bank will take such
action as in the reasonable judgment of the Bank (i) will eliminate
or reduce any such additional payment which may thereafter accrue
and (ii) is not otherwise commercially unreasonable. The Bank shall
use its reasonable efforts to obtain in a timely fashion any refund,
deduction or credit of any taxes paid or reimbursed by the Borrower
pursuant to this Section 2.10. If the Bank receives a benefit in the
nature of a refund, deduction or credit (including a refund in the
form of a deduction from or credit against taxes that are otherwise
payable by the Bank) of any taxes with respect to which the Borrower
has made a payment under Section 2.10, the Bank agrees to reimburse
the Borrower to the extent of the benefit of such refund, deduction
or credit promptly after the Bank reasonably determines that such
refund deduction or credit has become final; provided, however, that
nothing contained in this paragraph shall require the Bank to make
available its tax returns (or any other information relating to its
taxes which it deems to be confidential) or to attempt to obtain any
such refund, deduction or credit, which attempt would be
inconsistent with any reporting position otherwise taken by the Bank
on its tax returns.
(B) Notwithstanding the foregoing provisions of this Section 2.10,
in the event that by reason of any regulatory change any Bank either (i)
incurs Increased Costs based on, or measured by, the excess above a
specified level of the amount of a category of deposits or other
liabilities of such Bank that includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this Agreement
or a category of extensions of credit or other assets of such Bank that
includes LIBOR Loans or (ii) becomes subject to restrictions on the amount
of such a category of liabilities or assets that it may hold, then, if
such Bank so elects by written notice to the Borrower, the obligation of
such Bank to make or convert Loans of any other type into LIBOR Loans
hereunder shall be suspended until the earlier of the date such regulatory
change ceases to be in effect or the date the Borrower and such Bank agree
upon an alternative method of determining the interest rate payable by the
Borrower on LIBOR
23
Loans, and all LIBOR Loans of such Bank then outstanding shall be
converted into an ABR Loan (if not otherwise prohibited under the terms of
this Agreement) at such Bank's option.
2.11 Change of Law. Notwithstanding any other provision herein, in the
event that any change in any applicable law or in the interpretation or
administration thereof shall make it unlawful for the Banks to (i) honor any
commitment it may have hereunder to make any LIBOR Loan, then such commitment
shall terminate, or (ii) maintain any LIBOR Loan, then all LIBOR Loans of the
Banks then outstanding shall be repaid and converted to ABR Loans (unless the
Banks' obligations to fund Loans hereunder has been suspended by any other
provisions of this Agreement) at the Borrower's option in accordance with the
election procedures set forth in Section 2.04(B); provided, however, that prior
to the effective date of such election, interest shall be calculated at the ABR.
Any remaining commitment of the Banks hereunder to make LIBOR Loans (but not
other Loans) shall be suspended so long as they are prohibited by any applicable
law. Upon the occurrence of any such change, the Administrative Agent shall
promptly notify the Borrower thereof, and shall furnish to the Borrower in
writing evidence thereof certified by the Administrative Agent.
Any repayment or conversion of any LIBOR Loan which is required under this
Section 2.11 or under 2.04(B) shall be effected by payment thereof, together
with accrued interest thereon, on demand, and concurrently there shall occur the
borrowing of the corresponding ABR Loan as provided herein.
If any repayment to the Banks of any LIBOR Loan (including conversions
thereof) is made under this Section 2.11 on a day other than a day otherwise
scheduled for a payment of principal of or interest on such Loan, the Borrower
shall pay to the Banks upon its request of the Administrative Agent such amount
or amounts as will compensate the Banks for Breakage Costs, excluding, however,
any such Breakage Costs resulting from a prepayment or conversion made more than
sixty (60) days prior to the Administrative Agent's request for payment of
Breakage Costs. The payment of any such Breakage Costs to the Banks shall be
made within thirty (30) days of a request therefor from Administrative Agent.
2.12 Mitigation: Mandatory Assignment. Each Bank shall use reasonable
efforts to avoid or mitigate any Increased Cost or suspension of the
availability of an interest rate under Sections 2.09 through 2.10 above, to the
greatest extent practicable (including transferring the Loans to another lending
office or Affiliate of a Bank) unless, in the opinion of such Bank, such efforts
would be likely to have an adverse effect upon it. In the event a Bank makes a
request to the Borrower for additional payments in accordance with Sections 2.09
or 2.10, then, provided that no Event of Default has occurred and is continuing
at such time, the Borrower may, at its own expense and in its sole discretion,
require such Bank to transfer and assign in whole (but not in part), without
recourse, all of its interests, rights and obligations under this Agreement to
an assignee which shall assume such assigned obligations (which assignee may be
another Bank, if a Bank accepts such assignment); provided that (a) such
assignment shall not conflict with any law, rule or regulation or order of any
court or other governmental authority and (b) the Borrower or such assignee
shall have paid to the Administrative Agent for the account of the assigning
Bank in immediately available funds the principal of and interest accrued to the
date of such payment on the portion of the Loans hereunder held by such
assigning Bank and all other
24
amounts owed to such assigning Bank hereunder, including amounts owed pursuant
to Sections 2.09 and 2.10 hereof.
2.13 Pro Rata Treatment and Payments. Each Borrowing by Borrower from the
Banks hereunder, each payment by Borrower on account of any fee hereunder and
any reduction of the Commitments of the Banks shall be made pro rata according
to the respective Percentage Shares of the Banks. Each payment (including each
prepayment) by Borrower on account of principal of and interest on the Loans
shall be made pro rata according to the respective outstanding principal amounts
of the Loans then held by the Banks. The Administrative Agent shall distribute
such payments to the Banks promptly upon receipt in like funds as received.
2.14 Sharing of Payments and Setoffs. Each Bank agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
Borrower (pursuant to Section 9.01 or otherwise), including, but not limited to,
a secured claim under Section 506 of Title 11 of the United States Code or other
security or interest arising from, or in lieu of, such secured claim, received
by such Bank under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by similar means, obtain payment (voluntary or involuntary) in
respect of any Loan or Loans (other than pursuant to Section 2.10) as a result
of which the unpaid principal portion of its Loans shall be proportionately less
than the unpaid principal portion of the Loans of any other Bank, it shall
simultaneously purchase from such other Banks at face value a participation in
the Loans of such other Banks, so that the aggregate unpaid principal amount of
Loans and participations in Loans held by each Bank shall be in the same
proportion to the aggregate unpaid principal amount of all Loans then
outstanding as the principal amount of its Loans prior to such exercise of
banker's lien, setoff, counterclaim or other event was to the principal amount
of all Loans outstanding prior to such exercise of banker's lien, setoff,
counterclaim or other event; provided, however, that if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.14 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest.
2.15 Advances to Satisfy Obligations of the Borrower. The Administrative
Agent or any Bank may, but shall not be obligated to, make advances hereunder
for the benefit of the Banks and apply same to the satisfaction of any
condition, warranty, representation or covenant of the Borrower contained in
this Agreement, and the funds so advanced and applied shall be part of the Loan
proceeds advanced under this Agreement and evidenced by the Notes.
2.16 Assignment of Production. Certain of the Security Instruments
covering the Borrowing Base Oil and Gas Properties contain an assignment unto
and in favor of Administrative Agent for the benefit of the Banks of all oil,
gas and other minerals produced and to be produced from or attributable to the
Borrowing Base Oil and Gas Properties together with all of the revenues and
proceeds attributable to such production, and such Security Instruments further
provide that all such revenues and proceeds which may be so collected by
Administrative Agent for the benefit of the Banks pursuant to the assignment
shall be applied to the payment of the Notes and the satisfaction of all other
Indebtedness to be secured by such Security Instruments. The Borrower hereby
appoints the Administrative Agent as its Administrative Agent and
attorney-in-fact until this Agreement has been terminated in accordance with
Section 9.18 hereof for purposes of completing the Transfer Order Letters
delivered to the
25
Administrative Agent pursuant to Section 3.02(B) hereof, which power is coupled
with an interest and is not revocable.
2.17 Commitment Fee. As consideration for the commitment of the Banks to
make Credit Extensions to the Borrower through the Facility Termination Date
pursuant to this Agreement, the Borrower agrees to pay to the Administrative
Agent for the account of the Banks within five (5) Business Days of receipt of
the Administrative Agent's statement as to quarterly periods ending March 31,
June 30, September 30 and December 31 of each year (except the first period
shall be for a period of time from the Closing to June 30, 2004) during the
period commencing on the date of this Agreement to and including the Facility
Termination Date and at the Facility Termination Date, a commitment fee equal to
the percentage per annum specified in the Pricing Grid based on the Utilization
Percentage (computed on the basis of a year of 360 days) multiplied by an amount
equal to the daily average excess, if any, of the Aggregate Commitment Amount
over the Outstanding Credit Exposure, throughout the period from the Closing
Date or previous calculation date provided above, whichever is later, to the
relevant calculation date or the Facility Termination Date, as the case may be.
2.18 Addition/Deletion of Borrowing Base Oil & Gas Properties. The
Borrower may, from time to time upon written notice to the Administrative Agent,
propose to add Oil and Gas Properties of the Borrower to the Borrowing Base Oil
and Gas Properties. Any such proposal to add Oil and Gas Properties of the
Borrower to the Borrowing Base Oil and Gas Properties shall be accompanied by a
Reserve Report applicable to such properties that conforms to the requirements
of Section 2.06, and evidence sufficient to establish that the Borrower has
Marketable Title to such Oil and Gas Properties, and any such addition shall
become effective at such time as: (a) the Administrative Agent, with the
approval of the Banks, has made a determination of the amount by which the
Borrowing Base would be increased as the result of such addition and (b) the
conditions set forth in Article III hereof, to the extent they are applicable to
such additional Oil and Gas Properties of the Borrower, have been satisfied. In
determining the increase in the Borrowing Base pursuant to this Section, the
Administrative Agent and the Banks shall apply the parameters and other credit
factors set forth in Section 2.06, above.
2.19 Adjustment to Aggregate Commitment Amount.
(a) The Borrower shall have the right, with the prior written consent of
the Administrative Agent (provided that such consent shall not be unreasonably
withheld or delayed), to increase the Aggregate Commitment Amount; provided that
notwithstanding anything to the contrary in this Agreement, (1) the Aggregate
Commitment Amount after giving effect to such proposed increase or increases
shall not exceed the lesser of (i) the Borrowing Base then in effect, and (ii)
$500,000,000, (2) each Lender shall be offered a Percentage Share (calculated
prior to giving effect to any increase under this Section 2.19(a)) of such
proposed increase, (3) no Default or Event of Default shall have occurred and be
continuing at the effective date of such proposed increase, (4) on the effective
date of such increase, the Borrower shall pay any Breakage Costs incurred by any
Bank, if any, arising from the increase in the Aggregate Commitment Amount
pursuant to this Section 2.19(a), (5) no Bank's Commitment may be increased or
decreased without the consent of such Bank and (6) if necessary, one or more
other eligible financial institutions may become a Bank to accommodate such
proposed
26
increase. If the Borrower desires to effect an increase in the Aggregate
Commitment Amount, the Borrower and the financial institution(s) that the
Borrower proposes to become a Bank hereunder, and, if applicable, the existing
Banks(s) that the Borrower proposes to increase its existing Commitment shall
(subject at all times to the consent of each such financial institution or each
such existing Bank, as applicable) execute and deliver to the Administrative
Agent a certificate substantially in the form of Exhibit F hereto (an
"Additional Bank Certificate"). Upon receipt of such Additional Bank
Certificate, if the Administrative Agent consents to the proposed increase in
the Aggregate Commitment: (1) the Aggregate Commitment Amount shall be so
increased, (2) the Administrative Agent shall amend and distribute to the
Borrower and the Lenders a revised Schedule 1.01(b) adding or amending, as
applicable, the Commitment of any Bank executing the Additional Lender
Certificate and the revised Percentage Shares of the Banks, (3) any such
additional Bank shall be deemed to be a party in all respect to this Agreement
and the other Loan Documents as of the effective date set forth in such
Additional Bank Certificate and (4) upon the effective date set forth in such
Additional Bank Certificate, any such Bank party to the Additional Bank
Certificate shall purchase a pro rata portion of the outstanding Loans (and
participation interests in Facility LCs) of each of the current Banks such that
the Banks (including any additional Bank, if applicable) shall hold their
Percentage Share of the outstanding Loans (and participation interests) as
reflected in the revised Schedule 1.01(b) required by this Section 2.19(a). If
the Administrative Agent does not consent to the increase in the Aggregate
Commitment in accordance with this Section 2.19(a), the Aggregate Commitment
Amount and the Commitment of each Bank shall remain unchanged.
(b) The Borrower may upon written notice to Administrative Agent, not
sooner than one hundred eighty (180) days subsequent to the last such action by
Borrower, amend the definition of the Aggregate Commitment Amount by reducing
the amount set forth in such definition; provided that each Bank's Commitment
shall be reduce in accordance with such Bank's Percentage Share as provided in
Section 2.13. Upon such reduction, the Banks shall not be obligated to make
Credit Extensions in excess of such reduced Aggregate Commitment Amount.
2.20 Facility LCs.
(A) Issuance. The LC Issuer hereby agrees, on the terms and
conditions set forth in this Agreement, to issue standby letters of credit
(each, a "Facility LC") and to renew, extend, increase, decrease or
otherwise modify each Facility LC ("Modify," and each such action a
"Modification"), from time to time from and including the date of this
Agreement and prior to the Facility Termination Date upon the request of
the Borrower; provided that immediately after each such Facility LC is
issued or Modified, (i) the aggregate amount of the outstanding LC
Obligations shall not exceed $5,000,000.00 and (ii) the Aggregate
Outstanding Credit Exposure shall not exceed the Aggregate Commitment
Amount. Facility LC's issued pursuant to the Prior Credit Agreement and
outstanding as of the Closing of this Agreement shall also constitute
Facility LCs hereunder. No Facility LC shall have an expiry date later
than the earlier of (x) the fifth Business Day prior to the Facility
Termination Date and (y) one year after its issuance.
27
(B) Participations. Upon the issuance or Modification by the LC
Issuer of a Facility LC in accordance with this Section 2.20, the LC
Issuer shall be deemed, without further action by any party hereto, to
have unconditionally and irrevocably sold to each Bank, and each Bank
shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably purchased from the LC Issuer, a
participation in such Facility LC (and each Modification thereof) and the
related LC Obligations in proportion to its Percentage Share.
(C) Notice. Subject to Section 2.20(A), the Borrower shall give
the LC Issuer notice prior to 10:00 a.m. (Houston, Texas time) at least
two Business Days prior to the proposed date of issuance or Modification
of each Facility LC, specifying the beneficiary, the proposed date of
issuance (or Modification) and the expiry date of such Facility LC, and
describing the proposed terms of such Facility LC and the nature of the
transactions proposed to be supported thereby. Upon receipt of such
notice, the LC Issuer shall promptly notify the Administrative Agent, and
the Administrative Agent shall promptly notify each Bank, of the contents
thereof and of the amount of such Bank's participation in such proposed
Facility LC. The issuance or Modification by the LC Issuer of any Facility
LC shall, in addition to the conditions precedent set forth in Article III
(the satisfaction of which the LC Issuer shall have no duty to ascertain),
be subject to the conditions precedent that such Facility LC shall be
satisfactory to the LC Issuer and that the Borrower shall have executed
and delivered such application agreement and/or such other instruments and
agreements relating to such Facility LC as the LC Issuer shall have
reasonably requested (each, a "Facility LC Application"). In the event of
any conflict between the terms of this Agreement and the terms of any
Facility LC Application, the terms of this Agreement shall control.
(D) LC Fees. The Borrower shall pay to the Administrative Agent,
for the account of the Banks ratably in accordance with their respective
Percentage Shares, with respect to each Facility LC, a letter of credit
fee at a rate equal to the then otherwise applicable LIBOR Margin per
annum on the average daily undrawn stated amount under such Facility LC,
such fee to be payable in arrears on or before the first Business Day of
each calendar month (each such fee described in this sentence an "LC
Fee"). The Borrower shall also pay to the LC Issuer for its own account
(x) at the time of issuance of each Facility LC, a fronting fee calculated
at the rate of fifteen (15) basis points per annum, and (y) documentary
and processing charges in connection with the issuance or Modification of
and draws under Facility LCs in accordance with the LC Issuer's standard
schedule for such charges as in effect from time to time; except that upon
the occurrence and during the continuation of a default under the
Agreement, the fee on any outstanding Facility LC shall increase by two
percent (2%).
(E) Administration; Reimbursement by Banks. Upon receipt from the
beneficiary of any Facility LC of any demand for payment under such
Facility LC, the LC Issuer shall notify the Administrative Agent and the
Administrative Agent shall promptly notify the Borrower and each other
Bank as to the amount to be paid by the LC Issuer as a result of such
demand and the proposed payment date (the "LC Payment Date"). The
responsibility of the LC Issuer to the Borrower and each Bank shall be
only to determine that the documents (including each demand for payment)
delivered under
28
each Facility LC in connection with such presentment shall be in
conformity in all material respects with such Facility LC. The LC Issuer
shall endeavor to exercise the same care in the issuance and
administration of the Facility LCs as it does with respect to letters of
credit in which no participations are granted, it being understood that in
the absence of any gross negligence or willful misconduct by the LC
Issuer, each Bank shall be unconditionally and irrevocably liable without
regard to the occurrence of any Default or any condition precedent
whatsoever, to reimburse the LC Issuer on demand for (i) such Bank's
Percentage Share of the amount of each payment made by the LC Issuer under
each Facility LC to the extent such amount is not reimbursed by the
Borrower pursuant to Section 2.20(F) below, plus (ii) interest on the
foregoing amount to be reimbursed by such Bank, for each day from the date
of the LC Issuer's demand for such reimbursement (or, if such demand is
made after 11:00 a.m. (Houston, Texas time) on such date, from the next
succeeding Business Day) to the date on which such Bank pays the amount to
be reimbursed by it, at a rate of interest per annum equal to the Federal
Funds Effective Rate for the first three Business Days and, thereafter, at
a rate of interest equal to the Floating Rate based on ABR.
(F) Reimbursement by Borrower. The Borrower shall be irrevocably
and unconditionally obligated to reimburse the LC Issuer on the applicable
LC Payment Date for any amounts paid by the LC Issuer upon any drawing
under any Facility LC, without presentment, demand, protest or other
formalities of any kind; provided that neither the Borrower nor any Bank
shall hereby be precluded from asserting any claim for direct (but not
consequential) damages suffered by the Borrower or such Bank to the
extent, but only to the extent, caused by (i) the willful misconduct or
gross negligence of the LC Issuer in determining whether a request
presented under any Facility LC issued by it complied with the terms of
such Facility LC or (ii) the LC Issuer's failure to pay under any Facility
LC issued by it after the presentation to it of a request strictly
complying with the terms and conditions of such Facility LC. All such
amounts paid by the LC Issuer and remaining unpaid by the Borrower shall
bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the rate applicable to ABR Loans for
such day if such day falls after such LC Payment Date. The LC Issuer will
pay to each Bank ratably in accordance with its Percentage Share all
amounts received by it from the Borrower for application in payment, in
whole or in part, of the Reimbursement Obligation in respect of any
Facility LC issued by the LC Issuer, but only to the extent such Bank has
made payment to the LC Issuer in respect of such Facility LC pursuant to
Section 2.20(E). Subject to the terms and conditions of this Agreement
(including without limitation the submission of a Request for Advance in
compliance with Section 2.02 and the satisfaction of the applicable
conditions precedent set forth in Article III), the Borrower may request a
Loan hereunder for the purpose of satisfying any Reimbursement Obligation.
(G) Obligations Absolute. The Borrower's obligations under this
Section 2.20 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Borrower may have or have had against the LC Issuer, any
Bank or any beneficiary of a Facility LC. The Borrower further agrees with
the LC Issuer and the Banks that the LC Issuer and the Banks shall not be
responsible for, and the Borrower's Reimbursement Obligation in
29
respect of any Facility LC shall not be affected by, among other things,
the validity or genuineness of documents or of any endorsements thereon,
even if such documents should in fact prove to be in any or all respects
invalid, fraudulent or forged, or any dispute between or among the
Borrower, any of its Affiliates, the beneficiary of any Facility LC or any
financing institution or other party to whom any Facility LC may be
transferred or any claims or defenses whatsoever of the Borrower or of any
of its Affiliates against the beneficiary of any Facility LC or any such
transferee. The LC Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message
or advice, however transmitted, in connection with any Facility LC. The
Borrower agrees that any action taken or omitted by the LC Issuer or any
Bank under or in connection with each Facility LC and the related drafts
and documents, if done without gross negligence or willful misconduct,
shall be binding upon the Borrower and shall not put the LC Issuer or any
Bank under any liability to the Borrower. Nothing in this Section 2.20(G)
is intended to limit the right of the Borrower to make a claim against the
LC Issuer for damages as contemplated by the proviso to the first sentence
of Section 2.20(F).
(H) Actions of LC Issuer. The LC Issuer shall be entitled to rely,
and shall be fully protected in relying, upon any Facility LC, draft,
writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order
or other document believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the LC Issuer. The LC Issuer shall be fully justified in
failing or refusing to take any action under this Agreement unless it
shall first have received such advice or concurrence of the Required Banks
as it reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to
take any such action. Notwithstanding any other provision of this Section
2.20, the LC Issuer shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a request
of the Required Banks, and such request and any action taken or failure to
act pursuant thereto shall be binding upon the Banks and any future
holders of a participation in any Facility LC.
(I) Indemnification. The Borrower hereby agrees to indemnify and
hold harmless each Bank, the LC Issuer and the Administrative Agent, and
their respective directors, officers, agents and employees from and
against any and all claims and damages, losses, liabilities, costs or
expenses which such Bank, the LC Issuer or the Administrative Agent may
incur (or which may be claimed against such Bank, the LC Issuer or the
Administrative Agent by any Person whatsoever) by reason of or in
connection with the issuance, execution and delivery or transfer of or
payment or failure to pay under any Facility LC or any actual or proposed
use of any Facility LC, including, without limitation, any claims,
damages, losses, liabilities, costs or expenses which the LC Issuer may
incur by reason of or in connection with (i) the failure of any other Bank
to fulfill or comply with its obligations to the LC Issuer hereunder (but
nothing herein contained shall affect any rights the Borrower may have
against any defaulting Bank) or (ii) by reason of or on account of the LC
Issuer issuing any Facility LC which specifies
30
that the term "Beneficiary" included therein includes any successor by
operation of law of the named Beneficiary, but which Facility LC does not
require that any drawing by any such successor Beneficiary be accompanied
by a copy of a legal document, satisfactory to the LC Issuer, evidencing
the appointment of such successor Beneficiary; provided that the Borrower
shall not be required to indemnify any Bank, the LC Issuer or the
Administrative Agent for any claims, damages, losses, liabilities, costs
or expenses to the extent, but only to the extent, caused by (x) the
willful misconduct or gross negligence of the LC Issuer in determining
whether a request presented under any Facility LC complied with the terms
of such Facility LC or (y) the LC Issuer's failure to pay under any
Facility LC after the presentation to it of a request strictly complying
with the terms and conditions of such Facility LC (IT BEING THE INTENTION
OF THE BORROWER AND THE LC ISSUER THAT THE LC ISSUER SHALL BE INDEMNIFIED
BY THE BORROWER FOR THE LC ISSUER'S ORDINARY NEGLIGENCE). Nothing in this
Section 2.20(I) is intended to limit the obligations of the Borrower under
any other provision of this Agreement.
(J) Banks' Indemnification. Each Bank shall, ratably in accordance
with its Percentage Share, indemnify the LC Issuer, its affiliates and
their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrower) against any cost, expense (including
reasonable counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross negligence
or willful misconduct or the LC Issuer's failure to pay under any Facility
LC after the presentation to it of a request strictly complying with the
terms and conditions of the Facility LC, IT BEING THE INTENTION OF EACH
BANK AND THE LC ISSUER THAT THE LC ISSUER SHALL BE INDEMNIFIED BY EACH
BANK FOR THE LC ISSUER'S ORDINARY NEGLIGENCE) that such indemnitees may
suffer or incur in connection with this Section 2.20 or any action taken
or omitted by such indemnitees hereunder.
(K) Rights as a Bank. In its capacity as a Bank, the LC Issuer
shall have the same rights and obligations as any other Bank.
ARTICLE III.
CONDITIONS
The obligation of the Banks to make the Credit Extensions is subject to
the following conditions precedent:
3.01 General Conditions to Closing and to all Disbursements. At the time
of the execution and delivery of this Agreement by all parties who are
designated as signatories on the signature pages of this Agreement (the
"Closing") and at each subsequent Credit Extension:
(A) No Event of Default or Unmatured Event of Default shall have
occurred and be continuing, unless, with respect to any such Unmatured
Event of Default, Borrower provides evidence satisfactory to the Banks
that such Unmatured Event of
31
Default shall, contemporaneously with or promptly after such Credit
Extension, be cured with funds advanced pursuant to the Credit Extension;
(B) The representations and warranties contained in Article IV of
this Agreement shall be true and correct in all material respects as
though such representations and warranties had been made on such date,
except such as are expressly limited to a prior date, which shall have
been true and correct in all material respects as of such prior date;
(C) The Administrative Agent and the Banks shall have been, and
shall continue to be, satisfied, in their good faith discretion, that the
Borrower holds Marketable Title to the Borrowing Base Oil and Gas
Properties, and that such ownership includes record title to an undivided
net revenue interest in the production from each such Borrowing Base Oil
and Gas Property that is not less than, as well as an undivided working
interest in each Borrowing Base Oil and Gas Property that is not greater
than (unless there is a corresponding increase in the net revenue interest
attributed to such party therein), the net revenue interest therein and
the working interest therein, respectively, attributed to the Borrower in
the most recently delivered Reserve Report subject to the limitations and
qualifications therein (or attributed to Borrower in any Security
Instrument applicable to any Oil and Gas Property that is added to the
Borrowing Base Oil and Gas Properties in connection with any subsequent
funding after the Closing); provided, however, that for purposes of
Closing, Administrative Agent and Banks intend to have confirmed, to their
reasonable satisfaction, the status of Borrower's title to Borrowing Base
Oil and Gas Properties comprising approximately eighty percent (80%) of
the PW9 (based on the most recent Borrowing Base evaluation by the
Administrative Agent) of the Proved Reserves that are attributable to
those Borrowing Base Oil and Gas Properties; such determination by
Administrative Agent and the Banks, however, shall not relieve Borrower
from the ongoing obligation to comply with all of its representations,
warranties and covenants herein and in the Security Instruments regarding
Borrower's title to all Borrowing Base Oil and Gas Properties.
(D) No Material Adverse Change shall have occurred since the date
of the latest audited Consolidated Financial Statements provided to the
Administrative Agent;
(E) All of the Security Instruments previously delivered with
respect to the Borrowing Base Oil and Gas Properties shall have remained
in full force and effect, except to the extent released pursuant to the
terms of this Agreement; and
(F) All legal matters incidental thereto shall be reasonably
satisfactory to each Bank's designated legal counsel.
3.02 Deliveries at the Closing. The Borrower shall have duly delivered or
caused to be delivered to the Administrative Agent, prior to or
contemporaneously with the Closing, the following:
32
(A) The Notes payable to each respective Bank, along with each of
the Security Instruments covering any Borrowing Base Oil and Gas
Properties not already covered by valid and continuing Security
Instruments in favor of Administrative Agent; provided, however, that
Administrative Agent and the Banks intend to proceed with Closing (subject
to all other conditions in this Article III) if Borrowing Base Oil and Gas
Properties comprising approximately eighty percent (80%) of the Proved
Reserves attributable to all of the Borrowing Base Oil and Gas Properties
are made subject to Security Instruments in favor of Administrative Agent,
but Borrower is not thereby relieved from its obligation to execute and
deliver, upon request from Administrative Agent at any time, additional
Security Instruments covering any and all Borrowing Base Oil and Gas
Properties not previously covered by valid and continuing Security
Instruments, with the exception of the Borrowing Base Oil and Gas
Properties comprising any field (considered by the Administrative Agent to
be a "field" in its most recent Borrowing Base evaluation pursuant to
Section 2.06) that has a PW9 of $10,000 or less.
(B) Transfer Order Letters applicable to the production of oil and
gas from any Borrowing Base Oil and Gas Properties covered by a valid and
continuing Security Instrument for which Transfer Order letters have not
previously been delivered to the Administrative Agent;
(C) The results of a Uniform Commercial Code search showing all
financing statements and other documents or instruments on file against
the Borrower in the Offices of the Secretary of State of the State of
Wyoming and each State in which any of the Borrowing Base Oil and Gas
Properties are located or deemed to be located, such search to be as of
the most recent date practicable.
(D) A certified (as of the date of the Closing) copy of
resolutions of Borrower's Board of Directors authorizing the execution,
delivery, and performance of this Agreement, the Notes, and each other
Loan Document to be delivered by Borrower pursuant hereto;
(E) A certificate (dated the date of the Closing) of Borrower's
corporate secretary as to the incumbency and signatures of the officers of
the Borrower signing this Agreement, the Notes, and each other Loan
Document to be delivered by Borrower pursuant hereto;
(F) A copy, certified as of the most recent date practicable by
the Secretary of State of the state in which Borrower is incorporated, of
the Borrower's certificate of incorporation, together with a certificate
(dated the date of the Closing) of the Borrower's corporate secretary to
the effect that such certificate of incorporation has not been amended
since the date of the aforesaid certification;
(G) Certificates, as of the most recent dates practicable, of the
Secretary of State of each state in which the Borrower is qualified as a
foreign corporation, and the department of revenue or taxation of each of
the foregoing states, as to the good standing of the Borrower;
33
(H) A Compliance Certificate, dated the date of the Closing;
(I) Payment of the Administrative Agent's attorneys' fees upon
receipt of a reasonably detailed invoice pursuant to Section 5.12 hereof;
(J) A legal opinion or opinions of outside counsel to the Borrower
and each Guarantor, addressed to Administrative Agent, the Banks, the
Arranger and the LC Issuer, in form and substance reasonably satisfactory
to the Administrative Agent, covering, among other matters reasonably
requested by Administrative Agent or its counsel, the matters addressed in
Sections 4.01, 4.02, 4.03, 4.19 and 4.20 hereof as to Borrower, and
Section 4(d) of each Guaranty as to each respective Guarantor; and
(K) Duly executed counterparts to the Guaranty of each respective
Guarantor.
3.03 Documents Required for Subsequent Disbursements Involving Additional
Borrowing Base Oil and Gas Properties. As of the time of funding any additional
advances to Borrower that have been approved by the Banks pursuant to Section
2.18 and are made in conjunction with the addition of Oil and Gas Properties
owned by the Borrower to the Borrowing Base Oil and Gas Properties, the Borrower
shall have duly delivered to the Administrative Agent: (i) the Security
Instruments that are necessary or appropriate, in the reasonable opinion of the
Administrative Agent, relating to such additional Oil and Properties to the
extent not already covered by a valid and continuing Security Instrument,
provided that Borrower understands and agrees that Administrative Agent will
require Borrowing Base Oil and Gas Properties that include any well from which
Proved Reserves may be produced and each prospective drilling unit comprised of
Proved Reserves that are undeveloped to have attributable thereto at least 80
contiguous acres of land covered by a Lease that is made subject to the Security
Instruments, and (ii) Transfer Order Letters applicable to the production of oil
and gas from such additional Borrowing Base Oil and Gas Properties to the extent
covered by a valid and continuing Security Instrument.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Banks to enter into this
Agreement and to make the Credit Extensions hereunder, each Borrower represents
and warrants to the Administrative Agent and the Banks that:
4.01 Existence. The Borrower is a corporation, duly organized, legally
existing, and in good standing under the Laws of the State of Wyoming, the
Borrower has the lawful power to own its properties and to engage in the
businesses that it conducts, and is duly qualified and in good standing as a
foreign corporation in the jurisdictions wherein the nature of the business
transacted by it or property owned by it makes such qualification necessary,
other than those jurisdictions where the failure to so qualify will not have a
Material Adverse Effect; the states in which the Borrower is qualified to do
business are set forth in Schedule 4.01; the addresses of all places of business
of the Borrower are as set forth in Schedule 4.01; the Borrower has not
34
changed its name, been the surviving company in a merger, acquired any business,
or changed its principal executive office within five (5) years and one (1)
month prior to the date hereof, except as disclosed on Schedule 4.01.
4.02 Due Authorization. The execution and delivery by the Borrower of
this Agreement and the borrowings hereunder; the execution and delivery by the
Borrower of the Notes, the Security Instruments, and the other Loan Documents to
which it is a party; and the repayment by the Borrower of the Indebtedness
evidenced by the Notes and interest and fees provided in the Notes and this
Agreement are (a) within the corporate power of the Borrower; (b) have been duly
authorized by all necessary corporate action, and (c) do not and will not (i)
require the consent of any regulatory authority or governmental body, (ii)
contravene or conflict with any provision of Law or of the articles of
incorporation or bylaws of the Borrower, (iii) contravene or conflict with any
indenture, instrument or other agreement to which the Borrower is a party or by
which its property may be presently bound or encumbered, or (iv) result in or
require the creation or imposition of any mortgage, lien, pledge, security
interest, charge or other encumbrance in, upon or of any of the properties or
assets of the Borrower under any such indenture, instrument or other agreement,
other than under any of the Security Instruments.
4.03 Valid and Binding Obligations. This Agreement, the Notes, and the
Security Instruments , and the other Loan Documents to which Borrower is a
party, when duly executed and delivered, will be legal, valid and binding
obligations of and enforceable against the Borrower, in accordance with their
respective terms (subject to any applicable bankruptcy, insolvency or other Laws
of general application affecting creditors' rights, general equitable
principles, whether considered in a proceeding in equity or at law, and judicial
decisions interpreting any of the foregoing).
4.04 Scope and Accuracy of Financial Statements. All Financial Statements
submitted and to be submitted to the Administrative Agent hereunder are and will
be complete and correct in all material respects, are and will be prepared in
accordance with GAAP consistently applied, and do and will fairly reflect the
consolidated financial condition and the results of the operations of Ultra
Petroleum Corp. and its Subsidiaries in all material respects as of the dates
and for the period stated therein (subject only to normal year-end audit
adjustments with respect to such unaudited interim statements of Ultra Petroleum
Corp.), and no Material Adverse Change has occurred since the effective date of
the latest audited Consolidated Financial Statements delivered to Administrative
Agent.
4.05 Title to Borrowing Base Oil and Gas Properties. The Borrower has
Marketable Title to the working and net revenue interests in the Borrowing Base
Oil and Gas Properties as set forth in the most recently delivered Reserve
Report. Except as set forth in the instruments and agreements, if any, more
particularly described in Exhibit "A" hereto, all such shares of production
which the Borrower is entitled to receive, and shares of expenses which the
Borrower is obligated to bear, are not subject to change, except for changes
attributable to future elections by the Borrower not to participate in
operations proposed pursuant to customary forms of applicable joint operating
agreements, and except for changes attributable to changes in participating
areas under any federal units wherein participating areas may be formed,
enlarged or contracted in accordance with the rules and regulations of the
applicable governmental authority.
35
4.06 Oil and Gas Leases. The Leases which constitute any part of the
Borrowing Base Oil and Gas Properties are in full force and effect as to those
portions thereof that comprise the Borrowing Base Oil and Gas Properties.
4.07 Oil and Gas Contracts. Except: (a) as set forth on Schedule 4.07
attached hereto, and (b) as may subsequently occur and be disclosed by Borrower
in the next Compliance Certificate delivered by Borrower after such occurrence
pursuant to Section 5.05 hereof, the Borrower is not obligated, by virtue of any
prepayment under any contract providing for the sale by the Borrower of
Hydrocarbons which contains a "take-or-pay" clause or under any similar
prepayment agreement or arrangement, including, without limitation, "gas
balancing agreements", to deliver a material amount of Hydrocarbons produced
from the Borrowing Base Oil and Gas Properties at some future time without then
or thereafter receiving full payment therefor (i.e., in the case of oil, not in
excess of sixty (60) days, and in the case of gas, not in excess of ninety (90)
days). Except: (a) as set forth on Schedule 4.07 attached hereto, and (b) as may
subsequently occur and be disclosed by Borrower in the next Compliance
Certificate delivered by Borrower after such occurrence pursuant to Section 5.05
hereof, the Borrowing Base Oil and Gas Properties are not subject to any
contractual, or other arrangement for the sale of crude oil which cannot be
canceled on ninety (90) days' (or less) notice, unless the price provided for
therein is equal to or greater than the prevailing market price in the vicinity.
The Borrowing Base Oil and Gas Properties are not subject to any regulatory
refund obligation and no facts exist which might cause the same to be imposed.
4.08 Producing Wells. All producing wells that constitute part of the
Borrowing Base Oil and Gas Properties: (a) have been, during all times that any
such wells were operated by Borrower or its Affiliates, and (b) to the knowledge
of the Borrower, have been at all other times; drilled, operated and produced in
conformity with all applicable Laws, rules, regulations and orders of all
regulatory authorities having jurisdiction, are subject to no penalties on
account of past production, and are bottomed under and are producing from, and
the well bores are wholly within, the Borrowing Base Oil and Gas Properties, or
on Oil and Gas Properties which have been pooled, unitized or communitized with
the Borrowing Base Oil and Gas Properties, except to the extent that any
noncompliance with the representations set forth in this Section would not have
a Material Adverse Effect.
4.09 [This section is intentionally omitted].
4.10 Authorizations and Consents. No authorization, consent, approval,
exemption, franchise, permit or license of, or filing with, any governmental or
public authority or any third party is required to authorize, or is otherwise
required in connection with the valid execution and delivery by the Borrower of
this Agreement, the Notes, and the Security Instruments, or any other instrument
contemplated hereby, the repayment by the Borrower of advances against the Notes
and interest and fees provided in the Notes and this Agreement, or the
performance by the Borrower of its obligations under any of the foregoing.
4.11 Environmental Laws. Except to the extent that the failure to do so
would not have and would not be expected to have a Material Adverse Effect, the
Borrower (a) is and has in the past been in compliance with all Environmental
Laws and all permits, requests and notifications relating to health, safety or
the environment applicable to the Borrower or any of its properties,
36
assets, operations and businesses; (b) has obtained and adhered to and currently
possesses all necessary permits and other approvals, including interim status
under the Federal Resource Conservation and Recovery Act, necessary to store,
dispose of and otherwise handle Hazardous Substances and to operate its
properties, assets and businesses; (c) has reported, to the extent required by
all federal, state and local statutes, Laws, ordinances, regulations, rules,
permits, judgments, orders and decrees, all past and present sites owned and/or
operated by the Borrower where any Hazardous Substance has been released,
treated, stored or disposed of and (d) has not used, stored, or Released any
Hazardous Substance in excess of amounts allowed by Environmental Law. To the
best knowledge and belief of Borrower, there is (x) no location on any property
currently or previously owned or operated by the Borrower where Hazardous
Substances are known to have entered or are likely to enter into the soil or
groundwater on such property, other than releases of oil or natural gas in the
ordinary course of business none of which releases (i) either individually, or
in the aggregate, has had or may be expected to have a Material Adverse Effect
or (ii) has violated or may be expected to violate any Environmental Laws,
except for any such violation that has not had and would not be expected to have
a Material Adverse Effect, and (y) no on-site or off-site location to which the
Borrower has released or transported Hazardous Substances or arranged for the
transportation or disposal of Hazardous Substances, which is or is likely to be
the subject of any federal, state, local or foreign enforcement action or any
investigation which could lead to any material claims against any such entity
for any clean-up cost, remedial work, damage to natural resources, common law or
legal liability, including, but not limited to, claims under Comprehensive
Environmental Response, Compensation, and Liability Act. All Environmental
Impact Statements, orders or decrees specifically applicable to Borrower or any
of its Oil and Gas Properties with respect to operations to be conducted on any
of such Oil and Gas Properties are described on Schedule 4.11 attached hereto.
For the purposes of this Section, references to "the Borrower" shall include all
predecessors, successors-in-interest of the Borrower; provided, that with
respect to the Borrower's properties or assets, the foregoing representations as
to predecessors and successors-in-interest are limited to the knowledge of the
Borrower.
4.12 Compliance with Laws, Rules, Regulations and Orders. Except to the
extent that the failure to comply would not materially interfere with the
conduct of the business of the Borrower, the Borrower has complied with all
applicable Laws with respect to: (1) the conduct of its business; and (2) the
use, maintenance, and operation of the Borrowing Base Oil and Gas Properties and
personal properties owned or leased by it in the conduct of its business; except
as expressly set forth on Exhibit "A" hereto, the Borrower possesses all
licenses, approvals, registrations, permits and other authorizations necessary
to enable it to carry on its business in all material respects as now conducted,
and all such licenses, approvals, registrations, permits and other
authorizations are in full force and effect; and the Borrower has no reason to
believe that the Borrower will be unable to obtain the renewal of any such
licenses, approvals, registrations, permits and other authorizations.
4.13 Liabilities, Litigation and Restrictions. Except as disclosed in the
Financial Statements, the Borrower does not have any liabilities, direct or
contingent, which would have a Material Adverse Effect. There is no litigation
or other action of any nature pending before any court, governmental
instrumentality, regulatory authority or arbitral body or, to the knowledge of
the Borrower threatened against or affecting the Borrower which might reasonably
be expected to result in any material, adverse change in the Borrower, or its
business or assets. To the best of
37
the Borrower's knowledge, no unduly burdensome restriction, restraint or hazard
exists by contract or Law that would have a Material Adverse Effect.
4.14 Existing Indebtedness. All Indebtedness of the Borrower consisting
of liability to repay borrowed money or to pay money to become due on capital
leases is described in the most recent Financial Statements of Borrower
delivered to Administrative Agent prior to the Closing and from time to time
thereafter; and Borrower is not in default with respect to any of its existing
Indebtedness.
4.15 Material Commitments. Except as described in Schedule 4.15 hereto
and in filings made by Borrower with the Securities Exchange Commission, (a) the
Borrower does not have any material leases (other than oil and gas leases),
contracts or commitments of any kind (including, without limitation, employment
agreements; collective bargaining agreements; powers of attorney; distribution
arrangements; patent license agreements; contracts for future purchase or
delivery of goods or rendering of services; bonuses, pension and retirement
plans; or accrued vacation pay, insurance and welfare agreements); (b) to the
best of the Borrower's knowledge, all parties to all such material leases,
contracts, and other commitments to which the Borrower is a party have complied
with the provisions of such leases, contracts, and other commitments; and (c) to
the best of the Borrower's knowledge, no party is in default under any thereof
and no event has occurred that but for the giving of notice or the passage of
time, or both, would constitute a default, except for defaults and events that
have not had and would not be expected to have a Material Adverse Effect.
4.16 Margin Stock. The Borrower is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations T, U, or
X of the Board of Governors of the Federal Reserve System), and no part of the
proceeds of any extension of credit under this Agreement will be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock. Neither the Borrower nor any
Person acting on its behalf has taken any action that might cause the
transactions contemplated by this Agreement or the Notes to violate Regulations
T, U, or X or to violate the Securities Exchange Act of 1934, as amended.
4.17 Proper Filing of Tax Returns and Payment of Taxes Due. Except as
otherwise permitted herein, the Borrower has filed all federal, state, and local
tax returns and other reports required by any applicable Laws to have been filed
prior to the date hereof, has paid or caused to be paid all taxes, assessments,
and other governmental charges that are due and payable prior to the date
hereof, and has made adequate provision for the payment of such taxes,
assessments, or other charges accruing but not yet payable, except where the
failure to do so would not have a Material Adverse Effect; the Borrower has no
knowledge of any material deficiency or additional assessment in connection with
any taxes, assessments, or charges not provided for on its books.
4.18 ERISA. The Borrower is in compliance in all material respects with
all applicable provisions of ERISA. Neither a Reportable Event nor a Prohibited
Transaction has occurred and is continuing with respect to any plan; no notice
of intent to terminate a plan has been filed, nor has any plan been terminated;
no circumstances exist which constitute grounds under Section
38
4042 of ERISA entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administrate a plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multi-Employer
Plan; the Borrower and each ERISA Affiliate has met its minimum funding
requirements under ERISA with respect to all of its plans and the present value
of all vested benefits under each plan exceeds the fair market value of all plan
assets allocable to such benefits, as determined on the most recent valuation
date of the plan and in accordance with the provisions of ERISA and the
regulations thereunder for calculating the potential liability of the Borrower
or any ERISA Affiliate to the PBGC or the plan under Title IV of ERISA; and
neither the Borrower nor any ERISA Affiliate has incurred any liability to the
PBGC under ERISA.
4.19 Investment Company Act Compliance. The Borrower is not directly or
indirectly controlled by, or acting on behalf of, any, Person which is an
"Investment Company," within the meaning of the Investment Company Act of 1940,
as amended.
4.20 Public Utility Holding Company Act Compliance. The Borrower is not a
"holding company" or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
4.21 Insurance. The Borrower maintains insurance with respect to the
properties and business of the Borrower providing coverage for such liabilities,
casualties, risks and contingencies and in such amounts as is customary in the
industry. The insurance coverage reflected on the Certificate of Insurance
attached hereto as Schedule 4.21 is in full force and effect, and all premiums
due thereon have been paid.
4.22 Material Misstatements and Omissions. No representation or warranty
by or with respect to the Borrower contained herein or in any certificate or
other document furnished by the Borrower pursuant hereto contains any untrue
statement of a material fact or omits to state a material fact necessary to make
such representation or warranty not misleading in light of the circumstances
under which it was made.
ARTICLE V.
AFFIRMATIVE COVENANTS
Borrower covenants so long as any Indebtedness of the Borrower to any Bank
remains unpaid under this Agreement, or any Obligations of the Borrower to any
Bank or the LC Issuer remain unsatisfied, or any Bank remains obligated to make
advances hereunder, to:
5.01 Use of Funds. Use funds advanced hereunder for the purposes of (A)
extending, rearranging and renewing existing debt, (B) making acquisitions of
Oil and Gas Properties, and (C) funding Borrower's other lawful corporate
purposes.
5.02 Maintenance and Access to Records. Keep adequate records in
accordance with good accounting practices, of all of the transactions of the
Borrower so that at any time, and from time to time, such records present fairly
the financial condition of the Borrower which may be
39
readily determined and, at the Administrative Agent's reasonable request, make
all financial records and records relating to the Borrowing Base Oil and Gas
Properties available for the Administrative Agent's inspection and permit the
Administrative Agent to make and take away copies thereof.
5.03 Quarterly Unaudited Financial Statements. Deliver to the
Administrative Agent, on or before the sixtieth (60th) day after the end of each
calendar quarter, unaudited Consolidated Financial Statements, as at the end of
such period and from the beginning of such fiscal year to the end of the
respective period, as applicable, which Consolidated Financial Statements shall
be certified by the president or chief financial officer of Ultra Petroleum
Corp. as being true and correct, subject to changes resulting from year-end
audit adjustments.
5.04 Annual Audited Financial Statements. Deliver to the Administrative
Agent, on or before the one hundred twentieth (120th) day after the close of
each fiscal year of Ultra Petroleum Corp. a copy of annual audited Consolidated
Financial Statements, together with the report and opinion thereon of KPMG or
such other firm of independent certified public accountants acceptable to the
Administrative Agent at its reasonable discretion.
5.05 Compliance Certificate. At Closing, at the time of delivery of the
certified but unaudited Consolidated Financial Statements pursuant to Section
5.03 above, and at the time of the delivery of the annual audited Consolidated
Financial Statements pursuant to Section 5.04 above, deliver to the
Administrative Agent a Compliance Certificate.
5.06 Statement of Material Adverse Change. Deliver to the Administrative
Agent, promptly upon any Responsible Officer of the Borrower having knowledge of
any Material Adverse Change (or any event or circumstance that would result in
any such Material Adverse Change) in the condition, financial or otherwise, of
Borrower or of any Guarantor, a statement of a Responsible Officer of the
Borrower, setting forth the change in condition or event or circumstance likely
to result in any such change and the steps being taken by the Borrower and/or
Guarantor with respect to such change in condition or event or circumstance.
5.07 Title Defects. Cure any title defects to the Borrowing Base Oil and
Gas Properties material in value, in the reasonable opinion of the
Administrative Agent, within sixty (60) days after receipt of written notice
thereof from Administrative Agent and, in the event any title defects are not
cured in a timely manner, pay all related costs and fees reasonably incurred by
the Administrative Agent for the account of the Banks to do so; provided,
however, the Borrower may remove any of its Oil and Gas Properties from the
Borrowing Base Oil and Gas Properties so long as the Indebtedness evidenced by
the Notes is less than or equal to the Borrowing Base (determined by the Banks
in accordance with Section 2.06 exclusive of such Oil and Gas Properties).
5.08 Additional Information. Furnish to the Administrative Agent copies
of all information, if any, filed with the Securities Exchange Commission by the
Borrower or either Guarantor and all information routinely provided by the
Borrower or either Guarantor to its shareholders, generally. Furnish to the
Administrative Agent, promptly upon the Administrative Agent's reasonable
request, such additional financial or other information in Borrower's or either
Guarantor's possession or to which Borrower or either Guarantor has access,
without incurring
40
material costs, concerning the assets, liabilities, operations, and transactions
of the Borrower, including, without limitation, information concerning title to
any of the Borrowing Base Oil and Gas Properties.
5.09 Compliance with Laws and Payment of Assessments and Charges.
Materially comply with all applicable statutes and government regulations,
including, without limitation, ERISA, and pay all taxes, assessments,
governmental charges, claims for labor, supplies, rent and other obligations
which, if unpaid, might become a lien other than a Permitted Encumbrance against
its property, except any of the foregoing being contested in good faith and as
to which accruals satisfactory to the Administrative Agent, in its reasonable
discretion, have been provided.
5.10 Maintenance of Existence and Good Standing. Maintain the Borrower's
corporate existence and good standing in the jurisdiction of its organization,
and maintain the Borrower's qualification and good standing in all other
jurisdictions wherein the property now owned or hereafter acquired or business
now or hereafter conducted by Borrower necessitates same, other than those
jurisdictions wherein the failure to so qualify will not have a Material Adverse
Effect on the Borrower.
5.11 Further Assurances. Promptly cure any defects in the execution and
delivery of this Agreement, the Notes, the Security Instruments, or any other
Loan Document referred to herein or executed in connection with the Notes, and
upon the reasonable request of the Administrative Agent promptly execute and
deliver to the Administrative Agent all such other and further instruments as
may be reasonably required by the Administrative Agent from time to time in
compliance with the covenants and agreements made in this Agreement. Without
limiting the generality of the foregoing, upon the reasonable request of the
Administrative Agent, Borrower shall promptly execute and deliver to the
Administrative Agent amendments of the Security Instruments existing under the
Prior Credit Agreement to provide that references in any of such Security
Instruments to the Prior Credit Agreement shall include references to this
Agreement, as amended from time to time, and references in any such Security
Instrument to the Prior Note shall be amended to include references to the Notes
delivered pursuant to this Agreement, and any further notes issued in
substitution therefor or in renewal, extension, increase or rearrangement
thereof.
5.12 Initial Expenses of the Bank. Pay prior to or at Closing all
documented reasonable fees and expenses of Mayer, Brown, Rowe & Maw LLP, the
special legal counsel for the Administrative Agent incurred directly and solely
in connection with the preparation of this Agreement, the Notes, the Guaranty,
the Security Instruments, and any other Loan Document referred to herein or
executed directly and solely in connection with the Notes, the satisfaction of
the conditions precedent set forth in Article III of this Agreement and the
consummation of the transactions contemplated in this Agreement.
5.13 Subsequent Expenses of the Administrative Agent and the Arranger.
Upon request, promptly reimburse the Administrative Agent and the Arranger and
any Bank for all documented amounts reasonably expended, advanced or incurred by
the Administrative Agent, the Arranger or any such Bank to collect the Notes or
to enforce the rights of the Administrative Agent, the Arranger or such Banks
under this Agreement, the Notes, the Guaranty, the Security
41
Instruments, or any other Loan Document referred to herein or executed in
connection with the Notes, which amounts shall be deemed compensatory in nature
and liquidated as to amount upon notice to the Borrower by the Administrative
Agent and which amounts will include, but not be limited to, (a) all court
costs, (b) reasonable attorneys' fees, (c) fees of auditors and accountants, (d)
investigation expenses, (e) internal fees of the Administrative Agent's in-house
legal counsel, (f) fees and expenses incurred in connection with the
Administrative Agent's and any such Bank's participation as a member of the
creditors committee in a case commenced under Title 11 of the United States Code
or other similar Law of the United States, the State of Texas or any other
jurisdiction, (g) fees and expenses incurred in connection with lifting the
automatic stay prescribed in Sections 362 Title 11 of the United States Code,
and (h) fees and expenses incurred in connection with any action pursuant to
Sections 1129 Title 11 of the United States Code, reasonably incurred by the
Administrative Agent and/or any such Bank in connection with the collection of
any sums due under this Agreement, together with interest at the Floating Rate
per annum, calculated on a basis of a year of three hundred sixty (360) days on
each such amount from the date of notification to the Borrower that the same was
expended, advanced or incurred by the Administrative Agent and/or any such Bank
until, but not including, the date it is repaid to the Administrative Agent or
such Bank, with the obligations under this Section 5.13, surviving the
non-assumption of this Agreement in a case commenced under Title 11 of the
United States Code or other similar Law of the United States, the State of Texas
or any other jurisdiction and being binding upon the Borrower or a trustee,
receiver or liquidator of any such party appointed in any such case.
5.14 Maintenance of Tangible Property. Maintain all of its tangible
property relating to the Borrowing Base Oil and Gas Properties in good repair
and condition and make all necessary replacements thereof and operate such
property in a good and workmanlike manner in accordance with standard industry
practices, unless the failure to do so would not have a Material Adverse Effect
on the Borrower or the value of any Borrowing Base Oil and Gas Property.
5.15 Maintenance of Insurance. Continue to maintain, or cause to be
maintained, insurance with respect to the properties and business of the
Borrower against such liabilities, casualties, risks and contingencies and in
such amounts as is customary in the industry and furnish to the Administrative
Agent annually after the execution of this Agreement certificates evidencing
such insurance.
5.16 Inspection of Tangible Assets/Right of Audit. Permit any authorized
representative of the Administrative Agent or any Bank to visit and inspect (at
the risk of the Administrative Agent, such Bank and/or such representative) any
tangible asset of the Borrower, and/or to audit the books and records of the
Borrower during normal business hours, at the expense of the Administrative
Agent or such Bank and during normal business hours following reasonable advance
notice.
5.17 Payment of Note and Performance of Obligations. Pay the Notes
according to the reading, tenor and effect thereof, as modified hereby, and do
and perform every act and discharge all of the Obligations provided to be
performed and discharged hereunder.
5.18 Borrowing Base. Maintain a Borrowing Base in compliance with Section
2.07 such that the amount of the Outstanding Credit Exposure will not, at any
time other than during
42
applicable grace periods expressly set forth elsewhere in this Agreement, exceed
the Aggregate Commitment Amount.
5.19 Compliance with Environmental Laws. To the extent necessary to avoid
a Material Adverse Effect, comply with any and all requirements of Law,
including, without limitation, Environmental Laws, (a) applicable to any natural
or environmental resource or media located on, above, within, in the vicinity
of, related to or affected by any Borrowing Base Oil and Gas Properties or any
other property of the Borrower, or (b) applicable to the performance or conduct
of its operations, including, without limitation, all permits, licenses,
registrations, approvals and authorizations, and, in this regard, comply with,
and require all employees, crew members, agents, contractors and subcontractors
(pursuant to appropriate contractual provisions) and future lessees (pursuant to
appropriate lease provisions) of the Borrower while such Persons are acting
within the scope of their relationship with the Borrower, to so comply with, all
applicable requirements of Law, including, without limitation, applicable
Environmental Laws, and other applicable requirements with respect to the
property of the Borrower, and the operation thereof necessary or appropriate to
enable the Borrower to fulfill its obligations under all applicable requirements
of Law, including, without limitation, Environmental Laws, applicable to the
use, generation, handling, storage, treatment, transport and disposal of any
Hazardous Substances now or hereafter located or present on or under any such
property.
5.20 INDEMNIFICATION. INDEMNIFY AND HOLD THE ADMINISTRATIVE AGENT, THE
BANKS AND THE LC ISSUER AND THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, AND AFFILIATES AND EACH TRUSTEE FOR THE
BENEFIT OF THE ADMINISTRATIVE AGENT, THE BANKS AND THE LC ISSUER (EACH AN
"INDEMNIFIED PERSON") UNDER ANY SECURITY INSTRUMENT HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS, LOSSES, DAMAGES, LIABILITIES, FINES, PENALTIES, CHARGES,
ADMINISTRATIVE AND JUDICIAL PROCEEDINGS AND ORDERS, JUDGMENTS, REMEDIAL ACTIONS,
REQUIREMENTS AND ENFORCEMENT ACTIONS OF ANY KIND, AND ALL COSTS AND EXPENSES
INCURRED IN CONNECTION THEREWITH (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES
AND EXPENSES), ARISING DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, FROM (A) THE
PRESENCE OF ANY HAZARDOUS SUBSTANCES ON, UNDER, OR FROM ANY PROPERTY OF THE
BORROWER, WHETHER PRIOR TO OR DURING THE TERM HEREOF, (B) ANY ACTIVITY CARRIED
ON OR UNDERTAKEN ON OR OFF ANY PROPERTY OF THE BORROWER, WHETHER PRIOR TO OR
DURING THE TERM HEREOF, AND WHETHER BY THE BORROWER OR ANY PREDECESSOR IN TITLE,
EMPLOYEE, AGENT, CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER OR ANY OTHER
PERSON AT ANY TIME OCCUPYING OR PRESENT ON SUCH PROPERTY, IN CONNECTION WITH THE
HANDLING, TREATMENT, REMOVAL, STORAGE, DECONTAMINATION, CLEANUP, TRANSPORTATION,
OR DISPOSAL OF ANY HAZARDOUS SUBSTANCES AT ANY TIME LOCATED OR PRESENT ON OR
UNDER SUCH PROPERTY, (C) ANY RESIDUAL CONTAMINATION ON OR UNDER ANY PROPERTY OF
THE BORROWER, (D) ANY CONTAMINATION OF ANY PROPERTY OR NATURAL RESOURCES ARISING
IN CONNECTION WITH THE GENERATION, USE, HANDLING, STORAGE, TRANSPORTATION OR
DISPOSAL OF ANY HAZARDOUS SUBSTANCES BY THE BORROWER OR ANY EMPLOYEE, AGENT,
43
CONTRACTOR, OR SUBCONTRACTOR OF THE BORROWER WHILE SUCH PERSONS ARE ACTING
WITHIN THE SCOPE OF THEIR RELATIONSHIP WITH THE BORROWER, IRRESPECTIVE OF
WHETHER ANY OF SUCH ACTIVITIES WERE OR WILL BE UNDERTAKEN IN ACCORDANCE WITH
APPLICABLE REQUIREMENTS OF LAW, OR (E) THE PERFORMANCE AND ENFORCEMENT OF ANY
LOAN DOCUMENT, ANY ALLEGATION BY ANY BENEFICIARY OF A LETTER OF CREDIT OF A
WRONGFUL DISHONOR BY THE ADMINISTRATIVE AGENT, THE BANKS OR THE LC ISSUER OF A
CLAIM OR DRAFT PRESENTED THEREUNDER, OR ANY OTHER ACT OR OMISSION IN CONNECTION
WITH OR RELATED TO ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING, WITHOUT LIMITATION, ANY OF THE FOREGOING IN THIS SECTION ARISING FROM
NEGLIGENCE, WHETHER SOLE OR CONCURRENT, ON THE PART OF THE ADMINISTRATIVE AGENT,
THE BANKS OR THE LC ISSUER OR ANY OF THEIR RESPECTIVE SHAREHOLDERS, OFFICERS,
DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS-IN-FACT, OR AFFILIATES OR ANY TRUSTEE
FOR THE BENEFIT OF THE ADMINISTRATIVE AGENT, THE BANKS OR THE LC ISSUER UNDER
ANY SECURITY INSTRUMENT; PROVIDED THAT THE BORROWER SHALL HAVE NO OBLIGATION
HEREUNDER TO ANY INDEMNIFIED PERSON WITH RESPECT TO ANY OF THE FOREGOING IN THIS
SECTION TO THE EXTENT SAME ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF ANY INDEMNIFIED PERSON (IT BEING THE INTENTION OF THE BORROWER THAT EACH
INDEMNIFIED PERSON SHALL BE INDEMNIFIED BY THE BORROWER FOR SUCH INDEMNIFIED
PERSON'S ORDINARY NEGLIGENCE) WITH THE FOREGOING INDEMNITY SURVIVING
SATISFACTION OF ALL OBLIGATIONS AND THE TERMINATION OF THIS CREDIT AGREEMENT,
UNLESS ALL SUCH OBLIGATIONS HAVE BEEN SATISFIED WHOLLY IN CASH FROM THE BORROWER
AND NOT BY WAY OF REALIZATION AGAINST ANY COLLATERAL OR THE CONVEYANCE OF ANY
PROPERTY IN LIEU THEREOF, PROVIDED THAT SUCH INDEMNITY SHALL NOT EXTEND TO ANY
ACT OR OMISSION BY THE ADMINISTRATIVE AGENT, THE BANKS OR THE LC ISSUER AND
THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ATTORNEYS-IN-FACT AND AFFILIATES AND EACH TRUSTEE FOR THE BENEFIT OF THE
ADMINISTRATIVE AGENT, THE BANKS OR THE LC ISSUER UNDER ANY SECURITY INSTRUMENT
WITH RESPECT TO ANY PROPERTY THROUGH THE EXERCISE OF ADMINISTRATIVE AGENT'S, ANY
BANK'S OR THE LC ISSUER'S REMEDIES HEREUNDER OR UNDER ANY OF THE SECURITY
DOCUMENTS SUBSEQUENT TO THE ADMINISTRATIVE AGENT, ANY BANK OR THE LC ISSUER
BECOMING THE OWNER OF SUCH PROPERTY AND WITH RESPECT TO WHICH PROPERTY SUCH
CLAIM, LOSS, DAMAGE, LIABILITY, FINE, PENALTY, CHARGE, PROCEEDING, ORDER,
JUDGMENT, ACTION, OR REQUIREMENT ARISES SUBSEQUENT TO THE ACQUISITION OF TITLE
THERETO BY THE ADMINISTRATIVE AGENT, ANY BANK OR THE LC ISSUER OR OTHER PERSON.
5.21 Transactions with Affiliates. Conduct all transactions with any
Affiliate of the Borrower on an arm's-length basis (provided that such
transactions are otherwise permitted by the terms of this Agreement).
44
5.22 Leases. Keep and continue all Leases comprising the Borrowing Base
Oil and Gas Properties and related contracts and agreements relating thereto in
full force and effect in accordance with the terms thereof and not permit the
same to lapse or otherwise become impaired for failure to comply with the
obligations thereof, whether express or implied; provided, however, that this
provision shall not prevent the Borrower from abandoning and releasing any such
Leases upon their termination as the result of cessation of production in paying
quantities that did not result from the Borrower's failure to maintain such
production as a reasonably prudent operator.
5.23 Operation of Borrowing Base Oil and Gas Properties. Operate or, to
the extent that the right of operation is vested in others, exercise all
reasonable efforts to require the operator to operate the Borrowing Base Oil and
Gas Properties and all wells drilled thereon and that may hereafter be drilled
thereon, continuously and in a prudent and workmanlike manner and in accordance
with all Laws of the State in which the Borrowing Base Oil and Gas Properties
are situated and the United States of America, as well as all rules,
regulations, and Laws of any governmental agency having jurisdiction to regulate
the manner in which the operation of the Borrowing Base Oil and Gas Properties
shall be carried on, and comply with all terms and conditions of the Leases it
now holds, and any assignment or contract obligating the Borrower in any way
with respect to the Borrowing Base Oil and Gas Properties, except for any such
non-compliance that would not have a Material Adverse Effect; but nothing herein
shall be construed to empower the Borrower to bind the Administrative Agent or
any Bank to any contract obligation, or render the Administrative Agent or any
Bank in any way responsible or liable for bills or obligations incurred by the
Borrower.
5.24 [This section is intentionally omitted].
5.25 Payment of Taxes, Etc. Pay or cause to be paid when due, all taxes,
assessments, and charges or levies imposed upon it, or on its property, or which
it is required to withhold and pay, except where contested in good faith by
appropriate proceedings with adequate reserves therefor having been set aside on
its books, provided, however, that the Borrower shall pay or cause to be paid
all such taxes, assessments, charges, or levies forthwith whenever foreclosure
on any lien that may have attached (or security therefor) appears imminent.
5.26 Notice of Litigation. Give immediate notice to the Administrative
Agent of any litigation or proceeding in which it or any Guarantor is a party if
an adverse decision therein would require it or any Guarantor to: (a) pay more
than, and/or (b) deliver, forfeit or otherwise lose ownership of assets the
value of which exceeds, and/or (c) take any action or refrain from taking any
action the result of which causes it or any Guarantor to incur losses or damages
in excess of, $5,000,000 in the combined aggregate (whether or not any such
payment, loss or damages is considered to be covered by insurance).
5.27 Notice of Events of Default. Notify the Administrative Agent
immediately if it becomes aware of the occurrence of any Event of Default or of
any fact, condition, or event that only with the giving of notice or passage of
time or both, would become an Event of Default or if it becomes aware of any
Material Adverse Change (including, without limitation, proceedings in
bankruptcy, insolvency, reorganization, or the appointment of a receiver or
trustee).
45
5.28 Notice of Change of Principal Offices. Notify the Administrative
Agent thirty (30) days in advance of any change in the location of the principal
offices of Borrower or any Guarantor.
5.29 [This section is intentionally omitted].
5.30 Employee Benefit Plans. Fund its Plan(s) in accordance with no less
than the minimum funding standards of 29 U.S.C.A. Sections 1082 (Section 302 of
ERISA); furnish the Administrative Agent, promptly after the filing or receiving
of the same, with copies of any reports or other statements filed with, or
notices or other communications received from, the United States Department of
Labor, the PBGC, or the Internal Revenue Service with respect to any such Plan;
promptly advise the Administrative Agent of the occurrence of any Reportable
Event or Prohibited Transaction with respect to any such Plan and the action the
Borrower proposes to take with respect thereto; and promptly advise the
Administrative Agent when the Borrower knows or has reason to believe that the
PBGC or the Borrower has instituted or will institute proceedings under Title IV
of ERISA to terminate any such Plan and the action the Borrower proposes to take
with respect thereto.
5.31 Payment of Obligations. Promptly pay (or renew and extend) all of
its Indebtedness as it becomes due unless such Indebtedness is contested in good
faith by appropriate proceedings.
5.32 [This section is intentionally omitted].
ARTICLE VI.
NEGATIVE COVENANTS
Without the prior written consent of the Administrative Agent and the
Required Banks and so long as any part of the principal or interest on the Notes
shall remain unpaid or any Bank remains obligated to make advances hereunder,
Borrower covenants that it will not:
6.01 Other Indebtedness. Incur, create, assume or suffer to exist any
Indebtedness, whether by way of loan or the issuance or sale of securities
except Permitted Indebtedness.
6.02 Loans or Advances. Make or agree to make or allow to remain
outstanding any loans or advances to any Person, except: (a) advances or
extensions of credit in the form of accounts receivable incurred in the ordinary
course of business, (b) loans or advances permitted by Section 6.18, and (c)
provided no Event of Default or Unmatured Event of Default has occurred and is
continuing: (i) other loans or advances not exceeding $1,000,000, in the
aggregate, at any time outstanding, and (ii) loans or advances to Guarantor as
and to the extent necessary to enable Guarantor to retire or redeem any capital
stock of Guarantor, to the extent required pursuant to the terms of any employee
incentive compensation plan of Guarantor that was in effect at Closing and
disclosed to Administrative Agent in writing at or prior to Closing.
6.03 Mortgages or Pledges of Assets. Create, incur, assume or permit to
exist, any mortgage, pledge, security interest, lien or encumbrance on any of
its properties or assets (now owned or hereafter acquired), except for Permitted
Encumbrances.
46
6.04 Sales of Assets. Except for Permitted Asset Sales, sell, lease,
assign, transfer or otherwise dispose of, in one or any series of related
transactions, all or any portion of its Oil and Gas Properties or other material
assets, whether now owned or hereafter acquired, including transfers to
Affiliates, nor enter into any arrangement, directly or indirectly, with any
Person to sell and rent or lease back as lessee such property or any part
thereof which is intended to be used for substantially the same purpose or
purposes as the property sold or transferred.
6.05 Dividends. Declare or pay any dividend or distribution on any
capital stock of the Borrower; provided that, notwithstanding the foregoing, so
long as no Event of Default shall have occurred and shall then be continuing (a)
to the extent that Sino-American shall have previously made, directly or
indirectly, an investment in, or contributed capital to, the Borrower (other
than as an intercompany loan pursuant to clause (J) of the definition of
Permitted Indebtedness), the Borrower shall be permitted to return to
Sino-American an amount equal to the amount of such investment or capital
contribution on a dollar for dollar basis, and (b) the Borrower shall be
permitted to declare and pay dividends or distributions on its capital stock
that, together with any amounts paid by Borrower as permitted by the proviso in
Section 6.12, shall not exceed $15,000,000 in the aggregate for any calendar
year.
6.06 [This section is intentionally omitted].
6.07 [This section is intentionally omitted].
6.08 Investments. Make Investments in or purchase or otherwise acquire
all or substantially all of the assets of any Person, or any shares of stock of,
or similar interest in, any other Person, if the result of such action would
impair the ability of the Borrower to perform any of its Obligations pursuant to
this Agreement, including, without limitation, the obligation to repay the
Indebtedness evidenced by the Notes, except that the Borrower may invest in
instruments that are investment grade, short-term commercial paper.
6.09 Changes in Structure or Business. Consolidate or merge with or
purchase (for cash or securities) all or substantially all of the assets or
capital stock of any corporation, firm, association or enterprise, or allow any
such entity to be merged into the Borrower, or change the basic business
operations of the Borrower, unless all of the following conditions are
satisfied: (a) Borrower has provided Administrative Agent complete and detailed
information relating to such merger or purchase at least fifteen (15) days in
advance thereof, (b) Borrower is the survivor of such merger or the acquiror in
any such purchase, and (c) such merger or purchase will not otherwise constitute
or result in an Event of Default or Unmatured Event of Default under any other
provisions of this Agreement.
6.10 Pooling or Unitization. Voluntarily pool or unitize all or any part
of the Borrowing Base Oil and Gas Properties where the pooling or unitization
would result in the diminution of the Borrower's net revenue interest in
production from the pooled or unitized lands, without the Required Banks' prior
consent, which will not be unreasonably withheld. Any unitization, pooling or
communitization or other action or instrument in violation of this Section 6.10
shall be of no force or effect against any Bank.
47
6.11 Hedge Agreements. Except for Permitted Hedge Agreements, enter into
or become obligated under any contract for sale for future delivery of
Hydrocarbons other than normal production contracts entered into in the
Borrower's normal course of business (whether or not the subject Hydrocarbons
are to be delivered), forward contract, Hedging Agreement, futures contract or
any other similar agreement, without the prior written consent of the Required
Banks, acting in their reasonable discretion.
6.12 Capital Stock of Borrower. Without the prior written consent of the
Required Banks, acting in their reasonable discretion, (a) issue, redeem,
purchase, retire or otherwise acquire for value any of its capital stock or
grant, issue, purchase, retire or otherwise acquire for value any warrant,
right, or option pertaining thereto or other security convertible into any of
the foregoing, or (b) permit any transfer, sale, redemption, retirement, or
other change in the ownership of the outstanding capital stock of the Borrower;
except for the issuance or transfer of the Borrower's capital stock which does
not result in a Change of Control or otherwise constitute or result in an Event
of Default under any other provisions of this Agreement; provided that,
notwithstanding the foregoing, so long as no Event of Default shall have
occurred and shall then be continuing, the Borrower shall be permitted to
redeem, purchase, retire or otherwise acquire for value any of its capital stock
for an amount paid by Borrower that, together with any amounts paid by Borrower
under clause (b) of Section 6.05, shall not exceed $15,000,000 in the aggregate
for any calendar year.
6.13 Margin Stock. Directly or indirectly apply any part of the proceeds
of the Loans to the purchasing or carrying of any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
or any regulations, interpretations or rulings thereunder.
6.14 [This section is intentionally omitted].
6.15 Current Ratio. (a) Permit as of the end of any fiscal quarter the
Current Ratio to be less than 1.00 to 1.00, calculated based on the Consolidated
Financial Statements, and (b) permit as of the end of any fiscal quarter
Borrower's Current Ratio to be less than 1.00 to 1.00, calculated based solely
on the consolidating financial statements relative to Borrower, which constitute
a part of the Consolidated Financial Statements.
6.16 EBITDA to Interest Ratio. (a) Permit, as of the end of any fiscal
quarter, the ratio of EBITDA to total interest expense on all Indebtedness,
calculated based on the Consolidated Financial Statements, to be less than 2.5
to 1.0, calculated on a rolling four-quarter basis, and (b) permit, as of the
end of any fiscal quarter, the ratio of Borrower's EBITDA to Borrower's total
interest expense on all of Borrower's Indebtedness, calculated based solely on
the consolidating financial statements relative to Borrower, which constitute a
part of the Consolidated Financial Statements, to be less than 2.5 to 1.0,
calculated on a rolling four-quarter basis.
6.17 [This section is intentionally omitted].
6.18 Intercompany Transfers. Permit the Borrower or any of its Affiliates
to invest in, loan to or otherwise transfer to Sino-American without the prior
written approval of the Required Banks an amount greater than Thirty-Five
Million Dollars ($35,000,000) during each calendar
48
year, provided that, notwithstanding the foregoing restriction on transfers by
the Borrower to Sino-American, the Borrower shall be permitted, subject to the
two provisos below, to repay the outstanding principal amount of any
intercompany loans owed by the Borrower to Sino-American permitted by clause (J)
of the definition of Permitted Indebtedness or return the amount of any
investment in, or capital contribution to, the Borrower made by Sino-American in
accordance with Section 6.05; provided, however, that it shall be a condition of
any transfer by Borrower or any of its Affiliates to Sino-American that such
amounts transferred by the Borrower or any of its Affiliates to Sino-American be
applied, first, to repay and reduce the outstanding principal amount of any
intercompany loans owed by Borrower, or return the aggregate amount of
investments in or capital contributions to the Borrower from Sino-American, to
Sino-American, if any, in each case until repaid in full, and second, as
investments in, loans to or other transfers to Sino-American pursuant to the
foregoing clauses (a) or (b), as applicable; and further provided, however, in
no event shall any such investment in, loan, return or transfer to, or repayment
of intercompany loans to, Sino-American, be permitted if: (i) an Event of
Default has occurred and is continuing pursuant to any of Sections 7.01(a), (d),
(e), (f), (g), (h), (i) or (j) hereof; (ii) Administrative Agent has given
Borrower written notice that a Loan Excess has occurred and is continuing; (iii)
the Current Ratio calculated pursuant to Section 6.15(a) or (b) is, or as the
result of the making of such investment, loan, transfer or repayment would
become, less than 0.85 to 1.00; (iv) the EBITDA to Interest Ratio calculated
pursuant to Section 6.16 (a) or (b) is, or as the result of the making of such
investment, loan, transfer or repayment would become, less than 2.5 to 1.0; or
(v) Administrative Agent has accelerated the maturity of Borrower's Obligations
as provided in Section 7.03.
ARTICLE VII.
EVENTS OF DEFAULT
7.01 Enumeration of Events of Default. Any of the following events shall
be considered an Event of Default as that term is used herein:
(a) Default shall be made by the Borrower in the payment of
any installment of principal or interest (including, without
limitation, any mandatory prepayments payable pursuant to
either Section 2.07 or 2.08 of this Agreement) on the Notes,
any LC Fee or any other monetary obligation (other than
Reimbursement Obligations) payable hereunder when due,
including without limitation, any other fee due to
Administrative Agent, LC Issuer or any Bank hereunder within
five (5) days after such payment was due, or in the payment of
any Reimbursement Obligation within one Business Day after the
same becomes due;
(b) Default shall be made by the Borrower or any Guarantor
in the due observance or performance of any affirmative
covenant required in this Agreement, the Notes, the Guaranty,
the Facility LC Applications or the Security Instruments or
any other Loan Documents and such default continues for more
than thirty (30) days after the earlier of: (i) any
Responsible Officer of Borrower or any Guarantor having
49
knowledge thereof, or (ii) Borrower or Guarantor receiving
written notice thereof from the Administrative Agent;
(c) Default shall be made by the Borrower or any Guarantor
in the due observance or performance of any negative covenant
required in this Agreement, the Notes, the Guaranty, the
Facility LC Applications or the Security Instruments or any
other Loan Documents;
(d) Any representation or warranty made herein by the
Borrower or made in the Guaranty by either Guarantor proves to
have been untrue in any respect material to the Borrower or
such Guarantor, respectively, or any representation, statement
(including Financial Statements), certificate or data
furnished or made by the Borrower or any Guarantor to the
Administrative Agent in connection herewith proves to have
been untrue in any respect material to the Borrower or the
Guarantor, respectively, as of the date the facts therein set
forth were stated or certified;
(e) (x) Default shall be made by the Borrower or either
Guarantor (as principal or other surety) in payment or
performance of any bond, debenture, note or other evidence of
Indebtedness for borrowed money, or under any credit
agreement, loan agreement, indenture, promissory note or
similar agreement or instrument executed in connection with
any of the forgoing, relating to any Indebtedness in an
aggregate amount of One Million Dollars ($1,000,000.00) or
more, and such default shall remain unremedied for in excess
of the period of grace, if any, with respect thereto,
entitling the payee thereof to accelerate the maturity of such
Indebtedness; or (y) Default shall be made by Sino-American
Energy Corporation (as principal or other surety) in payment
or performance of any bond, debenture, note or other evidence
of Indebtedness for borrowed money, or under any credit
agreement, loan agreement, indenture, promissory note or
similar agreement or instrument executed in connection with
any of the forgoing, relating to any Indebtedness in an
aggregate amount of One Million Dollars ($1,000,000.00) or
more, and such default shall remain unremedied for in excess
of the period of grace, if any, with respect thereto,
entitling the payee thereof to accelerate the maturity of such
Indebtedness, and the payee of such Indebtedness has, or
alleges in written notice to Borrower or either Guarantor that
it has, recourse against Borrower or either Guarantor for the
collection of such Indebtedness;
(f) The Borrower or either Guarantor (i) discontinues its
usual business or applies for or consents to the appointment
of a receiver, trustee or liquidator of it or all or a
substantial part of its assets, or (ii) files a voluntary
petition commencing a case under Title 11 of the United States
Code, seeking liquidation, reorganization or rearrangement or
taking advantage of any bankruptcy, insolvency, debtor's
relief or other
50
similar Law of the United States the State of Texas or any
other jurisdiction, or (iii) makes a general assignment for
the benefit of creditors, or (iv) is unable, or admits in
writing its inability to pay its debts generally as they
become due, or (v) files an answer admitting the material
allegations of a petition filed against it in any case
commenced under Title 11 of the United States Code or any
reorganization, insolvency, conservatorship or similar
proceeding under any bankruptcy, insolvency, debtor's relief
or other similar Law of the United States, the State of Texas
or any other jurisdiction;
(g) An order, judgment or decree shall be entered against
the Borrower or either Guarantor by any court of competent
jurisdiction or by any other duly authorized authority, on the
petition of a creditor or otherwise, granting relief under
Title 11 of the United States Code or under any bankruptcy,
insolvency, debtor's relief or other similar Law of the United
States, the State of Wyoming, the State of Nevada, the Yukon
Territory of Canada, or any other jurisdiction, approving a
petition seeking reorganization or an arrangement of its debts
or appointing a receiver, trustee, conservator, custodian or
liquidator of it or all or any substantial part of its assets,
and the failure to have such order, judgment or decree
dismissed within thirty (30) days of its entry;
(h) the Borrower or either Guarantor has concealed, removed,
or permitted to be concealed or removed, any part of its
property, with intent to hinder, delay or defraud its
creditors or any of them; or has made or suffered a transfer
of any of its property which would be characterized as a
fraudulent conveyance under bankruptcy or similar Laws; or has
made any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated
have not been paid; or has suffered or permitted, while
insolvent, any creditor to obtain a lien upon any of its
property through legal proceedings or distraint which is not
vacated within thirty (30) days from the date thereof;
(i) the Liens under the Security Instruments are not, or
they cease to be, perfected first priority Liens subject to
only Permitted Encumbrances, or any of the Loan Documents or
the rights or remedies of the Administrative Agent, the Banks
or the LC Issuer are not, or they cease to be, valid and
enforceable; or
(j) a Material Adverse Change has occurred and the same
remains unremedied for in excess of 30 days after the earlier
of: (i) any Responsible Officer of Borrower or any Guarantor
having knowledge thereof, or (ii) Borrower receiving written
notice thereof from the Administrative Agent.
7.02 Rights Upon Unmatured Event of Default. At any time that there
exists an Unmatured Event of Default, any obligation of the Banks and the LC
Issuer to make Credit
51
Extensions shall be suspended: (a) unless, with respect to any such Unmatured
Event of Default, Borrower provides evidence satisfactory to the Banks that such
Unmatured Event of Default shall, contemporaneously with or promptly after such
Credit Extension, be cured with funds advanced pursuant to the Credit Extension,
or (b) unless and until the Administrative Agent, with the approval of the
Required Banks and the LC Issuer, shall reinstate the same in writing, the
Unmatured Event of Default shall have been waived by the Administrative Agent,
with approval of the Required Banks and the LC Issuer, or the relevant Unmatured
Event of Default shall have been remedied prior to ripening into an Event of
Default.
7.03 Rights Upon Default. Upon the happening of an Event of Default
specified in Subsections 7.01 (f) or (g), the obligations of the Banks and the
LC Issuer to make Credit Extensions hereunder shall automatically terminate and
all Obligations then outstanding hereunder and the interest accrued thereon
shall automatically become immediately due and payable without any election or
action on the part of the Administrative Agent, any Bank or the LC Issuer. Upon
the happening and during the continuation of any other Event of Default, the
Administrative Agent may, or upon the request of the Required Banks subject to
Section 9.12, the Administrative Agent shall terminate or suspend the
obligations of the Banks and the LC Issuer to make Credit Extensions hereunder,
or declare the Obligations to be immediately due and payable, or both, and upon
such declaration with respect to the Obligations they shall become immediately
due and payable. In either case, the entire principal and interest shall
thereupon become immediately due and payable, without notice (including, without
limitation, notice of intent to accelerate maturity or notice of acceleration of
maturity) and without presentment, demand, protest, notice of protest or other
notice of default or dishonor of any kind, except as provided to the contrary
elsewhere herein, all of which are hereby expressly waived by the Borrower.
If, within thirty (30) days after acceleration of the maturity of the
Obligations or termination of the obligations of the Banks and LC Issuer to make
Credit Extensions hereunder as the result of any Event of Default (other than
any Event of Default specified in subsections 7.01(f) or (g)) and before any
judgment or decree for the payment of the Obligations due shall have been
obtained or entered, the Required Banks (in their sole discretion) shall direct
with respect to the Obligations relating to the Loans or the LC Issuer (in its
sole discretion) shall direct with respect to Obligations relating to Facility
LCs, the Administrative Agent shall, by notice to the Borrower, rescind and
annul such acceleration and/or termination.
7.04 Remedies. After any acceleration, as provided for in Section 7.03,
the Administrative Agent, the Banks and the LC Issuer shall have, in addition to
the rights and remedies given them by this Agreement and the Security
Instruments, all those allowed by all applicable Laws.
7.05 Right of Set-off. Upon the occurrence of any Event of Default, each
Bank may, and is hereby authorized by the Borrower, at any time and from time to
time, to the fullest extent permitted by applicable Laws, without advance notice
to the Borrower (any such notice being expressly waived by the Borrower),
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and any other indebtedness at any time
owing by such Bank to or for the credit or the account of the Borrower against
any or all of the Obligations of the Borrower now or hereafter existing, whether
or not such Obligations have
52
matured and irrespective of whether such Bank may have exercised any other
rights that they have or may have with respect to such Obligations, including,
without limitation, any acceleration rights. Each Bank agrees promptly to notify
the Borrower after any such set-off and application, provided that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of each Bank under this Section 7.05 are in addition to
the other rights and remedies (including, without limitation, other rights of
set-off) which the Banks may have.
ARTICLE VIII.
THE ADMINISTRATIVE AGENT
8.01 Authorization and Action. Each Bank hereby irrevocably appoints and
authorizes the Administrative Agent to act on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are specifically
delegated to or required of the Administrative Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto. As to
any matters not expressly provided for by this Agreement or the other Loan
Documents (including, without limitation, enforcement or collection of the
Notes), the Administrative 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, as between the Administrative Agent and the Banks, shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Required Banks, and such instructions shall be binding upon all Banks and all
holders of Notes; provided, however, that the Administrative Agent shall not be
required to take any action which exposes such Administrative Agent to personal
liability or which is contrary to this Agreement, the other Loan Documents or
applicable law. The Administrative Agent is authorized to release Collateral
from the Security Instruments in connection with any sale, lease, assignment,
transfer or other disposition thereof permitted by Section 6.04.
8.02 Administrative Agent's Reliance, Etc. Neither the Administrative
Agent nor any of its directors, officers, agents or employees shall be liable to
any Bank for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents (i) with the consent
or at the request of the Required Banks or (ii) in the absence of its or their
own gross negligence or willful misconduct (it being the express intention of
the parties that the Administrative Agent and its directors, officers, agents
and employees shall have no liability for actions and omissions under this
Section 8.02 resulting from their sole ordinary or contributory negligence).
Without limitation of the generality of the foregoing, the Administrative Agent:
(i) may treat the payee of each Note as the holder thereof until the
Administrative Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Administrative
Agent; (ii) may consult with legal counsel (including counsel for Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Bank and shall not be responsible to any
Bank for any statements, warranties or representations made in or in connection
with this Agreement or the other Loan Documents; (iv) except as otherwise
expressly provided herein, shall not have any duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of
this Agreement or the other Loan Documents or to inspect the property (including
53
the books and records) of Borrower; (v) shall not be responsible to any Bank for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or the other Loan Documents or any other instrument
or document furnished pursuant hereto or thereto; and (vi) shall incur no
liability under or in respect of this Agreement or the other Loan Documents by
acting upon any notice, consent, certificate or other instrument or writing
(which may be by telegram, telecopier, cable or telex) reasonably believed by it
to be genuine and signed or sent by the proper party or parties; and (vii) the
provisions of this Section 8.02 shall survive the termination of this Agreement
and/or the payment or assignment of any of the Indebtedness under this
Agreement.
8.03 The Administrative Agent and Affiliates. With respect to its
Commitment, the Credit Extensions made by it and the Note issued to it as a
Bank, the Administrative Agent shall have the same rights and powers under this
Agreement or the other Loan Documents as any other Bank and may exercise the
same as though it were not the Administrative Agent. The term "Bank" or "Banks"
shall, unless otherwise expressly indicated, include the Administrative Agent in
its individual capacity. The Administrative Agent and its affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of business with Borrower and any Person who may do business
with or own securities of Borrower, all as if the Administrative Agent were not
the Administrative Agent and without any duty to account therefor to the Banks.
8.04 Bank Credit Decision. Each Bank acknowledges and agrees that it has,
independently and without reliance upon the Administrative Agent or any other
Bank and based on the Financial Statements referred to in Sections 5.03 and 5.04
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges and agrees that it will, independently and without reliance upon
the Administrative Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
8.05 Administrative Agent's Indemnity. The Administrative Agent shall not
be required to take any action hereunder or to prosecute or defend any suit in
respect of this Agreement or the other Loan Documents unless indemnified to the
Administrative Agent's satisfaction by the Banks against loss, cost, liability
and expense. If any indemnity furnished to the Administrative Agent shall become
impaired, it may call for additional indemnity and cease to do the acts
indemnified against until such additional indemnity is given. In addition, the
Banks agree to indemnify the Administrative Agent (to the extent not reimbursed
by Borrower), ratably according to the respective principal amounts of the Notes
then held by each of them (or if no Notes are at the time outstanding, ratably
according to either (i) the respective amounts of their Commitments, or (ii) if
no Commitments are outstanding, the respective amounts of the Commitments
immediately prior to the time the Commitments ceased to be outstanding), 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 the
Administrative Agent in any way relating to or arising out of this Agreement or
any action taken or omitted by the Administrative Agent under this Agreement or
the other Loan Documents (including, without limitation, any action taken or
omitted under Article II of this Agreement); provided, that no Bank shall be
liable for any
54
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. Each Bank agrees,
however, that it expressly intends, under this Section 8.05, to indemnify the
Administrative Agent ratably as aforesaid for all such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements arising out of or resulting from the Administrative Agent's
ordinary or contributory negligence. Without limitation of the foregoing, each
Bank agrees to reimburse the Administrative Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including reasonable counsel fees)
incurred by the Administrative Agent in connection with the preparation,
execution, administration, or enforcement of, or legal advice in respect of
rights or responsibilities under, this Agreement and the other Loan Documents to
the extent that the Administrative Agent is not reimbursed for such expenses by
Borrower. The provisions of this Section 8.05 shall survive the termination of
this Agreement and/or the payment or assignment of any of the Indebtedness under
this Agreement.
8.06 Successor Administrative Agent. The Administrative Agent may resign
at any time by giving thirty (30) days advance written notice thereof to the
Banks and Borrower and may be removed as Administrative Agent under this
Agreement and the other Loan Documents at any time with or without cause by the
Required Banks. Upon any such resignation or removal, the Required Banks with
the concurrence of Borrower shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Required Banks, and shall have accepted such appointment,
within 30 calendar days after the retiring Administrative Agent's giving of
notice of resignation or the Required Banks' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks and with the concurrence of Borrower, appoint a successor
Administrative Agent. Upon the acceptance of any appointment as Administrative
Agent hereunder and under the other Loan Documents by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement and the other Loan
Documents. After any retiring Administrative Agent's resignation or removal as
Administrative Agent hereunder and under the other Loan Documents, the
provisions of this Article VIII shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement and the other Loan Documents.
8.07 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Event of Default hereunder
unless the Administrative Agent shall have received notice from a Bank or
Borrower referring to this Agreement, describing such Event of Default and
stating that such notice is a "notice of default." If the Administrative Agent
receives such a notice, the Administrative Agent shall give notice thereof to
the Banks; provided, however, if such notice is received from a Bank, the
Administrative Agent also shall give notice thereof to Borrower. The
Administrative Agent shall be entitled to take action or refrain from taking
action with respect to such Event of Default as provided in Section 8.01 and
Section 8.02.
55
ARTICLE IX.
MISCELLANEOUS
9.01 Security Interests in Deposits and Right of Offset or the Banker's
Lien. The Borrower hereby transfers, assigns, pledges and grants to each Bank a
security interest (as security for the payment and/or performance of the
Obligations of the Borrower, with such interest of each Bank to be
retransferred, reassigned and/or released by such Bank at the expense of the
Borrower upon payment in full and/or complete performance by the Borrower of all
such Obligations) and the right, exercisable at such time as any obligation
hereunder shall mature, whether by acceleration of maturity or otherwise, of
offset or banker's lien against all funds or other property of the Borrower now
or hereafter or from time to time on deposit with or in the possession of such
Bank, including, without limitation, all certificates of deposit and other
depository accounts.
9.02 Survival of Representations, Warranties and Covenants. All
representations and warranties of the Borrower and all covenants and agreements
herein made shall survive the execution and delivery of the Notes and this
Agreement and shall remain in force and effect so long as any debt is
outstanding under the Notes, or any renewal or extension of this Agreement or
the Notes, or the Banks remain obligated to make advances hereunder.
9.03 Notices and Other Communications. Notices, requests and
communications hereunder shall be in writing and shall be sufficient in all
respects if delivered to the relevant address indicated below (including
delivery by registered or certified United States mail, facsimile, telex,
telegram or hand):
(A) If to the Borrower: ULTRA RESOURCES, INC.
363 N. Sam Houston Parkway, Suite 1200
Houston, Texas 77060
Attention: Mr. Fox Benton
Telecopy: (281) 876-2831
If to a Guarantor: ULTRA PETROLEUM CORPORATION, and
UP ENERGY CORPORATION
363 N. Sam Houston Parkway, Suite 1200
Houston, Texas 77060
Attention: Mr. Fox Benton
Telecopy: (281) 876-2831
with a copy to: ULTRA RESOURCES, INC.
363 N. Sam Houston Parkway, Suite 1200
Houston, Texas 77060
Attention: Ms. Charlotte Kauffman
Telecopy: (281) 876-0120 ext. 310
56
(B) If to the Administrative Agent or the Banks:
BANK ONE, NA
910 Travis, 6th Floor
Houston, Texas 77002
Attention: Stephen M. Shatto
Any party may, by proper written notice hereunder to the other, change the
individuals or addresses to which such notices to it shall thereafter be sent.
9.04 Parties in Interest. All covenants and agreements herein contained
by or on behalf of the Borrower shall be binding upon the Borrower and its
successors and assigns and inure to the benefit of the Administrative Agent and
the Banks and their respective successors and assigns.
9.05 Successors and Assigns; Participation; Purchasing Banks.
(a) Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the
successors and permitted assigns of such party; and all
covenants, promises and agreements by or on behalf of
Borrower, the Administrative Agent or the Banks that are
contained in this Agreement shall bind and inure to the
benefit of their respective successors and permitted assigns.
Borrower may not assign or transfer any of its rights or
obligations hereunder without the written consent of all the
Banks.
(b) Each Bank may, without the consent of Borrower, sell
participations to one or more banks or other financial
institutions in all or a portion of its rights and obligations
under this Agreement and the other Loan Documents (including,
without limitation, all or a portion of its Commitment, the
Loans owing to it, and the Notes held by it); provided,
however, that (i) the selling Bank's obligations under this
Agreement and the other Loan Documents shall remain unchanged,
(ii) such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii)
Borrower, the Administrative Agent, and the other Banks shall
continue to deal solely and directly with the selling Bank in
connection with such Bank's rights and obligations under this
Agreement and the other Loan Documents, (iv) the selling Bank
shall remain the holder of its Note(s) for all purposes of
this Agreement, and (v) no participant under any such
participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any
consent to any departure by the Borrower therefrom, except to
the extent that such amendment, waiver or consent would reduce
to the principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, in each case to the extent
subject to such participation, or
57
postpone any regularly scheduled payment of principal of, or
interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such
participation.
(c) With the prior written consent of Borrower and the
Administrative Agent, each Bank may assign to one or more
banks or other entities (a "Purchasing Bank"), all or a
portion of its interests, rights and obligations under this
Agreement and the other Loan Documents (including, without
limitation, all or a portion of its Commitment and the same
portion of the Loans at the time owing to it and the Notes
held by it); provided, however, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all
the assigning Bank's rights and obligations under this
Agreement and the other Loan Documents, (ii) after giving
effect to such assignment, the Purchasing Bank's Commitment
must be at least $5,000,000 (either solely as the result of
such assignment or as the result of multiple assignments from
two or more assigning Banks), (iii) the parties to each such
assignment shall execute and deliver to the Administrative
Agent a Commitment Transfer Supplement together with any Notes
subject to such Commitment Transfer Supplement, (iv) the
assigning Bank shall pay to Administrative Agent an assignment
fee of $3,500, (v) an assigning Bank shall not assign a
portion of such Bank's Commitment in an amount less than an
amount equal to the lesser of such Bank's Commitment hereunder
and $5,000,000 and (vi) if the assigning Bank has retained any
Commitment hereunder, such assigning Bank's Commitment shall
be at least $5,000,000 after giving effect to such assignment.
Upon such execution and delivery, from and after the effective
date specified in each Commitment Transfer Supplement, which
effective date shall be at least five Business Days after the
execution thereof (x) the Purchasing Bank thereunder shall be
a party hereto and, to the extent herein provided in such,
have the rights and obligations of a Bank hereunder and (y)
the assignor Bank thereunder shall, to the extent provided in
such assignment, be released from its obligations under this
Agreement and the other Loan Documents (and, in the case of a
Commitment Transfer Supplement covering all of the remaining
portion of an assigning Bank's rights and obligations under
this Agreement and the other Loan Documents, such Bank shall
cease to be a party hereto). 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 Bank and the resulting adjustment
of Percentage Shares arising from the purchase by such
Purchasing Bank of all or a portion of the rights and
obligations of such assigning Bank under this Agreement, the
Notes and the other Loan Documents.
(d) The Administrative Agent shall maintain at its office a
copy of each Commitment Transfer Supplement delivered to it
and a register for the recordation of the names and addresses
of the Banks and the Commitment Amount of, and principal
amount of the Loans
58
owing to, each Bank from time to time (the "Register"). The
entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, the Administrative Agent, and
the Banks may treat each Person whose name is recorded in the
Register as a Bank hereunder for all purposes of this
Agreement. The Register shall be available for inspection by
Borrower or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
(e) Upon its receipt of a Commitment Transfer Supplement
executed by an assigning Bank and a Purchasing Bank together
with any Notes subject to such Commitment Transfer Supplement
and the written consent to such Commitment Transfer
Supplement, the Administrative Agent shall (i) accept such
Commitment Transfer Supplement, (ii) record the information
contained therein in the Register and (iii) give prompt notice
thereof to the Banks and Borrower. Within five (5) Business
Days after receipt of such notice, Borrower shall, at its own
expense, execute and deliver to the Administrative Agent, in
exchange for the surrendered Notes, replacement Notes dated as
of the effective date of such surrendered Notes and otherwise
substantially in the form of the Notes replaced thereby
payable to the order of such Purchasing Bank in an amount
equal to the Commitment assumed by it pursuant to such
Commitment Transfer Supplement and, if the assigning Bank has
retained any Commitment hereunder, replacement Notes dated as
of the effective date of the surrendered Notes and otherwise
substantially in the form of the Notes replaced thereby
payable to the order of the assigning Bank in an amount equal
to the Commitment of such assigning Bank retained by it
hereunder. Such replacement Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of
such surrendered Notes. Contemporaneously with the delivery of
the replacement Notes, the canceled Notes shall be returned to
Borrower marked "Replaced."
(f) Each Bank agrees to hold any confidential information
which it may receive from the Borrower pursuant to this
Agreement in confidence, except for disclosure (i) to its
Affiliates and to other Banks and their respective Affiliates,
(ii) to legal counsel, accountants, and other professional
advisors to such Bank, (iii) to regulatory officials, (iv) to
any Person as requested pursuant to or as required by law,
regulation, or legal process, (v) to any Person in connection
with any legal proceeding to which such Bank is a party, (vi)
to such Bank's direct or indirect contractual counterparties
in swap agreements or to legal counsel, accountants and other
professional advisors to such counterparties, and (vii)
permitted by this Section. Notwithstanding any other provision
herein, any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant
to this Section 9.05, disclose to the assignee or participant
or proposed assignee or participant, any information relating
to
59
Borrower furnished to such Bank by or on behalf of Borrower;
provided, that prior to any such disclosure, each such
assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any
confidential information relating to Borrower received from
such Bank to the same extent as required by this Section.
Notwithstanding anything herein to the contrary, each of the
Borrower, the Administrative Agent and each Bank or any other
party to this Agreement (and any employee, representative or
other agent of the foregoing) may disclose to any and all
persons, without limitation of any kind (1) any information
with respect to the U.S. federal and state income tax
treatment of the Agreement, the transaction contemplated
hereby and any facts that may be relevant to understanding
such tax treatment, which facts shall not include for this
purpose the names of the parties or any other person named
herein, or information that would permit identification of the
parties or such other persons, or any pricing terms or other
nonpublic business or financial information that is unrelated
to such tax treatment or facts, and (2) all materials of any
kind (including opinions or other tax analyses) relating to
such tax treatment or facts that are provided to any of the
persons referred to above.
(g) Assignment to Federal Reserve Bank. Notwithstanding any
other language in this Agreement, any Bank may at any time
assign all or any portion of its rights under this Agreement
and the Notes to a Federal Reserve Bank as collateral in
accordance with Regulation A and the applicable operating
circular of such Federal Reserve Bank.
9.06 Renewals and Extensions. All provisions of this Agreement relating
to the Notes shall apply with equal force and effect to each and all promissory
notes hereafter executed which in whole or in part represent a renewal,
extension, amendment, modification or rearrangement of any part of the
Indebtedness originally represented by the Notes.
9.07 No Waiver by the Administrative Agent, the Banks or the LC Issuer.
No course of dealing on the part of the Administrative Agent, the Banks or the
LC Issuer, their officers or employees, nor any failure or delay by the
Administrative Agent, any Bank or the LC Issuer with respect to exercising any
of its rights, powers or privileges under this Agreement, the Notes, the
Facility LC Applications, the Security Instruments, or any other instrument
referred to herein or executed in connection with the Notes shall operate as a
waiver thereof. The rights and remedies of the Administrative Agent, the Banks
and the LC Issuer under this Agreement, the Notes, the Facility LC Applications,
the Security Instruments, or any other instrument referred to herein or executed
in connection with the Notes shall be cumulative and the exercise or partial
exercise of any such right or remedy shall not preclude the exercise of any
other right or remedy.
No Credit Extensions hereunder shall constitute a waiver of any of the
covenants or warranties of the Borrower contained herein or of any of the
conditions to the Banks' or the LC Issuer's obligation to make further Credit
Extensions hereunder. In the event that the Borrower is unable to satisfy any
such covenant, warranty or condition, no such Credit Extension shall
60
have the effect of precluding the Banks or the LC Issuer from thereafter
declaring such inability to be an Event of Default as hereinabove provided.
9.08 GOVERNING LAW. THIS AGREEMENT AND THE NOTE SHALL BE DEEMED TO BE
CONTRACTS MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS.
9.09 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
attached to this Agreement are incorporated herein for all purposes and shall be
considered a part of this Agreement.
9.10 Survival Upon Unenforceability. In the event any one or more of the
provisions contained in this Agreement, the Notes, the Security Instruments, or
in any other instrument referred to herein or executed in connection with the
Notes shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision hereof or of any other instrument referred to herein or
executed in connection herewith.
9.11 Rights of Third Parties. All provisions herein are imposed solely
and exclusively for the benefit of the Administrative Agent, the Banks, the LC
Issuer and Borrower and no other Person shall have standing to require
satisfaction of such provisions in accordance with their terms or be entitled to
assume that any Bank will refuse to make advances in the absence of strict
compliance with any or all thereof. Any or all of such provisions may be freely
waived in whole or in part by the Administrative Agent, the Banks and the LC
Issuer at any time if in their discretion they deem it advisable to do so.
9.12 Amendments or Modifications. Subject to the provisions of this
Section, the Required Banks (or the Administrative Agent with the consent in
writing of the Required Banks) and the Borrower may enter into agreements
supplemental hereto for the purpose of adding or modifying any provisions to the
Loan Documents or changing in any manner the rights of the Banks or the Borrower
hereunder or waiving any Event of Default hereunder; provided, however, that:
(a) no such supplemental agreement shall, without the consent of
all of the Banks:
(i) Extend the final maturity of any Loan, postpone any
regularly scheduled payment of principal of any Loan, forgive
all or any portion of the principal amount thereof, or reduce
the rate or extend the time of payment of interest or fees
thereon;
(ii) Reduce the percentage specified in the definition of
Required Banks;
(iii) Extend the Facility Termination Date, or reduce the amount
of, or extend the payment date for, the mandatory payments
required under Sections 2.07 or 2.08, increase the Aggregate
Commitment Amount or the Commitment of any Bank hereunder
(except, in each case, as expressly set
61
forth in Section 2.19), or permit the Borrower to assign its
rights under this Agreement;
(iv) Amend the requirement that the Borrowing Base may be
increased only with the consent of all Banks;
(v) Release any Guarantor of any Loan or, except as provided
in the Security Instruments, release all or substantially all
of the Borrowing Base Oil and Gas Properties; or
(vi) Amend this Section 9.12; and
(b) no amendment of any provision of this Agreement relating to
the Administrative Agent shall be effective without the written consent of the
Administrative Agent; and
(c) no such consent shall be required with respect to any release
by the Administrative Agent of Security Instruments to effectuate a Permitted
Asset Sale.
9.13 Agreement Construed as an Entirety. This Agreement, for convenience
only, has been divided into Articles and Sections and it is understood that the
rights, powers, privileges, duties and other legal relations of the parties
hereto shall be determined from this Agreement as an entirety and without regard
to the aforesaid division into Articles and Sections and without regard to
headings prefixed to said Articles or Sections.
9.14 Number and Gender. Whenever the context requires, reference herein
made to the single number shall be understood to include the plural and likewise
the plural shall be understood to include the singular. Words denoting sex shall
be construed to include the masculine, feminine, and neuter, when such
construction is appropriate, and specific enumeration shall not exclude the
general, but shall be construed as cumulative.
9.15 AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS. THIS AGREEMENT, TOGETHER
WITH THE NOTES, THE FACILITY LC APPLICATIONS, THE SECURITY INSTRUMENTS, AND ANY
OTHER WRITTEN INSTRUMENTS EXECUTED PURSUANT TO THIS AGREEMENT REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE
SUBJECT HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES AND SHALL
SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT HEREOF, UNLESS SUCH PRIOR AGREEMENT IS EXPRESSLY
CONTINUED IN EFFECT UNDER THE TERMS HEREOF. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
9.16 Controlling Provision Upon Conflict. In the event of a conflict
between the provisions of this Agreement and those of the Notes, the Facility LC
Applications, the Security Instruments or any other instrument referred to
herein or executed in connection with the Notes, the provisions of this
Agreement shall control; provided if any of the Facility LC Applications or
62
Security Instruments contain any representations, warranties, or covenants of
the Borrower that are in addition to or are more restrictive on the Borrower
than those set forth in this Agreement, such additional or more restrictive
representations, warranties, and covenants shall control.
9.17 Time, Place and Method of Payments. All payments required pursuant
to this Agreement or the Notes shall be made in immediately available funds;
shall be deemed received by the Administrative Agent on the next Business Day
following receipt if such receipt is after 4:00 p.m., on any Business Day, and
shall be made at the principal banking quarters of the Administrative Agent in
Houston, Texas.
9.18 Termination. This Agreement and the Aggregate Commitment Amount may
be canceled by the Borrower without premium or penalty prior to the Facility
Termination Date upon at least ten (10) days' prior written notice, provided,
that the Obligations that are then due and payable are paid and performed in
full to the satisfaction of the Administrative Agent and the Banks; provided,
however that any such cancellation hereunder shall not terminate any
obligations, representations or warranties of the Borrower to the Administrative
Agent and/or the Banks hereunder and under other Loan Documents that survive
beyond the Facility Termination Date. Upon the earlier to occur of the (i) the
Facility Termination Date, and (ii) cancellation of this Agreement and the
Aggregate Commitment Amount prior thereto in accordance with this Section 9.18
and upon payment and performance in full of the Obligations that are due and
payable to the satisfaction of the Banks, the Administrative Agent agrees, at
the Borrower's request and sole cost and expense, to execute and deliver any
such lien release documents and other documentation reasonably requested by the
Borrower to release or terminate the Administrative Agent's liens and security
interests hereunder and under the other Loan Documents.
9.19 Non-Application of Chapter 346 of Texas Finance Code. The provisions
of Chapter 346 of the Texas Finance Code are specifically declared by the
parties hereto not to be applicable to this Agreement or any of the other
Security Instruments or to the transactions contemplated hereby.
9.20 Counterpart Execution. This Agreement may be executed as one
instrument signed by all parties or in separate counterparts hereof, each of
which counterparts shall be considered an original and all of which shall be
deemed to be one instrument, and any signed counterpart shall be deemed
delivered by the party signing it if sent to any other party hereto by
electronic facsimile transmission.
9.21 Power of Attorney. To the fullest extent permitted by Law and until
this Agreement is terminated in accordance with Section 9.18 hereof, Borrower
hereby appoints Administrative Agent as its attorney-in-fact (without requiring
the Administrative Agent to act as such) to execute any Security Instrument in
the name of the Borrower, and to perform all other acts that the Administrative
Agent deems appropriate to perfect and continue its liens, security interests,
and other rights in, and to protect and preserve, the Borrowing Base Oil and Gas
Properties and other collateral covered by or described in (or, as evidenced by
this Agreement, intended to have been covered by) any of the Security
Instruments, but only to the extent required of Borrower under the terms of this
Agreement.
63
9.22 Amended and Restated Agreement. This Agreement amends, extends,
rearranges and restates the Prior Credit Agreement. All Security Instruments (as
defined and executed pursuant to the Prior Credit Agreement) shall also
constitute Security Instruments as defined in this Agreement, and they shall
continue to secure all Obligations of Borrower to the Administrative Agent, the
Banks and the LC Issuer hereunder.
9.23 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT
AND BANKS HEREBY (I) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED
THEREBY OR ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (II) CERTIFIES THAT
NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; AND (III)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.
[Signature pages follow]
64
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
BORROWER
ULTRA RESOURCES, INC.
By: /s/ Michael D. Watford
-----------------------------------------
Michael D. Watford
President and Chief Executive Officer
ADMINISTRATIVE AGENT, LC ISSUER AND BANK:
BANK ONE, NA
By: /s/ Stephen Shatto
-----------------------------------------
Stephen Shatto
Director
SYNDICATION AGENT AND BANK:
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Damien Melburger
-----------------------------------------
Damien Melburger
Senior Vice President
By: /s/ Randall Osterberg
-----------------------------------------
Randall Osterberg
Senior Vice President
S-1
CO-AGENT AND BANK:
HIBERNIA NATIONAL BANK
By: /s/ Nancy G. Moragas
-----------------------------------------
Nancy G. Moragas
Vice President
CO-AGENT AND BANK:
GUARANTY BANK, FSB
By: /s/ RICHARD MENCRACA
-----------------------------------------
RICHARD MENCRACA
Senior Vice President
BANK:
COMPASS BANK
By: /s/ KATHLEEN D. BOWEN
-----------------------------------------
Senior Vice President
S-2
BANK:
BANK OF SCOTLAND
By: /s/ Amena Nabi
-----------------------------------------
Amena Nabi
Assistant Vice President
BANK:
FLEET NATIONAL BANK
By: /s/ Terrence Ronan
-----------------------------------------
Terrence Ronan
Managing Director
S-3
EXHIBIT "A"
[Intentionally Omitted]
Exhibit A-1
EXHIBIT "B"
FOURTH AMENDED AND RESTATED REVOLVING NOTE
$________________ Houston, Texas June 9, 2004
On the dates hereinafter prescribed, for value received, ULTRA RESOURCES,
INC., a Wyoming corporation, (herein, called "Borrower"), having an address at
363 N. Sam Houston Parkway, Suite 1200, Houston, Texas 77060, promises to pay to
the order of ___________ (herein called "Bank"), at its principal offices at
_________, (i) the principal amount of U.S. ____________ AND 00/100 DOLLARS
(__________) or the principal amount advanced pursuant to the terms of the
Credit Agreement (defined herein) as of the date of maturity hereof, whether by
acceleration or otherwise, whichever may be the lesser, and (ii) interest on the
principal balance from time to time advanced and remaining unpaid from the date
of the advance until maturity at a rate of interest equal to lesser of (a) the
"Floating Rate" (as defined and calculated in the Credit Agreement), or (b) the
Maximum Rate (as defined and calculated in the Credit Agreement). Any increase
or decrease in interest rate resulting from a change in the Maximum Rate shall
be effective immediately when such change becomes effective, without notice to
the Borrower, unless Applicable Law (as defined in the Credit Agreement)
requires that such increase or decrease not be effective until a later time, in
which event such increase or decrease shall be effective at the earliest time
permitted under the provisions of such law.
Notwithstanding the foregoing, if during any period the Floating Rate
exceeds the Maximum Rate, the rate of interest in effect on this Note shall be
limited to the Maximum Rate during each such period, but at all times thereafter
the rate of interest in effect on this Note shall be the Maximum Rate or, if
there is no Maximum Rate, the Agreed Maximum Rate (as defined below), until the
total amount of interest accrued on this Note equals the total amount of
interest which would have accrued hereon if the Floating Rate had at all times
been in effect.
This Note is a revolving credit note and it is contemplated that by reason
of prepayments hereon there may be times when no indebtedness is owing
hereunder; but notwithstanding such occurrence, this Note shall remain valid and
in full force and effect as to each principal advance made hereunder subsequent
to each such occurrence. Each principal advance and each payment hereof made
pursuant to this Note shall be reflected by the Bank's records and the aggregate
unpaid amounts reflected by such records shall constitute rebuttably presumptive
evidence of the principal and unpaid, accrued interest remaining outstanding on
this Note.
"Agreed Maximum Rate" means a per annum rate of seven and three-fourths
percent (7.75%) plus the Floating Rate from time to time in effect, which Agreed
Maximum Rate shall apply only during any period while there is no Maximum Rate
applicable to this Note.
Other capitalized terms used herein, that are not defined herein, shall
have the meanings prescribed therefor in the Credit Agreement.
The Borrower and the Bank hereby agree that Chapter 346 of the Texas
Finance Code, shall not apply to this Note or the loan transaction evidenced by,
and referenced in, the Credit Agreement (hereinafter defined) in any manner,
including without limitation, to any account or arrangement evidenced or created
by, or provided for in, this Note.
Exhibit B-1
The principal sum of this Note, after giving credit for unadvanced
principal, if any, remaining at final maturity, shall be due and payable on or
before May 1, 2008; interest to accrue upon the principal sum from time to time
owing and unpaid hereunder shall be due and payable as provided in the Credit
Agreement; provided, however, the final installment of interest hereunder shall
be due and payable not later than the maturity of the principal sum hereof,
howsoever such maturity may be brought about.
In no event shall the aggregate of the interest on this Note, plus any
other amounts paid in connection with the loan evidenced by this Note which
would under Applicable Law be deemed "interest," ever exceed the maximum amount
of interest which, under Applicable Law, could be lawfully charged on this Note.
The Bank and the Borrower specifically intend and agree to limit contractually
the interest payable on this Note to not more than an amount determined at the
Maximum Rate. Therefore, none of the terms of this Note or any other instruments
pertaining to or securing this Note shall ever be construed to create a contract
to pay interest at a rate in excess of the Maximum Rate, and neither the
Borrower nor any other party liable herefor shall ever be liable for interest in
excess of that determined at the Maximum Rate, and the provisions of this
paragraph shall control over all provisions of this Note or of any other
instruments pertaining to or securing this Note. If any amount of interest taken
or received by the Bank shall be in excess of the maximum amount of interest
which, under Applicable Law, could lawfully have been collected on this Note,
then the excess shall be deemed to have been the result of a mathematical error
by the parties hereto and shall be refunded promptly to the Borrower. All
amounts paid or agreed to be paid in connection with the indebtedness evidenced
by this Note which would under Applicable Law be deemed "interest" shall, to the
extent permitted by Applicable Law, be amortized, prorated, allocated and spread
throughout the full term of this Note.
This Note is secured by all security agreements, collateral assignments,
mortgages and lien instruments executed by the Borrower (or by any other party)
in favor of Bank One, NA, as Administrative Agent for the Banks, including those
executed simultaneously herewith, those executed heretofore and those hereafter
executed, and including specifically and without limitation the Security
Instruments described and defined in that certain Credit Agreement dated as of
March 22, 2000 by and between Borrower, Ultra Petroleum (USA) Inc., and Bank
One, Texas, National Association, as amended by that certain First Amendment to
Credit Agreement dated as of July 19, 2001 by and between Borrower and Bank One,
NA, and as amended and restated by that certain First Amended and Restated
Credit Agreement dated March 1, 2002, by and among Borrower, Bank One, NA, as
the administrative agent, as a bank and as letter of credit issuer, and the
several other banks and financial institutions who are from time to time party
thereto, as banks, as amended by the First Amendment thereto dated November 4,
2002, the Second Amendment thereto dated May 14, 2003, and the Third Amendment
thereto dated as of December 12, 2003, and by that certain Second Amended and
Restated Credit Agreement dated as of June 9, 2004, by and among Borrower, Bank
One, NA, as the Administrative Agent, as a Bank and as LC Issuer, and the
several other banks and financial institutions who are from time to time party
thereto as Banks (as may be further amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement").
This Note is the Revolving Note issued pursuant to the Credit Agreement.
Reference is hereby made to the Credit Agreement for a statement of the rights
and obligations of the holder of this Note and the duties and obligations of the
Borrower in relation thereto; but neither this
Exhibit B-2
reference to the Credit Agreement nor any provisions thereof shall affect or
impair the absolute and unconditional obligation of the Borrower to pay any
outstanding and unpaid principal of and interest on this Note when due, in
accordance with the terms of the Credit Agreement. Each advance and each payment
made pursuant to this Note shall be reflected by notations made by the Bank on
its records and the aggregate unpaid amounts reflected by the notations on the
records of the Bank shall be deemed rebuttably presumptive evidence of the
principal amount owing under this Note.
In the event of default in the payment when due of any of the principal of
or any interest on this Note, or in the event of default under the terms of the
Credit Agreement or any of the Security Instruments, or if any event occurs or
condition exists which authorizes the acceleration of the maturity of this Note
under any agreement made by the Borrower, the Bank (or other holder of this
Note) may, at its option, without presentment or demand or any notice to the
Borrower or any other person liable herefor, declare the unpaid principal
balance of and accrued interest on this Note to be immediately due and payable.
If this Note is collected by suit or through the Probate or Bankruptcy
Court, or any judicial proceeding, or if this Note is not paid at maturity,
however such maturity may be brought about, and is placed in the hands of an
attorney for collection, then the Borrower agrees to pay reasonable and
documented attorneys' fees, not to exceed 10% of the full amount of principal
and interest owing hereon at the time this Note is placed in the hands of an
attorney.
The Borrower and all sureties, endorsers and guarantors of this Note waive
demand, presentment for payment, notice of nonpayment, protest, notice of
protest, notice of intent to accelerate maturity, notice of acceleration of
maturity, and all other notices, filing of suit and diligence in collecting this
Note or enforcing any of the security herefor, and agree to any substitution,
exchange or release of any such security or the release of any party primarily
or secondarily liable hereon and further agrees that it will not be necessary
for the Bank, in order to enforce payment of this Note by them, to first
institute suit or exhaust its remedies against any Borrower or others liable
herefor, or to enforce its rights against any security herefor, and consent to
any one or more extensions or postponements of time of payment of this Note on
any terms or any other indulgences with respect hereto, without notice thereof
to any of them. The Bank may transfer this Note, and the rights and privileges
of the Bank under this Note shall inure to the benefit of the Bank's
representatives, successors or assigns.
This Note is one of the Fourth Amended and Restated Notes that amends and
restates those certain Third Amended and Restated Notes dated December 12, 2003,
in an aggregate principal amount of $250,000,000, which Third Amended and
Restated Notes themselves amended and restated those certain that amends and
restates those certain Second Amended and Restated Notes dated March 1, 2002, in
an aggregate principal amount of $250,000,000, which Second Amended and Restated
Notes themselves amended and restated those certain Amended and Restated Notes
dated March 1, 2002, in an aggregate principal amount of $150,000,000, which
Amended and Restated Notes themselves amended and restated those certain
Revolving Notes dated March 1, 2002, in an aggregate principal amount of
$150,000,000, which Revolving Notes amended, extended, rearranged and restated
that certain Reducing Revolving Note executed effective as of July 19, 2001, in
the original principal amount of $100,000,000 executed by Ultra Resources, Inc.,
and payable to the order of Bank One, NA; which Reducing Revolving
Exhibit B-3
Note itself amended, extended, rearranged and restated that certain Reducing
Revolving Note dated March 22, 2000, in the original principal amount of
$40,000,000 executed by Ultra Resources, Inc., and Ultra Petroleum (USA) Inc.,
payable to the order of Bank One, Texas, National Association (collectively, the
"Prior Notes"). All liens and security interests that exist to secure the
indebtedness evidenced by that Prior Note shall continue in force and effect to
secure the indebtedness evidenced by this Note.
Executed as of June 9, 2004, but effective as of the date and year first
set forth above.
ULTRA RESOURCES, INC.
Attest:
__________________________________ By: _____________________________________
Charlotte H. Kauffman Michael D. Watford
Secretary President and Chief Executive Officer
Exhibit B-4
EXHIBIT "C"
Compliance Certificate
I, the President of ULTRA RESOURCES, INC. (the "Company"), pursuant to
Section 5.05 of the Second Amended and Restated Credit Agreement dated as of
June 9, 2004, by and among the Company, BANK ONE, NA, as Administrative Agent, a
Bank and the LC Issuer, and the other Banks that become party thereto, as the
same may be amended, restated, supplemented or otherwise modified (the
"Agreement") do hereby certify, as of the date hereof, that to my knowledge:
(a) No Event of Default (as defined in the Agreement) or Unmatured Event
Of Default has defined in the Agreement) has occurred and is
continuing except for the following events (include actions taken to
cure such situations):
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(b) No Material Adverse Change has occurred since the effective date of
the latest audited consolidated Financial Statements of the Company
delivered to the Administrative Agent;
(c) Except as otherwise stated in the Schedule, if any, attached hereto,
each of the representations and warranties of the Company contained
in Article IV of the Agreement is true and correct in all respects
[include on the attached Schedule, if any, any qualifications to the
representations in Section 4.07 of the Agreement that have occurred
since the date of the last Compliance Certificate]; and
(d) The Company's consolidated financial condition for the quarter
ending __________ is as follows:
ACTUAL
DATE OR TIME RATIO OR
FINANCIAL COVENANT PERIOD REQUIRED RATIO OR AMOUNT AMOUNT
(a) Current Ratio for any Term of not < 1.00 to 1.00, calculated based on _________
fiscal quarter Loan both: (a) the Consolidated Financial
Statements (as defined in the Agreement),
and (b) the consolidating financial
statements applicable to Borrower, which
form a part of the Consolidated Financial
Statements.
(b) Ratio of EBITDA to Term of not < 2.50 to 1.00, calculated on a _________
interest expense on all Loan rolling four (4) quarter basis and
Indebtedness as of the based on both:(a) the Consolidated
Exhibit C-1
ACTUAL
DATE OR TIME RATIO OR
FINANCIAL COVENANT PERIOD REQUIRED RATIO OR AMOUNT AMOUNT
end of each fiscal Financial Statements, and (b) the
quarter consolidating financial statements
applicable to Borrower, which form a
part of the Consolidated Financial
Statements.
(c) Intercompany Transfers During each not > $35,000,000.00, without the _________
to Sino-American calendar year prior written approval of the Required ____
Energy Corporation beginning Banks
permitted by Section with
6.18 calendar year
2004
(d) List the principal amount of all intercompany loans made by
Sino-American to Borrower in reliance on clause (J) of the
definition of "Permitted Indebtedness" outstanding as of the date
hereof, together with the date on which such proceeds were received
by Borrower, the date, if any, on which such loan is to be repaid by
Borrower, any interest rate applicable to such loans, and any other
material terms thereof; list any repayments made by Borrower to
Sino-American in respect of any previously outstanding intercompany
loans repaid by Borrower since the date of the immediately prior
Compliance Certificate:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
(e) List the aggregate amount of all investments or capital
contributions made by Sino-American to Borrower, together with the
date on which the proceeds of such investments or contributions were
received by the Borrower and any other material terms or conditions
thereof; list all returns of all such amounts previously invested or
capital contributions made by Borrower to Sino-American in reliance
of the proviso in Section 6.05:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Exhibit C-2
This certificate is executed this _____ day of_________,_____.
ULTRA RESOURCES, INC.
By: ______________________________
President and CEO
Exhibit C-3
EXHIBIT "D"
SECURITY INSTRUMENTS
The Security Instruments securing the Borrower's Obligations and
Indebtedness to the Banks shall include the following, each in form and
substance satisfactory to the Administrative Agent, on behalf of the Banks:
1. MORTGAGES, DEEDS OF TRUST, SECURITY AGREEMENTS, FIXTURE FILINGS AND
ASSIGNMENTS OF PRODUCTION covering Borrowing Base Oil and Gas Properties
situated in the State of Wyoming, the personal property and equipment therein
and thereon, the production of oil, gas, and other minerals therefrom, and all
of the products and proceeds thereof.
2. SECURITY AGREEMENTS granting the Administrative Agent, on behalf of
the Banks, a first priority security interest in all of the Borrower's
as-extracted oil and gas, accounts, equipment, machinery, fixtures, inventory,
chattel paper, documents, instruments and general intangibles relating to or
arising out of Oil and Borrowing Base Oil and Gas Properties and the business of
the Borrower, whether now owned or hereafter acquired, and all products and
proceeds thereof.
3. FINANCING STATEMENTS in connection with the Security Instruments
described in the preceding paragraphs, in form and number satisfactory to the
Administrative Agent, on behalf of the Banks, as the Administrative Agent may
specify from time to time (including additional or supplemental financing
statements, amendments thereto, and continuation statements thereof).
4. PRIOR SECURITY INSTRUMENTS. All Security Instruments (as defined in
the Prior Credit Agreement) shall continue to secure Borrower's Obligations
arising under this Agreement.
5. OTHER SECURITY INSTRUMENTS. Such other instruments as are necessary
or appropriate from time to time, in the good faith opinion of the
Administrative Agent, to perfect to the satisfaction of the Administrative Agent
the Banks' liens, security interests, and other rights in the Borrowing Base Oil
and Gas Properties and in any and all other collateral covered by or described
in (or, as evidenced by the Agreement, intended to have been covered by) any of
the other Security Instruments described above.
Exhibit D-1
EXHIBIT "E"
REQUEST FOR ADVANCE
I, the undersigned officer of ULTRA RESOURCES, INC. (the "Company"),
pursuant to Section 2.01 of the Second Amended and Restated Credit Agreement
dated as of June 9, 2004, as amended from time to time (the "Agreement"), by and
between BANK ONE, NA ("Administrative Agent"), the banks and other financial
institutions from time to time parties to the Agreement (the "Banks"), the LC
Issuer, and the Company, do hereby make the requests indicated below on this
____ day of ____, 200___:
[ ] 1. Loans:
(a) Amount of new Loan: $ ______________
(b) Requested funding date: ______________, 200
(c) $_________ of such Loan is to be an ABR Loan;
$___________of such Loan is to be a LIBOR Loan.
Requested Interest Period for LIBOR Loan:____ months.
[ ] 2. Continuation or conversion of LIBOR Loan maturing on____, 200__:
(a) Amount to be continued as a LIBOR Loan is $_________ , with an
Interest Period of ____ months;
(b) Amount to be converted to an ABR Loan is $__________.
[ ] 3. Conversion of Prime Rate Loan:
(a) Requested conversion date:_________, 200____.
(b) Amount to be converted to a LIBOR Loan is $__________, with an
Interest Period of _____ months.
4. The undersigned certifies that the funds advanced from the Banks
to the Company pursuant to paragraphs 1 through 3 hereof, as applicable,
shall be used by the Company solely for the purposes permitted by the
Agreement.
5. The undersigned certifies that to my knowledge after reasonable
inquiry into the applicable facts, as of the date hereof, the Company
is in compliance with all of the representations, warranties, terms,
conditions and covenants contained in the Agreement and no Event of
Default or Unmatured Event of Default has occurred and is continuing
under the Agreement.
6. The undersigned certifies that to my knowledge after reasonable
inquiry into the applicable facts, as of the date hereof, no
Material Adverse Change has occurred since the effective date of
the latest audited Financial Statements of the Company delivered
to the Administrative Agent;
Exhibit E-1
This certificate is executed this ____ day of ___________, 200 .____
ULTRA RESOURCES, INC.
By: ______________________________
Name:_____________________________
Title:____________________________
Exhibit E-2
EXHIBIT F
[FORM OF]
ADDITIONAL BANK CERTIFICATE
__________, 200__
To: BANK ONE, NA,
as Administrative Agent
The Borrower, the Administrative Agent, the LC Issuer and certain Banks
have heretofore entered into an Second Amended and Restated Credit Agreement,
dated as of June 9, 2004, as amended from time to time (the "Credit Agreement").
Capitalized terms not otherwise defined herein shall have the meaning given to
such terms in the Credit Agreement.
This Additional Bank Certificate is being delivered pursuant to Section
2.19(a) of the Credit Agreement.
[Language for Existing Lender]
[Please be advised that the undersigned has agreed to increase its
Commitment under the Credit Agreement from $_________ to $_________ and that it
shall continue to be a party in all respect to the Credit Agreement and the
other Loan Documents.]
[Language for New Lender]
[Please be advised that the undersigned has agreed (a) to become a Bank
under the Credit Agreement with an Commitment of $____________ and (b) that it
shall be deemed to be a party in all respect to the Credit Agreement and the
other Loan Documents.]
[Insert Additional provisions from Commitment Transfer Supplement]
Very truly yours,
By: ________________________________
Name:
Title:
SCHEDULE 1.01(b)
Commitment Amounts and Aggregate Commitment Amount
Percentage Commitment
Bank Share Amount
---- ----- ------
Bank One, NA 18.00000% $ 36,000,000.00
Guaranty Bank, FSB 18.00000% $ 36,000,000.00
Union Bank of California, N.A. 17.00000% $ 34,000,000.00
Bank of Scotland 15.00000% $ 30,000,000.00
Fleet National Bank 12.50000% $ 25,000,000.00
Hibernia National Bank 12.00000% $ 24,000,000.00
Compass Bank 7.50000% $ 15,000,000.00
Aggregate Commitment Amount: 100.00000% $200,000,000.00
Schedule 1.01(b)
Schedule 9.05(d)
COMMITMENT TRANSFER SUPPLEMENT
THIS COMMITMENT TRANSFER SUPPLEMENT (this "Commitment Transfer
Supplement") dated as of the date set forth in Item 1 of Schedule I hereto, is
among the Transferor Bank set forth in Item 2 of Schedule I hereto (the
"Transferor Bank"), each Purchasing Bank set forth in Item 3 of Schedule 1 (each
a "Purchasing Bank"), and BANK ONE, N.A., as Administrative Agent for the Banks
under, and as defined in, the Credit Agreement described below (in such
capacity, the "Administrative Agent").
RECITALS
WHEREAS, this Commitment Transfer Supplement is being executed and
delivered in accordance with Section 9.05(c) of the Second Amended and Restated
Credit Agreement dated as of June 9, 2004, by and among ULTRA RESOURCES, INC., a
Wyoming corporation ("Borrower"), the Transferor Bank and the other Banks party
thereto and the Administrative Agent (as from time to time amended, restated,
supplemented or otherwise modified in accordance with the terms thereof, the
"Credit Agreement"; terms defined therein being used herein as therein defined);
WHEREAS, each Purchasing Bank (if it is not already a Bank party to the
Credit Agreement) wishes to become a Bank party to the Credit Agreement; and
WHEREAS, the Transferor Bank is selling and assigning to each Purchasing
Bank, rights, obligations and commitments under the Credit Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
GENERAL TERMS
Section 1. Upon receipt by the Administrative Agent of five counterparts
of this Commitment Transfer Supplement, to each of which is attached a fully
completed Schedule I and Schedule II, and each of which has been executed by the
Transferor Bank, each Purchasing Bank (and any other person required by the
Credit Agreement to execute this Commitment Transfer Supplement), the
Administrative Agent will transmit to the Borrower, the Transferor Bank and each
Purchasing Bank a Transfer Effective Notice, substantially in the form of
Schedule III to this Commitment Transfer Supplement (a "Transfer Effective
Notice"). Such Transfer Effective Notice shall set forth, inter alia, the date
on which the transfer effected by this Commitment Transfer Supplement shall
become effective (the "Transfer Effective Date"), which date shall be at least
five (5) Business Days following the date of such Transfer Effective Notice.
From and after the Transfer Effective Date each Purchasing Bank shall be a Bank
party to the Credit Agreement for all purposes thereof.
Section 2. At or before 12:00 Noon, local time of the Transferor Bank, on
the Transfer Effective Date, each Purchasing Bank shall pay to the Transferor
Bank, in immediately available funds, an amount equal to the purchase price, as
agreed between the Transferor Bank and such Purchasing Bank (the "Purchase
Price"), of the portion being purchased by such Purchasing Bank (such Purchasing
Bank's "Purchased Percentage") of the outstanding Credit
Commitment to Transfer Supplement
Page 1
Extensions and other amounts owing to the Transferor Bank under the Credit
Agreement and the Notes. Effective upon receipt by the Transferor Bank of the
Purchase Price from a Purchasing Bank, the Transferor Bank hereby irrevocably
sells, assigns and transfers to such Purchasing Bank, without recourse,
representation or warranty, and each Purchasing Bank hereby irrevocably
purchases, takes and assumes from the Transferor Bank, such Purchasing Bank's
Purchased Percentage of the Commitment of the Transferor Bank and the presently
outstanding Credit Extensions and other amounts owing to the Transferor Bank
under the Credit Agreement and the Notes together with all instruments,
documents and collateral security pertaining thereto.
Section 3. The Transferor Bank has made arrangements with each Purchasing
Bank with respect to (a) the portion, if any, to be paid, and the date or dates
for payment, by the Transferor Bank to such Purchasing Bank of any fees
heretofore received by the Transferor Bank pursuant to the Credit Agreement
prior to the Transfer Effective Date, and (b) the portion, if any, to be paid,
and the date or dates for payment, by such Purchasing Bank to the Transferor
Bank of fees or interest received by such Purchasing Bank pursuant to the Credit
Agreement from and after the Transfer Effective Date.
Section 4. (a) All principal payments that would otherwise be payable from
and after the Transfer Effective Date to or for the account of the Transferor
Bank pursuant to the Credit Agreement and the Notes shall, instead, be payable
to or for the account of the Transferor Bank and the Purchasing Banks, as the
case may be, in accordance with their respective interests as reflected in this
Commitment Transfer Supplement.
(b) All interest, fees and other amounts that would otherwise accrue for
the account of the Transferor Bank from and after the Transfer Effective Date
pursuant to the Credit Agreement and the Notes shall, instead, accrue for the
account of, and be payable to, the Transferor Bank and the Purchasing Banks, as
the case may be, in accordance with their respective interests as reflected in
this Commitment Transfer Supplement.
(c) In the event that any amount of interest, fees or other amounts
accruing prior to the Transfer Effective Date was included in the Purchase Price
paid by any Purchasing Bank, the Transferor Bank and each Purchasing Bank will
make appropriate arrangements for payment by the Transferor Bank to such
Purchasing Bank of such amount upon receipt thereof from the Borrower.
Section 5. On or prior to the Transfer Effective Date, the Transferor Bank
will deliver to the Administrative Agent its Note. Within five (5) Business Days
after Borrower's receipt of notice from Administrative Agent of Administrative
Agent's receipt of this Commitment Transfer Supplement, the Borrower will
deliver to the Administrative Agent, in exchange for the surrendered Note from
the Transferor Bank, a new Note for each Purchasing Bank and the Transferor
Bank, to the extent the Transferor Bank has retained any of its Commitment, in
each case in principal amounts reflecting, in accordance with the Credit
Agreement, their respective Commitment Amounts (as adjusted pursuant to this
Commitment Transfer Supplement). As provided in Section 9.05(e) of the Credit
Agreement, each such new Note shall be dated the date of the original Note
delivered pursuant to the Credit Agreement (the "Effective Date"). Promptly
after the Transfer Effective Date, the Administrative Agent will send to each of
the Transferor Bank and the Purchasing Banks its new Note and will send to the
Commitment to Transfer Supplement
Page 2
Borrower the superseded Note of the Transferor Bank, marked "Canceled" or
"Replaced" as appropriate.
Section 6. Concurrently with the execution and delivery hereof, the
Transferor Bank will provide to each Purchasing Bank (if it is not already a
Bank party to the Credit Agreement) conformed copies of all documents in the
Transferor Bank's possession that were delivered to the Administrative Agent on
the Effective Date in satisfaction of the conditions precedent set forth in the
Credit Agreement.
Section 7. Each of the parties to this Commitment Transfer Supplement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Commitment Transfer Supplement.
Section 8. By executing and delivering this Commitment Transfer
Supplement, the Transferor Bank and each Purchasing Bank confirm to and agree
with each other and the Administrative Agent and the Banks as follows: (i) other
than the representation and warranty that it is the legal and beneficial owner
of the interest being assigned hereby free and clear of any adverse claim, the
Transferor Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, the Notes, any other Loan Document or any other instrument or
document furnished pursuant thereto; (ii) the Transferor Bank makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement, the Notes, any
other Loan Document or any other instrument or document furnished pursuant
hereto; (iii) each Purchasing Bank confirms that it has received a copy of the
Credit Agreement, together with copies of the Financial Statements referred to
in Section 3.1(D), the Financial Statements delivered pursuant to Sections 5.03
and 5.04, if any, and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Commitment Transfer Supplement; (iv) each Purchasing Bank will, independently
and without reliance upon the Administrative Agent, the Transferor Bank or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (v) each Purchasing Bank appoints
and authorizes the Administrative Agent to take such action as Administrative
Agent on its behalf and to exercise such powers under the Credit Agreement as
are delegated to the Administrative Agent by the terms thereof, together with
such powers as are reasonably incidental thereto, all in accordance with Article
VIII of the Credit Agreement; and (vi) each Purchasing Bank agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Credit Agreement are required to be performed by it as a Bank.
Section 9. Each party hereto represents and warrants to and agrees with
the Administrative Agent that it is aware of and will comply with the provision
of Section 2.16 of the Credit Agreement.
Commitment to Transfer Supplement
Page 3
Section 10. Schedule II hereto sets forth the revised Commitment Amounts
and Percentage Shares of the Transferor Bank and each Purchasing Bank as well as
administrative information with respect to each Purchasing Bank.
Section 11. THIS COMMITMENT TRANSFER SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, the parties hereto have caused this Commitment
Transfer Supplement to be executed by their respective duly authorized officers
on Schedule I hereto as of the date set forth in Item I of Schedule I hereto.
Commitment to Transfer Supplement
Page 4
Schedule I to
Commitment Transfer Supplement
COMPLETION OF INFORMATION AND
SIGNATURES FOR COMMITMENT
TRANSFER SUPPLEMENT
Re: Second Amended and Restated Credit Agreement dated as of June 9,
2004 among Ultra Resources, Inc., the Banks, and Bank One, N.A., as
Administrative Agent for the Banks thereunder.
Item 1 (Date of Commitment Transfer Supplement):
[Insert date of Commitment Transfer Supplement]
Item 2 (Transferor Bank): [Insert name of Transferor Bank]
Item 3 (Purchasing Bank[s]):[Insert name[s] of Purchasing Bank[s]]
Item 4 (Signatures of Parties to Commitment Transfer Supplement):
_____________________, as Transferor Bank
By: _____________________________________
Title:______________ , as Purchasing Bank
By: _____________________________________
Title: _____________ , as Purchasing Bank
By: _____________________________________
Title: __________________________________
Schedule I - Page 1
CONSENTED TO AND ACKNOWLEDGED:
ULTRA RESOURCES, INC.
By: ________________________
Title: _____________________
BANK ONE, NA,
AS ADMINISTRATIVE AGENT
By: _______________________
Title: ____________________
[Consents Required only when
Purchasing Bank is not already
a Bank or Affiliate thereof]
ACCEPTED FOR RECORDATION
IN REGISTER:
BANK ONE, NA,
AS ADMINISTRATIVE AGENT
By: _______________________
Title: _______________________
Schedule I - Page 2
Schedule II to
Commitment Transfer Supplement
LIST OF LENDING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT AMOUNTS
[Name of Transferor Bank] Revised Commitment Amount: $______________
Revised Commitment Percentage: $______________
[Name of Purchasing Bank] New Commitment Amount: $______________
New Commitment Percentage: $______________
Address for Notices:
[address]
Attention: ____________________
Telex: ________________________
Answer back: __________________
Telephone: ____________________
Telecopier: ___________________
Lending Office:
Schedule II -Page 1
[FORM OF TRANSFER EFFECTIVE NOTICE]
Schedule III to
Commitment Transfer Supplement
To: [INSERT NAME OF BORROWER, TRANSFEROR BANK AND EACH PURCHASING BANK]
The undersigned, as Administrative Agent under the Second Amended and
Restated Credit Agreement dated as of June 9, 2004, among Ultra Resources, Inc.
("Borrower"), the Banks and other financial institutions from time to time
parties thereto and Bank One, N.A., as Administrative Agent, acknowledges
receipt of five executed counterparts of a completed Commitment Transfer
Supplement, as described in Schedule I hereto. [NOTE: ATTACH COPY OF SCHEDULE I
FROM COMMITMENT TRANSFER SUPPLEMENT.] Terms defined in such Commitment Transfer
Supplement are used herein as therein defined.
1. Pursuant to such Commitment Transfer Supplement, you are
advised that the Transfer Effective Date will be [INSERT FIFTH BUSINESS
DAY FOLLOWING DATE OF TRANSFER EFFECTIVE NOTICE].
2. Pursuant to such Commitment Transfer Supplement, the
Transferor Bank is required to deliver its Note to the Administrative
Agent on or before the Transfer Effective Date.
3. Pursuant to such Commitment Transfer Supplement, the Borrower
is required to deliver to the Administrative Agent on or before the fifth
(5th) Business Day from its receipt of this notice, in return for the Note
surrendered to the Administrative Agent by the Transferor Bank, the
following Notes [DESCRIBE EACH NOTE FOR TRANSFEROR BANK AND PURCHASING
BANK AS TO PRINCIPAL AMOUNT AND PAYEE], dated [June 9, 2004].
4. Pursuant to such Commitment Transfer Supplement each
Purchasing Bank is required to pay its Purchase Price to the Transferor
Bank at or before 12:00 Noon on the Transfer Effective Date in immediately
available funds.
Very truly yours,
BANK ONE, NA, as Administrative Agent
By: _________________________________
Title: ______________________________
Execution Form
AMENDED AND RESTATED SECURITY AGREEMENT,
PLEDGE AND FINANCING STATEMENT
This AMENDED AND RESTATED SECURITY AGREEMENT, PLEDGE AND FINANCING
STATEMENT (this "Agreement") is made and entered into effective as of June 9,
2004, by Ultra Resources, Inc., a Wyoming corporation (the "Debtor"), in favor
of Bank One, NA, as Administrative Agent under the Credit Agreement (defined
below) (the "Secured Party").
RECITALS
WHEREAS, Debtor has heretofore entered into that certain First Amended and
Restated Credit Agreement dated as of March 1, 2002 (as amended, the "Prior
Credit Agreement"), among Debtor, Bank One, NA, as administrative agent and
letter of credit issuer, and the banks party thereto (such administrative agent,
letter of credit issuer and banks, collectively, the "Prior Lender Parties"),
pursuant to which such banks made certain loans and participated in letters of
credit issued for the benefit and account of Debtor; and
WHEREAS, to secure its obligations to the Prior Lender Parties, Debtor
executed and delivered a certain Security Agreement, Pledge and Financing
Statement dated as of March 1, 2002 (the "Prior Security Agreement"); and
WHEREAS, Debtor has, as of the date hereof, entered into a certain Second
Amended and Restated Credit Agreement dated as of even date herewith by and
among Debtor, the banks from time to time party thereto (the "Banks"), Banc One
Capital Markets, Inc., as arranger, and Secured Party in its capacity as a Bank,
the LC Issuer, and the Administrative Agent for itself and the other Banks (as
may from time to time be amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"); and
WHEREAS, the Debtor has executed and delivered this Agreement pursuant to
the Credit Agreement for the purpose of amending and restating the Prior
Security Agreement and of securing and providing for the repayment of all of its
obligations to the Banks, the LC Issuer and the Administrative Agent under the
Credit Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Debtor and Secured Party
hereby agree as follows:
Section 1. Definitions.
(a) As used in this Agreement, the following terms shall have the
respective meanings set forth below (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Collateral" shall have the meaning assigned to that term in Section
2 of this Agreement.
"Event of Default" shall have the meaning assigned to that term in
Section 6(a) of this Agreement.
"Indebtedness" means all amounts due or owing to Secured Party and
any and all other Banks and the LC Issuer (as defined in the Credit Agreement)
by the Debtor under the Credit Agreement, including, but not limited to, all
Obligations (as defined in the Credit Agreement), including any and all
obligations, contingent or otherwise, whether now existing or hereafter arising
of Debtor to any Bank arising under or in connection with any Hedge Agreement
(as defined in the Credit Agreement) or any other rate management transactions.
"Mortgage" means that certain Mortgage, Deed of Trust, Security
Agreement, Financing Statement, Fixture Filing and Assignment of Production
dated March 22, 2000, as amended by that certain Ratification of and Amendment
to Mortgage dated February 15, 2001, and as further amended by that certain
Ratification of and Amendment to Mortgage dated August 1, 2001, and as further
amended by that certain Third Amendment to Mortgage, Deed of Trust, Security
Agreement, Financing Statement, Fixture Filing and Assignment of Production
dated March 1, 2002, and as further amended by that certain Fourth Amendment to
Mortgage, Deed of Trust, Security Agreement, Financing Statement, Fixture Filing
and Assignment of Production dated September 19, 2004, and as further amended by
that certain Fifth Amendment to Mortgage, Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Production dated as of
June 9, 2004, and as the same may be further amended, restated, supplemented or
modified from time to time, and any other mortgage or deed of trust delivered
from time to time to Secured Party to secure the obligations of Debtor under the
Credit Agreement or any other Loan Document to the Banks, the LC Issuer and the
Administrative Agent.
"Permitted Encumbrances" shall have the meaning assigned to the term
"Permitted Encumbrances" in the Credit Agreement.
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas.
(b) All terms used in this Agreement which are defined in the UCC,
other than those that are specifically defined in Section l(a) above, shall have
the same meaning herein as in the UCC.
Section 2. Grant of Security Interest.
The Debtor hereby grants to Secured Party, to secure the payment and
performance in full of all of the Indebtedness, a security interest in and a
lien on and so pledges and assigns to Secured Party all of the Debtor's right,
title and interest in, to and under the following properties, assets and rights,
in each case, wherever located, all accessions and additions thereto, all
substitutions and replacements therefor, and all proceeds and products thereof
(all of the same being hereinafter called the "Collateral"): All improvements
and all personal property of any kind or character defined in and subject to the
provisions of the UCC, including the proceeds and products from any and all of
such improvements and personal property, situated on, incident, appurtenant or
belonging to and used in connection with, any of (i) the Mortgaged Property as
described in the Mortgage, (ii) Debtor's business operations
2
wherever located, including, without limitation, in, on or under the outer
continental shelf and offshore lands and onshore lands of the United States of
America. The Collateral includes, without limitation, all pipe, casing, tubing,
rods, storage tanks, boilers, loading racks, pumps, foundations, warehouses,
furniture, fixtures, equipment, office equipment, raw materials, inventory,
goods, contract rights (including Hedge Agreements), accounts, general
intangibles, chattel paper, electronic chattel paper, payment intangibles,
promissory notes, letter of credit rights, documents, instruments relating to
general intangibles, as-extracted collateral, commercial tort claims, investment
property, accounts receivable, receivables, rights to the payment of money,
insurance refund claims and all other insurance claims and proceeds (cash or
noncash), deposit accounts, all tax refund claims, license fees, computer
programs, computer software, engineering drawings, and all recorded data of any
kind or nature, regardless of the medium of recording including, without
limitation, all software, writings, plans, specifications and schematics, and
all other personal property and equipment of every kind and character.
Section 3. Representations and Warranties. The Debtor represents and
warrants, as of the date hereof, to Secured Party as follows:
(a) The chief executive office and principal place of business of
Debtor is located at 363 N. Sam Houston Parkway, Suite 1200, Houston, Texas
77060.
(b) The Debtor is the owner of all of the Collateral free and
clear of any lien, security interest, charge or encumbrance of any kind or
nature, except as permitted under the Credit Agreement and as may be provided
under licensing agreements. Except as permitted under the Credit Agreement, all
of the Collateral is free from any material credit, deduction, allowance,
defense, dispute, setoff or counterclaim and there is no material extension or
indulgence with respect thereto.
(c) This Agreement has been duly executed and delivered by the
Debtor and creates a valid security interest in, and lien on, the Collateral
securing the payment of the Indebtedness. Upon the making of the filings and the
taking of all other actions necessary to perfect the security interests created
hereby, including, without limitation, those actions specified in Section 4, the
security interests created by this Agreement will be duly perfected security
interests, subject to no equal or prior lien, security interest or encumbrance
of any kind or nature other than as permitted under the Credit Agreement.
(d) (i) The preamble of this Agreement lists the true legal name
of the Debtor as registered in the jurisdiction in which the Debtor is
organized, formed or incorporated; (ii) the Debtor's state of incorporation,
formation or organization, its organization identification number as designated
by the state of its incorporation, formation or organization, and its principal
place of business (or, if it has more than one place of business, its chief
executive office) are as set forth on Exhibit A to this Agreement; and (iii) the
Debtor is not now and has not been known by any trade name.
Section 4. Covenants. During the term of this Agreement and until all the
obligations with respect to the Indebtedness have been fully and indefeasibly
paid and discharged in full, the Debtor covenants and agrees with Secured Party
that:
3
(a) Except in the ordinary coarse of business, the Debtor will not
make any compromise or settlement with respect to any material portion of the
Collateral without notice to and consent of Secured Party.
(b) From time to time, the Debtor shall, at its own expense,
promptly give, execute, deliver, file and/or otherwise formalize any such
notice, statement, instrument, document, agreement or other papers, and do all
such other acts and things, as may be necessary or desirable, or as Secured
Party may reasonably request, in order to create, evidence, preserve, perfect,
validate or continue any lien or security interest created pursuant to this
Agreement or to enable Secured Party to exercise or enforce its rights hereunder
with respect to such lien or security interest, or otherwise further to effect
the purposes of this Agreement. Without limiting the generality of the
foregoing, the Debtor shall, at any time or from time to time upon the request
of Secured Party and at the Debtor's own expense, execute, acknowledge, witness,
deliver, file and/or record such financing and continuation statements, notices,
additional assignments and other documents or instruments (all of which shall be
in form and substance satisfactory to Secured Party and its counsel) as Secured
Party may from time to time reasonably request for the perfection of the liens
and security interests created hereby.
(c) Promptly upon a Responsible Officer becoming aware, the Debtor
shall promptly notify Secured Party (i) of any material changes in any fact or
circumstance represented or warranted by the Debtor with respect to any material
portion of the Collateral, (ii) of any material impairment of the Collateral and
(iii) of any claim, action or proceeding affecting title to all or any material
portion of the Collateral.
(d) Except for the liens and security interests created by this
Agreement and the Permitted Encumbrances in the Collateral, the Debtor shall at
its own expense defend the Collateral against any and all liens, claims,
security interests and other encumbrances or interests, howsoever arising.
(e) The Debtor shall at all times keep accurate and complete
records with respect to the Collateral, including, without limitation, records
of all payments made, credit granted and proceeds received in connection
therewith.
(f) The Debtor shall not relocate its principal place of business
or chief executive office to a county or state other than that specified in
Section 3(a) of this Agreement. The Collateral will be kept on or at the
Mortgaged Properties, on Schedule 4.01 to the Credit Agreement and/or at the
field locations where such Collateral is used or held for use in connection with
Debtors' Oil and Gas Properties and the Debtor will not remove the Collateral
from such locations.
(g) The Debtor shall not change its state of incorporation,
formation or organization or its name, identity, organizational identification
number as designated by the state of its incorporation or corporate structure
unless the Debtor shall have (a) given the Administrative Agent at least thirty
(30) days' prior notice of such change and (b) obtained the consent of the
requisite Banks, if such consent is so required by the Loan Documents or except
as otherwise provided in the Credit Agreement.
4
(h) The Debtor will keep the Collateral in good condition, repair
and working order (reasonable wear and tear excepted) and will not use the same
in violation of law or any policy of insurance thereon. Secured Party, or its
designee, may inspect the Collateral at any reasonable time, wherever located.
The Debtor has at all times operated, and the Debtor will continue to operate,
its business in compliance with all applicable provisions of the federal Fair
Labor Standards Act, as amended and with all applicable provisions of federal,
state and local statutes and ordinances dealing with the control, shipment,
storage or disposal of hazardous materials or substances.
Section 5. Powers of the Secured Party.
(a) The Debtor hereby irrevocably designates and appoints Secured
Party as its attorney-in-fact, with full power of substitution, for the purposes
of carrying out the provisions of this Agreement and taking any action and
executing any instrument that Secured Party may reasonably request pursuant to
this Agreement, which appointment as attorney-in-fact is irrevocable and coupled
with an interest.
(b) Without limiting the generality of Section 5(a) hereof, the
Debtor hereby irrevocably authorizes and empowers Secured Party, after the
occurrence of any Event of Default, at the expense of the Debtor, either in
Secured Party's own name or in the name of the Debtor, at any time and from time
to time:
(i) to ask, demand, receive, issue a receipt for, give
acquittance for, settle and compromise any and all monies which may be or
become due or payable or remain unpaid at any time or times to the Debtor,
and any and all other property which may be or become deliverable at any
time or times to the Debtor, under or with respect to the Collateral;
(ii) to endorse any drafts, checks, orders or other
instruments for the payment of money payable to the Debtor on account of
the Collateral (including any such draft, check, order or instrument
issued by any insurance company payable jointly to the Debtor and Secured
Party); and
(iii) to settle, compromise, prosecute or defend any action,
claim or proceeding, or take any other action, all either in its own name
or in the name of the Debtor or otherwise, which Secured Party may deem to
be necessary or advisable for the purpose of exercising and enforcing its
powers and rights under this Agreement or in furtherance of the purposes
hereof, including any action which by the terms of this Agreement is to be
taken by the Debtor.
(c) Nothing in this Agreement shall be construed as requiring or
obligating Secured Party to make any demand or to make any inquiry as to the
nature or sufficiency of any payment received by it or to present or file any
claim or notice, or to take any other action with respect to any of the
Collateral or the amounts due or to become due under any thereof, or to collect
or enforce the payment of any amounts assigned to it or to which it may
otherwise be entitled hereunder at any time or times other than to account for
amounts or Collateral received.
5
(d) Secured Party shall be entitled and authorized at any time to
file this Agreement, or a carbon, photographic or any other reproduction of this
Agreement, as a financing statement or any other Uniform Commercial Code
financing statement, continuation statement and financing statement amendment,
covering all of the Collateral or any portion thereof, which may be filed as
such without the signature of the Debtor where and to the full extent permitted
by applicable law, but the failure of Secured Party to do so shall not impair
the validity or enforceability of this Agreement. Secured Party shall have no
duty to comply with any recording, filing or other legal requirements necessary
to establish or maintain the validity, priority or enforceability of, or Secured
Party's rights in or to, any of the Collateral.
(e) In its discretion, Secured Party may discharge taxes and other
encumbrances at any time levied or placed on any of the Collateral, make repairs
thereto and pay any necessary filing fees. The Debtor agrees to reimburse
Secured Party on demand for any and all reasonable expenditures so made with
interest on unpaid amounts at the maximum rate permitted by law. Secured Party
shall have no obligation to the Debtor to make any such expenditures, nor shall
the making thereof relieve the Debtor of any Event of Default.
(f) Anything herein to the contrary notwithstanding, the Debtor
shall remain liable under each contract or agreement comprised in the Collateral
to be observed or performed by the Debtor thereunder. Secured Party shall not
have any obligation or liability under any such contract or agreement by reason
of or arising out of this Agreement or the receipt by Secured Party of any
payment relating to any of the Collateral, nor shall Secured Party be obligated
in any manner to perform any of the obligations of the Debtor under or pursuant
to any such contract or agreement, to make inquiry as to the nature or
sufficiency of any payment received by Secured Party in respect of the
Collateral or as to the sufficiency of any performance by any party under any
such contract or agreement, to present or file any claim, to take any action to
or force any performance or to collect the payment of any amounts which may have
been assigned to Secured Party or to which Secured Party may be entitled at any
time or times other than to account for amounts or Collateral received. Secured
Party's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Sections. 9-207 of the
UCC or otherwise, shall be to deal with such Collateral in the same manner as
Secured Party deals with similar property for its own account.
(g) Upon an Event of Default and for so long as same is
continuing, whether or not any Indebtedness is due, Secured Party may demand,
sue for, collect, or make any settlement or compromise which it deems desirable
with respect to the Collateral. Regardless of the adequacy of Collateral or any
other security for the Indebtedness, any deposits or other sums at any time
credited by or due from Secured Party to the Debtor may at any time be applied
to or set off against any of the Indebtedness.
(h) If an Event of Default shall have occurred and is continuing,
the Debtor shall, at the request of Secured Party, notify obligors on chattel
paper and general intangibles of the Debtor and obligors on instruments for
which the Debtor is an obligee of the security interest of Secured Party in any
chattel paper, general intangible or instrument and that payment thereof is to
be made directly to Secured Party or to any financial institution designated by
Secured Party as Secured Party's agent therefor, and Secured Party may itself,
if an Event of Default shall have
6
occurred and is continuing, without notice to or demand upon the Debtor, so
notify said obligors. After the making of such a request or the giving of any
such notification, the Debtor shall hold any proceeds of collection of chattel
paper, general intangibles and instruments received by the Debtor as trustee for
Secured Party without commingling the same with other funds of the Debtor and
shall turn the same over to Secured Party in the identical form received,
together with any necessary endorsements or assignments. Secured Party shall
apply the proceeds of collection of chattel paper, general intangibles and
instruments received by Secured Party to the Indebtedness, such proceeds to be
immediately entered after final payment in cash of the items giving rise to
them.
Section 6. Event of Default.
(a) It shall constitute an Event of Default under this Agreement
if (i) an Event of Default shall occur under the Credit Agreement, as that term
is defined therein, or (ii) a default shall occur under any provision in this
Agreement and be continuing following thirty (30) days notice thereof from
Secured Party to Debtor.
(b) If an Event of Default shall have occurred and be continuing,
in addition to any other rights and remedies that may be available to Secured
Party under the UCC or under Section 5(a) or 5(b) of this Agreement or otherwise
under this Agreement or at law, Secured Party shall also have the following
rights and powers:
(i) Secured Party may, without being required to give any
notice except as hereinafter provided, sell the Collateral, or any part
thereof, at public or private sale, for cash, upon credit or for future
delivery and at such price or prices as Secured Party deems satisfactory,
and Secured Party and/or its collateral agent may be the purchaser of any
or all of the Collateral so sold and thereafter hold the same absolutely
free from any right or claim of whatsoever kind, and the Indebtedness or
any portion of the Indebtedness may be applied as a credit against the
purchase price.
(ii) upon any such sale, Secured Party shall have the right
to deliver, assign and transfer to the purchaser thereof the Collateral so
sold. Each purchaser at any such sale shall hold the property sold
absolutely free from any claim or right of whatsoever kind by or on behalf
of the Debtor, including any equity or rights of redemption of the Debtor
and the Debtor hereby specifically waives, to the extent permitted by
applicable law, all rights of redemption, stay or appraisal which it has
or may have under any rule or law or statute now existing or hereafter
adopted.
(iii) Secured Party shall give the Debtor five (5) business
days' written notice (which the Debtor agrees is reasonable notification
within the meaning of Sections. 9-611 of the UCC) of its intention to make
any such public or private sale. Such notice, in case of a public sale,
shall state the time and place fixed for such sale and, in case of a
private sale, shall state the date after which such sale is to be made.
(iv) any such public sale shall be held at such time or times
within ordinary business hours and at such places as Secured Party may fix
in the notices of such
7
sale. At any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as Secured Party may determine.
(v) Secured Party shall not be obligated to make any sale
pursuant to any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed
for the sale, and such sale may be made at any time or place to which the
same shall be so adjourned.
(vi) in case of any sale of all or any part of the Collateral
on credit or for future delivery, the Collateral so sold may be retained
by Secured Party until the selling price is paid by the purchaser thereof,
but Secured Party shall not incur any liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may again be sold upon like notice.
(vii) Secured Party instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the liens and security interests granted in this
Agreement and sell the Collateral, or any portion thereof, under a
judgment or decree of a court or courts of competent jurisdiction.
(viii) Secured Party shall have the right to take possession
of the Collateral, and for that purpose Secured Party may, so far as the
Debtor can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Debtor
waives any and all rights that it may have to a judicial hearing in
advance of the enforcement of any of Secured Party's rights hereunder,
including, without limitation, its right following an Event of Default to
take immediate possession of the Collateral and to exercise its rights
with respect thereto.
(c) Secured Party shall incur no liability as a result of the sale
of the Collateral, or any part thereof, at any private sale other than for its
own gross negligence, willful misconduct or bad faith. The Debtor hereby waives,
to the maximum extent permitted by applicable law, any claims against Secured
Party arising by reason of the fact that the price at which the Collateral may
have been sold at such private sale was less than the price which might have
been obtained at a public sale or was less than the aggregate amount of the
Indebtedness, even if Secured Party accepts the first offer received and does
not offer such Collateral to more than one offeree.
(d) Secured Party shall not be obligated to pursue or exhaust its
rights and remedies against any particular Collateral or other security for the
Indebtedness before pursuing or enforcing its rights and remedies against any
other Collateral or other security for the Indebtedness.
(e) To the extent permitted by law, the Debtor hereby waives (i)
any rights to require Secured Party to proceed first against any other Person
(as defined in the Credit Agreement), to exhaust its rights in the Collateral or
other security for the Indebtedness or to pursue any other right that Secured
Party might have, and (ii) all rights of marshalling in respect of any and all
of the Collateral.
8
(f) Without precluding any other methods of sale, the Debtor
acknowledges that the sale of the Collateral shall have been made in a
commercially reasonable manner if conducted in conformity with reasonable
commercial practices of banks disposing of similar property. Secured Party shall
not be liable for any depreciation in the value of the Collateral.
(g) Remedies of Secured Party are cumulative and the exercise of
any one or more of the remedies provided herein shall not be construed as a
waiver of any of the other remedies of Secured Party.
(h) If an Event of Default shall have occurred, the proceeds of
any sale of or other realization upon all or any part of the Collateral and any
other amounts held by Secured Party under this Agreement shall be applied by
Secured Party as provided in the Credit Agreement.
Any amounts remaining after such applications shall be remitted to
the Debtor, its successors or assigns, or as a court of competent jurisdiction
may otherwise direct.
Section 7. General Provisions.
(a) This Agreement shall remain in full force and effect until all
of the Indebtedness shall have been indefeasibly paid in full.
(b) The lien and security interest created hereunder and the
Debtor's obligations hereunder and Secured Party's rights hereunder shall not be
released, diminished, impaired or adversely affected by the occurrence of any
one or more of the following events:
(i) the taking or accepting of any other security or
assurance for any or all of the Indebtedness;
(ii) any release, surrender, exchange, subordination or loss
of any security or assurance at any time existing in connection with any
or all of the Indebtedness;
(iii) the modification of, amendment to, or waiver of
compliance with any terms of the Credit Agreement;
(iv) any renewal, extension and/or rearrangement of the
payment of any or all of the Indebtedness or any statement, indulgence,
forbearance or compromise that may be granted or given by Secured Party to
the Debtor or any other Person;
(v) any neglect, delay, omission, failure or refusal of
Secured Party to take or prosecute any action in connection with any
agreement, document or other instrument evidencing, securing or assuring
the payment of any or all of the Indebtedness; or
(vi) the illegality, invalidity or unenforceability of all or
any part of the Indebtedness.
9
(c) This Agreement or any term hereof may be amended or changed
only by an instrument in writing executed jointly by the Debtor and Secured
Party.
(d) Each right, power and remedy herein specifically granted to
Secured Party or otherwise available to it shall be cumulative, and shall be in
addition to every other right, power and remedy herein specifically given or now
or hereafter existing at law, in equity, or otherwise (including, without
limitation, all rights, powers and remedies granted to a secured party under the
UCC), and each such right, power and remedy, whether specifically granted herein
or otherwise existing, may be exercised at any time and from time to time as
often and in such order as may be deemed expedient by Secured Party in its sole
and complete discretion. The provisions of this Agreement may only be waived by
an instrument in writing signed by Secured Party, and no failure on the part of
Secured Party to exercise, and no delay in exercising, and no course of dealing
with respect to, any such right, power or remedy, shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right.
(e) The manner and place of service of all notices, requests,
demands or other communications to be sent hereunder shall be sent as set forth
in Section 9.03 of the Credit Agreement.
(f) This Agreement shall be binding upon the Debtor and its
successors and assigns and shall inure to the benefit of Secured Party and its
successors and assigns. The Debtor may not, without the prior written consent of
Secured Party, assign any of its rights, duties or obligations hereunder.
(g) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
(h) The descriptive headings of the several sections of this
Agreement are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
(i) Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity of enforceability or such
provision in any other jurisdiction.
(j) This Agreement may be executed in any number of counterparts
and by different parties in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original, but all of which when
taken together shall constitute one and the same instrument, and any signed
counterpart shall be deemed delivered by the party signing it if sent to any
other party hereto by electronic facsimile transmission.
(k) To the extent that any Collateral covered by this Agreement is
also covered by the Mortgage, the terms and provisions of the Mortgage shall
govern and control the rights and obligations of the Debtor with respect
thereto.
10
(l) In the event of any conflict or inconsistency between the
terms, covenants, conditions and provisions set forth in this Agreement and the
terms, covenants, conditions and provisions set forth in the Credit Agreement,
the terms, covenants, conditions and provisions of the Credit Agreement shall
prevail.
(m) This Agreement amends and restates in its entirety that
certain Security Agreement, Pledge and Financing Statement dated as of March 1,
2002 given by Debtor.
(n) Final Agreement; No Oral Agreements. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS COMPRISE THE COMPLETE AND INTEGRATED AGREEMENT OF THE
PARTIES ON THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ALL PRIOR
AGREEMENTS, WRITTEN OR ORAL, ON SUCH SUBJECT MATTER. THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
11
IN WITNESS WHEREOF, the Debtor and Secured Party have executed this
Agreement as of the date first above written.
DEBTOR
ULTRA RESOURCES, INC.,
a Wyoming corporation
By: /s/ Michael D. Watford
-----------------------
Michael D. Watford
President and Chief Executive Officer
SECURED PARTY
BANK ONE, NA,
as Administrative Agent
By: /s/ Stephen Shatto
--------------------------------------
Stephen Shatto
Director
S-1
EXHIBIT A
State of Organization, Formation or Incorporation; Name
Name Jurisdiction Identification No. Address
- ---- ------------ ------------------ -------
Ultra Resources, Inc. Wyoming 1997-00320838 363 N. Sam Houston Pkwy
Suite 1200
Houston, Texas 77060
Exh. A - 1
Execution Form
FIFTH AMENDMENT AND SUPPLEMENT
TO MORTGAGE, DEED OF TRUST,
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF PRODUCTION
from
ULTRA RESOURCES, INC.
(Federal Income Tax Identification No. 83-0320643)
(Organizational Identification No. 1997-00320838)
(Mortgagor and Debtor)
to
Jeanie Gonzalez, Trustee
for the benefit of
BANK ONE, NA, as Administrative Agent
(Federal Income Tax Identification No. 74-1508719)
(as Administrative Agent, LC Issuer and a Bank)
(Mortgagee and Secured Party)
A CARBON, PHOTOGRAPHIC OR OTHER REPRODUCTION OF THIS INSTRUMENT IS
SUFFICIENT AS A FINANCING STATEMENT. FOR PURPOSES OF FILING THIS INSTRUMENT AS A
FINANCING STATEMENT THE ADDRESS OF THE MORTGAGOR AND DEBTOR IS 363 N. SAM
HOUSTON PARKWAY, SUITE 1200, HOUSTON, TEXAS 77060 AND THE ADDRESS OF THE
MORTGAGEE AND SECURED PARTY IS 910 TRAVIS STREET, HOUSTON, TX 77002.
THIS INSTRUMENT COVERS MINERALS AND OTHER SUBSTANCES OF VALUE THAT MAY BE
EXTRACTED FROM THE EARTH (INCLUDING WITHOUT LIMITATION OIL AND GAS). THIS
FINANCING STATEMENT IS TO BE FILED FOR RECORD, AMONG OTHER PLACES, IN THE REAL
ESTATE RECORDS OF THE COUNTY RECORDERS OF THE COUNTIES LISTED ON EXHIBIT "A"
HERETO. THE MORTGAGOR HAS AN INTEREST OF RECORD IN THE REAL ESTATE CONCERNED,
WHICH INTEREST IS DESCRIBED IN EXHIBIT "B" ATTACHED HERETO.
Attention of Recording Officer: This instrument is a mortgage of both real and
personal property and is, among other things, a Security Agreement and Financing
Statement under the Uniform Commercial Code. This instrument creates a lien on
rights in or relating to lands of Mortgagor that are described in Exhibit "B"
hereto.
THIS INSTRUMENT WAS PREPARED BY AND WHEN RECORDED OR FILED SHOULD BE RETURNED
TO:
Tristan E. Propst, Esq.
Mayer Brown Rowe & Maw LLP
700 Louisiana, 36th Floor
Houston, Texas 77002
2
FIFTH AMENDMENT AND SUPPLEMENT TO MORTGAGE, DEED OF TRUST,
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF PRODUCTION
This FIFTH AMENDMENT AND SUPPLEMENT TO MORTGAGE, DEED OF TRUST, SECURITY
AGREEMENT, FINANCING STATEMENT, FIXTURE FILING AND ASSIGNMENT OF PRODUCTION
(this "Fifth Amendment") is from ULTRA RESOURCES, INC., a Wyoming corporation,
("Mortgagor"), whose address is 363 N. Sam Houston Parkway, Suite 1200, Houston,
Texas 77060 to Jeanie Gonzalez, Trustee, whose address in 910 Travis, 6th Floor,
Houston, Texas 77002, and her successors and substitutes (the "Trustee") in
trust, as hereinafter provided, for the benefit of Bank One, NA, as
Administrative Agent, a national banking association, ("Mortgagee"), whose
address is 910 Travis, 6th Floor, Houston, Texas 77002, as Agent under the
Credit Agreement for itself, the LC Issuer and the Banks, as hereinafter
defined.
W I T N E S S E T H:
WHEREAS, Mortgagor is indebted unto Mortgagee for loans made or to be made
Banks (as defined below) pursuant to the terms of that certain Second Amended
and Restated Credit Agreement dated June 9, 2004 by and among the Mortgagor,
Mortgagee (as a Bank, as LC Issuer and as Administrative Agent), certain other
financial institutions and banks from time to time party thereto (the "Banks"),
(as amended, supplemented, restated or otherwise modified from time to time, the
"Credit Agreement"); and
WHEREAS, to secure the payment of the Indebtedness (as defined in the
Security Instrument (defined below) as amended hereby) and the performance of
the covenants and obligations relating thereto, Mortgagor has previously
executed and delivered that certain Mortgage, Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Production dated March 22,
2000, as amended by that certain Ratification Of and Amendment To Mortgage dated
February 15, 2001, as amended by that certain Ratification Of and Amendment To
Mortgage dated August 1, 2001, and as further amended by that certain Third
Amendment to Mortgage, Deed of Trust, Security Agreement, Financing Statement,
Fixture Filing and Assignment of Production dated March 1, 2002, and as further
amended by that certain Fourth Amendment to Mortgage, Deed of Trust, Security
Agreement, Financing Statement, Fixture Filing and Assignment of Production
dated September 19, 2003, all of which have been recorded as set forth on
Exhibit "A" attached hereto (the "Security Instrument"); and
WHEREAS, Mortgagor and Mortgagee desire to amend the Security Instrument
as set forth herein;
NOW THEREFORE, in consideration of the sum of ONE THOUSAND DOLLARS
($1,000.00) and other valuable consideration in-hand paid by Mortgagee to
Mortgagor and in consideration of the debts and trusts hereinafter mentioned,
the receipt and sufficiency of all of which are hereby acknowledged, Mortgagor
and Mortgagee hereby agree that the Security Instrument is hereby amended as
follows:
3
ARTICLE I
REAFFIRMANCE OF MORTGAGE; GRANT OF LIEN.
1.1 To secure the Indebtedness (as defined in the Security Instrument
(as amended hereby)), Mortgagor, for valuable consideration, the receipt of
which is hereby acknowledged, and in consideration of the debt and trust
hereinafter mentioned, has GRANTED, MORTGAGED, BARGAINED, SOLD, CONVEYED,
TRANSFERRED and ASSIGNED, and by these presents does GRANT, MORTGAGE, BARGAIN,
SELL, CONVEY, TRANSFER and ASSIGN to Trustee, for the benefit of Mortgagee, WITH
POWER OF SALE, the Mortgaged Property; and in addition thereto, Mortgagor, for
valuable consideration, the receipt of which is hereby acknowledged, and in
consideration of the debt and trust hereinafter mentioned, has GRANTED,
MORTGAGED, BARGAINED, SOLD, CONVEYED, TRANSFERRED and ASSIGNED, and by these
presents does GRANT, MORTGAGE, BARGAIN, SELL, CONVEY, TRANSFER to Jeanie
Gonzalez, as Trustee, for the benefit of Mortgagee, WITH POWER OF SALE the
following described Property:
(a) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to the leases, rights
of way, easements, or other documents described in Exhibit B attached
hereto and incorporated herein for all purposes, without regard to any
surface acreage and/or depth limitations set forth in Exhibit B, and all
renewals and extensions thereof and all new leases, rights of way,
easements, or other documents (i) in which an interest is acquired by
Mortgagor after the termination or expiration of any lease, right of way,
easement, or other document described in Exhibit B, and (ii) that covers
all or any part of the Property described in and covered by such
terminated or expired lease, right of way, easement, or other document
described in Exhibit B, to the extent, and only to the extent, such new
leases, rights of way, easements, or other documents may cover such
Property (all of the foregoing in this paragraph (a) being hereby added to
the definition of "Leases" as defined in the Security Instrument);
(b) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to the lands subject to
the Leases described in Exhibit B or otherwise described in Exhibit B (all
of the foregoing in this paragraph (b) being added to the definition of
"Lands" as defined in the Security Instrument), including, without
limitation, the oil, gas, mineral, and leasehold estates in and to the
Lands, without regard to any surface acreage and/or depth limitations set
forth in Exhibit B;
(c) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to any of the oil, gas,
and minerals in, on, or under the Lands described in Exhibit B, including,
without limitation, all contractual rights, fee interests, leasehold
interests, overriding royalty interests, non-participating royalty
interests, mineral interests, production payments, net profits interests,
or any other interest measured by or payable out of production of oil,
gas, or other minerals from such Leases and/or Lands;
(d) all of the foregoing interests of Mortgagor as such interests may be
enlarged by the discharge of any payments out of production or by the
removal of any charges or
4
encumbrances;
(e) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to, and under or derived
from any present or future operating, farmout, bidding, pooling,
unitization, and communitization agreements, assignments, and subleases,
whether or not described in Exhibit B, to the extent, and only to the
extent, that such agreements, assignments, and subleases cover or include
any right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in and to all or any portion
of such Leases and/or such Lands, and all units created by any such
pooling, unitization, and communitization agreements and all units formed
under orders, regulations, rules, or other official acts of any
Governmental Authority having jurisdiction, to the extent and only to the
extent that such units cover or include all or any portion of such Leases
and/or such Lands;
(f) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to, and under or derived
from all presently existing and future advance payment agreements, oil,
casinghead gas, and gas sales, exchange, and processing contracts and
agreements, including, without limitation, those contracts and agreements
that are described on Exhibit B, to the extent, and only to the extent,
those contracts and agreements cover or include all or any portion of such
Leases and/or such Lands;
(g) all right, title, and interest, whether now owned and existing or
hereafter acquired or arising, of Mortgagor in, to, and under or derived
from all existing and future permits, licenses, easements, and similar
rights and privileges that relate to or are appurtenant to any of such
Leases and/or such Lands; and
(h) any and all proceeds, rents, issues, profits, products, revenues and
other income arising from or by virtue of the sale, lease or other
disposition, or from any insurance payable with respect to damage, loss or
destruction of the collateral described in Subparagraphs (a) and (g)
above.
1.2 Security Interest. With respect to all personal property and
fixtures comprising a part of the Supplemental Mortgaged Property, together with
all proceeds and products thereof, this Fifth Amendment shall likewise be a
security agreement, and for the same consideration, and for the purpose of
further securing payment and performance of the Indebtedness (as defined in the
Security Instrument as amended hereby), Mortgagor hereby grants to Mortgagee a
continuing security interest in all improvements and all personal Property of
any kind or character defined in and subject to the provisions of the UCC,
including, but not limited to, substitutions and replacements for, accessions
to, and the proceeds and products from any and all of such improvements and
personal Property, whether now owned and existing or hereafter acquired or
arising, and situated on any of such Leases and/or such Lands, including, but
not limited to, pipe, casing, tubing, rods, storage tanks, boilers, loading
racks, pumps, foundations, warehouses, and all other personal Property and
equipment of every kind and character upon, incident, appurtenant, or belonging
to and used in connection with the interest of Mortgagor, whether now owned and
existing or hereafter acquired or arising, in such Lands and/or such Leases,
including, but not limited to, goods that are to become fixtures related to such
property and all oil, gas, and
5
other minerals produced or to be produced to the account of Mortgagor from such
Leases and/or such Lands and all accounts receivable, general intangibles, and
contract rights of Mortgagor in connection with such Lands and/or such Leases,
including, but not limited to, oil, gas, and other minerals and all products,
substitutions, and exchanges thereof and accounts resulting from the sale
thereof arising at any wellhead or minehead located on such Leases and/or such
Lands.
1.3 Supplemental Mortgaged Property. All of Mortgagor's interests in the
interests described in Section 1.1 and Section 1.2 and the Lands, the Leases,
and the real and personal Property interests hereinabove described (and which
are hereby added to the Mortgaged Property as defined in the Security Instrument
as amended hereby) are hereinafter collectively called the "Supplemental
Mortgaged Property", and the term Mortgaged Property, when used in the Security
Instrument, shall be deemed to include reference to the Supplemental Mortgaged
Property. Exhibit B hereto shall be made a part of Exhibit A to the Security
Instrument, and each reference to Exhibit A in the Security Instrument shall be
deemed to include reference to Exhibit B hereto.
1.4 Assignment of Security. Mortgagor, for the same consideration,
hereby grants to Mortgagee any and all rights of Mortgagor to Liens securing
payment of proceeds from the sale of production from the Supplemental Mortgaged
Property.
1.5 After-Acquired Property. Mortgagor, for the same consideration,
hereby grants, mortgages, bargains, sells, conveys, transfers, and assigns to
the Trustee or grants to Mortgagee a continuing security interest in, as the
case may be, all additional right, title, or interest which Mortgagor may
hereafter acquire or become entitled to in the Supplemental Mortgaged Property,
which additional right, title, and interest, when acquired, shall also
constitute Supplemental Mortgaged Property (and Mortgaged Property), the same as
if expressly described and conveyed herein.
1.6 Habendum. TO HAVE AND TO HOLD all and singular the Supplemental
Mortgaged Property and all other Property which, by the terms hereof, has or may
hereafter become subject to the Liens of the Security Instrument as amended
hereby, together with all rights, hereditaments, and appurtenances in anywise
belonging to the Trustee or Mortgagee, as the case may be, or the successors or
assigns of either of them forever.
1.7 Assignment. In addition to the conveyance to the Trustee herein made
and as additional security for repayment of the Indebtedness (as defined in the
Security Instrument as amended hereby), Mortgagor does hereby transfer, assign,
deliver and convey unto Mortgagee, its successors and assigns, all of the oil,
gas, and other mineral produced, saved and sold from the Supplemental Mortgage
Property and attributable to the interest of Mortgagor therein subsequent to
7:00 a.m. on the first day of the month in which this Fifth Amendment is
executed, together with the proceeds of any sale thereof. Mortgagor hereby
directs any purchaser now or hereafter taking any production from the
Supplemental Mortgaged Property to pay to Mortgagee such proceeds derived from
the sale thereof and to continue to make payments directly to Mortgagee until
notified in writing by Mortgagee to discontinue the same. The purchaser of any
such production shall not be required to see to the application of the proceeds
thereof by Mortgagee, and payment made to Mortgagee shall be binding and
conclusive as between such purchaser and Mortgagor. Mortgagor further agrees to
perform all such acts and to execute all
6
such further assignments, transfer and division orders, and other instruments as
may be required or desired by Mortgagee or any other party to have such proceeds
and revenues so paid to Mortgagee.
ARTICLE II
APPOINTMENT OF TRUSTEES
The Mortgagee hereby appoints and reaffirms the appointment of Jeanie
Gonzalez as Trustee, and vests in Jeanie Gonzalez all of the right, estate and
title of in and to all of the Mortgaged Property, including the Supplemental
Mortgaged Property. Jeanie Gonzalez shall continue to have all of the rights,
powers, privileges, immunities and duties previously conferred upon the Trustee
under the Mortgage.
ARTICLE III
AMENDMENTS TO SECURITY INSTRUMENT
3.1 Section 2.1 - Specific Obligations, to the Security Instrument is
hereby amended by replacing the text of that subsection in its entirety with the
following text:
The Obligations outstanding under that certain Second Amended and
Restated Credit Agreement dated as of June 9, 2004, by and among the
Mortgagor, Mortgagee (as a Bank, as LC Issuer (together with its
successors and assigns in such capacity, the "LC Issuer") and as
Administrative Agent (together with its successors and assigns in
such capacity, the "Administrative Agent")), certain other financial
institutions and banks from time to time party thereto (the
"Banks"), (as amended, supplemented, restated or otherwise modified
from time to time, the "Credit Agreement"), including, without
limitation, the indebtedness evidenced by those certain revolving
notes dated effective June 9, 2004, in an aggregate principal amount
of up to $500,000,000 and all other notes given in substitution
therefor to any Bank(s) or in modification, renewal or extension
thereof, in whole or in part (such notes, as from time to time
supplemented, amended or modified and all other notes given in
substitution therefor or in modification, renewal or extension
thereof, in whole or in part, including, without limitation, any
assignment of all or any portion of such notes from the Bank(s) to
another financial institution pursuant to the Credit Agreement being
hereafter called, collectively, the "Note").
3.2 Any and all references in the Security Instrument to the "Credit
Agreement" are hereby amended to mean, and shall hereafter be deemed to refer
to, the "Credit Agreement" as defined in Section 2.1 of the Security Instrument
as amended hereby.
3.3 Any and all references in the Security Instrument to the
"Administrative Agent," the "LC Issuer" or the "Banks" are each amended to mean,
and shall hereafter be deemed to refer to, respectively, the "Administrative
Agent," the "LC Issuer" and the "Banks" as defined in Section 2.1 of the
Security Instrument as amended hereby.
7
3.4 Any and all references in the Security Instrument to the "Mortgagee"
are amended to mean, and shall hereafter be deemed to refer to, the "Mortgagee"
as defined in the preamble of this Fifth Amendment.
3.5 By execution of this Fifth Amendment, Mortgagor hereby ratifies,
adopts and confirms, as of the date hereof, all of Mortgagor's warranties,
representations, and covenants set forth in the Security Instrument, as hereby
amended, and in the Credit Agreement.
3.6 Each capitalized term used but not defined herein shall have the
meaning given to such term in the Credit Agreement.
3.7 The Security Instrument, as hereby amended, shall remain in full
force and effect, subject to any partial releases that may have heretofore been
filed for record relating to such Security Instrument. The indebtedness secured
by the Security Instrument is a continuing indebtedness and nothing contained
herein or in any other document shall be construed to deem paid such
indebtedness, or as a novation of such indebtedness or the Security Instrument,
or to release or terminate any lien or security interest which secures payment
of such indebtedness, and all liens and security interests which secure payment
of such indebtedness (including, without limitation, those created by the
Security Instrument) shall continue in full force and effect, unimpaired from
the date(s) of their creation and perfection.
3.8 This Fifth Amendment shall be considered as an amendment to and
ratification of the Security Instrument, and the Security Instrument, as herein
expressly amended, is hereby ratified, approved and confirmed in every respect.
All liens created, extended or renewed by the Security Instrument are hereby
extended, renewed and carried forward by this instrument and incorporated
herein. All references to the Security Instrument in any document heretofore or
hereafter executed shall be deemed to refer to the Security Instrument as
amended by this Fifth Amendment.
3.9 For purposes of filing this Fifth Amendment as an amendment to a
financing statement, the address for Mortgagor, as the Debtor, and Mortgagee, as
the Secured Party, are as set forth herein above.
3.10 (i) The cover page to this Fifth Amendment sets forth the legal name
of the Mortgagor as registered in the jurisdiction in which Mortgagor is
incorporated; (ii) Mortgagor's state of incorporation, organizational
identification number as designated by the state of its incorporation, taxpayer
identification number, and principal place of business (or, if it has more than
one place of business, its chief executive office) are as set forth on
Attachment 1 hereto; and (iii) Mortgagor is now and has been known by any trade
name or assumed name.
3.11 For the convenience of the parties, this Fifth Amendment may be
executed in multiple counterparts. Each of the counterparts hereof so executed
shall for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same Fifth Amendment.
3.12 Mortgagee shall be entitled and authorized at any time to file this
Fifth Amendment, or a carbon, photographic or any other reproduction of this
Fifth Amendment, as a financing statement or any other Uniform Commercial Code
financing statement, continuation
8
statement and financing statement amendment, covering all of the Mortgaged
Property or any portion thereof, which may be filed as such without the
signature of the Mortgagor where and to the full extent permitted by applicable
law, but the failure of Mortgagee to do so shall not impair the validity or
enforceability of this Fifth Amendment. Mortgagee shall have no duty to comply
with any recording, filing or other legal requirements necessary to establish or
maintain the validity, priority or enforceability of, or Mortgagee's rights in
or to, any of the Mortgaged Property.
[The Remainder of This Page is Intentionally Left Blank.]
9
EXECUTED on this 9th day of June, 2004.
MORTGAGOR and DEBTOR
ADDRESS OF MORTGAGOR: ULTRA RESOURCES, INC.
363 N. Sam Houston Parkway
Suite 1200 By: /s/ Michael D. Watford
Houston, Texas 77060 -------------------------------------
Michael D. Watford
President and Chief Executive Officer
This Fifth Amendment to Mortgage, Deed of Trust, Security Agreement,
Financing Statement, Fixture Filing and Assignment of Production is executed by
the undersigned solely for the purpose of acknowledging and accepting the
benefits conferred on Mortgagee and to evidence its agreement with the covenants
of Mortgagee as set forth herein.
MORTGAGEE and SECURED PARTY
BANK ONE, NA, as Administrative Agent
By: /s/ Stephen M. Shatto
----------------------------------
Stephen M. Shatto
Director
10
ACKNOWLEDGMENTS
STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on this 9th day of June,
2004 by Michael D. Watford as President and Chief Executive Officer of Ultra
Resources, Inc.
DENA RENAE DuBOSE /s/ Dena Renae DuBose
(Seal) Notary Public,State of Taxas -----------------------------
My Commission Expires: 12-07-04 Notary Public, State of Texas
My commission expires: 12-07-04
STATE OF TEXAS Section
Section
COUNTY OF HARRIS Section
This instrument was acknowledged before me on this 9th day of June,
2004 by Stephen M. Shatto as Director of Bank One, NA.
/s/ Karen M. Ash
(Seal) -----------------------------
Notary Public, State of Texas
My commission expires: August 28, 2004
KAREN M. ASH
NOTARY PUBLIC STATE OF TEXAS
MY COMMISSION EXPIRES
AUG. 28, 2004
11
EXHIBIT "A"
TO
FIFTH AMENDMENT AND SUPPLEMENT TO MORTGAGE, DEED OF TRUST,
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF PRODUCTION
STATE COUNTY DOCUMENT RECORDING INFORMATION
----- ------ -------- ---------------------
Wyoming Sublette Co. Deed of Trust, Mortgage No. 278180, Book 114
O&G, Page 629
UCC-1 Financing Statement No. 278184 and/or 035811
Secretary of UCC-1 Financing Statement No. 00-102-13-1C02
State
Wyoming Sublette Co. Ratification of and Amendment No. 283288, Book 117
to Deed of Trust, Mortgage O&G, Page 387
Non-Standard Financing No. U37042
Statement
Secretary of Non-Standard Financing No. 01 086 16 1A03
State Statement
Wyoming Sublette Co. Ratification of and Amendment to Deed No. 286140, Book 119
of Trust, Mortgage O&G, Page 276
Wyoming Secretary Non-Standard Financing No. 01 239 16 1a02
of State Statement
Wyoming Sublette Co. Third Amendment to Deed of #289305
Trust, Mortgage O&G Book 121/Pg 155
State Lands Third Amendment to Deed of Approved July 10, 2002
and Trust, Mortgage
Investments
Secretary of UCC-1 Financing Statement #02066162D07
State
Wyoming Sublette Co. Fourth Amendment to Deed of #300096
Trust, Mortgage O&G Book 106/Pg 42
Secretary of UCC-1 Financing Statement #2003-19957744
State
A-1
Execution Form
EXHIBIT "B"
TO
FIFTH AMENDMENT AND SUPPLEMENT TO MORTGAGE, DEED OF TRUST,
SECURITY AGREEMENT, FINANCING STATEMENT,
FIXTURE FILING AND ASSIGNMENT OF PRODUCTION
[SEE FOLLOWING PAGES]
B-1
EXHIBIT "B"
The Lessor for each of the leases listed below is the U.S.A. All leases
located in Sublette County, Wyoming
B - 2
Execution Form
AMENDED AND RESTATED UNLIMITED GUARANTY
THIS AMENDED AND RESTATED UNLIMITED GUARANTY (this "Guaranty") is made as
of June 9, 2004, by Guarantor (as hereinafter defined) for the benefit of the
"Bank(s)", "Agent" and "LC Issuer" (as such terms are hereinafter defined).
1. Definitions. As used in this Guaranty, the following terms shall
have the meanings indicated below:
(a) The term "Agent" shall mean Bank One, NA, as Administrative
Agent for the Banks and the LC Issuer under the Credit Agreement (as
hereinafter defined), whose address is 910 Travis Street, Houston, Harris
County, Texas 77002, Attn: Steve Shatto, and each successor Administrative
Agent.
(b) The term "Bank(s)" shall have the same meaning as that term
has in the Credit Agreement, including each Bank's successors and assigns
as provided for in Section 9.05 thereof.
(c) The term "Borrower" shall mean Ultra Resources, Inc. (a
Wyoming corporation).
(d) The term "Credit Agreement" shall mean that certain Second
Amended and Restated Credit Agreement dated as of June 9, 2004 by and
among Bank One, NA, as Administrative Agent, LC Issuer and a Bank, the
other financial institutions and Banks from time to time party thereto,
and Ultra Resources, Inc., as Borrower, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
(e) The term "Guaranteed Indebtedness" shall mean (i) all
indebtedness, obligations and liabilities of Borrower arising under the
Credit Agreement and other Loan Documents (as defined in the Credit
Agreement) to the Bank(s), the LC Issuer and/or the Agent of any kind or
character, now existing or hereafter arising, whether direct, indirect,
related, unrelated, fixed, contingent, liquidated, unliquidated, joint,
several or joint and several, and regardless of whether such indebtedness,
obligations and liabilities may, prior to their acquisitions by the
Bank(s), the LC Issuer and/or the Agent, respectively, be or have been
payable to or in favor of a third party and subsequently acquired by the
Bank(s), the LC Issuer and/or the Agent (it being contemplated that the
Bank(s), the LC Issuer and/or the Agent may make such acquisitions from
third parties), including without limitation all indebtedness, obligations
and liabilities of Borrower to the Bank(s), the LC Issuer and/or the Agent
now existing or hereafter arising under the Loan Documents by note, draft,
acceptance, guaranty, endorsement, letter of credit, assignment, purchase,
overdraft, discount, indemnity agreement or otherwise, (ii) all accrued
but unpaid interest on any of the indebtedness described in (i) above
(including all such amounts which would become due but for the operation
of the automatic stay under Section 362(a) of the United States Bankruptcy
Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b) and
506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and
Section 506(b)), (iii) all costs and expenses incurred by the Bank(s),
the LC Issuer
and/or the Agent in connection with the collection and administration of
all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon,
the collateral securing all or any part of such indebtedness and
obligations, including without limitation all reasonable attorneys' fees,
and (iv) all renewals, extensions, modifications and rearrangements of the
indebtedness and obligations described in (i), (ii) and (iii) above.
(f) The term "Guarantor" shall mean Ultra Petroleum Corp., a Yukon
Territory of Canada corporation, whose address for notice purposes is the
following:
363 N. Sam Houston Parkway, Suite 1200
Houston, Texas 77060
Attn: Mr. Michael D. Watford
Telephone: (281) 876-0120
Telecopy: (281) 876-2831
(g) The term "LC Issuer" shall mean Bank One, NA (or any
subsidiary or affiliate of Bank One designated by Bank One, NA and
reasonably acceptable to Borrower) in its capacity as issuer of Facility
LCs (as defined in the Credit Agreement).
2. Obligations. As an inducement to Bank(s), the LC Issuer and/or the
Agent to extend or continue to extend credit and other financial accommodations
to Borrower, Guarantor, for value received, does hereby unconditionally and
absolutely guarantee the prompt and full payment and performance of the
Guaranteed Indebtedness when due or declared to be due and at all times
thereafter.
3. Character of Obligations. This is an absolute, continuing and
unconditional guaranty of payment and performance and not of collection and if
at any time or from time to time there is no outstanding Guaranteed
Indebtedness, the obligations of Guarantor with respect to any and all
Guaranteed Indebtedness incurred thereafter shall not be affected. All
Guaranteed Indebtedness heretofore, concurrently herewith or hereafter made by
Bank(s), the LC Issuer and/or the Agent to Borrower shall be conclusively
presumed to have been made or acquired in acceptance hereof. Guarantor shall be
liable, jointly and severally, with Borrower and any other guarantor of all or
any part of the Guaranteed Indebtedness.
4. Representations and Warranties. Guarantor hereby represents and
warrants the following to the Agent and to the Bank(s):
(a) The Board of Directors of Guarantor has determined that this
Guaranty may reasonably be expected to benefit, directly or indirectly,
Guarantor, and that the value of the benefits that Guarantor will derive
from giving this Guaranty are reasonably equivalent to the value of the
Guaranty; and
(b) Guarantor is familiar with, and has independently reviewed the
books and records regarding, the financial condition of Borrower and is
familiar with the value of any and all collateral intended to be security
for the payment of all or any part of the
2
Guaranteed Indebtedness; provided, however, Guarantor is not relying on
such financial condition or collateral as an inducement to enter into this
Guaranty; and
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower and Guarantor is not relying on the Agent, the Bank(s) or the LC
Issuer to provide such information to Guarantor either now or in the
future; and
(d) Guarantor has the power and authority to execute, deliver and
perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery and performance of
this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith do not and will not violate (i) any agreement
or instrument to which Guarantor is a party, (ii) any law, rule,
regulation or order of any governmental authority to which Guarantor is
subject, or (iii) its articles or certificate of incorporation or bylaws;
and
(e) Neither the Agent, the Bank(s), the LC Issuer nor any other
party has made any representation, warranty or statement to Guarantor in
order to induce Guarantor to execute this Guaranty; and
(f) The financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to the Agent, the
LC Issuer and/or the Bank(s) are and shall be true and correct in all
material respects and fairly present the financial position of Guarantor
as of the dates thereof, and no material adverse change has occurred in
the financial condition of Guarantor reflected in the financial statements
and other financial information regarding Guarantor heretofore delivered
to the Agent, the LC Issuer and/or the Bank(s) since the date of the last
statement thereof; and
(g) As of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and will
be solvent, (ii) the fair saleable value of Guarantor's assets exceeds and
will continue to exceed its liabilities (both fixed and contingent), (iii)
Guarantor is and will continue to be able to pay its debts as they mature,
and (iv) Guarantor has and will continue to have sufficient capital to
carry on its business and all businesses in which it is about to engage.
5. Covenants. Guarantor hereby covenants and agrees with the Agent, the
LC Issuer and the Bank(s) as follows:
(a) Guarantor shall not, so long as its obligations under this
Guaranty continue, transfer or pledge any material portion of its assets
for less than full and adequate consideration; and
(b) Guarantor shall promptly furnish to the Agent at any time and
from time to time such financial statements and other financial
information of Guarantor as the Agent may require, in form and substance
satisfactory to Agent; and
3
(c) Guarantor shall comply with all terms and provisions of the
Loan Documents (as defined in the Credit Agreement) that apply to
Guarantor; and
(d) Promptly upon a Responsible Officer of Guarantor becoming
aware, Guarantor shall promptly inform the Agent of (i) any litigation or
governmental investigation against Guarantor or affecting any security for
all or any part of the Guaranteed Indebtedness or this Guaranty which, if
determined adversely, might have a material adverse effect upon the
financial condition of Guarantor or upon such security or might cause a
default under any of the Loan Documents, (ii) any claim or controversy
which might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the financial
condition of Guarantor.
6. Consent and Waiver.
(a) Guarantor waives (i) promptness, diligence and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration,
notice of dishonor, diligence in enforcement and indulgences of every
kind, and (ii) the taking of any other action by the Agent, the LC Issuer
and/or the Bank(s), including without limitation, giving any notice of
default or any other notice to, or making any demand on, Borrower, any
other guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
(b) Guarantor waives each and every right to which it may be
entitled by virtue of the suretyship law of the State of Texas including,
without limitation, any rights it may have pursuant to Rule 31, Texas
Rules of Civil Procedure, Section 17.001, Civil Practice and Remedies
Code, and Chapter 34 of the Texas Business and Commerce Code, each as in
effect on the date of this Guaranty.
(c) The Agent, the LC Issuer and/or the Bank(s) may at any time,
without the consent of or notice to Guarantor, without incurring
responsibility to Guarantor and without impairing, releasing, reducing or
affecting the obligations of Guarantor hereunder: (i) change the manner,
place or terms of payment of all or any part of the Guaranteed
Indebtedness, or renew, extend, modify, rearrange or alter all or any part
of the Guaranteed Indebtedness; (ii) change the interest rate accruing on
any of the Guaranteed Indebtedness (including, without limitation, any
periodic change in such interest rate that occurs because such Guaranteed
Indebtedness accrues interest at a variable rate which may fluctuate from
time to time); (iii) sell, exchange, release, surrender, subordinate,
realize upon or otherwise deal with in any manner and in any order any
collateral for all or any part of the Guaranteed Indebtedness or this
Guaranty or setoff against all or any part of the Guaranteed Indebtedness;
(iv) neglect, delay, omit, fail or refuse to take or prosecute any action
for the collection of all or any part of the Guaranteed Indebtedness or
this Guaranty or to take or prosecute any action in connection with any of
the Loan Documents; (v) exercise or refrain from exercising any rights
against Borrower or others, or otherwise act or refrain from acting; (vi)
settle or compromise all or any part of the Guaranteed Indebtedness and
subordinate the payment
4
of all or any part of the Guaranteed Indebtedness to the payment of any
obligations, indebtedness or liabilities which may be due or become due to
the Bank(s), the LC Issuer and/or the Agent or others; and (vii) apply any
sums paid to the Bank(s), the LC Issuer and/or the Agent by Guarantor,
Borrower or others to the Guaranteed Indebtedness in such order and manner
as the Agent, in its sole discretion, may determine.
(d) Should the Agent, the LC Issuer or the Bank(s) seek to enforce
the obligations of Guarantor hereunder by action in any court or
otherwise, Guarantor waives any requirement, substantive or procedural,
that (i) the Agent, the LC Issuer or the Bank(s) first enforce any rights
or remedies against Borrower or any other person or entity liable to any
of such parties for all or any part of the Guaranteed Indebtedness,
including without limitation that a judgment first be rendered against
Borrower or any other person or entity, or that Borrower or any other
person or entity should be joined in such cause, or (ii) the Agent, the LC
Issuer or the Bank(s) shall first enforce rights against any collateral
which shall ever have been given to secure all or any part of the
Guaranteed Indebtedness or this Guaranty. Such waiver shall be without
prejudice to the Agent's, the LC Issuer's or the Bank(s)' right, at its
option, to proceed against Borrower or any other person or entity, whether
by separate action or by joinder.
(e) In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or omission
of the Agent and/or the Agent's directors, officers, employees,
representatives or agents in connection with Agent's administration of the
Guaranteed Indebtedness, except for the Agent's willful misconduct and
gross negligence (IT BEING THE INTENTION OF THE GUARANTOR THAT THE AGENT
AND/OR THE AGENT'S DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES OR
AGENTS IN CONNECTION WITH AGENT'S ADMINISTRATION OF THE GUARANTEED
INDEBTEDNESS SHALL BE INDEMNIFIED BY THE GUARANTOR FOR THE SUCH PERSON'S
ORDINARY NEGLIGENCE).
7. Obligations Not Impaired.
(a) Guarantor agrees that its obligations hereunder shall not be
released, diminished, impaired, reduced or affected by the occurrence of
any one or more of the following events: (i) the death, disability or lack
of corporate power of Borrower, Guarantor (except as provided in paragraph
11 herein) or any other guarantor of all or any part of the Guaranteed
Indebtedness, (ii) any receivership, insolvency, bankruptcy or other
proceedings affecting Borrower, Guarantor or any other guarantor of all or
any part of the Guaranteed Indebtedness, or any of their respective
property; (iii) the partial or total release or discharge of Borrower or
any other guarantor of all or any part of the Guaranteed Indebtedness, or
any other person or entity from the performance of any obligation
contained in any instrument or agreement evidencing, governing or securing
all or any part of the Guaranteed Indebtedness, whether occurring by
reason of law or otherwise; (iv) the taking or accepting of any collateral
for all or any part of the Guaranteed Indebtedness or this Guaranty; (v)
the taking or accepting of any other
5
guaranty for all or any part of the Guaranteed Indebtedness; (vi) any
failure by the Agent, the LC Issuer or the Bank(s) to acquire, perfect or
continue any lien or security interest on collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty; (vii) the impairment
of any collateral securing all or any part of the Guaranteed Indebtedness
or this Guaranty; (viii) any failure by the Agent, the LC Issuer or the
Bank(s) to sell any collateral securing all or any part of the Guaranteed
Indebtedness or this Guaranty in a commercially reasonable manner or as
otherwise required by law; (ix) any invalidity or unenforceability of or
defect or deficiency in any of the Loan Documents; or (x) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower or any other guarantor of all or any part of the
Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of all or any part of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by the
Agent, the LC Issuer or the Bank(s) upon the insolvency, bankruptcy or
reorganization of Borrower, Guarantor, any other guarantor of all or any
part of the Guaranteed Indebtedness, or otherwise, all as though such
payment had not been made.
(c) None of the following shall affect Guarantor's liability
hereunder: (i) the unenforceability of all or any part of the Guaranteed
Indebtedness against Borrower by reason of the fact that the Guaranteed
Indebtedness exceeds the amount permitted by law; (ii) the act of creating
all or any part of the Guaranteed Indebtedness is ultra vires; or (iii)
the officers or partners creating all or any part of the Guaranteed
Indebtedness acted in excess of their authority. Guarantor hereby
acknowledges that withdrawal from, or termination of, any ownership
interest in Borrower now or hereafter owned or held by Guarantor shall not
alter, affect or in any way limit the obligations of Guarantor hereunder.
8. Actions against Guarantor. In the event of a default in the payment
or performance of all or any part of the Guaranteed Indebtedness when such
Guaranteed Indebtedness becomes due, whether by its terms, by acceleration or
otherwise, Guarantor shall, without notice or demand, promptly pay the amount
due thereon to the Agent, in lawful money of the United States, at Agent's
address set forth in subparagraph 1(a) above. One or more successive or
concurrent actions may be brought against Guarantor, either in the same action
in which Borrower is sued or in separate actions, as often as Agent deems
advisable. The exercise by the Agent, the LC Issuer or the Bank(s) of any right
or remedy under this Guaranty or under any other agreement or instrument, at
law, in equity or otherwise, shall not preclude concurrent or subsequent
exercise of any other right or remedy. The books and records of the Agent, the
LC Issuer or the Bank(s) shall be admissible in evidence in any action or
proceeding involving this Guaranty and shall be prima facie evidence of the
payments made on, and the outstanding balance of, the Guaranteed Indebtedness.
9. Payment by Guarantor. Whenever Guarantor pays any sum that is or may
become due under this Guaranty, written notice must be delivered to the Agent
contemporaneously with such payment. Such notice shall be effective for purposes
of this paragraph when
6
contemporaneously with such payment the Agent receives such notice either by:
(a) personal delivery to the address and designated department of the Agent
identified in subparagraph 1(a) above, or (b) United States mail, certified or
registered, return receipt requested, postage prepaid, addressed to the Agent at
the address shown in subparagraph 1(a) above. In the absence of such notice to
the Agent by Guarantor in compliance with the provisions hereof, any sum
received by the Agent on account of the Guaranteed Indebtedness shall be
conclusively deemed paid by Borrower.
10. Waiver of Subrogation. Until the Guaranteed Indebtedness shall have
been fully and indefeasibly paid in full, the Guarantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
Borrower that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including any right of
subrogation, reimbursement, exoneration, or indemnification, any right to
participate in any claim or remedy of the Agent, LC Issuer or the Banks against
Borrower or any collateral which the Agent now has or hereafter acquires,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including the right to take or receive from Borrower,
directly or indirectly, in cash or other property or by set-off or in any
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to the Guarantor in violation of the preceding sentence and
the Guaranteed Indebtedness shall not have been paid in cash in full, such
amount shall be deemed to have been paid to the Guarantor for the benefit of,
and held in trust for, the Agent, the LC Issuer and the Banks, and shall
forthwith be paid to the Agent to be credited and applied upon the Guaranteed
Indebtedness, whether matured or unmatured. The Guarantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated by the Credit Agreement or any other Loan Document and that the
waiver set forth in this section is knowingly made in contemplation of such
benefits.
11. Notice of Sale. In the event that Guarantor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, at the address for Guarantor set forth in
subparagraph 1(d) above, five (5) days prior to the date any public sale, or
after which any private sale, of any such collateral is to be held; provided,
however, that notice given in any other reasonable manner or at any other
reasonable time shall be sufficient.
12. Waiver by Agent or Bank. No delay on the part of the Agent, the LC
Issuer or the Bank(s) in exercising any right hereunder or failure to exercise
the same shall operate as a waiver of such right. In no event shall any waiver
of the provisions of this Guaranty be effective unless the same be in writing
and signed by an officer of the Agent, the LC Issuer or the Bank(s), and then
only in the specific instance and for the purpose given.
13. Successors and Assigns. This Guaranty is for the benefit of the
Agent, each successor Agent, the LC Issuer, each successor LC Issuer, the
Bank(s), and each Bank's successors and assigns. This Guaranty is binding upon
Guarantor and Guarantor's successors and assigns, including without limitation
any person or entity obligated by operation of law upon
7
the reorganization, merger, consolidation or other change in the organizational
structure of Guarantor.
14. Costs and Expenses. Guarantor shall pay on demand by the Agent all
costs and expenses, including without limitation, all reasonable attorneys' fees
incurred by the Agent, the LC Issuer and/or the Bank(s) in connection with the
preparation, administration, enforcement and/or collection of this Guaranty.
This covenant shall survive the payment of the Guaranteed Indebtedness.
15. Severability. If any provision of this Guaranty is held by a court
of competent jurisdiction to be illegal, invalid or unenforceable under present
or future laws, such provision shall be fully severable, shall not impair or
invalidate the remainder of this Guaranty and the effect thereof shall be
confined to the provision held to be illegal, invalid or unenforceable.
16. No Obligation. Nothing contained herein shall be construed as an
obligation on the part of the Agent, the LC Issuer or the Bank(s) to extend or
continue to extend credit to Borrower.
17. Amendment. No modification or amendment of any provision of this
Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of the
Agent, the LC Issuer or the Bank(s), and then shall be effective only in the
specific instance and for the purpose for which given.
18. Cumulative Rights. All rights and remedies of the Agent, the LC
Issuer or the Bank(s) hereunder are cumulative of each other and of every other
right or remedy which the Agent, the LC Issuer or the Bank(s) may otherwise have
at law or in equity or under any instrument or agreement, and the exercise of
one or more of such rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of any other rights or remedies.
19. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.
20. Venue. This Guaranty has been entered into in the county in Texas
where the Agent's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising under or pertaining to
this Guaranty and venue for any such disputes shall be in the county or judicial
district where the Agent's address for notice purposes is located.
21. Compliance with Applicable Usury Laws. Notwithstanding any other
provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, Guarantor
and the Agent, the LC Issuer and the Bank(s) by their acceptance hereof agree
that Guarantor shall never be required or obligated to pay interest in excess of
the maximum nonusurious interest rate as may be authorized by applicable law for
the written contracts which constitute the Guaranteed Indebtedness. It is the
intention of Guarantor and the Agent, LC Issuer and the Bank(s) to conform
strictly to the applicable laws which limit interest rates, and any of the
aforesaid contracts for interest, if and to the extent
8
payable by Guarantor, shall be held to be subject to reduction to the maximum
nonusurious interest rate allowed under said law.
22. Descriptive Headings. The headings in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
23. Restatement. This Guaranty amends and restates in its entirety that
certain Unlimited Guaranty dated as of March 1, 2002 given by Guarantor.
24. Entire Agreement. THIS GUARANTY CONTAINS THE ENTIRE AGREEMENT
BETWEEN GUARANTOR AND THE AGENT, THE LC ISSUER AND THE BANK(S) REGARDING THE
SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR WRITTEN AND ORAL AGREEMENTS AND
UNDERSTANDINGS, IF ANY, REGARDING SAME; PROVIDED, HOWEVER, THIS GUARANTY IS IN
ADDITION TO AND DOES NOT REPLACE, CANCEL, MODIFY OR AFFECT ANY TERMS OF THE
CREDIT AGREEMENT OR ANY LOAN DOCUMENTS (AS DEFINED THEREIN), OR ANY OTHER
GUARANTY OF GUARANTOR NOW OR HEREAFTER HELD BY THE AGENT, THE LC ISSUER OR THE
BANK(S) THAT RELATES TO BORROWER OR ANY OTHER PERSON OR ENTITY.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
9
EXECUTED as of the date first above written.
GUARANTOR:
ULTRA PETROLEUM CORP.
By: /s/ Michael D. Watford
-------------------------------------
Michael D. Watford
President and Chief Executive Officer
[THIS IS THE SIGNATURE PAGE TO THE GUARANTY]
Execution Form
AMENDED AND RESTATED UNLIMITED GUARANTY
THIS AMENDED AND RESTATED UNLIMITED GUARANTY (this "Guaranty") is made as
of June 9, 2004, by Guarantor (as hereinafter defined) for the benefit of the
"Bank(s)", "Agent" and "LC Issuer" (as such terms are hereinafter defined).
1. Definitions. As used in this Guaranty, the following terms shall
have the meanings indicated below:
(a) The term "Agent" shall mean Bank One, NA, as Administrative
Agent for the Banks and the LC Issuer under the Credit Agreement (as
hereinafter defined), whose address is 910 Travis Street, Houston, Harris
County, Texas 77002, Attn: Steve Shatto, and each successor Administrative
Agent.
(b) The term "Bank(s)" shall have the same meaning as that term
has in the Credit Agreement, including each Bank's successors and assigns
as provided for in Section 9.05 thereof.
(c) The term "Borrower" shall mean Ultra Resources, Inc. (a
Wyoming corporation).
(d) The term "Credit Agreement" shall mean that certain Second
Amended and Restated Credit Agreement dated as of June 9, 2004 by and
among Bank One, NA, as Administrative Agent, LC Issuer and a Bank, the
other financial institutions and Banks from time to time party thereto,
and Ultra Resources, Inc., as Borrower, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
(e) The term "Guaranteed Indebtedness" shall mean (i) all
indebtedness, obligations and liabilities of Borrower arising under the
Credit Agreement and other Loan Documents (as defined in the Credit
Agreement) to the Bank(s), the LC Issuer and/or the Agent of any kind or
character, now existing or hereafter arising, whether direct, indirect,
related, unrelated, fixed, contingent, liquidated, unliquidated, joint,
several or joint and several, and regardless of whether such indebtedness,
obligations and liabilities may, prior to their acquisitions by the
Bank(s), the LC Issuer and/or the Agent, respectively, be or have been
payable to or in favor of a third party and subsequently acquired by the
Bank(s), the LC Issuer and/or the Agent (it being contemplated that the
Bank(s), the LC Issuer and/or the Agent may make such acquisitions from
third parties), including without limitation all indebtedness, obligations
and liabilities of Borrower to the Bank(s), the LC Issuer and/or the Agent
now existing or hereafter arising under the Loan Documents by note, draft,
acceptance, guaranty, endorsement, letter of credit, assignment, purchase,
overdraft, discount, indemnity agreement or otherwise, (ii) all accrued
but unpaid interest on any of the indebtedness described in (i) above
(including all such amounts which would become due but for the operation
of the automatic stay under Section 362(a) of the United States Bankruptcy
Code, 11 U.S.C. Section 362(a), and the operation of Sections 502(b) and
506(b) of the United States Bankruptcy Code, 11 U.S.C. Section 502(b) and
Section 506(b)), (iii) all costs and expenses incurred by the Bank(s),
the LC Issuer
and/or the Agent in connection with the collection and administration of
all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon,
the collateral securing all or any part of such indebtedness and
obligations, including without limitation all reasonable attorneys' fees,
and (iv) all renewals, extensions, modifications and rearrangements of the
indebtedness and obligations described in (i), (ii) and (iii) above.
(f) The term "Guarantor" shall mean UP Energy Corporation, a
Nevada corporation, whose address for notice purposes is the following:
363 N. Sam Houston Parkway, Suite 1200
Houston, Texas 77060
Attn: Mr. Michael D. Watford
Telephone: (281) 876-0120
Telecopy: (281) 876-2831
(g) The term "LC Issuer" shall mean Bank One, NA (or any
subsidiary or affiliate of Bank One designated by Bank One, NA and
reasonably acceptable to Borrower) in its capacity as issuer of Facility
LCs (as defined in the Credit Agreement).
2. Obligations. As an inducement to Bank(s), the LC Issuer and/or the
Agent to extend or continue to extend credit and other financial accommodations
to Borrower, Guarantor, for value received, does hereby unconditionally and
absolutely guarantee the prompt and full payment and performance of the
Guaranteed Indebtedness when due or declared to be due and at all times
thereafter.
3. Character of Obligations. This is an absolute, continuing and
unconditional guaranty of payment and performance and not of collection and if
at any time or from time to time there is no outstanding Guaranteed
Indebtedness, the obligations of Guarantor with respect to any and all
Guaranteed Indebtedness incurred thereafter shall not be affected. All
Guaranteed Indebtedness heretofore, concurrently herewith or hereafter made by
Bank(s), the LC Issuer and/or the Agent to Borrower shall be conclusively
presumed to have been made or acquired in acceptance hereof. Guarantor shall be
liable, jointly and severally, with Borrower and any other guarantor of all or
any part of the Guaranteed Indebtedness.
4. Representations and Warranties. Guarantor hereby represents and
warrants the following to the Agent and to the Bank(s):
(a) The Board of Directors of Guarantor has determined that this
Guaranty may reasonably be expected to benefit, directly or indirectly,
Guarantor, and that the value of the benefits that Guarantor will derive
from giving this Guaranty are reasonably equivalent to the value of the
Guaranty; and
(b) Guarantor is familiar with, and has independently reviewed the
books and records regarding, the financial condition of Borrower and is
familiar with the value of any and all collateral intended to be security
for the payment of all or any part of the
2
Guaranteed Indebtedness; provided, however, Guarantor is not relying on
such financial condition or collateral as an inducement to enter into this
Guaranty; and
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition of
Borrower and Guarantor is not relying on the Agent, the Bank(s) or the LC
Issuer to provide such information to Guarantor either now or in the
future; and
(d) Guarantor has the power and authority to execute, deliver and
perform this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith, and the execution, delivery and performance of
this Guaranty and any other agreements executed by Guarantor
contemporaneously herewith do not and will not violate (i) any agreement
or instrument to which Guarantor is a party, (ii) any law, rule,
regulation or order of any governmental authority to which Guarantor is
subject, or (iii) its articles or certificate of incorporation or bylaws;
and
(e) Neither the Agent, the Bank(s), the LC Issuer nor any other
party has made any representation, warranty or statement to Guarantor in
order to induce Guarantor to execute this Guaranty; and
(f) The financial statements and other financial information
regarding Guarantor heretofore and hereafter delivered to the Agent, the
LC Issuer and/or the Bank(s) are and shall be true and correct in all
material respects and fairly present the financial position of Guarantor
as of the dates thereof, and no material adverse change has occurred in
the financial condition of Guarantor reflected in the financial statements
and other financial information regarding Guarantor heretofore delivered
to the Agent, the LC Issuer and/or the Bank(s) since the date of the last
statement thereof; and
(g) As of the date hereof, and after giving effect to this
Guaranty and the obligations evidenced hereby, (i) Guarantor is and will
be solvent, (ii) the fair saleable value of Guarantor's assets exceeds and
will continue to exceed its liabilities (both fixed and contingent), (iii)
Guarantor is and will continue to be able to pay its debts as they mature,
and (iv) Guarantor has and will continue to have sufficient capital to
carry on its business and all businesses in which it is about to engage.
5. Covenants. Guarantor hereby covenants and agrees with the Agent, the
LC Issuer and the Bank(s) as follows:
(a) Guarantor shall not, so long as its obligations under this
Guaranty continue, transfer or pledge any material portion of its assets
for less than full and adequate consideration; and
(b) Guarantor shall promptly furnish to the Agent at any time and
from time to time such financial statements and other financial
information of Guarantor as the Agent may require, in form and substance
satisfactory to Agent; and
3
(c) Guarantor shall comply with all terms and provisions of the
Loan Documents (as defined in the Credit Agreement) that apply to
Guarantor; and
(d) Promptly upon a Responsible Officer of Guarantor becoming
aware, Guarantor shall promptly inform the Agent of (i) any litigation or
governmental investigation against Guarantor or affecting any security for
all or any part of the Guaranteed Indebtedness or this Guaranty which, if
determined adversely, might have a material adverse effect upon the
financial condition of Guarantor or upon such security or might cause a
default under any of the Loan Documents, (ii) any claim or controversy
which might become the subject of such litigation or governmental
investigation, and (iii) any material adverse change in the financial
condition of Guarantor.
6. Consent and Waiver.
(a) Guarantor waives (i) promptness, diligence and notice of
acceptance of this Guaranty and notice of the incurring of any obligation,
indebtedness or liability to which this Guaranty applies or may apply and
waives presentment for payment, notice of nonpayment, protest, demand,
notice of protest, notice of intent to accelerate, notice of acceleration,
notice of dishonor, diligence in enforcement and indulgences of every
kind, and (ii) the taking of any other action by the Agent, the LC Issuer
and/or the Bank(s), including without limitation, giving any notice of
default or any other notice to, or making any demand on, Borrower, any
other guarantor of all or any part of the Guaranteed Indebtedness or any
other party.
(b) Guarantor waives each and every right to which it may be
entitled by virtue of the suretyship law of the State of Texas including,
without limitation, any rights it may have pursuant to Rule 31, Texas
Rules of Civil Procedure, Section 17.001, Civil Practice and Remedies
Code, and Chapter 34 of the Texas Business and Commerce Code, each as in
effect on the date of this Guaranty.
(c) The Agent, the LC Issuer and/or the Bank(s) may at any time,
without the consent of or notice to Guarantor, without incurring
responsibility to Guarantor and without impairing, releasing, reducing or
affecting the obligations of Guarantor hereunder: (i) change the manner,
place or terms of payment of all or any part of the Guaranteed
Indebtedness, or renew, extend, modify, rearrange or alter all or any part
of the Guaranteed Indebtedness; (ii) change the interest rate accruing on
any of the Guaranteed Indebtedness (including, without limitation, any
periodic change in such interest rate that occurs because such Guaranteed
Indebtedness accrues interest at a variable rate which may fluctuate from
time to time); (iii) sell, exchange, release, surrender, subordinate,
realize upon or otherwise deal with in any manner and in any order any
collateral for all or any part of the Guaranteed Indebtedness or this
Guaranty or setoff against all or any part of the Guaranteed Indebtedness;
(iv) neglect, delay, omit, fail or refuse to take or prosecute any action
for the collection of all or any part of the Guaranteed Indebtedness or
this Guaranty or to take or prosecute any action in connection with any of
the Loan Documents; (v) exercise or refrain from exercising any rights
against Borrower or others, or otherwise act or refrain from acting; (vi)
settle or compromise all or any part of the Guaranteed Indebtedness and
subordinate the payment
4
of all or any part of the Guaranteed Indebtedness to the payment of any
obligations, indebtedness or liabilities which may be due or become due to
the Bank(s), the LC Issuer and/or the Agent or others; and (vii) apply any
sums paid to the Bank(s), the LC Issuer and/or the Agent by Guarantor,
Borrower or others to the Guaranteed Indebtedness in such order and manner
as the Agent, in its sole discretion, may determine.
(d) Should the Agent, the LC Issuer or the Bank(s) seek to enforce
the obligations of Guarantor hereunder by action in any court or
otherwise, Guarantor waives any requirement, substantive or procedural,
that (i) the Agent, the LC Issuer or the Bank(s) first enforce any rights
or remedies against Borrower or any other person or entity liable to any
of such parties for all or any part of the Guaranteed Indebtedness,
including without limitation that a judgment first be rendered against
Borrower or any other person or entity, or that Borrower or any other
person or entity should be joined in such cause, or (ii) the Agent, the LC
Issuer or the Bank(s) shall first enforce rights against any collateral
which shall ever have been given to secure all or any part of the
Guaranteed Indebtedness or this Guaranty. Such waiver shall be without
prejudice to the Agent's, the LC Issuer's or the Bank(s)' right, at its
option, to proceed against Borrower or any other person or entity, whether
by separate action or by joinder.
(e) In addition to any other waivers, agreements and covenants of
Guarantor set forth herein, Guarantor hereby further waives and releases
all claims, causes of action, defenses and offsets for any act or omission
of the Agent and/or the Agent's directors, officers, employees,
representatives or agents in connection with Agent's administration of the
Guaranteed Indebtedness, except for the Agent's willful misconduct and
gross negligence (IT BEING THE INTENTION OF THE GUARANTOR THAT THE AGENT
AND/OR THE AGENT'S DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES OR
AGENTS IN CONNECTION WITH AGENT'S ADMINISTRATION OF THE GUARANTEED
INDEBTEDNESS SHALL BE INDEMNIFIED BY THE GUARANTOR FOR THE SUCH PERSON'S
ORDINARY NEGLIGENCE).
7. Obligations Not Impaired.
(a) Guarantor agrees that its obligations hereunder shall not be
released, diminished, impaired, reduced or affected by the occurrence of
any one or more of the following events: (i) the death, disability or lack
of corporate power of Borrower, Guarantor (except as provided in paragraph
11 herein) or any other guarantor of all or any part of the Guaranteed
Indebtedness, (ii) any receivership, insolvency, bankruptcy or other
proceedings affecting Borrower, Guarantor or any other guarantor of all or
any part of the Guaranteed Indebtedness, or any of their respective
property; (iii) the partial or total release or discharge of Borrower or
any other guarantor of all or any part of the Guaranteed Indebtedness, or
any other person or entity from the performance of any obligation
contained in any instrument or agreement evidencing, governing or securing
all or any part of the Guaranteed Indebtedness, whether occurring by
reason of law or otherwise; (iv) the taking or accepting of any collateral
for all or any part of the Guaranteed Indebtedness or this Guaranty; (v)
the taking or accepting of any other
5
guaranty for all or any part of the Guaranteed Indebtedness; (vi) any
failure by the Agent, the LC Issuer or the Bank(s) to acquire, perfect or
continue any lien or security interest on collateral securing all or any
part of the Guaranteed Indebtedness or this Guaranty; (vii) the impairment
of any collateral securing all or any part of the Guaranteed Indebtedness
or this Guaranty; (viii) any failure by the Agent, the LC Issuer or the
Bank(s) to sell any collateral securing all or any part of the Guaranteed
Indebtedness or this Guaranty in a commercially reasonable manner or as
otherwise required by law; (ix) any invalidity or unenforceability of or
defect or deficiency in any of the Loan Documents; or (x) any other
circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower or any other guarantor of all or any part of the
Guaranteed Indebtedness.
(b) This Guaranty shall continue to be effective or be reinstated,
as the case may be, if at any time any payment of all or any part of the
Guaranteed Indebtedness is rescinded or must otherwise be returned by the
Agent, the LC Issuer or the Bank(s) upon the insolvency, bankruptcy or
reorganization of Borrower, Guarantor, any other guarantor of all or any
part of the Guaranteed Indebtedness, or otherwise, all as though such
payment had not been made.
(c) None of the following shall affect Guarantor's liability
hereunder: (i) the unenforceability of all or any part of the Guaranteed
Indebtedness against Borrower by reason of the fact that the Guaranteed
Indebtedness exceeds the amount permitted by law; (ii) the act of creating
all or any part of the Guaranteed Indebtedness is ultra vires; or (iii)
the officers or partners creating all or any part of the Guaranteed
Indebtedness acted in excess of their authority. Guarantor hereby
acknowledges that withdrawal from, or termination of, any ownership
interest in Borrower now or hereafter owned or held by Guarantor shall not
alter, affect or in any way limit the obligations of Guarantor hereunder.
8. Actions against Guarantor. In the event of a default in the payment
or performance of all or any part of the Guaranteed Indebtedness when such
Guaranteed Indebtedness becomes due, whether by its terms, by acceleration or
otherwise, Guarantor shall, without notice or demand, promptly pay the amount
due thereon to the Agent, in lawful money of the United States, at Agent's
address set forth in subparagraph 1(a) above. One or more successive or
concurrent actions may be brought against Guarantor, either in the same action
in which Borrower is sued or in separate actions, as often as Agent deems
advisable. The exercise by the Agent, the LC Issuer or the Bank(s) of any right
or remedy under this Guaranty or under any other agreement or instrument, at
law, in equity or otherwise, shall not preclude concurrent or subsequent
exercise of any other right or remedy. The books and records of the Agent, the
LC Issuer or the Bank(s) shall be admissible in evidence in any action or
proceeding involving this Guaranty and shall be prima facie evidence of the
payments made on, and the outstanding balance of, the Guaranteed Indebtedness.
9. Payment by Guarantor. Whenever Guarantor pays any sum that is or may
become due under this Guaranty, written notice must be delivered to the Agent
contemporaneously with such payment. Such notice shall be effective for purposes
of this paragraph when
6
contemporaneously with such payment the Agent receives such notice either by:
(a) personal delivery to the address and designated department of the Agent
identified in subparagraph 1(a) above, or (b) United States mail, certified or
registered, return receipt requested, postage prepaid, addressed to the Agent at
the address shown in subparagraph 1(a) above. In the absence of such notice to
the Agent by Guarantor in compliance with the provisions hereof, any sum
received by the Agent on account of the Guaranteed Indebtedness shall be
conclusively deemed paid by Borrower.
10. Waiver of Subrogation. Until the Guaranteed Indebtedness shall have
been fully and indefeasibly paid in full, the Guarantor hereby irrevocably
waives any claim or other rights which it may now or hereafter acquire against
Borrower that arise from the existence, payment, performance or enforcement of
the Guarantor's obligations under this Guaranty, including any right of
subrogation, reimbursement, exoneration, or indemnification, any right to
participate in any claim or remedy of the Agent, LC Issuer or the Banks against
Borrower or any collateral which the Agent now has or hereafter acquires,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including the right to take or receive from Borrower,
directly or indirectly, in cash or other property or by set-off or in any
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to the Guarantor in violation of the preceding sentence and
the Guaranteed Indebtedness shall not have been paid in cash in full, such
amount shall be deemed to have been paid to the Guarantor for the benefit of,
and held in trust for, the Agent, the LC Issuer and the Banks, and shall
forthwith be paid to the Agent to be credited and applied upon the Guaranteed
Indebtedness, whether matured or unmatured. The Guarantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated by the Credit Agreement or any other Loan Document and that the
waiver set forth in this section is knowingly made in contemplation of such
benefits.
11. Notice of Sale. In the event that Guarantor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in the state
governing any such notice, of the sale or other disposition of any collateral
securing all or any part of the Guaranteed Indebtedness or this Guaranty,
reasonable notice shall be deemed given when such notice is deposited in the
United States mail, postage prepaid, at the address for Guarantor set forth in
subparagraph 1(d) above, five (5) days prior to the date any public sale, or
after which any private sale, of any such collateral is to be held; provided,
however, that notice given in any other reasonable manner or at any other
reasonable time shall be sufficient.
12. Waiver by Agent or Bank. No delay on the part of the Agent, the LC
Issuer or the Bank(s) in exercising any right hereunder or failure to exercise
the same shall operate as a waiver of such right. In no event shall any waiver
of the provisions of this Guaranty be effective unless the same be in writing
and signed by an officer of the Agent, the LC Issuer or the Bank(s), and then
only in the specific instance and for the purpose given.
13. Successors and Assigns. This Guaranty is for the benefit of the
Agent, each successor Agent, the LC Issuer, each successor LC Issuer, the
Bank(s), and each Bank's successors and assigns. This Guaranty is binding upon
Guarantor and Guarantor's successors and assigns, including without limitation
any person or entity obligated by operation of law upon
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the reorganization, merger, consolidation or other change in the organizational
structure of Guarantor.
14. Costs and Expenses. Guarantor shall pay on demand by the Agent all
costs and expenses, including without limitation, all reasonable attorneys' fees
incurred by the Agent, the LC Issuer and/or the Bank(s) in connection with the
preparation, administration, enforcement and/or collection of this Guaranty.
This covenant shall survive the payment of the Guaranteed Indebtedness.
15. Severability. If any provision of this Guaranty is held by a court
of competent jurisdiction to be illegal, invalid or unenforceable under present
or future laws, such provision shall be fully severable, shall not impair or
invalidate the remainder of this Guaranty and the effect thereof shall be
confined to the provision held to be illegal, invalid or unenforceable.
16. No Obligation. Nothing contained herein shall be construed as an
obligation on the part of the Agent, the LC Issuer or the Bank(s) to extend or
continue to extend credit to Borrower.
17. Amendment. No modification or amendment of any provision of this
Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by an officer of the
Agent, the LC Issuer or the Bank(s), and then shall be effective only in the
specific instance and for the purpose for which given.
18. Cumulative Rights. All rights and remedies of the Agent, the LC
Issuer or the Bank(s) hereunder are cumulative of each other and of every other
right or remedy which the Agent, the LC Issuer or the Bank(s) may otherwise have
at law or in equity or under any instrument or agreement, and the exercise of
one or more of such rights or remedies shall not prejudice or impair the
concurrent or subsequent exercise of any other rights or remedies.
19. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.
20. Venue. This Guaranty has been entered into in the county in Texas
where the Agent's address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising under or pertaining to
this Guaranty and venue for any such disputes shall be in the county or judicial
district where the Agent's address for notice purposes is located.
21. Compliance with Applicable Usury Laws. Notwithstanding any other
provision of this Guaranty or of any instrument or agreement evidencing,
governing or securing all or any part of the Guaranteed Indebtedness, Guarantor
and the Agent, the LC Issuer and the Bank(s) by their acceptance hereof agree
that Guarantor shall never be required or obligated to pay interest in excess of
the maximum nonusurious interest rate as may be authorized by applicable law for
the written contracts which constitute the Guaranteed Indebtedness. It is the
intention of Guarantor and the Agent, LC Issuer and the Bank(s) to conform
strictly to the applicable laws which limit interest rates, and any of the
aforesaid contracts for interest, if and to the extent
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payable by Guarantor, shall be held to be subject to reduction to the maximum
nonusurious interest rate allowed under said law.
22. Descriptive Headings. The headings in this Guaranty are for
convenience only and shall not define or limit the provisions hereof.
23. Restatement. This Guaranty amends and restates in its entirety that
certain Unlimited Guaranty dated as of March 1, 2002 given by Guarantor.
24. Entire Agreement. THIS GUARANTY CONTAINS THE ENTIRE AGREEMENT
BETWEEN GUARANTOR AND THE AGENT, THE LC ISSUER AND THE BANK(S) REGARDING THE
SUBJECT MATTER HEREOF AND SUPERSEDES ALL PRIOR WRITTEN AND ORAL AGREEMENTS AND
UNDERSTANDINGS, IF ANY, REGARDING SAME; PROVIDED, HOWEVER, THIS GUARANTY IS IN
ADDITION TO AND DOES NOT REPLACE, CANCEL, MODIFY OR AFFECT ANY TERMS OF THE
CREDIT AGREEMENT OR ANY LOAN DOCUMENTS (AS DEFINED THEREIN), OR ANY OTHER
GUARANTY OF GUARANTOR NOW OR HEREAFTER HELD BY THE AGENT, THE LC ISSUER OR THE
BANK(S) THAT RELATES TO BORROWER OR ANY OTHER PERSON OR ENTITY.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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EXECUTED as of the date first above written.
GUARANTOR:
UP ENERGY CORPORATION
By: /s/ Michael D. Watford
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Michael D. Watford
President and Chief Executive Officer
[THIS IS THE SIGNATURE PAGE TO THE GUARANTY]
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