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EXHIBIT 10.18
AMENDED AND RESTATED SENIOR UNSECURED
CREDIT AGREEMENT
AMONG
CALLON PETROLEUM COMPANY,
AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION
AS ADMINISTRATIVE AGENT,
AND
THE LENDERS SIGNATORY HERETO
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CONVERTIBLE TERM LOAN
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DATED AS OF DECEMBER 8, 2003
AMENDED AND RESTATED AS OF DECEMBER 23, 2003
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 Terms Defined Above...................................................................... 1
Section 1.02 Certain Defined Terms.................................................................... 1
Section 1.03 Accounting Terms and Determinations...................................................... 30
ARTICLE II
COMMITMENTS
Section 2.01 Loans.................................................................................... 30
Section 2.02 Option to Issue Additional Notes......................................................... 30
Section 2.03 Notes.................................................................................... 31
Section 2.04 Prepayments.............................................................................. 33
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Repayment of Loans....................................................................... 34
Section 3.02 Interest................................................................................. 34
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
Section 4.01 Payments................................................................................. 34
Section 4.02 Pro Rata Treatment....................................................................... 35
Section 4.03 Computations............................................................................. 35
Section 4.04 Set-off, Sharing of Payments, Etc........................................................ 35
Section 4.05 Taxes.................................................................................... 36
ARTICLE V
CONVERSION OF NOTES
Section 5.01 Conversion under Rule 144A............................................................... 39
Section 5.02 Remedies for Certain Events.............................................................. 40
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ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Documents to be Delivered on Amendment and Restatement Date.............................. 41
Section 6.02 Conditions Precedent to Funding.......................................................... 42
Section 6.03 Conditions Precedent for the Benefit of Lenders.......................................... 42
Section 6.04 No Waiver................................................................................ 42
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Section 7.01 Corporate Existence; Capitalization...................................................... 42
Section 7.02 Financial Condition...................................................................... 43
Section 7.03 Litigation............................................................................... 44
Section 7.04 No Breach................................................................................ 44
Section 7.05 Authority................................................................................ 44
Section 7.06 Approvals................................................................................ 44
Section 7.07 Use of Loans............................................................................. 44
Section 7.08 ERISA.................................................................................... 45
Section 7.09 Taxes.................................................................................... 46
Section 7.10 Titles, Property, etc.................................................................... 46
Section 7.11 No Material Misstatements................................................................ 47
Section 7.12 Investment Company Act................................................................... 47
Section 7.13 Public Utility Holding Company Act....................................................... 47
Section 7.14 Subsidiaries............................................................................. 47
Section 7.15 Location of Business and Offices......................................................... 48
Section 7.16 Defaults................................................................................. 48
Section 7.17 Environmental Matters.................................................................... 49
Section 7.18 Compliance with the Law.................................................................. 50
Section 7.19 Insurance................................................................................ 50
Section 7.20 Hedging Agreements....................................................................... 50
Section 7.21 Material Agreements...................................................................... 51
Section 7.22 Gas Imbalances........................................................................... 51
Section 7.23 Labor Relations.......................................................................... 51
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Section 7.24 Intellectual Property.................................................................... 52
ARTICLE VIII
AFFIRMATIVE COVENANTS
Section 8.01 Reporting Requirements................................................................... 52
Section 8.02 Litigation............................................................................... 54
Section 8.03 Maintenance, Etc......................................................................... 54
Section 8.04 Environmental Matters.................................................................... 55
Section 8.05 Further Assurances....................................................................... 55
Section 8.06 Performance of Obligations............................................................... 56
Section 8.07 ERISA Information and Compliance......................................................... 56
Section 8.08 Restricted Subsidiaries.................................................................. 56
Section 8.09 Use of Proceeds of Qualified Offering.................................................... 56
Section 8.10 Rating................................................................................... 57
ARTICLE IX
NEGATIVE COVENANTS
Section 9.01 Debt Incurrence.......................................................................... 57
Section 9.02 Liens.................................................................................... 57
Section 9.03 Restricted Investments; Restrictive Agreements........................................... 58
Section 9.04 Sales and Leasebacks..................................................................... 63
Section 9.05 Nature of Business....................................................................... 63
Section 9.06 Limitation on Leases..................................................................... 63
Section 9.07 Consolidation and Merger................................................................. 64
Section 9.08 Proceeds of Notes and Loans.............................................................. 64
Section 9.09 ERISA Compliance......................................................................... 64
Section 9.10 Sale or Discount of Receivables.......................................................... 65
Section 9.11 Sale of Property......................................................................... 65
Section 9.12 Environmental Matters.................................................................... 68
Section 9.13 Transactions with Affiliates............................................................. 68
Section 9.14 Subordinated Debt........................................................................ 68
Section 9.15 Issuance and Sale of Capital Stock....................................................... 68
Section 9.16 Modification of Agreements............................................................... 68
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Section 9.17 Guarantees............................................................................... 69
Section 9.18 Limitation on Additional Debt............................................................ 69
Section 9.19 Permitted Medusa Transactions............................................................ 69
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default........................................................................ 69
Section 10.02 Remedies................................................................................. 71
ARTICLE XI
THE ADMINISTRATIVE AGENT
Section 11.01 Appointment, Powers and Immunities....................................................... 71
Section 11.02 Reliance by Administrative Agent......................................................... 72
Section 11.03 Defaults................................................................................. 72
Section 11.04 INDEMNIFICATION.......................................................................... 73
Section 11.05 Non-Reliance on Administrative Agent and other Lenders................................... 73
Section 11.06 Action by Administrative Agent........................................................... 73
Section 11.07 Resignation or Removal of Administrative Agent........................................... 74
ARTICLE XII
MISCELLANEOUS
Section 12.01 Waiver................................................................................... 74
Section 12.02 Notices.................................................................................. 75
Section 12.03 Payment of Expenses, Indemnities, etc.................................................... 75
Section 12.04 Amendments, Etc.......................................................................... 78
Section 12.05 Successors and Assigns................................................................... 78
Section 12.06 Assignments and Participations........................................................... 78
Section 12.07 Invalidity............................................................................... 79
Section 12.08 Counterparts............................................................................. 79
Section 12.09 References............................................................................... 79
Section 12.10 Survival................................................................................. 79
Section 12.11 Captions................................................................................. 79
Section 12.12 No Oral Agreements....................................................................... 79
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Section 12.13 Governing Law; Submission To Jurisdiction................................................ 80
Section 12.14 Interest................................................................................. 81
Section 12.15 Confidentiality.......................................................................... 82
Section 12.16 Effectiveness............................................................................ 83
Section 12.17 Exculpation Provisions................................................................... 83
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ANNEXES, EXHIBITS AND SCHEDULES
Annex I - List of Commitments
Exhibit A - Form of Note
Exhibit B - Form of Compliance Certificate
Exhibit C - Form of Responsible Officer's Certificate
Exhibit D - Form of Assignment Agreement
Exhibit E-1 - Form of Maximum Credit Amount Increase Certificate
Exhibit E-2 - Form of Additional Lender Certificate
Schedule 7.01(b) - Capitalization
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.09 - Taxes
Schedule 7.10 - Titles, Property, etc.
Schedule 7.14 - Subsidiaries and Partnerships
Schedule 7.17 - Environmental Matters
Schedule 7.19 - Insurance
Schedule 7.20 - Hedging Agreements
Schedule 7.21 - Material Agreements
Schedule 7.22 - Gas Imbalances
Schedule 9.01 - Debt
Schedule 9.02 - Liens
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THIS CREDIT AGREEMENT, dated as of December 8, 2003, and amended and
restated as of December 23, 2003, is made by and among CALLON PETROLEUM COMPANY,
a Delaware corporation (the "BORROWER"); each of the lenders that is a signatory
hereto or which becomes a signatory hereto pursuant to Section 2.02 or as
provided in SECTION 12.06 (individually, together with its successors and
assigns, a "LENDER" and, collectively, the "LENDERS"); each of the new lenders
that is a signatory hereto or which becomes a signatory hereto as provided in
SECTION 12.06 (individually, together with its successors and assigns, a "NEW
LENDER" and, collectively, the "NEW LENDERS"); and Wells Fargo Bank, National
Association, a national banking association, as administrative agent for the
Lenders (in such capacity, together with its successors in such capacity, the
"ADMINISTRATIVE AGENT").
RECITALS
A. The Lenders have made certain loans subject to the terms and
conditions of the Credit Agreement between Borrower and the Lenders dated
December 8, 2003 in the amount of $100,000,000 (the "CREDIT AGREEMENT").
B. The Borrower and the Lenders desire to amend and restate the
Credit Agreement and increase the amount of the loans to $185,000,000 by adding
New Lenders.
C. In consideration of the mutual covenants and agreements herein
contained and of the loans and commitments hereinafter referred to, the parties
hereto agree that the Credit Agreement is hereby amended and restated as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
SECTION 1.01 TERMS DEFINED ABOVE. As used in this Agreement, the
terms "ADMINISTRATIVE AGENT," "BORROWER," "CREDIT Agreement," "LENDER,"
"LENDERS," "NEW LENDER" and "NEW LENDERS" shall have the meanings indicated
above and, unless the context otherwise requires, the terms Lender and Lenders
shall include the terms New Lender and New Lenders, respectively.
SECTION 1.02 CERTAIN DEFINED TERMS. As used herein, the following
terms shall have the following meanings (all terms defined in this ARTICLE I or
in other provisions of this Agreement in the singular to have equivalent
meanings when used in the plural and vice versa):
"ADDITIONAL LENDER" shall have the meaning assigned to such term in
SECTION 2.02(a).
"ADDITIONAL LENDER CERTIFICATE" shall have the meaning assigned to
such term in SECTION 2.02(b).
"ADDITIONAL LOANS" shall have the meaning assigned to such term in
SECTION 2.01(a).
"ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS" shall mean (without
duplication), as of the date of determination, the remainder of:
(a) the sum of:
(1) discounted future net revenue from proved oil and
gas reserves of Borrower and its Restricted Subsidiaries calculated
in accordance with SEC guidelines but (x) using average prices
received by Borrower and its Restricted Subsidiaries during the
preceding year ( or, for purposes of any calculation made pursuant
to SECTION 9.01(b), NYMEX Strip Price on the date of such
calculation) and (y) before any state, federal or foreign income
taxes, as estimated by Borrower in a reserve report prepared as of
the end of Borrower's most recently completed fiscal year for which
audited financial statements are available, and any other Oil and
Gas Property in which Borrower or any Restricted Subsidiary
maintains an interest in oil and gas reserves, as increased by, as
of the date of determination, the estimated discounted future net
revenues from:
(A) estimated proved oil and gas reserves of
Borrower, its Restricted Subsidiaries and Borrower's and its
Restricted Subsidiaries' share of Oil and Gas Properties
acquired since such year end (including, for purposes of any
calculation made pursuant to SECTION 9.01(b) any Oil and Gas
Properties to be acquired in connection with such incurrence
of Debt), which reserves were not reflected in such year end
reserve report, and
(B) estimated oil and gas reserves of Borrower,
its Restricted Subsidiaries and Borrower's and its Restricted
Subsidiaries' share of Oil and Gas Properties attributable to
extensions, discoveries and other additions and upward
revisions of estimates of proved oil and gas reserves since
such year end due to exploration, development, exploitation or
production activities, in each case calculated in accordance
with SEC guidelines (utilizing the prices utilized in such
year end reserve report), and decreased by, as of the date of
determination, the estimated discounted future net revenues
from:
(C) estimated proved oil and gas reserves of
Borrower, its Restricted Subsidiaries and Borrower's and its
Restricted Subsidiaries' share of Oil and Gas Properties
produced or disposed of since such year end, and
(D) estimated oil and gas reserves of Borrower,
its Restricted Subsidiaries and Borrower's and its Restricted
Subsidiaries' share of Oil and Gas Properties attributable to
downward revisions of estimates of proved oil and gas reserves
since such year end due to changes in geological conditions or
other factors which would, in accordance with standard
industry practice, cause such revisions, in each
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case calculated on a pre-tax basis and substantially in
accordance with SEC guidelines (utilizing the prices utilized
in such year end reserve report), in each case as estimated by
Borrower's petroleum engineers or any independent petroleum
engineers engaged by Borrower for that purpose;
(2) the capitalized costs that are attributable to Oil
and Gas Properties of Borrower, its Restricted Subsidiaries and
Borrower's and its Restricted Subsidiaries' share of Oil and Gas
Properties to which no proved oil and gas reserves are attributable,
based on Borrower's books and records as of a date no earlier than
the date of Borrower's latest available annual or quarterly
financial statements;
(3) the consolidated net working capital of Borrower and
its Restricted Subsidiaries on a date no earlier than the date of
Borrower's latest annual or quarterly financial statements; and
(4) the greater of:
(A) the net book value of other tangible assets of
Borrower and its Restricted Subsidiaries, as of a date no
earlier than the date of Borrower's latest annual or quarterly
financial statements, and
(B) the appraised value, as estimated by
independent appraisers (reasonably acceptable to the
Administrative Agent), of other tangible assets of Borrower
and its Restricted Subsidiaries, as of a date no earlier than
the date of Borrower's latest audited financial statements;
minus
(b) the sum of:
(1) minority interests;
(2) to the extent included in (a)(1) above, any net gas
balancing liabilities of Borrower and its Restricted Subsidiaries
reflected in Borrower's latest audited financial statements;
(3) to the extent included in (a)(1) above, the
discounted future net revenues, calculated in accordance with SEC
guidelines (utilizing the prices utilized in Borrower's most recent
year end reserve report), attributable to reserves which are
required to be delivered to third parties to fully satisfy the
obligations of Borrower and its Restricted Subsidiaries with respect
to Volumetric Production Payments (determined, if applicable, using
the schedules specified with respect thereto); and
(4) the discounted future net revenues, calculated in
accordance with SEC guidelines, attributable to reserves subject to
Dollar-Denominated Production Payments which, based on the estimates
of production
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and price assumptions included in determining the discounted future
net revenues specified in (a)(1) above, would be necessary to fully
satisfy the payment obligations of Borrower and its Restricted
Subsidiaries with respect to Dollar-Denominated Production Payments
(determined, if applicable, using the schedules specified with
respect thereto).
"AFFILIATE" of any Person shall mean (i) any Person directly or
indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual and any trust whose principal beneficiary is such
individual or one or more members of such immediate family and any Person who is
controlled by any such member or trust. For purposes of this definition, any
Person which owns directly or indirectly 15% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 15% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to "control" (including, with its correlative meanings, "controlled by"
and "under common control with") such corporation or other Person.
"AGREEMENT" shall mean this Amended and Restated Credit Agreement,
as the same may from time to time be amended or supplemented.
"AMENDMENT AND RESTATEMENT DATE" shall mean December 23, 2003.
"ASSET DISPOSITION" shall mean any direct or indirect sale, lease
(other than an operating lease entered into in the ordinary course of business),
transfer, issuance or other disposition, or a series of related sales, leases,
transfers, issuances or dispositions that are part of a common plan, of shares
of capital stock of a Subsidiary (other than directors' qualifying shares) or
other Property (each referred to for the purposes of this definition as a
"disposition") by Borrower or any of its Restricted Subsidiaries, including any
disposition by means of a merger, consolidation or similar transaction.
Notwithstanding the preceding, the following items shall not be
deemed to be Asset Dispositions:
(a) a disposition by a Restricted Subsidiary to Borrower or by
Borrower or a Restricted Subsidiary to a Wholly-Owned Subsidiary;
(b) the sale of Cash Equivalents in the ordinary course of
business;
(c) a disposition of Hydrocarbons in the ordinary course of
business;
(d) a disposition or abandonment of obsolete or worn out
equipment or equipment that is no longer useful in the conduct of the
business of Borrower and its Restricted Subsidiaries and that is disposed
of in each case in the ordinary course of business;
(e) transactions permitted under SECTION 9.07;
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(f) an issuance of capital stock by a Restricted Subsidiary of
Borrower to Borrower or to a Wholly-Owned Subsidiary;
(g) for purposes of this definition only, the making of a
Permitted Investment or a disposition subject to SECTION 9.03;
(h) dispositions of assets of Borrower designated by Borrower
as not constituting an Asset Disposition with an aggregate fair market
value since the Closing Date of less than $5,000,000;
(i) dispositions in connection with Liens permitted under
SECTION 9.02;
(j) the licensing or sublicensing of intellectual property or
other general intangibles and licenses, leases or subleases of other
property in the ordinary course of business which do not materially
interfere with the business of Borrower and its Restricted Subsidiaries;
(k) foreclosure on assets;
(l) sale, transfer or abandonment (whether or not in the
ordinary course of business) of Oil and Gas Properties or direct or
indirect interests in Property; provided that at the time of such sale or
transfer such Properties do not have associated with them any material
proved reserves;
(m) the abandonment, farm-out, lease or sublease of developed
or undeveloped Oil and Gas Properties in the ordinary course of business;
(n) the trade or exchange by Borrower or any Restricted
Subsidiary of any Oil and Gas Properties owned or held by Borrower or such
Restricted Subsidiary for Oil and Gas Properties owned or held by another
Person, including any cash or Cash Equivalents necessary in order to
achieve an exchange of equivalent value; provided that any such cash or
Cash Equivalents received by Borrower or such Restricted Subsidiary will
be subject to the provisions described in SECTION 9.11, which the board of
directors of Borrower determines in good faith by resolution to be of
approximately equivalent value.
"ASSET DISPOSITION OFFER" shall have the meaning assigned such term
in SECTION 9.11(b).
"ASSET DISPOSITION OFFER AMOUNT" shall have the meaning assigned
such term in SECTION 9.11(b).
"ASSET DISPOSITION OFFER PERIOD" shall have the meaning assigned
such term in SECTION 9.11(b).
"ASSET DISPOSITION PURCHASE DATE" shall have the meaning assigned
such term in SECTION 9.11(b).
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"ASSIGNMENT" shall have the meaning assigned such term in SECTION
12.06(b).
"BORROWER INTELLECTUAL PROPERTY" shall have the meaning assigned
such term in SECTION 7.24.
"BUSINESS DAY" shall mean any day other than a day on which
commercial banks are authorized or required to close in Minnesota, Texas or New
York.
"CASH EQUIVALENTS" shall mean:
(a) securities issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
of the United States of America (provided that the full faith and credit
of the United States of America is pledged in support thereof), having
maturities of not more than one year from the date of acquisition; (b)
marketable general obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of
acquisition and, at the time of acquisition of the United States of
America (provided that the full faith and credit of the United States of
America is pledged in support thereof), having a credit rating of "A" or
better from either Standard & Poor's Ratings Services or Moody's Investors
Service, Inc.;
(c) certificates of deposit, time deposits, eurodollar time
deposits, overnight bank deposits or bankers' acceptances having
maturities of not more than one year from the date of acquisition thereof
issued by any commercial bank the long-term debt of which is rated at the
time of acquisition thereof at least "A" or the equivalent thereof by
Standard & Poor's Ratings Services, or "A" or the equivalent thereof by
Moody's Investors Service, Inc., and having combined capital and surplus
in excess of $500,000,000;
(d) repurchase obligations with a term of not more than seven
(7) days for underlying securities of the types described in clauses (a),
(b) and (c) above entered into with any bank meeting the qualifications
specified in clause (c) above;
(e) commercial paper rated at the time of acquisition thereof
at least "A-2" or the equivalent thereof by Standard & Poor's Ratings
Services or "P-2" or the equivalent thereof by Moody's Investors Service,
Inc., or carrying an equivalent rating by a nationally recognized rating
agency, if both of the two named rating agencies cease publishing ratings
of investments, and in any case maturing within one year after the date of
acquisition thereof; and
(f) interests in any investment company or money market fund
which invests solely in instruments of the type specified in clauses (a)
through (e) above.
"CHANGE IN CONTROL" shall mean (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities
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Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the
date hereof) of shares representing more than 35% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of
Borrower; or (b) occupation of a majority of the seats on the board of directors
of Borrower by Persons who were neither (i) nominated by the board of directors
of Borrower nor (ii) appointed by directors so nominated.
"CLOSING DATE" shall mean December 8, 2003.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute.
"COMMITMENT" shall mean, for any Lender party to the Credit
Agreement, its obligation to have made the Loan on the Closing Date under the
Credit Agreement and, for any new Lender, its obligation to make the Loan on the
Amendment and Restatement Date, or on a later date pursuant to SECTION 2.02 in
the amount set forth opposite such Lender's name on Annex I.
"CONSOLIDATED NET INCOME" shall mean with respect to Borrower and
its Restricted Subsidiaries, for any period, the aggregate of the net income (or
loss) of Borrower and its Restricted Subsidiaries after allowances for taxes for
such period, determined on a consolidated basis in accordance with GAAP;
provided that there shall be excluded from the calculation of net income (to the
extent otherwise included in the calculation) the following: (i) the net income
of any Person in which Borrower or any Restricted Subsidiary has an interest
(which interest does not cause the net income of such other Person to be
consolidated with the net income of Borrower and its Restricted Subsidiaries 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 Borrower or
to a Restricted Subsidiary, as the case may be; (ii) the net income (but not
loss) of any Restricted Subsidiary to the extent that the declaration or payment
of dividends or similar distributions or transfers or loans by that Restricted
Subsidiary is not at the time permitted by operation of the terms of its charter
or any agreement, instrument or Governmental Requirement applicable to such
Restricted Subsidiary, or is otherwise restricted or prohibited in each case
determined in accordance with GAAP; (iii) any extraordinary gains or losses,
including gains or losses attributable to Property sales not in the ordinary
course of business; (iv) the cumulative effect of a change in accounting
principles; and (v) any gains or losses attributable to write-ups or write downs
of assets.
"CONSOLIDATED SUBSIDIARIES" shall mean each Subsidiary of Borrower
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of Borrower in accordance with GAAP.
"DEBT" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property (except trade payables),
which payment is due more than
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six months after the date of placing such Property in service; (iv) all
obligations under leases which shall have been, or should have been, in
accordance with GAAP, recorded as capital leases in respect of which such Person
is liable (whether contingent or otherwise); (v) all obligations under operating
leases which require such Person to make payments over the term of such lease
based on the purchase price or appraised value of the Property subject to such
lease plus a marginal interest rate, and used primarily as a financing vehicle
for, or to monetize, such Property; (vi) all Debt (as described in the other
clauses of this definition) and other obligations of others secured by a Lien on
any Property of such Person, whether or not such Debt is assumed by such Person;
(vii) all Debt (as described in the other clauses of this definition) and other
obligations of others guaranteed by such Person or in which such Person
otherwise assures a creditor against loss of the debtor or obligations of
others; (viii) all obligations or undertakings of such Person to maintain or
cause to be maintained the financial position or covenants of others or to
purchase the Debt or Property of others; (ix) obligations to deliver goods or
services including Hydrocarbons in consideration of advance payments; (x)
obligations to pay for goods or services whether or not such goods or services
are actually received or utilized by such Person; (xi) any capital stock of such
Person in which such Person has a mandatory obligation to redeem such stock
prior to the maturity of the Loans; (xii) any Debt of a Special Entity for which
such Person is liable either by agreement or because of a Governmental
Requirement; (xiii) the undischarged balance of any production payment created
by such Person or for the creation of which such Person directly or indirectly
received payment; and (xiv) all obligations of such Person under Hedging
Agreements; provided that Debt shall not include (i) any debt arising in
connection with the Permitted Medusa Transaction, or (ii) any asset retirement
obligations arising under Financial Accounting Standards Board Statement No.
143, Accounting for Asset Retirement Obligations.
"DEBT COVERAGE RATIO" shall mean as of any date of determination,
with respect to Borrower and its Restricted Subsidiaries, the ratio of (x) the
aggregate amount of Debt to (y) EBITDA for such four calendar quarters;
provided, however, that:
(a) for purposes of clause (x) of the introductory paragraph
of this definition, Debt shall only include the obligations listed in
clauses (i) through (v), (vii), and (ix) through (xi) of the definition of
Debt in this SECTION 1.02;
(b) if Borrower or any Restricted Subsidiary:
(1) has incurred any Debt since the beginning of such
period that remains outstanding on such date of determination or if
the transaction giving rise to the need to calculate the Debt
Coverage Ratio is an incurrence of Debt, EBITDA and Interest Expense
for such period will be calculated after giving effect on a pro
forma basis to such Debt as if such Debt has been incurred on the
first day of such period (except that in making such computation,
the amount of Debt under any revolving credit facility existing on
the date of such calculation will be computed based on the average
daily balance of such Debt during such period; provided that, for
purposes of SECTION 9.01(a), the average daily balance deemed
outstanding during such period under a revolving credit facility
being repaid in whole or in part with the proceeds of such Debt
shall be the lesser of (i) the actual average daily balance of such
revolving indebtedness outstanding during such period and (ii) the
amount of such revolving indebtedness outstanding
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immediately before the application of the proceeds of such Debt to
repay such revolving indebtedness) and the discharge of any other
Debt repaid, repurchased, defeased or otherwise discharged with the
proceeds of such new Debt as if such discharge had occurred on the
first day of such period; or
(2) has repaid, repurchased, defeased or otherwise
discharged any Debt since the beginning of the period that is no
longer outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Debt Coverage
Ratio involves a discharge of Debt, EBITDA and Interest Expense for
such period will be calculated after giving effect on a pro forma
basis to such discharge of such Debt, including with the proceeds of
such new Debt, as if such discharge had occurred on the first day of
such period;
(c) if since the beginning of such period Borrower or any
Restricted Subsidiary will h3ave sold or otherwise disposed of any
material Property or other asset or if the transaction giving rise to the
need to calculate the Debt Coverage Ratio is such a sale or disposition:
(1) the EBITDA for such period will be reduced by an
amount equal to the EBITDA (if positive) directly attributable to
the assets which are the subject of such sale or disposition for
such period or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period; and
(2) Interest Expense for such period will be reduced by
an amount equal to the Interest Expense directly attributable to any
Debt of Borrower or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to Borrower and its
continuing Restricted Subsidiaries in connection with such sale or
disposition for such period (or, if the capital stock of any
Restricted Subsidiary is sold, the Interest Expense for such period
directly attributable to the Debt of such Restricted Subsidiary to
the extent Borrower and its continuing Restricted Subsidiaries are
no longer liable for such Debt after such sale);
(d) if since the beginning of such period Borrower or any Restricted
Subsidiary (by merger or otherwise) will have made an investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary or is
merged with or into Borrower) or an acquisition of material Properties or other
assets, including any acquisition of assets occurring in connection with a
transaction causing a calculation to be made hereunder, EBITDA and Interest
Expense for such period will be calculated after giving pro forma effect thereto
(including the incurrence of any Debt) as if such investment or acquisition
occurred on the first day of such period; and
(e) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into Borrower
or any Restricted Subsidiary since the beginning of such period) will have sold
or otherwise disposed of any material property or other asset or any investment
or acquisition of assets that would
9
have required an adjustment pursuant to clause (b) or (c) above if made by
Borrower or a Restricted Subsidiary during such period, EBITDA and Interest
Expense for such period will be calculated after giving pro forma effect thereto
as if such asset disposition or investment or acquisition of assets occurred on
the first day of such period.
For purposes of this definition, whenever pro forma effect is to be
given to any calculation under this definition, the pro forma calculations will
be determined in good faith by a responsible financial or accounting officer of
Borrower (including pro forma expense and cost reductions calculated in good
faith by Borrower). If any Debt bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Debt will be calculated as
if the rate in effect on the date of determination has been the applicable rate
for the entire period (taking into account any interest rate agreement
applicable to such Debt if such interest rate agreement has a remaining term in
excess of 12 months).
For the purposes of this definition an imputed interest rate for any
outstanding or proposed production payment, project financing and other
non-recourse debt will be included in the calculation of Interest Expense and
the corresponding EBITDA, if any and to the extent lowered, will be grossed up,
in a corresponding manner.
"DEFAULT" shall mean an Event of Default or an event which with
notice or lapse of time or both would become an Event of Default.
"DEFERRED COMPENSATION PLAN" shall mean the Borrower Deferred
Compensation Plan dated as of December 1, 1996 and the letter to employees dated
December 13, 1996 relating thereto.
"DISQUALIFIED STOCK" shall mean, with respect to any Person, any
capital stock of such Person which by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable) or upon the
happening of any event:
(a) matures or is mandatorily redeemable pursuant to a sinking
fund obligation or otherwise;
(b) is convertible or exchangeable for Debt or Disqualified
Stock (excluding capital stock which is convertible or exchangeable solely
at the option of Borrower or a Restricted Subsidiary); or
(c) is redeemable at the option of the holder thereof, in
whole or in part,
in each case on or prior to the date that is ninety-one (91) days after the date
(i) on which the Notes mature; provided that only the portion of capital stock
which so matures or is mandatorily redeemable, is so convertible or exchangeable
or is so redeemable at the option of the holder thereof prior to such date will
be deemed to be Disqualified Stock; provided, further, that any capital stock
that would constitute Disqualified Stock solely because the holders thereof have
the right to require Borrower to repurchase such capital stock upon the
occurrence of a change of control or asset disposition (each defined in a
substantially identical manner to the corresponding definitions herein) shall
not constitute Disqualified Stock if the terms of such capital stock (and all
such securities into which it is convertible or for which it is ratable or
exchangeable) provide that Borrower may not repurchase or redeem any such
capital stock (and
10
all such securities into which it is convertible or for which it is ratable or
exchangeable) pursuant to such provision prior to compliance by Borrower with
the provisions hereof described under SECTIONS 2.04(b), 9.03 and 9.11.
"DOLLAR-DENOMINATED PRODUCTION PAYMENTS" shall mean production
payment obligations recorded as liabilities in accordance with GAAP, together
with all undertakings and obligations in connection therewith.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"DUKE CREDIT FACILITY" shall mean that certain credit facility
pursuant to the Credit Agreement dated June 29, 2001, by and among the Borrower,
Duke Capital Partners, LLC, as Administrative Agent, and the lenders signatory
thereto, as amended from time to time.
"EBITDA" shall mean, for the period of the most recent four
consecutive calendar quarters ending prior to the date of determination for
which financial statements are available, the sum of Consolidated Net Income for
such period plus the following expenses or charges to the extent deducted from
Consolidated Net Income in such period: Interest Expense, taxes, depreciation,
depletion, amortization and non-cash compensation expense; for the purposes of
this definition (when used in the calculation of the Interest Coverage Ratio and
the Debt Coverage Ratio) EBITDA, if any and to the extent lowered, relating to
any production payment, project financing and other non-recourse debt and in
which an imputed interest rate has been calculated and used in the definition of
Interest Expense, will be grossed up by a corresponding amount.
"ENVIRONMENTAL LAWS" shall mean any and all Governmental
Requirements pertaining to health or the environment in effect in any and all
jurisdictions in which Borrower or any Subsidiary is conducting or at any time
has conducted business, or where any Property of Borrower or any Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The term "oil" shall
have the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; provided, however, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of Borrower or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
11
"EQUIPMENT FINANCING SUBSIDIARY" shall mean a Subsidiary of Borrower
formed for the sole purpose of owning equipment purchased in a Permitted
Equipment Financing and related assets and that has no substantial operations
and conducts no substantial activities other than those related to the ownership
of such equipment.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time and any successor statute.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with Borrower or any Subsidiary would be deemed to
be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA EVENT" shall mean (i) a "reportable event" described in
Section 4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal
of Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan
year in which it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"EVENT OF DEFAULT" shall have the meaning assigned such term in
SECTION 10.01.
"EXCESS PROCEEDS" shall have the meaning assigned such term in
SECTION 9.11(b).
"EXCHANGED PROPERTIES" shall mean Properties used or useful in the
oil and gas business and received by Borrower or a Consolidated Subsidiary in
exchange for other Properties owned by it, whether directly or indirectly
through the acquisition of the capital stock of a Person holding such Properties
so that such Person becomes a Wholly-Owned and Consolidated Subsidiary of
Borrower, in trade or as a portion of the total consideration for such other
Properties.
"EXISTING SUBORDINATED DEBT" shall mean the 2005 Senior Subordinated
Notes.
"FINAL MATURITY DATE" shall mean December 8, 2010.
"FINANCIAL STATEMENTS" shall have the meaning assigned such term in
SECTION 7.02.
"FORM W-8BEN CERTIFICATION" shall have the meaning assigned such
term in SECTION 4.05(D)(1).
"FORM W-8ECI CERTIFICATION" shall have the meaning assigned such
term in SECTION 4.05(D)(1).
"FUNDING" shall mean the funding of the Loan upon satisfaction of
the conditions set forth in SECTION 6.01.
12
"GAAP" shall mean generally accepted accounting principles in the
United States of America (i) as in effect on the date hereof with regard to
SECTIONS 9.01 and 9.03 (ii) otherwise as in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall mean the country, the state, county,
city and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, Borrower,
its Subsidiaries or any of their Property or the Administrative Agent or any
Lender.
"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code,
ordinance, order, determination, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other directive or
requirement (whether or not having the force of law), including, without
limitation, Environmental Laws, energy regulations and occupational, safety and
health standards or controls, of any Governmental Authority.
"HEDGING AGREEMENTS" shall mean any commodity, interest rate or
currency swap, cap, floor, collar, forward agreement or other exchange or
protection agreements or any option with respect to any such transaction.
"HIGHEST LAWFUL RATE" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to time
may be contracted for, taken, reserved, charged or received on the Notes under
laws applicable to such Lender which are currently in effect or, to the extent
allowed by law, under such applicable laws which may hereafter be in effect and
which allow a higher maximum nonusurious interest rate than applicable laws now
allow.
"HYDROCARBON INTERESTS" shall mean all rights, titles, interests and
estates now or hereafter acquired in and to oil and gas leases, oil, gas and
mineral leases, or other liquid or gaseous hydrocarbon leases, mineral fee
interests, overriding royalty and royalty interests, net profit interests and
production payment interests, including any reserved or residual interests of
whatever nature.
"HYDROCARBONS" shall mean oil, gas, casinghead gas, drip gasoline,
natural gasoline, condensate, distillate, liquid hydrocarbons, gaseous
hydrocarbons and all products refined or separated therefrom.
"INDEMNIFIED PARTIES" shall have the meaning assigned such term in
SECTION 12.03(a)(2).
"INDEMNITY MATTERS" shall mean any and all actions, suits,
proceedings (including any investigations, litigation or inquiries), claims,
demands and causes of action made or threatened against a Person and, in
connection therewith, all losses, liabilities, damages (including, without
limitation, consequential damages) or reasonable costs and expenses of any
13
kind or nature whatsoever incurred by such Person whether caused by the sole or
concurrent negligence of such Person seeking indemnification.
"INDENTURE" shall have the meaning assigned such term in SECTION
5.01(a).
"INDENTURE NOTES" shall have the meaning assigned such term in
SECTION 5.01(a).
"INTEREST COVERAGE RATIO" shall mean as of any date of
determination, with respect to Borrower and its Restricted Subsidiaries, the
ratio of (x) the aggregate amount of EBITDA to (y) Interest Expense for such
four calendar quarters; provided, however, that:
(a) if Borrower or any Restricted Subsidiary:
(1) has incurred any Debt since the beginning of such
period that remains outstanding on such date of determination or if
the transaction giving rise to the need to calculate the Interest
Coverage Ratio is an incurrence of Debt, EBITDA and Interest Expense
for such period will be calculated after giving effect on a pro
forma basis to such Debt as if such Debt has been incurred on the
first day of such period (except that in making such computation,
the amount of Debt under any revolving credit facility existing on
the date of such calculation will be computed based on the average
daily balance of such Debt during such period; provided that, for
purposes of SECTION 9.01, the average daily balance deemed
outstanding during such period under a revolving credit facility
being repaid in whole or in part with the proceeds of such Debt
shall be the lesser of (i) the actual average daily balance of such
revolving indebtedness outstanding during such period and (ii) the
amount of such revolving indebtedness outstanding immediately before
the application of the proceeds of such Debt to repay such revolving
indebtedness) and the discharge of any other Debt repaid,
repurchased, defeased or otherwise discharged with the proceeds of
such new Debt as if such discharge had occurred on the first day of
such period; or
(2) has repaid, repurchased, defeased or otherwise
discharged any Debt since the beginning of the period that is no
longer outstanding on such date of determination or if the
transaction giving rise to the need to calculate the Interest
Coverage Ratio involves a discharge of Debt (in each case other than
Debt incurred under any revolving credit facility unless such Debt
has been permanently repaid and the related commitment terminated;
provided, that for purposes of SECTION 9.01, this parenthetical
clause shall not apply), EBITDA and Interest Expense for such period
will be calculated after giving effect on a pro forma basis to such
discharge of such Debt, including with the proceeds of such new
Debt, as if such discharge had occurred on the first day of such
period;
(b) if since the beginning of such period Borrower or any
Restricted Subsidiary will have sold or otherwise disposed of any material
Property or other asset or if the transaction giving rise to the need to
calculate the Interest Coverage Ratio is such a sale or disposition:
14
(1) the EBITDA for such period will be reduced by an
amount equal to the EBITDA (if positive) directly attributable to
the assets which are the subject of such sale or disposition for
such period or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period; and
(2) Interest Expense for such period will be reduced by
an amount equal to the Interest Expense directly attributable to any
Debt of Borrower or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to Borrower and its
continuing Restricted Subsidiaries in connection with such sale or
disposition for such period (or, if the capital stock of any
Restricted Subsidiary is sold, the Interest Expense for such period
directly attributable to the Debt of such Restricted Subsidiary to
the extent Borrower and its continuing Restricted Subsidiaries are
no longer liable for such Debt after such sale);
(c) if since the beginning of such period Borrower or any
Restricted Subsidiary (by merger or otherwise) will have made an
investment in any Restricted Subsidiary (or any Person which becomes a
Restricted Subsidiary or is merged with or into Borrower) or an
acquisition of material Properties or other assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, EBITDA and Interest Expense for such
period will be calculated after giving pro forma effect thereto (including
the incurrence of any Debt) as if such investment or acquisition occurred
on the first day of such period; and
(d) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into
Borrower or any Restricted Subsidiary since the beginning of such period)
will have sold or otherwise disposed of any material property or other
asset or any investment or acquisition of assets that would have required
an adjustment pursuant to clause (b) or (c) above if made by Borrower or a
Restricted Subsidiary during such period, EBITDA and Interest Expense for
such period will be calculated after giving pro forma effect thereto as if
such asset disposition or investment or acquisition of assets occurred on
the first day of such period.
For purposes of this definition, whenever pro forma effect is to be
given to any calculation under this definition, the pro forma calculations will
be determined in good faith by a responsible financial or accounting officer of
Borrower (including pro forma expense and cost reductions calculated in good
faith by Borrower). If any Debt bears a floating rate of interest and is being
given pro forma effect, the interest expense on such Debt will be calculated as
if the rate in effect on the date of determination has been the applicable rate
for the entire period (taking into account any interest rate agreement
applicable to such Debt if such interest rate agreement has a remaining term in
excess of 12 months).
For the purposes of this definition an imputed interest rate for any
outstanding or proposed production payment, project financing and other
non-recourse debt will be included in the calculation of Interest Expense and
the corresponding EBITDA, if any and to the extent lowered, will be grossed up,
in a corresponding manner.
15
"INTEREST EXPENSE" shall mean, for the period of the most recent
four consecutive calendar quarters ending prior to the date of determination for
which financial statements are available, the total cash interest expense of
Borrower and its Restricted Subsidiaries determined in accordance with GAAP,
plus, to the extent not included in such interest expense (without duplication):
(a) interest expense attributable to capitalized lease
obligations and the interest portion of rent expense associated with Debt
in respect of the relevant lease giving rise thereto, determined as if
such lease were a capitalized lease in accordance with GAAP and the
interest component of any deferred payment obligations to the extent not
accrued in a prior period;
(b) imputed interest expense attributable to any production
payment, project financing by vendors and other non-recourse debt, but not
including any amounts arising out of the Permitted Medusa Transaction;
(c) interest actually paid by Borrower or any Restricted
Subsidiary under any guarantee of Debt or other obligation of any other
person;
(d) net costs associated with Hedging Agreements for the
purpose of ameliorating interest rate fluctuation risk or any kind of
interest rate agreement (excluding amortization of fees);
(e) the consolidated cash interest expense of Borrower and its
Restricted Subsidiaries that was capitalized during such period; and
(f) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used by such
plan or trust to pay interest or fees to any Person (other than Borrower
or its Restricted Subsidiaries) in connection with Debt incurred by such
plan or trust; provided, however, that there will be excluded therefrom
any such interest expense of any Unrestricted Subsidiary to the extent the
related Debt is not guaranteed or paid by Borrower or any Restricted
Subsidiary.
For purposes of the foregoing, total Interest Expense will be
determined after giving effect to any net payments made or received by Borrower
and its Restricted Subsidiaries with respect to interest rate agreements;
provided, however, that Interest Expense shall not include (a) to the extent
included in total Interest Expense, amortization or write-off of deferred
financial costs or discount accretion of such Person or (b) accretion of
interest charges on future plugging and abandonment obligations, future
retirement benefits and other obligations that do not constitute Debt.
"INVESTMENT" shall mean, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the form of any direct
or indirect advance, loan (other than advances to customers in the ordinary
course of business) or other extension of credit (including by way of guarantee
or similar arrangement, but excluding any Debt or extension of credit
represented by a bank deposit other than a time deposit) or capital contribution
to (by means of any transfer of cash or other Property to others or any payment
for Property or services for the account or use of others), or any purchase or
acquisition of capital stock, Debt or other
16
similar instruments issued by, such Person and all other items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP; provided that none of the following will be deemed to be an Investment:
(a) Hedging Agreements entered into in the ordinary course of
business and in compliance herewith;
(b) endorsements of negotiable instruments and documents in
the ordinary course of business; and
(c) an acquisition of assets, capital stock or other
securities by Borrower or a Subsidiary for consideration to the extent
such consideration consists exclusively of common equity securities of
Borrower.
For purposes of this definition:
(i) "INVESTMENT" shall mean the portion (proportionate to
Borrower's equity interest in a Restricted Subsidiary to be designated as
an Unrestricted Subsidiary) of the fair market value of the net assets of
such Restricted Subsidiary of Borrower at the time that such Restricted
Subsidiary is designated an Unrestricted Subsidiary; provided, however,
that upon a redesignation of such Subsidiary as a Restricted Subsidiary,
Borrower will be deemed to continue to have a permanent "INVESTMENT" in an
Unrestricted Subsidiary in an amount (if positive) equal to (a) Borrower's
"INVESTMENT" in such Subsidiary at the time of such redesignation less (b)
the portion (proportionate to Borrower's equity interest in such
Subsidiary) of the fair market value of the net assets (as conclusively
determined by the Board of Directors of Borrower in good faith) of such
Subsidiary at the time that such Subsidiary is so redesignated a
Restricted Subsidiary; and
(ii) any Property transferred to or from an Unrestricted
Subsidiary will be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the board of
directors of Borrower.
"LIEN" shall mean any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to (i)
the lien or security interest arising from a mortgage, encumbrance, pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes or (ii) production payments and the like payable
out of Oil and Gas Properties. The term "Lien" shall also mean reservations,
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
Property. For the purposes of this Agreement, Borrower or any Subsidiary shall
be deemed to be the owner of any Property which it has acquired or holds subject
to a conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.
"LOAN INCREASE CERTIFICATE" shall have the meaning assigned to such
term in SECTION 2.02(b)(4).
17
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, any
Assignment and any other agreements or documents executed in connection
herewith.
"LOAN" shall mean the loans as provided for by SECTION 2.01, and
unless the context otherwise requires, the term "Loans" shall include the
Additional Loans.
"MAJORITY LENDERS" shall mean Lenders holding at least 75% of the
outstanding aggregate principal amount of the Loan.
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect
on (i) the assets, liabilities, financial condition, business, operations or
affairs of Borrower and its Subsidiaries taken as a whole, or (ii) the ability
of Borrower and its Subsidiaries taken as a whole to carry out their business or
meet their obligations under the Loan Documents on a timely basis.
"MATERIAL AGREEMENT" shall have the meaning assigned such term in
SECTION 7.21.
"MULTIEMPLOYER PLAN" shall mean a Plan defined as such in Section
3(37) or 4001(a)(3) of ERISA.
"NET AVAILABLE CASH" from an Asset Disposition shall mean cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
but only as and when received, but excluding any other consideration received in
the form of assumption by the acquiring person of Debt or other obligations
relating to the Properties that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of:
(a) all legal, accounting, investment banking, title and
recording tax expenses, commissions and other fees and expenses incurred,
and all federal, state, provincial, foreign and local taxes required to be
paid or accrued as a liability under GAAP (after taking into account any
available tax credits or deductions and any tax sharing agreements), as a
consequence of such Asset Disposition;
(b) all payments made on any Debt which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of
any Lien upon such assets, or which must by its terms, or in order to
obtain a necessary consent to such Asset Disposition, or by applicable law
be repaid out of the proceeds from such Asset Disposition;
(c) all distributions and other payments required to be made
to minority interest holders in Subsidiaries or joint ventures as a result
of such Asset Disposition; and
(d) the deduction of appropriate amounts to be provided by the
seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition and
retained by Borrower or any Consolidated Subsidiary after such Asset
Disposition.
18
"NET CASH PROCEEDS," with respect to any issuance or sale of capital
stock, shall mean the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents'
fees, listing fees, discounts or commissions and brokerage, consultant and
other fees and charges actually incurred in connection with such issuance
or sale and net of taxes paid or payable as a result of such issuance or
sale (after taking into account any available tax credit or deductions and
any tax sharing arrangements).
"NOTES" shall mean the Notes described in and provided for by
SECTION 2.03, together with any and all renewals, extensions for any period,
increases, rearrangements, substitutions or modifications thereof.
"NYMEX STRIP PRICE" shall mean the average closing price of
contracts for future delivery for the next occurring 24 months as of the close
of trading on the New York Mercantile Exchange ("NYMEX") on the date of any
calculation. For crude oil, the reference contract will be light sweet crude
oil, the NYMEX symbol for which is currently "CL." For natural gas, the
reference contract will be natural gas delivered at the Henry Hub in Louisiana,
the NYMEX symbol for which is currently "NG." To the extent that reference
prices are not available for the entire 24 month period, prices will be
determined on the average of the contracts which are available during such 24
month period.
"OIL AND GAS PROPERTIES" shall mean Hydrocarbon Interests; the
Properties now or hereafter pooled or unitized with Hydrocarbon Interests; all
presently existing or future unitization, pooling agreements and declarations of
pooled units and the units created thereby (including without limitation all
units created under orders, regulations and rules of any Governmental Authority)
which may affect all or any portion of the Hydrocarbon Interests; all operating
agreements, contracts and other agreements which relate to any of the
Hydrocarbon Interests or the production, sale, purchase, exchange or processing
of Hydrocarbons from or attributable to such Hydrocarbon Interests; all
Hydrocarbons in and under and which may be produced and saved or attributable to
the Hydrocarbon Interests, including all oil in tanks, the lands covered thereby
and all rents, issues, profits, proceeds, products, revenues and other incomes
from or attributable to the Hydrocarbon Interests; all tenements, hereditaments,
appurtenances and Properties in any manner appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests; and all Properties, rights, titles,
interests and estates described or referred to above, including any and all
Property, real or personal, now owned or hereinafter acquired and situated upon,
used, held for use or useful in connection with the operating, working or
development of any of such Hydrocarbon Interests or Property (excluding drilling
rigs, automotive equipment or other personal property which may be on such
premises for the purpose of drilling a well or for other similar temporary uses)
and including any and all oil wells, gas wells, injection wells or other wells,
buildings, structures, fuel separators, liquid extraction plants, plant
compressors, pumps, pumping units, field gathering systems, tanks and tank
batteries, fixtures, valves, fittings, machinery and parts, engines, boilers,
meters, apparatus, equipment, appliances, tools, implements, cables, wires,
towers, casing, tubing and rods, surface leases, rights-of-way, easements and
servitudes together with all additions, substitutions, replacements, accessions
and attachments to any and all of the foregoing. Unless otherwise indicated, Oil
and Gas Properties shall mean such Property of Borrower and its Restricted
Subsidiaries.
19
"OTHER TAXES" shall have the meaning assigned such term in SECTION
4.05(b).
"PARI PASSU NOTES" shall have the meaning assigned such term in
SECTION 9.11(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
Person succeeding to any or all of its functions.
"PERCENTAGE SHARE" shall mean the percentage of the aggregate Loans
to be provided by a Lender under this Agreement as indicated on Annex I hereto,
as modified from time to time to reflect any assignments permitted by SECTION
12.06(b).
"PERMITTED BUSINESS INVESTMENT" shall mean any Investment made in
the ordinary course of, and of a nature that is or shall have become customary
in, the Related Business including investments or expenditures for exploiting,
exploring for, acquiring, developing, producing, processing, gathering,
marketing or transporting oil and gas through agreements, transactions,
interests or arrangements which permit one to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy other objectives
customarily achieved through the conduct of the Related Business jointly with
third parties, including (i) ownership interests in oil and gas properties,
processing facilities, gathering systems, pipelines or ancillary real property
interests and (ii) Investments in the form of or pursuant to operating
agreements, processing agreements, farm-in agreements, farm-out agreements,
development agreements, area of mutual interest agreements, unitization
agreements, pooling agreements, joint bidding agreements, service contracts,
joint venture agreements, partnership agreements (whether general or limited),
subscription agreements, stock purchase agreements and other similar agreements
(including for limited liability companies) with third parties, excluding,
however, Investments in corporations other than Restricted Subsidiaries.
"PERMITTED CONSIDERATION" shall have the meaning assigned such term
in SECTION 9.11.
"PERMITTED EQUIPMENT FINANCING" shall mean any Debt incurred by
Borrower or any Subsidiary of Borrower to finance or refinance the acquisition,
after the Closing Date, from a third party that is not an Affiliate of Borrower
of any equipment and related assets to be used in a Related Business; provided
that (i) the aggregate amount of all such Debt shall not exceed 50% of the
cumulative amount of capital expenditures made by Borrower and its Restricted
Subsidiaries after the Closing Date for capital equipment to be used in a
Related Business, together with any taxes, duties, installation costs or similar
costs related thereto, and (ii) such Debt shall be non-recourse to Borrower and
each Subsidiary of Borrower other than an Equipment Financing Subsidiary related
to such acquired equipment.
"PERMITTED INDEBTEDNESS" shall mean:
(a) the Notes and any additional Notes under SECTION 2.02 or
any guaranty of or suretyship arrangement for the Notes;
20
(b) Debt (other than that associated with the Senior Secured
Credit Facility and the Duke Credit Facility) of Borrower existing on the
Amendment and Restatement Date which is reflected in the Financial
Statements or is disclosed in Schedule 9.01, and any renewals or
extensions (but not increases) thereof;
(c) accounts payable (for the deferred purchase price of
Property or services) from time to time incurred in the ordinary course of
business which, if greater than ninety (90) days past the invoice or
billing date, are being contested in good faith by appropriate proceedings
if reserves adequate under GAAP shall have been established therefor;
(d) Debt under capital leases (as required to be reported on
the financial statements of Borrower pursuant to GAAP) in addition to any
obligations that are Debt as permitted under SECTION 9.06;
(e) Debt associated with bonds or surety obligations required
by Governmental Requirements in connection with the operation of the Oil
and Gas Properties;
(f) Hedging Agreements covering (A) oil and gas production of
proved developed producing Oil and Gas Properties of Borrower or any
Consolidated Subsidiary; provided, however, that such Hedging Agreements
related to oil or gas production shall not, either individually or in the
aggregate, cover more than 80% of estimated production on the date such
hedges are entered into of oil or gas of Borrower and the Consolidated
Subsidiaries for each individual period covered by the Hedging Agreements,
(B) fluctuations in interest rates for notional principal amounts not to
exceed at any time outstanding 80% of the Debt for borrowed money of
Borrower and its Consolidated Subsidiaries, and (C) foreign exchange risk;
(g) Debt arising out of the Deferred Compensation Plan to the
extent such Debt can be satisfied out of the investments held by such plan
and the proceeds thereof;
(h) Debt arising under the Senior Secured Credit Facility in a
total principal amount outstanding not greater than $125,000,000;
(i) Debt arising under the Duke Credit Facility in a total
principal amount outstanding not greater than $95,000,000, less the amount
of any repayment of principal required pursuant to SECTION 7.07 or 8.09;
(j) Debt of a Restricted Subsidiary incurred and outstanding
on the date on which such Restricted Subsidiary is acquired by Borrower
(other than Debt incurred (i) to provide all or any portion of the funds
utilized to consummate the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was otherwise acquired by Borrower or (ii) otherwise in
connection with, or in contemplation of, such acquisition); provided,
however, that at the time such Restricted Subsidiary is acquired by
Borrower, Borrower would have been
21
able to incur $1.00 of additional Debt pursuant to SECTION 9.01(a) after
giving effect to the incurrence of such Debt pursuant to this clause (j);
(k) Debt incurred in respect of workers' compensation claims,
self-insurance obligations, performance, bid, surety and similar bonds,
letters of credit and guarantees supporting such performance, bid, surety
and similar bonds and completion guarantees provided by Borrower or a
Restricted Subsidiary in the ordinary course of business;
(l) Debt arising from agreements of Borrower or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or capital stock of a Restricted
Subsidiary, provided that the maximum aggregate liability in respect of
all such Debt other than Debt related to environmental liabilities to
governmental agencies shall at no time exceed the gross proceeds actually
received by Borrower and its Restricted Subsidiaries in connection with
such disposition;
(m) Debt arising from the honoring by a bank or other
financial institution of a check, draft of similar instrument (except in
the case of daylight overdrafts) drawn against insufficient funds in the
ordinary course of business; provided, however, that such Debt is
extinguished within five (5) Business Days of incurrence;
(n) obligations relating to net gas balancing positions
arising in the ordinary course of business and consistent with past
practice;
(o) non-recourse debt not to exceed $10,000,000 in the
aggregate at any one time outstanding;
(p) the issuance of Debt issued in a Qualified Offering (other
than Debt issued in exchange for Notes converted under ARTICLE V subject
to SECTION 8.09), provided that the sum of any Debt issued pursuant to
SECTION 2.02 plus all Debt issued in a Qualified Offering (other than Debt
issued in exchange for Notes converted under ARTICLE V) shall not exceed
$165,000,000;
(q) Permitted Equipment Financing;
(r) in addition to the items referred to in clauses (a)
through (q) above, Debt of Borrower and its Restricted Subsidiaries in an
aggregate outstanding principal amount which, when taken together with the
principal amount of all other indebtedness incurred pursuant to this
clause (s) and then outstanding, will not exceed $10,000,000; and
(s) renewals or extensions of any Debt referred to in clauses
(a) through (f) above.
"PERMITTED INVESTMENT" shall mean an Investment by Borrower or any
Restricted Subsidiary in:
22
(a) a Restricted Subsidiary or a Person which will, upon the
making of such Investment, become a Restricted Subsidiary; provided,
however, that the primary business of such Restricted Subsidiary is a
Related Business;
(b) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, Borrower or a Restricted
Subsidiary; provided, however, that such Person's primary business is a
Related Business;
(c) cash and Cash Equivalents;
(d) receivables owing to Borrower or any Restricted Subsidiary
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionary trade terms as
Borrower or any such Restricted Subsidiary deems reasonable under the
circumstances;
(e) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course
of business;
(f) loans or advances to employees made in the ordinary course
of business consistent with past practices of Borrower or such Restricted
Subsidiary;
(g) stock, obligations or securities received in settlement of
Debts created in the ordinary course of business and owing to Borrower or
any Restricted Subsidiary or in satisfaction of judgments or pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of a debtor;
(h) Investments made as a result of the receipt of non-cash
consideration from an Asset Disposition that was made pursuant to and in
compliance with SECTION 9.11;
(i) Investments in existence on the date hereof;
(j) Hedging Agreements which transactions or obligations are
incurred in compliance with SECTION 9.01;
(k) Investments by Borrower or any of its Restricted
Subsidiaries, together with all other Investments pursuant to this clause
(k), in an aggregate amount at the time of such Investment not to exceed
$10,000,000; outstanding at any one time;
(l) guarantees issued in accordance with SECTION 9.01;
(m) Investments representing deferred compensation of
employees and earnings thereon under Borrower's KEYSOP plan;
23
(n) any investment arising out of the Permitted Medusa
Transaction; and
(o) Permitted Business Investments.
"PERMITTED LIEN" shall mean with respect to any Person:
(a) Liens securing the obligations of Borrower under the
Senior Secured Credit Facility, any other Senior Secured Debt permitted
under SECTION 9.01(b) or the Duke Credit Facility and related Hedging
Agreements and Liens on assets of Restricted Subsidiaries securing Debt
and other obligations of Borrower or such Restricted Subsidiaries under
the Senior Secured Credit Facility and the Duke Credit Facility;
(b) pledges or deposits by such Person under workmen's
compensation laws, unemployment insurance laws or similar legislation, or
good faith deposits in connection with bids, tenders, contracts or leases
to which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits or cash or United States government
bonds to secure surety or appeal bonds to which such Person is a party, or
deposits as security for contested taxes or import or customs duties or
for the payment of rent, in each case incurred in the ordinary course of
business;
(c) Liens imposed by law, including carriers', warehousemen's,
mechanics', materialmen's and operator's Liens, (including Liens arising
pursuant to Article 9.319 of the Texas Uniform Commercial Code or other
similar statutory provisions of other states with respect to production
purchased from others) in each case for sums not yet due or being
contested in good faith by appropriate proceedings if a reserve or other
appropriate provisions, if any, as shall be required by GAAP shall have
been made in respect thereof;
(d) Liens for taxes, assessments or other governmental charges
not yet subject to penalties for non-payment or which are being contested
in good faith by appropriate proceedings provided appropriate reserves
required pursuant to GAAP have been made in respect thereof;
(e) Liens in favor of issuers of surety or performance bonds
or letters of credit or bankers' acceptances issued pursuant to the
request of and for the account of such Person in the ordinary course of
its business; provided, however, that such letters of credit do not
constitute Debt;
(f) encumbrances, easements or reservations of, or rights of
others for, licenses, rights of way, sewers, electric lines, telegraph and
telephone lines, pipelines and other similar purposes, or zoning or other
restrictions as to the use of real properties or liens incidental to the
conduct of the business of such Person or to the ownership of its
properties which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the operation
of the business of such Person;
24
(g) Liens securing Hedging Agreements so long as the related
Debt is, and is permitted to be under this Agreement, secured by a Lien on
the same property securing such Hedging Agreement;
(h) leases and subleases of real property which do not
materially interfere with the ordinary conduct of the business of Borrower
or any of its Restricted Subsidiaries;
(i) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal
proceedings which may have been duly initiated for the review of such
judgment have not been finally terminated or the period within which such
proceedings may be initiated has not expired;
(j) Liens for the purpose of securing the payment of all or a
part of the purchase price of, or capitalized lease obligations with
respect to, assets or property acquired or constructed in the ordinary
course of business, provided that:
(1) the aggregate principal amount of Debt secured by
such Liens is otherwise permitted to be incurred hereunder and does
not exceed the cost of the assets or property so acquired or
constructed; and
(2) such Liens are created within one hundred eighty
(180) days of construction or acquisition of such Property and do
not encumber any other Property of Borrower or any Restricted
Subsidiary other than such Property affixed or appurtenant thereto;
(k) Liens arising solely by virtue of any statutory or common
law provisions relating to banker's Liens, rights of set-off or similar
rights and remedies as to deposit accounts or other funds maintained with
a depositary institution; provided that:
(1) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access
by Borrower in excess of those set forth by regulations promulgated
by the Federal Reserve Board; and
(2) such deposit account is not intended by Borrower or
any Restricted Subsidiary to provide collateral to the depository
institution;
(l) Liens arising from Uniform Commercial Code financing
statement filings regarding operating leases entered into by Borrower and
its Restricted Subsidiaries in the ordinary course of business;
(m) Liens existing on the Closing Date;
(n) Liens on property or shares of stock of a Person at the
time such Person becomes a Restricted Subsidiary; provided, however, that
such Liens are not created, incurred or assumed in connection with, or in
contemplation of, such other Person becoming a Restricted Subsidiary;
provided further, however, that any such Lien may not extend to any other
property owned by Borrower or any Restricted Subsidiary;
25
(o) Liens on property at the time Borrower or a Restricted
Subsidiary acquired the property, including any acquisition by means of a
merger or consolidation with or into Borrower or any Restricted
Subsidiary; provided, however, that such Liens are not created, incurred
or assumed in connection with, or in contemplation of, such acquisition;
provided further, however, that such Liens may not extend to any other
property owned by Borrower or any Restricted Subsidiary;
(p) Liens securing Debt or other obligations of a Restricted
Subsidiary owing to Borrower or a Wholly-Owned Subsidiary;
(q) Liens securing the Notes or the obligations under this
Agreement;
(r) Liens securing refinancing indebtedness incurred to
refinance Debt that was previously so secured, provided that any such Lien
is limited to all or part of the same Property (plus improvements, future
interests and additional acquired interests in the same Property
apportionment thereto, accessions, proceeds or dividends or distributions
in respect thereof) that secured (or, under the written arrangements under
which the original Lien arose, could secure) the Debt being refinanced or
is in respect of Property that is the security for a Permitted Lien
hereunder;
(s) Liens upon specific Properties of Borrower or any of its
Subsidiaries securing Debt incurred in the ordinary course of business to
provide all or part of the funds for the exploration, drilling, production
or development of those Properties;
(t) Liens in respect of production payments and reserve sales;
(u) farm-out, farm-in, seismic, carried working interests,
areas of mutual interests, joint operating, joint exploration,
unitization, gas balancing, royalty, overriding royalty, bonus, rental,
sales and similar agreements relating to the exploration or development
of, or production from, oil and gas properties and related facilities
(production and transportation) entered into in the ordinary course of
business;
(v) Liens on the capital stock or other equity interests of
any Equipment Financing Subsidiary to secure Debt of such Equipment
Financing Subsidiary incurred in connection with a Permitted Equipment
Financing; and
(w) Liens with respect to Permitted Indebtedness on the
capital stock or other equity interests of any Unrestricted Subsidiary to
secure Debt of such Unrestricted Subsidiary which is non-recourse to
Borrower or any Restricted Subsidiary.
"PERMITTED MEDUSA TRANSACTION" shall have the meaning ascribed to
such term in the credit agreement for the Senior Secured Credit Facility in
effect on the date hereof.
"PERSON" shall mean any individual, corporation, company,
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
26
"PLAN" shall mean any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained
or contributed to by Borrower, any Subsidiary or an ERISA Affiliate or (ii) was
at any time during the preceding six calendar years sponsored, maintained or
contributed to, by Borrower, any Subsidiary or an ERISA Affiliate.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Loan or any other amount payable by Borrower under this Agreement or any other
Loan Document, a rate per annum during the period commencing on the date of
occurrence of an Event of Default until such amount is paid in full or all
Events of Default then existing are cured or waived equal to 11.75% per annum,
but in no event to exceed the Highest Lawful Rate.
"PREFERRED STOCK," as applied to the capital stock of any Person,
shall mean capital stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of capital stock of any other class of such Person.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"QUARTERLY DATE" shall mean the last day of each March, June,
September, and December, in each year, the first of which shall be March 31,
2004; provided, however, that if any such day is not a Business Day, such
Quarterly Date shall be the next succeeding Business Day.
"QUALIFIED OFFERING" shall mean each of the following transactions
(or any combination thereof), provided that no Debt incurred in such Qualified
Offering shall be amortized or mature on a date earlier than the date on which
the Loans are paid in full:
(a) an offering by Borrower (which may be guaranteed by one or
more Subsidiaries) of debt securities of Borrower that are registered with
the SEC under the Securities Act pursuant to an effective registration
statement; or
(b) an offering by Borrower (which may be guaranteed by one or
more Subsidiaries) of debt securities of Borrower to "qualified
institutional buyers," without registration under the Securities Act in
reliance on Rule 144A (provided that a Qualified Offering may also include
a simultaneous offering of such debt securities to Persons outside of the
United States in reliance on Regulation S promulgated under the Securities
Act and to a limited number of institutional accredited investors in
reliance on Regulation D promulgated under the Securities Act); provided,
that such securities sold to qualified institutional buyers in the United
States shall be eligible for trading on The PORTAL Market.
"RELATED BUSINESS" shall mean any business which is the same as or
related, ancillary or complementary to any of the businesses of Borrower and its
Restricted Subsidiaries on the date hereof.
27
"RESPONSIBLE OFFICER" shall mean, as to any Person, the Chief
Executive Officer, the President or any Vice President of such Person and, with
respect to financial matters, the term "RESPONSIBLE OFFICER" shall include the
Chief Financial Officer of such Person. Unless otherwise specified, all
references to a Responsible Officer herein shall mean a Responsible Officer of
Borrower.
"RESTRICTED INVESTMENT" shall mean any Investment other than a
Permitted Investment.
"RESTRICTED PAYMENT" shall have the meaning assigned such term in
SECTION 9.03(a).
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary identified as a
Restricted Subsidiary on Schedule 7.14 and any Subsidiary created after the date
hereof that Borrower does not designate as an Unrestricted Subsidiary.
"RULE 144A" shall mean Rule 144A as promulgated under the Securities
Act (including any successor rule thereof), as the same may be amended from time
to time, or any similar rule or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SENIOR INDEBTEDNESS" shall mean, whether outstanding on the date
hereof or thereafter issued, created, incurred or assumed, the Senior Secured
Credit Facility Debt, the Duke Credit Facility Debt, and all other Debt of
Borrower, including accrued and unpaid interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to Borrower at the rate specified in the documentation with respect thereto
whether or not a claim for post filing interest is allowed in such proceeding)
and fees relating thereto; provided, however, that Senior Indebtedness will not
include:
(a) any Debt which, in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that
the obligations in respect of such Debt are subordinate to payment of the
Notes;
(b) any obligation of Borrower to any Subsidiary;
(c) any liability for federal, state, foreign, local or other
taxes owed or owing by Borrower;
(d) any accounts payable or other liability to trade creditors
arising in the ordinary course of business (including guarantees thereof
or instruments evidencing such liabilities);
28
(e) any Debt, guarantee or obligation of Borrower that is
expressly subordinate or junior in right of payment to any other Debt,
guarantee or obligation of Borrower, including, without limitation, any
Subordinated Debt; or
(f) any capital stock.
"SENIOR SECURED CREDIT FACILITY" shall mean Borrower's primary
senior revolving credit facility or facilities as constituted, amended, modified
or restated from time to time which allow Borrower to borrow and reborrow
amounts up to a borrowing base determined by the lenders thereunder, which is
currently the $75,000,000 Senior Secured Credit Facility among Borrower,
Wachovia Bank, National Association, as Administrative Agent and the other
lenders thereto.
"SENIOR SECURED DEBT" shall mean, whether outstanding on the date
hereof or thereafter issued, created, incurred or assumed, any Senior
Indebtedness of the Borrower or any Restricted Subsidiary secured by a Lien,
including, but not limited to the Senior Secured Credit Facility Debt.
"SPECIAL ENTITY" shall mean, with regard to a Person, any joint
venture, limited liability company or partnership, general or limited
partnership or any other type of partnership or company other than a corporation
in which such first Person or one or more of its other Subsidiaries is a member,
owner, partner or joint venturer and owns, directly or indirectly, at least a
majority of the equity of such entity or controls such entity, but excluding any
tax partnerships that are not classified as partnerships under state law.
"SUBORDINATED DEBT" shall mean any Debt of Borrower expressly
subordinated to the Loans, on terms including, without limitation, that payments
on such Debt shall be prohibited if a Default exists or would result from such
payment, and other terms and conditions substantially similar to those found in
the Existing Subordinated Debt.
"SUBORDINATED OBLIGATION" shall mean any Debt of Borrower (whether
outstanding on the date hereof or thereafter incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement.
"SUBSIDIARY" shall mean, with regard to a Person, (i) any
corporation of which at least a majority of the outstanding shares of stock
having by the terms thereof ordinary voting power to elect a majority of the
board of directors of such corporation (irrespective of whether or not at the
time stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person or one or more of its
Subsidiaries and (ii) any Special Entity of which at least a majority of the
equity interests are owned directly or indirectly or controlled by such Person.
Unless otherwise indicated herein, each reference to the term "Subsidiary" shall
mean a Subsidiary of Borrower.
"SUBSIDIARY SECURITIES" shall have the meaning assigned such term in
SECTION 7.14.
"TAXES" shall have the meaning assigned such term in SECTION
4.05(a).
29
"UNRESTRICTED SUBSIDIARY" shall mean any Subsidiary of Borrower that
is not a Restricted Subsidiary.
"VOLUMETRIC PRODUCTION PAYMENTS" shall mean production payment
obligations recorded as defined revenue in accordance with GAAP, together with
all undertakings and obligations in connection therewith.
"WHOLLY-OWNED SUBSIDIARY" shall mean a Restricted Subsidiary of
Borrower, all of the capital stock of which (other than director's qualifying
shares) is owned by Borrower or one or more other Wholly-Owned Subsidiaries.
"2005 SENIOR SUBORDINATED NOTES" shall mean the 11% Senior
Subordinated Notes due 2005 issued by Borrower pursuant to that certain
Supplemental Indenture, dated as of October 26, 2000, to the Indenture dated
October 26, 2000 between Borrower and American Stock Transfer and Trust Company.
SECTION 1.03 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to the Administrative Agent or the Lenders hereunder
shall be prepared, in accordance with GAAP, applied on a basis consistent with
the audited financial statements of Borrower referred to in SECTION 7.02 (except
for changes concurred with by Borrower's independent public accountants).
ARTICLE II
COMMITMENTS
SECTION 2.01 LOANS.
(a) COMMITMENT TO MAKE THE LOANS AND THE AMENDED AND RESTATED
NOTES. Each Lender party to the Credit Agreement has made Loans to the
Borrower in the respective amount for each such Lender indicated on Annex
I as of the Closing Date in the aggregate principal amount of $100,000,000
and each New Lender severally agrees, subject to the terms and conditions
of this Agreement, to make the Loans to Borrower, on the Amendment and
Restatement Date, in the aggregate principal amount of $85,000,000 and in
the respective amount for each such Lender indicated on Annex I (the
"ADDITIONAL LOANS").
(b) TRANSFER OF FUNDS ON AMENDMENT AND RESTATEMENT DATE.
Subject to the terms and conditions of this Agreement, the Additional
Loans shall be made available to Borrower by the New Lenders by wire
transfer or other immediately available funds to the account of Borrower
in accordance with Borrower's wiring instructions provided prior to the
Amendment and Restatement Date.
SECTION 2.02 OPTION TO ISSUE ADDITIONAL NOTES.
30
(a) Subject to the conditions set forth in subsection (b)
below, the Borrower may issue additional Notes to a Lender or a Person
that at such time is not a Lender, provided such Person becomes a Lender
(an "ADDITIONAL LENDER").
(b) Any such new Notes shall be subject to the following
additional conditions:
(1) such additional Notes shall have a principal amount
of not less than $5,000,000, and no such increase shall be permitted
if after giving effect thereto the aggregate principal of all Notes
would exceed $200,000,000;
(2) no Default shall have occurred and be continuing at
the effective date of such increase;
(3) no Lender shall be required to issue additional
Notes without such Lender's consent;
(4) if a Lender elects to increase the amount of its
Loan pursuant to this SECTION 2.02, the Borrower and such Lender
shall execute and deliver to the Administrative Agent a certificate
substantially in the form of Exhibit E-1 (a "LOAN INCREASE
CERTIFICATE"), and the Borrower shall deliver a new Note in exchange
for the existing Note held by such Lender payable to the order of
such Lender in a principal amount equal to the sum of the principal
amount of the existing Note and the principal amount of additional
Debt the Lender has agreed to issue; and
(5) if the Borrower elects to issue additional Notes by
causing an Additional Lender to become a party to this Agreement,
then the Borrower and such Additional Lender shall execute and
deliver to the Administrative Agent a certificate substantially in
the form of Exhibit E-2 (an "ADDITIONAL LENDER CERTIFICATE"), and
the Borrower shall deliver a Note payable to the order of such
Additional Lender in a principal amount equal to the Notes such
Additional Lender has agreed to issue to Borrower.
(c) Subject to acceptance and recording thereof pursuant to
subsection (b) above, from and after the effective date specified in the
Loan Increase Certificate or the Additional Lender Certificate: (a) the
amount of the aggregate Commitments shall be increased as set forth
therein, and (b) in the case of an Additional Lender Certificate, any
Additional Lender party thereto shall be a party to this Agreement and the
other Loan Documents and have the rights and obligations of a Lender under
this Agreement and the other Loan Documents. Upon its receipt of a duly
completed Loan Increase Certificate or an Additional Lender Certificate,
executed by the Borrower and the Lender or the Borrower and the Additional
Lender party thereto, as applicable, the Administrative Agent shall accept
such Loan Increase Certificate or Additional Lender Certificate and record
the information contained therein in Annex I pursuant to SECTION 12.06(b).
SECTION 2.03 NOTES.
31
(a) The Loan made by each Lender shall be evidenced by a
single promissory note (each a "NOTE") of Borrower in substantially the
form of Exhibit A, dated as of the Closing Date, or in the case of a New
Lender, such later date of issuance after the Amendment and Restatement
Date, payable to the order of such Lender for the principal amount of all
Loan outstanding and due such Lender, and otherwise duly completed.
(b) Restrictive Legends. Each of the Notes shall bear a legend
in substantially the following form:
THE ISSUANCE AND SALE OF THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER HEREOF, BY ITS
ACCEPTANCE OF THIS NOTE, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS NOTE
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE THERETO UNDER RULE 144(k) UNDER THE
SECURITIES ACT WHICH IS APPLICABLE TO THIS NOTE (THE "RESALE RESTRICTION
TERMINATION DATE") OTHER THAN (1) TO THE COMPANY OR THEIR RESPECTIVE
SUBSIDIARIES, (2) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER, IN EACH CASE TO WHOM NOTICE IS GIVEN THAT THE RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT), (4) TO A NON-"U.S. PERSON"
IN AN "OFFSHORE TRANSACTION" (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER
THE SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT,
(5) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, INCLUDING THE EXEMPTION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT, IF AVAILABLE, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO
ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF
SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL,
AND SUBJECT TO THE RIGHT OF THE ADMINISTRATIVE AGENT OR THE COMPANY PRIOR TO ANY
SUCH SALE, PLEDGE OR OTHER TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
32
THEM. THIS LEGEND WILL BE REMOVED UPON REQUEST OF THE HOLDER ON OR AFTER THE
RESALE RESTRICTION TERMINATION DATE.
SECTION 2.04 PREPAYMENTS.
(a) Voluntary Prepayments.
(1) Subject to the prepayment premiums provided for in
clause (2) of this SECTION 2.04(a), at any time after December 8,
2007, Borrower may prepay the Loans without premium or penalty upon
not less than one Business Day's prior notice to the Administrative
Agent (which shall promptly notify the Lenders), which notice shall
specify the prepayment date (which shall be a Business Day) and the
amount of the prepayment (which shall be at least $1,000,000 or the
remaining aggregate principal balance outstanding on the Notes) and
shall be irrevocable and effective only upon receipt by the
Administrative Agent, provided that interest on the principal
prepaid, accrued to the prepayment date, shall be paid on the
prepayment date.
(2) Voluntary prepayments made by Borrower pursuant to
SECTION 2.04(a)(1) shall be subject to the following prepayment
premiums:
(A) For any voluntary prepayment made after
December 8, 2007, but before December 8, 2008, Borrower shall
pay a prepayment premium equal to 5% of the amount prepaid;
(B) For any voluntary prepayment made after
December 8, 2008, but before December 8, 2009, Borrower shall
pay a prepayment premium equal to 3% of the amount prepaid;
and
(C) For any voluntary prepayment made after
December 8, 2009 but before the Final Maturity Date, Borrower
shall pay a prepayment premium equal to 1% of the amount
prepaid.
(b) Mandatory Prepayments. Upon the occurrence of a Change in
Control, each Lender shall have the right to require Borrower to prepay
the aggregate principal amount of its Loan outstanding on the date such
prepayment is made, together with accrued and unpaid interest, if any,
thereon to the date of such prepayment, plus a prepayment premium of 1% of
the principal amount prepaid. If a Lender elects to require such
prepayment, such Lender shall instruct the Administrative Agent to deliver
written notice thereof to Borrower, such prepayment to be made on or
before the date (which must be a Business Day at least two (2) days
following receipt of such notice) specified in such written notice.
(c) Generally. Any prepayment made pursuant to this SECTION
2.04 may not be reborrowed and shall be applied to the aggregate
outstanding principal amount of the Loans.
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ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
SECTION 3.01 REPAYMENT OF LOANS. On the Final Maturity Date,
Borrower shall repay the outstanding aggregate principal and accrued and unpaid
interest under the Notes and any other amounts due under the Loan Documents.
Such payment shall be made to the Administrative Agent, for the account of each
Lender.
SECTION 3.02 INTEREST.
(a) Interest on Notes. Borrower will pay to the Administrative
Agent, for the account of each Lender, interest on the unpaid principal
amount of the Loan made by such Lender for the period commencing on the
date such Loan was made (being either the Closing Date or, with respect to
the New Lenders, the date of the Notes issued to the New Lenders) up to,
but excluding the date such Loan shall be paid in full, at the simple rate
per annum equal to nine and seventy-five one-hundredths percent (9.75%),
but in no event to exceed the Highest Lawful Rate.
(b) Post-Default Rate. Notwithstanding the foregoing, Borrower
will pay to the Administrative Agent, for the account of each Lender,
interest at the applicable Post-Default Rate on any principal of the Loan
made by such Lender to the extent such principal is past due and owing for
the period commencing on the date of notice to Borrower of an Event of
Default until the same is paid in full or all Events of Default are cured
or waived.
(c) Due Dates. Accrued and unpaid interest on the Loans shall
be payable on each Quarterly Date commencing on March 31, 2004, and on the
Final Maturity Date.
ARTICLE IV
PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
SECTION 4.01 PAYMENTS. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by
Borrower under this Agreement and the Notes shall be made in Dollars, in
immediately available funds, to the Administrative Agent at such account as the
Administrative Agent shall specify by notice to Borrower at least three (3)
Business Days prior to the date such payment is due from time to time, not later
than 11:00 a.m. New York, New York time on the date on which such payments shall
become due (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Business Day). Such payments shall be
made without (to the fullest extent permitted by applicable law) defense,
set-off or counterclaim. Each payment received by the Administrative Agent under
this Agreement or any Note for account of a Lender shall be paid promptly to
such Lender in immediately available funds. If the due date of any payment under
this Agreement or any Note would otherwise fall on a day which is not a Business
Day such date
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shall be extended to the next succeeding Business Day and interest shall be
payable for any principal so extended for the period of such extension.
SECTION 4.02 PRO RATA TREATMENT. Except to the extent otherwise
provided herein each Lender agrees that: (a) the borrowing from the Lenders
hereunder shall be made from the Lenders pro rata in accordance with their
Percentage Share; (b) each payment of principal of the Loan by Borrower shall be
made for account of the Lenders pro rata in accordance with the respective
unpaid principal amount of the Loan held by the Lenders; and (c) each payment of
interest on the Loan by Borrower shall be made for account of the Lenders pro
rata in accordance with the amounts of interest due and payable to the
respective Lenders.
SECTION 4.03 COMPUTATIONS. Interest shall be computed on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest is payable.
SECTION 4.04 SET-OFF, SHARING OF PAYMENTS, ETC.
(a) Borrower agrees that, in addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a
Lender may otherwise have, each Lender shall have the right and be
entitled, at its option, to offset balances held by it or by any of its
Affiliates for account of Borrower or any Subsidiary at any of its
offices, in Dollars or in any other currency, against any principal of or
interest on any of such Lender's Loan, or any other amount payable to such
Lender hereunder, which is not paid when due (regardless of whether such
balances are then due to Borrower), in which case it shall promptly notify
Borrower and the Administrative Agent thereof, provided that such Lender's
failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain payment of any principal of or
interest on the Loan made by it to Borrower under this Agreement through
the exercise of any right of set-off, banker's lien or counterclaim or
similar right or otherwise, and, as a result of such payment, such Lender
shall have received a greater percentage of the principal or interest then
due hereunder by Borrower to such Lender than the percentage received by
any other Lenders, it shall promptly (1) notify the Administrative Agent
and each other Lender thereof and (2) purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender,
direct interests in) the Loans made by such other Lenders (or in interest
due thereon, as the case may be) in such amounts, and make such other
adjustments from time to time as shall be equitable, to the end that all
the Lenders shall share the benefit of such excess payment (net of any
expenses which may be incurred by such Lender in obtaining or preserving
such excess payment) pro rata in accordance with the unpaid principal
and/or interest on the Loan held by each of the Lenders. To such end all
the Lenders shall make appropriate adjustments among themselves (by the
resale of participations sold or otherwise) if such payment is rescinded
or must otherwise be restored. Borrower agrees that any Lender so
purchasing a participation (or direct interest) in the Loan made by other
Lenders (or in interest due thereon, as the case may be) may exercise all
rights of set-off, banker's lien, counterclaim or similar rights with
respect to such participation as fully as if such Lender were a direct
holder of Loans in the amount of such participation. Nothing contained
herein shall
35
require any Lender to exercise any such right or shall affect the right of
any Lender to exercise, and retain the benefits of exercising, any such
right with respect to any other indebtedness or obligation of Borrower. If
under any applicable bankruptcy, insolvency or other similar law, any
Lender receives a secured claim in lieu of a set-off to which this SECTION
4.04 applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the
rights of the Lenders entitled under this SECTION 4.04 to share the
benefits of any recovery on such secured claim.
SECTION 4.05 TAXES.
(a) Payments Free and Clear. Any and all payments by Borrower
hereunder shall be made, in accordance with SECTION 4.01, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the
Administrative Agent, taxes imposed on its income, and franchise or
similar taxes imposed on it, by (1) any jurisdiction (or political
subdivision thereof) of which the Administrative Agent or such Lender, as
the case may be, is a citizen or resident or in which such Lender has an
office, (2) the jurisdiction (or any political subdivision thereof) in
which the Administrative Agent or such Lender is organized, or (3) any
jurisdiction (or political subdivision thereof) in which such Lender or
the Administrative Agent is presently doing business which taxes are
imposed solely as a result of doing business in such jurisdiction (all
such non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "TAXES"). If
Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder to the Lenders or the Administrative Agent
(i) the sum payable shall be increased by the amount necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this SECTION 4.05) such Lender or the
Administrative Agent (as the case may be) shall receive an amount equal to
the sum it would have received had no such deductions been made, (ii)
Borrower shall make such deductions and (iii) Borrower shall pay the full
amount deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.
(b) Other Taxes. In addition, to the fullest extent permitted
by applicable law, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "OTHER
TAXES").
(c) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, BORROWER WILL INDEMNIFY EACH LENDER AND THE ADMINISTRATIVE
AGENT FOR THE FULL AMOUNT OF TAXES AND OTHER TAXES (INCLUDING, BUT NOT
LIMITED TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY
ON AMOUNTS PAYABLE UNDER THIS SECTION 4.05) PAID BY SUCH LENDER OR THE
ADMINISTRATIVE AGENT (ON THEIR BEHALF OR ON BEHALF OF
36
ANY LENDER), AS THE CASE MAY BE, AND ANY LIABILITY (INCLUDING PENALTIES,
INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO, WHETHER
OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED UNLESS
SUCH LENDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH
INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE ANY
LENDER OR THE ADMINISTRATIVE AGENT, AS THE CASE MAY BE, MAKES WRITTEN
DEMAND THEREFOR. IF ANY LENDER OR THE ADMINISTRATIVE AGENT RECEIVES A
REFUND OR CREDIT IN RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH
LENDER OR THE ADMINISTRATIVE AGENT HAS RECEIVED PAYMENT FROM BORROWER IT
SHALL PROMPTLY NOTIFY BORROWER OF SUCH REFUND OR CREDIT AND SHALL, IF NO
DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS AFTER
RECEIPT OF A REQUEST BY BORROWER (OR PROMPTLY UPON RECEIPT, IF BORROWER
HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO), PAY
AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO BORROWER WITHOUT INTEREST (BUT
WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT BORROWER, UPON
THE REQUEST OF SUCH LENDER OR THE ADMINISTRATIVE AGENT, AGREES TO RETURN
SUCH REFUND OR CREDIT (PLUS PENALTIES, INTEREST OR OTHER CHARGES) TO SUCH
LENDER OR THE ADMINISTRATIVE AGENT IN THE EVENT SUCH LENDER OR THE
ADMINISTRATIVE AGENT IS REQUIRED TO REPAY SUCH REFUND OR CREDIT.
(d) Lender Representations and Actions.
(1) Each Lender represents that it is either (A) a
banking association or corporation organized under the laws of the
United States of America or any state thereof or (B) it is entitled
to complete exemption from United States withholding tax imposed on
or with respect to any payments, including fees, to be made to it
pursuant to this Agreement (i) under an applicable provision of a
tax convention to which the United States of America is a party or
(ii) because it is acting through a branch, agency or office in the
United States of America and any payment to be received by it
hereunder is effectively connected with a trade or business in the
United States of America. Each Lender that is not a banking
association or corporation organized under the laws of the United
States of America or any state thereof agrees to provide to Borrower
and the Administrative Agent on the Amendment and Restatement Date,
or on the date of its delivery of the Assignment pursuant to which
it becomes a Lender, and at such other times as required by United
States law or as Borrower or the Administrative Agent shall
reasonably request, two accurate and complete original signed copies
of either (a) Internal Revenue Service Form W-8ECI (or successor
form) certifying that all payments to be made to it hereunder will
be effectively connected to a United States trade or business (the
"FORM W-8ECI CERTIFICATION") or (b) Internal Revenue Service Form
W-8BEN (or successor
37
form) certifying that it is entitled to the benefit of a provision
of a tax convention to which the United States of America is a party
which completely exempts from United States withholding tax all
payments to be made to it hereunder (the "FORM W-8BEN
CERTIFICATION"). In addition, each Lender agrees that if it
previously filed a Form W-8ECI Certification, it will deliver to
Borrower and the Administrative Agent a new Form W-8ECI
Certification prior to the first payment date occurring in each of
its subsequent taxable years; and if it previously filed a Form
W-8BEN Certification, it will deliver to Borrower and the
Administrative Agent a new certification prior to the first payment
date falling in the third year following the previous filing of such
certification. Each Lender also agrees to deliver to Borrower and
the Administrative Agent such other or supplemental forms as may at
any time be required as a result of changes in applicable law or
regulation in order to confirm or maintain in effect its entitlement
to exemption from United States withholding tax on any payments
hereunder, provided that the circumstances of such Lender at the
relevant time and applicable laws permit it to do so. If a Lender
determines, as a result of any change in either (i) a Governmental
Requirement or (ii) its circumstances, that it is unable to submit
any form or certificate that it is obligated to submit pursuant to
this SECTION 4.05, or that it is required to withdraw or cancel any
such form or certificate previously submitted, it shall promptly
notify Borrower and the Administrative Agent of such fact. If a
Lender is organized under the laws of a jurisdiction outside the
United States of America, unless Borrower and the Administrative
Agent have received a Form W-8BEN Certification or Form W-8ECI
Certification satisfactory to them indicating that all payments to
be made to such Lender hereunder are not subject to United States
withholding tax, Borrower shall withhold taxes from such payments at
the applicable statutory rate. Each Lender agrees to indemnify and
hold harmless Borrower or Administrative Agent, as applicable, from
any United States taxes, penalties, interest and other expenses,
costs and losses incurred or payable by (i) the Administrative Agent
as a result of such Lender's failure to submit any form or
certificate that it is required to provide pursuant to this SECTION
4.05 or (ii) Borrower or the Administrative Agent as a result of
their reliance on any such form or certificate which such Lender has
provided to them pursuant to this SECTION 4.05.
(2) For any period with respect to which a Lender has
failed to provide Borrower with the form required pursuant to this
SECTION 4.05, if any, (other than if such failure is due to a change
in a Governmental Requirement occurring subsequent to the date on
which a form originally was required to be provided), such Lender
shall not be entitled to indemnification under SECTION 4.05 with
respect to taxes imposed by the United States which taxes would not
have been imposed but for such failure to provide such forms;
provided, however, that if a Lender, which is otherwise exempt from
or subject to a reduced rate of withholding tax, becomes subject to
taxes because of its failure to deliver a form required hereunder,
Borrower shall take such steps as such Lender shall reasonably
request to assist such Lender to recover such taxes.
38
(3) Any Lender claiming any additional amounts payable
pursuant to this SECTION 4.05 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any
certificate or document requested by Borrower or the Administrative
Agent or to change the jurisdiction of its applicable lending office
or to contest any tax imposed if the making of such a filing or
change or contesting such tax would avoid the need for or reduce the
amount of any such additional amounts that may thereafter accrue and
would not, in the sole determination of such Lender, be otherwise
disadvantageous to such Lender. The Administrative Agent, at the
written request of Borrower, shall use its commercially reasonable
best efforts to replace any Lender claiming such additional amounts.
No Lender may claim reimbursement for incurred costs more than
ninety (90) days from the date of written request to Borrower.
ARTICLE V
CONVERSION OF NOTES
SECTION 5.01 CONVERSION UNDER RULE 144A.
(a) Subject to the terms and conditions of this SECTION 5.01,
the Notes shall automatically be converted into notes ("INDENTURE NOTES")
issued pursuant to an indenture entered into between Borrower and a
designated trustee selected by Borrower and reasonably acceptable to the
Administrative Agent (the "INDENTURE"). Borrower will initiate the
conversion of the Notes under this SECTION 5.01 on or before January 31,
2004.
(b) Except as discussed below, the terms of the Indenture will
reflect substantially the same terms and conditions as this Agreement,
except that the limitations on additional Debt specified in SECTION 9.18
will not be incorporated and the Indenture Notes will have the same
ranking, interest rate, maturity and redemption terms as the Notes. The
Indenture will be acceptable to Borrower and the Majority Lenders, acting
reasonably, and will include the following additional provisions:
(1) the Indenture Notes will be issued without coupons,
in denominations of $1,000 and integral multiples thereof, and will
initially be issued as global securities in book-entry form. The
global securities shall be deposited with a custodian for the
Depository Trust Company ("DTC") and registered in the name of DTC
or a nominee for DTC (qualified institutional buyers shall be able
to hold their interests in a Rule 144A global security directly
through DTC, if they are DTC participants, or indirectly through
organizations that are DTC participants);
(2) the Indenture Notes shall be eligible for trading on
the PORTAL Market;
(3) Borrower shall furnish to the Lenders, upon their
request, the information required to be delivered pursuant to Rule
144A(d)(4) if, at any
39
time while the Indenture Notes are restricted securities within the
meaning of the Securities Act, Borrower is not subject to the
informational requirements of the Securities Exchange Act of 1934;
(4) Borrower and Lenders shall enter into a registration
rights agreement on or prior to the conversion of the Notes to
Indenture Notes. Pursuant to the registration rights agreement,
Borrower will agree (i) to file with the SEC within ninety (90) days
of the date on which it issues the Indenture Notes either (x) a
shelf registration statement on Form S-1 or Form S-3, if the use of
such form is then available, to cover resales of registrable
securities by the holders thereof who satisfy certain conditions
relating to the provision of information in connection with the
shelf registration statement or (y) an exchange offer registration
statement on Form S-4, (ii) to use its reasonable best efforts to
cause the registration statement to be declared effective by the SEC
within 180 days of the date on which it issues the Indenture Notes,
and (iii) to use its reasonable best efforts to keep (x) such shelf
registration statement continuously effective under the Securities
Act, subject to the Borrower's right to impose commercially
reasonable trading blackouts until such time as there are no longer
any registrable securities covered thereby or (y) such exchange
offer registration statement effective until the completion of the
exchange offer contemplated thereby; and
(5) such other terms and conditions as are usual and
customary for indentures related to offerings of notes pursuant to
Rule 144A including, without limitation, provisions related to the
transfer and redemption procedures applicable to the Indenture Notes
and delivery of customary legal opinions, including assurances as to
the adequacy of information provided to investors.
(c) In the event that a conversion of the Notes is initiated
under this SECTION 5.01, the Borrower and each Lender will use
commercially reasonable efforts to cause the conversion to be completed
within forty-five (45) days of its initiation.
(d) In connection with a conversion of the Notes under this
SECTION 5.01, prior to the issuance of Indenture Notes to a Lender, each
Lender will (i) represent and warrant that such Lender is an "accredited
investor" as such term is defined in Section 501 of Regulation D
promulgated under the Securities Act of 1933, as amended, and (ii) will
surrender its Notes to the Borrower.
SECTION 5.02 REMEDIES FOR CERTAIN EVENTS. If Borrower fails to
initiate conversion of the Notes on or before the date specified for such in
SECTION 5.01(a), (b) Borrower fails to use reasonable best efforts to cause the
conversion of the Notes on or before the date specified in SECTION 5.01(c), (c)
Borrower fails to file a registration statement with the SEC on or before the
date specified in SECTION 5.01(b), (d) Borrower fails to cause such registration
statement to be declared effective by the SEC on or prior to September 30, 2004,
or Borrower fails to use its reasonable best efforts to keep such registration
statement effective if the registration statement with respect to the Notes is
declared effective, then the interest rate on the Notes will increase
immediately following the occurrence of any default referred to in clauses (a)
40
through (e) above by 0.25% per annum. Following the cure of all such defaults,
the accrual of such additional interest will cease and the interest rate will
revert to the original rate.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.01 DOCUMENTS TO BE DELIVERED ON AMENDMENT AND RESTATEMENT
DATE. The obligation of the New Lenders to fund the Additional Loans and of the
Lenders to execute this Agreement on the Amendment and Restatement Date is
subject to the receipt by the Administrative Agent of the following documents
and satisfaction of the other conditions provided for in SECTION 6.02 and this
SECTION 6.01, each of which shall be satisfactory to the Administrative Agent in
form and substance:
(a) A certificate of the Secretary or an Assistant Secretary
of Borrower setting forth (i) resolutions of its board of directors with
respect to the authorization of Borrower to execute and deliver this
Agreement and the Loan Documents and to enter into the transactions
contemplated thereby, (ii) the officers of Borrower (y) who are authorized
to sign the Loan Documents to which Borrower is a party and (z) who will,
until replaced by another officer or officers duly authorized for that
purpose, act as its representative for the purposes of signing documents
and giving notices and other communications in connection with this
Agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or
certificate of incorporation and bylaws of Borrower, certified as being
true and complete. The Administrative Agent and the Lenders may
conclusively rely on such certificate until the Administrative Agent
receives notice in writing from Borrower to the contrary.
(b) Certificates of the appropriate state agencies with
respect to the existence, qualification and good standing of Borrower in
its state of incorporation and each jurisdiction where it is qualified as
a foreign corporation.
(c) A compliance certificate, which shall be substantially in
the form of Exhibit B, duly and properly executed by a Responsible Officer
and dated as of the date of the Amendment and Restatement Date.
(d) The Notes, duly completed and executed.
(e) An opinion of Haynes and Boone, LLP, counsel to Borrower,
in form and substance reasonably acceptable to the Majority Lenders as to
such matters incident to the transactions herein contemplated.
(f) Third Amendment to Senior Secured Credit Facility by
Wachovia Bank, National Association, as Administrative Agent, consenting
to the transactions contemplated by this Agreement.
(g) Waiver letter with respect to the Duke Credit Facility by
Ingalls & Snyder LLC, as Administrative Agent thereunder, consenting to
the transactions contemplated by this Agreement.
41
(h) The seven year warrants for the purchase of 15,000 shares
of Borrower's Common Stock at a purchase price of $10.00 per share for
each $1,000,000.00 in Notes to be issued to the New Lenders on the
Amendment and Restatement Date and on the date any Additional Lenders
purchase additional Notes pursuant to SECTION 2.02, issued to the Lenders
in proportion to each Lender's Loan as originally in effect, in form
reasonably acceptable to the Lenders. For the avoidance of doubt, warrants
to purchase 1,500,000 shares of Borrower's Common Stock have already been
issued to the Lenders party to the Credit Agreement and, assuming the
aggregate principal amount of Notes to be issued to New Lenders on the
Amendment and Restatement Date is $85,000,000.00, warrants to purchase
1,275,000 shares of the Borrower's Common Stock will be issued to the New
Lenders on the Amendment and Restatement Date.
(i) Such other documents as the Administrative Agent or any
Lender or special counsel to the Administrative Agent may reasonably
request.
(j) Executed guarantees of the Notes by each of Callon
Petroleum Operating Company, Callon Offshore Production, Inc. and
Mississippi Marketing, Inc.
SECTION 6.02 CONDITIONS PRECEDENT TO FUNDING. The obligation of the
New Lenders to make the Additional Loans to Borrower and of the Lenders to enter
into this Agreement on the Amendment and Restatement Date is subject to the
further conditions precedent that, as of the date of such Loans and after giving
effect thereto:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by Borrower in
ARTICLE VII shall be true on and as of the Amendment and Restatement Date.
SECTION 6.03 CONDITIONS PRECEDENT FOR THE BENEFIT OF LENDERS. All
conditions precedent to the obligations of the Lenders to make the Loans are
imposed hereby solely for the benefit of the Lenders, and no other Person may
require satisfaction of any such condition precedent or be entitled to assume
that the Lenders will refuse to make the Loans in the absence of strict
compliance with such conditions precedent.
SECTION 6.04 NO WAIVER. No waiver of any condition precedent shall
preclude the Administrative Agent or the Lenders from thereafter declaring that
the failure of Borrower to satisfy such condition precedent constitutes a
Default.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to the Administrative Agent and the
Lenders each of the following matters.
SECTION 7.01 CORPORATE EXISTENCE; CAPITALIZATION.
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(a) Each of Borrower and each Restricted Subsidiary: (i) is a
corporation duly organized, legally existing and in good standing under
the laws of the jurisdiction of its incorporation or legal existence; (ii)
has all requisite corporate power, and has all material governmental
permits, licenses, authorizations, consents and approvals necessary to own
its Property and carry on its business as now being or as proposed to be
conducted; and (iii) is qualified to do business in all jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary and where failure so to qualify would have a Material Adverse
Effect.
(b) As of the Amendment and Restatement Date, the authorized
capital stock of Borrower consists solely of 20,000,000 shares of common
stock, par value $0.01 per share (the "COMMON STOCK"), of which 13,935,311
shares are issued and outstanding and 28,578 shares of which are held in
treasury, and 2,500,000 shares of preferred stock, par value $0.01 per
share, of which 600,861 shares of $2.125 Convertible Exchangeable
Preferred Stock, Series A, are issued and outstanding. Other than as set
forth on Schedule 7.01(b) or the certificate of designation for Borrower's
$2.125 Convertible Exchangeable Preferred Stock as of the Amendment and
Restatement Date, no subscription, warrant, option, convertible security,
stock appreciation or other rights (contingent or other) to purchase or
acquire any shares of any class of capital stock or, or any other equity
interest in, Borrower is authorized or outstanding, and there is not
outstanding any commitment of Borrower or any of its Subsidiaries to issue
any shares, warrants, options or other such rights or to distribute to
holders of any class of its capital stock any evidences of indebtedness or
assets. Except as set forth on SCHEDULE 7.01(b) or the certificate of
designation for Borrower's $2.125 Convertible Exchangeable Preferred Stock
as of the Amendment and Restatement Date, Borrower does not have any
contingent or other obligation to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof, and neither
Borrower nor any of its Subsidiaries is a party to any voting agreement,
voting trust or similar agreement or arrangement relating to its capital
stock or any agreement or arrangement relating to or providing for
registration rights with respect to its capital stock.
SECTION 7.02 FINANCIAL CONDITION. The audited consolidated balance
sheet of Borrower and its Consolidated Subsidiaries as at December 31, 2002 and
the related consolidated statement of income, stockholders' equity and cash flow
of Borrower and its Consolidated Subsidiaries for the fiscal year ended on said
date, with the opinion thereon of Ernst & Young LLP heretofore furnished to each
of the Lenders and the unaudited consolidated balance sheet of Borrower and its
Consolidated Subsidiaries as at September 30, 2003 and their related
consolidated statements of income, stockholders' equity and cash flow of
Borrower and its Consolidated Subsidiaries for the three and nine month period
ended on such date heretofore furnished to the Administrative Agent
(collectively, the "FINANCIAL STATEMENTS"), are complete and correct and fairly
present the consolidated financial condition of Borrower and its Consolidated
Subsidiaries as at said dates and the results of its operations for the fiscal
year and the three month period on said dates, all in accordance with GAAP, as
applied on a consistent basis (subject, in the case of the interim financial
statements, to normal year-end adjustments). Neither Borrower nor any Subsidiary
has on the Amendment and Restatement Date any material Debt, contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
43
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the Financial Statements or in
Schedule 7.02. Since September 30, 2003, there has been no change or event
having a Material Adverse Effect. Since the date of the Financial Statements,
neither the business nor the Properties of Borrower or any Subsidiary have been
materially and adversely affected as a result of any fire, explosion,
earthquake, flood, drought, windstorm, accident, strike or other labor
disturbance, embargo, requisition or taking of Property or cancellation of
contracts, permits or concessions by any Governmental Authority, riot,
activities of armed forces or acts of God or of any public enemy.
SECTION 7.03 LITIGATION. Except as disclosed to the Lenders in
SCHEDULE 7.03 hereto, at the Amendment and Restatement Date there is no
litigation, legal, administrative or arbitral proceeding, investigation or other
action of any nature pending or, to the knowledge of Borrower threatened against
or affecting Borrower or any Subsidiary which involves the possibility of any
judgment or liability against Borrower or any Subsidiary not fully covered by
insurance (except for normal deductibles), and which would be reasonably likely
to have a Material Adverse Effect.
SECTION 7.04 NO BREACH. Neither the execution and delivery of the
Loan Documents, nor compliance with the terms and provisions hereof will
conflict with or result in a breach of, or require any consent which has not
been obtained as of the Amendment and Restatement Date under, the respective
charter or by-laws of Borrower or any Restricted Subsidiary, or any Governmental
Requirement or any agreement or instrument to which Borrower or any Restricted
Subsidiary is a party or by which it is bound or to which it or its Properties
are subject, or constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien upon any of the revenues or
assets of Borrower or any Restricted Subsidiary pursuant to the terms of any
such agreement or instrument other than the Liens created by the Loan Documents.
SECTION 7.05 AUTHORITY. Borrower has all necessary corporate power
and authority to execute, deliver and perform its obligations under the Loan
Documents to which it is a party; and the execution, delivery and performance by
Borrower of the Loan Documents to which it is a party, have been duly authorized
by all necessary corporate action on its part; and the Loan Documents constitute
the legal, valid and binding obligations of Borrower, enforceable in accordance
with their terms.
SECTION 7.06 APPROVALS. No authorizations, approvals or consents of,
and no filings or registrations with, any Governmental Authority are necessary
for the execution, delivery or performance by Borrower of the Loan Documents or
for the validity or enforceability thereof.
SECTION 7.07 USE OF LOANS. The net proceeds of the Additional Loans
shall be used (a) first to repay up to $95,000,000.00 in outstanding principal
amount under the Duke Credit Facility, and (b) any remainder following the
repayment of the entire outstanding principal amount under the Duke Credit
Facility, for general corporate purposes. Borrower is not engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose, whether immediate, incidental or ultimate, of buying or carrying
margin stock (within the meaning of Regulation T, U or X of the Board of
Governors of the Federal Reserve
44
System) and no part of the proceeds of any Loan hereunder will be used to buy or
carry any margin stock.
SECTION 7.08 ERISA.
(a) Borrower, each Subsidiary and each ERISA Affiliate have
complied in all material respects with ERISA and, where applicable, the
Code regarding each Plan.
(b) Each Plan is, and has been, maintained in substantial
compliance with ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could
result in imposition on Borrower, any Subsidiary or any ERISA Affiliate
(whether directly or indirectly) of (i) either a civil penalty assessed
pursuant to section 502(c), (i) or (l) of ERISA or a tax imposed pursuant
to Chapter 43 of Subtitle D of the Code or (ii) breach of fiduciary duty
liability damages under section 409 of ERISA.
(d) No Plan (other than a defined contribution plan) or any
trust created under any such Plan has been terminated since September 2,
1974. No liability to the PBGC (other than for the payment of current
premiums which are not past due) by Borrower, any Subsidiary or any ERISA
Affiliate has been or is expected by Borrower, any Subsidiary or any ERISA
Affiliate to be incurred with respect to any Plan. No ERISA Event with
respect to any Plan has occurred.
(e) Full payment when due has been made of all amounts which
Borrower, any Subsidiary or any ERISA Affiliate is required under the
terms of each Plan or applicable law to have paid as contributions to such
Plan, and no accumulated funding deficiency (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan.
(f) The actuarial present value of the benefit liabilities
under each Plan which is subject to Title IV of ERISA does not, as of the
end of Borrower's most recently ended fiscal year, exceed the current
value of the assets (computed on a plan termination basis in accordance
with Title IV of ERISA) of such Plan allocable to such benefit
liabilities. The term "actuarial present value of the benefit liabilities"
shall have the meaning specified in section 4041 of ERISA.
(g) None of Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains, or contributes to an employee welfare benefit plan,
as defined in section 3(1) of ERISA, including, without limitation, any
such plan maintained to provide benefits to former employees of such
entities, that may not be terminated by Borrower, a Subsidiary or any
ERISA Affiliate in its sole discretion at any time without any material
liability.
(h) None of Borrower, any Subsidiary or any ERISA Affiliate
sponsors, maintains or contributes to, or has at any time in the preceding
six calendar years, sponsored, maintained or contributed to, any
Multiemployer Plan.
45
(i) None of Borrower, any Subsidiary or any ERISA Affiliate is
required to provide security under section 401(a)(29) of the Code due to a
Plan amendment that results in an increase in current liability for the
Plan.
SECTION 7.09 TAXES. Except as set out in SCHEDULE 7.09, each of
Borrower and its Subsidiaries has filed all United States Federal income
tax returns and all other tax returns which are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to
any assessment received by Borrower or any Subsidiary. The charges,
accruals and reserves on the books of Borrower and its Subsidiaries in
respect of taxes and other governmental charges are, in the opinion of
Borrower, adequate. No tax lien has been filed and, to the knowledge of
Borrower, no claim is being asserted with respect to any such tax, fee or
other charge. There is no ongoing audit or examination or, to the
knowledge of Borrower, other investigation by any Governmental Authority
of the tax liability of Borrower or any of its Subsidiaries, and there is
no unresolved claim by any Governmental Authority concerning the tax
liability of Borrower or any Subsidiary for any period for which tax
returns have been or were required to have been filed, other than
unsecured claims for which adequate reserves have been established in
accordance with GAAP.
SECTION 7.10 TITLES, PROPERTY, ETC.
(a) Except as set out in SCHEDULE 7.10, each of Borrower and
its Restricted Subsidiaries has good and defensible title to its material
(individually or in the aggregate) Properties, free and clear of all
Liens, except Liens permitted by SECTION 9.02. Except as set forth in
SCHEDULE 7.10, after giving full effect to the Permitted Liens, Borrower
owns the net interests in production attributable to the Hydrocarbon
Interests reflected in the most recent balance sheet included with the
Financial Statements, and the ownership of such Properties shall not in
any material respect obligate Borrower to bear the costs and expenses
relating to the maintenance, development and operations of each such
Property in an amount in excess of the working interest of each Property.
(b) All leases and agreements necessary for the conduct of the
business of Borrower and its Restricted Subsidiaries are valid and
existing, in full force and effect and there exists no default or event or
circumstance which with the giving of notice or the passage of time or
both would give rise to a default under any such lease or leases, which
would affect in any material respect the conduct of the business of
Borrower and its Restricted Subsidiaries.
(c) The rights, Properties and other assets presently owned,
leased or licensed by Borrower and its Restricted Subsidiaries including,
without limitation, all easements and rights of way, include all rights,
Properties and other assets necessary to permit Borrower and its
Restricted Subsidiaries to conduct their business in all material respects
in the same manner as its business has been conducted prior to the
Amendment and Restatement Date.
(d) All of the assets and Properties of Borrower and its
Restricted Subsidiaries which are necessary for the operation of its
business are in good working
46
condition, normal wear and tear excepted, and are maintained in accordance
with prudent business standards.
(e) Borrowers' and its Restricted Subsidiaries' Oil and Gas
Properties (and properties unitized therewith) have been maintained,
operated and developed in a good and workmanlike manner and in conformity
with all applicable laws and all rules, regulations and orders of all duly
constituted authorities having jurisdiction and in conformity with the
provisions of all leases, subleases or other contracts comprising a part
of the Hydrocarbon Interests and other contracts and agreements forming a
part of the Oil and Gas Properties; specifically in this connection, (i)
after the Amendment and Restatement Date, no Oil and Gas Property is
subject to having allowable production reduced below the full and regular
allowable (including the maximum permissible tolerance) because of any
overproduction (whether or not the same was permissible at the time) prior
to the Amendment and Restatement Date and (ii) none of the wells
comprising a part of the Oil and Gas Properties (or properties unitized
therewith) are deviated from the vertical more than the maximum permitted
by applicable laws, regulations, rules and orders, and such wells are, in
fact, bottomed under and are producing from, and the well bores are wholly
within, the Oil and Gas Properties (or in the case of wells located on
properties unitized therewith, such unitized properties).
SECTION 7.11 NO MATERIAL MISSTATEMENTS. No written information,
statement, exhibit, certificate, document or report furnished to the
Administrative Agent and the Lenders (or any of them) by Borrower or any
Subsidiary in connection with the negotiation of this Agreement contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statement contained therein not materially misleading in
the light of the circumstances in which made and with respect to Borrower and
its Subsidiaries taken as a whole. There is no fact peculiar to Borrower or any
Subsidiary which has a Material Adverse Effect or in the future is reasonably
likely to have (so far as Borrower can now foresee) a Material Adverse Effect.
SECTION 7.12 INVESTMENT COMPANY ACT. Neither Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 7.13 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Borrower
nor any Subsidiary is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," or a "public utility" within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
SECTION 7.14 SUBSIDIARIES.
(a) Except as set forth on SCHEDULE 7.14, as of the Amendment
and Restatement Date, Borrower has no Subsidiaries or Unrestricted
Subsidiaries.
(b) With respect to each Subsidiary of Borrower existing as of
the Amendment and Restatement Date, SCHEDULE 7.14 sets forth the following
information:
47
(1) the jurisdiction of formation and headquarters of
such Subsidiary;
(2) the identity of each other jurisdiction wherein such
Subsidiary is qualified to do business;
(3) the identity of each class of authorized capital
stock of such Subsidiary;
(4) the amount and ownership of the capital stock of
such Subsidiary that is issued and outstanding (collectively, the
"SUBSIDIARY SECURITIES"); and
(5) the identity of each Person or joint venture entity
in which such Subsidiary has an equity or similar interest.
All of the Subsidiary Securities have been duly authorized and validly issued
and are fully paid and nonassessable, to the extent such term is applicable
under local law. None of the Subsidiary Securities have been issued in violation
of any shareholder's preemptive rights.
(c) As of the Amendment and Restatement Date, and except as
disclosed on SCHEDULE 7.14, there are no contracts obligating Borrower or
any of its Affiliates to issue, sell, pledge, dispose of or encumber, nor
any options, warrants or rights of any kind to acquire, nor any securities
that are convertible into or exercisable or exchangeable for, any shares
of any class of capital stock of any Subsidiary. There are no contracts
obligating Borrower or any of its Affiliates to redeem, purchase or
acquire or offer to acquire any shares of any class of capital stock of
any Subsidiary. As of the Amendment and Restatement Date, and except as
disclosed on SCHEDULE 7.14, there are no contracts obligating any
Subsidiary to make any dividend or distribution of any kind.
(d) As of the Amendment and Restatement Date, and except as
disclosed on SCHEDULE 7.14, there are no shareholder agreements, voting
agreements, management agreements, proxies or other similar agreements or
understandings with respect to Borrower or any Subsidiary to which
Borrower or any of its Affiliates is a party. Except as described in the
Material Agreements listed on SCHEDULE 7.21, as of the Amendment and
Restatement Date there are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights
affecting the capital stock of Borrower or any Subsidiary with respect to
which Borrower or any of its Affiliates is a party or issuer.
SECTION 7.15 LOCATION OF BUSINESS AND OFFICES. As of the Amendment
and Restatement Date, Borrower's principal place of business and chief executive
offices are located at the address stated on the signature page of this
Agreement. As of the Amendment and Restatement Date, the principal place of
business and chief executive office of each Subsidiary are located at the
addresses stated on SCHEDULE 7.14.
SECTION 7.16 DEFAULTS. Neither Borrower nor any Restricted
Subsidiary is in default nor has any event or circumstance occurred which, but
for the expiration of any
48
applicable grace period or the giving of notice, or both, would constitute a
default under any material agreement or instrument to which Borrower or any
Restricted Subsidiary is a party or by which Borrower or any Restricted
Subsidiary is bound which default would be reasonably likely to have a Material
Adverse Effect. No Default hereunder has occurred and is continuing.
SECTION 7.17 ENVIRONMENTAL MATTERS. Except (i) as provided in
SCHEDULE 7.17 or (ii) as would not be reasonably likely to have a Material
Adverse Effect (or with respect to (c), (d) and (e) below, where the failure to
take such actions would not be reasonably likely to have a Material Adverse
Effect):
(a) Neither any Property now or previously owned or leased or
in the possession of or operated by or under the direction of Borrower or
any Subsidiary nor the operations now or previously conducted thereon
violate any order or requirement of any court or Governmental Authority or
any Environmental Laws;
(b) Without limitation of clause (a) above, no Property now or
previously owned or leased or in the possession of or operated by or under
the direction of Borrower or any Subsidiary nor the operations currently
conducted thereon or previously conducted thereon while in the ownership
of or under the operation, possession or direction of Borrower or any
Subsidiary, or, to the best knowledge of Borrower, by any prior owner or
operator of such Property or operation, are in violation of or subject to
any existing, pending or threatened action, suit, investigation, inquiry
or proceeding by or before any court or Governmental Authority or to any
remedial obligations under Environmental Laws;
(c) All notices, permits, licenses or similar authorizations,
if any, required to be obtained or filed in connection with the operation
or use of any and all Property now or previously owned or leased or in the
possession of or operated by or under the direction of Borrower and each
Subsidiary, including without limitation all permits for the treatment,
storage, disposal or release of a hazardous substance or solid waste, have
been duly obtained or filed, and Borrower and each Subsidiary are in
compliance with the terms and conditions of all such notices, permits,
licenses and similar authorizations;
(d) All hazardous substances, solid waste, and oil and gas
exploration and production wastes, if any, generated at any and all
Property now or previously owned or leased or in the possession of or
operated by or under the direction of Borrower or any Subsidiary have in
the past been transported, treated or disposed of in accordance with
Environmental Laws, and, to the knowledge of Borrower, all such transport
carriers and treatment and disposal facilities are in compliance with
Environmental Laws, and are not the subject of any existing, pending or
threatened action, investigation or inquiry by any Governmental Authority
in connection with any Environmental Laws;
(e) Borrower has taken steps reasonably necessary to determine
and has determined that no hazardous substances, solid waste, or oil and
gas exploration and production wastes, have been disposed of or otherwise
released and there has been no threatened release of any hazardous
substances on or to any Property now or previously
49
owned or leased or in the possession of or operated by or under the
direction of Borrower or any Subsidiary except in compliance with
Environmental Laws;
(f) To the extent applicable, all Property owned, leased, in
the possession of or operated by or under the direction of Borrower and
each Subsidiary currently satisfies all design, operation, and equipment
requirements currently imposed by the OPA (as defined in the definition of
"ENVIRONMENTAL LAWS" herein), and Borrower does not have any reason to
believe that such Property, to the extent subject to OPA, will not be able
to maintain compliance with the OPA requirements during the term of this
Agreement; and
(g) To Borrower's knowledge, neither Borrower nor any
Subsidiary has any known contingent liability in connection with any
release or threatened release of any oil, hazardous substance or solid
waste into the environment.
SECTION 7.18 COMPLIANCE WITH THE LAW. Neither Borrower nor any
Restricted Subsidiary has violated any Governmental Requirement in any material
respect or failed to obtain any license, permit, franchise or other governmental
authorization reasonably necessary for the ownership of any of its Properties or
the conduct of its business as it is currently being conducted or proposed to be
conducted in the future. All such licenses, permits, franchises or other
governmental authorizations are currently in full force and effect.
SECTION 7.19 INSURANCE. SCHEDULE 7.19 attached hereto contains an
accurate and complete description of all material policies of fire, liability,
workmen's compensation and other forms of insurance owned or held by Borrower
and each Subsidiary as of the Amendment and Restatement Date. All such policies
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the Amendment and Restatement Date have been paid,
and no notice of cancellation or termination has been received with respect to
any such policy. Such policies are sufficient for compliance with all
requirements of law and of all agreements to which Borrower or any Restricted
Subsidiary is a party; are valid, outstanding and enforceable policies; provide
adequate insurance coverage in at least such amounts and against at least such
risks (but including in any event public liability) as are usually insured
against in the same general area by companies engaged in the same or a similar
business for the assets and operations of Borrower and each Restricted
Subsidiary; will remain in full force and effect through the respective dates
set forth in SCHEDULE 7.19 without the payment of additional premiums; and will
not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. As of the Amendment and Restatement
Date, neither Borrower nor any Restricted Subsidiary has been refused any
insurance with respect to its assets or operations, nor has its coverage been
limited below usual and customary policy limits, by an insurance carrier to
which it has applied for any such insurance or with which it has carried
insurance during the last three years.
SECTION 7.20 HEDGING AGREEMENTS. SCHEDULE 7.20 sets forth, as of the
Amendment and Restatement Date, a true and complete list of all Hedging
Agreements (including commodity price swap agreements, insurance swap or option
agreements, forward agreements for terms in excess of thirty (30) days or
contracts of sale which provide for prepayment for deferred shipment or delivery
of oil, gas or other commodities) of Borrower and
50
each Subsidiary, the material terms thereof (including the type, term, effective
date, termination date and notional amounts or volumes), the net mark to market
value thereof, all credit support agreements relating thereto (including any
margin required or supplied), and the counter party to each such agreement.
SECTION 7.21 MATERIAL AGREEMENTS. Set forth on SCHEDULE 7.21 hereto
is a complete and correct list of all material agreements, contracts, leases,
indentures, purchase agreements, obligations in respect of letters of credit,
guarantees, joint venture agreements, and other instruments in effect or to be
in effect as of the Amendment and Restatement Date (other than Hedging
Agreements and agreements relating to Debt of the type described in clause (iii)
in the definition of Debt or clause (vii) in the definition of Debt to the
extent relating to primary obligations of the type described in clause (iii) in
the definition of Debt) providing for, evidencing, securing or otherwise
relating to any Debt of Borrower or any of its Subsidiaries to the extent such
instrument evidences Debt in excess of $5,000,000, and all obligations of
Borrower or any of its Subsidiaries to issuers of surety or appeal bonds issued
for account of Borrower or any such Subsidiary in excess of $5,000,000
(collectively, the "MATERIAL AGREEMENTS"), and such list correctly sets forth
the names of the debtor or lessee and creditor or lessor with respect to the
Debt or lease obligations outstanding or to be outstanding and the Property
subject to any Lien securing such Debt or lease obligation. Borrower has
heretofore delivered to the Administrative Agent a complete and correct copy of
all such material credit agreements, indentures, purchase agreements, contracts,
letters of credit, guarantees, joint venture agreements, or other instruments,
including any modifications or supplements thereto, as in effect on the
Amendment and Restatement Date, which the Administrative Agent has requested.
Each Material Agreement is in full force and effect and is enforceable by
Borrower in accordance with its terms, and none of Borrower nor, to the
knowledge of Borrower, any other party thereto is in breach of or default under
any Material Agreement that would reasonably be likely to have a Material
Adverse Effect or has given notice of termination or cancellation of any
Material Agreement.
SECTION 7.22 GAS IMBALANCES. As of the Amendment and Restatement
Date, except as set forth on SCHEDULE 7.22, on a net basis, there are no gas
imbalances, take or pay or other prepayments with respect to Borrower's Oil and
Gas Properties which would require Borrower to deliver, in the aggregate, five
percent or more of the quarterly production from Hydrocarbons produced from
Borrower's Oil and Gas Properties at some future time without then or thereafter
receiving full payment therefor.
SECTION 7.23 LABOR RELATIONS. None of Borrower or any Subsidiary is
engaged in any unfair labor practice within the meaning of the National Labor
Relations Act of 1947, as amended. There is (a) no unfair labor practice
complaint before the National Labor Relations Board, or grievance or arbitration
proceeding arising out of or under any collective bargaining agreement, pending
or, to the knowledge of Borrower, threatened, against Borrower or any
Subsidiary, (b) no strike, lock-out, slowdown, stoppage, walkout or other labor
dispute pending or, to the knowledge of Borrower, threatened, against Borrower
or any Subsidiary, nor has any such action occurred within the last five years,
and (c) to the knowledge of Borrower, no petition for certification or union
election or union organizing activities taking place with respect to Borrower.
51
SECTION 7.24 INTELLECTUAL PROPERTY. Each of Borrower and its
Subsidiaries owns, or has the legal right to use, all intellectual property
necessary for each of them to conduct its business as currently conducted
("BORROWER INTELLECTUAL Property"). Borrower has not received notice of any
claim challenging or questioning the use of any Borrower Intellectual Property
or the validity or effectiveness of any Borrower Intellectual Property, and to
the knowledge of Borrower, the use of such Borrower Intellectual Property by
Borrower or any Restricted Subsidiary does not infringe on the rights of any
Person, except for such claims and infringements that in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
ARTICLE VIII
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
Loans hereunder, all interest thereon and all other amounts payable by Borrower
hereunder and under the other Loan Documents:
SECTION 8.01 REPORTING REQUIREMENTS. Borrower shall deliver, or
shall cause to be delivered, to the Administrative Agent with sufficient copies
of each for the Lenders:
(a) Annual Financial Statements. As soon as available and in
any event within ninety (90) days after the end of each fiscal year of
Borrower, the audited consolidated (and if Borrower ever has any
Unrestricted Subsidiaries, the unaudited consolidating) statements of
income, stockholders' equity, changes in financial position and cash flow
of Borrower and its Consolidated Subsidiaries for such fiscal year, and
the related consolidated (and if Borrower ever has any Consolidated,
Unrestricted Subsidiaries, the consolidating) balance sheets of Borrower
and its Consolidated Subsidiaries as at the end of such fiscal year, and
setting forth in each case in comparative form the corresponding figures
for the preceding fiscal year, and accompanied by the related opinion of
independent public accountants of recognized national standing acceptable
to the Administrative Agent which opinion shall state that said financial
statements fairly present the consolidated financial condition and results
of operations of Borrower and its Consolidated Subsidiaries as at the end
of, and for, such fiscal year and that such financial statements have been
prepared in accordance with GAAP, except for such changes in such
principles with which the independent public accountants shall have
concurred and such opinion shall not contain a "going concern" or like
qualification or exception, and a certificate of such accountants stating
that, in making the examination necessary for their opinion, they obtained
no knowledge, except as specifically stated, of any Default.
(b) Quarterly Financial Statements. As soon as available and
in any event within forty-five (45) days after the end of each of the
first three fiscal quarterly periods of each fiscal year of Borrower,
consolidated (and if Borrower ever has any Consolidated, Unrestricted
Subsidiaries, the consolidating) statements of income, stockholders'
equity, changes in financial position and cash flow of Borrower and its
Consolidated Subsidiaries for such period and for the period from the
beginning of the
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respective fiscal year to the end of such period, and the related
consolidated (and if Borrower ever has any Unrestricted Subsidiaries, the
consolidating) balance sheets as at the end of such period, and setting
forth in each case in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year, accompanied by the
certificate of a Responsible Officer, which certificate shall state that
said financial statements fairly present the consolidated financial
condition and results of operations of Borrower and its Consolidated
Subsidiaries in accordance with GAAP, as at the end of, and for, such
period (subject to normal year-end audit adjustments).
(c) Notice of Default, Etc. Promptly after Borrower knows that
any Default or any Material Adverse Effect has occurred, a notice of such
Default or Material Adverse Effect, describing the same in reasonable
detail and the action Borrower proposes to take with respect thereto.
(d) Other Accounting Reports. Promptly upon receipt thereof, a
copy of each other material report or letter submitted to Borrower or any
Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of Borrower and its
Subsidiaries, and a copy of any response by Borrower or any Subsidiary of
Borrower, or the Board of Directors of Borrower or any Subsidiary of
Borrower, to such letter or report.
(e) SEC Filings, Etc. Promptly upon its becoming available,
each financial statement, report, notice or proxy statement sent by
Borrower to stockholders generally and each regular or periodic report and
any registration statement, prospectus or written communication (other
than transmittal letters) in respect thereof filed by Borrower with or
received by Borrower in connection therewith from any securities exchange
or the SEC.
(f) Notices Under Other Loan Agreements. Promptly after the
furnishing thereof, copies of any statement, report or notice furnished to
any Person pursuant to the terms of any indenture, loan or credit or other
similar agreement, other than this Agreement and not otherwise required to
be furnished to the Lenders pursuant to any other provision of this
SECTION 8.01.
(g) Other Matters. From time to time such other information
regarding the business, affairs or financial condition of Borrower or any
Subsidiary (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Administrative Agent may reasonably request.
(h) Hedging Agreements. As soon as available and in any event
within forty-five (45) days after the last day of each calendar quarter, a
report, in form and substance reasonably satisfactory to the
Administrative Agent, setting forth as of the last Business Day of such
calendar quarter a true and complete list of all Hedging Agreements
(including commodity price swap agreements, insurance swap or option
agreements, forward agreements with terms in excess of thirty (30) days or
contracts of sale which provide for prepayment for deferred shipment or
delivery of oil, gas or other
53
commodities) of Borrower and each Restricted Subsidiary, the material
terms thereof (including the type, term, effective date, termination date
and notional amounts or volumes), the net mark to market value therefor,
any new credit support agreements relating thereto not listed on SCHEDULE
7.20, any margin required or supplied under any credit support document,
and the counter party to each such agreement.
(i) Responsible Officer's Certificate. Borrower will furnish
to the Administrative Agent, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of Exhibit C executed by a Responsible Officer
(1) certifying as to the matters set forth therein and stating that no
Default has occurred and is continuing (or, if any Default has occurred
and is continuing, describing the same in reasonable detail), and (2)
setting forth in reasonable detail the computations necessary to determine
whether Borrower is in compliance with SECTION 9.01(a) as of the end of
the respective calendar quarter or fiscal year.
SECTION 8.02 LITIGATION. Borrower shall promptly give to the
Administrative Agent notice of: (i) all legal or arbitral proceedings, and of
all proceedings before any Governmental Authority against or adversely affecting
Borrower or any Restricted Subsidiary, except proceedings which, if adversely
determined, could not reasonably be expected to have a Material Adverse Effect,
and (ii) of any litigation or proceeding against or adversely affecting in any
material respect Borrower or any Restricted Subsidiary in which the amount
involved is not covered in full by insurance (subject to normal and customary
deductibles and for which the insurer has not assumed the defense), or in which
injunctive or similar relief is sought. Borrower will, and will cause each of
its Restricted Subsidiaries to, promptly notify the Administrative Agent and
each of the Lenders of any claim, judgment, Lien (other than those permitted
under SECTION 9.02) or other encumbrance affecting any Property of Borrower or
any Restricted Subsidiary if the value of the claim, judgment, Lien, or other
encumbrance affecting such Property shall exceed $500,000.
SECTION 8.03 MAINTENANCE, ETC.
(a) Generally. Borrower shall and shall cause each Restricted
Subsidiary to: preserve and maintain its corporate existence and all of
its material rights, privileges and franchises; keep books of record and
account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and activities;
comply with all Governmental Requirements if failure to comply with such
requirements would be reasonably likely to have a Material Adverse Effect;
pay and discharge all taxes, assessments and governmental charges or
levies imposed on it or on its income or profits or on any of its Property
prior to the date on which penalties attach thereto, except for any such
tax, assessment, charge or levy the payment of which is being contested in
good faith and by proper proceedings and against which adequate reserves
are being maintained; upon reasonable notice, permit representatives of
the Administrative Agent or any Lender, during normal business hours, to
examine, copy and make extracts from its books and records, to inspect its
Properties, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by such Lender or the Administrative
Agent (as the case may be); and keep, or cause to be kept, insured by
financially sound and reputable insurers all Property of a character
usually
54
insured by Persons engaged in the same or similar business similarly
situated against loss or damage of the kinds and in the amounts
customarily insured against by such Persons and carry such other insurance
as is usually carried by such Persons including, without limitation,
environmental risk insurance to the extent reasonably available. Subject
to SECTION 9.14, Borrower will, and will cause each Restricted Subsidiary,
to pay, discharge or otherwise satisfy at or before maturity all
liabilities and obligations as and when due (subject to any applicable
subordination provisions), and any additional costs that are imposed as a
result of any failure to so pay, discharge or otherwise satisfy such
obligations, except to the extent failure to do so would not, individually
or in the aggregate be reasonably likely to have a Material Adverse
Effect.
(b) Oil and Gas Properties. Borrower will and will cause each
Restricted Subsidiary to maintain all of its Oil and Gas Properties as a
reasonably prudent operator. Borrower will and will cause each Restricted
Subsidiary to keep unimpaired, except for Liens described in SECTION 9.02,
its rights with respect to its Oil and Gas Properties and other material
Properties and prevent any forfeiture thereof or a default thereunder.
Borrower will cause and cause each Restricted Subsidiary to perform or
make reasonable and customary efforts to cause to be performed, in
accordance with industry standards, the obligations required by each and
all of the assignments, deeds, leases, sub-leases, contracts and
agreements affecting its interests in its Oil and Gas Properties and other
material Properties.
SECTION 8.04 ENVIRONMENTAL MATTERS.
(a) Compliance with Environmental Laws. Borrower will and will
cause each Subsidiary to maintain and operate all Property of Borrower and
its Subsidiaries in compliance with applicable Environmental Laws in all
material respects.
(b) Notice of Action. Borrower will promptly notify the
Administrative Agent and the Lenders in writing of any threatened action,
investigation or inquiry by any Governmental Authority of which Borrower
has knowledge in connection with any Environmental Laws, excluding routine
testing and corrective action, which if adversely determined could have a
Material Adverse Effect.
(c) Future Acquisitions. Borrower will and will cause each
Subsidiary to provide environmental audits and tests in accordance with
industry standards as reasonably requested by the Majority Lenders (or as
otherwise required to be obtained by the Lenders by any Governmental
Authority) in connection with any future acquisitions of Oil and Gas
Properties.
SECTION 8.05 FURTHER ASSURANCES. Borrower will cure promptly any
defects in the creation and issuance of the Notes and the execution and delivery
of this Agreement. Borrower at its expense will promptly execute and deliver to
the Administrative Agent upon request all such other documents, agreements and
instruments to comply with or accomplish the covenants and agreements of
Borrower this Agreement, or to correct any omissions in, or to state more fully
the obligations set out herein or to make any recordings, to
55
file any notices or obtain any consents, all as may be necessary or appropriate
in connection therewith.
SECTION 8.06 PERFORMANCE OF OBLIGATIONS. Borrower will pay the Notes
according to the reading, tenor and effect thereof; and Borrower will do and
perform every act and discharge all of the obligations to be performed and
discharged by it under this Agreement and the Notes, at the time or times and in
the manner specified.
SECTION 8.07 ERISA INFORMATION AND COMPLIANCE. Borrower will
promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to
promptly furnish to the Administrative Agent with sufficient copies to the
Lenders (i) promptly after the filing thereof with the United States Secretary
of Labor, the Internal Revenue Service or the PBGC, copies of each annual and
other report with respect to each Plan or any trust created thereunder, (ii)
immediately upon becoming aware of the occurrence of any ERISA Event or of any
"prohibited transaction," as described in section 406 of ERISA or in section
4975 of the Code, in connection with any Plan or any trust created thereunder, a
written notice signed by a Responsible Officer specifying the nature thereof,
what action Borrower, the Subsidiary or the ERISA Affiliate is taking or
proposes to take with respect thereto, and, when known, any action taken or
proposed by the Internal Revenue Service, the Department of Labor or the PBGC
with respect thereto, and (iii) immediately upon receipt thereof, copies of any
notice of the PBGC's intention to terminate or to have a trustee appointed to
administer any Plan. With respect to each Plan (other than a Multiemployer
Plan), Borrower will, and will cause each Subsidiary and ERISA Affiliate to, (i)
satisfy in full and in a timely manner, without incurring any late payment or
underpayment charge or penalty and without giving rise to any lien, all of the
contribution and funding requirements of section 412 of the Code (determined
without regard to subsections (d), (e), (f) and (k) thereof) and of section 302
of ERISA (determined without regard to sections 303, 304 and 306 of ERISA), and
(ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring
any late payment or underpayment charge or penalty, all premiums required
pursuant to sections 4006 and 4007 of ERISA.
SECTION 8.08 RESTRICTED SUBSIDIARIES.
(a) Borrower shall ensure that each Restricted Subsidiary is
at all times a Consolidated Subsidiary.
(b) Borrower shall cause all Restricted Subsidiaries created
or acquired after the date hereof to execute a subsidiary guarantee of the
Notes and to provide legal opinions and such other documents as the
Majority Lenders may reasonably request.
SECTION 8.09 USE OF PROCEEDS OF QUALIFIED OFFERING. If the Borrower
issues Debt in a Qualified Offering, the Borrower shall use the net proceeds of
such offering to repay or redeem Debt, including Debt under the Senior Secured
Credit Facility (which may be reborrowed from time to time as Permitted
Indebtedness). If the aggregate net proceeds from Qualified Offerings equals or
exceeds $150,000,000, Borrower shall repay in full all Debt under the Duke
Credit Facility.
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SECTION 8.10 RATING. Prior to September 30, 2004, the Borrower will
cause the Notes to be rated by Standard & Poor's, Moody's Investor Services or
Fitch Ratings.
ARTICLE IX
NEGATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
Loans hereunder, all interest thereon and all other amounts payable by Borrower
hereunder and under the other Loan Documents, without the prior written consent
of the Majority Lenders:
SECTION 9.01 DEBT INCURRENCE.
(a) Borrower will not, and will not permit any Restricted
Subsidiary to, incur, create or assume any Debt, other than Permitted
Indebtedness, if (i) the Interest Coverage Ratio after giving effect to
the incurrence, creation or assumption of such Debt is less than 2.5 to
1.0, or (ii) the Debt Coverage Ratio after giving effect to the
incurrence, creation or assumption of such Debt is more than 4.0 to 1.0.
(b) Borrow will not, and will not permit any Restricted
Subsidiary to, incur, create or assume more than $175,000,000 in aggregate
principal amount of Senior Secured Debt unless the Ratio of Borrower's
Adjusted Consolidated Net Tangible Assets to Senior Secured Debt is equal
to, or greater than, 2.5 to 1.0.
SECTION 9.02 LIENS. Unless the Loans are secured equally and
ratably, Borrower will not, and will not permit any Restricted Subsidiary to,
create, incur or assume any Lien securing pari passu or subordinated Debt on any
of its Properties (now owned or hereafter acquired), except:
(a) Liens securing the payment of the Loans;
(b) Permitted Liens;
(c) Liens securing leases allowed under clause (d) in the
definition of Permitted Indebtedness, but only on the Property under
lease;
(d) Liens disclosed on SCHEDULE 9.02;
(e) Liens on cash or securities of Borrower securing Debt
described in clause (e) of the definition of Permitted Indebtedness; and
(f) any Lien on any Property acquired after the date hereof
existing prior to the acquisition thereof by Borrower or any Restricted
Subsidiary or existing on any Property of any Person that becomes a
Restricted Subsidiary after the date hereof prior to the time such Person
becomes a Restricted Subsidiary; provided that (i) such Lien is not
created in contemplation of or in connection with such acquisition or such
Person becoming a Restricted Subsidiary, as the case may be, (ii) such
Lien shall not apply to any other Property of Borrower or any Restricted
Subsidiary and (iii) such Lien shall
57
secure only those obligations which it secures on the date of such
acquisition or the date such Person becomes a Restricted Subsidiary, as
the case may be and extensions, renewals and replacements thereof that do
not increase the outstanding principal amount thereof.
SECTION 9.03 RESTRICTED INVESTMENTS; RESTRICTIVE AGREEMENTS.
(a) Borrower will not, and will not permit any of its
Restricted Subsidiaries, directly or indirectly, to:
(1) declare or pay any dividend or make any distribution
on or in respect of its capital stock (including any payment in
connection with any merger or consolidation involving Borrower or
any of its Restricted Subsidiaries) except:
(A) dividends or distributions payable in capital
stock of Borrower (other than Disqualified Stock) or in
options, warrants or other rights to purchase such capital
stock;
(B) dividends or distributions payable to Borrower
or a Restricted Subsidiary of Borrower (and if such Restricted
Subsidiary is not a Wholly-Owned Subsidiary, to its other
holders of common capital stock on a pro rata basis); and
(C) dividends on Borrower's $2.125 Convertible
Exchangeable Preferred Stock, Series A currently outstanding;
(2) purchase, redeem, retire or otherwise acquire for
value any capital stock of Borrower or any direct or indirect parent
of Borrower held by Persons other than Borrower or a Restricted
Subsidiary of Borrower (other than in exchange for capital stock of
Borrower (other than Disqualified Stock));
(3) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated Debt
(other than the purchase, repurchase or other acquisition of
Subordinated Debt purchased in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in each
case due within one year of the date of purchase, repurchase or
acquisition); or
(4) make any Restricted Investment in any Person;
(any such dividend, distribution, purchase, redemption, repurchase, defeasance,
other acquisition, retirement or Restricted Investment referred to in clauses
(1) through (4) only shall be referred to herein as a "RESTRICTED PAYMENT"), if
at the time Borrower or such Restricted Subsidiary makes such Restricted
Payment:
58
(A) a Default shall have occurred and be
continuing (or would result therefrom); or
(B) Borrower is not able to incur an additional
$1.00 of Debt pursuant to SECTION 9.01(a) after giving effect,
on a pro forma basis, to such Restricted Payment; or
(C) the aggregate amount of such Restricted
Payment and all other Restricted Payments declared or made
subsequent to the date hereof would exceed the sum of:
(i) 50% of Consolidated Net Income for the
period (treated as one accounting period) from the
beginning of the first calendar quarter commencing after
the date of this Agreement to the end of the most recent
calendar quarter ending prior to the date of such
Restricted Payment for which financial statements are in
existence (or, in case such Consolidated Net Income is a
deficit, minus 100% of such deficit); provided, however,
that writedowns of oil and gas properties due to the
application of the full-cost method of accounting will
not be deducted in calculating Consolidated Net Income
for purposes of this paragraph;
(ii) the aggregate Net Cash Proceeds
received by Borrower from the issue or sale of its
capital stock (other than Disqualified Stock) or other
capital contributions subsequent to the date hereof
(other than Net Cash Proceeds received from an issuance
or sale of such capital stock to a Subsidiary of
Borrower or an employee stock ownership plan, option
plan or similar trust to the extent such sale to an
employee stock ownership plan, option plan or similar
trust is financed by loans from or guaranteed by
Borrower or any Restricted Subsidiary unless such loans
have been repaid with cash on or prior to the date of
determination);
(iii) the amount by which Debt of Borrower
is reduced on Borrower's balance sheet upon the
conversion or exchange (other than by a Subsidiary of
Borrower) subsequent to the date hereof of any Debt of
Borrower convertible or exchangeable for capital stock
(other than Disqualified Stock) of Borrower (less the
amount of any cash, or other property, distributed by
Borrower upon such conversion or exchange); and
(iv) the amount equal to the net reduction
in Restricted Investments made by Borrower or any of its
Restricted Subsidiaries in any Person resulting from:
(a) repurchases or redemptions of such
Restricted Investments by such Person, proceeds
realized
59
upon the sale of such Restricted Investment to an
unaffiliated purchaser, repayments of loans or
advances or other transfers of assets (including
by way of dividend or distribution) by such Person
to Borrower or any Restricted Subsidiary of
Borrower; or
(b) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in
each case as provided in the definition of
"INVESTMENT") not to exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments
previously made by Borrower or any Restricted
Subsidiary in such Unrestricted Subsidiary,
which amount in each case under this clause (iv) was
included in the calculation of the amount of Restricted
Payments; provided, however, that no amount will be
included under this clause (iv) to the extent it is
already included in Consolidated Net Income.
The provisions of the preceding paragraph will not prohibit:
(1) any purchase or redemption of capital stock or
Subordinated Debt of Borrower made by exchange for, or out of the
proceeds of the substantially concurrent sale of, capital stock of
Borrower or Subordinated Debt with a maturity after December 31,
2010; provided, however, that (a) such purchase or redemption will
be excluded in subsequent calculations of the amount of Restricted
Payments and (b) the Net Cash Proceeds from such sale will be
excluded from clause (c)(ii) of the preceding paragraph;
(2) any purchase or redemption of Subordinated
Obligations of Borrower made by exchange for, or out of the proceeds
of the substantially concurrent sale of, Subordinated Debt of
Borrower that is refinanced in compliance with this Agreement;
provided, however, that such purchase or redemption will be excluded
in subsequent calculations of the amount of Restricted Payments;
(3) so long as no Default or Event of Default has
occurred and is continuing, any purchase or redemption of
Subordinated Debt from Net Available Cash to the extent permitted
under SECTION 9.11 below; provided, however, that such purchase or
redemption will be excluded in subsequent calculations of the amount
of Restricted Payments;
(4) dividends paid within sixty (60) days after the date
of declaration if at such date of declaration such dividend would
have complied with this provision; provided, however, that such
dividends will be included in subsequent calculations of the amount
of Restricted Payments;
(5) so long as no Default or Event of Default has
occurred and is continuing,
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(A) the purchase, redemption or other acquisition,
cancellation or retirement for value of capital stock, or
options, warrants, equity appreciation rights or other rights
to purchase or acquire capital stock of Borrower or any
Restricted Subsidiary of Borrower or any parent of Borrower
held by any existing or former directors, employees or
management of Borrower or any Subsidiary of Borrower or their
assigns, estates or heirs, in each case in connection with the
repurchase provisions under employee or director stock option
or stock purchase agreements or other agreements to compensate
management employees or directors; provided that such
redemptions or repurchases pursuant to this clause will not
exceed $2,000,000 in the aggregate during any calendar year
and $10,000,000 in the aggregate for all such redemptions and
repurchases; provided, however, that the amount of any such
repurchase or redemption will be included in subsequent
calculations of the amount of Restricted Payments; and
(B) loans or advances to employees or directors of
Borrower or any Subsidiary of Borrower the proceeds of which
are used to purchase capital stock of Borrower, in an
aggregate amount not in excess of $2,000,000 at any one time
outstanding; provided, however, that the amount of such loans
and advances will be included in subsequent calculations of
the amount of Restricted Payments;
(6) repurchases of capital stock deemed to occur upon
the exercise of stock options if such capital stock represents a
portion of the exercise price thereof; provided, however, that such
repurchases will be excluded from subsequent calculations of the
amount of Restricted Payments; and
(7) Restricted Payments in an amount not to exceed
$10,000,000; provided that the amount of such Restricted Payments
will be included in the calculation of the amount of Restricted
Payments pursuant to SECTION 9.03(a)(4)(c).
The amount of all Restricted Payments (other than cash) shall be the fair market
value on the date of such Restricted Payment of the Property or securities
proposed to be paid, transferred or issued by Borrower or such Restricted
Subsidiary, as the case may be, pursuant to such Restricted Payment. The fair
market value of any cash Restricted Payment shall be its face amount and any
non-cash Restricted Payment shall be determined conclusively by the board of
directors of Borrower acting in good faith.
(c) Borrower will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or consensual restriction on the
ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its
capital stock or pay any Debt or other obligations owed to Borrower
or any Restricted Subsidiary;
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(2) make any loans or advances to Borrower or any
Restricted Subsidiary; or
(3) transfer any of its Property to Borrower or any
Restricted Subsidiary.
The preceding provisions will not prohibit:
(A) any encumbrance or restriction pursuant to
this Agreement, the Senior Secured Credit Facility, the Duke
Credit Facility or an agreement in effect on the date hereof;
(B) any encumbrance or restriction with respect to
a Restricted Subsidiary pursuant to an agreement relating to
any Debt incurred by a Restricted Subsidiary on or before the
date on which such Restricted Subsidiary was acquired by
Borrower (other than Debt incurred as consideration in, or to
provide all or any portion of the funds utilized to
consummate, the transaction or series of related transactions
pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by Borrower or in
contemplation of the transaction) and outstanding on such
date;
(C) any encumbrance or restriction with respect to
a Restricted Subsidiary pursuant to an agreement effecting a
refunding, replacement or refinancing of Debt incurred
pursuant to an agreement referred to in clause (a) or (b) of
this paragraph or this clause (c) or contained in any
amendment to an agreement referred to in clause (a) or (b) of
this paragraph or this clause (c); provided, however, that the
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in any such agreement are no less
favorable in any material respect to the holders of the Notes
than the encumbrances and restrictions contained in such
agreements referred to in clauses (a) or (b) of this paragraph
on the date hereof or the date such Restricted Subsidiary
became a Restricted Subsidiary, whichever is applicable:
(D) in the case of clause (3) of this covenant,
any encumbrance or restriction;
(i) that restricts in a customary manner the
subletting, assignment or transfer of any Property that
is subject to a lease, license or similar contract, or
the assignment or transfer of any such lease, license or
other contract;
(ii) contained in mortgages, pledges or
other security agreements permitted under this Agreement
securing Debt of Borrower or a Restricted Subsidiary to
the extent such encumbrances or restrictions restrict
the transfer of the Property subject to such mortgages,
pledges or other security agreements; or
62
(iii) pursuant to customary provisions
regarding preferential rights or rights of first refusal
or restricting dispositions of real property interests
set forth in any reciprocal easement agreements of
Borrower or any Restricted Subsidiary;
(E) purchase money obligations for Property
acquired in the ordinary course of business that impose
encumbrances or restrictions of the nature described in clause
(3) of this covenant on the Property so acquired;
(F) any restriction with respect to a Restricted
Subsidiary (or any of its Property) imposed pursuant to an
agreement entered into for the direct or indirect sale or
disposition of all or substantially all the capital stock or
Property of such Restricted Subsidiary (or the Property that
is subject to such restriction) pending the closing of such
sale or disposition;
(G) encumbrances or restrictions arising or
existing by reason of applicable law or any applicable rule,
regulation or order;
(H) any encumbrance or restriction arising out of
any Permitted Lien; and
(I) customary provisions with respect to the
distribution of assets or property in joint venture
agreements.
SECTION 9.04 SALES AND LEASEBACKS. Other than in connection with
Permitted Equipment Financings, neither Borrower nor any Restricted Subsidiary
will enter into any arrangement, directly or indirectly, with any Person whereby
Borrower or any Restricted Subsidiary shall sell or transfer any of its
Property, whether now owned or hereafter acquired, and whereby Borrower or any
Restricted Subsidiary shall then or thereafter rent or lease as lessee such
Property or any part thereof or other Property which Borrower or any Restricted
Subsidiary intends to use for substantially the same purpose or purposes as the
Property sold or transferred.
SECTION 9.05 NATURE OF BUSINESS. Neither Borrower nor any Restricted
Subsidiary will allow any material change to be made in the character of its
business.
SECTION 9.06 LIMITATION ON LEASES. Other than in connection with
Permitted Equipment Financings, neither Borrower nor any Restricted Subsidiary
will create, incur, assume or permit to exist any obligation for the payment of
rent or hire of Property of any kind whatsoever (real or personal including
capital leases, but excluding leases of Hydrocarbon Interests), under leases or
lease agreements for terms in excess of, or that are non-cancelable by Borrower
or such Subsidiary within, twelve months which would cause all payments made by
Borrower and its Restricted Subsidiaries pursuant to all such leases or lease
agreements to exceed (i) $2,000,000 per annum during the calendar years 2004 and
2005 or (ii) $4,000,000 per annum during calendar years 2006 through 2010.
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SECTION 9.07 CONSOLIDATION AND MERGER. Borrower shall not merge into
or consolidate with or sell all or substantially all of its Property to any
Person or group of affiliated Persons unless (a) either (1) Borrower survives,
or (2) survivor is an entity organized under United States law or any state
thereof or the District of Columbia and assumes, in writing, the Loans; (b) no
Default or Event of Default shall have occurred and be continuing; (c) except in
the case of the consolidation or merger of any Restricted Subsidiary with or
into Borrower, the consolidated net worth of Borrower (or the surviving entity)
does not decrease; Borrower could incur $1.00 of additional Debt (excluding
Permitted Indebtedness) under SECTION 9.01(a); and (e) if any of Borrower's
assets become subject to any Lien, the imposition of such Lien shall have been
in compliance with SECTION 9.02. Notwithstanding the preceding clause (D), (i)
any Restricted Subsidiary of Borrower may consolidate with, merge into or
transfer all or part of its properties and assets to Borrower, (ii) Borrower may
merge with an Affiliate incorporated solely for the purpose of reincorporating
Borrower in another jurisdiction to realize tax or other benefits and (iii) any
Wholly-Owned Subsidiary can consolidate with or merge into any other
Wholly-Owned Subsidiary, except Restricted Subsidiaries cannot merge with
Unrestricted Subsidiaries.
SECTION 9.08 PROCEEDS OF NOTES AND LOANS. Borrower will not permit
the proceeds of the Notes and Loans to be used for any purpose other than those
permitted by SECTION 7.07. Neither Borrower nor any Person acting on behalf of
Borrower has taken or will take any action which might cause any of the Loan
Documents to violate Regulation T, U or X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
SECTION 9.09 ERISA COMPLIANCE. Borrower will not at any time:
(a) engage in, or permit any Subsidiary or ERISA Affiliate to
engage in, any transaction in connection with which Borrower, any
Subsidiary or any ERISA Affiliate could be subjected to either a civil
penalty assessed pursuant to section 502(c), (i) or (l) of ERISA or a tax
imposed by Chapter 43 of Subtitle D of the Code;
(b) terminate, or permit any Subsidiary or ERISA Affiliate to
terminate, any Plan in a manner, or take any other action with respect to
any Plan, which could result in any liability to Borrower, any Subsidiary
or any ERISA Affiliate to the PBGC;
(c) fail to make, or permit any Subsidiary or ERISA Affiliate
to fail to make, full payment when due of all amounts which, under the
provisions of any Plan, agreement relating thereto or applicable law,
Borrower, a Subsidiary or any ERISA Affiliate is required to pay as
contributions thereto;
(d) permit to exist, or allow any Subsidiary or ERISA
Affiliate to permit to exist, any accumulated funding deficiency within
the meaning of Section 302 of ERISA or section 412 of the Code, whether or
not waived, with respect to any Plan;
(e) permit, or allow any Subsidiary or ERISA Affiliate to
permit, the actuarial present value of the benefit liabilities under any
Plan maintained by Borrower,
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any Subsidiary or any ERISA Affiliate which is regulated under Title IV of
ERISA to exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan
allocable to such benefit liabilities. The term "actuarial present value
of the benefit liabilities" shall have the meaning specified in section
4041 of ERISA;
(f) contribute to or assume an obligation to contribute to, or
permit any Subsidiary or ERISA Affiliate to contribute to or assume an
obligation to contribute to, any Multiemployer Plan;
(g) acquire, or permit any Subsidiary or ERISA Affiliate to
acquire, an interest in any Person that causes such Person to become an
ERISA Affiliate with respect to Borrower, any Subsidiary or any ERISA
Affiliate if such Person sponsors, maintains or contributes to, or at any
time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (1) any Multiemployer Plan, or (2) any
other Plan that is subject to Title IV of ERISA under which the actuarial
present value of the benefit liabilities under such Plan exceeds the
current value of the assets (computed on a plan termination basis in
accordance with Title IV of ERISA) of such Plan allocable to such benefit
liabilities;
(h) incur, or permit any Subsidiary or ERISA Affiliate to
incur, a liability to or on account of a Plan under sections 515, 4062,
4063, 4064, 4201 or 4204 of ERISA;
(i) contribute to or assume an obligation to contribute to, or
permit any Subsidiary or ERISA Affiliate to contribute to or assume an
obligation to contribute to, any employee welfare benefit plan, as defined
in section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that
may not be terminated by such entities in their sole discretion at any
time without any material liability; or
(j) amend or permit any Subsidiary or ERISA Affiliate to
amend, a Plan resulting in an increase in current liability such that
Borrower, any Subsidiary or any ERISA Affiliate is required to provide
security to such Plan under section 401(a)(29) of the Code.
SECTION 9.10 SALE OR DISCOUNT OF RECEIVABLES. Neither Borrower nor
any Restricted Subsidiary will discount or sell (with or without recourse) any
of its notes receivable or accounts receivable other than settlement of any past
due accounts in the ordinary course of business and in accordance with prudent
commercial practices.
SECTION 9.11 SALE OF PROPERTY.
(a) Borrower shall not, and shall not permit any Restricted
Subsidiary to, sell, assign, convey or otherwise transfer any Property
unless (i) consideration equal to the fair market value of the Property
sold is received, (ii) the sale is an arm's length transaction; (iii) all
of the consideration received consists of cash, Cash Equivalents, liquid
securities or Exchanged Properties ("PERMITTED CONSIDERATION"); provided,
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however, that Borrower and its Restricted Subsidiaries may receive
Property that does not constitute Permitted Consideration, so long as the
aggregate fair market value of all Property received pursuant to this
proviso shall not exceed 10.0% of Adjusted Consolidated Net Tangible
Assets, as determined by the Borrower's Board of Directors.
(b) Within 365 days following the receipt of Net Available
Cash, an amount equal to 100% of the Net Available Cash from such Asset
Disposition shall be applied by Borrower or such Restricted Subsidiary, as
the case may be:
(1) to apply all or any of the Net Available Cash
therefrom to repay indebtedness under the Senior Secured Credit
Facility, or
(2) invest all or any part of the Net Available Cash in
Property that will be used in the oil and gas business of Borrower
or its Restricted Subsidiaries.
Any Net Available Cash from Asset Dispositions that are not applied
or invested as provided in the preceding paragraph will be deemed to constitute
"EXCESS PROCEEDS." On the 366th day after an Asset Disposition, if the aggregate
amount of Excess Proceeds exceeds $5,000,000.00, Borrower will be required to
make an offer ("ASSET DISPOSITION OFFER") to all holders of Notes and to the
extent required by the terms of other Senior Indebtedness, to all holders of
other Senior Indebtedness outstanding with similar provisions requiring Borrower
to make an offer to purchase such Senior Indebtedness with the proceeds from any
Asset Disposition ("PARI PASSU NOTES"), to purchase the maximum principal amount
of Notes and any such Pari Passu Notes to which the Asset Disposition Offer
applies that may be purchased out of the Excess Proceeds, at an offer price in
cash in an amount equal to 100% of the principal amount of the Notes and Pari
Passu Notes plus accrued and unpaid interest to the date of purchase, in
accordance with the procedures set forth herein or in the agreements governing
the Pari Passu Notes, as applicable, and subject to the prepayment provisions of
SECTION 2.04 (the term "voluntary" therein being deleted). To the extent that
the aggregate amount of Notes and Pari Passu Notes so validly tendered and not
properly withdrawn pursuant to an Asset Disposition Offer is less than the
Excess Proceeds, Borrower may use any remaining Excess Proceeds for general
corporate purposes, subject to the other covenants contained herein. If the
aggregate principal amount of Notes surrendered by holders thereof and other
Pari Passu Notes surrendered by holders or lenders, collectively, exceeds the
amount of Excess Proceeds, Borrower shall select the Notes and Pari Passu Notes
to be purchased on a pro rata basis on the basis of the aggregate principal
amount of tendered Notes and Pari Passu Notes. Upon completion of such Asset
Disposition Offer, the amount of Excess Proceeds shall be reset at zero.
The Asset Disposition Offer will remain open for a period of twenty
(20) Business Days following its commencement, except to the extent that a
longer period is required by applicable law (the "ASSET DISPOSITION OFFER
PERIOD"). No later than five (5) Business Days after the termination of the
Asset Disposition Offer Period (the "ASSET DISPOSITION PURCHASE DATE"), Borrower
will purchase the principal amount of Notes and Pari Passu Notes required to be
purchased pursuant to this covenant (the "ASSET DISPOSITION OFFER AMOUNT") or,
if less than
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the Asset Disposition Offer Amount has been so validly tendered, all Notes and
Pari Passu Notes validly tendered in response to the Asset Disposition Offer.
Any accrued and unpaid interest will be paid to the Person in whose
name a Note is registered at the close of business on such date, and no
additional interest will be payable to holders of the Notes who tender Notes
pursuant to the Asset Disposition Offer.
On or before the Asset Disposition Purchase Date, Borrower will, to
the extent lawful, accept for payment, on a pro rata basis to the extent
necessary, the Asset Disposition Offer Amount of Notes and Pari Passu Notes or
portions of Notes and Pari Passu Notes so validly tendered and not properly
withdrawn pursuant to the Asset Disposition Offer, or if less than the Asset
Disposition Offer Amount has been validly tendered and not properly withdrawn,
all Notes and Pari Passu Notes so validly tendered and not properly withdrawn.
Borrower will deliver all certificates and notes required, if any, by this
Agreement or the agreements governing the Pari Passu Notes. Borrower will
promptly (but in any case not later than the Asset Disposition Purchase Date)
mail or deliver to each tendering holder of Notes or holder or lender of Pari
Passu Notes, as the case may be, an amount equal to the purchase price of the
Notes or Pari Passu Notes so validly tendered and not properly withdrawn by such
holder or lender, as the case may be, and accepted by Borrower for purchase, and
Borrower will promptly issue a new Note and will deliver such new Note to such
holder, in a principal amount equal to any unpurchased portion of the Note
surrendered. In addition, Borrower will take any and all other actions required
by the agreements governing the Pari Passu Notes. Any Note not so accepted will
be promptly mailed or delivered by Borrower to the holder thereof. Borrower will
publicly announce the results of the Asset Disposition Offer on the Asset
Disposition Purchase Date.
For the purposes of this covenant, the following will be deemed to
be cash:
(1) the assumption by the transferee of Debt (other than
Subordinated Obligations or Disqualified Stock) of Borrower or Debt
(other than Preferred Stock) of any Restricted Subsidiary of
Borrower and the release of Borrower or such Restricted Subsidiary
from all liability on such Debt in connection with such Asset
Disposition (in which case Borrower will, without further action, be
deemed to have applied such deemed cash to Debt in accordance with
SECTION 9.11(b) above); and
(2) securities, notes or other obligations received by
Borrower or any Restricted Subsidiary of Borrower from the
transferee that are promptly converted by Borrower or such
Restricted Subsidiary into cash or Cash Equivalents.
Borrower will comply, to the extent applicable, with the
requirements of securities laws or regulations in connection with the repurchase
of Notes pursuant to this Agreement. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this covenant,
Borrower will comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under this Agreement by
virtue of complying with such securities laws and regulations.
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SECTION 9.12 ENVIRONMENTAL MATTERS. Neither Borrower nor any
Restricted Subsidiary will cause or, to the extent within its control, permit
any of its Property to be in violation of, or do anything or, to the extent
within its control, permit anything to be done which will subject any such
Property to any remedial obligations under any Environmental Laws, assuming
disclosure to the applicable Governmental Authority of all relevant facts,
conditions and circumstances, if any, pertaining to such Property where such
violations or remedial obligations would have a Material Adverse Effect.
SECTION 9.13 TRANSACTIONS WITH AFFILIATES. Neither Borrower nor any
Restricted Subsidiary will enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate unless such transactions are otherwise
permitted under this Agreement, are in the ordinary course of its business and
are upon fair and reasonable terms no less favorable to it than it would obtain
in a comparable arm's length transaction with a Person not an Affiliate;
provided, however, that notwithstanding the provisions of SECTION 9.12, Borrower
may engage in the Permitted Medusa Transaction.
SECTION 9.14 SUBORDINATED DEBT. If a Default exists or would result
therefrom, Borrower shall not make any payment in respect of any Subordinated
Debt or the Existing Subordinated Debt. Borrower will not amend, supplement or
otherwise modify any instruments evidencing, or agreements relating to or
executed in connection with, any Existing Subordinated Debt, in any manner which
would have the effect of (i) accelerating the timing or amount of any scheduled
payments of principal or interest thereon, (ii) increasing the rate of interest
payable thereon or (iii) resulting in a Material Adverse Effect.
SECTION 9.15 ISSUANCE AND SALE OF CAPITAL STOCK. Borrower (a) shall
not permit any Restricted Subsidiary to issue any capital stock (other than to
Borrower or a Wholly-Owned Subsidiary of Borrower) and (b) shall not permit any
Person (other than Borrower or a wholly-owned Restricted Subsidiary of Borrower)
to own any capital stock of any Restricted Subsidiary, except, in each case, for
(1) directors' qualifying shares, (2) capital stock of a Restricted Subsidiary
organized in a foreign jurisdiction required to be issued to, or owned by, the
government of such foreign jurisdiction or individual or corporate citizens of
such foreign jurisdiction in order for such Restricted Subsidiary to transact
business in such foreign jurisdiction, (3) a sale of all or substantially all
the capital stock of a Restricted Subsidiary effected in connection with a
Property sale in accordance with SECTION 9.11, and (4) the capital stock of a
Restricted Subsidiary owned by a Person at the time such Restricted Subsidiary
became a Restricted Subsidiary or acquired by such Person in connection with the
formation of the Restricted Subsidiary; provided, however, that any capital
stock retained by Borrower or a Restricted Subsidiary shall be treated as an
Investment for purposes of SECTION 9.03, if the amount of such capital stock
represents less than a majority of the voting stock of such Restricted
Subsidiary.
SECTION 9.16 MODIFICATION OF AGREEMENTS. Borrower shall not, and
shall not permit any Subsidiary to, amend, modify or change any provision of its
articles, certificate of incorporation, bylaws, partnership agreement,
certificate of formation or operating agreement, as applicable, or the terms of
any class or series of its capital stock, other than in a manner that would not
be reasonably likely to have a Material Adverse Effect or to adversely affect
the right
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or ability of Borrower to receive dividend payments or other distributions from
its Subsidiaries, or amend, modify, cancel or terminate or fail to renew or
extend or permit the amendment, modification, cancellation or termination of any
Material Agreement, except to the extent that such amendments, modifications,
cancellations or terminations would not be reasonably likely to have a Material
Adverse Effect.
SECTION 9.17 GUARANTEES. Borrower shall not, and shall not permit
any Restricted Subsidiary to, guarantee, directly or indirectly, any Debt of any
Unrestricted Subsidiary.
SECTION 9.18 LIMITATION ON ADDITIONAL DEBT. Borrower shall not incur
any Debt other than (i) Permitted Debt or (ii) Debt incurred under the Senior
Secured Credit Facility. For purposes of this SECTION 9.18, Debt shall only
include the obligations listed in clauses (i) through (v), (vii), and (ix)
through (xi) of the definition of Debt in SECTION 1.02.
SECTION 9.19 PERMITTED MEDUSA TRANSACTIONS. Notwithstanding anything
in this Agreement or any other Loan Document to the contrary, so long as no
Default or Event of Default has occurred and is continuing at the time Borrower
or any of its Subsidiaries enters into any Permitted Medusa Transaction, the
entering into and carrying out of such Permitted Medusa Transaction shall be
allowed hereunder and shall not in itself constitute a breach of, non-compliance
with, or Default or Event of Default under this Agreement or any other Loan
Document.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
SECTION 10.01 EVENTS OF DEFAULT. One or more of the following events
shall constitute an "EVENT OF DEFAULT":
(a) Borrower shall default in the payment or prepayment when
due of any principal of or interest on any Loan or any fees payable by it
hereunder or under any Loan Document and such default, other than a
default of a payment or prepayment of principal (which shall have no cure
period), shall continue unremedied for a period of thirty (30) days; or
(b) Borrower or any Restricted Subsidiary shall default in the
payment when due of any principal of or interest on any of its other Debt
(other than Debt owed to Borrower or any Restricted Subsidiary)
aggregating $10,000,000 or more ($15,000,000 in the case of non-recourse
Debt), or any event specified in any note, agreement, indenture or other
document evidencing or relating to any such Debt shall occur if the effect
of such event is to cause, or (with the giving of any notice or the lapse
of time or both) to permit the holder or holders of such Debt (or a
trustee or administrative agent on behalf of such holder or holders) to
cause, such Debt to become due prior to its stated maturity; or
(c) any representation, warranty or certification made or
deemed made herein, in any Loan Document by Borrower, or any certificate
furnished to any Lender or the Administrative Agent pursuant to the
provisions hereof, or any Loan Document, shall
69
prove to have been false or misleading as of the time made or furnished in
any material respect; or
(d) Borrower shall default in the performance of any of its
obligations under SECTION 9.07 of this Agreement; (ii) Borrower shall
default in the performance of any of its obligations under SECTION
2.04(b), ARTICLE VIII or ARTICLE IX (other than the payment of amounts due
which shall be governed by SECTION 10.01(a) or SECTION 9.07 which shall be
governed by SECTION 10.01(D)(I)) and such default shall continue
unremedied for a period of thirty (30) days after the earlier to occur of
(a) notice thereof to Borrower by the Administrative Agent or any Lender
(through the Administrative Agent), or (b) Borrower otherwise becoming
aware of such default; or (iii) Borrower shall default in the performance
of any of its other obligations under this Agreement and such default
shall continue unremedied for a period of sixty (60) days after the
earlier to occur of (a) notice thereof to Borrower by the Administrative
Agent or any Lender (through the Administrative Agent), or (b) Borrower
otherwise becoming aware of such default; or
(e) Borrower or any Restricted Subsidiary shall admit in
writing its inability to, or be generally unable to, pay its debts as such
debts become due; or
(f) Borrower or any Restricted Subsidiary shall (i) apply for
or consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property, (ii) make a general assignment for the
benefit of its creditors, (iii) commence a voluntary case under the
Federal Bankruptcy Code (as now or hereafter in effect), (iv) file a
petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, winding-up, liquidation or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Federal Bankruptcy Code, or
(vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(g) a proceeding or case shall be commenced, without the
application or consent of Borrower or any Restricted Subsidiary, in any
court of competent jurisdiction, seeking (i) its liquidation,
reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of such Person of all or any substantial
part of its assets, or (iii) similar relief in respect of such Person
under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order, judgment or decree approving
or ordering any of the foregoing shall be entered and continue unstayed
and in effect, for a period of sixty (60) days; or (iv) an order for
relief against such Person shall be entered in an involuntary case under
the Federal Bankruptcy Code;
(h) a judgment or judgments for the payment of money in excess
of $10,000,000 in the aggregate (net of any amounts that a reputable and
creditworthy insurance company has acknowledged liability for in writing)
shall be rendered by a court against Borrower or any Restricted Subsidiary
and the same shall not be discharged (or
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provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within sixty (60) days from the date of
entry thereof and Borrower or such Subsidiary shall not, within said
period of sixty (60) days, or such longer period during which execution of
the same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(i) any Subsidiary takes, suffers or permits to exist any of
the events or conditions referred to in clauses (e), (f), (g) or (h), and
such event or condition has a Material Adverse Effect.
SECTION 10.02 REMEDIES.
(a) In the case of an Event of Default other than one referred
to in clauses (e), (f) or (g)of SECTION 10.01, or in clause (i) to the
extent it relates to clauses (e), (f) or (g), the Administrative Agent,
upon request of the Majority Lenders, shall, by notice to Borrower declare
the principal amount then outstanding of, and the accrued interest on, the
Loans and all other amounts payable by Borrower hereunder and under the
other Loan Documents and the Notes to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other formalities of any kind, all of which are hereby
expressly waived by Borrower.
(b) In the case of the occurrence of an Event of Default
referred to in clauses (e), (f) or (g) of SECTION 10.01, or in clause (i)
to the extent it relates to clauses (e), (f) or (g), the principal amount
then outstanding of, and the accrued interest on, the Loans and all other
amounts payable by Borrower hereunder and under the other Loan Documents
and the Notes shall become automatically immediately due and payable
without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other formalities of any kind, all of which are
hereby expressly waived by Borrower.
(c) All proceeds received after maturity of the Notes, whether
by acceleration or otherwise shall be applied first to reimbursement of
expenses and indemnities provided for in this Agreement and the other Loan
Documents; second to accrued interest on the Notes; third to fees; fourth
pro rata to principal outstanding on the Notes; and any excess shall be
paid to Borrower or as otherwise required by any Governmental Requirement.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its
Administrative Agent hereunder with such powers as are specifically delegated to
the Administrative Agent by the terms of this Agreement, together with such
other powers as are reasonably incidental thereto. The Administrative Agent
(which term as used in this sentence and in SECTION 11.04 and the first
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sentence of SECTION 11.05 shall include reference to its Affiliates and its and
its Affiliates' officers, directors, employees, attorneys, accountants, experts
and administrative agents): (i) shall have no duties or responsibilities except
those expressly set forth in the Loan Documents, and shall not by reason of the
Loan Documents be a trustee or fiduciary for any Lender; (ii) makes no
representation or warranty to any Lender and shall not be responsible to the
Lenders for any recitals, statements, representations or warranties contained in
the Loan Documents, this Agreement, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement, or for the value, validity, effectiveness, genuineness, execution,
effectiveness, legality, enforceability or sufficiency of this Agreement, the
Loan Documents, any Note or any other document referred to or provided for
herein or for any failure by Borrower or any other Person (other than the
Administrative Agent) to perform any of its obligations hereunder or thereunder
or for the existence, value, perfection or priority of any collateral security
or the financial or other condition of Borrower, its Subsidiaries or any other
obligor or guarantor; (iii) except pursuant to SECTION 11.06 shall not be
required to initiate or conduct any litigation or collection proceedings
hereunder; and (iv) shall not be responsible for any action taken or omitted to
be taken by it hereunder or under any other document or instrument referred to
or provided for herein or in connection herewith including its own ordinary
negligence, except for its own gross negligence or willful misconduct. The
Administrative Agent may employ administrative agents, accountants, attorneys
and experts and shall not be responsible for the negligence or misconduct of any
such administrative agents, accountants, attorneys or experts selected by it in
good faith or any action taken or omitted to be taken in good faith by it in
accordance with the advice of such administrative agents, accountants, attorneys
or experts. The Administrative Agent shall not be required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties hereunder. The Administrative Agent may deem and treat the payee of
any Note as the holder thereof for all purposes hereof unless and until a
written notice of the assignment or transfer thereof permitted hereunder shall
have been filed with the Administrative Agent. The Administrative Agent is
authorized to release any collateral that is permitted to be sold or released
pursuant to the terms of the Loan Documents.
SECTION 11.02 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative
Agent shall be entitled to rely upon any certification, notice or other
communication (including any thereof by telephone, telex, telecopier, telegram
or cable) believed by it to be genuine and correct and to have been signed or
sent by or on behalf of the proper Person or Persons, and upon advice and
statements of legal counsel, independent accountants and other experts selected
by the Administrative Agent.
SECTION 11.03 DEFAULTS. The Administrative Agent shall not be deemed
to have knowledge of the occurrence of a Default (other than the non-payment of
principal of or interest on Loans or of fees) unless the Administrative Agent
has received written notice from a Lender or Borrower specifying such Default
and stating that such notice is a "Notice of Default." In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt written notice thereof to the Lenders. In
the event of a payment Default, the Administrative Agent shall give each Lender
prompt written notice of each such payment Default.
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SECTION 11.04 INDEMNIFICATION. THE LENDERS AGREE TO INDEMNIFY AND
HOLD HARMLESS THE ADMINISTRATIVE AGENT AND ITS AFFILIATES AND EACH OF THEIR
RESPECTIVE DIRECTORS, OFFICERS, PRINCIPALS, MEMBERS, MANAGERS, SHAREHOLDERS,
EMPLOYEES, FAMILY MEMBERS AND AGENTS RATABLY IN ACCORDANCE WITH EACH LENDER'S
PERCENTAGE SHARES FOR THE INDEMNITY MATTERS AS DESCRIBED IN SECTION 12.03 TO THE
EXTENT NOT INDEMNIFIED OR REIMBURSED BY BORROWER UNDER SECTION 12.03, BUT
WITHOUT LIMITING THE OBLIGATIONS OF BORROWER UNDER SAID SECTION 12.03 AND FOR
ANY AND ALL OTHER INDEMNITY MATTERS WHICH MAY BE IMPOSED ON, INCURRED BY OR
ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT
OF: (i) THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER DOCUMENTS CONTEMPLATED
BY OR REFERRED TO HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING,
UNLESS A DEFAULT HAS OCCURRED AND IS CONTINUING, NORMAL ADMINISTRATIVE COSTS AND
EXPENSES INCIDENT TO THE PERFORMANCE OF ITS AGENCY DUTIES HEREUNDER OR (ii) THE
ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS;
WHETHER OR NOT ANY OF THE FOREGOING SPECIFIED IN THIS SECTION 11.04 ARISES FROM
THE SOLE OR CONCURRENT NEGLIGENCE OF THE ADMINISTRATIVE AGENT, PROVIDED THAT NO
LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE ADMINISTRATIVE AGENT.
SECTION 11.05 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER
LENDERS. Each Lender acknowledges and agrees that it has, independently and
without reliance on the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis of Borrower and its decision to enter into this Agreement, and that it
will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Administrative Agent shall
not be required to keep itself informed as to the performance or observance by
Borrower of this Agreement, the Notes or any Loan Document or other document
referred to or provided for herein or to inspect the properties or books of
Borrower. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the affairs,
financial condition or business of Borrower (or any of its Affiliates) which may
come into the possession of the Administrative Agent or any of its Affiliates.
SECTION 11.06 ACTION BY ADMINISTRATIVE AGENT. Except for action or
other matters expressly required of the Administrative Agent hereunder, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall (i) receive written instructions from
the Majority Lenders (or all of the Lenders as expressly required by SECTION
12.04) specifying the action to be taken, and (ii) be indemnified to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of
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taking or continuing to take any such action. The instructions of the Majority
Lenders (or all of the Lenders as expressly required by SECTION 12.04) and any
action taken or failure to act pursuant thereto by the Administrative Agent
shall be binding on all of the Lenders. If a Default has occurred and is
continuing, the Administrative Agent shall take such action with respect to such
Default as shall be directed by the Majority Lenders (or all of the Lenders as
required by SECTION 12.04) in the written instructions (with indemnities
satisfactory to the Administrative Agent) described in this SECTION 11.07,
provided that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent shall not be obligated to take any
such action with respect to such Default. In no event, however, shall the
Administrative Agent be required to take any action which exposes the
Administrative Agent to personal liability or which is contrary to this
Agreement or applicable law.
SECTION 11.07 RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT.
Subject to the appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by giving at
least thirty (30) days' written notice thereof to the Lenders and Borrower, and
the Administrative Agent may be removed at any time with or without cause by the
Majority Lenders. Upon any such resignation or removal, the Majority Lenders
shall have the right to appoint a successor Administrative Agent with consent of
Borrower (such consent not to be unreasonably withheld), except no such consent
shall be necessary if an Event of Default has occurred and is continuing. If no
successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within thirty (30) days after
the retiring Administrative Agent's giving of notice of resignation or the
Majority Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent with consent of Borrower (such consent not to be
unreasonably withheld), except no such consent shall be necessary if an Event of
Default has occurred and is continuing. Upon the acceptance of such appointment
hereunder 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
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this ARTICLE XI and SECTION
12.03 shall continue in effect for its benefit in respect of any actions taken
or omitted to be taken by it while it was acting as the Administrative Agent.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01 WAIVER. No failure on the part of the Administrative
Agent or any Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under any of the Loan
Documents shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege under any of the Loan Documents
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
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SECTION 12.02 NOTICES. All notices and other communications provided
for herein and in the other Loan Documents (including, without limitation, any
modifications of, or waivers or consents under, this Agreement or the other Loan
Documents) shall be given or made by telex, telecopy, courier (including
overnight delivery service with delivery confirmation) or U.S. Mail or in
writing and telexed, telecopied, mailed or delivered to the intended recipient
at the "Address for Notices" specified below its name on the signature pages
hereof or, as to any party, at such other address as shall be designated by such
party in a notice to each other party pursuant to the terms hereof. Except as
otherwise provided in this Agreement or in the other Loan Documents, all such
communications shall be deemed to have been duly given when transmitted, if
transmitted before 1:00 p.m. local time on a Business Day (otherwise on the next
succeeding Business Day) by telex or telecopier and evidence or confirmation of
receipt is obtained, or personally delivered (including overnight delivery
service with delivery confirmation) or, in the case of a mailed notice, three
(3) Business Days after the date deposited in the mails, postage prepaid, in
each case given or addressed as aforesaid.
SECTION 12.03 PAYMENT OF EXPENSES, INDEMNITIES, ETC.
(a) Borrower agrees:
(1) to pay the reasonable fees and disbursements of
counsel to the Majority Lenders in connection with this Agreement
and related matters (not to exceed $100,000), together with all of
the Administrative Agent's and Majority Lenders' reasonable legal
fees and expenses in connection with any amendment, waiver or
consent relating to this Agreement and related matters, and, in the
case of enforcement pursuant to or in connection with this
Agreement, the reasonable fees and disbursements of counsel for the
Administrative Agent and any of the Lenders; and promptly reimburse
the Administrative Agent for all amounts expended, advanced or
incurred by the Administrative Agent or the Lenders to satisfy any
obligation of Borrower under this Agreement or any other Loan
Document, including without limitation, all costs and expenses of
foreclosure;
(2) TO INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH
LENDER AND EACH OF THEIR AFFILIATES AND EACH OF THEIR RESPECTIVE
OFFICERS, MEMBERS, MANAGERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES,
AGENTS, ATTORNEYS, ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES")
FROM, HOLD EACH OF THEM HARMLESS AGAINST AND PROMPTLY UPON DEMAND
PAY OR REIMBURSE EACH OF THEM FOR, THE INDEMNITY MATTERS WHICH MAY
BE INCURRED BY OR ASSERTED AGAINST OR INVOLVE ANY OF THEM (WHETHER
OR NOT ANY OF THEM IS DESIGNATED A PARTY THERETO) AS A RESULT OF,
ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL OR PROPOSED
USE BY BORROWER OF THE PROCEEDS OF ANY OF THE LOANS, (II) THE
EXECUTION, DELIVERY AND PERFORMANCE OF THE LOAN DOCUMENTS, (III) THE
OPERATIONS OF THE BUSINESS OF BORROWER AND ITS SUBSIDIARIES, (IV)
THE FAILURE OF BORROWER OR ANY SUBSIDIARY TO COMPLY WITH THE TERMS
OF
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THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF
BORROWER SET FORTH IN ANY OF THE LOAN DOCUMENTS, OR (VI) ANY OTHER
ASPECT OF THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, THE
REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER EXPENSES
INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING TO
DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY
INVESTIGATIONS, LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL
INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF
ANY INDEMNIFIED PARTY, BUT EXCLUDING ALL INDEMNITY MATTERS ARISING
SOLELY BY REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE
ADMINISTRATIVE AGENT OR A LENDER'S SHAREHOLDERS OR OWNERS AGAINST
THE ADMINISTRATIVE AGENT OR LENDER OR BY REASON OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED
PARTY; AND
(3) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS,
COST RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES
AND LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I)
UNDER ANY ENVIRONMENTAL LAW APPLICABLE TO BORROWER OR ANY SUBSIDIARY
OR ANY OF THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE
TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON ANY OF THEIR
PROPERTIES, (II) AS A RESULT OF THE BREACH OR NON-COMPLIANCE BY
BORROWER OR ANY SUBSIDIARY WITH ANY ENVIRONMENTAL LAW APPLICABLE TO
BORROWER OR ANY SUBSIDIARY, (III) DUE TO PAST OWNERSHIP BY BORROWER
OR ANY SUBSIDIARY OF ANY OF THEIR PROPERTIES OR PAST ACTIVITY ON ANY
OF THEIR PROPERTIES WHICH, THOUGH LAWFUL AND FULLY PERMISSIBLE AT
THE TIME, COULD RESULT IN PRESENT LIABILITY, (IV) THE PRESENCE, USE,
RELEASE, STORAGE, TREATMENT OR DISPOSAL OF HAZARDOUS SUBSTANCES ON
OR AT ANY OF THE PROPERTIES OWNED OR OPERATED BY BORROWER OR ANY
SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH OR SAFETY
CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS; PROVIDED, HOWEVER,
NO INDEMNITY SHALL BE AFFORDED UNDER THIS SECTION 12.03(a)(3) IN
RESPECT OF ANY PROPERTY FOR ANY OCCURRENCE ARISING FROM THE ACTS OR
OMISSIONS OF THE ADMINISTRATIVE AGENT OR ANY LENDER DURING THE
PERIOD AFTER WHICH SUCH PERSON, ITS SUCCESSORS OR ASSIGNS SHALL HAVE
OBTAINED POSSESSION OF SUCH PROPERTY (WHETHER BY FORECLOSURE OR DEED
IN LIEU OF FORECLOSURE, AS MORTGAGEE-IN-POSSESSION OR OTHERWISE).
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(b) No Indemnified Party may settle any claim to be
indemnified without the consent of the indemnitor, such consent not to be
unreasonably withheld; provided, that the indemnitor may not reasonably
withhold consent to any settlement that an Indemnified Party proposes, if
the indemnitor does not have the financial ability to pay all its
obligations outstanding and asserted against the indemnitor at that time,
including the maximum potential claims against the Indemnified Party to be
indemnified pursuant to this Section 12.03. No indemnitor shall, without
the prior written consent of the Indemnified Party, effect any settlement
of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have
been sought hereunder by such Indemnified Party, unless such settlement
(1) includes an unconditional release of such Indemnified Party in form
and substance satisfactory to such Indemnified Party from all liability on
claims that are the subject matter of such proceeding and (2) does not
include any statement as to an admission of fault, culpability or failure
to act by or on behalf of any Indemnified Party.
(c) In the case of any indemnification hereunder, the
Administrative Agent or Lender, as appropriate shall give notice to
Borrower of any such claim or demand being made against the Indemnified
Party and Borrower shall have the non-exclusive right to join in the
defense against any such claim or demand provided that if Borrower
provides a defense (such defense counsel to be reasonably acceptable to
the Administrative Agent and the Indemnified Party), the Indemnified Party
shall bear its own cost of defense unless there is a conflict between
Borrower and such Indemnified Party.
(d) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED
PARTIES NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR
CHARACTER WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE
ACT OR AN OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT
CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF
THE INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN
INDEMNIFIED PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL
CONTINUE BUT SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED
TO HAVE OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY.
(e) Borrower's obligations under this SECTION 12.03 shall
survive any termination of this Agreement and the Loan Documents and the
payment of the Notes and shall continue for a period of three years and
one day thereafter in full force and effect.
(f) Borrower shall pay any amounts due under this SECTION
12.03 within thirty (30) days of the receipt by Borrower of notice of the
amount due.
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SECTION 12.04 AMENDMENTS, ETC. Any provision of this Agreement or
any Loan Document may be amended, modified or waived with Borrower's and the
Majority Lenders' prior written consent; provided that (i) no amendment,
modification or waiver which extends the final maturity of the Loans, forgives
the principal amount of any Loans outstanding under this Agreement or reduces
the interest rate applicable to the Loans or the fees payable to the Lenders
generally, affects this SECTION 12.04 or SECTIONS 12.03 or 12.06(a) or modifies
the definition of "Majority Lenders" shall be effective without the consent of
all Lenders; (ii) no amendment, modification or waiver which modifies the
rights, duties or obligations of the Administrative Agent shall be effective
without the consent of the Administrative Agent.
SECTION 12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. SECTION 12.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) Borrower may not assign its rights or obligations
hereunder or under the Notes without the prior written consent of all of
the Lenders and the Administrative Agent.
(b) Any Lender may, upon the written consent of the
Administrative Agent and, if no Event of Default has occurred and is
continuing, Borrower (which consent will not be unreasonably withheld),
assign to one or more assignees all or a portion of its rights and
obligations under this Agreement pursuant to an Assignment Agreement
substantially in the form of Exhibit D (an "ASSIGNMENT"); provided,
however, that any such assignment shall be in the amount of at least
$5,000,000 or such lesser amount to which Borrower has consented. Any such
assignment will become effective upon the execution and delivery to the
Administrative Agent of the Assignment and the consent of the
Administrative Agent. Promptly after receipt of an executed Assignment,
the Administrative Agent shall send to Borrower a copy of such executed
Assignment. Upon receipt of such executed Assignment, Borrower, will, at
its own expense, execute and deliver new Notes to the assignor and/or
assignee, as appropriate, in accordance with their respective interests as
they appear. Upon the effectiveness of any assignment pursuant to this
SECTION 12.06(b), the assignee will become a "Lender," if not already a
"Lender," for all purposes of this Agreement. The assignor shall be
relieved of its obligations hereunder to the extent of such assignment
(and if the assigning Lender no longer holds any rights or obligations
under this Agreement, such assigning Lender shall cease to be a "Lender"
hereunder except that its rights under SECTIONS 4.05 and 12.03 shall not
be affected). The Administrative Agent will prepare on the last Business
Day of each month during which an assignment has become effective pursuant
to this SECTION 12.06(b), a new ANNEX I giving effect to all such
assignments effected during such month, and will promptly provide the same
to Borrower and each of the Lenders.
(c) The Lenders may furnish any information concerning
Borrower in the possession of the Lenders from time to time to assignees
and participants (including prospective assignees and participants);
provided that, such Persons agree to be bound by the provisions of SECTION
12.15.
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(d) Notwithstanding anything in this SECTION 12.06 to the
contrary, any Lender may assign and pledge its Note to any Federal Reserve
Bank as collateral security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any operating circular issued
by such Federal Reserve System and/or such Federal Reserve Bank. No such
assignment and/or pledge shall release the assigning and/or pledging
Lender from its obligations hereunder.
(e) Notwithstanding any other provisions of this SECTION
12.06, no transfer or assignment of the interests or obligations of any
Lender or any grant of participations therein shall be permitted if such
transfer, assignment or grant would require Borrower to file a
registration statement with the SEC or to qualify the Loans under the
"Blue Sky" laws of any state.
SECTION 12.07 INVALIDITY. In the event that any one or more of the
provisions contained in any of the Loan Documents shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of the Notes, this
Agreement or any other Loan Document.
SECTION 12.08 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
SECTION 12.09 REFERENCES. The words "herein," "hereof," "hereunder"
and other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a section shall be deemed to refer to the applicable
section of this Agreement unless otherwise stated herein. Any reference herein
to an annex, exhibit or schedule shall be deemed to refer to the applicable
annex, exhibit or schedule attached hereto unless otherwise stated herein.
SECTION 12.10 SURVIVAL. The obligations of the parties under SECTION
4.05 and SECTIONS 11.04 and 12.03 shall survive the termination of this
Agreement and the repayment of the Loans. To the extent that any payments on the
Loans are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, debtor in possession, receiver
or other Person under any bankruptcy law, common law or equitable cause, then to
such extent, the portion of the Loans so satisfied shall be revived and continue
as if such payment or proceeds had not been received and the Administrative
Agent's and the Lenders' Liens, security interests, rights, powers and remedies
under this Agreement and each Loan Document shall continue in full force and
effect. In such event, each Loan Document shall be automatically reinstated and
Borrower shall take such action as may be reasonably requested by the
Administrative Agent and the Lenders to effect such reinstatement.
SECTION 12.11 CAPTIONS. Captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
SECTION 12.12 NO ORAL AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE
ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE
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PARTIES AND SUPERSEDE ALL OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH
PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF. THE 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.
SECTION 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND THE NOTES
(INCLUDING, BUT NOT LIMITED TO, THE VALIDITY AND ENFORCEABILITY HEREOF AND
THEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS OF THE STATE OF NEW YORK, BUT OTHERWISE WITHOUT GIVING EFFECT
TO PRINCIPLES OF CONFLICTS OF LAWS.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THE LOAN
DOCUMENTS SHALL BE BROUGHT IN ANY FEDERAL OR STATE COURT OF COMPETENT
JURISDICTION LOCATED IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK, AND
ANY APPELLATE COURT AUTHORIZED TO HEAR APPEALS THEREFROM, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER, THE
ADMINISTRATIVE AGENT AND EACH LENDER HEREBY ACCEPTS FOR ITSELF AND (TO THE
EXTENT PERMITTED BY LAW) IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH
OF BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS. THIS SUBMISSION TO JURISDICTION IS
EXCLUSIVE AND IS INTENDED TO AND DOES PRECLUDE THE PARTIES FROM OBTAINING
JURISDICTION OVER OTHER PARTIES IN ANY OTHER COURT.
(c) BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION
LOCATED AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS THE DESIGNEE,
APPOINTEE AND AGENT OF BORROWER TO RECEIVE, FOR AND ON BEHALF OF BORROWER,
SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THE LOAN DOCUMENTS. IT IS UNDERSTOOD THAT A
COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY
OVERNIGHT COURIER TO BORROWER AT ITS ADDRESS SET FORTH UNDER ITS SIGNATURE
BELOW, BUT THE FAILURE OF
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BORROWER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF
SUCH PROCESS. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, TO BORROWER AT ITS SAID ADDRESS, SUCH SERVICE TO
BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING.
(d) NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY LENDER OR ANY HOLDER OF A NOTE TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(e) BORROWER AND EACH LENDER HEREBY (I) IRREVOCABLY AND
UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVE, TO
THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM
OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES; (III) CERTIFY THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR
ADMINISTRATIVE AGENT OF 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 WAIVERS, AND (IV) ACKNOWLEDGE
THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS
SECTION 12.13.
SECTION 12.14 INTEREST. It is the intention of the parties hereto
that each Lender shall conform strictly to usury laws applicable to it.
Accordingly, if the transactions contemplated hereby would be usurious as to any
Lender under laws applicable to it (including the laws of the United States of
America and the State of New York or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement), then, in that event, notwithstanding anything to the contrary
in any of the Loan Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to any Lender that
is contracted for, taken, reserved, charged or received by such Lender under any
of the Loan Documents or agreements or otherwise in connection with the Notes
shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by such Lender on the principal amount of the
Loans (or, to the extent that the principal amount of the Loans shall have been
or would thereby be paid in full, refunded by such Lender to Borrower); and (ii)
in the event that the maturity of the Notes is accelerated by reason of an
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election of the holder thereof resulting from any Event of Default under this
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest under law applicable to any
Lender may never include more than the maximum amount allowed by such applicable
law, and excess interest, if any, provided for in this Agreement or otherwise
shall be canceled automatically by such Lender as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by such
Lender on the principal amount of the Loans (or, to the extent that the
principal amount of the Loans shall have been or would thereby be paid in full,
refunded by such Lender to Borrower). All sums paid or agreed to be paid to any
Lender for the use, forbearance or detention of sums due hereunder shall, to the
extent permitted by law applicable to such Lender, be amortized, prorated,
allocated and spread throughout the full term of the Loans evidenced by the
Notes until payment in full so that the rate or amount of interest on account of
any Loans hereunder does not exceed the maximum amount allowed by such
applicable law. If at any time and from time to time (i) the amount of interest
payable to any Lender on any date shall be computed at the Highest Lawful Rate
applicable to such Lender pursuant to this SECTION 12.14 and (ii) in respect of
any subsequent interest computation period the amount of interest otherwise
payable to such Lender would be less than the amount of interest payable to such
Lender computed at the Highest Lawful Rate applicable to such Lender, then the
amount of interest payable to such Lender in respect of such subsequent interest
computation period shall continue to be computed at the Highest Lawful Rate
applicable to such Lender until the total amount of interest payable to such
Lender shall equal the total amount of interest which would have been payable to
such Lender if the total amount of interest had been computed without giving
effect to this SECTION 12.14.
SECTION 12.15 CONFIDENTIALITY. In the event that Borrower provides
to the Administrative Agent or the Lenders written confidential information
belonging to Borrower, the Administrative Agent and the Lenders shall thereafter
maintain such information in confidence in accordance with the standards of care
and diligence that each utilizes in maintaining its own confidential
information. This obligation of confidence shall not apply to such portions of
the information which (i) are in the public domain, (ii) hereafter become part
of the public domain without the Administrative Agent or the Lenders breaching
their obligation of confidence to Borrower, (iii) are previously known by the
Administrative Agent or the Lenders from some source other than Borrower, (iv)
are hereafter developed by the Administrative Agent or the Lenders without using
Borrower's information, (v) are hereafter obtained by or available to the
Administrative Agent or the Lenders from a third party who owes no obligation of
confidence to Borrower with respect to such information or through any other
means other than through disclosure by Borrower, (vi) are disclosed with
Borrower's consent, (vii) must be disclosed either pursuant to any Governmental
Requirement or to Persons regulating the activities of the Administrative Agent
or the Lenders, or (viii) as may be required by law or regulation or order of
any Governmental Authority in any judicial, arbitration or governmental
proceeding. Further, the Administrative Agent or a Lender may disclose any such
information to any other Lender, any independent certified public accountants,
any legal counsel employed by such Person in connection with this Agreement or
any Loan Document, including without limitation, the enforcement or exercise of
all rights and remedies thereunder, or any assignee or participant (including
prospective assignees and participants) in the Loans; provided, however, that
the Administrative Agent or the Lenders shall ensure that the Person to whom
such information is disclosed shall have the same obligation to maintain the
confidentiality of such information as is imposed upon the Administrative Agent
or the Lenders hereunder. Notwithstanding anything to
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the contrary provided herein, this obligation of confidence shall cease three
years from the date all Loans are paid in full, unless Borrower requests in
writing at least thirty (30) days prior to the expiration of such three (3) year
period, to maintain the confidentiality of such information for an additional
three year period. Borrower waives any and all other rights it may have to
confidentiality as against the Administrative Agent and the Lenders arising by
contract, agreement, statute or law except as expressly stated in this SECTION
12.15.
SECTION 12.16 EFFECTIVENESS. This Agreement shall be effective on
the Amendment and Restatement Date.
SECTION 12.17 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND EACH LOAN
DOCUMENT AND AGREES THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF
THIS AGREEMENT AND EACH LOAN DOCUMENT; THAT IT HAS IN FACT READ THIS AGREEMENT
AND EACH LOAN DOCUMENT AND IS FULLY INFORMED AND HAS FULL NOTICE AND KNOWLEDGE
OF THE TERMS, CONDITIONS AND EFFECTS OF THIS AGREEMENT AND EACH LOAN DOCUMENT;
THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS CHOICE
THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND EACH
LOAN DOCUMENT; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS
AGREEMENT AND EACH LOAN DOCUMENT; AND THAT IT RECOGNIZES THAT CERTAIN OF THE
TERMS OF THIS AGREEMENT AND EACH LOAN DOCUMENT RESULT IN ONE PARTY ASSUMING THE
LIABILITY INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER
PARTY OF ITS RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY HERETO AGREES AND
COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY
EXCULPATORY PROVISION OF THIS AGREEMENT AND EACH LOAN DOCUMENT ON THE BASIS THAT
THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS
NOT "CONSPICUOUS."
83
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
BORROWER: CALLON PETROLEUM COMPANY
By: _______________________________________
Name: John S. Weatherly
Title: Senior Vice President and
Chief Financial Officer
Address for Notices:
200 North Canal Street
Natchez, Mississippi 39120
Telecopier No.: (601) 446-1374
Telephone No.: (601) 442-1601
Attention: John S. Weatherly
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
ADMINISTRATIVE AGENT: WELLS FARGO BANK, NATIONAL
ASSOCIATION
By: _______________________________________
Name: Melissa Scott
Title: Vice President
Address for Notices:
505 Main Street, Suite 301
Fort Worth, TX 76102
Telecopier No.: (817) 885-8650
Telephone No.: (817) 334-7065
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: FTVIPT-INCOME SECURITIES FUND
By: _______________________________________
Name: David P. Goss
Title: Vice President
Address for Notices:
1 Franklin Parkway
San Mateo, CA 94403
With copy to:
Paul, Hastings, Janofsky & Walker
55 Second St., 24th Floor
San Francisco, CA 94105
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: FTIF INCOME FUND
By: _______________________________________
Name: Greg McGowan
Title: Director
Address for Notices:
1 Franklin Parkway
San Mateo, CA 94403
With copy to:
Paul, Hastings, Janofsky & Walker
55 Second St., 24th Floor
San Francisco, CA 94105
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: FRANKLIN CUSTODIAN FUNDS - INCOME
SERIES
By: _______________________________________
Name: David P. Gross
Title: Vice President
Address for Notices:
1 Franklin Parkway
San Mateo, CA 94403
With copy to:
Paul, Hastings, Janofsky & Walker
55 Second St., 24th Floor
San Francisco, CA 94105
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: MERRILL LYNCH PCG, INC.
By: _______________________________________
Name: Martin McInerney
Title: _______________________________________
Address for Notices:
4 World Financial Center
9th Floor
New York, NY 10080
ATTN: Larry First
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: DB DISTRESSED OPPORTUNITIES FUND,
L.P., AS ASSIGNEE
BY: POST ADVISORY GROUP, LLC, AS
INVESTMENT MANAGER
By: __________________________________
Name: Carl Goldsmith
Title: Executive Vice President
Address for Notices:
Post Advisory Group, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, CA 90025
ATTN: Mark Porrazzo
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: HFR ASSET MANAGEMENT, L.L.C.,
AS ASSIGNEE
BY: POST ADVISORY GROUP, LLC, AS
INVESTMENT MANAGER
By:_______________________________________
Name: Carl Goldsmith
Title: Executive Vice President
Address for Notices:
Post Advisory Group, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, CA 90025
ATTN: Mark Porrazzo
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: THE OPPORTUNITY FUND, LLC, AS ASSIGNEE
BY: POST ADVISORY GROUP, LLC, AS
INVESTMENT MANAGER
By:_______________________________________
Name: Carl Goldsmith
Title: Executive Vice President
Address for Notices:
Post Advisory Group, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, CA 90025
ATTN: Mark Porrazzo
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: POST BALANCED FUND, L.P., AS ASSIGNEE
BY: POST ADVISORY GROUP, LLC, AS
INVESTMENT MANAGER
By:_______________________________________
Name: Carl Goldsmith
Title: Executive Vice President
Address for Notices:
Post Advisory Group, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, CA 90025
ATTN: Mark Porrazzo
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: POST OPPORTUNITY FUND, L.P., AS ASSIGNEE
BY: POST ADVISORY GROUP, LLC, AS
INVESTMENT MANAGER
By:______________________________________
Name: Carl Goldsmith
Title: Executive Vice President
Address for Notices:
Post Advisory Group, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, CA 90025
ATTN: Mark Porrazzo
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: MW POST OPPORTUNITY OFFSHORE
FUND, LTD., AS ASSIGNEE
BY: POST ADVISORY GROUP, LLC, AS
INVESTMENT MANAGER
By:_______________________________________
Name: Carl Goldsmith
Title: Executive Vice President
Address for Notices:
Post Advisory Group, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, CA 90025
ATTN: Mark Porrazzo
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: POST TOTAL RETURN FUND, L.P.,
AS ASSIGNEE
BY: POST ADVISORY GROUP, LLC, AS
INVESTMENT MANAGER
By:______________________________________
Name: Carl Goldsmith
Title: Executive Vice President
Address for Notices:
Post Advisory Group, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, CA 90025
ATTN: Mark Porrazzo
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: SOUTH DAKOTA INVESTMENT COUNCIL,
AS ASSIGNEE
BY: POST ADVISORY GROUP, LLC, AS
INVESTMENT MANAGER
By:______________________________________
Name: Carl Goldsmith
Title: Executive Vice President
Address for Notices:
Post Advisory Group, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, CA 90025
ATTN: Mark Porrazzo
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: SPHINX DISTRESSED FUND SPC, AS ASSIGNEE
BY: POST ADVISORY GROUP, LLC, AS
INVESTMENT MANAGER
By:_______________________________________
Name: Carl Goldsmith
Title: Executive Vice President
Address for Notices:
Post Advisory Group, LLC
11755 Wilshire Blvd., Suite 1400
Los Angeles, CA 90025
ATTN: Mark Porrazzo
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: DEUTSCH BANK AG, LONDON BRANCH
By: _______________________________________
Name: Tracy Fu
Title: _______________________________________
Address for Notices:
31 West 52nd Street
New York, NY 10019
ATTN: Tracy Fu
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: CREDIT SUISSE FIRST BOSTON
INTERNATIONAL
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
By: _______________________________________
Name: _______________________________________
Title: _______________________________________
Address for Notices:
11 Madison Avenue
4th Floor
New York, NY 10010
ATTN: Jeff Tuck
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: DOUBLE BLACK DIAMOND OFFSHORE LDC
By: Carlson Capital, L.P., Investment Advisor
By: Asgard Investment Corp., its
General Partner
By: ______________________________
Name: Clint D. Carlson
Title: President
Address for Notices:
210 McKinney Avenue
Suite 1600
Dallas, TX 75201
ATTN: Don Kendall
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: BLACK DIAMOND OFFSHORE LTD.
By: Carlson Capital, L.P., Investment Advisor
By: Asgard Investment Corp., its
General Partner
By: ______________________________
Name: Clint D. Carlson
Title: President
Address for Notices:
210 McKinney Avenue
Suite 1600
Dallas, TX 75201
ATTN: Don Kendall
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
LENDERS: JEFFERIES & COMPANY, INC.
By: _______________________________________
Name: Robert J. Welch
Title: Senior Vice President
Address for Notices:
The Metro Center
One Station Place, Three North
Stamford, CT 06902
ATTN: Robert J. Welch
-SIGNATURE PAGE-
AMENDED AND RESTATED SENIOR UNSECURED CREDIT AGREEMENT,
DATED AS OF DECEMBER 23, 2003, AMONG
CALLON PETROLEUM COMPANY, AS BORROWER,
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
AND THE LENDERS SIGNATORY HERETO
ANNEX I
LIST OF COMMITMENTS
LENDER COMMITMENTS
-----------------
Franklin Custodian Funds-Income Series, A Maryland corporation ........ U.S. $ 92,500,000
FTVIPT-Income Securities Fund, A Massachusetts Business Trust.......... U.S. $ 6,000,000
FTIF Income Fund, A Luxembourg corporation............................. U.S. $ 1,500,000
-----------------
U.S. $100,000,000
NEW LENDER
Merrill Lynch PCG, Inc................................................. U.S. $ 20,000,000
DB Distressed Opportunities Fund, L.P.................................. U.S. $ 300,000
HFR Asset Management, L.L.C............................................ U.S. $ 700,000
The Opportunity Fund, LLC.............................................. U.S. $ 2,000,000
Post Balanced Fund, L.P................................................ U.S. $ 1,500,000
Post Opportunity Fund, L.P............................................. U.S. $ 3,800,000
MW Post Opportunity Offshore Fund, Ltd................................. U.S. $ 3,500,000
Post Total Return Fund, L.P............................................ U.S. $ 1,250,000
South Dakota Investment Council........................................ U.S. $ 1,650,000
Sphinx Distressed Fund SPC............................................. U.S. $ 300,000
Deutsch Bank AG, London Branch......................................... U.S. $ 5,000,000
Credit Suisse First Boston International............................... U.S. $ 5,000,000
Double Black Diamond Offshore LDC...................................... U.S. $ 14,280,000
Black Diamond Offshore Ltd............................................. U.S. $ 2,720,000
Black Diamond Energy Offshore LDC...................................... U.S. $ 3,000,000
Jefferies & Company, Inc............................................... U.S. $ 10,000,000
Franklin Custodian Funds - Income Series, a Maryland corporation....... U.S. $ 10,000,000
-----------------
U.S. $ 85,000,000
TOTAL U.S. $185,000,000
=================
Annex I
EXHIBIT A
[FORM OF]
NOTE
THE ISSUANCE AND SALE OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE OFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR ANY APPLICABLE STATE SECURITIES LAWS. THE HOLDER HEREOF, BY ITS
ACCEPTANCE OF THIS NOTE, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS NOTE
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE THERETO UNDER RULE 144(k) UNDER THE
SECURITIES ACT WHICH IS APPLICABLE TO THIS NOTE (THE "RESALE RESTRICTION
TERMINATION DATE") OTHER THAN (1) TO THE COMPANY OR THEIR RESPECTIVE
SUBSIDIARIES, (2) SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER, IN EACH CASE TO WHOM NOTICE IS GIVEN THAT THE RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (3) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT), (4) TO A NON-"U.S. PERSON"
IN AN "OFFSHORE TRANSACTION" (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER
THE SECURITIES ACT) IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT,
(5) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, INCLUDING THE EXEMPTION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT, IF AVAILABLE, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, SUBJECT IN EACH OF THE FOREGOING CASES TO
ANY REQUIREMENT OF LAW THAT THE DISPOSITION OF ITS PROPERTY OR THE PROPERTY OF
SUCH INVESTOR ACCOUNT OR ACCOUNTS BE AT ALL TIMES WITHIN ITS OR THEIR CONTROL,
AND SUBJECT TO THE RIGHT OF THE ADMINISTRATIVE AGENT OR THE COMPANY PRIOR TO ANY
SUCH SALE, PLEDGE OR OTHER TRANSFER TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM.
THIS LEGEND WILL BE REMOVED UPON REQUEST OF THE HOLDER ON OR AFTER THE RESALE
RESTRICTION TERMINATION DATE.
A-1
$____________________ December 23, 2003
CALLON PETROLEUM COMPANY, a Delaware corporation (the "BORROWER"),
for value received, promises and agrees to pay to __________________________
(the "LENDER"), or order, at the account of Wells Fargo Bank, National
Association, a national banking association, as Administrative Agent, maintained
at _______________, or such other account as the Administrative Agent may from
time to time specify by written notice to Borrower, the principal sum of
[__________________________] ($_________________), or such lesser amount as
shall equal the aggregate unpaid principal amount of the Loans owed to the
Lender under the Credit Agreement, as hereafter defined, in lawful money of the
United States of America and in immediately available funds, on the dates and in
the principal amounts provided for in the Credit Agreement, and to pay interest
on the unpaid principal amount as provided for in the Credit Agreement, at such
account, in like money and funds, for the period commencing on the date of each
such Loan until such Loan shall be paid in full, at the rate per annum equal to
9.75% or as otherwise specified in the Credit Agreement, but in no event to
exceed the Highest Lawful Rate, and on the dates provided in the Amended and
Restated Credit Agreement..
This note evidences the Loan owed to the Lender under that certain
Amended and Restated Credit Agreement dated as of December 8, 2003 and amended
and restated as of December 23, 2003, by and among Borrower, Wells Fargo Bank,
National Association, a national banking association, as Administrative Agent,
and the other lenders signatory thereto (including the Lender) (such Credit
Agreement, together with all modifications, amendments, supplements or
successors thereto, being the "CREDIT AGREEMENT"), and shall be governed by the
Credit Agreement. Capitalized terms used in this note and not defined in this
note, but which are defined in the Credit Agreement, have the respective
meanings herein as are assigned to them in the Credit Agreement.
Each payment made on account of the principal and interest hereof
shall be recorded by the Lender on its books, provided that any failure by the
Lender to make any such record shall not affect the obligations of Borrower
under the Credit Agreement or under this note in respect of such Loans.
Except only for any notices which are specifically required by the
Credit Agreement or the other Loan Documents, Borrower and any and all
co-makers, endorsers, guarantors and sureties severally waive notice (including
but not limited to notice of intent to accelerate and notice of acceleration,
notice of protest and notice of dishonor), demand, presentment for payment,
protest, diligence in collecting and the filing of suit for the purpose of
fixing liability, and consent that the time of payment hereof may be extended
and re-extended from time to time without notice to any of them. Each such
person agrees that his, her or its liability on or with respect to this note
shall not be affected by any release of or change in any guaranty or security at
any time existing or by any failure to perfect or maintain perfection of any
lien against or security interest in any such security or the partial or
complete unenforceability of any guaranty or other surety obligation, in each
case in whole or in part, with or without notice and before or after maturity.
A-2
The Credit Agreement provides for the acceleration of the maturity
of this note upon the occurrence of certain events and for prepayment of Loans
upon the terms and conditions specified therein. Reference is made to the Credit
Agreement for all other pertinent purposes. This note may not be assigned,
transferred, sold or indorsed except in accordance with the Credit Agreement.
This note is issued pursuant to and is entitled to the benefits of
the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY
THE LAW OF THE STATE OF NEW YORK INCLUDING SECTION 5-1401 OF THE GENERAL
OBLIGATIONS OF THE STATE OF NEW YORK, BUT OTHERWISE WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAWS AND THE UNITED STATES OF AMERICA FROM TIME TO
TIME IN EFFECT.
CALLON PETROLEUM COMPANY
By: ____________________________________
Name: ____________________________________
Title:____________________________________
A-3
EXHIBIT B
FORM OF
COMPLIANCE CERTIFICATE
The undersigned hereby certifies that he is the
_______________________ of CALLON PETROLEUM COMPANY, a Delaware corporation (the
"BORROWER"), and that as such he is authorized to execute and deliver this
certificate on behalf of Borrower. This certificate is being delivered pursuant
to that certain Amended and Restated Credit Agreement dated as of December 8,
2003 and amended and restated as of December 23, 2003 (as restated, amended,
modified, supplemented and in effect from time to time, the "AGREEMENT"), among
Borrower, the Lenders signatory thereto, and Wells Fargo Bank, National
Association, a national banking association, as Administrative Agent for the
Lenders.
The undersigned represents and warrants as follows (each capitalized
term used herein having the same meaning given to it in the Agreement unless
otherwise specified);
(a)______[There currently does not exist any Default under the
Agreement.] [Attached hereto is a schedule specifying the reasonable details of
[a] certain Default[s] which exist under the Agreement and the action taken or
proposed to be taken with respect thereto.]
(b)______All of the representations and warranties of Borrower set
forth in the Agreement are true and correct as of the date hereof, unless such
representations and warranties speak as to a certain date.
EXECUTED AND DELIVERED this ____ day of _____________, 20__.
CALLON PETROLEUM COMPANY
By: _______________________________
Name: _______________________________
Title: _______________________________
B-1
EXHIBIT C
FORM OF
RESPONSIBLE OFFICER'S CERTIFICATE
Pursuant to SECTION 8.01(I) of that certain Amended and Restated Credit
Agreement dated as of December 8, 2003 and amended and restated as of December
23, 2003 (the "CREDIT AGREEMENT") among Callon Petroleum Company, a Delaware
corporation (the "Borrower"), the Lenders signatory thereto, and Wells Fargo
Bank, National Association, a national banking association, as Administrative
Agent for the Lenders, the undersigned hereby certifies, as of the date hereof,
that:
1. He is the duly appointed ____________________ of Borrower and is
duly authorized to make, execute and deliver this certificate.
2. The matters set forth in the financial statements attached hereto
are accurate and correctly reflect the financial condition of the
Corporation for the respective calendar quarter or fiscal year of
the statements.
3. No Default has occurred and is continuing (or, if any Default has
occurred and is continuing, such Default is described in reasonable
detail in a document attached hereto).
4. Attached hereto, in reasonable detail, are the computations
necessary to determine whether Borrower is in compliance with
SECTION 9.01(a) of the Credit Agreement as of the end of the
respective calendar quarter or fiscal year of the financial
statements attached hereto.
IN WITNESS HEREOF, the undersigned has executed this certificate as of the ___
day of ____________, 20__.
By: _______________________________
Name:
Title:
C-1
EXHIBIT D
FORM OF
ASSIGNMENT AGREEMENT
This Assignment Agreement ("Assignment") between Assignor and
Assignee is executed and delivered pursuant to that certain Amended and Restated
Credit Agreement dated as of December 8, 2003 and amended and restated as of
December 23, 2003 (as amended, modified, supplemented and in effect on the date
hereof, (the "CREDIT AGREEMENT"), among Callon Petroleum Company, a Delaware
corporation, the Lenders signatory thereto and Wells Fargo Bank, National
Association, a national banking association, as Administrative Agent for the
Lenders. Capitalized terms used but not defined herein are as defined in the
Credit Agreement.
The Assignor named herein hereby sells and assigns, without
recourse, to the Assignee named herein, and the Assignee hereby purchases and
assumes, without recourse, from the Assignor, effective as of the Assignment
Date (defined below) the interests set forth herein (the "Assigned Interest") in
the Assignor's rights and obligations under the Credit Agreement, including,
without limitation, the Loans which are outstanding on the Assignment Date, but
excluding accrued interest and fees to and excluding the Assignment Date. The
Assignee hereby acknowledges receipt of a copy of the Credit Agreement. From and
after the Assignment Date (i) the Assignee shall be a party to and be bound by
the provisions of the Credit Agreement and, to the extent of the Assigned
Interest, have the rights and obligations of a Lender thereunder and (ii) the
Assignor shall, to the extent of the Assigned Interest, relinquish its rights
and be released from its obligations under the Credit Agreement.
This Assignment is being delivered to the Administrative Agent
together with (i) if the Assignee is a foreign lender, any documentation
required to be delivered by the Assignee pursuant to SECTION 4.05(D) of the
Credit Agreement, duly completed and executed by the Assignee, and (ii) if the
Assignee is not already a Lender under the Credit Agreement, any other
documentation required by the Credit Agreement or any Loan Document, duly
completed by the Assignee, to Borrower, the Administrative Agent and each
Lender, as applicable. The Assignee shall pay the fee payable to the
Administrative Agent pursuant to SECTION 12.06(b) of the Credit Agreement.
This Assignment shall be governed by and construed in accordance
with the laws of the State of New York including section 5-1401 of the General
Obligations Law of the State of New York, but otherwise without giving effect to
principles of conflicts of laws.
Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment ("Assignment Date"):
D-1
Percentage Assigned of
Facility/Commitment (set forth, to
at least 8 decimals, as a percentage
of the Facility and the aggregate
Commitments of all Lenders
Facility Principal Amount Assigned thereunder)
_____________________________ ______________________________ _________________________________
Commitment Assigned:
_____________________________ $_____________________________ _________________________________
Loans:
_____________________________ ______________________________ _________________________________
The terms set forth above are hereby agreed to:
[NAME OF ASSIGNEE], AS ASSIGNEE
By: ______________________________
Name: ______________________________
Title:______________________________
[NAME OF ASSIGNOR], AS ASSIGNOR
By: ______________________________
Name: ______________________________
Title:______________________________
The undersigned hereby consent to this Assignment:
CALLON PETROLEUM COMPANY
By: ____________________________________________
Name: ____________________________________________
Title: ____________________________________________
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS ADMINISTRATIVE AGENT
By: ____________________________________________
Name: ____________________________________________
Title: ____________________________________________
D-2
EXHIBIT E-1
FORM OF LOAN INCREASE CERTIFICATE
[_________], 200[__]
To: Wells Fargo Bank, National Association,
as Administrative Agent
The Borrower, the Administrative Agent and the other Agents and certain
Lenders have heretofore entered into that certain Amended and Restated Credit
Agreement, dated as of December 8, 2003 and amended and restated as of December
23, 2003, 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 Commitment Increase Certificate is being delivered pursuant to
SECTION 2.02 of the Credit Agreement.
Please be advised that the undersigned has agreed to increase its
Commitment under the Credit Agreement effective [ ], 200[ ] from $[ ] to $[ ]
and (b) that it shall continue to be a party in all respect to the Credit
Agreement and the other Loan Documents.
[The [Borrower/Lender] shall pay the fee payable to the Administrative
Agent pursuant to SECTION ____ of the Credit Agreement.]
Very truly yours,
[ ]
By: _______________________________
Name: _______________________________
Title: _______________________________
E-1-1
Accepted and Agreed:
Wells Fargo Bank, National Association,
as Administrative Agent
By: ________________________________
Name: ________________________________
Title: ________________________________
Accepted and Agreed:
Callon Petroleum Company
By: ________________________________
Name: ________________________________
Title: ________________________________
E-1-2
EXHIBIT E-2
FORM OF ADDITIONAL LENDER CERTIFICATE
[_________], 200[___]
To: Wells Fargo Bank, National Association,
as Administrative Agent
The Borrower, the Administrative Agent and the other Lenders have
heretofore entered into that certain Amended and Restated Credit Agreement,
dated as of December 8, 2003 and amended and restated as of December 23, 2003,
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 Lender Certificate is being delivered pursuant to SECTION
___ of the Credit Agreement.
Please be advised that the undersigned has agreed (a) to become a Lender
under the Credit Agreement effective [ ], 200[ ] with a Commitment of $[ ] and
(b) that it shall be a party in all respect to the Credit Agreement and the
other Loan Documents.
This Additional Lender Certificate is being delivered to the
Administrative Agent together with (i) if the Additional Lender is a Foreign
Lender, any documentation required to be delivered by such Additional Lender
pursuant to SECTION 4.05(D) of the Credit Agreement, duly completed and executed
by the Additional Lender[, and (ii) an Administrative Questionnaire in the form
supplied by the Administrative Agent, duly completed by the Additional Lender].
[The [Borrower/Additional Lender] shall pay the fee payable to the
Administrative Agent pursuant to SECTION ___ of the Credit Agreement.]
Very truly yours,
[ ]
By: _______________________________
Name: _______________________________
Title:_______________________________
F-1
Accepted and Agreed:
Wells Fargo Bank, National Association,
as Administrative Agent
By: ________________________________
Name: ________________________________
Title: ________________________________
Accepted and Agreed:
Callon Petroleum Company
By: ________________________________
Name: ________________________________
Title: ________________________________
F-2