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EXHIBIT 10.2
CREDIT AGREEMENT
among
EXUS ENERGY, LLC,
as Borrower,
NATIONSBANK, N.A.,
as Administrative Agent
and
The Financial Institutions Listed on Schedule 1 Hereto,
as Banks
$50,000,000
dated
June 30, 1999
Banc of America Securities LLC
as Sole Lead Arranger and Book Manager
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TABLE OF CONTENTS
ARTICLE 1
TERMS DEFINED..........................................................................1
SECTION 1.1 Definitions...............................................................1
SECTION 1.2 Accounting Terms and Determinations.....................................19
SECTION 1.3 Petroleum Terms..........................................................20
SECTION 1.4 Money....................................................................20
ARTICLE 2
THE CREDIT............................................................................20
SECTION 2.1 Commitments. ..........................................................20
SECTION 2.2 Notes....................................................................24
SECTION 2.3 Interest Rates; Payments.................................................25
SECTION 2.4 Mandatory Prepayments During Borrowing Base Deficiency...................26
SECTION 2.5 Mandatory Prepayments from Cash Flow.....................................27
SECTION 2.6 Voluntary Reduction of Commitments.......................................27
SECTION 2.7 Termination of Commitments; Final Maturity of Revolving Loan.............27
SECTION 2.8 Unused Commitment Fee....................................................28
SECTION 2.9 Borrowing Base Increase Fee..............................................28
SECTION 2.10 Letter of Credit Fee....................................................28
SECTION 2.11 Agency and other Fees...................................................28
SECTION 2.12 Closing Fee.............................................................28
ARTICLE 3
GENERAL PROVISIONS....................................................................29
SECTION 3.1 Delivery and Endorsement of Notes........................................29
SECTION 3.2 General Provisions as to Payments........................................29
ARTICLE 4
CHANGE IN CIRCUMSTANCES...............................................................30
SECTION 4.1 Increased Cost and Reduced Return........................................30
SECTION 4.2 Limitation on Types of Loans.............................................31
SECTION 4.3 Illegality...............................................................32
SECTION 4.4 Treatment of Affected Loans..............................................32
SECTION 4.5 Compensation.............................................................33
SECTION 4.6 Taxes....................................................................33
SECTION 4.7 Discretion of Banks as to Manner of Funding..............................35
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ARTICLE 5
BORROWING BASE........................................................................35
SECTION 5.1 Reserve Report; Proposed Borrowing Base..................................35
SECTION 5.2 Scheduled Redeterminations of the Borrowing Base; Procedures and
Standards................................................................35
SECTION 5.3 Special Redetermination..................................................36
SECTION 5.4 Borrowing Base Deficiency................................................36
SECTION 5.5 Initial Borrowing Base...................................................37
ARTICLE 6
COLLATERAL AND GUARANTEES.............................................................37
SECTION 6.1 Security.................................................................37
SECTION 6.2 Guarantees...............................................................37
SECTION 6.3 Supporting Documents.....................................................38
ARTICLE 7
CONDITIONS PRECEDENT..................................................................38
SECTION 7.1 Conditions to Initial Borrowing and Participation in Letter of Credit
Exposure.................................................................38
SECTION 7.2 Conditions to Each Borrowing and each Letter of Credit...................42
SECTION 7.3 Materiality of Conditions................................................43
ARTICLE 8
REPRESENTATIONS AND WARRANTIES........................................................43
SECTION 8.1 Existence and Power......................................................43
SECTION 8.2 Necessary Authorization; Contravention...................................43
SECTION 8.3 Binding Effect...........................................................43
SECTION 8.4 Financial Information....................................................44
SECTION 8.5 Litigation...............................................................45
SECTION 8.6 ERISA....................................................................45
SECTION 8.7 Taxes and Filing of Tax Returns..........................................46
SECTION 8.8 Ownership of Properties Generally........................................46
SECTION 8.9 Mineral Interests........................................................46
SECTION 8.10 Licenses, Permits, Etc..................................................46
SECTION 8.11 Compliance with Law.....................................................47
SECTION 8.12 Full Disclosure.........................................................47
SECTION 8.13 Organizational Structure; Nature of Business............................47
SECTION 8.14 Environmental Matters...................................................47
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SECTION 8.15 Burdensome Obligations....................................................................48
SECTION 8.16 Fiscal Year...............................................................................48
SECTION 8.17 No Default................................................................................48
SECTION 8.18 Government Regulation.....................................................................48
SECTION 8.19 Insider...................................................................................48
SECTION 8.20 Gas Balancing Agreements and Advance Payment Contracts....................................48
SECTION 8.21 Apache Acquisition Documents..............................................................49
ARTICLE 9
AFFIRMATIVE COVENANTS...................................................................................49
SECTION 9.1 Information...............................................................................49
SECTION 9.2. Business of Borrower......................................................................51
SECTION 9.3 Maintenance of Existence..................................................................51
SECTION 9.4 Title Data................................................................................52
SECTION 9.5 Right of Inspection.......................................................................52
SECTION 9.6 Maintenance of Insurance..................................................................52
SECTION 9.7 Payment of Taxes and Claims...............................................................52
SECTION 9.8 Compliance with Laws and Documents........................................................53
SECTION 9.9 Operation of Properties and Equipment.....................................................53
SECTION 9.10 Environmental Law Compliance..............................................................53
SECTION 9.11 ERISA Reporting Requirements..............................................................54
SECTION 9.12 Additional Documents......................................................................55
SECTION 9.13 Environmental Review......................................................................55
ARTICLE 10
NEGATIVE COVENANTS......................................................................................55
SECTION 10.1 Incurrence of Debt.......................................................................55
SECTION 10.2 Distributions............................................................................55
SECTION 10.3 Negative Pledge..........................................................................56
SECTION 10.4 Consolidations and Mergers...............................................................56
SECTION 10.5 Asset Dispositions.......................................................................56
SECTION 10.6 Amendments to Organizational Documents; Other Material Agreements........................56
SECTION 10.7 Use of Proceeds.........................................................................56
SECTION 10.8 Investments..............................................................................57
SECTION 10.9 Transactions with Affiliates.............................................................57
SECTION 10.10 ERISA....................................................................................57
SECTION 10.11 Hedge Transactions.......................................................................57
SECTION 10.12 Fiscal Year..............................................................................57
SECTION 10.13 Change in Business.......................................................................57
SECTION 10.14 Restricted Payments......................................................................57
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ARTICLE 11
FINANCIAL COVENANTS.....................................................................................58
SECTION 11.1 Current Ratio of Borrower.................................................................58
SECTION 11.2 Maximum General and Administrative Expenses...............................................58
ARTICLE 12
DEFAULTS................................................................................................58
SECTION 12.1 Events of Default.........................................................................58
ARTICLE 13
AGENTS..................................................................................................60
SECTION 13.1 Appointment, Powers, and Immunities.......................................................60
SECTION 13.2 Reliance by Agents........................................................................61
SECTION 13.3 Defaults..................................................................................61
SECTION 13.4 Rights as Bank............................................................................61
SECTION 13.5 Indemnification...........................................................................62
SECTION 13.6 Non-Reliance on Agents and Other Banks....................................................62
SECTION 13.7 Resignation of Agents.....................................................................62
ARTICLE 14
MISCELLANEOUS...........................................................................................63
SECTION 14.1 Notices...................................................................................63
SECTION 14.2 No Waivers................................................................................63
SECTION 14.3 Expenses; Indemnification.................................................................63
SECTION 14.4 Right of Set-off; Adjustments.............................................................64
SECTION 14.5 Amendments and Waivers....................................................................65
SECTION 14.6 Survival..................................................................................65
SECTION 14.7 Limitation on Interest....................................................................65
SECTION 14.8 Invalid Provisions........................................................................66
SECTION 14.9 Waiver of Consumer Credit Laws............................................................66
SECTION 14.10 Assignments and Participations............................................................66
SECTION 14.11 TEXAS LAW.................................................................................68
SECTION 14.12 Consent to Jurisdiction; Waiver of Immunities.............................................68
SECTION 14.13 Counterparts; Effectiveness...............................................................69
SECTION 14.14 No Third Party Beneficiaries..............................................................69
SECTION 14.15 COMPLETE AGREEMENT........................................................................69
SECTION 14.16 WAIVER OF JURY TRIAL......................................................................69
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EXHIBITS
EXHIBIT A FORM OF FACILITY GUARANTEES
EXHIBIT B FORM OF NOTE
EXHIBIT C FORM OF OPERATING AGREEMENT
EXHIBIT D FORM OF SECURITY AGREEMENT
EXHIBIT E FORM OF SUBORDINATION AGREEMENT
EXHIBIT F FORM OF REQUEST FOR BORROWING
EXHIBIT G FORM OF REQUEST FOR LETTER OF CREDIT
EXHIBIT H FORM OF CONTINUATION AND CONVERSION NOTICE
EXHIBIT I FORM OF CERTIFICATE OF OWNERSHIP INTERESTS
EXHIBIT J-1 FORM OF CERTIFICATE OF FINANCIAL OFFICER OF EXCO
EXHIBIT J-2 FORM OF CERTIFICATE OF FINANCIAL OFFICER OF VENUS
EXHIBIT J-3 FORM OF CERTIFICATE OF FINANCIAL OFFICER OF BORROWER
EXHIBIT K FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
SCHEDULES
SCHEDULE 1 FINANCIAL INSTITUTIONS
SCHEDULE 2 APPROVED CAP EX BUDGET
SCHEDULE 3 LITIGATION
SCHEDULE 4 ORGANIZATION STRUCTURE; NATURE OF BUSINESS
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of the 30th
day of June, 1999, among EXUS Energy, LLC, a Delaware limited liability company
("Borrower"), NationsBank, N.A., as Administrative Agent ("Administrative
Agent"), and the financial institutions listed on Schedule 1 hereto as Banks
(individually a "Bank" and collectively "Banks").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Banks provide Borrower with a
revolving credit facility, and Banks are willing to provide such facility on the
terms and subject to the conditions hereinafter set forth; and
WHEREAS, pursuant to Article 13 of this Agreement, NationsBank, N.A.
has been appointed Administrative Agent for Banks hereunder; and
WHEREAS, pursuant to separate agreements among NationsBank, Banc of
America Securities LLC ("BAS") and Borrower, BAS has been appointed Sole Lead
Arranger and Book Manager for the credit facility provided hereunder.
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Borrower, Administrative Agent and Banks agree as follows:
ARTICLE 1
TERMS DEFINED
SECTION 1.1 Definitions. The following terms, as used herein, have the
following meanings:
"Adjusted Eurodollar Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by Administrative Agent to be equal to the
quotient obtained by dividing (a) the Eurodollar Rate for such Eurodollar Loan
for such Interest Period by (b) 1.00 minus the Reserve Requirement for such
Eurodollar Loan for such Interest Period.
"Administrative Agent" means NationsBank, N.A. in its capacity as
Administrative Agent for Banks hereunder or any successor thereto.
"Advance Payment Contract" means any contract whereby Borrower or any
Subsidiary of Borrower either (a) receives or becomes entitled to receive
(either directly or indirectly) any payment
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(an "Advance Payment") to be applied toward payment of the purchase price of
Hydrocarbons produced or to be produced from Mineral Interests owned by Borrower
or any Subsidiary of Borrower and which Advance Payment is paid or to be paid in
advance of actual delivery of such production to or for the account of the
purchaser regardless of such production, or (b) grants an option or right of
refusal to the purchaser to take delivery of such production in lieu of payment,
and, in either of the foregoing instances, the Advance Payment is, or is to be,
applied as payment in full for such production when sold and delivered or is, or
is to be, applied as payment for a portion only of the purchase price thereof or
of a percentage or share of such production; provided that inclusion of the
standard "take or pay" provision in any gas sales or purchase contract or any
other similar contract shall not, in and of itself, constitute such contract as
an Advance Payment Contract for the purposes hereof.
"Affiliate" means, as to any Person, any Subsidiary of such Person, or
any other Person which, directly or indirectly, controls, is controlled by, or
is under common control with, such Person and, with respect to Borrower or any
of its Subsidiaries, means any director or executive officer of Borrower or any
of its Subsidiaries and any Person who holds five percent (5%) or more of the
voting stock of Borrower or any of its Subsidiaries. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or partnership interests, or
by contract or otherwise.
"Agent" means Administrative Agent, Sole Lead Arranger and Book
Manager, individually, and "Agents" means Administrative Agent, Sole Lead
Arranger and Book Manager, collectively.
"Agreement" means this Agreement as the same may hereafter be modified,
amended or supplemented from time to time.
"Annual Scheduled Redetermination" means the Scheduled Redetermination
to occur on or around January 1, 2000 and each October 31, thereafter.
"Apache Acquisition" means the proposed purchase by Borrower of the
Apache Properties pursuant to the Apache Acquisition Agreement.
"Apache Acquisition Agreement" means that certain Purchase and Sale
Agreement dated May 13, 1999, by and between Venus and Apache Corporation. The
rights of Venus under the Apache Acquisition Agreement were contributed by Venus
to Borrower.
"Apache Acquisition Documents" means the Apache Acquisition Agreement
and all agreements, assignments, deeds, conveyances, certificates and other
documents and instruments now or hereafter executed and delivered by or between
Borrower and Sellers pursuant to the Apache Acquisition Agreement or in
connection with the Apache Acquisition.
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"Apache Properties" means the Mineral Interests to be acquired by
Borrower on the Closing Date from Apache Corporation pursuant to the Apache
Acquisition Agreement.
"Applicable Environmental Law" means any Law, statute, ordinance, rule,
regulation, order or determination of any Tribunal or any board of fire
underwriters (or other body exercising similar functions), affecting any real or
personal property owned, operated or leased by Borrower or any of its
Subsidiaries or any other operation of Borrower or any of its Subsidiaries in
any way pertaining to health, safety or the environment, including, without
limitation, all applicable zoning ordinances and building codes, flood disaster
Laws and health, safety and environmental Laws and regulations, and further
including, without limitation, (a) the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986 (as amended from time to time, herein referred
to as "CERCLA"), (b) the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the Solid Waste Recovery Act of
1976, as amended by the Solid Waste Disposal Act of 1980, and the Hazardous and
Solid Waste Amendments of 1984 (as amended from time to time, herein referred to
as "RCRA"), (c) the Safe Drinking Water Act, as amended, (d) the Toxic
Substances Control Act, as amended, (e) the Clean Air Act, as amended, (f) the
Occupational Safety and Health Act of 1970, as amended, (g) the Laws, rules and
regulations of any state having jurisdiction over any real or personal property
owned, operated or leased by Borrower or any of its Subsidiaries or any other
operation of Borrower or any of its Subsidiaries which relates to health, safety
or the environment, as each may be amended from time to time, and (h) any
federal, state or municipal Laws, ordinances or regulations which may now or
hereafter require removal of asbestos or other hazardous wastes or impose any
liability related to asbestos or other hazardous wastes. The terms "hazardous
substance", "petroleum", "release" and "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, in the event either
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 with respect to all provisions of this Agreement; and provided
further that, to the extent the Laws of the state in which any real or personal
property owned, operated or leased by Borrower or any of its Subsidiaries is
located establish a meaning for "hazardous substance", "petroleum", "release",
"solid waste" or "disposal" which is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply in so far as such broader
meaning is applicable to the real or personal property owned, operated or leased
by Borrower or any of its Subsidiaries and located in such state.
"Applicable Lending Office" means, for each Bank and for each Type of
Loan, the Domestic Lending Office or Eurodollar Lending Office of such Bank (or
of an Affiliate of such Bank) designated for such Type of Loan set forth on
Schedule 1 hereto or such other office of such Bank (or an Affiliate of such
Bank) as such Bank may from time to time specify to Administrative Agent and
Borrower by written notice in accordance with the terms hereof as the office by
which its Loans of such Type are to be made and maintained.
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"Applicable Margin" means, on any date, with respect to each Eurodollar
Loan, an amount determined by reference to the ratio of Outstanding Credit to
the Borrowing Base on such date in accordance with the table below:
------------------------------------ ---------------------
Ratio of Outstanding Applicable Margin for
Credit to Borrowing Base Eurodollar Loans
------------------------------------ ---------------------
Less Than .75 to 1 1.50%
------------------------------------ ---------------------
Greater Than Or Equal To .75 to 1 1.75%
------------------------------------ ---------------------
"Approved Cap Ex" means capital expenditures to be made by Borrower for
the drilling and completion of two (2) development wells on the Apache Mineral
Interests in accordance with the Approved Cap Ex Budget.
"Approved Cap Ex Budget" means the budget attached hereto as Schedule 2
prepared by Borrower setting forth budgeted capital expenditures for the
drilling and completion of two (2) development wells on the Apache Properties.
"Approved Petroleum Engineer" means Lee Keeling and Associates, Inc. or
any other reputable firm of independent petroleum engineers as shall be selected
by Borrower and approved by Required Banks, such approval not to be unreasonably
withheld.
"Assignment and Acceptance Agreement" has the meaning given such term
in Section 14.10(a).
"Authorized Officer" means, as to any Person, its Chief Executive
Officer, its President, its Chief Financial Officer, any of its Vice Presidents,
its Treasurer or its corporate Secretary.
"Availability" means, as of any date, the remainder of (a) the
Borrowing Base in effect on such date, minus (b) the Outstanding Credit on such
date.
"Bank" means any financial institution reflected on Schedule 1 hereto
as having a Commitment and its successors and permitted Eligible Assignees, and
"Banks" shall mean all Banks.
"Base Rate" means, the floating rate of interest established from time
to time by Administrative Agent as its "prime rate" of interest, which rate may
not be the lowest rate of interest charged by Administrative Agent, each change
in the Base Rate to become effective without notice to Borrower on the effective
date of each such change.
"Base Rate Loan" means the portion of the principal of the Revolving
Loan bearing interest with reference to the Base Rate.
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"Book Manager" means Banc of America Securities LLC in its capacity as
Book Manager for the credit facility provided hereunder or any successor
thereto.
"Borrower" means EXUS Energy, LLC, a Delaware limited liability
company.
"Borrowing" means any disbursement to Borrower under, or to satisfy the
obligations of Borrower or any of its Subsidiaries under, any of the Loan
Papers. Any Borrowing of Base Rate Loans is referred to herein as a "Base Rate
Borrowing," and any Borrowing of Eurodollar Loans is referred to herein as a
"Eurodollar Borrowing."
"Borrowing Base" means the loan value attributable to certain of
Borrower's Mineral Interests as determined in accordance with Article 5 hereof.
"Borrowing Base Deficiency" means, as of any date, the amount, if any,
by which the Outstanding Credit on such date exceeds the Borrowing Base in
effect on such date; provided, that, for purposes of determining the existence
and amount of any Borrowing Base Deficiency, Letter of Credit Exposure will not
be deemed to be outstanding to the extent it is secured by cash in the manner
contemplated by Section 2.1(b).
"Borrowing Base Properties" means all Mineral Interests evaluated by
Banks for purposes of establishing the Borrowing Base. The Borrowing Base
Properties on the date hereof constitute all of the Mineral Interests described
in the Initial Reserve Report.
"Borrowing Date" means the Eurodollar Business Day or the Domestic
Business Day, as the case may be, upon which the proceeds of any Borrowing are
made available to Borrower or to satisfy any obligation of Borrower or any of
its Subsidiaries.
"Change of Control" means the occurrence of (a) any event or
circumstance which, for any reason (including by operation of law), results in
either EXUS or Venus ceasing to own on a fully diluted basis fifty percent (50%)
of the membership interests in Borrower free and clear of all Liens other than
(i) Liens granted by Venus in favor of EXCO encumbering Venus's membership
interest in Borrower, and (ii) as a result of a transfer by Venus of all or any
part of its membership interest in Borrower to EXCO, (b) an EXCO Change of
Control, or (c) a Venus Change of Control.
"Closing Date" means June 30, 1999.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means, with respect to any Bank, the commitment of such
Bank to lend its Commitment Percentage of the Total Commitment to Borrower
pursuant to Section 2.1 hereof. The amount of each Bank's Commitment is
initially the amount set forth opposite such Bank's name on Schedule 1 hereto,
as such Commitment may be terminated or reduced from time to time in accordance
with the provisions hereof; provided, that, after giving effect to any
Assignment and
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Acceptance Agreement, the Commitment of each Bank shall be the amount set forth
in the Register maintained by Administrative Agent pursuant to Section 14.10(b).
"Commitment Percentage" means, with respect to each Bank, initially,
the Commitment Percentage for such Bank set forth on Schedule 1 hereto;
provided, that, after giving effect to any Assignment and Acceptance Agreement,
the Commitment Percentage of each Bank shall be the amount set forth in the
Register maintained by Administrative Agent pursuant to Section 14.10(b).
"Consolidated Current Assets" means, for any Person at any time, the
current assets of such Person and its Consolidated Subsidiaries at such time.
"Consolidated Current Liabilities" means, for any Person at any time,
the current liabilities of such Person and its Consolidated Subsidiaries at such
time.
"Consolidated Subsidiary" or "Consolidated Subsidiaries" means, for any
Person, any Subsidiary or other entity the accounts of which would be
consolidated with those of such Person in its consolidated financial statements.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 2.3(c) hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 2.3(c) hereof of one Type of Loan into another Type of Loan.
"Credit Parties" means Borrower, each Subsidiary of Borrower, EXCO and
Venus, collectively, and "Credit Party" means any such party.
"Debt" means, for any Person at any time, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c)
all other indebtedness (including capitalized lease obligations, other than
usual and customary oil and gas leases) of such Person on which interest charges
are customarily paid or accrued, (d) all Guarantees by such Person, (e) the
unfunded or unreimbursed portion of all letters of credit issued for the account
of such Person, (f) any amount owed by such Person representing the deferred
purchase price of property or services other than accounts payable incurred in
the ordinary course of business and in accordance with customary trade terms and
which have not been outstanding for more than ninety (90) days past the invoice
date, (g) all obligations of such Person secured by a Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the
credit of that Person, and (h) all liability of such Person as a general partner
of a partnership for obligations of such partnership of the nature described in
(a) through (g) preceding.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice, lapse of time or both would, unless
cured or waived, become an Event of Default.
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"Distribution" by any Person, means (a) with respect to any stock
issued by such Person or any partnership, joint venture, limited liability
company, membership or other interest of such Person, the retirement,
redemption, purchase, or other acquisition for value of any such stock or
partnership, joint venture, limited liability company, membership or other
interest, (b) the declaration or payment of any dividend or other distribution
on or with respect to any stock, partnership, joint venture, limited liability
company, membership or other interest of any Person, (c) any other payment by
such Person with respect to such stock, partnership, joint venture, limited
liability company, membership or other interest of such Person, and (d) the
payment of any management fee, consulting fee, overhead reimbursement or other
fee or payment of any kind to any holder of any stock, partnership, joint
venture, limited liability company, membership or other interest of such Person
or to any Affiliate of such holder; provided, that "Distribution" will not
include payments made by Borrower to EXCO under the Operating Agreement
"Distribution Limit" means the limitation on the amount of
Distributions permitted to be made by Borrower during any period between Annual
Scheduled Redeterminations pursuant to Section 10.2 as set forth in the notice
provided to Borrower by Administrative Agent pursuant to Section 5.2. The
Distribution Limit in effect at any time shall be determined by Administrative
Agent and approved by Required Banks in their sole discretion.
"Dollars" means the lawful currency of the United States of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which national banks in Dallas, Texas, are authorized by Law to
close.
"Domestic Lending Office" means, as to each Bank, its office located at
its address identified on Schedule 1 hereto as its Domestic Lending Office or
such other office as such Bank may hereafter designate as its Domestic Lending
Office by notice to Borrower and Administrative Agent.
"Eligible Assignee" means (i) a Bank, (ii) an Affiliate of a Bank, and
(iii) any other Person approved by Administrative Agent and, unless an Event of
Default has occurred and is continuing at the time any assignment is effected in
accordance with Section 14.10, such approval not to be unreasonably withheld or
delayed by Borrower and such approval to be deemed given by Borrower if no
objection is received by the assigning Bank and Administrative Agent from
Borrower within two (2) Domestic Business Days after notice of such proposed
assignment has been provided by the assigning Bank to Borrower; provided,
however, that neither Borrower nor an Affiliate of Borrower shall qualify as an
Eligible Assignee.
"Environmental Complaint" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, proceeding,
judgment, letter or other communication from any federal, state or municipal
authority or any other party against Borrower or any of its Subsidiaries
involving (a) a Hazardous Discharge from, onto or about any real property owned,
leased or operated at any time by Borrower or any of its Subsidiaries, (b) a
Hazardous Discharge caused, in whole or in part, by Borrower or any of its
Subsidiaries or by any Person acting on behalf of or at the instruction of
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Borrower or any of its Subsidiaries, or (c) any violation of any Applicable
Environmental Law by Borrower or any of its Subsidiaries.
"Environmental Liability" means any liability, loss, fine, penalty,
charge, Lien, damage, cost, or expense of any kind that results directly or
indirectly, in whole or in part (a) from the violation of any Applicable
Environmental Law, (b) from the release or threatened release of any Hazardous
Substance, (c) from removal, remediation, or other actions in response to the
release or threatened release of any Hazardous Substance, (d) from actual or
threatened damages to natural resources, (e) from the imposition of injunctive
relief or other orders, (f) from personal injury, death, or property damage
which occurs as a result of Borrower's or any of its Subsidiaries' use, storage,
handling, or the release or threatened release of a Hazardous Substance, or (g)
from any environmental investigation performed at, on, or for any real property
owned by Borrower or any of its Subsidiaries.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rulings and regulations issued thereunder as from time to time
in effect.
"ERISA Affiliate"means any Person that for purposes of Title IV of
ERISA is under common control with Borrower as determined under Section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended, and the
regulations and rulings issued thereunder.
"ERISA Event" means, with respect to Borrower and any ERISA Affiliate,
(a) a "reportable event" as defined in section 4043 of ERISA (other than a
reportable event not subject to the provision for thirty (30) days notice to the
PBGC under regulations issued under section 4043 of ERISA), (b) the withdrawal
of Borrower 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, (c) the
filing of a notice of intent to terminate a Plan under section 4041(c) of ERISA,
(d) the institution of proceedings to terminate a Plan by the PBGC, (e) the
failure to make required contributions which could result in the imposition of a
Lien under section 412 of the Internal Revenue Code of 1986, as amended or
section 302 of ERISA, or (f) any other event or condition which might reasonably
be expected to constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan or the
imposition of any liability under Title IV of ERISA other than PBGC premiums due
but not delinquent under Section 4007 of ERISA.
"Eurodollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in the applicable eurodollar interbank market.
"Eurodollar Lending Office" means, as to each Bank, its office, branch
or Affiliate located at its address identified on Schedule 1 hereto as its
Eurodollar Lending Office or such other office, branch or Affiliate of such Bank
as it may hereafter designate as its Eurodollar Lending Office by notice to
Borrower and Administrative Agent.
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"Eurodollar Loans" means Loans that bear interest at rates based upon
the Adjusted Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two (2) Eurodollar Business Days prior to the first day of
such Interest Period for a term comparable to such Interest Period. If for any
reason such rate is not available, the term "Eurodollar Rate" shall mean, for
any Eurodollar Loan for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two (2) Eurodollar Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period; provided, however, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100 of 1%).
"Events of Default" has the meaning set forth in Section 12.1.
"EXCO" means EXCO Resources, Inc., a Texas corporation.
"EXCO Change of Control" will be deemed to have occurred if (a) as of
any date, more than fifty percent (50%) of the Persons comprising the Board of
Directors of EXCO were not members of the Board of Directors of EXCO one year
prior to such date, or (b) Douglas H. Miller shall cease, for any reason, to be
actively employed on a full time basis as the Chief Executive Officer of EXCO.
"EXCO/Venus Note" means a Convertible Promissory Note in the principal
amount of $8,000,000 executed by Venus and payable to the order of EXCO.
"Exhibit" refers to an exhibit attached to this Agreement and
incorporated herein by reference, unless specifically provided otherwise.
"Facility Guarantees" means Guarantees substantially in the form of
Exhibit A to be executed by EXCO and Venus and each Subsidiary of Borrower in
favor of Administrative Agent for the ratable benefit of the Banks pursuant to
which each EXCO and Venus and each Subsidiary of Borrower jointly and severally
guarantees payment and performance in full of the Obligations.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day; provided, that, (a) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (b) if no such rate
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is so published on such next succeeding Domestic Business Day, the Federal Funds
Rate for such day shall be the average rate charged to Administrative Agent (in
its individual capacity) on such day on such transactions as determined by
Administrative Agent.
"Financial Officer" of any Person means its Chief Financial Officer;
provided, that if no Person serves in such capacity, "Financial Officer" shall
mean the highest ranking executive officer of such Person with responsibility
for accounting, financial reporting, cash management and similar functions.
"Fiscal Quarter" means the three (3) month periods ending on March 31,
June 30, September 30 and December 31 of each Fiscal Year.
"Fiscal Year" means a twelve (12) month period ending December 31.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the American Institute of Certified
Public Accountants acting through its Accounting Principles Board or by the
Financial Accounting Standards Board or through other appropriate boards or
committees thereof and which are consistently applied for all periods after the
date hereof so as to properly reflect the financial condition, and the results
of operations and changes in financial position, of a Person and its
Consolidated Subsidiaries, except that any accounting principle or practice
required to be changed by the said Accounting Principles Board or Financial
Accounting Standards Board (or other appropriate board or committee of the said
Boards) in order to continue as a generally accepted accounting principle or
practice may be so changed.
"Gas Balancing Agreement" means any agreement or arrangement whereby
Borrower or any of its Subsidiaries, or any other party having an interest in
any Hydrocarbons to be produced from Mineral Interests in which Borrower or any
of its Subsidiaries owns an interest, has a right to take more than its
proportionate share of production therefrom.
"Governmental Authority" means any court or governmental department,
commission, board, bureau, agency, or instrumentality of any nation or of any
province, state, commonwealth, nation, territory, possession, county, parish, or
municipality, whether now or hereafter constituted or existing.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions, by "comfort letter" or other similar undertaking of support or
otherwise), or (b) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole
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or in part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"Hazardous Discharge" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping of any Hazardous Substance from or onto any real property
owned, leased or operated at any time by Borrower or any of its Subsidiaries or
any real property owned, leased or operated by any other party.
"Hazardous Substance" means any pollutant, toxic substance, hazardous
waste, compound, element or chemical that is defined as hazardous, toxic,
noxious, dangerous or infectious pursuant to any Applicable Environmental Law or
which is otherwise regulated by any Applicable Environmental Law or is required
to be investigated and/or remediated by or pursuant to any Applicable
Environmental Law.
"Hedge Transaction" means any commodity, interest rate, currency or
other swap, option, collar, futures contract or other contract pursuant to which
a Person hedges risks related to commodity prices, interest rates, currency
exchange rates, securities prices or financial market conditions. Hedge
Transactions expressly includes Oil and Gas Hedge Transactions.
"Hydrocarbons" means oil, gas, casinghead gas, drip gasolines, natural
gasoline, condensate, distillate, and all other liquid and gaseous hydrocarbons
produced or to be produced in conjunction therewith, and all products,
by-products and all other substances derived therefrom or the processing
thereof, and all other minerals and substances, including, but not limited to,
sulphur, lignite, coal, uranium, thorium, iron, geothermal steam, water, carbon
dioxide, helium, and any and all other minerals, ores, or substances of value,
and the products and proceeds therefrom, including, without limitation, all gas
resulting from the in-situ combustion of coal or lignite.
"Incremental Availability" means the incremental increase in
Availability resulting from any increase in the Borrowing Base hereunder.
"Initial Borrowing Base" means a Borrowing Base in the amount of
$19,500,000, which shall be in effect during the period commencing on the
Closing Date and continuing until the first Redetermination after the Closing
Date.
"Initial Reserve Report" means an engineering analysis of the Apache
Mineral Interests, prepared by EXCO's in house engineering staff as of April 1,
1999, a copy of which has been provided to Administrative Agent and each Bank.
"Interest Period" means, with respect to each Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending one (1), two (2),
three (3), and, if available to all Banks, six (6) months thereafter, as
Borrower may elect in the applicable Request for Borrowing; provided that:
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(i) any Interest Period which would otherwise end on a day
which is not a Eurodollar Business Day shall be extended to
the next succeeding Eurodollar Business Day unless such
Eurodollar Business Day falls in another calendar month, in
which case such Interest Period shall end on the next
preceding Eurodollar Business Day;
(ii) any Interest Period which begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall, subject to clause
(iii) below, end on the last Eurodollar Business Day of a
calendar month;
(iii) if any Interest Period includes a date on which any
payment of principal of any Eurodollar Loan is required to be
made hereunder, but does not end on such date, then (A) the
principal amount of each Eurodollar Loan required to be repaid
on such date shall have an Interest Period ending on such
date, and (B) the remainder of each such Eurodollar Loan shall
have an Interest Period determined as set forth above; and
(iv) no Interest Period applicable to a Eurodollar Loan shall
extend past the Termination Date.
"Investment" means, with respect to any Person, any loan, advance,
extension of credit, capital contribution to, investment in or purchase of the
stock or other securities of, or interests in, any other Person; provided, that
"Investment" shall not include current customer and trade accounts which are
payable in accordance with customary trade terms.
"Laws" means all applicable statutes, laws, ordinances, regulations,
orders, writs, injunctions, or decrees of any state, commonwealth, nation,
territory, possession, county, township, parish, municipality or Governmental
Authority.
"Letters of Credit" means letters of credit issued for the account of
Borrower pursuant to Section 2.1(b).
"Letter of Credit Exposure" of any Bank means such Bank's aggregate
participation in the unfunded portion and the funded but unreimbursed portion of
Letters of Credit outstanding at any time.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, financing statement, security interest or encumbrance of any kind in
respect of such asset. For the purposes of this Agreement, Borrower and its
Subsidiaries shall be deemed to own subject to a Lien any asset which is
acquired or held subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
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"Loan Papers" means this Agreement, the Notes, the Facility Guarantees,
each Security Agreement, the Subordination Agreement, all Mortgages now or at
any time hereafter delivered pursuant to Section 6.1, and all other
certificates, documents or instruments delivered in connection with this
Agreement, as the foregoing may be amended from time to time.
"Margin Regulations" means Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"Margin Stock" means "margin stock" as defined in Regulation U.
"Material Adverse Change" means any circumstance or event that has had
or would reasonably be expected to have (a) a material and adverse effect on the
financial condition, business operations, prospects, properties or assets of any
Credit Party, including, without limitation, any circumstances or event that has
had, or would reasonably be expected to have a material adverse effect on the
Apache Properties, (b) an adverse effect on (i) the validity and enforceability
of any Loan Paper, or (ii) the perfection or priority of any Lien purported to
be created thereby, or (c) a material adverse effect on the right or ability of
any Credit Party to fully, completely and timely pay and perform its obligations
under the Loan Papers.
"Material Agreement" means any material written or oral agreement,
contract, commitment, or understanding to which a Person is a party, by which
such Person is directly or indirectly bound, or to which any assets of such
Person may be subject, which involves the payment of $50,000 or more in any
Fiscal Year or goods or services with a value in any Fiscal Year of $50,000 or
more and is not cancelable by such Person upon notice of thirty (30) days or
less without liability for further payment other than nominal penalty.
"Material Gas Imbalance" means, with respect to all Gas Balancing
Agreements to which Borrower or any of its Subsidiaries is a party or by which
any Mineral Interest owned by Borrower or any of its Subsidiaries is bound, a
net gas imbalance to Borrower or any of its Subsidiaries in excess of $250,000.
"Maximum Lawful Rate" means, for each Bank, the maximum rate (or, if
the context so permits or requires, an amount calculated at such rate) of
interest which, at the time in question would not cause the interest charged on
the portion of the Loans owed to such Bank at such time to exceed the maximum
amount which such Bank would be allowed to contract for, charge, take, reserve,
or receive under applicable Laws after taking into account, to the extent
required by applicable Laws, any and all relevant payments or charges under the
Loan Papers. To the extent the Laws of the State of Texas are applicable for
purposes of determining the "Maximum Lawful Rate," such term shall mean the
"interest rate ceiling" from time to time in effect under Chapter 1D of the
Texas Credit Title, Revised Civil Statutes of Texas, 1925, as amended,
substituted for or restated, or, if permitted by applicable Law and effective
upon the giving of the notices required by such Chapter 1D (or effective upon
any other date otherwise specified by applicable Law), the "quarterly
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ceiling" or "annualized ceiling" from time to time in effect under such Chapter
1D, whichever Administrative Agent (with the approval of Required Banks) shall
elect to substitute for the "interest rate ceiling," and vice versa, each such
substitution to have the effect provided in such Chapter 1D, and Administrative
Agent (with the approval of Required Banks) shall be entitled to make such
election from time to time and one or more times and, without notice to
Borrower, to leave any such substitute rate in effect for subsequent periods in
accordance with such Chapter 1D.
"Mineral Interests" means rights, estates, titles, and interests in and
to oil and gas leases and any oil and gas interests, royalty and overriding
royalty interest, production payment, net profits interests, oil and gas fee
interests, and other rights therein, including, without limitation, any
reversionary or carried interests relating to the foregoing, together with
rights, titles, and interests created by or arising under the terms of any
unitization, communization, and pooling agreements or arrangements, and all
properties, rights and interests covered thereby, whether arising by contract,
by order, or by operation of Laws, which now or hereafter include all or any
part of the foregoing.
"Monthly Date" means the last day of each calendar month.
"Mortgages" means all mortgages, deeds of trusts, security agreements,
pledge agreements, collateral mortgages, collateral chattel mortgages, financing
statements and other documents, instruments and agreements evidencing, creating,
perfecting or otherwise establishing the Liens on Mineral Interests required by
Section 6.1 hereof. All Mortgages shall be in form and substance reasonably
satisfactory to Administrative Agent.
"NationsBank" means NationsBank, N.A., a national banking association.
"Net Revenues" means, for Borrower and its Consolidated Subsidiaries
for a month (a) the gross cash receipts of Borrower and its Consolidated
Subsidiaries for such month from whatever source derived, minus (b) the sum of
each of the following for such month (i) severance taxes payable in cash with
respect to Hydrocarbons produced from Borrower's and its Subsidiaries' Mineral
Interests during such month, (ii) lease operating expenses (including payments
under the Operating Agreement) paid by Borrower and its Subsidiaries in cash
during such month, and (iii) ad valorem tax expense accrual attributable to
Borrower and its Subsidiaries' Mineral Interests for such month.
"Note" means a promissory note of Borrower payable to the order of a
Bank, in substantially the form of Exhibit B hereto, in the amount of such
Bank's Commitment, evidencing the obligation of Borrower to repay to such Bank
the Loans made by such Bank, together with all modifications, extensions,
renewals and rearrangement thereof, and "Notes" means all of such Notes
collectively.
"Obligations" means all present and future indebtedness, obligations
and liabilities, and all renewals and extensions thereof, or any part thereof,
of any Credit Party to Administrative Agent or to any Bank or any Affiliate of
any Bank arising pursuant to the Loan Papers or pursuant to any Hedge
Transaction entered into with any Bank or any Affiliate of any Bank, and all
interest accrued thereon and costs, expenses, and attorneys' fees incurred in
the enforcement or collection thereof,
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regardless of whether such indebtedness, obligations and liabilities are direct,
indirect, fixed, contingent, liquidated, unliquidated, joint, several or joint
and several.
"Oil & Gas Hedge Transaction" means a Hedge Transaction pursuant to
which any Person hedges the price to be received by it for future production of
Hydrocarbons.
"Operating Agreement" means an Operating Agreement to be entered into
between Borrower and EXCO in the form of Exhibit C hereto.
"Outstanding Credit" means, on any date, the sum of (a) aggregate
outstanding principal balance of the Revolving Loan on such date, including the
amount of any Borrowing to be made on such date, and (b) the aggregate
outstanding Letter of Credit Exposure on such date, including Letter of Credit
Exposure attributable to Letters of Credit to be issued on such date.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Encumbrances" means with respect to any asset:
(i) Liens (if any) securing the Obligations in favor of Banks;
(ii) Minor defects in title which do not secure the payment of
money and otherwise have no material adverse effect on the
value or the operation of the subject property, and for the
purposes of this Agreement, a minor defect in title shall
include, but not be limited to, easements, rights-of-way,
servitudes, permits, surface leases and other similar rights
in respect of surface operations, and easements for pipelines,
streets, alleys, highways, telephone lines, power lines,
railways and other easements and rights-of-way, on, over or in
respect of any of the properties of Borrower or any of its
Subsidiaries that are customarily granted in the oil and gas
industry;
(iii) Inchoate statutory or operators' liens securing
obligations for labor, services, materials and supplies
furnished to Mineral Interests in the ordinary course of
business which are not delinquent (except to the extent
permitted by Section 9.7);
(iv) Mechanic's, materialmen's, warehouseman's, journeyman's
and carrier's liens and other similar liens arising by
operation of Law in the ordinary course of business which are
not delinquent (except to the extent permitted by Section
9.7);
(v) Liens for Taxes or assessments not yet due or not yet
delinquent, or, if delinquent, that are being contested in
good faith in the normal course of business by appropriate
action, as permitted by Section 9.7; and
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(vi) Lease burdens payable to third parties encumbering
Mineral Interests at the time such Mineral Interests are
acquired by Borrower or its Subsidiaries and which are
deducted in the calculation of discounted present value in the
Reserve Report including, without limitation, any royalty,
overriding royalty, net profits interest, production payment,
carried interest or reversionary working interest.
"Permitted Investments" means (a) readily marketable direct obligations
of the United States of America (or investments in mutual funds or similar funds
which invest solely in such obligations), (b) fully insured time deposits and
certificates of deposit with maturities of one year or less of any commercial
bank operating in the United States having capital and surplus in excess of
$500,000,000, and (c) commercial paper of a domestic issuer if at the time of
purchase such paper is rated in one of the two highest ratings categories of
Standard and Poor's Corporation or Moody's Investors Service.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a Government
Authority.
"Plan" means an employee benefit plan within the meaning of section
3(3) of ERISA, and any other similar plan, policy or arrangement, including an
employment contract, whether formal or informal and whether legally binding or
not, under which Borrower or an ERISA Affiliate of Borrower has any current or
future obligation or liability or under which any present or former employee of
Borrower or an ERISA Affiliate of Borrower, or such present or former employee's
dependents or beneficiaries, has any current or future right to benefits
resulting from the present or former employee's employment relationship with
Borrower or an ERISA Affiliate of Borrower.
"Proved Mineral Interests" means, collectively, Proved Producing
Mineral Interests, Proved Nonproducing Mineral Interests, and Proved Undeveloped
Mineral Interests.
"Proved Nonproducing Mineral Interests" means all Mineral Interests
which constitute proved developed nonproducing reserves.
"Proved Producing Mineral Interests" means all Mineral Interests which
constitute proved developed producing reserves.
"Proved Undeveloped Mineral Interests" means all Mineral Interests
which constitute proved undeveloped reserves.
"Quarterly Date" means the last day of each March, June, September and
December.
"Recognized Value" means, with respect to oil and gas properties, the
discounted present value of the estimated net cash flow to be realized from the
production of Hydrocarbons from such oil and gas properties as determined by
NationsBank for purposes of determining the portion of the
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Borrowing Base which it attributed to such oil and gas properties in connection
with the most recent Redetermination of the Borrowing Base as of the date
"Recognized Value" is being determined.
"Redetermination" means (i) any Scheduled Redetermination, or (ii) any
Special Redetermination.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Part 221, as in effect from time to time.
"Request for Borrowing" has the meaning set forth in Section 2.1(d).
"Required Banks" means Banks holding at least sixty-six and sixty-seven
one hundredths of one percent (66.67%) of the Total Commitment.
"Reserve Report" means an unsuperseded engineering analysis of the
Mineral Interests owned by Borrower, in form and substance reasonably acceptable
to Required Banks, prepared in accordance with customary and prudent practices
in the petroleum engineering industry and Financial Accounting Standards Board
Statement 69. Each Reserve Report required to be delivered by March 31 of each
year pursuant to Section 5.1 shall be prepared by the Approved Petroleum
Engineer. Each other Reserve Report shall be prepared by Borrower's in-house
engineering staff. Notwithstanding the foregoing, in connection with any Special
Redetermination requested by Borrower, the Reserve Report shall be in form and
scope mutually acceptable to Borrower and Required Banks. Until superseded the
Initial Reserve Report shall be considered a Reserve Report.
"Reserve Requirement" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks with respect to (i) any category
of liabilities which includes deposits by reference to which the Adjusted
Eurodollar Rate is to be determined, or (ii) any category of extensions of
credit or other assets which include Eurodollar Loans. The Adjusted Eurodollar
Rate shall be adjusted automatically on and as of the effective date of any
change in the Reserve Requirement.
"Restricted Payment" means any payment (whether in cash or other
property) by Borrower or any of its subsidiaries of any type, and whether or not
paid to an Affiliate, and including any payment of expenses, costs, liabilities,
obligations, Distributions or Debt, other than (a) payments of Approved Cap Ex,
(b) payments of the Obligations, (c) payments of lease operating expenses,
severance and ad valorem taxes, (d) payments of Distributions expressly
permitted by Section 10.2, (e) payments of general and administrative expenses
expressly permitted by Section 11.2, and (f) other payments in an amount not
exceeding $25,000 in any Fiscal Year.
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"Revolving Loan" means the revolving credit loan in an aggregate amount
outstanding at any time not to exceed the amount of the Total Commitment then in
effect less the amount of the Letter of Credit Exposure then outstanding to be
made by Banks to Borrower in accordance with Section 2.1 hereof. The Revolving
Loan may be comprised of the Base Rate Loan and one or more Eurodollar Loans as
Borrower may select in a Request for Borrowing or a Notice of Continuation or
Conversion.
"Schedule" means a "schedule" attached to this Agreement and
incorporated herein by reference, unless specifically indicated otherwise.
"Scheduled Redetermination" means any Redetermination of the Borrowing
Base pursuant to Section 5.2.
"Section" refers to a "section" or "subsection" of this Agreement
unless specifically indicated otherwise.
"Security Agreement" means a Security Agreement substantially in the
form of Exhibit D to be executed by Borrower and Subsidiaries of Borrower to
Administrative Agent pursuant to which Borrower and such Subsidiaries grant
first and prior Liens in substantially all of their personal property assets to
Administrative Agent for the ratable benefit of the Banks to secure the
Obligations.
"Sole Lead Arranger" means Banc of America Securities LLC in its
capacity as the Sole Lead Arranger for the credit facility provided hereunder
and any successor thereto.
"Special Redetermination" means any Redetermination of the Borrowing
Base pursuant to Section 5.3.
"Subordination Agreement" means a Subordination Agreement in the form
of Exhibit E hereto to be entered into by and between Administrative Agent and
EXCO and acknowledged by Venus pursuant to which the EXCO/Venus Note will be
subordinated to the Facility Guaranty to be executed by Venus.
"Subsidiary" means, for any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions (including that of a general partner) are at the time directly or
indirectly owned, collectively, by such Person and any Subsidiaries of such
Person. The term Subsidiary shall include Subsidiaries of Subsidiaries (and so
on).
"Taxes" means all taxes, assessments, filing or other fees, levies,
imposts, duties, deductions, withholdings, stamp taxes, capital transaction
taxes, foreign exchange taxes or other charges, or other charges of any nature
whatsoever, from time to time or at any time imposed by Law or any Governmental
Authority. "Tax" means any one of the foregoing.
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"Termination Date" means June 30, 2002.
"Title Review Limit" has the meaning assigned to such term in Section
6.3.
"Total Commitment" means the Commitments of all Banks in an initial
aggregate amount of $50,000,000 as such amount shall be reduced from time to
time pursuant to Section 2.6.
"Tribunal" means any state, commonwealth, federal, foreign, territorial
or other court or governmental body, subdivision, agency, department,
commission, board, bureau or instrumentality of a governmental body.
"Type" shall mean any type of Loan (i.e., the Base Rate Loan or
Eurodollar Loan).
"Unrestricted Advance Limit" means, on any date herein specified, the
remainder of (a) the cumulative total of all mandatory prepayments made on the
Loans pursuant to Section 2.5 (but excluding any portion of such payments which
are applied to reduce mandatory payments required pursuant to Section 2.4) and
all voluntary prepayments made on the Loans pursuant to Section 2.1(a) from and
after the Closing Date to and including such date, minus (b) the cumulative
total of all Unrestricted Borrowings made by Borrower from and after the Closing
Date to and including such date.
"Unrestricted Borrowings" means Borrowings made by Borrower hereunder
other than (a) a Borrowing made on the Closing Date in an amount up to
$14,500,000 to pay a portion of the purchase price for the Apache Acquisition
(including related transaction costs), and (b) Borrowings made on or after the
Closing Date in an aggregate amount not exceeding $4,800,000 utilized to pay
Approved Cap Ex.
"Venus" means Venus Exploration, Inc., a Delaware corporation.
"Venus Change of Control" will be deemed to have occurred if (a) as of
any date, more than fifty percent (50%) of the Persons comprising the Board of
Directors of Venus were not members of the Board of Directors of Venus one year
prior to such date, or (b) Eugene L. Ames, Jr. shall cease, for any reason, to
be actively employed on a full time basis as the Chief Executive Officer of
Venus.
SECTION 1.2 Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP,
applied on a basis consistent with the most recent audited consolidated
financial statements of Borrower delivered to Banks prior to the date hereof
except for changes concurred in by Borrower's independent certified public
accountants and which are disclosed to Administrative Agent on the next date on
which financial statements are required to be delivered to Banks pursuant to
Section 9.1.
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SECTION 1.3 Petroleum Terms. As used herein, the terms "proved
reserves," "proved developed reserves," "proved developed producing reserves,"
"proved developed nonproducing reserves," and "proved undeveloped reserves" have
the meaning given such terms from time to time and at the time in question by
the Society of Petroleum Engineers of the American Institute of Mining
Engineers.
SECTION 1.4 Money. Unless expressly stipulated otherwise, all
references herein to "dollars," "money," "funds," "payments," "prepayments" or
other similar financial or monetary terms, are references to currency of the
United States of America.
ARTICLE 2
THE CREDIT
SECTION 2.1 Commitments.
(a) Each Bank severally agrees, subject to Sections 2.1(c),
2.1(d), 7.1 and 7.2 and the other terms and conditions set forth in this
Agreement, to lend to Borrower from time to time prior to the Termination Date
amounts not to exceed in the aggregate at any one time outstanding, the amount
of such Bank's Commitment reduced by an amount equal to such Bank's Letter of
Credit Exposure. Each Borrowing shall be in an aggregate principal amount of
$500,000 or any larger integral multiple of $100,000 (except that any Base Rate
Borrowing may be in an amount equal to the Availability at such time), and (ii)
shall be made from Banks ratably in accordance with their respective Commitment
Percentages. Subject to the foregoing limitations and the other provisions of
this Agreement, prior to the Termination Date Borrower may borrow under this
Section 2.1(a), repay amounts borrowed and request new Borrowings to be made
under this Section 2.1.
(b) Administrative Agent will, from time to time prior to the
Termination Date, upon request by Borrower, issue Letters of Credit for the
account of Borrower, so long as (i) the sum of (A) the total Letter of Credit
Exposure then existing, and (B) the amount of the requested Letter of Credit
does not exceed $200,000, and (ii) Borrower would be entitled to a Borrowing
under Sections 2.1(a), 2.1(c) and 2.1(d) in the amount of the requested Letter
of Credit. Not less than three (3) Domestic Business Days prior to the requested
date of issuance of any such Letter of Credit, Borrower shall execute and
deliver to Administrative Agent, Administrative Agent's customary letter of
credit application. Each Letter of Credit shall be in the minimum amount of
$10,000 and shall be in form and substance acceptable to Administrative Agent.
No Letter of Credit shall have an expiration date later than the earlier of (i)
the Termination Date, or (ii) one (1) year from the date of issuance. Upon the
date of issuance of a Letter of Credit, Administrative Agent shall be deemed to
have sold to each other Bank, and each other Bank shall be deemed to have
unconditionally and irrevocably purchased from Administrative Agent, a
non-recourse participation in the related Letter of Credit and Letter of Credit
Exposure equal to such Bank's Commitment Percentage of such Letter of Credit and
Letter of Credit Exposure. Upon request of any Bank, but not less often than
quarterly,
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Administrative Agent shall provide notice to each Bank by telephone,
teletransmission or telex setting forth each Letter of Credit issued and
outstanding pursuant to the terms hereof and specifying the beneficiary and
expiration date of each such Letter of Credit, each Bank's percentage of each
such Letter of Credit and the actual dollar amount of each Bank's participation
held by Administrative Agent thereof for such Bank's account and risk.
Immediately upon the occurrence of an Event of Default Borrower shall
deposit with Administrative Agent cash in such amounts as Administrative Agent
may request, up to a maximum amount equal to the aggregate existing Letter of
Credit Exposure of all Banks. Any amounts so deposited shall be held by
Administrative Agent for the ratable benefit of all Banks as security for the
outstanding Letter of Credit Exposure and the other Obligations, and Borrower
will, in connection therewith, execute and deliver such security agreements in
form and substance satisfactory to Administrative Agent which it may, in its
discretion, require. As drafts or demands for payment are presented under any
Letter of Credit, Administrative Agent shall apply such cash to satisfy such
drafts or demands. When all Letters of Credit have expired and the Obligations
have been repaid in full (and no Bank has any obligation to lend or issue
Letters of Credit hereunder) or such Event of Default has been cured to the
satisfaction of Required Banks, Administrative Agent shall release to Borrower
any remaining cash deposited under this Section 2.1(b). Whenever Borrower is
required to make deposits under this Section 2.1(b) and fails to do so on the
day such deposit is due, Administrative Agent or any Bank may, without notice to
Borrower, make such deposit (whether by application of proceeds of any
collateral for the Obligations, by transfers from other accounts maintained with
any Bank or otherwise) using any funds then available to any Bank of any Credit
Party, any guarantor, or any other party liable for repayment of the
Obligations.
Notwithstanding anything to the contrary contained herein, Borrower
hereby agrees to reimburse Administrative Agent immediately upon demand by
Administrative Agent, and in immediately available funds, for any payment or
disbursement made by Administrative Agent under any Letter of Credit issued by
it. Payment shall be made by Borrower with interest on the amount so paid or
disbursed by Administrative Agent from and including the date payment is made
under any Letter of Credit to and including the date of payment, at the lesser
of (i) the Maximum Lawful Rate, or (ii) the sum of (a) two percent (2%), plus
(b) the Base Rate in effect from day to day. The obligations of Borrower under
this paragraph will continue until all Letters of Credit have expired and all
reimbursement obligations with respect thereto have been paid in full by
Borrower and until all other Obligations shall have been paid in full.
Borrower shall be obligated to reimburse Administrative Agent upon
demand for all amounts paid under Letters of Credit as set forth in the
immediately preceding paragraph hereof; provided, however, if Borrower for any
reason fails to reimburse Administrative Agent in full upon demand, Banks shall
reimburse Administrative Agent in accordance with each Banks' Commitment
Percentage for amounts due and unpaid from Borrower as set forth hereinbelow;
provided, however, that no such reimbursement made by Banks shall discharge
Borrower's obligations to reimburse Administrative Agent. All reimbursement
amounts payable by any Bank under this Section 2.1(b) shall include interest
thereon at the Federal Funds Rate, from the date of the payment of such amounts
by
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Administrative Agent to the date of reimbursement by such Bank. No Bank shall be
liable for the performance or nonperformance of the obligations of any other
Bank under this paragraph. The reimbursement obligations of Banks under this
paragraph shall continue after the Termination Date and shall survive
termination of this Agreement and the other Loan Papers.
Borrower shall indemnify and hold Administrative Agent and each Bank,
and their respective officers, directors, representatives and employees harmless
from loss for any claim, demand or liability which may be asserted against any
or such indemnified party in connection with actions taken under Letters of
Credit or in connection therewith (including losses resulting from the
negligence of any or such indemnified party), and shall pay each indemnified
party for reasonable fees of attorneys and legal costs paid or incurred by each
indemnified party in connection with any matter related to Letters of Credit,
except for losses and liabilities incurred as a direct result of the gross
negligence or wilful misconduct of such indemnified party, IT BEING THE EXPRESS
INTENTION OF THE PARTIES THAT EACH INDEMNIFIED PARTY SHALL BE INDEMNIFIED FOR
THE CONSEQUENCES OF ITS OWN ORDINARY NEGLIGENCE. If Borrower for any reason
fails to indemnify or pay such indemnified party as set forth herein in full,
Banks shall indemnify and pay such indemnified party upon demand, in accordance
with each Bank's Commitment Percentage of such amounts due and unpaid from
Borrower. The provisions of this paragraph shall survive the termination of this
Agreement.
Administrative Agent does not make any representation or warranty, and
does not assume any responsibility with respect to the validity, legality,
sufficiency or enforceability of any letter of credit application executed and
delivered in connection with any Letter of Credit issued hereunder or any
document relative thereto or to the collectability thereunder. Administrative
Agent does not assume any responsibility for the financial condition of Borrower
or for the performance of any obligation of Borrower. Administrative Agent may
use its discretion with respect to exercising or refraining from exercising any
rights, or taking or refraining from taking any action which may be vested in it
or which it may be entitled to take or assert with respect to any Letter of
Credit or any Letter of Credit application. FURTHERMORE, EXCEPT AS SET FORTH
HEREIN, ADMINISTRATIVE AGENT SHALL BE UNDER NO LIABILITY TO ANY BANK, WITH
RESPECT TO ANYTHING ADMINISTRATIVE AGENT MAY DO OR REFRAIN FROM DOING IN THE
EXERCISE OF ITS JUDGMENT, THE SOLE LIABILITY AND RESPONSIBILITY OF
ADMINISTRATIVE AGENT BEING TO HANDLE EACH BANK'S SHARE ON AS FAVORABLE A BASIS
AS ADMINISTRATIVE AGENT HANDLES ITS OWN SHARE. ADMINISTRATIVE AGENT SHALL NOT
HAVE ANY DUTIES OR RESPONSIBILITIES EXCEPT THOSE EXPRESSLY SET FORTH HEREIN AND
THOSE DUTIES AND LIABILITIES SHALL BE SUBJECT TO THE LIMITATIONS AND
QUALIFICATIONS SET FORTH HEREIN. FURTHERMORE, NEITHER ADMINISTRATIVE AGENT, NOR
ANY OF ITS DIRECTORS, OFFICERS, OR EMPLOYEES SHALL BE LIABLE FOR ANY ACTION
TAKEN OR OMITTED (WHETHER OR NOT SUCH ACTION TAKEN OR OMITTED IS EXPRESSLY SET
FORTH HEREIN) UNDER OR IN CONNECTION HEREWITH OR UNDER ANY OTHER INSTRUMENT OR
DOCUMENT IN CONNECTION HEREWITH, EXCEPT FOR GROSS NEGLIGENCE OR WILLFUL
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MISCONDUCT. Administrative Agent shall not incur any liability to any Bank,
Borrower, or any Affiliate of any Bank, or Borrower, in acting upon any notice,
document, order, consent, certificate, warrant or other instrument reasonably
believed by Administrative Agent to be genuine or authentic and to be signed by
the proper party.
(c) No Bank will be obligated to lend to Borrower hereunder or
incur Letter of Credit Exposure, and Borrower shall not be entitled to borrow
hereunder or obtain Letters of Credit hereunder at any time that a Borrowing
Base Deficiency exists or in an amount which would cause the Outstanding Credit
to exceed the Borrowing Base then in effect. Nothing in this Section 2.1(c)
shall be deemed to limit any Bank's obligation to reimburse Administrative Agent
with respect to its participation in Letters of Credit as a result of the
drawing under any Letter of Credit pursuant to Section 2.1(c).
(d) proceeds of Borrowings hereunder and Letters of Credit
issued hereunder shall be used only (a) to pay up to $14,500,000 of the purchase
price for the Apache Acquisition (including related transaction costs), (b) to
pay Approved Cap Ex in an amount up to $4,800,000, and (c) for other general
corporate purposes; provided, that no Borrowing shall be made for such other
general corporate purposes in an amount greater than the Unrestricted Advance
Limit in effect immediately prior to giving effect to such Borrowing unless and
to the extent that such Borrowing is made from Incremental Availability. Letters
of Credit may be used for general corporate purposes. Notwithstanding the
foregoing, Borrowing shall be made or Letter of Credit issued for any purpose
prohibited by Section 10.7 hereof.
(e) In order to request any Borrowing under this Section 2.1,
Borrower shall hand deliver, telex or telecopy to Administrative Agent a duly
completed Request for Borrowing (herein so called) prior to 12:00 noon (Dallas,
Texas time), (i) at least one (1) Domestic Business Day before the Borrowing
Date specified for a proposed Base Rate Borrowing, and (ii) at least three (3)
Eurodollar Business Days before the Borrowing Date of a proposed Eurodollar
Borrowing. Each such Request for Borrowing shall be substantially in the form of
Exhibit F hereto, and shall specify:
(i) the Borrowing Date of such Borrowing, which shall
be a Domestic Business Day in the case of a Base Rate
Borrowing or a Eurodollar Business Day in the case of
a Eurodollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether such Borrowing is to be a Base Rate
Borrowing or a Eurodollar Borrowing;
(iv) in the case of a Eurodollar Borrowing, the
duration of the Interest Period applicable thereto,
subject to the provisions of the definition of
Interest Period; and
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(v) The use of proceeds of such Borrowing.
Upon receipt of a Request for Borrowing, Administrative Agent shall promptly
notify each Bank of the contents thereof and the amount of the Borrowing to be
loaned by such Bank pursuant thereto, and such Request for Borrowing shall not
thereafter be revocable by Borrower. Not later than 12:00 noon (Dallas, Texas
time) on the date of each Borrowing, each Bank shall make available its
Commitment Percentage of such Borrowing, in Federal or other funds immediately
available in Dallas, Texas to Administrative Agent at its address set forth on
Schedule 1 hereto. Notwithstanding the foregoing, if Borrower delivers to
Administrative Agent a Request for Borrowing prior to 10:00 a.m. (Dallas, Texas
time) on a Domestic Business Day requesting a Base Rate Borrowing on such day,
each Bank shall use its best efforts to make available to Administrative Agent
its Commitment Percentage of such Borrowing by 1:00 p.m. (Dallas, Texas time) on
the same day. Unless Administrative Agent determines that any applicable
condition specified in Section 7.2 has not been satisfied, Administrative Agent
will make the funds so received from Banks available to Borrower at
Administrative Agent's aforesaid address.
(f) In order to request any Letter of Credit hereunder,
Borrower shall hand deliver, telex or telecopy to Administrative Agent a duly
completed Request for Letter of Credit (herein so called) prior to 12:00 noon
(Dallas, Texas time) at least three (3) Domestic Business Days before the date
specified for issuance of such Letter of Credit. Each Request for Letter of
Credit shall be substantially in the form of Exhibit G hereto, shall be
accompanied by Administrative Agent's duly completed and executed letter of
credit application and agreement and shall specify:
(i) the requested date for issuance of such Letter of Credit;
(ii) the terms of such requested Letter of Credit, including
the name and address of the beneficiary, the stated amount,
the expiration date and the conditions under which drafts
under such Letter of Credit are to be available; and
(iii) the purpose of such Letter of Credit.
Upon receipt of a Request for Letter of Credit, Administrative Agent shall
promptly notify each Bank of the contents thereof, including the amount of the
requested Letter of Credit, and such Request for Letter of Credit shall not
thereafter be revocable by Borrower. No later than 12:00 noon (Dallas, Texas
time) on the date each Letter of Credit is requested, unless Administrative
Agent determines that any applicable condition precedent set forth in Section
7.2 hereof has not been satisfied, Administrative Agent will issue and deliver
such Letter of Credit pursuant to the instructions of Borrower.
SECTION 2.2 Notes. Each Bank's Commitment Percentage of the Revolving
Loan shall be evidenced by a single Note payable to the order of such Bank in an
amount equal to such Bank's Commitment.
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SECTION 2.3 Interest Rates; Payments.
(a) The principal amount of the Base Rate Loan outstanding
from day to day shall bear interest at a rate per annum equal to the Base Rate
in effect from day to day; provided that in no event shall the rate charged
hereunder or under the Notes exceed the Maximum Lawful Rate. Interest on the
principal of the Base Rate Loan shall be payable as it accrues pursuant to
Section 2.5 and on each Quarterly Date, and on the Termination Date.
(b) The principal amount of each Eurodollar Loan shall bear
interest for the Interest Period applicable thereto at a rate per annum equal to
the sum of (i) the Applicable Margin, plus (ii) the applicable Adjusted
Eurodollar Rate; provided that in no event shall the rate charged hereunder or
under the Notes exceed the Maximum Lawful Rate. Interest on any portion of the
principal of each Eurodollar Loan shall be payable as it accrues pursuant to
Section 2.5 and, in the case of accrued interest which is not fully paid
pursuant to Section 2.5 and which (i) accrues on the outstanding principal
balance of a Eurodollar Loan subject to an Interest Period of one (1), two (2)
or three (3) months shall be payable on the last day of the Interest Period
applicable thereto, and (ii) on the outstanding principal balance of any Loan
having an Interest Period of more than three (3) months shall be payable on the
last day of the Interest Period applicable thereto and on each Quarterly Date.
(c) So long as no Default or Event of Default shall be
continuing, subject to the provisions of this Section 2.3, Borrower shall have
the option of having all or any portion of the principal outstanding under the
Revolving Loan be a Base Rate Loan or one (1) or more Eurodollar Loans, which
shall bear interest at rates determined by reference to the Base Rate and the
Adjusted Eurodollar Rate, respectively; provided, that each Eurodollar Loan
shall be in a minimum amount of $500,000 and shall be in an amount which is an
integral multiple of $100,000. Prior to the termination of each Interest Period
with respect to each Eurodollar Loan, Borrower shall give written notice (a
"Notice of Continuation or Conversion") in the form of Exhibit H attached hereto
to Administrative Agent of the Type of Loan which shall be applicable to the
principal of such Eurodollar Loan upon the expiration of such Interest Period.
Such Notice of Continuation or Conversion shall be given to Administrative Agent
at least one (1) Domestic Business Day, in the case of a Base Rate Loan
selection and three (3) Eurodollar Business Days, in the case of a Eurodollar
Loan selection, prior to the termination of the Interest Period then expiring.
If Borrower shall specify a Eurodollar Loan, such Notice of Continuation or
Conversion shall also specify the length of the succeeding Interest Period
(subject to the definition of such term) selected by Borrower. Each Notice of
Continuation or Conversion shall be irrevocable and effective upon notification
thereof to Administrative Agent. If the required Notice of Continuation or
Conversion shall not have been timely received by Administrative Agent, Borrower
shall be deemed to have elected that the principal of the Eurodollar Loan
subject to the Interest Period then expiring be a part of the Base Rate Loan
upon the expiration of such Interest Period and Borrower will be deemed to have
given Administrative Agent notice of such election. Subject to the limitations
set forth in this Section 2.3(c) on the amount and number of Eurodollar Loans,
Borrower shall have the right to convert (a "Conversion") all or any part of the
Base Rate Loan to a Eurodollar Loan by giving Administrative
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Agent a Notice of Continuation or Conversion of such election at least three (3)
Eurodollar Business Days prior to the date on which Borrower elects to make such
conversion (a "Conversion Date"). The Conversion Date selected by Borrower shall
be a Eurodollar Business Day. Notwithstanding anything in this Section 2.3 to
the contrary, no portion of the principal of the Base Rate Loan may be Converted
to a Eurodollar Loan and no Eurodollar Loan may be Continued as such when any
Default or Event of Default has occurred and is continuing, but each such
Eurodollar Loan shall be automatically Converted to the Base Rate Loan on the
last day of each applicable Interest Period. Borrower shall not be permitted to
have more than four (4) Eurodollar Loans in effect at any time.
(d) Notwithstanding anything to the contrary set forth in
Section 2.3(a) or 2.3(b) above, all overdue principal of the Obligations and, to
the extent permitted by law, overdue interest, shall bear interest from the date
due, payable on demand, for each day until paid at a rate per annum equal to the
lesser of (a) the sum of (i) two percent (2%), plus (ii) the Base Rate in effect
from day to day, and (b) the Maximum Lawful Rate.
(e) Administrative Agent shall determine each interest rate
applicable to the Revolving Loan in accordance with the terms hereof.
Administrative Agent shall promptly notify Borrower and Banks by telex, telecopy
or cable of each rate of interest so determined, and its determination thereof
shall be conclusive in the absence of manifest error.
(f) Notwithstanding the foregoing, if at any time the rate of
interest calculated with reference to the Base Rate or the Eurodollar Rate
hereunder (the "contract rate") is limited to the Maximum Lawful Rate, any
subsequent reductions in the contract rate shall not, to the extent permitted by
law, reduce the rate of interest on the affected Loan below the Maximum Lawful
Rate until the total amount of interest accrued equals the amount of interest
which would have accrued if the contract rate had at all times been in effect.
In the event that at maturity (stated or by acceleration), or at final payment
of any Note, the total amount of interest paid or accrued on such Note is less
than the amount of interest which would have accrued if the contract rate had at
all times been in effect with respect thereto, then at such time, to the extent
permitted by law, Borrower shall pay to the holder of such Note an amount equal
to the difference between (i) the lesser of the amount of interest which would
have accrued if the contract rate had at all times been in effect and the amount
of interest which would have accrued if the Maximum Lawful Rate had at all times
been in effect, and (ii) the amount of interest actually paid on such Note.
(g) Interest payable hereunder computed by reference to the
Eurodollar Rate shall be computed based on the number of actual days elapsed
assuming that each calendar year consisted of 360 days. Interest payable
hereunder computed by reference to the Base Rate shall be computed based on the
actual number of days elapsed assuming that each calendar year consisted of 365
days.
SECTION 2.4 Mandatory Prepayments During Borrowing Base Deficiency. In
the event a Borrowing Base Deficiency exists after giving effect to any
Redetermination, Borrower shall take the action specified in either clause (a),
(b) or (c) following, as specified by Administrative Agent in its sole
discretion in a written notice to Borrower: (a) eliminate such Borrowing Base
Deficiency by
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making a single mandatory prepayment of principal on the Revolving Loan in an
amount equal to the entire amount of such Borrowing Base Deficiency on the first
Monthly Date following the date on which such Borrowing Base Deficiency is
determined to exist, (b) eliminate such Borrowing Base Deficiency by making six
(6) consecutive mandatory prepayments of principal on the Revolving Loan each of
which shall be in the amount of one sixth (1/6th) of the amount of such
Borrowing Base Deficiency commencing on the first Monthly Date following the
date on which such Borrowing Base Deficiency is determined to exist and
continuing on each Monthly Date thereafter, or (c) eliminate such Borrowing Base
Deficiency by submitting additional Mineral Interests to Banks on the first
Monthly Date following the date on which such Borrowing Base Deficiency is
determined to exist for evaluation as Borrowing Base Properties which Banks, in
their sole discretion, determine have a value sufficient to increase the
Borrowing Base by at least the amount of the Borrowing Base Deficiency. If a
Borrowing Base Deficiency cannot be eliminated pursuant to this Section 2.4 by
prepayment of the Revolving Loan in full (as a result of outstanding Letter of
Credit Exposure), on each Monthly Date, Borrower shall also deposit cash with
Administrative Agent, to be held by Administrative Agent to secure outstanding
Letter of Credit Exposure in the manner contemplated by Section 2.1(b), in an
amount at least equal to one sixth (1/6th) of the balance of such Borrowing Base
Deficiency (i.e., one-sixth of the difference between the Borrowing Base
Deficiency and the remaining outstanding principal of the Revolving Loan on the
date such Borrowing Base Deficiency is first determined to occur).
SECTION 2.5 Mandatory Prepayments from Cash Flow. Commencing on
September 25, 1999 and continuing on the 20th day of each month thereafter until
the Commitments are terminated and the Obligations are paid in full, Borrower
shall make a mandatory prepayment on the Revolving Loan in an amount equal to
fifty percent (50%) of Borrower's Net Revenues for the immediately preceding
calendar month. Each such payment shall be applied first to accrued but unpaid
interest and then to principal. In the event mandatory prepayments are required
under this Section 2.5 at any time when mandatory prepayments are required under
Section 2.4, the mandatory prepayments required by this Section 2.5 shall be
applied to reduce the prepayments Borrower is required to make pursuant to
Section 2.4 in direct order of maturity.
SECTION 2.6 Voluntary Reduction of Commitments. Borrower may, by notice
to Administrative Agent five (5) Domestic Business Days prior to the effective
date of any such reduction, reduce the Total Commitment (and thereby reduce the
Commitment of each Bank ratably) in amounts not less than $5,000,000 and in an
amount which is an integral multiple of $1,000,000. On the effective date of any
such reduction, Borrower shall, to the extent required as a result of such
reduction, make a principal payment on the Revolving Loan in an amount
sufficient to cause the principal balance of the Revolving Loan to be equal to
or less than the Total Commitment as thereby reduced. Notwithstanding the
foregoing, Borrower shall not be permitted to voluntarily reduce the Total
Commitment to an amount less than the aggregate Letter of Credit Exposure of all
Banks.
SECTION 2.7 Termination of Commitments; Final Maturity of Revolving
Loan. The Total Commitment (and the Commitment of each Bank) shall terminate,
and the entire outstanding principal
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balance of the Revolving Loan, all interest accrued thereon, all accrued but
unpaid fees hereunder and all other outstanding Obligations shall be due and
payable in full on the Termination Date.
SECTION 2.8 Unused Commitment Fee. On the Termination Date, on each
Quarterly Date prior to the Termination Date, and, in the event the Commitments
are terminated in their entirety prior to the Termination Date, on the date of
such termination, Borrower shall pay to Administrative Agent, for the ratable
benefit of each Bank, a commitment fee equal to .375% (computed on a per annum
basis on the basis of actual days elapsed and as if each calendar year consisted
of 365 days) of the average daily Availability for the Fiscal Quarter (or
portion thereof) ending on the date such payment is due.
SECTION 2.9 Borrowing Base Increase Fee. Simultaneously with each
increase in the Borrowing Base, Borrower shall pay to Administrative Agent for
the ratable benefit of each Bank, a borrowing base increase fee in an amount to
be mutually agreed upon by Borrower and Administrative Agent in connection with
such increase.
SECTION 2.10 Letter of Credit Fee.
(a) Borrower shall pay to Administrative Agent for its own
account a fee on the daily average amount of all Letter of Credit Exposure
computed at a per annum rate for each day of .125% of such daily average Letter
of Credit Exposure. Such fee shall be payable in arrears on each Quarterly Date.
Notwithstanding the foregoing, no fee shall accrue or be payable pursuant to
this Section 2.10(a) at any time that there is only one Bank which is a party to
this Credit Agreement.
(b) Borrower shall pay to Administrative Agent for the ratable
benefit of each Bank a fee on the daily average amount of all Letter of Credit
Exposure computed at a per annum rate for each day equal to the Applicable
Margin in effect for Eurodollar Loans on such day. Such fee shall be payable
quarterly in arrears on each Quarterly Date.
SECTION 2.11 Agency and other Fees. Borrower shall pay to
Administrative Agent and its Affiliates such other reasonable fees and amounts
as Borrower shall be required to pay to Administrative Agent and its Affiliates
from time to time pursuant to any separate agreement between Borrower and
Administrative Agent or such Affiliates. Such fees and other amounts shall be
retained by Administrative Agent and its Affiliates, and no Bank (other than
Administrative Agent) shall have any interest therein.
SECTION 2.12 Closing Fee. Borrower shall pay to Administrative Agent,
for the ratable benefit of each Bank, a non-refundable closing fee on the
Closing Date in the amount of $48,750.
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ARTICLE 3
GENERAL PROVISIONS
SECTION 3.1 Delivery and Endorsement of Notes. Simultaneously with the
execution of this Agreement, Administrative Agent shall deliver to each Bank the
Note payable to such Bank. Each Bank may endorse (and prior to any transfer of
its Note shall endorse) on the schedules attached and forming a part thereof
appropriate notations to evidence the date and amount of its Commitment
Percentage of each Borrowing and type of each Loan made by it, the Interest
Period applicable thereto, and the date and amount of each payment of principal
made by Borrower with respect thereto; provided that the failure by any Bank to
so endorse its Note shall not affect the liability of Borrower for the repayment
of all amounts outstanding under such Note together with interest thereon. Each
Bank is hereby irrevocably authorized by Borrower to endorse its Note and to
attach to and make a part of any Note a continuation of any such schedule as
required.
SECTION 3.2 General Provisions as to Payments.
(a) Borrower shall make each payment of principal of, and
interest on, the Revolving Loan and all fees payable hereunder shall be paid not
later than 12:00 noon (Dallas, Texas time) on the date when due, in Federal or
other funds immediately available in Dallas, Texas, to Administrative Agent at
its address set forth on Schedule 1 hereto. Administrative Agent will promptly
(and if such payment is received by Administrative Agent by 10:00 a.m. (Dallas,
Texas time) and otherwise if reasonably possible, on the same Domestic Business
Day) distribute to each Bank its Commitment Percentage of each such payment
received by Administrative Agent for the account of Banks. Whenever any payment
of (a) principal of, or interest on, any portion of the Base Rate Loan, or (b)
fees shall be due on a day which is not a Domestic Business Day, the date for
payment thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, any Eurodollar Loan shall
be due on a day which is not a Eurodollar Business Day, the date for payment
thereof shall be extended to the next succeeding Eurodollar Business Day
(subject to the definition of Interest Period). If the date for any payment of
principal is extended by operation of Law or otherwise, interest thereon shall
be payable for such extended time. Borrower hereby authorizes Administrative
Agent to charge from time to time against Borrower's accounts with
Administrative Agent any amount then due.
(b) Prior to the occurrence of an Event of Default, all
principal payments received by Banks shall be applied first to Eurodollar Loans
outstanding with Interest Periods ending on the date of such payment, then to
the Base Rate Loan, and then to Eurodollar Loans, next maturing until such
principal payment is fully applied.
(c) After the occurrence of an Event of Default, all amounts
collected or received by Administrative Agent or any Bank shall be applied first
to the payment of all proper costs incurred by Administrative Agent in
connection with the collection thereof (including reasonable expenses and
disbursements of Administrative Agent), second to the payment of all proper
costs incurred by Banks
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in connection with the collection thereof (including reasonable expenses and
disbursements of Banks), third to the reimbursement of any advances made by
Banks to effect performance of any unperformed covenants of Borrower or any of
its Subsidiaries under any of the Loan Papers, fourth to the payment of any
unpaid fees required pursuant to Section 2.11, fifth to the payment of any
unpaid fees required pursuant to Sections 2.8, 2.9, and 2.10, sixth, to payment
to each Bank of its Commitment Percentage of the outstanding principal of the
Revolving Loan and accrued but unpaid interest thereon, and seventh to establish
the deposits required in Section 2.1(b). All payments received by a Bank after
the occurrence of an Event of Default for application to the principal of the
Revolving Loan shall be applied by such Bank in the manner provided in Section
3.2(b).
ARTICLE 4
CHANGE IN CIRCUMSTANCES
SECTION 4.1 Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable
Law, rule, or regulation, or any change in any applicable Law, rule, or
regulation, or any change in the interpretation or administration thereof by any
Governmental Authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of Law) of any such Governmental Authority, central bank, or
comparable agency:
(i) shall subject such Bank (or its Applicable Lending Office)
to any Tax, duty, or other charge with respect to any
Eurodollar Loans, its Note, or its obligation to make
Eurodollar Loans, or change the basis of taxation of any
amounts payable to such Bank (or its Applicable Lending
Office) under this Agreement or its Note in respect of any
Eurodollar Loans (other than Taxes imposed on the overall net
income of such Bank by the jurisdiction in which such Bank has
its principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other
than the Reserve Requirement utilized in the determination of
the Adjusted Eurodollar Rate) relating to any extensions of
credit or other assets of, or any deposits with or other
liabilities or commitments of, such Bank (or its Applicable
Lending Office), including the Commitment of such Bank
hereunder; or
(iii) shall impose on such Bank (or its Applicable Lending
Office) or on the London interbank market any other condition
affecting this Agreement or its Note or any of such extensions
of credit or liabilities or commitments;
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and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making, Converting into, Continuing, or
maintaining any Eurodollar Loans or to reduce any sum received or receivable by
such Bank (or its Applicable Lending Office) under this Agreement or its Note
with respect to any Eurodollar Loans, then Borrower shall pay to such Bank on
demand such amount or amounts as will compensate such Bank for such increased
cost or reduction. If any Bank requests compensation by Borrower under this
Section 4.1(a), Borrower may, by notice to such Bank (with a copy to
Administrative Agent), suspend the obligation of such Bank to make or Continue
Eurodollar Loans, or to Convert all or part of the Base Rate Loan owing to such
Bank to Eurodollar Loans, until the event or condition giving rise to such
request ceases to be in effect (in which case the provisions of Section 4.4
shall be applicable); provided that such suspension shall not affect the right
of such Bank to receive the compensation so requested.
(b) If, after the date hereof, any Bank shall have determined
that the adoption of any applicable Law, rule, or regulation regarding capital
adequacy or any change therein or in the interpretation or administration
thereof by any Governmental Authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the force of Law) of
any such Governmental Authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such Bank
or any corporation controlling such Bank as a consequence of such Bank's
obligations hereunder to a level below that which such Bank or such corporation
could have achieved but for such adoption, change, request, or directive (taking
into consideration its policies with respect to capital adequacy), then from
time to time upon demand Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank for such reduction.
(c) Each Bank shall promptly notify Borrower and
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Bank to compensation pursuant to this
Section 4.1 and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Bank, be otherwise disadvantageous to it.
Any Bank claiming compensation under this Section 4.1 shall furnish to Borrower
and Administrative Agent a statement setting forth the additional amount or
amounts to be paid to it hereunder which shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
SECTION 4.2 Limitation on Types of Loans. If on or prior to the first
day of any Interest Period for any Eurodollar Loan:
(a) Administrative Agent determines (which determination shall
be conclusive) that by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period; or
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(b) Required Banks determine (which determination shall be
conclusive) and notify Administrative Agent that the Adjusted Eurodollar Rate
will not adequately and fairly reflect the cost to Banks of funding Eurodollar
Loans for such Interest Period;
then Administrative Agent shall give Borrower prompt notice thereof specifying
the relevant amounts or periods, and so long as such condition remains in
effect, Banks shall be under no obligation to make additional Eurodollar Loans,
Continue Eurodollar Loans, or to Convert all or any part of the Base Rate Loan
into Eurodollar Loans and Borrower shall, on the last day(s) of the then current
Interest Period(s) for the outstanding Eurodollar Loans, either prepay such
Eurodollar Loans or Convert such Eurodollar Loans into the Base Rate Loan in
accordance with the terms of this Agreement.
SECTION 4.3 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to make, maintain, or fund Eurodollar Loans hereunder, then such
Bank shall promptly notify Borrower thereof and such Bank's obligation to make
or Continue Eurodollar Loans and to Convert all or any part of the Base Rate
Loan into Eurodollar Loans shall be suspended until such time as such Bank may
again make, maintain, and fund Eurodollar Loans (in which case the provisions of
Section 2.7 shall be applicable).
SECTION 4.4 Treatment of Affected Loans. If the obligation of any Bank
to make a Eurodollar Loan or to Continue Eurodollar Loans, or to Convert all or
any part of the Base Rate Loan into Eurodollar Loans shall be suspended pursuant
to Section 4.1 or hereof, such Bank's Eurodollar Loans shall be automatically
Converted into the Base Rate Loan on the last day(s) of the then current
Interest Period(s) for such Eurodollar Loans (or, in the case of a Conversion
required by Section 4.3 hereof, on such earlier date as such Bank may specify to
Borrower with a copy to Administrative Agent) and, unless and until such Bank
gives notice as provided below that the circumstances specified in Section 4.1
or 4.3 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Bank's Eurodollar Loans have been
so Converted, all payments and prepayments of principal that would otherwise be
applied to such Bank's Eurodollar Loans shall be applied instead to its
Commitment Percentage of the Base Rate Loan; and
(b) all Loans that would otherwise be made or Continued by
such Bank as Eurodollar Loans shall be made or Continued instead as a part of
the Base Rate Loan, and all or any part of the Base Rate Loan held by such Bank
that would otherwise be Converted into Eurodollar Loans shall remain as part of
the Base Rate Loan.
If such Bank gives notice to Borrower (with a copy to Administrative Agent) that
the circumstances specified in Section 4.1 or 4.3 hereof that gave rise to the
Conversion of such Bank's Eurodollar Loans pursuant to this Section 4.4 no
longer exist (which such Bank agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans made by other Banks are
outstanding, such Bank's portion of the Base Rate Loan shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Eurodollar Loans, to the extent
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necessary so that, after giving effect thereto, all Eurodollar Loans held by
Banks holding Eurodollar Loans are held pro rata (as to principal amounts and
Interest Periods) in accordance with their respective Commitments.
SECTION 4.5 Compensation. Upon the request of any Bank, Borrower shall
pay to such Bank such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost, or expense
incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar
Loan for any reason (including, without limitation, the acceleration of the
Loans pursuant to Section 12.1) on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Article 7 to be
satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Loan on the date
for such Borrowing, Conversion, Continuation, or prepayment specified in the
relevant Request for Borrowing, or notice of prepayment, Continuation, or
Conversion under this Agreement.
SECTION 4.6 Taxes.
(a) Any and all payments by Borrower to or for the account of
any Bank or Administrative Agent hereunder or under any other Loan Paper shall
be made free and clear of and without deduction for any and all present or
future Taxes, and all liabilities with respect thereto, excluding, in the case
of each Bank and Administrative Agent, Taxes imposed on its income, and
franchise Taxes imposed on it, by the jurisdiction under the Laws of which such
Bank (or its Applicable Lending Office) or Administrative Agent (as the case may
be) is organized or any political subdivision thereof. If Borrower shall be
required by Law to deduct any Taxes from or in respect of any sum payable under
this Agreement or any other Loan Paper to any Bank or Administrative Agent, (i)
the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 4.6) such Bank or Administrative Agent receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
Borrower shall make such deductions, (iii) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable Law, and (iv) Borrower shall furnish to Administrative Agent, at
its address set forth on Schedule 1 hereto, the original or a certified copy of
a receipt evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or
future stamp or documentary Taxes and any other excise or property Taxes or
charges or similar levies which arise from any payment made under this Agreement
or any other Loan Paper or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Paper (hereinafter referred to as
"Other Taxes").
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(c) Borrower agrees to indemnify each Bank and Administrative
Agent for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 4.6) paid by such Bank or Administrative
Agent (as the case may be) and any liability (including penalties, interest, and
expenses) arising therefrom or with respect thereto.
(d) Each Bank organized under the Laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Bank listed on Schedule 1 hereto and on or
prior to the date on which it becomes a Bank in the case of each other Bank, and
from time to time thereafter if requested in writing by Borrower or
Administrative Agent (but only so long as such Bank remains lawfully able to do
so), shall provide Borrower and Administrative Agent with (i) Internal Revenue
Service Form 1001 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Bank is entitled to benefits
under an income Tax treaty to which the United States is a party which reduces
the rate of withholding Tax on payments of interest or certifying that the
income receivable pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States, (ii) Internal Revenue
Service Form W-8 or W-9, as appropriate, or any successor form prescribed by the
Internal Revenue Service, and (iii) any other form or certificate required by
any taxing authority (including any certificate required by Sections 871(h) and
881(c) of the Code), certifying that such Bank is entitled to an exemption from
or a reduced rate of Tax on payments pursuant to this Agreement or any of the
other Loan Papers.
(e) For any period with respect to which a Bank has failed to
provide Borrower and Administrative Agent with the appropriate form pursuant to
Section 4.6(d) (unless such failure is due to a change in treaty, Law, or
regulation occurring subsequent to the date on which a form originally was
required to be provided), such Bank shall not be entitled to indemnification
under Section 4.6(a) or 4.6(b) with respect to Taxes imposed by the United
States; provided, however, that should a Bank, which is otherwise exempt from or
subject to a reduced rate of withholding Tax, become subject to Taxes because of
its failure to deliver a form required hereunder, Borrower shall take such steps
as such Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or
for the account of any Bank pursuant to this Section 4.6, then such Bank will
agree to use reasonable efforts to change the jurisdiction of its Applicable
Lending Office so as to eliminate or reduce any such additional payment which
may thereafter accrue if such change, in the judgment of such Bank, is not
otherwise disadvantageous to such Bank.
(g) Within thirty (30) days after the date of any payment of
Taxes Borrower is required to pay pursuant to this Section 4.6, Borrower shall
furnish to Administrative Agent the original or a certified copy of a receipt
evidencing such payment.
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(h) Without prejudice to the survival of any other agreement
of Borrower hereunder, the agreements and obligations of Borrower contained in
this Section 4.6 shall survive the termination of the Commitments and the
payment in full of the Notes.
SECTION 4.7 Discretion of Banks as to Manner of Funding.
Notwithstanding any provisions of this Agreement to the contrary, each Bank
shall be entitled to fund and maintain its funding of all or any part of its
Commitment in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if such
Bank had actually funded and maintained each Eurodollar Loan through the
purchase of deposits having a maturity corresponding to the last day of the
Interest Period applicable to such Eurodollar Loan and bearing an interest rate
equal to the Adjusted Eurodollar Rate for such Interest Period.
ARTICLE 5
BORROWING BASE
SECTION 5.1 Reserve Report; Proposed Borrowing Base. As soon as
available and in any event by March 31 and September 30 of each year commencing
September 30, 1999, Borrower shall deliver to each Bank a Reserve Report
prepared as of the immediately preceding December 31 and June 30 respectively.
Simultaneously with the delivery to Administrative Agent and each Bank of each
Reserve Report, Borrower shall notify each Bank of the amount of the Borrowing
Base which Borrower requests become effective on the next Redetermination Date
(or such date promptly following such Redetermination Date as Required Banks
shall elect).
SECTION 5.2 Scheduled Redeterminations of the Borrowing Base;
Procedures and Standards. Based in part on the Reserve Reports made available to
Banks pursuant to Section 5.1, Banks shall redetermine the Borrowing Base (i) on
a date selected by Required Banks by written notice to Borrower which date shall
be on or around January 1, 2000, and (ii) on or around each April 30 and October
31 thereafter commencing April 30, 2000 (or, in each such case, on a date
promptly thereafter as reasonably possible based on the engineering and other
information available to Banks). Any Borrowing Base which becomes effective as a
result of any Redetermination of the Borrowing Base shall be subject to the
following restrictions: (a) such Borrowing Base shall not exceed the Borrowing
Base requested by Borrower pursuant to Sections 5.1 or 5.3 (as applicable), (b)
such Borrowing Base shall not exceed the Total Commitment then in effect, (c) to
the extent such Borrowing Base represents an increase from the Borrowing Base in
effect prior to such Redetermination, such Borrowing Base shall be approved by
all Banks, and (d) any Borrowing Base which represents a decrease in the
Borrowing Base in effect prior to such Redetermination, or a reaffirmation of
such prior Borrowing Base, shall be approved by Required Banks. Each
Redetermination shall be made by Banks in their sole discretion. Without
limiting such discretion, Borrower acknowledges and agrees that Banks (i) may
make such assumptions regarding appropriate existing and projected pricing for
Hydrocarbons as they deem appropriate in their sole discretion, (ii) may make
such assumptions regarding projected rates and quantities of future production
of
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Hydrocarbons from the Mineral Interests owned by Borrower as they deem
appropriate in their sole discretion, (iii) may consider the projected cash
requirements of Borrower and its Subsidiaries, (iv) are not required to consider
any asset other than Proved Mineral Interests owned by Borrower which are
subject to first and prior Liens in favor of Administrative Agent for the
ratable benefit of Banks to the extent required by Section 6.1 hereof, and (v)
may make such other assumptions, considerations and exclusions as each Bank
deems appropriate in the exercise of its sole discretion. It is further
acknowledged and agreed that each Bank may consider such other credit factors as
it deems appropriate in the exercise of its sole discretion and shall have no
obligation in connection with any Redetermination to approve any increase from
the Borrowing Base in effect prior to such Redetermination. Promptly following
any Redetermination of the Borrowing Base, Administrative Agent shall deliver
written notice to Borrower specifying (a) the amount of the Borrowing Base as
redetermined (which Borrowing Base shall be effective as of the date specified
in such notice, and shall remain in effect for all purposes of this Agreement
until the next Redetermination), and (b) in the case of any Annual Scheduled
Redetermination, the Distribution Limit which shall be in effect for the period
commencing on the date of such notice and continuing until the next Annual
Scheduled Redetermination of the Borrowing Base thereafter
SECTION 5.3 Special Redetermination.
(a) In addition to Scheduled Redeterminations, Required Banks
shall be permitted to make a Special Redetermination of the Borrowing Base once
in each period between Scheduled Redeterminations. Any request by Required Banks
pursuant to this Section 5.3(a) shall be submitted to Administrative Agent and
Borrower.
(b) In addition to Scheduled Redeterminations, Borrower shall
be permitted to request a Special Redetermination of the Borrowing Base once in
each Fiscal Year. Such request shall be submitted to Administrative Agent and
Required Banks and at the time of such request Borrower shall deliver to each
Bank a Reserve Report. Together with such request, Borrower shall also notify
each Bank of the Borrowing Base requested by Borrower in connection with such
Special Redetermination.
(c) Any Special Redetermination shall be made by Banks in
accordance with the procedures and standards set forth in Section 5.2; provided,
that, no Reserve Report will be required to be delivered to Banks in connection
with any Special Determination requested by Required Banks pursuant to clause
(a) above.
SECTION 5.4 Borrowing Base Deficiency. If a Borrowing Base Deficiency
exists after giving effect to any Redetermination, Borrower shall be obligated
to eliminate such Borrowing Base Deficiency by making the mandatory prepayments
of the Loans or taking the other actions required by Section 2.4.
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SECTION 5.5 Initial Borrowing Base. The Borrowing Base shall be
$19,500,000 for the period commencing on the Closing Date and ending on the
effective date of the first Redetermination after the Closing Date
ARTICLE 6
COLLATERAL AND GUARANTEES
SECTION 6.1 Security.
(a) The Obligations shall be secured by first and prior Liens
(subject only to Permitted Encumbrances) covering and encumbering substantially
all assets owned by Borrower and each of its Subsidiaries, including, without
limitation, all Mineral Interests owned by Borrower and its Subsidiaries. On the
Closing Date, Borrower shall deliver to Administrative Agent for the ratable
benefit of each Bank, a Security Agreement and Mortgages in form and substance
acceptable to Administrative Agent and duly executed by Borrower together with
such other assignments, conveyances, amendments, agreements and other writings,
including, without limitation, UCC-1 financing statements (each duly authorized
and executed) as Administrative Agent shall deem necessary or appropriate to
grant, evidence and perfect first and prior Liens in substantially all assets
owned by Borrower, including, without limitation, all Mineral Interests owned by
Borrower.
(b) On or before each Redetermination Date and at such other
times as Administrative Agent or Required Banks shall request, Borrower shall
execute and deliver to Administrative Agent, and cause each of its Subsidiaries
to execute and deliver to Administrative Agent, for the ratable benefit of each
Bank, Mortgages granting, evidencing and perfecting the Liens required by
Section 6.1(a) preceding with respect to all Mineral Interests acquired by
Borrower or any Subsidiaries of Borrower on or subsequent to the last date on
which Borrower or any of its Subsidiaries were required to execute and deliver
Mortgages pursuant to this Section 6.1, or which, for any other reason are not
the subject of valid, enforceable, perfected first priority Liens (subject only
to Permitted Encumbrances) in favor of Administrative Agent for the ratable
benefit of Banks.
(c) On the date of the creation or acquisition by Borrower or
any Subsidiary of Borrower of any Subsidiary of Borrower (a "New Subsidiary"),
Borrower shall cause such New Subsidiary to execute and deliver to
Administrative Agent for the ratable benefit of the Banks, a Security Agreement
and one or more Mortgages, together with such other assignments, conveyances,
amendments, agreements and other writings, including, without limitations UCC-1
financing statements (each duly authorized and executed) as Administrative Agent
shall deem necessary or appropriate to grant, evidence and perfect first and
prior Liens on substantially all assets, including, without limitation, all
Mineral Interests, owed by such New Subsidiary.
SECTION 6.2 Guarantees. The Obligations shall be jointly and severally
guaranteed by each EXCO and Venus and each Subsidiary of Borrower pursuant to
Facility Guarantees duly executed
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and delivered by each such Person. On the date of the creation or acquisition by
Borrower or any Subsidiary of Borrower of any New Subsidiary, Borrower shall
cause such New Subsidiary to execute and deliver a Facility Guaranty to
Administrative Agent.
SECTION 6.3 Supporting Documents. At any time Borrower or any of its
Subsidiaries are required to execute and deliver Mortgages, Security Agreements
or Facility Guarantees to Administrative Agent pursuant to this Article 6,
Borrower shall also deliver or cause to be delivered to Administrative Agent
such other documents, instruments and agreements, including, without limitation,
certificates of officers of Borrower and its Subsidiaries, certificates of
Governmental Authorities, opinions of counsel (addressed to Administrative
Agent) and other documents, instruments and agreements Administrative Agent
shall deem necessary or appropriate to verify (i) the valid organization and
existence of the Credit Party executing and delivering such Loan Papers, (ii)
the due authorization, execution and delivery of such Loan Papers, (iii)
Borrower's or such Subsidiaries' title to the property (including Mineral
Interests) purported to be subject to the Liens created by such Loan Papers;
provided, that, in the absence of any Default or Borrowing Base Deficiency,
Borrower shall not be required to provide opinions or other evidence of title
with respect to Mineral Interests with an aggregate Recognized Value in excess
of ninety percent (90%) of the aggregate Recognized Value of all Mineral
Interests owned by Borrower (such limitation is referred to herein as the "Title
Review Limit"); and (iv) the validity, perfection and priority of the Liens
created by such Loan Papers and such other matters related thereto as
Administrative Agent shall reasonably request.
ARTICLE 7
CONDITIONS PRECEDENT
SECTION 7.1 Conditions to Initial Borrowing and Participation in Letter
of Credit Exposure. The obligation of each Bank to loan its Commitment
Percentage of the initial Borrowing made hereunder, and the obligation of
Administrative Agent to issue (or cause another Bank to issue) the initial
Letter of Credit issued hereunder is subject to the satisfaction of each of the
following conditions prior to or simultaneously with the initial Borrowing made
hereunder:
(a) Closing Deliveries. Administrative Agent shall have
received each of the following documents, instruments and agreements, each of
which shall be in form and substance and executed in such counterparts as shall
be acceptable to Administrative Agent and each Bank and each of which shall,
unless otherwise indicated, be dated the Closing Date:
(i) a Note payable to the order of each Bank, each in the
amount of such Bank's Commitment, duly executed by Borrower;
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(ii) Mortgages duly executed and delivered by Borrower
creating first and prior Liens on all Mineral Interests owned
by Borrower, including, without limitation, the Apache
Properties;
(iii) a Security Agreement duly executed and delivered by
Borrower;
(iv) such financing statements on form UCC-1 (or any other
form required by Lender in its reasonable discretion) as
Administrative Agent shall require to evidence and perfect the
Liens created by the Mortgages and the Security Agreement
referenced in clauses (ii) and (iii) above, each of which
shall be executed and delivered by Borrower and filed of
record in such jurisdictions as Administrative Agent shall
require in its sole discretion;
(v) Facility Guarantees duly executed and delivered by Venus
and EXCO;
(vi) the Subordination Agreement duly executed and delivered
by EXCO and acknowledged by Venus;
(vii) a copy of the Articles of Incorporation and all
amendments thereto of EXCO and Venus accompanied by a
certificate that such copy is true, correct and complete, and
dated within ten (10) days of the Closing Date, issued by the
appropriate Governmental Authority of the jurisdiction of
incorporation or organization of each of EXCO and Venus, and
accompanied by a certificate of the Secretary or comparable
Authorized Officer of each of EXCO and Venus that such copy is
true, correct and complete on the Closing Date;
(viii) a copy of the Bylaws and all amendments thereto of each
of EXCO and Venus accompanied by a certificate of the
Secretary or comparable Authorized Officer of EXCO and Venus
that such copy is true, correct and complete as of the date
hereof;
(ix) a copy of the Certificate of Organization and all
amendments thereto of Borrower accompanied by a certificate
that such copy is true, correct and complete and dated within
ten (10) days of the Closing Date, issued by the appropriate
Governmental Authority of the jurisdiction of incorporation or
organization of Borrower, and accompanied by a certificate of
the Secretary or comparable Authorized Officer of Borrower
that such copy is true, correct and complete on the Closing
Date;
(x) a copy of the Limited Liability Company Agreement for
Borrower together with a certificate from an Authorized
Officer of Borrower stating that such copy is a true and
correct copy of the Limited Liability Company Agreement for
Borrower and that such Limited Liability Company Agreement has
not been amended or modified in any respect and is in full
force and effect on the Closing Date;
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(xi) certain certificates and other documents issued by the
appropriate Governmental Authorities of such jurisdictions as
Administrative Agent has requested relating to the existence
of each of EXCO, Venus and Borrower and to the effect that of
each of EXCO, Venus and Borrower is in good standing with
respect to the payment of franchise and similar Taxes and is
duly qualified to transact business in such jurisdictions;
(xii) a certificate of incumbency of all officers of each of
EXCO, Venus and Borrower who will be authorized to execute or
attest to any Loan Paper on behalf of EXCO, Venus or Borrower
dated the date hereof, executed by the Secretary or comparable
Authorized Officer of such Person;
(xiii) copies of resolutions or comparable authorizations
approving the Loan Papers and authorizing the transactions
contemplated by this Agreement and the other Loan Papers, duly
adopted by the Board of Directors of each of EXCO and Venus
and the Management Committee of Borrower; accompanied by
certificates of the Secretary or comparable Authorized Officer
of each of EXCO, Venus and Borrower that such copies are true
and correct copies of resolutions duly adopted at a meeting of
or (if permitted by applicable Law and, if required by such
Law, by the Bylaws of EXCO or Venus and the Limited Liability
Company Agreement of Borrower) by the unanimous written
consent of the Board of Directors of each of EXCO and Venus
and the Management Committee of Borrower; and that such
resolutions constitute all the resolutions adopted with
respect to such transactions, have not been amended, modified,
or revoked in any respect, and are in full force and effect as
of the date hereof;
(xiv) an opinion of Haynes & Boone, L.L.P., counsel for
Borrower, EXCO and Venus, dated the date hereof, favorably
opining as to the enforceability of each of the Loan Papers
and otherwise in form and substance satisfactory to
Administrative Agent and Banks;
(xv) an opinion of Cliffe Laborde, special counsel for
Administrative Agent, favorably opining as to the
enforceability of the Mortgages in the State of Louisiana and
otherwise in form and substance satisfactory to Administrative
Agent and Banks;
(xvi) such UCC-11 search reports as Administrative Agent shall
require, prepared as of a date not more than twenty (20) days
prior to the Closing Date, conducted in such jurisdictions and
reflecting such names as Administrative Agent shall request;
(xvii) a certificate signed by an Authorized Officer of
Borrower stating that (A) the representations and warranties
contained in this Agreement and the other Loan Papers are true
and correct in all material respects, (B) no Default or Event
of Default has
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occurred and is continuing, and (C) all conditions set forth
in this Section 7.1 and Section 7.2 have been satisfied;
(xviii) a Certificate of Ownership Interests signed by an
Authorized Officer of Borrower in the form of Exhibit I
attached hereto;
(xix) a report or reports in form, scope and detail acceptable
to Administrative Agent from environmental engineering firms
acceptable to Administrative Agent setting forth the results
of a current phase I environmental review of the Mineral
Interests, which report(s) shall not reflect the existence of
facts or circumstances which would constitute a material
violation of any Applicable Environmental Law or which are
likely to result in a material liability to Borrower or any of
its Subsidiaries; and
(xx) certificates from Borrower's insurance broker setting
forth the insurance maintained by Borrower, stating that such
insurance is in full force and effect, that all premiums due
have been paid and stating that such insurance is adequate and
complies with the requirements of Section 9.6.
(b) Title Review. Administrative Agent or its counsel shall
have completed a review of title (including opinions of title) to the Apache
Properties (subject to the Title Review Limit), and such review shall not have
revealed any condition or circumstance which would reflect that the
representations and warranties contained in Section 8.9 hereof are inaccurate in
any respect.
(c) Partner Contributions. EXCO and Venus shall each have
contributed at least $7,000,000 in cash (an aggregate of $14,000,000) to the
partnership capital of Borrower.
(d) Completion of Apache Acquisition. Borrower shall have
completed (or simultaneously with the funding of the initial Borrowing
hereunder, Borrower shall complete) the Apache Acquisition for a total purchase
price of not more than $28,500,000 and otherwise on the terms and conditions
substantially in accordance with the Apache Acquisition Agreement as in effect
on the date hereof, and as a result thereof Borrower shall have acquired, or
simultaneously with the funding of such Borrowing Borrower shall acquire, good
and defensible title to all such Apache Properties, free and clear of all Liens
except Permitted Encumbrances.
(e) No Material Adverse Change. In the sole discretion of each
Bank, since no Material Adverse Change shall have occurred.
(f) No Legal Prohibition. The transactions contemplated by
this Agreement shall be permitted by applicable Law and regulation and shall not
subject Administrative Agent, any Bank, or any Credit Party to any Material
Adverse Change.
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(g) No Litigation. No litigation, arbitration or similar
proceeding shall be pending or threatened which calls into question the validity
or enforceability of this Agreement, the other Loan Papers or the transactions
contemplated hereby or thereby.
(h) Closing Fees. Borrower shall have paid to Administrative
Agent for the ratable benefit of each Bank, and shall have paid to
Administrative Agent, the fees to be paid on the Closing Date pursuant to
Section 2.12.
(i) Other Matters. All matters related to this Agreement, the
other Loan Papers and the Credit Parties shall be acceptable to each Bank in its
sole discretion, and Borrower shall have delivered to Administrative Agent and
each Bank such evidence as they shall request to substantiate any matters
related to this Agreement and the other Loan Papers, as Administrative Agent or
any Bank shall request.
SECTION 7.2 Conditions to Each Borrowing and each Letter of Credit. The
obligation of each Bank to loan its Commitment Percentage of each Borrowing and
the obligation of Administrative Agent to issue a Letter of Credit on the date
such Letter of Credit is to be issued is subject to the further satisfaction of
the following conditions:
(a) timely receipt by Administrative Agent of a Request for
Borrowing or a Request for Letter of Credit (as applicable);
(b) immediately before and after giving effect to such
Borrowing or issuance of such Letter of Credit, no Default or Event of Default
shall have occurred and be continuing and the funding of such Borrowing or the
issuance of the requested Letter of Credit (as applicable) shall not cause a
Default or Event of Default;
(c) the representations and warranties of Borrower contained
in this Agreement and the other Loan Papers shall be true and correct in all
material respects on and as of the date of such Borrowing or issuance of such
Letter of Credit (as applicable), with the same effect as though such
representations and warranties had been made on and as of the date of such
Borrowing or issuance of such Letter of Credit (as applicable) or, if such
representations and warranties are expressly limited to particular dates, as of
such particular dates;
(d) after giving effect to such Borrowing or issuance of such
Letter of Credit, the Outstanding Credit shall not exceed the Borrowing Base;
(e) no Material Adverse Change shall have occurred;
(f) the funding of such Borrowing or the issuance of such
Letter of Credit (as applicable) shall be permitted by applicable Law; and
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(g) such Borrowing in such Letter of Credit shall be used only
for a purpose permitted under the Agreement.
The funding of each Borrowing and the issuance of each Letter of Credit
hereunder shall be deemed to be a representation and warranty by Borrower on the
date of such Borrowing and the date of issuance of each Letter of Credit as to
the facts specified in Sections 7.2(b) through 7.2(e).
SECTION 7.3 Materiality of Conditions. Each condition precedent herein
is material to the transactions contemplated herein, and time is of the essence
in respect of each thereof.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Administrative Agent and each Bank
that each of the following statements is true and correct on the date hereof,
and will be true and correct on the occasion of each Borrowing and the issuance
of each Letter of Credit:
SECTION 8.1 Existence and Power. Each Credit Party (a) is a
corporation, limited liability company or partnership duly incorporated or
organized (as applicable), validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization (as applicable), (b) has
all corporate, limited liability company or partnership power (as applicable)
and all material governmental licenses, authorizations, consents and approvals
required to carry on its businesses as now conducted and as proposed to be
conducted, and (c) is duly qualified to transact business as a foreign
corporation, foreign limited liability company or foreign partnership (as
applicable) in each jurisdiction where a failure to be so qualified could result
in a Material Adverse Change.
SECTION 8.2 Necessary Authorization; Contravention. The execution,
delivery and performance of this Agreement and the other Loan Papers by each
Credit Party (to the extent each Credit Party is a party thereto), are within
such Credit Party's corporate, limited liability company or partnership power,
have been duly authorized by all necessary corporate, limited liability company
or partnership action, require no action by or in respect of, or filing with,
any Governmental Authority and do not contravene, or constitute a default under,
any provision of applicable Law (including, without limitation, the Margin
Regulations) or of the articles or certificate of incorporation, bylaws,
partnership agreement, limited liability company agreement or other
organizational documents of any Credit Party, or of any agreement, judgment,
injunction, order, decree or other instrument binding upon any Credit Party or
result in the creation or imposition of any Lien on any asset of any Credit
Party other than the Liens securing the Obligations.
SECTION 8.3 Binding Effect. This Agreement constitutes a valid and
binding agreement of Borrower; the other Loan Papers when executed and delivered
in accordance with this Agreement, will constitute the valid and binding
obligations of each Credit Party (to the extent each Credit Party
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is a party thereto), and each Loan Paper is, or when executed and delivered,
will be, enforceable against each Credit Party (to the extent each Credit Party
is a party thereto), in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors rights generally, and (ii) the availability of equitable
remedies may be limited by equitable principles of general applicability.
SECTION 8.4 Financial Information.
(a) The most recent annual audited consolidated balance sheets
of each of Borrower, EXCO and Venus and the related consolidated statements of
operations and cash flows for the Fiscal Year then ended, copies of which have
been delivered to each Bank, fairly present, in conformity with GAAP, the
consolidated financial position of each of Borrower, EXCO and Venus as of the
end of such Fiscal Year and its consolidated results of operations and cash
flows for such Fiscal Year. (Notwithstanding the foregoing, the representation
and warranty contained in this Section 8.4(a) will not be deemed to be made with
respect to Borrower until such time as annual audited consolidated balance
sheets, statements of operations and cash flows for Borrower for the Fiscal Year
ended December 31, 1999 are delivered to each Bank in accordance with Section
9.1(a)).
(b) The most recent quarterly unaudited consolidated balance
sheet of Borrower, EXCO and Venus delivered to Banks, and the related unaudited
consolidated statements of operations and cash flows for the portion of
Borrower's, EXCO's and Venus's Fiscal Year then ended, fairly present, in
conformity with GAAP applied on a basis consistent with the financial statements
referred to in Section 8.4(a), the consolidated financial position of Borrower,
EXCO and Venus as of such date and its consolidated results of operations and
cash flows for such portion of Borrower's, EXCO's and Venus's Fiscal Year.
(Notwithstanding the foregoing, the representation and warranty contained in
this Section 8.4(b) will not be deemed to be made with respect to Borrower until
such time as quarterly unaudited consolidated balance sheets, statements of
operations and cash flows for Borrower for the Fiscal Quarter ending September
30, 1999 are delivered to each Bank in accordance with Section 9.1(b)).
(c) No Material Adverse Change has occurred.
(d) After giving effect to the transactions contemplated by
this Agreement, (i) the fair value of the property of each Credit Party is
greater than the total amount of liabilities, including, without limitation,
contingent liabilities, of each Credit Party , (ii) the present fair saleable
value of the assets of each Credit Party is not less than the amount that will
be required to pay the liability of such Credit Party on its debts as they
become absolute and matured, (iii) each Credit Party is able to realize upon its
assets and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iv) no Credit
Party intends to, and no Credit Party believes that it will, incur debts or
liabilities beyond its ability to pay as such debts and liabilities mature, and
(v) no Credit Party is engaged in a business or transaction, and no Credit Party
is about to engage in business or a transaction for which such Credit Party's
property would
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constitute unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which such Credit Party is engaged.
(e) Borrower was formed on June 25, 1999 for the purpose of
acquiring and developing the Apache Properties and producing and marketing
Hydrocarbons therefrom. Prior to giving effect to the acquisition of the Apache
Properties, Borrower had no assets, operations, employees or liabilities of any
nature (contingent or otherwise) other than rights and obligations arising under
the Apache Acquisition Agreement, this Agreement and the other Loan Papers.
SECTION 8.5 Litigation. Except for matters disclosed on Schedule 3
attached hereto, there is no action, suit or proceeding pending against, or to
the knowledge of Borrower, threatened against or affecting Borrower or any of
its Subsidiaries before any Governmental Authority in which there is a
reasonable possibility of an adverse decision which could result in a Material
Adverse Change or which could in any manner draw into question the validity of
the Loan Papers.
SECTION 8.6 ERISA. Neither Borrower nor any ERISA Affiliate of Borrower
maintains or has ever maintained or been obligated to contribute to any Plan
covered by Title IV of ERISA or subject to the funding requirements of Section
412 of the Code or Section 302 of ERISA. Each Plan maintained by Borrower or any
ERISA Affiliate of Borrower is in compliance in all material respects with all
applicable Laws. Except in such instances where an omission or failure would not
result in a Material Adverse Change on the business, financial condition or
prospects of Borrower, (a) all returns, reports and notices required to be filed
with any regulatory agency with respect to any Plan have been filed timely, and
(b) neither Borrower nor any ERISA Affiliate of Borrower has failed to make any
contribution or pay any amount due or owing as required by the terms of any
Plan. There are no pending or, to the best of Borrower's knowledge, threatened
claims, lawsuits, investigations or actions (other than routine claims for
benefits in the ordinary course) asserted or instituted against, and neither
Borrower nor any ERISA Affiliate of Borrower has knowledge of any threatened
litigation or claims against, the assets of any Plan or its related trust or
against any fiduciary of a Plan with respect to the operation of such Plan that
are likely to result in liability of Borrower causing a Material Adverse Change.
Except in such instances where an omission or failure would not result in a
Material Adverse Change, each Plan that is intended to be "qualified" within the
meaning of section 401(a) of the Code is, and has been during the period from
its adoption to date, so qualified, both as to form and operation and all
necessary governmental approvals, including a favorable determination as to the
qualification under the Code of such Plan and each amendment thereto, have been
or will be timely obtained. Neither Borrower nor any ERISA Affiliate of Borrower
has engaged in any prohibited transactions, within the meaning of section 406 of
ERISA or section 4975 of the Code, in connection with any Plan which would
result in liability of Borrower causing a Material Adverse Change. Neither
Borrower nor any ERISA Affiliate of Borrower maintains or contributes to any
Plan that provides a post-employment health benefit, other than a benefit
required under Section 601 of ERISA, or maintains or contributes to a Plan that
provides health benefits that is not fully funded except where the failure to
fully fund such Plan would not result in a Material Adverse Change. Neither
Credit Party nor any ERISA Affiliate of Borrower maintains, has established or
has
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ever participated in a multiple employer welfare benefit arrangement within the
meaning of section 3(40)(A) of ERISA.
SECTION 8.7 Taxes and Filing of Tax Returns. Borrower and each of its
Subsidiaries has filed all tax returns required to have been filed and has paid
all Taxes shown to be due and payable on such returns, including interest and
penalties, and all other Taxes which are payable by such party, to the extent
the same have become due and payable. Borrower does not know of any proposed
material Tax assessment against it or any of its Subsidiaries and all Tax
liabilities of Borrower and its Subsidiaries are adequately provided for. Except
as disclosed in writing to Banks prior to the date hereof, no income tax
liability of Borrower or any of its Subsidiaries has been asserted by the
Internal Revenue Service or other Governmental Authority for Taxes in excess of
those already paid.
SECTION 8.8 Ownership of Properties Generally. Borrower and each of its
Subsidiaries has good and valid fee simple or leasehold title to all material
properties and assets purported to be owned by it, including, without
limitation, all assets reflected in the balance sheets referred to in Section
8.4(a) and 8.4(b) and all assets which are used by Borrower and its Subsidiaries
in the operation of their respective businesses, and none of such properties or
assets is subject to any Lien other than Permitted Encumbrances.
SECTION 8.9 Mineral Interests. Borrower has good and defensible title
to all Mineral Interests described in the Reserve Report, including, after
giving effect to the Apache Acquisition, the Apache Properties, free and clear
of all Liens except Permitted Encumbrances. All such Mineral Interests are
valid, subsisting, and in full force and effect, and all rentals, royalties, and
other amounts due and payable in respect thereof have been duly paid. Without
regard to any consent or non-consent provisions of any joint operating agreement
covering any of Borrower's Proved Mineral Interests, Borrower's share of (a) the
costs for each Proved Mineral Interest described in the Reserve Report is not
greater than the decimal fraction set forth in the Reserve Report, before and
after payout, as the case may be, and described therein by the respective
designations "working interests", "WI", "gross working interest", "G.I.", or
similar terms, and (b) production from, allocated to, or attributed to each such
Proved Mineral Interest is not less than the decimal fraction set forth in the
Reserve Report, before and after payout, as the case may be, and described
therein by the designations net revenue interest, NHI, or similar terms. Each
well drilled in respect of each Proved Producing Mineral Interest described in
the Reserve Report (y) is capable of, and is presently, producing Hydrocarbons
in commercially profitable quantities, and Borrower is currently receiving
payments for its share of production, with no funds in respect of any thereof
being presently held in suspense, other than any such funds being held in
suspense pending delivery of appropriate division orders, and (z) has been
drilled, bottomed, completed, and operated in compliance with all applicable
Laws and no such well which is currently producing Hydrocarbons is subject to
any penalty in production by reason of such well having produced in excess of
its allowable production.
SECTION 8.10 Licenses, Permits, Etc. Borrower and each of its
Subsidiaries possesses such valid franchises, certificates of convenience and
necessity, operating rights, licenses, permits, consents, authorizations,
exemptions and orders of Governmental Authorities, as are necessary to
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carry on its business as now conducted and as proposed to be conducted, except
to the extent a failure to obtain any such item would not result in a Material
Adverse Change.
SECTION 8.11 Compliance with Law. The business and operations of
Borrower and its Subsidiaries have been and are being conducted in accordance
with all applicable Laws other than violations of Laws which do not (either
individually or collectively) result in a Material Adverse Change.
SECTION 8.12 Full Disclosure. All information heretofore furnished by
any Credit Party to Administrative Agent or any Bank for purposes of or in
connection with this Agreement, any Loan Paper or any transaction contemplated
hereby or thereby is, and all such information hereafter furnished by or on
behalf of Borrower to Administrative Agent or any Bank will be, true, complete
and accurate in every material respect. Borrower has disclosed or has caused to
be disclosed to Banks in writing any and all facts (other than facts of general
public knowledge) which might reasonably be expected to result in a Material
Adverse Change.
SECTION 8.13 Organizational Structure; Nature of Business. Borrower is
engaged only in the business of acquiring, owning, exploring, developing and
operating the Apache Properties and the production, marketing, processing and
transporting of Hydrocarbons therefrom. Schedule 4 hereto accurately reflects
(i) the jurisdiction of organization of Borrower, (ii) each jurisdiction in
which Borrower is qualified to transact business as a foreign limited liability
company, (iii) the authorized, issued and outstanding membership interests of
Borrower (and the legal and beneficial owners of such interests), and (iv) all
outstanding warrants, options, subscription rights, convertible securities or
other rights to purchase membership interests of Borrower. Borrower has no
Subsidiaries on the Closing Date.
SECTION 8.14 Environmental Matters. No operation conducted by Borrower
or any Subsidiary of Borrower and no real or personal property now or previously
owned or leased by Borrower or any Subsidiary of Borrower (including, without
limitation, the Apache Properties) and no operations conducted thereon, and to
Borrower's knowledge, no operations of any prior owner, lessee or operator of
any such properties, is or has been in violation of any Applicable Environmental
Law other than violations which neither individually nor in the aggregate could
result in a Material Adverse Change. Neither Borrower, any Subsidiary of
Borrower, nor any such property or operation is the subject of any existing,
pending or, to Borrower's knowledge, threatened Environmental Complaint which
could, individually or in the aggregate, result in Material Adverse Change. All
notices, permits, licenses, and similar authorizations, required to be obtained
or filed in connection with the ownership of each tract of real property or
operations of Borrower or any Subsidiary of Borrower thereon and each item of
personal property owned, leased or operated by Borrower or any Subsidiary of
Borrower, including, without limitation, notices, licenses, permits and
authorizations required in connection with any past or present treatment,
storage, disposal, or release of Hazardous Substances into the environment, have
been duly obtained or filed except to the extent the failure to obtain or file
such notices, licenses, permits and authorizations would not result in a
Material Adverse Change. All Hazardous Substances, generated at each tract of
real property and by each item of
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personal property owned, leased or operated by Borrower or any Subsidiary of
Borrower have been transported, treated, and disposed of only by carriers or
facilities maintaining valid permits under RCRA and all other Applicable
Environmental Laws for the conduct of such activities except in such cases where
the failure to obtain such permits could not, individually or in the aggregate,
result in a Material Adverse Change. There have been no Hazardous Discharges
which were not in compliance with Applicable Environmental Laws other than
Hazardous Discharges which would not, individually or in the aggregate, result
in a Material Adverse Change. Neither Borrower nor any Subsidiary of Borrower
has any contingent liability in connection with any Hazardous Discharge which
could reasonably be expected to result in a Material Adverse Change.
SECTION 8.15 Burdensome Obligations. Neither Borrower, nor any
Subsidiary of Borrower, nor any of their respective properties is subject to any
Law or any pending or threatened change of Law or subject to any restriction
under its articles (or certificate) of incorporation, bylaws, regulations,
partnership agreement or comparable charter or other organizational documents or
under any agreement or instrument to which Borrower or any Subsidiary of
Borrower or by which Borrower or any Subsidiary of Borrower or any of their
respective properties may be subject or bound, which is so unusual or burdensome
as to be likely in the foreseeable future to result in a Material Adverse
Change. Without limiting the foregoing, neither Borrower nor any Subsidiary of
Borrower is a party to or bound by any agreement or subject to any order of any
Governmental Authority which prohibits or restricts in any way the right of
Borrower or any Subsidiary of Borrower to make Distributions.
SECTION 8.16 Fiscal Year. Borrower's Fiscal Year is January 1 through
December 31.
SECTION 8.17 No Default. Neither a Default nor an Event of Default has
occurred or will exist after giving effect to the transactions contemplated by
this Agreement or the other Loan Papers.
SECTION 8.18 Government Regulation. Neither Borrower nor any Subsidiary
of Borrower is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act (as any of the
preceding acts have been amended), the Investment Company Act of 1940 or any
other law which regulates the incurring by Borrower or any Subsidiary of
Borrower of Debt, including, but not limited to laws relating to common contract
carriers or the sale of electricity, gas, steam, water or other public utility
services.
SECTION 8.19 Insider. Neither Borrower nor any Subsidiary of Borrower
is, and no Person having "control" (as that term is defined in 12 U.S.C. Section
375(b) or regulations promulgated thereunder) of Borrower or any Subsidiary of
Borrower is an "executive officer", "director" or "shareholder" of any Bank or
any bank holding company of which any Bank is a Subsidiary or of any Subsidiary
of such bank holding company.
SECTION 8.20 Gas Balancing Agreements and Advance Payment Contracts.
On the date of this Agreement, (a) there is no Material Gas Imbalance, and (b)
the aggregate amount of all
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Advance Payments received by Borrower under Advance Payment Contracts which have
not been satisfied by delivery of production does not exceed $50,000.
SECTION 8.21 Apache Acquisition Documents. Borrower has provided each
Bank with a true and correct copy of each of the Apache Acquisition Documents
including all amendments and modifications thereto. No material rights or
obligations of any party to any of such Apache Acquisition Documents have been
waived and neither Borrower nor any of its Subsidiaries, nor to the best
knowledge of Borrower or any other party to any of such Apache Acquisition
Documents, is in default of its obligations thereunder. Each of the Apache
Acquisition Documents is a valid, binding and enforceable obligation of the
parties thereto in accordance with its terms and is in full force and effect.
Each representation and warranty made by Borrower, and to the best knowledge of
Borrower, by Sellers in the Apache Acquisition Agreement and the other Apache
Acquisition Documents (a) was true and correct when made, and (b) will be true
and correct on the Closing Date.
ARTICLE 9
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, so long as any Bank has any
commitment to lend or participate in Letter of Credit Exposure hereunder or any
amount payable under any Note remains unpaid or any Letter of Credit remains
outstanding:
SECTION 9.1 Information. Borrower will deliver, or cause to be
delivered, to each Bank:
(a) as soon as available and in any event within one hundred
twenty (120) days after the end of each Fiscal Year, a consolidated balance
sheet of each of Borrower, EXCO and Venus as of the end of such Fiscal Year and
the related consolidated statements of income and statements of cash flow for
such Fiscal Year, setting forth in each case in comparative form the figures for
the previous Fiscal Year, all reported by Borrower, EXCO and Venus in accordance
with GAAP and audited by a firm of independent public accountants of nationally
recognized standing and acceptable to Administrative Agent;
(b) (i) as soon as available and in any event within
forty-five (45) days after the end of each of the first three (3) Fiscal
Quarters of each Fiscal Year, consolidated balance sheets of Borrower, EXCO and
Venus as of the end of such Fiscal Quarter and the related consolidated
statements of income and statements of cash flow for such quarter and for the
portion of Borrower's, EXCO's and Venus's Fiscal Year ended at the end of such
Fiscal Quarter, setting forth in each case in comparative form the figures for
the corresponding quarter and the corresponding portion of Borrower's, EXCO's
and Venus's previous Fiscal Year;
(c) simultaneously with the delivery of each set of financial
statements referred to in Sections 9.1(a) and 9.1(b), a certificate of a
Financial Officer of each of EXCO, Venus or
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Borrower in the form of Exhibit J-1, J-2 or J-3 (as applicable) attached hereto,
(i) setting forth, in the case of the certificate delivered by the Financial
Officer of Borrower, in reasonable detail the calculations required to establish
whether Borrower was in compliance with the requirements of Article 11 on the
date of such financial statements, (ii) stating whether there exists on the date
of such certificate any Default and, if any Default then exists, setting forth
the details thereof and the action which the Credit Parties are taking or
propose to take with respect thereto, (iii) stating whether or not such
financial statements fairly reflect in all material respects the results of
operations and financial condition of Borrower, EXCO and Venus as of the date of
the delivery of such financial statements and for the period covered thereby,
(iv) setting forth (A) whether as of such date there is a Material Gas Imbalance
and, if so, setting forth the amount of net gas imbalances under Gas Balancing
Agreements to which Borrower or any of its Subsidiaries is a party or by which
any Mineral Interests owned by Borrower or any of its Subsidiaries are bound,
and (B) the aggregate amount of all Advance Payments received under Advance
Payment Contracts to which Borrower or any of its Subsidiaries is a party or by
which any Mineral Interests owned by Borrower or any of its Subsidiaries are
bound which have not been satisfied by delivery of production, if any, and (v) a
summary of the Hedge Transactions to which Borrower or any of its Subsidiaries
is a party on such date;
(d) as soon as available and in any event within twenty (20)
days after the end of each calendar month, a report of Borrower's Financial
Officer setting forth in reasonable detail Borrower's Net Revenues for the
preceding calendar month;
(e) promptly upon the delivery thereof to Borrower's members
or their Affiliates generally, copies of all financial statements, material
reports and proxy statements so mailed;
(f) promptly upon the filing thereof, copies of all final
registration statements, post effective amendments thereto and annual, quarterly
or special reports which any Credit Party shall have filed with the Securities
and Exchange Commission; provided that Borrower must deliver, or cause to be
delivered, any annual reports which any Credit Party shall have filed with the
Securities and Exchange Commission, within ninety (90) days after the end of
each Fiscal Year of such Credit Party, and any quarterly reports which Borrower
shall have filed with the Securities and Exchange Commission, within forty-five
(45) days after the end of each of the first three (3) Fiscal Quarters of each
Fiscal Year of such Credit Party;
(g) promptly upon receipt of same, any notice or other
information received by Borrower or any Subsidiary of Borrower indicating any
potential, actual or alleged (i) non-compliance with or violation of the
requirements of any Applicable Environmental Law which could result in liability
to Borrower or any Subsidiary of Borrower for fines, clean up or any other
remediation obligations or any other liability in excess of $100,000 in the
aggregate; (ii) threatened Hazardous Discharge which Hazardous Discharge would
impose on Borrower or any Subsidiary of Borrower a duty to report to a
Governmental Authority or to pay cleanup costs or to take remedial action under
any Applicable Environmental Law which could result in liability to Borrower or
any Subsidiary of Borrower for fines, clean up and other remediation obligations
or any other liability in
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excess of $100,000 in the aggregate; or (iii) the existence of any Lien arising
under any Applicable Environmental Law securing any obligation to pay fines,
clean up or other remediation costs or any other liability in excess of $100,000
in the aggregate. Without limiting the foregoing, Borrower or any Subsidiary of
Borrower shall provide to Banks promptly upon receipt of same by Borrower or any
Subsidiary of Borrower copies of all environmental consultants or engineers
reports received by Borrower or any Subsidiary of Borrower which would render
the representation and warranty contained in Section 8.14 untrue or inaccurate
in any respect;
(h) in the event any notification is provided to any Bank or
Administrative Agent pursuant to Section 9.1(f) hereof or Administrative Agent
or any Bank otherwise learns of any event or condition under which any such
notice would be required, then, upon request of Required Banks, Borrower shall
within thirty (30) days of such request, cause to be furnished to Administrative
Agent and each Bank a report by an environmental consulting firm acceptable to
Administrative Agent and Required Banks, stating that a review of such event,
condition or circumstance has been undertaken (the scope of which shall be
acceptable to Administrative Agent and Required Banks) and detailing the
findings, conclusions and recommendations of such consultant. Borrower shall
bear all expenses and costs associated with such review and updates thereof;
(i) immediately upon any Authorized Officer becoming aware of
the occurrence of any Default, a certificate of an Authorized Officer setting
forth the details thereof and the action which Borrower is taking or proposes to
take with respect thereto;
(j) no later than March 31, and September 30 of each year,
reports of production volumes, revenue, expenses and product prices for all
Mineral Interests owned by Borrower for the periods of six (6) months ending the
preceding December 31, and June 30, respectively; such reports shall be prepared
on an accrual basis and shall be reported on a field by field basis;
(k) promptly notify Banks of any Material Adverse Change;
(l) on or before July 30, 1999, an engineering analysis of the
Apache Properties in form and substance satisfactory to Administrative Agent and
prepared by Lee Keeling and Associates, Inc.; and
(m) from time to time such additional information regarding
the financial position or business of Borrower and its Subsidiaries as
Administrative Agent, at the request of any Bank, may reasonably request.
SECTION 9.2. Business of Borrower. The sole business of Borrower is and
shall continue to be solely the acquisition, ownership, exploration, development
and operation of the Apache Properties and the production, marketing, processing
and transportation of Hydrocarbons therefrom.
SECTION 9.3 Maintenance of Existence. Borrower shall, and shall cause
each Credit Party to, at all times (a) maintain its corporate, partnership or
limited liability company existence in its state
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of incorporation or organization, and (b) maintain its good standing and
qualification to transact business in all jurisdictions where the failure to
maintain good standing or qualification to transact business could result in a
Material Adverse Change.
SECTION 9.4 Title Data. In addition to the title information required
by Article 7, but subject to the Title Review Limit, Borrower shall, upon the
request of Required Banks, cause to be delivered to Administrative Agent such
title opinions and other information regarding title to Mineral Interests owned
by Borrower and the perfection and priority of Administrative Agent's Liens
therein as are appropriate to determine the status thereof.
SECTION 9.5 Right of Inspection. Borrower will permit, and will cause
each of its Subsidiaries to permit, any officer, employee or Administrative
Agent of Administrative Agent or of any Bank to visit and inspect any of the
assets of Borrower and its Subsidiaries, examine Borrower's and its
Subsidiaries' books of record and accounts, take copies and extracts therefrom,
and discuss the affairs, finances and accounts of Borrower and its Subsidiaries
with Borrower's and its Subsidiaries' officers, accountants and auditors, all at
such reasonable times and as often as Administrative Agent or any Bank may
reasonably request, all at the expense of Borrower; provided, that, in the
absence of a Default or Event of Default, neither Administrative Agent nor any
Bank will require Borrower to incur any unreasonable cost or expense under this
Section 9.5.
SECTION 9.6 Maintenance of Insurance. Borrower will, and will cause
each of its Subsidiaries to, at all times maintain or cause to be maintained
insurance covering such risks as are customarily carried by businesses similarly
situated, including, without limitation, the following: (a) workmen's
compensation insurance; (b) employer's liability insurance; (c) comprehensive
general public liability and property damage insurance; (d) comprehensive
automobile liability insurance, and (e) such other perils as are customarily
insured against in the oil and gas industry. All loss payable clauses or
provisions in all policies of insurance maintained by Borrower and its
Subsidiaries pursuant to this Section 9.6 shall be endorsed in favor of and made
payable to Administrative Agent for the ratable benefit of Banks, as their
interests may appear. Administrative Agent shall have the right, for the ratable
benefit of the Banks, to collect, and Borrower hereby assigns to Administrative
Agent for the ratable benefit of Banks (and hereby agrees to cause each
Subsidiary of Borrower to assign), any and all monies that may become payable
under any such policies of insurance by reason of damage, loss or destruction of
any of property which stands as security for the Obligations or any part
thereof, and Administrative Agent may, at its election, either apply for the
ratable benefit of Banks all or any part of the sums so collected toward payment
of the Obligations, whether or not such Obligations are then due and payable, in
such manner as Administrative Agent may elect or release same to Borrower or the
applicable Subsidiary of Borrower.
SECTION 9.7 Payment of Taxes and Claims. Borrower will, and will cause
each of its Subsidiaries to, pay (a) all Taxes imposed upon it or any of its
assets or with respect to any of its franchises, business, income or profits
before any material penalty or interest accrues thereon, and (b) all material
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by Law have or
might become a Lien (other
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than a Permitted Encumbrance) on any of its assets; provided, however, no
payment of Taxes or claims shall be required if (i) the amount, applicability or
validity thereof is currently being contested in good faith by appropriate
action promptly initiated and diligently conducted in accordance with good
business practices and no material part of the property or assets of Borrower or
any of its Subsidiaries is subject to any pending levy or execution, (ii)
Borrower and its Subsidiaries, as and to the extent required in accordance with
GAAP, shall have set aside on their books reserves (segregated to the extent
required by GAAP) deemed by them to be adequate with respect thereto, and (iii)
the Borrower has notified Administrative Agent of such circumstances in detail
satisfactory to Administrative Agent.
SECTION 9.8 Compliance with Laws and Documents. Borrower will, and will
cause each of its Subsidiaries to, comply with all Laws, their respective
partnership agreements, certificates (or articles) of incorporation, bylaws,
regulations and similar organizational documents and all Material Agreements to
which Borrower or any of its Subsidiaries is a party, if a violation, alone or
when combined with all other such violations, could result in a Material Adverse
Change.
SECTION 9.9 Operation of Properties and Equipment.
(a) Borrower will, and will cause each of its Subsidiaries to,
maintain, develop and operate (or cause the operator to maintain and operate to
the extent Borrower or any of its Subsidiaries is not the operator) its Mineral
Interests in a good and workmanlike manner, and observe and comply with all of
the terms and provisions, express or implied, of all oil and gas leases relating
to such Mineral Interests so long as such Mineral Interests are capable of
producing Hydrocarbons and accompanying elements in paying quantities.
(b) Borrower will, and will cause each of its Subsidiaries to,
comply in all respects with all contracts and agreements applicable to or
relating to its Mineral Interest or the production and sale of Hydrocarbons and
accompanying elements therefrom.
(c) Borrower will, and will cause each of its Subsidiaries to,
at all times maintain, preserve and keep all operating equipment used with
respect to its Mineral Interests in proper repair, working order and condition,
and make all necessary or appropriate repairs, renewals, replacements, additions
and improvements thereto so that the efficiency of such operating equipment
shall at all times be properly preserved and maintained; provided that, no item
of operating equipment need be so repaired, renewed, replaced, added to or
improved if Borrower shall in good faith determine that such action is not
necessary or desirable for the continued efficient and profitable operation of
the business of Borrower and its Subsidiaries.
SECTION 9.10 Environmental Law Compliance. Borrower will, and will
cause each of its Subsidiaries to, comply with all Applicable Environmental
Laws, including, without limitation, (a) all licensing, permitting, notification
and similar requirements of Applicable Environmental Laws, and (b) all
provisions of all Applicable Environmental Laws regarding storage, discharge,
release, transportation, treatment and disposal of Hazardous Substances.
Borrower will, and will cause each
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of its Subsidiaries to, promptly pay and discharge when due all legal debts,
claims, liabilities and obligations with respect to any clean-up or remediation
measures necessary to comply with Applicable Environmental Laws.
SECTION 9.11 ERISA Reporting Requirements. Borrower shall furnish, or
cause to be furnished, to Administrative Agent:
(a) Promptly and in any event (i) within thirty (30) days
after Borrower or any ERISA Affiliate knows or has reason to know that any ERISA
Event described in clause (a) of the definition of ERISA Event or any event
described in section 4063(a) of ERISA with respect to any Plan of Borrower or
any ERISA Affiliate has occurred, and (ii) within fifteen (15) days after
Borrower or any ERISA Affiliate knows or has reason to know that any other ERISA
Event with respect to any Plan of Borrower or any ERISA Affiliate has occurred
or a request for minimum funding waiver under section 412 of the Code with
respect to any Plan of Borrower or any ERISA Affiliate has been made, a written
notice describing such event and describing what action is being taken or is
proposed to be taken with respect thereto, together with a copy of any notice of
event that is given to the PBGC;
(b) Promptly and in any event within five (5) Domestic
Business Days after receipt thereof by Borrower or any ERISA Affiliate from the
PBGC, copies of each notice received by Borrower or any ERISA Affiliate of the
PBGC's intention to terminate any Plan or to have a trustee appointed to
administer any Plan;
(c) Promptly and in any event within thirty (30) days after
the receipt by Borrower of a request therefor by a Bank, copies of any annual
and other report (including Schedule B thereto) with respect to a Plan filed by
Borrower or any ERISA Affiliate with the United States Department of Labor, the
Internal Revenue Service or the PBGC;
(d) Promptly, and in any event within ten (10) Domestic
Business Days after receipt thereof, a copy of any correspondence Borrower or
any ERISA Affiliate receives from the Plan Sponsor (as defined by section
4001(a)(10) of ERISA) of any Plan asserting withdrawal liability pursuant to
section 4219 or 4202 of ERISA upon Borrower or any ERISA Affiliate, and a
statement from the chief financial officer of Borrower or such ERISA Affiliate
setting forth details as to the events giving rise to such withdrawal liability
and the action which Borrower or such ERISA Affiliate is taking or proposes to
take with respect thereto;
(e) Notification within thirty (30) days of the effective date
thereof of any material increases in the benefits of any existing Plan which is
not a multiemployer plan (as defined in section 4001(a)(3) of ERISA), or the
establishment of any new Plans, or the commencement of contributions to any Plan
to which Borrower or any ERISA Affiliate was not previously contributing;
(f) Notification within five (5) Domestic Business Days after
Borrower or any ERISA Affiliate knows or has reason to know that Borrower or any
such ERISA Affiliate has or
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intends to file a notice of intent to terminate any Plan under a distress
termination within the meaning of section 4041(c) of ERISA and a copy of such
notice; and
(g) Promptly after receipt of written notice of commencement
thereof, notice of all (i) claims made by participants or beneficiaries with
respect to any Plan and (ii) actions, suits and proceedings before any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, affecting Borrower or any ERISA Affiliate with respect to
any Plan, except those which, in the aggregate, if adversely determined would
not result in a Material Adverse Change.
SECTION 9.12 Additional Documents. Borrower will, and will cause each
other Credit Party (to the extent each is party thereto) to, cure promptly any
defects in the creation and issuance of each Note, and the execution and
delivery of this Agreement and the other Loan Papers and, at Borrower's expense,
Borrower shall promptly and duly execute and deliver to each Bank, and cause
each other Credit Party to promptly and duly execute and deliver to each Bank,
upon reasonable request, all such other and further documents, agreements and
instruments in compliance with or accomplishment of the covenants and agreements
of Borrower and each other Credit Party in this Agreement and the other Loan
Papers as may be reasonably necessary or appropriate in connection therewith.
SECTION 9.13 Environmental Review. Not later than thirty (30) days
prior to the date of any acquisition by Borrower of Mineral Interests or related
assets, other than an acquisition of additional interests in Mineral Interests
in which Borrower previously held an interest, Borrower shall deliver to
Administrative Agent a report in form, scope and detail acceptable to
Administrative Agent from environmental engineering firms acceptable to
Administrative Agent, which report or reports shall set forth the results of a
Phase I environmental review of such Mineral Interests and related assets.
ARTICLE 10
NEGATIVE COVENANTS
Borrower agrees that, so long as any Bank has any commitment to lend or
participate in Letter of Credit Exposure hereunder or any amount payable under
any Note remains unpaid or any Letter of Credit remains outstanding:
SECTION 10.1 Incurrence of Debt. Borrower will not, nor will Borrower
permit any of its Subsidiaries to, incur, become or remain liable for any Debt
other than (a) the Obligations, and (b) other Debt in an aggregate amount
outstanding at any time not to exceed $25,000.
SECTION 10.2 Distributions. Borrower will not, nor will Borrower permit
any of its Subsidiaries to, directly or indirectly, declare or pay, or incur any
liability to declare or pay, any
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Distribution; provided, that, so long as no Default or Borrowing Base Deficiency
has then occurred which is continuing Borrower shall be permitted to make
Distributions to EXCO and Venus in an aggregate amount not exceeding (a) for the
period commencing on the Closing Date and ending on December 31, 1999,
$1,050,000, and (b) for any period between Annual Scheduled Redeterminations
thereafter, an amount not exceeding the Distribution Limit for such period;
provided, that, in no event shall Borrower make Distributions exceeding
$1,000,000 in any Fiscal Year.
SECTION 10.3 Negative Pledge. Borrower will not, nor will Borrower
permit any of its Subsidiaries to, create, assume or suffer to exist any Lien on
any asset of Borrower or any of its Subsidiaries other than Permitted
Encumbrances. Borrower will not, nor will Borrower permit any of its
Subsidiaries to, enter into or become bound by any agreement (other than this
Agreement) that prohibits or otherwise restricts the right of Borrower or any of
its Subsidiaries to create, assume or suffer to exist any Lien on any of
Borrower's or any of its Subsidiaries' assets in favor of Administrative Agent
for the ratable benefit of Banks.
SECTION 10.4 Consolidations and Mergers. Borrower will not, nor will
Borrower permit any Subsidiary to, consolidate or merge with or into any other
Person.
SECTION 10.5 Asset Dispositions. Borrower will not, nor will Borrower
permit any of its Subsidiaries to, sell, lease, transfer, abandon or otherwise
dispose of assets with an aggregate value of $100,000 or greater in any Fiscal
Year other than sales of Hydrocarbons produced from Borrower's Mineral Interests
in the ordinary course of business. In no event will Borrower sell, transfer or
dispose of any capital stock or other equity interest, in any Subsidiary of
Borrower nor will any Subsidiary of Borrower issue or sell, any capital stock or
other equity interest or any option, warrant or other right to acquire such
capital stock or equity interest or security convertible into such capital stock
or equity interest to any Person other than the direct parent of such issuer on
the Closing Date.
SECTION 10.6 Amendments to Organizational Documents; Other Material
Agreements. Borrower will not, nor will Borrower permit any of its Subsidiaries
to, enter into or permit any modification or amendment of, or waive any right or
obligation of any Person under, (a) the Operating Agreement, or (b) its
certificate or articles of incorporation, bylaws, partnership agreement, limited
liability company agreement, regulations or other organizational documents.
SECTION 10.7 Use of Proceeds. The proceeds of Borrowings will not be
used for any purpose other than the purposes expressly permitted by Section
2.1(d) hereof. Without limiting the foregoing, none of such proceeds (including,
without limitation, proceeds of Letters of Credit issued hereunder) will be
used, directly or indirectly, for any other purpose, including, without
limitation, the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock, and none of such proceeds will be used
in violation of applicable Law (including, without limitation, the Margin
Regulations). Letters of Credit will be issued hereunder only for the purpose of
securing bids, tenders, bonds, contracts and other obligations entered into in
the ordinary course of Borrower's business. Without limiting the foregoing no
Letters of Credit will be issued hereunder for the
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purpose of providing credit enhancement with respect to any Debt or equity
security of Borrower or any Subsidiary of Borrower or to secure Borrower's or
any of its Subsidiaries' obligations with respect to Hedge Transactions other
than Hedge Transactions with a Bank.
SECTION 10.8 Investments. Borrower will not, nor will Borrower permit
any of its Subsidiaries to, directly or indirectly, make or have outstanding any
Investment other than Permitted Investments other than Investments permitted
pursuant to clause (f) of the definition of Restricted Payments. Borrower will
not create or acquire any Subsidiary.
SECTION 10.9 Transactions with Affiliates. Borrower will not, nor will
Borrower permit any of its Subsidiaries to, engage in any transaction with an
Affiliate unless such transaction is as favorable to such party as could be
obtained in an arm's length transaction with an unaffiliated Person in
accordance with prevailing industry customs and practices. Without limiting the
foregoing, Borrower will not, and Borrower will not permit any of its
Subsidiaries to, pay or become obligated to pay any Distribution to either EXCO
or Venus or any Affiliate of EXCO and Venus other than Distributions expressly
permitted by Section 10.2 hereof. Notwithstanding the foregoing, Borrower shall
be permitted to enter into the Operating Agreement and make the payments to EXCO
expressly contemplated thereof.
SECTION 10.10 ERISA. Except in such instances where an omission or
failure would not result in a Material Adverse Change, Borrower will not, nor
will Borrower permit any of its Subsidiaries to (a) take any action or fail to
take any action which would result in a violation of ERISA, the Code or other
laws applicable to the Plans maintained or contributed to by it or any ERISA
Affiliate, or (b) modify the term of, or the funding obligations or contribution
requirements under any existing Plan, establish a new Plan, or become obligated
or incur any liability under a Plan that is not maintained or contributed to by
a Borrower or any ERISA Affiliate as of the Closing Date.
SECTION 10.11 Hedge Transactions. Borrower will not, nor will Borrower
permit any of its Subsidiaries to, enter into Oil and Gas Hedge Transactions
which would cause the volume of Hydrocarbons with respect to which a settlement
payment is calculated under such Oil and Gas Hedge Transactions to exceed
seventy-five percent (75%) of Borrower's anticipated production from Proved
Producing Mineral Interests during the period from the immediately preceding
settlement date (or the commencement of such Hedge Transaction if there is no
prior settlement date) to such settlement date.
SECTION 10.12 Fiscal Year. Borrower will not change its fiscal year.
SECTION 10.13 Change in Business. Borrower will not engage in any
business other than the business engaged in by Borrower on the date hereof as
described in Section 8.13 hereof.
SECTION 10.14 Restricted Payments. Borrower will not make, and Borrower
will not permit any of its Subsidiaries to, make any Restricted Payment.
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ARTICLE 11
FINANCIAL COVENANTS
Borrower agrees that so long as any Bank has any commitment to lend or
participate in Letter of Credit Exposure hereunder or any amount payable under
any Note remains unpaid or any Letter of Credit remains outstanding:
SECTION 11.1 Current Ratio of Borrower. Borrower will not permit its
ratio of Consolidated Current Assets to its Consolidated Current Liabilities to
be less than 1.0 to 1.0 at any time.
SECTION 11.2 Maximum General and Administrative Expenses. Borrower will
not incur or pay, nor will Borrower permit any of its Subsidiaries to incur or
pay, general and administrative expenses in an aggregate amount exceeding (a)
$100,000 during the period commencing on the Closing Date and ending December
31, 2000, or (b) $200,000 during any Fiscal Year ending on or after December 31,
2000.
ARTICLE 12
DEFAULTS
SECTION 12.1 Events of Default. If one or more of the following events
(collectively "Events of Default" and individually an "Event of Default") shall
have occurred and be continuing:
(a) Borrower shall fail to pay when due any principal on any
Note;
(b) Borrower shall fail to pay when due accrued interest on
any Note or any fees or any other amount payable hereunder and such failure
shall continue for a period of three (3) days following the due date;
(c) Borrower shall fail to observe or perform any covenant or
agreement contained in Article 10 or Article 11 of this Agreement;
(d) Borrower or any other Credit Party shall fail to observe
or perform any covenant or agreement contained in this Agreement or any other
Loan Papers (other than those referenced in Sections 12.1(a), 12.1(b) and
12.1(c)) and such failure continues for a period of twenty (20) days after the
earlier of (i) the date any Authorized Officer of Borrower acquires knowledge of
such failure, or (ii) written notice of such failure has been given to Borrower
by Administrative Agent or any Bank;
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(e) any representation, warranty, certification or statement
made or deemed to have been made by Borrower or any other Credit Party in any
certificate, financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect when made;
(f) Borrower or any other Credit Party shall fail to make any
payment when due on any Debt of such Person in a principal amount equal to or
greater than $10,000 or any other event or condition shall occur which (i)
results in the acceleration of the maturity of any such Debt, or (ii) entitles
the holder of such Debt to accelerate the maturity thereof;
(g) Borrower or any other Credit Party shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
(h) an involuntary case or other proceeding shall be commenced
against Borrower or any other Credit Party seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days; or an
order for relief shall be entered against Borrower or any other Credit Party
under the federal bankruptcy Laws as now or hereafter in effect;
(i) one (1) or more final judgments or orders for the payment
of money aggregating in excess of $100,000 shall be rendered against Borrower or
any other Credit Party and such judgment or order shall continue unsatisfied and
unstayed for thirty (30) days;
(j) any event occurs with respect to any Plan or Plans
pursuant to which Borrower and/or any ERISA Affiliate incur a liability due and
owing at the time of such event, without existing funding therefor, for benefit
payments under such Plan or Plans in excess of $250,000; or (ii) Borrower, any
ERISA Affiliate, or any other "party-in-interest" or "disqualified person", as
such terms are defined in section 3(14) of ERISA and section 4975(e)(2) of the
Code, shall engage in transactions which in the aggregate would reasonably
result in a direct or indirect liability to Borrower or any ERISA Affiliate in
excess of $250,000 under section 409 or 502 of ERISA or section 4975 of the
Code;
(k) Borrower or any Subsidiary of Borrower shall incur
Environmental Liabilities which, individually or when considered in the
aggregate, exceed $250,000;
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(l) this Agreement or any other Loan Paper shall cease to be
in full force and effect or shall be declared null and void or the validity or
enforceability thereof shall be contested or challenged by Borrower or any other
Credit Party , or Borrower or any other Credit Party shall deny that it has any
further liability or obligation under any of the Loan Papers to which it is a
party, or any Lien created by the Loan Papers shall for any reason (other than
the release thereof in accordance with the Loan Papers) cease to be a valid,
first priority, perfected Lien upon any of the Proved Mineral Interests
purported to be covered thereby;
(m) a Material Adverse Change shall occur; or
(n) a Change of Central shall occur;
then, and in every such event, Administrative Agent shall without presentment,
notice or demand (unless expressly provided for herein) of any kind (including,
without limitation, notice of intention to accelerate and acceleration), all of
which are hereby waived, (a) if requested by Required Banks, terminate the
Commitments and they shall thereupon terminate, and (b) if requested by Required
Banks, take such other actions as may be permitted by the Loan Papers including,
declaring the Notes (together with accrued interest thereon) to be, and the
Notes shall thereupon become, immediately due and payable; provided that in the
case of any of the Events of Default specified in Sections 12.1(g) or 12.1(h),
without any notice to Borrower or any other act by Administrative Agent or
Banks, the Commitments shall thereupon terminate and the Notes (together with
accrued interest thereon) shall become immediately due and payable.
ARTICLE 13
AGENTS
SECTION 13.1 Appointment, Powers, and Immunities. Each Bank hereby
irrevocably appoints and authorizes each Agent to act as its agent under this
Agreement and the other Loan Papers with such powers and discretion as are
specifically delegated to each such Agent by the terms of this Agreement and the
other Loan Papers (and any separate agreements entered into among the parties
regarding same), together with such other powers as are reasonably incidental
thereto. No Agent (which term as used in this sentence and in Section 13.5 and
the first sentence of Section 13.6 hereof shall include their Affiliates and
their own and their Affiliates' officers, directors, employees, and agents): (a)
shall have any duties or responsibilities except those expressly set forth in
this Agreement and the other Loan Papers and no Agent shall be a trustee or
fiduciary for any Bank; (b) shall be responsible to Banks for any recital,
statement, representation, or warranty (whether written or oral) made in or in
connection with any Loan Paper or any certificate or other document referred to
or provided for in, or received by any of them under, any Loan Paper, or for the
value, validity, effectiveness, genuineness, enforceability, or sufficiency of
any Loan Paper, or any other document referred to or provided for therein or for
any failure by any Credit Party or any other Person to perform any of its
obligations thereunder; (c) shall be responsible for or have any duty to
ascertain, inquire into, or verify the performance or observance of any
covenants or agreements by any Credit
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Party or the satisfaction of any condition or to inspect the property (including
the books and records) of any Credit Party or any of its Subsidiaries or
Affiliates; (d) shall be required to initiate or conduct any litigation or
collection proceedings under any Loan Paper; and (e) shall be responsible for
any action taken or omitted to be taken by it under or in connection with any
Loan Paper, except for its own gross negligence or willful misconduct. Each
Agent may employ agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such agents or attorneys-in-fact selected by
any such Agent with reasonable care.
SECTION 13.2 Reliance by Agents. Each Agent shall be entitled to rely
upon any certification, notice, instrument, writing, or other communication
(including, without limitation, any thereof by telephone or telecopy) believed
by it to be genuine and correct and to have been signed, sent or made by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel for any Credit Party), independent accountants, and
other experts selected by any such Agent. Each Agent may deem and treat the
payee of any Note as the holder thereof for all purposes hereof unless and until
Administrative Agent receives and accepts an Assignment and Acceptance Agreement
executed in accordance with Section 14.10 hereof. As to any matters not
expressly provided for by this Agreement, no Agent shall be required to exercise
any discretion or take any action, but shall be required to act or to refrain
from acting (and shall be fully protected in so acting or refraining from
acting) upon the instructions of Required Banks, and such instructions shall be
binding on Banks; provided, however, that no Agent shall be required to take any
action that exposes such Agent to personal liability or that is contrary to any
Loan Paper or applicable Law unless it shall first be indemnified to its
satisfaction by Banks against any and all liability and expense which may be
incurred by it by reason of taking any such action.
SECTION 13.3 Defaults. No Agent shall be deemed to have knowledge or
notice of the occurrence of a Default or Event of Default unless Administrative
Agent has received written notice from a Bank, Parent or Borrower specifying
such Default or Event of Default and stating that such notice is a "Notice of
Default". In the event that Administrative Agent receives such a notice of the
occurrence of a Default or Event of Default, Administrative Agent shall give
prompt notice thereof to Banks. Administrative Agent shall (subject to Section
13.2 hereof) take such action with respect to such Default or Event of Default
as shall reasonably be directed by Required Banks; provided that, unless and
until Administrative Agent shall have received such directions, Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interest of Banks.
SECTION 13.4 Rights as Bank. With respect to its Commitment and the
Loans made by it, NationsBank (and any successor acting as Administrative Agent)
in its capacity as a Bank hereunder shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it were not
acting as Administrative Agent, and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include Administrative Agent in its individual
capacity. NationsBank (and any successor acting as Administrative Agent), each
other Agent and their Affiliates may (without having to account therefor to any
Bank) accept deposits from, lend money
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to, make investments in, provide services to, and generally engage in any kind
of lending, trust, or other business with any Credit Party or Affiliates as if
it were not acting as Agent, and NationsBank (and any successor acting as
Administrative Agent), each other Agent and their Affiliates may accept fees and
other consideration from any Credit Party or Affiliates for services in
connection with this Agreement or otherwise without having to account for the
same to Banks.
SECTION 13.5 Indemnification. Banks agree to indemnify each Agent (to
the extent not reimbursed by Parent and/or Borrower hereof, but without limiting
the obligations of Parent and Borrower to so reimburse) ratably in accordance
with their respective Commitments, for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including attorneys' fees), or disbursements of any kind and nature whatsoever
that may be imposed on, incurred by or asserted against any such Agent
(including by any Bank) in any way relating to or arising out of any Loan Paper
or the transactions contemplated thereby or any action taken or omitted by any
Agent under any Loan Paper (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF ANY AGENT); provided that no Bank shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person to be indemnified. Without limitation of the foregoing,
each Bank agrees to reimburse each Agent promptly upon demand for its ratable
share of any costs or expenses payable by Parent and/or Borrower hereunder, to
the extent that any such Agent is not promptly reimbursed for such costs and
expenses by Parent and/or Borrower. The agreements contained in this Section
13.5 shall survive payment and performance in full of the Obligations and all
other amounts payable under this Agreement.
SECTION 13.6 Non-Reliance on Agents and Other Banks. Each Bank agrees
that it has, independently and without reliance on any Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of each Credit Party and decision to enter into this
Agreement and that it will, independently and without reliance upon any Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under the Loan Papers. Except for notices, reports,
and other documents and information expressly required to be furnished to Banks
by Administrative Agent hereunder, no Agent shall have any duty or
responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition, or business of any Credit Party or
their Affiliates that may come into the possession of any such Agent or any of
their Affiliates.
SECTION 13.7 Resignation of Agents. Any Agent may resign at any time by
giving notice thereof to Banks and Borrower. Upon any such resignation, Required
Banks shall have the right to appoint a successor Agent. If no successor Agent
shall have been so appointed by Required Banks and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of Banks, appoint a
successor Agent which shall be a commercial bank organized under the Laws of the
United States of America having combined capital and surplus of at least
$100,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor, such successor shall thereupon succeed to and
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become vested with all the rights, powers, discretion, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article 13 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 Agent.
ARTICLE 14
MISCELLANEOUS
SECTION 14.1 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telecopy or
similar writing) and shall be given, if to Administrative Agent or any Bank, at
its address or telecopier number set forth on Schedule 1 hereto, and if given to
Borrower, at its address or telecopy number set forth on the signature pages
hereof (or in either case, at such other address or telecopy number as such
party may hereafter specify for the purpose by notice to the other parties
hereto). Each such notice, request or other communication shall be effective (a)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 14.1 and the appropriate answerback is received or
receipt is otherwise confirmed, (b) if given by mail, three (3) Domestic
Business Days after deposit in the mails with first class postage prepaid,
addressed as aforesaid or (c) if given by any other means, when delivered at the
address specified in this Section 14.1; provided that notices to Administrative
Agent under Article 2 or 3 shall not be effective until received.
SECTION 14.2 No Waivers. No failure or delay by Administrative Agent or
any Bank in exercising any right, power or privilege hereunder or under any Note
or other Loan Paper shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law or in any of the other Loan Papers.
SECTION 14.3 Expenses; Indemnification.
(a) Borrower agrees to pay on demand all reasonable costs and
expenses of Administrative Agent in connection with the syndication,
preparation, execution, delivery, modification, and amendment of this Agreement,
the other Loan Papers, and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees and expenses of counsel for
Administrative Agent (including the cost of internal counsel) with respect
thereto and with respect to advising Administrative Agent as to its rights and
responsibilities under the Loan Papers. Borrower further agrees to pay on demand
all reasonable costs and expenses of Administrative Agent and Banks, if any
(including, without limitation, reasonable attorneys' fees and expenses and the
cost of internal counsel), in connection with the enforcement (whether through
negotiations, legal proceedings, or otherwise) of the Loan Papers and the other
documents to be delivered hereunder.
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(b) Borrower agrees to indemnify and hold harmless
Administrative Agent and each Bank and each of their Affiliates and their
respective officers, directors, employees, Administrative Agents, and advisors
(each, an "Indemnified Party") from and against any and all claims, damages,
losses, liabilities, costs, and expenses (including, without limitation,
reasonable attorneys' fees) that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection with
or by reason of (including, without limitation, in connection with any
investigation, litigation, or proceeding or preparation of defense in connection
therewith) the Loan Papers, any of the transactions contemplated herein or the
actual or proposed use of the proceeds of the Revolving Loan (INCLUDING ANY OF
THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE INDEMNIFIED PARTY), except to
the extent such claim, damage, loss, liability, cost, or expense is found in a
final, non-appealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct.
In the case of an investigation, litigation or other proceeding to which the
indemnity in this Section 14.3 applies, such indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by
Borrower, its directors, shareholders or creditors or an Indemnified Party or
any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated. Borrower
agrees not to assert any claim against Administrative Agent, any Bank, any of
their Affiliates, or any of their respective directors, officers, employees,
attorneys, Administrative Agents, and advisers, on any theory of liability, for
special, indirect, consequential, or punitive damages arising out of or
otherwise relating to the Loan Papers, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Revolving Loan.
(c) Without prejudice to the survival of any other agreement
of Borrower hereunder, the agreements and obligations of Borrower contained in
this Section 14.3 shall survive the payment in full of the Loans and all other
amounts payable under this Agreement.
SECTION 14.4 Right of Set-off; Adjustments.
(a) Upon the occurrence and during the continuance of any
Event of Default, each Bank (and each of its Affiliates) is hereby authorized at
any time and from time to time, to the fullest extent permitted by Law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Bank (or any of its Affiliates) to or for the credit or the account of
Borrower against any and all of the Obligations, irrespective of whether such
Bank shall have made any demand under this Agreement or Note held by such and
although such obligations may be unmatured. Each Bank agrees promptly to notify
Borrower after any such set-off and application made by such Bank; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Bank under this Section 14.4
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) that such Bank may have.
(b) If any Bank (a "benefitted Bank") shall at any time
receive any payment of all or part of the Loans owing to it, or interest
thereon, or receive any collateral in respect thereof
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(whether voluntarily or involuntarily, by set-off, or otherwise), in a greater
proportion than any such payment to or collateral received by any other Bank, if
any, in respect of such other Bank's Loans owing to it, or interest thereon,
such benefitted Bank shall purchase for cash from the other Banks a
participating interest in such portion of each such other Bank's Loans owing to
it, or shall provide such other Banks with the benefits of any such collateral,
or the proceeds thereof, as shall be necessary to cause such benefitted Bank to
share the excess payment or benefits of such collateral or proceeds ratably with
each Banks; provided, however, that if all or any portion of such excess payment
or benefits is thereafter recovered from such benefitted Bank, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest. Borrower agrees that any Bank so
purchasing a participation from a Bank pursuant to this Section 14.4 may, to the
fullest extent permitted by Law, exercise all of its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Person were the direct creditor of Borrower in the amount of such
participation.
SECTION 14.5 Amendments and Waivers. Any provision of this Agreement or
any other Loan Paper may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by Borrower and the Required Banks (and, if
Article 13 or the rights or duties of any Agent are affected thereby, by such
Agent); provided that no such amendment or waiver shall, unless signed by each
Bank directly affected thereby, (i) increase the Commitments of Banks, (ii)
reduce the principal of or rate of interest on any Loan or any fees or other
amounts payable hereunder, (iii) postpone any date fixed for the payment of any
scheduled installment of principal of or interest on any Loan or any fees or
other amounts payable hereunder or for termination of any Commitment, (iv)
change the percentage of the Commitments or of the unpaid principal amount of
the Notes, or the number of Banks, which shall be required for Banks or any of
them to take any action under this Section 14.5 or any other provision of this
Agreement, or (v) release any guarantor of the Obligations or all or
substantially all of the collateral securing the Obligations.
SECTION 14.6 Survival. All representations, warranties and covenants
made by Borrower or any of its Subsidiaries herein or in any certificate or
other instrument delivered by it or in its behalf under the Loan Papers shall be
considered to have been relied upon by Banks and shall survive the delivery to
Banks of such Loan Papers or the extension of the Loans (or any part thereof),
regardless of any investigation made by or on behalf of Banks. The indemnity
provided in Section 14.3 herein shall survive the repayment of all credit
advances hereunder and/or the discharge or release of any Lien granted hereunder
or in any other Loan Paper, contract or agreement between Borrower or any of its
Subsidiaries and Administrative Agent or any Bank.
SECTION 14.7 Limitation on Interest. Regardless of any provision
contained in the Loan Papers, Banks shall never be entitled to receive, collect,
or apply, as interest on the Revolving Loan, any amount in excess of the Maximum
Lawful Rate, and in the event any Bank ever receives, collects or applies as
interest any such excess, such amount which would be deemed excessive interest
shall be deemed a partial prepayment of principal and treated hereunder as such;
and if the Revolving Loan is paid in full, any remaining excess shall promptly
be paid to Borrower. In determining whether or not the interest paid or payable
under any specific contingency exceeds the Maximum Lawful Rate,
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Borrower and Banks shall, to the extent permitted under applicable Law, (a)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof and (c)
amortize, prorate, allocate and spread, in equal parts, the total amount of the
interest throughout the entire contemplated term of the Notes, so that the
interest rate is the Maximum Lawful Rate throughout the entire term of the
Notes; provided, however, that if the unpaid principal balance thereof is paid
and performed in full prior to the end of the full contemplated term thereof,
and if the interest received for the actual period of existence thereof exceeds
the Maximum Lawful Rate, Banks shall refund to Borrower the amount of such
excess and, in such event, Banks shall not be subject to any penalties provided
by any laws for contracting for, charging, taking, reserving or receiving
interest in excess of the Maximum Lawful Rate.
SECTION 14.8 Invalid Provisions. If any provision of the Loan Papers is
held to be illegal, invalid, or unenforceable under present or future Laws
effective during the term thereof, such provision shall be fully severable, the
Loan Papers shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part thereof, and the remaining
provisions thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable
provision there shall be added automatically as a part of the Loan Papers a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 14.9 Waiver of Consumer Credit Laws. Pursuant to Article
15.10(b) of Chapter 15, Subtitle 79, Revised Civil Statutes of Texas, 1925, as
amended, Borrower agrees that such Chapter 15 shall not govern or in any manner
apply to the Revolving Loan.
SECTION 14.10 Assignments and Participations.
(a) Each Bank may assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its interest in the Revolving Loan, its
Note, and its Commitment); provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Bank or an
assignment of all of a Bank's rights and obligations under
this Agreement, any such partial assignment shall be in an
amount at least equal to $5,000,000 or an integral multiple of
$100,000 in excess thereof;
(iii) each such assignment by a Bank shall be of a constant,
and not varying, percentage of all of its rights and
obligations under this Agreement and its Note; and
(iv) the parties to such assignment shall execute and deliver
to Administrative Agent for its acceptance an Assignment and
Acceptance Agreement (herein so called)
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in the form of Exhibit K hereto, together with any Note
subject to such assignment and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance
Agreement, the assignee thereunder shall be a party hereto and, to the extent of
such assignment, have the obligations, rights, and benefits of a Bank hereunder
and the assigning Bank shall, to the extent of such assignment, relinquish its
rights and be released from its obligations under this Agreement. Upon the
consummation of any assignment pursuant to this Section 14.10(a), the assignor,
Administrative Agent and Borrower shall make appropriate arrangements so that,
if required, new Notes are issued to the assignor and the assignee. If the
assignee is not incorporated under the Laws of the United States of America or a
state thereof, it shall deliver to Borrower and Administrative Agent
certification as to exemption from deduction or withholding of Taxes in
accordance with Section 4.6(d).
(b) Administrative Agent shall maintain at its address set
forth on Schedule 1 hereto, a copy of each Assignment and Acceptance Agreement
delivered to and accepted by it and a register for the recordation of the names
and addresses of Banks and the Commitment of, and principal amount of the
Revolving Loan owing to, each Bank and the Commitment Percentage of each Bank
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and Borrower,
Administrative Agent and Banks may treat each Person whose name is recorded in
the Register as a Bank hereunder for all purposes of this Agreement. The
Register shall be available for inspection by Borrower or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(c) Upon its receipt of an Assignment and Acceptance Agreement
executed by the parties thereto, together with any Note subject to such
assignment and payment of the processing fee, Administrative Agent shall, if
such Assignment and Acceptance Agreement has been completed and is in
substantially the form of Exhibit K hereto, (i) accept such Assignment and
Acceptance Agreement, (ii) record the information contained therein in the
Register, and (iii) give prompt notice thereof to the parties thereto.
(d) Each Bank may sell participations to one or more Persons
in all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and its interest in the Revolving
Loan); provided, however, that (i) such Bank's obligations under this Agreement
shall remain unchanged, (ii) such Bank shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iii) the
participant shall be entitled to the benefit of the yield protection provisions
contained in Article 4 and the right of set-off contained in Section 14.4, and
(iv) Borrower shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement, and
such Bank shall retain the sole right to enforce the obligations of Borrower
relating to its interest in the Revolving Loan and its Note and to approve any
amendment, modification, or waiver of any provision of this Agreement (other
than amendments, modifications, or waivers decreasing the amount of principal of
or the rate at which interest is payable on the Revolving Loan or Note,
extending any scheduled principal payment date
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or date fixed for the payment of interest on the Revolving Loan or Note, or
extending its Commitment).
(e) Notwithstanding any other provision set forth in this
Agreement, any Bank may at any time assign and pledge all or any portion of its
interest in the Revolving Loan and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank. No such assignment shall release the assigning
Bank from its obligations hereunder.
(f) Any Bank may furnish any information concerning Borrower
or any of its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees and participants).
(g) Borrower shall not assign or transfer any rights or
obligations under any Loan Paper or permit any Credit Party to assign or
transfer any rights or obligations under any Loan Paper without first obtaining
all Banks' consent, and any purported assignment or transfer without all Bank's
consent is void.
SECTION 14.11 TEXAS LAW. THIS AGREEMENT, EACH NOTE AND THE OTHER LOAN
PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT TO THE
EXTENT THAT THE LAWS OF ANY STATE IN WHICH ANY PROPERTY INTENDED AS SECURITY FOR
THE OBLIGATIONS IS LOCATED NECESSARILY GOVERN (A) THE PERFECTION AND PRIORITY OF
THE LIENS IN FAVOR OF ADMINISTRATIVE AGENT AND BANKS WITH RESPECT TO SUCH
PROPERTY, AND (B) THE EXERCISE OF ANY REMEDIES (INCLUDING FORECLOSURE) WITH
RESPECT TO SUCH PROPERTY.
SECTION 14.12 Consent to Jurisdiction; Waiver of Immunities.
(a) Borrower hereby irrevocably submits to the jurisdiction of
any Texas State or Federal court sitting in the Northern District of Texas over
any action or proceeding arising out of or relating to this Agreement or any
other Loan Papers, and Borrower hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such Texas
State or Federal court. As an alternative, Borrower irrevocably consents to the
service of any and all process in any such action or proceeding by the mailing
of copies of such process to such Person at its address specified in Section
14.1. Borrower agrees that a final unappealable judgment on any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
(b) Nothing in this Section 14.12 shall affect any right of
Banks to serve legal process in any other manner permitted by law or affect the
right of any Bank to bring any action or
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proceeding against Borrower or its Subsidiaries or their respective properties
in the courts of any other jurisdictions.
(c) To the extent that Borrower has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property,
Borrower hereby irrevocably waives such immunity in respect of its obligations
under this Agreement and the other Loan Papers.
SECTION 14.13 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when Administrative Agent shall have
received counterparts hereof signed by all of the parties hereto or, in the case
of any Bank as to which an executed counterpart shall not have been received,
Administrative Agent shall have received telegraphic or other written
confirmation from such Bank of execution of a counterpart hereof by such Bank.
SECTION 14.14 No Third Party Beneficiaries. It is expressly intended
that there shall be no third party beneficiaries of the covenants, agreements,
representations or warranties herein contained other than third party
beneficiaries permitted pursuant to Section 14.10.
SECTION 14.15 COMPLETE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN
PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG BANKS,
ADMINISTRATIVE AGENT AND BORROWER AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF BANKS, ADMINISTRATIVE
AGENT AND BORROWER. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG BANKS,
ADMINISTRATIVE AGENT AND BORROWER.
SECTION 14.16 WAIVER OF JURY TRIAL. BORROWER, ADMINISTRATIVE AGENT AND
BANKS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN PAPERS
AND FOR ANY COUNTERCLAIM THEREIN.
(signature page to immediately follow)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective Authorized Officers on the day and year first
above written.
BORROWER:
EXUS Energy, LLC,
a Delaware limited liability company
By: /s/ T.W. EUBANK
--------------------------------------------------
Name: T.W. Eubank
------------------------------------------------
Title: President
-----------------------------------------------
Address for Notice:
5735 Pineland, Suite 235
Dallas, TX 75231
Attn: Douglas H. Miller
Fax No.: (214) 368-2087
With a copy to:
Venus Exploration, Inc.
1250 N.E. Loop 410, Suite 1000
San Antonio, Texas 78209
Attn: Eugene L. Ames, Jr.
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BANKS:
NationsBank, N.A.,
a national banking association
By: /s/ DALE T. WILSON
--------------------------------------------------
Name: Dale T. Wilson
Title: Managing Director
Administrative Agent:
NationsBank, N.A.,
a national banking association
By: /s/ DALE T. WILSON
--------------------------------------------------
Name: Dale T. Wilson
Title: Managing Director
78
EXHIBIT A
FACILITY GUARANTY
THIS FACILITY GUARANTY (this "Guaranty") is dated as of the ____ day of
__________, ____, by [ , A ____________] ("Guarantor"), in favor of NATIONSBANK,
N.A. (NationsBank, N.A., acting as a Bank but not as Administrative Agent, and
each of its successors and assigns are collectively referred to herein as
"Noteholders").
W I T N E S S E T H:
WHEREAS, EXUS Energy, LLC ("Borrower"), NationsBank, N.A., as
Administrative Agent ("Administrative Agent") and the financial institutions
parties thereto as Banks, are parties to that certain Credit Agreement (as from
time to time amended, the "Agreement") dated as of June 30, 1999, pursuant to
which Noteholders have made a revolving credit loan to Borrower and agreed to
issue and participate in letters of credit issued on behalf of Borrower (unless
otherwise defined herein, all terms used herein with their initial letter
capitalized shall have the meaning given such terms in the Agreement); and
WHEREAS, Noteholders have required, as a condition to the extension
and/or the continued extension of credit under the Agreement, that Guarantor
execute and deliver this Guaranty; and
WHEREAS, Guarantor has determined that valuable benefits will be
derived by it as a result of the Agreement and the extension of credit made
(and/or to be made) by Noteholders thereunder; and
WHEREAS, Guarantor has further determined that the benefits accruing to
it from the Agreement exceed Guarantor's anticipated liability under this
Guaranty.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged and confessed, Guarantor hereby covenants and
agrees as follows:
15. Guarantor hereby absolutely and unconditionally guarantees the
prompt, complete and full payment when due, no matter how such shall become due,
of the Obligations, and further guarantees that Borrower will properly and
timely perform the Obligations. Notwithstanding any contrary provision in this
Guaranty, however, Guarantor's maximum liability under this Guaranty is limited,
to the extent, if any, required so that its liability is not subject to
avoidance under applicable Debtor Relief Laws (as such term is defined in
Paragraph 8 hereof). [PRECEDING SENTENCE WILL NOT BE INCLUDED IN FACILITY
GUARANTEES EXECUTED BY VENUS AND EXCO.]
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16. If Guarantor is or becomes liable for any indebtedness owing by
Borrower to any Noteholder by endorsement or otherwise than under this Guaranty,
such liability shall not be in any manner impaired or affected hereby, and the
rights of Noteholders hereunder shall be cumulative of any and all other rights
that Noteholders may ever have against Guarantor. The exercise by any Noteholder
of any right or remedy hereunder or under any other instrument, at law or in
equity, shall not preclude the concurrent or subsequent exercise of any other
right or remedy.
17. In the event of default by Borrower in payment of the Obligations,
or any part thereof, when such Obligations become due, either by their terms or
as the result of the exercise of any power to accelerate, Guarantor shall, on
demand, and without further notice of dishonor and without any notice having
been given to Guarantor previous to such demand of the acceptance by Noteholders
of this Guaranty, and without any notice having been given to such Guarantor
previous to such demand of the creating or incurring of such Obligations, pay
the amount due thereon to Noteholders at Administrative Agent's office as set
forth in the Agreement, and it shall not be necessary for any Noteholder, in
order to enforce such payment by Guarantor, first, to institute suit or exhaust
its remedies against Borrower or others liable on such Obligations, to have
Borrower joined with Guarantor in any suit brought under this Guaranty or to
enforce their rights against any security which shall ever have been given to
secure such indebtedness; provided, however, that in the event any Noteholder
elects to enforce and/or exercise any remedies they may possess with respect to
any security for the Obligations prior to demanding payment from Guarantor,
Guarantor shall nevertheless be obligated hereunder for any and all sums still
owing to Noteholders on the Obligations and not repaid or recovered incident to
the exercise of such remedies.
18. Notice to Guarantor of the acceptance of this Guaranty and of the
making, renewing or assignment of the Obligations and each item thereof, are
hereby expressly waived by Guarantor.
19. Each payment on the Obligations shall be deemed to have been made
by Borrower unless express written notice is given to Noteholders at the time of
such payment that such payment is made by Guarantor as specified in such notice.
20. If all or any part of the Obligations at any time are secured,
Guarantor agrees that Administrative Agent and/or Noteholders may at any time
and from time to time, at their discretion and with or without valuable
consideration, allow substitution or withdrawal of collateral or other security
and release collateral or other security or compromise or settle any amount due
or owing under the Agreement or amend or modify in whole or in part the
Agreement or any Loan Paper executed in connection with same without impairing
or diminishing the obligations of Guarantor hereunder. Guarantor further agrees
that if Borrower executes in favor of any Noteholder any collateral agreement,
mortgage or other security instrument, the exercise by any Noteholder of any
right or remedy thereby conferred on such Noteholder shall be wholly
discretionary with such Noteholder, and that the exercise or failure to exercise
any such right or remedy shall in no way impair or diminish the obligation of
Guarantor hereunder. Guarantor further agrees that Noteholders and
Administrative Agent shall not be liable for their failure to use diligence in
the collection of the Obligations or in preserving the liability of any Person
liable for the Obligations, and Guarantor
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hereby waives presentment for payment, notice of nonpayment, protest and notice
thereof (including, notice of acceleration), and diligence in bringing suits
against any Person liable on the Obligations, or any part thereof.
21. Guarantor agrees that Noteholders, in their discretion, may a)
bring suit against all guarantors (including, without limitation, Guarantor
hereunder) of the Obligations jointly and severally or against any one or more
of them, b) compound or settle with any one or more of such guarantors for such
consideration as Noteholders may deem proper, and c) release one or more of such
guarantors from liability hereunder, and that no such action shall impair the
rights of Noteholders to collect the Obligations (or the unpaid balance thereof)
from other such guarantors of the Obligations, or any of them, not so sued,
settled with or released. Guarantor agrees, however, that nothing contained in
this paragraph, and no action by Noteholders permitted under this paragraph,
shall in any way affect or impair the rights or obligations of such guarantors
among themselves.
22. Guarantor represents and warrants to each Noteholder that a)
Guarantor is a corporation, limited liability company or partnership duly
organized and validly existing under the laws of the jurisdiction of its
incorporation or formation; and b) Guarantor possesses all requisite authority
and power to authorize, execute, deliver and comply with the terms of this
Guaranty; this Guaranty has been duly authorized and approved by all necessary
action on the part of Guarantor and constitutes a valid and binding obligation
of Guarantor enforceable in accordance with its terms, except as the enforcement
thereof may be limited by applicable Debtor Relief Laws; and no approval or
consent of any court or governmental entity is required for the authorization,
execution, delivery or compliance with this Guaranty which has not been obtained
(and copies thereof delivered to Noteholders). As used in this Guaranty, the
term "Debtor Relief Laws" means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments or similar debtor relief Laws from time to time in effect affecting
the rights of creditors generally.
23. Guarantor covenants and agrees that until the Obligations are paid
and performed in full, except as otherwise provided in the Agreement or unless
Noteholders give their prior written consent to any deviation therefrom, it will
a) at all times maintain its existence and authority to transact business in any
State or jurisdiction where Guarantor has assets and operations, b) promptly
deliver to Noteholders and to Administrative Agent such information respecting
its business affairs, assets and liabilities as Noteholders may reasonably
request, and c) duly and punctually observe and perform all covenants applicable
to Guarantor under the Agreement and the other Loan Papers. The failure of
Guarantor to comply with the terms of this paragraph shall be an Event of
Default under the Agreement.
24. This Guaranty is for the benefit of Noteholders, their successors
and assigns, and in the event of an assignment by Noteholders (or their
successors or assigns) of the Obligations, or any part thereof, the rights and
benefits hereunder, to the extent applicable to the Obligations so assigned,
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may be transferred with such Obligations. This Guaranty is binding upon
Guarantor and its successors and assigns.
25. No modification, consent, amendment or waiver of any provision of
this Guaranty, nor consent to any departure by Guarantor therefrom, shall be
effective unless the same shall be in writing and signed by each Noteholder, and
then shall be effective only in the specific instance and for the purpose for
which given. No notice to or demand on Guarantor in any case shall, of itself,
entitle Guarantor to any other or further notice or demand in similar or other
circumstances. No delay or omission by Noteholders in exercising any power or
right hereunder shall impair any such right or power or be construed as a waiver
thereof or any acquiescence therein, nor shall any single or partial exercise of
any such power preclude other or further exercise thereof, or the exercise of
any other right or power hereunder. All rights and remedies of Noteholders
hereunder are cumulative of each other and of every other right or remedy which
Noteholders may otherwise have at law or in equity or under any other contract
or document, and the exercise of one or more rights or remedies shall not
prejudice or impair the concurrent or subsequent exercise of other rights or
remedies.
26. No provision herein or in any promissory note, instrument or any
other Loan Paper executed by Borrower or Guarantor evidencing the Obligations
shall require the payment or permit the collection of interest in excess of the
Maximum Lawful Rate. If any excess of interest in such respect is provided for
herein or in any such promissory note, instrument, or any other Loan Paper, the
provisions of this paragraph shall govern, and neither Borrower nor Guarantor
shall be obligated to pay the amount of such interest to the extent that it is
in excess of the amount permitted by law. The intention of the parties being to
conform strictly to any applicable federal or state usury Laws now in force, all
promissory notes, instruments and other Loan Papers executed by Borrower or
Guarantor evidencing the Obligations shall be held subject to reduction to the
amount allowed under said usury Laws as now or hereafter construed by the courts
having jurisdiction.
27. If Guarantor should breach or fail to perform any provision of this
Guaranty, Guarantor agrees to pay Noteholders all costs and expenses (including
court costs and reasonable attorneys fees) incurred by Noteholders in the
enforcement hereof.
28. (a) The liability of Guarantor under this Guaranty shall in no
manner be impaired, affected or released by the insolvency, bankruptcy, making
of an assignment for the benefit of creditors, arrangement, compensation,
composition or readjustment of Borrower, or any proceedings affecting the
status, existence or assets of Borrower or other similar proceedings instituted
by or against Borrower and affecting the assets of Borrower.
(b) Guarantor acknowledges and agrees that any interest on any
portion of the Obligations which accrues after the commencement of any
proceeding referred to in clause (a) above (or, if interest on any portion of
the Obligations ceases to accrue by operation of law by reason of the
commencement of said proceeding, such interest as would have accrued on such
portion of the Obligations if said proceedings had not been commenced) shall be
included in the Obligations because it is the intention of Guarantor,
Administrative Agent and Noteholders that the Obligations which are
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guaranteed by Guarantor pursuant to this Guaranty should be determined without
regard to any rule of law or order which may relieve Borrower of any portion of
such Obligations. Guarantor will permit any trustee in bankruptcy, receiver,
debtor in possession, assignee for the benefit of creditors or similar Person to
pay Noteholders or Administrative Agent, or allow the claim of Noteholders or
Administrative Agent in respect of, any such interest accruing after the date on
which such proceeding is commenced.
(c) In the event that all or any portion of the Obligations
are paid by Borrower, the obligations of Guarantor hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from Administrative Agent or any Noteholder as a
preference, fraudulent transfer or otherwise, and any such payments which are so
rescinded or recovered shall constitute Obligations for all purposes under this
Guaranty.
29. Guarantor understands and agrees that any amounts of Guarantor on
account with any Noteholder may be offset to satisfy the obligations of
Guarantor hereunder.
30. Guarantor hereby subordinates and makes inferior any and all
indebtedness now or at any time hereafter owed by Borrower to Guarantor to the
Obligations evidenced by the Agreement and agrees after the occurrence of a
Default or Event of Default under the Agreement, not to permit Borrower to
repay, or to accept payment from Borrower of, such indebtedness or any part
thereof without the prior written consent of Noteholders. Without limiting the
foregoing, Guarantor hereby acknowledges and agrees that it will not accept from
Borrower or any of its Subsidiaries any, distribution, dividend, reimbursement,
repayment, payment or transfer of cash or assets of any type which is prohibited
under or pursuant to the terms of the Agreement (a "Prohibited Payment") and to
the extent any such Prohibited Payment is received by Guarantor, Guarantor will
hold the same in trust for the benefit of the Noteholders and promptly pay the
same to Administrative Agent for application to the Obligations.
31. During the period that Noteholders have any commitment to lend or
participate in Letter of Credit Exposure under the Loan Papers, or any amount
payable under any Note remains unpaid or any Letter of Credit remains
outstanding, and throughout any additional preferential period subsequent
thereto, Guarantor hereby waives any and all rights of subrogation to which
Guarantor may otherwise be entitled against Borrower, or any other guarantor of
the Obligations, as a result of any payment made by Guarantor pursuant to this
Guaranty.
32. As of the date hereof, the fair saleable value of the property of
Guarantor is greater than the total amount of liabilities (including contingent
and unliquidated liabilities) of Guarantor, and Guarantor is able to pay all of
its liabilities as such liabilities mature and Guarantor does not have
unreasonably small capital within the meaning of Section 548, Title 11, United
States Code, as amended. In computing the amount of contingent or liquidated
liabilities, such liabilities have been computed at the amount which, in light
of all the facts and circumstances existing as of the date
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hereof, represents the amount that can reasonably be expected to become an
actual or matured liability.
33. If any provision of this Guaranty is held to be illegal, invalid,
or unenforceable, such provision shall be fully severable; this Guaranty shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Guaranty a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid and enforceable.
34. (a) Except to the extent required for the exercise of the remedies
provided in the other security instruments, Guarantor hereby irrevocably submits
to the nonexclusive jurisdiction of any Texas state or federal court over any
action or proceeding arising out of or relating to this Guaranty or any other
Loan Paper, and Guarantor hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such Texas state or
federal court. Guarantor hereby irrevocably waives, to the fullest extent
permitted by Law, any objection which it may now or hereafter have to the laying
of venue of any Litigation (as hereinafter defined) arising out of or in
connection with this Guaranty or any of the Loan Papers brought in district
courts of Dallas County, Texas, or in the United States District Court for the
Northern District of Texas, Dallas Division. Guarantor hereby irrevocably waives
any claim that any Litigation brought in any such court has been brought in an
inconvenient forum. Guarantor hereby irrevocably consents to the service of
process out of any of the aforementioned courts in any such Litigation by the
mailing of copies thereof by certified mail, return receipt requested, postage
prepaid, to Guarantor's office at __________________________________________.
Guarantor irrevocably agrees that any legal proceeding against Noteholders shall
be brought in the district courts of Dallas County, Texas, or in the United
States District Court for the Northern District of Texas, Dallas Division.
Nothing herein shall affect the right of any Noteholder to commence legal
proceedings or otherwise proceed against Guarantor in any jurisdiction or to
serve process in any manner permitted by applicable Law. As used herein, the
term "Litigation" means any proceeding, claim, lawsuit or investigation (1)
conducted or threatened by or before any court or governmental department,
commission, board, bureau, agency or instrumentality of the United States or of
any state, commonwealth, nation, territory, possession, county, parish, or
municipality, whether now or hereafter constituted or existing, or (2) pending
before any public or private arbitration board or panel.
(b) Nothing in this Paragraph 20 shall affect any right of any
Noteholder to serve legal process in any other manner permitted by Law or affect
the right of any Noteholder to bring any action or proceeding against Guarantor
in the courts of any other jurisdictions.
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(c) To the extent that Guarantor has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property,
Guarantor hereby irrevocably waives such immunity in respect of its obligations
under this Guaranty and the other Loan Papers.
35. THIS GUARANTY AND THE OTHER LOAN PAPERS COLLECTIVELY REPRESENT THE
FINAL AGREEMENT BY AND AMONG NOTEHOLDERS, ADMINISTRATIVE AGENT, AND GUARANTOR
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF NOTEHOLDERS, ADMINISTRATIVE AGENT, AND GUARANTOR. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS AMONG NOTEHOLDERS, ADMINISTRATIVE AGENT, AND
GUARANTOR.
36. GUARANTOR, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RIGHT TO A JURY
TRIAL, IN ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR
ANY OF THE OTHER LOAN PAPERS.
37. THIS GUARANTY AND THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
EXECUTED and effective as of the date first above written.
GUARANTOR:
----------------------
By:
-----------------------------
Name:
--------------------------
Title:
------------------------
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EXHIBIT B
NOTE
$50,000,000 Dallas, Texas June 30, 1999
FOR VALUE RECEIVED, the undersigned, EXUS Energy, LLC, a Delaware
limited liability company ("Borrower"), promises to pay to the order of
NationsBank, N.A. ("Bank"), at the offices of NationsBank, N.A., as
Administrative Agent ("Administrative Agent"), at 901 Main Street, 64th Floor,
Dallas, Texas 75202, the principal sum of Fifty Million Dollars ($50,000,000),
or so much thereof as may be advanced and outstanding, together with interest,
as hereinafter described.
This Note has been executed and delivered pursuant to, and is subject
to and governed by, the terms of that certain Credit Agreement dated as of June
30, 1999 (as hereafter renewed, extended, amended, or supplemented, the
"Agreement") among Borrower, Bank, certain other financial institutions listed
on Schedule 1 thereto and Administrative Agent. Unless otherwise defined herein
or unless the context hereof otherwise requires, each term used herein with its
initial letter capitalized has the meaning given to such term in the Agreement.
Borrower also promises to pay interest on the unpaid principal amount
hereof in like money at the offices of Administrative Agent above referenced
from the date hereof at the rates applicable to amounts outstanding under the
Revolving Loan provided in the Agreement and on the dates specified in the
Agreement.
The principal balance of this Note shall be paid at the times and in
the amounts required by the Agreement. The entire outstanding principal balance
hereof and all accrued but unpaid interest thereon shall be due and payable in
full on the Termination Date.
Upon and subject to the terms and conditions of the Agreement, Borrower
shall be entitled to prepay the principal of or interest on this Note from time
to time and at any time, in whole or in part.
Upon the occurrence and continuance of an Event of Default, and upon
the conditions stated in the Agreement, Administrative Agent may, at its option,
and shall, to the extent required in accordance with the terms of the Agreement,
declare the entire unpaid principal of and accrued interest on this Note
immediately due and payable (provided that, upon the occurrence of certain
Events of Default, and upon the conditions stated in the Agreement, such
acceleration shall be automatic), without notice (except as otherwise required
by the Agreement), demand, or presentment, all of which are hereby waived, and
the holder hereof shall have the right to offset against this Note any sum or
sums owed by the holder hereof to Borrower. All past-due principal of and, to
the extent permitted by law, accrued interest on this Note shall, at the option
of the holder hereof, bear interest
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at the lesser of (a) the Maximum Lawful Rate, or (b) the Base Rate plus 2% until
paid from the due date.
Notwithstanding the foregoing, if at any time, any rate of interest
calculated under Section 2.3 of the Agreement (the "Contract Rate") exceeds the
Maximum Lawful Rate, the rate of interest hereunder shall be limited to the
Maximum Lawful Rate, but any subsequent reductions in the Contract Rate shall
not reduce the rate of interest on this Note below the Maximum Lawful Rate until
the total amount of interest accrued equals the amount of interest which would
have accrued (including the amount of interest which would have accrued prior to
the payment or prepayment of any portion of this Note) if the Contract Rate had
at all times been in effect. In the event that at maturity (stated or by
acceleration), or at final payment of this Note, the total amount of interest
paid or accrued on this Note is less than the amount of interest which would
have accrued if the Contract Rate had at all times been in effect with respect
thereto, then at such time Borrower shall pay to the holder of this Note an
amount equal to the difference between (a) the lesser of the amount of interest
which would have accrued if the Contract Rate had at all times been in effect
and the amount of interest which would have accrued if the Maximum Lawful Rate
had at all times been in effect, and (b) the amount of interest actually paid or
accrued on this Note.
EXUS Energy, LLC, a Delaware limited
liability company
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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LOANS, MATURITIES, AND
PAYMENTS OF PRINCIPAL AND INTEREST
=================================================================================================================================
Bank's
Commitment Expiration Rate of Amount of Amount Unpaid
Borrowing Percentage of Interest Interest Principal of Interest Principal Notation
Date of Period Applicable to Paid Paid Balance Made By
Borrowing Borrowing
============= ============== ================ ================= ================ =============== ============= =============
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- ------------- -------------- ---------------- ----------------- ---------------- --------------- ------------- -------------
- ------------- -------------- ---------------- ----------------- ---------------- --------------- ------------- -------------
- ------------- -------------- ---------------- ----------------- ---------------- --------------- ------------- -------------
- ------------- -------------- ---------------- ----------------- ---------------- --------------- ------------- -------------
- ------------- -------------- ---------------- ----------------- ---------------- --------------- ------------- -------------
- ------------- -------------- ---------------- ----------------- ---------------- --------------- ------------- -------------
- ------------- -------------- ---------------- ----------------- ---------------- --------------- ------------- -------------
- ------------- -------------- ---------------- ----------------- ---------------- --------------- ------------- -------------
- ------------- -------------- ---------------- ----------------- ---------------- --------------- ------------- -------------
============= ============== ================ ================= ================ =============== ============= =============
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EXHIBIT C
OPERATING AGREEMENT
[to be attached]
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EXHIBIT D
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") is executed and effective as
of June 30, 1999, by EXUS Energy, LLC, a Delaware limited liability company
("Debtor"), in favor of NationsBank, N.A., as Administrative Agent for the Banks
are parties to the Credit Agreement (as herein defined) ("Secured Party").
W I T N E S S E T H :
WHEREAS, Secured Party, Debtor and the financial institutions listed
under the designation "Banks" on the signature pages thereto (the "Banks") are
parties to that certain Credit Agreement dated as of June 30, 1999 pursuant to
which the Banks have agreed to provide Debtor with a multiple advance term
credit facility, all on the terms more particularly set forth therein (such
Credit Agreement, as the same may be modified, amended, renewed, extended or
restated from time to time is hereinafter referred to as the "Credit Agreement";
unless otherwise defined herein, terms used herein with their initial letter
capitalized shall have the meaning given such terms in the Credit Agreement);
and
WHEREAS, the Banks have required, as a condition precedent to making
the Initial Borrowing under the Credit Agreement, that Debtor execute and
deliver this Agreement to Secured Party for the ratable benefit of the Banks.
NOW, THEREFORE, in consideration of these premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and confessed, and intending to be legally bound hereby, Debtor
hereby agrees with Secured Party, for the ratable benefit of Banks as follows:
1. Defined Terms. As used herein, the following terms shall have the
following meanings:
"Account Debtor" means, with respect to any Account (as herein
defined) of Debtor, the party that is liable to Debtor with respect to
such Account.
"Accounts" has the meaning assigned in the UCC.
"Chattel Paper" has the meaning assigned in the UCC.
"Collateral" has the meaning assigned to it in Section 2 of
this Agreement.
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"Contracts" means any and all contracts between Debtor and any
other party as the same may from time to time be amended, supplemented
or otherwise modified, including, without limitation, (a) all rights of
Debtor to receive monies due and to become due to it thereunder or in
connection therewith, (b) all rights of Debtor to damages arising out
of, or for, breach or default in respect thereof, and (c) all rights of
Debtor to perform and to exercise all remedies thereunder. Without
limiting the foregoing, "Contracts" shall include that certain
Operating Agreement dated March 1, 1999 by and between Debtor and EXCO
Resources, Inc., a Texas corporation, and all rights of Debtor
thereunder.
"Copyright License" means any written agreement now or
hereafter in existence granting to Debtor any right to use any
Copyright.
"Copyrights" means (a) all copyrights, rights and interests in
copyrights, works protectable by copyright, copyright registrations and
copyright applications now owned or hereafter created or acquired by
Debtor, (b) all renewals of any of the foregoing, (c) all income,
royalties, damages and payments now or hereafter due and/or payable
under any of the foregoing, including, without limitation, damages or
payments for past or future infringements of any of the foregoing, (d)
the right to sue for past, present and future infringements of any of
the foregoing, (e) all rights corresponding to any of the foregoing
throughout the world, and (f) all goodwill associated with and
symbolized by any of the foregoing.
"Deposit Account" has the meaning assigned in the UCC.
"Document" has the meaning assigned in the UCC.
"Equipment" has the meaning assigned in the UCC.
"General Intangibles" has the meaning assigned in the UCC.
"Instrument" has the meaning assigned in the UCC.
"Intellectual Property" means collectively all of the
following: Copyrights, Copyright Licenses, Patents, Patent Licenses, Trademarks
and Trademark Licenses.
"Inventory" has the meaning assigned in the UCC.
"Mortgage" means that certain Mortgage, Deed of Trust,
Security Agreement, Financing Statement and Assignment of Production of
even date herewith, granted by Debtor to Secured Party and filed (or to
be filed) of record in the real property records of Jackson Parish,
Louisiana.
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"Patent License" means any written agreement now or hereafter
in existence granting to Debtor any right to use any invention on which
a Patent is in existence.
"Patents" means (a) all patents and patent applications now
owned or hereafter created or acquired by Debtor and the inventions and
improvements described and claimed therein, and patentable inventions,
(b) the examinations, reissues, divisions, continuations, renewals,
extensions and continuations-in-part of any of the foregoing, (c) all
income, royalties, damages or payments now and hereafter due and/or
payable under any of the foregoing with respect to any of the
foregoing, including, without limitation, damages or payments for past
or future infringements of any of the foregoing, (d) the right to sue
for past, present and future infringements of any of the foregoing, (e)
all rights corresponding to any of the foregoing throughout the world,
(f) all inventions, designs, proprietary or technical information,
know-how, other data or information, software, databases, all
embodiments or fixations thereof and related documentation, and all
other trade secret rights not described above, and (g) all goodwill
associated with any of the foregoing.
"Permitted Encumbrances" has the meaning given such term in
the Credit Agreement.
"Proceeds" means all "Proceeds" as such term is defined in the
UCC.
"Trademark License" means any written agreement now or
hereafter in existence granting to Debtor any right to use any
Trademark.
"Trademarks" means (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, all
elements of package or trade dress goods and all general intangibles of
like nature together with the goodwill of Debtor's business connected
with the use thereof and symbolized thereby, service marks, logos,
other business identifiers, prints and labels on which any of the
foregoing have appeared or appear, all registrations and recordings
thereof, and all applications in connection therewith including
registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political
subdivision thereof, (b) all reissues, extensions or renewals thereof,
(c) all income, royalties, damages and payments now or hereafter due
and/or payable under any of the foregoing or with respect to any of the
foregoing including damages or payments for past or future
infringements of any of the foregoing, (d) the right to sue for past,
present and future infringements of any of the foregoing, (e) all
rights corresponding to any of the foregoing throughout the world, and
(f) all goodwill associated with and symbolized by any of the
foregoing.
"UCC" means the Uniform Commercial Code as from time to time
in effect in each of the jurisdictions where the Collateral or a
portion thereof is situated.
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"Vehicles" means all cars, trucks, trailers, construction and
earth moving equipment and other vehicles covered by a certificate of
title under the law of any state and all tires and other appurtenances
to any of the foregoing.
2. Grant of Security Interest. As collateral security for the prompt
and complete payment and performance when due (whether at the stated maturity,
by acceleration or otherwise) of the Obligations, Debtor hereby assigns,
mortgages, pledges and hypothecates to Secured Party, and hereby grants to
Secured Party for the ratable benefit of the Banks, a continuing first and prior
lien and security interest in all of the following property wherever located and
now owned or at any time hereafter acquired by Debtor or in which Debtor now has
or at any time in the future may acquire any right, title or interest
(collectively, the "Collateral"), subject to no prior Liens other than Permitted
Encumbrances:
(1) all Accounts;
(2) all Chattel Paper;
(3) all Contracts;
(4) all Copyrights;
(5) all Copyright Licenses;
(6) all Deposit Accounts;
(7) all Documents;
(8) all Equipment;
(9) all General Intangibles;
(10) all Instruments;
(11) all Inventory;
(12) all Patents;
(13) all Patent Licenses;
(14) all Trademarks;
(15) all Trademark Licenses;
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(16) all Vehicles;
(17) all books and records of Debtor (including, without
limitation, customer lists, credit files, computer programs, printouts,
and other computer materials and records);
(18) all other deposit accounts, monies and other property and
assets of Debtor of any kind, whether in Debtor's possession or under
the control of Secured Party or a bailee; and
(19) to the extent not otherwise included, all accessions to,
substitutions for and all replacements, betterments, Proceeds and
products of any and all of the foregoing, including, without
limitation, proceeds of and unearned premiums with respect to insurance
policies insuring any of the foregoing.
3. Rights of Secured Party; Limitations on Secured Party's and Bank's
Obligations. (a) Debtor Remains Liable under Accounts, Chattel Paper and
Contracts. Anything herein to the contrary notwithstanding, Debtor shall remain
liable under each Account, each item of Chattel Paper, and each Contract to
observe and perform all the conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any agreement
constituting a part of or giving rise to each such Account or item of Chattel
Paper and in accordance with and pursuant to the terms and provisions of each
such Contract. Neither Secured Party nor any Bank shall have any obligation or
liability under any Account or item of Chattel Paper (or any agreement or item
of Chattel Paper giving rise thereto) or Contract by reason of or arising out of
this Agreement or the receipt by Secured Party or any Bank of any payment
relating to such Account, item of Chattel Paper or Contract pursuant hereto, nor
shall Secured Party be obligated in any manner to perform any of the obligations
of Debtor under or pursuant to any Account or item of Chattel Paper (or any
agreement giving rise thereto) or under or pursuant to any Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party under
any Account (or any agreement giving rise thereto) or under any Contract, to
present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
(b) Notice to Account Debtor, Obligors under Chattel Paper and
Contracting Parties. At any time during the existence of an Event of Default,
Secured Party may (and upon request of Secured Party, Debtor shall) notify
Account Debtors on the Accounts, obligors with respect to Chattel Paper and
parties to the Contracts that the Accounts, the Chattel Paper and the Contracts
have been assigned to Secured Party and that payments in respect thereof shall
be made directly to Secured Party. At any time during the continuance of an
Event of Default, or at any time before an Event of Default and with the prior
consent of Debtor, which consent shall not be unreasonably withheld, Secured
Party may in its own name or in the name of others, communicate with Account
Debtors on the Accounts, obligors with respect to the Chattel Paper and parties
to the Contracts to
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verify with them to its satisfaction the existence, amount and terms of any
Accounts, Chattel Paper or Contracts.
(c) Collections on Accounts and Contracts. Secured Party hereby
authorizes Debtor to collect the Accounts, Chattel Paper and Contracts, subject
to Secured Party's direction and control, and Secured Party may curtail or
terminate said authority at any time that an Event of Default has occurred which
is continuing. All Proceeds while held by Secured Party (or by Debtor in trust
for Secured Party) shall continue to be collateral security for all of the
Obligations and shall not constitute payment thereof until applied as
hereinafter provided. At Secured Party's request after an Event of Default,
Debtor shall deliver to Secured Party all original and other documents
evidencing, and relating to, the agreements and transactions which gave rise to
the Accounts and Contracts, including, without limitation, all original orders,
invoices and shipping receipts. At Secured Party's request prior to an Event of
Default, Debtor shall deliver to Secured Party certified copies of any and all
such documents.
4. Representations and Warranties. Debtor hereby represents and
warrants that:
(a) Title; No Other Liens. Except for the Permitted Encumbrances,
Debtor is the legal and beneficial owner of each item of the Collateral free and
clear of any and all Liens or claims of others, and no other person or entity
has any right, title or interest therein. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as may have
been filed in favor of Secured Party or in connection with a Permitted
Encumbrance. No item of Chattel Paper contains any legend or other notation
indicating that it is subject to a Lien in favor of any Person other than
Secured Party or constitutes property or assets of any Person other than Debtor.
(b) Perfected First Priority Liens. Except for and subject only to the
Permitted Encumbrances, the Liens and security interests evidenced hereby
constitute first priority perfected Liens on the Collateral in favor of Secured
Party, which are prior to all other Liens on the Collateral created by Debtor
and in existence on the date hereof and which are enforceable as such against
all creditors of and purchasers from Debtor and against any owner or purchaser
of the real property where any of the Collateral is located and any present or
future creditor obtaining a Lien on such real property.
(c) No Defenses. No dispute, right of setoff, counterclaim or defense
exists with respect to all or any part of the Collateral.
(d) Consents. No consent of any party (other than Debtor) to any
Contract any obligor with respect to any Chattel Paper or any Account Debtor in
respect of any Account is required in connection with the execution, delivery
and performance of this Agreement. Each Account, each item of Chattel Paper and
each Contract is in full force and effect and constitutes a valid and legally
enforceable obligation of the obligor in respect thereof or the parties thereto,
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors'
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rights generally, and (ii) the availability of equitable remedies may be limited
by equitable principals of general applicability. No consent or authorization
of, filing with or other act by or in respect of any Governmental Authority is
required in connection with the execution, delivery, performance, validity or
enforceability of any of the Accounts, Chattel Paper or Contracts by any party
thereto other than those which have been duly obtained, made or performed, and
the same are in full force and effect and do not subject the scope of any such
Account, item of Chattel Paper or Contract to any material adverse limitation,
either specific or general in nature. Neither Debtor, nor (to the best of
Debtor's knowledge) any other party to any Account, item of Chattel Paper or
Contract is in default or is likely to become in default in the performance or
observance of any of the terms thereof. The right, title and interest of Debtor
in, to and under each Account, each item of Chattel Paper and each Contract are
not subject to any defense, offset, counterclaim or other claim, nor have any of
the foregoing been asserted or alleged against Debtor as to any of the
foregoing. Debtor has delivered to Secured Party a complete and correct copy of
each Contract, including all amendments, supplements and other modifications
thereto. No amount payable to Debtor under or in connection with any Account,
item of Chattel Paper or Contract referred to above is evidenced by any
Instrument which has not been delivered to Secured Party.
(e) [Intentionally Deleted].
(f) Chief Executive Office; Employer ID Number. Debtor's principal
place of business (or, if Debtor has more than one principal place of business,
Debtor's chief executive office) is located at the address set forth on Schedule
I hereto. Debtor's Employer Identification Number is set forth on Schedule I
hereto.
(g) Farm Products. None of the Collateral constitutes, or is the
Proceeds of, farm products.
(h) Intellectual Property. Debtor does not own or hold any right or
interest in Intellectual Property with a value (considered in the aggregate) in
excess of $25,000.
(i) Chattel Paper. Debtor does not own or hold any Chattel Paper.
(j) Instruments. Debtor does not own or hold any Instruments.
(k) Vehicles. Debtor does not own or hold any Vehicles.
(l) Deposit Accounts. Schedule II hereto is a true and correct list of
all Deposit Accounts maintained by Debtor on the date hereof.
(m) Power and Authority; Authorization. Debtor has the power and
authority and the legal right to execute and deliver, to perform its obligations
under, and to grant the Liens and security interests on the Collateral pursuant
to, this Agreement and has taken all necessary action to authorize
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its execution, delivery and performance of, and grant of the Liens and security
interests on the Collateral pursuant to, this Agreement.
(n) Enforceability. This Agreement constitutes a legal, valid and
binding obligation of Debtor enforceable in accordance with its terms, except as
(i) the enforceability hereof may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally, and (ii)
the availability of equitable remedies may be limited by equitable principles of
general applicability.
(o) No Conflict. The execution, delivery and performance of this
Agreement will not violate any provision of any Law or contractual obligation of
Debtor and will not result in the creation or imposition of any Lien on any of
the properties or revenues of Debtor pursuant to any Law or contractual
obligation of Debtor, except as contemplated hereby.
(p) No Consents, etc. No consent or authorization of, filing with, or
other act by or in respect of, any Governmental Authority and no consent of any
other party (including, without limitation, any creditor of Debtor), is required
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement.
5. Covenants. Debtor covenants and agrees with Secured Party for the
ratable benefit of the Banks that, from and after the date of this Agreement
until the Obligations are paid in full:
(a) Further Documentation; Pledge of Instruments. At any time and from
time to time, upon the written request of Secured Party, and at the sole expense
of Debtor, Debtor will promptly and duly execute and deliver such further
assignments, certificates, supplemental writings, instruments and documents and
take such further action as Secured Party may reasonably request for the purpose
of obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the UCC in effect in any jurisdiction
with respect to the Liens and security interests evidenced hereby. Debtor also
hereby authorizes Secured Party to file any such financing or continuation
statement without the signature of Debtor to the extent permitted by applicable
law. A carbon, photographic or other reproduction of this Agreement shall be
sufficient as a financing statement for filing in any jurisdiction. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note or other Instrument, such Instrument
shall be immediately delivered to Secured Party, shall be duly endorsed in a
manner satisfactory to Secured Party, and shall constitute Collateral pursuant
to this Agreement.
(b) Indemnification. Debtor agrees to pay, and to indemnify, defend and
hold Secured Party and each Bank harmless from, any and all liabilities, costs
and expenses (including, without limitation, reasonable legal fees and expenses)
(i) with respect to, or resulting from, any delay in paying any and all excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral, (ii) with respect to, or resulting from, any
delay in complying with any Laws applicable to any of the Collateral or (iii) in
connection with any of the transactions contemplated by this Agreement. In any
suit, proceeding or action brought by Secured Party under
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any Account or Contract for any sum owing thereunder, or to enforce any
provisions of any Account or Contract, Debtor will save, indemnify, defend and
hold Secured Party and each Bank harmless from and against all expense, loss or
damage suffered by reason of any defense, setoff, counterclaim, recoupment or
reduction or liability whatsoever of the Account Debtor or obligor thereunder,
arising out of a breach by Debtor of any obligation thereunder or arising out of
any other agreement, indebtedness or liability at any time owing to or in favor
of such Account Debtor or obligor or its successors from Debtor.
(c) Maintenance of Records. Debtor will keep and maintain at its own
cost and expense satisfactory and complete records of the Collateral, including,
without limitation, a record of all payments received and all credits granted
with respect to the Accounts, Chattel Paper and Contracts. Debtor will mark its
books and records pertaining to the Collateral to evidence this Agreement and
the Liens and security interests evidenced hereby. For the further security of
Secured Party and the Banks, Secured Party shall have a security interest,
subject to no Liens other than Permitted Encumbrances, in all of Debtor's books
and records pertaining to the Collateral, and, after and during the continuance
of an Event of Default, Debtor shall turn over any such books and records to
Secured Party or to its representatives at the request of Secured Party.
(d) Right of Inspection. Secured Party, each Bank and their respective
representatives shall at all times have full and free access upon reasonable
notice and during normal business hours to all the books, correspondence and
records of Debtor, and Secured Party, each Bank and their respective
representatives may examine the same, take extracts therefrom and make
photocopies thereof. Secured Party, each Bank and their respective
representatives shall at all times also have the right upon reasonable notice
and during normal business hours to enter into and upon any premises where any
of the Inventory or Equipment is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein. Debtor shall
pay the costs incurred by Secured Party and each Bank in connection with any
such exercise of its rights pursuant to this Section 5(d) to the extent required
by the Credit Agreement.
(e) Compliance with Laws, etc. Debtor will comply with all Laws
applicable to the Collateral or any part thereof or to the operation of Debtor's
business.
(f) Compliance with Terms of Chattel Paper and Contracts, etc. Debtor
will perform and comply in all material respects with all of its obligations
under the Chattel Paper and Contracts and all its other contractual obligations
relating to the Collateral.
(g) Payment of Obligations. To the extent required pursuant to Section
8.7 of the Credit Agreement, Debtor will pay promptly when due all Taxes,
assessments and governmental charges or levies imposed upon the Collateral or in
respect of its income or profits therefrom, as well as all claims of any kind
(including, without limitation, claims for labor, materials and supplies)
against or with respect to the Collateral.
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(h) Limitation on Liens on Collateral. Debtor will not create, assume
or permit to exist, will defend the Collateral against, and will take such other
action as is necessary to remove, any Lien or claim on or to the Collateral,
other than the Permitted Encumbrances, and will defend the right, title and
interest of Secured Party and the Banks in and to any of the Collateral against
the claims and demands of all parties whomsoever other than holders of Permitted
Encumbrances with respect to such Permitted Encumbrances.
(i) Limitations on Dispositions of Collateral. Debtor will not sell,
transfer, lease, abandon or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so, except as may be permitted by the Credit
Agreement. Upon the sale, transfer, lease, abandonment or disposition of any of
the Collateral as permitted under the Credit Agreement, the Lien granted by this
Agreement shall continue with respect to any Proceeds received by Debtor upon
such sale, transfer, lease, abandonment or disposition.
(j) Limitations on Modifications, Waivers, Extensions of Agreements
Giving Rise to Accounts and Material Agreements. Debtor will not (i) amend,
modify, terminate or waive any provision of any Contract, any item of Chattel
Paper or any agreement giving rise to or forming a part of an Account or a
Deposit Account or any item of Chattel Paper in any manner, (ii) fail to
exercise promptly and diligently each and every material right which it may have
under each Contract, each item of Chattel Paper and each agreement giving rise
to an Account or a Deposit Account, or (iii) fail to deliver to Secured Party a
copy of each material demand, notice or document received by it relating in any
way to any Contract required to be delivered to Secured Party pursuant to the
terms of the Credit Agreement, Chattel Paper or any agreement giving rise to an
Account or a Deposit Account.
(k) Limitations on Discounts, Compromises, Extensions of Accounts.
Without the prior consent of Secured Party, Debtor will not grant any extension
of the time of payment of any item of Chattel Paper or any Account, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any party liable for the payment thereof, or allow any
credit or discount whatsoever thereon, provided that Debtor may, during any
fiscal year, grant credits or discounts of up to $25,000 in the aggregate on
Accounts.
(l) Maintenance of Equipment. Debtor will maintain each item of
Equipment as provided in the Credit Agreement and Mortgage.
(m) Maintenance of Insurance. Debtor will at all times maintain the
insurance required by the Mortgage.
(n) Further Identification of Collateral. Debtor will furnish to
Secured Party and each Bank from time to time upon request statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail and in form satisfactory to Secured Party.
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(o) Notices. Debtor will advise Secured Party and each Bank promptly,
in reasonable detail, at their respective addresses set forth for notice in the
Credit Agreement, (i) of any Lien (other than Permitted Encumbrances) on, or
claim asserted against, any of the Collateral and (ii) of the occurrence of any
other event which could reasonably be expected to have a Material Adverse Effect
on the aggregate value of the Collateral hereunder.
(p) Changes in Locations, Name, etc. Debtor will not change the
location of its chief executive office from that specified in Schedule I, and
Debtor will not change its name, identity or corporate structure to such an
extent that any financing statement filed by Secured Party in connection with
this Agreement would become seriously misleading, unless it shall give prior
written notice as soon as practicable thereof and prior to effecting any such
change take such steps as Secured Party may deem necessary or advisable to
continue the perfection and priority of the security interest granted pursuant
hereto; provided, that nothing contained herein shall be deemed to permit
anything prohibited by the Credit Agreement.
(q) Vehicles. Debtor will maintain each vehicle in good operating
condition, ordinary wear and tear and immaterial impairments of value and damage
by the elements excepted, and will provide all maintenance, service and repairs
necessary for such purpose. No Vehicle shall be removed from the state which has
issued the certificate of title therefor for a period in excess of thirty (30)
consecutive days. With respect to any Vehicle acquired by Debtor subsequent to
the date hereof, within five (5) days after the date of acquisition thereof, if
requested by Secured Party an application for certificate of title indicating
Secured Party's Lien on the Vehicle covered by such certificate, and any other
necessary documentation, shall be filed in each office in each jurisdiction
which Secured Party shall deem advisable to perfect its Lien on the Vehicle.
(s) Deposit Accounts. Debtor will not amend, modify, terminate or waive
any provision of any agreement giving rise to or forming a part of any Deposit
Account, and Debtor will not open any new Deposit Account or enter into any
agreement giving rise to or forming a part of any new Deposit Account unless,
within thirty (30) days after such event, Debtor advises Secured Party, in
reasonable detail, as to the name of the institution or organization in which
such Deposit Account shall be maintained together with such Deposit Account
number.
(t) Tax I.D. Debtor will not change its employer identification number
set forth on Schedule I of this Agreement unless it shall have given prior
written notice to Secured Party.
6. Secured Party's Appointment as Attorney-in-Fact.
(a) Powers. Debtor hereby irrevocably constitutes and appoints Secured
Party and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of Debtor and in the name of Debtor or in its own name, from
time to time in Secured Party's discretion, for the purpose of carrying out the
terms of this Agreement, but only during the existence of an Event of Default,
to take any and all appropriate action and to execute any and all documents and
instruments which may be necessary or
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desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, Debtor hereby gives Secured Party the power and
right, on behalf of Debtor, without notice to or assent by Debtor, but only
during the existence of an Event of Default, to do the following:
(1) in the case of any Collateral in the name of Debtor or its
own name, or otherwise, to take possession of and indorse and
collect any checks, drafts, notes, acceptances or other
instruments for the payment of monies due under, or with
respect to, any Collateral and to file any claim or to take
any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by Secured Party for the
purpose of collecting any and all such monies due or with
respect to such Collateral whenever payable;
(2) to pay or discharge Taxes and Liens, other than Permitted
Encumbrances, levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for
by the terms of this Agreement and to pay all or any part of
the premiums therefor and the costs thereof; and
(3) (a) to direct any party liable for any payment under any
of the Collateral to make payment of any and all monies due or
to become due thereunder directly to Secured Party or as
Secured Party shall direct; (b) to ask or demand for, collect,
receive payment of and receipt for, any and all monies, claims
and other amounts due or to become due at any time in respect
of or arising out of any Collateral; (c) to sign and indorse
any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors,
assignments, verifications, notices and other documents in
connection with any of the Collateral; (d) to commence and
prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other
right in respect of any Collateral; (e) to defend any suit,
action or proceeding brought against Debtor with respect to
any Collateral; (f) to settle, compromise or adjust any suit,
action or proceeding described in the preceding clause and, in
connection therewith, to give such discharges or releases as
Secured Party may deem appropriate; (g) to assign any
Trademark (along with the goodwill of the business to which
any such Trademark pertains), throughout the world for such
term or terms, on such conditions, and in such manner, as
Secured Party shall in its sole discretion determine; and (h)
generally, to sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral
as fully and completely as though Secured Party were the
absolute owner thereof for all purposes, and to do, at Secured
Party's option and Debtor's expense, at any time, or from time
to time, all acts and things which Secured Party deems
necessary to protect, preserve or realize upon the Collateral
and to effect the intent of this Agreement, all as fully and
effectively as Debtor might do.
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Debtor hereby ratifies all that said attorneys shall lawfully do or cause to be
done by virtue hereof. This power of attorney is power coupled with an interest
and shall be irrevocable until the Obligations shall have been paid in full or
this Agreement shall have been terminated.
(b) Other Powers. Debtor also authorizes Secured Party, at any time and
from time to time, during the continuance of an Event of Default, to execute, in
connection with the sale provided for in this Section 6, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
(c) No Duty on the Part of Secured Party. The powers conferred on
Secured Party hereunder are solely to protect the interests of Secured Party and
the Banks in the Collateral and shall not impose any duty upon Secured Party or
any Bank to exercise any such powers. The Banks shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and no Bank nor any Bank's officers, directors, employees or agents shall be
responsible to Debtor for any act or failure to act hereunder, except for its
own gross negligence or willful misconduct, it being the intent of the parties
hereto that Secured Party shall not be accountable for its own negligence.
7. Performance by Secured Party of Company's Obligations. If Debtor
fails to perform or comply with any of its agreements contained herein and
Secured Party, as provided for by the terms of this Agreement, or any Bank shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the expenses of Secured Party and any such Bank incurred in
connection with such performance or compliance, together with interest thereon
at the Maximum Lawful Rate on demand shall be payable by Debtor to Secured
Party, and shall constitute obligations secured hereby.
8. Proceeds. Upon request of Secured Party, during the continuance of
an Event of Default (a) all Proceeds received by Debtor consisting of cash,
checks and other non-cash items shall be held by Debtor in trust for Secured
Party, segregated from other funds of Debtor and shall, forthwith upon receipt
by Debtor be turned over to Secured Party for the ratable benefit of the Banks
in the exact form received by Debtor (duly endorsed by Debtor to Secured Party,
if required), and (b) any and all such Proceeds received by Secured Party
(whether from Debtor or otherwise) may, in the sole discretion of Secured Party,
be held by Secured Party as collateral security for, and/or then or at any time
thereafter may be applied by Secured Party against, the Obligations (whether
matured or unmatured), such application to be in such order as Secured Party
shall elect. Any balance of such Proceeds remaining after the Obligations shall
have been paid in full shall be paid over to Debtor or to whomsoever may be
lawfully entitled to receive the same.
9. Remedies.
(a) General. If an Event of Default shall occur and be continuing,
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Agreement and in the other Loan Papers, all rights and remedies of
a secured party under the UCC. Without limiting the generality of
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the foregoing, or any other right available to Secured Party hereunder, Secured
Party, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon Debtor or any other party (all and each of which demands,
offenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of Secured Party or elsewhere upon such terms and conditions as
it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. Secured
Party and each Bank shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in Debtor, which right or equity is hereby waived and
released. Debtor further agrees, at Secured Party's request, to assemble, or
cause the assembly of, the Collateral and make it available to Secured Party at
places which Secured Party shall reasonably select, whether at Debtor's premises
or elsewhere. Secured Party shall apply the net Proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of Secured Party hereunder, including, without
limitation, reasonable attorneys' fees and disbursements, to the payment in
whole or in part of the Obligations, in the manner provided by the Credit
Agreement, and only after such application and after the payment by Secured
Party of any other amount required by any provision of law, need Secured Party
account for the surplus, if any, to Debtor. To the extent permitted by
applicable law, Debtor waives all claims, damages and demands it may acquire
against Secured Party arising out of the exercise by them of any rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least five (5) days before such sale or other disposition. Debtor shall
remain liable for any deficiency if the Proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by Secured Party to collect
such deficiency.
10. Secured Party's Responsibility With Respect to Collateral. Neither
Secured Party nor any Bank shall have any duty to fix or preserve rights against
prior parties to the Collateral, and neither Secured Party nor any Bank shall
ever be liable for failure to use diligence to collect any amount payable with
respect to the Collateral, or any part thereof, but shall be liable only to
account to Debtor any amount Secured Party or any Bank may actually collect or
receive thereon and for acts constituting gross negligence or willful
misconduct. Secured Party's sole duty with respect to the custody, safekeeping
and physical preservation of the Collateral in its possession, under the UCC or
otherwise, shall be to deal with it in the same manner as Secured Party deals
with similar property for its own account. Neither Secured Party, nor any Bank
nor any of their directors, officers, employees or agents shall be liable for
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any
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Collateral upon the request of Debtor or otherwise other than acts constituting
gross negligence or willful misconduct.
11. Waiver of Certain Rights. To the full extent that it may lawfully
so agree, Debtor agrees that it will not at any time plead, claim or take the
benefit of any appraisement, valuation, stay, extension, moratorium or
redemption law nor or hereafter in force in order to prevent or delay the
enforcement of this Agreement, or the absolute sale of all or any part of the
Collateral or the possession thereof by any purchaser at any sale hereunder, and
Debtor hereby waives the benefit of all such laws to the extent it lawfully may.
12. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
13. Performance at Debtor's Expense. The cost and expense of performing
or complying with any and all of the Obligations shall be borne solely by
Debtor, subject to any specific limitations thereon provided for in the Credit
Agreement, and no portion of such cost and expense shall be, in any way and to
any extent, credited against any installment on or portion of the Obligations.
14. Survival. Each and all of the Obligations and each and all of
Debtor's representations and warranties hereunder shall survive the execution
and delivery of this Agreement, and shall continue in full force and effect
until the Obligations shall have been paid in full.
15. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable, this Agreement shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part thereof, and the remaining provisions
thereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance therefrom so as
to achieve the original intent of Debtor and Secured Party. Furthermore, in lieu
of such illegal, invalid, or unenforceable provision there shall be added
automatically as part of this Agreement a provision as similar in terms to such
illegal, invalid, or unenforceable provision as may be possible and be legal,
valid and enforceable.
16. Paragraph Headings. The paragraph headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
17. Cumulative Remedies. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law or in
any of the other Loan Papers.
18. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto, the Banks parties
to the Credit Agreement and each such Persons' respective successors and
assigns; except, that Debtor may not assign or otherwise transfer any of its
rights under this Agreement.
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19. Limitation on Interest. Regardless of any provision contained in
this Agreement or in the other Loan Papers, no Bank shall be entitled to
receive, collect, or apply, as interest on the Loans, any amount in excess of
the Maximum Lawful Rate, and in the event any Bank ever receives, collects or
applies as interest any such excess, such amount which would be deemed excessive
interest shall be deemed a partial prepayment of principal and treated hereunder
as such; and if the Loan is paid in full, any remaining excess shall promptly be
paid to Debtor. In determining whether or not the interest paid or payable under
any specific contingency exceeds the Maximum Lawful Rate, Debtor, Secured Party
and each Bank shall, to the extent permitted under applicable law, (a)
characterize any nonprincipal payment as an expense, fee or premium rather than
as interest, (b) exclude voluntary prepayments and the effects thereof and (c)
amortize, prorate, allocate and spread, in equal parts, the total amount of the
interest throughout the entire contemplated term of the Notes, so that the
interest rate is the Maximum Lawful Rate throughout the entire term of the
Notes; provided, however, that if the unpaid principal balance thereof is paid
and performed in full prior to the end of the full contemplated term thereof,
and if the interest received for the actual period of existence thereof exceeds
the Maximum Lawful Rate, the Banks shall refund to Debtor the amount of such
excess and, in such event, neither Secured Party nor any Bank shall be subject
to any penalties provided by any laws for contracting for, charging, taking,
reserving or receiving interest in excess of the Maximum Lawful Rate.
20. GOVERNING LAW. THIS AGREEMENT, THE NOTES, AND THE OTHER LOAN PAPERS
HAVE BEEN EXECUTED AND DELIVERED IN THE STATE OF TEXAS AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF
THE UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THAT THE LAWS OF A STATE IN
WHICH COLLATERAL IS LOCATED NECESSARILY GOVERNS (A) THE PERFECTION AND PRIORITY
OF THE LIEN AND SECURITY INTEREST CREATED HEREBY WITH RESPECT TO SUCH
COLLATERAL, AND (B) THE EXERCISE OF ANY REMEDIES (INCLUDING THE FORECLOSURE OF
SUCH LIEN AND SECURITY INTEREST) SUCH WITH RESPECT TO SUCH COLLATERAL.
21. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telex, telecopy or
similar writing) and shall be given to such party at its address, telex or
telecopy number set forth in the Credit Agreement or such other address, telex
or telecopy number as such party may hereafter specify by notice to the other
party. Each such notice, request or other communication shall be effective (i)
if given by telex or telecopy, when such telex or telecopy is transmitted to the
telex or telecopy number specified in this Section 21 and the appropriate answer
back is received or receipt is otherwise confirmed, (ii) if given by mail, three
(3) Business Days after deposit in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section 21.
22. Multiple Counterparts. This Agreement may be executed in a number
of identical counterparts, each of which for all purposes is to be deemed an
original, and all of which constitute collectively, one Agreement; but in making
proof of this Agreement, it shall not be necessary to produce or account for
more than one such counterpart. It is not necessary that each party hereto
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execute the same counterpart so long as identical counterparts are executed by
each such party hereto.
23. No Waiver. No course of dealing between any Bank, Secured Party and
Debtor, nor any failure to exercise, nor any delay in exercising on the part of
Secured Party of any right hereunder or under the Loan Papers shall operate as a
waiver hereof or thereof; nor shall any single or partial exercise of any right
hereunder or thereunder preclude any other or further exercise thereof or the
exercise of any other right.
24. Amendments and Modifications. This Agreement shall be modified or
amended only in a written document, signed by Secured Party and Debtor.
25. FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN PAPERS
COLLECTIVELY 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.
26. WAIVER OF JURY TRIAL. DEBTOR, FOR ITSELF, ITS SUCCESSORS AND
ASSIGNS AND SECURED PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.
27. SUBMISSION TO JURISDICTION; WAIVER OF SERVICE AND VENUE.
(A) DEBTOR CONSENTS AND AGREES TO THE JURISDICTION OF ANY STATE
COURT SITTING IN THE COUNTY OF DALLAS, STATE OF TEXAS, AND TO THE JURISDICTION
OF ANY FEDERAL COURT SITTING IN THE NORTHERN DISTRICT OF TEXAS, AND WAIVES ANY
OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT TO ANY ACTION
INSTITUTED THEREIN, AND AGREES THAT ANY DISPUTE CONCERNING THE RELATIONSHIP
BETWEEN SECURED PARTY OR ANY BANK, ON THE ONE HAND, AND DEBTOR, ON THE OTHER
HAND, OR THE CONDUCT OF ANY PARTY IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE
SHALL BE HEARD ONLY IN THE COURTS DESCRIBED ABOVE.
(B) DEBTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL
OR HAND DELIVERY TO DEBTOR AT ITS ADDRESS SET FORTH IN THE SIGNATURE PAGE
HERETO. DEBTOR HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID.
(C) NOTHING IN THIS SECTION 27 SHALL AFFECT THE RIGHT OF SECURED PARTY
OR ANY BANK TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF SECURED PARTY OR ANY BANK TO
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BRING ANY ACTION OR PROCEEDING AGAINST DEBTOR OR ANY OF ITS PROPERTY IN THE
COURTS OR ANY OTHER JURISDICTION.
IN WITNESS WHEREOF, Debtor has caused this Agreement to be duly
executed and delivered as of the date first above written.
Debtor:
EXUS Energy, LLC,
a Delaware limited liability company
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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SCHEDULE I
PRINCIPAL PLACE OF BUSINESS/CHIEF EXECUTIVE OFFICE
AND EMPLOYER IDENTIFICATION NUMBER
EXUS Energy, LLC
5735 Pineland, Suite 235
Dallas, Texas 75231
Taxpayer Identification Number: 75-2825676
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SCHEDULE II
DEPOSIT ACCOUNTS
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EXHIBIT E
SUBORDINATION AGREEMENT
This Subordination Agreement (this "Agreement") is executed this the
30th day of June, 1999, by and among EXCO Resources, Inc., a Texas corporation
(the "Subordinate Lender"), and NationsBank, N.A., as Administrative Agent
("Administrative Agent"), for the benefit of the financial institutions now or
hereafter a party to the Senior Credit Agreement (as hereinafter defined) as
Banks (the "Senior Lenders").
W I T N E S S E T H:
WHEREAS, concurrently with the execution of this Agreement, Subordinate
Lender is providing a loan in the amount of $7,000,000 to Venus Exploration,
Inc., a Delaware corporation ("Venus") which loan is evidenced by a Convertible
Promissory Note in the stated principal amount of $7,000,000 executed by Venus
and payable to the order of Subordinate Lender (the "Subordinate Note"); and
WHEREAS, concurrently with the execution of this Agreement, the
Administrative Agent, the Senior Lenders and EXUS Energy, LLC (the "Company")
are entering into a Credit Agreement dated June 30, 1999 (the "Credit
Agreement"), pursuant to which Senior Lenders will agree to extend credit in an
amount up to $50,000,000 to the Company in the form of (a) a revolving credit
loan, and (b) the issuance of certain letters of credit on behalf of the
Company; and
WHEREAS, pursuant to the terms of the Credit Agreement, Venus has
entered into or will enter into a Facility Guarantee (the "Venus Guarantee") in
favor of Administrative Agent for the ratable benefit of the Senior Lenders
pursuant to which Venus has guaranteed payment and performance in full of the
Credit Agreement Obligations (as herein defined); and
WHEREAS, Senior Lenders have required, as a condition to entering into
the Credit Agreement and making the loans and other extensions of credit to be
made thereunder, that Subordinate Lender enter into this Agreement; and
WHEREAS, Subordinate Lender has agreed to enter into this Agreement (a)
due to the valuable benefits to be derived by Subordinate Lender as a result of
the loans and other extensions of credit to be made by Senior Lenders under the
Credit Agreement, and (b) with full knowledge that Senior Lenders would not
enter into the Credit Agreement and make loans and other extensions of credit
thereunder but for the agreements of the Subordinate Lender herein contained.
NOW, THEREFORE, in consideration of the foregoing, the premises and the
mutual promises and covenants contained herein, the parties hereby agree as
follows:
1. Terms Defined. As used herein (a) the terms "Administrative Agent,"
"Agreement," "Senior Lenders," and "Subordinate Lender" shall have the meanings
given such terms in the preamble hereto, (b) the terms "Company,""Credit
Agreement," "Subordinate Notes," and "Venus Guarantee" shall have the meanings
given such terms in the recitals hereto, and (c) the following terms shall have
the following meanings:
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"Company Credit Parties" mean the Company and each existing or
hereafter acquired Subsidiary of the Company.
"Credit Agreement Loan Documents" means the Credit Agreement, the
Credit Agreement Notes, all documents, instruments or agreements now or at
anytime hereafter executed and delivered by Subordinate Lender, any Venus Credit
Party or any Company Credit Party evidencing, securing or otherwise pertaining
to the Credit Agreement Obligations as the same may be modified, amended,
renewed, extended or restated from time to time.
"Credit Agreement Notes" means the Notes (such term is defined in the
Credit Agreement).
"Credit Agreement Obligations" means the collective reference to the
unpaid principal of and interest on all loans outstanding under the Credit
Agreement, all reimbursement obligations with respect to all letters of credit
issued under the Credit Agreement, and all other obligations and liabilities of
any Company Credit Party (including, without limitation, interest accruing at
the then applicable rate provided in the Credit Agreement after the maturity of
such loans and reimbursement obligations and interest accruing at the then
applicable rate provided in the Credit Agreement after the filing of any
Proceeding, whether or not a claim for post-filing or post-petition interest is
allowed in such Proceeding ) to the Administrative Agent or any Senior Lender
(or, in the case of any Hedge Agreements referred to below, any affiliate of the
Administrative Agent or any Senior Lender), whether direct or indirect, absolute
or contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit Agreement, any
Credit Agreement Loan Documents, or any Hedge Agreement (as defined in the
Credit Agreement) entered unto by any Company Credit Party with any Senior
Lender (or any affiliate of any Senior Lender) or any other document made,
delivered or given in connection therewith, in each case whether on account of
principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent or to the Senior Lenders that are
required to be paid by any Credit Party pursuant to the terms of any of the
foregoing agreements).
"Enforcement Action" means any action by Subordinate Lender to,
directly or indirectly, (a) accelerate the maturity of the Subordinate
Obligations, (b) sue for collection of the Subordinate Obligations, (c)
commence, or join with any other creditor of any Credit Party in the
commencement of, any Proceeding, (d) exercise any right of off-set to collect
any Subordinate Obligation, or (e) foreclose any security interest, pledge or
other right securing all or any part of the Subordinate Obligations.
"Exempt Property" means all of Venus's membership interests in the
Company including, without limitation (a) all of Venus's right, title, and
interest now or hereafter accruing under the LLC Agreement (as defined in the
Pledge Agreement) with respect to any interest now owned or hereafter acquired
or owned by Venus in the Company, and (b) all distributions, proceeds, fees,
preferences, payments, or other benefits, which Venus now or may hereafter
become entitled to receive with respect to such interests in the Company and
with respect to the repayment of all loans now or hereafter made by Venus to the
Company, and Venus's undivided percentage interest in the assets of the Company;
provided, that "Exempt Property" shall not include any Distributions (as defined
in the Credit Agreement) which are made in respect of such membership interests
in violation of the terms of such Credit Agreement.
"PIK" means payments of interest on the Subordinate Note which are made
solely in the form of increases to the principal amount of the Subordinate Notes
pursuant to terms and conditions of the Subordinate Note.
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"Pledge Agreement" means the Pledge Agreement dated June 30, 1999 by
and between Venus and Subordinate Lender pursuant to which Venus pledged to
Subordinate Creditor the limited liability company interest in the Company to
secure the Subordinate Obligations.
"Proceeding" means (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to any Venus Credit Party, (b) any
liquidation, dissolution or winding up of any Venus Credit Party, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of any Venus Credit Party.
"Senior Guaranty Obligations" means all indebtedness obligation and
liabilities any Venus Credit Party, whether direct or indirect, absolute or
contingent, due or to become due or now existing or hereafter incurred, which
may arise out of, or in connection with the Venus Guaranty.
"Subordinate Loan Documents" means the Subordinate Note and all other
documents, instruments or agreements evidencing, securing or otherwise
pertaining to the Subordinate Note as the same may be modified, amended,
renewed, extended or restated from time to time.
"Subordinate Obligations" means the collective reference to the unpaid
principal of and interest on the Subordinate Note and all other obligations and
liabilities of any Venus Credit Party to any Subordinate Lender, whether direct
or indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with, the
Subordinate Note or any other document made, delivered or given in connection
therewith, in each case whether on account of principal, interest, reimbursement
obligations, fees, indemnities, costs, expenses or otherwise that are required
to be paid by any Venus Credit Party pursuant to the terms of any of the
foregoing agreements.
"Venus Credit Parties" means, collectively, Venus and each existing or
hereafter acquired Subsidiary of Venus.
2. Subordination Generally. To the extent and in the manner provided herein, the
Subordinate Obligations shall be subordinate, junior and inferior in right of
payment and collection to the prior payment and collection of the Senior
Guaranty Obligations.
3. Payments Prohibited. Notwithstanding anything contained herein or in the
Subordinate Loan Documents to the contrary, but subject in all respect to
Section 10 hereof, until such time as the Credit Agreement Obligations have been
finally and indefeasibly paid in full in cash and all obligations of the Senior
Lenders under the Credit Agreement Loan Documents have terminated, no Venus
Credit Party shall make, and Subordinate Lender shall not accept, receive or
retain, any payment on the Subordinate Obligations (whether in cash, property or
securities); provided, that, unless such payments are prohibited pursuant to
Sections 4, 5 or 6 hereof, Venus shall be permitted to make, and Subordinate
Lender shall be permitted to receive and retain, regularly scheduled payments of
interest when due on the Subordinate Note at the rates and in the amounts
provided in the Subordinate Note; and provided further that nothing contained
herein shall be deemed to limit the right of Subordinate Lender to (a) convert
the Subordinate Note to the common equity of Venus at any time, or (b) to
receive and retain interest payments which are solely in the form of PIK
payments.
4. Insolvency Proceedings. Upon any distribution of assets of any Venus Credit
Party pursuant to or during any Proceeding, but subject in all respect to
Section 10 hereof, Senior Lenders shall be entitled to receive
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payment in full from such assets of all amounts due or to become due on or in
respect of all Senior Guaranty Obligations, or provision shall be made for such
payment from such assets in money or money's worth, before any Subordinate
Lender shall be entitled to receive any payment of any type from such assets on
account of the Subordinate Obligations, and to that end, but subject in all
respect to Section 10 hereof, Senior Lenders shall be entitled to receive, for
application to the payment of the Senior Guaranty Obligations, any payment or
distribution of any kind or character, whether in cash, property or securities,
which may be payable or deliverable in respect of the Subordinate Obligations in
any such Proceeding. To the extent any Subordinate Lender fails to file in any
such Proceeding, any proof of claim, notice or other instrument or take any
other action in any such Proceeding necessary to preserve any claim in respect
of the Subordinate Obligations on or before twenty (20) days prior to the date
such claim would be barred absent such filing or other action, the
Administrative Agent shall have the right (but not the obligation), in the name
of the Senior Lenders, or in the name of the Subordinate Lender, to file such
proof of claim or notice and take such other action as the Administrative Agent
may determine to be necessary or appropriate for the preservation of the claims
in such Proceeding in respect of the Subordinate Obligations. In furtherance
thereof, the Subordinate Lender hereby irrevocably authorizes and empowers the
Administrative Agent to execute and deliver any such proof of claim or notice
and to take such other actions in the name of Subordinate Lender. In the event
that, notwithstanding the foregoing provisions of this paragraph, Subordinate
Lender shall have received during or pursuant to any Proceeding any payment or
distribution of assets of any Venus Credit Party which is the subject of such
Proceeding of any kind or character, whether in cash, property or securities,
before all Senior Guaranty Obligations are paid in full in cash, but subject in
all respect to Section 10 hereof, such payment or distribution shall be paid
over or delivered forthwith to the Administrative Agent or to the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other
person making payment or distribution of assets of the Venus Credit Party for
application to the payment of all Senior Guaranty Obligations remaining unpaid,
to the extent necessary to pay all Senior Guaranty Obligations in full, after
giving effect to any concurrent payment or distribution to or for the holders of
the Senior Guaranty Obligations. Subordinate Lender agrees that while it shall
retain the right to vote its claims and otherwise act in any such Proceeding
relative to Venus (including, without limitation, the right to vote to accept or
reject any plan of partial or complete liquidation, reorganization, arrangement,
composition, or extension), Subordinate Lender shall not take any action or vote
in any way so as to contest (a) the validity or the enforceability of any Credit
Agreement Document, the Credit Agreement Obligations, the Senior Guaranty
Obligations, or the liens and security interests purported to be granted to
secure the Credit Agreement Obligations or the Senior Guaranty Obligations, (b)
the rights and duties of the Administrative Agent or any Senior Lender
established in the Credit Agreement Loan Documents or any security documents
with respect to such liens and security interests, or (c) the validity or
enforceability of this Agreement.
5. Payment Following Acceleration of Subordinate Obligations. In the event the
Subordinate Obligations become due and payable before the stated maturity
thereof, but subject in all respect to Section 10 hereof, the Credit Agreement
Obligations outstanding at such time shall be paid in full in cash and all
obligations of the Senior Lenders under the Credit Agreement Loan Documents
shall be terminated, before Subordinate Lender shall be entitled to receive any
payment on account of the Subordinate Obligations.
6. Senior Default. In the event of any default in the payment when due of any
part of the Credit Agreement Obligations (whether principal, interest, fees,
costs, expenses or other amounts due and owing from time to time under the
Credit Agreement Loan Documents) or the occurrence of any other default under
any Senior Loan Document which will permit (or with the giving of notice, lapse
of time or both, unless cured or waived will permit) the Administrative Agent or
any Senior Lender to accelerate the maturity of the Credit Agreement Obligations
(any "Senior Default"), but subject in all respect to Section 10 hereof, no
payment shall
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be made by any Venus Credit Party or received by Subordinate Lender from any
Venus Credit Party on account of the Subordinate Obligations until such Senior
Default shall have been cured or waived or shall have ceased to exist and
acceleration (if any) as a result thereof shall have been rescinded or annulled.
7. Subordinate Obligations Unsecured. Subordinate Lender hereby represents and
warrants to the Administrative Agent for the benefit of each Subordinate Lender
that subject only to the pledge of the membership interest in the Company
pledged by Venus to Subordinate Lender pursuant to the Pledge Agreement, the
payment and performance of the Subordinate Obligations are not secured by any
property of any Venus Credit Party or by any Company Credit Party real, personal
or intangible and have not been directly or indirectly guaranteed by any Venus
Credit Party or by any Company Credit Party. Subordinate Lender hereby covenants
and agrees with the Administrative Agent for the benefit of all Senior Lenders
that, so long as all or any part of the Credit Agreement Obligations remain
outstanding or any Senior Lender has any obligations under any Senior Loan
Document, no lien or security interest whatsoever (other than pursuant to the
Pledge Agreement), nor any guaranty, whether direct or indirect, with respect to
the Subordinate Obligations, shall be granted by any Venus Credit Party or by
any Company Credit Party in favor of, or received or accepted by, Subordinate
Lender.
8. Notice of Subordinate Default. Subordinate Lender shall provide
Administrative Agent with notice of the occurrence of any default or event of
default which occurs under the Subordinate Loan Documents promptly upon
acquiring knowledge thereof. Subordinate Lender shall deliver to Administrative
Agent a duplicate copy of any notice of default or event of default under the
Subordinate Loan Documents Subordinate Lender delivers to any Venus Credit Party
(such duplicate copy to be delivered to Administrative Agent simultaneously with
the delivery of the original thereof to such Venus Credit Party). In the event
Subordinate Lender intends to commence any Enforcement Action, it shall deliver
notice ("Enforcement Notice") thereof to Administrative Agent. Subordinate
Lender shall be prohibited from taking any Enforcement Action until the earliest
of (a) the expiration of one hundred eighty (180) days following delivery of the
Enforcement Notice (provided that the event of default which was the basis for
delivery of the Enforcement Notice has not been cured or waived as of the
expiration of such 180 day period), or (b) the final payment of the Credit
Agreement Obligations in full in cash and the termination of all obligations of
the Senior Lenders under the Credit Agreement Loan Documents.
9. Subrogation. Subject to the payment in full in cash of all Credit Agreement
Obligations and the termination of the commitments of all Senior Lenders under
the Credit Agreement Loan Documents, Subordinate Lender shall be subrogated to
the extent of the payments or distributions made to Senior Lenders pursuant to
the provisions of the Subordinate Loan Documents and this Agreement, to the
right of the Senior Lenders to receive payments or distributions of cash,
property or securities applicable to the Senior Guaranty Obligations. For
purposes of such subrogation, no payments or distributions to the Senior Lenders
of any cash, property or securities to which Subordinate Lender would be
entitled except for the provisions of this Agreement and no payment turned over
to Senior Lenders pursuant to the provisions of this Agreement by Subordinate
Lender shall, as between the Venus Credit Parties and their respective creditors
other than Senior Lenders and Subordinate Lender, be deemed to be a payment or
distribution by the Credit Parties to or on account of the Subordinate
Obligations.
10. Exempt Property. Notwithstanding anything to the contrary contained herein,
the rights and interests of Subordinate Lender in and to the Exempt Property are
not subordinate to the Senior Guaranty Obligations pursuant to this Agreement,
and nothing contained herein shall limit or impair the right of Subordinate
Lender to enforce the Pledge Agreement or receive, retain and apply the Exempt
Property to the payment of the
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Subordinate Obligations notwithstanding that the Senior Guaranty Obligations or
the Credit Agreement Obligations have not been paid or performed in full.
11. Parties in Interest. The provisions of this Agreement are intended solely
for the purpose of defining the relative rights of the Subordinate Lender, on
the one hand, and the Administrative Agent and the Senior Lenders, on the other
hand. Nothing contained in this Agreement is intended to or shall impair, as
between the Venus Credit Parties and its creditors other than the Subordinate
Lender, the Administrative Agent and the Senior Lenders, the obligation of the
Venus Credit Parties, which is absolute and unconditional, to pay to Subordinate
Lender the Subordinate Obligations as and when the same shall become due and
payable in accordance with their terms.
12. Rights of Refinancing Lender. As used in this Section 13, "Refinancing"
means any refinancing or replacement of the Credit Agreement Obligations then
outstanding under the Credit Agreement Loan Documents and any number of
subsequent refinancings or replacements thereof. "Refinancing Lender" means any
party or parties which provide a Refinancing. In the event the Credit Agreement
Obligations are paid in full in whole or in part with the proceeds of one or
more Refinancings, regardless of whether or not the Credit Agreement Loan
Documents then in effect are assigned to the Refinancing Lender, the Refinancing
shall be subrogated to and entitled to all rights of the Administrative Agent
and the Senior Lenders under this Agreements and, (a) the obligations of any
Venus Credit Party to such Refinancing Lender shall be deemed to be Senior
Guaranty Obligations under and as defined in this Agreement, and (b) the
obligations of the Company Credit Parties to such Refinancing Lender shall be
deemed "Credit Agreement Obligations" under and as defined in this Agreement. In
furtherance (but not in limitation of the foregoing), in the event of a
Refinancing: (a) the Subordinate Obligations shall be subordinate to all
obligations owed by Venus or any other Venus Credit Party to the Refinancing
Lender to the same extent as the Subordinate Obligations are subordinate to the
original Senior Guaranty Obligations hereunder, and (b) the Refinancing Lender
shall be entitled to all rights and benefits of and shall be subject to all
terms and conditions applicable to the Administrative Agent and the Senior
Lenders hereunder. Upon a request by Venus or the Company or any existing or
prospective Refinancing Lender, Subordinate Lender shall deliver to such
existing or prospective Refinancing Lender a written confirmation that the
obligations owed (or contemplated to be owed) by Venus or any other Venus Credit
Party to such Refinancing Lender are (or will be) Senior Guaranty Obligations as
defined in this Agreement. Furthermore, upon request of the Company or any such
Refinancing Lender, Subordinate Lender will enter into a Subordination Agreement
with such Refinancing Lender in form and substance identical to this Agreement
but with all necessary conforming changes.
13. Rights Not Impaired. No right of the Administrative Agent or any Senior
Lender to enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of any
Company Credit Party or any Venus Credit Party or by any act or failure to act,
in good faith, by the Administrative Agent or any Senior Lender, or by any
noncompliance by Venus or Subordinate Lender with the terms, provisions and
covenants of this Agreement, regardless of any knowledge thereof the
Administrative Agent or any Senior Lender may have or be otherwise charged with.
14. Disgorged Payments. To the extent any payment of Credit Agreement
Obligations (whether by or on behalf of any Venus Credit Party or any Company
Credit Party as proceeds of security or enforcement of any right of set off or
otherwise) is (a) declared to be fraudulent or preferential, (b) set aside, or
(c) required to be paid to a trustee, receiver or other similar party under any
applicable bankruptcy or insolvency law, then, if such payment is recovered by,
or paid over to, such trustee, receiver or other similar party, the Credit
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Agreement Obligations or part thereof originally intended to be satisfied shall
be deemed to be reinstated and outstanding as if such payment had not occurred.
15. Modification and Amendments to Subordinate Obligations. Senior Lender may,
without notice to Subordinate Lender, at any time, in its sole discretion,
renew, extend, increase, amend, restructure, waive, compromise or otherwise
change the terms of the Credit Agreement Obligations and the Credit Agreement
Loan Documents and release any obligor on or collateral for the Credit Agreement
Obligations without in any way altering or affecting any of the rights of
Administrative Agent, or any Senior Lender under this Agreement.
16. Modifications and Amendments to Subordinate Obligations. Without the prior
written consent of the Administrative Agent, Subordinate Lender shall not renew,
extend, amend, restructure, waive, compromise or otherwise change the terms of
the Subordinate Obligations or the Subordinate Loan Documents.
17. Payments Held in Trust. If, notwithstanding the provisions hereof, any
payment or distribution of any character (whether in cash, securities or other
property) or any security shall be received by Subordinate Lender at any time
that payment to or receipt by Subordinate Lender is prohibited hereunder, then
such Subordinate Lender shall immediately notify the Administrative Agent of the
receipt of such payment, distribution or security and Subordinate Lender shall
hold all payments received in contravention of the terms hereof in trust for the
benefit of, and shall immediately pay the same over or deliver or transfer the
same to, the Administrative Agent for application to the Senior Guaranty
Obligations until all Senior Guaranty Obligations have been paid in full.
18. Legend. The Subordinate Lender shall cause the Subordinate Note and any
subsequent promissory note, bond or other instrument evidencing all or any part
of the Subordinate Obligations to be inscribed with a legend substantially in
form and substance as follows:
THE RIGHTS, TITLE AND INTERESTS OF ANY HOLDER OF THIS PROMISSORY NOTE
ARE SECONDARY, SUBORDINATE AND INFERIOR TO THE RIGHTS, TITLE AND
INTERESTS OF NATIONSBANK, N.A., AS ADMINISTRATIVE AGENT
("ADMINISTRATIVE AGENT") FOR THE BENEFIT OF THE BANKS, PURSUANT TO A
SUBORDINATION AGREEMENT DATED OF JUNE 18, 1999 BY AND BETWEEN EXCO
RESOURCES, INC. AND THE ADMINISTRATIVE AGENT.
19. Continuing Agreement. This is a continuing Agreement and will remain in full
force and effect until all of the Credit Agreement Obligations have been fully
paid, performed and satisfied and until all financing agreements between the
Administrative Agent and the Senior Lenders and all of the Credit Parties have
been terminated.
20. Assignment of Subordinate Obligations. Subordinate Lender shall not assign,
syndicate, participate to any other person, pledge, encumber or subordinate any
part of the Subordinate Obligations or the Subordinate Loan Documents; provided,
that the Subordinate Lender shall be permitted to assign, syndicate and
participate the Subordinate Obligations and the Subordinate Loan Documents if
the Subordinate Lender provides notice thereof (specifying the name and address
of the parties to which such assignment, syndication or participation is to be
effected and the effective date thereof) not less than 5 business days prior to
the effective date thereof and the party to which the Subordinate Obligations
and the Subordinate Loan Documents are assigned, syndicated or participated
expressly consents and agrees in writing to be bound by the terms and provisions
of this Agreement (such consent and agreement to be acceptable in form and
substance to
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Administrative Agent and delivered to Administrative Agent prior to the
effective date of such assignment, participation or syndication).
21. Governing Law, Submission to Jurisdiction, etc. (a) THIS AGREEMENT AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE
WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND, TO THE EXTENT
CONTROLLING, THE LAWS OF THE UNITED STATES OF AMERICA.
(b) SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS OR
OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF TEXAS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, SUBORDINATE LENDER HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. SUBORDINATE LENDER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, BUT NOT LIMITED TO, 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.
(c) WAIVER OF CONSEQUENTIAL DAMAGES. TO THE MAXIMUM EXTENT ALLOWED BY
APPLICABLE LAW, SUBORDINATE LENDER AND ADMINISTRATIVE AGENT (i) IRREVOCABLY
WAIVE ANY RIGHT EACH 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; (ii) CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER; AND (iv) ACKNOWLEDGES THAT IT HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT, BASED UPON, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 20.
22. Notices. All notices, requests and other communications to any party
hereunder shall be in writing (including, telecopy or similar teletransmission
or writing) and shall be given to such party at its address or telecopy number
set forth on the signature pages hereof or such other address or telecopy number
as such party may hereafter specify by notice to each other party hereto. Each
such notice, request or other communication shall be effective (a) if given by
mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, or (b) if given by any other
means (including, but not limited to, by air courier), when delivered at the
address specified in this Section 21.
23. Multiple Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original but all of which
shall together constitute one and the same instrument.
24. No Waiver. No course of dealing between the Administrative Agent or any
Senior Lender, on the one hand, and Subordinate Lender, on the other hand, nor
any failure to exercise, nor any delay in exercising on the part of the
Administrative Agent or any Senior Lender of any right hereunder or under the
Credit Agreement Loan Documents shall operate as a waiver hereof or thereof; nor
shall any single or partial exercise of any right hereunder or thereunder
preclude any other or further exercise thereof or the exercise of any other
right.
E-8
117
25. Amendments and Modifications. This Agreement shall be modified or amended
only in a written document, signed by the Administrative Agent and the
Subordinate Lender.
26. Final Agreement. THIS AGREEMENT EMBODIES THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDES ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF 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.
E-9
118
Executed and delivered as of the date and year first above written.
ADMINISTRATIVE AGENT: NationsBank, N.A.,
a national banking association
By:
-------------------------------
Name: Denise Smith
Title: Senior Vice President
EXCO: EXCO RESOURCES, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address for Notice:
5735 Pineland, Suite 235
Dallas, TX 75231
Attn: Douglas H. Miller
Fax No.: (214) 368-2087
Venus hereby acknowledges and consents to the terms of this Agreement
as set forth above and hereby agrees to observe each and every provision of this
Agreement applicable to it.
VENUS EXPLORATION, INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Address:
Venus Exploration, Inc.
1250 N.E. Loop 410, Suite 1000
San Antonio, Texas 78209
Attn: Eugene L. Ames, Jr.
E-10
119
EXHIBIT F
REQUEST FOR BORROWING
Reference is made to that certain Credit Agreement dated as of June 30,
1999 (as from time to time amended, the "Agreement"), among EXUS Energy, LLC
("Borrower"), NationsBank, N.A., as Administrative Agent ("Administrative
Agent"), and the financial institutions listed on Schedule 1 thereto, as Banks
("Banks"). Terms which are defined in the Agreement and which are used but not
defined herein are used herein with the meanings given them in the Agreement.
Pursuant to the terms of the Agreement, Borrower hereby requests a Borrowing in
the amount of $_____________ to be advanced on _____________, ____.
Borrower requests that the Borrowing to be made hereunder shall be [A
BASE RATE BORROWING] [A EURODOLLAR BORROWING] and shall have the Interest
Periods all as set forth below:
Type of Borrowing Aggregate Amount Interest Period
----------------- ---------------- ---------------
Borrower and the Authorized Officer of Borrower signing this instrument
hereby certify that:
(a) Such officer is the duly elected, qualified and acting
officer of Borrower as indicated below such officers signature hereto.
(b) The representations and warranties of Borrower set forth
in the Agreement and the Loan Papers delivered to Administrative Agent
and Banks are true and correct on and as of the date hereof, with the
same effect as though such representations and warranties had been made
on and as of the date hereof or, if such representations and warranties
are expressly limited to particular dates, as of such particular dates.
Since the date of the last financial reports of Borrower delivered to
each Bank pursuant to Section 9.1 of the Agreement, there has not
occurred any event or condition which has resulted in, or could
reasonably be expected to result in, a Material Adverse Change.
(c) There does not exist on the date hereof, any condition or
event which constitutes a Default or Event of Default, nor will any
such Default or Event of Default exist upon Borrower's receipt and
application of the proceeds requested hereby. Borrower will
F-1
120
use the proceeds hereby requested in compliance with the applicable
provisions of the Agreement.
(d) Borrower has performed and complied with all agreements
and conditions in the Agreement and the other Loan Papers required to
be performed or complied with by Borrower on or prior to the date
hereof, and each of the conditions precedent to the Borrowing contained
in the Agreement remain satisfied in all material respects.
(e) After giving effect to the Borrowing requested hereby, the
Outstanding Credit will not be in excess of the Borrowing Base on the
date requested for the making of such Borrowing.
(f) The Unrestricted Advance Limit on the date hereof, and
prior to giving effect to the Borrowing requested hereby, is $____.
(g) The Borrowing requested herein will be used for the
following purposes:
[ ] Pay a portion of the Purchase Price for the Apache
Acquisition [NOT TO EXCEED $14,500,000].
[ ] Pay Approved CapEx in the amount of $_________ [NOT TO
EXCEED $4,800,000 IN THE AGGREGATE].
[ ] Other general corporate purposes in the amount of $___
[NOT TO EXCEED THE UNRESTRICTED ADVANCE LIMIT UNLESS
MADE FROM INCREMENTAL AVAILABILITY].
IN WITNESS WHEREOF, this instrument is executed as of_________,______.
EXUS Energy, LLC, a Delaware limited
liability company
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
F-2
121
EXHIBIT G
REQUEST FOR LETTER OF CREDIT
Reference is made to that certain Credit Agreement dated as of June 30,
1999 (as from time to time amended, the "Agreement"), among EXUS Energy, LLC
("Borrower"), NationsBank, N.A., as Administrative Agent ("Administrative
Agent"), and the financial institutions listed on Schedule 1 thereto, as Banks
("Banks"). Terms which are defined in the Agreement and which are used but not
defined herein are used herein with the meanings given them in the Agreement.
Pursuant to the terms of the Agreement, Borrower hereby requests
Administrative Agent to issue a Letter of Credit for the account of Borrower as
follows:
Type of Commitment:
------------------
Requested Amount $
-------------------
Requested Date of Issuance
--------------------
Requested Expiration Date
--------------------
Summary of Terms
--------------------
(provide a brief description
of the purpose of such Letter
of Credit and the conditions
under which the drafts under
such Letter of Credit are
to be available)
--------------------
Beneficiary (Name/Address)
--------------------
--------------------
--------------------
--------------------
Such Letter of Credit is more particularly described in the Letter of
Credit Application and Agreement of Administrative Agent which is attached
hereto.
Borrower and the Authorized Officer of Borrower signing this instrument
hereby certify that:
(a) Such officer is the duly elected, qualified and acting
officer of Borrower as indicated below such officer's signature hereto.
(b) The representations and warranties of Borrower set forth
in the Agreement and the other Loan Papers delivered to Administrative
Agent and each Bank are true and correct on and as of the date hereof,
with the same effect as though such representations and warranties had
been made on and as of the date hereof, or if such representations and
warranties are expressly limited to particular dates, as of such
particular dates. No Material
G-1
122
Adverse Change has occurred since the date of the last financial
reports of Borrower delivered to Banks pursuant to Section 9.1 of the
Agreement.
(c) There does not exist on the date hereof any condition or
event which constitutes a Default or Event of Default, nor will any
such Default or Event of Default exist upon the issuance of the Letter
of Credit requested hereby. Borrower will use the Letter of Credit
solely for purposes permitted by the Agreement.
(d) Borrower has performed and complied with all agreements
and conditions in the Agreement and the other Loan Papers required to
be performed or complied with by Borrower on or prior to the date
hereof, and each of the conditions precedent to the issuance of Letters
of Credit contained in the Agreement remain satisfied in all material
respects.
(e) After the issuance of the Letter of Credit requested
hereby, the Outstanding Credit will not be in excess of the Borrowing
Base in effect on the date requested for the issuance of such Letter of
Credit.
IN WITNESS WHEREOF, this instrument is executed as of ________________,
____.
EXUS Energy, LLC, a Delaware limited
liability company
By:
-------------------------------
Its:
------------------------------
G-2
123
EXHIBIT H
NOTICE OF CONTINUATION AND CONVERSION NOTICE
Reference is made to that certain Credit Agreement dated as of June 30,
1999 (as from time to time amended, the "Agreement"), among EXUS Energy, LLC
("Borrower"), NationsBank, N.A., as Administrative Agent ("Administrative
Agent"), and the financial institutions listed on Schedule 1 thereto, as Banks
("Banks"). Terms which are defined in the Agreement and which are used but not
defined herein are used herein with the meanings given them in the Agreement.
[ ] Reference is hereby made to the existing Eurodollar Loan
outstanding under the Agreement in the amount of $________
which is subject to an Interest Period expiring on
_________________, _____. Borrower hereby requests that on the
expiration of such Interest Period the portion of the
principal of such Eurodollar Loan which is subject to such
Interest Period be made the subject of [ ] the Base Rate Loan
or [ ] a Eurodollar Loan having an Interest Period of ____
months.
[ ] Borrower hereby requests that on ____________, _____, a
portion of the principal of the Base Rate Loan in the amount
of $__________ be made the subject of a Eurodollar Loan having
an Interest Period of ______ (__) months.
Borrower and the Authorized Officer of Borrower signing this instrument
hereby certify that:
(a) Such officer is the duly elected, qualified and acting
officer of Borrower as indicated below such officer's signature hereto;
(b) There does not exist on the date hereof any condition or
event which constitutes a Default or Event of Default; and
(c) The representations and warranties of Borrower set forth
in the Agreement and the Loan Papers delivered to Administrative Agent
and each Bank are true and correct on and as of the date hereof, with
the same effect as though such representations and warranties had been
made on and as of the date hereof or, if such representations and
warranties are expressly limited to particular dates, as of such
particular dates.
H-1
124
IN WITNESS WHEREOF, this instrument is executed as of _____________,
_____.
EXUS Energy, LLC, a Delaware limited
liability company
By:
-------------------------------
Its:
------------------------------
H-2
125
EXHIBIT I
CERTIFICATE OF OWNERSHIP INTERESTS
This Certificate of Ownership Interests (this "Certificate") is
executed and delivered pursuant to that certain Credit Agreement dated as of
June 30, 1999 (as amended from time to time, the "Agreement"), among EXUS
Energy, LLC ("Borrower"), NationsBank, N.A., as Administrative Agent
("Administrative Agent"), and the financial institutions listed on Schedule I
thereto, as Banks ("Banks"). Unless otherwise defined herein, all capitalized
terms shall have the meanings given such terms in the Agreement.
In order to induce Banks to extend credit to Borrower under the
Agreement, Borrower hereby represents and warrants to Administrative Agent and
each Bank that (a) Exhibit A attached hereto is a complete and accurate
description of all Mineral Interests described in the Initial Reserve Report
including all Apache Properties (the "Initial Borrowing Base Properties"), (b)
after giving effect to the closing of the Apache Acquisition, Borrower will hold
good and defensible title, subject only to Permitted Encumbrances, to the
Initial Borrowing Base Properties, (c) Borrower's share of (i) the costs for
each of the Initial Borrowing Base Properties is not greater than the decimal
fraction set forth in the Initial Reserve Report before and after payout, as the
case may be, and described therein by the respective designations "working
interests," "WI," "gross working interest," "GWI," or similar terms (except in
such cases where there is a corresponding increase in the net revenue interest),
and (ii) production from, allocated to, or attributed to each of such Initial
Borrowing Base Properties is not less than the decimal fraction set forth in the
Initial Reserve Report before and after payout, as the case may be, and
described therein by the designations net revenue interest, NRI, or similar
terms, and (d) each well drilled in respect of each of the Initial Borrowing
Base Properties described in the Initial Reserve Report (A) is capable of, and
is presently, producing Hydrocarbons in commercially profitable quantities, and
Borrower is receiving (or will receive) payments for its share of production,
with no funds in respect of any thereof being presently held in suspense, other
than any such funds being held in suspense pending delivery of appropriate
division orders, and (B) has been drilled, bottomed, completed and operated in
compliance with all applicable Laws and no such well which is currently
producing Hydrocarbons is subject to any penalty in production by reason of such
well having produced in excess of its allowable production.
I-1
126
Borrower acknowledges and agrees that each Bank is relying on this
Certificate and the representations and warranties herein contained in extending
credit under the Agreement and but for Borrower's execution and delivery of this
Certificate, Banks would not extend credit under the Agreement.
Executed as of the 30th day of June, 1999.
EXUS Energy, LLC, a Delaware limited
liability company
By: -------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
I-2
127
EXHIBIT A
[To be attached]
I-3
128
EXHIBIT J-1
FINANCIAL OFFICER'S CERTIFICATE
The undersigned, the Chief Financial Officer of EXCO Resources, Inc., a
Texas corporation ("EXCO") hereby (a) delivers this Certificate pursuant to
Section 9.1(c) of that certain Credit Agreement (the "Agreement") dated as of
June 30, 1999, among EXCO, NationsBank, N.A., as Administrative Agent
("Administrative Agent"), and the financial institutions listed on Schedule 1
thereto, as Banks ("Banks"), and (b) certifies to each Bank, with the knowledge
and intent that Banks may, without any independent investigation, rely fully on
the matters herein in connection with the Agreement, as follows:
1. Attached hereto as Schedule I are the financial statements of EXCO
as of and for the Fiscal [ ]Year [ ]Quarter (check one) ended ___________, ____.
2. Such financial statements are true and correct in all materials
respects, have been prepared on a consistent basis in accordance with GAAP
(except as otherwise noted therein) and fairly present the financial condition
of EXCO as of the date indicated therein and the results of operations for the
respective periods indicated therein.
3. Except as described on Schedule II hereto, the representations and
warranties of EXCO set forth in the Loan Papers delivered to Administrative
Agent and each Bank are true and correct on and as of the date hereof, with the
same effect as though such representations and warranties had been made on and
as of the date hereof or, if such representations and warranties are expressly
limited to particular dates, as of such particular dates.
Unless otherwise defined herein, all capitalized terms used herein
shall have the meaning given such terms in the Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Financial
Officer's Certificate as of ___________, _____.
EXCO Resources, Inc., a Texas corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
J-1-1
129
Schedule I
Financial Statements
(to be attached)
J-1-2
130
Schedule II
Qualifications to Representations and Warranties
J-1-3
131
EXHIBIT J-2
FINANCIAL OFFICER'S CERTIFICATE
The undersigned, the Chief Financial Officer of Venus Exploration
Company, a Delaware corporation ("Venus") hereby (a) delivers this Certificate
pursuant to Section 9.1(c) of that certain Credit Agreement (the "Agreement")
dated as of June 30, 1999, among Venus, NationsBank, N.A., as Administrative
Agent ("Administrative Agent"), and the financial institutions listed on
Schedule 1 thereto, as Banks ("Banks"), and (b) certifies to each Bank, with the
knowledge and intent that Banks may, without any independent investigation, rely
fully on the matters herein in connection with the Agreement, as follows:
1. Attached hereto as Schedule I are the financial statements of Venus
as of and for the Fiscal [ ]Year [ ]Quarter (check one) ended ___________, ____.
2. Such financial statements are true and correct in all materials
respects, have been prepared on a consistent basis in accordance with GAAP
(except as otherwise noted therein) and fairly present the financial condition
of Venus as of the date indicated therein and the results of operations for the
respective periods indicated therein.
3. Except as described on Schedule II hereto, the representations and
warranties of Venus set forth in the Loan Papers delivered to Administrative
Agent and each Bank are true and correct on and as of the date hereof, with the
same effect as though such representations and warranties had been made on and
as of the date hereof or, if such representations and warranties are expressly
limited to particular dates, as of such particular dates.
Unless otherwise defined herein, all capitalized terms used herein
shall have the meaning given such terms in the Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Financial
Officer's Certificate as of ___________, _____.
Venus Exploration Company, a Delaware
corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
J-2-1
132
Schedule I
Financial Statements
(to be attached)
J-2-2
133
Schedule II
Qualifications to Representations and Warranties
J-2-3
134
EXHIBIT J-3
FINANCIAL OFFICER'S CERTIFICATE
The undersigned, the Chief Financial Officer of EXUS Energy, LLC, a
Delaware limited liability company ("Borrower") hereby (a) delivers this
Certificate pursuant to Section 9.1(c) of that certain Credit Agreement (the
"Agreement") dated as of June 30, 1999, among Borrower, NationsBank, N.A., as
Administrative Agent ("Administrative Agent"), and the financial institutions
listed on Schedule 1 thereto, as Banks ("Banks"), and (b) certifies to each
Bank, with the knowledge and intent that Banks may, without any independent
investigation, rely fully on the matters herein in connection with the
Agreement, as follows:
1. Attached hereto as Schedule I are the financial statements of
Borrower as of and for the Fiscal [ ]Year [ ]Quarter (check one) ended
____________, ____.
2. Such financial statements are true and correct in all materials
respects, have been prepared on a consistent basis in accordance with GAAP
(except as otherwise noted therein) and fairly present the financial condition
of Borrower as of the date indicated therein and the results of operations for
the respective periods indicated therein.
3. Attached hereto as Schedule II are detailed calculations used by
Borrower to establish that Borrower was in compliance with the requirements of
Article XI of the Agreement on the date of the financial statements attached as
Schedule I hereto.
4. Unless otherwise disclosed on Schedule III attached hereto and
incorporated herein by reference for all purposes, neither a Default nor an
Event of Default has occurred which is in existence on the date hereof;
provided, that for any Default or Event of Default disclosed on Schedule III
attached hereto, Borrower is taking or proposes to take the action to cure such
Default or Event of Default set forth on Schedule III.
5. On the date of the financial statements attached hereto as Schedule
I (a) (check one) [ ] there is no Material Gas Imbalance or [ ] the amount of
the net gas imbalances under Gas Balancing Agreements to which Borrower or any
of its Subsidiaries is a party or by which any Mineral Interests owned by
Borrower or any of its Subsidiaries is bound is ____________, and (b) the
aggregate amount of all Advance Payments received under Advance Payment
Contracts to which Borrower or any of its Subsidiaries is a party or by which
any Mineral Interests owned by Borrower or any of its Subsidiaries is bound
which have not been satisfied by delivery of production, if any, is
______________.
6. Attached hereto as Schedule IV is a summary of the Hedge
Transactions to which Borrower or any of its Subsidiaries is a party on the date
of the financial statements attached hereto as Schedule I.
J-3-1
135
7. Except as described on Schedule V hereto, the representations and
warranties of Borrower set forth in the Agreement and the Loan Papers delivered
to Administrative Agent and each Bank are true and correct on and as of the date
hereof, with the same effect as though such representations and warranties had
been made on and as of the date hereof or, if such representations and
warranties are expressly limited to particular dates, as of such particular
dates.
Unless otherwise defined herein, all capitalized terms used herein
shall have the meaning given such terms in the Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed this Financial
Officer's Certificate as of ___________, _____.
EXUS Energy, LLC, a Delaware limited
liability company
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
J-3-2
136
Schedule I
Financial Statements
(to be attached)
J-3-3
137
Schedule II
Compliance Calculations
(to be attached)
J-3-4
138
Schedule III
Defaults/Remedial Action
(to be attached)
J-3-5
139
Schedule IV
Summary of Hedge Transactions
(to be attached)
J-3-6
140
Schedule V
Qualifications to Representations and Warranties
J-3-7
141
EXHIBIT K
ASSIGNMENT AND ACCEPTANCE
Reference is made to that certain Credit Agreement dated as of June 30,
1999 (the "Agreement") among EXUS Energy, LLC ("Borrower"), NationsBank, N.A.,
as Administrative Agent ("Administrative Agent") and the financial institutions
listed on Schedule 1 thereto, as Banks ("Banks"). Terms defined in the Agreement
are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. Assignor hereby sells and assigns to Assignee, without recourse and
without representation or warranty except as expressly set forth herein, and
Assignee hereby purchases and assumes from Assignor, an interest in and to
Assignor's rights and obligations under the Agreement and the other Loan Papers
as of the date hereof equal to the percentage interest specified on Schedule 1
of all outstanding rights and obligations under the Agreement and the other Loan
Papers. After giving effect to such sale and assignment, Assignee's Commitment,
Assignee's Commitment Percentage and the principal amount of the Revolving Loan
owing to Assignee will be as set forth on Schedule 1.
2. Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan Papers or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Papers or any other instrument or document furnished pursuant
thereto; (iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of Borrower or the performance or
observance by Borrower of any of its obligations under the Loan Papers or any
other instrument or document furnished pursuant thereto; and (iv) attaches the
Note held by Assignor and requests that Administrative Agent exchange such Note
for new Notes payable to the order of Assignee in an amount equal to the
Commitment assumed by Assignee pursuant hereto and to Assignor in an amount
equal to the Commitment retained by Assignor, if any, as specified on Schedule
1.
3. Assignee (i) confirms that it has received a copy of the Agreement,
together with copies of the financial statements referred to in Section 9.1
thereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment and
Acceptance; (ii) agrees that it will, independently and without reliance upon
Administrative Agent, Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Agreement; (iii)
confirms that it is an Eligible Assignee; (iv) appoints and authorizes
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Agreement as are delegated to the
Administrative Agent by the terms thereof, together with such powers and
K-1
142
discretion as are reasonably incidental thereto; (v) agrees that it will perform
in accordance with their terms all of the obligations that by the terms of the
Agreement are required to be performed by it as a Bank; and (vi) attaches any
U.S. Internal Revenue Service or other forms required under Section 4.6(d).
4. Following the execution of this Assignment and Acceptance, it will
be delivered to Administrative Agent for acceptance and recording by
Administrative Agent. The effective date for this Assignment and Acceptance (the
"Effective Date") shall be the date of acceptance hereof by Administrative
Agent, unless otherwise specified on Schedule 1.
5. Upon such acceptance and recording by Administrative Agent, as of
the Effective Date, (i) Assignee shall be a party to the Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder, and (ii) Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Agreement.
6. Upon such acceptance and recording by Administrative Agent, from and
after the Effective Date, Administrative Agent shall make all payments under the
Agreement and the Notes in respect of the interest assigned hereby (including,
without limitation, all payments of principal, interest and commitment fees with
respect thereto) to Assignee. Assignor and Assignee shall make all appropriate
adjustments in payments under the Agreement and the Notes for periods prior to
the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Texas.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
IN WITNESS WHEREOF, Assignor and Assignee have caused Schedule 1 to
this Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date specified thereon.
K-2
143
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage interest assigned: %
--------
Assignee's Commitment: $
--------
Assignee's Commitment Percentage: %
--------
Aggregate outstanding principal amount
of Revolving Loans assigned: $
--------
Principal amount of Note payable to Assignee: $
--------
Principal amount of Note payable to Assignor: $
--------
Effective Date (if other than date
of acceptance by Administrative Agent): * , 19
------- --
[NAME OF ASSIGNOR], as Assignor
By:
--------------------------------------
Title:
--------------------------------
Dated: , 19
-------------- --
[NAME OF ASSIGNEE], as Assignee
By:
--------------------------------------
Title:
--------------------------------
Domestic Lending Office:
Eurodollar Lending Office:
K-3
144
* This date should be no earlier than five Domestic Business Days after
the delivery of this Assignment and Acceptance to the Administrative
Agent.
Accepted and Approved
this ___ day of ___________, ____
NATIONSBANK, N.A., as Administrative Agent
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Approved this ____ day
of ____________, _____
EXUS Energy, LLC
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
K-4
145
SCHEDULE 1
FINANCIAL INSTITUTIONS
=================================================================================================================================
Bank Commitment Amount Commitment Percentage
- ---------------------------------------------------------------------------------------------------------------------------------
NationsBank, N.A. $50,000,000 100%
=================================================================================================================================
=================================================================================================================================
Domestic Lending Eurodollar Lending Administrative Agent -
Office Office Address for Notice Address
- ---------------------------------------------------------------------------------------------------------------------------------
901 Main Street, 64th Floor 901 Main Street, 64th 901 Main Street, 64th Floor 901 Main Street, 64th Floor
Dallas, Texas 75202 Floor Dallas, Texas 75202 Dallas, Texas 75202
Fax No. (214) 508-1285 Dallas, Texas 75202 Fax No. (214) 508-1285 Fax No. (214) 508-1285
Fax No. (214) 508-1285
=================================================================================================================================
Schedule 1
146
SCHEDULE 2
APPROVED CAP EX BUDGET
Drilling and completion of two (2) development wells on the Apache Properties at
a cost of $2,400,000 per well.
Schedule 2
147
SCHEDULE 3
LITIGATION
None.
Schedule 3
148
SCHEDULE 4
ORGANIZATION STRUCTURE; NATURE OF BUSINESS
1. Borrower is a Delaware limited liability company.
2. Borrower is qualified to transact business as a foreign limited
liability company in the State of Louisiana.
3. Borrower's Members:
- ----------------------------------------------------------------------------------------------------------------
INITIAL
CAPITAL PERCENTAGE CLASS A
MEMBER CONTRIBUTION INTEREST UNITS UNITS
- ----------------------------------------------------------------------------------------------------------------
Venus $7,000,000 50% 100 100
- ----------------------------------------------------------------------------------------------------------------
EXCO $7,000,000 50% 100 100
- ----------------------------------------------------------------------------------------------------------------
4. Borrower has no outstanding warrants, options, subscription rights,
convertible securities or other rights to purchase interests in
Borrower.
Schedule 4