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Exhibit 10.1
$200,000,000 SENIOR SECURED REVOLVING
CREDIT AGREEMENT
Dated as of September 23, 2005
among
STROUD ENERGY, LTD. ,
THE GUARANTORS AS PARTY HERETO,
WELLS FARGO BANK, NATIONAL
ASSOCIATION,
JPMORGAN CHASE BANK, N.A.,
and
THE OTHER FINANCIAL INSTITUTIONS AS PARTY HERETO
TABLE OF CONTENTS
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CREDIT AGREEMENT
This CREDIT AGREEMENT (the “ Agreement ”) is dated as of September 23, 2005, among STROUD ENERGY, LTD. , a Texas limited partnership (formerly known as STROUD INVESTMENTS 2001, LTD., “ Borrower ”), STROUD OIL PROPERTIES, LP , a Delaware limited partnership (successor by merger to Stroud Oil Properties, Inc., “ SOP ”), STROUD ENERGY MANAGEMENT GP, LLC , a Texas limited liability company (formerly known as Stroud Energy Management, Ltd., “ SEM ”), STROUD ENERGY, INC. , a Delaware corporation (“ Parent ”), STROUD ENERGY GP, LLC , a Delaware limited liability company (“ SEGP ”), STROUD ENERGY LP, LLC , a Delaware limited liability company (“ SELP ”; SOP, SEM, Parent, SEGP and SELP are collectively, the “ Guarantors ” and each a “ Guarantor ”), each of the banks which is or which may from time to time become a signatory hereto (individually, a “ Bank ” and collectively, the “ Banks ”), WELLS FARGO BANK, NATIONAL ASSOCIATION , a national banking association, as Lead Arranger, Issuing Bank (in such capacity, together with its successors in such capacity “ Issuing Bank ”) and Administrative Agent for the Banks (in such capacity, together with its successors in such capacity “ Administrative Agent ”) and JPMORGAN CHASE BANK, N.A. , as syndication agent for the Banks (“ Syndication Agent ”).
RECITALS
WHEREAS, Borrower, certain Guarantors, Issuing Bank, Administrative Agent, and the Banks are party to that certain Senior Secured Revolving Credit Credit Agreement dated as of June 19, 2003, as amended by First Amendment to Senior Secured Revolving Credit Agreement effective July 2, 2003, and by Limited Waiver and Second Amendment to Senior Secured Revolving Credit Agreement effective January 12, 2004, and by Third Amendment to Senior Secured Revolving Credit Agreement effective March 31, 2004, and by Confirmation and Fourth Amendment to Senior Secured Revolving Credit Agreement effective October 30, 2004, and by Fifth Amendment to Senior Secured Revolving Credit Agreement dated as of July 27, 2005 (as amended, the “ Prior Credit Agreement ”);
WHEREAS, Borrower and Guarantors have requested that Administrative Agent and the Banks amend and restate the Prior Credit Agreement to reflect changes resulting from the Private Placement (defined herein);
WHEREAS, subject to the conditions precedent set forth herein, the Banks and Administrative Agent have agreed to amend and restate the Prior Credit Agreement;
NOW THEREFORE, in consideration of the premises, the representations, warranties, covenants and agreements contained herein, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Borrower, Guarantors, Issuing Bank, Administrative Agent and the Banks hereby agree that effective as of the Closing Date, the Prior Credit Agreement is and shall be amended and restated in its entirety on the terms and conditions set forth herein.
Borrower, Guarantors, Issuing Bank, Administrative Agent and the Banks hereby further agree effective as of the Closing Date as follows:
DEFINITIONS
1.01 Certain Defined Terms . The following terms have the following meanings:
Acquisition means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock of a corporation (or similar entity), which stock has ordinary voting power for the election of the members of such entity’s board of directors or persons exercising similar functions (other than stock having such power only by reason of the happening of a contingency), or the acquisition of in excess of 50% of the partnership interests or equity of any Person not a corporation which acquisition gives the acquiring Person the power to direct or cause the direction of the management and policies of such Person, or (c) a merger or consolidation or any other combination with another Person provided that Borrower is the surviving entity.
Administrative Agent means Wells Fargo Bank, in its capacity as Administrative Agent for the Banks hereunder or any successor thereto.
Administrative Agent’s Payment Office means the address for payments as Administrative Agent may from time to time specify.
Affiliate means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise. For Borrower, Affiliate shall include Parent, SEGP, SELP, SOP, SEM, and any Subsidiary thereof.
Agent-Related Persons as to the Administrative Agent, means Administrative Agent, its Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of Administrative Agent and its Affiliates.
Agreement means this Credit Agreement as same may be amended, restated, modified or renewed from time to time.
Applicable Margin means, with respect to LIBOR Loans and Base Rate Loans, the amounts set forth on the Pricing Grid.
Assignee has the meaning specified in Subsection 11.08(b) .
Attorney Costs means and includes all reasonable fees and disbursements of any law firm or other external counsel, together with all disbursements of internal counsel.
Available Borrowing Base means, at the particular time in question, the Borrowing Base amount then in effect minus the Effective Amount at such time.
Bankruptcy Code means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. § 101, et seq.), as amended, and regulations promulgated thereunder.
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Bank means any financial institution a party hereto as having a Commitment, and its successors and assigns, and Banks shall mean all Banks. References to “ Banks ” shall include Wells Fargo Bank, and such other lending institutions now a party or hereafter a party to this Agreement.
Base Rate means, for any day, the fluctuating rate of interest in effect for such day which rate per annum shall be equal to the higher of (i) the rate of interest as publicly announced from time to time by Administrative Agent as its “reference rate” (the “reference rate” is a rate set by Administrative Agent based upon various factors including costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate), or (ii) one-half of one percent (0.50%) per annum above the Federal Funds Rate in effect from time to time. Any change in the reference rate announced by Administrative Agent shall take effect at the opening of business on the day specified in the public announcement of such change.
Base Rate Loan means a Loan that bears interest based at the Base Rate.
Borrower shall have the meaning set forth in the introductory paragraph hereto.
Borrowing means a borrowing hereunder consisting of Loans of the same Interest Rate Type made to Borrower on the same day by any of the Banks under Article II, and, other than in the case of Base Rate Loans, having the same Interest Period.
Borrowing Base means at the particular time in question, the amount provided for in Section 2.04 provided, however, in no event shall the Borrowing Base ever exceed the Maximum Loan Amount.
Borrowing Base Period means each six (6) month period commencing October 1, and April 1 of each year.
Borrowing Date means any date on which a Borrowing occurs under Section 2.01 .
Business Day means any day other than a Saturday, Sunday or other day on which commercial banks in Dallas, Texas are authorized or required by law to close and, if the applicable Business Day relates to any LIBOR Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market.
Capital Adequacy Regulation means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of any bank or of any corporation controlling a bank.
Capital Lease means a lease or other agreement conveying the right to use real and/or personal Property, which obligations are required to be classified and accounted for as a capital lease under GAAP.
Cash Equivalents means: (a) securities issued or fully guaranteed or insured by the United States Government or any agency thereof and backed by the full faith and credit of the United States having maturities of not more than twelve (12) months from the date of acquisition; (b) certificates of deposit, time deposits, Eurodollar time deposits, or bankers’ acceptances having in each case a tenor of not more than three (3) months from the date of acquisition issued by any U.S. commercial bank or any
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branch or agency of a non-U.S. commercial bank licensed to conduct business in the U.S. having combined capital and surplus of not less than Five Hundred Million Dollars ($500,000,000); and (c) commercial paper of an issuer rated in one of the two highest rating categories of Standard and Poor’s Rating Service, a division of McGraw Hill, Inc., or Moody’s Investor Services, Inc. at the time of acquisition, and in either case having a tenor of not more than twelve (12) months.
Change of Control means any of the following: (a) any acquisition or acquisitions pursuant to which any Person or group (as defined in Section 13(d)(3) or 14(d)(2) of the Exchange Act) has become the direct or indirect beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 35% of the Voting Stock of Parent, (b) Parent is merged with or into or consolidated with another Person, (c) Parent, either individually or in connection with one or more of it’s Subsidiaries, sells, conveys, transfers or leases, or its Subsidiaries sell, convey, transfer or lease, all or substantially all of the assets of Parents and its Subsidiaries, taken as a whole (either in one transaction or a series of related transactions), including equity or partnership interests in its Subsidiaries, to any Person, or (d) the first day on which a majority of the individuals who constitute the board of directors of Parent are not Continuing Directors.
Closing means the date on which this Agreement is signed by Borrower, Guarantors, Administrative Agent and the Banks.
Closing Date means the date on which all conditions precedent set forth in Section 5.01 are satisfied or waived by the Banks.
Code means the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder.
Collateral means all Property of any kind which is subject to a Lien granted by Borrower or any Guarantor in favor of Administrative Agent for the benefit of the Banks or which under the terms of any Security Document is purported to be subject to such Lien.
Commitment means as to each Bank, such Bank’s Pro Rata Share of the lesser of the current Borrowing Base and the Maximum Loan Amount, as such Commitment may be terminated and/or reduced from time to time in accordance with the provisions hereof.
Compliance Certificate means a certificate substantially in the form of Exhibit ”E” .
Consolidated Interest Expense means, for any fiscal period, the aggregate amount of all costs, fees and expenses, including capital expenses, paid by the Parent and its Subsidiaries on a consolidated basis in such fiscal period, which are classified as interest expense on the Parent’s consolidated financial statements.
Consolidated Net Income means, for any period, the consolidated net income (or net loss) of Parent and its Subsidiaries for such period.
Consolidated Tangible Net Worth means, at any date, an amount equal to the Shareholders’ Equity less any intangible asset determined in accordance with GAAP, provided, there shall be excluded from the calculation of tangible net worth the effect of any non-cash ceiling test write down, provided, further, the non-cash mark-to-market value or liability of any Derivative Contracts pursuant to SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities , shall be excluded from the calculation of Tangible Net Worth.
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Contingent Obligation means, as to any Person without duplication, any direct or indirect liability of that Person with or without recourse, (a) with respect to any Indebtedness, dividend, letter of credit or other similar obligation (the “ primary obligations ”) of another Person (the “ primary obligor ”), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase Property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof (each, a “ Guaranty Obligation ”); (b) with respect to any Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) with respect to any Derivative Contract; or (d) to purchase any materials, supplies or other Property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other Property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other Property is ever made or tendered, or such services are ever performed or tendered. The amount of any Contingent Obligation shall, in the case of Guaranty Obligations, be deemed equal to the maximum stated or determinable amount of the primary obligation in respect of which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof, and in the case of other Contingent Obligations, shall be equal to the maximum reasonably anticipated liability in respect thereof.
Continuing Director means an individual who (a) is a member of the board of directors of the Parent and (b) was (i) a member of the board of directors of Parent at Closing, (ii) identified in the Preliminary Offering Memo as a person who was expected to become a director of the Parent, or (iii) first nominated for election or elected to the Parent’s board of directors by a vote of at least two-thirds of the directors still in office who were Continuing Directors.
Contractual Obligation means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its Property is bound.
Conversion/Continuation Date means any date on which, under Section 2.02 , Borrower (a) converts Loans of one Interest Rate Type to another Interest Rate Type, or (b) continues as Loans of the same Interest Rate Type, but with a new Interest Period, Loans having Interest Periods expiring on such date.
Current Assets means, for any Person, all assets of such Person that, in accordance with GAAP, would be included as consolidated current assets on a balance sheet as of the date of calculation, provided that , for purposes of calculating Parent’s Current Assets to Current Liabilities, Available Borrowing Base under this Agreement shall be included as Current Assets, and any non-cash mark-to-market value of any Derivative Contracts pursuant to SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities , shall be excluded from Current Assets.
Current Liabilities means, for any Person, all liabilities of such Person that, in accordance with GAAP, would be included as consolidated current liabilities on a balance sheet as of the date of calculation; provided that, for purposes of calculating Parent’s Current Ratio pursuant to Section 8.11 ,
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any non-cash obligations pursuant to SFAS No. 133 Accounting for Derivative Instruments an Hedging Activities , shall be excluded as Current Liabilities.
Default means any event or circumstance which, with the giving of notice, the lapse of time, or both, would constitute an Event of Default.
Default Rate shall have the meaning set forth in Section 2.05(b)(iii) .
Derivative Contracts means all futures contracts, forward contracts, swap, cap or collar contracts, option contracts, hedging contracts or other derivative contracts or similar agreements covering Oil and Gas commodities or prices or financial, monetary or interest rate instruments.
Dispositions has the meaning specified in Section 8.02 .
Dollars , dollars and $ each mean lawful money of the United States.
EBITDA means for any fiscal period, without duplication, (i) Consolidated Net Income of Parent, plus (ii) consolidated income taxes, plus (iii) consolidated depreciation, depletion, amortization and other non-cash items reducing Consolidated Net Income, plus (iv) Consolidated Interest Expense.
Effective Amount means on any date, the aggregate outstanding principal amount of all Borrowings after giving effect to any prepayments or repayments of Borrowings occurring on such date plus the LC Obligation, after giving effect to any reimbursement in respect thereof occurring on such date.
Eligible Assignee means (i) a commercial bank organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000.00; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the “ OECD ”), or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000.00, provided that such bank is acting through a branch or agency located in the United States; and (iii) any other Person approved by Administrative Agent.
Environmental Claims means all material claims by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release of Hazardous Substances or injury to the environment.
Environmental Laws means all material federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all material administrative orders, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, and safety matters.
ERISA means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder.
ERISA Affiliate means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code for purposes of provisions relating to Section 412 of the Code).
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ERISA Event means, with respect to the Borrower or any ERISA Affiliate (a) any event described in Section 4043(c) of ERISA with respect to a Pension Plan, (b) the withdrawal of the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the complete or partial withdrawal of the Borrower or any ERISA Affiliate from any Multiemployer Plan, (d) the termination of, the filing of a notice of intent to terminate a Pension Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA, (e) the institution of proceedings to terminate a Pension Plan or Multiemployer Plan by the PBGC, (f) the failure by the Borrower or any ERISA Affiliate to make when due required contributions to a Multiemployer Plan or Pension Plan unless such failure is cured within thirty (30) days, (g) any other event or condition that might reasonably be expected to constitute ground under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan or for the imposition of liability under Section 4069 or 4212(c) of ERISA, (h) the termination of a Multiemployer Plan under Section 4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA, (i) the loss of qualification or tax exempt status under the Code of any Pension Plan maintained, or contributed to by, or (j) the termination of a Pension Plan described in Section 4064 of ERISA.
Event of Default means any of the events or circumstances specified in Section 9.01 .
Exchange Act means the Securities Exchange Act of 1934, as amended, and regulations promulgated thereunder.
Federal Funds Rate means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, “ H.15(519) ”) on the preceding Business Day opposite the caption “ Federal Funds (Effective) ”; or, if for any relevant day such rate is not so published on any such preceding Business Day, the rate for such day will be the average as determined by Administrative Agent of the rates for the last transaction in overnight federal funds arranged prior to 9:00 a.m. (New York, New York time) on that day by each of three leading brokers of federal funds transactions in New York, New York selected by Administrative Agent.
FRB means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions.
GAAP means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), as modified by the requirements of applicable U.S. securities laws and the rules and pronouncements of the Securities and Exchange Commission and its staff, which are applicable to the circumstances as of the date of determination.
General Partner shall mean SEM, the general partner of Borrower, and its successors in such capacity.
Governmental Authority means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.
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Guarantees means collectively the guarantees executed by each of the Guarantors guaranteeing Borrower’s Obligations in favor of Administrative Agent and the Banks as required under Section 7.16 hereof as same may be amended or ratified from time to time.
Guarantors means Parent, SEGP, SELP, SOP, SEM, and any direct or indirect Subsidiaries of Parent now or hereafter created.
Hazardous Substances means any substances defined as “ hazardous substances ,” “ hazardous materials ,” “ hazardous wastes ,” or “ toxic substances ” under Environmental Laws.
Highest Lawful Rate means, for each Bank, the maximum rate (or, if the context so permits or requires, an amount calculated at such rate) of interest which, at the time in question would not cause the interest charged on the portion of the loan owed to such Bank at such time to exceed the maximum amount which such Bank would be allowed to contract for, charge, take, reserve, or receive under applicable law after taking into account, to the extent required by applicable law, any and all relevant payments or charges under the Loan Documents. To the extent Texas law is applicable, the Banks hereby notify and disclose to Borrower that, for purposes of Texas Finance Code §303.001, as it may from time to time be amended, the “ applicable ceiling ” shall be the “ weekly ceiling ” from time to time in effect as limited by Texas Finance Code §303.009; provided, however, that to the extent permitted by applicable law, The Banks reserve the right to change the “ applicable ceiling ” from time to time by further notice and disclosure to Borrower.
Hydrocarbon Interests means leasehold and other interests in or under Oil and Gas leases, mineral fee interests, overriding royalty and royalty interests, net profit interests, production payment interests relating to Oil and Gas wherever located, including any beneficial, reserved or residual interest of whatever nature.
Indebtedness of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of Property or services (other than trade payables entered into in the ordinary course of business on ordinary terms not more than 60 days past due); (c) all non-contingent reimbursement or payment obligations with respect to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of Property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to Property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such Property) including, without limitation, production payments, net profit interests and other Hydrocarbon Interests subject to repayment out of future Oil and Gas production; (f) all obligations with respect to Capital Leases; (g) all net obligations with respect to Derivative Contracts; (h) Contingent Obligations, (i) all indebtedness referred to in clauses (a) through (h) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in Property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (j) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (h) above.
Indemnified Liabilities has the meaning specified in Section 11.05 .
Indemnified Person has the meaning specified in Section 11.05 .
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Independent Auditor has the meaning specified in Subsection 7.01(a) .
Initial Reserve Report has the meaning specified in Section 6.11 .
Insolvency Proceeding means (a) any case, action or proceeding relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code.
Intercompany Loan means a revolving loan from Borrower to Guarantors as evidenced by the Intercompany Note, which is to be used solely for activities related to or in furtherance of the Principal Business.
Intercompany Note means that certain promissory note of even date herewith executed by Guarantors in favor of Borrower in the maximum principal amount of $30,000,000.
Interest Coverage Ratio shall mean for the ratio of (i) EBITDA for a particular fiscal quarter to (ii) Interest Expense for such fiscal quarter computed as of the end of such fiscal quarter for the four fiscal quarter period then ended.
Interest Expense means, for any fiscal period, the aggregate amount of all costs, fees and expenses paid by the Parent, Borrower and the other Guarantors in such fiscal period which are classified as interest expense on the Parent’s consolidated financial statements all as determined in accordance with GAAP.
Interest Payment Date means (i) as to any Base Rate Loan, the last Business Day of each calendar quarter and (ii) as to any Loan other than a Base Rate Loan, the last day of each Interest Period applicable to such Loan, provided, however, that if any Interest Period for a LIBOR Loan exceeds three (3) months, the date that falls three (3) months after the beginning of such Interest Period, and the date that falls three (3) months after each Interest Payment Date thereafter for such Interest Period, is also an Interest Payment Date.
Interest Period means, as to any LIBOR Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as LIBOR Loan, and ending on the date one, two, three or six months thereafter as selected by Borrower in its Notice of Borrowing or Notice of Conversion/Continuation; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of a LIBOR Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period pertaining to a LIBOR Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period for any Loan shall extend beyond the Termination Date.
Interest Rate Type means, with respect to any Loan, the interest rate, being either the Base Rate or the LIBOR forming the basis upon which interest is charged against such Loan hereunder.
Investment Company has the meaning specified in Section 6.16 .
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IRS means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions under the Code.
Issue means with respect to any Letter of Credit, to issue or extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms “ Issued ,” “ Issuing ” and “ Issuance ” have corresponding meanings.
Issuing Bank means Wells Fargo Bank.
LC Application means an application or agreement for a standby Letter of Credit in the current form promulgated by Issuing Bank with appropriate insertions or in such other form as shall be reasonably acceptable to Issuing Bank duly executed by Borrower pursuant to Section 2.09(a) .
LC Collateral means any amounts held by Issuing Bank, as security for LC Obligations of Borrower.
LC Collateral Account means a blocked deposit account held by Issuing Bank.
LC Obligation means, at the time in question, the sum of the Matured LC Obligations plus the aggregate amount available under all Letters of Credit then outstanding.
LC Related Document means the Letters of Credit, LC Applications and any other document relating to any Letter of Credit including any of Issuing Bank’s standard form documents for Letter of Credit issuances.
Lending Office means, as to any bank, the office or offices of such Bank specified as its “Lending Office,” or such other office or offices as such Bank may from time to time notify Borrower and Administrative Agent.
Letter of Credit means any standby letter of credit issued by Issuing Bank pursuant to this Agreement and upon an LC Application.
Letter of Credit Fee means the annualized variable rate set forth on the Pricing Grid as the LIBOR Rate.
Letters in Lieu means the letters described under Section 4.04(a) .
LIBOR means a per annum rate of interest (rounded upwards, if necessary, to the nearest .01%) equal to the quotient obtained by dividing (i) the rate at which Administrative Agent is offered deposits by major banks in dollars in the aggregate amount of the relevant Loans and for a period comparable to the applicable Interest Period in the London interbank market at approximately 11:00 a.m. (London time), two (2) Business Days prior to the beginning of the relevant Interest Period, by (ii) a percentage equal to 100% minus the average maximum rate of all reserve requirements relating to the LIBOR Rate Loans under regulations issued by the Board of Governors of the Federal Reserve System or any other Governmental Authority during such Interest Period (including, without limitation, any margin, emergency, supplemental, special or other reserves required by applicable Law) applicable to Administrative Agent. The determination and calculation of the LIBOR and each component thereof by Administrative Agent shall be conclusive and binding, absent manifest error.
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LIBOR Rate Loan means a Loan that bears interest based on LIBOR plus the Applicable Margin.
Lien means with respect to any Property, any right or interest therein of a creditor to secure Indebtedness owed to such creditor or any other arrangement with such creditor which provides for the payment of such Indebtedness out of such Property or which allows such creditor to have such debt satisfied out of such Property prior to the general creditors of any owner thereof, including any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any Property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement and the interest of a lessor under a Capital Lease), any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under a lease on Oil and Gas Properties or the interest of a lessor under an operating lease.
Loan means an extension of credit by a Bank to Borrower under Article II .
Loan Documents means this Agreement, the Notes, any Letter of Credit Application, any Letter of Credit, the Guarantees, the Security Documents, any Derivative Contracts entered into between Borrower, any of the Banks, or any Affiliate of the Banks, and all other agreements, instruments, or documents delivered to Administrative Agent, Issuing Bank or any Bank in connection herewith.
Majority Banks means, at any time, the Banks (such Banks must include at least one Bank other than Administrative Agent) holding at least fifty percent (50%) of the sum of the Effective Amount or, if there is no Effective Amount, the Banks holding at least fifty percent (50%) of the sum of the Commitments of all of the Banks.
Margin Stock means “ margin stock ” as such term is defined in Regulation T, U or X of the FRB.
Marketable Title means record title free and clear from reasonable doubt as to matters of law and fact such that a prudent operator of Oil and Gas Properties, advised of the facts and their legal significance, would willingly accept.
Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties or financial condition of Borrower or Parent and its Subsidiaries taken as a whole; (b) a material impairment of the ability of Borrower or Guarantors to perform under any Loan Document and to avoid any Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against Borrower, its Subsidiaries or any Guarantor of any Loan Document.
Matured LC Obligation means the aggregate amount of payments theretofore made by Issuing Bank in respect to Letters of Credit and not theretofore reimbursed by Borrower to Issuing Bank or deemed Loans pursuant to Section 2.01(b) .
Maximum Loan Amount means the amount of $200,000,000.
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Monthly Status Report means a status report prepared by Borrower in form, scope and content acceptable to Administrative Agent, setting forth as of such month then ended (i) detailing production from the Mortgaged Properties, the volumes of Oil and Gas produced and saved, the volumes of Oil and Gas sold, gross revenue, net income, related leasehold operating expenses, severance taxes, other taxes, capital costs and any production imbalances or take or pay imbalances incurred during such period and (ii) such additional information with respect to any of the Mortgaged Properties as may be reasonably requested by Administrative Agent, including the names and addresses of current purchasers of production and copies of current division orders from such purchasers showing Borrower’s interest in the subject wells and Oil and Gas Properties.
Mortgages means the Mortgages, Deeds of Trust, Assignments of Production, Security Agreements and Financing Statements from Borrower, Guarantors, or Subsidiaries thereof, as applicable, in favor of Administrative Agent, for the ratable benefit of the Banks, dated as of the dates set forth on Schedule 4.01 together with all other such instruments now or hereafter executed and all supplements, assignments, amendments and restatements thereto (or any agreement in substitution therefore).
Mortgaged Properties means the Oil and Gas Properties described in the Mortgages as the same may be amended or supplemented from time to time, until released.
Multiemployer Plan means a “ multiemployer plan ,” within the meaning of Section 4001 (a)(3) of ERISA, to which Borrower or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding seven (7) calendar years, has made, or been obligated to make, contributions.
Notes mean the promissory notes, whether one or more, specified in Section 2.01 , substantially in the same form as Exhibit ”A , ” including any amendments, modifications, renewals or replacements of such promissory notes.
Notice of Borrowing means a notice in substantially the form of Exhibit ”B . ”
Notice of Continuation/Conversion means a notice in substantially the form of Exhibit ”C . ”
Obligations means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by Borrower to any Bank (including obligations under any Derivative Contract by Borrower to any of the Banks or any of their Affiliates), Administrative Agent, Issuing Bank or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising.
Oil and Gas means petroleum, natural gas and other related hydrocarbons or minerals or any of them and all other commercial substances produced or extracted in association therewith.
Oil and Gas Properties means Hydrocarbon Interests now owned or hereafter acquired by Borrower, Guarantors or Subsidiaries thereof and contracts executed in connection therewith and all tenements, hereditaments, appurtenances, and properties belonging, affixed or incidental to such Hydrocarbon Interests, including, without limitation, any and all Property, real or personal, now owned or hereafter acquired by Borrower, Guarantors or Subsidiaries thereof and situated upon or to be situated upon, and used, built for use, or useful in connection with the operating, working or developing of such Hydrocarbon Interests, including, without limitation, any and all petroleum and/or natural gas wells, buildings, structures, field separators, processing plants, liquid extractors, plant compressors, pumps,
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pumping units, field gathering systems, tank and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, liters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, taping, tubing and rods, surface leases, rights-of-way, easements and servitudes, and all additions, substitutions, replacements for, fixtures and attachments to any and all of the foregoing owned directly or indirectly by Borrower, Guarantors or Subsidiaries thereof.
Operating Agreements shall have the meaning set forth in Section 5.01(j) .
Organization Documents means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of the shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation necessary in connection with the authorization of the foregoing documents or others in connection with the due organization of such corporation; for any limited liability company the articles of organization, certificate of authorization, operating agreement, organizational agreement, certificate of formation, regulations, certificates of qualification, joint resolutions of members (or any committee thereof) authorizing the foregoing; and for any partnership, the agreement of partnership and any certificates of such partnership or instrument relating to the rights of the partners of such partnership and all applicable resolutions of any corporate partners of such partnerships authorizing the foregoing.
Other Taxes means any present or future stamp or documentary taxes or any other excise or Property taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Documents.
Parent has the meaning set forth in the introductory paragraph hereto.
Participant has the meaning set forth in Section 11.08(a) .
Partners means the General Partner and the holders of the limited partnership interests.
Partnership Agreement shall mean Borrower’s Fourth Amended and Restated Agreement of Limited Partnership dated as of the Closing Date.
PBGC means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA.
Pension Plan means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA, other than a Multiemployer Plan, which Borrower sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years.
Permitted Liens has the meaning set forth in Section 8.01 .
Permitted Tax Distributions means such cash distributions as are necessary from time to time in order to pay amounts equal to cash payments due under federal, state and local consolidated income taxes payable by Parent and franchise, ad valorem and other taxes payable by Parent or the other Guarantors.
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Person means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority.
Plan means an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to ERISA, that Borrower or any ERISA Affiliate sponsors, maintains or has an obligation to contribute to, or has maintained, contributed to or had an obligation to contribute to, at any time during the past seven (7) years.
Preliminary Offering Memo means that certain Preliminary Offering Memorandum of Parent, dated August 19, 2005 describing how Borrower and Guarantors (other than Parent) became owned directly or indirectly by Parent.
Pricing Grid means the annualized variable rates (stated in terms of basis points (“ bps ”) set forth below for the Applicable Margin, Commitment Fee and Letter of Credit Fee based upon the ratio of Effective Amount to the Borrowing Base as follows:
The Pricing Grid for any date shall be determined by reference to the ratio of the daily average Effective Amount to the Borrowing Base over the fiscal quarter most recently ended and any change (x) shall become effective upon the delivery to the Administrative Agent of a Pricing Grid Certificate (in the form of Exhibit G hereto) of a Responsible Officer of General Partner (which certificate shall be delivered (A) simultaneously with the delivery of each Notice of Borrowing, Notice of Continuation/Conversion or a request for issuance of a Letter of Credit and (B) promptly after receipt of notice from Administrative Agent of any change in the amount of the Borrowing Base) and (y) shall apply to the Base Rate Loans outstanding on such delivery date or made on and after such delivery date. Notwithstanding the foregoing, at any time during which Borrower has failed to deliver the Pricing Grid Certificate when due, the ratio of Effective Amount to the Borrowing Base shall be deemed, solely for the purposes of this definition, to be greater than 90% until such time as Borrower shall deliver such certificate.
Principal Business means the business of the exploration for, and development, acquisition, production, and upstream marketing of Oil and Gas.
Prior Partners means the partners in Borrower under the Prior Partnership Agreement.
Prior Partnership Agreement means Borrower’s Third Amended and Restated Agreement of Limited Partnership dated as of January 1, 2004, as amended by that certain First Amendment to Third Amended and Restated Agreement of Limited Partnership effective as of January 1, 2004.
Private Placement means the reorganization and other transactions substantially as described in the Preliminary Offering Memo.
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Property means property of all kinds, real, personal or mixed, tangible or intangible (including without limitation, all rights thereto), whether owned or acquired on or after the date of this Agreement.
Pro Rata Share means, as to any Bank at any time, the percentage set forth opposite its name on Schedule 2.01 hereto.
Reportable Event means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which requirement under ERISA to provide notice to the PGBC has been waived by regulations.
Required Banks means, at any time, the Banks (such Banks must include at least one Bank other than Administrative Agent) holding at least sixty-six and two-thirds percent (66 2/3%) of the sum of the Effective Amount or, if there is no Effective Amount, the Banks holding at least sixty-six and two-thirds percent (66 2/3%) of the sum of the Commitments of all of the Banks.
Requirement of Law means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its Property or to which the Person or any of its Property is subject.
Reserve Report means a report, in form and substance satisfactory to Administrative Agent, prepared in a manner consistent with practices of reservoir engineers who prepare such reports for use in reserve-based lending transactions, which sets forth the present discounted value of the proven reserves attributable to the Mortgaged Properties.
Responsible Officer means the president or any vice president, treasurer, chief financial officer or chief accounting officer of Parent, SEGP, SELP, SOP or SEM, as appropriate.
Restricted Distributions has the same meaning set forth in Section 8.09.
Scheduled Borrowing Base Determination has the meaning specified in Subsection 2.04(a).
Security Documents means the Mortgages, assignments of production, collateral assignments, security agreements, pledges, assignments, Letters in Lieu and related financing statements set forth on Schedule 4.01 (as the same may be amended, supplemented or modified from time to time) together with any and all other instruments now or hereafter executed in connection with or as security for the payment of the Obligations.
SEGP has the meaning set forth in the introductory paragraph hereto.
SELP has the meaning set forth in the introductory paragraph hereto.
SEM has the meaning set forth in the introductory paragraph hereto.
Shareholder’s Equity means as to Parent, at any time, the sum of (a) the par value (or stated value on Parent’s books) of the capital stock of Parent, plus (b) the amount of the paid-in capital and consolidated retained earnings of Parent outstanding, in each case as such amounts which would be shown on their its consolidated balance sheet prepared as of such time in accordance with GAAP, but
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(i) excluding all treasury stock, (ii) excluding all capital stock which is subscribed and unissued, (iii) excluding all amounts attributable to minority interests in any such subsidiaries, and (iv) calculating the foregoing by treating as liabilities rather than equity all capital stock and other equity securities which Parent would be required to purchase, redeem or otherwise acquire prior to the Termination Date at the election of any holder thereof, upon the passage of time, or upon the occurrence of any contingency (other than the voluntary election of Parent to make such purchase, redemption or acquisition)
Solvent means, as to any Person at any time, that (a) the fair value of all of the Property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32) of the Bankruptcy Code; (b) the present fair saleable value of all of the Property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (d) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s Property would constitute unreasonably small capital.
SOP has the meaning set forth in the introductory paragraph hereto.
Special Borrowing Base Determination has the meaning specified in Subsection 2.04(d) .
Subsidiary means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a “ Subsidiary ” refer to a Subsidiary of Parent.
Surety Instruments means all Letters of Credit (including standby), banker’s acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments.
Taxes means any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Bank and Administrative Agent, any of the foregoing (including income taxes or franchise taxes) as are imposed on or measured by each Bank’s net income, gross receipts or capital by the jurisdiction (or any political subdivision thereof) under the laws of which such Bank or Administrative Agent, as the case may be, is organized or maintains a Lending Office.
Termination Date means the earlier of (a) September 23, 2009, or (b) the date on which the Banks’ Commitments terminate in accordance with this Agreement.
Unfunded Pension Liability means the excess of a Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan’s assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable Plan year.
United States and U.S. each means the United States of America.
Voting Stock means, with respect to any Person, securities of any class or classes of capital stock or other interests (including partnership interests) in such Person entitling the holders
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thereof (whether at all times or at the time that such class of capital stock has voting power by reason of the happening of any contingency) to vote in the election of members of the board of directors or comparable body of such Person.
Wells Fargo Bank means Wells Fargo Bank, National Association (successor-by-merger to Wells Fargo Bank Texas, N.A.), a national banking association, and any bank successor in interest thereto.
1.02 Other Interpretive Provisions . The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. Unless otherwise specified or the context clearly requires otherwise, the words “ hereof ,” “ herein ,” “ hereunder ” and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and Subsection, Section, Schedule and Exhibit references are to this Agreement. The term “ documents ” includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. The term “ including ” is not limiting and means “ including without limitation .” In the computation of periods of time from a specified date to a later specified date, the word “ from ” means “ from and including ;” the words “ to ” and “ until ” each mean “ to but excluding ,” and the word “ through ” means “ to and including .” Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. This Agreement and other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to Administrative Agent, Borrower and the other parties and are the products of all parties. Accordingly, they shall not be construed against Borrower, the Banks or Administrative Agent merely because of Borrower’s, Banks’ or Administrative Agent’s involvement in their preparation.
1.03 Accounting Principles . Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied.
THE CREDIT
2.01 Amounts and Terms of the Commitment .
(a) Each Bank severally agrees, on the terms and conditions set forth herein, to make Loans to Borrower (each such loan, a “Loan” ) during the period of time from and after the Closing Date up to the Termination Date, so long as (i) all Loans by each Bank do not exceed such Bank’s Pro Rata Share of the aggregate amount of Loans then requested from all Banks, and (ii) the aggregate amount of such Bank’s Loans and LC Obligation outstanding at any time does not exceed such Bank’s Pro Rata Share of the Borrowing Base determined as of the date on which the requested Loan is to be made. The obligation of Borrower to repay to each Bank the aggregate amount of all Loans made by such Bank, together with interest accruing in connection therewith, shall be evidenced by a single promissory note
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(herein called such Bank’s “ Note ”) made by Borrower payable to the order of such Bank in the form of Exhibit ”A” with appropriate insertions. The amount of principal owing on any Bank’s Note at any given time shall be the aggregate amount of all Loans theretofore made by such Bank minus all payments of principal theretofore received by such Bank on such Note. Interest on each Note shall accrue and be due and payable as provided herein. Borrower may borrow, repay and reborrow any amounts loaned hereunder. The obligation of Borrower to repay the aggregate amount of all Loans made by the Banks, together with interest accruing in connection therewith, shall be evidenced by the Notes.
(b) Subject to the terms and conditions of Section 2.09 below and relying upon the representations and warranties herein set forth, Issuing Bank agrees to issue standby Letters of Credit upon the request of Borrower at any time and from time to time on and after the Closing Date and up to five (5) days prior to the Termination Date. No Letter of Credit will be issued in a face amount which, after giving effect to the issuance of such Letter of Credit, would cause either the LC Obligation to exceed $10,000,000 or the Effective Amount to exceed the Borrowing Base then in effect. If any Letter of Credit has been drawn upon and the amount so drawn has not been reimbursed, for all purposes hereof to the extent of the Available Borrowing Base then existing, such funding shall be deemed a Loan in an amount equal to the matured LC Obligations applicable thereto.
(c) Each Borrowing (other than fundings of Letters of Credit deemed to be Loans under Section 2.01(b) ) shall be made subject to the following procedures:
(i) Each Borrowing of Loans shall be made upon Borrower’s irrevocable written notice delivered to Administrative Agent in the form of a Notice of Borrowing duly completed; which notice must be received by Administrative Agent prior to 11:00 a.m. (Dallas, Texas time) (i) three (3) Business Days prior to the requested Borrowing Date, in the case of LIBOR Rate Loans; and (ii) on the requested Borrowing Date, in the case of Base Rate Loans.
(ii) Each Notice of Borrowing shall specify (i) the amount of the Borrowing, which shall be in an aggregate minimum amount (A) for Base Rate Loans equal to the lesser of (y) $500,000 or any multiple integrals of $100,000 in excess thereof or (z) the unadvanced portion of the Available Borrowing Base and (B) for LIBOR Rate Loans $2,500,000 or any multiple integrals of $100,000 in excess thereof (if the Available Borrowing Base as of such Borrowing Date will be less than $2,500,000, then Borrower may not request a LIBOR Rate Loan); (ii) the requested Borrowing Date, which shall be a Business Day; (iii) the Interest Rate Type of Loans comprising the Borrowing; and (iv) for LIBOR Rate Loans the duration of the Interest Period applicable to such Loans. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Borrowing comprised of LIBOR Rate Loans, such Interest Period shall be three (3) months.
(iii) Administrative Agent will promptly notify each Bank of its receipt of any Notice of Borrowing and of the amount of such Bank’s Pro Rata Share of that Borrowing, and such Notice of Borrowing shall not thereafter be revocable by Borrower.
(iv) Provided the applicable conditions in Article 5 are met, each Bank will make the amount of its Pro Rata Share of each Borrowing available to Administrative Agent for the account of Borrower at Administrative Agent’s Payment Office by 12:30 p.m. (Dallas, Texas time) on the Borrowing Date requested by Borrower in funds immediately available to Administrative Agent. The proceeds of all such Loans will then be made available to Borrower by Administrative Agent to Borrower’s operating account with Administrative Agent of like funds as received by Administrative Agent.
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2.02 Conversion and Continuation Elections .
(a) Prior to the Termination Date, Borrower may, upon irrevocable written notice to Administrative Agent in accordance with Subsection 2.02(b) : (i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of LIBOR Loans, to convert any such Loans into Loans of any other Interest Rate Type; or (ii) elect as of the last day of the applicable Interest Period, to continue any Loans having Interest Periods expiring on such day; provided, that no more than five (5) LIBOR Loan tranches may exist at any one time and if at any time a LIBOR Loan in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to less than $2,000,000, such LIBOR Loan shall automatically convert into a Base Rate Loan.
(b) Borrower shall deliver an irrevocable Notice of Conversion/Continuation to be received by Administrative Agent not later than 11:00 a.m. (Dallas, Texas time) at least (i) three (3) Business Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into LIBOR Loans; (ii) as of the last day of the applicable Interest Period, in the case of LIBOR Loans, to continue any such Loans having Interest Periods expiring on such day as LIBOR Loans of the same or different Interest Period; and (iii) one (1) Business Day in advance of the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount of Loans to be converted or renewed; (C) the Interest Rate Type of Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to LIBOR Loans, Borrower has failed to timely notify Administrative Agent of its selection for a new Interest Period to be applicable to LIBOR Loans, or if any Default or Event of Default then exists, Borrower shall be deemed to have elected to convert such LIBOR Loans into Base Rate Loans effective as of the expiration date of such Interest Period.
(d) Administrative Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by Borrower, Administrative Agent will promptly notify each Bank of the details of any automatic conversion. All conversions and continuations shall be made ratably according to the respective Bank’s Pro Rata Share of outstanding principal amounts of the Loans with respect to which the notice was given.
2.03 Optional Prepayments . Subject to Section 3.04 , Borrower may, at any time or from time to time:
(a) prepay Base Rate Loans upon irrevocable notice to Administrative Agent of not less than one (1) Business Day, in whole or in part, in minimum principal amounts of $100,000 or integral multiples thereof (unless the portion of the Effective Amount consisting of Base Rate Loans is less than $100,000, then such prepayments shall be equal to the then outstanding amount of Base Rate Loans); and
(b) prepay LIBOR Loans upon irrevocable notice to Administrative Agent not less than three (3) Business Days, in whole or in part, in minimum principal amounts of $500,000 or integral multiples thereof.
Such notice of prepayment shall specify the date and amount of such prepayment and the Interest Rate Type(s) of Loans to be prepaid. Administrative Agent will promptly notify each Bank of its receipt of any such notice and of such Bank’s Pro Rata Share of such prepayment. The payment amount
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specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 3.04 . Except as provided herein there shall be no penalty or premium for such prepayment.
2.04 Borrowing Base Determinations, Mandatory Prepayments of Loans .
(a) Scheduled Borrowing Base Determinations . At all times prior to the Termination Date the Effective Amount shall not exceed the Borrowing Base then in effect. The initial Borrowing Base hereunder shall be $70,000,000. The Borrowing Base shall be redetermined by the Banks in their sole discretion for each Borrowing Base Period (each such determination a “Scheduled Borrowing Base Determination” ) commencing October 1, 2005, and effective as of the date set forth in such notice of redetermination. The Borrowing Base shall represent the determination by the Banks, in accordance with the provisions herein contained and their lending practices then in effect for loans of this nature, of the loan collateral value assigned to the Mortgaged Properties and such other credit factors (including without limitation the assets, liabilities, cash flow, current Derivative Contracts, business, properties, prospects, management and ownership of Borrower) which Banks in their sole discretion deem significant. Upon each redetermination of the Borrowing Base, Administrative Agent shall recommend to the Banks a new Borrowing Base and the Banks in accordance with their customary policies and procedures for extending credit to Oil and Gas reserve-based customers shall (by unanimous agreement in the case of Borrowing Base increases and by agreement of the Required Banks in the case of Borrowing Base affirmations or decreases) establish the redetermined Borrowing Base. If Borrower does not furnish the Reserve Reports or all such other information and data by the date required, the Banks may nonetheless determine a new Borrowing Base.
(b) Banks’ Sole Discretion . The Banks shall have no obligation to determine the Borrowing Base at any particular amount, either in relation to the Maximum Loan Amount or otherwise. Furthermore, Borrower acknowledges that the Banks have no obligation to increase the Borrowing Base and may reduce the Borrowing Base in accordance with Section 2.04(a) , in either case, at any time or as a result of any circumstance and that any increase in the Borrowing Base is subject to the individual credit approval processes of each of the Banks which processes shall be conducted on a basis consistent with each such Bank’s credit standards and assumptions then in effect.
(c) Mandatory Prepayments of Loans . If on any date the Effective Amount shall exceed the Borrowing Base, then Borrower shall, within thirty (30) days, exercise either one or a combination of the following: (i) prepay the amount by which the Effective Amount exceeds the Borrowing Base on such date; (ii) commence to prepay the amount necessary to reduce the Effective Amount to the Borrowing Base in five (5) equal consecutive monthly installments; or (iii) promptly pledge additional unencumbered assets of sufficient value and character (as determined by the Banks in their sole discretion) that when added to the Collateral will cause the Borrowing Base to equal or exceed the Effective Amount.
(d) Special Borrowing Base Determination . In addition to Scheduled Borrowing Base Determinations pursuant to Subsection 2.04(a) the Banks and the Borrower each may request a special redetermination once during any Borrowing Base Period (“ Special Borrowing Base Determination ”). In the event Borrower requests a Special Borrowing Base Determination, Borrower shall deliver written notice of such request to the Administrative Agent with sufficient copies for each Bank which shall include: (i) Reserve Report(s) covering the Mortgaged Properties prepared by Borrower as of a date not more than thirty (30) calendar days prior to the date of such request, (ii) such other information as the Administrative Agent shall request, and (iii) the amount of the Borrowing Base requested by Borrower to become effective. Likewise, in the event the Banks exercise their option for a
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Special Borrowing Base Determination, upon written request and notification by Administrative Agent to Borrower, Borrower shall furnish the information described above within thirty (30) days of such request. The Banks shall redetermine the Borrowing Base in accordance with the procedures set forth in Section 2.04(a) , which redetermined Borrowing Base shall then be the effective Borrowing Base until further redetermination.
(a) The Loans . Borrower shall repay to Administrative Agent for the Banks’ respective Pro Rata Shares the Effective Amount (with the amount paid in respect of any undrawn Letters of Credit to be held as cash collateral by Administrative Agent in accordance with Section 2.09(f) ) on or before the Termination Date, on which date all accrued unpaid interest and outstanding expenses hereunder or under the Loan Documents shall be due and payable in full.
(i) The Loans shall bear interest on the aggregate outstanding principal amount of all Borrowings thereof from the applicable Borrowing Date or date of conversion or continuation pursuant to Section 2.02, as the case may be, at a rate per annum equal to the lesser of (a) the Base Rate or LIBOR, as the case may be, plus the Applicable Margin, if applicable, or (b) the Highest Lawful Rate.
(ii) Interest on each Loan shall be paid in arrears on each Interest Payment Date, and during the existence of any Event of Default under Section 9.01(a) , (f) or (g) or upon acceleration of any or all of the Obligations, interest shall be paid on demand of Administrative Agent.
(iii) Notwithstanding Subsection (b)(i) of this Section 2.05, while any Event of Default under Section 9.01(a) , (g) or (h) exists or upon acceleration of the Obligations, Borrower shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Obligations then due and payable, at a rate per annum equal to the lesser of (x) the Highest Lawful Rate or (y) the Base Rate plus the Applicable Margin plus two percent (2%) (the “ Default Rate ”).
(a) Agency and Other Fees . Borrower shall pay to Administrative Agent and its Affiliates such fees and other amounts as Borrower shall be required to pay to Administrative Agent and its Affiliates from time to time pursuant to any separate agreement between Borrower and Administrative Agent or any of its Affiliates setting forth the compensation to be paid to Administrative Agent and its Affiliates in consideration for providing services in connection with the credit facilities provided pursuant hereto.
(b) Increase in Borrowing Base . Borrower shall pay to Administrative Agent, as a fee for the ratable account of the Banks, a fee for Borrowing Base increases resulting from redeterminations under Subsection 2.04 hereof, equal to one-quarter of one percent (0.25%) of each marginal increase over the previous maximum Borrowing Base. Any fee arising under this Subsection 2.06(b) is to be paid upon the effective date of the related Borrowing Base increase.
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(c) Commitment Fees . Borrower shall pay to Administrative Agent, for the ratable benefit of each Bank, an aggregate commitment fee calculated on the average daily amount of the Available Borrowing Base at a per annum rate equal to the amount set forth on the Pricing Grid. Such commitment fee shall accrue from the Closing Date to the Termination Date and shall be due and payable quarterly in arrears on the last Business Day of the last month of each quarter commencing on September 30, 2005, through the Termination Date, with the final payment to be made on the Termination Date; provided that , in connection with any reduction in the Borrowing Base or termination of Commitment, the accrued commitment fee calculated for the period ending on such date shall also be paid on the date of such reduction or termination, with the following quarterly payment being calculated on the basis of the period from such reduction or termination date to the following quarterly payment date. The commitment fees provided in this subsection shall accrue at all times after the Closing Date up to the Termination Date, including at any time during which one or more conditions in Section 5.02 are not met.
(d) Letter of Credit Fees . Borrower agrees to pay (i) to Issuing Bank, for the ratable account of the Banks, a fee for each Letter of Credit, to be paid quarterly in arrears following the Issuance of such Letter of Credit (including the initial Issuance and any renewal, extension or increase in the amount thereof) in the amount equal to the greater of (x) $500.00 and (y) the product equal to the Letter of Credit Fee multiplied by the amount available under such Letter of Credit (such fee shall be deemed to be fully earned and owing upon the Issuance of such Letter of Credit, and no refund shall be due in the event such Letter of Credit is terminated prior to its expiry date), (ii) to the Issuing Bank for its account a fee for the issuance of each Letter of Credit (including the initial Issuance and any renewal, extension or increase in the amount thereof), at the Issuance of such Letter of Credit, in an amount equal to the greater of (x) $500.00 and (y) one-eighth of one percent (0.125%) multiplied by the aggregate amount available under each Letter of Credit (such fees shall be prorated for any period less than a full year but shall not be refunded in the event any such Letter of Credit is terminated prior to its expiry date) and (iii) Issuing Bank’s usual and customary fees for amendment to transfer of or negotiation of the terms of each Letter of Credit. Administrative Agent shall pay to each Bank its Pro Rata Share of the Letter of Credit fees paid pursuant to Section 2.06(d)(i) . Administrative Agent shall pay to Issuing Bank the Letter of Credit fees paid pursuant to Section 2.06(d)(ii) and (iii) .
2.07 Computation of Fees and Interest.
(a) All computations of interest and fees shall be made on the basis of a 360-day year and actual days elapsed, except that interest on Base Rate Loans shall be computed on the basis of a 365/366-day year and actual days elapsed. Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof (including the first day but excluding such last day).
(b) Each determination of an interest rate by Administrative Agent, except in case of manifest error, shall be final, conclusive and binding on the parties.
2.08 Payments by Borrower; Borrowings Pro Rata .
(a) All payments to be made by Borrower shall be made without set-off, recoupment or counterclaim. All payments by Borrower shall be made in immediately available funds to Administrative Agent at Administrative Agent’s Payment Office for the account of Administrative Agent or the Bank to whom such payment is owed, and shall be made in dollars and in immediately available funds, no later than 12:00 p.m. (Dallas, Texas time) on the date specified herein. Except to the extent otherwise provided herein, (i) each payment by Borrower of fees payable to the Banks shall be made for
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the account of the Banks pro rata in accordance with their respective Pro Rata Shares, (ii) each payment of principal of Loans shall be made for the account of the Banks pro rata in accordance with their respective outstanding principal amount of Loans, and (iii) each payment of interest on Loans shall be made for the account of the Banks pro rata in accordance with their respective shares of the aggregate amount of interest due and payable to the Banks.
(b) Administrative Agent will promptly distribute to each Bank its applicable share of such payment in like funds as received. Any payment received by Administrative Agent later than 12:00 p.m. (Dallas, Texas time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. When Administrative Agent collects or receives money on account of the Obligations or otherwise pursuant to the Security Documents if such money is insufficient to pay all such Obligations, such money shall be applied first to any reimbursements due Administrative Agent.
(c) Subject to the provisions set forth in the definition of “ Interest Period ” herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be.
(d) Unless Administrative Agent receives notice from Borrower prior to the date on which any payment is due to the Banks that Borrower will not make such payment in full as and when required, Administrative Agent may assume that Borrower has made such payment in full to Administrative Agent on such date in immediately available funds and Administrative Agent may (but shall not be so required), in reliance upon such assumption, distribute to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent Borrower has not made such payment in full to Administrative Agent, each Bank shall repay to Administrative Agent on demand such amount distributed to such Bank, together with interest thereon for each day from the date such amount is distributed to such Bank at the Federal Funds Rate for the first three (3) days following demand by Administrative Agent and for each day thereafter until the date repaid at the Base Rate.
(e) Except to the extent otherwise expressly provided herein, each Borrowing hereunder shall be from the Banks pro rata in accordance with their respective Pro Rata Shares.
2.09 Issuing the Letters of Credit .
(a) In order to effect the issuance of a Letter of Credit, Borrower shall submit a Borrowing Request and a LC Application in writing by telecopy to Issuing Bank not later than 1:00 p.m., Dallas, Texas time, three (3) Business Days before the requested date of issuance of such Letter of Credit. Each such Borrowing Request and LC Application shall be signed by Borrower, specify the Business Day on which such Letter of Credit is to be issued, the purpose for the requested Letter of Credit, specify the availability for Letters of Credit under the Available Borrowing Base and the $10,000,000 aggregate LC Obligation limitation as of the date of issuance of such Letter of Credit, the expiry date thereof which shall not be later than the earlier of (i) twelve (12) months from the date of issuance of such Letter of Credit and (ii) five (5) days prior to the Termination Date and be accompanied by a current Pricing Grid Certificate.
(b) Upon satisfaction of the applicable terms and conditions set forth in Article V , Issuing Bank shall issue such Letter of Credit to the specified beneficiary not later than the close of business, Dallas, Texas time, on the date so specified. Issuing Bank shall provide Borrower and each Bank with a copy of each Letter of Credit so issued. Each such Letter of Credit shall (i) provide for the
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payment of drafts, presented for honor thereunder by the beneficiary in accordance with the terms thereon, at sight when accompanied by the documents described therein and (ii) unless otherwise expressly agreed by Issuing Bank and Borrower at the time such Letter of Credit is issued, be subject to the rules of the “International Standby Practices 1998” or such later version as may be published by the Institute of International Banking Law and Practice (the “ ISP 1998 ”) and shall, as to matters not governed by the ISP 1998, be governed by, and construed and interpreted in accordance with, the laws of the State of Texas.
(c) Upon the issuance date of each Letter of Credit, Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each other Bank, and each other Bank shall be deemed, without further action by any party hereto, to have purchased from Issuing Bank, a participation, to the extent of such Bank’s Commitment Percentage, in such Letter of Credit, the obligations thereunder and in the reimbursement obligations of Borrower due in respect of drawings made under such Letter of Credit. If requested by Issuing Bank, the other Banks will execute any other documents reasonably requested by Issuing Bank to evidence the purchase of such participation.
(d) Upon the presentment of any draft for honor under any Letter of Credit by the beneficiary thereof which Issuing Bank determines is in compliance with the conditions for payment thereunder, Issuing Bank shall promptly notify Borrower, and each Bank of the intended date of honor of such draft and Borrower hereby promises and agrees, at Borrower’s option, to either (i) pay to Issuing Bank, by 2:00 p.m., Dallas, Texas time, on the date payment is due as specified in such notice, the full amount of such draft in immediately available funds or (ii) request a Loan pursuant to the provisions of Sections 2.01(a) and 2.02 of this Agreement in the full amount of such draft, which request shall specify that the Borrowing Date is to be the date payment is due under the Letter of Credit as specified in Issuing Bank’s notice. If Borrower fails timely to make such payment because a Loan cannot be made pursuant to Section 2.01(a) and/or Section 5.02 , each Bank shall, notwithstanding any other provision of this Agreement (including the occurrence and continuance of a Default or an Event of Default), make available to Issuing Bank an amount equal to its Pro Rata Share of the presented draft on the day Issuing Bank is required to honor such draft. If such amount is not in fact made available to Administrative Agent by such Bank on such date, such Bank shall pay to Issuing Bank, on demand made by Issuing Bank, in addition to such amount, interest thereon at the Federal Funds Rate for the first three (3) days following demand and thereafter until paid at the Base Rate. Upon receipt by Administrative Agent from the Banks of the full amount of such draft, notwithstanding any other provision of this Agreement (including the occurrence and continuance of a Default or an Event of Default) the full amount of such draft shall automatically and without any action by Borrower, be deemed to have been a Base Rate Loan as of the date of payment of such draft. Nothing in this paragraph (d) or elsewhere in this Agreement shall diminish Borrower’s obligation under this Agreement to provide the funds for the payment of, or on demand to reimburse Issuing Bank for payment of, any draft presented to, and duly honored by, Issuing Bank under any Letter of Credit, and the automatic funding of a Loan as in this paragraph provided shall not constitute a cure or waiver of the Event of Default for failure to provide timely such funds as in this paragraph agreed.
(e) In order to induce the issuance of Letters of Credit by Issuing Bank and the purchase of participations therein by the other Banks, Borrower agrees with Issuing Bank and the other Banks that neither Administrative Agent nor any Bank (including the Issuing Bank) shall be responsible or liable (except as provided in the following sentence) for, and Borrower’s unconditional obligation to reimburse Issuing Bank for amounts paid by Issuing Bank, as provided in Subsection 2.09(d) above, on account of drafts so honored under the Letters of Credit shall not be affected by any circumstance, act or omission whatsoever (whether or not known to Administrative Agent or any Bank (including the Issuing Bank) other than a circumstance, act or omission resulting from the gross negligence or willful
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misconduct of the Issuing Bank. Borrower agrees that any action taken or omitted to be taken by the Issuing Bank under or in connection with any Letter of Credit or any related draft, document or Property shall be binding on Borrower and shall not put the Issuing Bank under any resulting liability to Borrower, unless such action or omission is the result of the gross negligence or willful misconduct of the Issuing Bank. Borrower hereby waives presentment for payment (except the presentment required by the terms of any Letter of Credit) and notice of dishonor, protest and notice of protest with respect to drafts honored under the Letters of Credit. Issuing Bank agrees promptly to notify Borrower whenever a draft is presented under any Letter of Credit, but failure to so notify Borrower shall not in any way affect Borrower’s obligations hereunder. Subject to Section 3.03 , if while any Letter of Credit is outstanding, any law, executive order or regulation is enforced, adopted or interpreted by any public body, governmental agency or court of competent jurisdiction so as to affect any of Borrower’s obligations or the compensation to Issuing Bank in respect of the Letters of Credit or the cost to Issuing Bank of establishing and/or maintaining the Letters of Credit (or any participation therein), Issuing Bank shall promptly notify Borrower thereof in writing and within ten (10) Business Days after receipt by Borrower of Issuing Bank’s request (through Administrative Agent) for reimbursement or indemnification or within thirty (30) days after receipt of a notice in respect of Taxes or Other Taxes, Borrower shall reimburse or indemnify Issuing Bank, as the case may be, with respect thereto so that Issuing Bank shall be in the same position as if there had been no such enforcement, adoption or interpretation. The foregoing agreement of Borrower to reimburse or indemnify the Issuing Bank shall apply in (but shall not be limited to) the following situations: an imposition of or change in reserve, capital maintenance or other similar requirements or in excise or similar taxes or monetary restraints, except a change in franchise taxes imposed on Issuing Bank or in tax on the net income of Issuing Bank.
(f) In the event that any provision of a Letter of Credit Application is inconsistent with, or in conflict of, any provision of this Agreement, including provisions for the rate of interest applicable to drawings thereunder or rights of setoff or any representations, warranties, covenants or any events of default set forth therein, the provisions of this Agreement shall govern.
(g) If the Obligations, or any part thereof, are declared or otherwise become immediately due and payable pursuant to Article IX of this Agreement, then all LC Obligations shall become immediately due and payable without regard for actual drawings or payments on the Letters of Credit, and Borrower shall be obligated to pay to Administrative Agent immediately an amount equal to the LC Obligations. All amounts made due and payable by Borrower under this Section 2.09(g) may be applied as Issuing Bank elects to any of the various LC Obligations; provided , however , that such amounts applied by Issuing Bank to the LC Obligations shall be (a) first applied to the Matured LC Obligations, and (b) second held by Issuing Bank as LC Collateral in the LC Collateral Account until all remaining Obligations have been satisfied. This Section 2.09(g) shall not limit or impair any rights which Administrative Agent, the Issuing Bank or any of the Banks may have under any other document or agreement relating to any Letter of Credit or LC Obligation, including without limitation, any LC Application. Borrower hereby grants a security interest in and lien on the LC Collateral Account to Administrative Agent for and on behalf of the Issuing Bank and the Banks as security for the Obligations. Borrower agrees to execute and deliver from time to time such documentation as Administrative Agent may reasonably request to further assure such security interest.
2.10 Payments by the Banks to Administrative Agent .
(a) Unless Administrative Agent receives notice from a Bank on or prior to the Closing Date or, with respect to any Borrowing after the Closing Date, at least one (1) Business Day prior to the date of such Borrowing, that such Bank will not make available as and when required hereunder to Administrative Agent for the account of Borrower the amount of that Bank’s Pro Rata Share
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of the Borrowing, Administrative Agent may assume that each Bank has made such amount available to Administrative Agent in immediately available funds on the Borrowing Date and Administrative 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 Bank shall not have made its full amount available to Administrative Agent in immediately available funds and Administrative Agent in such circumstances has made available to Borrower such amount, that Bank shall on the Business Day following such Borrowing Date make such amount available to Administrative Agent, together with interest at the Federal Funds Rate for the first three (3) days during such period and thereafter at the Base Rate. A notice of Administrative Agent submitted to any Bank with respect to amounts owing under this subsection (a) shall be conclusive, absent manifest error. If such amount is so made available, such payment to Administrative Agent shall constitute such Bank’s Loan on the date of Borrowing for all purposes of this Agreement. If such amount is not made available to Administrative Agent on the Business Day following the Borrowing Date, Administrative Agent will notify Borrower of such failure to fund and, upon demand by Administrative Agent, Borrower shall pay such amount to Administrative Agent for Administrative 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 Loans comprising such Borrowing.
(b) The failure of any Bank to make any Loan on any Borrowing Date shall not relieve any other Bank of any obligation hereunder to make a Loan on such Borrowing Date, but no Bank shall be responsible for the failure of any other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
2.11 Sharing of Payments, Etc. If any Bank shall obtain on account of the Obligations made by it any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) or receive any collateral in respect thereof in excess of the amount such Bank was entitled to receive pursuant to the terms hereof, such Bank shall immediately (a) notify Administrative Agent of such fact, and (b) purchase from the other Banks such participations in the Loans made by them as shall be necessary to cause such purchasing Bank to share the excess payment according to the terms hereof; provided , however , that if all or any portion of such excess payment is thereafter recovered from the purchasing Bank, such purchase shall to that extent be rescinded and each other Bank shall repay to the purchasing Bank the purchase price paid therefor, together with an amount equal to such paying Bank’s ratable share (according to the proportion of (i) the amount of such paying Bank’s required repayment to (ii) the total amount so recovered from the purchasing Bank) of any interest or other amount paid or payable by the purchasing Bank in respect of the total amount so recovered. Borrower agrees that any Bank so purchasing a participation from another Bank may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff, but subject to Section 11.09 ) with respect to such participation as fully as if such Bank were the direct creditor of Borrower in the amount of such participation. Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section and will in each case notify the Banks following any such purchases or repayments.
TAXES, YIELD PROTECTION AND ILLEGALITY
(a) Any and all payments by Borrower to each Bank or Administrative Agent under this Agreement and any other Loan Document shall be made free and clear of, and without deduction or
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withholding for any Taxes. In addition, Borrower shall pay all Other Taxes. However, Borrower may delay paying or discharging any Other Taxes so long as it is in good faith contesting the validity thereof by appropriate proceedings and has set aside on its books adequate reserve therefor.
(b) Borrower agrees to indemnify and hold harmless each Bank and Administrative Agent for the full amount of Taxes or Other Taxes (including any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section) paid by each Bank and Administrative Agent to the extent such Bank or Administrative Agent has provided Borrower with five (5) Business Days’ notice of its intent to pay or discharge same and any liability (including penalties, interest, additions to tax and reasonable expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted (except to the extent of Other Taxes contested by Borrower provided in Subsection 3.01(a) above). Payment under this indemnification shall be made within thirty (30) days after the date the Bank or Administrative Agent makes written demand therefor.
(c) If Borrower shall be required by law to deduct or withhold any Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank or Administrative Agent, then: (i) the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section) such Bank or Administrative Agent, as the case may be, receives an amount equal to the sum it would have received had no such deductions or withholdings been made; (ii) Borrower shall make such deductions and withholdings; (iii) Borrower shall pay the full amount deducted or withheld to the relevant taxing authority or other authority in accordance with applicable law; and (iv) Borrower shall also pay to each Bank or Administrative Agent for the account of such Bank, at the time interest is paid, all additional amounts which the respective Bank specifies as necessary to preserve the after-tax yield Bank would have received if such Taxes or Other Taxes had not been imposed.
(d) Upon request of Administrative Agent, Borrower shall furnish Administrative Agent the original or a certified copy of a receipt evidencing payment by Borrower of Taxes or Other Taxes under subsection (c) of this Section, or other evidence of payment satisfactory to Administrative Agent.
(e) If Borrower is required to pay additional amounts to any Bank or Administrative Agent pursuant to subsection (c) of this Section, then upon written request of Borrower such Bank shall use reasonable efforts (consistent with legal and regulatory restrictions) to change the jurisdiction of its Lending Office so as to eliminate any such additional payment by Borrower which may thereafter accrue, if such change in the judgment of such Bank is not otherwise disadvantageous to such Bank.
(a) If any Bank reasonably determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for any Bank or its applicable Lending Office to make LIBOR Loans, then, on notice thereof by the Bank to Borrower through Administrative Agent, any obligation of that Bank to make LIBOR Loans shall be suspended until such Bank notifies Administrative Agent and Borrower that the circumstances giving rise to such determination no longer exist (which the Bank agrees to do promptly thereafter).
(b) If any Bank reasonably determines that it is unlawful to maintain any LIBOR Loan, such Loan will automatically convert into a Base Rate Loan either on the last day of the Interest
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Period thereof, if such Bank may lawfully continue to maintain such LIBOR Loans to such day, or immediately, if such Bank may not lawfully continue to maintain such LIBOR Loan.
(c) If the obligation of any Bank to make or maintain LIBOR Loans has been so terminated or suspended, all Loans which would otherwise be made by such Bank as LIBOR Loans shall be instead Base Rate Loans.
(d) Before giving any notice to Administrative Agent under this Section, the affected Bank shall designate a different Lending Office with respect to its LIBOR Loans if such designation will avoid the need for giving such notice or making such demand and will not, in the judgment of the Bank, be illegal or otherwise disadvantageous to the Bank.
3.03 Increased Costs and Reduction of Return .
(a) If any Bank determines that, due to either (i) the introduction of any new law or regulation or any change (other than any change by way of imposition of or increase in reserve requirements included in the calculation of the LIBOR) in or in the interpretation of any law or regulation or (ii) the compliance by that Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the actual cost to such Bank of agreeing to make or making, funding or maintaining any LIBOR Loans, then Borrower shall be liable for, and shall from time to time, upon demand (with a copy of such demand to be sent to Administrative Agent), pay to Administrative Agent for the account of such Bank, additional amounts as are sufficient to compensate such Bank for such increased costs.
(b) If any Bank reasonably shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or its Lending Office) or any corporation controlling the Bank with any such Capital Adequacy Regulation, affects the amount of capital required to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration such Bank’s or such corporation’s policies with respect to such Bank’s capital adequacy) reasonably determines that the amount of such capital is increased as a consequence of its Commitments, loans, credits or obligations under this Agreement, then, upon demand of such Bank to Borrower through Administrative Agent, Borrower shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase.
3.04 Funding Losses . Borrower shall reimburse each Bank and hold each Bank harmless from any loss or expense which the Bank may actually sustain or incur as a consequence of: (a) the failure of Borrower to make on a timely basis any payment of principal of any LIBOR Loan; (b) the failure of Borrower to borrow, continue or convert a Loan after Borrower has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation (including by reason of the failure to satisfy any condition precedent thereto); (c) the failure of Borrower to make any prepayment in accordance with any notice delivered under Section 2.03 ; (d) the prepayment or other payment (including after acceleration thereof) of any LIBOR Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under Section 3.02 of any LIBOR Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its LIBOR Rate Loans or from fees payable to terminate the deposits from which such funds were obtained. For purposes of calculating amounts payable by Borrower to the Banks under this Section and under Section 3.03 ,
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each LIBOR Loan made by a Bank (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at the LIBOR for such LIBOR Rate Loan by a matching deposit or other borrowing in the interbank eurodollar market for a comparable amount and for a comparable period, whether or not such LIBOR Rate Loan is in fact so funded.
3.05 Inability to Determine Rates . If any Bank determines that for any reason adequate and reasonable means do not exist for determining the LIBOR for any requested Interest Period with respect to a proposed LIBOR Loan, or that the LIBOR applicable for any requested Interest Period with respect to a proposed LIBOR Loan does not adequately and fairly reflect the cost to such Bank of funding such Loan, Administrative Agent will promptly so notify Borrower. Thereafter, the obligation of such Bank to make, maintain or convert Loans into LIBOR Rate Loans hereunder shall be suspended until Administrative Agent upon the instruction of the Banks revokes such notice in writing and each LIBOR Rate Loan that has been affected will automatically, on the last day of the then-existing Interest Period therefor, convert into a Base Rate Loan. Upon receipt of such notice, Borrower may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If Borrower does not revoke such Notice, the Banks shall make, convert or continue the Loans, as proposed by Borrower, in the amount specified in the applicable notice submitted by Borrower, but such Loans shall be made, converted or continued as Base Rate Loans instead of LIBOR Loans. If any of the Banks notify Borrower through Administrative Agent of any event occurring after the date hereof that will entitle such Bank to compensation pursuant to Section 3.01 or 3.03 or if any of the Banks shall notify the Borrower through Administrative Agent of any event as to illegality under Section 3.02 , then such Bank shall designate a different Lending Office for the Loans affected by such event if such designation will, as the case may be, avoid the need for, or reduce the amount of, such compensation or avoid such illegality and will not, in the sole opinion of the Bank, be disadvantageous to the Bank.
3.06 Survival . The agreements and obligations of Borrower in this Article III shall survive the payment of all other Obligations.
3.07 Foreign Lenders, Participants, and Assignees . Each Bank, Participant (by accepting a participation interest under this Agreement), and Assignee (by executing an Assignment and Assumption Agreement) that is not organized under the laws of the United States of America or one of its states (a) represents to Administrative Agent and Borrower that (i) no Taxes are required to be withheld by Administrative Agent or Borrower with respect to any payments to be made to it in respect of the Obligations, and (ii) it has furnished to Administrative Agent and Borrower two (2) duly completed copies of either U.S. Internal Revenue Service Form 4224, Form 1001, Form W-8, or other form acceptable to Administrative Agent that entitles it to exemption from U. S. Federal withholding Tax on all interest payments under the Loan Documents, and (b) covenants to (i) provide Administrative Agent and Borrower a new Form 4244, Form 1001, Form W-8, or other form acceptable to Administrative Agent upon the expiration or obsolescense of any previously delivered form according to applicable laws and regulations, duly executed and completed by it, and (ii) comply from time to time with all applicable laws and regulations with regard to the withholding Tax exemption. If any of the foregoing is not true or the applicable forms are not provided, then Borrower and Administrative Agent (but without duplication) may deduct and withhold from interest payments under the Loan Documents any United States Federal-Income Tax at the maximum rate under the Code.
(a) If any Bank is a “ foreign corporation, partnership or trust ” within the meaning of the Code and such Bank claims exemption from, or a reduction of, U.S. withholding tax under
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Sections 1441 or 1442 of the Code, such Bank agrees with and in favor of Administrative Agent, to deliver to Administrative Agent:
(i) if such Bank claims an exemption from, or a reduction of, withholding tax under a United States tax treaty, properly completed IRS Forms 1001 and W-8 before the payment of any interest in the first calendar year and before the payment of any interest in each third succeeding calendar year during which interest may be paid under this Agreement;
(ii) if such Bank 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 Bank, two properly completed and executed copies of IRS Form 4224 before the payment of any interest is due in the first taxable year of such Bank and in each succeeding taxable year of such Bank during which interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the Code or other laws of the United States as a condition to exemption from, or reduction of, United States withholding tax.
Such Bank agrees to promptly notify Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding tax under a United States tax treaty by providing IRS Form 1001 and such Bank sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Borrower to such Bank, such Bank agrees to notify Administrative Agent of the percentage amount in which it is no longer the beneficial owner of Obligations of Borrower to such Bank. To the extent of such percentage amount, Administrative Agent will treat such Bank’s IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax by filing IRS Form 4224 with Administrative Agent sells, assigns, grants a participation in, or otherwise transfers all or part of the Obligations of Borrower to such Bank, such Bank agrees to undertake sole responsibility for complying with the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable withholding tax, Administrative Agent may withhold from any interest payment to such Bank 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 Administrative Agent, then Administrative Agent may withhold from any interest payment to such Bank not providing such forms or other documentation an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States or other jurisdiction asserts a claim that Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Bank (because the appropriate form was not delivered, was not properly executed, or because such Bank failed to notify Administrative Agent of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason) such Bank shall indemnify Administrative Agent fully for all amounts paid, directly or indirectly, by Administrative Agent as tax or otherwise, including penalties and interest, and including any taxes imposed by any jurisdiction on the amounts payable to Administrative Agent under this Section, together
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with all costs and expenses (including Attorney Costs). The obligation of the Banks under this subsection shall survive the payment of all Obligations and the resignation or replacement of Administrative Agent.
SECURITY
4.01 Agreement to Deliver Guarantees and Security Documents . At Closing, Borrower shall execute, and shall cause the Guarantors, as applicable, to execute, such Guarantees, Mortgages, financing statements and other Security Documents in form and substance satisfactory to Administrative Agent for the purpose of guaranteeing Borrower’s Obligations and granting and perfecting first and prior liens or security interests (subject to any Permitted Liens) in the Mortgaged Properties and other Collateral described therein. Borrower shall and shall cause Guarantors to enter into such Mortgages and amendments and supplements thereto from time to time covering all of the Oil and Gas Properties now owned or acquired on or after Closing.
4.02 Perfection and Protection of Security Interests and Liens . Borrower will, and will cause Guarantors, as applicable, from time to time deliver to Administrative Agent such additional Guarantees, Mortgages, letters of credit, financing statements, amendments, assignment and continuation statements, extension agreements and other documents, properly completed and executed (and acknowledged when required) by Borrower and Guarantors, as applicable, in form and substance satisfactory to Administrative Agent, which the Banks request for the purpose of perfecting, confirming, or protecting any Liens or other rights in the Collateral securing any Obligations.
4.03 Offset . To secure the repayment of the Obligations, Borrower hereby grants Administrative Agent and each Bank a security interest, a lien, and a right of offset, each of which shall be in addition to all other interests, liens, and rights of Administrative Agent at common law, under the Loan Documents, or otherwise, and each of which shall be upon and against (a) any and all moneys, securities or other Property (and the proceeds therefrom) of Borrower now or hereafter held or received by or in transit to Administrative Agent or any Bank from or for the account of Borrower, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and (b) any and all deposits (general or special, time or demand, provisional or final) of Borrower with Administrative Agent or any Bank, including certificates of deposit. Upon the occurrence of any Default, Administrative Agent or any Bank is hereby authorized to foreclose upon and apply, at any time and from time to time, without notice to Borrower to the extent permitted by law, any and all items hereinabove referred to against the Obligations then due and payable.
4.04 Letters in Lieu/Power of Attorney .
(a) In connection with the rights of Administrative Agent under Section 4.05 below, Borrower shall provide to Administrative Agent undated letters, in form of Exhibit D attached hereto, from Borrower in blank to each purchaser of production and disburser of proceeds of production from or attributable to the Mortgaged Properties, with the addressees left blank, authorizing and directing the addressees to make future payments attributable to production from the Mortgaged Properties directly to Administrative Agent for the ratable benefit of the Banks.
(b) Borrower hereby designates Administrative Agent as its agent and attorney-in-fact, to act in their name, place, and stead for the purpose of completing and delivering any and all of the letters in lieu of transfer orders delivered by Borrower to Administrative Agent, including,
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without limitation, completing any blanks contained in such letter and attaching exhibits thereto describing the relevant Collateral. The Borrower hereby ratifies and confirms all that Administrative Agent shall lawfully do or cause to be done by virtue of this power of attorney and the rights granted with respect to such power of attorney. This power of attorney is coupled with the interest of Administrative Agent in the Collateral, shall commence and be in full force and effect as of the Closing Date and shall remain in full force and effect and shall be irrevocable so long as any Obligation remains outstanding or unpaid or any Commitment exists. The powers conferred on Administrative Agent by this appointment are solely to protect the interests of Administrative Agent and each of the Banks under the Loan Documents and shall not impose any duty upon Administrative Agent to exercise any such powers. Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and shall not be responsible to Borrower or any other Person for any act or failure to act with respect to such powers, except for gross negligence or willful misconduct.
4.05 Assignment of Runs . Notwithstanding that, under the Mortgages, Borrower or a Guarantor, as applicable, has assigned to Administrative Agent for the ratable benefit of the Banks all of the proceeds of runs accruing to the Mortgaged Properties covered thereby:
(a) Until such time as Administrative Agent shall notify Borrower or Guarantor, as applicable, to the contrary, Borrower or Guarantor, as applicable, shall be entitled to receive from the purchasers or disbursers of production all such proceeds of runs, subject however to the liens created under the Mortgages, which liens are hereby affirmed and ratified. Upon the occurrence and during the continuance of a Default or such other time as Administrative Agent shall in its discretion so elect, Administrative Agent may deliver to the addressees the letters-in-lieu described in Section 4.04 above and may exercise all rights and remedies granted under the Mortgages, including the right to obtain possession of all proceeds of runs then held by Borrower or Guarantor, as applicable, or to receive directly from the purchaser or disburser of production all other proceeds of runs.
(b) In no case shall any failure, whether purposed or inadvertent, by Administrative Agent to collect directly any such proceeds of runs constitute in any way a waiver, remission or release of any of its rights under the Mortgages, nor shall any release of any other proceeds of runs or of any rights of Administrative Agent to collect other proceeds of runs thereafter.
(c) Borrower or Guarantor, as applicable, will upon the instruction of Administrative Agent join with Administrative Agent in notifying in writing and accompanied (if necessary) by certified copies of the Mortgages the purchasers or disbursers of production produced from the Mortgaged Properties of the existence of the Mortgages, and instructing that all proceeds of runs be paid directly to Administrative Agent for the ratable benefit of the Banks.
CONDITIONS PRECEDENT
5.01 Conditions of Initial Loan . The effectiveness of this Agreement and the obligation of each Bank and Administrative Agent to amend and restate the Prior Credit Agreement, to make Loans hereunder and the obligation of the Issuing Bank to issue Letters of Credit hereunder, are subject to the condition that Administrative Agent shall have received all of the following, in form and substance satisfactory to Administrative Agent and each Bank, and in sufficient copies for each Bank:
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(a) Credit Agreement, Notes and Security Documents . This Agreement, the Notes, the | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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