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Exhibit 10.5
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LOAN AND SECURITY AGREEMENT
BY AND AMONG
ABRAXAS PETROLEUM CORPORATION
AS BORROWER,
THE SUBSIDIARIES OF BORROWER
THAT ARE SIGNATORIES HERETO
AS GUARANTORS,
THE LENDERS THAT ARE SIGNATORIES HERETO
AS THE LENDERS,
AND
FOOTHILL CAPITAL CORPORATION
AS THE ARRANGER AND ADMINISTRATIVE AGENT
DATED AS OF JANUARY 22, 2003
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT"), is entered into
as of January 22, 2003, by and among, on the one hand, the lenders identified on
the signature pages hereof (such lenders, together with their respective
successors and assigns, are referred to hereinafter each individually as a
"LENDER" and collectively as the "LENDERS"), FOOTHILL CAPITAL CORPORATION, a
California corporation, as the arranger and administrative agent for the Lenders
("AGENT"), and, on the other hand, ABRAXAS PETROLEUM CORPORATION, a Nevada
corporation ("BORROWER"), and the subsidiaries of Borrower that are signatories
hereto ("GUARANTORS").
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"ACCEPTABLE COMMODITY HEDGING AGREEMENT" means a Commodity Hedging
Agreement (i) with a counterparty rated A3 or better by Moody's and A- or better
by Standard & Poor's, or the equivalent by a rating agency acceptable to Agent,
(ii) pursuant to an agreement the terms of which are acceptable to Agent, and
(iii) the arrangements of which are otherwise reasonably acceptable to Agent.
"ACCOUNT DEBTOR" means any Person who is or who may become obligated
under, with respect to, or on account of, an Account, chattel paper, or a
General Intangible.
"ACCOUNTS" means all of Borrower's or any Guarantor's now owned or
hereafter acquired right, title, and interest with respect to "accounts" (as
that term is defined in the Code), and any and all supporting obligations in
respect thereof.
"ACH TRANSACTIONS" means any cash management or related services
(including the Automated Clearing House processing of electronic funds transfers
through the direct Federal Reserve Fedline system) provided by Wells Fargo or
its Affiliates for the account of Borrower or its Subsidiaries.
"ADDITIONAL DOCUMENTS" has the meaning set forth in SECTION 4.4.
"ADVANCES" has the meaning set forth in SECTION 2.1.
"AFFILIATE" means, as applied to any Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to direct the management and
policies of a Person, whether through the ownership of Stock, by contract, or
otherwise; PROVIDED, HOWEVER, that, for the purposes of SECTION 7.14 hereof: (a)
any Person which owns directly or indirectly 10% or more of the securities
having ordinary voting
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power for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed to
control such Person, (b) each director (or comparable manager) of a Person shall
be deemed to be an Affiliate of such Person, and (c) each partnership or joint
venture (other than joint ventures permitted under clause (d) of the definition
of Permitted Investments) in which a Person is a partner or joint venturer shall
be deemed to be an Affiliate of such Person.
"AGENT" means Foothill, solely in its capacity as agent for the
Lenders hereunder, and any successor thereto.
"AGENT ADVANCES" has the meaning set forth in SECTION 2.3(e)(i).
"AGENT'S ACCOUNT" means an account identified on SCHEDULE A-1.
"AGENT'S LIENS" means the Liens granted by Borrower or any Guarantor
to Agent for the benefit of the Lender Group under this Agreement or the other
Loan Documents.
"AGENT-RELATED PERSONS" means Agent together with its Affiliates,
officers, directors, employees, and agents.
"AGENT RESERVE" has the meaning set forth in SECTION 2.1(b).
"AGREEMENT" has the meaning set forth in the preamble hereto.
"APPLICABLE PREPAYMENT PREMIUM" means, as of any date of
determination, an amount equal to (a) during the period of time from and after
the date of the execution and delivery of this Agreement up to the date that is
the first anniversary of the Closing Date, 3.0% times the Maximum Revolver
Amount, (b) during the period of time from and including the date that is the
first anniversary of the Closing Date up to the date that is the second
anniversary of the Closing Date, 2.0% times the Maximum Revolver Amount, and (c)
during the period of time from and including the date that is the second
anniversary of the Closing Date up to the Maturity Date, 1.0% times the Maximum
Revolver Amount.
"APPLICABLE REDUCTION" means the applicable amount set forth in the
following table for the applicable period set forth opposite thereto:
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<Caption>
Applicable Period Applicable Reduction
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From the day immediately after the Closing Date and through,
but excluding the earlier of (i) the Reserve Report Delivery
Date for the Reserve Report as of June 30, 2003 and (ii)
September 15, 2003 (such earlier date, the "FIRST REDUCTION
DATE") $ 2,000,000
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From and including the First Reduction Date and $ 3,500,000
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</Table>
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<Table>
<Caption>
Applicable Period Applicable Reduction
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through, but excluding the earlier of (i) the Reserve Report
Delivery Date for the Reserve Report as of December 31, 2003
and (ii) March 15, 2004 (such earlier date, the "SECOND
REDUCTION DATE")
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From and including the Second Reduction Date and through,
but excluding the earlier of (i) the Reserve Report Delivery
Date for the Reserve Report as of June 30, 2004 and (ii)
September 15, 2004 (such earlier date, the "THIRD REDUCTION
DATE") $ 5,000,000
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From and including the Third Reduction Date and through, but
excluding the earlier of (i) the Reserve Report Delivery
Date for the Reserve Report as of December 31, 2004 and (ii)
March 15, 2005 (such earlier date, the "FOURTH REDUCTION
DATE") $ 8,500,000
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From and including the Fourth Reduction Date and through,
but excluding the earlier of (i) the Reserve Report Delivery
Date for the Reserve Report as of June 30, 2005 and (ii)
September 15, 2005 (such earlier date, the "FIFTH REDUCTION
DATE") $ 12,000,000
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From and including the Fifth Reduction Date and through, but
excluding the earlier of (i) the Reserve Report Delivery
Date for the Reserve Report as of December 31, 2005 and (ii)
March 15, 2006 (such earlier date, the "SIXTH REDUCTION
DATE") $ 13,500,000
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From and including the Sixth Reduction Date and thereafter $ 15,000,000
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</Table>
"ASSIGNEE" has the meaning set forth in SECTION 14.1.
"ASSIGNMENT AND ACCEPTANCE" means an Assignment and Acceptance in the
form of EXHIBIT A-1.
"AUTHORIZED PERSON" means any officer or other employee of Borrower or
any Guarantor.
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"AVAILABILITY" means, as of any date of determination, if such date is
a Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount that Borrower is entitled to borrow as Advances under SECTION 2.1 (after
giving effect to all then outstanding Obligations (other than Bank Products
Obligations and the Term Loan Obligations) and all sublimits and Agent Reserves
applicable hereunder).
"BANK PRODUCT AGREEMENTS" means those certain agreements entered into
from time to time by Borrower or its Subsidiaries in connection with any of the
Bank Products.
"BANK PRODUCT OBLIGATIONS" means all obligations, liabilities,
contingent reimbursement obligations, fees, and expenses owing by Borrower or
its Subsidiaries to Wells Fargo or its Affiliates pursuant to or evidenced by
the Bank Product Agreements and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all such amounts that Borrower
is obligated to reimburse to Lender as a result of Lender purchasing
participations or executing indemnities or reimbursement obligations with
respect to the Bank Products provided to Borrower or its Subsidiaries pursuant
to the Bank Product Agreements.
"BANK PRODUCT RESERVES" means, as of any date of determination, the
amount of reserves that Lender has established (based upon Wells Fargo's or its
Affiliate's reasonable determination of the credit exposure in respect of then
extant Bank Products) for Bank Products then provided or outstanding, PROVIDED
that in order to qualify as Bank Product Reserves, such reserves must be
established at the time Wells Fargo or its affiliate provides the applicable
Bank Products.
"BANK PRODUCTS" means any service or facility extended to Borrower or
its Subsidiaries by Wells Fargo or any Affiliate of Wells Fargo including: (a)
credit cards, (b) credit card processing services, (c) debit cards, (d) purchase
cards, (e) ACH Transactions, (f) cash management, including controlled
disbursement, accounts or services, or (g) Hedging Agreements.
"BANKRUPTCY CODE" means (i) the United States Bankruptcy Code, (ii)
the Bankruptcy and Insolvency Act (Canada) or (iii) the Companies' Creditors
Arrangement Act (Canada), as applicable or any similar legislation in a relevant
jurisdiction, in each case as in effect from time to time.
"BASE RATE" means, the rate of interest announced within Wells Fargo
at its principal office in San Francisco as its "prime rate", with the
understanding that the "prime rate" is one of Wells Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Wells Fargo may designate.
"BASE RATE LOAN" means each portion of an Advance or the Term Loan
that bears interest at a rate determined by reference to the Base Rate.
"BASE RATE MARGIN" means 4.50 percentage points.
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"BASIS DIFFERENTIAL" means, in the case of any Oil and Gas Property,
the difference between the NYMEX futures contract prices and the sales prices at
the delivery point where the oil or gas, as the case may be, produced by such
Oil and Gas Property, is sold.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in Section
3(35) of ERISA) or a benefit plan under Canadian Employee Benefit Laws for which
Borrower or any Subsidiary or ERISA Affiliate of Borrower has been an "employer"
(as defined in Section 3(5) of ERISA) or has held equivalent status under
Canadian Employee Benefit Laws within the past six years.
"BOARD OF DIRECTORS" means the board of directors (or comparable
managers) of Borrower or any committee thereof duly authorized to act on behalf
of the board.
"BOOKS" means Borrower's and each Guarantor's now owned or hereafter
acquired books and records (including all of its Records indicating,
summarizing, or evidencing its assets (including the Collateral) or liabilities,
all of Borrower's and each Guarantor's Records relating to its or their business
operations or financial condition, and all of its or their goods or General
Intangibles related to such information).
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWING" means a borrowing hereunder consisting of Advances (or
term loans, in the case of the Term Loan) made on the same day by the Lenders
(or Agent on behalf thereof), or by Swing Lender in the case of a Swing Loan, or
by Agent in the case of an Agent Advance.
"BORROWING BASE" has the meaning set forth in SECTION 2.1.
"BUSINESS DAY" means any day that is not a Saturday, Sunday, or other
day on which national banks are authorized or required to close in New York
City.
"CANADIAN ABRAXAS" means Canadian Abraxas Petroleum Limited.
"CANADIAN EMPLOYEE BENEFITS LAWS" means the Canadian Pension Plan Act
(Canada), the Pension Benefit Act (Ontario), the Health Insurance Act (Ontario),
the Employment Standard Act (Ontario) and any other applicable federal,
provincial or local counterparts or equivalents, in each case as amended from
time to time, to the extent same may be applicable to Borrower or any of the
Guarantors.
"CANADIAN GUARANTY" means that certain Guaranty executed and delivered
by Newco Canada in favor of Agent, for the benefit of the Lender Group, in form
and substance satisfactory to Agent.
"CANADIAN SECURITY AGREEMENT" means the Fixed and Floating Charge
Debenture, and the pledge thereof made by Newco Canada in favor of Agent, for
the benefit of the Lender Group, in form and substance satisfactory to Agent.
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"CANADIAN SECURITY DOCUMENTS" means, collectively, the Canadian
Guaranty and the Canadian Security Agreement.
"CAPEX ADJUSTMENT RATIO" means an amount equal to (x) the Total Assets
as of the first day of the applicable period, DIVIDED BY (y) the Total Assets as
of March 31, 2003.
"CAPITAL EXPENDITURES" means, for any period, any direct or indirect
expenditure made during such period, in each case, whether expensed or
capitalized, in respect of the use of assets, including all Drilling
Expenditures (as such term is defined in the New Notes Indenture as in effect on
the Closing Date), and shall include all investments and cash expenses and other
cash outflows of Borrower and its Subsidiaries related to any Permitted
Investments (as such term is defined in the New Notes Indenture as in effect on
the Closing Date) included but not limited to those relating to joint ventures,
royalty arrangements, off-balance sheet financing and farm-out expenditures made
by Borrower or its Subsidiaries, and expenditures made during such period in any
Investment (as such term is defined in the New Notes Indenture as in effect on
the Closing Date) other than Investments in Cash Equivalents, but excluding (i)
any expenditures by Borrower or any of its Subsidiaries to the extent the source
of funds for such expenditures was the proceeds of an equity offering by
Borrower consummated after the original issuance of the New Notes or the
proceeds of any Subordinated Indebtedness (as such term is defined in the New
Notes Indenture as in effect on the Closing Date) incurred by Borrower or any of
its Subsidiaries after the issuance of the New Notes in compliance with the
terms of this Agreement and the New Notes Indenture, (ii) any expenditures by
Borrower or any of its Subsidiaries to the extent such expenditures constitute
SG&A (as such term is defined in the New Notes Indenture as in effect on the
Closing Date) not prohibited by the terms of the New Notes Indenture, and (iii)
any expenditures by Borrower or any of its Subsidiaries for Qualified Lease
Operating Costs (as such term is defined in the New Notes Indenture as in effect
on the Closing Date).
"CAPITAL LEASE" means a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means any Indebtedness represented by
obligations under a Capital Lease.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody's,
(c) commercial paper maturing no more than 270 days from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-1 or P-1, or
better, from S&P or Moody's, (d) certificates of deposit or bankers' acceptances
maturing within 1 year from the date of acquisition thereof either (i) issued by
any bank organized under the laws of the United States or any state thereof
which bank has a rating of A or A2, or better, from S&P or Moody's, or (ii)
certificates of deposit less than or equal to $100,000 in the aggregate issued
by any other bank insured by the Federal Deposit Insurance Corporation, and
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(e) to the extent not otherwise included in clauses (a) through (d) above, "Cash
Equivalents" as such term is defined in the New Notes Indenture as in effect on
the Closing Date.
"CASH MANAGEMENT ACCOUNT" has the meaning set forth in SECTION 2.7(a).
"CASH MANAGEMENT AGREEMENTS" means those certain cash management
service agreements, in form and substance satisfactory to Agent, each of which
is among Borrower or any Guarantor, Agent and one of the Cash Management Banks.
"CASH MANAGEMENT BANK" has the meaning set forth in SECTION 2.7(a).
"CHANGE OF CONTROL" means (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act), becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 20%, or more, of the Stock of Borrower having the right to vote for the
election of members of the Board of Directors, or (b) a majority of the members
of the Board of Directors do not constitute Continuing Directors, (c) a "Change
of Control" (as defined in the New Notes Indenture) shall have occurred or (d)
Borrower ceases to directly own and control 100% of the outstanding capital
Stock of each of its Subsidiaries extant as of the Closing Date.
"CLOSING DATE" means the date of the making of the initial Advance (or
other extension of credit) hereunder.
"CLOSING DATE BUSINESS PLAN" means the set of Projections of Borrower
for the 3 year period following the Closing Date (on a year by year basis, and
for the 1 year period following the Closing Date, on a month by month basis), in
form and substance (including as to scope and underlying assumptions)
satisfactory to Agent.
"CODE" means the New York Uniform Commercial Code, as in effect from
time to time.
"COLLATERAL" means all assets and property of each Loan Party,
including, without limitation, all of each Loan Party's now owned or hereafter
acquired right, title, and interest in and to each of the following:
(a) Accounts,
(b) Books,
(c) Equipment,
(d) General Intangibles and DDA's,
(e) Inventory,
(f) Investment Property,
(g) Negotiable Collateral,
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(h) Oil and Gas Properties,
(i) Real Property Collateral,
(j) money or other assets of Borrower or any Guarantor that now
or hereafter come into the possession, custody, or control of any member of the
Lender Group, and
(k) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any or all of
the foregoing, and any and all Accounts, Books, Equipment, General Intangibles,
Inventory, Investment Property, Negotiable Collateral, Oil and Gas Properties,
Real Property, money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver, bailee letter,
or acknowledgement agreement of any lessor, warehouseman, processor, consignee,
or other Person in possession of, having a Lien upon, or having rights or
interests in the Books and Records, the Equipment or Inventory, but excluding
Oil and Gas Properties, in each case, in form and substance satisfactory to
Agent.
"COLLECTIONS" means all cash, checks, notes, instruments, and other
items of payment (including insurance proceeds, proceeds of cash sales, rental
proceeds, and tax refunds) of Borrower or any Guarantor.
"COMMERCIAL TORT CLAIM ASSIGNMENT" has the meaning set forth in
SECTION 4.4(b).
"COMMITMENT" means, with respect to each Lender, its Revolver
Commitment, its Term Loan Commitment, or its Total Commitment, as the context
requires, and with respect to all Lenders, all of their Revolver Commitments,
all of their Term Loan Commitments, or all of their Total Commitments, as the
context requires, in each case as such dollar amounts are set forth beside such
Lender's name under the applicable heading on SCHEDULE C-1 or the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of SECTION 14.1.
"COMMODITY HEDGING AGREEMENT" means a commodity hedging or purchase
agreement or similar arrangement entered into with the intent of protecting
against fluctuations in commodity prices or the exchange of notional commodity
obligations, either generally or under specific contingencies.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT C-1 delivered by the chief financial officer of Borrower to Agent.
"CONCENTRATION ACCOUNT" has the meaning set forth in SECTION 2.7(a).
"CONCENTRATION ACCOUNT BANK" has the meaning set forth in SECTION
2.7(a).
"CONTINUING DIRECTOR" means (a) any member of the Board of Directors
who was a director (or comparable manager) of Borrower on the Closing Date, and
(b) any individual who
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becomes a member of the Board of Directors after the Closing Date if such
individual was recommended, appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Borrower (as such terms are used in Rule 14a-11 under the Exchange Act) and
whose initial assumption of office resulted from such contest or the settlement
thereof.
"CONTRIBUTION AGREEMENT" means the Contribution Agreement made by the
Guarantors in favor of the Lender Group.
"CONSOLIDATED NET INTEREST EXPENSE" means, with respect to any Person
for any period, gross cash interest expense of such Person and its Subsidiaries
for such period determined on a consolidated basis and in accordance with GAAP
(including, without limitation, interest expense paid to Affiliates of such
Person), LESS (i) the sum of (A) cash interest income for such period and (B)
cash gains for such period on Interest Rate Protection Agreements (to the extent
not included in cash interest income above and to the extent not deducted in the
calculation of gross cash interest expense), PLUS (ii) the sum of (A) cash
losses for such period on Interest Rate Protection Agreements (to the extent not
included in gross cash interest expense) and (B) the upfront cash costs or fees
for such period associated with Interest Rate Protection Agreements (to the
extent not included in gross cash interest expense), in each case, determined on
a consolidated basis and in accordance with GAAP.
"CONTROL AGREEMENT" means a control agreement, in form and substance
satisfactory to Agent, executed and delivered by Borrower, Agent, and the
applicable securities intermediary with respect to a Securities Account or bank
with respect to a deposit account, other than deposit accounts that are subject
to a Cash Management Agreement.
"CURRENCY PROTECTION AGREEMENT" means a currency swap, cap or collar
agreement or similar arrangement entered into with the intent of protecting
against fluctuations in currency values, either generally or under specific
contingencies.
"DAILY BALANCE" means, with respect to each day during the term of
this Agreement, the amount of an Obligation owed at the end of such day.
"DDA" means any checking or other demand deposit account maintained by
Borrower.
"DEFAULT" means an event, condition, or default that, with the giving
of notice, the passage of time, or both, would be an Event of Default.
"DEFAULTING LENDER" means any Lender that fails to make any Advance
(or other extension of credit) that it is required to make hereunder on the date
that it is required to do so hereunder.
"DEFAULTING LENDER RATE" means (a) the Base Rate for the first 3 days
from and after the date the relevant payment is due, and (b) thereafter, at the
interest rate then applicable to Advances that are Base Rate Loans (inclusive of
the Base Rate Margin applicable thereto).
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"DESIGNATED ACCOUNT" means that certain DDA of Borrower identified on
Schedule D-1.
"DISBURSEMENT LETTER" means an instructional letter executed and
delivered by Borrower to Agent regarding the extensions of credit to be made on
the Closing Date, the form and substance of which is satisfactory to Agent.
"DOLLARS" or "$" means United States dollars.
"DOMESTIC LOAN PARTY" means each Borrower or Guarantor organized in
the United States.
"DUE DILIGENCE LETTER" means the due diligence letter sent by Agent's
counsel to the Loan Parties, together with each Loan Party's completed responses
to the inquiries set forth therein, the form and substance of such responses to
be satisfactory to Agent.
"EBITDA" means, with respect to any fiscal period, Borrower's and its
Subsidiaries' consolidated net earnings (or loss), minus extraordinary gains,
including any gains related to the extinguishment or retirement of the Firstar
Notes, plus interest expense, income taxes, non-cash expenses incurred in
connection with the payment of Stock compensation, and depletion depreciation
and amortization for such period, as determined in accordance with GAAP.
"ELIGIBLE TRANSFEREE" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having total assets in
excess of $250,000,000, (b) a commercial bank organized under the laws of any
other country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) any Affiliate (other than individuals) of a Lender that was
party hereto as of the Closing Date including, without limitation, a fund or
account managed by such Lender or an Affiliate of such Lender or its investment
manager (a "RELATED FUND"), (e) so long as no Event of Default has occurred and
is continuing, any other Person approved by Agent and Borrower, and (f) during
the continuation of an Event of Default, any other Person approved by Agent.
"ENVIRONMENTAL ACTIONS" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter, or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or Releases of Hazardous Materials from (a) any assets, properties, or
businesses of any Loan Party or any predecessor in interest, (b) from adjoining
properties or businesses, or (c) from or onto any facilities which received
Hazardous Materials generated by any Loan Party or any predecessor in interest.
"ENVIRONMENTAL LAW" means any applicable federal, state, provincial,
foreign or local statute, law, rule, regulation, ordinance, code, binding and
enforceable guideline, binding
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and enforceable written policy, or rule of common law now or hereafter in effect
and in each case as amended, or any judicial or administrative interpretation
thereof, including any judicial or administrative order, consent decree or
judgment, to the extent binding on any Loan Party, relating to the environment,
employee health and safety, or Hazardous Materials, including CERCLA; RCRA; the
Federal Water Pollution Control Act, 33 USC Section 1251 et seq.; the Toxic
Substances Control Act, 15 USC, Section 2601 et seq.; the Clean Air Act, 42 USC
Section 7401 et seq.; the Safe Drinking Water Act, 42 USC. Section 3803 et seq.;
the Oil Pollution Act of 1990, 33 USC Section 2701 et seq.; the Emergency
Planning and the Community Right-to-Know Act of 1986, 42 USC Section 11001 et
seq.; the Hazardous Material Transportation Act, 49 USC Section 1801 et seq.;
and the Occupational Safety and Health Act, 29 USC Section 651 et seq. (to the
extent it regulates occupational exposure to Hazardous Materials); the Canadian
Environmental Protection Act (Canada); the Fisheries Act (Canada); the
Environmental Protection Act (Ontario); the Water Resource Act (Ontario); the
Environmental Protection and Enhancement Act (Alberta); the Waste Management Act
(British Columbia); any state, provincial and local or foreign counterparts or
equivalents, in each case as amended from time to time.
"ENVIRONMENTAL LIABILITIES AND COSTS" means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.
"ENVIRONMENTAL LIEN" means any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.
"EQUIPMENT" means all of Borrower's and any Guarantor's now owned or
hereafter acquired right, title, and interest with respect to equipment,
machinery, machine tools, motors, furniture, furnishings, fixtures, vehicles
(including motor vehicles), tools, parts, goods (other than consumer goods, farm
products, or Inventory), wherever located, including all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto.
"ERISA AFFILIATE" means (a) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any Person subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
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"ERISA EVENT" means (a) a Reportable Event with respect to any Benefit
Plan or Multiemployer Plan, (b) the withdrawal of a Loan Party, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (ii) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of
ERISA, of a Loan Party, any of its Subsidiaries or ERISA Affiliates from a
Multiemployer Plan, (g) providing any security to any Plan under Section
401(a)(29) of the IRC by a Loan Party or its Subsidiaries or any of their ERISA
Affiliates or (h) any equivalent event, action, condition, proceeding or
otherwise under Canadian Employee Benefit Laws.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCESS AVAILABILITY" means the amount, as of the date any
determination thereof is to be made, equal to Availability minus the aggregate
amount, if any, of all trade payables of Borrower and its Subsidiaries aged in
excess of historical levels with respect thereto and all book overdrafts in
excess of historical practices with respect thereto, in each case as determined
by Agent in its Permitted Discretion.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as in effect
from time to time.
"EXCHANGE OFFER" means Borrower's offer to exchange cash, the New
Notes and common Stock of Borrower for any and all of the Firstar Notes, which
Firstar Notes, upon consummation of the Exchange Offer, will be canceled or
otherwise retired, all in accordance with Borrower's Offer to Exchange dated
December 9, 2002, as amended by Supplement No.1 to the Offer to Exchange, dated
January 15, 2003.
"FEE LETTER" means that certain fee letter, dated as of even date
herewith, between Borrower and Agent, in form and substance satisfactory to
Agent.
"FEIN" means Federal Employer Identification Number.
"FIRSTAR HOLDOVER REDEMPTION" has the meaning set forth in SECTION
3.1(aa).
"FIRSTAR NOTES" means all of Borrower's Series A and Series D 11-1/2%
Senior Secured Notes due 2004, governed by the Indenture, dated as of December
21, 1999, between Borrower and Firstar Bank, National Association, as trustee.
"FOOTHILL" means Foothill Capital Corporation, a California
corporation.
"FUNDING DATE" means the date on which a Borrowing occurs.
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"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means all of Borrower's and any Guarantor's now
owned or hereafter acquired right, title, and interest with respect to general
intangibles (including payment intangibles, contract rights, rights to payment,
judgments, rights arising under common law, statutes, or regulations, choses or
things in action, goodwill, patents, designs, inventions, trade names, trade
secrets, d/b/a's, Internet domain names, logos, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due or
recoverable from pension funds, route lists, rights to payment and other rights
under any royalty or licensing agreements, infringement claims, computer
programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, money, deposit accounts, insurance premium
rebates, tax refunds, and tax refund claims), and any and all supporting
obligations in respect thereof, and any other personal property other than
goods, Accounts, Investment Property, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational
documents of such Person.
"GOVERNMENTAL AUTHORITY" means any federal (including the federal
government of Canada), state, local, provincial or other governmental or
administrative body, instrumentality, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.
"GREY WOLF" means 967173 Alberta Ltd. (f/k/a Grey Wolf Exploration,
Inc.).
"GREY WOLF CREDIT FACILITY" means the Credit Agreement, dated December
20, 2001, between Grey Wolf and Mirant Canada Energy Capital, Ltd.
"GUARANTOR" has the meaning set forth in the preamble to this
Agreement and each other Person that executes a Guaranty, including, without
limitation, Newco Canada.
"GUARANTY" means that certain general continuing guaranty executed and
delivered by any Guarantor (including, without limitation, the Canadian
Guaranty) in favor of Agent, for the benefit of the Lender Group, in form and
substance satisfactory to Agent.
"GUARANTEED OBLIGATIONS" has the meaning set forth in Section 18.1.
"HAZARDOUS MATERIALS" means (a) substances that are defined or listed
in, or otherwise classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes," "toxic
substances," or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or "EP
toxicity" under Environmental Laws, (b) Hydrocarbons, including, without
limitation, oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any
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oil or dielectric fluid containing levels of polychlorinated biphenyls in excess
of 50 parts per million.
"HEDGING AGREEMENT" means any Currency Protection Agreement, Interest
Rate Protection Agreement or Commodity Hedging Agreement.
"HYDROCARBONS" means oil, gas, coal seam gas, casinghead gas,
condensate, distillate, liquid hydrocarbons, gaseous hydrocarbons, all products
and byproducts refined, separated, settled and dehydrated therefrom and all
products and byproducts refined therefrom, including, without limitation,
kerosene, liquefied petroleum gas, refined lubricating oils, diesel fuel, drip
gasoline, natural gasoline, helium, sulfur, geothermal steam, water, carbon
dioxide, and all other minerals.
"HYDROCARBON INTERESTS" means all rights, titles, interests and
estates now owned or hereafter acquired in and to oil and gas leases, oil, gas
and mineral leases, oil, gas and casinghead gas leases, or other liquid or
gaseous hydrocarbon leases, mineral fee or lease interests, farm-outs,
overriding royalty and royalty interests, net profit interests, oil payments,
production payment interests and similar mineral interests, including any
reserved or residual interest of whatever nature.
"INDEBTEDNESS" means (a) all obligations for borrowed money, (b) all
obligations evidenced by bonds, debentures, notes, or other similar instruments
and all reimbursement or other obligations in respect of letters of credit,
bankers acceptances, interest rate swaps, or other financial products, (c) all
obligations under Capital Leases, (d) all obligations or liabilities of others
secured by a Lien on any asset of Borrower or its Subsidiaries, irrespective of
whether such obligation or liability is assumed, (e) all obligations for the
deferred purchase price of assets, including trade debt (other than trade debt
incurred in the ordinary course of business and paid in accordance with
customary trade practices), and (f) any obligation guaranteeing or intended to
guarantee (whether directly or indirectly guaranteed, endorsed, co-made,
discounted, or sold with recourse) any obligation of any other Person.
"INDENTURE DEFICIT" has the meaning set forth in SECTION 2.1(d).
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION 11.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION 11.3.
"INITIAL RESERVE REPORT" means the report of the Petroleum Engineers
dated June 30, 2002 with respect to the Oil and Gas Properties of Borrower and
Newco Canada.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or against
any Person under any provision of the Bankruptcy Code or under any other state,
provincial or federal bankruptcy or insolvency law, assignments for the benefit
of creditors, formal or informal moratoria, compositions, extensions generally
with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement, dated as
of January 23, 2003, by and among, Agent, on behalf of the Lenders, and the New
Notes Trustee, on behalf
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of the holders of the New Notes, and acknowledged by Borrower and each
Guarantor, the form and substance of which shall be satisfactory to Agent.
"INTEREST RATE PROTECTION AGREEMENT" an interest rate swap, cap or
collar agreement or similar arrangement entered into with the intent of
protecting against fluctuations in interest rates or the exchange of notional
interest obligations, either generally or under specific contingencies.
"INVENTORY" means all Borrower's and Guarantors' now owned or
hereafter acquired right, title, and interest with respect to inventory (as
defined in the Code), including extracted Hydrocarbons, and other goods held for
sale or lease or to be furnished under a contract of service, goods that are
leased by Borrower or any Guarantor as lessor, goods that are furnished by
Borrower or any Guarantor under a contract of service, and raw materials, work
in process, or materials used or consumed in Borrower's or any Guarantor's
business.
"INVESTMENT" means, with respect to any Person, any investment by such
Person in any other Person (including Affiliates) in the form of loans,
guarantees, advances, or capital contributions (excluding (a) commission,
travel, and similar advances to officers and employees of such Person made in
the ordinary course of business, and (b) bona fide Accounts arising in the
ordinary course of business consistent with past practices), purchases, or other
acquisitions for consideration, of Indebtedness or Stock, and any other items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"INVESTMENT PROPERTY" means all of Borrower's or any Guarantor's now
owned or hereafter acquired right, title, and interest with respect to
"investment property" as that term is defined in the Code, and any and all
supporting obligations in respect thereof.
"IRC" means the Internal Revenue Code of 1986, as in effect from time
to time.
"ISSUING LENDER" means Foothill or any other Lender that, at the
request of Borrower and with the consent of Agent agrees, in such Lender's sole
discretion, to become an Issuing Lender for the purpose of issuing L/Cs or L/C
Undertakings pursuant to SECTION 2.12.
"L/C" has the meaning set forth in SECTION 2.12(a).
"L/C DISBURSEMENT" means a payment made by the Issuing Lender pursuant
to a Letter of Credit.
"L/C UNDERTAKING" has the meaning set forth in SECTION 2.12(a).
"LENDER" and "LENDERS" have the respective meanings set forth in the
preamble to this Agreement, and shall include any other Person made a party to
this Agreement in accordance with the provisions of SECTION 14.1.
"LENDER GROUP" means, individually and collectively, each of the
Lenders (including the Issuing Lender) and Agent.
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"LENDER GROUP EXPENSES" means all (a) costs or expenses (including
taxes, and insurance premiums) required to be paid by Borrower under any of the
Loan Documents that are paid or incurred by any one or more members of the
Lender Group, (b) reasonable fees or charges paid or incurred by any one or more
members of the Lender Group in connection with any one or more members of the
Lender Group's transactions with Borrower, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien and judgment searches, and searches for
liens under the Uniform Commercial Code and the applicable Personal Property
Security Act(s) in Canada) and including searches with the patent and trademark
office, the copyright office, or the department of motor vehicles), filing,
recording, publication, appraisal (including periodic Collateral appraisals,
business valuations or examinations of Borrower's or any Guarantors' Oil and Gas
Properties to the extent of the fees and charges (and up to the amount of any
limitation) contained in this Agreement), and environmental audits, (c) costs
and expenses incurred by any one or more members of the Lender Group in the
disbursement of funds to Borrower (by wire transfer or otherwise), (d)
reasonable charges paid or incurred by any one or more members of the Lender
Group resulting from the dishonor of checks, (e) reasonable costs and expenses
paid or incurred by the Lender Group to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated, (f) reasonable audit fees and expenses of any one
or more members of the Lender Group related to audit examinations of the Books
to the extent of the fees and charges (and up to the amount of any limitation)
contained in this Agreement, (g) reasonable costs and expenses of third party
claims or any other suit paid or incurred by any one or more members of the
Lender Group in enforcing or defending the Loan Documents or in connection with
the transactions contemplated by the Loan Documents or any one or more members
of the Lender Group's relationship with Borrower or any guarantor of the
Obligations, (h) Agent's reasonable fees and expenses (including attorneys'
fees) incurred in advising, structuring, drafting, reviewing, administering, or
amending the Loan Documents, and (i) Agent's and each Lender's reasonable fees
and expenses (including attorneys' fees) incurred in terminating, enforcing
(including attorneys' fees and expenses incurred in connection with a "workout,"
a "restructuring," or an Insolvency Proceeding concerning Borrower or in
exercising rights or remedies under the Loan Documents), or defending the Loan
Documents, irrespective of whether suit is brought, or in taking any Remedial
Action concerning the Collateral.
"LENDER-RELATED PERSON" means, with respect to any Lender, such
Lender, together with such Lender's Affiliates, and the officers, directors,
employees, and agents of such Lender.
"LETTER OF CREDIT" means an L/C or an L/C Undertaking, as the context
requires.
"LETTER OF CREDIT USAGE" means, as of any date of determination, the
aggregate undrawn amount of all outstanding Letters of Credit PLUS 100% of the
amount of outstanding time drafts accepted by an Underlying Issuer as a result
of drawings under Underlying Letters of Credit.
"LIEN" means any interest in an asset securing an obligation owed to,
or a claim by, any Person other than the owner of the asset, whether such
interest shall be based on the
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common law, statute, or contract, whether such interest shall be recorded or
perfected, and whether such interest shall be contingent upon the occurrence of
some future event or events or the existence of some future circumstance or
circumstances, including (a) the lien or security interest arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, security agreement, conditional sale or trust receipt, or from a
lease, consignment, or bailment for security purposes and also including,
purchase options, reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting any Oil and Gas Properties or Real
Property and (b) production or royalty payments or the like payable from Oil and
Gas Properties.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Bank Product Agreements,
the Cash Management Agreements, the Canadian Guaranty, the Canadian Security
Agreements, the Contribution Agreement, the Control Agreements, the Disbursement
Letter, the Due Diligence Letter, the Fee Letter, the Guaranties, the
Intercreditor Agreement, the Letters of Credit, the Mortgages, the Officers'
Certificate, the Stock Pledge Agreement, the UCC/PPSA Filing Authorization
Letter, any note or notes executed by Borrower or any Guarantor in connection
with this Agreement and payable to a member of the Lender Group, and any other
agreement entered into, now or in the future, by Borrower or any Guarantor and
the Lender Group in connection with this Agreement.
"LOAN PARTY" means the Borrower and any Guarantor.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change in the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of Borrower, individually, or the Loan
Parties taken as a whole, (b) a material impairment of Borrower's, individually,
or the Loan Parties' taken as a whole, ability to perform its or their
obligations under the Loan Documents to which it is or they are a party or of
the Lender Group's ability to enforce the Obligations or realize upon the
Collateral, or (c) a material impairment of the enforceability or priority of
the Agent's Liens with respect to the Collateral as a result of an action or
failure to act on the part of Borrower or any Guarantor.
"MATERIAL CONTRACT" means, with respect to any Person, (i) each
contract or agreement to which such Person or any of its Subsidiaries is a party
involving aggregate consideration payable to or by such Person or such
Subsidiary of $125,000 or more (other than purchase orders in the ordinary
course of the business of such Person or such Subsidiary and other than
contracts that by their terms may be terminated by such Person or Subsidiary in
the ordinary course of its business upon less than 60 days' notice without
penalty or premium) and (ii) all other contracts or agreements material to the
business, operations, condition (financial or otherwise), performance, prospects
or properties of such Person or such Subsidiary.
"MATURITY DATE" has the meaning set forth in SECTION 3.4.
"MAXIMUM REVOLVER AMOUNT" means $50,000,000.
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"MAXIMUM SENIOR DEBT" means $50,000,000 less the aggregate amount
applied from time to time to repay the principal amount of the Advances which is
accompanied by a corresponding permanent reduction of the Revolver Commitment,
PLUS (b) (x) $15 million, if the then applicable Revolver Commitment is $25
million or greater, (y) $10 million, if the then applicable Revolver Commitment
is less than $25 million and greater than or equal to $15 million or (z) $5
million, if the then applicable Revolver Commitment is less than $15 million);
PROVIDED, HOWEVER, that in no event shall Indebtedness constituting Bank Product
Obligations or Related Indebtedness be included in the calculation of Maximum
Senior Debt.
"MOODY'S" means Moody's Investors Service, Inc. and any successor
thereto.
"MORTGAGES" means, individually and collectively, one or more
mortgages, deeds of trust, debentures or deeds to secure debt, executed and
delivered by Borrower or any Guarantor in favor of Agent, for the benefit of the
Lender Group, in form and substance satisfactory to Agent, that encumber the
Real Property Collateral, the Oil and Gas Properties and the related
improvements thereto.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA) or such equivalent plan under Canadian Employee
Benefit Laws to which a Loan Party, any of its Subsidiaries, or any ERISA
Affiliate has contributed, or was obligated to contribute, within the past six
years.
"NEGOTIABLE COLLATERAL" means all of Borrower's or any Guarantor's now
owned and hereafter acquired right, title, and interest with respect to letters
of credit, letter of credit rights, instruments, promissory notes, drafts,
documents, and chattel paper (including electronic chattel paper and tangible
chattel paper), and any and all supporting obligations in respect thereof.
"NET CASH INTEREST COVERAGE RATIO" means, with respect to any Person
for any period, the ratio of (i) EBITDA of such Person and its Subsidiaries for
such period, to (ii) the Consolidated Net Interest Expense of such Person and
its Subsidiaries for such period.
"NEWCO CANADA" means Grey Wolf Exploration Inc., an Alberta
corporation wholly owned by Borrower, which was formed on December 6, 2002.
"NEWCO CANADA TRANSFER" means, prior to the consummation of the
PrimeWest Transaction, the transfer or assignment of each Oil and Gas Property
identified on Schedule 5.22 as being the property of Newco Canada from Canadian
Abraxas or Grey Wolf to Newco Canada on terms and conditions and pursuant to
documentation satisfactory to Agent.
"NEW NOTES" means Borrower's 11-1/2% Secured Notes due 2007 issued by
Borrower pursuant to the New Notes Indenture.
"NEW NOTES INDENTURE" means the Indenture, dated as of January 23,
2003, between Borrower and the New Notes Trustee.
"NEW NOTES TRUSTEE" means U.S. Bank, N.A., as trustee to the holders
of the New Notes and any successor thereto.
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"NEW NOTES DOCUMENTS" means the New Notes Indenture, the New Notes and
all agreements, instruments and other documents delivered in connection with the
foregoing.
"NORWEST NOTES" means Borrower's 12-7/8% Senior Secured Notes due
March 2003, governed by the Indenture, dated as of March 26, 1999, between
Borrower and Norwest Bank Minnesota, National Association, as trustee.
"NORWEST REDEMPTION" has the meaning set forth in SECTION 3.1(cc).
"NYMEX" means the New York Mercantile Exchange or its successor
entity.
"NYMEX STRIP PRICE" means the lower of (i) as of any date of
determination the average of the 24 succeeding monthly futures contract prices,
commencing with the month during which the determination date occurs, for each
of the appropriate crude oil and natural gas categories included in the most
recent Reserve Report provided by Borrower to Agent pursuant to SECTION 6.2(e),
as quoted on the NYMEX; PROVIDED, that if the NYMEX no longer provides futures
contract price quotes or has ceased to operate, the future contract prices used
shall be the comparable futures contract prices quoted on such other nationally
recognized commodities exchange as Agent shall designate, and (ii) $27.43 per
barrel of oil and $4.43 per MmBTU of natural gas produced from Oil and Gas
Properties of Borrower and Newco Canada, PROVIDED, that with respect to the
volume of Borrower's or Newco Canada's Hydrocarbons for which prices are fixed
under an Acceptable Commodity Hedging Agreement, the NYMEX Strip Price for such
volume of Hydrocarbons, if greater than the price determined above, shall be the
price fixed under such Acceptable Commodity Hedging Agreement then in effect.
"OBLIGATIONS" means (a) all loans (including the Term Loan), Advances,
debts, principal, interest (including any interest that, but for the provisions
of the Bankruptcy Code, would have accrued), contingent reimbursement
obligations with respect to outstanding Letters of Credit, premiums, liabilities
(including all amounts charged to Borrower's Loan Account pursuant hereto),
obligations, fees (including the fees provided for in the Fee Letter), charges,
costs, Lender Group Expenses (including any fees or expenses that, but for the
provisions of the Bankruptcy Code, would have accrued), lease payments,
guaranties, covenants, and duties of any kind and description owing by any Loan
Party to the Lender Group pursuant to or evidenced by the Loan Documents and
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or hereafter arising,
and including all interest not paid when due and all Lender Group Expenses that
Borrower is required to pay or reimburse by the Loan Documents, by law, or
otherwise, and (b) all Bank Product Obligations. Any reference in this Agreement
or in the Loan Documents to the Obligations shall include all amendments,
changes, extensions, modifications, renewals replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding.
"OFFICERS' CERTIFICATE" means the representations and warranties of
officers form submitted by Agent to the Loan Parties, together with each Loan
Party's completed responses to the inquiries set forth therein, the form and
substance of such responses to be satisfactory to Agent.
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"OIL AND GAS BUSINESS" means (a) the acquisition, exploration,
exploitation, development, operation and disposition of interests in Oil and Gas
Properties and Hydrocarbons, (b) the gathering, marketing, treating, processing,
storage, selling and transporting of any production from such interests or
properties, including, without limitation, the marketing of Hydrocarbons
obtained from unrelated Persons, (c) any business relating to or arising from
exploration for or development, production, treatment, processing, storage,
transportation or marketing of oil, gas and other minerals and products produced
in association therewith, (d) any business relating to oilfield sales and
service, and (e) any activity that is ancillary or necessary or desirable to
facilitate the activities described in clauses (a) through (d) of this
definition.
"OIL AND GAS PROPERTIES" means all Hydrocarbon Interests; personal
property and/or real property now or hereafter pooled or unitized with
Hydrocarbon Interests; presently existing or future unitization, pooling
agreements and declarations of pooled units and the units created thereby
(including without limitation all units created under orders, regulations and
rules of any Governmental Authority having jurisdiction) which may affect all or
any portion of the Hydrocarbon Interests; pipelines, gathering lines,
compression facilities, tanks and processing plants; oil wells, gas wells, water
well, injection wells, platforms, spars or other offshore facilities, casings,
rods, tubing, pumping units and engines, Christmas trees, derricks, separators,
gun barrels, flow lines, gas systems (for gathering, treating and compression),
and water systems (for treating, disposal and injection); interests held in
royalty trusts whether presently existing or hereafter created; Hydrocarbons in
and under and which may be produced, saved, processed or attributable to the
Hydrocarbon Interests, the lands covered thereby and all Hydrocarbons in
pipelines, gathering lines, tanks and processing plants and all rents, issues,
profits, proceeds, products, revenues and other incomes from or attributable to
the Hydrocarbon Interests; tenements, hereditaments, appurtenances and personal
property and/or real property in any way appertaining, belonging, affixed or
incidental to the Hydrocarbon Interests, and all rights, titles, interests and
estates described or referred to above, including any and all real property, now
owned or hereafter acquired, used or held for use in connection with the
operating, working or development of any of such Hydrocarbon Interests or
personal property and/or Real Property and including any and all surface leases,
rights-of-way, easements and servitudes together with all additions,
substitutions, replacements, accessions and attachments to any and all of the
foregoing; oil, gas and mineral leasehold, fee and term interests, overriding
royalty interests, mineral interests, royalty interests, net profits interests,
net revenue interests, oil payments, production payments, carried interests,
leases, subleases, farm-outs and any and all other interests in Hydrocarbons; in
each case whether now owned or hereafter acquired directly or indirectly.
"ORIGINATING LENDER" has the meaning set forth in SECTION 14.1(e).
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PARTICIPANT" has the meaning set forth in SECTION 14.1(e).
"PARTICIPANT REGISTER" has the meaning set forth in SECTION 14.1(i).
"PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto or equivalent entity under Canadian
Employee Benefits Laws.
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"PERMITTED DISCRETION" means a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
"PERMITTED DISPOSITIONS" means (a) sales or other dispositions by
Borrower or its Subsidiaries of Equipment that is substantially worn, damaged,
no longer used, surplus, or obsolete in the ordinary course of Borrower's or its
Subsidiaries' business, (b) sales by Borrower or its Subsidiaries of Inventory,
including Hydrocarbons, to buyers in the ordinary course of business, (c) the
use or transfer of money or Cash Equivalents by Borrower or its Subsidiaries in
a manner that is not prohibited by the terms of this Agreement or the other Loan
Documents, (d) the licensing by Borrower or its Subsidiaries, on a non-exclusive
basis, of patents, trademarks, copyrights, and other intellectual property
rights in the ordinary course of Borrower's or its Subsidiaries' business, (e)
releases or surrenders (in accordance with the terms of the applicable lease)
and sales or other dispositions of leasehold interests in properties with no
Proved Reserves, (f) releases or surrenders (in accordance with the terms of the
applicable lease) and sales or other dispositions of leasehold interests in
properties with Proved Undeveloped Reserves to the extent Agent consents in its
Permitted Discretion to such releases, surrenders, sales or dispositions, (g)
the sale by Newco Canada to the PrimeWest Purchasers of Oil and Gas Properties
pursuant to the option to purchase in favor of the PrimeWest Purchasers set
forth in Section 3.7 of the PrimeWest Agreement as in effect on the Closing
Date, provided that the net proceeds to the Loan Parties of such Oil and Gas
Properties is equal to or greater than the amount of the then effective
Borrowing Base attributable to such Oil and Gas Properties, and (h) the
farm-outs described under Schedule P of the PrimeWest Agreement as in effect on
the Closing Date and, to the extent there exists no Default or Event of Default,
the sale of the properties subject to such farm-out to the PrimeWest Purchasers.
"PERMITTED INVESTMENTS" means (a) investments in Cash Equivalents, (b)
investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) investments made in the ordinary course of, and of a nature that
is customary in, the Oil and Gas Business as a means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, marketing or
transporting oil and gas through agreements, transactions, interests or
arrangements which permit one to share risks or costs, comply with regulatory
requirements regarding local ownership or satisfy other objectives customarily
achieved through the conduct of the Oil and Gas Business jointly with third
parties, including, without limitation, the entry into operating agreements,
working interests, royalty interests, mineral leases, processing agreements,
farm-out and farm-in agreements, division orders, contracts for the sale,
transportation or exchange of oil or natural gas, unitization and pooling
declarations and agreements and area of mutual interest agreements, production
sharing agreements or other similar or customary agreements, transactions,
properties, interests, and investments and expenditures in connection therewith;
PROVIDED that for purposes of this clause (d), an investment in capital Stock,
partnership or joint venture interests (other than interests arising from
farm-outs, farm-ins or other similar operating agreements entered into in the
ordinary course of the Oil and Gas Business), limited liability company
interests or other similar equity interests in a Person shall not constitute a
Permitted Investment, (e) investments constituting intercompany Indebtedness to
the extent permitted pursuant to SECTIONS 7.1(i) or 7.1(j), and (f) an
investment in the form of a guarantee by Borrower of Wamsutter Holdings, Inc.'s
obligations as the general partner in Abraxas Wamsutter, L.P. so
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long as neither Wamsutter Holdings, Inc. nor Abraxas Wamsutter, L.P. conducts
any business or operations.
"PERMITTED LIENS" means (a) Liens held by Agent for the benefit of
Agent and the Lenders, (b) Liens for unpaid taxes that either (i) are not yet
delinquent, or (ii) do not constitute an Event of Default hereunder and are the
subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the
interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course
of business and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet delinquent, or (ii) are the subject of Permitted
Protests, (g) Liens arising from deposits made in connection with obtaining
worker's compensation or other unemployment insurance, (h) Liens or deposits to
secure performance of bids, tenders, regulatory compliance in connection with
the Oil and Gas Business or leases incurred in the ordinary course of business
and not in connection with the borrowing of money, (i) Liens granted as security
for surety or appeal bonds in connection with obtaining such bonds in the
ordinary course of business, (j) Liens resulting from any judgment or award that
is not an Event of Default hereunder, (k) Liens with respect to the Real
Property (not including Oil and Gas Properties) constituting easements, rights
of way, zoning restrictions and other minor imperfections of title that do not
materially interfere with or impair the use or operation thereof, (l) with
respect to the Oil and Gas Properties, imperfections of title as described in
title opinions delivered and which are acceptable to Agent, (m) Liens created
pursuant to the New Notes Documents, to the extent such Liens are subordinated
to Agent's Liens pursuant to the terms of the Intercreditor Agreement, (n) Liens
for royalties, overriding royalties, net profit interests, reversionary
interests, operating agreements and other similar interests, properties,
arrangements and agreements as they relate to Hydrocarbon Interests of Borrower
or Newco Canada, to the extent such Liens are customary in the Oil and Gas
Business, are incurred in the ordinary course of business, do not secure
Indebtedness for borrowed money and which secure sums which are not then
required to be paid, (o) Liens in favor of collecting or payor banks having a
right of setoff, revocation, refund or chargeback with respect to money or
instruments of Borrower or any Subsidiary on deposit with or in possession of
such bank to the extent such Liens secure Indebtedness under clause (k) of
SECTION 7.1, and (p) Liens in favor of the PrimeWest Purchasers arising from
their option to purchase the Oil and Gas Properties and other properties under
Section 3.7 and Schedule P of the PrimeWest Agreement as in effect on the
Closing Date.
"PERMITTED PROTEST" means the right of Borrower or any of its
Subsidiaries, as applicable, to protest any Lien (other than any such Lien that
secures the Obligations), taxes (other than payroll taxes or taxes that are the
subject of a United States federal tax lien or a Canadian provincial deemed
trust), or rental payment, provided that (a) a reserve with respect to such
obligation is established on the Books in such amount as is required under GAAP,
(b) any such protest is instituted promptly and prosecuted diligently by
Borrower or any of its Subsidiaries, as applicable, in good faith, and (c) Agent
is satisfied that, while any such protest is pending, there will be no
impairment of the enforceability, validity, or priority of any of the Agent's
Liens.
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"PERMITTED PURCHASE MONEY INDEBTEDNESS" means, as of any date of
determination, Purchase Money Indebtedness incurred after the Closing Date in an
aggregate principal amount outstanding at any one time not in excess of
$500,000.
"PERSON" means natural persons, corporations, limited liability
companies, limited partnerships, general partnerships, limited liability
partnerships, joint ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and governments
and agencies and political subdivisions thereof.
"PERSONAL PROPERTY COLLATERAL" means all Collateral other than Real
Property.
"PETROLEUM ENGINEERS" means (i) DeGolyer & McNaughton, (ii) McDaniel &
Associates Consultants Ltd. or (iii) such other petroleum engineers of
recognized national standing as may be selected by Borrower with the prior
consent of Agent.
"PLEDGE AGREEMENT" means a pledge and security agreement, in form and
substance satisfactory to Agent, executed and delivered by any Loan Party to
Agent with respect to the pledge of the Stock owned by, and promissory notes
made in favor of, any such Loan Party.
"PRIMEWEST AGREEMENT" means the Purchase and Sale Agreement, dated
November 21, 2002, among Borrower, Canadian Abraxas, Grey Wolf and each
PrimeWest Purchaser.
"PRIMEWEST TRANSACTION" means the sale by Borrower of the Stock of
Canadian Abraxas and Grey Wolf to PrimeWest Energy Inc. and PrimeWest Gas Inc.
(the "PRIMEWEST PURCHASERS") pursuant to the PrimeWest Agreement, provided that
the term "PrimeWest Transaction" shall not include any sale or other disposition
of assets of Canadian Abraxas and/or Grey Wolf to any PrimeWest Purchaser.
"PROJECTIONS" means Borrower's and Guarantor's forecasted (a) balance
sheets, (b) profit and loss statements, and (c) cash flow statements, all
prepared on a basis consistent with Borrower's and Guarantor's historical
financial statements, together with appropriate supporting details and a
statement of underlying assumptions.
"PRO RATA SHARE" means:
(a) with respect to a Lender's obligation to make Advances and
receive payments of principal, interest, fees, costs, and expenses with respect
thereto, (x) prior to the Revolver Commitment being terminated or reduced to
zero, the percentage obtained by dividing (i) such Lender's Revolver Commitment,
by (ii) the aggregate Revolver Commitments of all Lenders and (y) from and after
the time the Revolver Commitment has been terminated or reduced to zero, the
percentage obtained by dividing (i) the aggregate unpaid principal amount of
such Lender's Advances by (ii) the aggregate unpaid principal amount of all
Advances,
(b) with respect to a Lender's obligation to participate in
Letters of Credit, to reimburse the Issuing Lender, and to receive payments of
fees with respect thereto, (x) prior to the Revolver Commitment being terminated
or reduced to zero, the percentage obtained
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by dividing (i) such Lender's Revolver Commitment, by (ii) the aggregate
Revolver Commitments of all Lenders and (y) from and after the time the Revolver
Commitment has been terminated or reduced to zero, the percentage obtained by
dividing (i) the aggregate unpaid principal amount of such Lender's Advances by
(ii) the aggregate unpaid principal amount of all Advances,
(c) with respect to a Lender's obligation to make the Term Loan
and receive payments of interest, fees, and principal with respect thereto, (i)
prior to the making of the Term Loan, the percentage obtained by dividing (x)
such Lender's Term Loan Commitment, by (y) the aggregate amount of all Lenders'
Term Loan Commitments, and (ii) from and after the making of the Term Loan, the
percentage obtained by dividing (x) the principal amount of such Lender's
portion of the Term Loan Amount by (y) the Term Loan Amount, and
(d) with respect to all other matters as to a particular Lender
(including the indemnification obligations arising under SECTION 16.7), the
percentage obtained by dividing (i) such Lender's Revolver Commitment PLUS the
unpaid principal amount of such Lender's portion of the outstanding Term Loan by
(ii) the aggregate amount of Revolver Commitments of all Lenders PLUS the unpaid
principal amount of the outstanding Term Loan; PROVIDED, HOWEVER, that in the
event the Revolver Commitments have been terminated or reduced to zero, Pro Rata
Share shall be the percentage obtained by dividing (A) the principal amount of
such Lender's Advances PLUS the unpaid principal amount of such Lender's portion
of the outstanding Term Loan, by (B) the principal amount of all outstanding
Advances plus the unpaid principal amount of the outstanding Term Loan.
"PROVED DEVELOPED NON-PRODUCING RESERVES" means those Oil and Gas
Properties designated as "proved developed non-producing" (in accordance with
the Definitions for Oil and Gas Reserves approved by the Board of Directors of
the Society for Petroleum Engineers, Inc. from time to time) in the Reserve
Report and used in establishing the Borrowing Base.
"PROVED DEVELOPED PRODUCING RESERVES" means those Oil and Gas
Properties designated as "proved developed producing" (in accordance with the
Definitions for Oil and Gas Reserves approved by the Board of Directors of the
Society for Petroleum Engineers, Inc. from time to time) in the Reserve Report
and used in establishing the Borrowing Base.
"PROVED RESERVES" means those Oil and Gas Properties designated as
"proved" (in accordance with the Definitions for Oil and Gas Reserves approved
by the Board of Directors of the Society for Petroleum Engineers, Inc. from time
to time) in the Reserve Report and used in establishing the Borrowing Base.
"PROVED UNDEVELOPED RESERVES" means those Oil and Gas Properties
designated as "proved undeveloped" (in accordance with the Definitions for Oil
and Gas Reserves approved by the Board of Directors of the Society for Petroleum
Engineers, Inc. from time to time) in the Reserve Report and used in
establishing the Borrowing Base.
"PV-10" means, as of any date of determination, the sum of the present
values of the amounts of net revenues before income taxes expected to be
received in each of the months
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following the date of determination on the basis of estimated production from
Proved Reserves during such months determined as follows:
(i) each such monthly net revenue amount shall be calculated (x)
on the basis of the applicable NYMEX Strip Price for the appropriate category of
oil or gas as of such date of determination, adjusting such price to reflect (A)
the appropriate Basis Differential with respect to Hydrocarbons produced from
specific Oil and Gas Properties of Borrower and Newco Canada as set forth on
Exhibit PV-10, as such Exhibit may from time to time be amended at the request
of Borrower with the written consent of Agent, (B) the prices for fixed price
contracts for such month and (C) Btu content, (y) assuming that production costs
remain constant throughout the periods of the calculation of such monthly net
revenues, and (z) otherwise applying the financial accounting and reporting
standards prescribed by the SEC for application of the successful efforts method
of accounting for such revenues under Rule 4-10 of Regulation S-X as promulgated
by the SEC from time to time; and
(ii) the present value of each such monthly net revenue amount
shall be determined by discounting each such monthly net revenue amount from the
month in which it is expected to be received, on a monthly basis, to such date
of determination at a rate of 10% per annum.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness (other than the
Obligations, but including Capitalized Lease Obligations), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets for the purpose
of financing all or any part of the acquisition cost thereof.
"REAL PROPERTY" means any estates or interests in real property now
owned or hereafter acquired by Borrower or any Guarantor and the improvements
thereto.
"REAL PROPERTY COLLATERAL" means (i) the parcel or parcels of Real
Property identified on Parts A and C of Schedule 5.22 and (ii) any Real Property
hereafter (A) acquired by Borrower or any Guarantor in the case of Real Property
constituting Oil and Gas Properties or (B) owned in fee in the case of Real
Property not constituting Oil and Gas Properties.
"RECORD" means information that is inscribed on a tangible medium or
which is stored in an electronic or other medium and is retrievable in
perceivable form.
"REGISTER" has the meaning set forth in SECTION 14.1(h).
"REGISTERED LOAN" has the meaning set forth in SECTION 2.14.
"REGISTERED NOTE" has the meaning set forth in SECTION 2.14.
"RELATED FUND" has the meaning set forth in the definition of
"Eligible Transferee".
"RELATED INDEBTEDNESS" means (i) Indebtedness under the Loan Documents
related to any fees and expenses incurred by Borrower or any of its Subsidiaries
incurred in connection with the Loan Documents (including, but not limited to,
those owed to any Person not an
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Affiliate of Borrower or any of its Subsidiaries) in connection with any
amendment (including any amendment and restatement thereof), supplement,
replacement, restatement or other modification from time to time, including any
agreements (and related instruments and documents) extending the maturity of,
refinancing, replacement or other restructuring of all or any portion of the
Indebtedness under the Loan Documents (and related instruments and documents) or
any successor or replacement agreements (and related instruments and documents)
and (ii) any capitalized interest, fees, or other expenses incurred by Borrower
or any of its Subsidiaries whether or not charged to the Loan Account or any
similar account created under the Loan Documents.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers and other closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including, without
limitation, the movement of Hazardous Materials through or in the ambient air,
soil, surface or ground water, or property.
"REMEDIAL ACTION" means all actions taken to (a) clean up, remove,
remediate, contain, treat, monitor, assess, evaluate, or in any way address
Hazardous Materials in the indoor or outdoor environment, (b) prevent or
minimize a release or threatened release of Hazardous Materials so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment, (c) perform any pre-remedial studies,
investigations, or post-remedial operation and maintenance activities, or (d)
conduct any other actions authorized by 42 USC Section 9601.
"REPORT" has the meaning set forth in SECTION 16.17.
"REPORTABLE EVENT" means any of the events described in Section
4043(c) of ERISA or the regulations thereunder other than a Reportable Event as
to which the provision of 30 days' notice to the PBGC is waived under applicable
regulations.
"REQUIRED AVAILABILITY" means Excess Availability in an amount of not
less than $5,000,000.
"REQUIRED LENDERS" means, at any time, Lenders (other than the Term
Loan Lender) whose Pro Rata Shares aggregate 66-2/3% of the Revolver
Commitments, or if the Revolver Commitments have been terminated irrevocably,
66-2/3% of the Obligations (other than Bank Product Obligations and the Term
Loan Obligations) then outstanding.
"RESERVE REPORT" means a report of the Petroleum Engineers in the form
of the Initial Reserve Report, setting forth, as of June 30 or December 31 of
any calendar year, and as of any other date on which a Reserve Report is
required or permitted to be obtained pursuant to this Agreement, (i) the
volumetric quantity and the PV-10 (and solely with respect to the Reserve Report
dated December 31 of any year, the SEC Value), of the oil and gas reserves
attributable to the Oil and Gas Properties of Borrower and Newco Canada included
in the calculation of the Borrowing Base, together with a projection of the rate
of production and future net income, taxes, operating expenses and Capital
Expenditures with respect thereto as of such date, and
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(ii) such other information as Agent may reasonably request, all in form and
substance satisfactory to Agent.
"RESERVE REPORT DELIVERY DATE" means the date on which Agent receives
from Borrower the most recent Reserve Report required to be delivered by
Borrower in accordance with SECTION 6.2(e).
"RESTRUCTURING" means the Newco Canada Transfer, the Exchange Offer,
the Firstar Holdover Redemption, the Norwest Redemption and the PrimeWest
Transaction.
"REVOLVER COMMITMENT" means, with respect to each Lender, its Revolver
Commitment, and, with respect to all Lenders, their Revolver Commitments, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on Schedule C-1 or on the signature page of the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of SECTION 14.1.
"REVOLVER USAGE" means, as of any date of determination, the sum of
(a) the then extant amount of outstanding Advances, plus (b) the then extant
amount of the Letter of Credit Usage.
"REVOLVING LOAN LENDERS" means any Lender with a Revolver Commitment.
"REVOLVING LOAN OBLIGATIONS" means any Obligations with respect to the
Advances (including, without limitation, the principal thereof, the interest
thereon, and the fees and expenses specifically related thereto and shall
include the Bank Product Obligations and any Related Indebtedness other than
Related Indebtedness of any Term Loan Lender).
"RISK PARTICIPATION LIABILITY" means, as to each Letter of Credit, all
reimbursement obligations of Borrower to the Issuing Lender with respect to an
L/C Undertaking, consisting of (a) the amount available to be drawn or which may
become available to be drawn, (b) all amounts that have been paid by the Issuing
Lender to the Underlying Issuer to the extent not reimbursed by Borrower,
whether by the making of an Advance or otherwise, and (c) all accrued and unpaid
interest, fees, and expenses payable with respect thereto.
"SEC" means the United States Securities and Exchange Commission and
any successor thereto.
"SEC VALUE" means the future net revenues before income taxes from
Proved Reserves, estimated utilizing the actual price for the appropriate
category of oil or gas as of the date of determination and assuming that oil and
natural gas prices and production costs thereafter remain constant, then
discounted at the rate of 10% per year to obtain the present value, and
otherwise applying the financial accounting and reporting standards prescribed
by the SEC for application of the successful efforts method of accounting under
Rule 4-10 and Regulation S-X as promulgated by the SEC from time to time.
"SECURITIES ACCOUNT" means a "securities account" as that term is
defined in the Code.
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"SETTLEMENT" has the meaning set forth in SECTION 2.3(f)(i).
"SETTLEMENT DATE" has the meaning set forth in SECTION 2.3(f)(i).
"SOLVENT" means, with respect to any Person on a particular date, that
such Person is not insolvent (as such term is defined in the Uniform Fraudulent
Transfer Act or any similar law in Canada).
"STANDARD & POOR'S" means Standard & Poor's Rating Services, a
division of the McGraw-Hill Companies, Inc. and any successor thereto.
"STOCK" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
Person, whether voting or nonvoting, including common stock, preferred stock, or
any other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the SEC under the Exchange Act).
"SUBSIDIARY" means, with respect to any Person, a corporation,
partnership, limited liability company, or other entity in which that Person
directly or indirectly owns or controls the shares of Stock having ordinary
voting power to elect a majority of the board of directors (or appoint other
comparable managers) of such corporation, partnership, limited liability
company, or other entity.
"SWING LENDER" means Foothill or any other Lender that, at the request
of Borrower and with the consent of Agent agrees, in such Lender's sole
discretion, to become the Swing Lender hereunder.
"SWING LOAN" has the meaning set forth in SECTION 2.3(d)(i).
"TAX PAYMENTS" has the meaning set forth in SECTION 6.6.
"TAXES" has the meaning set forth in SECTION 16.11.
"TERM LOAN" has the meaning set forth in SECTION 2.2.
"TERM LOAN AMOUNT" means $4,200,000.
"TERM LOAN COMMITMENT" means, with respect to each Lender, its Term
Loan Commitment, and, with respect to all Lenders, all of their Term Loan
Commitments, in each case as such Dollar amounts are set forth beside such
Lender's name under the applicable heading on Schedule C-1 or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of SECTION 14.1.
"TERM LOAN LENDER" means any Lender with a Term Loan Commitment.
"TERM LOAN OBLIGATIONS" means any Obligations with respect to the Term
Loans (including, without limitation, the principal thereof, the interest
capitalized thereon, and the fees and expenses specifically related thereto).
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"TOTAL COMMITMENT" means, with respect to each Lender, its Total
Commitment, and, with respect to all Lenders, all of their Total Commitments, in
each case as such Dollar amounts are set forth beside such Lender's name under
the applicable heading on Schedule C-1 attached hereto or on the signature page
of the Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of SECTION 14.1.
"TOTAL ASSETS" means, as of any date, total assets of Borrower and its
Subsidiaries as reflected on Borrower's consolidated balance sheet as of such
date prepared in accordance with GAAP.
"UCC/PPSA FILING AUTHORIZATION LETTER" means a letter duly executed by
each Loan Party authorizing Agent to file appropriate financing statements on
Form UCC-1 and PPSA registration statements without the signature of such Loan
Party in such office or offices as may be necessary or, in the opinion of Agent,
desirable to perfect the security interests purported to be created hereby or
any other Loan Document.
"UNDERLYING ISSUER" means a third Person which is the beneficiary of
an L/C Undertaking and which has issued a letter of credit at the request of the
Issuing Lender for the benefit of Borrower.
"UNDERLYING LETTER OF CREDIT" means a letter of credit that has been
issued by an Underlying Issuer.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 17.7.
"WELLS FARGO" means Wells Fargo Bank, National Association, a national
banking association.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto. Whenever
the term "Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrower and its Subsidiaries on a
consolidated basis unless the context clearly requires otherwise.
1.3 CODE. Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless otherwise
defined herein.
1.4 CONSTRUCTION. Unless the context of this Agreement or any other
Loan Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and similar terms in this Agreement or any
other Loan Document refer to this Agreement or such other Loan Document, as the
case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. Section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise
specified. Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto
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and thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein). Any reference herein
to any Person shall be construed to include such Person's successors and
assigns. Any requirement of a writing contained herein or in the other Loan
Documents shall be satisfied by the transmission of a Record and any Record
transmitted shall constitute a representation and warranty as to the accuracy
and completeness of the information contained therein.
1.5 SCHEDULES AND EXHIBITS. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 REVOLVER ADVANCES.
(a) Subject to the terms and conditions of this Agreement, and
during the term of this Agreement, each Lender with a Revolver Commitment agrees
(severally, not jointly or jointly and severally) to make advances ("ADVANCES")
to Borrower in an amount at any one time outstanding not to exceed such Lender's
Pro Rata Share of an amount equal to the LESSER of (i) the Maximum Revolver
Amount LESS the Letter of Credit Usage, and (ii) the Borrowing Base LESS the
Letter of Credit Usage. For purposes of this Agreement, "BORROWING BASE," as of
any date of determination, shall mean the result of:
(x) an amount equal to the sum of
(i) 65% of the PV-10 of the Proved Developed
Producing Reserves of Borrower and Newco Canada
that are located in the continental United
States or Canada and subject to a Mortgage and
UCC financing statements (and PPSA registration
statements in the case of Newco Canada), that in
each case create a first priority perfected Lien
in such Oil and Gas Properties in favor of Agent
for the ratable benefit of the Lenders,
(ii) 25% of the PV-10 of the Proved Developed
Non-Producing Reserves of Borrower and Newco
Canada that are located in the continental
United States or Canada and subject to a
Mortgage and UCC financing statements (and PPSA
registration statements in the case of Newco
Canada), that in each case create a first
priority perfected Lien in such Oil and Gas
Properties in favor of Agent for the ratable
benefit of the Lenders, and
(iii) 10% of the PV-10 of the Proved Undeveloped
Reserves of Borrower and Newco Canada that are
located in the continental United States or
Canada
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and subject to a Mortgage and UCC financing
statements (and PPSA registration statements in
the case of Newco Canada), that in each case
create a first priority perfected Lien in such
Oil and Gas Properties in favor of Agent for the
ratable benefit of the Lenders, MINUS
(y) the Applicable Reduction, MINUS
(z) the sum of (i) the Bank Products Reserve, and (ii) the
aggregate amount of Agent Reserves, if any, established by
Agent under SECTION 2.1(b).
(b) Anything to the contrary in this Agreement notwithstanding,
Agent may, and, at the request of the Required Lenders, shall, create reserves
against the Borrowing Base (without declaring an Event of Default) as Agent
determines, in its Permitted Discretion (in each case, an "AGENT RESERVE", and
collectively, the "AGENT RESERVES"). Without limiting the generality of the
foregoing, Agent Reserves may include (but are not limited to) reserves based
upon, without duplication, (A) past due or accrued taxes or other charges by a
Governmental Authority, including ad valorem, personal property and other taxes
which may have priority over the Liens of Agent in the Collateral; (B) Liens
(whether inchoate or otherwise) in favor of third Persons, including, without
limitation, any Governmental Authority (whether or not such Liens are Permitted
Liens); (C) estimates of present and future costs, expenses, deposits and
liabilities related to the plugging and abandonment of the Oil and Gas
Properties (net of the amount thereof which has been taken into account in the
most recent Reserve Report or is fully secured by an escrow or surety
arrangement acceptable to Agent in its Permitted Discretion); (D) without
duplication of the foregoing, amounts owing by Borrower or any Guarantor to any
Person, including, without limitation, any Governmental Authority, to the extent
secured by a Lien (whether or not such Lien is a Permitted Lien) on, or trust
(constructive or otherwise) over, any of the Collateral (including proceeds
thereof or collections from the sale of Hydrocarbons which may from time to time
come into the possession of any of the Lenders or their agents), which Lien or
trust, in Agent's Permitted Discretion has a reasonable possibility of having a
priority superior to Agent's Liens (such as landlord liens, ad valorem taxes,
production taxes, severance taxes, sales taxes, collections attributable to sale
of Hydrocarbons of Persons other than the Loan Parties) in and to such item of
Collateral, proceeds or collection; (E) to the extent not taken into account in
the most recent Reserve Report delivered to Agent, amounts which Agent
determines are appropriate to account for minority interests and other interests
of Persons other than Borrower or Newco Canada and any natural gas imbalances of
Borrower or Newco Canada and for sales of Oil and Gas Properties; (F) unrealized
losses related to Commodities Hedging Agreements; (G) any reserves that Agent
may impose as a result of the non-compliance with SECTION 6.5 by any owner or
operator of the Oil and Gas Properties of Borrower or Newco Canada; and (H) an
amount equal to three months' rent on the Loan Parties' chief executive offices
in the United States and Canada to the extent any such location is not subject
to a Collateral Access Agreement within 30 days after the Closing Date. Borrower
and Agent understand and agree that any amount of Agent Reserves shall not be
considered a disbursement bearing interest hereunder, but rather shall be an
amount that is not available for borrowing by Borrower.
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(c) The Revolving Loan Lenders shall have no obligation to make
additional Advances hereunder to the extent such additional Advances would cause
the Revolver Usage to exceed the Maximum Revolver Amount.
(d) Notwithstanding the foregoing, the Revolving Loan Lenders
shall have no obligation to make Advances if, either immediately before or after
giving effect to such Advances, the Revolver Usage PLUS the outstanding Term
Loan exceeds or will exceed the amount of Indebtedness permitted under the New
Notes Indenture (the amount of any such excess is hereafter referred to as the
"INDENTURE DEFICIT").
(e) Amounts borrowed pursuant to this Section may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 TERM LOAN. Subject to the terms and conditions of this Agreement,
on the Closing Date, each Term Loan Lender agrees (severally, not jointly or
jointly and severally) to make term loans (collectively, the "TERM LOAN") to
Borrower in an amount equal to such Lender's Pro Rata Share of the Term Loan
Amount. The Term Loan shall not be prepaid without the prior written consent of
the Revolving Loan Lenders and shall be repaid on the Maturity Date. The
outstanding unpaid principal balance and all accrued and unpaid interest under
the Term Loan shall be due and payable on the date of termination of this
Agreement, whether by its terms or by acceleration. All amounts outstanding
under the Term Loan shall constitute Obligations.
2.3 BORROWING PROCEDURES AND SETTLEMENTS.
(a) PROCEDURE FOR BORROWING. Each Borrowing shall be made by an
irrevocable written request by an Authorized Person delivered to Agent (which
notice must be received by Agent no later than 10:00 a.m. (California time) on
the Business Day prior to the date that is the requested Funding Date in the
case of a request for an Advance or the Term Loan specifying (i) the amount of
such Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day and, for the Term Loan, which must be the Closing Date; PROVIDED, HOWEVER,
that in the case of a request for Swing Loan in an amount of $5,000,000, or
less, such notice will be timely received if it is received by Agent no later
than 10:00 a.m. (California time) on the Business Day that is the requested
Funding Date) specifying (i) the amount of such Borrowing, and (ii) the
requested Funding Date, which shall be a Business Day. At Agent's election, in
lieu of delivering the above-described written request, any Authorized Person
may give Agent telephonic notice of such request by the required time, with such
telephonic notice to be confirmed in writing within 24 hours of the giving of
such notice.
(b) AGENT'S ELECTION. Promptly after receipt of a request for a
Borrowing pursuant to SECTION 2.3(a), Agent shall elect, in its discretion, (i)
to have the terms of SECTION 2.3(c) apply to such requested Borrowing, or (ii)
if the Borrowing is for an Advance, to request Swing Lender to make a Swing Loan
pursuant to the terms of SECTION 2.3(d) in the amount of the requested
Borrowing; PROVIDED, HOWEVER, that if Swing Lender declines in its sole
discretion to make a Swing Loan pursuant to SECTION 2.3(d), Agent shall elect to
have the terms of SECTION 2.3(c) apply to such requested Borrowing.
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(c) MAKING OF ADVANCES.
(i) In the event that Agent shall elect to have the terms
of this SECTION 2.3(c) apply to a requested Borrowing as described in
SECTION 2.3(b), then promptly after receipt of a request for a Borrowing
pursuant to SECTION 2.3(a), Agent shall notify the Lenders, not later than
1:00 p.m. (California time) on the Business Day immediately preceding the
Funding Date applicable thereto, by telecopy, telephone, or other similar
form of transmission, of the requested Borrowing. Each Lender shall make
the amount of such Lender's Pro Rata Share of the requested Borrowing
available to Agent in immediately available funds, to Agent's Account, not
later than 10:00 a.m. (California time) on the Funding Date applicable
thereto. After Agent's receipt of the proceeds of such Advances, (or the
Term Loan, as applicable), upon satisfaction of the applicable conditions
precedent set forth in SECTION 3 hereof, Agent shall make the proceeds
thereof available to Borrower on the applicable Funding Date by
transferring immediately available funds equal to such proceeds received by
Agent to Borrower's Designated Account; PROVIDED, HOWEVER, that, subject to
the provisions of SECTION 2.3(i), Agent shall not request any Lender to
make, and no Lender shall make, any Advance (or its portion of the Term
Loan) if Agent shall have actual knowledge that (1) one or more of the
applicable conditions precedent set forth in SECTION 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing unless
such condition has been waived, or (2) the requested Borrowing would exceed
the Availability on such Funding Date.
(ii) Unless Agent receives notice from a Lender on or
prior to the Closing Date or, with respect to any Borrowing after the
Closing Date, at least 1 Business Day prior to the date of such Borrowing,
that such Lender will not make available as and when required hereunder to
Agent for the account of Borrower the amount of that Lender's Pro Rata
Share of the Borrowing, Agent may assume that each Lender has made or will
make such amount available to Agent in immediately available funds on the
Funding Date and Agent may (but shall not be so required), in reliance upon
such assumption, make available to Borrower on such date a corresponding
amount. If and to the extent any Lender shall not have made its full amount
available to Agent in immediately available funds and Agent in such
circumstances has made available to Borrower such amount, that Lender shall
on the Business Day following such Funding Date make such amount available
to Agent, together with interest at the Defaulting Lender Rate for each day
during such period. A notice submitted by Agent to any Lender with respect
to amounts owing under this subsection shall be conclusive, absent manifest
error. If such amount is so made available, such payment to Agent shall
constitute such Lender's Advance on the date of Borrowing for all purposes
of this Agreement. If such amount is not made available to Agent on the
Business Day following the Funding Date, Agent will notify Borrower of such
failure to fund and, upon demand by Agent, Borrower shall pay such amount
to Agent for Agent's account, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Advances composing such
Borrowing. The failure of any Lender to make any Advance on any Funding
Date shall not relieve any other Lender of any obligation hereunder to make
an Advance on such Funding Date, but
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no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on any Funding Date.
(iii) Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrower to Agent for the Defaulting
Lender's benefit, and, in the absence of such transfer to the Defaulting
Lender, Agent shall transfer any such payments to each other non-Defaulting
Lender member of the Lender Group ratably in accordance with their Revolver
Commitments (but only to the extent that such Defaulting Lender's Advance
was funded by the other members of the Lender Group) or, if so directed by
Borrower and if no Default or Event of Default had occurred and is
continuing (and to the extent such Defaulting Lender's Advance was not
funded by the Lender Group), retain same to be re-advanced to Borrower as
if such Defaulting Lender had made Advances to Borrower. Subject to the
foregoing, Agent may hold and, in its Permitted Discretion, re-lend to
Borrower for the account of such Defaulting Lender the amount of all such
payments received and retained by it for the account of such Defaulting
Lender. Solely for the purposes of voting or consenting to matters with
respect to the Loan Documents, such Defaulting Lender shall be deemed not
to be a "Lender" and such Lender's Revolver Commitment shall be deemed to
be zero. This Section shall remain effective with respect to such Lender
until (x) the Obligations under this Agreement shall have been declared or
shall have become immediately due and payable, (y) the non-Defaulting
Lenders, Agent, and Borrower shall have waived such Defaulting Lender's
default in writing, or (z) the Defaulting Lender makes its Pro Rata Share
of the applicable Advance and pays to Agent all amounts owing by Defaulting
Lender in respect thereof. The operation of this Section shall not be
construed to increase or otherwise affect the Revolver Commitment of any
Lender, to relieve or excuse the performance by such Defaulting Lender or
any other Lender of its duties and obligations hereunder, or to relieve or
excuse the performance by Borrower of its duties and obligations hereunder
to Agent or to the Lenders other than such Defaulting Lender. Any such
failure to fund by any Defaulting Lender shall constitute a material breach
by such Defaulting Lender of this Agreement and shall entitle Borrower at
its option, upon written notice to Agent, to arrange for a substitute
Lender to assume the Revolver Commitment of such Defaulting Lender, such
substitute Lender to be acceptable to Agent. In connection with the
arrangement of such a substitute Lender, the Defaulting Lender shall have
no right to refuse to be replaced hereunder, and agrees to execute and
deliver a completed form of Assignment and Acceptance Agreement in favor of
the substitute Lender (and agrees that it shall be deemed to have executed
and delivered such document if it fails to do so) subject only to being
repaid its share of the outstanding Obligations (other than Bank Product
Obligations) (including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind
whatsoever; PROVIDED FURTHER, HOWEVER, that any such assumption of the
Revolver Commitment of such Defaulting Lender shall not be deemed to
constitute a waiver of any of the Lender Groups' or Borrower's rights or
remedies against any such Defaulting Lender arising out of or in relation
to such failure to fund.
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(d) MAKING OF SWING LOANS.
(i) In the event Agent shall elect, with the consent of
Swing Lender, as a Lender, to have the terms of this SECTION 2.3(d) apply
to a requested Borrowing as described in SECTION 2.3(b), Swing Lender as a
Lender shall make such Advance in the amount of such Borrowing (any such
Advance made solely by Swing Lender as a Lender pursuant to this SECTION
2.3(d) being referred to as a "SWING LOAN" and such Advances being referred
to collectively as "SWING LOANS") available to Borrower on the Funding Date
applicable thereto by transferring immediately available funds to
Borrower's Designated Account. Each Swing Loan is an Advance hereunder and
shall be subject to all the terms and conditions applicable to other
Advances, except that all payments on any Swing Loan shall be payable to
Swing Lender as a Lender solely for its own account (and for the account of
the holder of any participation interest with respect to such Swing Loan).
Subject to the provisions of SECTION 2.3(i), Agent shall not request Swing
Lender as a Lender to make, and Swing Lender as a Lender shall not make,
any Swing Loan if Agent has actual knowledge that (i) one or more of the
applicable conditions precedent set forth in SECTION 3 will not be
satisfied on the requested Funding Date for the applicable Borrowing unless
such condition has been waived, or (ii) the requested Borrowing would
exceed the Availability on such Funding Date. Swing Lender as a Lender
shall not otherwise be required to determine whether the applicable
conditions precedent set forth in SECTION 3 have been satisfied on the
Funding Date applicable thereto prior to making, in its sole discretion,
any Swing Loan.
(ii) The Swing Loans shall be secured by the Agent's
Liens, shall constitute Advances and Obligations hereunder, and shall bear
interest at the rate applicable from time to time to Advances that are Base
Rate Loans.
(e) AGENT ADVANCES.
(i) Agent hereby is authorized by Borrower and the
Lenders, from time to time in Agent's sole discretion, (1) after the
occurrence and during the continuance of a Default or an Event of Default,
or (2) at any time that any of the other applicable conditions precedent
set forth in SECTION 3 have not been satisfied, to make Advances to
Borrower on behalf of the Lenders that Agent, in its Permitted Discretion
deems necessary or desirable (A) to preserve or protect the Collateral, or
any portion thereof, (B) to enhance the likelihood of repayment of the
Obligations (other than Bank Product Obligations), or (C) to pay any other
amount chargeable to Borrower pursuant to the terms of this Agreement,
including Lender Group Expenses and the costs, fees, and expenses described
in SECTION 10 (any of the Advances described in this SECTION 2.3(e) shall
be referred to as "AGENT ADVANCES"); PROVIDED, that notwithstanding
anything to the contrary contained in this SECTION 2.3(e), the aggregate
principal amount of Agent Advances outstanding at any time, when taken
together with the aggregate principal amount of Overadvances made in
accordance with Section 2.3(i) hereof outstanding at any time, shall not
exceed an amount equal to the lesser of (x) 10% of the Borrowing Base then
in effect and (y) $5,000,000. Each Agent Advance is an Advance hereunder
and shall be subject to all the terms and conditions applicable to other
Advances, and all
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payments thereon shall be payable to Agent solely for its own account (and
for the account of the holder of any participation interest with respect to
such Agent Advance).
(ii) The Agent Advances shall be repayable by Borrower on
demand and secured by the Agent's Liens granted to Agent under the Loan
Documents, shall constitute Advances and Obligations hereunder, and shall
bear interest at the rate applicable from time to time to Advances that are
Base Rate Loans.
(f) SETTLEMENT. It is agreed that each Lender's funded portion
of the Advances is intended by the Lenders to equal, at all times, such Lender's
Pro Rata Share of the outstanding Advances. Such agreement notwithstanding,
Agent, Swing Lender, and the other Lenders agree (which agreement shall not be
for the benefit of or enforceable by Borrower) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Advances, the Swing Loans, and the Agent Advances shall take
place on a periodic basis in accordance with the following provisions:
(i) Agent shall request settlement ("SETTLEMENT") with
the Lenders on a weekly basis, or on a more frequent basis if so determined
by Agent, (1) on behalf of Swing Lender, with respect to each outstanding
Swing Loan, (2) for itself, with respect to each Agent Advance, and (3)
with respect to Collections received, as to each by notifying the Lenders
by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 2:00 p.m. (California time) on the
Business Day immediately prior to the date of such requested Settlement
(the date of such requested Settlement being the "SETTLEMENT DATE"). Such
notice of a Settlement Date shall include a summary statement of the amount
of outstanding Advances, Swing Loans, and Agent Advances for the period
since the prior Settlement Date. Subject to the terms and conditions
contained herein (including SECTION 2.3(c)(iii)): (y) if a Lender's balance
of the Advances, Swing Loans, and Agent Advances exceeds such Lender's Pro
Rata Share of the Advances, Swing Loans, and Agent Advances as of a
Settlement Date, then Agent shall, by no later than 12:00 p.m. (California
time) on the Settlement Date, transfer in immediately available funds to
the account of such Lender as such Lender may designate, an amount such
that each such Lender shall, upon receipt of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent
Advances, and (z) if a Lender's balance of the Advances, Swing Loans, and
Agent Advances is less than such Lender's Pro Rata Share of the Advances,
Swing Loans, and Agent Advances as of a Settlement Date, such Lender shall
no later than 12:00 p.m. (California time) on the Settlement Date transfer
in immediately available funds to the Agent's Account, an amount such that
each such Lender shall, upon transfer of such amount, have as of the
Settlement Date, its Pro Rata Share of the Advances, Swing Loans, and Agent
Advances. Such amounts made available to Agent under clause (z) of the
immediately preceding sentence shall be applied against the amounts of the
applicable Swing Loan or Agent Advance and, together with the portion of
such Swing Loan or Agent Advance representing Swing Lender's Pro Rata Share
thereof, shall constitute Advances of such Lenders. If any such amount is
not made available to Agent by any Lender on the Settlement Date applicable
thereto to the extent required by the terms hereof, Agent shall be entitled
to recover for its account such amount on demand from such Lender together
with interest thereon at the Defaulting Lender Rate.
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(ii) In determining whether a Lender's balance of the
Advances, Swing Loans, and Agent Advances is less than, equal to, or
greater than such Lender's Pro Rata Share of the Advances, Swing Loans, and
Agent Advances as of a Settlement Date, Agent shall, as part of the
relevant Settlement, apply to such balance the portion of payments actually
received in good funds by Agent with respect to principal, interest and
fees payable by Borrower and allocable to the Lenders hereunder, and
proceeds of Collateral. To the extent that a net amount is owed to any such
Lender after such application, such net amount shall be distributed by
Agent to that Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no
Agent Advances or Swing Loans are outstanding, may pay over to Swing Lender
any payments received by Agent, that in accordance with the terms of this
Agreement would be applied to the reduction of the Advances, for
application to Swing Lender's Pro Rata Share of the Advances. If, as of any
Settlement Date, Collections received since the then immediately preceding
Settlement Date have been applied to Swing Lender's Pro Rata Share of the
Advances other than to Swing Loans, as provided for in the previous
sentence, Swing Lender shall pay to Agent for the accounts of the Lenders,
and Agent shall pay to the Lenders, to be applied to the outstanding
Advances of such Lenders, an amount such that each Lender shall, upon
receipt of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances. During the period between Settlement Dates, Swing
Lender with respect to Swing Loans, Agent with respect to Agent Advances,
and each Lender (subject to the effect of letter agreements between Agent
and individual Lenders) with respect to the Advances other than Swing Loans
and Agent Advances, shall be entitled to interest at the applicable rate or
rates payable under this Agreement on the daily amount of funds employed by
Swing Lender, Agent, or the Lenders, as applicable.
(g) NOTATION. Agent shall record on its books the principal
amount of the Advances owing to each Lender, including the Swing Loans owing to
Swing Lender, and Agent Advances owing to Agent, and the interests therein of
each Lender, from time to time. In addition, each Lender is authorized, at such
Lender's option, to note the date and amount of each payment or prepayment of
principal of such Lender's Advances in its books and records, including computer
records, such books and records constituting conclusive evidence, absent
manifest error, of the accuracy of the information contained therein.
(h) LENDERS' FAILURE TO PERFORM. All Advances (other than Swing
Loans and Agent Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. It is understood that (i) no Lender shall
be responsible for any failure by any other Lender to perform its obligation to
make any Advance (or other extension of credit) hereunder, nor shall any
Commitment of any Lender be increased or decreased as a result of any failure by
any other Lender to perform its obligations hereunder, and (ii) no failure by
any Lender to perform its obligations hereunder shall excuse any other Lender
from its obligations hereunder.
(i) OPTIONAL OVERADVANCES. (i) Any contrary provision of this
Agreement (including, without limitation, SECTION 2.3(i)(ii)) notwithstanding,
the Lenders hereby authorize Agent or Swing Lender, as applicable, and Agent or
Swing Lender, as applicable, may,
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but is not obligated to, knowingly and intentionally, continue to make Advances
(including Swing Loans) to Borrower notwithstanding that an Overadvance exists
or thereby would be created, so long as (A) after giving effect to such Advances
(including a Swing Loan), the outstanding Revolver Usage does not exceed the
Borrowing Base by more than an amount equal to the lesser of (x) 10% of the
Borrowing Base then in effect and (y) $5,000,000, (B) after giving effect to
such Advances (including a Swing Loan), the outstanding Revolver Usage (except
for and excluding amounts charged to the Loan Account for interest, fees, or
Lender Group Expenses) does not exceed the Maximum Revolver Amount, (C) the
aggregate principal amount of Overadvances made pursuant to this SECTION 2.3(i)
when taken together with the aggregate principal amount of Agent Advances made
pursuant to SECTION 2.3(e) does not exceed at any time an amount equal to the
lesser of (x) 10% of the Borrowing Base then in effect and (y) $5,000,000 and
(D) at the time of the making of any such Advance (including any Swing Loan),
Agent does not believe, in good faith, that the Overadvance created by such
Advance will be outstanding for more than 90 days. The foregoing provisions are
for the exclusive benefit of Agent, Swing Lender, and the Revolving Loan Lenders
and are not intended to benefit Borrower or the Term Loan Lenders in any way.
The Advances and Swing Loans, as applicable, that are made pursuant to this
SECTION 2.3(i) shall be subject to the same terms and conditions as any other
Advance or Swing Loan, as applicable, and the rate of interest applicable
thereto shall be the rate applicable to Advances that are Base Rate Loans under
SECTION 2.6(c) hereof without regard to the presence or absence of a Default or
Event of Default.
(ii) In the event Agent obtains actual knowledge that the
Revolver Usage exceeds the amounts permitted by the preceding paragraph,
regardless of the amount of, or reason for, such excess, Agent shall notify
Lenders as soon as practicable (and prior to making any (or any additional)
intentional Overadvances (except for and excluding amounts charged to the
Loan Account for interest, fees, or Lender Group Expenses of Agent and the
Revolving Loan Lenders) unless Agent determines that prior notice would
result in imminent harm to the Collateral or its value), and the Revolving
Loan Lenders thereupon shall, together with Agent, jointly determine the
terms of arrangements that shall be implemented with Borrower intended to
reduce, within a reasonable time, the outstanding principal amount of the
Advances to Borrower to an amount permitted by the preceding paragraph. In
the event Agent or any Revolving Loan Lender disagrees over the terms of
reduction or repayment of any Overadvance, the terms of reduction or
repayment thereof shall be implemented according to the determination of
the Required Lenders.
(iii) Each Revolving Loan Lender shall be obligated to
settle with Agent as provided in SECTION 2.3(f) for the amount of such
Lender's Pro Rata Share of any unintentional Overadvances by Agent reported
to such Lender, any intentional Overadvances made as permitted under this
SECTION 2.3(i), and any Overadvances resulting from the charging to the
Loan Account of interest, fees, or Lender Group Expenses.
2.4 PAYMENTS.
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(a) PAYMENTS BY BORROWER.
(i) Except as otherwise expressly provided herein, all
payments by Borrower shall be made to Agent's Account for the account of
the Lender Group and shall be made in immediately available funds, no later
than 11:00 a.m. (California time) on the date specified herein. Any payment
received by Agent later than 11:00 a.m. (California time) shall be deemed
to have been received on the following Business Day and any applicable
interest or fee shall continue to accrue until such following Business Day.
(ii) Unless Agent receives notice from Borrower prior to
the date on which any payment is due to the Revolving Loan Lenders that
Borrower will not make such payment in full as and when required, Agent may
assume that Borrower has made (or will make) such payment in full to Agent
on such date in immediately available funds and Agent may (but shall not be
so required), in reliance upon such assumption, distribute to each
Revolving Loan Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent Borrower does not make such payment
in full to Agent on the date when due, each Revolving Loan Lender severally
shall repay to Agent on demand such amount distributed to such Revolving
Loan Lender, together with interest thereon at the Defaulting Lender Rate
for each day from the date such amount is distributed to such Lender until
the date repaid.
(b) APPORTIONMENT AND APPLICATION OF PAYMENTS.
(i) Except as otherwise provided with respect to
Defaulting Lenders and except as otherwise provided in the Loan Documents
(including letter agreements between Agent and individual Revolving Loan
Lenders), aggregate principal and interest payments shall be apportioned
ratably among the Revolving Loan Lenders (according to the unpaid principal
balance of the Revolving Loan Obligations held by each Revolving Loan
Lender) and payments of fees and expenses (other than fees or expenses that
are for Agent's separate account, after giving effect to any letter
agreements between Agent and individual Revolving Loan Lenders) shall be
apportioned ratably among the Revolving Loan Lenders having a Pro Rata
Share of the Revolver Commitment or Revolving Loan Obligations (other than
payments received while no Event of Default has occurred and is continuing
and which relate to the payment of principal or interest of specific
Obligations other than the Term Loan Obligations or which relate to the
payment of specific fees other than those payable to the Term Loan
Lenders), and all proceeds of Accounts or other Collateral received by
Agent, shall be applied as follows:
(A) FIRST, to pay any Lender Group Expenses then due
to Agent under the Loan Documents, until paid in full,
(B) SECOND, to pay any Lender Group Expenses then
due to the Revolving Loan Lenders under the Loan Documents, on a
ratable basis, until paid in full,
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(C) THIRD, to pay any fees then due to Agent (for
its separate accounts, after giving effect to any letter agreements
between Agent and individual Revolving Loan Lenders) under the Loan
Documents until paid in full,
(D) FOURTH, to pay any fees then due to any or all
of the Revolving Loan Lenders (after giving effect to any letter
agreements between Agent and individual Revolving Loan Lenders) under
the Loan Documents, on a ratable basis, until paid in full,
(E) FIFTH, to pay interest due in respect of all
Agent Advances, until paid in full,
(F) SIXTH, ratably to pay interest due in respect
of the Advances (other than Agent Advances) and the Swing Loans until
paid in full,
(G) SEVENTH, to pay the principal of all Agent
Advances until paid in full,
(H) EIGHTH, to pay the principal of all Swing Loans
until paid in full,
(I) NINTH, so long as no Event of Default has
occurred and is continuing, and at Agent's election (which election
Agent agrees will not be made if an Overadvance would be created
thereby) to pay amounts then due and owing by Borrower or its
Subsidiaries in respect of Bank Products, until paid in full,
(J) TENTH, so long as no Event of Default has
occurred and is continuing, to pay the principal of all Advances until
paid in full,
(K) ELEVENTH, if an Event of Default has occurred
and is continuing, ratably (i) to pay the principal of all Advances
until paid in full, and (ii) to Agent, to be held by Agent, for the
benefit of Wells Fargo or its Affiliates, as applicable, as cash
collateral in an amount up to the amount of the Bank Products Reserve
established prior to the occurrence of, and not in contemplation of,
the subject Event of Default until Borrower's and its Subsidiaries'
obligations in respect of the then extant Bank Products have been paid
in full or the cash collateral amount has been exhausted,
(L) TWELFTH, if an Event of Default has occurred and
is continuing, to Agent, to be held by Agent, for the ratable benefit
of Issuing Lender and those Revolving Loan Lenders having a Revolver
Commitment, as cash collateral in an amount up to 105% of the then
extant Letter of Credit Usage until paid in full,
(M) THIRTEENTH, to pay any other Revolving Loan
Obligations (including Bank Product Obligations) until paid in full,
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(N) FOURTEENTH, after all of the Revolving Loan
Obligations have been paid in full, all Letters of Credit have either
been terminated or cash collateralized and the Revolver Commitments
have been terminated, to pay the Lender Group Expenses then due to the
Term Loan Lenders, on a ratable basis, until paid in full,
(O) FIFTEENTH, after all of the Revolving Loan
Obligations have been paid in full, all Letters of Credit have either
been terminated or cash collateralized and the Revolver Commitments
have been terminated, to pay interest due in respect of the Term Loan
until paid in full,
(P) SIXTEENTH, after all of the Revolving Loan
Obligations have been paid in full, the Letters of Credit have either
been terminated or cash collateralized and the Revolver Commitments
have been terminated, to pay the outstanding principal balance of the
Term Loan until the Term Loan is paid in full,
(Q) SEVENTEENTH, after all of the Revolving Loan
Obligations have been paid in full, the Letters of Credit have either
been terminated or cash collateralized and the Revolver Commitments
have been terminated, to pay any other Term Loan Obligations until
paid in full, and
(R) EIGHTEENTH, to Borrower (to be wired to the
Designated Account) or such other Person entitled thereto under
applicable law.
(ii) Agent promptly shall distribute to each Lender,
pursuant to the applicable wire instructions received from each Lender in
writing, such funds as it may be entitled to receive, subject to a
Settlement delay as provided in SECTION 2.3(h).
(iii) In each instance, so long as no Event of Default has
occurred and is continuing, SECTION 2.4(b)(i) shall not be deemed to apply
to any payment by Borrower specified by Borrower to be for the payment of
specific Obligations other than the Term Loan Obligations then due and
payable (or prepayable) under any provision of this Agreement.
(iv) For purposes of the foregoing, "paid in full" means
payment of all amounts owing under the Loan Documents according to the
terms thereof, including loan fees, service fees, professional fees,
interest (and specifically including interest accrued after the
commencement of any Insolvency Proceeding), default interest, interest on
interest, and expense reimbursements, whether or not the same would be or
is allowed or disallowed in whole or in part in any Insolvency Proceeding.
(v) Notwithstanding anything contained in this Agreement,
Borrower shall not repay any Term Loan Obligations unless and until all of
the Revolving Loan Obligations have been paid in full, all Letters of
Credit have been terminated or cash collateralized and the Revolver
Commitments have been terminated.
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(vi) In the event of a direct conflict between the
priority provisions of this SECTION 2.4 and other provisions contained in
any other Loan Document, it is the intention of the parties hereto that
such priority provisions in such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other. In the event of any actual, irreconcilable conflict that cannot be
resolved as aforesaid, the terms and provisions of this SECTION 2.4 shall
control and govern.
(c) EXCESS CASH. If, on the day immediately prior to the end of
any fiscal quarter of Borrower, the aggregate amount of cash and Cash
Equivalents of Borrower and its Subsidiaries exceeds $2,000,000, Borrower shall
immediately pay to Agent an amount equal to such excess to be applied to the
outstanding principal of the Advances.
(d) INDENTURE DEFICIT. If on any day an Indenture Deficit
exists, Borrower shall immediately pay to Agent an amount equal to such
Indenture Deficit to be applied to the outstanding principal of the Advances.
2.5 OVERADVANCES. If, at any time or for any reason, the amount of
the Revolving Loan Obligations (other than Bank Product Obligations and Related
Indebtedness) owed by Borrower to the Lender Group pursuant to SECTIONS 2.1 and
2.12 is greater than either the Dollar or percentage limitations set forth in
SECTIONS 2.1 or 2.12, (an "OVERADVANCE"), Borrower immediately shall pay to
Agent (unless an Overadvance is created pursuant to SECTION 2.3(i) in which case
such payment shall be on demand), in cash, the amount of such excess, which
amount shall be used by Agent to reduce the Revolving Loan Obligations in
accordance with the priorities set forth in SECTION 2.4(b). In addition,
Borrower hereby promises to pay the Obligations (including principal, interest,
fees, costs, and expenses) in Dollars in full to the Lender Group as and when
due and payable under the terms of this Agreement and the other Loan Documents.
2.6 INTEREST RATES AND LETTER OF CREDIT FEE: RATES, PAYMENTS, AND
CALCULATIONS.
(a) INTEREST RATES. Except as provided in clause (c) below, all
Obligations (except for undrawn Letters of Credit and except for Bank Product
Obligations) whether or not charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to the Base Rate plus the Base Rate Margin; PROVIDED that, all interest on
the Term Loan shall be capitalized on the date such interest is payable. For
purposes of this Agreement and the other Loan Documents, the amounts so
capitalized hereunder shall bear interest in accordance with this SECTION
2.6(a).
The foregoing notwithstanding, at no time shall any portion of the
Obligations (other than Bank Product Obligations) bear interest on the Daily
Balance thereof at a per annum rate less than 9.0%. To the extent that interest
accrued hereunder at the rate set forth herein would be less than the foregoing
minimum daily rate, the interest rate chargeable hereunder for such day
automatically shall be deemed increased to the minimum rate.
(b) LETTER OF CREDIT FEE. Borrower shall pay Agent (for the
ratable benefit of the Lenders, with a Revolver Commitment subject to any letter
agreement between
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Agent and individual Lenders), a Letter of Credit fee (in addition to the
charges, commissions, fees, and costs set forth in SECTION 2.12(e)) which shall
accrue at a rate equal to 4.0% per annum TIMES the Daily Balance of the undrawn
amount of all outstanding Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default (and at the election of Agent or the
Required Lenders),
(i) all Obligations (except for undrawn Letters of Credit
and except for Bank Product Obligations) whether or not charged to the Loan
Account pursuant to the terms hereof shall bear interest on the Daily
Balance thereof at a per annum rate equal to 4 percentage points above the
per annum rate otherwise applicable hereunder, and
(ii) the Letter of Credit fee provided for above shall be
increased to 4 percentage points above the per annum rate otherwise
applicable hereunder.
(d) PAYMENT. Interest, shall be due and payable, in arrears, on
the first day of each month at any time that Obligations or Revolver Commitments
are outstanding. Letter of Credit fees and all other fees payable hereunder
shall be due and payable on the date upon which such fees are due and payable
hereunder. Borrower hereby authorizes Agent, from time to time without prior
notice to Borrower, to, and Agent agrees that it will, charge such interest and
fees, all Lender Group Expenses (as and when incurred), the charges,
commissions, fees, and costs provided for in SECTION 2.12(e) (as and when
accrued or incurred), the fees and costs provided for in SECTION 2.11 (as and
when accrued or incurred), and all other payments as and when due and payable
under any Loan Document excluding any interest, fees, charges, commission costs
and any other payments due and payable in respect of the Term Loan or to the
Term Loan Lenders, but including any amounts due and payable to Wells Fargo or
its Affiliates in respect of Bank Products (up to the amount of the then extant
Bank Products Reserve) to Borrower's Loan Account, which amounts thereafter
shall constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due shall be
compounded by being charged to Borrower's Loan Account and shall thereafter
constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances that are Base Rate Loans hereunder.
(e) COMPUTATION. All interest and fees chargeable under the Loan
Documents shall be computed on the basis of a 360-day year for the actual number
of days elapsed. In the event the Base Rate is changed from time to time
hereafter, the rates of interest hereunder based upon the Base Rate
automatically and immediately shall be increased or decreased by an amount equal
to such change in the Base Rate.
(f) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no event
shall the interest rate or rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group, in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; PROVIDED, HOWEVER, that, anything contained herein
to
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the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, IPSO FACTO, as
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.7 CASH MANAGEMENT.
(a) Borrower shall (i) establish and maintain cash management
services of a type and on terms satisfactory to Agent at one or more of the
banks set forth on Schedule 2.7(a) (each a "CASH MANAGEMENT BANK"), and shall
request in writing and otherwise take such reasonable steps to ensure that all
of its Account Debtors forward payment of the amounts owed by them directly to
such Cash Management Bank, and (ii) deposit or cause to be deposited promptly,
and in any event no later than the first Business Day after the date of receipt
thereof, all Collections (including those sent directly by Account Debtors to a
Cash Management Bank) into a bank account in Agent's name (a "CASH MANAGEMENT
ACCOUNT") at one of the Cash Management Banks. Borrower shall establish and
maintain a concentration account in its name (the "CONCENTRATION ACCOUNT") at
the bank or banks which shall be designated as the concentration account bank
for Borrower on Schedule 2.7(a) (the "CONCENTRATION ACCOUNT BANK") which bank
shall be satisfactory to Agent.
(b) Each Cash Management Bank and the Concentration Account Bank
shall establish and maintain Cash Management Agreements with Agent and Borrower
or any Guarantor, in form and substance acceptable to Agent. Each such Cash
Management Agreement shall provide, among other things, that (i) all items of
payment deposited in such Cash Management Account and the Concentration Account
and proceeds thereof are held by such Cash Management Bank or the Concentration
Account Bank, as the case may be, as agent or bailee-in-possession for Agent,
(ii) the Cash Management Bank and the Concentration Account Bank have no rights
of setoff or recoupment or any other claim against the applicable Cash
Management Account or Concentration Account, other than for payment of its
service fees and other charges directly related to the administration of such
Cash Management Account or Concentration Account and for returned checks or
other items of payment, (iii) (A) with respect to each Cash Management Bank,
such bank agrees, to forward immediately all amounts in each Cash Management
Account to the Concentration Account Bank and to cause daily sweeps from such
Cash Management Account into the Concentration Account, and (B) with respect to
the Concentration Account Bank, such bank agrees from and after a receipt of a
notice (an "ACTIVATION NOTICE") from Agent (which Activation Notice may be given
by Agent at any time at which an Event of Default shall have occurred and is
continuing), to immediately forward all amounts received in the Concentration
Account to the Agent's Account; PROVIDED, HOWEVER, that Agent reserves the right
in its sole discretion, to require that Collections representing amounts
attributable to trust fund taxes or Hydrocarbon interests of third Persons be
segregated by the Cash Management Banks and held in a separate account (it being
the intent of Agent, to the extent it has sufficient information to do so, to so
segregate trust fund taxes or Hydrocarbon interests of third Persons, and avoid
the deposit of such funds into the Agent's Account), and (iv) prior to the
receipt by the Concentration Account Bank of an Activation Notice, all amounts
in the Concentration Account may be transferred to and used by Borrower in the
ordinary course of business. From and after the date Agent has delivered an
Activation Notice to any Cash
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Management Bank with respect to any Cash Management Account(s), Borrower shall
not accumulate or maintain cash in disbursement or payroll accounts as of any
date of determination in excess of checks outstanding against such accounts as
of that date and amounts necessary to meet minimum balance requirements.
(c) So long as no Default or Event of Default has occurred and
is continuing, Borrower may amend Schedule 2.7(a) to add or replace a Cash
Management Bank, Cash Management Account, Concentration Account Bank or
Concentration Account; PROVIDED, HOWEVER, that (i) such prospective Cash
Management Bank or Concentration Account Bank shall be satisfactory to Agent and
Agent shall have consented in writing in advance to the opening of such Cash
Management Account or Concentration Account with the prospective Cash Management
Bank or Concentration Account Bank, and (ii) prior to the time of the opening of
such Cash Management Account or Concentration Account, Borrower and Guarantors
and such prospective Cash Management Bank or Concentration Account Bank shall
have executed and delivered to Agent a Cash Management Agreement. Borrower shall
close any of its Cash Management Accounts or Concentration Account (and
establish replacement cash management accounts in accordance with the foregoing
sentence) promptly and in any event within 30 days of notice from Agent that the
creditworthiness of any Cash Management Bank or Concentration Account Bank is no
longer acceptable in Agent's reasonable judgment, or as promptly as practicable
and in any event within 60 days of notice from Agent that the operating
performance, funds transfer, or availability procedures or performance of the
Cash Management Bank with respect to Cash Management Accounts, Concentration
Account Bank with respect to the Concentration Account or Agent's liability
under any Cash Management Agreement with such Cash Management Bank or the
Concentration Account Bank is no longer acceptable in Agent's reasonable
judgment.
(d) The Cash Management Accounts and the Concentration Account
shall be cash collateral accounts, with all Collections in such accounts
securing payment of the Obligations, and in which Borrower and each Guarantor is
hereby deemed to have granted a Lien to Agent.
(e) Within 15 days after the Closing Date, Newco Canada shall
(i) establish and maintain one or more depository accounts, under the dominion
and control of Agent pursuant to a lockbox agreement among Agent, Newco Canada
and the applicable Canadian financial institution, in form and substance
satisfactory to Agent, in respect of its Collections and (ii) instruct all of
its Account Debtors to remit all such Collections to such depository accounts.
Newco Canada shall at all times deposit all Collections into such accounts that
are received by it from any source promptly, and in any event no later than the
first Business Day, after the date of receipt thereof.
(f) So long as no Event of Default shall have occurred and be
continuing, Newco Canada may use the funds on deposit in its foreign bank
accounts for its working capital purposes. During the continuance of an Event of
Default, Agent shall have the right to convert all non-Dollar denominated
balances in Newco Canada's foreign bank accounts into Dollars (at Borrower's
sole expense) and cause all amounts in such accounts to be wired into a DDA or
other account subject to a Control Agreement and then wired from such DDA to a
Cash Management Account. The arrangements contemplated in SECTION 2.7(e) and
this SECTION
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2.7(f) shall not be modified by Borrower, Newco Canada or any other Subsidiaries
of Borrower without the prior written consent of Agent.
2.8 CREDITING PAYMENTS; FLOAT CHARGE. The receipt of any payment item
by Agent (whether from transfers to Agent by the Cash Management Banks pursuant
to the Cash Management Agreements or otherwise) shall not be considered a
payment on account unless such payment item is a wire transfer of immediately
available federal funds made to the Agent's Account or unless and until such
payment item is honored when presented for payment. Should any payment item not
be honored when presented for payment, then Borrower shall be deemed not to have
made such payment and interest shall be calculated accordingly. Anything to the
contrary contained herein notwithstanding, any payment item shall be deemed
received by Agent only if it is received into the Agent's Account on a Business
Day on or before 11:00 a.m. (California time). If any payment item is received
into the Agent's Account on a non-Business Day or after 11:00 a.m. (California
time) on a Business Day, it shall be deemed to have been received by Agent as of
the opening of business on the immediately following Business Day. From and
after the Closing Date, Agent shall be entitled to charge Borrower for 2
Business Days of 'clearance' or 'float' at the rate applicable to Base Rate
Loans under SECTION 2.6 on all Collections that are received by Borrower
(regardless of whether forwarded by the Cash Management Banks to Agent). This
across-the-board 2 Business Days clearance or float charge on all Collections is
acknowledged by the parties to constitute an integral aspect of the pricing of
the financing of Borrower and shall apply irrespective of whether or not there
are any outstanding monetary Obligations; the effect of such clearance or float
charge being the equivalent of charging 2 Business Days of interest on such
Collections. The parties acknowledge and agree that the economic benefit of the
foregoing provisions of this SECTION 2.8 shall be for the exclusive benefit of
Agent.
2.9 DESIGNATED ACCOUNT. Agent is authorized to make the Advances and
the Term Loan, and Issuing Lender is authorized to issue the Letters of Credit,
under this Agreement based upon telephonic or other instructions received from
anyone purporting to be an Authorized Person, or without instructions if
pursuant to SECTION 2.6(d). Borrower agrees to establish and maintain the
Designated Account with the Designated Account Bank for the purpose of receiving
the proceeds of the Advances requested by Borrower and made by Agent or the
Lenders hereunder. Unless otherwise agreed by Agent and Borrower, any Advance,
Agent Advance, or Swing Loan requested by Borrower and made by Agent or the
Lenders hereunder shall be made to the Designated Account.
2.10 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS. Agent
shall maintain an account on its books in the name of Borrower (the "LOAN
ACCOUNT") on which Borrower will be charged with all Advances (including Agent
Advances and Swing Loans) made by Agent, Swing Lender, or the Lenders to
Borrower or for Borrower's account, the Letters of Credit issued by Issuing
Lender for Borrower's account, and with all other payment Obligations hereunder
or under the other Loan Documents (including Bank Product Obligations up to the
amount of the then extant Bank Products Reserve but excluding the Term Loan
Obligations), including, accrued interest, fees and expenses, and Lender Group
Expenses. In accordance with SECTION 2.8, the Loan Account will be credited with
all payments received by Agent from Borrower or for Borrower's account,
including all amounts received in the Agent's Account from any Cash Management
Bank. Agent shall render statements regarding the Loan Account to Borrower,
including principal, interest, fees, and including an itemization of all charges
and
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expenses constituting Lender Group Expenses owing, and such statements shall be
conclusively presumed to be correct and accurate and constitute an account
stated between Borrower and the Lender Group unless, within 30 days after
receipt thereof by Borrower, Borrower shall deliver to Agent written objection
thereto describing the error or errors contained in any such statements.
2.11 FEES. Borrower shall pay to Agent the following fees and charges,
which fees and charges shall be non-refundable when paid (irrespective of
whether this Agreement is terminated thereafter) and shall be apportioned among
the Revolving Loan Lenders in accordance with their Pro Rata Share (as
determined by clause (a) of the definition thereof):
(a) UNUSED LINE FEE. On the first day of each month during the
term of this Agreement, an unused line fee in an amount equal to 0.50% per annum
TIMES the result of (a) the Maximum Revolver Amount, LESS (b) the sum of (i) the
average Daily Balance of Advances that were outstanding during the immediately
preceding month, PLUS (ii) the average Daily Balance of the Letter of Credit
Usage during the immediately preceding month,
(b) FEE LETTER FEES. As and when due and payable under the terms
of the Fee Letter, Borrower shall pay to Agent the fees set forth in the Fee
Letter, and
(c) AUDIT, APPRAISAL, AND VALUATION CHARGES. For the separate
account of Agent, audit, appraisal, and valuation fees and charges as follows,
(i) a fee of $850 per day, per auditor (such fees for all auditors for any
single financial audit not to exceed $5,000 in the aggregate), plus
out-of-pocket expenses for each financial audit of a Loan Party performed by
personnel employed by Agent, (ii) a fee of $1,500 per day per appraiser, plus
out-of-pocket expenses, for each appraisal of the Collateral performed by
personnel employed by Agent, and (iii) the actual charges paid or incurred by
Agent if it elects to employ the services of one or more third Persons to
perform financial audits of any Loan Party, to appraise the Collateral, or any
portion thereof, to review or examine the Oil and Gas Properties of any Loan
Party or to assess any Loan Party's business valuation, PROVIDED that, (x) with
respect of clause (i) above, so long as no Event of Default shall have occurred
and be continuing, Borrower shall not be obligated to pay for more than four (4)
financial audits during any calendar year and (y) with respect to any Reserve
Report requested by Borrower or Agent (in addition to the Reserve Reports
required to be delivered semi-annually by Borrower to Agent pursuant to SECTION
6.2(e)), the party requesting the issuance of such Reserve Report shall pay the
costs and expenses associated therewith in the absence of a continuing Default
or Event of Default (and during a continuing Default or Event of Default, such
Reserve Report shall be at Borrower's sole cost and expense).
2.12 LETTERS OF CREDIT.
(a) Subject to the terms and conditions of this Agreement, the
Issuing Lender agrees to issue letters of credit for the account of Borrower
(each, an "L/C") or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an "L/C UNDERTAKING") with
respect to letters of credit issued by an Underlying Issuer (as of the Closing
Date, the prospective Underlying Issuer is to be Wells Fargo) for the account of
Borrower. To request the issuance of an L/C or an L/C Undertaking (or the
amendment, renewal, or extension of an outstanding L/C or L/C Undertaking),
Borrower shall
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hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the Issuing Lender) to the
Issuing Lender and Agent (reasonably in advance of the requested date of
issuance, amendment, renewal, or extension) a notice requesting the issuance of
an L/C or L/C Undertaking, or identifying the L/C or L/C Undertaking to be
amended, renewed, or extended, the date of issuance, amendment, renewal, or
extension, the date on which such L/C or L/C Undertaking is to expire, the
amount of such L/C or L/C Undertaking, the name and address of the beneficiary
thereof (or the beneficiary of the Underlying Letter of Credit, as applicable),
and such other information as shall be necessary to prepare, amend, renew, or
extend such L/C or L/C Undertaking. If requested by the Issuing Lender, Borrower
also shall be an applicant under the application with respect to any Underlying
Letter of Credit that is to be the subject of an L/C Undertaking. The Issuing
Lender shall have no obligation to issue a Letter of Credit if any of the
following would result after giving effect to the requested Letter of Credit:
(i) the Letter of Credit Usage would exceed the Borrowing
Base LESS the amount of outstanding Advances, or
(ii) the Letter of Credit Usage would exceed $10,000,000,
or
(iii) the Letter of Credit Usage would exceed the Maximum
Revolver Amount LESS the then extant amount of outstanding Advances, or
(iv) an Indenture Deficit would exist.
Borrower and the Lender Group acknowledge and agree that certain
Underlying Letters of Credit may be issued to support letters of credit that
already are outstanding as of the Closing Date. Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its Permitted Discretion),
including the requirement that the amounts payable thereunder must be payable in
Dollars. If Issuing Lender is obligated to advance funds under a Letter of
Credit, Borrower immediately shall reimburse such L/C Disbursement to Issuing
Lender by paying to Agent an amount equal to such L/C Disbursement not later
than 11:00 a.m., California time, on the date that such L/C Disbursement is
made, if Borrower shall have received written or telephonic notice of such L/C
Disbursement prior to 10:00 a.m., California time, on such date, or, if such
notice has not been received by Borrower prior to such time on such date, then
not later than 11:00 a.m., California time, on the Business Day that Borrower
receives such notice, if such notice is received prior to 10:00 a.m., California
time, on the date of receipt, and, in the absence of such reimbursement, the L/C
Disbursement immediately and automatically shall be deemed to be an Advance
hereunder and, thereafter, shall bear interest at the rate then applicable to
Advances that are Base Rate Loans under SECTION 2.6. To the extent an L/C
Disbursement is deemed to be an Advance hereunder, Borrower's obligation to
reimburse such L/C Disbursement shall be discharged and replaced by the
resulting Advance. Promptly following receipt by Agent of any payment from
Borrower pursuant to this paragraph, Agent shall distribute such payment to the
Issuing Lender or, to the extent that Revolving Loan Lenders have made payments
pursuant to SECTION 2.12(c) to reimburse the Issuing Lender, then to such
Revolving Loan Lenders and the Issuing Lender as their interest may appear.
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(b) Promptly following receipt of a notice of L/C Disbursement
pursuant to SECTION 2.12(a), each Revolving Loan Lender agrees to fund its Pro
Rata Share of any Advance deemed made pursuant to the foregoing subsection on
the same terms and conditions as if Borrower had requested such Advance and
Agent shall promptly pay to Issuing Lender the amounts so received by it from
the Revolving Loan Lenders. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Lender or the Revolving Loan Lenders,
the Issuing Lender shall be deemed to have granted to each Revolving Loan
Lender, and each Revolving Loan Lender shall be deemed to have purchased, a
participation in each Letter of Credit, in an amount equal to its Pro Rata Share
of the Risk Participation Liability of such Letter of Credit, and each such
Revolving Loan Lender agrees to pay to Agent, for the account of the Issuing
Lender, such Lender's Pro Rata Share of any payments made by the Issuing Lender
under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Revolving Loan Lender hereby absolutely and unconditionally
agrees to pay to Agent, for the account of the Issuing Lender, such Revolving
Loan Lender's Pro Rata Share of each L/C Disbursement made by the Issuing Lender
and not reimbursed by Borrower on the date due as provided in clause (a) of this
Section, or of any reimbursement payment required to be refunded to Borrower for
any reason. Each Revolving Loan Lender acknowledges and agrees that its
obligation to deliver to Agent, for the account of the Issuing Lender, an amount
equal to its respective Pro Rata Share pursuant to this SECTION 2.12(b) shall be
absolute and unconditional and such remittance shall be made notwithstanding the
occurrence or continuation of an Event of Default or Default or the failure to
satisfy any condition set forth in SECTION 3 hereof. If any such Revolving Loan
Lender fails to make available to Agent the amount of such Revolving Loan
Lender's Pro Rata Share of any payments made by the Issuing Lender in respect of
such Letter of Credit as provided in this Section, Agent (for the account of the
Issuing Lender) shall be entitled to recover such amount on demand from such
Revolving Loan Lender together with interest thereon at the Defaulting Lender
Rate until paid in full.
(c) Borrower hereby agrees to indemnify, save, defend, and hold
the Lender Group harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit; PROVIDED, HOWEVER, that Borrower shall not
be obligated hereunder to indemnify for any loss, cost, expense, or liability
that is caused by the gross negligence or willful misconduct of the Issuing
Lender or any other member of the Lender Group. Borrower agrees to be bound by
the Underlying Issuer's regulations and interpretations of any Underlying Letter
of Credit or by Issuing Lender's interpretations of any L/C issued by Issuing
Lender to or for Borrower's account, even though this interpretation may be
different from Borrower's own, and Borrower understands and agrees that the
Lender Group shall not be liable for any error, negligence, or mistake, whether
of omission or commission, in following Borrower's instructions or those
contained in the Letter of Credit or any modifications, amendments, or
supplements thereto. Borrower understands that the L/C Undertakings may require
Issuing Lender to indemnify the Underlying Issuer for certain costs or
liabilities arising out of claims by Borrower against such Underlying Issuer.
Borrower hereby agrees to indemnify, save, defend, and hold the Lender Group
harmless with respect to any loss, cost, expense (including reasonable attorneys
fees), or liability incurred by the Lender Group under any L/C Undertaking as a
result of the Lender Group's indemnification of any Underlying Issuer; PROVIDED,
HOWEVER, that Borrower shall not be obligated hereunder to
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indemnify for any loss, cost, expense, or liability that is caused by the gross
negligence or willful misconduct of the Issuing Lender or any other member of
the Lender Group.
(d) Borrower hereby authorizes and directs any Underlying Issuer
to deliver to the Issuing Lender all instruments, documents, and other writings
and property received by such Underlying Issuer pursuant to such Underlying
Letter of Credit and to accept and rely upon the Issuing Lender's instructions
with respect to all matters arising in connection with such Underlying Letter of
Credit and the related application.
(e) Any and all charges, commissions, fees, and costs incurred
by the Issuing Lender relating to Underlying Letters of Credit shall be Lender
Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrower to Agent for the account of the Issuing Lender; it
being acknowledged and agreed by Borrower that, as of the Closing Date, the
issuance charge imposed by the prospective Underlying Issuer is .825% per annum
times the face amount of each Underlying Letter of Credit, that such issuance
charge may be changed from time to time, and that the Underlying Issuer also
imposes a schedule of charges for amendments, extensions, drawings, and
renewals.
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or application
thereof by any Governmental Authority, or (ii) compliance by the Underlying
Issuer or the Lender Group with any direction, request, or requirement
(irrespective of whether having the force of law) of any Governmental Authority
or monetary authority including, Regulation D of the Federal Reserve Board as
from time to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or
shall be imposed or modified in respect of any Letter of Credit issued
hereunder, or
(ii) there shall be imposed on the Underlying Issuer or
the Lender Group any other condition regarding any Underlying Letter of
Credit or any Letter of Credit issued pursuant hereto,
and the result of the foregoing is to increase, directly or indirectly, the cost
to the Lender Group of issuing, making, guaranteeing, or maintaining any Letter
of Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Borrower, and Borrower shall pay on demand such amounts as Agent may
specify to be necessary to compensate the Lender Group for such additional cost
or reduced receipt, together with interest on such amount from the date of such
demand until payment in full thereof at the rate then applicable to Base Rate
Loans hereunder. The determination by Agent of any amount due pursuant to this
Section, as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
2.13 CAPITAL REQUIREMENTS. If, after the date hereof, any Lender
determines that (i) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or
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application thereof by any Governmental Authority charged with the
administration thereof, or (ii) compliance by such Lender or its parent bank
holding company with any guideline, request, or directive of any such entity
regarding capital adequacy (whether or not having the force of law), the effect
of reducing the return on such Lender's or such holding company's capital as a
consequence of such Lender's Commitments hereunder to a level below that which
such Lender or such holding company could have achieved but for such adoption,
change, or compliance (taking into consideration such Lender's or such holding
company's then existing policies with respect to capital adequacy and assuming
the full utilization of such entity's capital) by any amount deemed by such
Lender to be material, then such Lender may notify Borrower and Agent thereof.
Following receipt of such notice, Borrower agrees to pay such Lender on demand
the amount of such reduction of return of capital as and when such reduction is
determined, payable within 90 days after presentation by such Lender of a
statement in the amount and setting forth in reasonable detail such Lender's
calculation thereof and the assumptions upon which such calculation was based
(which statement shall be deemed true and correct absent manifest error). In
determining such amount, such Lender may use any reasonable averaging and
attribution methods.
2.14 REGISTERED NOTES. Borrower agrees to record the Term Loan and
each Advance on the Register referred to in SECTION 14.1(h). The Term Loan and
each Advance recorded on the Register (the "REGISTERED LOAN") may not be
evidenced by promissory notes other than Registered Notes (as defined below).
Upon the registration of the Term Loan or any Advance, Borrower agrees, at the
request of any Lender, to execute and deliver to such Lender a promissory note,
in conformity with the terms of this Agreement, in registered form to evidence
such Registered Loan, in form and substance reasonably satisfactory to Agent and
such Lender, and registered as provided in SECTION 14.1(h) (a "REGISTERED
NOTE"), payable to the order of such Lender and otherwise duly completed,
provided that any Registered Note issued to evidence Advances shall be issued in
the principal amount of the applicable Lender's Revolver Commitment. Once
recorded on the Register, the Term Loan and each Advance may not be removed from
the Register so long as it or they remain outstanding, and a Registered Note may
not be exchanged for a promissory note that is not a Registered Note.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of the Lender Group (or any member thereof) to make the initial
Advance (or otherwise to extend any credit provided for hereunder), is subject
to the fulfillment, to the satisfaction of Agent, of each of the conditions
precedent set forth below:
(a) the Closing Date shall occur on or before January 23, 2003;
(b) Agent shall have received and filed all financing statements
and PPSA registration statements required by Agent, duly executed or otherwise
authorized by Borrower or any Guarantor, and Agent shall have received evidence
reflecting the filing of all such financing statements and PPSA registration
statements;
(c) Agent shall have received each of the following documents,
in form and substance satisfactory to Agent, duly executed, and each such
document shall be in full force and effect:
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(i) the Cash Management Agreements,
(ii) the Control Agreements,
(iii) the Canadian Guaranty,
(iv) the Canadian Security Agreement,
(v) the Contribution Agreement,
(vi) the Disbursement Letter,
(vii) the Due Diligence Letter,
(viii) the Fee Letter,
(ix) the Mortgages,
(x) the Officers' Certificate,
(xi) the UCC/PPSA Filing Authorization Letter,
(xii) the Pledge Agreement, together with all certificates
representing the shares of Stock pledged thereunder, as well as Stock
powers with respect thereto endorsed in blank and all promissory notes
pledged thereunder as well as allonges with respect thereto endorsed in
blank, and
(xiii) the Intercreditor Agreement;
(d) Agent shall have received a certificate from the Secretary
of Borrower (i) attesting to the resolutions of Borrower's Board of Directors
authorizing its execution, delivery, and performance of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute the same and (ii) certifying the names and true
signatures of the officers of Borrower authorized to sign each Loan Document to
which Borrower is a party;
(e) Agent shall have received copies of Borrower's Governing
Documents, as amended, modified, or supplemented to the Closing Date, certified
by the Secretary of Borrower;
(f) Agent shall have received a certificate of status with
respect to Borrower, dated within 10 days of the Closing Date, such certificate
to be issued by the appropriate officer of the jurisdiction of organization of
Borrower, which certificate shall indicate that Borrower is in good standing in
such jurisdiction;
(g) Agent shall have received certificates of status with
respect to Borrower, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions (other
than the jurisdiction of organization of Borrower) in
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which its failure to be duly qualified or licensed would constitute a Material
Adverse Change, which certificates shall indicate that Borrower is in good
standing in such jurisdictions;
(h) Agent shall have received a certificate from the Secretary
of each Guarantor (i) attesting to the resolutions of Guarantor's Board of
Directors authorizing its execution, delivery, and performance of the Loan
Documents to which Guarantor is a party and authorizing specific officers of
Guarantor to execute the same and (ii) certifying the names and true signatures
of the officers of such Guarantor authorized to sign each Loan Document to which
such Guarantor is a party;
(i) Agent shall have received copies of each Guarantor's
Governing Documents, as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of Guarantor;
(j) Agent shall have received a certificate of status with
respect to Guarantor (other than Eastside Coal Company, Inc.), dated within 10
days of the Closing Date, such certificate to be issued by the appropriate
officer of the jurisdiction of organization of Guarantor, which certificate
shall indicate that Guarantor is in good standing in such jurisdiction;
(k) Agent shall have received certificates of status with
respect to Guarantor, each dated within 30 days of the Closing Date, such
certificates to be issued by the appropriate officer of the jurisdictions (other
than the jurisdiction of organization of Guarantor) in which its failure to be
duly qualified or licensed would constitute a Material Adverse Change, which
certificates shall indicate that Guarantor is in good standing in such
jurisdictions;
(l) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.7, the form
and substance of which shall be satisfactory to Agent;
(m) [intentionally omitted];
(n) Agent shall have received an opinion of the Loan Parties'
counsel in form and substance satisfactory to Agent;
(o) Agent shall have received satisfactory evidence (including a
certificate of the chief financial officer of Borrower) that all tax returns
required to be filed by Borrower have been timely filed and all taxes upon
Borrower or its properties, assets, income, and franchises (including Real
Property taxes and payroll taxes) have been paid prior to delinquency, except
such taxes that are the subject of a Permitted Protest;
(p) Borrower shall have the Required Availability after giving
effect to the initial extensions of credit hereunder;
(q) Agent shall have completed its business, legal, and
collateral due diligence, including (i) a collateral audit and review of
Borrower's books and records and verification of Borrower's representations and
warranties to the Lender Group, (ii) environmental reports on the Oil and Gas
Properties of Borrower and Guarantors and (iii) a takeover audit which will
include, among other things, a verification that all of Borrower's and
Guarantors'
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production taxes and royalty payments are current, verification of Borrower's
and Guarantors' cash balances (including the sources of such cash) and a
calculation of the Borrowing Base after updating the two-year NYMEX Strip Price
and rolling forward the production volumes of Borrower and Guarantors, in each
case the results of which shall be satisfactory to Agent;
(r) Agent shall have received completed reference checks with
respect to Borrower's senior management, the results of which are satisfactory
to Agent in its sole discretion;
(s) Agent shall have received (i) Borrower's Closing Date
Business Plan, (ii) evidence satisfactory to it that the debt and capital
structure of Borrower and its Subsidiaries after giving effect to the
Restructuring and the initial Advances under this Agreement, is consistent with
the Closing Date Business Plan and the projections of Borrower and its
Subsidiaries previously delivered to Agent and (iii) financial reports of
Borrower and its Subsidiaries for the month ending immediately prior to the
Closing Date;
(t) Borrower shall pay all Lender Group Expenses incurred in
connection with the transactions evidenced by this Agreement;
(u) Agent shall have received (i) updated land records and/or
title searches and abstracts of Oil and Gas Properties of Borrower and Newco
Canada, the review of which shall be satisfactory to Agent, (ii) updated title
opinions of such Oil and Gas Properties with respect to the Hydrocarbon
Interests therein of Borrower and Newco Canada and (iii) Mortgages on such Oil
and Gas Properties that are valid and enforceable first priority mortgage Liens
on such Oil and Gas Properties free and clear of all defects and encumbrances
except Permitted Liens;
(v) Lenders shall have received the Initial Reserve Report,
which shall be satisfactory to Lenders;
(w) Agent shall have received satisfactory evidence verifying
all production taxes and royalty payments pertaining to each well comprising a
part of the Oil and Gas Properties are current;
(x) Agent shall have received satisfactory evidence that the
Newco Canada Transfer shall have been consummated in compliance with all
applicable laws;
(y) Agent shall have received satisfactory evidence that
Borrower shall have consummated the PrimeWest Transaction pursuant to the terms
and conditions of the PrimeWest Agreement and in compliance with all applicable
laws and no terms or provisions set forth in the PrimeWest Agreement shall have
been amended, waived or otherwise modified without the prior written consent of
Agent;
(z) the Exchange Offer shall have been consummated pursuant to
Borrower's Offer to Exchange, dated December 9, 2002, as amended by Supplement
No. 1 to the Exchange Offer dated January 15, 2003, in compliance with all
applicable laws and no terms or provisions set forth in such Offer to Exchange
shall have been amended, waived or otherwise modified without the prior written
consent of Agent;
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(aa) Agent shall have received evidence that (i) Borrower shall
have deposited funds sufficient to effect a redemption, on terms satisfactory to
Agent, of the Firstar Notes not otherwise exchanged or canceled pursuant to the
Exchange Offer and shall have effected such redemption of such Firstar Notes in
compliance with all applicable laws and pursuant to documents satisfactory to
Agent (such redemption, the "FIRSTAR HOLDOVER REDEMPTION") and (ii) immediately
upon the deposit of such funds, the trustee of the Firstar Notes shall have
terminated, discharged, and released its Liens and mortgages on all of
Borrower's and its Subsidiaries' properties and assets and shall have delivered
and/or authorized the filing of UCC and PPSA termination statements, discharges
or release or mortgages and such other documentation evidencing such
termination, discharge and release;
(bb) Borrower shall have entered into the New Notes Indenture,
the terms and conditions of which are set forth in Borrower's Offer to Exchange,
dated December 9, 2002, as amended by Supplement No. 1 to the Exchange Offer
dated January 15, 2003, which New Notes Indenture shall be in compliance with
all applicable laws;
(cc) Agent shall have received evidence that (i) Borrower shall
have deposited funds sufficient to effect a redemption, on terms satisfactory to
Agent, of the Norwest Notes and shall have effected such redemption of the
Norwest Notes in compliance with all applicable laws and pursuant to documents
satisfactory to Agent (such redemption, the "NORWEST REDEMPTION") and (ii)
immediately upon the deposit of such funds, the trustee of the Norwest Notes
shall have terminated, discharged and released its Liens and mortgages on all of
Borrower's and its Subsidiaries' properties and assets and shall have delivered
and/or authorized the filing of UCC and PPSA termination statements, discharges
or releases or mortgages and such other documentation evidencing such
termination, discharge and release;
(dd) Agent shall have received evidence that Grey Wolf shall have
(i) entered into a termination and release agreement with respect to the Grey
Wolf Credit Facility and all related documents, duly executed by Grey Wolf and
Mirant Canada Energy Capital, Ltd., (ii) repaid in full all Indebtedness under
the Grey Wolf Credit Facility, as well as all fees and expenses related thereto
and (iii) caused Mirant Canada Energy Capital, Ltd. to terminate, discharge and
release its Liens and mortgages on Grey Wolf's properties and assets and shall
have delivered and/or authorized the filing of PPSA termination statements,
discharges or releases of mortgages and such other documents evidencing such
termination, discharges and releases;
(ee) no Material Adverse Change shall have occurred;
(ff) Agent shall have received evidence that Borrower shall have
entered into Commodity Hedging Agreements with respect to its Hydrocarbon
production with one or more counterparties rated investment grade by Moody's and
Standard & Poor's, or the equivalent by a rating agency acceptable to Agent or
with a counterparty otherwise reasonably acceptable to Agent, with the aggregate
notional volumes of Hydrocarbons covered by such Commodities Hedging Agreements
constituting not less than 25% and not more than 75% of the aggregate amount of
Borrower's estimated Hydrocarbon production volumes on an mcf equivalent basis
(where one barrel of oil is equal to six mcf of gas) for the succeeding six
calendar months after the Closing Date from Oil and Gas Properties classified as
Proved
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Developed Producing Reserves in the Initial Reserve Report plus the estimated
production from anticipated drilling by Borrower or its Subsidiaries during such
succeeding six months;
(gg) Agent shall have received and reviewed information with
respect to all material litigation of Borrower and its Subsidiaries, and shall
be satisfied with the results of its review;
(hh) Agent shall have received fully executed copies of each of
the Material Contracts, the New Notes Documents and the agreements, documents or
instruments related to the Firstar Holdover Redemption, the Norwest Redemption
and the Newco Canada Transfer, together with a certificate of the Chief
Executive Officer of Borrower certifying each such document as being a true,
correct, and complete copy thereof and that such agreements, documents or
instruments remain in full force and effect and that none of the Loan Parties
has breached or defaulted in any of its obligations under such agreements;
(ii) Borrower shall have received all licenses, approvals or
evidence of other actions required by any Governmental Authority in connection
with the Restructuring and the execution and delivery by Borrower and each
Guarantor of this Agreement or any other Loan Document or with the consummation
of the transactions contemplated by the Restructuring and hereby and thereby;
and
(jj) all other documents and legal matters in connection with the
transactions contemplated by this Agreement and the Restructuring shall have
been delivered, executed, or recorded and shall be in form and substance
satisfactory to Agent.
3.2 CONDITIONS SUBSEQUENT TO THE INITIAL EXTENSION OF CREDIT. The
obligation of the Lender Group (or any member thereof) to continue to make
Advances (or otherwise extend credit hereunder) is subject to the fulfillment,
on or before the date applicable thereto, of each of the conditions subsequent
set forth below (the failure by Borrower to so perform or cause to be performed
constituting an Event of Default):
(a) within 30 days of the Closing Date, deliver to Agent
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by SECTION 6.7, the form and substance of which shall
be satisfactory to Agent and its counsel;
(b) [intentionally omitted];
(c) within 30 days after the Closing Date, deliver to Agent
title opinions, in form and substance satisfactory to Agent, with respect to the
Oil and Gas Properties referred to as Caprito Section 82 and Caprito Section 83;
(d) within 30 days after the Closing Date, deliver to Agent an
updated certificate of status for Eastside Coal Company, Inc., such certificate
to be issued by the Secretary of State of Colorado; which certificate shall
indicate that such corporation is in good standing in such jurisdiction; and
(e) within 30 days after the Closing Date, with respect to the
Oil and Gas Property referred to as Caprito Section 98: (i) use its best efforts
to satisfy (A) Requirement
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No. 6A of Limited Title Opinion, dated January 13, 2003 by William D. Patterson,
P.C., which calls for a stipulation of interest or corrected assignments
executed by the parties identified in such Requirement, and (B) Requirement No.
14 of such Opinion, which calls for execution of a stipulation of interest by
the "owners of the oil and gas leasehold estate" in such Section 98; and (ii)
provide evidence reasonably acceptable to Agent that (A) the AMI and Option
Agreement, dated May 28, 1992, referred to in such Opinion, does not adversely
affect the Borrower's interest in such Section 98 (it being agreed that an
opinion from such opining counsel to that effect shall be a satisfactory form of
such evidence); (B) Borrower is being paid 100% of the oil and gas production
allocable to the oil and gas leasehold estate in such Section 98 (it being
agreed that a copy of the relevant portions of all relevant product purchase
contract(s), or check stubs which identify such Section 98) shall be a
satisfactory form of such evidence), and (C) the owners of the oil and gas
leasehold estate are being paid on the interests shown in such Opinion (it being
agreed that copies of pay sheets on all wells in such Section 98 shall be a
satisfactory form of such evidence).
3.3 CONDITIONS PRECEDENT TO ALL EXTENSIONS OF CREDIT. The obligation
of the Lender Group (or any member thereof) to make all Advances (or to extend
any other credit hereunder) shall be subject to the following conditions
precedent:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all material
respects on and as of the date of such extension of credit, as though made on
and as of such date (except to the extent that such representations and
warranties relate solely to an earlier date),
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof,
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any Governmental Authority against
Borrower, Agent, any Lender, or any of their Affiliates, and
(d) no Material Adverse Change shall have occurred.
3.4 TERM. This Agreement shall become effective upon the execution
and delivery hereof by Borrower, Agent, and the Lenders and shall continue in
full force and effect for a term ending on January 22, 2006 (the "MATURITY
DATE"). The foregoing notwithstanding, the Lender Group, upon the election of
the Required Lenders, shall have the right to terminate its obligations under
this Agreement immediately and without notice upon the occurrence and during the
continuation of an Event of Default.
3.5 EFFECT OF TERMINATION. On the date of termination of this
Agreement, all Obligations (including contingent reimbursement obligations of
Borrower with respect to outstanding Letters of Credit and including all Bank
Products Obligations) immediately shall become due and payable without notice or
demand (including (a) either (i) providing cash collateral to be held by Agent
in an amount equal to 105% of the then extant Letter of Credit Usage, or (ii)
causing the original Letters of Credit to be returned to Lender and (b)
providing cash
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collateral, in such amounts as Wells Fargo or its Affiliates, as applicable,
requires from its customers generally with respect to such products, to be held
by Agent for the benefit of Wells Fargo or its Affiliates with respect to the
then extant Bank Products Obligations). No termination of this Agreement,
however, shall relieve or discharge Borrower of its duties, Obligations, or
covenants hereunder and Agent's Liens in the Collateral shall remain in effect
until all Obligations have been fully and finally discharged and Lenders'
obligations to provide additional credit hereunder have been terminated. When
this Agreement has been terminated and all of the Obligations have been fully
and finally discharged and Lenders' obligations to provide additional credit
under the Loan Documents have been terminated irrevocably, Agent will, at
Borrower's sole expense, execute and deliver any UCC termination statements,
lien releases, mortgage releases, re-assignments of trademarks, discharges of
security interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, Agent's Liens and all notices of security interests and liens previously
filed by Lender with respect to the Obligations.
3.6 EARLY TERMINATION BY BORROWER. Borrower has the option, at any
time upon 90 days' prior written notice to Lender, to terminate this Agreement
by paying to Agent, in cash, the Obligations (including (a) either (i) providing
cash collateral to be held by Agent in an amount equal to 105% of the then
extant Letter of Credit Usage, or (ii) causing the original Letters of Credit to
be returned to Agent, and (b) providing cash collateral, in such amounts as
Wells Fargo or its Affiliates, as applicable, requires from its customers
generally with respect to such products, to be held by Agent for the benefit of
Wells Fargo or its Affiliates with respect to the then extant Bank Products
Obligations), in full, together with the Applicable Prepayment Premium. If
Borrower has sent a notice of termination pursuant to the provisions of this
Section, then Lenders' obligations to extend credit hereunder shall terminate
and Borrower shall be obligated to repay the Obligations (including (a) either
(i) providing cash collateral to be held by Agent (in an interest-bearing
account) in an amount equal to 105% of the then extant Letter of Credit Usage,
or (ii) causing the original Letters of Credit to be returned to Agent, and (b)
providing cash collateral, in such amounts as Wells Fargo or its Affiliates, as
applicable, requires from its customers generally with respect to such products,
to be held by Agent for the benefit of Wells Fargo or its Affiliates with
respect to the then extant Bank Products Obligations), in full, together with
the Applicable Prepayment Premium, on the date set forth as the date of
termination of this Agreement in such notice. In the event of the termination of
this Agreement and repayment of the Revolving Loan Obligations at any time prior
to the Maturity Date, for any other reason, including (a) termination upon the
election of the Required Lenders to terminate after the occurrence of an Event
of Default, (b) foreclosure and sale of Collateral, (c) sale of the Collateral
in any Insolvency Proceeding, or (d) restructure, reorganization, or compromise
of the Obligations by the confirmation of a plan of reorganization or any other
plan of compromise, restructure, or arrangement in any Insolvency Proceeding,
then, in view of the impracticability and extreme difficulty of ascertaining the
actual amount of damages to Lenders or profits lost by the Revolving Loan
Lenders as a result of such early termination, and by mutual agreement of the
parties as to a reasonable estimation and calculation of the lost profits or
damages of the Revolving Loan Lenders, Borrower shall pay the Applicable
Prepayment Premium to the Revolving Loan Lenders, measured as of the date of
such termination, provided, that notwithstanding the foregoing, Borrower shall
not be obligated to pay the Applicable Prepayment Premium if the termination of
this Agreement and repayment of the Revolving Loan Obligations at any time prior
to the Maturity Date is from the proceeds received by Borrower pursuant to (x) a
public or private placement of
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stock (including a placement in the form of a merger) or subordinated
indebtedness of any Loan Party, (y) a sale of assets of any Loan Party or (z) a
financing facility provided by Wells Fargo. Notwithstanding anything contained
in this Agreement, Borrower shall not repay any Term Loan Obligation unless and
until all of the Revolving Loan Obligations have been paid in full, all Letters
of Credit have been terminated or cash collateralized and the Revolver
Commitments have been terminated.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. Each Domestic Loan Party hereby
grants to Agent, for the benefit of the Lender Group, a continuing security
interest in all of its right, title, and interest in all currently existing and
hereafter acquired or arising Personal Property Collateral in order to secure
prompt repayment of any and all of the Obligations or the Guaranteed Obligations
(as the case may be) in accordance with the terms and conditions of the Loan
Documents and in order to secure prompt performance by each such Domestic Loan
Party of each of its covenants and duties under the Loan Documents. The Agent's
Liens in and to the Personal Property Collateral shall attach to all Personal
Property Collateral without further act on the part of Agent or any Domestic
Loan Party. Anything contained in this Agreement or any other Loan Document to
the contrary notwithstanding, except for Permitted Dispositions, no Domestic
Loan Party shall have authority, express or implied, to dispose of any item or
portion of the Collateral.
4.2 NEGOTIABLE COLLATERAL. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral, and if
and to the extent that perfection or priority of Agent's security interest is
dependent on or enhanced by possession, each Domestic Loan Party, immediately
upon the request of Agent, shall endorse and deliver physical possession of such
Negotiable Collateral to Agent.
4.3 COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL. At any time after the occurrence and during the continuation of an
Event of Default, Agent or Agent's designee may (a) notify Account Debtors of
any Loan Party that the Accounts, chattel paper, or General Intangibles have
been assigned to Agent or that Agent has a security interest therein, or (b)
collect the Accounts, chattel paper, or General Intangibles directly and charge
the collection costs and expenses to the Loan Account. Each Domestic Loan Party
agrees, and Borrower shall cause each other Loan Party to agree, that it will
hold in trust for the Lender Group, as the Lender Group's trustee, any
Collections that it receives and immediately will deliver said Collections to
Agent or a Cash Management Bank in their original form as received by Borrower.
4.4 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
(a) Each Domestic Loan Party authorizes Agent to file any
financing statement required hereunder, and any continuation statement or
amendment with respect thereto, in any appropriate filing office without the
signature of such Domestic Loan Party where permitted by applicable law. Each
Domestic Loan Party hereby ratifies the filing of any financing statement, any
continuation statement or amendment with respect thereto, filed without the
signature of such Domestic Loan Party prior to the date hereof.
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(b) If any Domestic Loan Party acquires any commercial tort
claims after the date hereof, such Domestic Loan Party shall promptly deliver to
Agent a written description of such commercial tort claim and, upon request of
Agent, shall deliver a written agreement, in form and substance reasonably
satisfactory to Agent, pursuant to which such Domestic Loan Party shall pledge
and collaterally assign all of its right, title and interest in and to such
commercial tort claim to Agent as security for the Obligations or the Guaranteed
Obligations, as the case may be (each, a "COMMERCIAL TORT CLAIM ASSIGNMENT").
(c) At any time upon the request of Agent, each Domestic Loan
Party shall execute and deliver to Agent, and cause its Subsidiaries to execute
and deliver to Agent, any and all financing statements, original financing
statements in lieu of continuation statements, amendments to financing
statements, fixture filings, security agreements, pledges, assignments,
Commercial Tort Claim Assignments, endorsements of certificates of title, and
all other documents (collectively, the "ADDITIONAL DOCUMENTS") that Agent may
request in its Permitted Discretion, in form and substance reasonably
satisfactory to Agent, to create and perfect and continue perfected or better
perfect the Agent's Liens in the Collateral (whether now owned or hereafter
acquitted, tangible or intangible, real or personal), and in order to fully
consummate all of the transactions contemplated hereby and under the other Loan
Documents, including any Mortgages.
(d) To the maximum extent permitted by applicable law, each
Domestic Loan Party authorizes Agent to execute any such Additional Documents in
such Domestic Loan Party's name and authorizes Agent to file such executed
Additional Documents in any appropriate filing office. To the maximum extent
permitted by applicable law, each Domestic Loan Party authorizes the filing of
any such Additional Documents without the signature of such Domestic Loan Party
in any appropriate filing office. Agent will promptly provide Borrower with a
copy of any Additional Documents. In addition, on such periodic basis as Agent
shall require and to the extent any Domestic Loan Party acquires or generates
any Collateral described in the following clauses (i) and (ii), such Domestic
Loan Party shall (i) provide Agent with a report of all new patentable,
copyrightable, or trademarkable materials acquired or generated by such Domestic
Loan Party during the prior period, (ii) cause all patents, copyrights, and
trademarks acquired or generated by such Domestic Loan Party that are not
already the subject of a registration with the appropriate filing office (or an
application therefor diligently prosecuted) to be registered with such
appropriate filing office in a manner sufficient to impart constructive notice
of such Domestic Loan Party's ownership thereof, and (iii) cause to be prepared,
executed, and delivered to Agent supplemental schedules to the applicable Loan
Documents to identify such patents, copyrights, and trademarks as being subject
to the security interests created thereunder.
4.5 POWER OF ATTORNEY. Each Domestic Loan Party hereby irrevocably
makes, constitutes, and appoints Agent (and any of Agent's officers, employees,
or agents designated by Agent) as such Domestic Loan Party's true and lawful
attorney, with power to (a) if such Domestic Loan Party refuses to, or fails
timely to execute and deliver any of the documents described in SECTION 4.4,
sign the name of such Domestic Loan Party on any of the documents described in
SECTION 4.4, (b) at any time that an Event of Default has occurred and is
continuing, sign such Domestic Loan Party's name on any invoice or bill of
lading relating to the Collateral, drafts against Account Debtors, or notices to
Account Debtors, (c) send requests for verification of
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Accounts, (d) endorse such Domestic Loan Party's name on any Collection item
that may come into the Lender Group's possession, (e) at any time that an Event
of Default has occurred and is continuing, make, settle, and adjust all claims
under such Domestic Loan Party's policies of insurance and make all
determinations and decisions with respect to such policies of insurance, and (f)
at any time that an Event of Default has occurred and is continuing, settle and
adjust disputes and claims respecting the Accounts, chattel paper, or General
Intangibles directly with Account Debtors, for amounts and upon terms that Agent
determines to be reasonable, and Agent may cause to be executed and delivered
any documents and releases that Agent determines to be necessary. The
appointment of Agent as such Domestic Loan Party's attorney, and each and every
one of its rights and powers, being coupled with an interest, is irrevocable
until all of the Obligations have been fully and finally repaid and performed
and the Lender Group's obligations to extend credit hereunder are terminated.
4.6 RIGHT TO INSPECT. Agent and each Lender (through any of their
respective officers, employees, or agents) shall have the right, upon notice to
Borrower, which notice shall not be required upon the occurrence and during the
continuance of an Event of Default, from time to time hereafter to inspect the
Books and to check, test, and appraise the Collateral and review and examine the
Oil and Gas Properties of Borrower in order to verify Borrower's or any
Guarantor's financial condition or the amount, quality, value, condition of, or
any other matter relating to, the Collateral.
4.7 CONTROL AGREEMENTS. Each Domestic Loan Party agrees that it will
not transfer assets out of any Securities Accounts other than as permitted under
SECTION 7.19 and, if to another securities intermediary, unless each such
Domestic Loan Party, Agent, and the substitute securities intermediary have
entered into a Control Agreement. Each Domestic Loan Party hereby agrees to take
any and all action that Agent requests in order for Agent to obtain control in
accordance with Sections 9-104, 9-105, 9-106 and 9-107 of the Code with respect
to any Securities Accounts, DDA's, chattel paper, Investment Property and
letter-of-credit rights. No arrangement contemplated hereby or by any Control
Agreement in respect of any Securities Accounts or other Investment Property or
any DDA, electronic chattel paper or letter-of-credit rights shall be modified
by any Domestic Loan Party without the prior written consent of Agent. Upon the
occurrence and during the continuance of a Default or Event of Default, Agent
may notify any securities intermediary or depository to liquidate the applicable
Securities Account or any related Investment Property maintained or held thereby
and remit the proceeds thereof to the Agent's Account.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender Group to enter into this Agreement, each
Domestic Loan Party makes the following representations and warranties to the
Lender Group which shall be true, correct, and complete, in all material
respects, as of the date hereof, and shall be true, correct, and complete, in
all material respects, as of the Closing Date, and at and as of the date of the
making of each Advance (or other extension of credit) made thereafter, as though
made on and as of the date of such Advance (or other extension of credit)
(except to the extent that such representations and warranties relate solely to
an earlier date) and such representations and warranties shall survive the
execution and delivery of this Agreement:
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5.1 NO ENCUMBRANCES. Each Loan Party has good and indefeasible title
to the Collateral and the Real Property (other than Oil and Gas Properties
constituting Real Property) or good and defensible title to Oil and Gas
Properties constituting Real Property, free and clear of Liens except for
Permitted Liens.
5.2 EQUIPMENT. All of the Equipment is used or held for use in each
Loan Party's business and is fit for such purposes.
5.3 LOCATION OF INVENTORY AND EQUIPMENT. The Equipment is located
only at the locations identified on Schedule 5.3 other than such Equipment in
transit or temporarily removed to a location not identified therein for
refurbishment or repair. There is no location at which any Domestic Loan Party
has any Inventory, including Hydrocarbon products (except for Hydrocarbon
products in transit), other than the locations identified on Schedule 5.3 and
5.22. Schedule 5.3 and 5.22 contains a true, correct and complete list, as of
the Closing Date, of each location at which Hydrocarbon products of the Domestic
Loan Parties are stored.
5.4 INVENTORY RECORDS. Each Loan Party keeps correct and accurate
records itemizing and describing the type and quantity of its Inventory and the
book value thereof.
5.5 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN.
(a) The chief executive office of each Domestic Loan Party is
located at the address indicated in Schedule 5.5 and such Domestic Loan Party's
FEIN is identified in Schedule 5.5.
(b) Each Domestic Loan Party's organizational identification
number is identified in Schedule 5.5.
(c) No Domestic Loan Party holds any commercial tort claims as
of the date hereof, except as identified in Schedule 5.5.
5.6 DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Loan Party is duly organized and existing and in good
standing under the laws of the jurisdiction of its organization and qualified to
do business in any state where the failure to be so qualified reasonably could
be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.6(b), is a complete and accurate
description of the authorized capital Stock of Borrower, by class, and, as of
the Closing Date, a description of the number of shares of each such class that
are issued and outstanding. Other than as described on Schedule 5.6(b), there
are no subscriptions, options, warrants, or calls relating to any shares of
Borrower's capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Borrower is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital Stock or any security convertible into or
exchangeable for any of its capital Stock.
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(c) Set forth on Schedule 5.6(c), is a complete and accurate
list of Borrower's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their organization, (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries, and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by Borrower. All of the outstanding capital Stock of each
such Subsidiary has been validly issued and is fully paid and non-assessable.
(d) Except as set forth on Schedule 5.6(c), there are no
subscriptions, options, warrants, or calls relating to any shares of Borrower's
Subsidiaries' capital Stock, including any right of conversion or exchange under
any outstanding security or other instrument. Neither Borrower nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of Borrower's Subsidiaries'
capital Stock or any security convertible into or exchangeable for any such
capital Stock.
5.7 DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents and the agreements, documents and instruments
related to the Restructuring to which it is a party have been duly authorized by
all necessary action on the part of Borrower.
(b) The execution, delivery, and performance by Borrower of this
Agreement and the Loan Documents and the agreements, documents and instruments
related to the Restructuring to which it is a party do not and will not (i)
violate any provision of federal, provincial, state, or local law or regulation
applicable to Borrower, the Governing Documents of Borrower, or any order,
judgment, or decree of any court or other Governmental Authority binding on
Borrower, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of Borrower (including, without limitation, any Material Contract of
any Loan Party), (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of Borrower, other
than Permitted Liens, or (iv) require any approval of Borrower's interestholders
or any approval or consent of any Person under any material contractual
obligation of Borrower that has not been obtained by Borrower on or prior to the
Closing Date.
(c) Other than the filing of financing statements and
informational filings with the SEC, fixture filings, and Mortgages, the
execution, delivery, and performance by Borrower of this Agreement and the Loan
Documents to which Borrower is a party do not and will not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any Governmental Authority or other Person.
(d) This Agreement and the other Loan Documents and the
agreements, documents and instruments related to the Restructuring to which
Borrower is a party, and all other documents contemplated hereby and thereby,
and the agreements, documents and instruments related to the Restructuring when
executed and delivered by Borrower will be the legally valid and binding
obligations of Borrower, enforceable against Borrower in accordance with their
respective terms, except as enforcement may be limited by equitable
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principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.
(e) The Agent's Liens are validly created, perfected, and first
priority Liens, subject only to Permitted Liens.
(f) The execution, delivery, and performance by each Guarantor
of the Loan Documents to which it is a party have been duly authorized by all
necessary action on the part of Guarantor.
(g) The execution, delivery, and performance by each Guarantor
of the Loan Documents to which it is a party do not and will not (i) violate any
provision of federal, provincial, state, or local law or regulation applicable
to such Guarantor, the Governing Documents of such Guarantor, or any order,
judgment, or decree of any court or other Governmental Authority binding on such
Guarantor, (ii) conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under any material contractual
obligation of such Guarantor, (iii) result in or require the creation or
imposition of any Lien of any nature whatsoever upon any properties or assets of
such Guarantor, other than Permitted Liens, or (iv) require any approval of such
Guarantor's interestholders or any approval or consent of any Person under any
material contractual obligation of such Guarantor that has not been obtained by
Borrower on or prior to the Closing Date.
(h) The execution, delivery, and performance by each Guarantor
of the Loan Documents to which such Guarantor is a party do not and will not
require any registration with, consent, or approval of, or notice to, or other
action with or by, any Governmental Authority or other Person.
(i) The Loan Documents to which each Guarantor is a party, and
all other documents contemplated hereby and thereby, when executed and delivered
by such Guarantor will be the legally valid and binding obligations of such
Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforcement may be limited by such equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors' rights generally.
5.8 LITIGATION. Other than those matters disclosed on Schedule 5.8,
there are no actions, suits, or proceedings pending or, to the best knowledge of
Borrower, threatened against Borrower or any of its Subsidiaries, as applicable,
except for (a) matters that are fully covered by insurance (subject to customary
deductibles), and (b) matters arising after the Closing Date that, if decided
adversely to Borrower or any of its Subsidiaries, as applicable, reasonably
could not be expected to result in a Material Adverse Change.
5.9 NO MATERIAL ADVERSE CHANGE. All financial statements relating to
Borrower or Guarantor that have been delivered by Borrower to the Lender Group
have been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and present fairly in all material respects, Borrower's (or
Guarantor's, as applicable) financial condition as of the date thereof and
results of operations for the period then ended. There has not been a Material
Adverse Change
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with respect to Borrower (or Guarantor, as applicable) since the date of the
latest financial statements submitted to the Lender Group on or before the
Closing Date.
5.10 FRAUDULENT TRANSFER.
(a) After giving effect to the Restructuring and the initial
Advances and the making of the Term Loan under this Agreement, Borrower
individually is, and the Loan Parties taken as a whole are, Solvent.
(b) No transfer of property is being made by any Loan Party and
no obligation is being incurred by any Loan Party in connection with the
Restructuring or the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of any Loan Party.
5.11 EMPLOYEE BENEFITS. None of Borrower any of its Subsidiaries, or
any of their ERISA Affiliates maintains or contributes to any Benefit Plan. Each
Loan Party and each ERISA Affiliate has satisfied the minimum funding standards
of ERISA, the IRC, the Canadian Employee Benefit Laws and the German Employee
Benefit Laws with respect to each Benefit Plan to which it is obligated to
contribute. No ERISA Event has occurred nor has any other event occurred that
may result in an ERISA Event that reasonably could be expected to result in a
Material Adverse Change. No Loan Party or any ERISA Affiliate is required to
provide security to any Benefit Plan under Section 401(a)(29) of the IRC or
under Canadian Employee Benefit Laws.
5.12 ENVIRONMENTAL CONDITION. Except as set forth on Schedule 5.12,
(a) to each Domestic Loan Party's knowledge, no assets of any Loan Party has
ever been used by any such Loan Party or by previous owners or operators in the
disposal of, or to produce, store, handle, treat, release, or transport, any
Hazardous Materials, where such production, storage, handling, treatment,
release or transport was in violation, in any material respect, of applicable
Environmental Law, (b) to each Domestic Loan Party's knowledge, no properties or
assets of any Loan Party has ever been designated or identified in any manner
pursuant to any environmental protection statute as a Hazardous Materials
disposal site, (c) no Loan Party has received notice that a Lien arising under
any Environmental Law has attached to any revenues or to any Real Property owned
or operated by any such Loan Party, and (d) Borrower has not received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, provincial or state governmental agency concerning any action or
omission by Borrower resulting in the releasing or disposing of Hazardous
Materials into the environment.
5.13 BROKERAGE FEES. Other than Jefferies & Company, Inc., no Loan
Party has utilized the services of any broker or finder in connection with
Borrower's obtaining financing from the Lender Group under this Agreement and
other than to Jefferies & Co., no brokerage commission or finders fee is payable
by any Loan Party in connection herewith.
5.14 INTELLECTUAL PROPERTY. Each Loan Party owns, or holds licenses
in, all trademarks, trade names, copyrights, patents, patent rights, and
licenses that are necessary to the conduct of its business as currently
conducted. Attached hereto as Schedule 5.14 is a true, correct, and complete
listing of all material patents, patent applications, trademarks, trademark
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applications, copyrights, and copyright registrations as to which each Domestic
Loan Party is the owner or is an exclusive licensee.
5.15 LEASES. Each Loan Party enjoys peaceful and undisturbed
possession under all leases material to the business of such Loan Party and to
which it is a party or under which it is operating. All of such leases are valid
and subsisting and no material default by such Loan Party exists under any of
them. There are no leases, subleases, contracts or other operating agreements
that allocate operating expenses to Borrower or any Guarantor in excess of
Borrower's or any Guarantor's working interest of record in the particular Oil
and Gas Property subject to such lease, the sublease, contract or other
operating agreement.
5.16 DDAs. Set forth on Schedule 5.16 are all of each Loan Party's
DDAs, including, with respect to each depository (i) the name and address of
such depository, and (ii) the account numbers of the accounts maintained with
such depository.
5.17 COMPLIANCE WITH THE LAW. No Loan Party has violated any laws or
failed to obtain any material license, permit, franchise or other authorization
from any Governmental Authority necessary for the ownership of any of its Oil
and Gas Properties or the conduct of its business. The Oil and Gas Properties of
each Loan Party (and assets and properties utilized therewith) have been
maintained, operated and developed in a good and workmanlike manner and in
substantial conformity with all applicable laws and all rules, regulations and
orders of all Governmental Authorities having jurisdiction and in substantial
conformity with the provisions of all leases, subleases or other contracts
comprising a part of the Hydrocarbon Interests and other contracts and
agreements forming a part of such Oil and Gas Properties; specifically in this
connection, (i) except as set forth on Schedule 5.17, after the Closing Date, no
Oil and Gas Property of any Loan Party is subject to having allowable production
reduced below the full and regular allowable production (including the maximum
permissible tolerance) because of any overproduction (whether or not the same
was permissible at the time) prior to the Closing Date and (ii) none of the
wells comprising a part of such Oil and Gas Properties (or assets and properties
utilized therewith) is deviated from the vertical by more than the maximum
permitted by applicable laws, regulations, rules and orders of any Governmental
Authority, and such wells are, in fact, bottomed under and are producing from,
and the well bores are wholly within, such Oil and Gas Properties (or in the
case of wells located on Real Property utilized therewith, such utilized Real
Property) covered by the leases that are the subject of the title opinions
delivered pursuant to SECTION 3.1(u).
5.18 COMPLETE DISCLOSURE. All factual information (taken as a whole)
furnished by or on behalf of Borrower in writing to Agent or any Lender
(including all information contained in the Schedules hereto or in the other
Loan Documents) for purposes of or in connection with the Restructuring or this
Agreement, the other Loan Documents, or any transaction contemplated herein or
therein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of Borrower in writing to Agent or any Lender will be,
true and accurate, in all material respects, on the date as of which such
information is dated or certified and not incomplete by omitting to state any
fact necessary to make such information (taken as a whole) not misleading in any
material respect at such time in light of the circumstances under which such
information was provided. On the Closing Date, the Closing Date Projections
represent, and as of the date on which
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any other Projections are delivered to Agent, such additional Projections
represent Borrower's good faith best estimate of its future performance for the
periods covered thereby.
5.19 INDEBTEDNESS. Set forth on Schedule 5.19 is a true and complete
list of all Indebtedness of each Loan Party outstanding on or immediately prior
to the Closing Date that is to remain outstanding after the Closing Date and
such Schedule accurately reflects the aggregate principal amount of such
Indebtedness and the principal terms thereof.
5.20 OIL AND GAS IMBALANCES. Except as set forth on Schedule 5.20 or
on the most recent certificate delivered pursuant to SECTION 6.2(e), on a net
basis there are not gas imbalances, take-or-pay oil and gas or other prepayments
with respect to Borrower's and Guarantors' Oil and Gas Properties which would
require such Person either to make cash settlements for such production or
deliver Hydrocarbons produced from such Oil and Gas Properties at some future
time without then or thereafter receiving full payments therefor exceeding two
percent (2%) of the current monthly production of oil and gas from the Oil and
Gas Properties of Borrower and Guarantors in the aggregate.
5.21 HEDGING AGREEMENTS. Schedule 5.21 (which schedule, so long as a
Default or Event of Default has not occurred and is not continuing, shall be
deemed to be amended by the most recent certificate delivered by Borrower
pursuant to SECTION 6.2(d)) sets forth, as of the Closing Date, a true and
complete list of all Hedging Agreements (including commodity price swap
agreements, forward agreements or contracts of sale which provide for prepayment
for deferred shipment or delivery of Hydrocarbons or other commodities) of
Borrower and Guarantors, the material terms thereof (including the type, term,
effective date, termination date and notional amounts or volumes), all credit
support agreements relating thereto (including any margin required or supplied),
and the counterparty to each such agreement.
5.22 LOCATION OF REAL PROPERTY AND LEASED PREMISES.
(a) (i) Part A of Schedule 5.22 lists completely and correctly
as of the Closing Date all Real Property (other than Oil and Gas Properties)
owned in fee by each Loan Party and the addresses thereof, (ii) Part B of
Schedule 5.22 lists completely and correctly as of the Closing Date all Real
Property (other than Oil and Gas Properties) leased by each Loan Party and the
respective addresses thereof and (iii) Part C of Schedule 5.22 lists completely
and correctly as of the Closing Date all Oil and Gas Properties that are Real
Property whether leased or owned by any Loan Party and the respective addresses
(if any), counties and states thereof.
(b) As of the Closing Date, each Loan Party has valid leasehold
interests in the leases described on Schedule 5.22 and such schedule sets forth
with respect to each such lease, the commencement date, termination date,
renewal options (if any) and annual base rents. Each such lease is valid and
enforceable in accordance with its terms in all material respects and is in full
force and effect. No consent or approval of any landlord or other third party in
connection with any such lease is necessary for any Loan Party to enter into and
execute the Loan Documents to which it is a party, except as set forth on
Schedule 5.22. To the knowledge of any Loan Party, no other party to any such
lease is in default of its obligations thereunder, and no Loan Party (or any
other party to any such lease) has at any time delivered or received any notice
of default which remains uncured under any such lease and, as of the Closing
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Date, no event has occurred which, with the giving of notice or the passage of
time or both, would constitute a default under any such lease.
(c) Each Loan Party has good and defensible title to all of its
Oil and Gas Properties set forth on Schedule 5.22 which constitute Real Property
and good and indefeasible title to all of its Oil and Gas Properties which
constitute personal property, except for (i) such imperfections of title which
do not in the aggregate materially detract from the value thereof to, or the use
thereof in, the business of such Loan Party and (ii) Permitted Liens. The
quantum and nature of the interest of such Loan Party in and to the Oil and Gas
Properties as set forth in the Initial Reserve Report or the most recent Reserve
Report, as the case may be, includes the entire interest of such Loan Party in
such Oil and Gas Properties as of the date of the Initial Reserve Report or such
applicable Reserve Report delivered by Borrower to Agent pursuant to SECTION
6.2(e), as the case may be, and are complete and accurate in all material
respects as of the date of the Initial Reserve Report or such applicable Reserve
Report, as the case may be; and there are no "back-in" or "reversionary"
interests held by third parties which could materially reduce the interest of
such Loan Party in such Oil and Gas Properties except as expressly set forth in
the Initial Reserve Report or the most recent Reserve Report, as the case may
be. The ownership of the Oil and Gas Properties by each Loan Party shall not in
any material respect obligate any such Loan Party to bear the costs and expenses
relating to the maintenance, development or operations of each such Oil and Gas
Property in an amount in excess of the working interest of record of such Loan
Party in each Oil and Gas Property set forth in the Initial Reserve Report or
the most recent Reserve Report, as the case may be.
(d) Each Loan Party's marketing, gathering, transportation,
processing and treating facilities and equipment, together with any marketing,
gathering, transportation, processing and treating contracts in effect between
and/or among such Loan Party and any other Person, are sufficient to gather
transport, process and/or treat, reasonably anticipated volumes of production of
Hydrocarbons from the Oil and Gas Properties of the Loan Party.
5.23 NEW NOTES DOCUMENTS.
(a) The Borrower's Indebtedness incurred from (i) the Advances
and the Term Loan made by the Lenders on and after the Closing Date and (ii) the
issuance of Letters of Credit, in each case, subject to the limitations set
forth in this Agreement, does not conflict with or result in a default under any
New Notes Document.
(b) Other than Borrower's Indebtedness which may be incurred
under the Loan Documents, the Loan Parties have not created, incurred, assumed,
permitted, guaranteed, or otherwise become, directly or indirectly, liable with
respect to any Indebtedness permitted pursuant to clause (m) of the definition
of "Permitted Indebtedness" contained in the New Notes Indenture.
5.24 MATERIAL CONTRACTS. Set forth on Schedule 5.24 is a complete and
accurate list as of the Closing Date of all Material Contracts of each Loan
Party, showing the parties and subject matter thereof and amendments and
modifications thereto. Each such Material Contract (i) is in full force and
effect and is binding upon and enforceable against each Loan Party and, to the
knowledge of such Loan Party, all other parties thereto in accordance with its
terms, (ii) has not
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been otherwise amended or modified, and (iii) is not in default due to the
action of Borrower or, to the knowledge of such Loan Party, any other party
thereto.
5.25 PERMITS, ETC. Each Loan Party has, and is in compliance with, all
permits, licenses, authorizations, approvals, entitlements and accreditations
required for such Person lawfully to own, lease, manage or operate, or to
acquire, each business and the Real Property currently owned, leased,` managed
or operated, or to be acquired, by such Person except for such permits,
licenses, authorizations, approvals, entitlements and accreditations the absence
of which could not reasonably be expected to result in a Material Adverse
Change. No condition exists or event has occurred which, in itself or with the
giving of notice or lapse of time or both, would result in the suspension,
revocation, impairment, forfeiture or non-renewal of any such permit, license,
authorization, approval, entitlement or accreditation, and to Borrower's
knowledge, there is no claim that any thereof is not in full force and effect.
5.26 EMPLOYEE AND LABOR MATTERS. Except as set forth on Schedule 5.26,
there is (a) no unfair labor practice complaint pending or, to Borrower's
knowledge, threatened against any Loan Party before any Governmental Authority
and no grievance or arbitration proceeding pending or threatened against any
Loan Party which arises out of or under any collective bargaining agreement, (b)
no strike, labor dispute, slowdown, stoppage or similar action or grievance
pending or, to the knowledge of Borrower, threatened against any Loan Party and
(c) no union representation question existing with respect to the employees of
any Loan Party and no union organizing activity taking place with respect to any
of the employees of any of them. Neither any Loan Party nor any ERISA Affiliate
of any Loan Party has incurred any liability or obligation under the Worker
Adjustment and Retraining Notification Act ("WARN") or similar state or
provincial law, which remains unpaid or unsatisfied. The hours worked and
payments made to employees of each Loan Party have not been in violation of the
Fair Labor Standards Act, the applicable Canadian provincial employment
standards legislation or any other applicable legal requirements. All material
payments due from any Loan Party on account of workers compensation, wages and
employee health and welfare insurance and other benefits have been paid or
accrued as a liability on the books of such Loan Party.
5.27 BONDS AND INSURANCE. Schedule 5.27 attached hereto contains an
accurate and complete description of all performance bonds related to operations
on or pertaining to the Oil and Gas Properties, and all material policies of
insurance owned or held by Borrower and each Subsidiary. Except as set forth on
Schedule 5.27, all such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the Closing Date have
been paid, and no notice of cancellation or termination has been received with
respect to any such policy. Such bonds and policies are sufficient for
compliance with all requirements of law and of all agreements to which Borrower
or any of its Subsidiaries is a party; are valid, outstanding and enforceable
policies; provide adequate coverage in at least such amounts and against at
least such risks (but including in any event public liability) as are required
by Governmental Authorities and/or usually insured or bonded against in the same
general area by companies engaged in the same or a similar business for the
assets and operations of Borrower and each of its Subsidiaries; will remain in
full force and effect through the respective dates set forth in Schedule 5.27
without the payment of additional premiums except as set forth on Schedule 5.27;
and will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this agreement. Neither Borrower nor any of its
Subsidiaries has been refused any bonds or insurance with respect
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to its assets or operations, nor has its coverage been limited below usual and
customary bond or policy limits, by any bonding company or insurance carrier to
which it has applied for any such bond or insurance or with which it has carried
insurance during the last three years.
5.28 NATURE OF BUSINESS. Neither Borrower nor Newco Canada is engaged
in any business other than the Oil and Gas Business within the continental
United States, in the case of Borrower, and Canada, in the case of Newco Canada.
Except as otherwise disclosed in Schedule 5.28, no other Loan Party (x) owns any
assets or properties used by Borrower or Newco Canada in its Oil and Gas
Business, and (y) has any liabilities or conducts any business.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations and the
termination of this Agreement, Borrower shall and shall cause each of its
Subsidiaries to do all of the following:
6.1 ACCOUNTING SYSTEM. Maintain a system of accounting that enables
Borrower to produce financial statements in accordance with GAAP and maintain
records pertaining to the Collateral that contain information as from time to
time reasonably may be requested by Agent. Borrower also shall keep a joint
interest billing and remittance system with respect to each of the Oil and Gas
Properties on which it is the operator and a reporting system that shows, among
other things, the value, revenues and profits/losses of the Oil and Gas
Properties of Borrower and its Subsidiaries, volume of production and value of
sales of Hydrocarbon production, the location and condition of the Equipment and
Borrower's positions and liability exposure under all Hedging Agreements.
6.2 COLLATERAL REPORTING. Provide Agent (and if so requested by
Agent, with copies for each Lender) with the following documents at the
following times in form satisfactory to Agent:
(a) daily, notices of disputes and claims;
(b) as soon as available, but in any event within 30 days after
the end of each month, (i) a detailed aging, by total, of the Accounts,
including, among other things, lease operating expenses and royalty payments and
(ii) a summary, by vendor of each Loan Party's accounts payable and any book
overdraft;
(c) as soon as available, but in any event within 30 days after
the end of each month, a report, in form and substance satisfactory to Agent,
setting forth on a well-by-well or unit-by-unit basis (i) a statement of gross
and net sales proceeds of all Hydrocarbons produced from the Oil and Gas
Properties of each Loan Party, (ii) the volume and/or quantity of Hydrocarbon
products sold for the previous month, (iii) the severance, gross production,
occupation, or gathering taxes deducted from or paid out of the proceeds payable
to the Loan Parties, (iv) the operating expenses, drilling costs, and capital
expenditures, (v) the number of wells operated (or the numbers of pooled units),
drilled or abandoned, (vi) a statement of all funds received from the sale of
Hydrocarbons deposited into the Cash Management Accounts and the portion of such
funds collected representing amounts attributable to trust fund taxes or
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Hydrocarbon Interests of third parties, and (vii) such other information as
Agent may reasonably request;
(d) as soon as available, but in any event within 30 days after
the end of each month, a report, in form and substance satisfactory to Agent,
setting forth as of the last Business Day of such month, a summary of the
hedging positions of each Loan Party under all Hedging Agreements (including,
without limitation, any contracts of sale which provide for prepayment for
deferred shipment or delivery of oil, gas or other commodities) of each Loan
Party, including the type, term, effective date, termination date and notional
principal amounts or volumes, the hedged price(s), interest rate(s) or exchange
rate(s), as applicable, and any new credit support agreements relating thereto;
(e) as soon as available, but in any event not later than 75
days after June 30th and December 31st of each year, a Reserve Report, prepared
under the supervision of the chief engineer of Borrower who shall certify such
Reserve Report to be true and accurate and to have been prepared in accordance
with the procedures used in the Initial Reserve Report, and together with each
such Reserve Report, a certificate of an Authorized Person certifying that, to
such Person's knowledge (i) the information contained in the Reserve Report and
any other information delivered in connection therewith is true and correct,
(ii) Borrower or Newco Canada owns good and defensible title to its Oil and Gas
Properties evaluated in such Reserve Report and such Oil and Gas Properties are
free and clear of all Liens except for Permitted Liens, (iii) except as set
forth on an exhibit to the certificate, on a net basis there are no gas
imbalances, take-or-pay or other prepayments with respect to its Oil and Gas
Properties evaluated in such Reserve Report which would require any such Loan
Party to deliver Hydrocarbons produced from such Oil and Gas Properties or make
cash payments at some future time without then or thereafter receiving full
payment therefor, (iv) except as set forth on an exhibit to the certificate,
none of its Oil and Gas Properties have been sold since the date of the Reserve
Report most recently delivered pursuant to this SECTION 6.2(e), which exhibit
shall list all of its Oil and Gas Properties sold and in such detail as is
reasonably required by Agent, (v) attached as an exhibit to the certificate is a
list of its Oil and Gas Properties added to and deleted from the Reserve Report
most recently delivered pursuant to this SECTION 6.2(e) and a list of all
Persons disbursing proceeds to Borrower or any Guarantor, as applicable from its
Oil and Gas Properties, (vi) all of the Oil and Gas Properties evaluated by such
Reserve Report are subject to a Mortgage, the Agent's Liens and UCC financing
statements or PPSA registration statements, that in each case create a first
priority perfected Lien in such Oil and Gas Properties in favor of Agent for the
benefit of the Lenders, (vii) except as set forth on an exhibit to such
certificate, none of the Oil and Gas Properties evaluated by such Reserve Report
are subject to any farm-out or similar arrangement, and (viii) except as set
forth on an exhibit to such certificate, there has not been any change in the
working interest or net revenue interest of any Loan Party in any of the Oil and
Gas Properties included on such Reserve Report; provided, however, that,
notwithstanding the foregoing semi-annual reporting requirement of this SECTION
6.2(e), Borrower or Agent may have a Reserve Report prepared more frequently
than semi-annually and such Reserve Report shall be used to update the Borrowing
Base to the extent such Reserve Report complies with the requirements set forth
in this SECTION 6.2(e) and is otherwise satisfactory to Agent;
(f) as soon as available, but in any event within 30 days after
the end of each month ending after the Closing Date, (i) a Borrowing Base
Certificate, current as of the
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last day of such month, supported by schedules showing the derivation thereof,
including the calculation of the PV-10 of the Proved Reserves composing the
Borrowing Base and containing such detail and other information as Agent may
request from time to time, provided, that (A) the Borrowing Base set forth in
the Borrowing Base Certificate shall be determined pursuant to the information
set forth in the Reserve Report most recently delivered by Borrower pursuant to
SECTION 6.2(e), such calculation to be made by multiplying (x) the volumetric
quantity of the categories of estimated Proved Reserves set forth in such
Reserve Report less such aggregate projected production volumes of Proved
Reserves since the date of and as provided in such Reserve Report by (y) the
applicable NYMEX Strip Price as of the last Business Day of the month preceding
the date of the delivery by Borrower of such report to Agent, (B) such Borrowing
Base shall be effective from and including the date such Borrowing Base
Certificate is duly received by Agent but not including the date on which a
subsequent Borrowing Base Certificate is received by Agent unless Agent disputes
the eligibility of any Oil and Gas Property for inclusion in the calculation of
the Borrowing Base or the valuation thereof by notice of such dispute to
Borrower and (C) in the event of any dispute about the eligibility of any such
property included in the calculation of the Borrowing Base or the valuation
thereof, Agent's good faith judgment shall control, and (ii) a report, with a
certificate of an Authorized Person of Borrower certifying to the completeness
and accuracy of the report, discussing (A) any change since the date of such
Reserve Report in the categorization of any Oil and Gas Properties among Proved
Developed Producing Reserves, Proved Developed Non-Producing Reserves, Provided
Undeveloped Reserves and "other", (B) any change in the working interest or net
revenue interest in the Oil and Gas Properties of any Loan Party reflected on
such Reserve Report, and (C) such other information as Agent shall reasonably
consider appropriate or necessary from the perspective of an asset-based lender;
(g) as soon as available, but in any event not later than 45
days after the end of each quarter, a report, certified by an Authorized Person
of Borrower: (i) setting forth the total amount actually paid by each Loan Party
during the preceding quarter for: (A) plugging and abandonment costs for
previous or ongoing plugging and abandonment operations pertaining to its Oil
and Gas Properties, and (B) general bond and supplemental bond payments
pertaining to plugging and abandonment costs; and (ii) estimating the future
payments for (A) and (B), above, for each of the succeeding two quarters; and
(h) upon request by Agent, such other reports as to the Oil and
Gas Properties, the other Collateral or the financial condition of Borrower or
any of its Subsidiaries.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Deliver to Agent,
with copies to each Lender:
(a) as soon as available, but in any event within 30 days (45
days in the case of a month that is the end of one of the first 3 fiscal
quarters in a fiscal year) after the end of each month during each of Borrower's
fiscal years,
(i) a company prepared consolidated balance sheet, income
statement, and statement of cash flow covering Borrower's and its
Subsidiaries' operations during such period,
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(ii) a certificate signed by the chief financial officer
of Borrower to the effect that:
(A) the financial statements delivered hereunder
have been prepared in accordance with GAAP (except for the lack of
footnotes and being subject to year-end audit adjustments) and fairly
present in all material respects the financial condition of Borrower
and its Subsidiaries,
(B) the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such
certificate, as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an
earlier date), and
(C) there does not exist any condition or event that
constitutes a Default or Event of Default (or, to the extent of any
non-compliance, describing such non-compliance as to which he or she
may have knowledge and what action Borrower has taken, is taking, or
proposes to take with respect thereto), and
(iii) for each month that is the date on which a financial
covenant in SECTION 7.20 is to be tested, a Compliance Certificate
demonstrating, in reasonable detail, compliance at the end of such period
with the applicable financial covenants contained in SECTION 7.20, and
(b) as soon as available, but in any event within 90 days after
the end of each of Borrower's fiscal years,
(i) financial statements of Borrower and its Subsidiaries
for each such fiscal year, audited by independent certified public
accountants reasonably acceptable to Agent and certified, without any
qualifications (including, without limitation, (A) any going concern or
like qualification or exception or (B) any qualification as to the scope of
such audit), by such accountants to have been prepared in accordance with
GAAP (such audited financial statements to include a balance sheet, income
statement, and statement of cash flow and, if prepared, such accountants'
letter to management),
(ii) a certificate of such accountants addressed to Agent
and the Lenders stating that such accountants do not have knowledge of the
existence of any Default or Event of Default under SECTION 7.20,
(c) as soon as available, but in any event within 30 days prior
to the start of each of Borrower's fiscal years,
(i) copies of Borrower's Projections, in form and substance
(including as to scope and underlying assumptions) satisfactory to Agent,
in its sole discretion, for the forthcoming 3 years, year by year, and for
the forthcoming fiscal year, month by month, certified by the chief
financial officer of Borrower as being such
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officer's good faith best estimate of the financial performance of Borrower
during the period covered thereby,
(d) if and when filed by Borrower,
(i) Form 10-Q quarterly reports, Form 10-K annual
reports, and Form 8-K current reports,
(ii) any other filings made by Borrower with the SEC,
(iii) copies of Borrower's federal income tax returns, and
any amendments thereto, filed with the Internal Revenue Service, and
(iv) any other information that is provided by Borrower to
its shareholders generally,
(e) if and when filed by any Loan Party and as requested by
Agent, satisfactory evidence of payment of applicable excise taxes in each
jurisdictions in which (i) such Loan Party conducts business or is required to
pay any such excise tax, (ii) where such Loan Party's failure to pay any such
applicable excise tax would result in a Lien on the properties or assets of such
Loan Party, or (iii) where such Loan Party's failure to pay any such applicable
excise tax reasonably could be expected to result in a Material Adverse Change,
(f) promptly after sending or receipt thereof, copies of any
material notice or other correspondence sent to, or received from, any
Governmental Authority related to the Oil and Gas Properties of any Loan Party,
including, without limitation, notice of any new plugging and abandonment or
other performance or other assurance bond requirements related to such Oil and
Gas Properties,
(g) promptly after the commencement thereof, but in any event
within five days after the service of process with respect thereto on any Loan
Party, notice of all actions, suits or proceedings brought by or against any
Loan Party before any Governmental Authority which, if determined adversely to
such Loan Party, could result in a Material Adverse Change,
(h) as soon as Borrower has knowledge of any event or condition
that constitutes a Default or an Event of Default, notice thereof and a
statement of the curative action that Borrower proposes to take with respect
thereto,
(i) (i) promptly after receipt or delivery thereof, copies of
any material notices that any Loan Party receives from or sends to any Person in
connection with the New Notes Documents or the PrimeWest Agreement and (ii) at
least 3 Business Days prior to the effective date thereof, any amendments,
modifications, waivers or other changes to any of the New Notes Documents or the
PrimeWest Agreement, and
(j) upon the request of Agent, any other report reasonably
requested relating to the financial condition of Borrower or any of its
Subsidiaries.
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In addition to the financial statements referred to above, Borrower
agrees to deliver financial statements prepared on both a consolidated and
consolidating basis and agrees that no Subsidiary of Borrower will have a fiscal
year different from that of Borrower. Borrower agrees that its independent
certified public accountants are authorized to communicate with Agent and to
release to Agent whatever financial information concerning Borrower Agent
reasonably may request. Borrower waives the right to assert a confidential
relationship, if any, it may have with any accounting firm or service bureau in
connection with any information requested by Agent pursuant to or in accordance
with this Agreement, and agrees that Agent may contact directly any such
accounting firm or service bureau in order to obtain such information.
6.4 GUARANTOR REPORTS. Cause Guarantor to deliver its annual
financial statements at the time when Borrower provides its audited financial
statements to Agent and copies of all federal income tax returns as soon as the
same are available and in any event no later than 30 days after the same are
required to be filed by law.
6.5 MAINTENANCE OF PROPERTIES.
(a) Maintain and preserve all of its properties which are
necessary or useful in the proper conduct to its business in good working order
and condition, ordinary wear and tear excepted, and comply at all times with the
provisions of all leases to which it is a party as lessee, so as to prevent any
loss or forfeiture thereof or thereunder.
(b) Cause to be done all things necessary to preserve and keep
in good repair, working order and efficiency all the Oil and Gas Properties of
each Loan Party and other material assets including, without limitation, all
equipment, machinery, facilities, and marketing, gathering, transportation and
processing assets and, from time to time, will make all the reasonably necessary
repairs, renewals and replacements so that at all times the state and conditions
of such Oil and Gas Properties and other material assets will be fully preserved
and maintained, except to the extent a portion of such assets is no longer
capable of producing Hydrocarbons in economically reasonable amounts.
(c) Promptly: (i) pay and/or discharge or cause to be paid
and/or discharged, all rentals, royalties, expenses, taxes and Indebtedness
accruing under the lease or other agreements affecting or pertaining to the Oil
and Gas Properties of each Loan Party, (ii) perform, observe and comply or make
reasonable and customary efforts to cause to be performed, observed and complied
with, in accordance with usual and customary industry standards, the obligations
required by each and all of the assignments, deeds, leases, sub-leases,
contracts and agreements affecting its interests in such Oil and Gas Properties
and the accompanying elements therefrom and other material properties so long as
such properties are capable of producing Hydrocarbons and the accompanying
elements in quantities and at prices providing for continued efficient and
profitable operations of business and (iii) do all other things necessary to
keep unimpaired, except for Permitted Liens, its rights with respect thereto and
prevent any forfeiture thereof or a default thereunder, except to the extent a
portion of such properties is no longer capable of producing Hydrocarbons in
economically reasonable amounts.
(d) Operate its Oil and Gas Properties and other material
properties or cause or make reasonable and customary efforts to cause such Oil
and Gas Properties and other
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material properties to be operated on a continuous basis for the production of
Hydrocarbons and in a careful and efficient manner in accordance with the usual
and customary practices of the industry and in substantial compliance with all
applicable contracts and agreements and in compliance in all material respects
with all material laws.
(e) Operate and produce, as a reasonably prudent operator, the
Oil and Gas Properties of the Loan Parties in accordance with good engineering
practices and the following requirements: (i) the amount of Hydrocarbons
produced from any well shall not exceed in any month the lower of (A) the
maximum amount that such well is capable of producing at its maximum efficient
rate of flow and (B) the respective allowable rate of flow under applicable
orders, rules, regulations or laws, if any; (ii) the amount of Hydrocarbons
produced from the Loan Parties' wells shall be sufficient to prevent a net
migration of Hydrocarbons from the reservoirs to which Proved Reserves are
attributed; and (iii) subject to field rules established by any Governmental
Authority having or asserting jurisdiction, the amount of Hydrocarbons produced
from the Loan Parties' wells shall be equitable and ratable, based on factors
used in determining such field rules.
(f) To the extent the interests in Oil and Gas Properties of
Borrower or Newco Canada (other than working interests of record) are operated
by Persons other than Borrower or Newco Canada, Borrower shall cause any owner
or operator of such Oil and Gas Properties to comply with this SECTION 6.5;
PROVIDED, HOWEVER, that it shall not be a breach of this SECTION 6.5 if such
owners or operators are not in compliance with this SECTION 6.5 on Oil and Gas
Properties of Borrower or Newco Canada with an aggregate PV-10 for all such Oil
and Gas Properties of less than $200,000.
6.6 TAXES. Cause all assessments, remittances, source deductions, and
taxes (including, without limitation, withholding taxes), whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed ("TAX
PAYMENTS") against any Loan Party or any of such Loan Party's assets to be paid
in full, before delinquency or before the expiration of any extension period,
except to the extent that the validity of such Tax Payment shall be the subject
of a Permitted Protest. Each Loan Party will make timely payment or deposit of
all Tax Payments required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Agent with proof satisfactory to
Agent indicating that each such Loan Party has made such Tax Payments or
deposits. Borrower shall deliver satisfactory evidence of payment of applicable
excise taxes in each jurisdictions in which a Loan Party is required to pay any
such excise tax.
6.7 INSURANCE.
(a) At Borrower's expense, maintain insurance respecting its
assets wherever located, covering loss or damage by fire, theft, explosion, and
all other hazards and risks as ordinarily are insured against by other Persons
engaged in the same or similar businesses. Borrower also shall maintain public
liability insurance, as well as insurance against larceny, embezzlement, and
criminal misappropriation to the extent Borrower maintains such insurance on the
Closing Date or is otherwise required by Agent, in its reasonable discretion, to
maintain such insurance after the Closing Date to the extent the premiums
related thereto are not at levels commercially unreasonable. All such policies
of insurance shall be in such amounts and
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with such insurance companies as are reasonably satisfactory to Agent. Borrower
shall deliver copies of all such policies to Agent with a satisfactory lender's
loss payable endorsement naming Agent as sole loss payee or additional insured,
as appropriate. Each policy of insurance or endorsement shall contain a clause
requiring the insurer to give not less than 30 days' prior written notice to
Agent in the event of cancellation of the policy for any reason whatsoever.
During the period of the drilling of wells and the construction of any other
improvements comprising a part of the Oil and Gas Properties of any Loan Party,
Borrower shall, or, as applicable, shall cause its contractors or subcontractors
to, obtain and maintain well control insurance (including coverage for costs and
redrilling) and builder's risk insurance, as applicable, in such form and
amounts as is customary in the industry and worker's compensation insurance
covering all Persons employed by any Loan Party or its agents or subcontractors
of any tier in connection with any construction affecting such Oil and Gas
Properties, including, without limitation, all agents and employees of any Loan
Party and such Loan Party's subcontractors with respect to whom death or bodily
injury claims could be asserted against any Loan Party.
(b) Borrower shall give Agent prompt notice of any loss covered
by such insurance. So long as no Event of Default has occurred and is
continuing, Borrower shall have the right to adjust losses of up to $250,000 in
the aggregate. If an Event of Default shall have occurred and is continuing,
Agent shall have the exclusive right to adjust any losses payable under any such
insurance policies, and in any event shall have the exclusive right to adjust
all losses in excess of $250,000 in the aggregate without any liability to any
Loan Party whatsoever in respect of such adjustments absent Agent's gross
negligence or willful misconduct as finally determined by a court of competent
jurisdiction. Any monies received as payment for any loss under any insurance
policy mentioned above (other than liability insurance policies) or as payment
of any award or compensation for condemnation or taking by eminent domain, shall
be paid over to Agent to be applied at the option of the Required Lenders either
to the prepayment of the Obligations or shall be disbursed to Borrower under
staged payment terms reasonably satisfactory to the Required Lenders for
application to the cost of repairs, replacements, or restorations. Any such
repairs, replacements, or restorations shall be effected with reasonable
promptness and shall be of a value at least equal to the value of the items of
property destroyed prior to such damage or destruction.
(c) No Loan Party will take out separate insurance concurrent in
form or contributing in the event of loss with that required to be maintained
under this SECTION 6.7, unless Agent is included thereon as named insured with
the loss payable to Agent under a lender's loss payable endorsement or its
equivalent. Borrower immediately shall notify Agent whenever such separate
insurance is taken out, specifying the insurer thereunder and full particulars
as to the policies evidencing the same, and copies of such policies promptly
shall be provided to Agent.
6.8 LOCATION OF INVENTORY AND EQUIPMENT. Keep the Equipment only at
the locations identified on Schedule 5.3 and 5.22; PROVIDED, HOWEVER, that
Borrower may amend Schedule 5.3 so long as such amendment occurs by written
notice to Agent not less than 30 days prior to the date on which Equipment is
moved to such new location, so long as such new location is within the
continental United States or Canada, and so long as, at the time of such written
notification, Borrower provides any financing statements or fixture filings
necessary to perfect and
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continue perfected the Agent's Liens on such assets and also provides to Agent a
Collateral Access Agreement.
6.9 COMPLIANCE WITH LAWS. Comply with the requirements of all
applicable laws, rules, regulations, and orders of any Governmental Authority,
including the Fair Labor Standards Act and the Americans With Disabilities Act
and other than laws, rules, regulations, and orders the non-compliance with
which, individually or in the aggregate, would not result in and reasonably
could not be expected to result in a Material Adverse Change.
6.10 LEASES. Pay when due all rents and other amounts payable under
any leases to which any Loan Party is a party or by which any Loan Party's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest.
6.11 BROKERAGE COMMISSIONS. Pay any and all brokerage commission or
finders fees incurred in connection with or as a result of Borrower's obtaining
financing from the Lender Group under this Agreement. Borrower agrees and
acknowledges that payment of all such brokerage commissions or finders' fees
shall be the sole responsibility of Borrower, and Borrower agrees to indemnify,
defend, and hold Agent and the Lender Group harmless from and against any claim
of any broker or finder arising out of Borrower's obtaining financing from the
Lender Group under this Agreement.
6.12 EXISTENCE. At all times preserve and keep in full force and
effect each Loan Party's valid existence and good standing and any rights and
franchises material to each Loan Party's businesses.
6.13 ENVIRONMENTAL. (a) Keep any property either owned or operated by
any Loan Party free of any Environmental Liens or post bonds or post bonds or
other financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, (b) comply, in all material respects,
with Environmental Laws and provide to Agent documentation of such compliance
which Agent reasonably requests, (c) promptly notify Agent of any release of a
Hazardous Material in a quantity which is in violation of any Environmental Law
from or onto property owned or operated by any Loan Party and take any Remedial
Actions required to abate said release or otherwise to come into compliance with
applicable Environmental Law, and (d) promptly provide Agent with written notice
within 10 days of the receipt of any of the following: (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of any Loan Party, (ii) commencement of any Environmental Action or notice that
an Environmental Action will be filed against any Loan Party, and (iii) notice
of a violation, citation, or other administrative order which reasonably could
be expected to result in a Material Adverse Change.
6.14 DISCLOSURE UPDATES. Promptly and in no event later than 5
Business Days after obtaining knowledge thereof, (a) notify Agent if any written
information, exhibit, or report furnished to the Lender Group contained any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made, and (b) correct any defect or error that may be
discovered therein or in any Loan Document or in the execution, acknowledgement,
filing, or recordation thereof.
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6.15 AFTER ACQUIRED PROPERTIES. With respect to any Oil and Gas
Property of any Loan Party acquired after the Closing Date by Borrower or Newco
Canada or any discovery and/or confirmation of the existence of Hydrocarbons in
any property owned or leased by Borrower or Newco Canada, promptly (and in any
event within 30 days after the acquisition thereof): (A) execute and deliver to
Agent such amendments to the Mortgages or such other documents as Agent shall
deem necessary or advisable to grant to Agent, for the benefit of the Lenders, a
perfected first priority Lien on such Oil and Gas Property; (B) take all actions
necessary or advisable to cause such Lien to be duly perfected in accordance
with all applicable law, including, without limitation, the filing of Mortgages,
financing statements or PPSA registration statements in such jurisdictions as
may be requested by Agent; and (C) deliver to Agent title opinions and/or legal
opinions relating to the matters described in clauses (A) and (B) immediately
preceding, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to Agent.
6.16 PROTECTION AGAINST DRAINAGE. To the extent that the Oil and Gas
Properties of any Loan Party (i) are operated by Borrower or its Subsidiaries,
Borrower or its Subsidiaries shall, or shall cause its Subsidiaries to, act as a
reasonably prudent operator in an effort to identify and prevent the occurrence
of any drainage of Hydrocarbons from such Oil and Gas Properties and (ii) are
not operated by Borrower or its Subsidiaries, Borrower shall utilize, or cause
its Subsidiaries to utilize, its property and contractual rights as a reasonably
prudent owner in an effort to identify and prevent the occurrence of any
drainage of Hydrocarbons from such Oil and Gas Properties.
6.17 ADDITIONAL COLLATERAL REVIEWS. Borrower shall, from time to time
upon the reasonable request of Agent, take such actions and execute and deliver
such documents and instruments as Agent shall require to ensure that Agent
shall, at all times, have received satisfactory title reviews (including, if
requested, supplemental or new title opinions addressed to it), which title
opinions shall be in form and substance acceptable to Agent in its sole
discretion and shall include opinions regarding the before payout and after
payout ownership interests held by Borrower and Newco Canada, for all wells
located on the Oil and Gas Properties covered thereby as to the ownership of Oil
and Gas Properties of Borrower and its Subsidiaries.
6.18 HEDGING AGREEMENTS. Maintain in effect one or more Commodities
Hedging Agreements with respect to its Hydrocarbon production with one or more
counterparties rated investment grade by Moody's and Standard & Poor's, or the
equivalent by a rating agency acceptable to Agent or with a counterparty
otherwise reasonably acceptable to Agent. The aggregate notional volumes of
Hydrocarbons covered by such Commodities Hedging Agreements shall constitute not
less than 25% and not more than 75% of the Loan Parties' aggregate estimated
Hydrocarbon production volumes on an mcf equivalent basis (where one barrel of
oil is equal to six mcf of gas) for the succeeding six calendar months on a
rolling six calendar month basis for such period from Oil and Gas Properties
classified as Proved Developed Producing Reserves as of the date of the most
recent Reserve Report delivered pursuant to SECTION 6.2(e) hereof plus the
estimated production from anticipated drilling by Borrower or its Subsidiaries
during such succeeding six months. Borrower shall use such Commodities Hedging
Agreements solely as a part of its normal business operations as a risk
management strategy and/or hedge against changes resulting from market
conditions related to Borrower's and its Subsidiaries' oil and gas operations
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and not as a means to speculate for investment purposes on trends and shifts in
financial or commodities markets.
6.19 COMMERCIAL TORT CLAIMS; ORGANIZATIONAL ID NUMBER. Immediately
upon obtaining any commercial tort claim, deliver to Agent an updated Schedule
5.5 and the other documents required under SECTION 4.4. Immediately upon
obtaining an organizational identification number (to the extent Borrower has
not been issued such number on or prior to the Closing Date), notify Agent in
writing and deliver to Agent an updated Schedule 5.5.
6.20 COLLATERAL ACCESS AGREEMENT. Borrower shall use its commercially
reasonable efforts to obtain a Collateral Access Agreement with the landlord of
its chief executive office and shall cause Newco Canada to use its commercially
reasonable efforts to obtain a Collateral Access Agreement with the landlord of
its chief executive office.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations and the
termination of this Agreement, Borrower will not and will not permit any of its
Subsidiaries to do any of the following:
7.1 INDEBTEDNESS. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement and the other Loan
Documents, together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit,
(b) Indebtedness set forth on Schedule 5.19,
(c) Permitted Purchase Money Indebtedness,
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c), and (e) of this SECTION 7.1 (and continuance
or renewal of any Permitted Liens associated therewith) so long as: (i) the
terms and conditions of such refinancings, renewals, or extensions do not, in
Agent's judgment, materially impair the prospects of repayment of the
Obligations by any Loan Party or materially impair any Loan Party's
creditworthiness, (ii) such refinancings, renewals, or extensions do not result
in an increase in the principal amount of, or interest rate with respect to, the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions that, taken as a whole, are materially more burdensome or
restrictive to such Loan Party, (iv) if the Indebtedness that is refinanced,
renewed, or extended was subordinated in right of payment to the Obligations,
then the terms and conditions of the refinancing, renewal, or extension
Indebtedness must include subordination terms and conditions that are at least
as favorable to the Lender Group as those that were applicable to the
refinanced, renewed, or extended Indebtedness and (v) if the Permitted Liens
securing the Indebtedness that is refinanced, renewed or extended was
subordinated to the Agent's Liens securing the
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Obligations, then the terms and conditions of such refinancing, renewal, or
extension shall include subordination terms and conditions that are at least as
favorable to the Lender Group as those that were applicable to the Indebtedness
being refinanced, renewed or extended,
(e) Indebtedness evidenced by the New Notes issued pursuant to
the terms of the New Notes Indenture, so long as all such Indebtedness and such
documents are subject to the Intercreditor Agreement, to the extent provided
therein;
(f) Indebtedness under Hedging Agreements incurred in the
ordinary course of business of Borrower and its Subsidiaries consistent with
prudent business practice and not for speculative purposes and in accordance
with this Agreement;
(g) Indebtedness associated with bonds or surety obligations
required by applicable law in connection with the operation of Borrower's and
its Subsidiaries' Oil and Gas Properties;
(h) Indebtedness composing Permitted Investments;
(i) Indebtedness of a Subsidiary to Borrower in an aggregate
principal amount at any time outstanding not to exceed $5,000,000, provided that
such Indebtedness is unsecured;
(j) Indebtedness of Borrower to a Guarantor that is unsecured
and subject to an intercompany subordination agreement satisfactory to Agent;
(k) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; PROVIDED, HOWEVER, that the aggregate amount of
such Indebtedness is extinguished within two (2) Business Days of incurrence and
does not at any time exceed $50,000;
(l) Indebtedness of Borrower or any of its Subsidiaries
represented by letters of credit for the account of Borrower or any of its
Subsidiaries, as the case may be, in order to provide security for workers'
compensation claims, payment obligations in connection with self-insurance or
similar requirements in the ordinary course of business, to the extent such
letters of credit are unsecured and subordinated, in form and substance
satisfactory to Agent, to the Obligations; and
(m) other unsecured Indebtedness of Borrower or any of its
Subsidiaries in an aggregate principal amount at any time outstanding not to
exceed $500,000.
7.2 LIENS. Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under SECTION 7.1(d) and so long as the replacement Liens only encumber
those assets that secured the refinanced, renewed, or extended Indebtedness).
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7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization, or
recapitalization, or reclassify its Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Convey, sell, lease, license, assign, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its assets.
7.4 DISPOSAL OF ASSETS. Other than Permitted Dispositions, convey,
sell, lease, license, assign, transfer, or otherwise dispose of any of
Borrower's assets, including, without limitation, sell, lease, license, assign,
farm-out, convey or otherwise transfer any Oil and Gas Property or any interest
in any Oil and Gas Property.
7.5 CHANGE NAME. Change any Loan Party's name, organizational
identification number, state of incorporation, FEIN, corporate structure, or
identity, or add any new fictitious name; PROVIDED, HOWEVER, that Borrower may
change its name upon at least 30 days' prior written notice to Agent of such
change and so long as, at the time of such written notification, such Loan Party
provides any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens.
7.6 GUARANTEE. Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement of
instruments or items of payment for deposit to the account of any Loan Party or
which are transmitted or turned over to Agent.
7.7 NATURE OF BUSINESS. Make any change in the principal nature of
its business as described in Section 5.28.
7.8 PAYMENTS, PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by SECTION
7.1(d), prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness
of Borrower and its Subsidiaries, including, without limitation, the
Indebtedness evidenced by the New Notes, other than the Obligations in
accordance with this Agreement, and
(b) Except in connection with a refinancing permitted by SECTION
7.1(d), directly or indirectly, amend, modify, alter, increase, or change any of
the terms or conditions of any agreement, instrument, document, indenture, or
other writing evidencing or concerning Indebtedness permitted under SECTIONS
7.1(b), (c) or (e).
(c) Except in connection with a refinancing permitted by SECTION
7.1(d), directly or indirectly, by deposit of monies or otherwise, make any
payment on account of any principal of, premium, interest, fees or other amounts
(excluding expenses payable to the trustee of the New Notes) payable in
connection with the Indebtedness under the New Notes Documents; PROVIDED,
HOWEVER, Borrower may make interest payments by issuing additional New Notes to
holders of the New Notes.
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(d) (i) Amend, modify or otherwise change its or its
Subsidiaries' Governing Documents, including, without limitation, by the filing
or modification of any certificate of designation, or any agreement or
arrangement entered into by it with respect to any of its Stock (including any
shareholders' agreement), or enter into any new agreement with respect to any of
its Stock, or (ii) amend, modify or otherwise change any Material Contract,
except any such amendments, modifications or changes or any such new agreements
or arrangements pursuant to this paragraph (d) that, either individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Change.
7.9 CHANGE OF CONTROL. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 FORWARD SALES. Except in accordance with the ordinary course of
the Oil and Gas Business, enter into or permit to exist any advance payment
agreement or other arrangement pursuant to which any Loan Party, having received
full or substantial payment of the purchase price for a specified quantity of
Hydrocarbons upon entering such agreement or arrangement, is required to
deliver, in one or more installments subsequent to the date of such agreement or
arrangement, such quantity of Hydrocarbons pursuant to and during the terms of
such agreement or arrangement.
7.11 DISTRIBUTIONS. Make any distribution or declare or pay any
dividends (in cash or other property, other than common Stock) on, or purchase,
acquire, redeem, or retire any of Borrower's Stock, of any class, whether now or
hereafter outstanding.
7.12 ACCOUNTING METHODS. Modify or change its method of accounting
(other than as may be required to conform to GAAP) or enter into, modify, or
terminate any agreement currently existing, or at any time hereafter entered
into with any third party accounting firm or service bureau for the preparation
or storage of any Loan Party's accounting records without said accounting firm
or service bureau agreeing to provide Agent information regarding the Collateral
or any Loan Party's financial condition.
7.13 INVESTMENTS. Except for Permitted Investments, directly or
indirectly, make or acquire any Investment or incur any liabilities (including
contingent obligations) for or in connection with any Investment; PROVIDED,
HOWEVER, that Borrower and its Subsidiaries shall not have Permitted Investments
(other than in the Cash Management Accounts) in deposit accounts or Securities
Accounts in excess of $25,000 outstanding at any one time unless or its
Subsidiary, as applicable, Borrower and the applicable securities intermediary
or bank have entered into Control Agreements governing such Permitted
Investments, as Agent shall determine in its Permitted Discretion, to perfect
(and further establish) the Agent's Liens in such Permitted Investments.
7.14 TRANSACTIONS WITH AFFILIATES. Other than with respect to the
transactions contemplated by the agreement identified in Part B of Schedule
5.24, directly or indirectly enter into or permit to exist any transaction with
any Affiliate of any Loan Party except for transactions that are in the ordinary
course of such Loan Party's business, upon fair and reasonable terms, that are
fully disclosed to Agent, and that are no less favorable to such Loan Party than
would be obtained in an arm's length transaction with a non-Affiliate.
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7.15 SUSPENSION. Suspend or go out of a substantial portion of its
business.
7.16 COMPENSATION. Increase the annual fee or per-meeting fees paid to
the members of its Board of Directors during any year by more than 15% over the
prior year; pay or accrue total cash compensation, during any year, to its
officers and senior management employees in an aggregate amount in excess of
115% of that paid or accrued in the prior year.
7.17 USE OF PROCEEDS. Use the proceeds of the Advances and the Term
Loan for any purpose other than (a) on the Closing Date, (i) to finance the
Exchange Offer and (ii) to pay transactional fees, costs, and expenses incurred
in connection with this Agreement, the other Loan Documents, and the
transactions contemplated hereby and thereby, and (b) thereafter, consistent
with the terms and conditions hereof, for its lawful and permitted purposes.
7.18 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; EQUIPMENT WITH
BAILEES. Relocate its chief executive office to a new location without providing
30 days' prior written notification thereof to Agent and so long as, at the time
of such written notification, each Loan Party provides any financing statements
or fixture filings necessary to perfect and continue perfected the Agent's Liens
and also provides to Agent a Collateral Access Agreement with respect to such
new location. The Equipment shall not at any time now or hereafter be stored
with a bailee, warehouseman, or similar party without Agent's prior written
consent.
7.19 SECURITIES ACCOUNTS. Establish or maintain any Securities Account
unless Agent shall have received a Control Agreement in respect of such
Securities Accounts; PROVIDED, that Borrower may maintain a Securities Account
not subject to a Control Agreement if (x) the only asset in such account is the
common Stock of Borrower which Stock is subject to a registration statement with
the SEC and which class is publicly traded on a national securities exchange in
the United Stock and (y) the shares of such Stock held in all such accounts will
be limited to the shares of such Stock held in such accounts on the Closing Date
and proceeds thereof. No Loan Party shall transfer assets out of any Securities
Account; PROVIDED, HOWEVER, that, so long as no Event of Default has occurred
and is continuing or would result therefrom, each Loan Party may use such assets
(and the proceeds thereof) to the extent not prohibited by this Agreement.
7.20 FINANCIAL COVENANTS.
(a) Fail to maintain:
(i) MINIMUM EBITDA. EBITDA, measured on a fiscal
quarter-end basis, of not less than the required amount set forth in the
following table for the applicable period set forth opposite thereto;
<Table>
<Caption>
Applicable Period Applicable Amount
- ----------------- -----------------
For the 3 month period ending March 31, 2003 $ 2,850,000
For the 6 month period ending June 30, 2003 $ 6,425,000
For the 9 month period ending September 30, 2003 $ 10,000,000
</Table>
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<Table>
For the 12 month period ending December 31, 2003 $ 14,000,000
For the 12 month period ending March 31, 2004 and for each 12 $ 14,500,000
month period ending at the end of each fiscal quarter
thereafter
</Table>
(b) CAPITAL EXPENDITURES. Make Capital Expenditures in excess
of:
(i) subject to any adjustments pursuant to clause (iii)
below, (A) during the first calendar quarter of 2003, $8,000,000 and (B)
during each other calendar quarter of 2003, $2,500,000 MULTIPLIED BY the
applicable CapEx Adjustment Ratio for such calendar quarter; PROVIDED,
HOWEVER, during calendar year 2003 the aggregate amount of Capital
Expenditures of Borrower and its Subsidiaries shall not exceed an amount
equal to $15,000,000 MULTIPLIED BY the applicable CapEx Adjustment Ratio
for such calendar year, and
(ii) subject to any adjustments pursuant to clause (iii)
below, during each calendar quarter of 2004 or any calendar quarter during
any calendar year thereafter, $2,500,000 MULTIPLIED BY the applicable CapEx
Adjustment Ratio for such calendar year; PROVIDED, HOWEVER, during calendar
year 2004 the aggregate amount of Capital Expenditures of Borrower and its
Subsidiaries shall not exceed $10,000,000 MULTIPLIED BY the applicable
CapEx Adjustment Ratio for such calendar year.
(iii) Borrower may reallocate Capital Expenditures in an
amount not greater than $3,000,000 (such amount, the "REALLOCATION AMOUNT")
from one calendar year (the "REDUCTION YEAR") to the immediately succeeding
calendar year (the "ALLOCATION YEAR"); PROVIDED, that (x) such reallocation
shall reduce the aggregate amount of Capital Expenditures by the
Reallocation Amount that may be made in the Reduction Year and increase the
aggregate amount of Capital Expenditures by the Reallocation Amount that
may be made in the Allocation Year, (y) such Reallocation Amount shall be
used for development expenditures with respect to non-operating mineral
interests, and (z) such Reallocation Amount may not be carried over to
subsequent calendar years pursuant to the provisions of clause (iv) below.
(iv) (A) if during any calendar quarter the amount of
Capital Expenditures of Borrower and its Subsidiaries exceeds the amounts
permitted by clause (i) or (ii) above (such excess amount hereinafter
referred to as the "EXCESS AMOUNT"), the aggregate Capital Expenditures for
the two succeeding calendar quarters thereafter shall be decreased by an
aggregate amount equal to such Excess Amount, and (B) if during any
calendar quarter the amount of Capital Expenditures of Borrower and its
Subsidiaries permitted by clause (i) or (ii) above is not utilized during
the applicable calendar quarter (such unutilized amount hereinafter
referred to as the "UNUSED AMOUNT"), the aggregate Capital Expenditures for
the two succeeding calendar quarters thereafter shall be increased by an
aggregate amount equal to such Unused Amount, PROVIDED that in any such
subsequent calendar quarters, actual Capital Expenditures made from time to
time in such calendar quarters shall be deemed to be made (and utilized)
from the amount permitted above for such calendar quarters (without giving
effect to any Unused
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Amount), and then to be made (and utilized) from the remaining (if any)
portion of the Unused Amount.
(v) Notwithstanding any of the foregoing, in no event
shall the amount of Capital Expenditures of Borrower and its Subsidiaries
during any period exceed the amount of Capital Expenditures permitted to be
made by Borrower and its Subsidiaries under the New Notes Indenture.
(c) NET CASH INTEREST COVERAGE RATIO. Permit the Net Cash
Interest Coverage Ratio of Borrower and its Subsidiaries to be less than the
amount set forth in the following table for the applicable period set forth
opposite thereto:
<Table>
<Caption>
Applicable Period Cash Interest Coverage Ratio
----------------- ----------------------------
For the 3 month period ending March 31, 2003 2.8 to 1.0
For the 6 month period ending June 30, 2003 3.2 to 1.0
For the 9 month period ending September 30, 2003 3.4 to 1.0
For the 12 month period ending December 31, 2003 3.5 to 1.0
and for each 12 month period ending at
the end of each quarter thereafter
</Table>
7.21 OIL AND GAS IMBALANCES. Enter into any contracts or agreements
which warrant production of Hydrocarbons (other than Hedging Agreements
otherwise permitted hereunder) and will not hereafter allow gas imbalances,
take-or-pay or other prepayment with respect to its Oil and Gas Properties which
would require any Loan Party to deliver Hydrocarbons produced on Oil and Gas
Properties at some future time without then or thereafter receiving full payment
therefore to exceed, during any monthly period two percent (2%) of the current
aggregate monthly gas production for such monthly period from the Oil and Gas
Properties of any Loan Party.
7.22 ENVIRONMENTAL. Permit the use, handling, generation, storage,
treatment, Release or disposal of Hazardous Materials at any Real Property
owned, operated or leased by any Loan Party, except in compliance with
Environmental Laws.
7.23 LIMITATION ON LEASES. Create, incur, assume or suffer to exist
any obligation for the payment of rent or hire of Oil and Gas Properties of any
kind whatsoever (real or personal, including capital leases but excluding leases
of Hydrocarbon Interests and leases directly related to oil and gas field
operations), under leases or lease agreements which would cause the aggregate
amount of all payments made by such Person pursuant to such leases or lease
agreements to exceed $800,000, in any period of twelve consecutive calendar
months in the aggregate.
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8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event of
default (each, an "EVENT OF DEFAULT") under this Agreement:
8.1 If Borrower fails to pay when due and payable, or when declared
due and payable, all or any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2 (i) If any Loan Party fails to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in SECTIONS 6.1,
6.4 and 6.6 of this Agreement, or comparable provisions of the other Loan
Documents, and such failure continues for 15 days, (ii) if any Loan Party fails
to perform, keep, or observe any term, provision, condition, covenant or
agreement contained in SECTIONS 6.2 (but only up to three times during any
12-month period), 6.3, 6.8 and 6.10 of this Agreement, or comparable provisions
of the other Loan Documents, and such failure continues for 5 days, or (iii) if
any Loan Party otherwise fails to perform, keep, or observe any other term,
provision, condition, covenant, or agreement contained in this Agreement or in
any of the other Loan Documents
8.3 If any material portion of Borrower's or any of its Subsidiaries'
assets is attached, seized, subjected to a writ or distress warrant, levied
upon, or comes into the possession of any third Person;
8.4 If an Insolvency Proceeding is commenced by Borrower or any of
its Subsidiaries;
8.5 If an Insolvency Proceeding is commenced against Borrower or any
of its Subsidiaries, and any of the following events occur: (a) Borrower or such
Subsidiary consents to the institution of such Insolvency Proceeding against it,
(b) the petition commencing the Insolvency Proceeding is not timely
controverted, (c) the petition commencing the Insolvency Proceeding is not
dismissed within 45 calendar days of the date of the filing thereof; PROVIDED,
HOWEVER, that, during the pendency of such period, Agent (including any
successor agent) and each other member of the Lender Group shall be relieved of
their obligations to extend credit hereunder, (d) an interim trustee is
appointed to take possession of all or any substantial portion of the properties
or assets of, or to operate all or any substantial portion of the business of,
Borrower or any of its Subsidiaries, or (e) an order for relief shall have been
entered therein;
8.6 If Borrower or any of its Subsidiaries is enjoined, restrained,
or in any way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.7 If a notice of Lien, levy, or assessment is filed of record with
respect to any of Borrower's or any of its Subsidiaries' assets by the United
States, or any department, agency, or instrumentality thereof, or by any state,
county, municipal, or governmental agency, or if any taxes or debts owing at any
time hereafter to any one or more of such entities becomes a
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Lien, whether choate or otherwise, upon any of Borrower's or any of its
Subsidiaries' assets and the same is not paid before such payment is delinquent;
8.8 If a judgment or other claim in excess of $50,000 (to the extent
not bonded or insured by a bonding or insurance company acceptable to Agent) in
the aggregate becomes a Lien or encumbrance upon any material portion of
Borrower's or any of its Subsidiaries' assets;
8.9 If there is a default under any material agreement (including the
New Notes Documents or any Material Contract) to which Borrower or any of its
Subsidiaries is a party and such default (a) occurs at the final maturity of the
obligations thereunder, or (b) results in a right by the other party thereto,
irrespective of whether exercised, to accelerate the maturity of Borrower's or
its Subsidiaries' obligations thereunder, to terminate such agreement, or to
refuse to renew such agreement pursuant to an automatic renewal right therein;
8.10 If Borrower or any of its Subsidiaries makes any payment on
account of Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.11 If any material misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or Record made to the
Lender Group by Borrower, its Subsidiaries, or any officer, employee, agent, or
director of Borrower or any of its Subsidiaries;
8.12 If there is a loss, suspension or revocation of, or failure to
renew, any license or permit now held or hereafter acquired by Borrower or any
of its Subsidiaries and such loss, suspension, revocation or failure to renew
could reasonably be expected to have a Material Adverse Change;
8.13 If the obligation of Guarantor under the Guaranty is limited or
terminated by operation of law or by Guarantor thereunder;
8.14 If this Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security interest in the Collateral covered hereby or
thereby; or
8.15 Any provision of any Loan Document shall at any time for any
reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by any Loan Party, or a proceeding shall be commenced
by any Loan Party, or by any Governmental Authority having jurisdiction over any
Loan Party, seeking to establish the invalidity or unenforceability thereof, or
any Loan Party shall deny that it has any liability or obligation purported to
be created under any Loan Document.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. Upon the occurrence, and during the
continuation, of an Event of Default, the Required Lenders (at their election
but without notice of their election and without demand) may authorize and
instruct Agent to do any one or more of the following on
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behalf of the Lender Group (and Agent, acting upon the instructions of the
Required Lenders, shall do the same on behalf of the Lender Group), all of which
are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and the Lender Group;
(c) Terminate this Agreement and any of the other Loan Documents
as to any future liability or obligation of the Lender Group, but without
affecting any of the Agent's Liens in the Collateral and without affecting the
Obligations;
(d) Settle or adjust disputes and claims directly with Account
Debtors for amounts and upon terms which Agent considers advisable, and in such
cases, Agent will credit Borrower's Loan Account with only the net amounts
received by Agent in payment of such disputed Accounts after deducting all
Lender Group Expenses incurred or expended in connection therewith;
(e) Without notice to or demand upon Borrower or Guarantor, make
such payments and do such acts as Agent considers necessary or reasonable to
protect its security interests in the Collateral. Borrower agrees to assemble
the Personal Property Collateral if Agent so requires, and to make the Personal
Property Collateral available to Agent at a place that Agent may designate which
is reasonably convenient to both parties. Borrower authorizes Agent to enter the
premises where the Personal Property Collateral is located, to take and maintain
possession of the Personal Property Collateral, or any part of it, and to pay,
purchase, contest, or compromise any Lien that in Agent's determination appears
to conflict with the Agent's Liens and to pay all reasonable expenses incurred
in connection therewith and to charge Borrower's Loan Account therefor. With
respect to any of Borrower's owned or leased premises, Borrower hereby grants
Agent a license to enter into possession of such premises and to occupy the
same, without charge, in order to exercise any of the Lender Group's rights or
remedies provided herein, at law, in equity, or otherwise;
(f) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of the Code), set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by the Lender
Group (including any amounts received in the Cash Management Accounts), or (ii)
Indebtedness at any time owing to or for the credit or the account of Borrower
held by the Lender Group;
(g) Hold, as cash collateral, any and all balances and deposits
of Borrower held by the Lender Group, and any amounts received in the Cash
Management Accounts or the Concentration Account, to secure the full and final
repayment of all of the Obligations and apply, to the extent permitted by
applicable law, such cash collateral to repay the Obligations;
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(h) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Personal Property Collateral. Borrower hereby grants to Agent a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, in completing production of, advertising for sale,
and selling any Personal Property Collateral and Borrower's rights under all
licenses and all franchise agreements shall inure to the Lender Group's benefit;
(i) Sell the Personal Property Collateral at either a public or
private sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's premises)
as Agent determines is commercially reasonable. It is not necessary that the
Personal Property Collateral be present at any such sale;
(j) Agent shall give notice of the disposition of the Personal
Property Collateral as follows:
(i) Agent shall give Borrower a notice in writing of the
time and place of public sale, or, if the sale is a private sale or some
other disposition other than a public sale is to be made of the Personal
Property Collateral, the time on or after which the private sale or other
disposition is to be made; and
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in SECTION 12, at least 10 days
before the earliest time of disposition set forth in the notice; no notice
needs to be given prior to the disposition of any portion of the Personal
Property Collateral that is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a recognized market;
(k) Agent, on behalf of the Lender Group, may credit bid and
purchase at any public sale;
(l) Agent may seek the appointment of a receiver or keeper to
take possession of all or any portion of the Collateral or to operate same and,
to the maximum extent permitted by law, may seek the appointment of such a
receiver without the requirement of prior notice or a hearing;
(m) Agent, on behalf of the Lender Group, may foreclose any or
all of the Mortgages and sell the Real Property or cause the Real Property to be
sold in accordance with the provisions of the Mortgages and applicable law, and
exercise any and all other rights or remedies available to Agent, on behalf of
the Lender Group, under the Mortgages, any of the other Loan Documents, at law
or in equity with respect to the Collateral encumbered by the Mortgages;
(n) The Lender Group shall have all other rights and remedies
available at law or in equity or pursuant to any other Loan Document; and
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(o) Any deficiency that exists after disposition of the Personal
Property Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Agent to Borrower.
9.2 REMEDIES CUMULATIVE. The rights and remedies of the Lender Group
under this Agreement, the other Loan Documents, and all other agreements shall
be cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Loan Party fails to pay any monies (whether taxes, assessments,
remittances, source deductions, insurance premiums, or, in the case of leased
properties or assets, rents or other amounts payable under such leases) due to
third Persons, or fails to make any deposits or furnish any required proof of
payment or deposit, all as required under the terms of this Agreement, then,
Agent, in its sole discretion and without prior notice to any Loan Party, may do
any or all of the following: (a) make payment of the same or any part thereof,
(b) set up such reserves in Borrower's Loan Account as Agent deems necessary to
protect the Lender Group from the exposure created by such failure, or (c) in
the case of the failure to comply with SECTION 6.7 hereof, obtain and maintain
insurance policies of the type described in SECTION 6.7 and take any action with
respect to such policies as Agent deems prudent. Any such amounts paid by Agent
shall constitute Lender Group Expenses and any such payments shall not
constitute an agreement by the Lender Group to make similar payments in the
future or a waiver by the Lender Group of any Event of Default under this
Agreement. Agent need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension, or renewal
of documents, instruments, chattel paper, and guarantees at any time held by the
Lender Group on which Borrower may in any way be liable.
11.2 THE LENDER GROUP'S LIABILITY FOR COLLATERAL. Borrower hereby
agrees that: (a) so long as Agent complies with its obligations, if any, under
the Code, the Lender Group shall not in any way or manner be liable or
responsible for: (i) the safekeeping of the Collateral, (ii) any loss or damage
thereto occurring or arising in any manner or fashion from any cause, (iii) any
diminution in the value thereof, or (iv) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person, and (b) all risk of
loss, damage, or destruction of the Collateral shall be borne by Borrower.
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11.3 INDEMNIFICATION. Borrower shall pay, indemnify, defend, and hold
the Agent-Related Persons, the Lender-Related Persons with respect to each
Lender, each Participant (subject to SECTION 14.1(e)(v)), and each of their
respective officers, directors, employees, agents, and attorneys-in-fact (each,
an "INDEMNIFIED PERSON") harmless (to the fullest extent permitted by law) from
and against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and disbursements
and other costs and expenses actually incurred in connection therewith (as and
when they are incurred and irrespective of whether suit is brought), at any time
asserted against, imposed upon, or incurred by any of them (a) in connection
with or as a result of or related to the execution, delivery, enforcement,
performance, or administration of this Agreement, any of the other Loan
Documents, or the transactions contemplated hereby or thereby, and (b) with
respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event, or circumstance in any manner related
thereto (all the foregoing, collectively, the "INDEMNIFIED LIABILITIES"). The
foregoing to the contrary notwithstanding, Borrower shall have no obligation to
any Indemnified Person under this SECTION 11.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. This provision shall survive the termination of this Agreement and the
repayment of the Obligations. If any Indemnified Person makes any payment to any
other Indemnified Person with respect to an Indemnified Liability as to which
Borrower was required to indemnify the Indemnified Person receiving such
payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrower with respect thereto. WITHOUT LIMITATION,
THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART CAUSED BY OR ARISE OUT OF ANY
NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by
Borrower or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Borrower or Agent, as applicable, may designate to each other
in accordance herewith), or telefacsimile to Borrower or Agent, as the case may
be, at its address set forth below:
If to Borrower: ABRAXAS PETROLEUM CORPORATION
500 North Loop 1604 East, Suite 100
San Antonio, Texas 78232
Attn: Robert Carington
Fax No. 210-490-8816
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with copies to: COX & SMITH INCORPORATED
112 East Pecan, Suite 1800
San Antonio, Texas 78205
Attn: Steve R. Jacobs, Esq.
Fax No. 210-226-8395
If to Agent: FOOTHILL CAPITAL CORPORATION
2450 Colorado Avenue
Suite 3000 West
Santa Monica, California 90404
Attn: Business Finance Division Manager
Fax No. 310-478-9788
with copies to: SCHULTE ROTH & ZABEL LLP
919 Third Avenue
New York, New York 10022
Attn: Frederic L. Ragucci, Esq.
Fax No. 212-593-5955
Agent and Borrower may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other party. All notices or demands sent in accordance with this SECTION 12,
other than notices by Agent in connection with enforcement rights against the
Collateral under the provisions of the Code, shall be deemed received on the
earlier of the date of actual receipt or 3 Business Days after the deposit
thereof in the mail. Borrower acknowledges and agrees that notices sent by the
Lender Group in connection with the exercise of enforcement rights against
Collateral under the provisions of the Code shall be deemed sent when deposited
in the mail or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
(a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE VALIDITY AND
PERFECTION OR THE PERFECTION AND EFFECT OF PERFECTION OR NON-PERFECTION OF THE
SECURITY INTEREST CREATED HEREBY OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(b) THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE
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OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, PROVIDED, HOWEVER,
THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE BROUGHT, AT AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT
ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. BORROWER AND THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13(b).
(c) BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWER AND THE LENDER GROUP REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
14.1 ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of Agent (provided
that no written consent of Agent shall be required in connection with any
assignment and delegation by a Lender to an Eligible Transferee), assign and
delegate to one or more assignees (each an "ASSIGNEE") all, or any part of all,
of the Obligations, the Commitments and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000 (except such minimum amount shall not apply to any Term Loan Lender
or any Affiliate of a Lender or to a Related Fund or account managed by a
Lender); PROVIDED, HOWEVER, that Borrower and Agent may continue to deal solely
and directly with such Lender in connection with the interest so assigned to an
Assignee until (i) written notice of such assignment, together with payment
instructions, addresses, and related information with respect to the Assignee,
have been given to Borrower and Agent by such Lender and the Assignee, (ii) such
Lender and its Assignee have delivered to Borrower and Agent a fully executed
Assignment and Acceptance, and (iii) the assignor Lender or Assignee has paid to
Agent for Agent's separate account a processing fee in the amount of $5,000.
Anything contained herein to the contrary notwithstanding, the consent of Agent
shall not be required (and payment of any fees shall not be required) if (x)
such assignment is in connection with any merger, consolidation, sale, transfer,
or other disposition of all or any substantial portion of the business or loan
portfolio of such Lender or (y) the assignee is an Affiliate of a Lender or a
Related Fund.
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(b) From and after the date that Agent notifies the assignor
Lender (with a copy to Borrower) that it has received a fully executed
Assignment and Acceptance and payment (if applicable) of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, shall have the rights and obligations of a
Lender under the Loan Documents, and (ii) the assignor Lender shall, to the
extent that rights and obligations hereunder and under the other Loan Documents
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights (except with respect to SECTION 11.3 hereof) and be released from its
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement and the other Loan Documents, such Lender
shall cease to be a party hereto and thereto), and such assignment shall affect
a novation between Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto, (2) such assigning Lender 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 this Agreement or any other Loan Document furnished pursuant hereto, (3)
such Assignee confirms that it has received a copy of this Agreement, together
with such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance, (4) such Assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement, (5)
such Assignee appoints and authorizes Agent to take such actions and to exercise
such powers under this Agreement as are delegated to Agent, by the terms hereof,
together with such powers as are reasonably incidental thereto, and (6) such
Assignee agrees that it will perform all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance and receipt and acknowledgment by
Agent of such fully executed Assignment and Acceptance, this Agreement shall be
deemed to be amended to the extent, but only to the extent, necessary to reflect
the addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender PRO TANTO.
(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "PARTICIPANT") participating interests
in its Obligations owing to such Lender, the Commitment of such Lender, and the
other rights and interests of that Lender (the "ORIGINATING
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LENDER") hereunder and under the other Loan Documents (provided that no written
consent of Agent shall be required in connection with any sale of any such
participating interests by a Lender to an Eligible Transferee); PROVIDED,
HOWEVER, that (i) the Originating Lender shall remain a "Lender" for all
purposes of this Agreement and the other Loan Documents and the Participant
receiving the participating interest in the Obligations, the Commitments, and
the other rights and interests of the Originating Lender hereunder shall not
constitute a "Lender" hereunder or under the other Loan Documents and the
Originating Lender's obligations under this Agreement shall remain unchanged,
(ii) the Originating Lender shall remain solely responsible for the performance
of such obligations, (iii) Borrower, Agent, and the Lenders shall continue to
deal solely and directly with the Originating Lender in connection with the
Originating Lender's rights and obligations under this Agreement and the other
Loan Documents, (iv) no originating Lender shall transfer or grant any
participating interest under which the Participant has the right to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating, (C) release
all or a material portion of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant, (E) change the amount or due dates of scheduled principal
repayments or prepayments or premiums in respect of the Obligations hereunder in
which such Participant is participating, or (F) subordinate Agent's Liens to the
Liens of any other creditor of Borrower, and (v) all amounts payable by Borrower
hereunder shall be determined as if such Lender had not sold such participation,
except that, if amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be deemed to have the
right of set-off in respect of its participating interest in amounts owing under
this Agreement to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement. The rights of any
Participant only shall be derivative through the Originating Lender with whom
such Participant participates and no Participant shall have any rights under
this Agreement or the other Loan Documents or any direct rights as to the other
Lenders, Agent, Borrower, the Collections, the Collateral, or otherwise in
respect of the Obligations. No Participant shall have the right to participate
directly in the making of decisions by the Lenders among themselves. The
provisions of this SECTION 14.1(e) are solely for the benefit of the Lender
Group, and Borrower shall not have any rights as a third party beneficiary of
such provisions.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose to a third party all
documents and information which it now or hereafter may have relating to
Borrower or Borrower's business.
(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR Section 203.14, and
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such Federal Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
(h) Borrower shall maintain, or cause to be maintained, a
register (the "REGISTER") on which it enters the name of a Lender as the
registered owner of the Term Loan and each Advance, as the case may be, held by
such Lender. A Registered Loan (and the Registered Note, if any, evidencing the
same) may be assigned or sold in whole or in part only by registration of such
assignment or sale on the Register (and each Registered Note shall expressly so
provide). Any assignment or sale of all or part of such Registered Loan (and the
Registered Note, if any, evidencing the same) may be effected only by
registration of such assignment or sale on the Register, together with the
surrender of the Registered Note, if any, evidencing the same duly endorsed by
(or accompanied by a written instrument of assignment or sale duly executed by)
the holder of such Registered Note, whereupon, at the request of the designated
assignee(s) or transferee(s), one or more new Registered Notes in the same
aggregate principal amount shall be issued to the designated assignee(s) or
transferee(s). Prior to the registration of assignment or sale of any Registered
Loan (and the Registered Note, if any evidencing the same), Borrower shall treat
the Person in whose name such Registered Loan (and the Registered Note, if any,
evidencing the same) is registered as the owner thereof for the purpose of
receiving all payments thereon and for all other purposes, notwithstanding
notice to the contrary. In the case of an assignment or delegation covered by
SECTION 14.1(a)(y), the assigning Lender shall maintain a comparable Register on
behalf of Borrower.
(i) In the event that a Lender sells participations in the
Registered Loan, such Lender shall maintain a register on which it enters the
name of all participants in the Registered Loans held by it (the "PARTICIPANT
REGISTER"). A Registered Loan (and the Registered Note, if any, evidencing the
same) may be participated in whole or in part only by registration of such
participation on the Participant Register (and each Registered Note shall
expressly so provide). Any participation of such Registered Loan (and the
Registered Note, if any, evidencing the same) may be effected only by the
registration of such participation on the Participant Register.
14.2 SUCCESSORS. This Agreement shall bind and inure to the benefit of
the respective successors and assigns of each of the parties hereto; PROVIDED,
HOWEVER, that Borrower may not assign this Agreement or any rights or duties
hereunder without the Lenders' prior written consent and any prohibited
assignment shall be absolutely void AB INITIO. No consent to assignment by the
Lenders shall release Borrower from its Obligations. A Lender may assign this
Agreement and the other Loan Documents and its rights and duties hereunder and
thereunder pursuant to SECTION 14.1 hereof and, except as expressly required
pursuant to SECTION 14.1 hereof, no consent or approval by Borrower is required
in connection with any such assignment.
15. AMENDMENTS; WAIVERS.
15.1 REVOLVING LOAN LENDERS' AMENDMENTS AND WAIVERS. No amendment or
waiver of any provision of this Agreement or any other Loan Document, and no
consent with respect to any departure by Borrower therefrom, shall be effective
unless the same shall be in writing and signed by the Required Lenders (or by
Agent at the written request of the Required Lenders) and Borrower and then any
such waiver or consent shall be effective only in the specific
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instance and for the specific purpose for which given; PROVIDED, HOWEVER, that
no such waiver, amendment, or consent shall, unless in writing and signed by all
of the Revolving Loan Lenders affected thereby and Borrower, do any of the
following:
(a) increase or extend any Revolver Commitment of any Revolving
Loan Lender,
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees, or other
amounts due hereunder or under any other Loan Document,
(c) reduce the principal of, or the rate of interest on, any
loan or other extension of credit hereunder, or reduce any fees or other amounts
payable hereunder or under any other Loan Document,
(d) change the percentage of the Revolver Commitments that is
required to take any action hereunder,
(e) amend, modify or waive this SECTION 15 or any provision of
the Agreement providing for consent or other action by all Revolving Loan
Lenders,
(f) release Collateral other than as permitted by SECTION 16.12,
(g) change the definition of "Required Lenders" or "Pro Rata
Share",
(h) contractually subordinate any of the Agent's Liens,
(i) release Borrower or any Guarantor from any obligation for
the payment of money,
(j) change, modify or waive SECTION 2.1(b) or change, modify or
waive the definition of "Borrowing Base", "Basis Differential", "NYMEX Strip
Price", "PV-10" "Maximum Revolver Amount", "Maximum Senior Debt", or "Related
Indebtedness" or
(k) amend, modify or waive any of the provisions of SECTIONS
2.1(a), 2.3(e), 2.3(i), 2.4(b), or 16 (or change any definition of a term used
in such Section in a manner adverse to any Revolving Loan Lender).
and, PROVIDED FURTHER, HOWEVER, that no amendment, waiver or consent
shall, unless in writing and signed by Agent, Issuing Lender, or Swing Lender,
as applicable, affect the rights or duties of Agent, Issuing Lender, or Swing
Lender, as applicable, under this Agreement or any other Loan Document. The
foregoing notwithstanding, any amendment, modification, waiver, consent,
termination, or release of, or with respect to, any provision of this Agreement
or any other Loan Document that relates only to the relationship of the Lender
Group among themselves, and that does not affect the rights or obligations of
Borrower, shall not require consent by or the agreement of Borrower.
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15.2 TERM LOAN LENDERS' AMENDMENTS AND WAIVERS. No waiver or amendment
of, or consent to any departure from, any of the following provisions nor any
act to do any of the following set forth in this SECTION 15.2 by Borrower, shall
be effective unless the same shall be in writing and signed by all of the Term
Loan Lenders affected thereby, the Revolving Loan Lenders and Borrower, and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given:
(a) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment to the Term Loan Lenders of principal,
interest, fees, or other amounts due hereunder or under any other Loan Document,
to the extent any postponement or delay would extend the payment date thereof to
a date that is the earlier of (i) after May 1, 2007 and (ii) one Business Day
after all Revolving Loan Obligations have been paid in full, all Letters of
Credit have been terminated or cash collateralized and all Revolver Commitments
have been terminated,
(b) reduce the principal of, or the rate of interest on, the
Term Loan, or reduce any fees or other amounts payable to the Term Loan Lenders
hereunder,
(c) amend, modify or waive SECTION 2.4(b) to eliminate from such
section the requirement to pay the Term Loan Lenders after all Revolving Loan
Obligations have been paid in full, all Letters of Credit have been terminated
or cash collateralized and all Revolver Commitments have been terminated,
(d) amend, modify or waive SECTION 2.2, this SECTION 15.2 or
SECTION 15.3 in an manner adverse to the Term Loan Lenders,
(e) amend, modify or waive (i) SECTION 16.1 to release Agent
from serving as the agent to the Term Loan Lenders unless Agent is released from
serving as the agent to both the Revolving Loan Lenders and the Term Loan
Lenders (it being understood that this provision shall not limit or restrict any
Person serving as Agent from resigning or be replaced as Agent pursuant to the
terms of SECTION 16.9), or (ii) SECTION 16.9(b) to permit the appointment of a
successor agent by or any Person other than the Term Loan Lenders,
(f) release Borrower or any Guarantor from any obligation for
the payment of money to the Term Loan Lenders, PROVIDED, that, notwithstanding
the foregoing, Agent and the Required Lenders may release any Guarantor from its
obligations to guarantee in connection with any sale or other disposition of the
Stock of, or all or substantially all of the assets of, any Guarantor, whether
by merger, consolidation, amalgamation or otherwise, whether or not an Event of
Default has occurred or is continuing to the extent such release is applicable
to both the Revolving Loan Obligations and the Term Loan Obligations,
(g) change, modify or waive (i) the definition of "Term Loan",
"Term Loan Amount", "Term Loan Commitment", "Term Loan Lender" Term Loan
Obligation", "Maximum Senior Debt", or "Related Indebtedness" in a manner
adverse to the Term Loan Lenders, or (ii) clause (c) or (d) of the definition of
"Pro Rata Share",
(h) change, modify or waive the definition of "Maximum Revolver
Amount" to the extent such change, modification or waiver would permit the
principal amount of
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the Indebtedness under the Loan Documents (excluding Indebtedness constituting
Bank Product Obligations and Related Indebtedness) to be in excess of the
Maximum Senior Debt less the outstanding Term Loan.
Except as otherwise provided in this SECTION 15.2, the Required
Lenders or the Revolving Loan Lenders, as applicable, may change, modify or
waive any term or provision of the Loan Documents without the consent of the
Term Loan Lenders, and the effectiveness of any such amendment, modification, or
waiver shall not require any action by any Term Loan Lender.
15.3 OTHER TERM LOAN LENDER PROVISIONS. (a) If any Loan Party shall
become subject to an Insolvency Proceeding, and if Agent and the Required
Lenders shall desire to permit the use of cash collateral or to provide
post-petition financing to such Loan Party, the Term Loan Lenders agrees as
follows: (i) adequate notice to the Term Loan Lenders shall be deemed to have
been provided for such use of cash collateral or post-petition financing if the
Term Loan Lenders receive notice thereof at least three (3) Business Days prior
to any hearing on a request to approve such use of cash collateral or
post-petition financing, and (ii) no objection will be raised by the Term Loan
Lenders to any such use of cash collateral or such post-petition financing by
Agent and the Required Lenders, provided that (x) the Term Loan Lenders are
granted the same Liens on the post-petition Collateral that may be granted to or
for the benefit of Agent and the Revolving Loan Lenders, junior and subordinated
only to the Liens of Agent and the Revolving Loan Lenders therein and (y) the
aggregate principal amount of pre-petition secured indebtedness together with
the aggregate principal amount of financing in such Insolvency Proceeding will
not exceed the Maximum Senior Debt (which shall exclude any Indebtedness
constituting Bank Product Obligations or Related Indebtedness) less the
outstanding Term Loan. No objection will be raised by the Term Loan Lenders to
Agent's motion for relief from the automatic stay in any proceeding under the
Bankruptcy Code to foreclose on and sell the Collateral.
(b) During any Insolvency Proceeding involving any Loan Party,
the Revolving Loan Lenders shall be entitled to vote the claim of the Term Loan
Lenders with respect to any matters arising from or relating to the Collateral
(including permitting the use of cash collateral, debtor-in-possession financing
or post-petition financing), including, without limitation, enforcing the Liens
on the Collateral, in each case as the Required Lenders may reasonably deem
necessary or advisable for the exercise or enforcement of any of the rights or
interests of the Revolving Loan Lenders hereunder, or the treatment of any
Collateral in any proposed plan of reorganization so long as the rights of the
Term Loan Lenders in the Collateral shall be the same as they existed before the
commencement of such Insolvency Proceeding.
(c) Any waiver, amendment or consent described in SECTION 15.1
and SECTION 15.2 shall apply equally to all of the Term Loan Lenders and shall
be binding upon them, upon each future Term Loan Lender, whether or not any
promissory note evidencing a Term Loan issued to any Term Loan Lender shall have
been marked to indicate such waiver, amendment or consent. No such amendment or
waiver shall extend to or affect any obligation not expressly waived, amended or
consented to or impair any right consequent thereon.
(d) Notwithstanding anything to the contrary, if there is an
amendment, restatement, modification, renewal, refunding, refinancing or other
replacement of the Revolving Loan Obligations or this Agreement and the other
Loan Documents, such
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amendment, restatement, modification, renewal, refunding, refinancing or other
replacement shall not constitute a satisfaction or payment in full of the
Revolving Loan Obligations hereunder or a termination of this Agreement and the
other Loan Documents and the Revolving Loan Obligations shall be deemed to
remain outstanding and each of the Term Loan Lenders agree to enter into with
any successor Revolving Loan Lender that amends, restates, modifies, renews,
refunds, refinances or otherwise replaces the Revolving Loan Obligations, an
intercreditor and subordination agreement or arrangement on the same terms and
with the same priorities set forth in this Agreement.
(e) Halcyon Fund, L.P. ("HALCYON") and each of its Affiliates
(collectively, the "HALCYON LENDERS") that is a Term Loan Lender hereby
irrevocably appoints Halcyon as its representative agent (the "Halcyon
Representative") which appointment shall remain in full force and effect so long
as such Person is a Term Loan Lender. Each Halcyon Lender hereby irrevocably
appoints and authorizes the Halcyon Representative to provide Agent, the
Revolving Loan Lenders or the Loan Parties with all notices or other
communications under the Loan Documents, and to receive from Agent, the
Revolving Loan Lenders or the Loan Parties all notices and instructions and
payments under the Loan Documents. Each of Agent, the Revolving Loan Lenders and
the Loan Parties may rely on any notice or instruction of the Halcyon
Representative related to any Halcyon Lender or any other action taken by the
Halcyon Representative on behalf of any Halcyon Lender. Each Halcyon Lender
agrees that Halcyon shall incur no liability to any other Halcyon Lender
relating to the performance of its duties hereunder. Each of the Halcyon Lenders
agree that Halcyon Lenders who hold at least 51% of the aggregate principal
amount of Term Loans held by all Halcyon Lenders may appoint another Halcyon
Lender to serve as the Halcyon Representative. Each Halcyon Lender consents to
the taking by the Halcyon Representative of any and all actions and the making
of any decisions required or permitted to be made or taken by it and agrees to
be bound by all actions taken by the Halcyon Representative taken in its
capacity as its representative. Borrower hereby indemnifies the Halcyon
Representative in its capacity as such and releases and holds harmless the
Halcyon Representative from and against any and all losses that the Halcyon
Representative may incur as a result of its acting as the Halcyon Representative
under any Loan Document or in connection with the performance of any of its
duties hereunder or under any related agreement to the fullest extent permitted
by law, except to the extent that such losses are caused by actions of the
Halcyon Representative that were taken in bad faith, in a grossly negligent
manner or due to willful misconduct.
15.4 REPLACEMENT OF HOLDOUT LENDER.
(a) If any action to be taken by the Lender Group or Agent
hereunder requires the unanimous consent, authorization, or agreement of all
Revolving Loan Lenders, and a Revolving Loan Lender ("HOLDOUT LENDER") fails to
give its consent, authorization, or agreement, then Agent, upon at least 5
Business Days' prior irrevocable notice to the Holdout Lender, may permanently
replace the Holdout Lender with one or more substitute Revolving Loan Lenders
(each, a "REPLACEMENT LENDER"), and the Holdout Lender shall have no right to
refuse to be replaced hereunder. Such notice to replace the Holdout Lender shall
specify an effective date for such replacement, which date shall not be later
than 15 Business Days after the date such notice is given.
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(b) Prior to the effective date of such replacement, the Holdout
Lender and each Replacement Lender shall execute and deliver an Assignment and
Acceptance Agreement, subject only to the Holdout Lender being repaid its share
of the outstanding Revolving Loan Obligations (including an assumption of its
Pro Rata Share of the Risk Participation Liability) without any premium or
penalty of any kind whatsoever. If the Holdout Lender shall refuse or fail to
execute and deliver any such Assignment and Acceptance Agreement prior to the
effective date of such replacement, the Holdout Lender shall be deemed to have
executed and delivered such Assignment and Acceptance Agreement. The replacement
of any Holdout Lender shall be made in accordance with the terms of SECTION
14.1. Until such time as the Replacement Lenders shall have acquired all of the
Revolving Loan Obligations, the Revolver Commitments, and the other rights and
obligations of the Holdout Lender hereunder and under the other Loan Documents,
the Holdout Lender shall remain obligated to make the Holdout Lender's Pro Rata
Share of Advances and to purchased a participation in each Letter of Credit, in
an amount equal to its Pro Rata Share of the Risk Participation Liability of
such Letter of Credit.
15.5 NO WAIVERS; CUMULATIVE REMEDIES. No failure by Agent or any
Lender to exercise any right, remedy, or option under this Agreement or any
other Loan Document, or delay by Agent or any Lender in exercising the same,
will operate as a waiver thereof. No waiver by Agent or any Lender will be
effective unless it is in writing, and then only to the extent specifically
stated. No waiver by Agent or any Lender on any occasion shall affect or
diminish Agent's and each Lender's rights thereafter to require strict
performance by Borrower of any provision of this Agreement. Agent's and each
Lender's rights under this Agreement and the other Loan Documents will be
cumulative and not exclusive of any other right or remedy that Agent or any
Lender may have.
16. AGENT; THE LENDER GROUP.
16.1 APPOINTMENT AND AUTHORIZATION OF AGENT. Each Lender hereby
designates and appoints Foothill as its representative under this Agreement and
the other Loan Documents and each Lender hereby irrevocably authorizes Agent to
take such action on its behalf under the provisions of this Agreement and each
other Loan Document and to exercise such powers and perform such duties as are
expressly delegated to Agent by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto. Agent
agrees to act as such on the express conditions contained in this SECTION 16.
Except as otherwise specifically provided in SECTIONS 16.12 and 16.17, the
provisions of this SECTION 16 are solely for the benefit of Agent, and the
Lenders, and Borrower shall have no rights as a third party beneficiary of any
of the provisions contained herein. Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only, that Foothill
is merely the representative of the Lenders, and only has the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking
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any actions that Agent expressly is entitled to take or assert under or pursuant
to this Agreement and the other Loan Documents. Without limiting the generality
of the foregoing, or of any other provision of the Loan Documents that provides
rights or powers to Agent, Lenders agree that Agent shall have the right to
exercise the following powers as long as this Agreement remains in effect: (a)
maintain, in accordance with its customary business practices, ledgers and
records reflecting the status of the Obligations, the Collateral, the
Collections, and related matters, (b) execute or file any and all financing or
similar statements or notices, amendments, renewals, supplements, documents,
instruments, proofs of claim, notices and other written agreements with respect
to the Loan Documents, (c) make Advances, for itself or on behalf of Revolving
Loan Lenders as provided in the Loan Documents, (d) exclusively receive, apply,
and distribute the Collections as provided in the Loan Documents, (e) open and
maintain such bank accounts and cash management arrangements as Agent deems
necessary and appropriate in accordance with the Loan Documents for the
foregoing purposes with respect to the Collateral and the Collections, (f)
perform, exercise, and enforce any and all other rights and remedies of the
Lender Group with respect to Borrower, the Obligations, the Collateral, the
Collections, or otherwise related to any of same as provided in the Loan
Documents, (g) incur and pay such Lender Group Expenses as Agent may deem
necessary or appropriate for the performance and fulfillment of its functions
and powers pursuant to the Loan Documents, and (h) enter into and perform its
duties under the Intercreditor Agreement.
16.2 DELEGATION OF DUTIES. Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects as
long as such selection was made without gross negligence or willful misconduct.
16.3 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by Borrower or any Subsidiary or
Affiliate of Borrower, or any officer or director thereof, contained in this
Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the Books or properties of Borrower or the books or
records or properties of any of Borrower's Subsidiaries or Affiliates.
16.4 RELIANCE BY AGENT. Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent, or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to Borrower
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or counsel to any Lender), independent accountants and other experts selected by
Agent. Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless Agent shall first receive
such advice or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
16.5 NOTICE OF DEFAULT OR EVENT OF DEFAULT. Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest,
fees, and expenses required to be paid to Agent for the account of the Lenders,
except with respect to Defaults and Events of Default of which Agent has actual
knowledge, unless Agent shall have received written notice from a Lender or
Borrower referring to this Agreement, describing such Default or Event of
Default, and stating that such notice is a "notice of default." Agent promptly
will notify the Lenders of its receipt of any such notice or of any Event of
Default of which Agent has actual knowledge. If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. Each Lender shall be solely
responsible for giving any notices to its Participants, if any. Subject to
SECTION 16.4, Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Required Lenders in accordance with
SECTION 9; PROVIDED, HOWEVER, that unless and until Agent has received any such
request, 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.
16.6 CREDIT DECISION. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by Agent hereinafter taken, including any review of the affairs of Borrower
and its Subsidiaries or Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to Borrower. Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports, and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of
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Borrower and any other Person party to a Loan Document that may come into the
possession of any of the Agent-Related Persons.
16.7 COSTS AND EXPENSES; INDEMNIFICATION. Agent may incur and pay
Lender Group Expenses to the extent Agent reasonably deems necessary or
appropriate for the performance and fulfillment of its functions, powers, and
obligations pursuant to the Loan Documents, including court costs, reasonable
attorneys fees and expenses, costs of collection by outside collection agencies
and auctioneer fees and costs of security guards or insurance premiums paid to
maintain the Collateral, whether or not Borrower is obligated to reimburse Agent
or Lenders for such expenses pursuant to the Loan Agreement or otherwise. Agent
is authorized and directed to deduct and retain sufficient amounts from
Collections received by Agent to reimburse Agent for such out-of-pocket costs
and expenses prior to the distribution of any amounts to Lenders. In the event
Agent is not reimbursed for such costs and expenses from Collections received by
Agent, each Lender hereby agrees that it is and shall be obligated to pay to or
reimburse Agent for the amount of such Lender's Pro Rata Share thereof. Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by
or on behalf of Borrower and without limiting the obligation of Borrower to do
so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; PROVIDED, HOWEVER, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct nor shall any Lender be liable for the obligations of any Defaulting
Lender in failing to make an Advance or other extension of credit hereunder.
Without limitation of the foregoing, each Lender shall reimburse Agent upon
demand for such Lender's ratable share of any costs or out-of-pocket expenses
(including attorneys fees and expenses) incurred by Agent in connection with the
preparation, execution, delivery, administration, modification, amendment, or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that Agent is not reimbursed for such expenses by or on behalf of
Borrower. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of Agent.
16.8 AGENT IN INDIVIDUAL CAPACITY. Foothill and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in, and generally engage in any kind of banking,
lending, trust, financial advisory, underwriting, or other business with
Borrower and its Subsidiaries and Affiliates and any other Person (other than
the Lender Group) party to any Loan Documents as though Foothill were not Agent
hereunder, and, in each case, without notice to or consent of the other members
of the Lender Group. The other members of the Lender Group acknowledge that,
pursuant to such activities, Foothill or its Affiliates may receive information
regarding Borrower or its Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver Agent will use its reasonable best efforts to obtain),
Agent shall not be under any obligation to provide such information to them. The
terms "Lender" and "Lenders" include Foothill in its individual capacity.
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16.9 SUCCESSOR AGENT. (a) Agent may resign as Agent upon 45 days'
notice to the Revolving Loan Lenders. If Agent resigns under this Agreement, the
Required Lenders shall appoint a successor Agent for the Lenders. If no
successor Agent is appointed prior to the effective date of the resignation of
Agent, Agent may appoint, after consulting with the Revolving Loan Lenders, a
successor Agent. If Agent has materially breached or failed to perform any
material provision of this Agreement or of applicable law, the Required Lenders
may agree in writing to remove and replace Agent with a successor Agent from
among the Revolving Loan Lenders. (b) After all of the Revolving Loan
Obligations have been paid in full, all Letters of Credit have either been
terminated or cash collateralized and the Revolver Commitments have been
terminated, Agent agrees to resign and, immediately upon such resignation, the
Term Loan Lenders (or their designee) shall automatically and without further
action be appointed the successor Agent. (c) Nothing contained in this SECTION
16.9 shall be construed to limit or eliminate Agent's right to resign as an
Agent in accordance with this SECTION 16.9. In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor Agent
shall succeed to all the rights, powers, and duties of the retiring Agent and
the term "Agent" shall mean such successor Agent and the retiring Agent's
appointment, powers, and duties as Agent shall be terminated. After any retiring
Agent's resignation hereunder as Agent, the provisions of this SECTION 16 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor Agent has accepted
appointment as Agent by the date which is 45 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Revolving Loan Lenders shall perform all of
the duties of Agent hereunder until such time, if any, as the Revolving Loan
Lenders appoint a successor Agent as provided for above.
16.10 LENDER IN INDIVIDUAL CAPACITY. Any Lender and its respective
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with Borrower
and its Subsidiaries and Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents as though such Lender were not a Lender
hereunder without notice to or consent of the other members of the Lender Group.
The other members of the Lender Group acknowledge that, pursuant to such
activities, such Lender and its respective Affiliates may receive information
regarding Borrower or its Affiliates and any other Person (other than the Lender
Group) party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrower or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such Lender will use its reasonable best efforts to
obtain), such Lender not shall be under any obligation to provide such
information to them. With respect to the Swing Loans and Agent Advances, Swing
Lender shall have the same rights and powers under this Agreement as any other
Lender and may exercise the same as though it were not the sub-agent of Agent.
16.11 WITHHOLDING TAXES.
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:
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(i) if such Lender claims an exemption from withholding
tax pursuant to its portfolio interest exception, (a) a statement of the
Lender, signed under penalty of perjury, that it is not a (I) a "bank" as
described in Section 881(c)(3)(A) of the IRC, (II) a 10% shareholder
(within the meaning of Section 881(c)(3)(B) of the IRC), or (III) a
controlled foreign corporation described in Section 881(c)(3)(C) of the
IRC, and (B) a properly completed IRS Form W-8BEN, before the first payment
of any interest under this Agreement and at any other time reasonably
requested by Agent or Borrower;
(ii) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, properly
completed IRS Form W-8BEN before the first payment of any interest under
this Agreement and at any other time reasonably requested by Agent or
Borrower;
(iii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form W-8ECI
before the first payment of any interest is due under this Agreement and at
any other time reasonably requested by Agent or Borrower;
(iv) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form W-8BEN
and such Lender sells, assigns, grants a participation in, or otherwise
transfers all or part of the Obligations of Borrower to such Lender, such Lender
agrees to notify Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of Borrower to such Lender. To the extent of
such percentage amount, Agent will treat such Lender's IRS Form W-8BEN as no
longer valid.
(c) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(d) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that Agent did not properly
withhold tax from amounts paid to or for the account of any Lender (because the
appropriate form was not delivered, was not properly executed, or because such
Lender failed to notify Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Lender shall indemnify and hold Agent harmless for all amounts
paid, directly or indirectly, by Agent as tax or otherwise, including penalties
and interest, and
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including any taxes imposed by any jurisdiction on the amounts payable to Agent
under this Section, together with all costs and expenses (including attorneys
fees and expenses). The obligation of the Lenders under this subsection shall
survive the payment of all Obligations and the resignation or replacement of
Agent.
(e) All payments made by Borrower hereunder or under any note
will be made without setoff, counterclaim, or other defense, except as required
by applicable law other than for Taxes (as defined below). All such payments
will be made free and clear of, and without deduction or withholding for, any
present or future taxes, levies, imposts, duties, fees, assessments or other
charges of whatever nature now or hereafter imposed by any jurisdiction (other
than the United States) or by any political subdivision or taxing authority
thereof or therein (other than of the United States) with respect to such
payments (but excluding, any tax imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein (i) measured by or based on
the net income or net profits of a Lender, or (ii) to the extent that such tax
results from a change in the circumstances of the Lender, including a change in
the residence, place of organization, or principal place of business of the
Lender, or a change in the branch or lending office of the Lender participating
in the transactions set forth herein) and all interest, penalties or similar
liabilities with respect thereto (all such non-excluded taxes, levies, imposts,
duties, fees, assessments or other charges being referred to collectively as
"TAXES"). If any Taxes are so levied or imposed, Borrower agrees to pay the full
amount of such Taxes, and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement or under any note,
including any amount paid pursuant to this SECTION 16.11(e) after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; PROVIDED, HOWEVER, that Borrower shall not be required to
increase any such amounts payable to Agent or any Lender (i) that is not
organized under the laws of the United States, if such Person fails to comply
with the other requirements of this SECTION 16.11, or (ii) if the increase in
such amount payable results from Agent's or such Lender's own willful misconduct
or gross negligence. Borrower will furnish to Agent as promptly as possible
after the date the payment of any Taxes is due pursuant to applicable law
certified copies of tax receipts evidencing such payment by Borrower.
16.12 COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, at its
option and in its sole discretion, to release any Lien on any Collateral (i)
upon the termination of the Commitments and payment and satisfaction in full by
Borrower of all Obligations, (ii) constituting property being sold or disposed
of if a release is required or desirable in connection therewith and if Borrower
certifies to Agent that the sale or disposition is permitted under SECTION 7.4
of this Agreement or the other Loan Documents (and Agent may rely conclusively
on any such certificate, without further inquiry), (iii) constituting property
in which Borrower owned no interest at the time the security interest was
granted or at any time thereafter, or (iv) constituting property leased to
Borrower under a lease that has expired or is terminated in a transaction
permitted under this Agreement. Notwithstanding the foregoing, so long no Event
of Default shall have occurred and be continuing, Agent shall, for the benefit
and at the request of Borrower, release its Lien on Collateral in a transaction
constituting a Permitted Disposition. Except as provided above, Agent will not
execute and deliver a release of any Lien on any Collateral without the prior
written authorization of (y) if the release is of all or a material
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portion of the Collateral, all of the Revolving Loan Lenders or (z) otherwise,
the Required Lenders. Upon request by Agent or Borrower at any time, the Lenders
will confirm in writing Agent's authority to release any such Liens on
particular types or items of Collateral pursuant to this SECTION 16.12;
PROVIDED, HOWEVER, that (1) Agent shall not be required to execute any document
necessary to evidence such release on terms that, in Agent's opinion, would
expose Agent to liability or create any obligation or entail any consequence
other than the release of such Lien without recourse, representation, or
warranty, and (2) such release shall not in any manner discharge, affect, or
impair the Obligations or any Liens (other than those expressly being released)
upon (or obligations of Borrower in respect of) all interests retained by
Borrower, including, the proceeds of any sale, all of which shall continue to
constitute part of the Collateral. To the maximum extent permitted by law, the
Term Loan Lenders waive any right to assert that any release, sale, transfer or
other disposition of any Collateral by Agent was not made on commercially
reasonable terms.
(b) Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by Borrower or is cared
for, protected, or insured or has been encumbered, or that the Agent's Liens
have been properly or sufficiently or lawfully created, perfected, protected, or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission, or event
related thereto, subject to the terms and conditions contained herein, Agent may
act in any manner it may deem appropriate, absent Agent's gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction,
in its sole discretion given Agent's own interest in the Collateral in its
capacity as one of the Lenders and that Agent shall have no other duty or
liability whatsoever to any Lender as to any of the foregoing, except as
otherwise provided herein.
16.13 RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without the
express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the Obligations,
any amounts owing by such Lender to Borrower or any deposit accounts of Borrower
now or hereafter maintained with such Lender. Each of the Lenders further agrees
that it shall not, unless specifically requested to do so by Agent, take or
cause to be taken any action, including, the commencement of any legal or
equitable proceedings, to foreclose any Lien on, or otherwise enforce any
security interest in, any of the Collateral the purpose of which is, or could
be, to give such Lender any preference or priority against the other Lenders
with respect to the Collateral.
(b) If, at any time or times any Lender shall receive (i) by
payment, foreclosure, setoff, or otherwise, any proceeds of Collateral or any
payments with respect to the Obligations arising under, or relating to, this
Agreement or the other Loan Documents, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender's Pro Rata Share portion of
all such distributions by Agent, such Lender promptly shall (1) turn the same
over to Agent, in kind, and with such endorsements as may be required to
negotiate the same to Agent, or in
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immediately available funds, as applicable, for the account of all of the
Lenders and for application to the Obligations in accordance with the applicable
provisions of this Agreement, or (2) purchase, without recourse or warranty, an
undivided interest and participation in the Obligations owed to the other
Lenders so that such excess payment received shall be applied ratably as among
the Lenders in accordance with their Pro Rata Shares; PROVIDED, HOWEVER, that if
all or part of such excess payment received by the purchasing party is
thereafter recovered from it, those purchases of participations shall be
rescinded in whole or in part, as applicable, and the applicable portion of the
purchase price paid therefor shall be returned to such purchasing party, but
without interest except to the extent that such purchasing party is required to
pay interest in connection with the recovery of the excess payment.
16.14 AGENCY FOR PERFECTION. Agent hereby appoints each other Lender
as its agent (and each Lender hereby accepts such appointment) for the purpose
of perfecting the Agent's Liens in assets which, in accordance with Article 9 of
the Code can be perfected only by possession. Should any Lender obtain
possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent's request therefor shall deliver such Collateral to Agent or
in accordance with Agent's instructions.
16.15 PAYMENTS BY AGENT TO THE LENDERS. All payments to be made by
Agent to the Lenders shall be made by bank wire transfer or internal transfer of
immediately available funds pursuant to such wire transfer instructions as each
party may designate for itself by written notice to Agent. Concurrently with
each such payment, Agent shall identify whether such payment (or any portion
thereof) represents principal, premium, or interest of the Obligations.
16.16 CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS. Each
member of the Lender Group authorizes and directs Agent to enter into this
Agreement and the other Loan Documents relating to the Collateral, for the
benefit of the Lender Group. Each member of the Lender Group agrees that any
action taken by Agent in accordance with the terms of this Agreement or the
other Loan Documents relating to the Collateral and the exercise by Agent of its
powers set forth therein or herein, together with such other powers that are
reasonably incidental thereto, shall be binding upon all of the Lenders.
16.17 FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY;
DISCLAIMERS BY LENDERS; OTHER REPORTS AND INFORMATION. By becoming a party to
this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a "REPORT" and collectively, "REPORTS") prepared by or at the
request of Agent, and Agent shall so furnish each Lender with such Reports,
(b) expressly agrees and acknowledges that Agent does not (i)
make any representation or warranty as to the accuracy of any Report, and (ii)
shall not be liable for any information contained in any Report,
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or
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examination will inspect only specific information regarding Borrower and will
rely significantly upon the Books, as well as on representations of Borrower's
personnel,
(d) agrees, for the benefit of the Lender Group and,
notwithstanding SECTION 16.1, the Loan Parties, to keep all Reports and other
material, non-public information regarding Borrower and its Subsidiaries and
their operations, assets, and existing and contemplated business plans in a
confidential manner; it being understood and agreed by Borrower that in any
event such Lender may make disclosures (a) to counsel for and other advisors,
accountants, and auditors to such Lender, (b) reasonably required by any bona
fide potential or actual Assignee or Participant in connection with any
contemplated or actual assignment or transfer by such Lender of an interest
herein or any participation interest in such Lender's rights hereunder, (c) of
information that has become public by disclosures made by Persons other than
such Lender, its Affiliates, assignees, transferees, or Participants, or (d) as
required or requested by any court, governmental or administrative agency,
pursuant to any subpoena or other legal process, or by any law, statute,
regulation, or court order; PROVIDED, HOWEVER, that, unless prohibited by
applicable law, statute, regulation, or court order, such Lender shall notify
Borrower of any request by any court, governmental or administrative agency, or
pursuant to any subpoena or other legal process for disclosure of any such
non-public material information concurrent with, or where practicable, prior to
the disclosure thereof, and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or conclusion the indemnifying Lender may reach or draw from any Report in
connection with any loans or other credit accommodations that the indemnifying
Lender has made or may make to Borrower, or the indemnifying Lender's
participation in, or the indemnifying Lender's purchase of, a loan or loans of
Borrower, and (ii) to pay and protect, and indemnify, defend and hold Agent, and
any such other Lender preparing a Report harmless from and against, the claims,
actions, proceedings, damages, costs, expenses, and other amounts (including,
attorneys fees and costs) incurred by Agent and any such other Lender preparing
a Report as the direct or indirect result of any third parties who might obtain
all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) any Revolving Loan Lender may from
time to time request of Agent in writing that Agent provide to such Revolving
Loan Lender a copy of any report or document provided by Borrower to Agent that
has not been contemporaneously provided by Borrower to such Revolving Loan
Lender, and, upon receipt of such request, Agent promptly shall provide a copy
of same to such Revolving Loan Lender, (y) to the extent that Agent is entitled,
under any provision of the Loan Documents, to request additional reports or
information from Borrower, any Revolving Loan Lender may, from time to time,
reasonably request Agent to exercise such right as specified in such Revolving
Loan Lender's notice to Agent, whereupon Agent promptly shall request of
Borrower the additional reports or information reasonably specified by such
Revolving Loan Lender, and, upon receipt thereof from Borrower, Agent promptly
shall provide a copy of same to such Revolving Loan Lender, and (z) any time
that Agent renders to Borrower a statement regarding the Loan Account, Agent
shall send a copy of such statement to each Revolving Loan Lender.
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16.18 SEVERAL OBLIGATIONS; NO LIABILITY. Notwithstanding that certain
of the Loan Documents now or hereafter may have been or will be executed only by
or in favor of Agent in its capacity as such, and not by or in favor of the
Lenders, any and all obligations on the part of the Lenders to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their respective
Commitments, to make an amount of such credit not to exceed, in principal
amount, at any one time outstanding, the amount of their respective Commitments.
Nothing contained herein shall confer upon any Lender any interest in, or
subject any Lender to any liability for, or in respect of, the business, assets,
profits, losses, or liabilities of any other Lender. Each Lender shall be solely
responsible for notifying its Participants of any matters relating to the Loan
Documents to the extent any such notice may be required, and no Lender shall
have any obligation, duty, or liability to any Participant of any other Lender.
Except as provided in SECTION 16.7, no member of the Lender Group shall have any
liability for the acts or any other member of the Lender Group. No Lender shall
be responsible to Borrower or any other Person for any failure by any other
Lender to fulfill its obligations to make credit available hereunder, nor to
advance for it or on its behalf in connection with its Commitment, nor to take
any other action on its behalf hereunder or in connection with the financing
contemplated herein.
17. GENERAL PROVISIONS.
17.1 EFFECTIVENESS. This Agreement shall be binding and deemed
effective when executed by Borrower, Agent, and each Lender whose signature is
provided for on the signature pages hereof.
17.2 SECTION HEADINGS. Headings and numbers have been set forth herein
for convenience only. Unless the contrary is compelled by the context,
everything contained in each Section applies equally to this entire Agreement.
17.3 INTERPRETATION. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed against the Lender Group or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
17.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
17.5 AMENDMENTS IN WRITING. This Agreement only can be amended by a
writing signed by Agent (on behalf of the requisite Lenders) and Borrower.
17.6 COUNTERPARTS; TELEFACSIMILE EXECUTION. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original, and all of which, when taken together, shall constitute but one and
the same Agreement. Delivery of an executed counterpart of this Agreement by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Agreement. Any party delivering an executed counterpart of
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this Agreement by telefacsimile also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Loan Document mutatis
mutandis.
17.7 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. If the incurrence or
payment of the Obligations by Borrower or Guarantor or the transfer to the
Lender Group of any property should for any reason subsequently be declared to
be void or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to fraudulent
conveyances, preferences, or other voidable or recoverable payments of money or
transfers of property (collectively, a "VOIDABLE TRANSFER"), and if the Lender
Group is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that the Lender Group is
required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrower or Guarantor automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
17.8 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
18. GUARANTY
18.1 GUARANTY; LIMITATION OF LIABILITY. Each Guarantor (other than
Newco Canada) hereby, unconditionally and irrevocably, guarantees the punctual
payment when due, whether at stated maturity, by acceleration or otherwise, of
all Obligations of Borrower now or hereafter existing under any Loan Document,
whether for principal, interest (including, without limitation, all interest
that accrues after the commencement of any case, proceeding or other action
relating to bankruptcy, insolvency or reorganization of Borrower), fees,
expenses or otherwise (such obligations, to the extent not paid by Borrower,
being the "GUARANTEED OBLIGATIONS"), and agrees to pay any and all expenses
(including reasonable counsel fees and expenses) incurred by the Lender Group in
enforcing any rights under the guaranty set forth in this SECTION 18. Without
limiting the generality of the foregoing, each such Guarantor's liability shall
extend to all amounts that constitute part of the Guaranteed Obligations and
would be owed by Borrower to any member of the Lender Group under any Loan
Document but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
Borrower.
18.2 GUARANTY ABSOLUTE. Each Guarantor (other than Newco Canada)
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the Loan Documents, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of Agent or the Lenders with respect thereto. The obligations of such
Guarantor under this SECTION 18 are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against such
Guarantor to enforce such obligations, irrespective of whether any action is
brought against
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Borrower or whether the Borrower is joined in any such action or actions. The
liability of such Guarantor under this SECTION 18 shall be irrevocable, absolute
and unconditional irrespective of, and such Guarantor hereby irrevocably waives
any defenses it may now or hereafter have in any way relating to, any or all of
the following:
(a) any lack of validity or enforceability of any Loan Document
or any agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Guaranteed Obligations, or any other
amendment or waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Guaranteed Obligations
resulting from the extension of additional credit to Borrower or otherwise;
(c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;
(d) any change, restructuring or termination of the corporate,
limited liability company or partnership structure or existence of Borrower; or
(e) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
Agent or the Lenders that might otherwise constitute a defense available to, or
a discharge of, Guarantor, Borrower or any other guarantor or surety.
This SECTION 18 shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Guaranteed Obligations
is rescinded or must otherwise be returned by a Lender or any other Person upon
the insolvency, bankruptcy or reorganization of Borrower or otherwise, all as
though such payment had not been made.
18.3 WAIVER. Each Guarantor (other than Newco Canada) hereby waives
promptness, diligence, notice of acceptance and any other notice with respect to
any of the Guaranteed Obligations and this SECTION 18 and any requirement that
Agent or the Lenders exhaust any right or take any action against Borrower or
any other Person or any Collateral. Each Guarantor (other than Newco Canada)
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated herein and that the waiver set forth in this
SECTION 18.3 is knowingly made in contemplation of such benefits. Each Guarantor
(other than Newco Canada) hereby waives any right to revoke this SECTION 18, and
acknowledges that this SECTION 18 is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.
18.4 CONTINUING GUARANTY; ASSIGNMENTS. This SECTION 18 is a continuing
guaranty and shall (a) remain in full force and effect until the later of (i)
the cash payment in full of the Guaranteed Obligations (other than
indemnification obligations as to which no claim has been made) and all other
amounts payable under this SECTION 18 and (ii) the Maturity Date, (b) be binding
upon each Guarantor (other than Newco Canada), its successors and assigns and
(c) inure to the benefit of and be enforceable by Agent and the Lenders and
their successors, pledgees,
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transferees and assigns. Without limiting the generality of the foregoing clause
(c), any Lender may pledge, assign or otherwise transfer all or any portion of
its rights and obligations under this Agreement (including, without limitation,
all or any portion of its Revolver Commitments owing to it) to any other Person,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted such Lender herein or otherwise, in each case as
provided in SECTION 14.1.
18.5 SUBROGATION. Each Guarantor (other than Newco Canada) will not
exercise any rights that it may now or hereafter acquire against Borrower or any
other insider guarantor that arise from the existence, payment, performance or
enforcement of such Guarantor's obligations under this SECTION 18, including,
without limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any claim or
remedy of Agent and the Lenders against Borrower or any other insider guarantor
or any collateral, whether or not such claim, remedy or right arises in equity
or under contract, statute or common law, including, without limitation, the
right to take or receive from Borrower or any other insider guarantor, directly
or indirectly, in cash or other property or by set-off or in any other manner,
payment or security solely on account of such claim, remedy or right, unless and
until all of the Guaranteed Obligations and all other amounts payable under this
SECTION 18 shall have been paid in full in cash and the Maturity Date or earlier
termination of this Agreement shall have occurred. If any amount shall be paid
to each Guarantor (other than Newco Canada) in violation of the immediately
preceding sentence at any time prior to the later of the payment in full in cash
of the Guaranteed Obligations and all other amounts payable under this SECTION
18 and the earlier of the Maturity Date and the early termination of this
Agreement, such amount shall be held in trust for the benefit of Agent and the
Lenders and shall forthwith be paid to Agent and the Lenders to be credited and
applied to the Guaranteed Obligations and all other amounts payable under this
SECTION 18, whether matured or unmatured, in accordance with the terms of this
Agreement, or to be held as collateral for any Guaranteed Obligations or other
amounts payable under this SECTION 18 thereafter arising. If (i) any Guarantor
(other than Newco Canada) shall make payment to Agent and the Lenders of all or
any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations
and all other amounts payable under this SECTION 18 shall be paid in full in
cash and (iii) the Maturity Date or earlier termination of this Agreement shall
have occurred, Agent and the Lenders will, at such Guarantor's request and
expense, execute and deliver to such Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the
transfer by subrogation to such Guarantor of an interest in the Guaranteed
Obligations resulting from such payment by such Guarantor.
[Signature page to follow.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
BORROWER:
ABRAXAS PETROLEUM CORPORATION
/s/ Robert W. Carington, Jr.
------------------------
Executive Vice President
GUARANTORS:
SANDIA OIL & GAS CORPORATION
/s/ Robert W. Carington, Jr.
------------------------
Vice President
SANDIA OPERATING CORP.
/s/ Robert W. Carington, Jr.
------------------------
Vice President
EASTSIDE COAL COMPANY, INC.
/s/ Robert W. Carington, Jr.
------------------------
Vice President
WESTERN ASSOCIATED ENERGY CORPORATION
/s/ Robert W. Carington, Jr.
------------------------
Vice President
WAMSUTTER HOLDINGS, INC.
/s/ Robert W. Carington, Jr.
------------------------
Vice President
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AGENT AND LENDERS:
FOOTHILL CAPITAL CORPORATION,
as Agent and as a Lender
/s/ Josh Easterly
-------------
Vice President
ABLECO FINANCE LLC,
as a Lender
/s/ Kevin Genda
-----------
Senior Vice President
HIGHBRIDGE/ZWIRN SPECIAL OPPORTUNITIES
FUND, L.P.,
as a Lender
By: HIGHBRIDGE/ZWIRN CAPITAL
MANAGEMENT, LLC
/s/ Daniel B. Zwirn
---------------
Managing Principal
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HALCYON FUND, L.P.
HALCYON ARBITRAGE II L.P.
HALCYON SPECIAL SITUATIONS, L.P.
HALCYON EVENT-DRIVEN STRATEGIES FUND, L.P.
GRYPHON HIDDEN VALUES 2000 LIMITED
GRYPHON HIDDEN VALUES VI L.P.
By: Halcyon Management Company LLC
as investment manager
/s/ James Pasquarelli
-----------------
Chief Financial Officer
HALCYON OFFSHORE EVENT-DRIVEN
STRATEGIES FUND
GRYPHON HIDDEN VALUES VI LIMITED
By: Halcyon Offshore Management Company LLC
as investment manager
/s/ James Pasquarelli
-----------------
Chief Financial Officer
HALCYON MAC 19 LTD
By: Halcyon Offshore Management Company LLC
as investment advisor
/s/ James Pasquarelli
-----------------
Chief Financial Officer
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TABLE OF CONTENTS
<Table>
<Caption>
Page
----
1. DEFINITIONS AND CONSTRUCTION........................................................................1
1.1 Definitions..................................................................................1
1.2 Accounting Terms............................................................................29
1.3 Code........................................................................................29
1.4 Construction................................................................................29
1.5 Schedules and Exhibits......................................................................30
2. LOAN AND TERMS OF PAYMENT..........................................................................30
2.1 Revolver Advances...........................................................................30
2.2 Term Loan...................................................................................32
2.3 Borrowing Procedures and Settlements........................................................32
2.4 Payments....................................................................................38
2.5 Overadvances................................................................................42
2.6 Interest Rates and Letter of Credit Fee: Rates, Payments, and Calculations..................42
2.7 Cash Management.............................................................................44
2.8 Crediting Payments; Float Charge............................................................46
2.9 Designated Account..........................................................................46
2.10 Maintenance of Loan Account; Statements of Obligations......................................46
2.11 Fees........................................................................................47
2.12 Letters of Credit...........................................................................47
2.13 Capital Requirements........................................................................50
2.14 Registered Notes............................................................................51
3. CONDITIONS; TERM OF AGREEMENT......................................................................51
3.1 Conditions Precedent to the Initial Extension of Credit.....................................51
3.2 Conditions Subsequent to the Initial Extension of Credit....................................56
3.3 Conditions Precedent to all Extensions of Credit............................................57
3.4 Term........................................................................................57
3.5 Effect of Termination.......................................................................57
3.6 Early Termination by Borrower...............................................................58
4. CREATION OF SECURITY INTEREST......................................................................59
4.1 Grant of Security Interest..................................................................59
4.2 Negotiable Collateral.......................................................................59
4.3 Collection of Accounts, General Intangibles, and Negotiable Collateral......................59
4.4 Delivery of Additional Documentation Required...............................................59
4.5 Power of Attorney...........................................................................60
4.6 Right to Inspect............................................................................61
4.7 Control Agreements..........................................................................61
5. REPRESENTATIONS AND WARRANTIES.....................................................................61
5.1 No Encumbrances.............................................................................62
</Table>
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<Table>
5.2 Equipment...................................................................................62
5.3 Location of Inventory and Equipment.........................................................62
5.4 Inventory Records...........................................................................62
5.5 Location of Chief Executive Office; FEIN....................................................62
5.6 Due Organization and Qualification; Subsidiaries............................................62
5.7 Due Authorization; No Conflict..............................................................63
5.8 Litigation..................................................................................64
5.9 No Material Adverse Change..................................................................64
5.10 Fraudulent Transfer.........................................................................65
5.11 Employee Benefits...........................................................................65
5.12 Environmental Condition.....................................................................65
5.13 Brokerage Fees..............................................................................65
5.14 Intellectual Property.......................................................................65
5.15 Leases......................................................................................66
5.16 DDAs........................................................................................66
5.17 Compliance with the Law.....................................................................66
5.18 Complete Disclosure.........................................................................66
5.19 Indebtedness................................................................................67
5.20 Oil and Gas Imbalances......................................................................67
5.21 Hedging Agreements..........................................................................67
5.22 Location of Real Property and Leased Premises...............................................67
5.23 New Notes Documents.........................................................................68
5.24 Material Contracts..........................................................................68
5.25 Permits, Etc................................................................................69
5.26 Employee and Labor Matters..................................................................69
5.27 Bonds and Insurance.........................................................................69
5.28 Nature of Business..........................................................................70
6. AFFIRMATIVE COVENANTS..............................................................................70
6.1 Accounting System...........................................................................70
6.2 Collateral Reporting........................................................................70
6.3 Financial Statements, Reports, Certificates.................................................72
6.4 Guarantor Reports...........................................................................75
6.5 Maintenance of Properties...................................................................75
6.6 Taxes.......................................................................................76
6.7 Insurance...................................................................................76
6.8 Location of Inventory and Equipment.........................................................77
6.9 Compliance with Laws........................................................................78
6.10 Leases......................................................................................78
6.11 Brokerage Commissions.......................................................................78
6.12 Existence...................................................................................78
6.13 Environmental...............................................................................78
6.14 Disclosure Updates..........................................................................78
6.15 After Acquired Properties...................................................................79
6.16 Protection Against Drainage.................................................................79
6.17 Additional Collateral Reviews...............................................................79
6.18 Hedging Agreements..........................................................................79
</Table>
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<Table>
6.19 Commercial Tort Claims; Organizational ID Number............................................80
6.20 Collateral Access Agreement.................................................................80
7. NEGATIVE COVENANTS.................................................................................80
7.1 Indebtedness................................................................................80
7.2 Liens.......................................................................................81
7.3 Restrictions on Fundamental Changes.........................................................82
7.4 Disposal of Assets..........................................................................82
7.5 Change Name.................................................................................82
7.6 Guarantee...................................................................................82
7.7 Nature of Business..........................................................................82
7.8 Payments, Prepayments and Amendments........................................................82
7.9 Change of Control...........................................................................83
7.10 Forward Sales...............................................................................83
7.11 Distributions...............................................................................83
7.12 Accounting Methods..........................................................................83
7.13 Investments.................................................................................83
7.14 Transactions with Affiliates................................................................83
7.15 Suspension..................................................................................84
7.16 Compensation................................................................................84
7.17 Use of Proceeds.............................................................................84
7.18 Change in Location of Chief Executive Office; Equipment with Bailees........................84
7.19 Securities Accounts.........................................................................84
7.20 Financial Covenants.........................................................................84
7.21 Oil and Gas Imbalances......................................................................86
7.22 Environmental...............................................................................86
7.23 Limitation on Leases........................................................................86
8. EVENTS OF DEFAULT..................................................................................87
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.............................................................88
9.1 Rights and Remedies.........................................................................88
9.2 Remedies Cumulative.........................................................................91
10. TAXES AND EXPENSES.................................................................................91
11. WAIVERS; INDEMNIFICATION...........................................................................91
11.1 Demand; Protest; etc........................................................................91
11.2 The Lender Group's Liability for Collateral.................................................91
11.3 Indemnification.............................................................................92
12. NOTICES............................................................................................92
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.........................................................93
14. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.........................................................94
14.1 Assignments and Participations..............................................................94
</Table>
-iii-
<Page>
<Table>
14.2 Successors..................................................................................97
15. AMENDMENTS; WAIVERS................................................................................97
15.1 Revolving Loan Lenders' Amendments and Waivers..............................................97
15.2 Term Loan Lenders' Amendments and Waivers...................................................99
15.3 Other Term Loan Lender Provisions..........................................................100
15.4 Replacement of Holdout Lender..............................................................101
15.5 No Waivers; Cumulative Remedies............................................................102
16. AGENT; THE LENDER GROUP...........................................................................102
16.1 Appointment and Authorization of Agent.....................................................102
16.2 Delegation of Duties.......................................................................103
16.3 Liability of Agent.........................................................................103
16.4 Reliance by Agent..........................................................................103
16.5 Notice of Default or Event of Default......................................................104
16.6 Credit Decision............................................................................104
16.7 Costs and Expenses; Indemnification........................................................105
16.8 Agent in Individual Capacity...............................................................105
16.9 Successor Agent............................................................................106
16.10 Lender in Individual Capacity..............................................................106
16.11 Withholding Taxes..........................................................................106
16.12 Collateral Matters.........................................................................108
16.13 Restrictions on Actions by Lenders; Sharing of Payments....................................109
16.14 Agency for Perfection......................................................................110
16.15 Payments by Agent to the Lenders...........................................................110
16.16 Concerning the Collateral and Related Loan Documents.......................................110
16.17 Field Audits and Examination Reports; Confidentiality;
Disclaimers by Lenders; Other Reports and Information......................................110
16.18 Several Obligations; No Liability..........................................................112
17. GENERAL PROVISIONS................................................................................112
17.1 Effectiveness..............................................................................112
17.2 Section Headings...........................................................................112
17.3 Interpretation.............................................................................112
17.4 Severability of Provisions.................................................................112
17.5 Amendments in Writing......................................................................112
17.6 Counterparts; Telefacsimile Execution......................................................112
17.7 Revival and Reinstatement of Obligations...................................................113
17.8 Integration................................................................................113
18. GUARANTY..........................................................................................113
18.1 Guaranty; Limitation of Liability..........................................................113
18.2 Guaranty Absolute..........................................................................113
18.3 Waiver.....................................................................................114
18.4 Continuing Guaranty; Assignments...........................................................114
18.5 Subrogation................................................................................115
</Table>
-iv-
<Page>
EXHIBITS AND SCHEDULES
<Table>
Exhibit A-1 Form of Assignment and Acceptance
Exhibit C-1 Form of Compliance Certificate
Exhibit PV-10 PV-10 Calculation
Schedule A-1 Agent's Account
Schedule C-1 Revolver Commitments
Schedule D-1 Designated Account
Schedule P-1 Permitted Liens
Schedule 2.7(a) Cash Management and Concentration Account Banks
Schedule 5.3 Locations of Equipment
Schedule 5.5 Chief Executive Office; FEIN
Schedule 5.6(b) Capitalization of Borrower
Schedule 5.6(c) Capitalization of Borrower's Subsidiaries
Schedule 5.8 Litigation
Schedule 5.12 Environmental Matters
Schedule 5.14 Intellectual Property
Schedule 5.16 Demand Deposit Accounts
Schedule 5.17 Compliance with the Law
Schedule 5.19 Permitted Indebtedness
Schedule 5.20 Oil and Gas Imbalances
Schedule 5.21 Hedging Agreements
Schedule 5.22 Location of Real Property and Leased Properties
Schedule 5.24 Material Contracts
Schedule 5.26 Employee and Labor Matters
Schedule 5.27 Bonds and Insurance
Schedule 5.28 Nature of Business
</Table>
-v-
<Page>
Schedule A-1
AGENT'S ACCOUNT
An account at a bank designated by Agent from time to time as the
account into which Borrower shall make all payments to Agent for the benefit of
the Lender Group and into which the Lender Group shall make all payments to
Agent under this Agreement and the other Loan Documents; unless and until Agent
notifies Borrower and the Lender Group to the contrary, Agent's Account shall be
that certain deposit account bearing account number 323-266193 and maintained by
Agent with JPMorgan Chase Bank, 4 New York Plaza, 15th Floor, New York, New York
10004, ABA #021000021.
<Page>
Schedule C-1
COMMITMENTS
<Table>
<Caption>
LENDER REVOLVER COMMITMENT TERM LOAN COMMITMENT TOTAL COMMITMENT
- -------------------------------------------------------------------------------------------------------------
Foothill Capital Corporation $ 30,000,000 - 0 - $ 30,000,000
- -------------------------------------------------------------------------------------------------------------
Ableco Finance LLC $ 15,000,000 - 0 - $ 15,000,000
- -------------------------------------------------------------------------------------------------------------
Highbridge/Zwirn Special $ 5,000,000 - 0 - $ 5,000,000
Opportunities Fund, L.P.
- -------------------------------------------------------------------------------------------------------------
Halcyon and its Affiliates* - 0 - $ 4,200,000 $ 4,200,000
- -------------------------------------------------------------------------------------------------------------
All Lenders $ 50,000,000 $ 4,200,000 $ 54,200,000
- -------------------------------------------------------------------------------------------------------------
</Table>
*HALCYON AND ITS AFFILIATES
<Table>
<Caption>
Entity Pro Rata Share of the Term Loan
- ------------------------------------------------------------------------------------------------------
Halcyon Fund, L.P. 28.5%
Halcyon Arbitrage II L.P. 1.7
Halcyon Special Situations, L.P. 3.2
Halcyon Event-Driven Strategies Fund, L.P. 3.6
Halcyon Offshore Event-Driven Strategies Fund 21.0
Gryphon Hidden Values 2000 Limited 23.5
Gryphon Hidden Values VI Limited 13.5
Gryphon Hidden Values VI L.P. 1.9
Halcyon MAC 19 Ltd 3.1
</Table>
<Page>
Schedule D-1
DESIGNATED ACCOUNT
Account number 0062243-01 of Borrower maintained with Borrower's
Designated Account Bank, or such other deposit account of Borrower (located
within the United States) that has been designated as such, in writing, by
Borrower to Agent.
"Designated Account Bank" means International Bank of Commerce, whose
office is located at 130 East Travis Street, San Antonio, Texas 78205, and whose
ABA number is 114902528.